SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported) April 9, 1999
ADELPHIA COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-16014 23-2417713
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
Main at Water Street - Coudersport, PA 16915-1141
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (814) 274-9830
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Item 5. Other Events.
(a) On April 12, 1999, Adelphia announced the signing of a definitive agreement
for the purchase of the cable television systems owned by Harron
Communications Corp. ("Harron") for $1.17 billion in a press release which
is attached hereto as Exhibit 99.01 and incorporated by reference herein.
Adelphia is filing as an exhibit under Item 7 of this Form 8-K the stock
purchase agreement with respect to the Harron acquisition, which is
attached hereto as Exhibit 2.01 and incorporated by reference herein.
(b) On April 9, 1999, Adelphia entered into a stock purchase agreement with
Highland Holdings, a general partnership controlled by members of the
family of John J. Rigas, in which Adelphia agreed to sell to Highland
Holdings, and Highland Holdings agreed to purchase, from $250 million to
$375 million of Class B common stock of Adelphia. The purchase price for
the Class B common stock will be equal to the public offering price per
share in a future public offering with at least $100 million in gross
proceeds to nonaffiliated purchasers ("Public Offering"), less the
underwriting discount, plus an interest factor. Closing under this stock
purchase agreement is to occur within 270 days following the closing of the
Public Offering. Adelphia is filing as an exhibit under Item 7 of this Form
8-K the stock purchase agreement between Highland Holdings and Adelphia,
which is attached as Exhibit 10.01 and incorporated by reference herein.
The Highland Holdings stock purchase agreement relates to the previously
announced intention of the family of John J. Rigas to purchase common stock
of Adelphia.
(c) On or about March 10, 1999, Robert Lowinger (the "Plaintiff"), on behalf of
himself and all other shareholders of Class A Common Stock of Century
Communications Corp. ("Century"), commenced an action by filing a putative
Class Action Complaint (the "Complaint") in the Superior Court of
Connecticut, Judicial District of Stamford/Norwalk, against Century, all of
its directors, and the Company. The Plaintiff claims that he owns shares of
Class A Common Stock of Century, and alleges that in connection with the
proposed merger of the Company with Century, holders of Class B Common
Stock of Century - which has superior voting rights to the Class A Common
Stock - will receive $4.00 per share more than the consideration to be paid
to the holders of Class A Common Stock. This would allegedly result in the
Class B shareholders receiving approximately $170,000,000 more than if they
held the equivalent number of Century Class A shares. The Plaintiff claims
that the individual defendants, comprising the directors of Century and the
majority shareholders of Century's Class B shares, breached their fiduciary
duties of loyalty, good faith, and due care to Century's Class A
shareholders by agreeing to these two levels of consideration. The sole
claim against the Company is that it, together with Century, aided and
abetted these alleged breaches of fiduciary duty. The Plaintiff seeks
certification of a class of Century's Class A shareholders and seeks
recovery on behalf of himself and the class of unspecified damages,
profits, and special benefits. He also seeks all costs, expenses and
attorney's fees. The Company is currently required to respond to the
Complaint by May 21, 1999. The Company believes the allegation of liability
against it to be without merit and intends to vigorously defend the action.
(d) The Registrant is also filing, as Exhibit 3.02 under Item 7 of this Form
8-K, its amended bylaws which reflect its recently announced change in
fiscal year to a year ending December 31, commencing with the fiscal year
ended December 31, 1998.
Item 7. Financial Statements and Exhibits.
Exhibit No. Description
2.01 Stock Purchase Agreement dated April 9, 1999 between
Adelphia Communications Corporation and the
shareholders of Harron Communications Corp. (Filed
herewith)
3.02 Bylaws of Adelphia Communications Corporation (Filed
herewith)
10.01 Letter Agreement dated April 9, 1999 between Adelphia
Communications Corporation and Highland Holdings (Filed
herewith)
99.01 Press Release dated April 12, 1999 regarding the
Registrant's definitive agreement for the purchase of
the cable television systems owned by Harron
Communications Corp. (Filed herewith)
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SIGNATURE
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.
ADELPHIA COMMUNICATIONS CORPORATION
Date: April 19, 1999 By: /s/ Timothy J. Rigas
--------------------------
Timothy J. Rigas
Executive Vice President, Treasurer
and Chief Financial Officer
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EXHIBIT INDEX
Exhibit No. Description
2.01 Stock Purchase Agreement dated April 9, 1999 between
Adelphia Communications Corporation and the
shareholders of Harron Communications Corp. (Filed
herewith)
3.02 Bylaws of Adelphia Communications Corporation (Filed
herewith)
10.01 Letter Agreement dated April 9, 1999 between Adelphia
Communications Corporation and Highland Holdings (Filed
herewith)
99.01 Press Release dated April 12, 1999 regarding the
Registrant's definitive agreement for the purchase of
the cable television systems owned by Harron
Communications Corp. (Filed herewith)
EXHIBIT 2.01
STOCK PURCHASE AGREEMENT
THIS AGREEMENT, dated April 9, 1999 by and between the Shareholders of
Harron Communications Corp. ("Harron") listed on the signature page hereto
(individually a "Shareholder" and collectively "Shareholders"), and Adelphia
Communications Corporation, a Delaware corporation ("Buyer").
W I T N E S S E T H :
WHEREAS, Shareholders are the owners of all the stock (the "Stock") of
Harron which, together with the Operating Subsidiaries (as hereinafter defined),
is the owner and operator of the cable television system (the "CATV System"),
and businesses in respect thereof, located in the cities and/or townships listed
on Schedule 4.5 attached hereto (the CATV System, and the businesses of Harron
and the Operating Companies in respect thereof (other than with respect to the
Excluded Assets), are herein referred to collectively as the "Business"); and
WHEREAS, Shareholders desire to sell, and Buyer desires to purchase, on
the terms and subject to the conditions contained in this Agreement, the Stock,
free and clear of all liens, claims, pledges, restrictions, rights of others,
voting agreements, charges or other encumbrances of any kind or nature
whatsoever, all in accordance with and subject to the terms and conditions set
forth herein.
NOW, THEREFORE, in consideration of the mutual promises each to the
other made herein, the parties hereto, intending to be legally bound hereby,
agree as follows:
1. Definitions. As used herein, the following terms shall, except where the
context otherwise requires, have the meanings specified in this Section 1 (such
definitions to be equally applicable to the singular and plural forms of the
term defined):
"Agreement" - This Stock Purchase Agreement, as the same may be amended
or modified in accordance with the terms hereof.
"Accounts Receivable" - All accounts receivable of the Cable Companies.
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"Additional Escrow Fund" - As defined in Section 7.1.
"Additional Subscribers" - As defined in Section 2.3.
"Authorizations" - All Governmental Permits and other approvals,
authorizations or agreements necessary to own and operate the Business lawfully
and in the manner in which it is now being operated.
"Authority" - any federal, state or local governmental authority or
entity having regulatory or other authority or jurisdiction over the Harron
Companies, or any of them.
"Bank Debt" - Obligations of the Cable Companies referenced in a
certain Amended and Restated Revolving Credit and Term Loan Agreement dated June
3, 1998, as amended, with First Union N.A., and the other banks party thereto.
"Benefit Arrangement" means each plan, arrangement, program, agreement
or commitment (written or oral) providing for insurance coverage (including,
without limitation, any self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
retirement benefits, life, health or accident benefits (including, without
limitation, any "voluntary employees' beneficiary association" as defined in
Section 501(c)(9) of the Code) or for deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights, stock purchase or other forms
of incentive compensation or post-retirement insurance, compensation or benefits
which (a) is not a Welfare Plan, Pension Plan or Multiemployer Plan, (b) is
entered into, maintained, contributed to or required to be contributed to, as
the case may be, by Harron or any ERISA Affiliate or under which Harron or any
ERISA Affiliate may incur any liability, and (c) covers any Employee or former
employee of Harron or any ERISA Affiliate (with respect to their relationship
with such entity).
"Business" - As defined in the first WHEREAS paragraph.
"Business Assets" - As described in Section 4.10.
"Buyer" - As defined in the first paragraph of this Agreement, its
successors and assigns.
"Cable Companies" - Harron and the Operating Subsidiaries.
"Cash Balance" - As defined in Section 2.3.
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"CATV" - cable television.
"CATV System" - As defined in the first WHEREAS paragraph.
"Closing and Closing Date" - As defined in Section 3.
"Code" - The Internal Revenue Code of 1986, as amended, and the
regulations promulgated thereunder.
"Communications Act" - The Communications Act of 1934, as amended,
including all provisions of the Cable Communications Policy Act of 1984, the
Cable Television Consumer Protection and Competition Act of 1992, and the
provisions of the Telecommunications Act of 1996.
"Copyright Act" - As defined in Section 4.6.
"Damage Notice" - As defined in Section 12.
"Employees" mean all persons employed by Harron or the Business as of
the date specified or, if no date is specified, as of the date hereof.
"Employee Plan" means all Benefit Arrangements, Multiemployer Plans,
Pension Plans and Welfare Plans.
"Encumbrances" - Collectively, all debts, claims, liabilities,
obligations, Taxes, liens, mortgages, security interests, claims, pledges,
restrictions, voting agreements, title exceptions, rights of others or other
encumbrances of any kind or nature whatsoever.
"Environmental Laws" - Any statute, ordinance, code, law (common or
otherwise), rule, regulation or order pertaining to land use, air, soil, surface
water, groundwater (including the protection, cleanup, removal, remediation or
damage thereof), or to the protection of public health and safety or any other
environmental matter, including the following laws as amended and if effect from
time to time up to the date hereof: (A) Clean Air Act (42 U.S.C. SS7401, et
seq.); (B) Clean Water Act (33 U.S.C. SS1251, et seq.); (C) Resource
Conservation and Recovery Act (42 U.S.C. SS6901, et seq.); (D) Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. SS9601, et
seq.); (E) Safe Drinking Water Act (42 U.S.C. SS300f, et seq.); and (F) Toxic
Substance Control Act (15 U.S.C. SS2601, et seq.).
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations promulgated thereunder.
"ERISA Affiliate" means any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, or otherwise
required to be aggregated with, Harron, as set forth in Section 414(b), (c), (m)
or (o) of the Code.
"Escrow Agreement" - The form of Escrow Agreement attached as Exhibit
A.
"Estimate Statement" - As defined in Section 2.3.
"Existing Employment Agreements" - As defined in Section 4.14.
"Excluded Assets" - As defined in Section 6.2.
"Excluded Liabilities" - As defined in Section 6.2.
"Family Loans" - All loans from the Harron Companies to the lineal
descendants of Margaret E. Harron, as reflected on the Financial Statements and
as made by the Harron Companies prior to the Closing Date.
"FAA" - The Federal Aviation Administration.
"FCC" - The Federal Communications Commission.
"Final Statement" - As defined in Section 2.3.
"Financial Statements" - As defined in Section 4.13.
"FTC" - The Federal Trade Commission.
"Governmental Permits" - All franchises and related agreements,
approvals, authorizations, permits, licenses, easements, registrations,
qualifications, leases, variances and similar rights obtained from any
Authority.
"Hazardous Substances" - Any pollutant, contaminant, hazardous or toxic
substance, material, constituent or waste or any pollutant or any release
thereof that is labeled or regulated as such by any Authority pursuant to an
Environmental Law, including, without limitation, petroleum or petroleum
compounds, radioactive materials, asbestos or any asbestos-containing material,
or polychlorinated biphenyl's.
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"Harron" - As defined in the first WHEREAS clause hereof.
"Harron Companies" - Harron, the Operating Subsidiaries and all other
subsidiaries (direct or indirect) of Harron.
"HSR Act" - As defined in Section 4.12.
"Indemnitor" - As defined in Section 13.4.
"Indemnitee" - As defined in Section 13.4.
"Knowledge" - Whenever the phrases "knowledge of Shareholders" or
"known to Shareholders" is used, Shareholders shall be deemed to know of all
information of which any officer or general manager of any of the Cable
Companies is aware.
"Listed Contracts" - As defined in Section 4.11.
"Material Adverse Effect" - A material adverse effect on the condition,
financial or otherwise, results of operations or prospects of the Business or
the Business Assets. For purposes hereof, changes applicable to the CATV
business generally, federal or other governmental rate regulation,
"over-building", the offering of CATV service by another person within the
municipalities served by the CATV System, or the issuance to another person of a
franchise in a territory served by the CATV System, shall not be considered to
have a Material Adverse Effect.
"Material Business Contract" - Any contract, other than Excluded Assets
and Excluded Liabilities, requiring payments by or to any of the Cable Companies
of, in the aggregate, $50,000.00 or more during the current term of such
contract, and all headend, tower and microwave site leases and fiber leases.
"Multiemployer Plan" means any "multiemployer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) Harron or any ERISA Affiliate
maintains, administers, contributed to or was required to contribute to, or
under which Harron or any ERISA Affiliate may incur any liability and (b) covers
any employee or former employee of Harron or any ERISA Affiliate (with respect
to their relationship with any such entity).
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"Non-competition Agreement" - As defined in Section 9.9.
"Non-consenting Authorizations" - As defined in Section 7.1.
"Officer Agreement" - As defined in Section 9.10.
"Operating Subsidiaries" - The subsidiaries of Harron listed on
Exhibit B.
"Pension Plan" means any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) which (a) Harron or any
ERISA Affiliate maintains, administers, contributes to or is required to
contribute to or, within the five years prior to the Closing Date, maintained,
administered, contributed to or was required to contribute to, or under which
Harron or any ERISA Affiliate may incur any liability (including, without
limitation, any contingent liability); and (b) covers any employee or former
employee of Harron or any ERISA Affiliate (with respect to their relationship
with any such entity).
"Permitted Encumbrances" - Liens for Taxes not yet due and payable,
defects or encumbrances of title which, either individually or in the aggregate,
do not materially interfere with the use or ownership of property, liens to be
released immediately after, at or prior to Closing, leases for Real Property, to
the extent disclosed in Schedule 4.8 or Schedule 4.11, municipal, zoning and
other ordinances, standard title exceptions, easements for utilities, recorded
building and use restrictions and covenants which, either individually or in the
aggregate, do not materially interfere with the use or ownership of property.
"Purchase Price" - As defined in Section 2.2.
"Real Property" - As defined in Section 4.8.
"Severance Arrangements" - As defined in 6.1.
"Shareholder" - As defined in the first paragraph of this Agreement.
"Shareholders" - As defined in the first paragraph hereof.
"Stock" - As defined in the first WHEREAS paragraph.
"Tangible Personal Property" - As defined in Section 4.10.
"Tax" - Any federal, state, local or foreign income, gross receipts,
windfall profits, property, production, sales, use, license, excise, franchise,
capital, transfer, employment, withholding, or other tax or governmental
assessment, together with any interest, additions, or penalties with respect
thereto and any interest in respect of such additions or penalties.
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"Tax Return" - Any tax return, declaration of estimated tax, tax report
or other tax statement, or any other similar filing required to be submitted to
any Authority with respect to any Tax.
"Welfare Plan" means any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, other than a Multiemployer Plan, which (a) Harron or any
ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or under which Harron or any ERISA Affiliate may incur any
liability and (b) covers any employee or former Employee of Harron or any ERISA
Affiliate (with respect to their relationship with any such entity).
2. Stock Purchased/Purchase Price.
2.1 Stock Purchase. Shareholders agree to sell, assign
and convey, and Buyer agrees to buy, as of the Closing Date, all the Stock.
2.2. Purchase Price. In consideration of the sale, assignment and
conveyance to Buyer of the Stock, and for entering into this Agreement, Buyer
agrees to pay to Shareholders the sum of $1,200,000,000.00, subject to reduction
or addition as hereinafter set forth (collectively the "Purchase Price"), to be
paid at Closing by wire transfer to a bank or banks designated by Shareholders.
2.3. Adjustments to Purchase Price. The Purchase Price shall be
adjusted as follows:
a. Acquisition Adjustments. In the event that the Cable
Companies fail to acquire, through the acquisition of CATV systems not owned by
the Cable Companies, at least 2,200 subscribers (other than subscribers of the
CATV systems being acquired pursuant to that certain Asset Purchase Agreement
dated February, 1999, with J. Feeney Associates, Inc. (the "Feeney Agreement"))
(the "Additional Subscribers"), the Purchase Price shall be decreased by (i) the
excess of 2,200 over the number of subscribers so acquired, times (ii)
$1,500.00; provided, however, notwithstanding the foregoing provisions of this
Section 2.3(a), in the event any of the Cable Companies enters into a purchase
agreement relative to all or any portion of the Additional Subscribers, and the
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transactions contemplated by such purchase agreement(s) do not close until after
the Closing Date, then the number of subscribers to be purchased pursuant to
such purchase agreement(s) will not be included in the calculation contemplated
by this Section 2.3(a), and any amounts payable after the Closing Date pursuant
to such purchase agreement(s) (less purchase price deposits made in connection
therewith) will be included as a liability in Section 2.3(c). In addition, with
respect to the Feeney Agreement: (i) in the event such transaction does not
close until after the Closing Date, any amounts payable after the Closing Date
pursuant to the Feeney Agreement (less purchase price deposits made in
connection therewith) will be included as a liability in Section 2.3(c); and
(ii) in the event the Feeney Agreement is terminated for any reason on or prior
to the Closing Date, then the Purchase Price shall be reduced by the purchase
price (less the purchase price deposits, if any made thereunder) payable
thereunder.
b. Cash Balance. The Purchase Price shall be increased by the
sum of all cash and cash equivalents held by the Cable Companies on the Closing
Date (including the funds to be realized on the Closing Date in connection with
the payment of all amounts outstanding under the Family Loans (the "Cash
Balance")).
c. Accrued Liabilities/Accounts Payable. The Purchase Price
shall be decreased by the amount of all liabilities of the Cable Companies,
determined in accordance with generally accepted accounting principles,
allocable to the period ending as of the day before the Closing Date, including
the principal balance of the Bank Debt and costs due on account of the
prepayment thereof (including any amounts necessary to satisfy any interest rate
swap agreements), accounts payable, any Tax payments due and payable by any of
the Cable Companies for all Tax periods ending prior to the Closing Date
(including, without limitation, Tax liabilities attributable to the distribution
or other disposition of the Excluded Assets and the Excluded Liabilities), and
any amounts payable on or after the Closing Date with respect to Additional
Subscribers or pursuant to the Feeney Agreement, but excluding deferred income
taxes.
d. Payments for Services/Expenses/Other Income. Without
duplication with Section 2.3(c) hereof, the Purchase Price shall be increased or
decreased to take into account a pro ration of all income and expense such that
all income and expense of the Cable Companies attributable to the period ending
on the day before the Closing Date shall be for the benefit (or detriment) of
Shareholders, and all income and expense of the Cable Companies attributable to
the period beginning on the Closing Date shall be for the benefit (or detriment)
of Buyer.
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e. Pre-payments. The Purchase Price shall be increased for all
deposits and prepaid expenses of the Business.
f. Accounts Receivable. The Purchase Price shall be
increased by the Business' Accounts Receivable aged 90 days or less.
g. Launch Fees. The Purchase Price shall be decreased by the
sum of all programmer "launch" fees received by the Cable Companies during 1997,
1998 and 1999 which, if amortized over the period during which the Cable
Companies are contractually obligated to carry the subject programming, would be
allocated to the period beginning on the Closing Date.
h. Capital Expenditures. The Purchase Price shall be decreased
by the amount by which the sums paid or accrued with respect to capital
expenditures fail to include the following sums during the 1999 calendar year:
Southeast Michigan and Southeast Pennsylvania cable plant rebuilds:
$30,000,000.00; and,
Capital Expenditures other than the rebuilds of cable plant in
Southeast Michigan and Southeast Pennsylvania:
$12,000,000.00.
For purposes of determining the Purchase Price adjustment under this Section
2.3(h), in the event the Closing Date is prior to December 31, 1999, the
foregoing decrease in the Purchase Price shall be determined on an annualized
basis (e.g., if the Closing occurs on September 30, the foregoing requirement
will be met if 75% of such sums have been accrued).
i. Application of Adjustments. All adjustments to the Purchase
Price shall increase (or decrease) the Purchase Price paid for each share of
Stock on a proportionate basis.
Attached hereto as Schedule 2.3 is an example of the calculation of the Purchase
Price adjustments contemplated by this Section 2.3, for illustrative purposes
only, prepared by the Shareholders as a good faith estimate of the items set
forth in this Section 2.3 as if the Closing Date was February 28, 1999. It is
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the intention of the parties that, without duplication and without limitation,
the preceding paragraphs result in an adjustment to the Purchase Price to
reflect a pro ration of all expenses incurred by the Cable Companies, and all
payments made on account of services to be provided by the Cable Companies to:
(x) the period up to but not including the Closing Date; or (y) the period
beginning on the Closing Date. Such pro rations shall include, without
limitation and without duplication, interest accrued on the Bank Debt, all
payments received for CATV services to be rendered in whole or in part on or
after the Closing Date, prepayments relating to periods of time on or after the
Closing Date, property and other Taxes and assessments, payroll, accrued
vacation, copyright royalties and fees, rents, pole rents, franchise fees,
license fees, power and utility expenses, deposits and prepaid expenses. The
Shareholders shall prepare and deliver to Buyer, at least five business days
prior to the Closing Date, a statement (the "Estimate Statement") showing, as of
the latest date reasonably possible, the amount reasonably estimated by
Shareholders, in good faith, to be the amount of the Purchase Price adjustments
provided for in this Section 2.3. The Purchase Price adjustments reflected in
the Estimate Statement shall be used in determining the Purchase Price at
Closing. However, such adjustments (and the Purchase Price) shall be
recalculated subsequent to the Closing in accordance with this section. Within
120 days after the Closing Date, the Buyer shall prepare a statement (the "Final
Statement") showing, as of the Closing Date, the Purchase Price adjustments
provided for in this Section 2.3, and the Purchase Price shall be recalculated
to reflect such Purchase Price adjustments. Within 30 days of receipt of the
Final Statement, Shareholders may object thereto. All matters contained within
the Final Statement for which no objection is proposed within such 30 days shall
be deemed accepted. Buyer and Shareholders shall have 60 days from the date of
the preparation and delivery of any objection to the Final Statement by
Shareholders to agree on the resolution thereof. In the event they have not so
agreed within such time, it is agreed that such shall be submitted for
resolution to a national accounting firm to be appointed by Shareholders and
approved by Buyer (provided, if the amount in controversy exceeds the sum of
$5,000,000.00, Shareholders or Buyer may require that such accounting firm
appoint three accountants practicing within such accounting firm to act as a
panel to resolve such dispute). Buyer hereby approves of any "Big Five"
accounting firm selected by Shareholders so long as such firm does not then
serve as the independent auditor of any of the Harron Companies, Shareholders or
Buyer. The determination by the designated accounting firm of the amounts
properly to be taken into account as Purchase Price adjustments under this
Section 2.3 shall be binding and non-appealable by either party. Within ten days
of an agreement by the parties to an adjustment to the Final Statement, or the
binding determination thereof in accordance with the foregoing, the net amount
owed as a Purchase Price adjustment shall be paid by the obligor thereof to the
other party or parties, together with interest at the rate of 7% per annum,
calculated from the Closing Date. All costs and expenses of the selected
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accounting firm and its services rendered pursuant to this Section 2 shall be
borne by Buyer, on the one hand, and Shareholders, on the other hand, as nearly
as possible in proportion to the amount by which the determination of all
matters related to such costs and expenses varies from the positions of Buyer
and Shareholders on all such matters.
3. Closing. The date of closing ("Closing") hereunder (the "Closing Date") shall
be the later of September 30, 1999, or as specified by Buyer in writing no less
than five nor more than 30 days following the date on which the conditions set
forth in Section 7 and 8 have been satisfied; provided, however, either party
may terminate this Agreement in accordance with the terms of Section 14 on
account of a Closing not having occurred on or before March 31, 2000, and any
such termination shall be preceded by 60 days advance notice thereof in
accordance with Section 14, in which case the Closing Date shall not be later
than May 30, 2000. Notwithstanding the foregoing; (a) Shareholders shall have
the right to delay closing to March 31, 2000, in order to obtain the consents of
the FCC, Ackerley Communications Group, Inc. and Robert Smith (or entities
controlled by him), with respect to the transfer of the broadcast interests
included in the Excluded Assets as provided for herein; (b) in no event shall
Closing occur other than on the last day of a calendar month; (c) in no event
shall Closing occur in the month of December; and (d) in the event Closing does
not occur on or before October 31, 1999, Shareholders shall have the right to
extend the Closing Date until January 31, 2000.
4. Shareholders' Representations, Warranties and Covenants. Each of the
Shareholders hereby jointly and severally represent, warrant and covenant to
Buyer that:
4.1 Organization of Shareholders/Authority and Enforcement. Each
Shareholder is a duly formed trust, formed under the laws of the Commonwealth of
Pennsylvania.
4.2 Authority to Execute and Consummate Agreement. The execution,
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delivery and performance of this Agreement have been duly and validly authorized
by all necessary action on the part of Shareholders. This Agreement has been
duly executed and delivered by Shareholders and constitutes, and each contract
or written undertaking delivered by Shareholders to Buyer pursuant hereto will
constitute, the legal, valid and binding obligation of Shareholders enforceable
in accordance with its terms, except to the extent such enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws or
equitable principles of general application relating to or limiting creditors'
rights. Assuming the receipt of the consents referenced in Schedule 4.12, the
execution, delivery and performance of this Agreement by Shareholders does not
and, as of the Closing, will not, result in a breach or violation of, or
constitute a default (or an event which, with or without the passage of time or
the giving of notice, or both, will constitute a breach or default) under, any
trust or other agreement, instrument, statute, ordinance, rule, regulation or
order to which any of the Harron Companies or Shareholders is a party or is
bound.
4.3 Organization and Good Standing of the Cable Companies. The Cable
Companies are duly organized corporations, validly existing, and in good
standing under the laws of their respective states of incorporation, and have
all requisite power and authority to own and operate their respective assets and
to carry on the Business at the places and in the manner owned and operated.
Schedule 4.3 lists all directors and officers of the Cable Companies.
4.4 Ownership of Capital Stock of Company; Capitalization. Each
Shareholder owns the number of shares of Stock set forth opposite such
Shareholder's name on Schedule 4.4, free and clear of all liens, security
interests, pledges, claims, options, restrictions, voting agreements, and rights
of others. Harron has 48,168.46 issued and outstanding shares of stock, all of
which are validly issued, fully paid and non-assessable and held of record by
the Shareholders. Except for the rights of certain Shareholders to purchase
additional shares of Harron, there are no outstanding options or other similar
rights to purchase any shares of stock of Harron or the Operating Subsidiaries.
All existing options or warrants to purchase additional shares of stock of
Harron shall be exercised or extinguished before the Closing Date. Any
additional shares of Harron stock issued prior to the Closing Date on account of
the exercise of an option or warrant to purchase such shares shall be
transferred to Buyer on the Closing Date in accordance with the terms hereof.
Between the date hereof and the Closing Date, no transfer of record ownership
of, or beneficial interest in, any of the Stock will be made (other than to
Harron, among the Shareholders or to trusts formed for lineal descendants of
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beneficiaries of the Shareholders, provided all such transfers are subject to
the terms of this Agreement and the transferees have agreed in writing to be
bound by, and a party to, this Agreement) and no liens, security interests,
pledges, claims, options, restrictions, voting agreements and rights of others
with respect to the Stock will be created.
4.5 Permits and Authorizations.
(a) The Cable Companies have all Authorizations from the FCC
and any Authority granting a franchise necessary to own and operate the Business
lawfully and in the manner in which it is now operated.
(b) Schedule 4.5 contains a true and complete list of all
Authorizations issued to the Cable Companies by the FCC and any Authority
granting any franchise, together with the expiration date thereof.
(c) Shareholders have delivered to Buyer true and complete
copies of all Authorizations issued to the Cable Companies by the FCC and any
Authority granting any franchise in effect on the date hereof. All such
Authorizations are in full force and effect (subject to expiration at the end of
their current term or as indicated on Schedule 4.5) and are valid, binding and
enforceable upon the Cable Company that is a party thereto and, to the
Shareholders' knowledge, the other parties thereto, in accordance with their
terms, except to the extent such enforceability may be affected by bankruptcy,
insolvency, or similar laws affecting creditor's rights generally and by
judicial discretion in the enforcement of equitable remedies. Except as
disclosed in Schedule 4.5, the Cable Companies are in material compliance with
the terms of the Authorizations granted by the FCC and any Authority granting a
franchise, and as of the date of this Agreement none of the Cable Companies has
received any written notice (or to the Shareholders' knowledge, after due
inquiry of the regional managers of the CATV System, oral notice from such
regional managers) from an Authority to the effect that any of the Cable
Companies are not currently in material compliance with the terms of the
Authorization granted by the FCC and any Authority granting a franchise.
(d) Except as disclosed on Schedule 4.5, there exists no fact
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or matter known to Shareholders which would constitute a legally valid basis for
revocation, suspension or termination of an Authorization, or elimination of any
rights under an Authorization.
(e) Schedule 4.5 contains a list of all municipalities which
have granted a franchise to the Cable Companies and which, to the knowledge of
Shareholders, have also granted a franchise to any other person such that such
other person has the right to offer CATV services in competition with the Cable
Companies within the geographical area governed by a franchise issued by such
Authority.
(f) Provided all consents specified in Schedule 4.12 are
obtained, the execution, delivery and performance of this Agreement will not
entitle any person or entity to cancel, suspend, terminate or diminish the
rights of any of the Cable Companies under any Authorization by the FCC or an
Authority granting a franchise.
(g) All commitments or obligations to any Authority issuing to
the Cable Companies a franchise in New York, Pennsylvania and Southeast
Michigan, relative to the upgrade or rebuild of the CATV System, have been met
or will be met upon completion of rebuilds presently in progress.
4.6 FCC and Other Regulatory Matters.
(a) During the three year period ending on the Closing Date,
the Cable Companies have submitted all material reports and filings required by
the Communications Act and the FCC's rules, the Copyright Act of 1976, as
amended (the "Copyright Act") and the rules of the Copyright office. All factual
statements made by the Cable Companies in any and all such reports and filings
made by the Cable Companies within the past 36 months are, in all material
respects, accurate and complete.
(b) The Cable Companies maintain appropriate public files as
required by FCC rules. The Cable Companies are providing syndicated exclusivity
and network non-duplication protection to stations entitled thereto which have
requested such protection, and have followed the requirements governing
commercial leased access, origination cablecasting, equal time and personal
attack obligations, obscenity, sponsorship identifications and sponsorship
lists, as specified by FCC rules.
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(c) Except as disclosed on Schedule 4.6, to the knowledge of
the Shareholders, there are no facts, and the Cable Companies have received no
notice or other communication, indicating that the Cable Companies are not in
compliance with all requirements of the FCC's rules or the Communications Act,
or applicable state and local statutes, regulations and ordinances, or that any
FCC license has been revoked, suspended, has expired, or is otherwise not in
full force and effect.
(d) There are no must-carry complaints pending at the FCC
against the Cable Companies. In any case where the FCC has granted a must-carry
complaint against any of the Cable Companies, the television broadcast station
that filed the complaint has been added on the affected CATV System.
(e) All required certificates, permits, and clearances from
Authorities with respect to the CATV System's plant, antenna towers, CARS
stations, microwave transmitters, earth stations, and business radios used by
the Cable Companies have been obtained. All aeronautical frequencies in use in
the CATV System have been properly registered with the FCC, and on the Closing
Date only aeronautical frequencies eligible under 47 C.F.R. SS76.612 shall be in
use. The Cable Companies monitor signal leakage, maintain applicable signal
leakage logs, conduct the cumulative leakage test, demonstrate compliance with
the cumulative criteria by showing a passing cumulative leakage index or a
successful flyover, and comply with the frequency separation standards, all in
compliance with the requirements set forth in 47 C.F.R. SS76.610 through
SS76.619.
(f) Schedule 4.5 sets forth the CATV System's communities
where basic rates are currently regulated. In such communities, rates for basic
service were set by FCC Form 1200 or 1230, as brought forward by Form 1210's.
There are no CPST rate complaints pending against any of the Cable Companies,
nor have any CPST rate complaints been resolved adversely to the Cable Companies
within the last year.
(g) Except as set forth on Schedule 4.12, no Authority or
other person has any right to purchase the CATV System or any portion thereof,
and no Authority for any of the communities served by the CATV System has
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expressed to the Cable Companies any intention to provide cable television
service, nor are the Cable Companies aware of any such intention.
(h) The Cable Companies have timely made all filings relating
to the CATV System in order to preserve their respective rights under Section
626 of the Communications Act of 1934, as amended.
(i) Schedule 4.6 lists all definitive purchase and sale
agreements pursuant to which the CATV Systems were acquired or sold during the
1997, 1998 and 1999 calendar years. Except as disclosed in Schedule 4.6, no
Cable Company is bound by any contractual non-compete or similar restrictive
covenant. The Cable Companies have paid all amounts that are due and payable
under the purchase and sale agreements referred to above, or such have been
properly accrued as liabilities under Section 2.3(a) hereof.
(j) The Cable Companies have paid all franchise fees that are
due and payable with respect to the operation by the Cable Companies of the CATV
System, or such have been properly accrued as liabilities under Section 2.3(a)
hereof.
(k) The Cable Companies have paid all pole attachment fees
that are due and payable with respect to the operation by the Cable Companies of
the CATV System. As of the date of this Agreement, except as disclosed in
Schedule 4.6, no pole attachment audits are pending and the Cable Companies have
not received written notice of any pending pole attachment audits.
(l) Except for such rearrangements or rehabilitations of cable
trunk of the CATV System as may be necessary in the ordinary course of business,
to the Shareholders' knowledge, none of the Cable Companies has any contractual
obligation to rearrange any of such cable trunk.
4.7 Insurance. All insurance policies pertaining to the Business are in
full force and effect on the date hereof, are valid and enforceable in
accordance with their terms, and are issued by financially sound and reputable
insurance companies.
4.8 Real Property. Schedule 4.8 contains a complete and correct list of
all real property, other than Excluded Assets, in which the Cable Companies have
a fee or leasehold interest (the "Real Property"), specifying whether the Cable
Companies own or lease such property. The Cable Companies have not received any
notice of any condemnation proceeding or other proceeding in the nature of
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eminent domain in connection with the Real Property. To the knowledge of the
Shareholders, except as disclosed on Schedule 4.19, the Real Property is in
material compliance with all applicable federal, state and local laws, rules,
regulations and ordinances.
4.9 Accounts Receivable. Each Account Receivable is (i) a valid
obligation of the account debtor enforceable in accordance with its terms; and
(ii) in all material respects, a true and correct statement of the account for
merchandise actually sold and delivered to, or for actual services performed for
and accepted by, such account debtor.
4.10 Tangible Personal Property; Business Assets. The tangible personal
property of the Cable Companies (the "Tangible Personal Property"), together
with the other assets used in connection with the Business (the "Business
Assets"), other than certain of the Excluded Assets which relate to the
"corporate" offices of the Business located at 70 East Lancaster Avenue, Frazer,
Pennsylvania, collectively constitute all assets and rights necessary to enable
Buyer to operate the Business as it is currently being operated. Changes in such
assets from the date hereof will consist only of changes made in the ordinary
course of business. The Cable Companies have good and marketable title to all
the Business Assets, free and clear of all Encumbrances, except for Permitted
Encumbrances. None of the Excluded Assets relate to the Business (other than the
"corporate" office of the Business located at 70 East Lancaster Avenue, Frazer,
Pennsylvania). All of the Harron Companies, other than the Cable Companies,
constitute part of the Excluded Assets.
4.11 Contracts; No Defaults. Schedule 4.11 contains a true and correct
list of all Material Business Contracts, as well as the pole attachment
agreements and retransmission agreements of the Cable Companies (the "Listed
Contracts"). Except as disclosed on Schedule 4.11, each of the Listed Contracts
is in full force and effect and constitutes a valid and binding obligation of,
and is legally enforceable in accordance with its terms against, the parties
thereto. Except as disclosed on Schedule 4.11, there has not been (i) any
failure of any Cable Company which is party to any such Listed Contract (or, to
the knowledge of Shareholders, any other party to any such Listed Contract) to
comply with all material provisions of such Listed Contract, (ii) any material
default by any Cable Company thereunder (or, to the knowledge of Shareholders,
any other party to any such Listed Contract), (iii) any threatened cancellation
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thereof, (iv) any outstanding dispute thereunder, or (v) any basis for any claim
of material breach or material default thereunder by any Cable Company which is
party to any such Listed Contract (or, to the knowledge of Shareholders, any
other party to any such Listed Contract).
4.12 Approvals and Consents. Except for filings with the FTC and the
U.S. Department of Justice pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the expiration of the
applicable waiting period thereunder, and the FCC, Ackerley Communications
Group, Inc. and Robert Smith (or entities controlled by him) (with respect to
the transfer of the broadcast interests included in the Excluded Assets to the
Shareholders as provided for herein) the only persons whose approval of or
consent to the execution, delivery or performance of this Agreement by
Shareholders is legally or contractually required, or is necessary to preclude
any cancellation, suspension, or termination of or diminution of rights under
any of the Authorizations, are specified on Schedule 4.12. Schedule 4.12
includes any persons with rights of first refusal with respect to transfers or
assignments of any of the Business Assets.
4.13 Financial Information; Change in Condition of Assets; Liabilities.
Attached hereto as Schedule 4.13 are: (a) true and complete copies of audited
statements of income of the Harron Companies for the twelve months ended
December 31, 1997 and December 31, 1998, statements of cash flows for the same
periods, the related balance sheets as of such dates, and the related schedules
and notes thereto, each of which was prepared from books and records of account
of the Harron Companies kept in the normal course of business and in accordance
with generally accepted accounting principles, consistently applied in
accordance with the Harron Companies' past practices, and together present
fairly the financial position of the Harron Companies as at such dates and the
results of their operations for the periods covered thereby; (b) true and
complete copies of unaudited statements of income of the Business for the twelve
months ended December 31, 1997 and December 31, 1998, the related balance sheets
as of such dates, each of which was prepared from books and records of account
of the Cable Companies kept in the normal course of business and in accordance
with generally accepted accounting principles, consistently applied in
accordance with the Cable Companies' past practices, and together present fairly
the financial position of the Business as at such dates and the results of their
operations for the periods covered thereby (the foregoing information related to
the Business being referred to herein as the "Financial Statements"); and (c) a
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true and complete report, prepared from the books and records of the Cable
Companies, showing the number of subscribers of the Cable Companies as at the
dates indicated thereon. Since December 31, 1998 the Cable Companies have:
(i) not borrowed any money (other than as allowed under the Bank Debt);
(ii) paid all obligations as they have become due; and
(iii) not knowingly waived any right of material value.
Except as set forth on the Financial Statements, there are no material
liabilities, debts, or obligations of the Cable Companies except for:
obligations under Authorizations; contractual obligations; Permitted
Encumbrances; obligations arising in the ordinary course of business; and
Excluded Liabilities. Except as set forth in Schedule 4.13, since January 1,
1999, there have been no changes to the condition of the Business Assets the
result of which would have a Material Adverse Effect, and no material portion of
the Business Assets has been removed from the Business except for Business
Assets disposed of or consumed in the ordinary course of business, or Business
Asset (other than any portion of the CATV System) replaced by replacement
property of substantially equivalent kind and use. For purposes hereof, the
accrual as income of the receipt of launch fees from programmers in the year of
receipt shall be deemed to be in accordance with generally accepted accounting
principles.
4.14 Employees.
(a) Schedule 4.14 contains a complete list of Employees,
including such Employee's location, position, current salary or hourly wages and
other cash compensation payable to each Employee. Except as set forth in
Schedule 4.14, none of the Cable Companies is a party to any labor agreement
with respect to its Employees with any labor organization, group or association
and, except as disclosed on such schedule, within the three years preceding the
date hereof, none of the Cable Companies has experienced any attempt by
organized labor or its representatives to enter into a binding agreement with
organized labor that would cover the Employees of such Cable Company not
otherwise so covered. Except as set forth in Schedule 4.14 or Schedule 4.19,
there is no unfair labor practice charge or complaint against any of the Cable
Companies pending before the National Labor Relations Board or any other
governmental agency arising out of any such Cable Company's activities; there is
no labor strike or labor disturbance pending against any of the Cable Companies
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nor is any material grievance currently being asserted against any such entity;
and, none of the Cable Companies has experienced a work stoppage within the past
three years.
(b) Except as set forth in Schedule 4.19, the Cable Companies
are in material compliance with all applicable legal requirements respecting
employment practices, terms and conditions of employment, wages and hours, equal
employment opportunity, and the payment of social security and similar taxes,
and none of them are engaged in any unfair labor practice. Except as set forth
in Schedules 4.14 and 4.19, none of the Cable Companies are liable for any
claims for past due wages or any penalties for failure to comply with any of the
foregoing which will not be included in the Purchase Price adjustment set forth
in Section 2.3.
(c) Except with respect to the employment agreements set forth
on Schedule 4.11 and Schedule 4.14 (including agreements with any labor
organization reflected on Schedule 4.14) (the "Existing Employment Agreements"),
none of the Cable Companies entered into any severance or similar arrangement in
respect of any present or former Employee that will result in any obligations
(absolute or contingent) of Buyer or any of the Cable Companies to make any
payment to any present or former Employee following termination of employment
subsequent to the Closing Date or upon consummation of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement or any related agreement nor the consummation of the transaction
contemplated hereby or thereby will automatically result in the acceleration or
vesting of any rights of any person to benefits under any Employee Plans.
(d) The Cable Companies have provided Buyer with copies of all
employment contracts, consulting contracts and severance agreements to which any
of the Cable Companies and any Employee or independent contractor providing
services to or on behalf of any of the Cable Companies are parties, other than
those which will be terminated on or before the Closing Date.
(e) Schedule 4.14 contains a complete list of each Employee
Plan. True and complete copies of each of the following documents have been
delivered (or will be delivered within two weeks of the date hereof) by Harron
to Buyer: (i) each Benefit Arrangement, Pension Plan and Welfare Plan (and, if
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applicable, related trust agreements, annuity contracts or other funding
instruments) which covers Employees or former employees of the Cable Companies
(with respect to their relationship with each such Company) and all amendments
thereto, all summary plan descriptions, summary of material modifications (as
defined in ERISA) and all written interpretations and descriptions thereof which
have been distributed to participants therein, and a complete description of any
Benefit Arrangement which is not in writing, (ii) the most recent determination
letter issued by the Internal Revenue Service with respect to each Pension Plan
and each voluntary employees' beneficiary association as defined under Section
501(c)(9) of the Code (other than a Multiemployer Plan) which covers Employees
or former employees of any of the Cable Companies (with respect to their
relationship with each such Company), (iii) for the three most recent plan
years, Annual Reports on Form 5500 Series required to be filed with any
governmental agency for each Pension Plan or Welfare Plan which covers Employees
or former employees of the Cable Companies (with respect to their relationship
with each such Company), (iv) all actuarial reports prepared for the last three
years for each Pension Plan which covers Employees or former employees of the
Cable Companies (with respect to their relationship with each such Company), and
(v) a description setting forth the amount of any liability of the Cable
Companies as of the Closing Date for payments more than thirty calendar days
past due with respect to any Welfare Plan.
(f) No Pension Plan is subject to the minimum funding
requirements of Part 3 of Title I of ERISA, or the plan termination insurance
provisions of Title IV of ERISA. None of Harron or any ERISA Affiliate have
incurred any liability (contingent or otherwise) to Pension Benefit Guaranty
Corporation other than for the payment of annual premiums for plans heretofore
terminated.
(g) Each Pension Plan and each related trust agreement,
annuity contract or other funding instrument which covers or has covered
employees or former employees of any of the Cable Companies or any ERISA
Affiliate (with respect to their relationship with such entity) which has been
operated as a qualified plan has received a favorable determination letter from
the Internal Revenue Service.
(h) Except for amendments for which a remedial amendment
period is available under Section 401(b) of the Code, each Pension Plan and each
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related trust agreement, annuity contract or other funding instrument which
covers Employees or former employees of any of the Cable Companies or any ERISA
Affiliate (with respect to their relationship with such entity) currently
complies in all material respects, both as to form and in operation, with the
requirements prescribed by any and all statutes, orders, rules and regulations
which are applicable to such plans, including, without limitations, ERISA and
the Code.
(i) Except as disclosed on Schedule 4.14, neither any of the
Cable Companies nor any ERISA Affiliate has any withdrawal liability (contingent
or otherwise) with respect to a Multiemployer Plan.
(j) Each Welfare Plan which covers or has covered employees or
former employees of any of the Cable Companies (with respect to their
relationship with each such entity) currently complies in all material respects,
both as to form and operation, with the requirements prescribed by any and all
statues, orders, rules and regulations which are applicable to such Welfare
Plan, including, without limitation, ERISA and the Code.
(k) Except as disclosed on Schedule 4.14, and except as
required by Section 4980B of the Code or Part 6 of Title 1, Subtitle B of ERISA,
no Welfare Plan provides for benefits for retirees or has any obligation to
provide such benefits in the future.
(l) Each Welfare Plan which is a "group health plan", as
defined in Section 607(1) of ERISA, presently complies in all material respects
with and has been operated in compliance in all material respects with
provisions of Part 6 of Title I, Subtitle B of ERISA and Sections 162(k) and
4980B of the Code at all times.
(m) Each Benefit Arrangement presently complies and has been
maintained in compliance in all material respects with its terms and with the
requirements prescribed by any all statues, orders, rules and regulations which
are applicable to such Benefit Arrangement, including, without limitation, the
Code. Except as provided by law or in any employment agreement set forth on
Schedule 4.14, the employment of all persons presently employed or retained by
any of the Cable Companies is terminated at will.
(n) No Employee Plan (or trust or other funding vehicle
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pursuant thereto) has incurred any liability under Code Section 511. Neither any
Cable Company nor any ERISA Affiliate has any liability for unpaid contributions
under Section 515 of ERISA with respect to any Multiemployer Plan.
(o) There is no contract, agreement, plan or arrangement
covering any employee or former employee of any of the Cable Companies (with
respect to such employee's relationship with each such entity) that individually
or collectively requires the payment by any of the Cable Companies of any amount
(i) that is not deductible under Section 162(a)(1) or 404 of the Code or (ii)
that is an "excess parachute payment" pursuant to Section 280G of the Code.
(p) To the knowledge of the Shareholders, none of the Cable
Companies has engaged in, or has any liability in respect of, any transaction in
violation of Sections 406 of ERISA or any "prohibited transaction," as defined
in Section 4975(c)(1) of the Code, for which no exemption exists under Section
408 of ERISA or Section 4975(c)(2) or (d) of the Code, or has otherwise violated
the provisions of Part 4 of Title I, Subtitle B or ERISA so as to create any
material liability of the Cable Companies.
(q) There is no action, order, writ, injunction, judgment or
decree outstanding or claim (other than routine claims for benefits), suit,
litigation, proceeding, arbitration proceeding, governmental audit or
investigation relating to or seeking benefits under any Employee Plan that is
pending or, to the knowledge of any of the Cable Companies, threatened against
any of the Cable Companies, any ERISA Affiliate or any Employee Plan, other than
a Multiemployer Plan.
(r) Except as evidenced in any collective bargaining agreement
referenced in Schedule 4.14 hereof, neither any of the Cable Companies nor any
ERISA Affiliates has announced to employees, former employees, consultants or
directors an intention to create, or otherwise created, a legally binding
commitment to adopt any additional Employee Plan which is intended to cover
employees or former employees of any of the Cable Companies (with respect to
their relationship with each such entity) or to amend or modify any existing
Employee Plan which covers or has covered employees or former employees of any
of the Cable Companies (with respect to their relationship with each such
entity).
(s) No Pension Plan or Welfare Plan holds as an asset any
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interest in any annuity contract, guaranteed investment contract or any other
investment or insurance contract issued by an insurance company that is the
subject to bankruptcy, conservatorship or rehabilitation proceedings as of the
date hereof.
(t) Except with respect to the Existing Employment Agreements,
neither the execution and delivery of this Agreement or any related agreements
by any of the Cable Companies nor the consummation of the transactions
contemplated hereby or the related transactions will result in the acceleration
or creation of any rights of any person to benefits under any Employee Plan
(including, without limitations, the acceleration of the vesting or
exercisability of any stock options, the acceleration of the vesting of any
restricted stock, the acceleration of the accrual or vesting of any benefits
under any Pension Plan or the acceleration or creation of any rights under any
severance, parachute or change in control agreement).
(u) No event has occurred in connection with which any of the
Cable Companies, or any Employee Plan (other than a Multiemployer Plan),
directly or indirectly, could be subject to any material liability (A) under any
statute, regulation or governmental order relating thereto or (B) pursuant to
any obligation of any of the Cable Companies to indemnify any person against
liability incurred under any such statute, regulation or order as they relate
thereto.
4.15 Payment of Taxes. The Harron Companies have paid and discharged
all Taxes for which they or any of them are obligated. True, correct and
complete copies of the federal and state Tax Returns of the Harron Companies for
all income and gross receipts Taxes for the Harron Companies' for 1996 and 1997
have been delivered to Buyer. Except as set forth in Schedule 4.15, there are no
unassessed Tax deficiencies, proposed or threatened, against any of the Harron
Companies, nor are there any agreements, waivers or other arrangements providing
for extension of time with respect to the assessment or collection of any Tax
against any of the Harron Companies, or any actions, suits, proceedings,
investigations or claims now pending against any of the Harron Companies with
respect to any Tax, or any matter under discussion with any federal, state,
local or foreign authority relating to Taxes. Except as disclosed on Schedule
4.15, none of the Harron Companies is a party to or bound by any Tax sharing or
similar agreements. Harron properly elected to be treated as a Subchapter S
Corporation for federal and certain state tax purposes as of January 1, 1998.
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The Cable Companies have filed qualified Subchapter S subsidiary elections for
federal tax purposes.
4.16 Technical and other Information. Schedule 4.16 sets forth true and
complete technical and business information relating to the operation of the
CATV System as of the date indicated thereon with respect to: (a) rates for
basic services by category, and stations or signals carried on the CATV System;
(b) miles of plant, as reflected on the Cable Companies' books and records; (c)
FAA tower clearances and approvals; (d) a description of the CATV System's
channel and megahertz capacity by headend, and (e) the number of subscribers
(including the approximate number of subscribers served in each franchise area
and served by each headend).
4.17 Compliance with Laws, Regulations and Reporting. Each of the Cable
Companies is in compliance in all material respects with all applicable laws,
rules, regulations, ordinances, requirements, standards and guidelines of all
federal, state and local authorities or agencies having jurisdiction over the
CATV System's franchises, licenses, property, Business or affairs, and with the
terms and provisions of any mortgage, lease, license, indenture, or agreement
relating to the Business. None of the Cable Companies is in default or in
violation with respect to any judgment, order, injunction or decree of any
court, administrative agency or other governmental authority. This Section 4.17
shall not apply to the compliance by the Cable Companies with laws, rules,
regulations, requirements, standards and guidelines of all federal, state and
local authorities with respect to any subject matter specifically governed by
any other section of this Article IV.
4.18 Environmental Matters. To the knowledge of Shareholders, except as
set forth on Schedule 4.18, none of the Harron Companies own Real Property upon
which there is located any underground fuel storage tanks, and they are in
material compliance with all Environmental Laws. In addition, no written notice,
notification, demand, request for information, citation, summons or order has
been issued to the Harron Companies, no written complaint has been filed against
the Harron Companies, no penalty has been assessed and no investigation or
review is pending or, to the knowledge of Shareholders, threatened by any
governmental authority or other entity, with respect to any alleged failure by
the Harron Companies to have any environmental, health or safety permit, license
or other authorization required under any applicable Environmental Laws. Except
as set forth on Schedule 4.18, no Hazardous Substances have been generated or
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produced at, or disposed of or in connection with, any of the Real Property
owned by the Harron Companies, during the period of the Harron Companies'
ownership thereof. No Hazardous Substances have been generated or produced at,
or disposed on or in connection with, any of the Real Property leased by the
Harron Companies or, to the Shareholders' knowledge, any other person, during
the period of the Harron Companies' use thereof.
4.19 Claims and Litigation. Except as set forth on Schedule 4.19, there
is no material action, suit, investigation, claim, arbitration, administrative
or other proceeding pending or, to the knowledge of Shareholders, threatened
against or involving any of the Shareholders, the Cable Companies, the Business,
or the Business Assets, at law or in equity, which would prevent or adversely
affect in any material respect the ownership, use or operation of any of the
same by Buyer.
5. Buyer's Representations. Buyer hereby represents, warrants and covenants to
Shareholders that:
5.1 Organization and Standing of Buyer. Buyer is a corporation duly
organized and validly existing and in good standing under the laws of the State
of Delaware, is duly qualified to transact business in the State of Delaware,
and has all requisite corporate power and authority to execute, deliver, and
perform this Agreement.
5.2 Authority to Execute and Consummate Agreement. The execution,
delivery and performance of this Agreement have been duly authorized by all
necessary corporate action on the part of Buyer. This Agreement has been duly
executed and delivered by Buyer and constitutes, and each contract or written
undertaking delivered by Buyer to Shareholders pursuant hereto will constitute,
the legal, valid, and binding obligation of Buyer enforceable in accordance with
its terms, except to the extent such enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable principles
of general application relating to or limiting creditor's rights. The execution,
delivery and performance of this Agreement by Buyer does not and, as of the
Closing, will not, result in a breach or violation of, or constitute a default
(or an event which, with or without the passage of time or the giving of notice,
or both, will constitute a breach or default) under, any agreement, instrument,
charter or by-law provision, statute, ordinance, rule, regulation or order to
which Buyer is a party or by which Buyer is bound.
5.3 Approvals and Consents. Except for filings with the FTC and the
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U.S. Department of Justice pursuant to the HSR Act, and the expiration of the
applicable waiting period thereunder, the only persons whose approval of or
consent to the execution, delivery or performance of this Agreement by Buyer is
legally or contractually required are specified on Schedule 5.3.
5.4 Buyer's Ability to Consummate. Buyer has the financial ability to
consummate the transactions contemplated herein, and the Buyer has available to
it sufficient funds to pay the Purchase Price at Closing. Buyer has no knowledge
of any fact or condition that will impede Buyer's ability to consummate the
transactions contemplated by this Agreement at the times and in the manner
contemplated by this Agreement.
5.5 FCC Cross Ownership. Buyer does not now, nor will it on the Closing
Date, own any assets, or own any interest, equitable or otherwise, or otherwise
have an affiliation with any person such that FCC restrictions on
"cross-ownership" of media and related business will be violated upon
consummation of the transactions provided for herein.
5.6 Investment. Buyer is a sophisticated person with extensive
knowledge and experience in the CATV business. Buyer is financially able to take
the risk of purchasing the Stock, has been given adequate opportunity to
investigate the Business and to discuss all aspects of the Business with
Harron's management. Buyer is acquiring the Stock for its own account and not
with an intent to sell the Stock, understands that the Stock has not been
registered under any securities laws, and that the transactions contemplated
herein involve a substantial degree of risk.
5.7 Existing Contracts/Employee Terminations. Buyer will, in connection
with any liquidation, merger or other alteration to the corporate status of the
Cable Companies, honor its obligations under the Listed Contracts in connection
therewith. In addition, Buyer has no intention of terminating such number of
employees as would subject Harron to WARN, 29 U.S.C. SS2101, et seq.
6. Additional Covenants.
6.1 Negative Covenants of Shareholders. From the date of this Agreement
until the Closing, Shareholders will cause each of the Cable Companies to not,
without the prior written consent of Buyer (which consent will not be
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unreasonably withheld, delayed or otherwise conditioned), do or agree to do any
of the following:
(a) Sell, assign, lease, swap or otherwise transfer or dispose
of any of the Business Assets, other than the consumption or disposition of
Business Assets in the ordinary course of business, or merge or consolidate with
or into any other entity or enter into any agreements relating thereto;
(b) Other than with respect to converting customers to new
channel line-ups introduced in systems currently being rebuilt, consistent with
historical practice, voluntarily change the channel line-up of the CATV System,
or delete, substitute or add any additional channels or programming service on
the CATV System, enter into any contract, agreement, commitment, license or
understanding therefor;
(c) Outside the ordinary course of Business, and except as
contemplated herein: enter into any material contracts, leases, commitments,
understandings, licenses, or other agreements that are not terminable on 30 days
or less prior notice, or that involve post-Closing obligations in excess of
$25,000.00 in any one case, or in excess of $50,000.00 in the aggregate, or
incur any other obligation or liability (contingent or absolute) relating to the
Business; or, amend, alter or modify to the detriment of the Business any
material provision of any of the Authorizations (other than renewal and
extensions thereof on existing terms) or the Listed Contracts;
(d) Incur any additional indebtedness for borrowed money
except to the extent consented to by Buyer, or indebtedness which will be repaid
on or before the Closing date, or advances under the Bank Debt which will be
included in the adjustments to the Purchase Price under Section 2.3(c);
(e) Create, assume or permit to exist any Encumbrances upon
the Business Assets except for the Permitted Encumbrances;
(f) With respect to the employees of the Business, other than
agreements providing for incentive or severance arrangements in connection with
the transactions contemplated hereby ("Severance Arrangements"), enter into or
become subject to any employment, labor or union contract, any professional
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service contract not terminable at will, or any bonus, pension, insurance,
profit sharing, deferred compensation, retirement, hospitalization, employee
benefit, or other similar plan;
(g) Take any action or fail to take any action which would
cause any of the representations and warranties contained herein to be untrue or
incorrect on the Closing Date;
(h) Enter into any commitments affecting the Business which,
when judged in relationship to past business operations of the Business, are
unusual or extraordinary or outside the scope of the normal course of routine
operations; or
(i) Fail to use commercially reasonable efforts to renew on
substantially the same or on other commercially reasonable terms consented to by
Buyer (which consent will not be unreasonably withheld, delayed or otherwise
conditioned) any Authorization from the FCC and any Authority which granted a
franchise that will expire after the date hereof and prior to the Closing Date.
Notwithstanding the foregoing, and without limitation, Harron shall be free to:
(i) reduce the amount outstanding under the Bank Debt from
time to time, including by using funds distributed to it from the Harron
Companies;
(ii) cause the lenders of the Bank Debt to release the Harron
Companies (other than Harron) from guaranties thereof;
(iii) with the other Harron Companies, contribute cash to the
capital of, or receive distributions or loans from, the other Harron Companies
so as to satisfy and discharge any "inter-company" indebtedness and receivables;
and
(iv) make distributions or loans to the Shareholders.
6.2 Affirmative Pre-Closing Covenants of Shareholders. Pending
and prior to the Closing Date, Shareholders will cause the Cable Companies to:
(a) Preserve their corporate existence and business
organizations intact and use their reasonable best efforts to preserve
relationships with suppliers, customers, employees and others having business
relationships with them;
(b) Operate the Business in the normal and usual manner;
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provided, however: (i) the non-Cable Companies may merge or otherwise transfer
their assets and liabilities with or to other Harron Companies, convert
non-Cable companies into limited liability companies by merger or otherwise, or
contribute Excluded Assets to one or more non-Cable Companies (provided,
notwithstanding the foregoing, no non-Cable Company will be merged with a Cable
Company, or transfer liabilities to a Cable Company, unless the liabilities of
such non-Cable Company are paid and discharged in full on or prior to the
Closing Date); (ii) the Cable Companies shall distribute, sell or otherwise
transfer to the Shareholders (or their beneficiaries or assignors), directly or
indirectly (such as by contribution to new entities and distribution of the new
entities) all of the assets listed on Schedule 6.2 hereto (the "Excluded
Assets"), subject to the liabilities listed on Schedule 6.2 (the "Excluded
Liabilities"); and (iii) the Cable Companies shall discuss with Buyer a proper
strategy, pending Closing, for the Cable Companies to develop internet and
digital capabilities;
(c) Use commercially reasonable efforts to maintain the
validity of the Authorizations, renew Authorizations on a timely basis, and
comply with all material requirements of the Authorizations;
(d) Maintain in full force and effect all of their existing
casualty, liability, and other insurance in amounts not less than those in
effect on the date hereof;
(e) Take all necessary action to comply with all applicable
laws, rules and regulations of the FCC, the United States Copyright Office and
any other Authority (including any necessary filings, reports, statements,
applications of), in connection with the Business, the Business Assets and
operations thereof, and the transactions contemplated by this Agreement and the
agreements and instruments called for hereunder.
(f) Provide Buyer with reasonable access during normal
business hours to the Business Assets and the Cable Companies' books and
records;
(g) Increase subscriber rates in the ordinary course of
business, consistent with past practices;
(h) Promptly furnish Buyer with copies of such documents and
with such information with respect to the Business and their operations as Buyer
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may, from time to time, reasonably request;
(i) Use its commercially reasonable efforts to obtain all
authorizations, consents, orders and approvals of all federal, state and local
regulatory bodies and officials and other third parties that may be or become
necessary for the performance of this Agreement; and
(j) Use commercially reasonable efforts to acquire at
least 2,200 additional subscribers in the State of New York.
(k) Cause the Harron Companies to contribute cash to the
capital of, or receive dividends or loans from, the other Harron Companies so as
to satisfy or discharge any "inter-company" indebtedness or receivables.
6.3 Affirmative Post-Closing Covenants of Shareholders.
(a) On and subsequent to the Closing Date, Shareholders
covenant to discharge and satisfy or cause other persons to discharge and
satisfy all of the Excluded Liabilities without cost to Buyer or the Cable
Companies.
(b) On the Closing Date, the Shareholders shall cause all
obligors under the Family Loans to satisfy all such loans in full and to execute
and deliver to Buyer the Release described in Section 9.2.
6.4 Affirmative Covenants of Buyer. Buyer covenants that:
(a) Pending and prior to the Closing Date, Buyer will exercise
reasonable efforts and due diligence in vigorously assisting and cooperating
with Shareholders in their efforts to obtain all authorizations, consents,
orders and approvals of all federal, state and local regulatory bodies and
officials and other third parties that may be or become necessary for the
performance of this Agreement. Buyer acknowledges that time is of the essence in
connection with its obligations under this Section 6.4.
(b) Buyer will preserve and make available (including the
right to inspect and copy) to Shareholders, their attorneys and accountants, for
a seven year period from and after the Closing Date and during normal business
hours after reasonable notice, such of the books, records, files,
correspondence, memoranda and other documents of the Cable Companies as
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Shareholders may reasonably require in connection with any legitimate purpose,
including, but not limited to, the preparation of Tax reports and Tax Returns,
the preparation of financial statements, and the completion of the calculation
of adjustments to the Purchase Price.
(c) On the Closing Date, and immediately following
Closing, Buyer shall cause Harron to pay in full the Bank Debt.
(d) Buyer agrees that Shareholders shall be entitled to
receive, and Buyer shall pay to Shareholders, all sums received in connection
with any audit or other reconciliation of the Harron Companies' insurance
programs attributable to the period ending on the Closing Date, and that Buyer
will allow Shareholders to control such audit or reconciliation.
6.5 Notification. Each party will promptly notify the other in writing
upon becoming aware of any order or decree or any complaint praying for an order
or decree restraining or enjoining the consummation of this Agreement or the
transactions contemplated hereby, or upon receiving any notice from any
governmental department, court, agency or commission of its intention to
institute an investigation into, or institute a suit or proceeding to restrain
or enjoin the consummation of this Agreement or such transactions, or to nullify
or render ineffective this Agreement or such transactions if consummated, or
upon the occurrence of, or upon becoming aware of the impending or threatened
occurrence of, any event which would cause or constitute a breach or would have
caused a breach had such event occurred or been known to such party prior to the
date hereof, of any of the respective representations and warranties contained
in or referred to in this Agreement or in any schedule hereto.
6.6 Closing Conditions. Shareholders and Buyer will diligently exert
their commercially reasonable efforts, in good faith, to cause the Closing
conditions set forth in Sections 7 and 8 to be met on or before the Closing
Date.
6.7 No Sale. While this Agreement remains in force, neither the
Shareholders nor any other officer, director or shareholder of Harron or the
Operating Subsidiaries will contract or negotiate with any potential buyers for
the sale of the Business, the Business Assets or the Stock, in whole or in part,
whether by stock sale, asset sale, merger or otherwise.
6.8 HSR Notification. As soon as practicable after the execution of
this Agreement, and in no event more than 30 days after the date hereof,
Shareholders and Buyer will each complete and file, or cause to be completed and
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filed, any notification and report required to be filed under the HSR Act. Each
of the parties will take additional action that may be necessary, proper or
advisable, will cooperate to prevent inconsistencies between their respective
filings, and will furnish to each other such necessary information and
reasonable assistance as the other may reasonably request in connection with its
preparation of necessary filings or submissions under the HSR Act. Buyer and
Shareholders shall use commercially reasonable efforts (including the filing of
a request for early termination) to obtain the early termination of the waiting
period under the HSR Act. Buyer will be responsible for one-half of the filing
fees required under the HSR Act and the Shareholders will require Harron to be
responsible for the other one-half of the filing fees.
6.9 Publicity. Prior and subsequent to Closing, all press releases or
public announcements concerning this Agreement or the transactions contemplated
herein shall be made by a party hereto only following the obtaining of the
consent of the other parties hereto, except to the extent required by applicable
law (including any legal obligation imposed upon Buyer in connection with its
status as a public company), after reasonable notice to the other parties
hereto. For purpose hereof, the consent of Shareholders shall be deemed given
upon the receipt of consent from one individual designated by the Shareholders
in writing.
6.10 Transition. In connection with the transactions contemplated
herein, and notwithstanding anything herein to the contrary, it is agreed that:
(a) Except as otherwise provided in this Section 6.10, subject
to the obligations of the Harron Companies under the Listed Contracts, nothing
herein shall require Buyer to continue the employment of any employee of the
Cable Companies for any period of time following the Closing. Not less than
forty-five days before Closing, Buyer shall provide to Shareholders written
notice of which of the employees of the Cable Companies Buyer intends to retain
following the Closing, which list shall contain not less than 65% of the
non-"corporate" employees (the "Assumed Employees"). Shareholders shall cause
the Cable Companies to terminate the employment of all employees that are not
Assumed Employees prior to or as of the Closing. Buyer shall assume all of
Shareholders' liability in connection with providing any notice under the WARN
Act. Buyer shall be solely responsible for and shall indemnify and hold
Shareholders harmless from any liability arising under the WARN Act arising out
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of the failure to provide adequate advanced notice. Buyer shall continue to
employ the Assumed Employees for a period of at least one year following the
Closing, or provide to such employees severance of nine months' base pay (which
base pay will be at least equal the base pay in place on the Closing Date),
except for such employees who voluntarily terminate employment, retire or are
discharged for cause. Subject to the obligations of the Cable Companies under
the Listed Contracts, Buyer shall have no obligation to provide any severance
benefits to any employee discharged for cause. Buyer shall have no obligation to
provide severance to any employee whose employment is terminated before Closing
except for liabilities and obligations accrued by the Harron Companies before
the Closing Date and included in the Purchase Price adjustments set forth in
Section 2.3. As of and immediately after the Closing, each Assumed Employee
shall be employed in a position which is commensurate with their experience in
the CATV System with respect to which such employee is presently employed, and
on the same terms and conditions as are afforded comparably situated employees
of Buyer, and each Assumed Employee who continues his employment after the
Closing shall receive credit for past service with any of the Cable Companies
and their predecessors for all purposes of eligibility and vesting under Buyer's
Employee Plans, and for all other purposes under Buyer's vacation, sick leave or
other benefit programs or arrangements. Subject to the obligations of the Cable
Companies under the Listed Contracts, Buyer shall not otherwise be required by
Shareholders, to maintain any particular level of benefits for any of the
Assumed Employees. Upon Buyer's request, the Shareholders will coordinate with
Buyer to permit Buyer to meet with any of the "corporate" level employees to
discuss employment opportunities following the Closing, including position,
salary and other employment benefits (and the requirement that such employees
must continue employment in the same position and on the same terms and
conditions shall not apply to any "corporate" level Assumed Employees). Buyer
shall assume full responsibility and liability for offering and providing
"continuation coverage" to any "qualified beneficiary" who is covered by a
"group health plan" sponsored or contributed to by any Cable Company or any of
their ERISA Affiliates and who has experienced a "qualifying event" or is
receiving "continuation coverage" on or prior to the Closing. "Continuation
coverage," "qualified beneficiary", "qualifying event" and "group health plan"
all shall have the meanings given such terms under Section 4980B of the Code and
Section 601 et seq. of ERISA. Buyer shall hold the Cable Companies and any
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entity required to be combined with the Cable Companies (within the meaning of
Sections 414(b), (c), (m),or (o) of the Code) harmless from and fully indemnify
them against any costs, expenses, losses, damages and liabilities incurred or
suffered by them directly or indirectly, including, but not limited to,
reasonable attorneys' fees and expenses, which relate to continuation coverage
and arise as a result of any action or omission by any Cable Company or any of
their ERISA Affiliates, or because Buyer is deemed to be a successor employer to
any Cable Company or any of their ERISA Affiliates.
(b) The Harron Companies shall be free, until the Closing
Date, to not accrue certain corporate expenses which will not be paid prior to
the Closing Date, such as employee bonuses, legal expenses, accounting and audit
fees, and other similar items which will not be paid.
(c) On or before the first anniversary of the Closing Date,
Buyer shall cease using the name "Harron" for any purpose, and shall cause the
Cable Companies to cease using such name, including by changing the names of all
such companies to eliminate the name "Harron".
6.11 Tax Matters. Each of the Harron Companies will timely and properly
file or cause to be filed all Tax Returns which it is or will be required to
file on or before the Closing Date, all such Tax Returns to be true, correct and
complete in all respects to the knowledge of the Shareholders, and will pay or
cause to be paid in full when due all Taxes, if any, which become due and
payable pursuant to such Tax Returns or assessments received by it on or before
the Closing Date, subject to the right of the taxpayer to, in good faith,
contest such assessments. The Shareholders and the Buyer acknowledge and agree
that Harron is a corporation subject to the provisions of Subchapter S of the
Code and, as such, the day immediately prior to the Closing Date will be the
last day of Harron's S tax year. Buyer agrees that the Shareholders shall
prepare, for Buyer's review and reasonable approval, the Tax Returns for such
period and for all periods ending on or before the Closing Date. All federal and
state Taxes due in connection with such period, including with respect to the
transfer of the Excluded Assets to the Shareholders (or their assignees), shall
constitute a liability taken into account under Section 2.3(c) hereof. All
federal and state tax refunds with respect to any tax period ending prior to the
Closing Date shall, if received after the Closing Date, be paid by Harron to the
Shareholders. Buyer agrees that the Tax Returns of the Harron Companies filed
with respect to the period ending prior to the Closing Date, and all prior Tax
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Returns, shall not be amended without the consent of Shareholders. On or before
the Closing Date the Harron Companies will execute a termination and release
agreement terminating the existing Tax Sharing Agreement and certifying that
there is and will be no liability or obligation by any of the Harron Companies
to any other person or to each other thereunder. Buyer acknowledges that
Shareholders will not join in a Code Section 338(h)(10) election.
6.12 Capitalization of the Shareholders. The Shareholders agree that
they will not, through distributions, liquidations or otherwise, within the
period ending three years after the Closing Date, allow the balance of cash and
marketable securities held by them to equal, in the aggregate as to all
Shareholders, not less than the sum of $75,000,000.00.
7. Conditions of Buyer's Obligations. The obligations of Buyer to purchase the
Business Assets and to proceed with the Closing are subject to the satisfaction
at or prior to the Closing of each of the following conditions, any one or more
of which may be waived in whole or in part by Buyer by giving written notice to
Shareholders to that effect:
7.1 Consents.
(a) Shareholders shall, with the reasonable cooperation of
Buyer, have obtained all consents required under the Authorizations set forth in
Section 7.1 in connection with the transactions contemplated hereby in the form
attached hereto as Exhibit C. Shareholders shall use their reasonable efforts to
cause all consents to include a provision permitting Buyer to transfer the Stock
to a direct or indirect subsidiary of Buyer; provided, however, that (i) such
person agrees in writing to be bound by any obligations of Buyer in connection
therewith; and (ii) the inclusion of such a provision regarding transfer does
not otherwise cause such consent to be withheld, delayed or otherwise
conditioned. In the event that Shareholders are unable to obtain all consents
required under the Authorizations necessary pursuant to this Section 7.1(a)
(such Authorizations for which consent is not obtained being referred to as
"Non-Consenting Authorizations") by the Closing Date, but Shareholders have
obtained consents with respect to Authorizations which authorize service to that
number of subscribers which, when added to the number of subscribers serviced
under Authorizations for which no consent is necessary for the transactions
contemplated herein, represent at least 95% of the total number of subscribers
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for the CATV System set forth in Schedule 4.16, then Shareholders shall have the
option of requiring Buyer to proceed with Closing with no Purchase Price
adjustment required to be made at Closing; provided, however, on the Closing
Date, Shareholders shall deposit into escrow, under and subject to an Escrow
Agreement in substantially the form of Exhibit A, subject to the terms of this
Section 7.1, and provided the funds deposited therein shall be used solely in
accordance with this Section 7.1, an amount equal to the product of (i) the
number of subscribers as of the Closing Date, less the number of subscribers set
forth on Schedule 4.16, times (ii) $4,000.00 (together with all earnings
thereof, the "Additional Escrow Fund"). During the 365 days following the
Closing Date, Buyer shall use best efforts to assist Shareholders in obtaining
consents for the Non-Consenting Authorizations, and the Additional Escrow Fund
shall be released to Shareholders at the rate of $4,000.00 for each subscriber
serviced on the Closing Date under Non-Consenting Authorizations for which a
consent is obtained subsequent to the Closing Date, up to the Additional Escrow
Fund. On the 366th day following the Closing Date, the sum of the Additional
Escrow Fund, less the amount so released, shall be paid to Buyer as an
adjustment to the Purchase Price. Except as provided in this Section 7.1,
following Closing, Shareholders shall have no liability in connection with the
failure to obtain consents for the transactions contemplated herein in
connection with the Non-Consenting Authorizations.
(b) Shareholders shall have obtained the consents, approvals
and waivers of rights of first refusal of such persons or parties as may be
required for the assignment to Buyer of the contracts listed on Schedule 7.1, if
any.
7.2 No Material Adverse Changes. Between the date of this Agreement and
the Closing Date, there shall have been no change to the Business or to the
Business Assets which would have a Material Adverse Effect, and the Business
Assets shall not have suffered any damage (not covered by insurance) by fire or
other casualty which has not been substantially repaired or replaced, or
provision for repair or replacement made, as provided in Section 12, the
consequences of which would have a Material Adverse Effect.
7.3 Representations Warranties and Covenants. The representations,
warranties and covenants of Shareholders set forth in this Agreement, or in any
agreement, instrument, schedule, exhibit or other documents to be delivered by
Shareholders pursuant hereto, shall be true and correct in all material
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respects, and Shareholders shall have performed and complied in all material
respects with all covenants and agreements required by this Agreement to be
performed or complied with on or before the Closing Date.
7.4 Legal Proceedings. No action, suit or proceeding shall have been
instituted against any of the parties to this Agreement before any court or
governmental department, agency or commission which might restrain, prohibit or
otherwise invalidate this Agreement or the consummation of the transactions
contemplated hereby (other than an action or proceeding instituted or threatened
by Buyer or Shareholders).
7.5 HSR Act. All filings required under the HSR Act shall have been
made and the applicable waiting period shall have expired or been earlier
terminated without the commencement of any litigation by a governmental
authority of competent jurisdiction to restrain the consummation of the
transactions contemplated by this Agreement.
7.6 Deliveries at Closing. Shareholders shall have delivered to Buyer
on or before the Closing, all agreements, instruments and documents required to
be delivered pursuant to Section 9 below.
8. Conditions of Shareholders' Obligations. The obligations of Shareholders to
be performed under this Agreement on the Closing Date are subject to the
conditions hereinafter set forth, any one or more of which may be waived in
whole or in part by Shareholders by giving written notice to Buyer to that
effect:
8.1 Representations Warranties and Covenants. The representations,
warranties and covenants of Buyer set forth in this Agreement or in any
agreement, instrument, schedule, exhibit or other document to be delivered by
Buyer pursuant hereto shall be true and correct in all material respects, and
Buyer shall have performed and complied with all material covenants and
agreements required by this Agreement to be performed or complied with on or
before the Closing Date.
8.2 Deliveries at Closing. Buyer shall have delivered to Shareholders
on or before the Closing, all agreements, instruments and documents required to
be delivered pursuant to Section 10 below.
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8.3 HSR Act. All filings required under the HSR Act shall have been
made and the applicable waiting period shall have expired or been earlier
terminated without the commencement of any litigation by a governmental
authority of competent jurisdiction to restrain the consummation of the
transactions contemplated by this Agreement.
9. Shareholders' Deliveries at Closing. On or prior to the Closing, Shareholders
shall deliver to Buyer:
9.1 Stock Certificates. Stock Certificates representing all of the
Stock duly endorsed for transfer or accompanied by stock powers duly executed in
blank.
9.2 Release. A Confirmation and Release in the form of Exhibit D
whereby each Shareholder confirms that such Shareholder is the owner of the
number of shares of Stock shown on Schedule 4.4, and each Shareholder, officer,
director and obligor under the Family Loans releases any and all claims against
the Harron Companies.
9.3 Opinion - General. An Opinion of Counsel for Shareholders and the
Cable Companies dated as of the Closing Date, substantially in the form of
Exhibit E.
9.4 Opinion - FCC. An Opinion of FCC Counsel for the Cable Companies,
dated as of the Closing Date, substantially in the form of Exhibit F.
9.5 Delivery of Documents. To the extent in the Cable Companies
possession and not otherwise held at offices located at the Real Property, all
existing blueprints, schematics, working drawings, plans, specifications,
projections, statistics, engineering records, CATV System maps, copies of all
executed assignments of Authorizations and Listed Contracts not previously
delivered, customer lists, files and records used by the Cable Companies in
connection with the operation of the Business, and any other lists reasonably
necessary to continue the operation of the Business as a going enterprise.
9.6 Subscriber/Accounts Receivable Certificate. A certificate of
Shareholders estimating, in good faith, the Accounts Receivable, and a statement
as to the number of subscribers accompanied by materials sufficient to show how
such numbers were determined, each certified as being true and correct and
prepared in accordance with the terms of this Agreement.
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9.7 Certificate. A Certificate of Shareholders in the form of Exhibit G
certifying that all the conditions set forth in Section 7 have been satisfied.
9.8 Resignations. Resignations of all officers and directors of
the Cable Companies in a form reasonably acceptable to Buyer.
9.9 Non-competition Agreement. A Non-competition Agreement duly
executed by Paul F. Harron, Jr. and dated as at the Closing Date, substantially
in the form of Exhibit H.
9.10 Officer Agreements. An Agreement duly executed by each of John F.
Quigley, III and Gregory Raymond, dated as at the Closing Date, substantially in
the form of Exhibit I.
9.11 Stock Books. The corporate stock and minute books of the
Cable Companies.
9.12 Good Standing Certificates. Good standing certificates for the
Cable Companies from their jurisdiction of incorporation and from the
jurisdictions in which they do business.
10. Buyer's Performance at Closing. At the Closing, Buyer shall deliver to
Shareholders:
10.1 Certificate of Officer. A Certificate of Buyer signed by its Chief
Financial Officer that the conditions set forth in Section 8 have been satisfied
substantially in the form attached hereto as Exhibit J.
10.2 Opinion of Counsel. An Opinion of Buyer's counsel dated as of
the Closing Date substantially in the form of Exhibit K.
10.3 Payment. Payment of the Purchase Price as set forth in
Section 2.3.
11. Brokerage Fees. Except for the services of Communications Equity Associates,
which shall be paid for by one of the Harron Companies immediately before the
Closing, each party represents and warrants to the other that it has not entered
into any agreement with any person, firm or corporation, or become indirectly a
party to any such agreement, nor has it taken any action nor is it aware of any
facts which would result in the assertion of any liability or claim for the
payment of any commission, brokerage or finder's fee in connection with the
execution of this Agreement or the consummation of the transactions contemplated
herein.
12. Risk of Loss and Casualty Damage. The risk of loss or damage by fire or
other casualty to the Business Assets shall be upon Shareholders until Closing.
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In the event of any substantial casualty damage prior to Closing, Shareholders
shall promptly notify Buyer of such damage by delivery of written notice (a
"Damage Notice"). In such event, Buyer shall have the right to require
Shareholders to cause the Cable Companies to either: (i) diligently repair,
replace and restore (collectively "repair") the damaged property to its former
condition, in which case the Closing Date shall be delayed to allow for such
repair; or (ii) make such repairs as Buyer directs with all applicable excess
insurance proceeds being assigned to Buyer.
13. Indemnification by Shareholders and Buyer.
13.1 Shareholders' Indemnification Liability. Notwithstanding the
Closing, and regardless of any investigation made at any time by or on behalf of
Buyer, or any information Buyer may have, Shareholders jointly and severally
agree to indemnify, defend and hold Buyer and the Cable Companies harmless from
and against and in respect of any and all claims, losses, actions, suits,
proceedings, assessments, demands, judgments, damages, liabilities, costs and
expenses (including, without limitation, reasonable attorney's fees and costs of
suit) resulting from or associated with:
(a) any misrepresentation, breach of warranty, or
non-fulfillment of any agreement or covenant on the part of Shareholders under
this Agreement (whether to be performed prior or subsequent to the Closing
Date);
(b) any Tax cost associated with the distribution of the
Excluded Assets and the Excluded Liabilities;
(c) any or all of the Excluded Liabilities or the
Excluded Assets;
(d) any and all liability in connection with the
litigation referenced on Schedule 4.19 as Cheryl Holl vs. Harron Communications
Corp. and Sharon Fialla vs. Harron Communications Corp.; and
(e) any liability for subscriber fee refunds due in connection
with the Massachusetts Refund Order referenced on Schedule 4.19, for the period
through the Closing Date (which shall be the Shareholders' sole liability in
connection therewith).
13.2 Limitations on Shareholders' Indemnification Liability.
Notwithstanding Section 13.1, Buyer's claims and Shareholders' liability shall
41
<PAGE>
be subject to the following:
(a) All representations and warranties made by Shareholders in
this Agreement, or pursuant hereto, and any covenants required to be performed
at or prior to Closing, shall survive the Closing Date for a period of one year;
provided that:
(i) the representations and warranties made by Shareholders in Sections
4.19 and Sections 4.14 (a), (b) and (c) of this Agreement shall survive
the Closing Date for a period of two years; and
(ii) the representations and warranties made by Shareholders in
Sections 4.1, 4.4, 4.5(a), 4.14 (f), (i), (l) and (m), 4.15 (with
respect to federal and state income taxes) and 4.18 of this Agreement
shall survive the Closing Date for the applicable statute of
limitations.
No claims for indemnification for a breach of a representation or warranty may
be asserted after the expiration of the foregoing periods; provided, however,
the written assertion of a specific claim by Buyer against Shareholders with
respect to any specific matter subject to indemnification prior to the foregoing
period shall not be precluded as a result of the foregoing time period
limitations.
(b) With respect to any matter resulting in a claim hereunder
by Buyer, Buyer will use commercially reasonable efforts to mitigate Buyer's
damages, or the amount of Buyer's Claim.
(c) Except with respect to any claim made under Sections 4.4,
4.14 (f), (l) and (m), 4.15, 4.18 and 13.1(b) - (e), Shareholders shall have no
liability until the aggregate of all items for which indemnity is sought exceeds
$5,000,000.00, however, in the event the aggregate for all items for which
indemnity is sought exceeds $5,000,000.00, the Shareholders shall be liable for
all such items in excess of the first $2,500,000.00; provided, further, in the
event the aggregate for all items for which indemnity is sought exceeds
$10,000,000.00, the Shareholders shall be liable for all such items from the
first dollar.
(d) Shareholders shall have no tax liability or
indemnification or other obligation to Buyer, and there shall be no adjustment
to the Purchase Price under Section 2.3, in connection with the making by Buyer
42
<PAGE>
or any affiliated company of an election under Section 338 of the Code, or under
similar state or local income tax provisions, in connection with the
transactions contemplated hereunder, or in connection with any other transaction
effected by Buyer involving the Harron Companies.
13.3 Buyer's Indemnification Liability. Notwithstanding the Closing,
and regardless of any investigation made at any time by or on behalf of
Shareholders or any information Shareholders may have, Buyer agrees to
indemnify, defend and hold Shareholders harmless from and against and in respect
of any loss, damage or liability resulting from:
(a) any misrepresentation, breach of warranty, or
non-fulfillment of any agreement or covenant on the part of Buyer under this
Agreement (whether to be performed prior or subsequent to the Closing Date);
(b) any contract, liability or other obligation of the Cable
Companies, except to the extent of Shareholders' liability in connection
therewith hereunder;
(c) all costs and expense (including reasonable attorneys'
fees) incurred by Shareholders in connection with any claim, action, suit,
proceeding, demand, assessment or judgment incident to any of the matters
Shareholders are indemnified against by Buyer in this Agreement; and
(d) all costs and expense, including Taxes, to Shareholders in
connection with the making by Buyer or any affiliated company of an election
under Section 338 of the Code, or under similar state or local income tax
provisions, in connection with the transactions contemplated hereunder, or in
connection with any other transaction effected by Buyer involving the Harron
Companies.
13.4 Indemnification Procedures. Promptly upon any party entitled to
indemnity hereunder becoming aware of any basis for a claim for indemnity
hereunder, including the receipt of notice of any claim, demand or assessment
made by any third party, or the commencement of any suit, action or proceeding
brought by any third party, the party seeking indemnification (the "Indemnitee")
will give prompt written notice thereof to the party from whom indemnification
is sought (the "Indemnitor") and, in any event, within sufficient time to enable
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<PAGE>
the Indemnitor to respond to such claim or answer or otherwise plead in any such
action. The failure or omission of such Indemnitee to so notify promptly the
Indemnitor of any such third party claim or action shall not relieve such
Indemnitor from any liability which it may have to such Indemnitee in connection
therewith, except to the extent that the Indemnitor shall have been actually
prejudiced thereby. In case any third party claim, demand or assessment shall be
asserted or third party suit, action or proceeding commenced against an
Indemnitee, and such Indemnitee shall notify the Indemnitor of the commencement
thereof, the Indemnitor shall be entitled to participate therein and, to the
extent that it may wish, to assume the defense or settlement thereof, with
counsel reasonably satisfactory to the Indemnitee, by providing the Indemnitee
with written notice within ten days after receipt of the Indemnitee's notice of
the claim, demand or assessment. After notice from the Indemnitor to the
Indemnitee of its election to assume the defense or settlement thereof within
such 10-day period, the Indemnitor will not be liable to the Indemnitee for any
legal or other expenses subsequently incurred by the Indemnitee in connection
therewith. The Indemnitee will cooperate with the Indemnitor in connection with
any such claim, and make personnel, books and records relevant to the claim
available to the Indemnitor. The Indemnitee will not settle such claim, demand,
or assessment without the consent of the Indemnitor, which shall not be
unreasonably withheld. In addition to, and not in limitation of, the foregoing,
Buyer agrees that Shareholders shall be promptly notified in the event that any
of the Cable Companies becomes the subject of an audit, examination or other
proceeding by the Internal Revenue Service or any other authority with respect
to Taxes for any tax year for which Buyer may seek an indemnity against
Shareholders or for any S year. With respect to any such audit or proceeding,
the Shareholders shall be given the right to participate in and, at their
election, control such audit, with any settlement or compromise made in
connection therewith shall be subject to the reasonable consent of Buyer.
Shareholders shall assume the defense and all liability in connection with the
litigation referenced on Schedule 4.19 as Cheryl Holl vs. Harron Communications
Corp. and Sharon Fialla vs. Harron Communications Corp.
14. Termination.
14.1 Termination by Agreement. This Agreement may be terminated at any
time prior to the Closing by Agreement between Shareholders and Buyer.
14.2 Termination by Shareholders. This Agreement may be terminated at
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<PAGE>
any time prior to the Closing by Shareholders, and the purchase and sale of the
Stock abandoned upon written notice to Buyer, if on any date determined for the
Closing in accordance with Section 3 each condition set forth in Section 7 has
been satisfied (or will be satisfied by the delivery of documents at the
Closing) or waived in writing on such date and either a condition set forth in
Section 8 has not been satisfied (or will not be satisfied by the delivery of
documents at the Closing) or waived in writing on such date, or Buyer has
nonetheless refused to consummate the Closing. Notwithstanding the foregoing,
Shareholders may not rely on the failure of any conditions set forth in Section
8 to be satisfied if such failure was principally caused by any Shareholder's
failure to act in good faith or a breach of or failure to perform any of its
representations, warranties, covenants or other obligations in accordance with
terms of this Agreement.
14.3 Termination by Buyer. This Agreement may be terminated at any time
prior to the Closing by Buyer, and the purchase and sale of the Stock abandoned
upon written notice to Shareholders, if on any date determined for the Closing
in accordance with Section 3 each condition set forth in Section 8 has been
satisfied (or will be satisfied by the delivery of documents at the Closing) or
waived in writing on such date and either a condition set forth in Section 7 has
not been satisfied (or will not be satisfied by the delivery of documents at the
Closing) or waived in writing on such date (provided Shareholders shall have 60
days from the date of such notice to satisfy such conditions), or Shareholders
have nonetheless refused to consummate the Closing. Notwithstanding the
foregoing, Buyer may not rely on the failure of any condition set forth in
Section 7 to be satisfied if such failure was principally caused by Buyer's
failure to act in good faith or a breach of or failure to perform any of its
representations, warranties, covenants or other obligations in accordance with
the terms of this Agreement.
14.4 Effect of Termination. If this Agreement is terminated as provided
in this Article 14, then this Agreement will forthwith become null and void and
there will be no liability on the part of any party to any other party or any
other person in respect thereof, provided that:
(a) The obligations of the parties described in Sections 15.1
and 15.2 (and all other provisions of this Agreement relating to expenses) will
survive any such termination.
(b) All filings, applications and other submissions relating
to the transfer of the Stock shall, to the extent practicable, be withdrawn from
45
<PAGE>
the Authority or other person to whom made.
(c) No such termination will relieve Buyer from liability for
a breach of this Agreement, and in such event Shareholders shall have all rights
and remedies available at law or equity, including the remedy of specific
performance.
(d) No such termination will relieve Shareholders from
liability for a breach of this Agreement, and in such event Buyer shall have all
rights and remedies available at law or equity, including the remedy of specific
performance.
14.5 Attorney's Fees. Notwithstanding any provision in this Agreement
that may limit or qualify a party's remedies, in the event of a default by any
party that results in a lawsuit or other proceedings for any remedy available
under this Agreement, the prevailing party shall be entitled to reimbursement
from the defaulting party of its reasonable legal fees and expenses (whether
incurred in arbitration, at trial, or on appeal.)
15. Miscellaneous.
15.1 Confidentiality. Except as provided in Section 6.9, the parties
hereto agree to hold in strict confidence all the terms and conditions of this
Agreement, and agree not to disclose or otherwise provide, directly or
indirectly, the terms hereof to third parties without the prior written consent
of the other party hereto, other than to its directors, employees and advisers
(such as bankers, accountants and lawyers) who are advised of the terms of this
Agreement and who need to know such information.
15.2 Controlling Law. This Agreement and all questions relating to its
validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
notwithstanding any conflict-of-laws doctrines of such state or other
jurisdiction to the contrary, and without the aid of any canon, custom or rule
of law requiring construction against the draftsman.
15.3 Notices. All notices, requests, demands and other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given, made and received only when delivered
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<PAGE>
(personally, by courier service such as Federal Express, by other messenger or
by telecopy (with automatic machine confirmation)) to the address set forth
below:
(i) If to Shareholders:
The Shareholders of Harron Communications Corp.
c/o Paul F. Harron, Jr.
70 East Lancaster Avenue
Frazer, PA 19355
Telecopy Number 610 993-1100
with a copy, given in the manner prescribed above, to:
James J. McEntee, III
Lamb, Windle & McErlane, P.C.
24 East Market St.
P.O. Box 565
West Chester, PA 19381-0565
Telecopy Number 610 430-7838
(ii) If to Buyer:
James M. Kane
Vice President, Corporate Development
Adelphia Communications Corporation
Main at Water
Coudersport, PA 16915
Telecopy Number 814 274-7098
with a copy, given in the manner prescribed above, to:
Bruce I. Booken, Esq.
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<PAGE>
Buchanan Ingersoll Professional Corporation
One Oxford Centre
21st Floor
301 Grant Street
Pittsburgh, PA 15219
Telecopy Number 412 562-1041
Any party may alter the address to which communications or copies are to be sent
by giving notice of such change of address in conformity with the provisions of
this section for the giving of notice.
15.4 Exhibits and Schedules. All exhibits and schedules attached hereto
are hereby incorporated by reference into, and made a part of, this Agreement.
15.5 Binding Nature of Agreement; No Assignment. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. No party may assign or transfer its rights or
obligations under this Agreement without the prior written consent of the other
party hereto; provided, however, notwithstanding the foregoing provisions of
this sentence, Buyer may assign all or any portion of its rights under this
Agreement to one or more affiliates of Buyer provided Buyer remains personally
liable to fully perform the terms of this Agreement and Buyer give notice to
Shareholders.
15.6 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed to be an original as
against any party whose signature appears thereon, and all of which shall
together constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
15.7 Severability. Unless material hereto, if any provision of this
Agreement is held illegal, invalid or unenforceable, such illegality, invalidity
or unenforceability shall not affect any other provision hereof. Such provision
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<PAGE>
and the remainder of this Agreement shall, in such circumstances, be deemed
modified to the extent necessary to render enforceable the remaining provisions
hereof.
15.8 Entire Agreement. This Agreement, including the schedules and
exhibits hereto and other instruments and documents referred to herein or
delivered pursuant hereto, or concurrent herewith, and represents the entire
understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements and
understandings, inducements or conditions, express or implied, oral or written,
except as herein contained. The express terms hereof control and supersede any
course of performance and/or usage of the trade inconsistent with any of the
terms hereof. This Agreement may not be modified or amended other than by an
agreement in writing signed by each of the parties hereto. Notwithstanding the
foregoing, the Confidentiality Agreement executed by Buyer and Harron dated
March 18, 1999, shall survive the execution of this Agreement.
15.9 Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
15.10 Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or holiday on which federal banks are or may elect to be
closed, then the final day shall be deemed to be the next day which is not a
Saturday, Sunday or such holiday.
15.11 No Third Party Rights. Nothing in this Agreement, express or
implied, shall be construed to confer upon any person, other than the parties
hereto, their successors and permitted assigns, any legal or equitable rights,
remedies, claims, obligations or liabilities under or by reason of this
Agreement.
15.12 Expenses. Except as otherwise expressly provided herein, each
party hereto shall pay its own expenses incident to this Agreement and the
transactions contemplated hereunder, including all legal and accounting fees and
disbursements, and costs of obtaining all necessary consents.
15.13 Further Assurances. The parties hereto will use their best
efforts to comply with all legal requirements imposed on them with respect to
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<PAGE>
the transactions contemplated by this Agreement. Each party agrees to execute
and deliver any and all further agreements, documents or instruments necessary
to effectuate this Agreement and the transactions referred to herein,
contemplated hereby or reasonably requested by the other party to perfect or
evidence its rights hereunder. Each of Shareholders and Buyer will use its
diligent efforts to effect the transaction as promptly as practicable, and will
promptly notify the other party of any information delivered to or obtained by
such party concerning an event that would prevent the consummation of the
transactions contemplated by this Agreement.
15.14 Cable Companies' Financial Statements. Shareholders hereby
consent to the inclusion by Buyer of the Cable Companies' financial statements,
if required to be so included by Buyer, in any report required to be filed by
Buyer with the Securities and Exchange Commission ("SEC"), National Association
of Securities Dealers' Automated Quotations ("NASDAQ") System or any stock
exchange pursuant to applicable law, rule or regulation, including the
Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as
amended. All accounting costs and fees incurred by reason of the reformatting of
the Cable Companies' financial statements in connection with the inclusion by
Buyer of the Cable Companies' financial statements in any such report shall be
borne by Buyer. Upon the request of Buyer, Shareholders agree to cause the Cable
Companies to promptly prepare (not later than thirty (30) days after the date of
such request) such financial statements relating to the Cable Companies as may
be required to be filed by Buyer with SEC, NASDAQ or any stock exchange. All
accounting costs and fees incurred by reason of the preparation of such
financial statements shall be borne by Buyer. Shareholders agree to obtain the
consent of the independent public accountants of the Cable Companies to the
inclusion of the Cable Companies' financial statements in any report required to
be filed by Buyer with the SEC, NASDAQ System or stock exchange.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
<TABLE>
<S> <C>
By: /s/ Margaret E. Harron By: /s/ Patricia H. Imbesi
Margaret E. Harron Patricia H. Imbesi
Trustee of Intervivos Trust of Margaret E. Harron, Trust Trustee of Intervivos Trust of Margaret E. Harron,
U/W of Paul F. Harron, Intervivos Trust of Paul F. Harron, Intervivos Trust of Patricia H. Imbesi, Intervivos
Jr., Intervivos Trust of Patricia H. Imbesi, Intervivos Trust of James J. Bruder, Jr., Intervivos Trust of
Trust of Margaret H. Bruder, Intervivos Trust of James J. Margaret Anne Nolen, Intervivos Trust of Jennifer
Bruder, Jr., Intervivos Trust of Margaret Anne Nolen, Marie Bruder, GST Exempt Trust, Regina Hanson and
Intervivos Trust of Jennifer Marie Bruder, GST Exempt Appointment Trust, Regina Hanson.
Trust, Regina Hanson and Appointment Trust, Regina Hanson
Adelphia Communications Corporation
By: /s/ Paul F. Harron, Jr.
Paul F. Harron, Jr. By: /s/ Timothy J. Rigas
Trustee of Intervivos Trust of Margaret E. Harron, Trust Name: Timothy J. Rigas
U/W of Paul F. Harron, Intervivos Trust of Paul F. Harron,
Jr., Intervivos Trust of Margaret H. Bruder, Intervivos Title: Executive Vice President
Trust of James J. Bruder, Jr., Intervivos Trust of
Margaret Anne Nolen, Intervivos Trust of Jennifer Marie
Bruder, GST Exempt Trust, Regina Hanson and Appointment
Trust, Regina Hanson
</TABLE>
51
<PAGE>
Exhibits/Schedules
[any of which will be filed if requested by the staff of the Commission]
A. Escrow Agreement
B. Operating Subsidiaries
C. Form of Authorization
D. Release
E. Opinion - Seller
F. Opinion - FCC
G. Certificate of Shareholders
H. Non-competition Agreement
I. Officer's Agreement
J. Certificate of Buyer
K. Opinion - Buyer
2.3 Estimate of Purchase Price Adjustments
4.3 Officers and Directors of Cable Companies Complete
4.4 Shareholder/Options Complete
4.5 Authorizations Complete
4.6 FCC Filings. Complete
4.8 Real Property Complete
4.10 Tangible Personal Property/Business Assets
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<PAGE>
4.11 Listed Contracts
4.12 Consents/First Refusal Rights
4.13 Financial Statements/Adverse Changes
4.14 Employees
4.15 Tax Proceedings
4.16 Technical Information
4.18 Environmental Matters
4.19 Claims and Litigation
4.20 List Employees/Labor Matters
5.3 Approvals and Consents - Buyer
6.2 Excluded Assets/Liabilities
7.1 Contracts requiring consent (to be prepared by Buyer)
EXHIBIT 3.02
BYLAWS
OF
ADELPHIA COMMUNICATIONS CORPORATION
(As amended through March 30, 1999)
ARTICLE I
Stockholders
Section 1.1 Annual Meetings. An annual meeting of the stockholders
shall be held for the election of directors and the transaction of any other
proper business on the first Thursday of August in each year, if not a legal
holiday, and if a legal holiday, then on the next secular day following at 10:00
a.m., or at such date, time and place either within or without Delaware as may
be designated by the Board of Directors from time to time.
Section 1.2 Special Meetings. Special meetings of the stockholders may
be called at any time by the Chairman of the Board, the President, any Vice
President, or the Board of Directors to be held at such date, time and place
either within or without Delaware as may be stated in the notice of the meeting.
Section 1.3 Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, such written notice shall be given not
less than ten (10) nor more than sixty (60) days before the day of the meeting
to each stockholder entitled to vote at such meeting. If mailed, such notice
shall be deemed to be given when deposited in the United States mail, postage
prepaid, directed to the stockholder at such stockholder's address as it appears
on the records of the corporation.
Section 1.4 Adjournments. Any meeting of stockholders, annual or
special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the stockholders may transact any business which
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
Section 1.5 Quorum. Except as otherwise provided in
the certificate of incorporation or by law, at any meeting of the
stockholders, the presence in person or by proxy of the holders
of the majority of the votes of all of the outstanding shares, in
<PAGE>
the aggregate, of all classes of stock entitled to vote at the meeting shall
constitute a quorum. The stockholders present at a duly organized meeting may
continue to do business until adjournment notwithstanding the withdrawal of
enough stockholders to leave less than a quorum. If a meeting cannot be
organized because a quorum has not attended, those present may adjourn the
meeting in the manner provided by Section 1.4 of these bylaws until a quorum
shall attend.
Section 1.6 Organization. Meetings of stockholders shall be presided
over by the Chairman of the Board, or in the absence of the Chairman of the
Board, by the President, or in the absence of the President, by any Vice
President, or in the absence of the foregoing persons, by a chairman designated
by the Board of Directors, or in the absence of such designation by a chairman
chosen at the meeting. The Secretary, or in the absence of the Secretary, an
Assistant Secretary, shall act as Secretary of the meeting, but in the absence
of the Secretary and any Assistant Secretary the chairman of the meeting may
appoint any person to act as Secretary of the meeting.
Section 1.7 Voting; Proxies. The stockholders of the Corporation shall
have such voting rights and powers as set forth in the certificate of
incorporation. All questions shall be decided by the vote of the majority of the
votes of all of the voting shares of all classes, in the aggregate, entitled to
vote on the matter in question, represented at any meeting, unless otherwise
provided in the certificate of incorporation or by law. Each stockholder
entitled to vote at a meeting of the stockholders or to express consent or
dissent to corporate action in writing without a meeting may authorize another
person or persons to act for such stockholder by proxy, but no such proxy shall
be voted or acted upon after three (3) years from its date, unless the proxy
provides for a longer period. All proxies must be in writing and filed with the
Secretary of the corporation. A duly executed proxy shall be irrevocable if it
states that it is irrevocable and if it is coupled with an interest sufficient
in law to support an irrevocable power. Revocation of a proxy is not effective
until notice of the revocation has been given to the Secretary of the
corporation.
Section 1.8 Record Date. In order that the corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or to express written consent to corporate action
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock, or for the purpose of
any other lawful action, the Board of Directors may fix, in advance, a record
date, which shall not be more than sixty (60) nor less than ten (10) days before
the date of such meeting, nor more than sixty (60) days prior to any other
action. A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting,
except that the Board of Directors may fix a new record date for the adjourned
meeting. In the event dividends are declared, stock transfer books will not be
closed but that a record date will be set by the Company, upon which date the
transfer agent will take a record of all shareholders entitled to the dividend
<PAGE>
without actually closing the transfer books.
Section 1.9 List of Stockholders Entitled to Vote. The officer in
charge of the stock ledger of the corporation shall make, at least ten (10) days
before each meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, with the
address of and the number of shares registered in the name of each, which list
shall be kept on file at the registered office of the corporation and, further,
shall be subject to inspection by any stockholder, for any purpose germane to
the meeting, during usual business hours, for a period of at least ten (10) days
before to the meeting, either at a place within the city where the meeting is to
be held, which place shall be specified in the notice of the meeting or, if not
so specified, at the place where the meeting is to be held. This list shall also
be produced and kept at the time and place of the meeting, and shall be subject
to inspection by any stockholder during the whole time of the meeting.
Section 1.10 Consent of Stockholders in Lieu of Meeting. Unless
otherwise provided in the certificate of incorporation or by law, any action
required by law to be taken at any annual or special meeting of stockholders of
the corporation, or any action which may be taken at any special meeting of such
stockholders, may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Prompt notice of the taking of the corporate action without a meeting by less
than unanimous consent shall be given to those stockholders who have not
consented in writing.
Section 1.11 Voting by Fiduciaries and Pledgees. Persons holding stock
in a fiduciary capacity shall be entitled to vote the shares so held. A person
whose stock is pledged shall be entitled to vote, unless in the transfer by the
pledgor on the books of the Corporation he has expressly empowered the pledgee
to vote thereon, in which case only the pledgee, or his proxy, may represent and
vote such stock.
ARTICLE II
Board of Directors
Section 2.1 Powers; Number; Qualifications. The business and affairs
of the Corporation shall be managed by or under the direction of the Board of
Directors. The Board shall consist of not less than five (5) nor more than nine
(9) members, the number thereof to be determined from time to time by the Board.
Directors need not be stockholders, unless the certificate of incorporation so
requires.
Section 2.2 Election; Term of Office; Resignation; Removal; Vacancies.
Each director shall hold office until the annual meeting of stockholders next
succeeding his election and until his successor is elected and qualified or
until his death,
<PAGE>
resignation or removal. Any director may resign at any time upon written notice
to the Board of Directors or to the President, any Vice President, or the
Secretary of the corporation. A resignation shall take effect at the time it
specifies, and unless otherwise specified in the resignation, no acceptance of
the resignation is necessary to make it effective. Any director may be removed,
with or without cause, by the holders of a majority of the shares then entitled
to vote at an election of directors except that whenever the holders of any
class are entitled by the certificate of incorporation to elect one or more
directors, the director or directors so elected may be removed with or without
cause by a majority of the holders of the outstanding shares of that class.
Unless otherwise provided in the certificate of incorporation or these bylaws,
vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by the sole remaining director.
Section 2.3 Regular Meetings. Regular meetings of the Board of
Directors may be held at such places within or without Delaware and at such
times as the Board may from time to time determine, and if so determined, notice
thereof need not be given.
Section 2.4 Special Meetings. Special meetings of the Board may be
called by the Chairman of the Board, the President, any Vice President, the
Secretary, or any two directors. Except as otherwise provided in the certificate
of incorporation, meetings of the Board of Directors may be held at such places
within or without Delaware as a majority of the directors may direct. A written
notice of all special meetings of the Board of Directors specifying the place,
day and hour shall be given to each director at least twenty-four (24) hours
before the day named for the meeting, either personally or by sending a copy
thereof by mail or by telegram, charges prepaid, to his address appearing on the
books of the Corporation or supplied by him to the Corporation for the purpose
of notice. When a meeting of directors is adjourned, notice need not be given of
the adjourned meeting or of the business to be transacted at an adjourned
meeting, other than by announcement at the meeting at which the adjournment is
taken.
Section 2.5 Participation in Meetings by Conference Telephone. Unless
otherwise restricted by the certificate of incorporation, members of the Board
of Directors, or any committee designated by the Board, may participate in a
meeting of the Board or of such committee, as the case may be, by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other.
Section 2.6 Quorum; Vote Required for Action. A majority of the
directors in office is necessary to constitute a quorum for the transaction of
business, and the acts of a majority of the Directors present at a meeting at
which a quorum is present shall be the acts of the Board of Directors. If at any
meeting a quorum is not present, the meeting may be adjourned from time to time
until a quorum is present.
<PAGE>
Section 2.7 Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, or in the absence of the Chairman of
the Board, by the President, or in the absence of Chairman of the Board and the
President, by any Vice President, or in their absence, by a chairman chosen at
the meeting. The Secretary, or in the absence of the Secretary, an Assistant
Secretary, shall act as Secretary of the meeting, but in the absence of the
Secretary and any Assistant Secretary, the chairman of the meeting may appoint
any person to act as Secretary of the meeting.
Section 2.8 Compensation of Directors. The Board of
Directors shall have the authority to fix the compensation of
Directors.
Section 2.9 Action by Directors Without a Meeting. Unless otherwise
restricted by the certificate of incorporation, any action required or permitted
to be taken at any meeting of the Board of Directors, or of any committee
thereof, may be taken without a meeting if all members of the Board or of such
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of proceedings of the Board or committee.
Section 2.10 Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its Directors or officers, or between
the Corporation and any other corporation, partnership, association or other
organization in which one or more of its Directors or officers are Directors or
officers, or have a financial interest, shall be void or voidable solely for
that reason, or solely because the director or officer is present at or
participates in the meeting of the Board or committee which authorizes the
contract or transaction, or solely because his or their votes are counted for
such purpose, if: (1) the material facts as to his relationship or interest and
as to the contract or transaction are disclosed or are known to the Board of
Directors or the committee and the Board or the committee in good faith
authorizes the contract or transaction by the affirmative vote of a majority of
the disinterest directors, even though the disinterested directors be less than
a quorum; or (2) the material facts as to his relationship or interest and as to
the contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and the contract or transaction is specifically
approved in good faith by vote of the stockholders; or (3) the contract or
transaction is fair as to the Corporation as of the time it is authorized,
approved or ratified by the Board of Directors, a committee thereof or the
stockholders. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of directors or of a committee
which authorizes the contract or transaction.
Section 2.11 Other Powers. In addition to the powers expressly
conferred by these bylaws, the Board of Directors may exercise all such powers
of the Corporation and do all such lawful acts as are not by law, the
certificate of incorporation or these bylaws required to be exercised or done by
the stockholders.
ARTICLE III
<PAGE>
Committee
Section 3.1 Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more committees, each
committee to consist of one or more of the Directors of the corporation. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the Board to act at the meeting in place
of any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board, shall have and may exercise all the
powers and authority of the Board in the management of the business and affairs
of the Corporation, and may authorize the seal of the Corporation to be affixed
to all papers which may require it; but, except to the extent otherwise provided
by law, no such committee may amend the certificate of incorporation, adopt an
agreement of merger or consolidation, recommend to the stockholders the sale,
lease or exchange of all or substantially all of the corporation's property and
assets, recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amend these bylaws; and, unless a resolution of
the Board of Directors, the certificate of incorporation, or these bylaws
expressly so provides, no such committee may declare a dividend or authorize the
issuance of stock.
Section 3.2 Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board may adopt, amend and repeal
rules for conducting its business. In the absence of a provision by the Board or
a provision in the rules of a committee to the contrary, a majority of the
entire authorized number of members of such committee shall constitute a quorum
for the transaction of business, the vote of a majority of the members present
at a meeting at the time of such vote if a quorum is then present shall be the
act of such committee, and in other respects each committee shall conduct its
business in the same manner as the Board conducts its business pursuant to
Article II of these bylaws.
ARTICLE IV
Officers
Section 4.1 Officers; Election. As soon as practicable after every
annual meeting of stockholders, the Board of Directors shall elect a President
and a Secretary, and it may, if it so determines, elect from among its members a
Chairman of the Board and a Vice Chairman of the Board. The Board may also elect
one or more Vice Presidents, one or more Assistant Secretaries, a Treasurer and
one or more Assistant Treasurers, and such other officers as the Board may deem
desirable or appropriate and may give any of them such further designations or
alternate titles as it considers desirable. Any number of offices may be held by
the same person.
<PAGE>
Section 4.2 Term of Office; Resignation; Removal; Vacancies. Except as
otherwise provided in the resolution of the Board of Directors electing him,
each officer shall hold office until the first meeting of the Board after the
annual meeting of the stockholders next succeeding his election, and until his
successor is elected and qualified, or until his earlier resignation or removal.
An officer may resign at any time upon written notice to the Board or to the
President or the Secretary of the Corporation. A resignation shall take effect
at the time it specifies, and unless otherwise specified in the resignation, no
acceptance of the resignation is necessary to make it effective. The Board may
remove any officer with or without cause at any time. Any removal shall be
without prejudice to the contractual rights of the officer, if any, with the
Corporation, but the election of an officer shall not of itself create
contractual rights. Any vacancy occurring in any office of the Corporation by
death, resignation, removal or otherwise may be filled for the unexpired portion
of the term by the Board at any regular or special meeting.
Section 4.3 Powers and Duties. The officers of the Corporation shall
have such powers and duties in managing the Corporation as shall be stated in
these bylaws or in a resolution of the Board of Directors not inconsistent with
these bylaws and, to the extent not so stated, as generally pertain to their
respective offices, subject to the control of the Board. The Secretary shall
have the duty to record the proceedings of the meetings of the stockholders, the
Board of Directors and any committees in a book to be kept for that purpose. The
Board may require any officer, agent or employee to give security for the
faithful performance of his duties.
Section 4.4 Chairman of the Board. The Chairman of the Board shall
preside at all meetings of the Board of Directors and of the stockholders at
which he is present and shall have and may exercise such powers as may, from
time to time, be assigned to him by the Board and as may be provided by law.
Section 4.5 President. In the absence of the Chairman of the Board,
the President shall preside at all meetings of the Board of Directors and of the
stockholders at which he is present. The President shall be the chief executive
officer and shall have general charge and supervision of the business of the
Corporation and, in general, shall perform all duties incident to the office of
president of a corporation and such other duties as may, from time to time, be
assigned to him by the Board or as may be provided by law.
Section 4.6 Vice Presidents. The Vice President or Vice Presidents, at
the request or in the absence of the President or during the President's
inability to act, shall perform the duties of the President and when so acting
shall have the powers of the President. If there be more than one Vice
President, the Board of Directors may determine which one or more of the Vice
Presidents shall perform any of such duties; or if such determination is not
made by the Board, the President may make such determination; otherwise any of
the Vice Presidents may perform any of such duties. The Vice President or Vice
Presidents shall have such other powers and shall perform such
<PAGE>
other duties as may, from time to time, be assigned to him or them by the Board
or the President or as may be provided by law.
Section 4.7 Secretary. The Secretary shall have the duty to record the
proceedings of the meetings of the stockholders, the Board of Directors and any
committees in a book to be kept for that purpose, shall see that all notices are
duly given in accordance with the provisions of these bylaws or as required by
law, shall be custodian of the records of the Corporation, may affix the
corporate seal to any document the execution of which, on behalf of the
Corporation, is duly authorized, and when so affixed may attest the same, and,
in general, shall perform all duties incident to the office of Secretary of a
corporation and such other duties as may, from time to time, be assigned to him
by the Board or the President or as may be provided by law.
Section 4.8 Treasurer. The Treasurer shall have charge of and be
responsible for all funds, securities, receipts and disbursements of the
Corporation and shall deposit or cause to be deposited, in the name of the
Corporation, all moneys or other valuable effects in such banks, trust companies
or other depositories as shall, from time to time, be selected by or under
authority of the Board of Directors. If required by the Board, the Treasurer
shall give a bond for the faithful discharge of his duties, with such surety or
sureties as the Board may determine. The Treasurer shall keep or cause to be
kept complete and accurate records of all receipts and disbursements of the
Corporation, shall render to the President and to the Board, whenever requested,
an account of the financial condition of the Corporation, and, in general, shall
perform all the duties incident to the office of treasurer of a corporation and
such other duties as may, from time to time, be assigned to him by the Board or
the President or as may be provided by law.
Section 4.9 Other Officers. Any other officers of the Corporation
shall have such powers and duties in managing the Corporation as shall be stated
in a resolution of the Board of Directors which is not inconsistent with these
bylaws and, to the extent not so stated, as generally pertain to their
respective offices, subject to the control of the Board. The Board may require
any officer, agent or employee to give security for the faithful performance of
his duties.
ARTICLE V
Stock
Section 5.1 Certificates. Every holder of the stock in the Corporation
shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman of the Board of Directors, or the President or any
Vice-President, and by the Treasurer or an Assistant Treasurer, or the Secretary
or an Assistant Secretary of the Corporation, certifying the number and class of
shares owned by him in the Corporation. Any of the signatures on the certificate
may be a facsimile. If any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate ceases to be
such officer, transfer agent, or registrar before the
<PAGE>
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent, or registrar at the date of issue.
Section 5.2 Lost, Stolen or Destroyed Stock Certificates; Issuance of
New Certificates. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificates previously issued by the
Corporation alleged to have been lost, stolen or destroyed. When authorizing
such issuance, the Board of Directors may require the owner of the lost, stolen
or destroyed certificate or certificates, or his legal representative, to give
the Corporation a bond sufficient to indemnify the Corporation against any claim
that may be made against it on account of the alleged loss, theft or destruction
of any such certificate or the issuance of such new certificate.
ARTICLE VI
Indemnification
Section 6.1 Indemnification. Except to the extent prohibited by law,
the corporation shall indemnify any person made, or threatened to be made, a
party to an action, suit or proceeding, whether civil, criminal, administrative
or investigative ("an Action") by reason of the fact that the person or such
person's representative is or was a director and officer of the Corporation, and
may indemnify any person made, or threatened to be made, a party to any Action
by reason of the fact that he is or was an employee or agent of the Corporation
or serves or served as a director, officer, employee, or agent of any other
enterprise at the request of the Corporation. This indemnification shall not be
deemed exclusive of any other rights to which any person indemnified may be
entitled under any agreement, vote of stockholders or disinterested directors,
or otherwise. The Corporation may, but shall have no obligation to, purchase
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation against any liability asserted against or incurred by
him in any such capacity, or arising out of his status as such to the extent
permitted by law. Such insurance may be provided by the Corporation at the sole
discretion of the Board of Directors.
Section 6.2 Right to Advancement of Defense Expenses. Expenses
(including fees and expenses of counsel selected by the person entitled to
indemnification described in Section 6.1) incurred in defending any action shall
be paid by the Corporation in advance upon the written request of such person if
he shall undertake to repay such amounts advanced to the extent that a court of
competent jurisdiction ultimately determines that such person is not entitled to
indemnification under this Article or otherwise, unless the Board of Directors
or independent legal counsel reasonably determines that such person deliberately
breached his duty to the Corporation or its shareholders. Such person's expenses
incurred in connection with successfully establishing his right to
indemnification, in whole or part, in any such proceeding shall also be
indemnified by the Corporation.
Section 6.3 Right to Indemnification. The right to
<PAGE>
indemnification and advances as provided in this Article VI shall be a
contractual right. Indemnification under this Article VI shall continue as to a
person eligible to be indemnified even though he may have ceased to be a
director or officer, and shall inure to the benefit of the heirs and legal
representatives of persons entitled to indemnity hereunder, and shall be
applicable to any Action commenced after the adoption hereof, whether arising
from acts or omissions occurring before or after adoption hereof. Any repeal or
modification of this Article VI shall not affect any rights or obligations then
existing.
ARTICLE VII
Miscellaneous
Section 7.1 Fiscal Year. The fiscal year of the Corporation shall
begin on January 1 and end on December 31 of each calendar year, commencing with
the fiscal year ended December 31, 1998.
Section 7.2 Office. The registered office of the Corporation shall be
229 South State Street, City of Dover, County of Kent, State of Delaware, or any
other location within Delaware which the Board of Directors may determine.
Section 7.3 Registered Agent. The registered agent of the Corporation
shall be The Prentice-Hall Corporation System, Inc., or such other individual or
domestic corporation (including the Corporation) as the Board of Directors may
designate.
Section 7.4 Seal. The Corporation may have a corporate seal which
shall have inscribed thereon the name of the Corporation, and shall be in such
form as may be approved from time to time by the Board of Directors. The seal
may be used by causing it or a facsimile thereof to be impressed or affixed, or
in any other manner reproduced.
Section 7.5 Form of Records. Any records maintained by the Corporation
in the regular course of its business, including its stock ledger, books of
account and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time. The Corporation shall so convert any records so
kept upon the request of any person entitled to inspect the same.
Section 7.6 Waiver of Notice of Meetings of Stockholders, Directors
and Committees. Whenever any written notice is required to be given by law, the
Certificate of Incorporation or these bylaws, a waiver thereof in writing,
signed by the person entitled to such notice, whether before or after the time
stated therein, shall be deemed equivalent to the giving of such notice. Unless
otherwise required by the certificate of incorporation, neither the business to
be transacted at nor the purpose of the meeting need be specified in the waiver
of notice of such meeting. The attendance of a person, either in person or by
proxy, at any meeting shall constitute a waiver of notice of the meeting, except
where a person attends a meeting for the express purpose of objecting to
<PAGE>
the transaction of any business because the meeting was not
lawfully called or convened.
Section 7.7 Amendment of Bylaws. These bylaws may be amended or
repealed, and new bylaws adopted, by the Board of Directors, but the
stockholders entitled to vote may adopt additional bylaws and may amend or
repeal any bylaw whether or not adopted by them.
ARTICLE VIII
Non-Applicability of Section 203
of the Delaware General Corporation Law
Section 8.1 Section 203 of the General Corporation Law of Delaware
shall not apply to the Corporation.
(As amended through March 30, 1999.)
EXHIBIT 10.01
HIGHLAND HOLDINGS
MAIN AT WATER STREET
COUDERSPORT, PA 16915
April 9, 1999
Adelphia Communications Corporation
Main at Water Street
Coudersport, Pennsylvania 16915
Re: Purchase of Shares of Adelphia Communications Corporation's
Class B Common Stock, $.01 par value per share (the "Common Stock")
Gentlemen:
The undersigned hereby agrees to purchase directly from you, and you
agree to sell to the undersigned, upon the terms and subject to the conditions
set forth herein, at a per share price equal to the Purchase Price per Share (as
hereafter defined), that number of shares (the "Shares") of the Common Stock of
Adelphia Communications Corporation, a Delaware corporation (the "Company")
which equals the lesser of (a) the number of unissued shares of Common Stock or
(b) the Investment (as hereafter defined) divided by the Purchase Price per
Share. The Purchase Price per Share shall equal the sum of (a) the gross
proceeds less underwriting discount received by the Company per share from the
first underwritten public offering after the date hereof of Class A Common
Stock, $.01 par value per share, of the Company which offering results in gross
proceeds of at least $100 million to the Company (the "Underwritten Public
Offering") and (b) the Additional Amount (as hereafter defined). The Additional
Amount shall be equal to an amount computed, to the eighth decimal place, as
though interest were paid at the Libor Rate in Effect (as hereafter defined)
plus 75 basis points (0.0075) on the per share amount determined under clause
(a) of the definition of Purchase Price per Share for each period of three
months (or, in the case of the final period, portion thereof if less than three
months) subsequent to the date of the closing of the Underwritten Public
Offering until the date of the closing hereunder. The Libor Rate In Effect shall
mean a rate determined on the first day of each period of three months (or, in
the case of the final period, portion thereof if less than three months)
subsequent to the Underwritten Public Offering equal to the quotient, expressed
as a percentage (rounded to the nearest 1/100th of 1%), resulting from the
division of (x) the average (rounded to the nearest 1/16th of 1%) of the
interest rates per annum at which deposits of United States Dollars are offered
to money center banks in the London interbank market for deposits of three
months by (y) the percentage equal to 100% minus the reserve percentage
<PAGE>
applicable on that day under regulations issued by the Board of Governors of the
Federal Reserve System for determining the maximum reserve requirement for a
member bank of the Federal Reserve System with respect to Eurocurrency
liabilities having a three month term. The Company shall determine in good faith
the Libor Rate in Effect for each such period. The Investment shall mean an
amount equal to $250,000,000; provided, however, that the undersigned may
increase the Investment to an amount not to exceed $375,000,000 by delivering a
final written election to such effect to the Company on or before the time at
which the Company executes and delivers the underwriting agreement for the
Underwritten Public Offering. The Underwritten Public Offering shall include
without limitation a transaction in which one or more investment banking firms
purchase Class A Common Stock from Adelphia in a block trade for resale to its
or their customers pursuant to a prospectus or prospectus supplement in addition
to a transaction in which one or more investment bankers are denominated as
"underwriters" for the Company in a prospectus or prospectus supplement filed
with the Securities and Exchange Commission.
Each of the parties hereto represents and warrants that it has full
power and is duly authorized to enter into and perform this agreement; that it
has all necessary corporate or partnership approvals (subject in the case of the
Company to any shareholder approval required by law) necessary to do so; that
the execution and performance of this agreement will not conflict with the
organic corporate or partnership documents of it or any order of a governmental
body or agency (subject to any regulatory approvals or regulatory filings and
expiration of waiting periods required by law) or material agreement to which it
is a party or by which it is bound; and that this Agreement is enforceable in
accordance with it terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, fraudulent conveyance and other laws of general applicability
relating to or affecting creditors rights and to general equity principles. The
parties hereto agree that the undersigned is entitled to rely on the
representations and warranties made by the Company in any underwriting or
purchase agreement entered into by the Company with the investment banking firm
or firms conducting the Underwritten Public Offering; provided, however, that
the undersigned represents and warrants to the Company that such representations
and warranties will be true and correct to the best of its knowledge.
Each party's obligations hereunder shall be conditioned upon the
Underwritten Public Offering having occurred, any required approvals having been
obtained, any required filings having been made and any required waiting periods
having expired, and the other party's representations and warranties being true
and correct on and as of the closing date for the sale of the Shares hereunder
(except (i) for representations and warranties which expressly relate solely to
an earlier date or time, which representations or warranties shall be true and
correct on and as of the specific dates or times referred to therein and (ii)
for representations and warranties which are not true and correct due to matters
subsequent to the date of the closing of the Underwritten Public Offering which
2
<PAGE>
have occurred in the Company in the ordinary course of its business, which have
occurred in the Company and been authorized by the Board of Directors of the
Company or which have occurred in the Company and been authorized by any
individual affiliate of the undersigned who is an executive officer of the
Company). A closing on the purchase of the Shares hereunder shall be held at the
principal executive offices of the Company at a mutually agreeable date
following the Underwritten Public Offering; provided, however, that the closing
shall occur no later than 270 days from the date of the closing of the
Underwritten Public Offering. At such closing, (i) the Company shall deliver to
the undersigned certificates for the Shares duly executed in such name or names
as the undersigned shall have requested bearing appropriate securities laws
legends, an opinion of counsel that the Shares have been duly authorized, are
validly existing and fully paid and a registration rights agreement for the
Shares in form similar to the existing registration rights agreements, entered
into in the two years prior to the date hereof, between the Company and the
undersigned or its affiliates and (ii) the undersigned shall deliver to the
Company the purchase price for the Shares in immediately available funds. In the
event that the Underwritten Public Offering does not occur and close on or
before the date which is 365 days from the date hereof, this Agreement shall be
null and void and neither party shall have any liability to the other hereunder.
The obligation of the undersigned to consummate the purchase of Common Stock
hereunder will be subject to termination in the discretion of the undersigned
if, prior to consummation, (i) trading in the Company's Class A Common Stock has
been suspended by the Securities and Exchange Commission or the Nasdaq National
Market or trading in securities generally on the New York Stock Exchange or the
Nasdaq National Market has been suspended, (ii) a banking moratorium has been
declared either by Federal or New York State authorities, or (iii) there has
occurred any outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war or other calamity or crisis the effect of
which on financial markets is such as to make it, in the reasonable judgment of
the undersigned, materially impracticable to proceed with such consummation.
The undersigned agrees not to, and agrees to cause the individual
members of the Rigas family and their affiliates not to, sell any shares of
Class B Common Stock held by it or them for a period of six months after the
closing of the purchase of Class B Common Stock under this Agreement (but such
period shall not in any event terminate later than one year from the closing of
the Underwritten Public Offering), except that such sales shall be permitted (a)
to affiliates of the undersigned or the individual members of the Rigas family,
(b) in connection with a sale of all or substantially all of all outstanding
classes of common stock of the Company, (c) pursuant to the written consent of
the Company authorized by a majority of the members of its Board of Directors
who are not individual members of the Rigas family and who are not financially
interested in such proposed sale of Class B Common Stock, or (d) pursuant to a
default under a bona fide pledge arrangement, provided that the foregoing
provisions and restrictions shall be subject to the terms of any agreement
existing on the date of this Agreement, including without limitation the Class B
Stockholder Agreement among certain holders of Class B Common Stock and the
Company dated July 14, 1986, as amended.
3
<PAGE>
The aggregate liability of the undersigned and any of its officers,
directors, shareholders, partners or other affiliates (collectively, the
"Undersigned Affiliate Group") for any and all losses, claims, demands whether
for specific performance or otherwise, damages, liabilities, obligations, costs
and expenses (including without limitation, reasonable fees and disbursements of
counsel however sustained or incurred, and including, without limitation, any of
the foregoing enumerated items arising from any action or proceeding involving
any third party) sustained or incurred by or claimed against one or several of
the Undersigned Affiliate Group or otherwise with respect to the subject matter
of this Agreement and the transactions contemplated hereby (collectively,
"Damages") is, and shall be, limited to an amount equal to the greater of (i)
the product determined by multiplying the number of Shares to be purchased
hereunder by the positive excess, if any, of the Purchase Price per Share over
the weighted average trading price during the twenty trading days preceding the
270th day from the date of the closing of the Underwritten Public Offering or
(ii) an amount determined by multiplying the number of Shares to be purchased
hereunder by the Additional Amount per share assuming that a closing on the sale
of the Shares had occurred on the 270th day from the date of the closing of the
Underwritten Public Offering. The Company agrees not to seek any recovery for
Damages or otherwise with respect to the subject matter of this Agreement and
the transactions contemplated hereby which when aggregated with any other
recovery of the Company would result in the Company obtaining from the
Undersigned Affiliate Group an amount in excess of the amount permitted by the
preceding sentence for any and all Damages. In no event shall any of the
Undersigned Affiliate Group be liable for any special, indirect, or
consequential damages sustained by the Company or punitive damages as a result
of a breach of this Agreement or arising out of this Agreement and the
transactions contemplated hereby.
No commissions or discounts shall be paid to any placement agent for
the purchase or sale of the Shares. The Shares shall be purchased and shall be
held for investment.
This Agreement may be assigned by the undersigned to any affiliate of
the undersigned provided that a majority of John Rigas, Michael Rigas, Timothy
Rigas and James Rigas consent in writing to such assignment. This Agreement may
be executed in one or more counterparts each of which, taken together, shall
constitute one and the same agreement.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
4
<PAGE>
This Agreement shall be governed by and construed in accordance with
the internal laws of the State of New York without giving effect to the
principles of conflicts of law thereof.
Very truly yours,
Highland Holdings
By /s/ Michael J. Rigas
Name: Michael J. Rigas
Title: General Partner
Agreed to and accepted on this 9th day of April, 1999 by.
ADELPHIA COMMUNICATIONS CORPORATION
By: /s/ James P. Rigas
Name: James P. Rigas
Title: Executive Vice President
5
Exhibit 99.01
Contact: Adelphia Communications Corporation
Timothy J. Rigas
Executive Vice President
(814) 274-9830
ADELPHIA COMMUNICATIONS TO ACQUIRE HARRON COMMUNICATIONS CABLE SYSTEMS
FOR $1.17 BILLION
Coudersport, April 12, 1999. Adelphia Communications Corporation ("Adelphia")
(NASDAQ:ADLAC) today announced the signing of a definitive agreement for the
purchase of the cable television systems owned by Harron Communications Corp.
("Harron") for $1.17 billion. Adelphia estimates that the transaction will close
during the March 2000 quarter. Proforma for this and other previously announced
pending acquisitions, Adelphia will become the fourth largest operator of cable
television systems in the United States, serving approximately 5.0 million
subscribers.
Tim Rigas, Executive Vice President and Chief Financial Officer of Adelphia,
said "The Rigas family is very much aware of the commitment, dedication and
contributions that the Harron family has made to both their cable subscribers
and to the cable television industry over the past three and a half decades.
Their presence has added greatly to both the rich history and impressive success
of the industry. These systems are an excellent strategic fit with Adelphia's
existing operations in Pennsylvania and New England. This acquisition increases
our presence in New England to nearly 800,000 customers and increases our
subscriber base in the greater Philadelphia region to approximately 250,000
customers. Not only do these systems provide a hand in glove strategic fit for
the Company, but the purchase price and timing of the close of this acquisition
are consistent with Adelphia continuing to improve its balance sheet and
achieving its leverage targets."
Paul Harron, President and CEO of Harron Communications commented, "Harron has
served cable customers since 1963. We have a record of excellence for the
quality of our service, the professionalism and dedication of our people, and
the significant contributions we have made throughout the years in the
communities we serve. Given the convergence of video, voice and data
technologies and heightened competitive forces, it is becoming increasingly
evident that consolidation in the industry needs to continue in order to offer
customers advanced services and the highest levels of customer service and
technical support. The decision to divest our cable interests has been a
difficult one for me and my family; however, I have enormous respect for John
Rigas (Chairman and CEO of Adelphia) and his family. I have every confidence
that Harron's customers will be served by a company committed to delivering
advanced services both in the short and long term. Both strategically and
operationally, Harron is a good fit for Adelphia. Our companies have similar
histories and cultures, which should facilitate a smooth integration of our
operations."
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Harron's markets have been characterized historically by high growth rates and
favorable demographics. Internal subscriber growth has averaged over 3.0%
annually during the last five years. Median income and housing start rates for
the areas in which the Harron systems operate continue to exceed national
averages.
Adelphia expects to be able to consolidate the majority of the Harron systems'
cable headends with existing Adelphia system headends. Additionally, at closing
approximately 67% of Harron's cable plant will be 750 MHz. At closing, Harron is
expected to have approximately 300,000 basic subscribers in New England,
Pennsylvania and Michigan. The Harron acquisition is subject to certain
customary conditions, including regulatory and other approvals.
Proforma for expected operating and programming expense savings, Harron is
expected to generate revenues of $139 million and $153 million for the years
ended December 31, 1999 and December 31, 2000, respectively. On the same basis,
the systems are expected to generate EBITDA of $76 million and $84 million,
respectively, for the same periods.
Adelphia's current business operations include cable entertainment; competitive
local exchange telephone services; high-speed Internet access; long distance
telephone service; paging and security.
This press release contains forward-looking statements as defined by Section 21E
of the Securities Exchange Act of 1934, as amended, including without limitation
statements regarding expected revenue and operating cash flow results in the
future. These statements are based on a number of assumptions and estimates that
inherently are subject to significant risks, uncertainties and contingencies,
many of which are beyond the control of the Company. Actual results may differ
materially from those expressed or implied in the forward-looking statements.
Additional information on potential factors and risks that could affect future
results are contained in the Company's reports and filings with the Securities
and Exchange Commission.
This press release and additional information is available at
www.adelphia.net/finance/.
