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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 10, 1998
Scott Cable Communications, Inc.
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(Exact name of Registrant as specified in its charter)
Texas
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(State or other jurisdiction of incorporation)
0-22-093 75-1766202
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(Commission File Number) (I.R.S. Employer Identification No.)
Four Landmark Square, Suite 302, Stamford, Connecticut 06901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (203) 323-1100
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS.
On July 10, 1998, the Company entered into a definitive asset sale
agreement (the "Sale Agreement") with InterLink Communications Partners, LLLP
("InterLink"), providing for the sale by the Company of substantially all of
its assets to InterLink for a purchase price of $165,000,000, subject to
closing adjustments.
The Sale Agreement provides for the consummation of the sale to be
effected through a pre-packaged Chapter 11 bankruptcy proceeding and
requires the Company to commence that bankrupcty proceeding by September 23,
1998. In connection therewith, the Company is preparing to commence
promptly the pre-bankruptcy solicitation process with respect to its plan of
reorganization. Both that plan of reorganization and the Sale Agreement
contemplate that all of the Company's trade creditors will be paid in full.
The Company's plan of reorganization also contemplates payment in full of the
Company's obligations under its senior credit facility and its Senior
Subordinated PIK notes, but only partial payment of its Junior Subordinated
PIK notes.
The closing of the sale is expected to be consummated in the fourth
quarter of this year subject to, among other things, the U.S. Bankruptcy
Court's approval of the proposed sale and the Court's confirmation of the
Company's pre-packaged bankruptcy plan of regorganization, the Federal Trade
Commission's grant of any necessary approval under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, the Federal Communications Commission's
approval of the transfer of certain of the Company's licenses, and the
issuance of consents or waivers by various franchising authorities, real
property lessors and other third parties.
InterLink is a Colorado limited liability limited partnership and
maintains its headquarters in Denver, Colorado. It is an affiliate of and is
managed by Rifkin & Associates, Inc., an established manager of cable
television systems.
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Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits. The following document is being filed herewith by
the Company as an exhibit to this Current Report on Form 8-K:
2.1 Asset Purchase and Sale Agreement dated as of July 1,
1998, by and between Scott Cable Communications, Inc.
and InterLink Communications Partners, LLLP.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Scott Cable Communications, Inc.
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(Registrant)
Date: July 10, 1998 By: /s/ John M. Flanagan, Jr.
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John M. Flanagan, Jr.
Chief Financial Officer
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ASSET PURCHASE AND SALE AGREEMENT
By and Between
SCOTT CABLE COMMUNICATIONS, INC.
and
INTERLINK COMMUNICATIONS PARTNERS, LLLP
Dated as of July 1, 1998
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TABLE OF CONTENTS
ARTICLE I -DEFINITIONS..................................................... 2
ARTICLE II - PURCHASE AND SALE OF ASSETS OF SELLER......................... 9
2.1 Purchase and Sale of Assets ...................................... 9
2.2 Excluded Assets .................................................. 11
2.3 Instruments of Transfer .......................................... 11
ARTICLE III - PURCHASE PRICE............................................... 12
3.1 Purchase Price and Payments ...................................... 12
3.2 Deposit in Escrow ................................................ 14
3.3 Assumption of Liabilities......................................... 15
3.4 Adjustments and Prorations ....................................... 16
3.5 Indemnity Escrow ................................................. 19
ARTICLE IV - CLOSING....................................................... 20
4.1 Closing Date ..................................................... 20
4.2 Default at Closing ............................................... 21
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF SELLER....................... 21
5.1 Corporate Existence and Qualification ............................ 21
5.2 Authorization; No Breach ......................................... 22
5.3 Effect of Agreement .............................................. 22
5.4 Financial Statements ............................................. 23
5.5 Undisclosed Liabilities .......................................... 23
5.6 Tax Returns and Audits............................................ 24
5.7 Franchises and Necessary Contracts ............................... 24
5.8 Material Contracts and Obligations ............................... 26
5.9 Systems' Capacity, Subscribers and Rates ......................... 27
5.10 Pole Attachment Agreements ...................................... 27
5.11 Employees ....................................................... 27
5.12 Absence of Certain Developments ................................. 28
5.13 Real Property ................................................... 29
5.14 Title to Assets; Personal Property .............................. 29
5.15 Necessary Property .............................................. 30
5.16 Compliance with Laws ............................................ 30
5.17 Transactions .................................................... 32
5.18 Litigation and Legal Proceedings ................................ 32
5.19 Brokers' Fees ................................................... 33
5.20 Pensions and Other Deferred Compensation ........................ 33
5.21 Benefit Claims .................................................. 33
5.22 Insurance, Surety Bonds, Damages ................................ 33
5.23 Environmental Laws .............................................. 33
5.24 No Other Commitment to Sell ..................................... 34
5.25 Disclosure ...................................................... 34
ARTICLE VI - REPRESENTATIONS AND WARRANTIES OF BUYER....................... 35
6.1 Organization ..................................................... 35
6.2 Authorization of Agreement ....................................... 35
6.3 No Default ....................................................... 35
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6.4 Litigation........................................................ 36
6.5 Finders' and Brokers' Fees ....................................... 36
6.6 Disclosure ....................................................... 36
ARTICLE VII - CONDUCT OF BUSINESS OF SELLER PRIOR TO CLOSING............... 36
7.1 Restrictions on Operations Prior to Closing Date ................. 36
7.2 Payment of Obligations ........................................... 37
7.3 Inventory ........................................................ 37
7.4 Compliance with Franchises........................................ 37
ARTICLE VIII - INVESTIGATION BY BUYER...................................... 38
8.1 Access to Records................................................. 38
8.2 Publicity ........................................................ 38
ARTICLE IX - FURTHER COVENANTS............................................. 39
9.1 Delivery of Documents to Buyer.................................... 39
9.2 Transfer of Franchises and Necessary Contracts Prior to Closing... 40
9.3 Further Assurances ............................................... 40
9.4 Release of Encumbrances .......................................... 41
9.5 Environmental Reports ............................................ 41
9.6 HSR Notification ................................................. 41
9.7 Collection of Advertising Sales Accounts Receivable .............. 42
9.8 Solicitation of Bankruptcy Plan Acceptances ...................... 42
9.9 Documents and Motions to be Filed by Seller ...................... 42
9.10 Bankruptcy Proceedings........................................... 43
9.11 Diligent, Good Faith Efforts..................................... 43
9.12 Confirmation Order or Approval Order ............................ 44
9.13 No Solicitation; Competing Transaction .......................... 45
9.14 Notification of Utilities ....................................... 47
9.15 Broadcast TV Signals............................................. 47
9.16 Due Diligence Payment to Buyer .................................. 48
ARTICLE X - CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL PARTIES......... 48
10.1 Litigation Prohibiting Consummation of Transactions ............. 48
10.2 Orders Prohibiting Consummation of Transactions ................. 48
10.3 HSR Act ......................................................... 48
10.4 Morbeck Agreement Escrow ........................................ 48
ARTICLE XI - CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS................... 49
11.1 Compliance with Agreement ....................................... 49
11.2 Correctness of Representations and Warranties ................... 49
11.3 No Adverse Change in Business or Properties ..................... 49
11.4 Certificate of Officer .......................................... 49
11.5 Opinion of Counsel .............................................. 49
11.6 Opinion of Reorganization Counsel ............................... 49
11.7 Opinion of FCC Counsel .......................................... 49
11.8 Noncompete Agreement ............................................ 50
11.9 Absence of Litigation ........................................... 50
11.10 Consents ....................................................... 50
11.11 Subscribers .................................................... 50
11.12 Receivables Report ............................................. 50
11.13 Bankruptcy Court Approvals ..................................... 50
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ARTICLE XII - CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS................. 51
12.1 Correctness of Representations and Warranties ................... 51
12.2 Compliance with Agreement ....................................... 51
12.3 Certificate of Officer .......................................... 51
12.4 Absence of Litigation ........................................... 51
12.5 Proceedings and Documents ....................................... 51
12.6 Opinion of Counsel .............................................. 51
12.7 Bankruptcy Court Approvals ...................................... 52
12.8 Appraisal ....................................................... 52
ARTICLE XIII - EXPENSES OF NEGOTIATION AND TRANSFER........................ 52
13.1 Expenses......................................................... 52
ARTICLE XIV - RIGHTS TO TERMINATE, BREACH, LIQUIDATED DAMAGES.............. 53
14 Termination ....................................................... 53
ARTICLE XV - INDEMNIFICATION............................................... 59
15.1 Indemnification by Seller ....................................... 59
15.2 Indemnification by Buyer ........................................ 60
ARTICLE XVI - CASUALTY OR LOSS............................................. 63
16.1 Repairs or Replacement of Assets ................................ 63
16.2 Risk of Loss .................................................... 64
ARTICLE XVII - MISCELLANEOUS............................................... 64
17.1 Assignment ...................................................... 64
17.2 Successors....................................................... 64
17.3 Entire Agreement ................................................ 64
17.4 Third Parties ................................................... 64
17.5 Amendments in Writing ........................................... 65
17.6 Governing Law ................................................... 65
17.7 Interpretation .................................................. 65
17.8 Arbitration ..................................................... 66
17.9 Notices ......................................................... 66
17.10 Severability ................................................... 67
17.11 Counterparts ................................................... 67
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INDEX TO EXHIBITS
Exhibit 2.3(i) Form of Bill of Sale
Exhibit 2.3(ii) Form of Assignment and Assumption Agreement
Exhibit 2.3(iii) Form of Special Warranty Deed
Exhibit 3.2 Deposit Escrow Agreement
Exhibit 3.5 Form of Closing Escrow Agreement
Exhibit 11.5 Form of Seller's Counsel Opinion
Exhibit 11.6 Form of Seller's FCC Counsel Opinion
Exhibit 11.7 Form of Non-Competition Agreement
Exhibit 11.9 Form of Consent or Approval to Assignment and Transfer
Exhibit 12.6 Form of Buyer's Opinion of Counsel
INDEX OF SCHEDULES
Schedule Title
1.1(A) Slow Pay Bulk Agreements
1.1(B) Systems and Service Areas
2.1(A) Real Estate
2.1(C) Seller's Interest in Leases, as Lessor
2.1(H) Choses in Action
2.1(I) Proprietary Rights
2.1(K) Vehicles
2.2 Excluded Assets
3.3(B) Free Service
5.3 Material Consents and Approvals
5.6 Unpaid Taxes
5.7(A) Franchises
5.7(B) Necessary Contracts
5.7(C) Defaults Under Franchises and Necessary Contracts
5.8(A) Material Agreements
5.8(B) Defaults under Material Agreements
5.9(A) Channel Capacity, Subscribers and Rates
5.10 Pole Attachments
5.11 Labor Discussions
5.12 Absence of Certain Developments
5.13 Real Estate Liens and Encumbrances
5.17 Transactions
5.18 Litigation and Administrative Proceedings
5.20 Retirement Plans
5.21 Employee Benefit Plans
5.22 Insurance Policies and Surety Bonds
5.23 Environmental Laws; Environmental Permits
5.24 Sale Commitments
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THIS ASSET PURCHASE AND SALE AGREEMENT is made and entered into as of July
1, 1998 by and between Scott Cable Communications, Inc., a Texas corporation
("Seller"), and InterLink Communications Partners, LLLP, a Colorado limited
liability limited partnership ("Buyer").
WHEREAS, Seller owns and operates cable television systems serving
subscribers in various areas in the States of Arkansas, California, Colorado,
Louisiana, Nebraska, New Mexico, North Dakota, Ohio, Texas, and Virginia (which
areas of service are more specifically described in Schedule 1.1(B) hereto and
are hereinafter collectively referred to as the "Service Areas");
WHEREAS, Seller, in reliance upon the representations and warranties of
Buyer, desires to sell to Buyer, and Buyer, in reliance upon the
representations and warranties of Seller, desires to purchase from Seller,
substantially all of the assets, property and business relating to Seller's
cable television systems serving subscribers in and around the Service Areas,
but specifically excluding those assets described in Section 2.2;
WHEREAS, in connection with the proposed sale of the Assets (the
capitalized terms used and not otherwise defined herein being used as defined
in Article I hereof) to Buyer, Seller intends to commence the Bankruptcy Case
and file the Bankruptcy Plan with the Bankruptcy Court, providing, inter alia,
for (i) the sale of the Assets to Buyer pursuant to the terms and conditions
set forth in this Agreement and (ii) the distribution of the sale proceeds to
creditors of Seller in accordance with the Bankruptcy Plan and the distribution
priority scheme established by the Bankruptcy Code; and
WHEREAS, Buyer and Seller, respectively, deem it advisable and in the best
interests of each that a sale of the Assets occur upon the terms and subject to
the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein set forth, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1 "1992 Act" means the Cable Television Consumer Protection and
Competition Act of 1992.
1.2 "Additional Financial Statements" means (i) as to monthly
statements, Seller's unaudited Statement of Operations for each monthly period
after the period ended September 30, 1997, and (ii) as to quarterly statements,
Seller's unaudited Balance Sheet and related Statements of Operations and
Statements of Changes in Financial Position for each quarterly period after the
period ended September 30, 1997.
1.3 "Affiliate" has the meaning ascribed to such term in the Bankruptcy
Code.
1.4 "Approval Order" means an order of the Bankruptcy Court, approving
this Agreement and authorizing the sale of the Assets to Buyer pursuant to
Sections 363 and 365 of the Bankruptcy Code and which order shall by its
express terms be binding upon any subsequent Chapter 7 trustee that may be
appointed in the Bankruptcy Case.
1.5 "Assets" has the meaning set forth in Section 2.1.
1.6 "Assignment And Assumption Agreement" has the meaning set forth in
Section 2.3(ii).
1.7 "Assumed Liabilities" has the meaning set forth in Section 3.3.
1.8 "Audited Financial Statements" has the meaning set forth in Section
5.4.
1.9 "Bankruptcy Case" means the voluntary Chapter 11 case to be
commenced by Seller in the Bankruptcy Court.
1.10 "Bankruptcy Code" means the United States Bankruptcy Code as set
forth in Title 11 of the United States Code and in effect on the date of the
commencement of the Bankruptcy Case together with any amendments thereto that
are applicable to the Bankruptcy Case.
1.11 "Bankruptcy Court" means the United States Bankruptcy Court for the
District of Connecticut, or any other court with jurisdiction over the
Bankruptcy Case.
1.12 "Bankruptcy Plan" means the Chapter 11 plan of Seller attached to
the Disclosure Statement to be filed by Seller, and the exhibits thereto,
including, inter alia, a copy of this Agreement.
1.13 "Bankruptcy Plan Solicitation" means Seller's solicitation of
acceptances of the Bankruptcy Plan pursuant to Section 1126(b) of the
Bankruptcy Code.
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1.14 "Basic Subscriber Equivalents" means equivalent bona fide
Non-Delinquent CATV subscribers served by commercial establishments and
multi-dwelling units (e.g. bars, taverns, apartment buildings, dormitories,
hospitals, etc.) that are billed on a bulk or otherwise discounted basis for
basic (or expanded basic) service which have paid in full the charges for at
least one month of service, none of which is pending disconnection for any
reason, the number of which Basic Subscriber Equivalents shall be deemed to be
equal to the quotient that is derived from dividing: (a) the gross basic (or,
if applicable, expanded basic) billings to all such commercial establishments
and multi-dwelling units that are billed on a bulk or otherwise discounted
basis for basic (or expanded basic) service (but excluding billings from a la
carte tiers or premium services, installation or other non-recurring charges,
converter rental, any fees or charges for 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-dwelling unit during the
most recent Monthly Billing Period ended prior to the date of calculation (but
excluding billings in excess of a single Monthly Billing Period's charge) by
(b) the rate charged by the respective System to individual homes at the date
of determination for basic service (or, if the respective commercial
establishment or multi-dwelling unit also takes expanded basic service, then by
the rate charged by that System to individual homes at the date of
determination for basic and expanded basic service), exclusive of any charges
for the additional services, franchise fees, taxes, etc. which are excluded
from the calculation of gross basic (or, if applicable, expanded basic)
billings set forth in clause (a) above, such rate to be not less than the
respective System's standard rate for such service.
1.15 "Basic Subscribers" means (i) all bona fide Non-Delinquent CATV
subscribers (i.e., the first connections) that have paid in full, on a
nondiscounted basis (other than senior citizen discounts), for at least one
Monthly Billing Period of the respective services ordered by the respective
subscriber, and to whom the respective System is rendering its basic (or
expanded basic, as the case may be) CATV service (whether or not in conjunction
with any tiered or premium services) at that System's then applicable monthly
rate therefor, none of which subscribers is pending disconnection for any
reason, plus (ii) all Basic Subscriber Equivalents.
1.16 "Basket" has the meaning set forth in Section 15.1(b).
1.17 "Bill of Sale" has the meaning set forth in Section 2.3(i).
1.18 "Business" means the CATV business conducted by Seller on the date
of this Agreement through the Systems in and around the Service Areas.
1.19 "Buyer" means InterLink Communications Partners, LLLP, a Colorado
registered limited liability limited partnership.
1.20 "CARS" means CATV relay service.
1.21 "CATV" means cable television.
1.22 "Closing" has the meaning set forth in Section 4.1.
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1.23 "Closing Adjustment Certificate" means the certificate to be
delivered by Seller to Buyer, not less than ten (10) days prior to the Closing
Date, pursuant to Section 3.4(d).
1.24 "Closing Date" has the meaning set forth in Section 4.1.
1.25 "Closing Escrow Agreement" means an indemnification escrow
agreement substantially in the form of Exhibit 3.5 hereto.
1.26 "Commencement Date" means the date on which the Bankruptcy Case is
commenced.
1.27 "Competing Proposal" has the meaning set forth in Section 9.13(a).
1.28 "Competing Transaction" means one or more transactions effected, or
to be effected, pursuant to a Competing Proposal for all or substantially all
of the Assets which provides for consideration which, in the aggregate, is
equal to or in excess of One Hundred Seventy Two Million Six Hundred Fifty
Thousand dollars ($172,650,000).
1.29 "Competing Proposal Acceptance Notice" has the meaning set forth in
Section 9.13(c).
1.30 "Confirmation Order" means an order of the Bankruptcy Court
confirming the Bankruptcy Plan and approving the sale of the Assets to Buyer
pursuant to the Bankruptcy Plan under, inter alia, Sections 105, 365, 1123 and
1129 of the Bankruptcy Code and otherwise in accordance with the terms of this
Agreement.
1.31 "DeMinimis Agreements" means Seller's written or verbal subscriber
agreements with subscribers (other than bulk subscribers) entered into in the
ordinary course of business for the provision of CATV service at the standard
rates charged by the respective System for such service and those contracts,
leases, assignments, licenses, commitments and agreements that are not Material
Agreements because those contracts, leases, assignments, licenses, commitments
or agreements involve payments of less than $10,000 individually over the life
of such agreements and less than $50,000 in the aggregate for all such
agreements over the life of such agreements and do not impose (individually or
collectively) any significant non-monetary obligations.
1.32 "Deposit" means the sum of Four Million Nine Hundred Fifty Thousand
Dollars ($4,950,000) deposited into escrow by Buyer with the Escrow Agent
pursuant to Section 3.2(a).
1.33 "Deposit Escrow Agreement" means a deposit escrow agreement
substantially in the form of Exhibit 3.2 hereto.
1.34 "Disclosure Statement" means Seller's Disclosure Statement in
connection with the Bankruptcy Plan to be filed in the Bankruptcy Case.
1.35 "Effective Time" means 11:59 p.m. of the day prior to the Closing
Date.
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1.36 "Encumbrances" means, collectively, all debts, claims, liabilities,
obligations, taxes, liens, mortgages, security interests and other encumbrances
of any kind, character or description, whether accrued, absolute, contingent or
otherwise (and whether or not reflected or reserved against in the balance
sheets, books of account and records of Seller).
1.37 "Environmental Law" means any applicable federal, state, or local
law, statute, standard, ordinance, rule, regulation, code, license, permit,
authorization, approval, and any consent order, administrative or judicial
order, judgment, decree, injunction, or settlement agreement between Seller and
a governmental entity relating to the protection, preservation or restoration
of the environment (including, without limitation, air, water, land, plant and
animal life or any other natural resource).
1.38 "Environmental Permit" means any permit, license, approval, consent
or other authorization required by any applicable Environmental Law.
1.39 "Escrow Agent" means Colorado National Bank.
1.40 "Event of Loss" has the meaning set forth in Section 16.1.
1.41 "Excluded Assets" has the meaning set forth in Section 2.2.
1.42 "FAA" means the Federal Aviation Authority.
1.43 "FCC" means the Federal Communications Commission.
1.44 "Final Closing Certificate" means the certificate to be delivered
by Buyer to Seller within ninety (90) days after the Closing Date pursuant to
Section 3.4(d).
1.45 "Final Order" means an order or judgment which has not been
reversed or stayed and as to which (i) the time to appeal or seek review or
certiorari has expired pursuant to Rule 8002 of the Federal Rules of Bankruptcy
Procedure and no appeal or petition for review or certiorari is pending and
(ii) the time to seek rehearing pursuant to Rule 8015 of the Federal Rules of
Bankruptcy Procedure has expired and no petition for rehearing to such Rule
8015 is pending.
1.46 "Franchise" means, with respect to any System, the respective
franchise (or, in lieu thereof, the respective license, consent, permit,
approval or authorization) entered into, issued or otherwise granted by any
state or local (e.g., city, county, parish, town or village) governmental body,
for the construction, installation and operation of that System.
1.47 "Free Service" has the meaning set forth in Section 3.3(b).
1.48 "Hazardous Substance" means any substance or material listed,
defined, designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law, whether by type
or by quantity; Hazardous Substance includes, without limitation, any toxic
waste, pollutant, contaminant, hazardous substance, toxic substance, hazardous
waste, special waste, industrial substance or petroleum or any derivative or
by-product thereof, radon, radioactive material, asbestos, asbestos-containing
material, urea formaldehyde
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foam installation, lead and polychlorinated biphenyl classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated under any Environmental
Law.
1.49 "Homes Passed" means all single family homes, and all residential
units in multi-dwelling units, capable of being serviced by any System without
further trunk or feeder line construction.
1.50 "HSR Act" has the meaning set forth in Section 9.6.
1.51 "Improvements" means all buildings, structures, CATV towers and
fixtures, and other improvements now or hereafter actually or constructively
attached to the Real Estate, and all modifications, additions, restorations or
replacements of the whole or any part thereof.
1.52 "Indemnifiable Damages" means any and all liabilities in respect of
suits, proceedings, demands, judgments, damages, expenses and costs (including,
without limitation, reasonable counsel fees and costs and expenses) incurred in
the investigation, defense or settlement of any claims covered by the
indemnification set forth in this Agreement.
1.53 "Indemnitee" has the meaning set forth in Section 15.3.
1.54 "Indemnitor" has the meaning set forth in Section 15.3.
1.55 "Indemnity Fund" means the sum of Four Million Nine Hundred Fifty
Thousand Dollars ($4,950,000) of the Purchase Price deposited at Closing with
the Escrow Agent pursuant to the Closing Escrow Agreement.
1.56 "Interim Motion" means the motion to be filed by Seller with the
Bankruptcy Court for the purpose of seeking to obtain the Bankruptcy Court's
entry of an Interim Order in substantially the form of the Proposed Interim
Order (a copy of which shall be submitted therewith).
1.57 "Interim Order" means the actual order entered by the Bankruptcy
Court in response to the Interim Motion.
1.58 "Legal Proceedings" has the meaning set forth in Section 5.18.
1.59 "Mandatory Retransmission Obligations" has the meaning set forth in
Section 9.15.
1.60 "Material Agreement" means any agreement of any nature (other than
one required to be listed by Section 5.7) to which Seller is a party, or by
which Seller or any of its properties is bound, which (i) by its terms
obligates Seller to pay more than $10,000, (ii) in the aggregate with all such
agreements obligates Seller to pay more than $50,000, or (iii) imposes upon
Seller any significant non-monetary obligations.
1.61 "Monthly Billing Period" means the respective monthly period
(whether such period is a calendar month or, as in the case of any System that
engages in cycle billing, any other monthly period) to which any
System-generated subscriber bill for CATV services relates.
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1.62 "Morbeck Agreement" means the Severance Agreement dated as of
September 1, 1994 between the Company and J.P. Morbeck.
1.63 "Necessary Contract" means any agreement to which Seller is a party
and which is necessary for Seller's (i) use of any tower, office or headend
site, (ii) pole attachments, (iii) rights-of-way, (iv) service to any
residential development or any commercial or residential dwelling unit, (v)
material licenses and easements, or (vi) operation of the Business and the
Systems, other than any Material Agreement which, if not entered into, would
not have a material adverse effect on the Systems.
1.64 "Non-Delinquent" means a subscriber who does not have a past due
balance of more than two Monthly Billing Periods (except as otherwise set forth
on Schedule 1.1(A) with respect to the bulk accounts itemized thereon) from the
first day of the initial Monthly Billing Period to which a bill relates, except
for past due amounts representing late fees and other minimal ancillary charges
totaling $5.00 or less.
1.65 "Outside Date" has the meaning set forth in Section 4.1.
1.66 "Paying Agent" means such Person as shall be appointed to serve as
the administrative trustee or disbursing agent under the Bankruptcy Plan.
1.67 "Permitted Encumbrances" means (a) any Encumbrances set forth in
Schedule 5.13 hereto or in any title insurance policy provided to Buyer
hereunder, all of which Encumbrances shall be released at or prior to the
Closing (or the release of which shall be fully secured by Seller at the
Closing at Seller's sole cost and expense by an escrow in form acceptable to
Buyer, which acceptance shall not be unreasonably withheld or delayed), except
insofar as any such Encumbrance shall constitute a Permitted Encumbrance under
clause (b), (c), or (d) hereof; (b) any liens for current taxes, assessments or
governmental charges not yet due and payable; (c) any non-monetary Encumbrances
that do not, in any material respect, individually or in the aggregate, affect
or impair Seller's present use of the affected Asset; and (d) any
materialmen's, mechanics', carriers', workmen's, warehousemen's, repairmen's or
other like liens arising in the ordinary course of business (or deposits to
obtain the release thereof), which liens (or deposits) shall be released at or
prior to the Closing (or the release of which shall be fully secured by Seller
at the Closing at Seller's sole cost and expense by an escrow in form
acceptable to Buyer, which acceptance shall not be unreasonably withheld or
delayed).
1.68 "Person" means an individual, corporation, limited liability
company, partnership, sole proprietorship, association, joint venture, joint
stock company, trust, incorporated organization, or governmental agency or
other entity.
1.69 "Phase I Property" has the meaning set forth in Section 9.5.
1.70 "Premium Subscriber" means a Basic Subscriber who subscribes to and
has been (or is to be) charged for any optional single channel or non-basic
tier service for which there is a specified charge.
1.71 "Property Interests" has the meaning set forth in Section 2.1(d).
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1.72 "Proposed Interim Order" means the proposed form of Interim Order
to be submitted to the Bankruptcy Court by Seller pursuant to the Interim
Motion for the purpose of seeking to obtain the Bankruptcy Court's entry of an
Interim Order adopting or otherwise approving the provisions of Sections 4.2,
8.1, 9.13, Article XIV and Section 15.1.
1.73 "Purchase Price" means One Hundred Sixty Five Million Dollars
($165,000,000), as adjusted pursuant to Section 3.4.
1.74 "Qualified Third Party" has the meaning set forth in Section
9.13(a).
1.75 "Real Estate" has the meaning set forth in Section 2.1(a).
1.76 "Required Consents" means those approvals and consents set forth on
Schedule 5.3 that are marked with an asterisk.
1.77 "Seller" means Scott Cable Communications, Inc., a Texas
corporation.
1.78 "Service Areas" has the meaning set forth in the second paragraph
of this Agreement.
1.79 "Signals" means the transmissions (whether television, satellite,
radio or otherwise) of video programming or other information that any System
transmits to its respective subscribers.
1.80 "Signature Date" means the date (or the later of the two dates) on
which Buyer and Seller actually execute this Agreement, as such date(s) is
(are) set forth below Buyer's and Seller's signatures on the signature page
hereof; provided that, as used in this Agreement, the words "the date of this
Agreement", "the date hereof" and words to similar effect shall mean "as of
July 1, 1998" and not the Signature Date.
1.81 "Special Warranty Deed" has the meaning set forth in Section
2.3(iii).
1.82 "System" means all of the assets, property and business
constituting any CATV system of Seller, each of which Systems (together with
the respective Service Areas served thereby) is described in Schedule1.1(B)
hereto.
1.83 "Third Party" means any person other than Buyer or Seller or any
Affiliate of Buyer.
1.84 "Topping Fee" has the meaning set forth in Section 14(c).
1.85 "Topping Offer" has the meaning set forth in Section 9.13(c).
1.86 "Topping Right" has the meaning set forth in Section 9.13(c).
1.87 "Unaudited Financial Statements" has the meaning set forth in
Section 5.4.
The plural of any term defined in the singular, and the singular of any term
defined in the plural, shall have a meaning correlative to such defined term.
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ARTICLE II
PURCHASE AND SALE OF ASSETS OF SELLER
2.1 Purchase and Sale of Assets.
Seller agrees to sell, assign, transfer, convey, bargain, grant and
deliver to Buyer on the Closing Date, and Buyer agrees to purchase from Seller
on the Closing Date, all on the terms and conditions hereinafter set forth, all
of Seller's right, title, and interest, of whatever kind and nature, real,
personal and mixed, tangible and intangible, whether or not reflected on
Seller's books and records, known or unknown, accrued, absolute, contingent or
otherwise, in and to the Assets, all as the same exist on the Closing Date,
free and clear of and expressly excluding all Encumbrances other than the
Permitted Encumbrances, and except for the assumption of obligations expressly
provided for in Section 3.3, including without limitation:
(a) each parcel of real property owned by Seller at the date hereof as
described in Schedule 2.1(A) hereto, all of which parcels (together with any
other parcels of real property acquired by Seller between the date hereof and
the Closing Date) are herein collectively referred to as the "Real Estate";
(b) all Improvements;
(c) all post-Closing Date interests of Seller as lessor (whether named
as such therein or by assignment or otherwise) in all leases and subleases, if
any, of the Real Estate and the Improvements now existing or at any time
hereafter made, and any and all amendments, modifications, supplements,
renewals and extensions thereof, together with all rents, royalties, security
deposits, revenues, issues, earnings, profits, income and other benefits of the
Real Estate or the Improvements due (or to become due) on or after the Closing
Date with respect to the Real Estate or the Improvements or any part thereof,
all of which leases and subleases, as amended to date, are described in
Schedule 2.1(C) hereto;
(d) all interests of Seller in and to all streets, roads and public
places, open or proposed, and all easements, licenses and rights of way, public
and private, tenements, hereditaments, rights and appurtenances, now or
hereafter used in connection with the Systems,
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or belonging, incident or appertaining to, the Real Estate or the Improvements
(the "Property Interests");
(e) all property, plant, equipment, fixtures, office furnishings,
machinery, antenna installations, inventory, cable strand, converters,
amplifiers, house drops, towers, microwave facilities, earth stations and other
auxiliary facilities, and other property owned by Seller;
(f) all of Seller's Franchises (all of which are listed in Schedule
5.7(A) hereto);
(g) all of Seller's Necessary Contracts and Material Agreements
described and categorized in Schedules 5.7(B) and 5.8(A) hereto (other than
Seller's CATV programming agreements, all of which shall be terminated as of
the Closing Date except as provided otherwise in Section 9.15 with respect to
the Mandatory Retransmission Obligations) and the DeMinimis Agreements;
(h) all choses-in-action of Seller, as set forth in Schedule 2.1(H)
hereto;
(i) all patents, copyrights, trademarks, trade names and service marks
owned or held by Seller (other than the names American Cable Entertainment,
Scott Cable Communications, Inc. and derivations thereof, provided that Buyer
shall have the right to use the foregoing names and derivations for a period of
90 days following the Closing Date, or for such longer period of time as Buyer
shall be using commercially reasonable efforts to remove all such names from
any items of equipment or inventory of the Systems, but in no event for more
than 180 days after the Closing Date) and all of the rights associated
therewith (including any and all applications, registrations, extensions and
renewals thereof), all of which are described in Schedule 2.1(I) hereto;
(j) all engineering specifications, maps, plans, diagrams, billing
service reports, computer master tapes, books and records owned by Seller and
relating to the Systems, other than its tax returns and financial records;
provided, however, that Buyer agrees to provide access, at Seller's expense, to
such transferred books and records to Seller during normal business hours upon
reasonable notice if necessary for tax purposes for a period not to exceed six
years after Closing; provided, further, that notwithstanding anything herein to
the contrary, Buyer shall have the right to destroy such transferred books and
records at any time during the last two years of such six-year period after 45
days written notice to Seller of Buyer's intent to destroy such
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transferred books and records unless Seller elects to take possession of the
transferred books and records at its expense within the 45 days after receipt
of such notice from Buyer;
(k) all automotive equipment and motor vehicles utilized in the
operation of the Systems by Seller, all of which are described in Schedule
2.1(K) hereto;
(l) all business radio licenses, and all applications therefor, all of
which are listed in Schedule 5.7(B) hereto;
(m) all subscriber lists and rights with respect thereto of Seller, and
the names used by Seller in the operation of the Systems (other than the names
American Cable Entertainment, Scott Cable Communications, Inc. and derivations
thereof, provided that Buyer shall have the right to use the foregoing names
and derivations for a period of 90 days following the Closing Date, or for such
longer period of time as Buyer shall be using commercially reasonable efforts
to remove all such names from any items of equipment or inventory of the
Systems, but in no event for more than 180 days after the Closing Date),
provided, however, that Buyer agrees to comply with any applicable right of
privacy laws with respect thereto;
(n) all of Seller's accounts receivable; and
(o) all earth stations and other auxiliary facilities.
All of the foregoing business, assets, properties and rights to be
transferred to Buyer hereunder are collectively referred to herein as the
"Assets".
2.2 Excluded Assets.
Anything in the foregoing to the contrary notwithstanding, there shall be
excluded from the Assets (and Seller shall be entitled to retain): (i) all
cash and cash equivalents, (ii) all advertising sales accounts receivable
representing advertising sales allocable to advertisements exhibited prior to
the Closing Date, and (iii) all of the assets listed on Schedule 2.2 hereto
(collectively, the "Excluded Assets").
2.3 Instruments of Transfer.
At the Closing, Seller will deliver to Buyer the following:
(i) a bill of sale in substantially the form of Exhibit 2.3(i) hereto
(the "Bill of Sale");
(ii) an instrument of assignment and assumption in substantially the
form of Exhibit 2.3 (ii) (the "Assignment And Assumption Agreement");
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(iii) for each parcel of Real Estate, a special warranty deed in the form
customarily used in the jurisdiction where the respective parcel of Real Estate
is located, or, in lieu thereof, in substantially the form of Exhibit 2.3(iii)
hereto (each a "Special Warranty Deed"); and
(iv) the originals (or, if not then in Seller's possession, such copies
as Seller then possesses) of all instruments and other data relating to the
Assets, business and operations of Seller with respect to the Systems and,
simultaneously with such delivery, Seller will grant Buyer actual possession
and operating control of such Assets, business and operations. At any time and
from time to time after the Closing Date, on Buyer's reasonable request, Seller
will execute, acknowledge and deliver such further deeds, assignments and
transfers and take such further actions as may be reasonably required in
conformity with this Agreement for the adequate sale assignment, transfer and
grant to Buyer of the Assets.
ARTICLE III
PURCHASE PRICE
3.1 Purchase Price and Payments.
The purchase price for the sale of the Assets under this Agreement shall
be One Hundred Sixty Five Million Dollars ($165,000,000), as adjusted pursuant
to Section 3.4 (the "Purchase Price"). The entire Purchase Price except for
the amount of the Indemnity Fund shall be payable at the Closing by the wire
transfer of federal funds to an account or accounts designated by Seller, in a
written notice delivered by Seller to Buyer. Buyer shall deposit the amount of
the Indemnity Fund provided in Section 3.5 directly with the Escrow Agent on
the Closing Date. Buyer and Seller agree that the allocation of the Purchase
Price among the Assets shall be in accordance with an appraisal to be conducted
and delivered to Buyer and Seller within sixty (60) days after the Signature
Date by a reputable appraisal firm selected and retained by Buyer, at Buyer's
expense, with experience in the valuation and appraisal of CATV system assets,
and such allocation shall be used by both Buyer and Seller in any federal,
state and/or local income or other tax or information return filed by it, which
includes an evaluation of the Assets (i.e., allocation of the Purchase Price),
provided that not less than thirty five percent (35%) of the Purchase Price
shall be allocated to the tangible assets among the Assets. Seller shall
promptly notify Buyer, and Buyer shall promptly notify Seller, of any
adjustment that
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comes to its attention which is proposed to be made by any federal, state or
local taxing authority with respect to the allocation of the Purchase Price.
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3.2 Deposit in Escrow.
(a) On (or within two business days after) the Signature Date, Buyer
will deposit in escrow with the Escrow Agent under the Deposit Escrow Agreement
the sum of Four Million Nine Hundred Fifty Thousand Dollars ($4,950,000) (the
"Deposit"). At the Closing, Buyer and Seller shall authorize and direct the
Escrow Agent to pay the Deposit plus accrued interest to Seller on the Closing
Date, which combined sum shall be credited against the Purchase Price. In the
event that the Closing shall not occur prior to the Outside Date by reason of
any breach or default hereunder by Buyer as determined by a Final Order, and
provided that Seller shall have performed, or shall stand ready, willing, and
able to perform, its obligations under this Agreement in all material respects,
the Escrow Agent, in accordance with the terms of the Deposit Escrow Agreement,
shall pay the Deposit and all accrued interest to Seller, which Seller shall
retain as liquidated damages, and upon such payment, all obligations of Buyer
to Seller (and all obligations of Seller to Buyer) hereunder shall terminate,
except as otherwise expressly provided in the Deposit Escrow Agreement with
respect to such legal fees and expenses, if any, as Seller may have incurred in
connection with obtaining the foregoing payment. Seller and Buyer hereby agree
that any damages which Seller or any person claiming through or under Seller
may at any time allege to have been suffered by Seller or any such person
arising out of or related to any breach by Buyer are not easily measured and
that the proceeds of the Deposit and all accrued interest represent a
reasonable estimate of the damages to be suffered by Seller and not a penalty.
Accordingly, Buyer and Seller hereby agree that the payment of the proceeds of
the Deposit and all accrued interest shall be a liquidated sum in full
satisfaction and complete payment of all such damages and in lieu of any and
all other damages, including without limitation, all consequential, incidental
and punitive damages, arising out of or related to such breach by Buyer and
that no additional damages shall be payable to Seller or any such person
arising out of or related to such breach (except as otherwise expressly
provided in the Deposit Escrow Agreement with respect to such legal fees and
expenses, if any, as Seller may have incurred in connection with obtaining the
foregoing payment).
(b) In the event that (i) the Closing does not occur prior to the
Outside Date for any reason other than a breach or default by Buyer under this
Agreement, or (ii) this Agreement is terminated by Buyer or Seller for any
reason in accordance with Section 14 (other
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than a termination by Seller based upon a breach or default by Buyer under this
Agreement), Buyer and Seller shall authorize and direct the Escrow Agent to
return the Deposit plus interest to Buyer, in accordance with the terms of the
Deposit Escrow Agreement, without prejudice to any other of Buyer's remedies
hereunder.
(c) Concurrent with the execution of this Agreement, Buyer, Seller and
Escrow Agent are entering into the Deposit Escrow Agreement, subject to the
Escrow Agent's timely receipt of the Deposit pursuant to Section 3.2(a).
3.3 Assumption of Liabilities.
On the Closing Date, Buyer shall execute and deliver to Seller the
Assignment And Assumption Agreement pursuant to which Buyer shall assume and
agree to perform and discharge the following with respect to the Systems as
they become due for all periods from and after the Effective Time, to the
extent not theretofore performed or discharged (the "Assumed Liabilities"):
(a) All obligations of Seller attributable and relating to the period
after the Effective Time under all Franchises, Necessary Contracts, Material
Agreements, and all such other leases, contracts and agreements in existence on
the Closing Date as are set forth on Schedules 2.1(C), 5.7(A), 5.7(B) and
5.8(A) hereto, or which are not required to be set forth under the provisions
of Section 5.8 because such leases, contracts, or other agreements are
DeMinimis Agreements; provided, however, that Seller shall have paid or
discharged, and Buyer shall not be liable for, any cure payment required to be
made in connection with the assumption and assignment of any such agreement
under section 365 of the Bankruptcy Code or any other amount attributable and
relating to the period prior to the Effective Time;
(b) The obligation of Seller and its assigns to provide free,
discounted or reduced price CATV services to (i) those Persons identified on
Schedule 3.3(B) hereto, (ii) those Persons as required pursuant to any
Franchise, and (iii) those Persons where such service can be terminated by
Buyer upon not more than 90 days notice (the above obligations being herein
collectively referred to as "Free Service");
(c) All obligations of Seller arising out of customer prepayments and
converter deposits and all accrued and unpaid expenses and liabilities to the
extent an adjustment to the Purchase Price in favor of Buyer is made pursuant
to Section 3.4(a)(ii) and Section 3.4(c);
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(d) All obligations of Seller for any and all state and local sales or
transfer taxes payable in connection with Seller's sale and transfer of the
Assets to Buyer;
(e) All obligations of Seller under the Morbeck Agreement to the extent
an adjustment to the Purchase Price in favor of Buyer is made pursuant to
Section 3.4(a)(iv); and
(f) All obligations of Seller for its ordinary course payables and
other ordinary course obligations accrued or outstanding on the Closing Date,
but only to the extent an adjustment to the Purchase Price is made in favor of
Buyer pursuant to Section 3.4(g).
Buyer shall not be liable for any liabilities, contracts, agreements or
other obligations of Seller which are not specifically assumed hereunder, and
Seller shall indemnify Buyer against all such liabilities, contracts,
agreements and other obligations in accordance with the provisions of Section
15.1.
3.4 Adjustments and Prorations.
The operation of the Systems until the Effective Time shall be for the
account of Seller and thereafter for the account of Buyer. The operation of
the Systems and the income and expenses attributable thereto shall be prorated
as of the Effective Time. The Purchase Price shall be adjusted and the
revenues and expenses relating to the Systems shall be prorated, as follows
(all such adjustments and prorations being effective as of the Effective Time):
(a) The Purchase Price shall be reduced by the sum of the following
amounts: (i) an amount equal to $2,132 for each Basic Subscriber less than
77,400; (ii) the amount of Seller's liabilities with respect to subscriber
prepayments and converter deposits, the responsibility for which is hereby
assumed by Buyer under this Agreement (that portion of those prepayments
relating to services provided prior to the Effective Time being for the account
of Seller, and that portion of those prepayments relating to services to be
provided by Buyer after the Effective Time being for the account of Buyer);
(iii) the aggregate amount of all state and local sales or transfer taxes
payable in connection with the sale and transfer to Buyer of such of the Assets
that are located in Colorado or Nebraska, and one-half of the aggregate amount
of all state and local sales or transfer taxes payable in connection with the
sale and transfer to Buyer of such of the Assets that are located in any state
other than Colorado or Nebraska;and (iv) the amount of Seller's obligations to
J.P. Morbeck at Closing pursuant to the Morbeck Agreement; provided, however,
an amount equal to the final six months' of severance payments pursuant to the
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Morbeck Agreement shall be delivered by Buyer to Baker & Hostetler LLP;
Attention: Stuart G. Rifkin, Esq. to be held in escrow to cover the contingent
payments potentially owed Morbeck under the Morbeck Agreement. In the event
that any funds remain in the escrow on the date which is one year from the
Closing Date and are not required to be paid to Morbeck under the Morbeck
Agreement, such funds shall be paid to the Paying Agent on the tenth business
day following the first anniversary of the Closing Date.
(b) The Purchase Price shall be increased by the sum of the following
amounts: (i) an amount for Seller's subscriber accounts receivable for
services rendered by Seller prior to the Closing Date, as determined in
accordance with generally accepted accounting principles, equal to: (a) 100% of
the face amount of the receivables which, as of the Effective Time, are thirty
(30) days or less past due from the first day of the respective Monthly Billing
Period to which a bill relates; (b) 80% of the face amount of the receivables
which, as of the Effective Time, are more than thirty (30) days but not more
than sixty (60) days past due from the first day of the respective Monthly
Billing Period to which a bill relates; and (c) 0% of the face amount of the
receivables which, as of the Effective Time, are more than sixty (60) days past
due from the first day of the respective Monthly Billing Period to which a bill
relates, excepting from every such past due determination in each case those
late fees and other minimal ancillary charges that do not exceed $5.00 per
subscriber.
(c) The Purchase Price shall be further adjusted, and shall be
increased or decreased, as appropriate, based upon the following proration: all
revenues (other than those revenues attributable to subscriber accounts
receivable which revenues are covered separately in Section 3.4(b)) and
expenses, costs and liabilities relating to the Systems (including, without
limitation: franchise fees, pole rental fees, other rental or similar charges
or payments payable in respect of any leases, contracts, or agreements of
Seller being assumed by Buyer, sales and use taxes payable in respect of CATV
service and equipment furnished in connection with the operation of the
Systems, power and utility charges, real and personal property taxes and
rentals, applicable copyright or other fees, sales and service charges, taxes,
and similar prepaid and deferred items), shall be prorated between Seller and
Buyer, with Seller being entitled to all such revenues and liable for all such
expenses, costs and liabilities as relate to the period at or prior to the
Effective Time and Buyer being entitled to all such revenues and liable for all
such expenses, costs and
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liabilities as relate to the period after the Effective Time, all as determined
in accordance with generally accepted accounting principles consistently
applied, subject to Section 3.4(f) below.
(d) Seller shall deliver to Buyer, not less than ten (10) days prior to
the Closing Date, a certificate (the "Closing Adjustment Certificate") signed
by a designated officer of Seller, which shall set forth Seller's good faith
estimates of the respective amounts of the adjustments and prorations set forth
in Sections 3.4(a), (b), and (c) above, as of the Effective Time. The Closing
Adjustment Certificate shall be in form and substance acceptable to Buyer,
which acceptance shall not be unreasonably withheld or delayed, and Seller's
good faith estimates set forth therein shall be reasonably accurate, and Seller
shall therewith deliver to Buyer a copy of such supporting evidence as shall be
appropriate hereunder and as Buyer may reasonably request. At the Closing, the
Purchase Price shall be adjusted by Buyer and Seller on the basis of Seller's
foregoing Closing Adjustment Certificate, to account for the adjustments and
prorations required by Sections 3.4(a), (b), and (c) above, subject to a final
settlement thereof after the Closing Date as provided in Section 3.4(e).
(e) Within ninety (90) days after the Closing Date, Buyer shall deliver
to Seller a certificate (the "Final Closing Certificate") to be signed by a
designated officer of the general partner of Buyer setting forth any changes to
the adjustments made as of the Closing pursuant to Sections 3.4(a), (b), and
(c), together with a copy of such supporting evidence as shall be appropriate
hereunder and as Seller may reasonably request. If Seller shall conclude that
the Final Closing Certificate does not accurately reflect the changes to be
made to the closing adjustments pursuant to this Section 3.4, Seller shall,
within thirty (30) days after its receipt of the Final Closing Certificate,
provide to Buyer its written statement (together with any supporting
documentation as Buyer may reasonably request) of any discrepancy or
discrepancies believed to exist. Seller's representatives shall be permitted
access to all books, records, billing service reports and other documents
necessary or appropriate for the determination of the adjustments and
prorations.
Buyer and Seller shall attempt jointly to resolve any discrepancies within
thirty (30) days after receipt of Seller's discrepancy statement, which
resolution, if achieved, shall be binding upon all parties to this Agreement
and not subject to dispute or review. If Buyer and Seller cannot resolve the
discrepancies to their mutual satisfaction within such thirty (30) day period,
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Buyer and Seller shall, within the following ten (10) days, jointly retain the
Chicago office of Arthur Andersen LLP, or the Chicago office of another
mutually-acceptable nationally known independent public accounting firm to
review the Final Closing Certificate together with Seller's discrepancy
statement and any other relevant documents. The cost of retaining such
independent public accounting firm shall be borne equally by Seller and Buyer.
Such firm shall report its conclusions in writing to Buyer and Seller and such
conclusions as to adjustments pursuant to this Section 2.4 shall be conclusive
on Seller and Buyer and not subject to dispute or review.
If as a result of such adjustments, Buyer shall owe any amount to Seller,
Buyer shall pay that amount to Seller in immediately available funds within
three business days of such determination, and if Seller shall owe any amount
to Buyer, Seller shall pay that amount to Buyer in immediately available funds
within three business days of such determination (it being agreed that any such
amount to be paid by Seller shall not be subject to the limitations of Section
15.1 and shall not reduce the Indemnity Fund; provided, however, that at
Buyer's option, Buyer may seek payment thereof from the Indemnity Fund).
(f) Section 3.4(c) is intended to establish the Effective Time as the
cutoff date from and after which Buyer shall be entitled to all of the
revenues, and liable for all of the costs and expenses, of operating the
Systems and shall not be construed as an assumption by Buyer of any contract,
agreement, obligation or liability which is not referenced in Section 3.3.
(g) Seller shall cause all of Seller's ordinary course payables and
other ordinary course obligations accrued or outstanding on the Closing Date to
be satisfied in full (or otherwise provided for) on the Closing Date pursuant
to the Bankruptcy Plan. In the event that this Agreement is approved, and the
sale of the Assets to Buyer is authorized pursuant to the Approval Order, Buyer
shall assume the payment of such claims and shall be entitled to a deduction
from the Purchase Price in the amount thereof.
3.5 Indemnity Escrow.
At the Closing, Buyer shall deposit with the Escrow Agent the sum of Four
Million Nine Hundred Fifty Thousand Dollars ($4,950,000) of the Purchase Price
(the "Indemnity Fund") pursuant to the Closing Escrow Agreement. One-half of
the Indemnity Fund, less the amount of all claims made by Buyer for
indemnification pursuant to Section 15.1 (together with the portion of accrued
interest attributable to such claims), provided that the aggregate amount of
such
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claims that are based upon breaches of Seller's representations and warranties
contained herein shall exceed the Basket, shall be paid to the Paying Agent
under the Closing Escrow Agreement at the close of business on the first
business day after six (6) months from the Closing Date. The remainder of the
Indemnity Fund, less the amount of all claims made by Buyer for indemnification
pursuant to Section 15.1 (together with the portion of accrued interest
attributable to such claims), provided that the aggregate amount of such claims
that are based upon breaches of Seller's representations and warranties
contained herein shall exceed the Basket, shall be paid to Paying Agent at the
close of business on the first business day after the first anniversary date of
the Closing Date. Seller expressly agrees that any post-Closing Date
adjustments required to be made to the Purchase Price pursuant to Sections
3.4(a), (c) and (e) and payable to Buyer shall be paid directly by Seller to
Buyer in immediately available funds and shall not reduce the amount of the
Indemnity Fund; provided that Buyer may, at its option, make a claim against
the Indemnity Fund for such Purchase Price adjustment amounts, which claim
shall not be subject to either the Basket or any other limitation as to the
maximum amount thereof which Buyer may seek or be entitled to indemnification
under Section 15 or any other provision of this Agreement.
ARTICLE IV
CLOSING
4.1 Closing Date.
Subject to the satisfaction of the terms and conditions of this Agreement,
the closing of the transactions contemplated hereby (the "Closing") shall occur
at 10:00 a.m. at the offices of Baker & Hostetler LLP in Denver, Colorado on
such date as Seller and Buyer shall mutually designate (or, absent any such
mutual designation, on such date as Buyer shall unilaterally designate upon at
least fifteen (15) business days prior written notice to Seller), which mutual
or unilateral designation shall be made within three (3) business days
following the delivery of notice by Seller to Buyer that all conditions to
Buyer's obligation to consummate the Closing have been satisfied (or could
reasonably be expected to be satisfied) or waived (the "Closing Date");
provided, that in no event shall the Closing Date occur (or be designated to
occur) later than November 30, 1998, unless either party upon prior written
notice to the other at least two
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business days prior to such November 30 date elects to extend such date for up
to an additional six months (not to extend beyond May 31, 1999, subject to the
last sentence of this Section) in order to allow Seller the further opportunity
to obtain all of the approvals and consents required to consummate the
transactions contemplated by this Agreement in the event that any such
approvals or consents have not been received by November 30, 1998, but are
being actively pursued with a reasonable expectation of their receipt. That
November 30, 1998 date, as the same may hereafter be extended to May 31, 1999
as hereinbefore provided (and as the same may hereafter be extended, or further
extended, pursuant to the last sentence of this Section), is hereinafter
referred to as the "Outside Date." Notwithstanding anything contained herein
to the contrary, without the consent of Buyer, the Closing shall occur no
sooner than sixty (60) days after the entry of the Confirmation Order;
provided, that if the Outside Date would otherwise occur during that 60-day
period, then either party shall have the right to extend the Outside Date to
the first business day occurring immediately after the expiration of that
60-day period.
4.2 Default at Closing.
If Seller shall breach this Agreement by failing or refusing to consummate
the transactions set forth in this Agreement on or prior to the Closing Date,
then, in addition to any other remedies available to Buyer, Buyer may, at its
option, invoke any equitable remedies it may have to enforce delivery of the
Assets hereunder, including, without limitation, an action or suit for specific
performance. Seller acknowledges that in the event of Seller's breach of its
obligations hereunder, Buyer will suffer irreparable harm and Seller hereby
irrevocably waives the defense that Buyer has an adequate remedy at law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SELLER
As an inducement to Buyer to enter into this Agreement and to consummate
the transactions contemplated hereby, Seller hereby makes the following
representations and warranties:
5.1 Corporate Existence and Qualification.
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of Texas. Seller has the requisite
corporate power and authority to own, lease, '
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use and operate its properties and to transact the business in which it is
engaged, and is qualified to do business in all jurisdictions in which the
nature of the business conducted by it makes such qualification necessary,
except where the failure to qualify will not have a material adverse effect on
the Systems.
5.2 Authorization; No Breach.
The execution and delivery of this Agreement and all other instruments or
documents executed by Seller in connection herewith, as well as all actions
required to be taken hereunder or thereunder by Seller, have been duly
authorized by Seller, and upon execution and delivery, each such document will
constitute the valid and binding obligation of Seller enforceable upon and in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally and by general principles of equity. All persons who have executed
this Agreement on behalf of Seller are authorized to do so under its
organizational documents and the laws of its state of creation.
5.3 Effect of Agreement.
(a) All approvals and consents required under (i) any of Seller's
Franchises, (ii) any of Seller's material permits, licenses, leases, contracts
and agreements and (iii) under any applicable government regulations in order
for the sale of the Assets to occur pursuant to this Agreement are listed in
Schedule 5.3 hereto.
(b) Subject to obtaining the requisite approvals and consents with
respect to the Franchises, permits, licenses, leases, contracts and agreements
listed in Schedule 5.3 hereto, neither the execution, delivery and performance
by Seller of this Agreement nor the consummation of the transactions
contemplated hereby will (i) conflict with, or result in a breach of the terms
of, or constitute a default under, or a violation of, any Franchise or any
material permit, license, lease, contract or agreement to which Seller is a
party or by which it or any of its properties is bound, or (ii) result in the
violation of any law, rule, regulation, order, writ, judgment, decree,
determination or award presently in effect or having applicability to Seller,
except for suchPhase I conflicts, breaches, defaults, or violations as would
not have a material adverse effect on the Systems. Subject to obtaining such
approvals and consents, such execution, delivery, performance or consummation
will not give to others any rights of termination,
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acceleration or cancellation in or with respect to any franchises, permits,
licenses, leases or agreements of (or relating to the business of) Seller.
5.4 Financial Statements.
Seller has delivered to Buyer a copy of (i) Seller's Balance Sheet at
December 31, 1997 and related Statement of Operations and Statement of Changes
in Financial Position of Seller for its fiscal year then ended, which have been
audited by Seller's independent certified public accountant (the "Audited
Financial Statements"), and (ii) Seller's unaudited Balance Sheet at March 31,
1998 and related Statements of Operations and Statements of Changes in
Financial Position of Seller for the quarters ended March 31, 1998 and 1997
(the "Unaudited Financial Statements"). The Audited Financial Statements and
the Unaudited Financial Statements (i) were prepared in conformity with
generally accepted accounting principles consistently applied, subject to
normal year-end audit adjustments and footnotes in the case of the Unaudited
Financial Statements (none of which are expected to be material in amount), and
(ii) present fairly the financial position of Seller at the dates indicated and
the results of operations of Seller and changes in financial position for the
periods indicated. The Additional Financial Statements to be delivered
pursuant to Section 9.1(ii) that are for quarterly periods will (i) be prepared
in conformity with generally accepted accounting principles applied
consistently with the Audited Financial Statements, and (ii) present fairly the
financial position of Seller at the dates indicated and the results of
operations of Seller and changes in financial position for the periods
indicated, subject to normal year-end audit adjustments and footnotes (none of
which are expected to be material in amount). The Additional Financial
Statements to be delivered pursuant to Section 9.1(ii) that are for monthly
periods will (i) be prepared in conformity with generally accepted accounting
principles applied consistently with the Audited Financial Statements, and (ii)
present fairly the results of operations of Seller for the periods indicated,
subject to normal year-end audit adjustments and footnotes (none of which are
expected to be material in amount). Whenever references are made throughout
this Agreement to financial statements, it will be understood that all notes
and exhibits are included therein, except as herein otherwise expressly
provided.
5.5 Undisclosed Liabilities.
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Seller has no material liabilities or obligations, whether accrued,
absolute, contingent or otherwise, and whether due or to become due, and Seller
does not know of any basis for any claim against it for any such liabilities or
obligations, except (i) to the extent set forth in this Agreement or in the
Schedules hereto (or which otherwise are not required to be disclosed hereunder
because they involve agreements with payments of less than $10,000 individually
over the life of any such agreement and $50,000 in the aggregate for all such
agreements over the life of all such agreements), or in the Audited Financial
Statements or other documents concerning Seller delivered to Buyer prior to the
date hereof, or (ii) liabilities, debts or obligations incurred in the ordinary
course of business of Seller since December 31, 1997, none of which
individually or in the aggregate will have a material adverse effect upon the
business or condition, financial or otherwise, of Seller.
5.6 Tax Returns and Audits.
Seller has filed with the appropriate agencies all tax returns and tax
reports required by law to be filed by Seller with respect to the operation of
the Systems, which failure to file would have a materially adverse effect on
Seller. Seller has paid all of its assessments, fees and taxes to the extent
that the same have become due and payable. Except as set forth on Schedule 5.6
hereto, to the best of Seller's knowledge, there exists no unpaid federal,
state or local income or other tax with respect to the existence or operations
of the Systems, or the Assets except for accrued taxes not yet due and payable.
Except as set forth in Schedule 5.6 hereto, Seller does not hold and has not
held a permit, registration, certificate or like instrument as a "dealer" or
other collecting agent from a state taxing authority under which Seller
collects sales tax from Seller's business operations and remits such tax to
such taxing authority. Seller is in substantial compliance with all applicable
sales and use tax laws and regulations. Seller is not a "United States real
property interest" and is not a "U.S. real property holding corporation" within
the meaning of Section 897 of the Code and applicable treasury regulations.
5.7 Franchises and Necessary Contracts.
Seller has validly and legally obtained and duly holds the Franchises and
Necessary Contracts. Attached hereto as Schedule 5.7(A) is a true and accurate
list of each Franchise held by Seller. Attached hereto as Schedule 5.7(B) is a
true and accurate list of each Necessary Contract (other than the pole
attachment agreements, none of which are being assigned to or
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assumed by Buyer except those that are expressly assignable to Buyer and which
Buyer hereafter timely requests be assigned to it). Except as set forth on
Schedule 5.7(C) hereto, Seller is in substantial compliance (and the operations
of the Systems and the Assets are being conducted in substantial compliance)
with the provisions of all Franchises and Necessary Contracts, all of the
Franchises and Necessary Contracts are in full force and effect, and there are
no pending (or to Seller's knowledge, threatened) modifications, amendments
(other than extensions of the term) or revocations by the issuers of the
Franchises or any other third parties with respect to the Necessary Contracts.
Seller does not have any knowledge of any material breach of any Necessary
Contract by any other parties thereto. Except as disclosed in Schedule 5.7(C)
or as specifically contained in the Franchises, Necessary Contracts, or other
material contracts which have been provided to Buyer by Seller, no promises or
commitments which are to be fulfilled after the Closing Date have been made
with respect to capital improvements relating to the Systems. Pursuant to
subsections (a) through (g) of Section 626 of the Cable Communications Policy
Act of 1984, as amended, Seller has timely submitted proposals for renewal of
all Franchises having a remaining term of thirty-six (36) months or less as of
the date hereof, and has provided Buyer with copies of all proposals for
renewal, preliminary assessments and franchisor determinations described in
subsection (c) of said Section 626. Seller has no knowledge of any material
breach or anticipated material breach by the other parties to the Franchises or
Necessary Contracts.
Except as otherwise disclosed in Schedule 5.7(B) hereto, as of the date of
this Agreement (i) Seller has not received any notice from any utility or
governmental agency to relocate any pole attachments or cable lines that has
not been and cannot be complied with prior to the expiration of the time period
(if any) specified therein, and (ii) Seller has no knowledge of any pole
attachments or cable lines of Seller that are required to have been relocated
at or prior to the date hereof, but have not yet been relocated. In the event
that Seller shall receive, subsequent to the date of this Agreement but on or
before the Closing Date, any request from any utility or governmental agency
for the relocation of any of Seller's cable lines or pole attachments, Seller
shall give Buyer prompt written notice thereof and shall in good faith
undertake the scheduling, commencement and completion of such relocation to the
extent that Seller would customarily do so in the ordinary course of its
business within the time remaining prior to the Closing Date, it
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being agreed that Seller shall not have any other obligation (or any
post-Closing obligation) with respect thereto; provided, that the Seller shall
reimburse Buyer for the costs and expenses of any such relocation necessitated
by such request from any utility or governmental agency that is not completed
prior to the Closing Date and which is attributable to Seller's not being in
compliance with the applicable clearance and spacing requirements of the
respective pole license.
5.8 Material Agreements and Obligations.
(a) Schedule 5.8(A) hereto lists the Material Agreements. Except for
those contracts listed on the Schedules hereto, Seller is not a party to any
written or oral contract with respect to the Systems that is not cancelable
without penalty upon 30 days' notice or less, including any:
(i) bonus, incentive, pension, profit sharing, retirement,
hospitalization, insurance, or other plan providing for deferred or
other compensation to employees, or any other employee benefit or
"fringe benefit" plan, including, without limitation, vacation,
sick leave, medical or other insurance plans or any union
collective bargaining or any other contract with any labor union;
(ii) employment contract for any person or entity on a
full-time, part-time, consulting or other basis;
(iii) agreement or indenture relating to the borrowing of money
or to mortgaging, pledging or otherwise placing a lien on any asset
or group of assets of Seller;
(iv) guarantee of any obligation;
(v) lease or agreement under which it is lessee or lessor, or
holds or operates any property, real or personal, owned by any
other party, except for any lease under which the aggregate annual
rental payments do not exceed $10,000;
(vi) agreement or group of related agreements with the same
party or any group of affiliated parties which requires or may in
the future require aggregate consideration by or to Seller in
excess of $10,000.
(b) Except as disclosed on Schedule 5.8(B) hereto, Seller has performed
all obligations required to be performed by it and is not in default under, or
in breach of, or in receipt of any claim of default under, any material
agreement to which Seller is a party or by which Seller or any of its
properties is bound except where any such breach or default would not
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be reasonably expected to have a material adverse effect on the Business; and
Seller does not have any knowledge of any breach or anticipated breach by the
other parties to any material contract or commitment to which Seller is a party
or by which Seller or any of its properties is bound.
(c) There is no term or provision of any mortgage, indenture, license,
permit, franchise, contract, agreement or instrument to which Seller is a party
or by which it or any of its properties is bound, or, to the knowledge of
Seller, of any provision of any federal or state judgment, decree, order,
statute, rule or regulation applicable to or binding upon Seller or its
properties, which does or will materially adversely affect the business,
prospects, condition, affairs or operations of Seller, the Business, or the
Systems, except for matters affecting the CATV industry generally.
5.9 Systems' Capacity, Subscribers and Rates.
Schedule 5.9(A) hereto lists, as of December 31, 1997 (or as of the
respective date therein specified), (i) the system bandwidth and maximum
National Television System Committee ("NTSC") analog channel capacity for each
System, (ii) programming offered, (iii) approximate linear miles of aerial and
underground plant (i.e., main trunk and distribution or feeder cable), (iv) the
number of Homes Passed, (v) number of Basic Subscribers, (vi) the aggregate
number of premium units subscribed to by Seller's Premium Subscribers, and
(vii) subscriber rates for all services including basic and premium services,
tier services, additional outlets and converter rental charges in and for the
Service Areas.
5.10 Pole Attachment Agreements.
Schedule 5.10 sets forth, as of the date of this Agreement, the
approximate number of pole attachments and the names of the utilities providing
the attachments. Seller has provided copies to Buyer of the most recent
invoice for the pole attachments with each utility for the respective billing
period. Seller has made all required payments for its pole attachments and is
not in default under, or in breach of, or in receipt of any claim of default
under any arrangement for pole attachments except where any such breach or
default would not be reasonably expected to have a material adverse effect on
the Business.
5.11 Employees.
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Seller is not aware that any officer, executive employee or any group of
employees of Seller has or have any plans to terminate his, her or their
employment with Seller; provided, that Seller's foregoing representation and
warranty shall not be deemed to restrict Seller from terminating all or
substantially all of Seller's officers and employees (except for certain of
Seller's officers and employees located at Seller's corporate office in
Stamford, CT) effective upon the consummation of the Closing. Seller has
complied in all material respects with all applicable laws relating to the
employment of labor, including provisions thereof relating to wages, hours,
equal opportunity, collective bargaining and the payment of social security and
other taxes. Except as set forth in Schedule 5.11 hereto, at the date of this
Agreement Seller is not, nor during the 12 months prior to the date of this
Agreement has Seller been, involved in any labor discussion with any unit or
group seeking to become the bargaining unit for any of its employees. Buyer
shall have no obligation to hire or employ any employee of Seller or, subject
to applicable federal and state laws, to assume any obligations or liabilities
of Seller relating to its employees except as herein otherwise provided with
respect to the Morbeck Agreement.
5.12 Absence of Certain Developments.
Except as set forth on Schedule 5.12 hereto, and except for the
transactions contemplated by this Agreement, Seller has not insofar as the
Systems or the Assets are concerned, since December 31, 1997:
(i) borrowed any amount or incurred or become subject to any
liabilities (absolute or contingent) except current liabilities incurred
in the ordinary course of business;
(ii) mortgaged or pledged any of its assets, tangible or
intangible, or subjected them to any lien, charge or other encumbrance,
except liens for current property taxes not yet due and payable and liens
securing indebtedness under pre-1997 credit facilities;
(iii) sold, assigned or transferred any of its tangible assets,
except in the ordinary course of business, or cancelled any debts or
claims (other than unpaid subscriber debts and claims in the ordinary
course of business);
(iv) suffered any substantial losses or waived any material
rights, whether or not in the ordinary course of business;
(v) made any changes in employee compensation except in the
ordinary course of business and consistent with past practices;
(vi) entered into any other transaction other than in the
ordinary course of business, or entered into any other material
transaction, whether or not in the ordinary course of business;
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(vii) suffered any material damage, destruction or casualty loss,
whether or not covered by insurance; or
(viii) entered into any agreement or understanding to do any of
the foregoing.
5.13 Real Property.
Schedule 2.1(A) hereto contains a legal description of each parcel of Real
Estate owned by Seller together with a description of the type of use of each
such parcel. Seller has furnished to Buyer a copy of any title insurance
policy or other evidence of title issued with respect to each parcel of Real
Estate owned by Seller. Except for any Permitted Encumbrances, Seller is the
sole owner (both legal and equitable) of, and has good and marketable title to,
each parcel of Real Estate listed on Schedule 2.1(A) hereto. The use (i.e.,
headend, tower or office site) of each real property lease to which Seller is a
party is identified on Schedule 5.7(B). All of the Real Estate, and all of the
real property leased by Seller, utilized as a headend, office or tower site has
unfettered access to public roads or streets and all utilities and services
necessary for the proper conduct and operation of the Systems. None of the
towers (including any guy anchors or wires), buildings or other facilities
located upon any parcel of Real Estate or leased real property that is utilized
as a headend or tower site constitutes a trespass upon the property of any
other person or entity.
5.14 Title to Assets; Personal Property.
Seller is the sole owner (both legal and equitable) of and has good and
marketable title to the Assets constituting personal property, tangible and
intangible, free and clear of all mortgages, liens, security interests,
charges, claims, restrictions and other encumbrances of every kind other than
with respect to indebtedness to be discharged at Closing out of the Closing
proceeds and the Permitted Encumbrances. The material items of machinery,
equipment and other tangible assets included in the Assets are in satisfactory
operating condition, reasonable wear and tear excepted, and conform in all
material respects to all applicable ordinances, rules, regulations and
technical
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standards, including the rules, regulations and technical standards of the FCC
and the local franchise authorities, and all applicable building, zoning and
other laws. None of the owners of any property on which any trunk or feeder
lines or other facilities of the Systems are located has notified Seller in
writing of any objection to the placement of such cable, lines, or other
facilities on their property, nor have any such owners made any demand for
relocation, removal, reinstallation, or restoration of such cable, lines or
other facilities which might require material expenditures in connection
therewith.
5.15 Necessary Property.
The Assets, together with the Excluded Assets, constitute all of the
property necessary for the operation of the Systems in the manner and to the
extent presently conducted by Seller.
5.16 Compliance with Laws.
(a) The operations of the Systems have been, and are being, conducted
in substantial compliance with all applicable laws, rules, regulations and
other requirements of all federal, state, county or local governmental
authorities or agencies.
(b)(i) Seller is permitted under all applicable Franchises and FCC rules,
regulations and orders to distribute the transmissions (whether television,
satellite, radio or otherwise) of video programming or other information that
the Systems make available to customers of the Systems (the "Signals")
presently being carried to such customers and to utilize all carrier
frequencies generated by the operations of the Systems, and is licensed to
operate all the facilities required by law to be licensed, including without
limitation, any business radio and any CARS system being operated as part of
the Systems; and (ii) other than requests for network nonduplication and syndex
protection and sports league (e.g., NBA, NHL, MLB) blackout requests, no
written requests have been received by Seller during the three years preceding
the date of this Agreement from the FCC, the United States Copyright Office,
any local or other television station or system or from any other Person
challenging or questioning the legal right of Seller to own or operate any
System or to own, operate or use any FCC licensed or registered facility owned,
operated and used by Seller in conjunction with Seller's operation of any
System.
(c) Seller is in substantial compliance with the applicable Cumulative
Leakage Index requirements of the FCC.
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(d) Each of the Systems, when loaded with the maximum number of analog
channels set forth on Schedule 5.9(A), is capable of operating in compliance in
all material respects with the terms of the applicable FCC rules and
regulations currently in effect and is capable of delivering such maximum
number of analog channels throughout all portions of the respective System.
(e) Seller has deposited with the United States Copyright Office all
statements of account and other documents and instruments, and has paid all
such royalties, supplemental royalties, fees and other sums to the United
States Copyright Office with respect to the business and operations of the
Systems as are required under the Copyright Act to obtain, hold and maintain
the compulsory license for CATV systems prescribed in Section 111 of the
Copyright Act. To Seller's knowledge, Seller and the Systems are in compliance
with the Copyright Act and the rules and regulations of the Copyright Office.
Seller and the Systems are entitled to hold and do hold the compulsory
copyright license described in Section 111 of the Copyright Act, which
compulsory copyright license is in full force and effect and has not been
revoked, cancelled, encumbered or adversely affected in any manner. The
carriage, transmission or use of the Signals has not and does not subject the
Systems or Seller to any FCC proceedings or any suits or actions, including
without limitation, suits or actions for copyright infringement.
(f) All necessary FAA approvals have been obtained with respect to the
height and location of those towers owned by Seller which are used in
connection with the operation of the Systems and those towers are being
operated in accordance with applicable FCC and FAA rules.
(g) To the best of Seller's knowledge, there is as of the date of this
Agreement no inquiry, claim, action or demand pending before the United States
Copyright Office or the Copyright Royalty Tribunal which questions the
copyright filings or payments made by Seller with respect to the Systems other
than routine inquiries or proposed corrections none of which inquiries or
corrections (individually or in the aggregate) is or will have any material
effect upon the Business or any System. Seller will provide Buyer with copies
of any and all additional inquiries, claims, actions or demands during the
period between the date of this Agreement and the Closing Date .
(h) Copies of all aeronautical frequency notices filed with the FCC
with respect to the Systems have been delivered to Buyer.
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(i) To the best of Seller's knowledge, no basis exists under the 1992
Act (after giving effect to provisions of the 1992 Act which otherwise would be
effective but for the passage of time), as in effect at the date of this
Agreement, for any rollback of rates for basic service, or any rollback or
refund of rates for any premium or pay service, with respect to the Systems.
5.17 Transactions.
Except as disclosed on Schedule 5.17 hereto, since December 31, 1997
Seller has not entered into any transaction not in the ordinary course of its
business, and there has not been any material change in the manner in which
Seller conducts its business. Since December 31, 1997, there has not been any
change (other than any change attributable to matters affecting the CATV
industry generally) in the assets, liabilities, property, business, operations,
prospects, customers or financial condition of Seller, the effect of which was
or will be materially adverse to Seller, the Assets or the Systems.
5.18 Litigation and Legal Proceedings.
Set forth on Schedule 5.18 hereto is a complete and accurate list and
description of all suits, claims, actions and administrative, arbitration or
other similar proceedings relating to Seller or the Assets (including
proceedings concerning labor disputes or grievances, civil rights
discrimination cases and affirmative action proceedings) and all governmental
investigations pending or, to the knowledge of Seller, threatened, to which
Seller is a party, or against its properties or business, and each judgment,
order, injunction, decree or award relating to Seller, or the Assets (whether
rendered by a court or administrative agency, or by arbitration pursuant to a
grievance or other procedure) to which Seller is a party or relating to the
Assets which is unsatisfied or requires continuing compliance therewith (such
suits, actions, claims, judgments, orders, injunctions, decrees and awards are
herein referred to as "Legal Proceedings"). Seller is not aware of any facts
or circumstances, which would give rise to any unasserted possible material
claims against the Systems or the Assets. The foregoing warranty specifically
excludes matters undertaken by or pending before Congress, the FCC, the
Copyright Royalty Tribunal or any state governmental authority in any state in
which any System is located which would have applicability to CATV systems in
general but to which Seller is not expressly a party.
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5.19 Brokers' Fees.
Except for HPC Puckett & Company and the brokerage fee due HPC Puckett &
Company in connection with the transactions contemplated by this Agreement
(which brokerage fee will be paid by Seller out of the Closing proceeds),
Seller has not employed any broker or finder or incurred any liability for any
brokerage fees, commissions or finders' fees in connection with the
transactions contemplated by this Agreement.
5.20 Pensions and Other Deferred Compensation.
There are no pension, retirement, or deferred compensation plans or
policies for the benefit of employees of Seller except as set forth on Schedule
5.20 hereto and Seller is not subject to any liability resulting from the
withdrawal by Seller or any of its affiliates from a multi-employer pension
plan or resulting from the termination of a plan previously utilized by Seller.
5.21 Benefit Claims.
Except with respect to claims under the self-insured employee benefit
plans listed on Schedule 5.21 hereto, no person has asserted any claim under
which Seller would have any liability under any health insurance, life
insurance, disability, medical, surgical, hospital, death benefit, or any other
employee benefit plan, contract or arrangement maintained by Seller, or to
which Seller is a party or may be bound, or under any worker's compensation or
similar law, which is not fully covered by insurance maintained with reputable,
responsible financial insurers or by an adequately funded self-insured plan.
5.22 Insurance, Surety Bonds, Damages.
Set forth on Schedule 5.22 hereto is a correct list of all insurance
policies and surety bonds of Seller now in effect, including the names of the
insureds and their addresses. The premiums on such insurance policies and
bonds have been currently paid, and such policies and bonds are valid,
outstanding and enforceable, in full force and effect and insure against risks
and liabilities and provide for coverage to the extent and in a manner required
of or deemed reasonably appropriate and sufficient by Seller. Seller will
maintain coverage of similar kinds and amounts and will pay the premium for
such coverage through the Closing Date.
5.23 Environmental Laws.
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Except as set forth in Schedule 5.23: (i) Seller is in compliance in all
material respects with all Environmental Laws relating to the Systems; (ii) no
order, directions or notices relating to the Systems have been issued pursuant
to any Environmental Law and no government agency has submitted to Seller any
request for information pursuant to any Environmental Law relating to the
Systems; (iii) to the best of Seller's knowledge, there are no material
Environmental Permits required under any Environmental Law in connection with
the operation of the Systems; and (iv) during the term that Seller has occupied
the Real Estate and any leased real property, the Real Estate and such portion
of the leased real property as has been occupied by Seller has not been
utilized for any industrial or commercial operation involving the storage,
release or disposal of any Hazardous Substance. Except as set forth on
Schedule 5.23, Seller has received no notification pursuant to any
Environmental Laws that: (i) any work, repairs, construction or capital
expenditures are required to be made in respect of any of the Assets as a
condition of continued compliance with any Environmental Laws relating to the
Systems; or (ii) any currently held material Environmental Permit relating to
the Systems is about to be made subject to materially different limitations or
conditions, or is about to be revoked, withdrawn or terminated. Seller has
provided, or prior to Closing, will provide, Buyer with complete and correct
copies of all studies, reports or surveys in Seller's possession relating to
the presence or alleged presence of Hazardous Substances at, on or affecting
the Real Estate or leased real property.
5.24 No Other Commitment to Sell.
No part of the Systems or any of the Assets is directly or indirectly
subject in any manner to any written or oral commitment or any arrangement for
the sale, transfer, assignment, or disposition thereof, in whole or in part,
except (i) pursuant to this Agreement, (ii) as provided in any of Seller's
Franchises or in the general security provisions of any of Seller's debt
instruments, (iii) the sale any Asset in the ordinary course of business which
has been or will be replaced by Seller on or before the Closing Date with a
replacement Asset of equal or greater value, or (iv) as otherwise set forth in
Schedule 5.24 hereto.
5.25 Disclosure.
No representation or warranty made herein by Seller, and no statement
contained in any certificate or other instrument furnished or to be furnished
by Seller to Buyer pursuant to this Agreement, contains or will contain any
untrue statement of a material fact.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF BUYER
As an inducement to Seller to enter into this Agreement and to consummate
the transactions contemplated hereby, Buyer hereby makes the following
representations and warranties:
6.1 Organization.
Buyer is a limited liability limited partnership duly organized and
validly existing under the laws of the State of Colorado and has the power and
authority to own and use its properties and to transact the business in which
it is engaged and to acquire the Assets pursuant to this Agreement. Prior to
the Closing, Buyer will be qualified to do business in all of the states in
which the Systems are located, except where such qualification is not required
by the respective state or, if required, where the failure to qualify will not
have a material adverse effect on Buyer and will not adversely effect Seller or
the consummation of any of the transactions contemplated hereby.
6.2 Authorization of Agreement.
The execution and delivery of this Agreement and all other instruments or
documents executed by Buyer in connection herewith, as well as all action
required to be taken hereunder or thereunder by Buyer, have been duly
authorized by Buyer, and upon execution and delivery, each such document will
constitute the valid and binding obligation of Buyer enforceable upon and in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally and by general principles of equity. All persons who have executed
this Agreement on behalf of Buyer are authorized to do so under its
organizational documents and the laws of its state of creation.
6.3 No Default.
The execution and delivery of this Agreement and all other instruments or
documents executed by Buyer in connection herewith and the consummation of the
transactions contemplated hereby will not violate any provision of, or
constitute a default under any provision in Buyer's Agreement or Certificate of
Limited Partnership or any agreement or instrument to which Buyer is a party or
which is otherwise applicable to Buyer or result in the acceleration of
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any obligation, or to the best of its knowledge, cause or give any reason for
an adverse action to be taken by any person or governmental authority under any
mortgage, lien, lease, agreement, instrument, order, judgment, or decree to
which Buyer is a party or by which it is bound and will not violate or conflict
with any other restriction to which Buyer is subject, including, to the best of
Buyer's knowledge, federal, state, and local laws and regulations.
6.4 Litigation.
As of the date hereof, there is no pending suit, claim, action or
proceeding to which Buyer is a party which individually or in the aggregate
will have a material adverse affect upon the business or condition, financial
or otherwise, of Buyer. As of the date hereof, no judgment, order or decree
has been entered nor any such liability incurred which has such effect. There
is no claim, action or proceeding pending as of the date hereof or threatened
as of the date hereof against Buyer of which Buyer has received notice which
will prevent or delay the consummation of the transactions contemplated by this
Agreement.
6.5 Finders' and Brokers' Fees.
Buyer has not employed any broker or finder or incurred any liability for
any brokerage fees, commissions or finders' fees in connection with the
transactions contemplated by this Agreement.
6.6 Disclosure.
No representation or warranty made herein by Buyer, and no statement
contained in any certificate or other instrument furnished or to be furnished
by Buyer to Seller pursuant to this Agreement, contains or will contain any
untrue statement of a material fact.
ARTICLE VII
CONDUCT OF BUSINESS OF SELLER PRIOR TO CLOSING
7.1 Restrictions on Operations Prior to Closing Date.
Following its execution hereof and to and including the Closing Date,
Seller shall conduct its business and operations and maintain all of the Assets
according to its ordinary and usual course of business, except as otherwise
contemplated by the provisions of this Agreement. Furthermore, Seller, without
the prior written consent of Buyer, agrees not to:
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(i) Incur any indebtedness or make any contract other than in
the ordinary course of business, except for any
debtor-in-possession financing or cash collateral agreements in
connection with the Bankruptcy Case which shall not constitute
Assumed Liabilities;
(ii) Sell, transfer, lease, or assign any Asset, or take or
agree to take any action, other than in the ordinary course of
business;
(iii) Increase in any manner the compensation of any of its
employees (except for normal increases in line with past practices
and one-time bonuses payable by Seller to those employees who
remain in the employ of Seller through the Closing Date and for
which Buyer shall have no liability) or commit to any employment or
collective bargaining agreements;
(iv) Cancel or fail to renew any of the insurance policies
referred to in Schedule 5.22 hereto except in compliance with
Section 5.22;
(v) Fail to use its diligent efforts to keep the business of
Seller intact, to keep in service the present officers and key
employees of Seller consistent with good business practices and to
preserve the good will of Seller's suppliers and customers and
others having business relations with it; or
(vi) Grant subscribers or potential subscribers any discounts or
waive any service or installation fees or grant any other promotion
in connection with marketing activities, which are not in
accordance with Seller's past practices in the ordinary course of
business.
7.2 Payment of Obligations.
Seller shall pay its current liabilities consistent with prior business
practices as and when they become due, except those being contested in good
faith by appropriate proceedings.
7.3 Inventory.
Seller shall continue to maintain its inventory of equipment, cable and
supplies consistent with past practices.
7.4 Compliance with Franchises.
Seller shall continue to comply in all material respects with the
provisions of the Franchises in its operation of the Systems.
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ARTICLE VIII
INVESTIGATION BY BUYER
8.1 Access to Records.
Following its execution hereof and to and including the Closing Date,
Seller shall give Buyer and its representatives, including, without limitation,
advisors, accountants and attorneys designated by Buyer, full access during
ordinary business hours, upon reasonable notice, to its premises, assets,
properties, books of account, agreements and commitments, provided that Buyer's
investigation and use of the same shall not unreasonably interfere with
Seller's normal operations. Seller shall permit Buyer to inspect, review and
copy all information with respect to the business and affairs of Seller to
which Buyer may, from time to time, reasonably request access, including,
without limitation, any interim financial statements and reports of Seller and
the tax returns and information relating to Seller. Seller shall cause its
employees to render to Buyer and its representatives reasonable cooperation in
connection with their investigation of Seller's premises, assets, properties,
records, books of account, agreements, commitments and other information
relating to the CATV Business and the Systems. No such investigation by Buyer
or its representatives of the assets and other information relating to Seller's
affairs shall affect the continuing validity or effect of the representations
and warranties of Seller contained in this Agreement. In the event that Buyer
discovers any fact which would result in a Seller's representation or warranty
being inaccurate, or any other breach of this Agreement by Seller, Buyer will
give prompt notice of such breach to Seller, specifying the nature of such
breach in reasonable detail and Seller shall have the right (but not the
obligation) to cure such breach prior to the Closing.
8.2 Publicity.
Except as required by applicable law, (i) Seller and Buyer shall consult
with and cooperate with the other with respect to the content and timing of all
press releases and other public announcements concerning this Agreement and the
transactions contemplated hereby and (ii) neither Buyer nor Seller shall make
any such release or announcement without the prior written consent and approval
of the other, which consent and approval shall not be unreasonably withheld.
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ARTICLE IX
FURTHER COVENANTS
9.1 Delivery of Documents to Buyer.
Seller covenants that, to the extent that it has not already done so,
Seller will insofar as practicable deliver or otherwise make available to Buyer
for inspection, at Stamford, Connecticut or Irving, Texas, the following within
thirty (30) days after the Signature Date, or as specifically delineated below:
(i) Seller's most recently prepared managerial reports and
subscriber accounting records, which shall include a subscriber
accounts receivable aging report summarizing, respectively,
subscribers whose accounts are at least one, two, and three or more
Monthly Billing Periods overdue, for the last (or then most
recently concluded) regular Monthly Billing Period. Seller further
covenants to deliver to Buyer the monthly subscriber accounting
records within 20 days after the end of each calendar month prior
to the Closing and to deliver the managerial reports as soon as
practicable.
(ii) Copies of the Additional Financial Statements as soon as
possible after completion, but in any case, within forty-five (45)
days of the end of the period covered by any such Additional
Financial Statement, and monthly statements of operating income
within 20 days after the end of each month.
(iii) Copies of such as-built engineering drawings as Seller has
in its possession for the Systems, or, if not available, such
design maps and plant drawings and as-built engineering drawings as
Seller has in its possession will be made available to Buyer for
inspection and at the Closing will be left on site at a System
office for Buyer.
(iv) Copies of any and all bonds in force with regard to the
Systems and Seller.
(v) Copies of all written franchises, contracts, agreements and
other documents listed in the Schedules hereto, including any and
all contracts in force with any union or collective bargaining unit
representing any employee of Seller together with a certificate of
a duly authorized executive officer, certifying that to
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the best of such officer's knowledge the copies so delivered are
true and complete in all material respects.
(vi) Copies of any required Registration Statements filed with
the FCC pursuant to 47 C.F.R. Section 76.12.
(vii) The Initial Notice of Identity and Signal Carriage, and all
subsequent statements of account filed with the Copyright Office
within the past three years and all Notices of Change of Identity
or Signal Carriage filed within the past three years shall be made
available for inspection by Buyer or its representatives upon
reasonable notice.
(viii) Copies of radio licenses, earth station licenses and CARS
licenses.
(ix) Copies of must carry elections and retransmission consent
agreements;
To the extent that any of the items referred to above are received or filed
after a date which is 30 days from the Signature Date, Seller covenants to
deliver such items to Buyer as soon as practicable after receipt or filing.
9.2 Transfer of Franchises and Necessary Contracts Prior to Closing.
Seller shall use its diligent good faith efforts, prior to the Closing
Date (including, without limitation, attendance at City Council or similar
meetings and hearings before local and county administrative bodies) to obtain
at its expense all requisite consents, approvals and authorizations required to
be received by or on the part of Seller or Buyer for the transfer of the
Franchises and the Necessary Contracts. Seller shall commence its efforts to
obtain such required consents as soon as practicable after the Signature Date.
Buyer agrees to reasonably cooperate and assist Seller, subject to all the
terms and conditions of this Agreement, in obtaining such approvals, including,
without limitation, attendance at City Council or similar meetings and hearings
before local and county administrative bodies and to promptly return to Seller
any reasonably requested documents required to be executed or delivered by
Buyer to the franchisors in the normal course of the transfer proceedings.
9.3 Further Assurances.
Each of the parties hereto shall, subject to the fulfillment at or before
the Closing Date of each of the conditions to its performance set forth herein
or the waiver thereof, perform such further acts and execute such documents as
reasonably may be required to effectuate the transactions contemplated hereby.
Each of the parties hereto shall use all reasonable efforts to
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expeditiously fulfill or obtain the fulfillment of the conditions precedent of
the other party set forth below, provided that nothing herein shall be deemed
to expand any parties' obligations hereunder.
9.4 Release of Encumbrances.
Concurrent with the Closing, to the extent not otherwise obtained through
the Approval Order or the Confirmation Order, Seller shall deliver to Buyer
terminations of any security interest, mortgage, pledge, lien or other
Encumbrance, except for any Permitted Encumbrances.
9.5 Environmental Reports.
Within sixty (60) days of the Signature Date, Seller shall cause to be
prepared and delivered a Phase I environmental report and, if recommended in
such report, within forty-five (45) days thereafter, a Phase II environmental
report for each parcel of Real Estate that is listed on Schedule 2.1(A) hereto.
The cost for the Phase I environmental reports shall be borne by Seller,
provided that at Closing Buyer shall reimburse Seller for fifty percent (50%)
of the cost of such Phase I environmental reports. The cost of any Phase II
environmental reports shall be borne by Seller. Seller shall deliver to Buyer
a copy of each environmental report within three (3) business days of receipt
of such report by Seller. Subject to Section 14(a)(iv) hereof, if such
environmental reports disclose one or more adverse environmental conditions,
Seller shall assume full responsibility for remediation of each such
environmental condition and shall bear all expenses incurred in connection
therewith.
9.6 HSR Notification.
Within sixty (60) days of the Signature Date, Seller and Buyer shall
complete and file, or cause to be completed and filed, any required
notification and report required to be filed under the Hart-Scott-Rodino
Anti-Trust Improvements Act of 1976, as amended (the "HSR Act"). Each of the
parties will take or cause to be taken any additional action that may be
necessary, proper or advisable, will cooperate to prevent inconsistencies
between their respective filings and will furnish to each other such necessary
information and reasonable assistance as the other may reasonably request in
connection with its preparation of necessary filings or submissions under the
HSR Act. Buyer and Seller shall use commercially reasonable efforts (including
the filing of a request for early termination) to obtain the early termination
of the waiting period under the HSR Act. Seller shall bear the entire cost of
any filing fees in connection therewith; provided that Buyer shall promptly
reimburse Seller for fifty percent (50%) of the cost of any such filing
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fees upon the earlier of (i) the Closing, or (ii) the Approval Order and the
Confirmation Order becoming Final Orders.
9.7 Collection of Advertising Sales Accounts Receivable.
From and after the Closing Date, Buyer shall use commercially reasonable
efforts to collect Seller's advertising sales accounts receivable for
advertising sales prior to the Closing Date for the account of Seller and shall
remit any payment received to the Paying Agent at least monthly for
distribution pursuant to the Bankruptcy Plan. Notwithstanding anything herein
in this Section 9.7 to the contrary, Buyer shall not be obligated to bring suit
to collect any advertising sales accounts receivable for the period prior to
the Closing Date.
9.8 Solicitation of Bankruptcy Plan Acceptances.
Seller shall use its diligent, good faith efforts (i) to obtain the
requisite acceptances of the Bankruptcy Plan from all holders of impaired
claims within seventy-five (75) days after the Signature Date and (ii) to
ensure that the Bankruptcy Plan Solicitation and any registration statement
and/or Disclosure Statement prepared and disseminated in connection therewith
shall comply in all material respects with the requirements of the Securities
Act, the Exchange Act and the Bankruptcy Code and all other laws, rules,
regulations, decrees and orders promulgated thereunder.
9.9 Documents and Motions to be Filed by Seller.
(a) Promptly upon completion of the Bankruptcy Plan Solicitation, and
in no event later than seventy-five (75) days after the Signature Date, Seller
shall commence the Bankruptcy Case. Notwithstanding any other provision of
this Agreement to the contrary, however, Seller shall not be under any
obligation to commence the Bankruptcy Case if Seller has not received in the
Bankruptcy Plan Solicitation the requisite number of acceptances from at least
one class of impaired creditors (excluding the votes of insiders) needed to
confirm the Bankruptcy Plan.
(b) Promptly upon the commencement of the Bankruptcy Case, and in no
event later than three business days thereafter, Seller shall (i) file the
Disclosure Statement and the Bankruptcy Plan and the certification of votes for
acceptance or rejection of the Bankruptcy Plan with the Bankruptcy Court, (ii)
seek from the Bankruptcy Court and take all reasonable steps to obtain a
hearing at the earliest practicable date for approval of the Disclosure
Statement and confirmation of the Bankruptcy Plan, and (iii) file a separate
Section 363 sale motion with the Bankruptcy Court seeking entry of the Approval
Order. Those portions of the Bankruptcy Plan which relate
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to this Agreement or the sale of the Assets contemplated hereby, shall be
acceptable to Buyer, which acceptance shall not be unreasonably withheld or
delayed.
(c) Seller shall file no later than three business days after the
Commencement Date the Interim Motion with the Bankruptcy Court and use its
diligent, good faith efforts to cause the Bankruptcy Court to enter the Interim
Order as expeditiously as practicable. The Interim Motion (and Proposed
Interim Order) shall be acceptable to Buyer, which acceptance shall not be
unreasonably withheld or delayed.
9.10 Bankruptcy Proceedings.
Seller shall seek confirmation of the Bankruptcy Plan by the Bankruptcy
Court using the acceptances of the Bankruptcy Plan received by Seller pursuant
to the Bankruptcy Plan Solicitation. Seller shall comply in all material
respects with the Bankruptcy Code and all other laws, rules, regulations,
decrees and orders promulgated thereunder in connection with obtaining
confirmation of the Bankruptcy Plan, and Seller shall not consent to any
amendment or supplement to, or modification of, the Bankruptcy Plan or the
Disclosure Statement that purports to change in any respect the terms or
conditions of the transactions contemplated by this Agreement without the prior
written consent of Buyer, which consent Buyer shall not unreasonably withhold
or delay. The Disclosure Statement Order and the Confirmation Order or any
other order submitted by Seller to the Bankruptcy Court that may affect the
transactions contemplated by this Agreement including, without limitation the
Approval Order, shall be in form and substance acceptable to Buyer's counsel,
which acceptance shall not be unreasonably withheld or delayed. Seller shall
promptly provide to Buyer copies of all motions, orders, briefs, reports and
other pleadings received or filed by Seller in the Bankruptcy Court or in
related court proceedings after the date of Seller's receipt or filing thereof.
9.11 Diligent, Good Faith Efforts.
Upon the terms and subject to the conditions of this Agreement, Seller
shall use its diligent, good faith efforts to fulfill the conditions precedent
to Closing hereunder and to take, or cause to be taken, and to do all things
reasonably necessary, proper or advisable under any applicable law to
consummate and make effective in the most expeditious manner practicable, the
transactions contemplated hereby, including, without limitation, to obtain from
the Bankruptcy Court such Bankruptcy Court orders as may be necessary or
appropriate to effect such transactions, including, without limitation, the
Interim Order on the terms of the Proposed Interim Order, the Approval Order
and the Confirmation Order. Except for actions
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expressly permitted by Section 9.13(a) after entry of the Interim Order and
prior to the entry of the Approval Order, from and after the Signature Date,
Seller shall not (and shall cause its Subsidiaries not to) take any action or
fail to take any action, which action or failure to act might (i) prevent,
impede, or result in the revocation of the entry of the Approval Order or the
confirmation of the Bankruptcy Plan, (ii) prevent or impede the consummation of
the transactions contemplated by this Agreement in accordance with the terms of
this Agreement and the Bankruptcy Plan or (iii) result in (a) the reversal,
avoidance, revocation, vacating or modification (in any manner that could, in
the reasonable judgment of Buyer, materially and adversely affect Buyer's
rights hereunder) or (b) the entry of a stay pending appeal, in each case of
(a) or (b), of the Interim Order, the Approval Order or the Confirmation Order
or any separate order entered pursuant to Sections 105, 363, 365, 1123, 1125,
1129, 1145 or other section of the Bankruptcy Code relating to the subject
matter hereof.
9.12 Approval Order and Confirmation Order.
Seller shall request that the Bankruptcy Court enter both the Approval
Order and the Confirmation Order.
(i) Such Approval Order shall contain findings or rulings pursuant to,
inter alia, Sections 363(b), (f) and (m) and 365 of the Bankruptcy Code
and such other provisions as Buyer may reasonably request (consistent with
the provisions of this Agreement) relating to the transactions
contemplated by this Agreement;
(ii) Such Confirmation Order shall contain findings or rulings pursuant
to, inter alia, Sections 1125(e), 1145(a)(1) and 1146(c) of the Bankruptcy
Code and such other provisions as Buyer may reasonably request (consistent
with the provisions of this Agreement) relating to the transactions
contemplated by this Agreement;
(iii) Each of the Approval Order and the Confirmation Order shall: (a)
provide for (i) the sale, assignment, transfer and delivery, or assumption
and assignment, of the Assets free and clear of all Encumbrances (other
than Permitted Encumbrances) to Buyer; (ii) Buyer's status as a good faith
purchaser under, and as a good faith participant in, the Bankruptcy Plan;
and (iii) the limitations on the assumed liabilities set forth in this
Agreement; (b) permanently enjoin after the Closing any Third Party from
asserting any claim or interest against Buyer or any of its Affiliates
which was or could have been asserted in the Bankruptcy Case against
Seller and/or any of its Affiliates prior to the Confirmation Date other
than claims directly related to the Assumed Liabilities; and (c)
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obligate Seller to assume and reaffirm any of Seller's obligations
outstanding under this Agreement (including, without limitation, Seller's
indemnification obligations under Section 15.1) after the date of such
Approval Order or Confirmation Order.
9.13 No Solicitation; Competing Transaction.
The Proposed Interim Order shall include terms and provisions to the
following effect:
(a) Neither Seller nor any of its Affiliates nor any officer, director,
employee, agent (including without limitation, any investment banker, financial
advisor, attorney or accountant) or other representative of Seller or any of
its Affiliates shall, directly or indirectly, initiate any contact with, or
solicit, encourage, negotiate or enter into any agreement with, or enter into
or continue any discussions or negotiations with, or disclose, directly or
indirectly, any information concerning the Assets to, any Third Party in
connection with any possible proposal regarding the acquisition of any part of
the Assets or any indirect interests therein (whether by merger, purchase of
capital stock or partnership interests, purchase of securities convertible or
exchangeable by their terms into equity securities, purchase of assets, tender
offer, stand-alone plan or otherwise) (each a "Competing Proposal"); provided,
however, after entry of the Interim Order and prior to entry of the
Confirmation Order or Approval Order, Seller may furnish information to, and
cooperate with, Qualified Third Parties (as defined below) with regard to
information relating to the Assets or the business of Seller (but specifically
excluding information regarding Buyer or Buyer's plans with respect to the
Assets) to a Third Party, which party Seller reasonably believes is or will be
financially able to consummate, and is or may be interested in consummating, a
Competing Transaction (a "Qualified Third Party"). Without limiting the
foregoing, it is understood that any violation of the restrictions set forth in
the provisions above by any executive officer of Seller or any of its
Affiliates or any investment banker or attorney of Seller or any of its
Affiliates, whether or not such Person is purporting to act on behalf of Seller
or any of its Affiliates or otherwise, shall be deemed to be a breach of this
Section 9.13 by Seller.
(b) In the event that Seller shall directly or indirectly receive any
Competing Proposal or inquiry regarding same, whether written or oral, Seller
shall within one business day (i) notify Buyer of such Competing Proposal or
inquiry and shall, in any such notice to Buyer, indicate in reasonable detail
the identity of the offeror and the terms and conditions of such Competing
Proposal or inquiry, and (ii) if such Competing Proposal or inquiry is in
writing, provide Buyer with a copy of same. Any Competing Proposal must be
based upon substantially the same terms
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and conditions provided in this Agreement (other than the bankruptcy provisions
contained herein which are inapplicable to such Third Party).
(c) In the event that, prior to the entry of the Confirmation Order or
Approval Order, Seller determines to accept a Competing Proposal, Seller shall
deliver a written notice to Buyer (a "Competing Proposal Acceptance Notice")
advising it of the foregoing determination, which notice shall be accompanied
by copies of the proposed form of agreement, if any, or other documentation
proposed to be entered into in connection with such proposal. Upon delivery of
any Competing Proposal Acceptance Notice, Buyer shall have the right (a
"Topping Right") to deliver to Seller, within ten (10) business days following
the receipt by Buyer of such Competing Proposal Acceptance Notice, an offer (a
"Topping Offer") to amend the terms of this Agreement to provide substantially
the same or better terms which, when taken as a whole, are at least as good or
better than such Competing Proposal, and otherwise on such terms and conditions
as Buyer may determine in its sole discretion. In connection with any such
Topping Offer, Buyer shall be permitted to consider the amount of the Topping
Fee otherwise payable to Buyer as additional consideration payable by Buyer in
connection with any Topping Offer made by Buyer. In the event Buyer makes a
Topping Offer, Seller shall be required to accept such Topping Offer, subject
to Seller's ability to accept a subsequent Competing Proposal in accordance
with this Section 9.13(c). In that event, as soon as practicable (but in no
event more than five business days) following submission of such Topping Offer,
Buyer and Seller shall enter into an amendment to this Agreement to reflect
Seller's acceptance of the Topping Offer. Following the making of a Topping
Offer by Buyer, any subsequent Competing Proposal from a Third Party must be in
an amount of at least One Million Dollars ($1,000,000) greater than Buyer's
Topping Offer. In the event that prior to the entry of the Confirmation Order
or Approval Order, as applicable, Seller determines to accept such higher
Competing Proposal, Seller shall deliver a Competing Proposal Acceptance Notice
to Buyer and Buyer may within five (5) business days submit a revised Topping
Offer to amend the terms of this Agreement, as amended by any prior Topping
Offer, to match or top such Competing Proposal. If within the specified time
periods Buyer has failed to make a Topping Offer or has notified Seller in
writing that it does not intend to make a Topping Offer, Seller shall confirm
in writing to Buyer that it will pay the Topping Fee to Buyer on the terms and
conditions set forth in Section 14(c) and thereafter Seller may terminate this
Agreement in accordance with Section 14(a)(iii) and Seller may proceed with an
agreement with the Third Party named in the Competing Proposal Acceptance
Notice containing
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terms and conditions no less favorable to Seller than those described in the
Competing Proposal Acceptance Notice. Notwithstanding anything in this Section
9.13(c) to the contrary, if any Competing Proposal (which must be based on
substantially the same terms and conditions provided in this Agreement) is
received at or within the ten (10) day period prior to the hearing at which
entry of the Confirmation Order or Approval Order is sought, then Buyer may
exercise its Topping Right during such ten (10) day period or, if necessary, at
such hearing.
(d) No Competing Proposal shall be considered, approved, adopted or
recommended by Seller or its Board of Directors; provided, however, that in the
exercise of its fiduciary duties the Board of Directors may consider, approve,
adopt or recommend a Competing Proposal for a Competing Transaction with a
Qualified Third Party, in each case at any time after such Qualified Third
Party shall have furnished to Seller in immediately available funds a good
faith deposit in an amount equal to five percent (5%) of the amount of the
Competing Proposal. Seller shall not execute a definitive sale agreement with
a Qualified Third Party with respect to a Competing Proposal for a Competing
Transaction unless such sale agreement contains an express provision making the
validity of such sale agreement subject to (i) this Agreement being properly
terminated by Buyer or Seller in accordance with Section 14(a) of this
Agreement and (ii) Seller paying to Buyer the Topping Fee in accordance with
Section 14(c) of this Agreement.
9.14 Notification of Utilities.
Seller shall promptly notify the utilities with which Seller has pole
attachments of the proposed transfer of the Assets to Buyer pursuant to this
Agreement and shall request a form of agreement that each utility would enter
into directly with Buyer. Seller shall provide Buyer with a list containing the
contact persons at each utility and Buyer shall thereafter communicate directly
with the utilities regarding the pole attachment agreements that Buyer will
enter into with such utilities.
9.15 Broadcast TV Signals.
Within forty five (45) days after the Signature Date, Seller shall
identify to Buyer those broadcast TV signals which any System transmits
pursuant to any must-carry requirement or retransmission consent the provisions
of which requirement or consent will require Seller to assign to Buyer (or
Buyer to assume from Seller), effective the Closing Date, Seller's post-Closing
Date rights, duties and obligations thereunder (collectively, the "Mandatory
Retransmission Obligations"); and Seller hereby agrees to assign to Buyer, and
Buyer hereby agrees to assume, on and as of the Closing Date, the Mandatory
Retransmission Obligations.
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Seller further agrees to assign to Buyer any and all such other System-related
broadcast TV retransmission consents as Seller shall (under the respective
terms thereof) be able, but not obligated, to assign to Buyer, provided that
Buyer shall request and direct Seller to do so.
9.16 Due Diligence Payment to Buyer.
To induce Buyer to enter into this Agreement, Seller shall, on (or within
two business days after) the Signature Date, make an irrevocable payment to
Buyer in the amount of One Hundred Thousand dollars ($100,000.00), which
payment, except as otherwise provided in this Agreement, shall be Seller's sole
contribution to the costs and expenses incurred (and to be incurred) by Buyer
in connection with Buyer's due diligence with respect to the proceedings and
transactions contemplated by this Agreement.
ARTICLE X
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF ALL PARTIES
The obligations of each of the parties to consummate the transaction
contemplated hereby are subject to the conditions that:
10.1 Litigation Prohibiting Consummation of Transactions.
At the Closing Date, no bona fide suit, action, investigation or other
proceeding will have been instituted by any governmental agency of the United
States or by any Third Party in which it is sought to restrain, prohibit,
invalidate or set aside the transactions contemplated by this Agreement.
10.2 Orders Prohibiting Consummation of Transactions.
At the Closing Date, there shall exist no applicable law, rule,
regulation, order, judgment or injunction the effect of which is to prohibit
consummation of the transactions contemplated by this Agreement.
10.3 HSR Act.
All necessary pre-merger notification filings required under the HSR Act
will have been made with the Federal Trade Commission and the United States
Department of Justice and the prescribed waiting periods (and any extensions
thereof) will have expired or been terminated.
10.4 Morbeck Agreement Escrow.
Seller, Buyer and Baker & Hostetler LLP shall have entered into an escrow
agreement pursuant to which an amount equal to the final six months' of
severance payments pursuant to the Morbeck Agreement shall be delivered by
Buyer to Baker & Hostetler LLP to be held in
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escrow to cover the contingent payments potentially owed Morbeck under the
Morbeck Agreement.
ARTICLE XI
CONDITIONS PRECEDENT TO BUYER'S OBLIGATIONS
All obligations of Buyer under this Agreement are subject to the
fulfillment in all material respects (or waiver in whole or in part by Buyer in
writing) on or before the Closing Date (or such earlier date as may be
specified), of each of the following conditions:
11.1 Compliance with Agreement.
Seller shall have performed and complied in all material respects with all
of its obligations under this Agreement and any Bankruptcy Court order relating
to this Agreement to be performed by it at or prior to Closing and there shall
be no material uncured default of Seller under any term of this Agreement.
11.2 Correctness of Representations and Warranties.
The representations and warranties of Seller contained in this Agreement,
and in the certificates delivered to Buyer pursuant hereto, shall be true in
all material respects on the date hereof and on the Closing Date as though such
representations and warranties were made on and as of the Closing Date.
11.3 No Adverse Change in Business or Properties.
Since December 31, 1997, neither the Business, the Systems nor the Assets
have been affected in the aggregate adversely to a material extent or
interfered with in any material way, except for matters affecting the CATV
industry generally.
11.4 Certificate of Officer.
Seller shall deliver to Buyer a certificate of an authorized executive
officer dated the Closing Date, certifying as to the fulfillment of the
conditions set forth in Sections 11.1, 11.2 and 11.3 above, together with a
certified authorizing resolution and incumbency certificate.
11.5 Opinion of Counsel.
Buyer shall have received from Seller's Senior Vice President and General
Counsel, Day L. Patterson, a favorable opinion of such counsel, addressed to
Buyer and its lenders dated as of the Closing Date, substantially in the form
of Exhibit 11.5 hereto.
11.6 Opinion of FCC Counsel.
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Buyer shall have received from Seller's FCC counsel, Cole Raywid &
Braverman, a favorable opinion of such counsel, addressed to Buyer and its
lenders dated as of the Closing Date, in the form of Exhibit 11.6 hereto.
11.7 Noncompete Agreement.
Buyer shall have received from Seller, and Bruce A. Armstrong, John M.
Flanagan, Jr. and J. Paul Morbeck, an executed Noncompete Agreement in the form
of Exhibit 11.7 hereto.
11.8 Absence of Litigation.
No suit, action or other proceeding shall be pending before any court or
governmental agency to restrain or prohibit, or to obtain damages or other
relief in connection with, this Agreement or the consummation of the
transactions contemplated hereby (other than actions or proceedings instituted
by Buyer or any Affiliates of Buyer).
11.9 Consents.
All consents or approvals of franchisors, governmental authorities and
other third parties which are Required Consents in connection with the transfer
of the Assets to Buyer and the other transactions contemplated by this
Agreement shall have been obtained in substantially the form set forth in
Exhibit 11.9 hereto (subject to the asterisked provisions thereof and footnote
therein), or in such other form as the respective Third Party may reasonably
request (but without any terms or provisions adverse to Buyer, other than those
terms and provisions set forth in Exhibit 11.9 hereto), and Seller shall have
delivered to Buyer copies of all such consents and approvals so obtained.
Without Buyer's approval, the consents shall not contain any materially adverse
changes to the underlying documents to which they apply.
11.10 Subscribers.
The number of Basic Subscribers shall be not less than 76,250.
11.11 Receivables Report.
Seller shall provide Buyer with a subscriber accounts receivable aging
report listing, respectively, subscribers whose accounts are at least one, two,
and three or more Monthly Billing Periods overdue as of the Closing Date (or if
that shall not be readily practicable for Seller to provide, as of a date
proximate thereto).
11.13 Bankruptcy Court Approvals.
The Bankruptcy Court shall have entered the Approval Order, the Disclosure
Statement Order and the Confirmation Order, and, in the case of the Approval
Order and the Confirmation Order, (i) the time allowed for appeals therefrom
shall have expired and no appeal therefrom
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shall have been filed during such period or (ii) no stay of either such order
shall be in effect and the Approval Order and the Confirmation Order shall
contain a finding that Buyer is a good faith purchaser in accordance with, and
is entitled to the protections under, Section 363(m) of the Bankruptcy Code.
ARTICLE XII
CONDITIONS PRECEDENT TO SELLER'S OBLIGATIONS
All obligations of Seller under this Agreement are subject to fulfillment
in all material respects (or waiver in whole or in part by Seller in writing)
on or before the Closing Date (or such earlier date as may be specified) of
each of the following conditions:
12.1 Correctness of Representations and Warranties.
The representations and warranties of Buyer contained in this Agreement
and in the certificates delivered to Buyer pursuant hereto shall be true in all
material respects on the date hereof and on the Closing Date as though such
representations and warranties were made at and as of the Closing Date.
12.2 Compliance with Agreement.
Buyer shall have performed and complied with all of its obligations under
this Agreement.
12.3 Certificate of Officer.
Buyer shall have delivered to Seller a certificate of its General Partner
dated the Closing Date, certifying as to the fulfillment of the conditions set
forth in Sections 12.1 and 12.2 above, together with a certified authorizing
resolution and incumbency certificate.
12.4 Absence of Litigation.
No suit, action or other proceeding shall be pending before any court or
governmental agency to restrain or prohibit, or to obtain damages or other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby (other than actions or proceedings instituted
by Seller or any Affiliates of Seller).
12.5 Proceedings and Documents.
All corporate and other proceedings taken in connection with the
transactions contemplated hereby and all documents incident thereto shall be
satisfactory in form and substance to Seller and its counsel.
12.6 Opinion of Counsel.
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Seller shall have received from Buyer's counsel, Baker & Hostetler, a
favorable opinion of such counsel, addressed to Seller dated as of the Closing
Date, substantially in the form of Exhibit 12.6 hereto.
12.7 Bankruptcy Court Approvals.
The Bankruptcy Court shall have entered the Approval Order, the Disclosure
Statement Order and the Confirmation Order, and, in the case of the Approval
Order and the Confirmation Order, (i) the time allowed for appeals therefrom
shall have expired and no appeal therefrom shall have been filed during such
period or (ii) no stay of either such order shall be in effect and the Approval
Order and the Confirmation Order shall contain a finding that Buyer is a good
faith purchaser in accordance with, and is entitled to the protections under,
Section 363(m) of the Bankruptcy Code.
12.8 Appraisal.
Seller shall have received the appraisal referred to in Section 3.1(a).
ARTICLE XIII
EXPENSES OF NEGOTIATION AND TRANSFER
13.1 Expenses.
Except as otherwise provided in this Agreement, each party shall pay its
own expenses, taxes and other costs incident to or resulting from this
Agreement whether or not the transactions contemplated hereby are consummated.
Costs of Seller include, but are not limited to, all filing and application
fees paid to governmental and regulatory authorities in connection with the
transactions contemplated by this Agreement (with the exception of the HSR
filing fees referred to in Section 9.6 hereof, which fees shall be paid
entirely by Seller at the time of filing; provided that Buyer shall promptly
reimburse Seller for fifty percent (50%) of such filing fees upon the earlier
of (i) the Closing, or (ii) the entry of the Approval Order and the
Confirmation Order and such orders becoming Final Orders), and documentary
taxes. Buyer's costs include, but are not limited to, fees for the filing or
recording of instruments of transfer. It is understood by the parties hereto
that the transfer of the Assets and Assumed Liabilities hereunder is intended
to be the making or delivery of an instrument or instruments of transfer under
a plan confirmed under Section 1129 of the Bankruptcy Code and, as such, would
not be taxed under any law imposing a stamp tax or similar tax in accordance
with Section 1146(c) of the Bankruptcy Code.
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ARTICLE XIV
RIGHTS TO TERMINATE; BREACH; LIQUIDATED DAMAGES
14 Termination.
(a) This Agreement may be terminated prior to the Closing:
(i) at any time by mutual consent of Seller and Buyer;
(ii) by either Seller or Buyer if there shall be in effect a
final, nonappealable order restraining, enjoining, or otherwise
prohibiting the consummation of the transactions contemplated
hereby;
(iii) by either Buyer or Seller, if ten (10) business days shall
have elapsed after the delivery to Buyer by Seller of a Competing
Proposal Acceptance Notice (or five (5) business days shall have
elapsed after the delivery to Buyer by Seller of a subsequent
Competing Proposal Acceptance Notice as to a subsequent Competing
Proposal from the same Third Party) and Buyer has not delivered a
Topping Offer to Seller, or if a Competing Proposal is received at
or immediately prior to the hearing to consider entry of the
Confirmation Order or Approval Order which is accepted by Seller
and Buyer has not delivered a Topping Offer at or prior to the
hearing at which entry of the Confirmation Order or Approval Order
is sought;
(iv) by Seller (provided that Seller is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein), in the event that Buyer shall be in breach or
default under this Agreement or the Deposit Escrow Agreement, and
shall have failed to cure such breach or default within thirty (30)
days after receiving written notice thereof from Seller;
(v) by Seller, if all the conditions set forth in Section 12
have not been satisfied (or waived by Seller) by the Outside Date
other than due, in whole or in part, to a breach or default by
Seller; and
(vi) by Seller, if any Phase I environmental report or Phase II
environmental report for any Phase I property obtained pursuant to
Section 9.5 discloses one or more adverse environmental conditions
and Seller concludes, in its reasonable judgment, that the cost of
remediation of such condition(s) will exceed $250,000; provided
that termination pursuant to this Section 14(a)(vi) shall not be
effective, and shall be void ab initio, in the event that within
three business days after
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receipt of Seller's notice of termination Buyer delivers notice to
Seller that Buyer will bear all costs in connection with such
remediation in excess of $250,000.
(vii) by Buyer (provided that Buyer is not then in material
breach of any representation, warranty, covenant or other agreement
contained herein), in the event that Seller shall be in breach or
default under this Agreement or the Deposit Escrow Agreement, and
shall have failed to cure such breach or default within thirty (30)
days after receiving written notice thereof from Seller;
(viii) by Buyer, if all the conditions set forth in Section 11
have not been satisfied (or waived by Buyer) by the Outside Date
other than due, in whole or in part, to a breach or default by
Buyer; and
(ix) by Buyer, if (a) Seller shall fail to commence the
Bankruptcy Case within seventy-five (75) days after the Signature
Date, provided that Buyer's foregoing right of termination under
this clause (a) shall expire upon Seller's commencement of the
Bankruptcy Case in the event that Seller shall commence the
Bankruptcy Case subsequent to the foregoing 75-day period but prior
to Buyer's exercise of its foregoing right of termination, (b) the
motion seeking entry of the Interim Order is not filed with the
Bankruptcy Court on or prior to the third business day after the
Commencement Date, provided that Buyer's foregoing right of
termination under this clause (b) shall expire upon the filing of
the foregoing motion with the Bankruptcy Court in the event that
such motion is filed subsequent to the foregoing three business day
period period but prior to Buyer's exercise of its foregoing right
of termination, (c) the Interim Order is not entered by the
Bankruptcy Court on or prior to the twentieth (20) day after the
filing of the Interim Motion, except in the event that the failure
to enter the Interim Order by the Bankruptcy Court within such
20-day period is attributable to the inability of the Bankruptcy
Court to take action upon the matter for any reason attributable to
any Bankruptcy Court scheduling conflict, calendar-related matter,
illness, disability, vacation schedule, etc., provided that Buyer's
foregoing right of termination under this clause (c) shall expire
upon the Bankruptcy Court's entry of the Interim Order in the event
that the Bankruptcy Court enters the Interim Order subsequent to
the foregoing 20-day period but prior to Buyer's exercise of its
foregoing right of termination, (d) the motion for entry of the
Approval Order,
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the Disclosure Statement, the Bankruptcy Plan, and the vote
tabulation from the Bankruptcy Plan Solicitation, are not filed
with the Bankruptcy Court on or prior to the third business day
after the Commencement Date, provided that Buyer's foregoing right
of termination under this clause (d) shall expire upon the filing
of the foregoing items with the Bankruptcy Court in the event that
such items are filed with the Bankruptcy Court subsequent to the
foregoing third business day but prior to Buyer's exercise of its
foregoing right of termination, (e) the Approval Order is not
entered by the Bankruptcy Court within forty-five (45) days after
the Commencement Date, except in the event that the failure to
enter such Order by the Bankruptcy Court within such 45-day period
is attributable to the inability of the Bankruptcy Court to take
action upon the matter for any reason attributable to any
Bankruptcy Court scheduling conflict, calendar-related matter,
illness, disability, vacation schedule, etc., provided that Buyer's
foregoing right of termination under this clause (e) shall expire
upon the Bankruptcy Court's entry of the Approval Order in the
event that such order is entered by the Bankruptcy Court subsequent
to the foregoing 45-day period but prior to Buyer's exercise of its
foregoing right of termination, (f) the Disclosure Statement Order
and the Confirmation Order are not entered by the Bankruptcy Court
within sixty (60) days after the Commencement Date, except in the
event that the failure to enter either such order by the Bankruptcy
Court within such 60-day period is attributable to the inability of
the Bankruptcy Court to take action upon the matter for any reason
attributable to any Bankruptcy Court scheduling conflict,
calendar-related matter, illness, disability, vacation schedule,
etc., provided that Buyer's foregoing right of termination under
this clause (f) shall expire upon the Bankruptcy Court's entry of
the respective orders in the event that such orders are entered by
the Bankruptcy Court subsequent to the foregoing 60-day period but
prior to Buyer's exercise of its foregoing right of termination,
(g) after the entry of the Approval Order and the Confirmation
Order, the Approval Order or the Confirmation Order is reversed,
revoked, voided, vacated, modified or stayed by an order of a court
of competent jurisdiction in any manner not satisfactory to Buyer
in its sole discretion, or (h) an order by the Bankruptcy Court is
entered
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approving any Competing Transaction, any plan not incorporating
this Agreement or the sale of all or substantially all of the
Assets or the Business to a Third Party.
(b) In the event either party shall terminate this Agreement pursuant
to Section 14(a), the terminating party shall give prompt written
notice thereof to the other party hereto and this Agreement shall
thereupon terminate, without further action by either of the
parties hereto. If the Agreement is terminated as provided herein:
(i) except as otherwise provided herein, the termination of
this Agreement shall not relieve any party of any liability for
breach of this Agreement prior to the date of termination; and
(ii) all filings, applications and other submissions relating to
the transfer of the Assets made pursuant to this Agreement shall,
to the extent practicable, be withdrawn from the agency or other
person to which made.
(c) In the event that this Agreement is terminated by Buyer or Seller
pursuant to Section 14(a)(iii), then, so long as Buyer has not
materially breached any of its covenants or agreements under this
Agreement, Seller shall be obligated to pay to Buyer a fee in the
amount of Six Million Dollars ($6,000,000) (the "Topping Fee"), by
wire transfer of immediately available funds to an account
designated by Buyer with one-half of such payment to be paid to
Buyer at the time of Seller's acceptance of a Competing Proposal,
and the remaining one-half of such payment to be made to Buyer upon
the earlier of (i) the closing of the Competing Transaction or any
other Competing Transaction, (ii) consummation of a Chapter 11 plan
for Seller, or (iii) eighteen (18) months after Seller's acceptance
of the Competing Proposal.
(d) In the event that this Agreement is terminated by Buyer:
(i) pursuant to Section 14(a)(ix)(a) due to or as a result of
Seller's failure to commence the Bankruptcy Case within
seventy-five (75) days after the Signature Date, and such
termination by Buyer occurs prior to any subsequent commencement of
the Bankruptcy Case by Seller, then Buyer shall be entitled to the
payment by Seller of a fee of One Million Dollars ($1,000,000) as
liquidated damages payable immediately upon such termination;
(ii) pursuant to Section 14(a)(ix)(e) due to or as a result of
the Bankruptcy Court's failure to enter the Approval Order within
forty-five (45) days after the
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Commencement Date, and such termination by Buyer occurs at any time
after ninety (90) days after the Commencement Date but prior to any
entry of the Approval Order by the Bankruptcy Court, then Buyer
shall be entitled to the payment by Seller of a fee of Two Million
Six Hundred Twenty Five Thousand Dollars ($2,625,000) as liquidated
damages, and the foregoing $2,625,000 liquidated damage payment
provided in this Section 14(d)(ii) shall be treated by Seller as an
administrative claim and shall be payable upon the earlier of (a)
consummation of a Chapter 11 plan for Seller, or (b) the closing of
a sale of substantially all of the Assets, irrespective of whether
such sale occurs during the Bankruptcy Case, in a Chapter 7 case or
outside of a case under the Bankruptcy Code;
(iii) pursuant to Section 14(a)(ix)(f) due to or as a result of
the Bankruptcy Court's failure to enter the Disclosure Statement
Order and the Confirmation Order within sixty (60) days after the
Commencement Date, and such termination by Buyer occurs at any time
after ninety (90) days after the Commencement Date but prior to any
entry of the Disclosure Statement Order and the Confirmation Order
by the Bankruptcy Court, then Buyer shall be entitled to the
payment by Seller of a fee of Two Million Six Hundred Twenty Five
Thousand Dollars ($2,625,000)as liquidated damages, and the
foregoing $2,625,000 liquidated damage payment provided in this
Section 14(d)(iii) shall be treated by Seller as an administrative
claim and shall be payable upon the earlier of (a) consummation of
a Chapter 11 plan for Seller, or (b) the closing of a sale of
substantially all of the Assets, irrespective of whether such sale
occurs during the Bankruptcy Case, in a Chapter 7 case or outside
of a case under the Bankruptcy Code; or
(iv) pursuant to Section 14(a)(ix)(c) due to or as a result of
the Bankruptcy Court's failure to enter the Interim Order within
twenty (20) days after the filing of the Interim Motion, and such
termination by Buyer occurs prior to any subsequent entry of the
Interim Order by the Bankruptcy Court, then Buyer shall be entitled
to the payment by Seller of a fee of One Million Dollars
($1,000,000) as liquidated damages payable immediately upon such
termination.
Any payment of liquidated damages pursuant to this Section 14(d)
shall be by wire transfer of immediately available funds to an
account designated by Buyer.
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Upon the payment of liquidated damages to Buyer pursuant to this
Section 14(d), all obligations of Seller to Buyer hereunder shall
terminate. Seller and Buyer agree that any damages which Buyer, or
any person claiming through or under Buyer, may at any time allege
to have been suffered by Buyer or any such person arising out of or
related to the termination of this Agreement by Buyer under the
circumstances contained in this Section 14(d) are not easily
measured and that the payment of the liquidated damages provided in
this Section 14(d) represents a reasonable estimate of the damages
that will be suffered by Buyer and not a penalty. Accordingly,
Buyer and Seller hereby agree that the payment of such liquidated
damages shall be in full satisfaction and complete payment of all
such damages and in lieu of any and all other damages and that no
additional damages shall be payable to Buyer or any such person
arising out of or related to the circumstances set forth in this
Section 14(d). In no event shall Buyer be or become entitled to
the payment of liquidated damages in the event that Buyer is paid
the Topping Fee; and in no event shall Buyer be or become entitled
to the payment of liquidated damages of more than $2,625,000 in the
aggregate under Sections 14(d)(i), 14(d)(ii), 14(d)(iii) and
14(d)(iv) hereof, or (in the event that Buyer shall not be or
become entitled to liquidated damages under either of Sections
14(d)(ii) or 14(d)(iii) hereof) of more than $1,000,000 in the
aggregate under Sections 14(d)(i) and 14(d)(iv) hereof.
(e) Following the commencement of the Bankruptcy Case and to the extent
that any order of the Bankruptcy Court shall permit Buyer to pursue
any claim Buyer may hereafter have against Seller for or with
respect to (i) the Topping Fee provided for in Section 14(c), (ii)
any of the liquidated damages provided for in Section 14(d) or
(iii) any of the Indemnifiable Damages provided for in Section
15.1, then in the event that Buyer shall hereafter have and pursue
any such permitted claim against Seller, Seller shall (i) waive all
rights and defenses available to it as to such claim under Section
502(c), (d), or (e) of the Bankruptcy Code and (ii) acknowledge
and agree that such claim shall constitute an allowed
administrative expense under Section 503(b) of the Bankruptcy Code
entitled to priority under Section 507(a)(1) of the Bankruptcy
Code.
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(f) In the event of a termination of this Agreement by Buyer or Seller,
the provisions of Sections 14(c), (d) and (e) shall survive any
such termination.
ARTICLE XV
INDEMNIFICATION
15.1 Indemnification by Seller.
Seller shall indemnify Buyer against and hold it harmless from any and all
Indemnifiable Damages which Buyer may suffer or incur by reason of (i) Seller's
breach of any of Seller's representations and warranties contained in this
Agreement or any document, certificate or agreement delivered pursuant hereto;
(ii) Seller's breach of any of Seller's covenants or agreements contained in
this Agreement or any document, certificate or agreement delivered pursuant
hereto; or (iii) any liabilities for obligations, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, of Seller, other
than the Assumed Liabilities for which Buyer receives a purchase price
adjustment pursuant to Section 3.4 hereof or arising out of any acts occurring
(or the operation of the Business) after the Closing. Without limiting the
generality of the foregoing, with respect to the measurement of Indemnifiable
Damages, Buyer shall have the right to be put in the same financial position as
it would have been in had Seller not breached the respective representation,
warranty, covenant or agreement. However, notwithstanding anything contained
in this Agreement to the contrary, if Buyer makes any claim for damages, Buyer
will use reasonable efforts to mitigate the amount and nature thereof in
accordance with customary industry maintenance procedures and all reasonable
costs and expenses that Buyer incurs in mitigating those damages shall be
considered Indemnifiable Damages. The foregoing obligation of Seller to
indemnify Buyer shall be subject to and limited by each of the following
qualifications:
(a) Each of the representations and warranties made by Seller in this
Agreement or pursuant hereto shall survive for a period of one year from and
after the Closing Date unless a claim shall have been commenced by Buyer's
providing Seller and the Escrow Agent with written notice thereof prior to the
first anniversary of the Closing Date, in which notice Buyer shall set forth
the basis of its claim for damages and its good faith estimate of the amount
thereof, in which case the applicable representations and warranties shall
survive with respect to such claim until such claim has been resolved, and
thereafter all such representations and warranties
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shall be extinguished, and no action for the enforcement of the foregoing
obligation may be commenced with respect to any claim made more than one year
following the Closing Date.
(b) Seller shall have no liability to Buyer for or on account of any of
the Indemnifiable Damages provided in Section 15.1(i) unless and until such
damages in the aggregate exceed Two Hundred Fifty Thousand Dollars ($250,000)
(the "Basket"), in which case such damages shall include the entire amount of
the Indemnifiable Damages, including those not in excess of the Basket. The
total liability of Seller for its indemnity obligation under this Section 15.1,
or otherwise under this Agreement, shall be limited in all respects to, and
shall be payable solely from, the Indemnity Fund. Upon the occurrence of an
event to which Seller's indemnity obligations under this Section 15.1 applies,
Buyer's sole and exclusive remedy shall be recourse to the Indemnity Fund upon
and subject to Buyer's compliance with the terms and conditions of the Closing
Escrow Agreement.
15.2 Indemnification by Buyer.
Buyer shall indemnify Seller against and hold it harmless from any and all
Indemnifiable Damages which Seller may suffer or incur by reason of (i) Buyer's
breach of any of Buyer's representations and warranties contained in this
Agreement or any document, certificate or agreement delivered pursuant hereto;
(ii) Buyer's breach of any of Buyer's covenants, or agreements contained in
this Agreement or any document, certificate or agreement delivered pursuant
hereto; or (iii) any liabilities for obligations, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, assumed by Buyer
pursuant to this Agreement or any document, certificate or agreement delivered
pursuant hereto or arising out of any acts occurring (or the operation of the
Business) after the Closing. Without limiting the generality of the foregoing,
with respect to the measurement of Indemnifiable Damages, Seller shall have the
right to be put in the same financial position as it would have been in had
Buyer not breached the respective representation, warranty, covenant or
agreement. The foregoing obligation of Buyer to indemnify Seller shall be
subject to and limited by each of the following qualifications:
(a) Each of the representations and warranties made by Buyer in this
Agreement or pursuant hereto shall survive for a period of one year from and
after the Closing Date, unless a claim shall have been commenced by Seller's
providing Buyer and the Escrow Agent with written notice thereof prior to the
first anniversary of the Closing Date, in which notice Seller shall set forth
the basis of its claim for damages and its good faith estimate of the amount
thereof, in which case the applicable representations and warranties shall
survive with respect to such
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claim until such claim has been resolved), and thereafter all such
representations and warranties shall be extinguished, and no action for the
enforcement of the foregoing obligation may be commenced with respect to any
claim made more than one year following the Closing Date; and
(b) Buyer shall have no liability to Seller for or on account of any of
the Indemnifiable Damages provided in Section 15.2(i) unless and until such
damages in the aggregate exceed the Basket, in which case such damages shall
include the entire amount of the Indemnifiable Damages, including those not in
excess of the Basket.
15.3 Notice and Right to Defend Third Party Claims
Promptly, upon receipt of notice of any claim, demand or assessment made
by any Third Party or the commencement of any suit, action or proceeding
brought by any Third Party in respect of which indemnity may be sought on
account of any provision of Article XV hereof, the party seeking
indemnification (the "Indemnitee") will give written notice thereof to the
party from whom indemnification is sought (the Indemnitor") promptly and in any
event within sufficient time to enable the Indemnitor to respond to such claim
or answer or otherwise plead in such action. The failure or omission of such
Indemnitee so to notify promptly the Indemnitor of any such Third Party claim
or action shall not relieve such Indemnitor from any liability which it may
have to such Indemnitee in connection therewith, on account of any indemnity
agreement contained in Article XV hereof, except to the extent that the
Indemnitor shall have been actually prejudiced thereby. In case any Third
Party claim, demand or assessment shall be asserted or Third Party suit, action
or proceeding commenced against an Indemnitee, and such Indemnitee shall notify
the Indemnitor of the commencement thereof, the Indemnitor shall be entitled to
participate therein, and, to the extent that it may wish, to assume the
defense, conduct or settlement thereof, with counsel reasonably satisfactory to
the Indemnitee by providing the Indemnitee with written notice within 10 days
after receipt of the Indemnitee's notice of the claim, demand or assessment.
After notice from the Indemnitor to the Indemnitee of its election so to assume
the defense, conduct or settlement thereof within such 10-day period, the
Indemnitor will not be liable to the Indemnitee for any legal or other expenses
subsequently incurred by the Indemnitee in connection with the defense, conduct
or settlement thereof. The Indemnitee will cooperate with the Indemnitor in
connection with any such claim, and make personnel, books and records relevant
to the claim available to the Indemnitor. In the event that the Indemnitor
does not assume the defense, conduct or settlement of any Third Party claim,
demand, or assessment within the foregoing 10-day period, the Indemnitee will
not settle such
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claim, demand, or assessment without the consent of the Indemnitor, which shall
not be unreasonably withheld. A claim shall be deemed conceded, unless the
Indemnitor shall contest it by giving written notice thereof to the Indemnitee
within thirty (30) days after such claim is made.
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ARTICLE XVI
CASUALTY OR LOSS
16.1 Repairs or Replacement of Assets.
In the event that any of the Assets is damaged or destroyed between the
date hereof and the Closing Date (an "Event of Loss") which has not, as of the
time of Closing, had a material adverse effect on the Systems, then at the
Closing, in addition to all other closing transactions, all insurance proceeds
and claims to insurance proceeds or other rights of Seller against third
parties arising from such Event of Loss shall (to the extent assignable under
applicable state law and the applicable insurance policy) be separately
assigned by Seller to Buyer unless such Assets are repaired or replaced as
hereinafter provided. To the extent not so assignable, such claims may be
pursued by Buyer, at its cost and expense and for its own account and benefit,
in the name of Seller. If any Event of Loss shall occur, Seller shall use such
commercially reasonable efforts as would customarily be applied in the ordinary
course of business to repair or replace the respective damaged or destroyed
Asset(s) with comparable property of like value and quality before the Closing
Date. In the event that any such damaged or destroyed Asset(s) cannot
reasonably be repaired or replaced prior to the Closing Date, the Purchase
Price shall be reduced by the replacement cost of any such damaged or destroyed
Asset(s). If the Event of Loss shall have had a material adverse effect on the
Systems and the repair or replacement thereof cannot be accomplished by the
Closing Date, the Closing shall be postponed for a period of up to 60 days to
the extent reasonably necessary to permit Seller to accomplish that repair or
replacement; if, however, the Event of Loss shall have had a material adverse
effect on the Systems and the repair or replacement thereof cannot be
accomplished prior to the expiration of the foregoing 60-day extension period,
Seller shall give Buyer written notice thereof and Buyer may thereupon elect,
by written notice to Seller within thirty (30) days after Buyer's receipt of
Seller's foregoing notice, as follows:
(i) to postpone the Closing, but not more than 90 days beyond the date
for Closing originally scheduled pursuant to Section 4.1, until such date as
the damaged or destroyed Asset(s) can be repaired or replaced in all material
respects as aforesaid;
(ii) to close the sale transaction on the scheduled date of the Closing
and accept the Assets as is (in which event Seller shall assign to Buyer all
proceeds of insurance relating to the casualty or loss, but no reduction shall
be made to the Purchase Price in respect of such casualty or loss except to the
extent of the amount of any deductibles under Seller's insurance policies); or
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(iii) to terminate this Agreement without liability on the part of either
Buyer or Seller.
16.2 Risk of Loss.
The risk of any loss, damage or destruction with respect to any of the
Assets (whether from fire, casualty or other cause) shall be borne by and
remain with Seller until the Closing.
ARTICLE XVII
MISCELLANEOUS
17.1 Assignment.
Neither this Agreement, nor any right hereunder, may be assigned by any of
the parties hereto, except that: (i) at any date prior to July 15, 1998, Buyer
may (upon at least seven days prior written notice to Seller) assign all of its
rights hereunder to an Affiliate; provided, that notwithstanding any such
assignment, Buyer shall (with such Affiliate) be and remain liable to Seller
for the performance and fulfillment of all of Buyer's covenants, duties and
obligations hereunder; and (ii) Buyer may assign all of its rights, duties,
covenants and obligations hereunder to any successor or assign at any time
after the Closing, upon 10 days prior written notice to Seller.
17.2 Successors.
This Agreement shall be binding upon and inure to the benefit of Buyer and
its heirs, successors or assigns, and Seller and its respective heirs,
successors or assigns, subject in all respects to Section 17.1.
17.3 Entire Agreement.
This Agreement, including the Schedules and Exhibits hereto, constitutes
the entire agreement of the parties, and supercedes all prior documents,
agreements (including, without limitation, that certain letter of intent
between Seller and Buyer dated November 26, 1997), promises, covenants,
arrangements, communications, representations or warranties, whether oral or
written, by or on behalf of either party hereto or any officer, employee,
representative or agent of either party hereto.
17.4 Third Parties.
Except as specifically set forth or referred to herein, nothing herein
expressed or implied is intended or shall be construed to confer upon or give
to any person or other entity, other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
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17.5 Amendments in Writing.
The terms of this Agreement may not be amended, modified or waived except
by written agreement executed by Buyer and Seller.
17.6 Governing Law.
This Agreement shall be construed in accordance with and governed by the
laws of the State of Colorado.
17.7 Interpretation.
The headings of the Articles and Sections of this Agreement are inserted
for convenience of reference only and shall not constitute a part hereof or
affect in any way the meaning or interpretation of this Agreement. Each of
Seller and Buyer acknowledges that it has actively participated in the
preparation, drafting and review of this Agreement, and each party hereby
waives any claim that this Agreement or any provision hereof (or any Exhibit or
Schedule hereto) is to be construed against the other party hereto as the
draftsperson thereof.
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17.8 Arbitration.
(a) Any dispute may be submitted by any party hereto to arbitration.
Arbitration shall be conducted in Chicago, Illinois, or any other location
mutually agreeable to Seller and Buyer, before a single arbitrator appointed by
the American Arbitration Association in accordance with the commercial rules of
the American Arbitration Association then in effect. The award of such
arbitrator shall be final and may be entered by any party hereto in any court
of competent jurisdiction. The prevailing party in such arbitration shall be
entitled to an award of all costs and expenses of such arbitration (including
its reasonable legal expenses, including counsel fees); provided, however, in
the event that the arbitrator makes an award not entirely in favor of either
party, the costs and expenses (including reasonable legal expenses of either
party) shall be paid as directed by the arbitrator.
(b) Notwithstanding the provisions of Section 17.8(a) hereof, any
dispute or proceeding arising out of or related to this Agreement (including,
without limitation, any arbitration proceeding commenced under Section 17.8(a)
hereof) shall, from and after the commencement of the Bankruptcy Case, be
submitted to and decided by the Bankruptcy Court, and for purposes of giving
effect to the foregoing provision hereof, Buyer and Seller hereby consent and
submit to the jurisdiction of the Bankruptcy Court.
17.9 Notices.
All notices hereunder shall be in writing and shall be deemed to have been
delivered on the date of the first attempted delivery by (i) the United States
Postal Service, unless otherwise provided herein, to the respective party if
mailed by certified mail, return receipt requested, or (ii) a reputable
overnight delivery service, to the respective party at its address set forth
below or such other address as either party may designate to the other by
written notice in accordance herewith:
If to Seller:
Scott Cable Communications, Inc.
c/o American Cable Entertainment
Attention: Bruce A. Armstrong, President and CEO
Four Landmark Square, Suite 302
Stamford, CT 06901
with a complete copy under separate cover (which copy by itself
shall not constitute notice) to:
Day L. Patterson, Senior Vice President
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and General Counsel
American Cable Entertainment
Four Landmark Square, Suite 302
Stamford, Connecticut 06901
If to Buyer:
InterLink Communications Partners, LLLP
c/o Rifkin & Associates, Inc.
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Attention: Kevin B. Allen
with a complete copy under separate cover (which copy by itself
shall not constitute notice) to:
Stuart G. Rifkin, Esq.
Baker & Hostetler LLP
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203
17.10 Severability.
Any provision hereof which is prohibited or unenforceable shall be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof.
17.11 Counterparts.
This Agreement may be executed in one or more counterparts and each executed
copy shall constitute an original.
IN WITNESS WHEREOF, the parties hereunto have duly executed this
Agreement.
SELLER:
SCOTT CABLE COMMUNICATIONS, INC.
By: /s/ Bruce A. Armstrong
------------------------
Bruce A. Armstrong,
President and CEO
Signature Date: July 9, 1998
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BUYER:
INTERLINK COMMUNICATIONS PARTNERS, LLLP
By: Rifkin Co., its general partner
By: /s/ Kevin B. Allen
--------------------------------
Name: Kevin B. Allen
Title: Vice President
Signature Date: July 10, 1998
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INDEX TO EXHIBITS
Exhibit 2.3(i) Form of Bill of Sale
Exhibit 2.3(ii) Form of Assignment and Assumption Agreement
Exhibit 2.3(iii) Form of Special Warranty Deed
Exhibit 3.2 Deposit Escrow Agreement
Exhibit 3.5 Form of Closing Escrow Agreement
Exhibit 11.5 Form of Seller's Counsel Opinion
Exhibit 11.6 Form of Seller's FCC Counsel Opinion
Exhibit 11.7 Form of Non-Competition Agreement
Exhibit 11.9 Form of Consent or Approval to Assignment and Transfer
Exhibit 12.6 Form of Buyer's Opinion of Counsel
INDEX OF SCHEDULES
Schedule Title
1.1(A) Slow Pay Bulk Agreements
1.1(B) Systems and Service Areas
2.1(A) Real Estate
2.1(C) Seller's Interest in Leases, as Lessor
2.1(H) Choses in Action
2.1(I) Proprietary Rights
2.1(K) Vehicles
2.2 Excluded Assets
3.3(B) Free Service
5.3 Material Consents and Approvals
5.6 Unpaid Taxes
5.7(A) Franchises
5.7(B) Necessary Contracts
5.7(C) Defaults Under Franchises and Necessary Contracts
5.8(A) Material Agreements
5.8(B) Defaults under Material Agreements
5.9(A) Channel Capacity, Subscribers and Rates
5.10 Pole Attachments
5.11 Labor Discussions
5.12 Absence of Certain Developments
5.13 Real Estate Liens and Encumbrances
5.17 Transactions
5.18 Litigation and Administrative Proceedings
5.20 Retirement Plans
5.21 Employee Benefit Plans
5.22 Insurance Policies and Surety Bonds
5.23 Environmental Laws; Environmental Permits
5.24 Sale Commitments
