<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the period ended June 30, 1995
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or
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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Commission File Number: 0-16064
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Northland Cable Properties Four Limited Partnership
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(Exact Name of Registrant as Specified in Charter)
Washington 74-1998317
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(State of Organization) (I.R.S. Employer Identification No.)
1201 Third Avenue, Suite 3600, Seattle, Washington 98101
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(Address of Principal Executive Offices) (Zip Code)
(206) 621-1351
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(Registrant's telephone number, including area code)
N/A
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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________________________
This filing contains __ pages. Exhibits index appears on page __.
<PAGE> 2
PART 1 - FINANCIAL INFORMATION
ITEM 1. Financial Statements
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
BALANCE SHEETS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
Cash $ 263,665 $ 350,892
Accounts receivable 144,428 135,960
Prepaid expenses 88,518 56,210
Property and equipment, net of accumulated
depreciation of $12,754,050 and $12,415,608,
respectively 3,343,645 3,794,184
Intangible assets, net of accumulated
amortization of $1,318,802 and $1,260,062,
respectively 349,358 408,099
---------- ----------
Total assets $4,189,615 $4,745,345
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable and accrued expenses $553,052 $489,794
Due to managing general partner and affiliates 88,496 58,851
Converter deposits 32,507 31,995
Subscriber prepayments 55,725 138,196
Notes payable 9,194,878 9,784,068
---------- ----------
Total liabilities 9,924,658 10,502,904
---------- ----------
Partners' equity:
General Partners:
Contributed capital, net (49,394) (47,905)
Accumulated deficit (69,918) (71,632)
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(119,312) (119,537)
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Limited Partners:
Contributed capital, net 1,306,044 1,453,466
Accumulated deficit (6,921,775) (7,091,488)
---------- ----------
(5,615,731) (5,638,022)
---------- ----------
Total partners' equity (5,735,043) (5,757,559)
---------- ----------
Total liabilities and partners' equity $4,189,615 $4,745,345
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements.
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<PAGE> 3
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1995 1994
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<S> <C> <C>
Service revenues $2,989,066 $2,779,292
Expenses:
Operating 374,962 360,614
General and administrative (including
$363,774 and $314,853 to affiliates
in 1995 and 1994, respectively) 745,087 720,526
Programming 620,267 516,425
Depreciation and amortization 709,390 824,946
---------- ----------
2,450,706 2,422,511
---------- ----------
Income from operations 538,360 356,781
Other income (expense):
Interest expense (365,087) (292,854)
Interest income 2,394 1,234
Loss on disposal of assets (4,240) -
---------- ----------
(366,933) (291,620)
---------- ----------
Net income $ 171,427 $ 65,161
========== ==========
Allocation of net income:
General Partners $ 1,714 $ 652
========== ==========
Limited Partners $ 169,713 $ 64,509
========== ==========
Net income per limited partnership
unit: (14,663 units) $ 12 $ 4
========== ==========
Net income per $1,000 investment $ 23 $ 9
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements.
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<PAGE> 4
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the three months ended June 30,
-----------------------------------
1995 1994
---------- ----------
<S> <C> <C>
Service revenues $1,534,920 $1,402,528
Expenses:
Operating 203,122 192,335
General and administrative (including
$182,880 and $157,573 to affiliates
in 1995 and 1994, respectively) 385,269 352,976
Programming 327,274 259,145
Depreciation and amortization 287,566 412,784
---------- ----------
1,203,231 1,217,240
---------- ----------
Income from operations 331,689 185,288
Other income (expense):
Interest expense (177,805) (145,565)
Interest income 1,567 729
Loss on disposal of assets (4,515) -
---------- ----------
(180,753) (144,836)
---------- ----------
Net income $ 150,936 $ 40,452
========== ==========
Allocation of net income:
General Partners $ 1,509 $ 405
========== ==========
Limited Partners $ 149,427 $ 40,047
========== ==========
Net income per limited partnership
unit: (14,663 units) $ 10 $ 3
========== ==========
Net income per $1,000 investment $ 20 $ 5
========== ==========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements.
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<PAGE> 5
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS - (Unaudited)
(Prepared by the Managing General Partner)
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1995 1994
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $171,427 $ 65,161
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization 709,390 824,946
Loss on disposition of assets 4,515 -
(Increase) decrease in operating assets:
Accounts receivable (8,468) 21,570
Prepaid expenses (32,308) 4,560
Increase (decrease) in operating liabilities:
Account payable and accrued expenses 63,258 176,441
Due to managing general partner and affiliates 29,645 30,703
Converter deposits 512 1,133
Subscriber prepayments (82,471) (66,602)
-------- --------
Net cash from operating activities 855,500 1,057,912
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment, net (204,627) (185,828)
-------- --------
Net cash used in investing activities (204,627) (185,828)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on borrowings (589,189) (412,433)
Distributions to partners (148,911) (149,182)
Loan fees and other costs incurred - -
Repurchase of limited partner interest (31,000)
-------- --------
Net cash used in financing activities (738,100) (592,615)
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INCREASE (DECREASE) IN CASH (87,227) 279,469
CASH, beginning of period 350,892 214,642
-------- --------
CASH, end of period $263,665 $494,111
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $367,317 $322,356
======== ========
</TABLE>
The accompanying note to unaudited financial statements is an integral part of
these statements.
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<PAGE> 6
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
NOTE TO UNAUDITED FINANCIAL STATEMENTS
(1) These unaudited financial statements are being filed in conformity with
Rule 10-01 of Regulation S-X regarding interim financial statement disclosure
and do not contain all of the necessary footnote disclosures required for a
fair presentation of the Balance Sheets, Statements of Operations and
Statements of Cash Flows in conformity with generally accepted accounting
principles. However, in the opinion of management, this data includes all
adjustments, consisting only of normal recurring accruals, necessary to present
fairly the Partnership's financial position at June 30, 1995 and December 31,
1994, its Statements of Operations for the six and three months ended June 30,
1995 and 1994, and its Statements of Cash Flows for the six months ended June
30, 1995 and 1994. Results of operations for these periods are not necessarily
indicative of results to be expected for the full year.
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<PAGE> 7
PART I (continued)
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Revenues totalled $1,534,920 for the three months ended June 30, 1995,
representing an increase of approximately 9% over the same period in 1994. Of
these revenues, $1,084,010 (71%) was derived from basic service charges,
$176,328 (12%) from premium services, $92,812 (6%) from tier services, $37,319
(2%) from installation charges, $51,704 (3%) from service maintenance contracts
and $92,747 (6%) from other sources. The revenue increase is due to an
increase in basic subscribers of approximately 4%, as well as revenue generated
from inflation based rate increases placed into effect in the latter part of
1994.
As of June 30, 1995, the Partnership's systems served approximately 16,300
basic subscribers, 6,000 premium subscribers and 5,100 tier subscribers.
Operating expenses totalled $203,122 for the three months ended June 30, 1995
representing an increase of approximately 6% over the same period in 1994. The
net increase is primarily due to increased salary and benefit costs as a result
of cost of living adjustments and the addition of two operating employees in
1995 offset by a decrease in overtime compensation.
General and administrative expenses totalled $385,269 for the three months
ended June 30, 1995, representing an increase of approximately 9% over the same
period in 1994. The increase is attributable to increased management,
franchise and copyright fees which are based on partnership revenues and
increases in wage and benefit costs.
Programming expenses totalled $327,274 for the three months ended June 30, 1995
representing an increase of approximately 26% over the same period in 1994.
This is mainly due to increased costs charged by various program suppliers,
increases in the subscriber base, as well as new channel launches in the
various systems.
Depreciation and amortization expense decreased approximately 30% as compared
to the same period in 1994. This is mainly due to assets becoming fully
depreciated during the second quarter of 1995.
Interest expense for the three months ended June 30, 1995 increased
approximately 22% as compared to the same period in 1994. The average bank
debt outstanding decreased from $10,402,718 during the second quarter of 1994
to $9,489,473 during the second quarter of 1995, however, the Partnership's
effective interest rate increased from 5.56% in 1994 to 7.24% in 1995.
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<PAGE> 8
Liquidity and Capital Resources
The Partnership's primary source of liquidity is cash flow provided from
operations. Based on management's analysis, the Partnership's cash flow from
operations is sufficient to cover future operating costs, debt service and
planned capital expenditures.
Under the terms of the Partnership's loan agreement, the Partnership has agreed
to restrictive covenants which require the maintenance of certain ratios
including a maximum ratio of senior debt to annualized operating cash flow of
4.00 to 1 and a minimum ratio of annualized operating cash flow to pro forma
debt service of 1.25 to 1. As of June 30, 1995 the Partnership was in
compliance with its required financial covenants.
As of the date of this filing, the balance under the credit facility is
$9,194,876. Certain fixed rate agreements in place as of March 31, 1995
expired during the second quarter of 1995, and the Partnership entered into new
fixed rate agreements. As of the date of this filing, interest rates on the
credit facility were as follows: $4,200,000 at Libor based rate of 7.12%
expiring August 17, 1995; $1,898,376 fixed at 7.2% under the terms of a
self-amortizing interest rate swap agreement with the Partnership's lender
expiring September 6, 1995; and $3,000,000 fixed at 7.37% expiring August 8,
1995. The balance of $96,500 bears interest at the prime rate plus 1/4%
(currently 9.00%). The above rates include a margin paid to the lender based
on overall leverage, and may increase or decrease as the Partnership's leverage
fluctuates.
Capital Expenditures
During the second quarter of 1995, the Partnership incurred approximately
$155,000 in capital expenditures, including line extensions and channel
additions in the Chowchilla, CA system and the Tyler, TX system. Planned
capital expenditures for the balance of 1995 include line extensions to pass an
additional 400 homes in the various systems, vehicle replacements, the initial
phases of a system upgrade to 450 MHz and mapping of the New Caney, TX system,
and a possible fiber interconnect of the Flint and Lake Palestine headends in
the Tyler, TX system.
Acquisition of Assets
On April 10, 1995, Northland Telecommunications Corporation, an affiliate of
the Partnership entered into an agreement to acquire substantially all
operating assets and franchise rights of the cable television systems in or
around the communities of Kaufman, Oak Grove, Hillsboro, Mt. Calm, Rice,
Mildred/Eureka, Wortham, Mexia, Lake Mexia, Tehuacana, Coolidge, Groesbeck,
Jewett, New Waverly and Waterwood, all in the State of Texas. The cable
television systems are owned and operated by SLT TV Cable, Inc.
The Partnership will acquire approximately 3,400 subscribers in or around the
communities of Kaufman, Oak Grove, Hillsboro, New Waverly and Waterwood, Texas
(the "SLT System"), and the remaining cable television systems will be acquired
by an affiliate of the Partnership. The estimated purchase price of the
systems is $4,400,000 and the closing date is anticipated on or
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<PAGE> 9
about August 31, 1995.
The Partnership has received terms from a bank to refinance its existing debt,
increasing the total facility to $23,000,000. The Partnership will use the
proceeds to repay the previous credit facility, finance the acquisition of the
SLT System and provide working capital.
Effects of Regulation
On October 5, 1992, Congress enacted the Cable Television Consumer Protection
and Competition Act of 1992 (the "1992 Act"). The 1992 Act substantially
reregulated the cable television industry and imposed numerous requirements,
including provisions subjecting rates for certain services and equipment to
regulation by the applicable local franchising authority and by the Federal
Communications Commission ("FCC"), exclusive programming arrangements, the
carriage of broadcast signals, customer service standards, leased access
channels, customer premises equipment compatibility and various other matters.
On April 1, 1993, the FCC announced the adoption of rate regulations which
became effective September 1, 1993. Under those initial regulations, rates
were evaluated against "competitive benchmarks" and were generally subject to
rollbacks if they exceeded the benchmark levels. On February 22, 1994, the FCC
substantially revised the rate regulation rules to effect further rate
reductions effective May 15, 1994, or later in certain circumstances, based on
complex formulas and revised benchmarks.
All of the Partnership's cable systems are potentially subject to rate
regulation. The 1992 Act (i) requires the FCC to establish rate standards for
basic cable service rates which may be regulated by the applicable local
franchising authority, (ii) requires the FCC, upon receipt of a complaint, to
review rates for additional tiers of cable service, (iii) regulates rates for
mandatorily offered commercial leased access channels and (iv) eliminates the
automatic five percent annual increase for basic rates allowed under prior law.
Rates for channels offered on a per-channel basis as individual purchase
options and pay-per-view events are excluded from rate regulation.
Basic service rates, including the equipment used to receive basic service, may
be regulated by a local franchising authority once it has been "certified" by
the FCC. When the certification becomes effective, the local franchise
authority may request the cable operator to justify its existing rates charged
for basic service and related equipment ("request for justification" or "RFJ").
Rates charged in excess of the maximum allowable rates determined under FCC
regulations are subject to refund for the period in which the excess rates were
charged or one year, whichever is shorter. Additional tiers of service are
subject to regulation only upon an appropriately filed complaint to the FCC by
any subscriber, franchising authority or other person ("subscriber
complaints"). If no subscriber complaints are filed within 45 days of a change
in the FCC regulated rates, such rates are not subject to challenge unless and
until the cable operator seeks to modify them. Refund liability, if any,
generally would be limited to any incremental increase in rates. In late 1994,
the FCC revised its rules to permit cable operators to offer New Product Tiers
at rates which they elect so long as, among other conditions, other channels
that are subject to rate regulation are priced in conformity with applicable
regulations and cable operators do not remove programming services from
existing service tiers and offer
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<PAGE> 10
them on the New Product Tier.
On May 5, 1995, the FCC announced the adoption of a simplified set of
rate regulation rules that will apply to "small" cable systems, defined as a
system serving 15,000 or fewer subscribers, that are owned by "small"
companies, defined as a company serving 400,000 or fewer subscribers. Under
the FCC's definition, the Partnership is a "small" company and each of the
Partnership's cable systems are "small" systems. As of the date of this
filing, the FCC has not released the text of its new rules so the Partnership
is unable to determine the ultimate effects of the regulatory change. Based on
the FCC's public comments, however, the new rules are anticipated to provide a
significant degree of relief from rate regulation for the Partnership's
systems.
As of the date of this filing, the Partnership has received
notification that local franchising authorities with jurisdiction over
approximately 4% of the Partnership's subscribers have elected to certify and
subscriber complaints have been filed in systems representing 2% of the
Partnership's total subscribers. Based on management's analysis, the rates
charged by these systems are within the maximum rates allowed under FCC rate
regulations.
Future rate increases under this regulatory environment will be
dependent on several factors including the level of inflation as measured by
the annual change in the GNP-PI index, increases in "external costs" as defined
by the FCC and possible changes to the existing rules regarding rate increases
associated with the launch of new services on regulated tiers. Because of the
uncertainties associated with these factors the future impact of rate
regulation on the Partnership's results of operations cannot be determined at
this time. Management feels it is reasonably possible under the price cap
mechanism that operating margins will stabilize and perhaps increase in future
periods as inflation and external cost increases are allowed to be passed
through to subscribers through rate adjustments.
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<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1 Legal proceedings
None
ITEM 2 Changes in securities
None
ITEM 3 Defaults upon senior securities
None
ITEM 4 Submission of matters to a vote of security holders
None
ITEM 5 Other information
None
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibit index
10.37 Asset Purchase Agreement between Northland Telecommunications
Corporation and SLT Cable TV, Inc., dated April 10, 1995.
27.0 Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter ended
June 30, 1995.
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<PAGE> 12
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 thereunto duly authorized.
NORTHLAND CABLE PROPERTIES FOUR LIMITED PARTNERSHIP
BY: Northland Communications Corporation,
Managing General Partner
Dated: BY: /s/ RICHARD I. CLARK
----------------- ---------------------------------------
Richard I. Clark
(Vice President/Treasurer)
Dated: BY: /s/ GARY S. JONES
----------------- ---------------------------------------
Gary S. Jones
(Vice President)
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<PAGE> 1
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
NORTHLAND TELECOMMUNICATIONS CORPORATION
("BUYER")
AND
SLT CABLE TV, INC.
("SELLER")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Section 1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2.1 Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2.2 CATV Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2.3 CATV Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2.4 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2.5 Seller Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2.6 Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Basic Package Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Basic Service Tier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.5 Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 CATV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 CATV Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 CLI Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.9 Closing and Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.10 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.11 Equivalent Billing Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.12 Equivalent Subscribers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.13 ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.14 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.15 FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.16 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.17 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.18 Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.19 Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.20 Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2. Sale of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Agreement to Purchase and Sell . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Assets to Be Sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3. Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1.1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.1.2 Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2 Adjustments and Prorations to the Purchase Price at Closing . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2.1 Subscriber Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3.2.2 Prorations and Other Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Post-Closing Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.3.1 Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
3.3.2 Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.4 Allocation of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 4. Assumption of Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.1 Assignment and Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2 Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2.1 Buyer's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
4.2.2 Termination of or Indemnification Against Agreements not Assumed . . . . . . . . . . . . . . . . . . 8
4.3 Sales and Transfer Taxes; Third-Party Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 5. Representations and Warranties of Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.1 Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.2 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.3 No Breach or Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.4 Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5 Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5.1 Zoning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5.2 Access; Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5.3 Effectiveness of Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5.4 Easements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.5.5 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.6 Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7 CATV Instruments and Seller Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7.1 Effectiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.7.2 Copies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.7.3 Status of CATV Instruments and Seller Contracts Not Assumed . . . . . . . . . . . . . . . . . . . . 12
5.8 FCC Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8.1 General Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.8.2 CLI Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8.3 Tests and Compliance with Standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.8.4 System Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.8.5 Payment of Fines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.9 Copyrights, Patents and Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.9.1 Copyright Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.9.2 Copyright Infringement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.9.3 Payment of Fines and Copyright Royalties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.9.4 Patents, Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.10 Assets and CATV Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.10.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.10.2 Cable Plant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.11 Litigation and Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.12 Tax Returns; Other Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.13 Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.14 Employment Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.14.1 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
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5.14.2 Employment Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.14.3 Unions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14.4 Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14.5 Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14.6 Seller's Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14.7 Health Care Continuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14.8 Miscellaneous Federal Acts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.14.9 FCC Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.15 Subscribers Fees and Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.16 Insolvency Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.17 Finders and Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.18 Effect of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.19 Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.20 Overbuilds; Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.21 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.22 Free CATV Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6. Buyer's Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.1 Organization and Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.3 Financial Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Litigation and Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Finders and Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Status of Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.7 Effect of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.8 Citizenship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7. Conduct Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.1 Access to Premises and Records . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.2 Continuity and Maintenance of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
7.3 Existing Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.4 Employees; Employment Relationship . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.5 Buyer's Right to Employ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.6 Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.7 News Releases and Media Notification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 8. Closing; Closing Date; Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.1 Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
8.3 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
8.4 Return of Confidential Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9. Seller's Obligations At and Prior to Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.1 Transaction Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
9.2 Closing Documents Checklist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
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9.3 Security Interest Searches . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
9.4 Tax Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 10. Buyer's Obligations At Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 11. Conditions of Buyer's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.1 Tests and Inspections Before Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
11.1.2 Environmental Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.2 Approvals and Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.2.1 Franchises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
11.3 Performance by Seller of Covenants and Accuracy of Representations and Warranties . . . . . . . . . . . . 27
11.3.2 Operability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3.3 Restraint of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3.4 No Governmental Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3.5 Equivalent Subscribers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3.6 Updated Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.3.7 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.4 Conveyance of Title to Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
11.4.2 Title Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 12. Conditions of Seller's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.1 Performance by Buyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.2 Buyer's Certificate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.3 Restraint of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.4 Operability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.5 Restraint of Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
12.6 No Governmental Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
12.7 Closing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 13. Noncompetition Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 14. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
14.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Section 15. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.2 Assignment and Delegation of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
15.3 Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.5 Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.6 Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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15.7 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.8 Execution in Multiple Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.9 Schedules and Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
15.10 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
15.11 Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.12 Captions and Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.13 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
15.14 Legal Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.15 Severability; Invalidity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.16 Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is made as of April 10, 1995, by and
between NORTHLAND TELECOMMUNICATIONS CORPORATION, a Washington corporation, and
its assigns, and SLT CABLE TV, INC., a Texas corporation.
RECITALS
A. SLT Cable TV, Inc. currently is engaged in the business of
providing cable television service in or around the communities of Kaufman, Oak
Grove, Hillsboro, Mt. Calm, Rice, Mildred/Eureka, Wortham, Mexia, Lake Mexia,
Tehuacana, Coolidge, Groesbeck, Jewett, New Waverly and Waterwood, all in the
State of Texas.
B. Northland Telecommunications Corporation, and its assigns,
desires to purchase, and SLT Cable TV, Inc. desires to sell and convey
substantially all of the assets of SLT Cable TV, Inc. used or useful in
connection with such cable television business, all as more particularly
described below.
AGREEMENT
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties agree as follows:
SECTION 1. DEFINITIONS
For the purposes of this Agreement, the following capitalized terms
shall have the respective meanings ascribed to them below (terms defined in the
singular shall have the same meanings when used in the plural, and vice versa):
1.1 Agreement. "Agreement" shall mean this Asset Purchase
Agreement, as amended, supplemented or modified from time to time, including
all agreements, instruments and documents delivered in connection with this
Agreement and all Schedules and Exhibits annexed hereto.
1.2 Assets. Excepting only the Excluded Assets as defined in
Section 1.14, "Assets" shall include all properties, privileges, rights and
interests, real and personal, tangible and intangible, of every type and
description in which Seller has any right, title or interest, and that are
owned, held, used, or useful in the CATV Systems as of the Closing Date,
including without limitation the items which are listed in Schedule 1.2, and
the following:
1.2.1 Cash and Cash Equivalents. All cash and cash
equivalents held by Seller and relating to converter and other subscriber
deposits (but only to the extent the refund obligations for the same are
assumed by Buyer), all subscriber prepayments, advertising
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prepayments and other prepaid revenues, and all accounts receivable existing as
of Closing with respect to the CATV Systems, including but not limited to those
Cash Equivalents described in Schedule 1.2, but not including cash on hand,
accounts or investments of any kind that are not otherwise Cash Equivalents;
1.2.2 CATV Instruments. Franchises, pole attachment rights,
licenses, crossing permits, service agreements, retransmission consent
agreements and all intangible CATV channel distribution rights or privileges
owned, used or held for use by Seller, including without limitation those
described in Schedule 1.2;
1.2.3 CATV Equipment. All tangible personalty, furniture,
fixtures, office equipment and supplies, electronic devices, strand, trunk,
feeder, drop and other distribution cable, towers, antennae, poles, amplifiers,
power supplies, conduit, vaults, non-telephone pedestals, grounding and pole
hardware, "headend" (origination, earth stations, transmission and distribution
system) hardware, motor and other vehicles, tools, construction equipment, test
equipment, maintenance equipment, spare parts, inventory and other personal
property and facilities owned, leased, used, or held for use in the CATV
Systems, and subscribers' devices to the extent owned by Seller (including,
without limitation, converters, encoders, transformers behind TV sets and
fittings), all of which includes, without limitation, those described in
Schedule 1.2;
1.2.4 Real Property. All realty, including appurtenances,
improvements, and fixtures located thereon, easements, and other such items,
owned or leased by Seller and used or held for use in the CATV Systems,
including Seller's fee and leasehold interests therein, and including without
limitation those items or interests described in Schedule 1.2;
1.2.5 Seller Contracts. All contracts, agreements and other
arrangements pertaining to the lawful ownership, operation and maintenance of
the CATV Systems or used in the CATV Systems, including without limitation
those described in Schedule 1.2; and
1.2.6 Intangibles. All general intangibles including, but
not limited to, subscriber lists, accounts receivable, notes receivable,
options, claims, trade names other than SLT Cable TV, Inc., including any
derivatives thereof, patents, copyrights, registered trademarks, and goodwill.
1.3 Basic Package Services. "Basic Package Services" shall mean
the package of cable television programming, including broadcast and satellite
service programming (but excluding premium or pay-television programming) sold
to the greatest number of subscribers of the CATV Systems for a fixed monthly
fee, as more particularly described in Schedule 1.7.
1.4 Basic Service Tier. "Basic Service Tier" shall mean that
level of cable services, offered at the rate set forth in Schedule 1.7, that
includes only (a) the signals of off-air television broadcast stations, (b) the
signals of television broadcast stations that are secondarily transmitted
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by a satellite carrier beyond the local service area of such stations, (c)
local origination channels, and (d) public, educational and governmental access
channels.
1.5 Buyer. "Buyer" shall mean Northland Telecommunication
Corporation, a Washington corporation, or any affiliated corporation or
partnership to which Northland Telecommunications Corporation may assign its
rights and obligations pursuant to Section 15.2.
1.6 CATV. "CATV" shall mean cable television.
1.7 CATV Systems. "CATV Systems" shall refer to (a) Seller's
complete CATV reception and distribution systems as presently conducted by
Seller in or around the communities of Kaufman, Oak Grove, Hillsboro, Mt. Calm,
Rice, Mildred/Eureka, Wortham, Mexia, Lake Mexia, Tehuacana, Coolidge,
Groesbeck, Jewett, New Waverly and Waterwood, all in the State of Texas,
consisting of one or more headends, trunk cable, feeder cable, microwave
transmission and reception facilities, drops and associated electronic
equipment, which are, or are capable of being, operated as an independent
system without interconnections to other CATV systems; and (b) all of the
Assets and business of such systems, as more particularly described in Schedule
1.7.
1.8 CLI Rules. "CLI Rules" shall refer to the Cumulative Leakage
Index ("CLI") standards under currently effective FCC rules and regulations.
1.9 Closing and Closing Date. "Closing" shall refer to the
meeting for the purpose of concluding the transactions contemplated by this
Agreement, to be held at the place and on the date specified in Section 8.1.
The day on which such meeting takes place shall be referred to as the "Closing
Date."
1.10 Code. "Code" shall mean the Internal Revenue Code of 1986,
and any successor statute of similar import, and regulations thereunder, in
each case as in effect from time to time.
1.11 Equivalent Billing Units. "Equivalent Billing Units" shall
mean the sum of: (a) the number obtained by dividing the aggregate monthly
amount billed by Seller to bulk subscribers of the CATV Systems, such as
hotels, motels and apartment houses, that receive Basic Package Services (not
more than a single month's billing for any single bulk account and excluding
installation and other non-recurring charges), by the full monthly rate charged
to single family households in the CATV Systems for Basic Package Services,
provided, that no part of the account of any bulk subscriber is more than sixty
(60) days past due from the original due date of billing, and provided further
that each such bulk subscriber has paid at least two (2) months' regular
charges for Basic Package Services and all installation charges billed
therefor; and (b) the number obtained by dividing the aggregate monthly amount
billed by Seller to Basic Service Tier subscribers (excluding installation and
other non-recurring charges) by the full monthly rate charged to subscribers of
the Basic Package Services, provided, that no part of the account of any Basic
Service Tier subscriber is more than sixty (60) days past due from the
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original due date of billing, and provided further that each Basic Service Tier
subscriber has paid at least two (2) months' regular charges for such services
and all installation charges billed therefor.
1.12 Equivalent Subscribers. "Equivalent Subscribers" shall mean,
with respect to the CATV Systems, the sum of (a) the number of single family
households (exclusive of "additional outlets" or "second connects" and "pending
disconnects," as such terms are commonly understood in the CATV industry)
subscribing to Basic Package Services of the CATV Systems and paying the full
or senior citizen monthly price for such services in accordance with standard
rates generally charged by Seller throughout the CATV Systems, whose accounts
payable to Seller for Basic Package Services are not more than sixty (60) days
past due from the original due date as stated on such billing, and who have
paid at least two (2) months' payment for Basic Package Services in full
without discount and all installation charges billed therefor, and (b) the
number of Equivalent Billing Units.
1.13 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and any successor statute of similar import,
and regulations thereunder, in each case as in effect from time to time.
1.14 Excluded Assets. The term "Excluded Assets" shall include
Seller's cash on hand at Closing, but only to the extent that such cash does
not constitute Cash Equivalents under Section 1.2.1, the name "SLT Cable TV"
and all derivatives thereof, and those assets, and only those assets, mutually
agreed to by the parties and listed in Schedule 1.14.
1.15 FCC. "FCC" shall mean the Federal Communications Commission.
1.16 Note. "Note" shall mean the non-negotiable, non-assignable
promissory note made by Buyer and payable to Seller, as more particularly
described in Section 3.1.2.
1.17 Purchase Price. "Purchase Price" shall mean the total
consideration payable by Buyer to Seller for the transactions contemplated in
this Agreement, as more particularly described in Section 3.1.
1.18 Required Consents. "Required Consents" shall mean the written
consents of the governmental authorities and other third parties necessary or
required for Buyer to conduct the business of the CATV Systems, as more
particularly described in Section 5.6.
1.19 Security Interest. "Security Interest" shall mean any
mortgage, deed-of-trust, lien, security agreement, limitation, pledge,
hypothecation, assignment for security purposes, option, put, charge,
restrictive agreement, capital or financing lease arrangement, restriction,
priority, encumbrance, adverse interest, claim, restraint on transfer, or claim
of any kind or nature whatsoever (including, without limitation, any agreement
to give or suffer to exist any of the foregoing) against title with respect to
any Asset to be sold under this Agreement.
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1.20 Seller. "Seller" shall mean SLT Cable TV, Inc., a Texas
corporation.
SECTION 2. SALE OF ASSETS
2.1 Agreement to Purchase and Sell. Subject to the terms and
conditions set forth in this Agreement, at Closing Buyer shall purchase and
Seller shall sell, transfer, assign, convey and deliver the Assets to Buyer.
2.2 Assets to Be Sold. Except as otherwise specifically provided
in this Agreement, all of the Assets are intended to be sold, transferred,
assigned, conveyed and delivered to Buyer, whether or not described in the
Schedules to this Agreement.
SECTION 3. PURCHASE PRICE
3.1 Purchase Price. Buyer shall pay to Seller total consideration
of Nine Million Dollars ($9,000,000) (the "Purchase Price") for the Assets, as
adjusted pursuant to Sections 3.2 and 3.3. The Purchase Price shall be paid as
follows:
3.1.1 Cash. At Closing, Buyer shall pay to Seller Eight
Million Five Hundred Thousand Dollars ($8,500,000) as adjusted pursuant to
Section 3.2, by wire transfer of immediately available funds on the Closing
Date; and
3.1.2 Note. At Closing, Buyer shall execute and deliver to
Seller a non-negotiable, non-assignable promissory Note in the principal amount
of Five Hundred Thousand Dollars ($500,000), due and payable two hundred
seventy (270) days following Closing and in substantially the form of Exhibit
G. The Note shall bear interest at a per annum rate equal to the "Prime Rate"
then currently in effect on the Closing Date as reported in the "Money Rates"
section of the Wall Street Journal. Payment of the principal of the Note may
be postponed under certain conditions, as more particularly described in
Section 14.5.
3.2 Adjustments and Prorations to the Purchase Price at Closing
3.2.1 Subscriber Adjustments. The portion of the Purchase
Price payable under Section 3.1.1 shall be increased or reduced, as the case
may be, up to a maximum amount of Five Hundred Thousand Dollars ($500,000), as
follows: if the CATV Systems have greater or fewer than six thousand nine
hundred seventy-two (6,972) Equivalent Subscribers as of the Closing Date, the
portion of the Purchase Price payable under Section 3.1.1 shall be increased or
decreased by that amount determined by multiplying the Purchase Price by a
fraction, the numerator of which is the number of Equivalent Subscribers as of
the Closing Date and the denominator of which is 6,972.
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3.2.2 Prorations and Other Adjustments
(a) Prorations. In addition to the adjustments
described in Section 3.2.1, appropriate adjustments to the portion of
the Purchase Price payable under Section 3.1.1 shall be made on a
prorata basis as of the Closing Date (or as of such other date as
mutually agreed by the parties) to the extent reasonably possible for
all prepaid expenses, accrued expenses and prepaid revenue, all as
determined in accordance with generally accepted accounting
principles, to reflect the principle that all expenses arising out of
and all income attributable to the CATV Systems for the period prior
to 11:59 p.m. on the Closing Date are for the account of Seller, and
that all expenses arising out of and all income attributable to the
CATV Systems for the period after 11:59 p.m. on the Closing Date are
for the account of Buyer. All overlapping items of income or expense,
including without limitation the following, shall be prorated or
reimbursed, as the case may be, as of 11:59 p.m. on the Closing Date:
(i) Prepaid expenses and deposits made
prior to Closing, as permitted by the terms hereof, for or in
connection with goods or services where all or a part of such
goods or services have not been received or used as of the
Closing Date (e.g., rents paid in advance for a rental period
extending beyond the Closing Date);
(ii) Liabilities customarily accrued,
arising from expenses incurred but unpaid as of Closing,
including without limitation liabilities under any and all
contracts assumed by Buyer pursuant to Section 4.1 (e.g.,
rents, sales commissions, fees for business and professional
services, and other similar matters);
(iii) Taxes and utility charges
related to the CATV Systems or in respect of any of the Assets
(other than state sales taxes that may be due as a consequence
of the consummation of the transactions contemplated by this
Agreement, which sales taxes, if any, shall be paid by Buyer,
and any taxes that may be imposed upon Buyer on the basis of
Buyer's income);
(iv) Deposits made and unearned
prepayments received by Seller in connection with any of
Seller's obligations assumed by Buyer pursuant to Section 4.1;
and
(v) Franchise fees, copyright
payments, pole attachment agreements, railroad and/or highway
crossing charges, programming expenses, satellite service
fees, antenna space leases, bad debt expenses, billing company
charges, and other similar fees, expenses, costs and charges.
No payments or adjustments shall be made with respect to any Excluded
Assets.
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(b) Pre-Closing Procedure. At least five (5)
calendar days prior to Closing, Seller shall notify Buyer of Seller's
good faith estimate of (i) the Equivalent Subscribers as of the
Closing Date, and (ii) any adjustments or prorations required by
this Section 3.2. If such estimate will result in an adjustment to the
Purchase Price paid by Buyer under Section 3.1.1 and/or Section 3.1.2,
then the amount paid by Buyer under such sections at Closing shall be
preliminarily adjusted by such estimate. Prior to Closing, Seller
shall provide Buyer or Buyer's representatives with copies of or
reasonable access to all books and records, subscriber work orders,
billing reports, bank statements and related documentation as Buyer
may reasonably request for purposes of verifying the matters set forth
in such notification, but without limiting Seller's obligations
hereunder to certify the accuracy of all adjustments. Seller and
Buyer shall work together in good faith to resolve on or before the
Closing Date any disagreement with respect to any matter set forth in
such notification. One day before the Closing Date, Seller shall
deliver to Buyer a certificate setting forth (i) the number of
Equivalent Subscribers as of the Closing Date, and (ii) any
adjustments or prorations required by this Section 3.2 to which the
parties have mutually agreed.
3.3 Post-Closing Adjustments
3.3.1 Procedure. As soon as practicable, but in any event
within forty-five (45) days after the Closing Date, Buyer shall prepare and
deliver to Seller a certificate setting forth Buyer's computations of the
amount of all prorations and adjustments, if any, called for in Section 3.2.
After such certificate has been delivered, Seller shall have a period of thirty
(30) days to review such certificate and to present objections, if any, to
Buyer. Buyer shall grant to Seller or Seller's representatives reasonable
access to Buyer's books and records as Seller may reasonably request for
purposes of verifying such computations. Such certificate shall be final and
conclusive unless objected to by Seller in writing within such 30-day period.
During the fifteen (15) days after Buyer's receipt of any such written
objection from Seller, Seller and Buyer shall attempt to reach agreement upon
the proper prorations and adjustments called for in Section 3.2. A payment
shall be made by Seller or Buyer within five (5) business days after any such
agreement as to the proper undisputed amounts, taking into account any
preliminary adjustment for such items made at Closing. If Seller and Buyer are
unable to agree upon the proper amount of any such adjustment within such
15-day period, then the amounts in dispute shall be submitted to an accounting
firm mutually acceptable to Buyer and Seller, which shall render a written
decision to Seller and Buyer within thirty (30) calendar days after it has been
retained, which decision shall be final, and whose fees shall be paid one-half
by Buyer and one-half by Seller.
3.3.2 Property Taxes. If the amount of any real or
personal property tax to be prorated is not known on the Closing Date, such tax
shall be apportioned on the basis of the most recent tax assessment; except,
however, if there is a re-assessment pending or threatened with respect to the
property being taxed, then the parties shall mutually agree to an appropriate
apportionment taking into account such pending or threatened re-assessment.
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3.4 Allocation of Purchase Price. The Purchase Price shall be
allocated among the Assets in such amounts as set forth in Schedule 3.4. Buyer
and Seller agree to be bound by such allocation and to file according to Code
Section 1060, all returns and reports with respect to the transaction
contemplated by this Agreement, including, but not limited to, all federal,
state, and local tax returns, on the basis of such allocation. In the event
the Purchase Price is adjusted pursuant to Sections 3.2 or 3.3, the difference
shall be allocated among appropriate categories on a prorata basis unless such
differences are specifically allocable in whole or in part to a particular
category or categories as mutually agreed by Buyer and Seller.
SECTION 4. ASSUMPTION OF LIABILITIES
4.1 Assignment and Assumption. All of Seller's obligations with
respect to the CATV Systems are set forth in the agreements listed in Schedule
1.2. Buyer shall assume only the obligations of Seller set forth on Schedule
4.1 that accrue after the Closing Date (the "Assumed Liabilities"). If and to
the extent that Seller, in the ordinary course of business, enters into other
agreements after the date of this Agreement but before the Closing Date that
are not listed on Schedule 4.1 but have terms less than ninety (90) days and
have payment or performance obligations that are not material, Buyer shall
assume all of such agreements as a part of the Assumed Liabilities. At
Closing, Seller shall assign and Buyer shall assume the Assumed Liabilities.
Such agreement for assignment and assumption pertaining to CATV Instruments and
Seller Contracts shall, to the extent reasonably possible, be in the form of
Exhibit B. Such agreement for assignment and assumption pertaining to Real
Property shall, to the extent reasonably possible, be in the form of Exhibit C.
4.2 Limitation of Liability
4.2.1 Buyer's Liability. It is expressly understood and
agreed that Buyer shall not be liable for, and does not assume, any obligations
or liabilities of Seller of any kind or nature, other than Seller's obligations
to subscribers of the CATV Systems with respect to (a) subscriber deposits held
by Seller (and for which Buyer receives credit) as of the Closing Date which
are refundable, and (b) subscriber advance payments held by Seller (and for
which Buyer receives credit) as of the Closing Date for services to be rendered
in connection with the operation of the CATV Systems subsequent to the Closing
Date, and (c) obligations accruing after Closing under the Assumed Liabilities
expressly assumed by Buyer pursuant to the terms of Section 4.1. Except as
otherwise set forth herein, Buyer shall be under no obligation to, and shall
not, assume any obligation, liability or indebtedness of Seller or the CATV
Systems.
4.2.2 Termination of or Indemnification Against Agreements
not Assumed. Seller in its discretion may terminate as of Closing any and all
agreements with third parties which affect the Assets or the CATV Systems which
Buyer does not expressly assume; provided, however, any agreements not
terminated shall be subject to Seller's representations and warranties set
forth in Section 5.7.3. Seller shall provide to Buyer prior to Closing written
confirmation that such agreements have been or will be terminated as of the
Closing Date.
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4.3 Sales and Transfer Taxes; Third-Party Consents. Seller and
Buyer shall each pay one-half of any and all (a) costs, fees, transfer, use and
similar taxes (other than state sales taxes that may be due as a consequence of
the consummation of the transactions contemplated by this Agreement, which
sales taxes, if any, shall be paid by Buyer, and any taxes that may be imposed
on each party on the basis of such party's income), and (b) costs, fees and
expenses directly assessed or charged by any governmental authority or any
independent third-party in connection with obtaining a Required Consent.
SECTION 5. REPRESENTATIONS AND WARRANTIES OF SELLER
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer as follows:
5.1 Organization and Authority. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and is qualified to transact business in all other jurisdictions in which
the failure to so qualify would have a material adverse effect on its business
or properties; openly and lawfully does business under the name SLT Cable TV,
Inc., but no other name; has full power and authority to execute, deliver, and
perform this Agreement; has all requisite power and authority to carry on its
business as currently conducted and to own, lease, use, and operate the Assets
at the places they are located and in the manner in which the CATV Systems are
operated; and has taken all corporate action required by law, its articles of
incorporation and otherwise, and as of Closing shall have used its commercially
reasonable efforts to have obtained all Required Consents and shall have
received all necessary corporate consents and approvals, including without
limitation the approval of all of the shareholders and directors of Seller, to
authorize the execution, delivery, and performance of this Agreement. Seller
has not, within the two (2) year period immediately preceding the date of this
Agreement, changed its name, been the surviving entity of a merger or
consolidation, or acquired all or substantially all of the assets of any
person, company or entity.
5.2 Schedules. The Schedules to this Agreement, as the same may
be amended or supplemented pursuant to Section 15.9, list all of the material
Assets owned, held, or used for the performance of any CATV Instrument or
Seller Contract and for the lawful conduct of the CATV Systems. All Schedules
to this Agreement, as the same may be amended or supplemented pursuant to
Section 15.9 are true, accurate, and complete in all material respects. Seller
shall update the Schedules at Closing and certify that such updated Schedules
are true, accurate, and complete in all material respects as of the Closing
Date.
5.3 No Breach or Violation. Except as set forth on Schedule 5.3,
the execution, delivery, and performance of this Agreement will not (a)
conflict with or result in a breach or violation by Seller of, or (b)
constitute default by Seller under, or (c) create or impose any Security
Interest or right of termination, cancellation, or acceleration with respect to
any of the Assets pursuant to, any statute, ordinance, rule, regulation, or
order, or any material agreement, lease, instrument, document or arrangement
affecting the CATV Systems or the Assets or any
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part thereof, to which Seller is a party or by which Seller or the Assets are
bound. This Agreement constitutes the legal, valid, and binding obligation of
Seller, enforceable in accordance with its terms.
5.4 Title to Assets. Seller has good, marketable and indefeasible
title, both legal and equitable, to all of the Assets which are owned, and a
valid leasehold interest in all of the Assets which are leased; and the Assets
are free and clear of all Security Interests of any kind or nature, subject
only to (a) Permitted Exceptions (as defined in Section 11.4.2) with respect to
real property, (b) any property taxes not delinquent and (c) those Security
Interests disclosed in Schedule 5.4, which Security Interests shall be removed
and released at or prior to Closing, unless assumed by Buyer.
5.5 Real Property. With respect to all Real Property:
5.5.1 Zoning. The Real Property and the improvements located
thereon and the continuation of business presently being conducted thereon do
not and will not violate any applicable material zoning laws.
5.5.2 Access; Utilities. The Real Property is served by all
utilities and services, including without limitation electrical power, water,
sewer and telephone, reasonably necessary for the normal and intended use of
the Real Property in connection with the operation of the CATV Systems.
5.5.3 Effectiveness of Leases. All leases of Real Property
are currently in full force and effect and are valid and enforceable in
accordance with their respective terms under all applicable laws. Seller is in
compliance with all of the material requirements and obligations under all such
leases, and there is no pending assertion or claim by any party that Seller is
in default or otherwise not in compliance with all such leases. Except as
disclosed in Schedule 5.5.3, each lease of Real Property has been duly recorded
in the records of the appropriate governmental authority.
5.5.4 Easements. Except as disclosed in Schedule 5.5.4, to
the best of Seller's knowledge, Seller owns and possesses all easements and
rights-of-way necessary for the operation, maintenance, repair, replacement,
and current location of all cables, lines, towers, poles, equipment, and other
facilities used or useful in connection with the operation of the CATV Systems.
5.5.5 Environmental Matters
(a) Definitions. For purposes of this Section
5.5.5, the following terms shall have the following meanings:
(i) Hazardous Substance. "Hazardous
Substance" shall mean any chemical, substance, material, or
waste, including without limitation asbestos,
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PCBs and formaldehyde, that is defined, classified, listed, or
designated as hazardous, toxic, or radioactive, or by other
similar term, by any federal, state, or local environmental
statute, regulation, rule, order, or ordinance presently in
effect.
(ii) Other Property. "Other Property" shall
mean any property that becomes contaminated with any Hazardous
Substance as a result of operations or other activities on, or
as a result of any contamination of, the Real Property.
(iii) Environmental Laws. "Environmental Laws"
shall mean all federal, state and local laws and regulations
in effect as of the Closing Date relating to emissions,
discharges, releases or threatened releases of pollutants,
contaminants, chemicals or industrial, hazardous or toxic
materials or wastes into the environment (including without
limitation the atmosphere, ambient water, surface water,
ground water or land surface or sub- surface) or otherwise
relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of
Hazardous Substances.
(b) Presence. Except as set forth on Schedule
5.5.5, Seller has no knowledge of: (i) any storage, spill, release,
discharge, emission, or disposal of any Hazardous Substance that has
occurred or is presently occurring in, upon, or onto the Real Property
in violation of any Environmental Law; or (ii) the presence of any
underground storage tank on the Real Property.
(c) Pending Proceedings. Except as set forth on
Schedule 5.5.5, there is no threatened or pending civil or criminal
litigation, notice of violation, investigation or administrative
proceeding arising out of the business or activities of Seller,
including without limitation any threatened or pending litigation,
notice, investigation or proceeding relating in any way to the
Environmental Laws.
5.6 Required Consents. Schedule 5.6 sets forth a true, correct
and complete list of all Required Consents from governmental and third-party
franchises, approvals, licenses, consents, landlord's consents, other
agreements, and other approvals necessary or required for Buyer to conduct the
business of the CATV Systems and to own, lease, use, and operate, as the case
may be, the Assets at the places and in the manner in which the CATV Systems
and Assets are presently conducted or used and will be conducted or used on the
Closing Date.
5.7 CATV Instruments and Seller Contracts
5.7.1 Effectiveness. Except as disclosed in Schedule 1.2,
the CATV Instruments and Seller Contracts (i) are currently in full force and
effect, (ii) are valid and enforceable in accordance with their respective
terms under all applicable federal, state, and local laws and (iii) include all
material licenses, rights of entry, permits, and other rights and
authorizations, necessary to enable Seller to operate the CATV Systems as and
in the manner in
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which they presently are conducted and in accordance with all applicable
federal, state and local laws. Seller has no knowledge of any default under or
violation of any material provision of any CATV Instrument or Seller Contract.
Except as disclosed in Schedule 1.2, there is no dispute, legal action,
governmental proceeding or investigation, pending or, to the knowledge of
Seller, threatened, for the purpose of modifying, revoking, terminating,
suspending, canceling, or reforming any CATV Instrument or Seller Contract, or
seeking damages or other relief with respect thereto. Except as disclosed in
Schedule 1.2, Seller is in material compliance with the applicable requirements
of all governing or regulatory authorities (including without limitation the
FCC and the Register of Copyrights) relating to the CATV Instruments and Seller
Contracts, including, without limitation, all requirements relating to
notification, filing, document delivery, reporting, posting, maintenance of
logs and records and payment of fees or other amounts due. Except as set forth
in Schedule 5.11, there is no pending assertion or claim in writing by any
governmental authority or party to any CATV Instrument or Seller Contract that
operations pursuant to such CATV Instruments or Seller Contracts have been
improperly conducted or maintained. As of Closing, a request for renewal has
been filed under Section 626 of the Cable Communications Policy Act of 1984
with respect to all franchises expiring within thirty-six (36) months of the
date of this Agreement. Seller shall deliver to Buyer copies of all such
renewal notices.
5.7.2 Copies. True, correct and complete copies of all
material CATV Instruments and Seller Contracts and any amendments to the CATV
Instruments and the Seller Contracts to the date of this Agreement have been
delivered by Seller to Buyer.
5.7.3 Status of CATV Instruments and Seller Contracts Not
Assumed. At Closing, Seller either (a) will have terminated all CATV
Instruments and Seller Contracts that are not assumed by Buyer under Section
4.1, or (b) will forever indemnify Buyer for any and all Third Party Claims and
Direct Claims (as such terms are defined in Section 14) against Buyer arising
directly or indirectly from such CATV Instruments and Seller Contracts that are
not assumed by Buyer under Section 4.1 and not terminated by Seller in
accordance with (a) above.
5.8 FCC Compliance
5.8.1 General Compliance. As of Closing, Seller shall be
duly authorized under applicable CATV Instruments and FCC rules, regulations,
and orders to distribute all of the off-air television and radio broadcast
signals presently being carried to the subscribers of the CATV Systems and to
utilize all carrier frequencies generated by the CATV Systems, and shall be
duly licensed to operate all the property, equipment and facilities, including,
without limitation, any business radio and any CATV relay service system, being
operated in connection with the CATV Systems. As of Closing, the operation of
the CATV Systems and of any FCC-licensed facility used in conjunction with the
operation of the CATV Systems shall be in material compliance with the FCC's
rules and regulations and, to the extent applicable, the rules and regulations
of the Federal Aviation Administration, and Seller has received no notice, and
otherwise has no reason to know, of any claimed default or violation with
respect to the foregoing. Seller shall deliver to Buyer copies of all current
and past reports and filings necessary for Buyer to evaluate Seller's
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compliance with FCC rules and regulations. As of Closing, Seller will have
materially complied with and will have provided Buyer with true, correct and
complete copies of all valid Syndicated Exclusivity, Network Nonduplication and
Sports Blackout requests and all notices received by Seller relating to the
mandatory carriage of off-air broadcast signals on the CATV Systems. In
addition, Seller shall provide Buyer with true and correct copies of the
following if and to the extent the same are available:
(i) The CATV Systems' political file maintained
pursuant to Section 76.207 of the FCC's rules.
(ii) The CATV Systems' advertising and sponsorship
identification file maintained pursuant to Section 76.221(f) of the
FCC's rules.
(iii) The CATV Systems' paid political advertising
file maintained pursuant to Section 76.221(d) of the FCC's rules.
(iv) The CATV Systems' file on commercial matter on
children's programs maintained pursuant to Section 76.225(c) of the
FCC's rules.
(v) The CATV Systems' proof of performance test
data, including an identification of the instruments, a description of
the procedures utilized, and a statement of the qualifications of the
person performing the tests, from the semi-annual performance tests
required pursuant to Section 76.601(c) of the FCC's rules.
(vi) The CATV Systems' written policy statement
and all records relating to indecent leased access programming
pursuant to and in accordance with Section 76.701(h) of the FCC's
rules, and a schedule of Seller's commercial leased access rates
pursuant to and in accordance with Section 76.970(e) of the FCC's
rules.
(vii) Records of complaints from subscribers of
the CATV system concerning the quality of the television signals
delivered together with Seller's correspondence and other records of
how such complaints were resolved.
(viii) Letters to broadcasters sent pursuant to
Section 76.58 of the FCC's rules.
(ix) FCC Forms 393, 1200, 1210 and 1215 as
submitted to the FCC and/or any of the CATV Systems' franchising
authorities, together with any correspondence, notices or other
documentation related thereto.
(x) The CATV Systems' notices to subscribers sent
pursuant to Sections 76.56(d)(3), 76.309(c)(3), 76.607, 76.630(a),
76.630(d), 76.630(e), 76.802, 76.931, 76.932, 76.964, 76.952, and
76.980(d) of the FCC's rules, and the notice sent to subscribers
pursuant to Section 624(d) of the Communications Act of 1934, as
amended.
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5.8.2 CLI Compliance. As of Closing, Seller shall have
materially complied with its obligations in connection with the CLI Rules
including, without limitation, (a) using reasonably adequate CLI monitoring
equipment, (b) maintaining appropriate log books and other record-keeping
pursuant to and in accordance with Section 76.601(e) of the FCC's rules, and
(c) promptly correcting any radiation leakage discovered by Seller in
connection with its monitoring obligations under the CLI Rules. Seller, at
Seller's expense and not less than thirty (30) days before Closing, will cause,
among other things, CLI tests to be conducted by Bridgeport Communications,
Inc., 104 Waller Street, Red Oak, Texas 75154, and will cause Buyer to be
named as a joint recipient of such reports that contain the results of such
tests (including the CLI tests).
5.8.3 Tests and Compliance with Standards. During the period
beginning not more than thirty (30) days prior to the execution of this
Agreement and ending not more than seventy-five (75) days after the execution
of this Agreement, Seller shall have completed each of the following tests in
the manner specified below and shall have certified to Buyer that each of the
CATV Systems complies with the standards set forth in Sections 5.8.3(a) and
(e), and that each of the CATV Systems that serves greater than 1,000
subscribers complies with the standards set forth in Sections 5.8.3(a), (b),
(c), (d) and (e). (When conducting any of the following tests, the CATV
Systems shall be operated at the power levels specified in the CATV Systems'
technical design.)
(a) Signal Leakage and CLI Certification.
Pursuant to the rules of the FCC and in accordance with the standards
generally accepted by qualified engineers in the CATV industry, Seller
shall complete a ground-based signal leakage test on the CATV Systems
and shall certify to the Buyer that the CATV Systems' CLI, as
determined by using the I# method, shall be less than 64. Results of
the signal leakage test, together with a log covering the three year
period immediately preceding the date of this Agreement of all
detected leaks and a description of the repairs effected, shall be
delivered to Buyer promptly following completion of the testing.
(b) Proof of Performance. Seller shall perform
an end-to-end swept frequency response test of all the trunk
facilities of the CATV Systems to 300 MHz, and demonstrate a
"peak-to-valley" ratio of less than 3dB between adjacent channels and
less than 10dB between all other channels.
(c) Carrier to Noise. Seller shall perform
carrier to noise ratio testing on all channels of the CATV Systems and
shall demonstrate a ratio of better than 43 db on all channels
throughout the CATV Systems.
(d) Hum Modulation. Seller shall perform hum
modulation testing on all channels of the CATV Systems and shall
demonstrate hum disturbances of less than three percent on all
channels throughout the CATV Systems.
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(e) Aeronautical Frequencies. All aeronautical
frequencies used by the CATV Systems shall be maintained within 5 KHz
+/- of the authorized offset frequency.
5.8.4 System Repair. To the extent the CATV Systems or any
portion thereof are not in compliance with CLI Rules, or with the other
standards prescribed in Section 5.8.3, Seller will take the necessary steps so
as to have caused the CATV Systems to be in full compliance with such rules and
standards (collectively, the "Remedial Steps"), no later than thirty (30) days
prior to Closing. Seller shall have completed the Remedial Steps at its sole
cost and expense, and otherwise shall have thereafter maintained the CATV
Systems in compliance with the CLI Rules and with the standards prescribed in
Section 5.8.3. In the event Buyer and Seller are unable to agree whether
appropriate Remedial Steps have been taken to bring the CATV Systems into
compliance with the standards prescribed in Section 5.8.3, Buyer and Seller
shall appoint a mutually acceptable engineering firm to conduct appropriate
tests, in accordance with the rules of the FCC and the standards generally
accepted by qualified engineers in the CATV industry, to certify the CATV
Systems' compliance with the standards of Section 5.8.3, which firm shall
render a written report to Buyer and Seller within thirty (30) calendar days
after it has been retained, and whose fees shall be paid one-half by Buyer and
one-half by Seller.
5.8.5 Payment of Fines. Seller has, prior to Closing, paid
in full any and all fines or penalties levied or assessed by the FCC as a
result of the failure of any portion of the CATV Systems to comply with the CLI
Rules or standards prescribed in Section 5.8.3. Seller shall pay in full any
such fines or penalties levied or assessed by the FCC after Closing, to the
extent that such fines or penalties (a) relate to the period prior to Closing,
and (b) have been determined to be valid.
5.9 Copyrights, Patents and Trademarks
5.9.1 Copyright Filings. Except as set forth in Schedule
5.9.1, Seller has timely made all requisite filings with and payments to the
Register of Copyrights and is otherwise in material compliance with all
applicable rules and regulations of the Copyright Office. Seller shall deliver
to Buyer copies of all current and past reports and filings within the past
three (3) years reasonably necessary to evidence such compliance with Copyright
Office rules and regulations.
5.9.2 Copyright Infringement. In addition to any other of
Seller's warranties hereunder, Seller hereby covenants, warrants and represents
that the Assets and the programming offered over the CATV Systems are free and
clear of any rightful claim of any third person by way of copyright
infringement. Seller further warrants that the manner in which the off-air
broadcast signals and other program services are offered over the CATV Systems
will not result in additional reportable gross receipts under applicable rules
and regulations of the Copyright Office because of the manner in which Seller
has offered or currently offers such services.
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5.9.3 Payment of Fines and Copyright Royalties. Seller has,
prior to Closing, paid in full any and all fines or penalties levied or
assessed by the Copyright Office as a result of the failure to timely or
accurately file Statements of Account for the CATV Systems. Seller shall pay
in full any such fines or penalties levied or assessed by the Copyright Office
after Closing, to the extent that such fines or penalties (a) relate to the
period prior to Closing, and (b) have been determined to be valid.
5.9.4 Patents, Trademarks. Seller does not possess any
patent, patent right, trademark, copyright or other proprietary intellectual
property and is not a party to any license or royalty agreement with respect to
any patent, trademark, or copyright except for licenses respecting program
material and obligations under the Copyright Act of 1976 applicable to CATV
systems generally.
5.10 Assets and CATV Business
5.10.1 Generally. Except as expressly set forth in the
Schedules to this Agreement and subject to any waiver with respect to the CATV
Equipment pursuant to Section 11.1, at Closing all Assets shall be in operating
condition, ordinary wear and tear excepted. None of the CATV Systems, or the
buildings, structures, or appurtenances used in the CATV Systems, violate
applicable laws, ordinances, codes, regulations or restrictive covenants, the
enforcement of which would involve a material cost to correct, would materially
detract from their value, or would materially interfere with their use. Except
as expressly set forth in the Schedules, the CATV Systems are properly located
and materially comply with all applicable laws, rules and regulations. Seller
has not received any notice heretofore not complied with, from any federal,
state, local or other governmental authority or agency having jurisdiction over
the CATV Systems or the Assets, or any insurance or inspection body, that the
CATV Systems or the Assets fail to materially comply with any applicable law,
ordinance, regulation, building or zoning law, or the requirements of any
public authority or body. The CATV Systems and the Assets are suitable for
continued use in the manner in which they are presently operated without the
need for repairs or replacement, except for the repairs and maintenance
normally arising in the ordinary course of business of a cable system of
similar age and geographic location.
5.10.2 Cable Plant. All cable used in the CATV Systems is
coaxial, and, except for such conditions as might be expected for a cable
system of its age and geographic location, is water-tight and joined and
connected according to normal and customary industry standards.
5.11 Litigation and Proceedings. Except as set forth in Schedule
5.11, there is no litigation at law, or in equity, and there is no other
proceeding or investigation pending or, to Seller's knowledge, threatened
against, or which may adversely affect, Seller, or which involves the
possibility of any judgment, order, award or other decision affecting Seller
and (i) which might impair the ability of Seller to perform under this
Agreement, (ii) could have any adverse effect on the CATV Systems, might impair
the quality of title to the Assets, or (iii) might adversely affect the rights,
title, or interest of Seller, and Seller does not know of any basis for
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such litigation or proceedings. Seller is not materially in default in any
manner with respect to any order, writ, injunction, or decree of any court or
federal, State, municipal, or other governmental department, commission, board,
bureau, agency, or instrumentality which relates to the operation of the CATV
Systems, and Seller has materially complied with all laws, rules, or
regulations applicable to the CATV Systems and the operation thereof.
5.12 Tax Returns; Other Reports. Except as set forth in Schedule
5.12, Seller has duly and timely filed in proper form all federal, state,
local, and foreign income, franchise, sales, use, property, excise, payroll,
and other tax returns and all other reports (whether or not relating to taxes)
required to be filed by law with any governmental authority or agency thereof.
Except as set forth in Schedule 5.12, all taxes, fees and assessments of
whatever nature due or payable by Seller pursuant to said returns, reports, or
otherwise, have been paid. Except as set forth in Schedule 5.12, there are no
tax audits pending and no outstanding agreements or waivers extending the
statutory period of limitations applicable to any federal, state, or local
income tax return for any period.
5.13 Dissenters' Rights. Neither the sale and transfer of the
Assets pursuant to this Agreement, nor Buyer's ownership, possession, or use of
the Assets from and after the Closing because of such sale and transfer, will
result in or be subject to, the imposition of any liability upon Buyer for
appraisal rights or any other liability of any nature whatsoever owing to any
participation interest holder in Seller or any other person.
5.14 Employment Matters
5.14.1 Employees. Schedule 5.14.1 contains a true and
complete list of the names, positions, current hourly wages or annual salary,
and other compensation amounts of all employees of the CATV Systems. Seller
has materially complied with all applicable laws relating to the employment of
labor, including, without limitation, ERISA, and those relating to wages,
hours, collective bargaining, unemployment insurance, worker's compensation,
equal employment opportunity and the payment and withholding of taxes.
Schedule 5.14.1 also contains a true and complete description of all vacation
plans, sick pay plans and other benefit plans provided by Seller to its
employees, including without limitation those plans described in Section
5.14.4. On or within two weeks after the Closing Date, Seller will pay its
employees (except those employees who are not hired by Buyer) all accrued, if
any, compensation, including vacation, sick pay, and other benefits accrued as
of the Closing Date (except for amounts owing under the terms of benefit plans
described in Section 5.14.4, which amounts shall be provided in accordance with
the terms of such plans).
5.14.2 Employment Relationship. Seller has no employment
agreements, either written or oral, with any person which would require Buyer
to employ any person after the Closing Date. Seller shall terminate the
employment of each of its employees as of the Closing Date (except those
employees who are not hired by Buyer).
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5.14.3 Unions. Seller is not a party to any contract with
any labor organization, and neither has Seller agreed to recognize any union or
other collective bargaining unit, nor has any union or other collective
bargaining unit been certified as representing any of its employees nor has
Seller received any requests from any party for recognition as a representative
of employees for collective bargaining purposes.
5.14.4 Benefits. At Closing, Buyer shall not be required to
continue any defined benefit, defined contribution, or other employee benefit
plan subject to the jurisdiction of ERISA to which Seller is currently a party
or by which Seller is bound.
5.14.5 Plans. Seller shall have the sole responsibility for
maintenance and/or distribution of benefits accrued under any qualified plans
maintained by Seller pursuant to the plan provisions of all such plans
sponsored by Seller, if any. Buyer will not assume any liability for (a) any
such accrued benefits or (b) any fiduciary or administrative responsibility to
account for or dispose of any such accrued benefits maintained under any
qualified plans sponsored by Seller.
5.14.6 Seller's Responsibility. All welfare plan claims and
short- or long-term disability plan obligations incurred on or before the
Closing, if any, shall remain the sole responsibility of Seller. Eligible
indemnity plan expenses attributable to any of Seller's covered employees or
dependents who are confined to a hospital or medical institution on the date of
the Closing will continue to be the responsibility of Seller to the extent
required under Seller's applicable plans.
5.14.7 Health Care Continuation. There has been no material
failure to comply with the continuation health care requirements of the
Internal Revenue Code or related acts, laws, rules and regulations as such
requirements have applied or currently apply to any current or former employee
of Seller or any spouse, former spouse, dependent child, or former dependent
child of any such employee under any group health plan maintained by or for
Seller on or prior to the Closing Date.
5.14.8 Miscellaneous Federal Acts. Seller's present
employment practices materially comply with all rules and standards set by the
Americans With Disabilities Act of 1990, Pub. L. 101-36, as amended, and the
Family and Medical Leave Act of 1993, Pub. L. 103-3 including any regulations
promulgated thereunder.
5.14.9 FCC Filings. Schedule 5.14.9 contains true, correct
and complete copies of Seller's Form 395-A filings, which Seller filed on or
before the applicable deadlines, beginning with the Form 395-A filed two years
before such form filed at the latest applicable deadline.
5.15 Subscribers Fees and Rates. The monthly rates currently
charged by Seller for each of the services offered on the CATV Systems are as
set forth in Schedule 1.7. Except as set forth in Schedule 5.15, Seller has
not been ordered by the FCC or any of the CATV Systems'
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local franchising authorities to reduce the rates charged for any of the
regulated services and equipment listed in Schedule 1.7 nor, to Seller's
knowledge, is any such order threatened.
5.16 Insolvency Proceedings. No insolvency proceedings of any
character, including without limitation bankruptcy, receivership,
reorganization, composition or arrangement with creditors, voluntary or
involuntary, affecting Seller or the CATV Systems are pending or, to Seller's
knowledge, threatened. Seller has not made an assignment for the benefit of
creditors or taken any action with a view to, or that would constitute a valid
basis for, the institution of any such insolvency proceedings. On the Closing
Date, Seller (i) will have sufficient capital to carry on its business and
transactions, (ii) will be able to pay its debts as they mature or become due,
and (iii) will own assets the fair market value of which will be greater than
the sum of all liabilities of Seller not specifically assumed by Buyer pursuant
to the terms of this Agreement.
5.17 Finders and Brokers. Neither Seller nor its officers,
directors, shareholders or employees has entered into any contract,
arrangement, or understanding with any person or firm, which may result in the
obligation of Seller or Buyer to pay any finder's, brokerage, or agent's fees,
commission or other like payment or compensation. For the two year period
prior to the date of this Agreement, Seller has not entered into any agreement,
whether written, oral, express or implied, directly or indirectly regarding the
sale or other disposition of the CATV Systems. Seller shall defend, indemnify
and hold Buyer harmless from and against any claims asserted against Buyer for
any finder's, brokerage, or agent's fees, commission or other like payments or
compensation as a result of Seller's activities.
5.18 Effect of Certificates. All certificates required to be
delivered by Seller under this Agreement shall be deemed to be additional
representations and warranties of Seller.
5.19 Citizenship. Seller is not a "foreign person" as defined in
Section 1445(f)(3) of the Code. On the Closing Date, Seller will deliver to
Buyer an affidavit to that effect, verified as true and sworn to under penalty
of perjury by a duly- authorized agent of Seller. The affidavit shall also set
forth Seller's name, address, taxpayer identification number, and such
additional information as may be required to exempt the transaction
contemplated by this Agreement from the withholding provisions of Section 1445
of the Code. Buyer shall have the right to furnish copies of the affidavit to
the Internal Revenue Service.
5.20 Overbuilds; Competition. To the best knowledge of Seller, no
area presently served by the CATV Systems or within the scope of any of
Seller's CATV franchises is presently subject to an overbuild situation,
except for the Mexia, Texas portion of the CATV Systems, or subject to
competition from a multipoint distribution service ("MDS"), multichannel
multipoint distribution service ("MMDS") or other wireless cable services. To
the Seller's best knowledge, no person or firm other than Seller has been
granted a CATV franchise, except for the Mexia, Texas portion of the CATV
Systems, or a license to provide MDS, MMDS or other wireless cable services in
any of the communities (or any of the unincorporated areas) presently served by
the CATV Systems or within the geographical scope of any of Seller's CATV
franchises. Seller has no current knowledge, without independent inquiry, of
any person or firm that (a) intends to
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construct or operate a CATV system or to provide MDS, MMDS or other wireless
cable services within any area served by the CATV Systems or any area within
the geographical scope of any of Seller's CATV franchises, or (b) intends to
apply for a CATV franchise or a license to provide MDS, MMDS or other wireless
cable services covering any area served by the CATV Systems or any area within
the geographical scope of any of Seller's CATV franchises.
5.21 Financial Statements. Seller's financial statements,
including without limitation balance sheets, income statements and any and all
other related documents, the most recent of which are attached as Schedule
5.21: (i) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the period involved and as
compared with prior periods; (ii) are true, correct, complete and accurate in
all material respects subject, in the case of any interim statements, to
year-end adjustments where applicable, and (iii) fairly present Seller's
financial position, income, expenses, assets, liabilities, shareholders' equity
and the results of operation of the CATV Systems as of the date and for the
period indicated. There has been no material adverse change in the business,
assets, properties, prospects, or condition (financial or otherwise) of the
CATV Systems since the preparation of the most recent financial statements. No
event has occurred and, except as may be disclosed in the Seller's Certificate
delivered pursuant to Section 9.1, no event will have occurred prior to Closing
that would make the financial statements delivered to Buyer misleading in any
material respect.
5.22 Free CATV Service. Except as set forth in Schedule 5.22 to
this Agreement, there is no agreement, obligation or other requirement for
Seller to provide free CATV service to any person, entity or firm.
SECTION 6. BUYER'S REPRESENTATIONS AND WARRANTIES
6.1 Organization and Authority. Buyer represents and warrants to
Seller that Buyer is a corporation duly organized and validly existing under
the laws of the State of Washington; has full power and authority to execute,
deliver and perform this Agreement; and has taken all corporate action required
by law and otherwise to authorize the execution, delivery and performance of
this Agreement. This Agreement constitutes the legal, valid and binding
obligation of Buyer enforceable in accordance with its terms.
6.2 Financial Statements. Buyer's financial statements, including
the most recent of which have been delivered to Seller: (i) have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the period involved and as compared with prior
periods; (ii) are true, correct, complete and accurate in all material respects
subject, in the case of any interim statements, to year-end adjustments where
applicable, and (iii) fairly present Buyer's financial position, income,
expenses, assets, liabilities, shareholders' equity and the results of
operation of the Buyer's business as of the date and for the period indicated.
Without limiting the foregoing, none of the financial statements materially
overstates the revenues or materially understates the expenses of the Buyer's
business for the periods covered. There has been no material adverse change in
the business, assets, properties,
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prospects, or condition (financial or otherwise) of the Buyer's business since
the preparation of the most recent financial statements, and no event has
occurred and, prior to Closing, no event will have occurred that would make the
financial statements delivered to Seller misleading in any material respect.
6.3 Financial Capacity. Buyer will have sufficient cash or the
ability to borrow funds to pay the Purchase Price in the manner specified in
Section 3.1, and Buyer and its affiliates to whom it may assign all or a
portion of its rights under this Agreement (the "Affiliates") will have
sufficient financial resources to operate the CATV Systems after Closing.
Buyer and its Affiliates are solvent, are able to pay their debts as they
become due, and own property that has both a fair value and a fair saleable
value in excess of the amount required to pay their debts as they come due.
6.4 Litigation and Proceedings. Except as set forth in Schedule
6.4, there is no litigation at law, or in equity, and there is no other
proceeding or investigation pending or, to Buyer's knowledge, threatened
against, or which may adversely affect, Buyer, or which involves the
possibility of any judgment, order, award or other decision which might impair
the ability of Buyer to perform under this Agreement, and Buyer does not know
of any basis for such litigation or proceedings.
6.5 Finders and Brokers. Neither Buyer nor its officers,
directors, shareholders or employees has entered into any contract,
arrangement, or understanding with any person or firm, which may result in the
obligation of Seller or Buyer to pay any finder's, brokerage, or agent's fees,
commission or other like payment or compensation. Buyer shall defend, indemnify
and hold Seller harmless from and against any claims asserted against Seller
for any finder's, brokerage, or agent's fees, commission or other like payments
or compensation as a result of Buyer's activities.
6.6 Status of Assumed Liabilities. After Closing, Buyer shall
perform and pay any and all obligations due under the Assumed Liabilities which
accrue after the Closing Date and will forever indemnify Seller for any and all
Third Party Claims and Direct Claims (as such terms are defined in Section 14)
against Seller arising directly or indirectly from the Assumed Liabilities.
6.7 Effect of Certificates. All certificates required to be
delivered by Buyer under this Agreement shall be deemed to be additional
representations and warranties of Buyer.
6.8 Citizenship. Buyer is not a "foreign person" as defined in
Section 1445(f)(3) of the Code. On the Closing Date, Buyer will deliver to
Seller an affidavit to that effect, verified as true and sworn to under penalty
of perjury by a duly- authorized agent of Buyer. The affidavit shall also set
forth Buyer's name, address, taxpayer identification number, and such
additional information as may be required to exempt the transaction
contemplated by this Agreement from the withholding provisions of Section 1445
of the Code. Seller shall have the right to furnish copies of the affidavit to
the Internal Revenue Service.
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SECTION 7. CONDUCT PENDING CLOSING
7.1 Access to Premises and Records. Between the date of execution
and delivery of this Agreement and the Closing Date, Seller shall allow Buyer,
its accountants, auditors, engineers and representatives full access, on not
less than three (3) business days' prior notice, at mutually agreed upon
reasonable times, to all of the premises and books and records of Seller and
the CATV Systems and shall furnish to Buyer and its representatives all
information regarding the business and properties of Seller. Buyer shall have
the opportunity to perform CLI testing, other FCC-related systems performance
testing, and environmental audits of the CATV Systems pursuant to Section 11.1
with Seller's full cooperation and assistance prior to the Closing, provided
that such audit and other procedures do not unreasonably interfere with the
operations of the CATV Systems. Buyer shall have the opportunity to perform a
field audit of Seller's accounts and such other procedures commonly performed
in an audit conducted by an independent certified public accounting firm with
Seller's full cooperation and assistance prior to the Closing, provided that
such audit and other procedures do not unreasonably interfere with the
operations of the CATV Systems. Seller also shall cooperate with Buyer and its
accountants, auditors and representatives to enable Buyer to generate the type
of financial information required under Form 8-K to be filed by Buyer with the
United States Securities and Exchange Commission pursuant to Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.
7.2 Continuity and Maintenance of Operations. Seller shall
continue to operate the CATV Systems, shall maintain the Assets (including
maintenance and replenishment of all inventories of spare equipment and parts
reasonably adequate for the needs of the CATV Systems, including without
limitation those listed in Schedule 1.2), and shall keep all of its business
books, records, and files all in the ordinary course of business in accordance
with past practices, consistently applied. Except as set forth in Schedule
7.2, Seller shall not, without prior written consent of Buyer, which consent
shall not be unreasonably withheld, (i) change the rate charged for Basic
Package Services or any premium services, (ii) add or delete any program
services, or (iii) rearrange the CATV Systems' channel line-ups. Seller shall
not sell, transfer, assign, or permit the creation of any Security Interest on
any of the Assets without the prior written consent of Buyer, which consent
shall not be unreasonably withheld. Except as otherwise required under the
terms of this Agreement, Seller may amend or cancel any CATV Instruments, any
Seller Contract or any other contract or agreement which is necessary or
appropriate for the maintenance of the Assets or the operation of the CATV
Systems, but only in the ordinary course of business. Seller specifically
acknowledges that any amendment or cancellation of any franchise or lease
agreement shall be deemed not to be in the ordinary course of business. Seller
shall not itself, nor shall Seller permit any of its partners or its partners',
directors, officers, shareholders, agents, or employees to pay any of Seller's
accounts receivable from the CATV Systems' subscribers outstanding on the date
of this Agreement or hereafter; provided, however, that such persons shall be
permitted to make payment for CATV services received by them at their own
dwellings.
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7.3 Existing Relationships. Except as otherwise required by this
Agreement, Seller shall use its best efforts to preserve the CATV Systems as a
going concern and to preserve existing relationships with suppliers, customers,
governmental entities and others having business dealings with Seller, all in
accordance with Seller's ordinary course of business consistent with past
practices.
7.4 Employees; Employment Relationship. All of Seller's employees
shall be and remain Seller's employees, with Seller having full authority and
control over their actions, and Buyer shall not assume the status of an
employer or a joint employer of, or incur or be subject to any liability or
obligation of an employer with respect to, any such employees unless and until
actually hired by Buyer. Seller shall be solely responsible for any and all
liabilities and obligations Seller may have to its employees, including without
limitation compensation, severance pay, and accrued vacation time and long-term
disability, if applicable. Seller shall comply with the provisions of the
Worker Adjustment and Retraining and Notification Act and similar laws, if
applicable, and shall be solely responsible for any and all liabilities,
penalties, fines, or other sanctions that may be assessed or otherwise due
under such laws on account of the closing of the transaction contemplated by
this Agreement and the dismissal or termination of any of Seller's employees by
Seller at or prior to Closing. Seller shall use its best efforts to preserve
Seller's relationship with its employees and shall pay to those employees all
salaries, commissions, benefits and other compensation to which they are
entitled for services rendered prior to Closing. Seller shall not, without the
prior written consent of Buyer, which consent shall not be withheld
unreasonably, change the compensation of any employees of the CATV Systems
where such changes would be inconsistent with Seller's past practices
consistently applied.
7.5 Buyer's Right to Employ. Seller consents to Buyer discussing
with any of Seller's employees, at any time after five (5) days from the
execution of this Agreement the possibility of their employment by Buyer after
the Closing and to Buyer hiring any of those employees after the Closing.
Seller agrees and acknowledges, however, that Buyer is under no obligation to
offer employment to any of those employees. Current employees of Seller which
are hired by Buyer, if any, shall not be considered to be in the employ of
Buyer until such time as they have been formally hired by Buyer and satisfy the
active work requirement of completing one full hour of active service for
Buyer.
7.6 Approvals. To the extent reasonably possible, Seller shall
deliver to Buyer for Buyer's review and approval a copy of Seller's request for
each Required Consent, together with any franchise, agreement, lease, document,
instrument or paper to be executed by or on behalf of any governmental entity,
franchising authority, lessor or third party, prior to delivery of such to any
such entity, lessor or third party. Such consents shall be in forms reasonably
acceptable to Buyer. Seller shall use its reasonable best efforts to obtain
each of the Required Consents, including without limitation the payment of
standard processing fees, charges and expenses, but Seller shall not be
required to pay any extraordinary or unreasonable fees or expenses. Buyer
shall reasonably cooperate, collaborate and assist Seller in obtaining the
Required Consents; provided, however, that such cooperation and assistance
shall not require Buyer to undertake any
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extraordinary or unreasonable measures to obtain such approvals and consents,
including, without limitation, the initiation or prosecution of legal
proceedings.
7.7 News Releases and Media Notification. Prior to Closing, any
and all news releases or other notification of the local media with respect to
the transactions contemplated in this Agreement shall be subject to the prior
consent of both Seller and Buyer, which consent shall not be unreasonably
withheld.
7.8 Written, Executed Easements. With respect to easements listed
in Schedule 5.5.4 that are not in a properly recordable form, Seller shall use
its best efforts to obtain written easements that are assignable to Buyer,
executed by the proper third parties, that accurately set forth the legal
descriptions and scope of such easements or rights-of-way.
SECTION 8. CLOSING; CLOSING DATE; TERMINATION
8.1 Closing Date. Subject to the terms and conditions of this
Agreement, Closing shall be conducted at the offices of Seller's counsel or
such other location on a Closing Date as may be mutually agreed to by the
parties. Timing of the Closing shall be subject to the following terms:
Closing shall take place not later than June 1, 1995, if Seller has then
obtained all Required Consents and has complied with all other terms and
conditions of this Agreement; provided, however, that the Closing may be
postponed by either party for an aggregate maximum period of thirty (30) days
from the latter of (i) June 1, 1995, or (ii) the date on which Seller has
obtained all Required Consents and has complied with all other terms and
conditions of this Agreement.
8.2 Termination. This Agreement may be terminated at any time
prior to Closing:
(a) by the mutual written consent of Seller and Buyer;
(b) by Buyer in its sole and absolute discretion, if
Seller fails to demonstrate to Buyer's reasonable satisfaction that
the CATV Systems have at least 6,585 Equivalent Subscribers.
(c) by Buyer in its reasonable discretion, if the Seller
or the CATV Systems are subject to an order of the FCC or any of the
CATV Systems' local franchising authorities to reduce any of the rates
charged to the CATV Systems' subscribers, and such order would have a
material adverse effect on the CATV Systems as a whole.
(d) by either Seller or Buyer, in the event of a material
breach or misrepresentation under this Agreement by the other party
unless (i) such breach is cured within fifteen (15) days after written
notice thereof is given by the party alleging such material breach or
misrepresentation, or (ii) the alleged breaching party has given
written notice providing reasonable assurance to the nonbreaching
party that it is exercising its
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diligent best efforts to cure the alleged breach; provided that in no
circumstance shall the period to cure exceed forty- five (45) days
after the original written notice was given; or
(e) by either party in such party's sole and absolute
discretion, if the transactions contemplated by this Agreement shall
not have been consummated on or before September 30, 1995.
8.3 Effect of Termination. In the event this Agreement is
terminated pursuant to Section 8.2:
(a) this Agreement will thereafter be void and have no
force and effect, except that Sections 5.17, 8.4, 14 and 15.7and this
Section 8.3 will remain in effect;
(b) nothing in this Section 8.3 shall be deemed to
release either party from any liability for any breach by such party
of the terms and provisions of this Agreement or any failure by such
party to perform its obligations hereunder. Nothing in this Section
8.3 or elsewhere in this Agreement shall impair the right of either
party, prior to termination of this Agreement pursuant to Section 8.2,
to pursue all legal remedies for breach of contract and damages or to
compel specific performance by the other party of its obligations
hereunder; and
(c) in the event this Agreement is terminated pursuant to
Section 8.2(a), (c) or (e), neither Seller nor Buyer shall be liable
to each other for any legal or equitable remedies.
8.4 Return of Confidential Information. In the event of
termination of this Agreement hereunder, Buyer, upon receipt of a written
request from Seller, will promptly return to Seller any documents or other
written information in accordance with that certain Confidentiality Agreement
between Buyer and Seller dated as of February 15, 1995.
SECTION 9. SELLER'S OBLIGATIONS AT AND PRIOR TO CLOSING
Unless delivery is required prior to Closing by the terms of this
Agreement, Seller, at its sole cost and expense, shall deliver to Buyer at the
Closing all of the following (collectively, the "Closing Documents"):
9.1 Transaction Documents. A bill of sale, an assignment and
assumption agreement, assignment and assumption of franchises, assignment and
assumption of leases, the Seller's certificate and the noncompetition
agreement, each substantially in the forms of Exhibits A, B, C, D, E and F.
9.2 Closing Documents Checklist. The documents, certificates and
papers listed on the Closing Documents Checklist, in the form of Exhibit H,
together with such other deeds, assignments, certificates, and other documents,
instruments, and agreements as shall be
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necessary or appropriate to vest in Buyer all right, title, and interest in and
to the Assets free and clear of all Security Interests (except for Permitted
Exceptions and liabilities assumed by Buyer pursuant to Section 4.1) and all
right, title, and interest of Seller arising under or by virtue of each CATV
Instrument and Seller Contract expressly assumed in writing by Buyer, and as
may otherwise be reasonably required by Buyer.
9.3 Security Interest Searches. Seller, at its sole expense,
shall provide Buyer with UCC searches, tax lien searches, pending litigation
searches and judgment searches of the county and state public records from each
county in which any of the Assets are located, within forty-five (45) days
after the execution of this Agreement. Buyer, at its sole expense, shall
obtain any and all updates of such security interest searches. To the extent
that any Security Interests appear on the aforementioned UCC searches, Seller
shall deliver full and complete releases of such Security Interests in form
reasonably satisfactory to Buyer at Closing unless assumed by Buyer. Seller
also shall deliver evidence of the dismissal of any suits or the satisfaction
of any liens or judgments, all in form reasonably satisfactory to Buyer.
9.4 Tax Certificates. Except as specifically waived by Buyer in
writing, Seller shall deliver to Buyer certificates from each appropriate
taxing authority if available stating that all applicable state and/or local
taxes, such as personal property taxes, due in connection with the transactions
contemplated by this Agreement have been timely paid in full and that no
obligation or liability is outstanding in connection therewith.
SECTION 10. BUYER'S OBLIGATIONS AT CLOSING
At Closing, Buyer shall deliver to Seller: (a) payment of the portion
of the Purchase Price required by Section 3.1; (b) the Note (in the form of
Exhibit G); (c) assignment and assumption agreements (in the forms of Exhibits
B, C and D) evidencing Buyer's assumption and agreement to pay and discharge,
in accordance with the terms of each, the Assumed Liabilities, and (d) the
Buyer's Certificate (in the form of Exhibit I).
SECTION 11. CONDITIONS OF BUYER'S OBLIGATIONS
Buyer's obligations to close hereunder are subject to the satisfaction
of all of the following conditions, each of which must be satisfied on or
before the Closing Date and any of which may be waived in writing by Buyer.
11.1 Tests and Inspections Before Closing.
11.1.1 Technical Tests. During the period beginning not more
than thirty (30) days prior to the execution of this Agreement and ending not
more than seventy-five (75) days after the execution of this Agreement, Seller
shall have caused to be performed on the CATV Systems the tests specified in
Section 5.8.3, in the manner and according to the test criteria specified
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therein, and the results and findings of such tests shall be satisfactory to
Buyer in its sole discretion. Within twenty (20) days prior to the Closing
Date, Buyer, with Seller's permission and reasonable cooperation, shall have
re-tested the CATV Systems, and Seller shall have either (a) certified
compliance with the CLI Rules and all of the technical standards specified in
Section 5.8, or (b) effected Remedial Steps so as to bring the CATV Systems
into compliance with all of such rules and technical standards. With respect
to the latter series of tests, the results and findings of such tests shall not
indicate a substantial variance from the test criteria applicable to each of
the CATV Systems.
11.1.2 Environmental Audits. Within thirty (30) days after
the execution of this Agreement, Buyer, at its sole expense, may conduct "Level
I" environmental audits of the Assets (including without limitation the Real
Property) and the CATV Systems, provided that such audits shall not include any
intrusive soil or ground water testing. The results and findings of such
audits shall be satisfactory to Buyer in its sole discretion.
11.1.3 Financial Inspection. Buyer and its accountants and
representatives shall have generated the financial information required by Form
8-K, as more particularly described in Section 7.1. Seller shall provide
Buyer's accountants with a standard representation letter certifying the
fairness of the presentation of Seller's financial position, the completeness
of the information provided, and the absence of any other irregularities,
communications or transactions not otherwise disclosed.
11.2 Approvals and Consents
11.2.1 Franchises. All franchising authorities shall have
consented to the assignment and assumption of the respective franchises, if
applicable, and shall have waived in writing any rights, if any, they may have
to purchase all or any part of the CATV Systems.
11.2.2 Other Required Consents. All of the other Required
Consents, a true and complete list of which is set forth in Schedule 5.6, shall
have been obtained and delivered to Buyer, except to the extent that Seller and
Buyer execute a memorandum at Closing specifying any Required Consent that
Buyer agrees need not be obtained until after the Closing Date or Required
Consents for assignment of agreements which Buyer does not agree to assume.
Buyer shall have received from Seller evidence reasonably satisfactory to Buyer
that no material terms or conditions of the CATV Instruments and Seller
Contracts have been or will be amended, modified or changed prior to or
effective with the Closing.
11.3 Performance by Seller of Covenants and Accuracy of
Representations and Warranties
11.3.1 Performance of Covenants. Seller shall have performed
all of its agreements and covenants under this Agreement to the extent such are
required to be performed at or prior to Closing, and all of Seller's
representations and warranties shall be true and correct as of Closing.
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11.3.2 Operability. Between the date of this Agreement and
the Closing Date, the CATV Systems shall not have suffered, on or prior to
Closing, any loss, claim, casualty, or calamity that has a significant and
material adverse effect on the Assets or the CATV Systems, whether or not
disclosed in amended Schedules and whether or not covered by insurance. Seller
shall bear the risk of loss on or prior to Closing with respect to the Assets
and the CATV Systems as a result of any loss, claim, casualty, or calamity.
11.3.3 Restraint of Proceedings. No action, proceeding or
investigation shall have been instituted or threatened on or prior to Closing,
to set aside or modify the transactions provided for in this Agreement or to
enjoin or prevent its consummation or which would impair the ability of Buyer
to realize the benefits of such transactions.
11.3.4 No Governmental Action. No investigation, action or
proceeding shall have been commenced by the Department of Justice or Federal
Trade Commission or any other governmental entity challenging or seeking to
enjoin the consummation of this transaction and neither Buyer nor Seller shall
have been notified of a present intention by the Assistant Attorney General in
charge of the Antitrust Division of the Department of Justice, the Director of
the Bureau of Competition of the Federal Trade Commission or any governmental
entity (or their respective agents or designees) to commence, or recommend the
commencement of, such an investigation, action or proceeding.
11.3.5 Equivalent Subscribers. Seller shall have
demonstrated to Buyer's reasonable satisfaction that the CATV Systems have at
least 6,585 Equivalent Subscribers.
11.3.6 Updated Schedules. Buyer shall have received updated
Schedules, as of the Closing Date, which are reasonably satisfactory to Buyer
and Seller.
11.3.7 Closing Documents. Buyer shall have received all of
the Closing Documents in form reasonably satisfactory to Buyer.
11.4 Conveyance of Title to Assets
11.4.1 Security Interests. Buyer shall have received
documentation reasonably satisfactory to it of the release and discharge of any
and all Security Interests, suits or judgments on or against Seller, the Assets
or the CATV Systems, except to the extent Buyer assumes such Security Interests
pursuant to Section 4.1.
11.4.2 Title Insurance. Seller shall, at least thirty (30)
days prior to the Closing Date, deliver to Buyer the commitment(s) of a title
insurance company reasonably satisfactory to Buyer (the "Title Company")
agreeing to issue to Buyer ALTA lessee's extended coverage title insurance
policies and ALTA owner's extended coverage title insurance policies insuring
Buyer's interests in the Real Property, in each case subject only to (i)
standard printed exceptions, (ii) inchoate liens for current taxes and
assessments not yet delinquent, (iii) standard utility and roadway easements,
covenants and restrictions, whether or not of record, that do not individually
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or in the aggregate materially detract from the value, or impair the use of the
Real Property affected thereby, (iv) existing zoning or similar laws or
ordinances that do not interfere with the operation of the CATV Systems, (v)
Security Interests specifically assumed by Buyer pursuant to Section 4.1, (vi)
survey exceptions that do not individually or in the aggregate materially
detract from the value or impair the use of the Real Property affected thereby,
and (vii) standard mineral or water rights exceptions (collectively, the
"Permitted Exceptions"). If a preliminary title binder indicates an exception
other than a Permitted Exception that would impair marketability in any
material respect, Seller shall, at its expense, cause such exception to be
removed on or before the Closing Date. At Closing Seller shall deliver to
Buyer an affidavit or indemnification agreement that shall be sufficient to
cause the Title Company to affirmatively insure against the existence of
outstanding rights that could form the basis for mechanic's, materialmen's or
similar liens, unrecorded documents, claims of parties in possession, and
judgments, bankruptcies or other charges against any persons whose names are
the same as or similar to Seller's name. Seller shall be responsible for the
payment of (i) all surveys and other documents required by the Title Company to
issue such policies, and (ii) all title insurance premiums. Buyer and Seller
shall mutually establish reasonable values for the properties to be insured.
SECTION 12. CONDITIONS OF SELLER'S OBLIGATIONS
Seller's obligations to close are subject to all of the following
conditions, any of which may be waived in writing by Seller.
12.1 Performance by Buyer. Buyer shall have performed all of its
agreements and covenants under this Agreement to the extent such are required
to be performed at or prior to Closing. At Closing, Buyer shall certify to
Seller that Buyer's representations and warranties set forth in the Agreement
are true and correct as of Closing.
12.2 Buyer's Certificate. At Closing, Buyer shall certify to
Seller that Buyer's representations and warranties set forth in the Agreement
are true and correct as of Closing.
12.3 Restraint of Proceedings. No action or proceeding shall have
been instituted, on or prior to Closing, to set aside or modify the
transactions provided for in this Agreement or to enjoin or prevent the
consummation thereof.
12.4 Operability. Between the date of this Agreement and the
Closing Date, the CATV Systems shall not have suffered, on or prior to Closing,
any loss, claim, casualty, or calamity that has a significant and material
adverse effect on the Assets or the CATV Systems, whether or not disclosed in
amended Schedules and whether or not covered by insurance. Seller shall bear
the risk of loss on or prior to Closing with respect to the Assets and the CATV
Systems as a result of any loss, claim, casualty, or calamity.
12.5 Restraint of Proceedings. No action, proceeding or
investigation shall have been instituted or threatened on or prior to Closing,
to set aside or modify the transactions provided for
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in this Agreement or to enjoin or prevent its consummation or which would
impair the ability of Seller to realize the benefits of such transactions.
12.6 No Governmental Action. No investigation, action or
proceeding shall have been commenced by the Department of Justice or Federal
Trade Commission or any other governmental entity challenging or seeking to
enjoin the consummation of this transaction and neither Buyer nor Seller shall
have been notified of a present intention by the Assistant Attorney General in
charge of the Antitrust Division of the Department of Justice, the Director of
the Bureau of Competition of the Federal Trade Commission or any governmental
entity (or their respective agents or designees) to commence, or recommend the
commencement of, such an investigation, action or proceeding.
12.7 Closing Documents. Seller shall have received all of the
Closing Documents in form reasonably satisfactory to Seller.
SECTION 13. NONCOMPETITION AGREEMENT
Seller shall enter into a noncompetition agreement with Buyer, in the
form of Exhibit F.
SECTION 14. INDEMNIFICATION
14.1 Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants made pursuant to this Agreement shall
survive the Closing for the following periods after the Closing Date:
(a) The representations, warranties and covenants set
forth in Sections 5.4, 5.7.3, 5.17, 6.5 and 6.6 shall survive without
limitation as to time.
(b) All other representations, warranties and covenants
shall survive for eighteen (18) months.
The date of expiration of any representation, warranty or covenant shall be
referred to herein as the "Termination Date." Representations, warranties and
covenants under this Agreement shall be of no further force of effect after the
applicable Termination Date. Any claim for indemnification with respect to any
alleged breach of any representation, warranty or covenant not asserted by
notice given as herein provided that specifically identifies a particular
breach and the underlying facts thereto, which notice is given prior to the
Termination Date, may not be pursued and is irrevocably waived and released
after such time. Any and all claims for indemnification under this Section 14
must be based on either a Third Party Claim or a Direct Claim (as such terms
are hereinafter defined).
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14.2 Limitations of Liability.
14.2.1 For purposes of this Section 14:
(i) "Indemnification Payment" means any amount of
Indemnifiable Losses required to be paid pursuant to this Agreement,
(ii) "Indemnitee" means any person or entity entitled
to indemnification under this Agreement,
(iii) "Indemnifying Party" means any person or entity
required to provide indemnification under this Agreement;
(iv) "Indemnifiable Losses" means any losses,
liabilities, costs, fines, penalties, damages (actual, punitive or
other), and expenses and any claims, demands or suits by any person or
entity, including, without limitation, any federal governmental
authority or any state, county, town, municipality, special political
subdivision, or any agency, department or division related thereto,
and costs and expenses actually incurred in connection with any
actions, suits, demands, assessments, judgments and settlements and
reasonable attorneys' fees and expense, in such case (x) reduced by
the amount of insurance proceeds recovered from any person or entity
as a result of the Indemnifiable Losses involved and (y) provided that
the underlying liability or obligation is not solely the result of any
action taken or omitted to be taken by the Indemnitee;
(v) "Third Party Claim" means any claim or
commencement of any action, proceeding, or investigation by any entity
or person that is not a party to this Agreement or an affiliate of
such a party; and
(vi) "Direct Claim" means any claim by an Indemnitee
on account of an Indemnifiable Loss that does not result from a Third
Party Claim.
14.2.2 As between Seller and any affiliate of Seller, on the
one hand, and Buyer and any affiliate of Buyer, on the other hand, the rights
and obligation set forth in this Section 14 will be the exclusive rights and
obligations with respect to the liabilities and obligations referred to in
Section 14.3 and any breach of the representations, warranties or covenants
contained in this Agreement, except for any liability, obligation or breach
that results from the actual fraud under the common law, not otherwise implied
or imputed, by a party to this Agreement.
14.2.3 Notwithstanding any other provision of this Agreement
or of any applicable law, no Indemnitee will be entitled to make a claim
against an Indemnifying Party under Section 14.3.1 or Section 14.3.2 until the
aggregate amount of claims that may be asserted for such Indemnifiable Losses
incurred by the Indemnitee exceeds Ten Thousand Dollars
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($10,000.00), after which amount the Indemnitee may claim for the entire
aggregate amount of such claims.
14.2.4 Notwithstanding any other provision of this
Agreement, the indemnification obligations of Seller under Section 14.3.1 and
of Buyer under Section 14.3.2 will not exceed the sum of Five Hundred Thousand
Dollars ($500,000.00).
14.2.5 Notwithstanding anything to the contrary contained
herein, no Indemnifying Party shall be liable to or obligated to indemnify any
Indemnitee hereunder for any consequential, special, multiple, punitive or
exemplary damages including, but not limited to, damages arising from loss or
interruption of business, profits, business opportunities or goodwill, loss of
use of facilities, loss of capital, claims of customers, or any costs or
expense related thereto, except to the extent such damages have been recovered
by a third person and are the subject of a Third Party Claim for which
indemnification is available under the express terms of this Section 14.
14.3 Indemnification.
14.3.1 Subject to the other sections of this Section 14,
Seller will indemnify, defend and hold harmless Buyer and its affiliates,
directors, officers, agents and representatives from all Indemnifiable Losses
relating to, resulting from or arising out of (i) a breach by Seller of any of
the representations, warranties or covenants contained in this Agreement,
except for any such breach of representations, warranties or covenants which
was specified on Seller's Schedules or Closing Certificate all of which are
waived upon Closing, or (ii) any Third Party Claim, whether filed, asserted, or
sought before or after the Closing Date, in respect of the operations of the
CATV Systems or the ownership or operation of the Assets or CATV Systems by
Seller, on or prior to the Closing Date, regardless of whether known or
unknown, asserted or unasserted, on the Closing Date.
14.3.2 Subject to the other sections of this Section 14,
Buyer will indemnify, defend and hold harmless Seller and its affiliates, and
their directors, officers, agents and representatives from all Indemnifiable
Losses relating to, resulting from or arising out of (i) a breach by Buyer of
any representations, warranties or covenants contained in this Agreement,
except for any such breach of representations, warranties or covenants which
was specified on Buyer's Closing Certificate all of which are waived upon
Closing, or (ii) any Third Party Claim, filed, asserted, or sought after the
Closing Date, in respect to the ownership or operation of the assets or the
CATV Systems by Buyer or its affiliates after the Closing Date.
14.3.3 Payments made under this Section 14.3 shall be
treated by Buyer and Seller as purchase price adjustments and Buyer and Seller
shall file all tax returns consistent with such treatment. Notwithstanding
anything to the contrary contained herein, Buyer shall not be indemnified or
reimbursed for any adjustment to the basis of any asset resulting from any
adjustment to the purchase price or any additional or reduced taxes resulting
from any such basis adjustment.
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14.4 Defense of Claims.
14.4.1 If any Indemnitee receives notice of the assertion of
any Third Party Claim against such Indemnitee, with respect to which an
Indemnifying Party is obligated to provide indemnification under this
Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt
written notice thereof, but in any event not later than thirty (30) calendar
days after receipt of actual notice of such Third Party Claim; provided,
however, that the failure of the Indemnitee to notify the Indemnifying Party
during the required notification period shall only relieve the Indemnifying
Party from its obligation to indemnify the Indemnitee pursuant to this Section
14 to the extent that Indemnifying Party is materially prejudiced by such
failure (whether as a result of the forfeiture of substantive rights or
defenses or otherwise); and provided, however, that the Indemnitee must, in any
event, notify the Indemnifying Party prior to the Termination Date as required
pursuant to Section 14.1 in order for such party to be indemnified. The
Indemnifying Party shall be entitled, upon written notice to the Indemnitee, to
assume the investigation and defense thereof with counsel reasonably
satisfactory to the Indemnitee. Whether or not the Indemnifying Party elects
to assume the investigation and defense of any Third Party Claim, the
Indemnitee shall have the right to employ separate counsel and to participate
in the investigation and defense thereof, provided, however, that the
Indemnitee shall pay the fees and disbursements of such separate counsel unless
(i) the employment of such separate counsel has been specifically authorized in
writing by the Indemnifying Party, (ii) the Indemnifying Party has failed to
assume the defense of such Third Party Claim within a reasonable time after
receipt of notice thereof with counsel reasonably satisfactory to such
Indemnitee, or (iii) the named parties to the proceeding in which such claim,
demand, action or cause of action has been asserted include both the
Indemnifying Party and such Indemnitee and, in the reasonable judgment of
counsel to such Indemnitee, there exists one or more defenses that may be
available to the Indemnitee that are in conflict with those available to the
Indemnifying Party. Notwithstanding the foregoing, the Indemnifying Party
shall not be liable for the fees and disbursements of more than one counsel for
all Indemnified Parties in connection with any one proceeding or any similar or
related proceedings arising from the same general allegations or circumstances.
Without the prior written consent of the Indemnitee, the Indemnifying Party
will not enter into any settlement of any Third Party Claim that would lead to
liability or create any financial or other obligation on the part of the
Indemnitee unless such settlement includes as an unconditional term thereof the
release of the Indemnitee from all liability in respect of such Third Party
Claim.
14.4.2 Any Direct Claim will be asserted by giving the
Indemnifying Party reasonably prompt written notice thereof, but in any event
not later than thirty (30) calendar days after the Indemnitee actually becomes
aware of the incurrence thereof, and the Indemnifying Party will have a period
of thirty (30) calendar days within which to respond in writing to such Direct
Claim; provided, however, that the failure of the Indemnitee to notify the
Indemnifying Party shall only relieve the Indemnifying Party from its
obligation to indemnify the Indemnitee pursuant to this Section 14 to the
extent the Indemnifying Party is materially prejudiced by such failure (whether
as a result of the forfeiture of substantive rights or defenses or otherwise);
and provided, however, that the Indemnitee must, in any event, notify the
Indemnifying Party prior to
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the Termination Date as required pursuant to Section 14.1 in order for such
party to be indemnified. If the Indemnifying Party does not so respond within
such thirty (30) calendar day period, the Indemnifying Party will be deemed to
have rejected such claim, in which event the Indemnitee will be free to pursue
such remedies as may be available to the Indemnitee on the terms and subject to
the provisions of this Section 14.
14.4.3 If after the making of any Indemnification Payment,
the amount of the Indemnifiable Loss to which such payment relates is reduced
by recovery, settlement or otherwise under any insurance coverage, or pursuant
to any claim, recovery, settlement or payment by or against any other entity,
the amount of such reduction (less any costs, expenses, premiums or taxes
incurred in connection herewith) will promptly be repaid by the Indemnitee to
the Indemnifying Party. Upon making any Indemnification Payment, the
Indemnifying Party will, to the extent of such Indemnification Payment, be
subrogated to all rights of the Indemnitee against any third party that is not
an Affiliate of the Indemnitee in respect to the Indemnifiable Loss to which the
Indemnification Payment relates; provided that (i) the Indemnifying Party shall
then be in compliance with its obligations under this Agreement in respect of
such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of
its Indemnifiable Loss, all claims of the Indemnifying Party against such third
party on account of said Indemnification Payment will be subrogated and
subordinated in right of payment to the Indemnitee's rights against such third
party. Without limiting the generality or effect of any other provision of
this Section 14, each such Indemnitee and Indemnifying Party will duly execute
upon request all instruments reasonably necessary to evidence and perfect the
above-described subrogation and subordination rights.
14.5 Extension of Due Date of Note. If Buyer has submitted a claim
for Indemnifiable Losses pursuant to this Section 14 and there remains pending
a claim for Indemnifiable Losses on the date payment of the Note is due, Buyer
shall be entitled to postpone payment of the principal amount of the Note (but
not interest thereon) until the claim for Indemnifiable Losses has been
resolved pursuant to Section 14.
14.6 Dispute Resolution Regarding Indemnification Claims. If
either Seller or Buyer rejects a claim for indemnification by the other party,
Seller and Buyer shall submit the dispute to binding arbitration in accordance
with the alternative dispute resolution procedures set forth in Exhibit J.
SECTION 15. MISCELLANEOUS
15.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
15.2 Assignment and Delegation of Agreement. Neither party may
assign this Agreement or any interest in this Agreement without the prior
written consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that Buyer may assign and delegate, at or prior to
Closing, all or a part of its rights and obligations under this
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Agreement to one or more entities formed and controlled by Buyer without the
prior written consent of Seller. In no event shall any such assignment and
delegation relieve Buyer from any liability under this Agreement, including
without limitation the payment of the Purchase Price and the Note. Buyer
currently anticipates assigning its rights under this Agreement to Northland
Cable Television, Inc., Northland Cable Properties Four Limited Partnership and
Northland Cable Properties Five Limited Partnership.
15.3 Entire Agreement; Amendments. This Agreement constitutes and
embodies the entire agreement and understanding between the parties with
respect to the subject matter hereof and, except for that certain
Confidentiality Agreement between Buyer and Seller dated as of February 15,
1995, which shall remain in effect for the term of such agreement, this
Agreement supersedes all prior or contemporaneous written or oral agreements
and understandings between the parties with respect thereto. This Agreement
may not be modified or amended except by a written instrument executed by the
parties.
15.4 Binding Effect. Notwithstanding the provisions of Section
15.2, this Agreement shall be binding upon and shall inure to the benefit of
the parties to this Agreement and their respective permitted successors and
assigns.
15.5 Additional Agreements. Seller and Buyer shall sign any
additional agreements and other documents necessary or desirable to carry out
the terms of this Agreement.
15.6 Efforts. Subject to the terms and conditions herein provided,
each of the parties hereto agrees to use all reasonable efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers,
consents and approvals to be provided by each of them hereunder, and to effect
all necessary registrations and filings, including, but not limited to,
submissions of information requested by governmental authorities.
15.7 Expenses. Except as otherwise expressly provided in this
Agreement, each party shall pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations hereunder, and the consummation of the
transactions contemplated by this Agreement.
15.8 Execution in Multiple Counterparts. This Agreement may be
executed in one or more identical counterparts, and all of such counterparts,
when taken together, shall be deemed to constitute the original of this
Agreement.
15.9 Schedules and Exhibits. Each of the Schedules and Exhibits
listed below shall be incorporated into and shall for all purposes be deemed a
part of this Agreement:
<TABLE>
<S> <C>
Schedule 1.2 - Assets
Schedule 1.7 - Description of CATV Systems
</TABLE>
35
<PAGE> 42
<TABLE>
<S> <C>
Schedule 1.14 - Excluded Assets
Schedule 3.4 - Allocation of Purchase Price
Schedule 4.1 - Seller's Obligations Assumed by Buyer
Schedule 5.3 - Potential Conflicts
Schedule 5.4 - Security Interests
Schedule 5.5.3 - Non-recorded Real Property Leases
Schedule 5.5.4 - Easements Under Negotiation
Schedule 5.5.5 - Environmental Matters
Schedule 5.6 - Required Consents
Schedule 5.9.1 - Copyright Filing Matters
Schedule 5.11 - Litigation and Proceedings
Schedule 5.12 - Tax Matters
Schedule 5.14.1 - Employees
Schedule 5.14.9 - Form 395-A Filings
Schedule 5.15 - Requested Rate Reduction
Schedule 5.21 - Financial Statements
Schedule 5.22 - Free CATV Service
Schedule 6.4 - Litigation Matters
Schedule 7.2 - Operational Changes
Exhibit A - Bill of Sale
Exhibit B - Assignment and Assumption Agreement
Exhibit C - Assignment and Assumption of Franchises
Exhibit D - Assignment and Assumption of Leases
Exhibit E - Seller's Certificate
Exhibit F - Noncompetition Agreement
Exhibit G - Note
Exhibit H - Closing Documents Checklist
Exhibit I - Buyer's Certificate
Exhibit J - Alternative Dispute Resolution Procedures
</TABLE>
Except as otherwise provided in Section 4.1, any of such Schedules and
Exhibits may be later amended or revised by the mutual consent of the parties.
Such Schedules and Exhibits, as so amended or revised, shall be incorporated
into and shall for all purposes be deemed a part of this Agreement.
15.10 Waiver. No waiver of or with respect to any term, provision,
requirement, or condition of this Agreement, nor consent by a party to the
breach of or departure from any of the terms, provisions, requirements or
conditions hereof by the other party, shall in any event be binding on or
effective against the waiving or non-breaching party unless it be in writing
and signed by such party, and then such waiver shall be effective only in the
specific instance and for the purpose for which given.
36
<PAGE> 43
15.11 Counsel. Each party has been represented by its own counsel in
connection with the negotiation and preparation of this Agreement and,
consequently, each party hereby waives the application of any rule of law that
would otherwise be applicable in connection with the interpretation of this
Agreement, including but not limited to any rule of law to the effect that any
provisions of this Agreement shall be interpreted or construed against the
party whose counsel drafted the provision.
15.12 Captions and Headings. The captions and headings are inserted
in this Agreement for convenience only, and shall in no event be deemed to
define, limit, or describe the scope or intent of this Agreement, or of any
provision hereof, nor in any way affect the interpretation of this Agreement.
15.13 Notices. All notices and communications required or permitted
to be given under any of the provisions of this Agreement shall be in writing
and shall be deemed to have been duly given when delivered by messenger, by
overnight delivery service, by facsimile transmission (receipt confirmed), or
mailed by first class certified mail, return receipt requested, addressed to
the parties at the addresses set forth below or at such other addresses as
either party shall notify the other in accordance with this Section 15.13:
If to Buyer:
Northland Telecommunications Corporation
1201 Third Avenue, Suite 3600
Seattle, Washington 98101
Attn: John S. Whetzell and James A. Penney
and to:
John E. Iverson, Esq.
Ryan Swanson & Cleveland
1201 Third Avenue, Suite 3400
Seattle, Washington 98101
If to Seller:
SLT Cable TV, Inc.
c/o ALLTEL Sugarland Telephone
14141 S.W. Freeway
Suite 6600
Sugar Land, Texas 77478
Attention: Mr. R.C. Brown, III
37
<PAGE> 44
and to:
Francis X. Frantz, Esq.
General Counsel
ALLTEL Corporation
One Allied Drive
P.O. Box 2177
Little Rock, Arkansas 72203
15.14 Legal Expenses. If any proceeding is brought by either party
to enforce or interpret any term or provision of this Agreement, the
substantially prevailing party in such proceeding shall be entitled to recover,
in addition to all other relief as set forth in this Agreement, such party's
reasonable attorneys' and experts' fees and expenses.
15.15 Severability; Invalidity. If any provision of this Agreement
is held to be invalid, such invalidity shall not render invalid the remainder of
this Agreement or the remainder of which such invalid provision is a part. If
any provision of this Agreement is so broad as to be held unenforceable, such
provision shall be interpreted to be only so broad as is enforceable.
15.16 Time of the Essence. Time is of the essence in this Agreement.
BUYER: NORTHLAND TELECOMMUNICATIONS
CORPORATION
By James A. Penney
--------------------------------------
Its Vice President
----------------------------------
SELLER: SLT CABLE TV, INC.
By Charles Robert Galloway
--------------------------------------
Its Sr. Vice President - Accounting
----------------------------------
38
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> APR-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 263,665
<SECURITIES> 0
<RECEIVABLES> 144,428
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 496,611
<PP&E> 16,097,695
<DEPRECIATION> 12,754,050
<TOTAL-ASSETS> 4,189,615
<CURRENT-LIABILITIES> 729,780
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> (5,735,043)
<TOTAL-LIABILITY-AND-EQUITY> 4,189,615
<SALES> 0
<TOTAL-REVENUES> 2,989,066
<CGS> 0
<TOTAL-COSTS> 374,962
<OTHER-EXPENSES> 2,075,744
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 365,087
<INCOME-PRETAX> 171,427
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 171,427
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
