<PAGE> 1
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
AMERICAN CABLE TV INVESTORS 5, LTD.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
$93,486,900 X .0002 = $18,697.38
(1) Title of each class of securities to which transaction applies: UNITS
OF LIMITED PARTNERSHIP INTEREST
(2) Aggregate number of securities to which transaction applies: 200,005
UNITS OF LIMITED PARTNERSHIP INTEREST
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): Transaction
Valuation *$__________.
(4) Proposed maximum aggregate value of transaction*: $93,486,900
* For the purpose of calculating the filing fee only.
(5) Total fee paid: $18,697.38
[X] Fee paid previously with preliminary materials.
[X] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: $18,697.38
(2) Form, Schedule or Registration Statement No.: Schedule 14A
(3) Filing Party: American Cable TV Investors 5, Ltd.
(4) Date Filed: December 11, 1996
<PAGE> 2
AMERICAN CABLE TV INVESTORS 5, LTD.
5619 DTC PARKWAY
ENGLEWOOD, COLORADO 80111
February 12, 1997
Dear Limited Partner:
You are invited to attend a special meeting (the "Special Meeting") of
limited partners (the "Limited Partners") of American Cable TV Investors 5, Ltd.
(the "Partnership"), called by IR-TCI Partners V, L.P., the general partner (the
"General Partner") of the Partnership, to be held at 5619 DTC Parkway,
Englewood, Colorado 80111 on March 26, 1997 at 11:00 a.m., local time, and at
any adjournment thereof.
At this Special Meeting, you will be asked to consider and vote upon three
separate sales transactions (or any substitute sales transaction(s) that the
General Partner determines to be in the best interest of the Limited Partners in
the event that any of the proposed sales transactions is approved by the Limited
Partners, but does not close for any reason) which, if approved and consummated,
would result in the sale of a significant portion of the Partnership's cable
assets for cash. The sales transactions involve the Partnership's sale of its
ownership interests in the cable television systems (the "Sales Systems") which
serve communities located in and around (i) Lower Delaware and Maryland to
Mediacom LLC ("Mediacom") or one of Mediacom's affiliates for $43,100,000 in
cash (the "Lower Delaware Sale"), (ii) St. Mary's County, Maryland to Gans
Multimedia Partnership ("Gans") or one of Gans' affiliates for $30,636,900 in
cash (the "St. Mary's Sale") and (iii) Shelbyville and Manchester, Tennessee to
Rifkin Acquisition Partners, L.L.L.P. ("Rifkin") or one of Rifkin's affiliates
for $19,750,000 in cash (the "Southern Tennessee Sale"). The Lower Delaware, St.
Mary's and Southern Tennessee Sales are collectively referred to as the "Sales
Transactions."
There can be no assurance that any of the Sales Transactions will be
consummated. However, assuming all of the Sales Transactions had occurred on
September 30, 1996 and that no amounts were used to fund capital expenditures or
the liquidity requirements of the Partnership's remaining cable television
system which serves communities located in and around Riverside, California (the
"Riverside System"), it is estimated that the pro forma net cash proceeds
available for distribution to the Limited Partners would have been $366 per $500
unit ("Unit") of limited partnership interest (the "Pro Forma Distribution Per
Unit"). On March 29, 1996 the Partnership's share of the cash proceeds from the
sale of the cable television system which served communities located in and
around Newport News, Virginia was used to fund a distribution to Limited
Partners of $165 per Unit. The Partnership is unable to predict the amount that
Limited Partners would receive upon a sale of the Partnership's remaining cable
television system, the Riverside System. The Pro Forma Distribution Per Unit,
which is based upon the Partnership's historical financial position at September
30, 1996, does not reflect any contingent liabilities that might arise
subsequent to the date of this Proxy Statement and is based on various
assumptions with respect to transaction related costs, sales price adjustments
and other matters, as further discussed under "PRO FORMA FINANCIAL INFORMATION"
in the accompanying Proxy Statement. As such, the actual amounts distributed to
the Limited Partners may vary from the Pro Forma Distribution Per Unit. As
described below, the amount by which the Pro Forma Distribution Per Unit would
be reduced if one or more of the Sales Transactions does not close is dependent
upon future events and circumstances.
At this Special Meeting, you will also be asked to consider and vote upon a
resolution which would grant the General Partner the authority to sell any Sales
System(s) (the "Substitute Sale System(s)"), in the event that any Sales
Transaction approved by the Limited Partners does not close for any reason;
provided, however, that a substitute sales transaction (a "Substitute Sales
Transaction") will only be consummated if (i) the General Partner obtains an
opinion from an investment banking firm of national repute that the
consideration to be received pursuant to any such Substitute Sales Transaction
is fair to the Partnership from a financial point of view, (ii) any such
Substitute Sales Transaction is consummated within two years of the date hereof
for cash consideration and (iii) the purchaser in such transaction is not an
affiliate of the Partnership. Consent to any Substitute Sales Transaction shall
not be deemed a consent to the sale of the Riverside System.
<PAGE> 3
In the event that any Sales Transaction approved by the Limited Partners
does not close, it is currently the General Partner's intention to seek a
substitute buyer for the Substitute Sale System(s). There is no assurance that
the General Partner could arrange for a Substitute Sales Transaction(s) for the
Substitute Sale System(s) at an appropriate price or on terms acceptable to the
Partnership. Accordingly, there is no assurance that the sales price for any
Substitute Sales Transaction would be equivalent to the proposed sales price for
the applicable Sales System pursuant to the proposed Sales Transactions. Any
change to the amount of net sales proceeds to be received would cause a
corresponding change to the Pro Forma Distribution Per Unit. As described below,
the amount by which the Pro Forma Distribution Per Unit would be reduced if one
or more of the Sales Transactions does not close is dependent upon future events
and circumstances. In the event that any of the Sales Transactions do not close,
it is currently the General Partner's intention to seek a substitute buyer for
the Substitute Sale System(s). There is no assurance that the General Partner
could arrange for a Substitute Sales Transaction(s) at an appropriate price or
on terms acceptable to the Partnership. If the General Partner's efforts in
arranging a Substitute Sales Transaction(s) prove to be unsuccessful, the
General Partner would evaluate market, competitive, regulatory, financial and
other conditions (relating to the cable television industry generally and to the
Substitute Sale System(s) specifically) in order to determine whether it would
be in the best interest of the Partnership to use all or a portion of the
available net cash proceeds (after repaying debt as required by the terms of the
Partnership's bank credit facility and repaying any amounts due to TCI
Communications, Inc. and its affiliates) from any of the consummated Sales
Transactions to fund all or a portion of any remaining cable television
system's(s') liquidity requirements, including non-discretionary capital
expenditures and necessary maintenance costs as well as the cost of implementing
technological advancements or improvements. Accordingly, the failure to
consummate one or more of the Sales Transactions could delay and would reduce
the Pro Forma Distribution Per Unit. The General Partner has not yet determined
which course of action it would pursue and anticipates that it would pursue such
a course of action only after making a careful evaluation of all relevant
factors. Limited Partners will not have an opportunity to vote on such course of
action. See "BACKGROUND AND REASONS FOR THE SALES TRANSACTIONS -- Plans If Any
Transaction Is Not Consummated" and "PRO FORMA FINANCIAL INFORMATION" in the
accompanying Proxy Statement.
THE GENERAL PARTNER BELIEVES THAT THE SALES TRANSACTIONS ARE IN THE BEST
INTEREST OF THE LIMITED PARTNERS AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
EACH OF THE SALES TRANSACTIONS. THE GENERAL PARTNER HAS RECEIVED THE WRITTEN
OPINIONS OF LEHMAN BROTHERS INC., FINANCIAL ADVISOR TO THE PARTNERSHIP ("LEHMAN
BROTHERS"), THAT THE CONSIDERATION TO BE RECEIVED IN CONNECTION WITH EACH OF THE
LOWER DELAWARE, ST. MARY'S AND SOUTHERN TENNESSEE SALES IS FAIR, FROM A
FINANCIAL POINT OF VIEW, TO THE PARTNERSHIP. A COPY OF THE OPINIONS OF LEHMAN
BROTHERS ARE ATTACHED TO THE ACCOMPANYING PROXY STATEMENT AS APPENDICES B-1, B-2
AND B-3 IN THEIR ENTIRETY.
You are urged to read carefully the accompanying Proxy Statement in its
entirety for important information about the Sales Transactions.
If you have any questions, please call The Herman Group, Inc. at (800)
657-8830.
Very truly yours,
/s/ Marvin L. Jones
MARVIN JONES
President of TCI Ventures Five, Inc.,
the general partner of the General
Partner
<PAGE> 4
AMERICAN CABLE TV INVESTORS 5, LTD.
NOTICE OF SPECIAL MEETING OF LIMITED PARTNERS
TO BE HELD ON MARCH 26, 1997
NOTICE IS HEREBY GIVEN, that a special meeting (the "Special Meeting") of
the limited partners (the "Limited Partners") of American Cable TV Investors 5,
Ltd. (the "Partnership"), called by IR-TCI Partners V, L.P., the general partner
(the "General Partner") of the Partnership, will be held at 5619 DTC Parkway,
Englewood, Colorado, 80111 on March 26, 1997, at 11:00 a.m., local time, for the
following purpose:
To approve three separate sales transactions (or any substitute sales
transaction(s) that the General Partner determines to be in the best
interest of the Limited Partners in the event that any of the proposed
sales transactions is approved by the Limited Partners, but does not close
for any reason) which, if approved and consummated, would result in the
sale of a significant portion of the assets of the Partnership (other than
cash) consisting of the Partnership's ownership interests in the cable
television systems which serve communities located in and around (i) Lower
Delaware and Maryland (the "Lower Delaware System"), (ii) St. Mary's
County, Maryland (the "St. Mary's System") and (iii) Shelbyville and
Manchester, Tennessee (the "Southern Tennessee System"). The Lower
Delaware, St. Mary's and Southern Tennessee Systems are collectively
referred to herein as the "Sales Systems." At the Special Meeting, Limited
Partners will be asked to consider and vote upon the following resolutions,
as more fully described in the Proxy Statement which accompanies this
Notice:
Resolution 1: Sale of the Lower Delaware System
1. Consent to the sale of the Lower Delaware System to Mediacom LLC
("Mediacom") or one of Mediacom's affiliates pursuant to an Asset Purchase
Agreement dated as of December 24, 1996 between the Partnership and Mediacom.
2. Approve and adopt an amendment to the Partnership's limited partnership
agreement (the "Partnership Agreement") which would permit the sale of the Lower
Delaware System to Mediacom or one of Mediacom's affiliates.
The proposals included as part of Resolution 1 are related matters and
shall be considered together at the Special Meeting.
Resolution 2: Sale of the St. Mary's System
1. Consent to the sale of the St. Mary's System to Gans Multimedia
Partnership ("Gans") or one of Gans' affiliates pursuant to an Asset Purchase
Agreement dated as of November 27, 1996 between the Partnership and Gans.
2. Approve and adopt an amendment to the Partnership Agreement which would
permit the sale of the St. Mary's System to Gans or one of Gans' affiliates.
The proposals included as part of Resolution 2 are related matters and
shall be considered together at the Special Meeting.
Resolution 3: Sale of the Southern Tennessee System
1. Consent to the sale of the Southern Tennessee System to Rifkin
Acquisition Partners, L.L.L.P. ("Rifkin") or one of Rifkin's affiliates pursuant
to an Asset Purchase Agreement dated as of November 29, 1996 between the
Partnership and Rifkin.
2. Approve and adopt an amendment to the Partnership Agreement which would
permit the sale of the Southern Tennessee System to Rifkin or one of Rifkin's
affiliates.
<PAGE> 5
The proposals included as part of Resolution 3 are related matters and
shall be considered together at the Special Meeting.
Resolution 4: Substitute Sale of the Sales Systems
Consent to any substitute sales transaction that the General Partner
determines to be in the best interest of the Limited Partners in the event that
any of the Sales System sales (as referenced under Resolutions 1, 2 and 3 above)
is approved by the Limited Partners, but does not close for any reason;
provided, however, that such substitute sales transaction will only be
consummated if (i) the General Partner obtains an opinion from an investment
banking firm of national repute that the consideration to be received pursuant
to any such substitute sales transaction is fair to the Partnership from a
financial point of view, (ii) such substitute sale is consummated within two
years of the date hereof for cash consideration and (iii) the purchaser in such
transaction is not an affiliate of the Partnership. Consent to any substitute
sales transaction shall not be deemed a consent to the sale of the Partnership's
cable television system which serves communities located in and around
Riverside, California.
LIMITED PARTNERS MUST VOTE ON EACH OF THE RESOLUTIONS SEPARATELY AND
APPROVAL OF ANY RESOLUTION IS NOT DEPENDENT ON APPROVAL OF ANY OTHER RESOLUTION.
THE GENERAL PARTNER RECOMMENDS THAT YOU VOTE FOR APPROVAL OF EACH OF THE
RESOLUTIONS.
Matters incidental to the conduct of the Special Meeting which are properly
brought before the Special Meeting may also be voted upon at the Special
Meeting. The General Partner has fixed the close of business on February 3, 1997
as the record date for determination of the Limited Partners entitled to notice
of and to vote at the Special Meeting.
BY ORDER OF THE GENERAL PARTNER,
IR-TCI PARTNERS V, L.P.
By: TCI Ventures Five, Inc.,
the general partner
/s/ Stephen M. Brett
STEPHEN M. BRETT, Secretary
YOUR VOTE IS IMPORTANT. IN ORDER TO ENSURE THAT YOUR INTERESTS WILL BE
REPRESENTED, WHETHER YOU INTEND TO BE PRESENT AT THE SPECIAL MEETING OR NOT,
PLEASE SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED
ENVELOPE.
Englewood, Colorado
February 12, 1997
<PAGE> 6
AMERICAN CABLE TV INVESTORS 5, LTD.
5619 DTC Parkway
Englewood, Colorado 80111
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF LIMITED PARTNERS
TO BE HELD MARCH 26, 1997
INTRODUCTION
This Proxy Statement is being furnished to the limited partners (the
"Limited Partners") of American Cable TV Investors 5, Ltd. (the "Partnership")
in connection with the solicitation of proxies by IR-TCI Partners V, L.P., the
general partner of the Partnership (the "General Partner"), on behalf of the
Partnership, for use at a special meeting of Limited Partners (the "Special
Meeting") to be held at 5619 DTC Parkway, Englewood, Colorado 80111 on March 26,
1997 at 11:00 a.m., local time, and at any adjournment thereof. At this Special
Meeting, Limited Partners will be asked to consider and vote upon three separate
sales transactions (or any substitute sales transaction(s) that the General
Partner determines to be in the best interest of the Limited Partners in the
event that any of the proposed sales transactions is approved by the Limited
Partners, but does not close for any reason) which, if approved and consummated,
would result in the sale of a significant portion of the Partnership's assets
(other than cash) for cash. The Partnership's assets consist of ownership
interests in the cable television systems serving communities located in and
around (i) Lower Delaware and Maryland (the "Lower Delaware System"), (ii) St.
Mary's County, Maryland (the "St. Mary's System"), (iii) Shelbyville and
Manchester, Tennessee (the "Southern Tennessee System") and (iv) Riverside,
California (the "Riverside System"). The Lower Delaware, St. Mary's and Southern
Tennessee Systems are collectively referred to in this Proxy Statement as the
"Sales Systems." The Partnership anticipates that it would make distributions of
the net cash proceeds of the Sales Transactions as soon as possible following
the final determination and satisfaction of its liabilities. Limited Partners
are not being asked to consider and vote upon a sale of the Riverside System.
The Notice of Meeting, Proxy Statement and form of proxy are being mailed
to Limited Partners on or about February 12, 1997.
It is proposed that (i) the Lower Delaware System will be sold to Mediacom
LLC ("Mediacom") or one of Mediacom's affiliates for $43,100,000 in cash
(subject to adjustment as described herein) (the "Lower Delaware Sale"), (ii)
the St. Mary's System will be sold to Gans Multimedia Partnership ("Gans") or
one of Gans' affiliates for $30,636,900 in cash (subject to adjustment as
described herein) (the "St. Mary's Sale") and (iii) the Southern Tennessee
System will be sold to Rifkin Acquisition Partners, L.L.L.P. ("Rifkin") or one
of Rifkin's affiliates for $19,750,000 in cash (subject to adjustment as
described herein) (the "Southern Tennessee Sale"). (The Lower Delaware, St.
Mary's and Southern Tennessee Sales are collectively referred to in this Proxy
Statement as the "Sales Transactions.") None of Mediacom, Gans and Rifkin is an
affiliate of the Partnership.
In the event that any Sales Transaction approved by the Limited Partners
does not close for any reason, it is proposed that the General Partner be
granted the authority to sell any Sales System(s) (the "Substitute Sale
System(s)"); provided, however, that a substitute sales transaction (a
"Substitute Sales Transaction") will only be consummated if (i) the General
Partner obtains an opinion from an investment banking firm of national repute
that the consideration to be received pursuant to any such Substitute Sales
Transaction is fair to the Partnership from a financial point of view, (ii) any
such Substitute Sales Transaction is consummated within two years of the date
hereof for cash consideration and (iii) the purchaser in such transaction is not
an affiliate of the Partnership. Consent to any Substitute Sales Transaction
shall also be deemed a consent to the sale of all or substantially all of the
Partnership's assets (other than cash) which, under certain circumstances,
(Cover page continued)
i
<PAGE> 7
would ultimately result in the dissolution and termination of the Partnership
pursuant to the Partnership's limited partnership agreement (the "Partnership
Agreement"). Such consent shall not be deemed a consent to the sale of the
Riverside System.
Because the Partnership Agreement provides that Limited Partners owning in
the aggregate more than 50% of the units of limited partnership interest (the
"Units") vote on the sale of all or substantially all of the assets of the
Partnership and because the Partnership has provided for separate votes with
respect to each of the Sales Transactions, amendments to the Partnership
Agreement will be required in order to permit the Lower Delaware, St. Mary's and
Southern Tennessee Sales to occur.
Assuming all of the Sales Transactions had occurred on September 30, 1996
and that no amounts were used to fund capital expenditures or the liquidity
requirements of the Riverside System, it is estimated that the pro forma net
cash proceeds available for distribution to Limited Partners would have been
$366 per $500 Unit of limited partnership interest (the "Pro Forma Distribution
Per Unit"). On March 29, 1996 the Partnership's share of the cash proceeds from
the sale of the cable television system which served communities located in and
around Newport News, Virginia (the "Newport News System") was used to fund a
distribution to Limited Partners of $165 per Unit. The Partnership is unable to
predict the amount that Limited Partners would receive upon a sale of the
Partnership's remaining cable television system, the Riverside System. There is
no assurance that any of the Sales Transactions will be consummated. The actual
amounts distributed to the Limited Partners may vary from the Pro Forma
Distribution Per Unit. Given the fact that the Partnership has made aggregate
cash distributions of $165 per Unit in prior periods, $335 of the $366 Pro Forma
Distribution Per Unit would have represented a return of capital to the Limited
Partners. For a further discussion of the assumptions underlying the Pro Forma
Distribution Per Unit and for a discussion of the possible ramifications if one
or more of the Sales Transactions are not consummated, see "PRO FORMA FINANCIAL
INFORMATION," "INCOME TAX CONSEQUENCES" and "BACKGROUND AND REASONS FOR THE
SALES TRANSACTIONS -- Reasons for the Sales Transactions -- Prospects for Future
Capital Appreciation of the Sales Systems."
Assuming all of the Sales Transactions had occurred on September 30, 1996
and that no amounts were used to fund capital expenditures or the liquidity
requirements of the Riverside System and based on the foregoing pro forma
assumptions, TCI Communications, Inc. ("TCIC") and its affiliates would have
received $593,000 in the form of distributions and $2,805,000 representing the
disposition fees generated by such sales (of which amount, $818,000 is payable
to a third party broker). TCIC performs cash management services for the
Partnership. Accordingly, TCIC makes disbursements on behalf of the Partnership
and the Partnership reimburses TCIC from time to time for such disbursements. In
addition, the Partnership reimburses TCIC and its affiliates for certain
expenses incurred by TCIC and its affiliates on behalf of the Partnership. At
September 30, 1996, the Partnership owed TCIC and its affiliates $9,937,000 as a
result of the above-described cash management services and reimbursable
expenses. Such amounts were assumed to be repaid with cash proceeds from the
Sales Transactions in determining the Pro Forma Distribution Per Unit, however,
the repayment of such amounts is not contingent upon consummation of the Sales
Transactions.
THE GENERAL PARTNER BELIEVES THAT THE SALES TRANSACTIONS ARE IN THE BEST
INTEREST OF THE LIMITED PARTNERS AND RECOMMENDS THAT YOU VOTE FOR APPROVAL OF
ALL OF THE SALES TRANSACTIONS AND THE SUBSTITUTE SALES TRANSACTION. THE
AFFIRMATIVE VOTE OF THE LIMITED PARTNERS OWNING IN THE AGGREGATE MORE THAN 50%
OF THE OUTSTANDING UNITS IS REQUIRED FOR THE APPROVAL OF EACH OF THE
RESOLUTIONS.
ii
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TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION............................................................................ i
SUMMARY................................................................................. 1
The Sales Transactions................................................................ 1
Dissolution of the Partnership; Distributions......................................... 1
Limited Partner Approval.............................................................. 2
The Parties........................................................................... 3
The Partnership.................................................................... 3
The Purchasers..................................................................... 5
Competitive Auction................................................................... 5
Plans If Any Transaction Is Not Consummated........................................... 5
Summary Historical Financial Data..................................................... 7
Partnership Summary Historical Financial Data...................................... 7
Lower Delaware System Summary Historical Financial Data............................ 8
St. Mary's System Summary Historical Financial Data................................ 9
Southern Tennessee System Summary Historical Financial Data........................ 10
Reasons for the Sales Transactions.................................................... 11
Fairness of the Sales Transactions.................................................... 11
Interests of TCIC and Related Parties................................................. 11
Interests of TCIC and Its Affiliates............................................... 11
Conflicts of the Broker............................................................ 13
Lack of Appraisal Rights.............................................................. 13
Certain Definitions................................................................... 13
BACKGROUND AND REASONS FOR THE SALES TRANSACTIONS....................................... 14
Reasons for the Sales Transactions.................................................... 14
General............................................................................ 14
Prospects for Future Capital Appreciation of the Sales Systems..................... 14
Perception of Cable Television Market.............................................. 15
Competition........................................................................ 16
Regulation......................................................................... 17
Conclusion......................................................................... 18
Alternatives Considered to the Sales Transactions..................................... 18
General............................................................................ 18
Continued Ownership of the Sales Systems........................................... 18
Background of the Sales Transactions.................................................. 19
General............................................................................ 19
Competitive Auction for the Sales Systems.......................................... 20
Fairness of the Sales Transactions.................................................... 22
Competitive Auction................................................................ 22
Cash Flow and Subscriber Multiples................................................. 22
Independent Fairness Opinions...................................................... 23
Alternative Transaction Provisions................................................. 23
Plans If Any Transaction Is Not Consummated........................................... 23
Recommendation for a Substitute Sales Transaction..................................... 24
DESCRIPTION OF THE SALES TRANSACTIONS................................................... 25
Lower Delaware Sale................................................................... 26
Description of the Lower Delaware System........................................... 26
Principal Provisions of the Lower Delaware Asset Purchase Agreement................ 26
</TABLE>
iii
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<TABLE>
<S> <C>
St. Mary's Sale....................................................................... 30
Description of the St. Mary's System............................................... 30
Principal Provisions of the St. Mary's Asset Purchase Agreement.................... 30
Southern Tennessee Sale............................................................... 32
Description of the Southern Tennessee System....................................... 32
Principal Provisions of the Southern Tennessee Asset Purchase Agreement............ 32
Substitute Sales Transaction(s)....................................................... 34
Amendment to Partnership Agreement.................................................... 34
FAIRNESS OPINIONS....................................................................... 36
General............................................................................... 36
Analysis of the Competitive Auction................................................... 37
Comparable Public Company Methodology................................................. 37
Comparable Transactions Methodology................................................... 38
Experience of Lehman Brothers......................................................... 39
Compensation and Material Relationships............................................... 39
MANAGEMENT.............................................................................. 40
INTERESTS OF TCIC AND RELATED PARTIES................................................... 41
General............................................................................... 41
Interests of TCIC and Its Affiliates.................................................. 41
Interests of the General Partner...................................................... 42
Conflicts of the Broker............................................................... 42
OTHER RELEVANT INFORMATION.............................................................. 43
Disposition Fee and Other Payments to the General Partner and Its Affiliates.......... 43
Disposition Fee.................................................................... 43
Other Payments..................................................................... 43
Indemnification.................................................................... 43
Appraisals by Communications Equity Associates, Inc................................ 44
Dissolution of the Partnership; Distributions......................................... 44
Costs of the Sales Transactions....................................................... 46
INCOME TAX CONSEQUENCES................................................................. 47
General............................................................................... 47
Federal............................................................................... 47
General............................................................................ 47
At Risk Basis...................................................................... 47
Lower Delaware Sale................................................................ 47
St. Mary's Sale.................................................................... 48
Southern Tennessee Sale............................................................ 48
Estimated Aggregate Results of System Sales........................................ 48
State................................................................................. 48
PRO FORMA FINANCIAL INFORMATION......................................................... 50
AVAILABLE INFORMATION................................................................... 57
INCORPORATION BY REFERENCE.............................................................. 57
OTHER MATTERS........................................................................... 57
Voting Rights and Vote Required....................................................... 57
Revocability.......................................................................... 58
No Appraisal Rights................................................................... 58
Proxy Solicitation.................................................................... 58
Independent Accountants............................................................... 58
</TABLE>
iv
<PAGE> 10
<TABLE>
<S> <C> <C>
APPENDICES
APPENDIX A Glossary............................................................ A-1
APPENDIX B-1 Fairness Opinion of Lehman Brothers Inc. Regarding the Southern B-1
Tennessee Sale......................................................
APPENDIX B-2 Fairness Opinion of Lehman Brothers Inc. Regarding the St. Mary's B-3
Sale................................................................
APPENDIX B-3 Fairness Opinion of Lehman Brothers Inc. Regarding the Lower B-5
Delaware Sale.......................................................
APPENDIX C Relevant Partnership Agreement Provisions and Proposed Amendment.... C-1
</TABLE>
The Appendices listed above are a part of this Proxy Statement.
v
<PAGE> 11
SUMMARY
Set forth below is a summary of certain information contained elsewhere in
this Proxy Statement. It is not intended to be a complete description of those
matters which it covers, and much of the information contained in this Proxy
Statement is not covered by this summary. The information contained in this
summary is qualified by the more complete information contained elsewhere in
this Proxy Statement. Limited Partners are urged to read this Proxy Statement in
its entirety, including the Appendices hereto, the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1995 (the "1995 10-K") and the
Partnership's Quarterly Report on Form 10-Q for the quarter ended September 30,
1996 (as amended, the "1996 10-Q"), which accompany and are part of this Proxy
Statement.
THE SALES TRANSACTIONS
The Partnership proposes to sell certain of its interests in its cable
television systems in three separate sales transactions. The Partnership
proposes to sell (i) the Lower Delaware System to Mediacom or one of Mediacom's
affiliates for $43,100,000 in cash (subject to adjustment as described herein),
(ii) the St. Mary's System to Gans or one of Gans' affiliates for $30,636,900 in
cash (subject to adjustment as described herein) and (iii) the Southern
Tennessee System to Rifkin or one of Rifkin's affiliates for $19,750,000 in cash
(subject to adjustment as described herein), pursuant to the terms of the
applicable asset purchase agreements (the "Asset Purchase Agreements"). The
consideration to be received by the Partnership from the Sales Transactions will
be used to repay the Partnership's net liabilities. The remaining consideration,
after payment of certain expenses relating to the Sales Transactions, and, to
the extent not otherwise used to fund capital expenditures or the liquidity
requirements of any remaining cable television systems, will be distributed to
the Limited and General Partners in accordance with the sharing ratios set forth
in the Partnership Agreement. See "DESCRIPTION OF THE SALES TRANSACTIONS," "PRO
FORMA FINANCIAL INFORMATION" and "OTHER RELEVANT INFORMATION -- Dissolution of
the Partnership; Distributions."
DISSOLUTION OF THE PARTNERSHIP; DISTRIBUTIONS
The General Partner is in the process of marketing for sale its remaining
cable television system, the Riverside System. There is no assurance that the
General Partner can arrange for a sale of the Riverside System at an appropriate
price or on terms acceptable to the Partnership. If the General Partner is
unable to arrange for a sale of the Riverside System at an appropriate price or
on terms acceptable to the Partnership, the Partnership will continue to operate
the Riverside System. Although no assurance can be given, the General Partner
currently anticipates that any cash proceeds from the Sales Transactions will
not be used to fund the Riverside System's capital expenditures or liquidity
requirements. Limited Partners owning in the aggregate more than 50% of the
Units will have to approve a sale of the Riverside System, including a sale to
an affiliate of the Partnership.
If all of the Sales Transactions are approved and consummated, and if the
Riverside System is sold, the Partnership will have sold all of its assets
(other than cash) and, pursuant to the Partnership Agreement, will ultimately be
dissolved and terminated.
Assuming all of the Sales Transactions had occurred on September 30, 1996
and that no amounts were used to fund capital expenditures or the liquidity
requirements of the Riverside System, it is estimated that the Pro Forma
Distribution Per Unit would have been $366. On March 29, 1996 the Partnership's
share of the cash proceeds from the sale of the Newport News System was used to
fund a distribution to Limited Partners of $165 per Unit. The Partnership is
unable to predict the amount that Limited Partners would receive upon a sale of
the Partnership's remaining cable television system, the Riverside System. There
is no assurance that any of the Sales Transactions will be consummated. The Pro
Forma Distribution Per Unit, which is based upon the Partnership's historical
financial position at September 30, 1996, does not reflect any contingent
liabilities that might arise subsequent to the date of this Proxy Statement, and
is based on various assumptions with respect to transaction related costs, sales
price adjustments and other matters, as described under "PRO FORMA FINANCIAL
INFORMATION." As such, the actual amounts distributed to Limited Partners may
vary from the Pro Forma Distribution Per Unit. As described below, the amount by
which the Pro Forma Distribution Per Unit would be reduced if one or more of the
Sales Transactions does not close is dependent
1
<PAGE> 12
upon future events and circumstances. In the event that any of the Sales
Transactions do not close, it is currently the General Partner's intention to
seek a substitute buyer for the Substitute Sale System(s). There is no assurance
that the General Partner could arrange for a Substitute Sales Transaction(s) at
an appropriate price or on terms acceptable to the Partnership. If the General
Partner's efforts in arranging a Substitute Sales Transaction(s) prove to be
unsuccessful, the General Partner would evaluate market, competitive,
regulatory, financial and other conditions (relating to the cable television
industry generally and to the Substitute Sale System(s) specifically) in order
to determine whether it would be in the best interest of the Partnership to use
all or a portion of the available net cash proceeds (after repaying debt as
required by the terms of the Partnership's bank credit facility and repaying any
amounts due to TCIC and its affiliates) from any of the consummated Sales
Transactions to fund all or a portion of any remaining cable television
system's(s') liquidity requirements, including non-discretionary capital
expenditures and necessary maintenance costs as well as the cost of implementing
technological advancements or improvements. Accordingly, the failure to
consummate one or more of the Sales Transactions could delay and would reduce
the Pro Forma Distribution Per Unit. For a further discussion of the
ramifications if one or more of the Sales Transactions are not consummated, see
"BACKGROUND AND REASONS FOR THE SALES TRANSACTIONS -- Plans If Any Transaction
Is Not Consummated," "PRO FORMA FINANCIAL INFORMATION," "INCOME TAX
CONSEQUENCES" and "OTHER RELEVANT INFORMATION -- Dissolution of the Partnership;
Distributions."
In general, distributions of net cash proceeds are anticipated to occur as
soon as practicable after the date of the last closing of the Sales
Transactions; however, the General Partner may establish different dates for
such distributions if there is a material delay in the closing of any of the
Sales Transactions. Subject to the receipt of any indemnifiable claims against
post-closing amounts that will be held in escrow with respect to the Lower
Delaware, St. Mary's or Southern Tennessee Sales ($1,077,500, $765,923 and
$493,750, respectively), it is expected that such amounts will be distributed as
soon as practicable after all, or substantially all, of the balance of the
principal amount of such escrowed funds have been released to the Partnership.
See "DESCRIPTION OF THE SALES TRANSACTIONS -- Lower Delaware Sale -- Principal
Provisions of the Lower Delaware Asset Purchase Agreement", "-- St. Mary's
Sale -- Principal Provisions of the St. Mary's Asset Purchase Agreement" and
"-- Southern Tennessee Sale -- Principal Provisions of the Southern Tennessee
Asset Purchase Agreement." There can be no assurance that distributions of net
cash proceeds will take place on this schedule. In addition, circumstances
beyond the control of the Partnership, such as the existence of contingencies,
could affect the timing and amount of distributions to the Limited and General
Partners.
On January 1, 1996, Newport News Cablevision, Ltd. ("Newport News") sold
the Newport News System to an unaffiliated party for cash proceeds of
$121,886,000. Pursuant to the terms of the sale agreement, $5,000,000 of the
sales price was held in escrow until September 27, 1996. The Partnership has a
40% ownership interest in Newport News. Accordingly, in January 1996 the
Partnership received $33,696,000 of the net cash proceeds (after satisfaction of
Newport News transaction costs and liabilities) from the Newport News Sale. In
November 1996, the Partnership received $2.1 million representing the
Partnership's share of the amount held in escrow plus the balance of other
amounts held by Newport News. See "OTHER RELEVANT INFORMATION -- Dissolution of
the Partnership; Distributions."
LIMITED PARTNER APPROVAL
The Partnership is seeking the consent of the Limited Partners prior to the
consummation of the Sales Transactions because the Partnership Agreement
requires Limited Partners owning in the aggregate more than 50% of the
outstanding Units to approve any sale of all, or substantially all, of the
Partnership's assets. The sale of the Sales Systems constitutes a sale of
substantially all of the Partnership's assets under the terms
of the Partnership Agreement because the Partnership Agreement defines
"substantially all of the assets" to mean cable television systems representing
66 2/3% or more of the net book value of the Partnership's cable television
systems.
Limited Partners are also being asked to consent to any Substitute Sales
Transaction, which would permit the sale of any Substitute Sale System;
provided, however, that a Substitute Sales Transaction will only be
2
<PAGE> 13
consummated if (i) the General Partner obtains an opinion from an investment
banking firm of national repute that the consideration to be received pursuant
to any such Substitute Sales Transaction is fair to the Partnership from a
financial point of view, (ii) any such Substitute Sales Transaction is
consummated within two years of the date hereof for cash consideration and (iii)
the purchaser in such transaction is not an affiliate of the Partnership. The
Partnership is making this proposal in order to avoid the time and expense
associated with seeking Limited Partner approval of such Substitute Sales
Transaction. As of the date of this Proxy Statement, the General Partner has no
reason to believe that the Sales Transactions will not be consummated in
accordance with the terms set forth in the Asset Purchase Agreements. Consent to
any Substitute Sales Transaction shall not be deemed a consent to the sale of
the Riverside System.
Because the Partnership Agreement provides that Limited Partners owning in
the aggregate more than 50% of the Units vote on the sale of all or
substantially all of the assets of the Partnership and because the Partnership
has provided for separate votes with respect to each of the Sales Transactions,
amendments to the Partnership Agreement will be required in order to permit the
Lower Delaware, St. Mary's and Southern Tennessee Sales to occur. In addition,
in the event a Substitute Sales Transaction is consummated after the
consummation of a sale of the Riverside System, then consent to the Substitute
Sales Transaction shall also be deemed a consent to a sale of all or
substantially all of the Partnership's assets (other than cash), which would
ultimately result in the dissolution and termination of the Partnership pursuant
to the Partnership Agreement.
In the event the General Partner arranges for a satisfactory sale of the
Riverside System, Limited Partners owning in the aggregate more than 50% of the
Units will have to approve a sale of the Riverside System, including a sale to
an affiliate of the Partnership.
Limited Partners may submit their proxy by returning it, properly executed,
prior to the Special Meeting. Proxies may be revoked at any time prior to the
Special Meeting. See "OTHER MATTERS -- Voting Rights and Vote Required."
THE PARTIES
The Partnership
The Partnership is a Colorado limited partnership organized in 1986 to
acquire, develop, operate and sell or otherwise dispose of cable television
systems in the United States. The principal executive offices of the Partnership
are located at 5619 DTC Parkway, Englewood, Colorado 80111, and the telephone
number is (303) 267-5500. From May 1987 through February 1989, Limited Partners
contributed $100,002,500 to the Partnership in exchange for 200,005 Units (at
$500 each). There is no established trading market for the Units. The
Partnership owns 100% of the Lower Delaware, Riverside, St. Mary's and Southern
Tennessee Systems.
Subject to the voting rights granted to the Limited Partners in the
Partnership Agreement, the General Partner has sole authority to manage the
Partnership's affairs. The General Partner is a Colorado limited partnership
whose general partner is TCI Ventures Five, Inc. ("TVI") and whose limited
partner is beneficially owned by certain former executive officers and key
employees of the predecessor of TCI Cablevision Associates, Inc. ("TCA"), the
parent of TVI. Until it withdrew by letter dated January 17, 1996, Integrated
Cable Corp. V ("Cable Corp."), a wholly-owned subsidiary of Presidio Cable V
Corp. ("PCC"), was also a general partner of the General Partner and held a 20%
general partnership interest in the General Partner. As such, it is entitled
under Colorado law to the fair value of its partnership interest based on its
right to share in distributions from the General Partner. The General Partner
has proposed that Cable Corp. receive the share of distributions that it would
have received from the General Partner if it had remained a general partner of
the General Partner. As a response to Cable Corp.'s withdrawal, TVI's board of
directors has been modified such that it includes members who are not employees
of, or otherwise affiliated with, TCIC. See "MANAGEMENT." David B. Beyth, a
former executive officer of Cable Corp., is the initial limited partner of the
Partnership. The Partnership has entered into a management agreement with TCA
pursuant to which TCA is responsible for managing the day-to-day operations of
the Sales Systems. See "INTERESTS OF TCIC AND RELATED PARTIES."
The chart on the succeeding page sets forth the organizational structure of
the Partnership.
3
<PAGE> 14
ORGANIZATIONAL STRUCTURE OF
AMERICAN CABLE TV INVESTORS 5, LTD.
[Chart representing ownership structure of the
Partnership to the ultimate parent corporation,
Tele-Communications, Inc.]
- ---------------
(1) Represents the percentage of TCIC's common stock that is owned by
Tele-Communications, Inc. ("TCI"), the ultimate parent of TVI.
(2) Reflects TCIC's ownership of TCA through various intermediary corporations.
(3) Until its withdrawal on January 17, 1996, Cable Corp. had a 20% general
partnership interest in the General Partner. See "MANAGEMENT."
(4) See "PRO FORMA FINANCIAL INFORMATION" and "OTHER RELEVANT
INFORMATION -- Dissolution of the Partnership; Distribution."
4
<PAGE> 15
The Purchasers
The proposed purchasers (collectively, the "Purchasers") are Mediacom,
which has agreed to acquire the Lower Delaware System; Gans, which has agreed to
acquire the St. Mary's System; and Rifkin, which has agreed to acquire the
Southern Tennessee System. Certain information in this Proxy Statement
concerning the Purchasers was obtained from representatives of the respective
Purchasers.
Mediacom LLC. Mediacom is a New York limited liability company organized
in July 1995. Mediacom is not affiliated with the General Partner, the
Partnership or any affiliate of the Partnership. Mediacom's principal executive
offices and place of business is 90 Crystal Run Road, Middletown, New York
10941. Mediacom is engaged in the acquisition, ownership and operation of cable
television systems. Rocco B. Commisso, the founder of Mediacom, is the former
Executive Vice President, Chief Financial Officer and Director of Cablevision
Industries Corporation, the eighth-largest multiple system operator in the cable
television industry prior to its merger with Time Warner, Inc. in January 1996.
Gans Multimedia Partnership. Gans is a Pennsylvania general partnership
consisting of four corporate partners. Gans is not affiliated with the General
Partner, the Partnership or any affiliate of the Partnership. Gans' principal
executive offices and place of business is 217 East Ninth Street, Hazleton,
Pennsylvania 18201. Gans is principally engaged in the acquisition, ownership
and operation of cable television systems, and at December 31, 1995, serviced
approximately 30,000 basic subscribers.
Rifkin Acquisition Partners, L.L.L.P. Rifkin is a Colorado limited
liability limited partnership organized in 1988. Rifkin is not affiliated with
the General Partner, the Partnership or any affiliate of the Partnership.
Rifkin's principal executive offices and place of business is 360 South Monroe
Street, Suite 600, Denver, Colorado 80209. Rifkin is principally engaged in the
ownership and operation of cable television systems. As of September 30, 1996,
Rifkin directly or indirectly owned cable television systems that provided cable
television services to approximately 183,000 basic subscribers located in
Tennessee, Georgia, Illinois and Michigan. Rifkin & Associates, Inc. manages the
cable television systems owned by Rifkin pursuant to a management agreement, and
also manages various other cable television systems owned by affiliates.
COMPETITIVE AUCTION
After monitoring competitive, regulatory and other factors affecting the
marketplace for cable television systems similar to the Partnership's cable
television systems, in March 1996 the General Partner concluded that it would be
beneficial to offer such systems for sale. See "BACKGROUND AND REASONS FOR THE
SALES TRANSACTIONS -- Alternatives Considered to the Sales Transactions." The
Partnership Agreement provides that certain affiliates of the General Partner
are permitted to make an offer to purchase all of the Partnership's remaining
cable television assets based on a formula price. However, TCIC and its
affiliates did not exercise this purchase right because TCIC was not interested
in purchasing all of the Partnership's cable television systems. The Asset
Purchase Agreements relating to the Sales Transactions were entered into
following the completion of a competitive auction (the "Competitive Auction").
The Competitive Auction was completed in October 1996 and involved the
solicitation of bids for the Partnership's cable television systems by Daniels &
Associates, L.P. (the "Broker"), a media properties broker. The General Partner
believes that the Competitive Auction resulted in the Partnership receiving fair
market value for its cable television systems. See "BACKGROUND AND REASONS FOR
THE SALES TRANSACTIONS -- Background of the Sales Transactions -- Competitive
Auction for the Sales Systems" and "-- Fairness of the Sales Transactions."
PLANS IF ANY TRANSACTION IS NOT CONSUMMATED
In the event that any Sales Transaction approved by the Limited Partners
does not close, it is currently the General Partner's intention to seek a
substitute buyer for the Substitute Sale System(s). There is no assurance that
the General Partner could arrange for a Substitute Sales Transaction(s) for the
Substitute Sale System(s) at an appropriate price or on terms acceptable to the
Partnership. Accordingly, there is no assurance that the sales price for any
Substitute Sales Transaction would be equivalent to the sales price contained in
the applicable Asset Purchase Agreement. Any change to the amount of net sales
proceeds to be
5
<PAGE> 16
received would cause a corresponding change to the Pro Forma Distribution Per
Unit. See "PRO FORMA FINANCIAL INFORMATION." As described below, the amount by
which the Pro Forma Distribution Per Unit would be reduced if one or more of the
Sales Transactions does not close is dependent upon future events and
circumstances. In the event that any of the Sales Transactions do not close, it
is currently the General Partner's intention to seek a substitute buyer for the
Substitute Sale System(s). There is no assurance that the General Partner could
arrange for a Substitute Sales Transaction(s) at an appropriate price or on
terms acceptable to the Partnership. If the General Partner's efforts in
arranging a Substitute Sales Transaction(s) prove to be unsuccessful, the
General Partner would evaluate market, competitive, regulatory, financial and
other conditions (relating to the cable television industry generally and to the
Substitute Sale System(s) specifically) in order to determine whether it would
be in the best interest of the Partnership to use all or a portion of the
available net cash proceeds (after repaying debt as required by the terms of the
Partnership's bank credit facility and repaying any amounts due to TCIC and its
affiliates) from any of the consummated Sales Transactions to fund all or a
portion of any remaining cable television system's(s') liquidity requirements,
including non-discretionary capital expenditures and necessary maintenance costs
as well as the cost of implementing technological advancements or improvements.
Accordingly, the failure to consummate one or more of the Sales Transactions
could delay and would reduce the Pro Forma Distribution Per Unit. The General
Partner expects that any portion of the net cash proceeds not utilized to fund
such non-discretionary capital expenditures, maintenance costs and the costs of
technological advancements or improvements or other obligations of the
Partnership would be available for distribution to the Limited Partners. The
General Partner has not yet determined which course of action it would pursue
and anticipates that it would pursue such a course of action only after making a
careful evaluation of all relevant factors. Limited Partners will not have an
opportunity to vote on such course of action.
The General Partner is in the process of marketing for sale its remaining
cable television system, the Riverside System. There is no assurance that the
General Partner can arrange for a sale of the Riverside System at an
appropriate price or on terms acceptable to the Partnership. If the General
Partner is unable to arrange for a sale of the Riverside System at an
appropriate price or on terms acceptable to the Partnership, the Partnership
will continue to operate the Riverside System. Although no assurance can be
given, the General Partner currently anticipates that any cash proceeds from
the Sales Transactions will not be used to fund the Riverside System's
capital expenditures or liquidity requirements. Limited Partners owning in
the aggregate more than 50% of the Units will have to approve a sale of the
Riverside System, including a sale to an affiliate of the Partnership.
6
<PAGE> 17
SUMMARY HISTORICAL FINANCIAL DATA
Partnership Summary Historical Financial Data
The following table sets forth summary financial and statistical data
relating to the Partnership's financial condition as of September 30, 1996 and
December 31, 1995 and 1994 and the Partnership's results of operations for the
nine months ended September 30, 1996 and 1995 and the years ended December 31,
1995 and 1994. Such summary financial and statistical data is qualified in its
entirety by, and should be read in conjunction with, the "PRO FORMA FINANCIAL
INFORMATION" included elsewhere herein, and the detailed information and
financial statements included in the 1996 10-Q and the 1995 10-K. Amounts are in
thousands, except for percentages and per Unit amounts.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1)
- ---------------------------------------------
Revenue................................................... $20,744 $19,250 $26,196 $24,393
Operating costs and expenses:
Programming, operating, selling, general and
administrative (2)................................... 13,329 11,815 16,459 15,123
Depreciation and amortization........................... 10,635 10,897 14,604 14,483
------- ------- ------- -------
Operating loss....................................... (3,220) (3,462) (4,867) (5,213)
Interest expense, net..................................... 240 (666) (844) (989)
Share of earnings (losses) of Newport News................ 39,976 (251) (652) (194)
Other, net................................................ -- 199 199 --
------- ------- ------- -------
Net earnings (loss)..................................... $36,996 $(4,180) $(6,164) $(6,396)
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ---------------
1996 1995 1994
------------- ------ ------
<S> <C> <C> <C>
BALANCE SHEET DATA
- -----------------------------
Property and equipment, net...................................... 39,684 39,794 39,588
Franchise costs and other intangibles, net....................... 30,859 37,050 45,398
Total assets..................................................... 83,174 79,936 86,563
Debt............................................................. 2,000 8,700 13,800
Partners' equity................................................. 61,502 57,840 64,004
Limited Partners' equity per Unit................................ 320.94 302.81 333.32
STATISTICAL DATA(3)
- ------------------------
Homes passed..................................................... 107.4 105.8 103.2
Basic subscribers................................................ 78.6 73.0 72.5
Basic Penetration (4)............................................ 73% 69% 70%
Premium subscriptions............................................ 77.3 67.3 63.0
Premium Penetration (5).......................................... 98% 92% 87%
</TABLE>
- ---------------
(1) See the 1996 10-Q and Item 7 of the 1995 10-K for explanations of certain
revenue and expense variances.
(2) Includes allocations and charges from related parties. See Note (5) to the
financial statements in the 1995 10-K.
(3) See the 1996 10-Q and Item 7 of the 1995 10-K for explanations of certain
fluctuations in the Partnership's subscribers.
(4) "Basic Penetration" represents the ratio of basic subscribers to homes
passed.
(5) "Premium Penetration" represents the ratio of premium subscriptions to basic
subscribers.
7
<PAGE> 18
Lower Delaware System Summary Historical Financial Data
The following table sets forth summary financial and statistical data
relating to the Lower Delaware System's financial condition as of September 30,
1996 and December 31, 1995 and 1994 and the Lower Delaware System's results of
operations for the nine months ended September 30, 1996 and 1995 and the years
ended December 31, 1995 and 1994. Such summary financial and statistical data is
qualified in its entirety by, and should be read in conjunction with, the "PRO
FORMA FINANCIAL INFORMATION" included elsewhere herein, and the detailed
information and financial statements included in the 1996 10-Q and the 1995
10-K. The statement of operations and balance sheet data include those assets,
liabilities, revenue and expenses directly related to the Lower Delaware System.
Amounts are in thousands, except for percentages.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- ------------------
1996 1995 1995 1994
------ ------- ------- -------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1)
- ----------------------------------------------
Revenue................................................. $6,558 $ 5,892 $ 8,069 $ 7,659
Operating costs and expenses:
Programming, operating, selling, general and
administrative (2)................................. 3,753 3,243 4,686 3,997
Depreciation and amortization......................... 3,762 3,809 5,096 4,912
------ ------- ------- -------
Operating loss..................................... $ (957) $(1,160) $(1,713) $(1,250)
====== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ---------------
1996 1995 1994
------------- ------ ------
<S> <C> <C> <C>
BALANCE SHEET DATA
- ------------------------------
Property and equipment, net...................................... 12,981 12,123 12,128
Franchise costs and other intangibles, net....................... 10,123 12,620 15,948
Total assets..................................................... 28,452 25,791 27,972
Partnership's equity............................................. 27,438 24,855 27,279
STATISTICAL DATA(3)
- -------------------------
Homes passed..................................................... 35.0 32.9 33.8
Basic subscribers................................................ 29.2 25.9 25.7
Basic Penetration................................................ 83% 79% 76%
Premium subscriptions............................................ 23.2 18.5 11.9
Premium Penetration.............................................. 79% 71% 46%
</TABLE>
- ---------------
(1) See the 1996 10-Q and Item 7 of the 1995 10-K for explanations of certain
revenue and expense variances.
(2) As compared to the corresponding prior year periods, programming, operating,
selling, general and administrative expenses increased 16% and 17% during
the nine months ended September 30, 1996 and the year ended December 31,
1995, respectively. The increase during the nine months ended September 30,
1996 is due primarily to (i) higher programming costs ($261,000) and (ii)
higher labor costs ($85,000). The increase during the year ended December
31, 1995 is due primarily to (i) higher labor costs ($303,000) and (ii)
higher programming costs ($240,000).
(3) See the 1996 10-Q and Item 7 of the 1995 10-K for explanations of certain
fluctuations in the Lower Delaware System's subscribers.
8
<PAGE> 19
St. Mary's System Summary Historical Financial Data
The following table sets forth summary financial and statistical data
relating to the St. Mary's System's financial condition as of September 30, 1996
and December 31, 1995 and 1994 and the St. Mary's System's results of operations
for the nine months ended September 30, 1996 and 1995 and the years ended
December 31, 1995 and 1994. Such summary financial and statistical data is
qualified in its entirety by, and should be read in conjunction with, the "PRO
FORMA FINANCIAL INFORMATION" included elsewhere herein, and the detailed
information and financial statements included in the 1996 10-Q and the 1995
10-K. The statement of operations and balance sheet data include those assets,
liabilities, revenue and expenses directly related to the St. Mary's System.
Amounts are in thousands, except for percentages.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- ------------------
1996 1995 1995 1994
------- ------ ------- -------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1)
- ----------------------------------------------
Revenue................................................. $ 5,075 $4,552 $ 6,161 $ 5,771
Operating costs and expenses:
Programming, operating, selling, general and
administrative(2).................................. 3,267 2,604 3,655 3,442
Depreciation and amortization......................... 2,826 2,855 3,835 3,709
------- ------ ------- -------
Operating loss..................................... $(1,018) $ (907) $(1,329) $(1,380)
======= ====== ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------
1996 1995 1994
------------- ------ ------
<S> <C> <C> <C>
BALANCE SHEET DATA
- ------------------------------
Property and equipment, net.................................... 11,612 11,031 10,019
Franchise costs and other intangibles, net..................... 9,744 11,469 13,769
Total assets................................................... 25,062 23,390 23,836
Partnership's equity........................................... 24,426 22,763 23,291
STATISTICAL DATA
- -------------------------
Homes passed................................................... 26.7 23.5 24.0
Basic subscribers.............................................. 18.5 17.3 17.1
Basic Penetration.............................................. 69% 74% 71%
Premium subscriptions.......................................... 22.8 18.3 13.6
Premium Penetration............................................ 123% 106% 80%
</TABLE>
- ---------------
(1) See the 1996 10-Q and Item 7 of the 1995 10-K for explanations of certain
revenue and expense variances.
(2) As compared to the corresponding prior year periods, programming, operating,
selling, general and administrative expenses increased 25% and 6% during the
nine months ended September 30, 1996 and the year ended December 31, 1995,
respectively. The increase during the nine months ended September 30, 1996
is due primarily to (i) higher labor costs ($212,000) and (ii) higher
programming costs ($173,000). The increase during the year ended December
31, 1995 is primarily due to higher programming costs ($187,000).
9
<PAGE> 20
Southern Tennessee System Summary Historical Financial Data
The following table sets forth summary financial and statistical data
relating to the Southern Tennessee System's financial condition as of September
30, 1996 and December 31, 1995 and 1994 and the Southern Tennessee System's
results of operations for the nine months ended September 30, 1996 and 1995 and
the years ended December 31, 1995 and 1994. Such summary financial and
statistical data is qualified in its entirety by, and should be read in
conjunction with, the "PRO FORMA FINANCIAL INFORMATION" included elsewhere
herein, and the detailed information and financial statements included in the
1996 10-Q and the 1995 10-K. The statement of operations and balance sheet data
include those assets, liabilities, revenue and expenses directly related to the
Southern Tennessee System. Amounts are in thousands, except for percentages.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
----------------- -----------------
1996 1995 1995 1994
------ ------ ------ ------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1)
- ----------------------------------------------
Revenue................................................. $2,881 $2,778 $3,759 $3,451
Operating costs and expenses:
Programming, operating, selling, general and
administrative(2).................................. 1,574 1,573 2,126 1,965
Depreciation and amortization(3)...................... 1,090 1,168 1,560 1,588
------ ----- ----- -----
Operating income (loss)............................ $ 217 $ 37 $ 73 $ (102)
====== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- -------------------
1996 1995 1994
------------- ------- -------
<S> <C> <C> <C>
BALANCE SHEET DATA
- -----------------------------
Property and equipment, net................................. 5,252 5,707 5,940
Franchise costs and other intangibles, net.................. 505 939 1,612
Total assets................................................ 6,424 6,690 7,607
Partnership's equity........................................ 6,149 6,412 7,358
STATISTICAL DATA
- ------------------------
Homes passed................................................ 14.5 14.1 14.2
Basic subscribers........................................... 11.4 10.9 10.8
Basic Penetration........................................... 79% 77% 76%
Premium subscriptions....................................... 8.4 7.9 7.5
Premium Penetration......................................... 74% 72% 69%
</TABLE>
- ---------------
(1) See the 1996 10-Q and Item 7 of the 1995 10-K for explanations of certain
revenue and expense variances.
(2) As compared to the corresponding prior year period, programming, operating,
selling, general and administrative expenses remained relatively constant
during the nine months ended September 30, 1996 and increased 8% during the
year ended December 31, 1995. The increase during the year ended December
31, 1995 is due primarily to increased programming costs ($62,000).
(3) As compared to the corresponding prior year periods, depreciation and
amortization decreased 7% during the nine months ended September 30, 1996
and remained relatively constant during the year ended December 31, 1995.
Such decrease during the nine months ended September 30, 1996 is due to
certain intangible assets becoming fully amortized.
10
<PAGE> 21
REASONS FOR THE SALES TRANSACTIONS
The General Partner's decision to proceed with the Sales Transactions was
based upon its belief that consummation of the Sales Transactions was in the
best interest of the Limited Partners. In making this decision, the General
Partner considered the amount likely to be distributed to the Limited Partners
if the Sales Transactions were to occur, the business risks to which the
Partnership would be exposed if the Sales Transactions were not to occur and the
General Partner's belief as to the expectations of the Limited Partners
regarding the timing of the liquidation of their investment in the Partnership.
The General Partner believes that the non-discretionary capital
expenditures and the maintenance costs of the Lower Delaware and St. Mary's
Systems, and to a lesser extent, the Southern Tennessee System, will increase
and that the Sales Systems will be faced with increased competition. The General
Partner also believes that the most effective method to maintain the
Partnership's competitive position, and to seek to increase the value of the
Sales Systems in the future, would be to implement various technological
advancements and improvements to each Sales System. However, the General Partner
believes that uncertainty exists as to whether a reasonable return could be
earned on the capital invested in any such technological advancements and
improvements during the remaining term of the Partnership. See "BACKGROUND AND
REASONS FOR THE SALES TRANSACTIONS -- Reasons for the Sales Transactions."
In light of the uncertainties associated with the continued ownership of
the Sales Systems, the General Partner believes that now is the time to convert
to cash the Limited Partners' interests in the Sales Systems. See "BACKGROUND
AND REASONS FOR THE SALES TRANSACTIONS -- Reasons for the Sales Transactions."
FAIRNESS OF THE SALES TRANSACTIONS
The General Partner believes that the Sales Transactions are fair to the
Limited Partners based on, among other things, (i) the Competitive Auction
utilized in soliciting bids for the Sales Systems, (ii) the opinions received
from Lehman Brothers Inc. ("Lehman Brothers"), which concluded that the
consideration to be received by the Partnership in connection with each of the
Sales Transactions is fair, from a financial point of view, to the Partnership
(the "Fairness Opinions"), (iii) the cash flow multiples and per subscriber
values represented by the Sales Transactions, as compared to the General
Partner's knowledge of the corresponding multiples and values represented by
recent prices paid for comparable cable television systems and (iv) the price
protections afforded to the Partnership by the provisions in the applicable
Asset Purchase Agreements, which generally permit the Partnership to terminate
such agreements for a specified dollar amount if a higher offer is received for
the Sales Systems. See "BACKGROUND AND REASONS FOR THE SALES
TRANSACTIONS -- Fairness of the Sales Transactions," "DESCRIPTION OF THE SALES
TRANSACTIONS -- Lower Delaware Sale -- Principal Provisions of the Lower
Delaware Asset Purchase Agreement", "-- St. Mary's Sale -- Principal Provisions
of the St. Mary's Asset Purchase Agreement" and "-- Southern Tennessee
Sale -- Principal Provisions of the Southern Tennessee Asset Purchase Agreement"
and "FAIRNESS OPINIONS." The General Partner also believes that a Substitute
Sales Transaction will be fair to the Limited Partners, based on, among other
things, (i) the conditions that must be satisfied in connection with a
Substitute Sales Transaction and (ii) the General Partner's belief that a vote
at this time would expedite the sale of any Substitute Sale System in the event
that any of the Sales Transactions fail to close. See "BACKGROUND AND REASONS
FOR THE SALES TRANSACTIONS -- Recommendation for a Substitute Sales
Transaction." THEREFORE, THE GENERAL PARTNER RECOMMENDS THAT THE LIMITED
PARTNERS VOTE FOR APPROVAL OF EACH OF THE RESOLUTIONS.
INTERESTS OF TCIC AND RELATED PARTIES
Interests of TCIC and Its Affiliates
The recommendation of the General Partner that the Limited Partners vote
for approval of each of the resolutions relating to the approval of the Sales
Transactions and the Substitute Sales Transaction(s) (the
11
<PAGE> 22
"Resolutions") could be considered subject to certain conflicts of interest.
Because TCIC is the indirect parent of the General Partner and will therefore
receive distributions upon the consummation of any sale of the Partnership's
Sales Systems attributable to its interest in the General Partner, and because
TCIC and its affiliates will receive certain disposition fees upon the
consummation of any sale of the Partnership's Sales Systems, TCIC has an
economic interest in the Sales Transactions and any Substitute Sales
Transaction(s). However, the amount of distributions and the disposition fees is
related directly to the amount received by the Partnership upon the sale of any
Sales System, and the General Partner therefore believes that its interest is
consistent, and not in conflict, with the economic interest of the Limited
Partners. In any event, the General Partner believes that the Sales Transactions
are in the best interest of the Limited Partners, and that the Competitive
Auction utilized to solicit bids for the Sales Systems provided the Partnership
with a purchase price equal to the fair market value for each Sales System. In
addition, no member of TVI's Board of Directors owns any Units or more than one
percent of the outstanding shares of TCI, the ultimate parent and owner,
directly or indirectly, of all of the voting stock of TVI. Except for the
employment relationships of certain members of the Board of Directors of TVI
described in "MANAGEMENT," and the ownership by any member of not more than one
percent of the shares of TCI, no member of TVI's Board of Directors has any
economic interest in the General Partner, TVI, TCA, TCIC or TCI. Three of the
four members of TVI's Board of Directors were present at the meeting pursuant to
which the Sales Transactions were approved and voted in favor of the Sales
Transactions. Stephen M. Brett was not present, and did not vote, at such
meeting. See "MANAGEMENT" for a description of the relationships between the
members of the Board of Directors of TVI and TCIC or any of its affiliates.
The following table sets forth the estimated amounts that would have been
received by TCIC and its affiliates from the Partnership if the Sales
Transactions had been consummated on September 30, 1996 (amounts in thousands):
<TABLE>
<S> <C>
Disposition Fee(1).................................................. $1,987
Share of Partnership distributions(2)............................... 593
------
Total..................................................... $2,580
======
</TABLE>
- ---------------
(1) The amount shown ($916,000 attributable to the Lower Delaware Sale, $651,000
attributable to the St. Mary's Sale and $420,000 attributable to the
Southern Tennessee Sale) has been reduced by the amounts payable by TCA to
the Broker in connection with the Lower Delaware Sale ($377,000), St. Mary's
Sale ($268,000) and Southern Tennessee Sale ($173,000).
(2) This payment is attributable to TVI's 46.4% interest in the General Partner
and has been reduced by the amount payable by the General Partner to Cable
Corp. See "MANAGEMENT."
In addition, TCIC performs cash management services for the Partnership.
Accordingly, TCIC makes disbursements on behalf of the Partnership for all of
the Partnership's expenses, including expenses for day-to-day operations and for
capital expenditures, and the Partnership reimburses TCIC from time to time for
such disbursements from the Partnership's cash flow from operations and
borrowings under its revolving line of credit. In addition, the Partnership
reimburses TCIC and its affiliates for certain expenses incurred by TCIC and its
affiliates on behalf of the Partnership. See Note (7) and Note (5) to the
Partnership's financial statements included in the 1996 10-Q and the 1995 10-K,
respectively. The amount owed to TCIC and its affiliates as a result of these
cash management services and reimbursable expenses fluctuates from period-to-
period based upon the timing of expenditures, cash flow from operations and bank
borrowings. At September 30, 1996, the Partnership owed TCIC and its affiliates
$9,937,000. TCIC does not charge interest to the Partnership on this outstanding
balance. Such amounts were assumed to be repaid with cash proceeds from the
Sales Transactions in determining the Pro Forma Distribution Per Unit, although
the repayment of such amounts is not contingent upon consummation of the Sales
Transactions. To the extent not otherwise paid in the normal course of business,
the full amount owed for such services and expenses is expected to be paid to
TCIC and its affiliates upon the first of the Sales Transactions to close.
See "PRO FORMA FINANCIAL INFORMATION," and "INTERESTS OF TCIC AND RELATED
PARTIES -- Interests of TCIC and Its Affiliates" and "-- Interests of the
General Partner."
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<PAGE> 23
Conflicts of the Broker
The Broker was retained by the Partnership to conduct the Competitive
Auction. Certain of the shareholders of a general partner of the Broker are also
limited partners of Cablevision Equities VI ("Cablevision"), the limited partner
of the General Partner. As a limited partner, Cablevision is allocated 33.6% of
the General Partner's profits, losses and distributions. However, this ownership
interest did not entitle Cablevision to participate in the selection of the
Broker to conduct the Competitive Auction, and the General Partner believes that
these common ownership interests did not preclude the Broker from maintaining
its independence with respect to the manner in which the Competitive Auction was
conducted. See "INTERESTS OF TCIC AND RELATED PARTIES -- Conflicts of the
Broker."
LACK OF APPRAISAL RIGHTS
The Partnership Agreement and the Colorado Uniform Limited Partnership Act,
under which the Partnership is governed, do not give rights of appraisal or
similar rights to Limited Partners who dissent from the vote of the majority in
approving or disapproving any of the Resolutions.
CERTAIN DEFINITIONS
Capitalized terms used in this Proxy Statement shall have the meanings set
forth in the Glossary, which appears herein as Appendix A.
13
<PAGE> 24
BACKGROUND AND REASONS FOR THE SALES TRANSACTIONS
This section describes the background and reasons for the Sales
Transactions. The decision to offer the Sales Systems for sale was made during
the first quarter of 1996.
REASONS FOR THE SALES TRANSACTIONS
General
The General Partner's decision to proceed with the Sales Transactions was
based upon its belief that consummation of the Sales Transactions was in the
best interest of the Limited Partners. In making this decision, the General
Partner considered (i) the fact that the Pro Forma Distribution Per Unit
together with the distribution previously made to the Limited Partners in
connection with the sale of the Newport News System was expected to exceed the
Limited Partners' original investment of $500 per Unit, (ii) the fact that a
longer holding period would likely subject Limited Partners to certain business
risks associated with increased capital investment requirements and certain
competitive and regulatory developments in the cable television industry, as
discussed in more detail below and (iii) the General Partner's belief that the
Limited Partners expected that their investments in the Partnership would be
liquidated after a reasonable holding period.
Although the terms of the Partnership Agreement do not provide for the
termination of the Partnership until December 31, 2005, it was not the General
Partner's intention that the Partnership would hold its cable television
properties for the entire term of the Partnership. By virtue of the provisions
of the Partnership Agreement, the General Partner has the right and
responsibility to determine when cable television properties should be sold and
when the Partnership should be liquidated. As discussed in the Partnership's
offering prospectus, the decision to sell the Partnership's cable television
properties would depend on a variety of factors; accordingly, it was not
possible at the outset of the Partnership to determine precisely when the
Partnership's cable television properties would be sold.
After careful consideration, the General Partner believes that the
herein-described factors support its belief that now is an appropriate time to
sell the Sales Systems.
Prospects for Future Capital Appreciation of the Sales Systems
The General Partner's decision to sell the Sales Systems took into account
the General Partner's opinions concerning the prospects for capital appreciation
of the Sales Systems beyond current market prices.
In general, the General Partner believes that the traditional methods used
to increase the values of cable television systems cannot necessarily be relied
upon to produce additional increases in values in future periods. Historically,
the values of cable television systems have been increased by (i) expanding the
number of homes passed by such cable television systems by either acquiring
adjacent service areas or constructing line extensions, (ii) increasing the
percentage of homes passed by cable that subscribe to basic cable services,
(iii) increasing revenue by offering additional services to subscribers, (iv)
implementing increases to prices charged for services and (v) reducing certain
cash operating costs. The General Partner believes that the historical means by
which the Partnership has achieved capital appreciation of the Sales Systems may
be limited in the future by increased competition, the effects of the regulation
of certain cable rates, limitations of the Sales Systems' existing cable
distribution systems and the general maturity of subscriber growth within the
cable television industry. The General Partner also believes that the
non-discretionary capital expenditures and the maintenance costs of the Sales
Systems will increase and that the Sales Systems will be faced with increased
competition. In this regard, the General Partner believes that the Partnership
could be placed at a competitive disadvantage if it were not to invest
significant capital in certain technological advancements or improvements to the
Sales Systems. As noted under "-- Alternatives Considered to the Sales
Transactions," the Sales Systems, particularly the Lower Delaware and St. Mary's
Systems, offer significantly fewer channels and provide a lower quality picture
than state-of-the-art cable television and direct broadcast satellite ("DBS")
systems. See "Competition" and "Regulation."
In light of the factors described in the preceding paragraph, in March 1996
the General Partner determined that the most effective method to maintain its
competitive position and to seek to increase the
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<PAGE> 25
value of the Sales Systems in the future would be to implement certain
technological advancements and improvements which could in time (i) increase
revenue by enabling the distribution of a broad array of new and enhanced
services and (ii) reduce certain components of cash operating expenses. These
technological advancements and improvements would involve the replacement of the
Sales Systems' coaxial trunk cable with optical fiber, the installation of a
two-way broad-band communications network, and the development and deployment of
digital compression technology. The General Partner anticipated that this plan,
which was at the time being deployed in many of TCIC's cable television systems,
(i) would increase channel capacity and improve picture quality and (ii) would
create an information network with the capability of eventually expanding beyond
television programming to deliver an array of high speed two-way communication
services. Such technological advancements and improvements would require
significant capital expenditures and there can be no assurance that such
advancements and improvements would have increased revenue and/or lowered cash
operating expenses of the Sales Systems. In addition, certain franchise
agreements relating to the Sales Systems expire and must therefore be renewed
over the next several years, and franchising authorities may require certain
technological advancements and improvements as a condition to renewal.
Although the General Partner continues to believe that under certain
circumstances it would replace the Sales Systems' coaxial trunk cable with
optical fiber and install a two-way broad-band communications network, it now
believes that, in the near term, the most effective method to maintain the
competitive position of the Sales Systems, and to increase the value of the
Sales Systems in the future, would be to deploy digital compression technology
for the Sales Systems' pay services, while retaining traditional analog service
for the basic services. This could be done in a cable television system which
has available channel bandwidth or which could be achieved if the existing
programming were digitized. Compression technology would increase channel
capacity and improve picture quality. The cost of digital compression technology
is limited to the installation and equipment costs of a digital box;
implementation time is short, and the equipment can be redeployed to another
household if the service is canceled. A second approach to maintaining a Sales
System's competitive position and increasing its value in the future would be to
add enhanced programming to existing service by means of DBS. See "Competition"
below for a description of the advantages and disadvantages of DBS. Such an
approach would probably be considered in Sales Systems which do not have channel
bandwidth available but do suffer from competitive threats in the area. The
replacement of coaxial trunk cable and installation of a two-way broad-band
communications network would only be considered if compression technology and
DBS were not viable alternatives for a Sales System.
Currently, the Partnership has no specific plans with respect to the
foregoing advancements or improvements for any individual Sales System. The
General Partner would not proceed with the implementation of any technological
advancements or improvements to the Sales Systems without first conducting
additional analyses of the economic feasibility of such advancements and
improvements on a system-by-system basis. Although the General Partner has not
yet performed such additional analyses, the General Partner believes that such
additional analyses would focus primarily on whether a reasonable return could
be earned on the capital invested in any such improvements and the period of
time required to achieve such a return. In this regard, the General Partner was,
and continues to be, uncertain whether a reasonable return could be earned on
any such invested capital during the remaining term of the Partnership.
Based upon the General Partner's assessment of the factors set forth above,
it was determined that (i) the Partnership's prospects for future capital
appreciation of the Sales Systems were uncertain and (ii) the continued
ownership of the Sales Systems would subject the Partnership to significant
business risks during the remaining term of the Partnership. Accordingly, the
General Partner concluded that it would be in the best interest of the
Partnership to sell the Sales Systems in order to convert to cash the
Partnership's interest in the Sales Systems.
Perception of Cable Television Market
The General Partner's perception of trends in the cable television
marketplace was also a factor in arriving at the decision to sell the Sales
Systems in the first quarter of 1996. In general, the General Partner believes
that most of the recent activity in the cable marketplace had been driven by the
efforts of multiple system operators ("MSOs") or small system operators to
consolidate (or cluster) cable television systems so
15
<PAGE> 26
that the operator could obtain the operational, financial and technological
benefits associated with owning cable television systems that serve
substantially all of the cable television subscribers in any given geographical
area. One result of the clustering trend was that the number of buyers who may
have been interested in acquiring a stand-alone cable television system would
generally be a function of the number of operators that own one or more cable
television systems in a particular geographical area. For example, Rifkin was
the successful bidder for the Southern Tennessee System, which Sales System is
capable of being clustered because of its proximity to the existing operations
of Rifkin.
Competition
Another significant factor considered by the General Partner in making its
decision to sell the Sales Systems was the General Partner's evaluation of the
business risks associated with increasing levels of competition from alternative
providers of video programming services. For a related discussion, see
"-- Prospects for Future Capital Appreciation of the Sales Systems."
One source of competition is multichannel multipoint distribution systems
("MMDS"). MMDS delivers programming services over microwave channels received by
subscribers with a special antenna. MMDS systems are less capital intensive, are
not required to obtain local franchises or pay franchise fees, and are subject
to fewer regulatory requirements than cable television systems. The Federal
Communications Commission (the "FCC") has taken a series of actions intended to
facilitate the development of wireless cable systems as an alternative means of
distributing video programming, including reallocating the use of certain
frequencies to these services and expanding the permissible use and eligibility
requirements for the use of certain channels reserved for educational purposes.
The FCC's actions would enable a single entity to develop an MMDS system with
the potential for up to 35 channels, and thus compete more effectively with
cable television. Digital compression technology, which is now being used by
certain operators of satellite distribution systems, is expected soon to
increase significantly the number of channels that will be available from
over-the-air technologies such as MMDS in the future. Further, in 1995, several
large telephone companies acquired significant ownership in numerous MMDS
companies. This substantial infusion of money into the MMDS industry is expected
to accelerate its competitive impact.
Another source of competition is DBS. DBS has advantages and disadvantages
as an alternative means of distributing video signals to the home. Among the
advantages are (1) the initial capital investment for the satellite and
uplinking segment of a DBS system (such as DirecTV) is fixed and does not
increase with the number of subscribers receiving satellite transmissions; (2)
DBS is not currently subject to local regulation of service and prices or
required to pay franchise fees; (3) the capital costs for the ground segment of
a DBS system (the reception equipment) are directly related to and limited by
the number of service subscribers; and (4) digital compression technology
enables the operator to offer a broad variety of programming choices and enables
subscribers to receive laser disc-quality picture and compact disc-quality
sound. DBS's disadvantages presently include the inability to tailor the
programming package to the interests of different geographic markets, such as
providing local news, other local origination services and local broadcast
stations; signal reception being subject to line of sight angles; and
intermittent interference from atmospheric conditions and terrestrially
generated radio frequency noise. Disadvantages of DBS include certain regulatory
restraints concerning the delivery of off-air signals, but there can be no
assurance that these restraints will continue in the future. In this regard, the
Partnership is aware that DBS service is now available within the service areas
of all of the Sales Systems.
The Partnership expects that it may face substantial competition from
telephone companies for the provision of video services. The Partnership assumes
that all major telephone companies have already entered or soon will enter the
business of providing video services. The major telephone companies have greater
financial resources than the Partnership, and the Cable Television Consumer
Protection and Competition Act of 1992 (the "1992 Cable Act") ensures that
telephone company providers of video services will have access to acquiring all
of the significant cable television programming services. Additionally, the
Telecommunications Act of 1996 (the "1996 Telecom Act") eliminates certain
federal restrictions on utility holding companies and thus frees all utility
companies to provide cable television services. The 1996 Telecom Act allows
telephone companies to compete directly with cable operators by repealing the
telephone company-cable cross-
16
<PAGE> 27
ownership ban and the FCC's video dialtone regulations. This will allow local
exchange carriers ("LECs"), including the bell operating companies, to compete
with cable operators both inside and outside their telephone service areas. The
1996 Telecom Act replaces the FCC's video dialtone rules with an "open video
system" ("OVS") plan pursuant to which LECs can elect to provide cable service
in their telephone service area. LECs complying with FCC OVS regulations will
receive relaxed oversight, and only the program access, negative option billing
prohibition, subscriber privacy, EEO, PEG and must-carry and retransmission
consent provisions of the Communications Act of 1934 will apply to LEC-provided
OVS, and cable copyright provisions will apply to programmers using OVS.
Franchise requirements, rate regulation, consumer service provisions, leased
access and equipment compatibility provisions will not apply, although local
franchising authorities ("LFAs") may require OVS operators to pay "franchise
fees" to the extent that the OVS provider or its affiliates provide cable
services over the OVS. Such fees may not exceed the franchise fees charged to
cable operators in the area, and the OVS provider may pass through the fees as a
separate subscriber bill item.
The Partnership expects that these new statutory provisions may result in
another source of competition in the delivery of video services. The Partnership
is aware that one regional bell operating company has completed installation of
a fiber optic network within the Lower Delaware System's franchise areas. Based
on the foregoing, the Partnership continues to believe that its cable systems
will experience competition from alternative providers of video programming
services in the future.
Cable television system operators are presently operating in an industry
that is characterized by rapidly changing competitive, regulatory, technological
and economic factors. Although the General Partner generally is unable to
predict the effect that such changing factors might have on the Partnership's
financial condition and results of operations, the General Partner believes that
the continued evolution of such factors could place the Partnership at a
competitive disadvantage if it were not to implement certain technological
advancements or improvements to the Sales Systems. See "Prospects for Future
Capital Appreciation of the Sales Systems."
The General Partner cannot predict the impact that these existing and
future competitors will have on the operations of the Sales Systems. Even if the
Sales Systems implement any technological advancements or improvements that
would allow the Sales Systems to compete more effectively with alternative
providers of video programming, the General Partner believes that the impact
from these sources of competition could still be substantial.
Accordingly, the General Partner believes that the consummation of the
Sales Transactions represents a desirable course of action because Limited
Partners would be relieved of the risks and uncertainties associated with the
above-described competitive developments.
Regulation
In making its decision to sell the Sales Systems, the General Partner
considered the regulatory environment facing the cable television industry in
general and the Sales Systems in particular.
On October 5, 1992, Congress enacted the 1992 Cable Act, which greatly
expands federal and local regulation of the cable television industry. Among
other matters, the 1992 Cable Act mandated regulation of certain cable
television rates, provided for the choice by broadcast television stations of
either "must carry" rights or "retransmission consent" rights, regulated the
sale of cable programming, and implemented other operational restrictions.
In 1993 and 1994, the FCC adopted certain rate regulations required by the
1992 Cable Act and imposed a moratorium on certain rate increases. As a result
of such actions, the Partnership's basic and tier service rates and its
equipment and installation charges (the "Regulated Services") are subject to the
jurisdiction of LFAs and the FCC. The regulations established bench mark rates
in 1993, which were further reduced in 1994, to which the rates charged by cable
operators for Regulated Services were required to conform.
The Partnership reduced its rates in 1993 and 1994 and limited its rate
increases in 1995 and 1996 in response to FCC regulations. The Partnership
believes that it has complied, in all material respects, with the provisions of
the 1992 Cable Act, including its rate setting provisions. However, the
Partnership's rates for Regulated Services are subject to review by the FCC, if
a complaint has been filed, or by the appropriate
17
<PAGE> 28
franchise authority, if such authority has been certified. If, as a result of
the review process, a system cannot substantiate its rates, it could be required
to retroactively reduce its rates to the appropriate benchmark and refund the
excess portion of rates received. Any refunds of the excess portion of tier
service rates would be retroactive to the date of complaint. Any refunds of the
excess portion of all other Regulated Services rates would be retroactive to one
year prior to the implementation of the rate reductions.
On February 8, 1996, the 1996 Telecom Act was signed into law. Because the
1996 Telecom Act does not deregulate cable programming services tier rates until
1999 (and basic service tier rates will remain regulated thereafter), the
Partnership believes that the 1993 and 1994 rate regulations have had and will
continue to have a material adverse effect on its results of operations.
The General Partner currently believes that none of the Sales Systems is
subject to "effective competition" as defined in the 1992 Cable Act. However,
the 1996 Telecom Act expands the definition of effective competition to include
any franchise area where an LEC (or affiliate) provides video programming
services to subscribers by any means other than through direct broadcast
satellite. The FCC is conducting a rulemaking to clarify the statutory language
with respect to the expanded definition of "effective competition."
In light of the uncertainties and adverse developments within the
regulatory framework for the cable television industry, the General Partner
believes that consummation of the Sales Transactions represents a desirable
course of action because the Limited Partners would be relieved of the business
risks associated with such uncertainties and adverse developments.
Conclusion
In the General Partner's opinion, the consummation of the Sales
Transactions represents the most desirable course of action because the
Partnership's interests in the Sales Systems would be converted to cash and the
Limited Partners would be relieved of the risks and uncertainties associated
with the continued ownership of the Sales Systems.
ALTERNATIVES CONSIDERED TO THE SALES TRANSACTIONS
General
In the summer of 1993, the General Partner considered the sale of the
Southern Tennessee and Newport News Systems. At that time, (i) American Cable TV
Investors 4, Ltd. ("ACT 4") was exploring the possible sale of all of its
remaining assets, including the Newport News System (which was owned by ACT 4
and the Partnership) and (ii) American Cable TV Investors 3, Ltd. was in the
process of selling a cable television system which was contiguous to the
Southern Tennessee System. In June 1994, the General Partner determined to go
forward with only the sale of the Newport News System.
In March 1996, the General Partner again considered the advisability of a
sale of some or all of the Partnership's cable television systems. The General
Partner briefly discussed the sale of only the Lower Delaware and St. Mary's
Systems. The General Partner believed that although the Partnership's properties
were suitable and adequate by industry standards, the Partnership could be
placed at a competitive disadvantage if it were not to implement certain
technological advancements or improvements to the Sales Systems. The General
Partner concluded that this was particularly true of the Lower Delaware and St.
Mary's Systems, which offered significantly fewer channels, experienced higher
maintenance costs and provided a lower quality picture than was available by
state-of-the-art cable television systems and DBS. The General Partner
ultimately determined that a sale of all of its cable television systems in one
or more transactions would be the preferable way to convert to cash the value of
such systems. See "BACKGROUND AND REASONS FOR THE SALES TRANSACTIONS."
Continued Ownership of the Sales Systems
In March 1996, the General Partner also considered, but rejected as not in
the best interest of the Limited Partners, retaining any or all of its cable
television systems for a longer period with the expectation of achieving greater
capital appreciation. This alternative was rejected because, based on the
General Partner's
18
<PAGE> 29
experience in the cable television industry and its specific knowledge of the
competitive, regulatory, financial and other factors affecting the operations of
its cable television systems, the General Partner believed that any significant
future increase in the value of its cable television systems was not likely to
be achieved without making substantial capital investments in such systems. Even
if the Partnership were to make such capital investments, there is no assurance
that a reasonable return on any such capital investments could be achieved
during the remaining term of the Partnership. Moreover, the General Partner
believed that any increase in the holding period of its cable television systems
(i) would subject the Limited Partners to business risks related to competitive,
technological and regulatory developments in the cable television industry and
(ii) would not be consistent with the Limited Partners' expectations as to the
length of such holding period. It should be noted that the General Partner did
not perform any specific financial analysis in the context of evaluating the
merits of this alternative. See "Reasons for the Sales Transactions."
BACKGROUND OF THE SALES TRANSACTIONS
General
Because the Partnership was expected to hold its cable television
investments for a number of years after its formation, no efforts to dispose of
its cable television systems were made by the General Partner in the early years
of the Partnership's existence. Instead, the General Partner concentrated its
initial effort in making suitable investments for the Partnership, consistent
with the Partnership's investment policies and restrictions, and managing all of
its cable television systems with a view to achieving capital appreciation.
In the summer of 1994, the General Partner and the general partner of ACT 4
considered the sale of the Newport News Systems. The General Partner and the
general partner of ACT 4 believed that a sale at that time was warranted because
of recent improvements in the cable television marketplace, and they concluded
that it was an appropriate time to sell the Newport News System. On January 1,
1996, Newport News sold the Newport News System to an unaffiliated third party
for cash proceeds of $121,886,000. The Partnership has a 40% ownership interest
in Newport News. Accordingly, the Partnership received $35,764,000 of the net
cash proceeds (after satisfaction of Newport News' transaction costs and
liabilities) from the sale of the Newport News System and release of the funds
held in escrow. See "OTHER RELEVANT INFORMATION -- Dissolution of the
Partnership; Distributions").
Annually, generally during the spring, representatives of TVI and Cable
Corp. (prior to its withdrawal in January 1996 as a general partner of the
General Partner) met at TVI's offices in Denver, Colorado to review the
Partnership's cable television systems' financial condition and recent operating
results and to discuss the operational plans for the Partnership's cable
television systems, including budgeted operating data and capital expenditures.
At the annual meeting held in March 1996, representatives of TVI again
considered the alternative of selling the Partnership's cable television
systems, and considered various factors relevant to a decision to proceed with a
sale of such systems. First, the General Partner had reached the conclusion that
the traditional means used to increase the value of the Partnership's cable
television systems were becoming less effective and could no longer be relied
upon to produce significant increases in value in future periods and that any
significant future increases in value were likely to result from the
implementation of certain technological advancements or improvements to such
systems. See "Reasons for the Sales Transactions -- Prospects for Future Capital
Appreciation of the Sales Systems." Second, the 1996 Telecom Act does not
deregulate cable television tier rates until 1999 (and basic service tier rates
will remain regulated thereafter) and the General Partner believed that the 1993
and 1994 rate regulations would continue to have a material adverse effect on
its results of operations. Third, because MSOs were pursuing clustering
strategies, the General Partner thought that MSOs would again become active in
the marketplace. Fourth, the General Partner was aware that all of its cable
television systems are subject to competition from DBS operators. Finally, the
General Partner was also aware that possible future competition from "video
dial-tone" services could have an adverse impact on the revenue and cash flow of
the Lower Delaware and St. Mary's Systems. For the foregoing reasons, the
General Partner determined, in its business judgment, that it was an appropriate
time to begin exploring a means through which Limited Partners could liquidate
their investment in the Partnership's cable television systems. See "Reasons for
the Sales Transactions."
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<PAGE> 30
In March 1996, the General Partner was aware that TCIC did not wish to make
an offer to purchase all of the Partnership's cable television systems pursuant
to the formula set forth in the Partnership Agreement because TCIC did not want
to purchase all of such systems.
Because of the competitive, economic, regulatory and financial environment
in which the Sales Systems operated at such time the General Partner decided,
during the first quarter of 1996, to offer such Systems for sale in the
Competitive Auction.
Competitive Auction for the Sales Systems
Following the General Partner's decision in March 1996 to offer the Sales
Systems for sale, the General Partner determined to engage a broker to offer the
Sales Systems for sale in a competitive auction. The Riverside System was
offered for sale as part of the same competitive auction. After interviewing
several potential brokers, the General Partner retained the Broker to conduct
the Competitive Auction because (i) of the Broker's knowledge of the Sales
Systems, (ii) of the General Partner's belief (based on its knowledge of the
cable television industry) that the Broker is one of the leading cable
television brokers in the United States and (iii) of the experience with the
Broker of the other partnerships in which TCIC and Presidio Capital Corp.
("Presidio") indirectly own general and limited partnership interests (the
"PR-TCI Partnerships") in connection with the sale of the cable television
systems owned by such partnerships.
The General Partner, with the assistance of the Broker, established
procedures for the Competitive Auction that were designed to elicit the highest
bids and to reduce any advantages which other bidders might have perceived TCIC
to have had over such bidders. These procedures included instructions for the
submission of bids and provided, in part, that (i) all bids were to be submitted
in sealed envelopes; (ii) no bids were to be opened until after the deadline for
submission of bids had passed; and (iii) separate bids were to be submitted on
individual Sales Systems.
The General Partner believes that the Competitive Auction was conducted in
a manner that was designed to mitigate potential conflicts of interest. All
potential bidders were advised that TCIC would also be a potential bidder, and
procedures (as described in the preceding paragraph) were established to
minimize any perceived competitive advantage to TCIC. In order to avoid this
possible conflict, the General Partner could have prohibited TCIC and its
affiliates from participating in the Competitive Auction. Instead, the General
Partner determined that it would not have been in the best interest of the
Limited Partners to prohibit TCIC and its affiliates from submitting bids for
the Sales Systems because to do so would have eliminated a financially qualified
bidder who was capable of submitting bids which would be competitive with those
received from non-affiliates. In addition, the General Partner believed that if
TCIC and its affiliates were prohibited from participating in the Competitive
Auction, certain bidders might have attempted to take advantage of their absence
by submitting bids for the Sales Systems which would be lower than the bids
which otherwise would have been submitted had TCIC and its affiliates been a
potential competitor for the Sales Systems.
During the last two weeks of June 1996, the Broker contacted approximately
35 potential bidders by telephone about the cable television systems (including
the Riverside System) that were offered for sale pursuant to the Competitive
Auction. Of the potential bidders contacted, 15 expressed an interest in the
Lower Delaware System, 7 expressed an interest in the Riverside System, 14
expressed an interest in the St. Mary's System and 9 expressed an interest in
the Southern Tennessee System. After expressing an interest in a Sales System,
potential bidders were asked to sign a confidentiality agreement, after which
they were sent an informational memorandum which contained pertinent business
and financial information regarding the Sales System in which such bidder
expressed an interest. The informational memoranda were mailed beginning in June
1996.
As part of the auction process, the Broker organized business, financial
and legal information about the Sales Systems and the Partnership. Interested
parties had the opportunity to receive copies of such information beginning in
late June 1996. The Broker also arranged for bidders to visit with employees at
the various cable systems. Between July 10, 1996 and September 20, 1996,
potential bidders visited the local operations for the Sales Systems.
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<PAGE> 31
On September 13, 1996, the Broker sent all prospective bidders who received
the informational memorandum an auction procedures letter (the "Procedures
Letter") which set forth specific terms governing the manner in which bids for
the Sales Systems should be submitted. Each bidder was also provided with a form
asset purchase agreement. The Procedures Letter required that all bids be
submitted to the Broker by 3:00 p.m. Denver time on September 30, 1996. In
addition, the Procedures Letter provided, among other things, that bids remain
open for 15 business days from the date the bids were due and that separate bids
be submitted with respect to each Sales System. On September 25, 1996, the
General Partner decided to extend the original preliminary bid deadline from
September 30, 1996 to October 7, 1996 because of a concern that prospective
bidders needed more time to conduct due diligence and prepare their bids, and
the General Partner's conclusion that additional time would increase
participation in the Competitive Auction.
Bidders were also advised that the Partnership had no obligation to accept
any bid even if it represented the highest and best proposed sales price. In
addition, bidders were told that in connection with the evaluation of bids, the
Partnership would consider such matters as it deemed appropriate, including (a)
the amount of consideration, (b) the timing of the consummation of the
transaction, (c) the risk of non-consummation of the transaction, (d) the
structure of the transaction, (e) the contingencies associated with the bid
proposal and in particular any proposed financing arrangements and (f) the
nature and extent of any proposed changes to the form asset purchase agreement.
Shortly after 3:00 p.m. Denver time on October 7, 1996, representatives of
the Broker and the Partnership's legal counsel opened the 13 bids submitted
(five relating to the Lower Delaware System, four relating to the St. Mary's
System and four relating to the Southern Tennessee System) by seven bidders. On
October 9, 1996, representatives of TVI, representatives of the Broker and the
Partnership's legal advisors met to discuss and analyze the terms (including the
sales price and certain conditions) of the bids submitted. At this meeting,
representatives of the Broker and the Partnership's legal advisors contacted
certain bidders by telephone and discussed specific questions that such persons
had about the bids submitted. Also at the meeting, representatives of the Broker
analyzed the bids and advised those present as to the financial terms of the
bids received in terms of the multiples of the bid prices to the Sales Systems'
annualized cash flow and the implied value per subscriber of the bids received.
From October 9 through October 16, 1996, (i) representatives of the Broker
contacted certain bidders by telephone to discuss the terms of such bidders'
financing arrangements and certain bidders' proposed revisions to the terms of a
sale transaction, and asked bidders to propose a higher bid price not later than
12:00 noon Denver time on October 17, 1996 and (ii) the Partnership's legal
advisors contacted certain bidders and their legal representatives by telephone
to discuss the bidders' proposed revisions to the form asset purchase agreement
and to request that bidders reconsider certain requested revisions. Following
receipt of these subsequent bids, the Partnership's legal advisors analyzed any
new terms of the bids submitted and provided them to representatives of TVI.
On October 17, 1996, the Board of Directors of TVI, at a meeting held at
its office in Denver, Colorado and via telephone, reviewed the results of
discussions among representatives of the Broker, the bidders and the
Partnership's legal advisors. At such meeting, TVI authorized the Partnership's
legal advisors to commence negotiations for a sale of the Lower Delaware System
to Mediacom, a sale of the St. Mary's System to Gans, a sale of the Riverside
System to Mediacom and a sale of the Southern Tennessee System to Rifkin. At
such meeting the Board of Directors of TVI also authorized Marvin Jones, the
President of TVI, to execute definitive asset purchase agreements for the sale
of each of the cable television systems, substantially on the terms discussed at
such meeting, with such changes as Mr. Jones deemed appropriate. From October
17, 1996 to October 23, 1996, the Partnership's legal advisors continued
negotiations with such bidders regarding specific provisions to the form asset
purchase agreement. Each of such bidders then entered into a letter of intent
with the Partnership which provided for an exclusivity period that expired on
November 7, 1996, November 21, 1996 and November 22, 1996 for Gans, Mediacom and
Rifkin, respectively. The letters of intent with Gans and Rifkin were
subsequently extended to November 26, 1996. On November 22, 1996, the
Partnership informed Mediacom that it was not extending the letter of intent
relating to the sale of the Lower Delaware or Riverside Systems, although the
Partnership continued discussions with Mediacom relating to the sale of the
Lower Delaware System.
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<PAGE> 32
On November 27, 1996, the Partnership entered into a definitive agreement
to sell the St. Mary's System to Gans for $30,636,900 in cash. On November 29,
1996, the Partnership entered into a definitive agreement to sell the Southern
Tennessee System to Rifkin for $19,750,000 in cash. On December 24, 1996, the
Partnership entered into a definitive agreement to sell the Lower Delaware
System to Mediacom for $43,100,000 in cash. The General Partner continues to
market for sale the Riverside System.
In November 1996, representatives of TVI contacted representatives of
Lehman Brothers to discuss the possible engagement of Lehman Brothers as an
advisor to the General Partner for the purpose of evaluating the fairness of the
terms of the proposed Sales Transactions to the Limited Partners. At that same
time, the representatives of the General Partner provided Lehman Brothers with
details regarding the proposed transactions entered into or expected to be
entered into as a result of the Competitive Auction. The General Partner
believed that obtaining fairness opinions would provide an independent basis
upon which the General Partner could support its recommendation regarding the
proposed Sales Transactions. Discussions between representatives of the General
Partner and Lehman Brothers followed over the course of the next few days until
November 24, 1996, when Lehman Brothers orally agreed to advise the General
Partner with respect to the fairness to the Limited Partners from a financial
point of view of the consideration to be received for the Sales Transactions. In
early December 1996, representatives of Lehman Brothers advised representatives
of TVI that, subject to further due diligence, it believed that it could render
individual fairness opinions with respect to the Sales Transactions. On January
15, 1997, the General Partner received a written opinion from Lehman Brothers
with respect to each of the Sales Transactions stating that the consideration to
be received by the Partnership for each of the applicable Sales Transactions is
fair, from a financial point of view, to the Partnership.
FAIRNESS OF THE SALES TRANSACTIONS
The General Partner believes that the consideration to be received by the
Partnership in connection with the Sales Transactions is fair to the Limited
Partners, and it recommends that the Limited Partners approve the Sales
Transactions. The General Partner, because of its contractual and fiduciary duty
to the Limited Partners, has an obligation to ensure that the Sales Systems are
sold for a fair price.
The following is a brief description of the reasons why the General Partner
believes the Sales Transactions are fair to the Limited Partners:
Competitive Auction
The sales price for each of the Sales Systems was determined in the
Competitive Auction. The General Partner believes that a widely publicized and
fairly conducted auction is one of the best means of maximizing the price that a
buyer would be willing to pay for an asset. The General Partner believes that
the Competitive Auction was widely publicized and was conducted by the Broker in
a manner that (a) allowed for a due diligence period of approximately three
months (from the date informational memoranda were first sent to bidders to the
date bids were due to be submitted) and (b) resulted in the Partnership
accepting bids representing the fair market value of the Sales Systems from
buyers who have the financial ability to consummate acquisitions of this size.
Cash Flow and Subscriber Multiples
In assessing the fairness of the consideration to be received in the Sales
Transactions, the General Partner considered the annualized cash flow multiples
and the per subscriber values represented by the sales prices for the Sales
Systems. The General Partner believes, based on its knowledge of the cable
television marketplace, that such annualized cash flow multiples and per
subscriber values are indicators commonly used to compare and estimate the value
of cable television assets.
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<PAGE> 33
The following table sets forth these ratios and values as of and for the
six months ended June 30, 1996, the period immediately preceding the Competitive
Auction date:
<TABLE>
<CAPTION>
RATIO OF PURCHASE
PRICE TO
ANNUALIZED CASH PER SUBSCRIBER
FLOW(1) VALUE(2)
------------------ --------------
<S> <C> <C>
Lower Delaware System.................................. 10.4 $1,507
St. Mary's System...................................... 10.3 $1,621
Southern Tennessee System.............................. 9.7 $1,717
</TABLE>
- ---------------
(1) Calculated by dividing the cash sales price by annualized cash flow for the
six months ended June 30, 1996. Annualized cash flow represents the six
month operating income before depreciation, amortization, management fees
and certain administrative allocations from TCA multiplied by 2.
(2) Calculated by dividing the sales price by the minimum number of basic
subscribers needed at the time of the closing of the sale of the applicable
Sales System, so that there is no purchase price adjustment.
The General Partner believes that the above annualized cash flow and per
subscriber values for the Sales Transactions are comparable to the corresponding
multiples and values represented by recent prices paid for comparable cable
television assets. The General Partner based this belief on its knowledge of the
cable television marketplace and the specific quantitative and qualitative
characteristics of the Sales Systems.
Independent Fairness Opinions
The opinions from Lehman Brothers stating that the consideration to be
received by the Partnership for each of the Sales Transactions is fair, from a
financial point of view, to the Partnership confirmed the General Partner's
belief and provided an independent basis upon which the General Partner could
support its recommendation regarding the proposed Sales Transactions. See
"FAIRNESS OPINIONS" and Appendices B-1, B-2 and B-3.
Alternative Transaction Provisions
The General Partner, in determining the fairness of the consideration to be
received in connection with the Sales Transactions, considered the terms and
conditions of the Asset Purchase Agreements, including the Alternative
Transaction provision which generally provides that the Asset Purchase
Agreements can be terminated for a specified dollar amount if the Partnership
receives an unsolicited better offer for the applicable Sales System. The
General Partner believes that such a provision affords the Partnership
protection regarding the adequacy of the price received for each of the Sales
Systems. The Partnership does not have the right to terminate the Asset Purchase
Agreement relating to the Southern Tennessee System if an unsolicited better
offer is received from a person for a purchase price of less than $21,725,000 or
from a person who submitted a written bid pursuant to the Competitive Auction.
PLANS IF ANY TRANSACTION IS NOT CONSUMMATED
The General Partner believes that consummation of the Sales Transactions is
the preferable course of action. In the event that any Sales Transaction
approved by the Limited Partners does not close, it is currently the General
Partner's intention to seek a substitute buyer for the Substitute Sale
System(s). There is no assurance that the General Partner could arrange for a
Substitute Sales Transaction(s) for the Substitute Sale System(s) at an
appropriate price or on terms acceptable to the Partnership. Accordingly, there
is no assurance that the sales price for any Substitute Sales Transaction would
be equivalent to the sales price contained in the applicable Asset Purchase
Agreement. Any change to the amount of net sales proceeds to be received would
cause a corresponding change to the Pro Forma Distribution Per Unit. See "PRO
FORMA FINANCIAL INFORMATION."
In the event any Sales Transaction is not consummated, the Partnership
would continue to operate the Substitute Sale System(s). As described below, the
amount by which the Pro Forma Distribution Per Unit
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<PAGE> 34
would be reduced if one or more of the Sales Transactions does not close is
dependent upon future events and circumstances. In the event that any of the
Sales Transactions do not close, it is currently the General Partner's intention
to seek a substitute buyer for the Substitute Sale System(s). There is no
assurance that the General Partner could arrange for a Substitute Sales
Transaction(s) at an appropriate price or on terms acceptable to the
Partnership. If the General Partner's efforts in arranging a Substitute Sales
Transaction(s) prove to be unsuccessful, the General Partner would evaluate
market, competitive, regulatory, financial and other conditions (relating to the
cable television industry generally and to the Substitute Sale System(s)
specifically) in order to determine whether it would be in the best interest of
the Partnership to use all or a portion of the available net cash proceeds
(after repaying debt as required by the terms of the Partnership's bank credit
facility and repaying any amounts due to TCIC and its affiliates) from any of
the consummated Sales Transactions to fund all or a portion of any remaining
cable television system's(s') liquidity requirements, including
non-discretionary capital expenditures and necessary maintenance costs as well
as the cost of implementing technological advancements or improvements.
Accordingly, the failure to consummate one or more of the Sales Transactions
could delay and would reduce the Pro Forma Distribution Per Unit. The General
Partner expects that any portion of the net cash proceeds not utilized to fund
such non-discretionary capital expenditures, maintenance costs and the costs of
technological advancements or improvements or other obligations of the
Partnership would be available for distribution to the Limited Partners. The
General Partner has not yet determined which course of action it would pursue
and anticipates that it would pursue such a course of action only after making a
careful evaluation of all relevant factors. The General Partner anticipates that
such relevant factors would include, but would not necessarily be limited to:
(i) the availability and terms of Substitute Sales Transactions with respect to
the Substitute Sale System(s); (ii) the amount of the reduction to partner
distributions that would be required to fund the remaining cable television
system's(s') non-discretionary capital expenditures, necessary maintenance costs
and the costs of technological advancements or improvements; (iii) the prospects
for a reasonable return on the capital invested in the remaining cable
television system's(s') non-discretionary capital expenditures, necessary
maintenance costs and the costs of technological advancements or improvements;
(iv) the prospects for capital appreciation of the remaining cable television
systems(s) if such non-discretionary capital expenditures, maintenance costs or
technological advancements or improvements were not implemented; (v) the
anticipated competitive and regulatory environment in which the Substitute Sale
System(s) would be operating; and (vi) the risks and uncertainties associated
with the continued ownership of the Substitute Sale System(s). Limited Partners
will not have an opportunity to vote on such course of action.
The General Partner is in the process of marketing for sale its remaining
cable television system, the Riverside System. There is no assurance that the
General Partner can arrange for a sale of the Riverside System at an appropriate
price or on terms acceptable to the Partnership. If the General Partner is
unable to arrange for a sale of the Riverside System at an appropriate price or
on terms acceptable to the Partnership, the Partnership will continue to operate
the Riverside System. Although no assurance can be given, the General Partner
currently anticipates that any cash proceeds from the Sales Transactions will
not be used to fund the Riverside System's capital expenditures or liquidity
requirements. Limited Partners owning in the aggregate more than 50% of the
Units will have to approve a sale of the Riverside System, including a sale to
an affiliate of the Partnership.
RECOMMENDATION FOR A SUBSTITUTE SALES TRANSACTION
The General Partner believes that the consideration to be received by the
Partnership in connection with a Substitute Sales Transaction will be fair to
the Limited Partners, and it recommends that the Limited Partners approve such a
transaction. The General Partner, because of its contractual fiduciary duty to
the Limited Partners, has an obligation to ensure that the Sales Systems are
sold for a fair price. The General Partner believes that the conditions that
must be satisfied in connection with a Substitute Sales Transaction ensure that
such a transaction will be fair to the Limited Partners. First, the General
Partner must receive a written opinion from an independent investment banking
firm of national repute that the consideration to be received pursuant to any
such transaction is fair to the Partnership from a financial point of view.
Second, any such transaction must be consummated within two years from the date
of this Proxy Statement for cash consideration. Third, the purchaser in any such
transaction must be a person who is not an affiliate of the Partnership. In
addition, the General Partner believes that (i) in approving the Sales Systems
sales
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<PAGE> 35
(referenced under Resolutions 1, 2 and 3) the Limited Partners will have
expressed their desire to sell a significant portion of the Partnership's assets
and (ii) it is in the best interest of the Limited Partners to approve a
Substitute Sales Transaction at this time due to the time and expense associated
with another solicitation of proxies.
DESCRIPTION OF THE SALES TRANSACTIONS
If all of the Sales Transactions are approved by the requisite vote of
Limited Partners and the other conditions of the Asset Purchase Agreements are
satisfied or waived, the Partnership will sell a significant portion of its
assets (other than cash), as more fully described below, and the Partnership
will thereafter distribute to its partners the net proceeds from the Sales
Transactions, after making provision for all of its liabilities. If the General
Partner is able to arrange for a sale of the Riverside System at an appropriate
price and on terms acceptable to the Partnership and the Limited Partners, the
Partnership will take action to dissolve, wind-up and terminate its existence.
At the Special Meeting, Limited Partners will be asked to consider and vote
upon the following resolutions:
Resolution 1: Sale of the Lower Delaware System
1. Consent to the sale of the Lower Delaware System to Mediacom or one of
Mediacom's affiliates pursuant to an Asset Purchase Agreement dated as of
December 24, 1996 between the Partnership and Mediacom.
2. Approve and adopt an amendment to the Partnership Agreement which would
permit the sale of the Lower Delaware System to Mediacom or one of Mediacom's
affiliates.
The proposals included as part of Resolution 1 are related matters and
shall be considered together at the Special Meeting.
Resolution 2: Sale of the St. Mary's System
1. Consent to the sale of the St. Mary's System to Gans or one of Gans's
affiliates pursuant to an Asset Purchase Agreement dated as of November 27, 1996
between the Partnership and Gans.
2. Approve and adopt an amendment to the Partnership Agreement which would
permit the sale of the St. Mary's System to Gans or one of Gans' affiliates.
The proposals included as part of Resolution 2 are related matters and
shall be considered together at the Special Meeting.
Resolution 3: Sale of the Southern Tennessee System
1. Consent to the sale of the Southern Tennessee System to Rifkin or one
of Rifkin's affiliates pursuant to an Asset Purchase Agreement dated as of
November 29, 1996 between the Partnership and Rifkin.
2. Approve and adopt an amendment to the Partnership Agreement which would
permit the sale of the Southern Tennessee System to Rifkin or one of Rifkin's
affiliates.
The proposals included as part of Resolution 3 are related matters and
shall be considered together at the Special Meeting.
Resolution 4: Substitute Sale of the Sales Systems
Consent to any substitute sales transaction that the General Partner
determines to be in the best interest of the Limited Partners in the event that
any of the Sales System sales (as referenced under Resolutions 1, 2 and 3,
above) is approved by the Limited Partners, but does not close for any reason;
provided, however, that such substitute sales transaction will only be
consummated if (i) the General Partner obtains an opinion from
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<PAGE> 36
an investment banking firm of national repute that the consideration to be
received pursuant to any such substitute sales transaction is fair to the
Partnership from a financial point of view, (ii) such substitute sale is
consummated within two years of the date of this Proxy Statement for cash
consideration and (iii) the purchaser in such transaction is not an affiliate of
the Partnership. Consent to any substitute sale transaction shall not be deemed
a consent to the sale of the Riverside System.
LIMITED PARTNERS MUST VOTE ON EACH OF THE RESOLUTIONS SEPARATELY AND
APPROVAL OF ANY RESOLUTION IS NOT DEPENDENT ON APPROVAL OF ANY OTHER RESOLUTION.
THE GENERAL PARTNER RECOMMENDS THAT YOU VOTE FOR APPROVAL OF EACH OF THE
RESOLUTIONS.
LOWER DELAWARE SALE
The Partnership proposes to sell the Lower Delaware System to Mediacom or
one of Mediacom's affiliates.
Description of the Lower Delaware System
The Lower Delaware System, which offers 35 channels, provides cable
television service to the communities in and around Lower Delaware and Maryland.
As of June 30, 1996, the Lower Delaware System served approximately 28,800
equivalent basic subscribers, passed approximately 34,700 homes and operated
approximately 750 miles of cable plant. The Lower Delaware System is subject to
competition from DBS operators and from TCIC, which also has a franchise
agreement for a portion of the area encompassed by the Lower Delaware System.
The franchise agreements that authorize the operation of the Lower Delaware
System are scheduled to expire from October 1997 through June 2007. Although
there is no assurance, the General Partner believes that if the closing of the
Lower Delaware Sale has not occurred prior to October 1997, it will be
successful in obtaining extensions of the agreements scheduled to expire in
October 1997 until such time as the closing occurs. See "BACKGROUND AND REASONS
FOR THE SALES TRANSACTIONS -- Reasons for the Sales
Transactions -- Competition."
Principal Provisions of the Lower Delaware Asset Purchase Agreement
The summary of the Lower Delaware Asset Purchase Agreement (the "Lower
Delaware Asset Purchase Agreement") that is set forth below is qualified in its
entirety by reference to the complete Lower Delaware Asset Purchase Agreement,
which has been filed with the Securities and Exchange Commission (the
"Commission").
Sales Price. The sales price for the Lower Delaware System is $43,100,000,
payable in cash. The sales price is subject to the following prorations and
adjustments as of the closing date:
(i) revenues and expenses attributable to the operation of the Lower
Delaware System shall be allocated such that the Partnership receives all
revenues (other than accounts receivable being purchased by Mediacom) and
shall be responsible for all expenses arising from operations up to the
closing date and Mediacom shall receive all such revenues and shall be
responsible for all such expenses arising from operations on and after such
date;
(ii) the sales price shall be increased by an amount equal to the sum
of (a) the face amount of all accounts receivable which, as of the closing
date, are outstanding for a period of not more than 30 days, 85% of the
face amount of all accounts receivable which, as of the closing date, are
outstanding for a period of more than 30 days but not more than 60 days and
(c) all advance payments to, or deposits with, third parties relating to
the operation of the Lower Delaware System; and
(iii) the sales price shall be decreased by an amount equal to the sum
of (a) all advance payments to, or monies of third parties deposited with,
the Partnership relating to the operation of the Lower Delaware System and
the dollar amount of accrued vacation pay of employees who are employed by
Mediacom as of the closing date and (b) $1,507 per equivalent basic
subscriber to the extent that the average of the aggregate number of
equivalent basic subscribers served by the Lower Delaware System
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<PAGE> 37
(other than with respect to the private community known as Sea Colony) as
of the closing date and the first day of each of the eleven months prior to
the closing of the Lower Delaware Sale is fewer than 27,582.
Additional Adjustments to the Lower Delaware Sales Price. (i) The
Partnership has received notice that the successor to Sea Colony Associates,
Inc., a multi-unit dwelling, intends to terminate its agreement for cable
services in May 1997. In the event that as of the closing date the Partnership
does not have an agreement with an expiration date no earlier than the second of
the anniversary of the closing date (a "New Sea Colony Agreement") to provide
cable services to the units of the community known as Sea Colony and notice (the
"Sea Colony Notice") has been provided to the Partnership that Mediacom will not
be permitted to service such units, the purchase price will be decreased by
approximately $1,534,000. In the event that as of the closing date the
Partnership has not obtained consent to transfer a New Sea Colony Agreement to
Mediacom and no Sea Colony Notice has been received, approximately $1,534,000
(the "Sea Colony Adjustment") of the purchase price will be placed into escrow.
The funds held in escrow will be released to Mediacom if Mediacom does not
service the units of Sea Colony for a continuous period of 180 days beginning
prior to the first anniversary of the closing of the Lower Delaware Sale. The
funds will be released from escrow to the Partnership if Mediacom enters into an
agreement to provide cable services to the units of Sea Colony, or if Mediacom
ceases to provide such services and within 180 days thereafter recommences
providing services to the units of Sea Colony. The Sea Colony Adjustment will be
disbursed no later than 180 days after the one year anniversary of the closing
of the Lower Delaware Sale. In the event that (i) a purchase price adjustment is
made in Mediacom's favor or the escrow is released to Mediacom and (ii) on or
prior to the first anniversary of the closing of the Lower Delaware Sale,
Mediacom enters into an agreement to provide cable services to the units of Sea
Colony or on the first anniversary of the closing of the Lower Delaware Sale,
Mediacom is regularly servicing the units of Sea Colony, then Mediacom will pay
the Partnership an amount equal to the Sea Colony Adjustment, as adjusted for
lost revenue.
(ii) If as of the closing date the Partnership has not obtained consent to
permit Mediacom to provide cable services to the subscribers of Tunnell
Properties, a private residential community, then the Partnership will place
into escrow an amount of the purchase price equal to the number of equivalent
basic subscribers that are the subject of such consent times $1,507 (as of
December 31, 1996, such amount would be approximately $2,433,800). The escrow
will be released (a) to Mediacom if prior to one year after the closing of the
Lower Delaware Sale, Mediacom does not provide cable services to the subscribers
of Tunnell Properties for a continuous period of 45 days and (b) to the
Partnership, if (i) Mediacom enters into an agreement to provide cable services
to the subscribers of Tunnell Properties, (ii) the Partnership obtains the
requisite consent to permit Mediacom to service the subscribers of Tunnell
Properties or (iii) if not theretofore released, on the first anniversary of the
closing of the Lower Delaware Sale. If the funds are released from escrow to
Mediacom and on or prior to the first anniversary of the closing Mediacom enters
into an agreement to provide cable services, or as of the first anniversary of
the closing is in fact regularly providing such services, to the subscribers of
Tunnell Properties, then Mediacom will pay to the Partnership an amount equal to
the funds released from escrow to Mediacom, as adjusted for lost revenue.
(iii) If as of the closing date the Partnership has not obtained consent to
permit Mediacom to provide cable services to the subscribers of
Angola-by-the-Bay, a private residential community, then the Partnership will
place into escrow an amount of the purchase price equal to the number of
equivalent basic subscribers that are the subject of such consent times $1,507
(as of December 31, 1996, such amount would be approximately $761,040). The
escrow will be released (a) to Mediacom if prior to one year after the closing
of the Lower Delaware Sale, Mediacom does not provide cable services to the
subscribers of Angola-by-the-Bay for a continuous period of 45 days and (b) to
the Partnership, if (i) Mediacom enters into an agreement to provide cable
services to the subscribers of Angola-by-the-Bay, (ii) the Partnership obtains
the requisite consent to permit Mediacom to service the subscribers of
Angola-by-the-Bay or (iii) if not theretofore released on the first anniversary
of the closing of the Lower Delaware Sale. If the funds are released from escrow
to Mediacom and on or prior to the first anniversary of the closing Mediacom
enters into an agreement to provide cable services, or as of the first
anniversary of the closing is in fact regularly providing such services, to the
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subscribers of Angola-by-the-Bay, then Mediacom will pay to the Partnership an
amount equal to the funds released from escrow to Mediacom, as adjusted for lost
revenue.
Conditions to Closing. Consummation of the Lower Delaware Sale is subject
to the following material conditions: (i) approval of the Lower Delaware Sale by
Limited Partners owning in the aggregate more than 50% of the Units; (ii) the
accuracy of the representations and warranties; (iii) no material adverse change
having occurred; (iv) approval of the applicable franchise authority to transfer
the franchises applicable to the operation of the Lower Delaware System and
extend such franchises which have an expiration date prior to June 30, 2000 to a
date no earlier than June 30, 2000; (v) receipt of all material consents
(including consents to transfer the FCC licenses) required to permit the
transfer of the assets to Mediacom or permit the Partnership to perform any of
its obligations under the Lower Delaware Asset Purchase Agreement; (vi) the
absence of a pending or threatened action by a governmental authority; (vii) the
absence of the enactment of legislation which would prohibit the consummation of
the Lower Delaware Sale; (viii) compliance with the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), if required; (ix) the
performance of all obligations and compliance with all covenants required by the
Lower Delaware Asset Purchase Agreement; (x) in the event prior to the closing
date the Partnership and Mediacom enter into an agreement for the sale by the
Partnership of any other cable television system to Mediacom, the prior or
simultaneous closing of the sale of such other system; (xi) receipt of a
Fairness Opinion and (xii) completion of remediation of any adverse
environmental conditions disclosed in any environmental report prepared on
Mediacom's behalf. The regulatory approvals referred to in subsections (iv) and
(v) hereof have not yet been obtained, but the Partnership is in the process of
applying for them at this time. No HSR Act filing is required because of the
size of the parties to the transaction. There is no assurance that the Lower
Delaware Sale will be consummated.
Noncompete Covenants. As part of the Lower Delaware Asset Purchase
Agreement, TCIC, the Partnership and the General Partner agreed to a noncompete
provision, and TCIC agreed to cause its direct and indirect wholly-owned
subsidiaries to agree to a noncompete provision.
Representations and Warranties. The Partnership's representations and
warranties include the following: (i) valid organization and qualification of
the Partnership and authorization of the Lower Delaware Asset Purchase
Agreement, (ii) non-contravention of the Lower Delaware Asset Purchase Agreement
with the Partnership's charter documents, legal requirements or contracts; (iii)
completeness of the assets necessary to conduct the business; (iv) title to
property; (v) compliance with environmental matters, required permits,
copyright, and the rules of the FCC; (vi) list of material contracts; (vii)
accuracy of financial statements; (viii) absence of legal proceedings; (ix)
employment matters; (x) number of homes passed, equivalent basic subscribers,
subscribers of expanded basic services, bandwidth and miles of plant; and (xi)
certain tax matters. Mediacom's representations and warranties include: (i)
valid organization of Mediacom and authorization of the Lower Delaware Asset
Purchase Agreement; (ii) non-contravention of the Lower Delaware Asset Purchase
Agreement with Mediacom's charter documents, legal requirements or contracts;
(iii) certain litigation matters; (iv) conformity of Mediacom's financial
statements to generally accepted accounting principles, except as may be noted
therein; (v) Mediacom's belief in its ability to finance the purchase of the
Lower Delaware System; and (vi) Mediacom's knowledge regarding qualification for
licenses and permits. The representations and warranties of the parties
generally survive the closing for a period of one year from the closing date.
Environmental Remediation. In the event that any environmental report
conducted on behalf of Mediacom discloses one or more adverse environmental
conditions on the Lower Delaware System's real property, the Partnership will
bear all expenses incurred in connection with remediation of such condition(s)
up to $200,000, subject to Mediacom's right to terminate the Lower Delaware
Asset Purchase Agreement pursuant to its terms.
Indemnification. The Partnership has agreed to indemnify Mediacom with
respect to claims for breaches of representations and warranties and covenants.
After closing, the Partnership's maximum liability for indemnifiable claims
(other than claims (i) with respect to breaches of representations of title and
tax matters, (ii) claims arising from third party claims asserted against the
Purchaser and (iii) claims for
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breaches of covenants, agreements and obligations to be performed by the
Partnership after the closing date ("Surviving Claims")) is limited to
$1,077,500, the portion of the sales price that will be deposited into escrow
(the "Lower Delaware Escrow"). Any claims against the Lower Delaware Escrow
other than Surviving Claims must be made by Mediacom no later than one year
after the closing. Surviving Claims may be made by Mediacom at any time and are
not limited to the funds in the Lower Delaware Escrow, although Mediacom has
agreed that its first recourse will be against the Lower Delaware Escrow. The
Partnership will have no liability for indemnifiable claims until the total of
all damages with respect to such claims exceeds $50,000 and then only for
damages in excess of $50,000. The amount placed in the Lower Delaware Escrow
will not be available for distribution to the Limited Partners until the escrow
period has expired. Any undisputed funds remaining in the escrow account at the
end of the escrow period will be payable to the Partnership.
Termination. In the event the Lower Delaware Sale has not been consummated
by the termination date, either of the parties may terminate the Lower Delaware
Asset Purchase Agreement. The termination date initially is July 22, 1997 and
may be extended by the Partnership to a date no later than December 19, 1997.
The Partnership may, in certain circumstances, terminate the Lower Delaware
Asset Purchase Agreement following receipt of an unsolicited proposal for an
Alternative Transaction as described below. The Partnership may also terminate
the Lower Delaware Asset Purchase Agreement if it has not obtained the consent
of Ocean Pines Association, Inc. (the "Ocean Pines Consent") to transfer to
Mediacom the right to service the community of Ocean Pines by February 22, 1997,
and either the Partnership or Mediacom may terminate the Lower Delaware Asset
Purchase Agreement if the Ocean Pines Consent has not been obtained by March 24,
1997. The Partnership may also terminate the Lower Delaware Asset Purchase
Agreement if Mediacom has not obtained a commitment to finance the purchase of
the Lower Delaware System (the "Lower Delaware Commitment") by June 23, 1997 or
if the Lower Delaware Commitment is later terminated. In the event that any
environmental report conducted on behalf of Mediacom discloses one or more
adverse environmental conditions on the Lower Delaware System's real property
and the cost of remediation of such condition(s) would exceed $200,000, Mediacom
may terminate the Lower Delaware Asset Purchase Agreement if Mediacom does not
agree to bear all costs of remediation in excess of $200,000.
Limitation of Remedies Upon Breach. If the Lower Delaware Asset Purchase
Agreement is terminated by the Partnership because of Mediacom's failure to
obtain the Lower Delaware Commitment and such failure is due solely to a
material adverse change in the financial markets, then the Partnership's damages
will be limited to $3,026,700. The Partnership will not be entitled to any such
damages if termination is solely because of a change in the financial markets,
(i) all conditions to closing of the Lower Delaware Sale other than the prior or
simultaneous closing of the sale of another of the Partnership's cable
television systems had been satisfied or waived, (ii) Mediacom requested and the
Partnership rejected, the waiver of such condition to closing and (iii) the
Lower Delaware Commitment is obtained and is later terminated after June 30,
1997. If Mediacom breaches any of its obligations under the Lower Delaware Asset
Purchase Agreement, the Partnership will be entitled to specifically enforce the
terms of the Lower Delaware Asset Purchase Agreement in addition to any other
remedies it may have unless as a result of such enforcement Mediacom would be
required to accept financing on terms which are not commercially reasonable in
order to finance the purchase price of the Lower Delaware Sale. There is no
assurance that the Lower Delaware Sale will be consummated.
Alternative Transactions. The Partnership has agreed that it will not
initiate, solicit or encourage, directly or indirectly, any inquiries or the
making of any proposal with respect to any Alternative Transaction (as defined
below), engage in any negotiations concerning, or provide to any other person
any information or data relating to, the business or assets of the Lower
Delaware System for the purposes of, or have any discussions with any person
relating to, or otherwise cooperate in any way with or assist or participate in,
facilitate or encourage, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any effort or attempt by
any other person to seek or to effect an Alternative Transaction, or agree to or
endorse any Alternative Transaction. However, the Partnership may make any
disclosure to the Limited Partners that, in the judgment of the General Partner
in accordance with the advice of independent counsel, is required under
applicable law. In addition, (i) following receipt of an unsolicited request of
a third
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party to furnish information relating to the Partnership or the assets of the
Lower Delaware System for the purposes of an Alternative Transaction, the
General Partner may furnish to such third party the requested information and
may participate in negotiations with the person making (or who may reasonably be
expected to make) an unsolicited proposal regarding an Alternative Transaction
and (ii) following receipt of a proposal for an Alternative Transaction, the
General Partner may terminate the Lower Delaware Asset Purchase Agreement, to
the extent that the General Partner determines, in good faith on the basis of
advice of independent counsel, that such action is necessary or appropriate in
order for the General Partner to act in a manner that is consistent with its
fiduciary obligations under applicable law. If the Partnership terminates the
Lower Delaware Asset Purchase Agreement because it has accepted a proposal for
an Alternative Transaction, the Partnership must pay to Mediacom a termination
fee of $1,077,500, except that the termination fee shall be $2,145,000 if the
proposal is from a person who submitted a written proposal to purchase the Lower
Delaware System pursuant to the Competitive Auction.
The term "Alternative Transaction" is defined in the Lower Delaware Asset
Purchase Agreement as any transaction which could result in the transfer of
control over, or ownership of, all or substantially all of the assets relating
to the Lower Delaware System, including (a) any merger or consolidation of the
Partnership in which another person or group of persons acquires 50% or more of
the partnership interests in the Partnership or the equity interests of the
surviving entity, as the case may be, (b) any tender offer or exchange offer for
partnership interests in the Partnership which, if consummated, would result in
a person or group of persons (other than the existing partners in such entities
as of the date of the execution of the Lower Delaware Asset Purchase Agreement)
owning 50% or more of the partnership interests in the Partnership or (c) any
sale or other disposition of all or substantially all the assets relating to the
Lower Delaware System.
Although the Partnership did not issue a press release regarding the sales
price for the Lower Delaware System, the Partnership did file with the
Commission a Current Report on Form 8-K (dated February 11, 1997) which
disclosed the sales price of the Lower Delaware System. In addition, such sales
price was included in a letter dated February 11, 1997 that was mailed to all
Limited Partners. Also, cable trade publications have reported the proposed sale
of the Lower Delaware System.
Expense Reimbursement. The Lower Delaware Asset Purchase Agreement
provides that each party will pay all of its own expenses, including attorneys'
and accountants' fees, in connection with the transaction. In addition, each
party has agreed to pay one-half of any state or local sales, use, transfer,
excise, documentary or license taxes or fees or any other charge imposed by any
governmental authority as a consequence of the transfer of the assets.
ST. MARY'S SALE
The Partnership proposes to sell the St. Mary's System to Gans or one of
Gans' affiliates.
Description of the St. Mary's System
The St. Mary's System, which offers 24 to 41 channels, provides cable
television service to the communities in and around St. Mary's County, Maryland.
As of June 30, 1996, the St. Mary's System served approximately 18,300
equivalent basic subscribers, passed approximately 26,500 homes and operated
approximately 720 miles of cable plant. The St. Mary's System is subject to
competition from DBS operators. The franchise agreements that authorize the
operation of the St. Mary's System are scheduled to expire in August 1998, May
1999, September 1999, December 1999, February 2002 and May 2006. See "BACKGROUND
AND REASONS FOR THE SALES TRANSACTIONS--Reasons for the Sales
Transactions--Competition."
Principal Provisions of the St. Mary's Asset Purchase Agreement
The summary of the St. Mary's Asset Purchase Agreement (the "St. Mary's
Asset Purchase Agreement") that is set forth below is qualified in its entirety
by reference to the complete St. Mary's Asset Purchase Agreement, which has been
filed with the Commission.
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Sales Price. The sales price for the St. Mary's System is $30,636,900,
payable in cash. The sales price is subject to the identical adjustments set
forth in the Lower Delaware Asset Purchase Agreement except that the purchase
price for the St. Mary's Sale will be (i) increased by the face amount of all
accounts receivable which, as of the closing date, are outstanding for a period
of not more than 60 days and (ii) decreased by (a) $1,621 per equivalent basic
subscriber to the extent that the aggregate number of equivalent basic
subscribers served by the St. Mary's System as of the closing date of the St.
Mary's Sale is fewer than 18,900 and (b) if the closing of the St. Mary's Sale
does not occur by June 30, 1997, 50% of the dollar amount of all charges and
fees of any financial institution incurred by Gans after such date which Gans
would not have incurred if the closing had occurred by June 30, 1997 (the
"Commitment Expense") up to $125,000.
Conditions to Closing. Consummation of the St. Mary's Sale is subject to
substantially similar material conditions as those set forth in the Lower
Delaware Asset Purchase Agreement except that consummation of the St. Mary's
Sale is not subject to (i) the prior or simultaneous closing of any other Sales
System or (ii) completion of remediation of any adverse environmental
conditions. In addition, the St. Mary's Sale is subject to the St. Mary's System
having a minimum of 17,955 equivalent basic subscribers as of the closing date.
The regulatory approvals necessary to consummate the St. Mary's Sale have not
yet been obtained, but the Partnership is in the process of applying for them at
this time. No HSR Act filing is required because of the size of the parties to
the transaction. There is no assurance that the St. Mary's Sale will be
consummated.
Noncompete Covenant. The noncompete covenant is substantially similar to
that in the Lower Delaware Asset Purchase Agreement except that TCIC has not
made such an agreement.
Representations and Warranties. The Partnership's representations and
warranties are substantially similar to those in the Lower Delaware Asset
Purchase Agreement. The representations and warranties of the parties survive
the closing for a period of one year from the closing date.
Indemnification. The Partnership has agreed to indemnify Gans with respect
to claims for breaches of representations and warranties and covenants. After
closing, the Partnership's maximum liability for indemnifiable claims is limited
to $765,923, the portion of the sales price that Gans will deposit into escrow
(the "St. Mary's Escrow"). Any claims against the St. Mary's Escrow must be made
by Gans no later than one year after the closing. The Partnership will have no
liability for indemnifiable claims until the total of all damages with respect
to such claims exceeds $50,000 and then only for damages in excess of $50,000.
The amount placed in the St. Mary's Escrow will not be available for
distribution to the Limited Partners until the escrow period has expired. Any
undisputed funds remaining in the escrow account at the end of the escrow period
will be payable to the Partnership.
Termination. In the event that the St. Mary's sale has not been
consummated by the termination date, either of the parties may terminate the St.
Mary's Asset Purchase Agreement. The termination date initially is June 25, 1997
and may be extended by the Partnership to a date no later than November 24,
1997. The Partnership may, in certain circumstances, terminate the St. Mary's
Asset Purchase Agreement following receipt of an unsolicited proposal for an
Alternative Transaction as described below. There is no assurance that the St.
Mary's Sale will be consummated. If the St. Mary's Asset Purchase Agreement is
terminated after June 30, 1997 solely because the Partnership is in default or
breach, the Partnership will pay Gans the Commitment Expense up to $125,000.
Alternative Transactions. Except for the termination fee that would be
payable by the Partnership in connection with the acceptance of an Alternative
Transaction, provisions regarding Alternative Transactions are similar to those
described in "Principal Provisions of the Lower Delaware Asset Purchase
Agreement" above. If the Partnership terminates the Lower Delaware Asset
Purchase Agreement because it has accepted any Alternative Transaction, the
Partnership must pay Gans a termination fee of $765,923, except that the
termination fee shall be $1,148,884 if the proposal is from a person who
submitted a written proposal to purchase the St. Mary's System pursuant to the
Competitive Auction. In the event the Partnership terminates the St. Mary's
Asset Purchase Agreement after June 30, 1997 because it has accepted a proposal
for an Alternative Transaction, the Partnership must pay Gans the Commitment
Expense up to $125,000 in addition to the termination fee.
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Although the Partnership did not issue a press release regarding the sales
price for the St. Mary's System, the Partnership did file with the Commission a
Current Report on Form 8-K (dated February 11, 1997) which disclosed the sales
price of the St. Mary's System. In addition, such sales price was included in a
letter dated February 11, 1997 that was mailed to all Limited Partners. Also,
cable trade publications have reported the proposed sale of the St. Mary's
System.
Expense Reimbursement. The St. Mary's Asset Purchase Agreement provides
that each party will pay all of its own expenses, including attorneys' and
accountants' fees, in connection with the transaction. In addition, each party
has agreed to pay one-half of any state or local sales, use, transfer, excise,
documentary or license taxes or fees or any other charge imposed by any
governmental authority as a consequence of the transfer of the assets.
SOUTHERN TENNESSEE SALE
The Partnership proposes to sell the Southern Tennessee System to Rifkin or
one of Rifkin's affiliates.
Description of the Southern Tennessee System
The Southern Tennessee System, which offers 37-38 channels, provides cable
television service to the communities in and around Southern Tennessee. As of
June 30, 1996, the Southern Tennessee System served approximately 11,500
equivalent basic subscribers, passed approximately 14,500 homes and operated
approximately 360 miles of cable plant. The Southern Tennessee System is subject
to competition from DBS operators. The franchise agreements that authorize the
operation of the Southern Tennessee System are scheduled to expire in April
1997, August 2000, March 2005 and January 2026. Although there is no assurance,
the General Partner believes that if the closing of the Southern Tennessee Sale
has not occurred prior to April 1997, it will be successful in obtaining
extensions of the agreement scheduled to expire in April 1997 until such time as
the closing occurs. See "BACKGROUND AND REASONS FOR THE SALES
TRANSACTIONS -- Reasons for the Sales Transactions -- Competition."
Principal Provisions of the Southern Tennessee Asset Purchase Agreement
The summary of the Southern Tennessee Asset Purchase Agreement (the
"Southern Tennessee Asset Purchase Agreement") that is set forth below is
qualified in its entirety by reference to the complete Southern Tennessee Asset
Purchase Agreement, which has been filed with the Commission.
Sales Price. The sales price for the Southern Tennessee System is
$19,750,000, payable in cash. The sales price is subject to the identical
adjustments set forth in the Lower Delaware Asset Purchase Agreement except that
the purchase price for the Southern Tennessee System will be (i) increased by
the sum of (a) 95% of the face amount of all accounts receivable which, as of
the closing date, are outstanding for a period of not more than 30 days and (b)
85% of the face amount of all accounts receivable which, as of the closing date,
are outstanding for a period of more than 30 days but not more than 60 days and
(ii) decreased by (a) $1,717 per equivalent basic subscriber to the extent that
the aggregate number of equivalent basic subscribers served by the Southern
Tennessee System as of the closing date of the Southern Tennessee Sale is fewer
than 11,500 and (b) 100% of the dollar amount of any deductibles paid under
insurance policies for which insurance proceeds are payable to Rifkin in the
event of any loss or damage to any material portion of the Southern Tennessee
System resulting from fire, theft or any other casualty prior to the closing of
the Southern Tennessee Sale.
Conditions to Closing. Consummation of the Southern Tennessee Sale is
subject to substantially similar material conditions as those set forth in the
Lower Delaware Asset Purchase Agreement, except that consummation of the
Southern Tennessee Sale is not subject to the prior or simultaneous closing of
any other system. In addition, it is a condition to closing of the Southern
Tennessee Sale that TCIC, the Partnership and the General Partner deliver a
noncompetition agreement. The regulatory approvals necessary to consummate the
Southern Tennessee Sale (including compliance with the HSR Act) have not yet
been obtained, but the Partnership is in the process of applying for them at
this time. There is no assurance that the Southern Tennessee Sale will be
consummated.
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Representations and Warranties. The Partnership's representations and
warranties are substantially similar to those in the Lower Delaware Asset
Purchase Agreement. The representations and warranties of the parties generally
survive the closing for a period of one year from the closing date.
Environmental Remediation. In the event that any environmental report
conducted on behalf of Rifkin discloses one or more adverse environmental
conditions on the Southern Tennessee System's real property, the Partnership
will bear all expenses incurred in connection with remediation of such
condition(s) up to $200,000, subject to the Partnership's right to terminate the
Southern Tennessee Asset Purchase Agreement pursuant to its terms in the event
that the cost of remediation exceeds $200,000.
Indemnification. The Partnership has agreed to indemnify Rifkin with
respect to claims for breaches of representations and warranties and covenants.
After closing, the Partnership's maximum liability for indemnifiable claims
other than Surviving Claims is limited to $493,750, the portion of the sales
price that Rifkin will deposit into escrow plus all interest accrued thereon
after the closing date (the "Southern Tennessee Escrow"). Any claims against the
Southern Tennessee Escrow, other than Surviving Claims, must be made by Rifkin
no later than one year after the closing. Surviving Claims may be made by Rifkin
at any time and are not limited to the funds in the Southern Tennessee Escrow
although Rifkin has agreed that its first recourse will be against the Southern
Tennessee Escrow. The Partnership will have no liability for indemnifiable
claims until the total of all damages with respect to such claims exceeds
$50,000 but then for the entire amount of such damages. The amount placed in the
Southern Tennessee Escrow will not be available for distribution to the Limited
Partners until the escrow period has expired. Any undisputed funds remaining in
the escrow account at the end of the escrow period will be payable to the
Partnership.
Termination. In the event the Southern Tennessee Sale has not been
consummated by the termination date, either of the parties may terminate the
Southern Tennessee Asset Purchase Agreement. The termination date initially is
June 25, 1997 and may be extended by the Partnership or Rifkin to a date no
later than August 25, 1997 and may be subsequently extended by the Partnership
to a date no later than November 24, 1997. The Partnership may, in certain
circumstances, terminate the Southern Tennessee Asset Purchase Agreement
following receipt of an unsolicited proposal for an Alternative Transaction as
described below. In the event that any environmental report conducted on behalf
of Rifkin discloses one or more adverse environmental conditions on the Southern
Tennessee System's real property and the cost of remediation of such
condition(s) would exceed $200,000, the Partnership may terminate the Southern
Tennessee Asset Purchase Agreement if Rifkin does not agree to bear all costs of
remediation in excess of $200,000. There is no assurance that the Southern
Tennessee Sale will be consummated.
Limitation on Remedies. If Rifkin breaches any of its obligations under
the Southern Tennessee Asset Purchase Agreement, the Partnership will not be
entitled to specifically enforce the terms of the Southern Tennessee Asset
Purchase Agreement and will be limited to monetary damages.
Alternative Transactions. Except for (i) the termination fee that would be
payable by the Partnership in connection with the acceptance of an Alternative
Transaction and (ii) the inability of the Partnership to terminate the Southern
Tennessee Asset Purchase Agreement with respect to a proposal with a purchase
price of less than $21,725,000 or a proposal from a person, or an affiliate of a
person, who submitted a written proposal to purchase the Southern Tennessee
System pursuant to the Competitive Auction, provisions regarding Alternative
Transactions are substantially similar to those described in "Principal
Provisions of the Lower Delaware Asset Purchase Agreement" above. If the
Partnership terminates the Southern Tennessee Asset Purchase Agreement because
it has accepted an Alternative Transaction, the Partnership must pay Rifkin a
fee of $493,750. In the event that Rifkin or the Partnership extends the
termination date of the Southern Tennessee Asset Purchase Agreement to a date
later than June 27, 1997 but the Agreement is not extended by the Partnership to
a date later than August 26, 1997, the Partnership will pay Rifkin the
termination fee in the event it enters into an Alternative Transaction prior to
November 24, 1997.
Although the Partnership did not issue a press release regarding the sales
price for the Southern Tennessee System, the Partnership did file with the
Commission a Current Report on Form 8-K (dated February 11, 1997) which
disclosed the sales price of the Southern Tennessee System. In addition, such
sales
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price was included in a letter dated February 11, 1997 that was mailed to all
Limited Partners. Also, cable trade publications have reported the proposed sale
of the Southern Tennessee System.
Expense Reimbursement. The Southern Tennessee Asset Purchase Agreement
provides that each party will pay all of its own expenses, including attorneys'
and accountants' fees, in connection with the transaction. In addition, each
party has agreed to pay one-half of any state or local sales, use, transfer,
excise, documentary or license taxes or fees or any other charge imposed by any
governmental authority as a consequence of the transfer of the assets.
SUBSTITUTE SALES TRANSACTION(S)
Limited Partners are also being asked to consent to any Substitute Sales
Transaction to a purchaser that is not an affiliate of the Partnership that the
General Partner determines to be in the best interest of the Limited Partners in
the event that any of the Sales Transactions is approved by the Limited
Partners, but does not close for any reason; provided, however, that no such
Substitute Sales Transaction shall be consummated unless (i) the General Partner
obtains an opinion from an investment banking firm of national repute that the
consideration to be received pursuant to such sales transaction is fair to the
Partnership from a financial point of view and (ii) such substitute sale is
consummated within two years of the date hereof for cash consideration. The
Partnership is making this proposal in order to avoid the time and expense
associated with seeking Limited Partner approval of a Substitute
Sales Transaction.
AMENDMENT TO PARTNERSHIP AGREEMENT
Generally, the Lower Delaware, St. Mary's and Southern Tennessee Sales,
each to a buyer unaffiliated with the General Partner, require no amendment to
the Partnership Agreement. However, because (i) the Partnership Agreement
requires Limited Partners owning in the aggregate more than 50% of the
outstanding Units to approve any sale of all or substantially all of the
Partnership's assets and (ii) the Partnership has provided for separate votes
with respect to each of the Lower Delaware, St. Mary's and Southern Tennessee
Sales, amendments to the Partnership Agreement will be required in order to
permit the Lower Delaware, St. Mary's and Southern Tennessee Sales to occur
because it cannot be known, at the time of the Limited Partners' vote, whether
any individual sale will constitute the sale of all or substantially all of the
Partnership's assets. Accordingly, Limited Partners who vote in favor of the
Lower Delaware, St. Mary's and Southern Tennessee Sales will also be approving
an amendment to the Partnership Agreement which would permit such sales to
occur.
Paragraph 15.4.2 of the Partnership Agreement provides, among other things,
that the General Partner may not sell all or substantially all of the assets of
the Partnership, without the approval of the Limited Partners owning in the
aggregate more than 50% of the Units. Because the Partnership Agreement does not
specify whether a separate vote on each of the Lower Delaware, St. Mary's and
Southern Tennessee Systems satisfies the requirement in the Partnership
Agreement that Limited Partners owning in the aggregate more than 50% of the
Units vote for a sale of all or substantially all of the assets, it is proposed
that the Partnership Agreement be amended to authorize each of the Lower
Delaware, St. Mary's and Southern Tennessee Sales.
In connection with the approval of the Lower Delaware Sale, the Partnership
Agreement will be amended as follows:
(1) Paragraph 2 will be amended to include the following definition:
"Lower Delaware System" shall mean the cable television system which
services communities located in and around Lower Delaware and Maryland.
(2) New Paragraph 15.1.19 will be added as follows:
To sell the Lower Delaware System to Mediacom LLC ("Mediacom") or one of
Mediacom's affiliates in accordance with the terms set forth in the
Asset Purchase Agreement dated as of December 24, 1996 between the
Partnership and Mediacom, including, without limitation, in
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situations where such sale would result in the sale of all or
Substantially All of the Assets of the Partnership and the termination
and dissolution of the Partnership.
In connection with the approval of the St. Mary's Sale, the Partnership
Agreement will be amended as follows:
(1) Paragraph 2 will be amended to include the following definition:
"St. Mary's System" shall mean the cable television system which serves
communities located in and around St. Mary's County, Maryland.
(2) New Paragraph 15.1.20 will be added as follows:
To sell the St. Mary's System to Gans Multimedia Partnership ("Gans") or
one of Gans' affiliates in accordance with the terms set forth in the
Asset Purchase Agreement dated as of November 27, 1996 between the
Partnership and Gans, including, without limitation, in situations where
such sale would result in the sale of all or Substantially All of the
Assets of the Partnership and the termination and dissolution of the
Partnership.
In connection with the approval of the Southern Tennessee Sale, the
Partnership Agreement will be amended as follows:
(1) Paragraph 2 will be amended to include the following definition:
"Southern Tennessee System" shall mean the cable television system which
serves communities located in and around Shelbyville and Manchester,
Tennessee.
(2) New Paragraph 15.1.21 will be added as follows:
To sell the Southern Tennessee System to Rifkin Acquisition Partners,
L.L.L.P. ("Rifkin") or one of Rifkin's affiliates in accordance with the
terms set forth in the Asset Purchase Agreement dated as of November 29,
1996 between the Partnership and Rifkin including, without limitation,
in situations where such sale would result in the sale of all or
Substantially All of the Assets of the Partnership and the termination
and dissolution of the Partnership.
In connection with the approval of the Lower Delaware, St. Mary's and
Southern Tennessee Sales, Paragraph 15.4.2 will be amended to read as follows:
15.4.2 Without the approval of the Limited Partners by Majority Vote,
sell all or Substantially All of the Assets of the Partnership in a
single sale, or in multiple sales in the same twelve-month period,
except (i) in the liquidation and winding up of the business of the
Partnership upon its termination and dissolution, (ii) that the General
Partner may sell any two Cable TV Systems in any twelve-month period and
(iii) in connection with sales authorized pursuant to Paragraphs
15.1.19, 15.1.20 and 15.1.21.
Paragraph 16.2.5 of the Partnership Agreement provides, among other things,
that the Limited Partners have the right to vote upon the sale of all or
substantially all of the assets of the Partnership. In connection with the
approval of the Lower Delaware, St. Mary's and Southern Tennessee Sales,
Paragraph 16.2.5 will be amended to read as follows:
16.2.5 The sale of all or Substantially All of the Assets of the
Partnership in a single sale, or in multiple sales in the same
twelve-month period, except (i) in the liquidation and winding up of the
business of the Partnership upon its termination and dissolution, (ii)
that the General Partner may sell any two Cable TV Systems in any
twelve-month period and (iii) in connection with sales authorized
pursuant to Paragraphs 15.1.19, 15.1.20 and 15.1.21.
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<PAGE> 46
FAIRNESS OPINIONS
GENERAL
Lehman Brothers was engaged by the Partnership to conduct an analysis of
whether the consideration to be received by the Partnership in connection with
each of the Lower Delaware, St. Mary's and Southern Tennessee Sales is fair,
from a financial point of view, to the Partnership and to render the Fairness
Opinions. Lehman Brothers rendered the Fairness Opinions to the General Partner
on January 15, 1997, to the effect that, as of such date, the consideration to
be received by the Partnership in connection with each of the Lower Delaware,
St. Mary's and Southern Tennessee Sales is fair, from a financial point of view,
to the Partnership.
THE FULL TEXT OF EACH OF LEHMAN BROTHERS' WRITTEN OPINIONS, DATED JANUARY
15, 1997, IS ATTACHED AS APPENDICES B-1, B-2 AND B-3 TO THIS PROXY STATEMENT AND
EACH IS INCORPORATED HEREIN BY REFERENCE. LIMITED PARTNERS MAY READ EACH
FAIRNESS OPINION FOR A DISCUSSION OF THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITATIONS ON THE REVIEW UNDERTAKEN BY LEHMAN BROTHERS IN RENDERING SUCH
FAIRNESS OPINION. THE SUMMARY OF THE FAIRNESS OPINIONS SET FORTH IN THIS PROXY
STATEMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF EACH
SUCH FAIRNESS OPINION.
Except as described below, no limitations were imposed by the Partnership
on the scope of Lehman Brothers' investigation or the procedures to be followed
by Lehman Brothers in rendering the Fairness Opinions. Lehman Brothers was not
requested to and did not make any recommendation to the Partnership as to the
form or amount of the consideration to be received by the Partnership in each of
the Sales Transactions, which was determined through arm's-length negotiations
between the parties. In arriving at the each of the Fairness Opinions, Lehman
Brothers did not ascribe a specific range of value to the applicable Sales
System, but rather made its determination as to the fairness, from a financial
point of view, of the consideration to be received by the Partnership in each of
the Sales Transactions on the basis of the financial and comparative analyses
described below. Lehman Brothers' Fairness Opinions are for the use and benefit
of the Partnership and were rendered to the Partnership in connection with its
consideration of each of the Sales Transactions. The Fairness Opinions are not
intended to be and do not constitute a recommendation to any Limited Partner of
the Partnership as to how such Limited Partner should vote with respect to any
of the Sales Transactions. Lehman Brothers was not requested to opine as to, and
the Fairness Opinions do not address, (i) the Partnership's underlying business
decision to proceed with or effect any of the Sales Transactions, (ii) any
application of the proceeds of any of the Sales Transactions, including the
allocation among the partners of the Partnership of the proceeds to be received
by the Partnership in any of the Sales Transactions or (iii) the fairness to any
Limited Partner of the Partnership of the consideration, if any, to be
distributed to such Limited Partner following the consummation of any of the
Sales Transactions.
In arriving at each Fairness Opinion, Lehman Brothers reviewed and
analyzed: (1) the applicable Asset Purchase Agreement and the specific terms of
each of the Sales Transactions, (2) the preliminary Proxy Statement filed with
the Commission on December 11, 1996, and such other publicly available
information concerning the Partnership and the applicable Sales System that
Lehman Brothers believed to be relevant to its analysis, (3) financial and
operating information with respect to the business, operations and assets of
such Sales System furnished to Lehman Brothers by the Partnership, including
without limitation the applicable informational memorandum which was distributed
to potential acquirors of such Sales System, (4) the results of efforts by the
Partnership and the Broker to solicit indications of interest, proposals and
bids from third parties with respect to the acquisition of such Sales System,
(5) a comparison of the historical financial results and present financial
condition of such Sales System with those of other companies or businesses that
Lehman Brothers deemed relevant and (6) a comparison of the financial terms of
each of the Sales Transactions with the financial terms of certain other recent
transactions that Lehman Brothers deemed relevant. In addition, Lehman Brothers
had discussions with the management of the General Partner concerning the
business, operations, assets, financial condition and prospects of the Sales
Systems and the Partnership and undertook such other studies, analyses and
investigations as it deemed appropriate.
In arriving at each of the Fairness Opinions, Lehman Brothers assumed and
relied upon the accuracy and completeness of the financial and other information
used by it without assuming any responsibility for
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<PAGE> 47
independent verification of such information and further relied upon the
assurances of the management of the General Partner that it is not aware of any
facts or circumstances that would make such information inaccurate or
misleading. In performing its analysis and in arriving at each of the Fairness
Opinions, Lehman Brothers did not have access to and was not provided with, any
forecasts of the future financial performance or results of operations of any of
the Sales Systems because no such forecasts were available at the time of Lehman
Brothers' analysis. Lehman Brothers also did not conduct a physical inspection
of the assets of any of the Sales Systems and did not make or obtain any
evaluations or appraisals of any of the assets or liabilities of the Sales
Systems or the Partnership. Each of the Fairness Opinions necessarily is based
upon market, economic and other conditions as they existed on, and could be
evaluated as of, the date of such Fairness Opinion.
In connection with the preparation and delivery of each of the Fairness
Opinions to the General Partner, Lehman Brothers performed a variety of
financial and comparative analyses as described below. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial and comparative analysis and the application of
those methods to the particular circumstances and, therefore, such an opinion is
not readily susceptible to summary description. Furthermore, in arriving at the
Fairness Opinions, Lehman Brothers did not attribute any particular weight to
any analysis or factor considered by it, but rather made qualitative judgments
as to the significance and relevance of each analysis and factor. Accordingly,
Lehman Brothers believes that its analyses must be considered as a whole and
that considering any portion of such analyses and factors, without considering
all analyses and factors, could create a misleading or incomplete view of the
process underlying the Fairness Opinions. In its analyses, Lehman Brothers made
numerous assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond the control of
the Partnership. Any estimates contained in these analyses are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than as set forth therein. In addition,
analyses relating to the value of businesses do not purport to be appraisals or
to reflect the prices at which cable television systems actually may be sold.
ANALYSIS OF THE COMPETITIVE AUCTION
The Partnership did not request Lehman Brothers to solicit, and Lehman
Brothers did not solicit, any proposals or other indications of interest from
any third party with respect to an acquisition of any Sales System or all or
part of the assets of the Partnership. Lehman Brothers, however, did review the
Competitive Auction performed by the Broker on behalf of the Partnership. In
this review, Lehman Brothers considered the number of potential bidders
contacted, the number of potential bidders requesting confidential information
regarding each of the Sales Systems, the number of initial bids made for each
Sales System, the number of bids made in a second round of bidding for each
Sales System and the decision process in selecting winning bids for each Sales
System.
COMPARABLE PUBLIC COMPANY METHODOLOGY
Using publicly available information, Lehman Brothers compared selected
financial data of each Sales System with similar data of selected companies
engaged in businesses considered by Lehman Brothers to be comparable to that of
the Sales Systems. Lehman Brothers identified nine publicly traded companies
(the "Comparable Group") which it considered to have assets reasonably
comparable to each of the Sales Systems. Lehman Brothers reviewed historical
operating performance, balance sheet data, common stock trading data and other
publicly available information regarding these companies which it considered
relevant to establish a range of valuation multiples. The Comparable Group
consisted of Adelphia Communications Corporation, Cablevision Systems
Corporation, Century Communications Corp., Comcast Corporation, Cox
Communications, Inc., Jones Intercable, Inc., TCA Cable TV, Inc.,
Tele-Communications, Inc. and U S WEST Media Group. Each of these companies is
involved in the management and operation of cable television systems, and
certain of these companies are involved in the management and operation of other
non-cable assets. In each case, to the extent possible, Lehman Brothers based
its analysis solely on the results of
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<PAGE> 48
operations, balance sheet data and operating statistics concerning the
consolidated cable television assets of each of the companies in the Comparable
Group.
For valuation purposes, Lehman Brothers utilized the closing stock prices
of each company in the Comparable Group as of January 14, 1997, a date proximate
to the rendering of the Fairness Opinions. Based upon the closing prices as of
such date, (i) the ratio of (a) Adjusted Total Market Value (defined as the
market value of equity on a fully-diluted basis plus the value of debt, the
value of outstanding non-convertible or out-of-the-money convertible preferred
stock and minority interests less cash and cash equivalents adjusted to exclude
the estimated public market value of the unconsolidated and non-cable television
assets) to (b) operating income before depreciation and amortization for the
most recent quarter for which financial information was available at the time
the Fairness Opinions were rendered, multiplied by four, resulting from the
consolidated cable assets for the Comparable Group, ranged from 7.3x, to 9.7x
with a mean of 8.2x and (ii) the Adjusted Total Market Value per consolidated
subscriber for the Comparable Group ranged from $1,215 to $2,088 with a mean of
$1,539. The implied multiple paid in connection with the Lower Delaware, St.
Mary's and Southern Tennessee Sales was 9.2x, 10.1x and 9.8x, respectively, and
the per subscriber value paid for each such Sales System was $1,476, $1,656 and
$1,732, respectively. Lehman Brothers noted that the respective implied multiple
to Latest Quarter's Annualized Adjusted System Cash Flow (defined below) and per
subscriber value for each of the Lower Delaware, St. Mary's and Southern
Tennessee Sales falls within a reasonably proximate range to the mean implied by
this analysis. Latest Quarter's Annualized Adjusted System Cash Flow (defined as
operating income for the quarter ended September 30, 1996, before depreciation,
amortization, management fees, corporate expense allocations and certain other
adjustments, which Lehman Brothers did not believe to be material, provided to
Lehman Brothers by the Partnership, multiplied by four) was used to reflect the
cash flow produced by each of the Sales Systems, independent of any of the
Partnership's operations which have been allocated to the Sales Systems and
which would not be assumed by a buyer, and thereby results in a more relevant
multiple of cash flow for comparison. Due to the lack of information regarding
the estimated costs of technological improvements that the individual companies
in the Comparable Group might implement to their cable television systems in the
future, the ratios and per subscriber amounts were not adjusted to reflect the
estimated costs of any such technological improvements.
However, because of the inherent differences between the businesses,
operations and prospects of each of the Sales Systems and the businesses,
operations and prospects of the companies and businesses included in the
Comparable Group, Lehman Brothers believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analysis, and
accordingly also made qualitative judgments concerning differences between the
financial and operating characteristics of each of the Sales Systems and the
companies and businesses in the Comparable Group that would affect the public
trading values of such Sales System and such comparable companies and
businesses.
COMPARABLE TRANSACTIONS METHODOLOGY
Using publicly available information, Lehman Brothers compared selected
financial data for each Sales System to similar data for 13 selected
transactions involving the sale of cable television systems between November
1995 and November 1996 (the "Recent Transactions"), which Lehman Brothers deemed
to be comparable transactions, for an indication of recent prices paid in cable
television systems sales. The Recent Transactions consisted of transactions
ranging in value from $20 million to $50 million. In the Recent Transactions,
the average ratio of the Aggregate Transaction Value (defined as the total cash
or stock purchase price plus any debt and preferred stock to be assumed less
cash and cash equivalents) to the latest quarter's annualized operating income
before depreciation and amortization was 9.5x and ranged from 8.5x to 11.0x, and
the average Aggregate Transaction Value per basic subscriber was $1,925 and
ranged from $1,465 to $2,965 . In the Recent Transactions, the acquired cable
systems had a range of 10,000 to 30,000 subscribers, and the average number of
subscribers was 18,810. In this regard it should be noted that as of September
30, 1996, the Lower Delaware System had 29,200 subscribers, the St. Mary's
System had 18,500 subscribers and the Southern Tennessee System had 11,400
subscribers.
The Aggregate Transaction Value to be received in connection with the Lower
Delaware, St. Mary's and Southern Tennessee Sales represents multiples of each
Sales System's Latest Quarter's Annualized Adjusted
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System Cash Flow of 9.2x, 10.1x and 9.8x, respectively. In addition, the
Aggregate Transaction Value to be received in connection with the Lower
Delaware, St. Mary's and Southern Tennessee Sales represents a value per
subscriber of $1,476, $1,656 and $1,732, respectively. Lehman Brothers noted
that the respective implied multiples to Latest Quarter's Annualized Adjusted
System Cash Flow and per subscriber values for the Lower Delaware, St. Mary's
and Southern Tennessee Sales fall within a reasonably proximate range to the
mean ratio implied by the Recent Transactions.
However, because the market conditions, rationale and circumstances
surrounding each of the Recent Transactions analyzed were specific to each
transaction and because of the inherent differences between the businesses,
operations and prospects of each of the Sales Systems and the acquired
businesses analyzed, Lehman Brothers believed that it was inappropriate to, and
therefore did not, rely solely on the quantitative results of the analysis, and
accordingly, also made qualitative judgments concerning differences between the
characteristics of the Recent Transactions and each of the Sales Transactions
that would affect the acquisition values of such Sales System and such acquired
companies and businesses.
EXPERIENCE OF LEHMAN BROTHERS
Lehman Brothers is an internationally recognized investment banking firm
and, as part of its investment banking activities, is regularly engaged in the
evaluation of businesses and their securities in connection with mergers and
acquisitions, negotiated underwritings, competitive bids, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. The Partnership selected Lehman
Brothers because of its expertise, reputation and familiarity with the
Partnership in particular and the cable industry in general and because its
investment banking professionals have substantial experience in transactions
similar to the Sales Transactions.
COMPENSATION AND MATERIAL RELATIONSHIPS
As compensation for its services in connection with the Sales Transactions,
the Partnership has agreed to pay Lehman Brothers a retainer of $100,000 payable
upon the signing of the engagement letter and an additional fee upon delivery of
each Fairness Opinion of $50,000 for each Fairness Opinion. In addition, the
Partnership has agreed to reimburse Lehman Brothers for reasonable out-of-pocket
expenses incurred in connection with rendering the Fairness Opinions and to
indemnify Lehman Brothers for certain liabilities that may arise out of its
engagement by the Partnership and the rendering of the Fairness Opinions.
Lehman Brothers has in the past performed various services for the ultimate
parent of TVI, TCI and its affiliates, including investment banking and
financial and strategic advisory services, and has received customary fees for
such services, which aggregated approximately $9 million for the period from
January 1, 1995 to the date of the rendering of the Fairness Opinions. In the
ordinary course of its business, Lehman Brothers actively trades in the
securities of TCI for its own account and for the accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
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MANAGEMENT
As the Partnership has no directors or officers of its own, all of the
Partnership's major decisions are made by the General Partner, whose general
partner is TVI. Until it withdrew by letter dated January 17, 1996, Cable Corp.
was also a general partner of the General Partner. As such, it is entitled under
Colorado law to the fair value of its partnership interest based on its right to
share in distributions from the General Partner. The General Partner has
proposed Cable Corp. receive the share of distributions that it would have
received from the General Partner if it had remained a general partner of the
General Partner. As a response to Cable Corp.'s withdrawal, TVI's board of
directors has been modified such that it includes members who are not employees
of, or otherwise affiliated with, TCIC. The General Partner has received no
response to its offer from Cable Corp. Cable Corp. is an indirect wholly-owned
subsidiary of PCC.
The Partnership has entered into a management agreement with TCA pursuant
to which TCA is responsible for managing the day-to-day operations of the Sales
Systems.
The following executive officers and directors of TVI operate the General
Partner:
<TABLE>
<CAPTION>
NAME POSITION
- --------------------------------- ------------------------------------------------------------
<S> <C>
Marvin Jones(1).................. Director and President of TVI since March 1996. President of
Born September 11, 1937 one of TCIC's cable groups since November 1, 1996. Mr. Jones
has performed consulting services in the cable television
industry since December 1991. From 1988 to December 1991, he
was Director and Executive Vice President of United Artists
Entertainment Company ("UAE").
Stephen M. Brett(1).............. Director of TVI since August 1995. Vice President and
Born September 20, 1940 Secretary of TCA and TVI since March 1992. Executive Vice
President and Secretary of TCIC since January 1994;
appointed TCIC Senior Vice President and General Counsel as
of December 1991. From August 1988 through December 1991,
was Executive Vice President - Legal and Secretary of UAE.
Arthur C. Belanger(1)............ Director of TVI since June 25, 1996. Mr. Belanger was
Born November 23, 1925 Executive Vice President and Chief Operating Officer of
United Artists Communications, Inc. from December 1984 to
his retirement in January 1992.
Paul F. Schonewolf(1)............ Director of TVI since June 25, 1996. Mr. Schonewolf is the
Born February 9, 1937 President of Hamilton County/Gore Mt. Cable TV, Inc., a
cable company serving six upstate New York communities. From
1987 to 1993 he was President of Schomann Entertainment
Corp., which owned and operated cable television companies
in New York, Vermont, New Hampshire and Pennsylvania. From
1986 to 1994 he was President of PFS Communications, a
consulting company serving the cable television industry.
Gary K. Bracken.................. Vice President and Controller of TCA and TVI since March
Born July 29, 1939 1992. Mr. Bracken has been Controller of TCIC since 1969.
Appointed TCIC Senior Vice President in December 1991. Was
named Vice President and Principal Accounting Officer of
TCIC in 1982.
Bernard W. Schotters............. Vice President and Treasurer of TCA and TVI since March
Born September 25, 1944 1992. Appointed TCIC Senior Vice President - Finance and
Treasurer in December 1991. Was appointed TCIC Vice
President of Finance in 1984.
</TABLE>
- ---------------
(1) Directors of TVI serve until their successors are appointed and qualified.
There are no family relations, of first cousin or closer, among the
individuals named above, by blood, marriage or adoption.
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During the past five years, none of the persons named above has had any
involvement in such legal proceedings as would be material to an evaluation of
that person's ability or integrity.
None of the above individuals owns (i) any Units or (ii) more than 1% of
the outstanding shares of TCI, the ultimate parent and owner, directly or
indirectly, of all of the voting stock of TVI. Except for the employment
relationships described above, and the ownership by any member of not more than
one percent of the shares of TCI, no member of TVI's Board of Directors has any
economic interest in the General Partner, TVI, TCA, TCIC or TCI.
Pursuant to Section 16(a) of the Exchange Act, the officers and directors
of the General Partner are required to file reports of ownership and changes in
ownership with the Commission. Officers and directors are required by regulation
of the Commission to furnish the Partnership with copies of all Section 16(a)
forms filed.
Based solely on its review of the copies of such forms received by it, or
written representations from certain reporting persons that no Form 5s were
required for those persons, the Partnership believes that, during the fiscal
year ended December 31, 1995, all applicable filing requirements were complied
with.
INTERESTS OF TCIC AND RELATED PARTIES
GENERAL
The Sales Transactions raise conflicts of interest for the General Partner
as well as the general partner of the General Partner. As a result, both of them
have economic interests in the Sales Transactions which may conflict with each
of their obligations to the Limited Partners. However, each of the General
Partner and TVI believes that it has fulfilled its respective fiduciary
obligations to the Partnership and the Limited Partners and that the Sales
Transactions are fair to the Limited Partners. In addition, the Broker's
involvement in the Competitive Auction might have involved a conflict of
interest attributable to the fact that certain of the shareholders of a general
partner of the Broker are also limited partners in Cablevision, the limited
partner of the General Partner.
INTERESTS OF TCIC AND ITS AFFILIATES
The recommendation of the General Partner that the Limited Partners vote
for approval of each of the Resolutions could be considered subject to certain
conflicts of interest. Because TCIC is the indirect parent of the General
Partner and will therefore receive distributions upon the consummation of any
sale of the Partnership's Sales Systems attributable to its interest in the
General Partner, and because TCIC and its affiliates will receive certain
disposition fees upon the consummation of any sale of the Partnership's Sales
Systems, TCIC has an economic interest in the Sales Transactions and any
Substitute Sales Transaction(s). However, the amount of distributions and the
disposition fees is related directly to the amount received by the Partnership
upon the sale of any Sales System, and the General Partner therefore believes
that its interest is consistent, and not in conflict, with the economic interest
of the Limited Partners. In any event, the General Partner believes that the
Sales Transactions are in the best interest of the Limited Partners, and that
the Competitive Auction utilized to solicit bids for the Sales Systems provided
the Partnership with a purchase price equal to the fair market value for each
Sales System. In addition, no member of TVI's Board of Directors owns any Units
or more than one percent of the outstanding shares of TCI, the ultimate parent
and owner, directly or indirectly, of all of the voting stock of TVI. Except for
the employment relationships of certain members of the Board of Directors of TVI
described in "MANAGEMENT," and the ownership by any member of not more than one
percent of the shares of TCI, no member of TVI's Board of Directors has any
economic interest in the General Partner, TVI, TCA, TCIC or TCI. Three of the
four members of TVI's Board of Directors were present at the meeting pursuant to
which the Sales Transactions were approved and voted in favor of the Sales
Transactions. Stephen M. Brett was not present, and did not vote, at such
meeting. See "MANAGEMENT" for a description of the relationships between the
members of the Board of Directors of TVI and TCIC or any of its affiliates.
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The following table sets forth the estimated amounts that would have been
received by TCIC and its affiliates from the Partnership if the Sales
Transactions had been consummated on September 30, 1996 (amounts in thousands):
<TABLE>
<S> <C>
Disposition Fee(1).................................................. $1,987
Share of Partnership distributions(2)............................... 593
------
Total..................................................... $2,580
======
</TABLE>
- ---------------
(1) The amount shown ($916,000 attributable to the Lower Delaware Sale,
$651,000 attributable to the St. Mary's Sale and $420,000 attributable
to the Southern Tennessee Sale) has been reduced by the amounts payable
by TCA to the Broker in connection with the Lower Delaware Sale
($377,000), St. Mary's Sale ($268,000) and Southern Tennessee Sale
($173,000).
(2) This payment is attributable to TVI's 46.4% interest in the General
Partner and has been reduced by the amount payable by the General
Partner to Cable Corp. See "MANAGEMENT."
In addition, TCIC performs cash management services for the Partnership.
Accordingly, TCIC makes disbursements on behalf of the Partnership for all of
the Partnership's expenses, including expenses for day-to-day operations and for
capital expenditures, and the Partnership reimburses TCIC from time to time for
such disbursements from the Partnership's cash flow from operations and
borrowings under its revolving line of credit. In addition, the Partnership
reimburses TCIC and its affiliates for certain expenses incurred by TCIC and its
affiliates on behalf of the Partnership. See Note (7) and Note (5) to the
Partnership's financial statements included in the 1996 10-Q and the 1995 10-K,
respectively. The amount owed to TCIC and its affiliates as a result of these
cash management services and reimbursable expenses fluctuates from period-to-
period based upon the timing of expenditures, cash flow from operations and bank
borrowings. At September 30, 1996, the Partnership owed TCIC and its affiliates
$9,937,000. TCIC does not charge interest to the Partnership on this outstanding
balance. Such amounts were assumed to be repaid with cash proceeds from the
Sales Transactions in determining the Pro Forma Distribution Per Unit, although
the repayment of such amounts is not contingent upon consummation of the Sales
Transactions. To the extent not otherwise paid in the normal course of business,
the full amount owed for such services and expenses is expected to be paid to
TCIC and its affiliates upon the first of the Sales Transactions to close.
See "OTHER RELEVANT INFORMATION -- Disposition Fee and Other Payments to
the General Partner and Its Affiliates" and "PRO FORMA FINANCIAL INFORMATION."
INTERESTS OF THE GENERAL PARTNER
Because the General Partner is controlled by TVI, the General Partner has
conflicts of interests in connection with the Sales Transactions which are the
same as those of TVI. See "BACKGROUND AND REASONS FOR THE SALES
TRANSACTIONS -- Background of the Sales Transactions -- Competitive Auction for
the Sales Systems." The General Partner believes that it has fulfilled its
fiduciary obligations to the Partnership and the Limited Partners and that the
Sales Transactions are fair to the Limited Partners.
CONFLICTS OF THE BROKER
Certain of the shareholders of a general partner of the Broker are also
limited partners in Cablevision, the limited partner of the General Partner. As
a limited partner, Cablevision is allocated 33.6% of the General Partner's
profits, losses and distributions. However, this ownership interest did not
entitle Cablevision to participate in the selection of the Broker to conduct the
Competitive Auction and the General Partner believes that these common ownership
interests did not preclude the Broker from maintaining its independence with
respect to the manner in which the Competitive Auction was conducted. See "OTHER
RELEVANT INFORMATION -- Disposition Fee and Other Payments to the General
Partner and Its Affiliates."
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<PAGE> 53
OTHER RELEVANT INFORMATION
DISPOSITION FEE AND OTHER PAYMENTS TO THE GENERAL PARTNER AND ITS AFFILIATES
Disposition Fee
Pursuant to the Partnership Agreement and an Acquisition and Disposition
Services Agreement, TCA is entitled to receive a disposition fee (the
"Disposition Fee") as compensation for services rendered in brokering and
selling the Partnership's cable television properties. This Disposition Fee is
equal to 3% of the gross proceeds received from the sale or disposition of a
Partnership cable television property, which fee is payable in instances where
the sales price of such property is greater than its original acquisition cost
plus the depreciated book value of capitalized expenditures. In general, the
amount of this fee may be reduced in the future if the Limited Partners have not
received aggregate distributions in an amount equal to their original invested
capital of $500 per Unit ("Payback").
Assuming all of the Sales Transactions had occurred on September 30, 1996
and that no amounts were used to fund capital expenditures or the liquidity
requirements of the Riverside System, it is estimated that, on a pro forma
basis, the net cash proceeds from the Sales Transactions would provide for
distributions to the Limited Partners which would exceed Payback. Under such
circumstances, the Partnership would pay the full Disposition Fee. Therefore, if
all of the Sales Transactions had been consummated on September 30, 1996, it is
estimated that TCA would have been entitled to a Disposition Fee from the
Partnership of $2,805,000 ($1,293,000 attributable to the Lower Delaware Sale,
$919,000 attributable to the St. Mary's Sale and $593,000 attributable to the
Southern Tennessee Sale). TCA, in turn, would then be obligated to pay the
Broker's fees, which amount would have aggregated $818,000 ($377,000
attributable to the Lower Delaware Sale, $268,000 attributable to the St. Mary's
Sale and $173,000 attributable to the Southern Tennessee Sale). Actual amounts
may vary from the foregoing pro forma amounts. See "PRO FORMA FINANCIAL
INFORMATION" and "INTERESTS OF TCIC AND RELATED PARTIES."
If at least one but not all of the Sales Transactions are consummated, a
Disposition Fee would be payable only with respect to the Sales System(s) sold.
(If the proceeds from the subsequent sale of the Substitute Sale System(s)
proved to be insufficient to reach Payback, TCA would be obligated to return to
the Partnership the Disposition Fee received by it to the extent necessary to
make up such shortfall.)
Other Payments
In addition to the distribution of the General Partner's share of net cash
proceeds and the payment of the Disposition Fee to TCA, the Partnership will use
cash proceeds from the Sales Transactions to repay amounts owed by the Sales
Systems to TCIC and its affiliates. At September 30, 1996, the amounts owed to
TCIC and its affiliates by the Partnership aggregated $9.9 million. The
repayment of amounts due TCIC and its affiliates is not contingent upon
consummation of the Sales Transactions. See "INTERESTS OF TCIC AND RELATED
PARTIES."
Indemnification
The Partnership Agreement provides that the General Partner and its
affiliates are entitled to be indemnified for any liability, loss or damage
incurred by them or by the Partnership by reason of any act performed or omitted
to be performed by them in connection with the business of the Partnership,
including costs and attorneys' fees and any amounts expended in the settlements
of any claims of liability, loss or damage provided that, if such liability,
loss or claim arises out of any action or inaction of the General Partner, the
General Partner must have determined, in good faith, that such course of conduct
was in the best interest of the Partnership and did not constitute fraud,
negligence, breach of fiduciary duty or misconduct. If a claim is made against
the General Partner and its affiliates (including TVI and its directors) in
connection with their actions on behalf of the Partnership with respect to the
Sales Transactions or a Substitute Sales Transaction, the General Partner
expects that it and such affiliates will seek to be indemnified by the
Partnership with respect to such claim. As a result of these indemnification
rights, a Limited Partner's remedy with respect to claims against the General
Partner and its affiliates relating to the General Partner's or such affiliates'
43
<PAGE> 54
involvement in the Sales Transactions could be more limited than the remedy
which would have been available absent the existence of these rights in the
Partnership Agreement. A successful claim for indemnification, including the
expenses of defending a claim made, would reduce the Partnership's assets by the
amount paid.
Appraisals by Communications Equity Associates, Inc.
No appraisals were commissioned by the General Partner in connection with
the proposed Sales Transactions. However, in 1994 the Partnership arranged to
have the assets of the Partnership appraised by Communications Equity
Associates, Inc. ("Communications Equity"). Communications Equity's appraisals
of the Sales Systems were based on December 31, 1994 financial and statistical
data and are dated as of December 31, 1994 (the "Appraisals"). The Appraisals
were based on a physical review of the Sales Systems, and financial and
operational information provided by the Partnership. Based on the foregoing
factors, Communications Equity determined that, as of December 31, 1994, the
fair market value of (i) the Lower Delaware System was $36,000,000, (ii) the St.
Mary's System was $25,500,000 and (iii) the Southern Tennessee System was
$16,500,000. These appraised values were included in a letter that was sent to
Limited Partners on June 13, 1995.
The General Partner did not order new appraisals of the Sales Systems
before the commencement of the Competitive Auction because it believed that a
competitive auction would provide the best measure of the fair market value of
the Sales Systems. The General Partner did not rely on the Appraisals in
assessing the fairness of the consideration to be received in the Sales
Transactions. As further described under "BACKGROUND AND REASONS FOR SALES
TRANSACTIONS -- Fairness of the Sales Transactions," the General Partner relied
on other measures (i.e., Fairness Opinions and the Competitive Auction) to
assess the fairness of the Sales Transactions at the time of the Competitive
Auction.
DISSOLUTION OF THE PARTNERSHIP; DISTRIBUTIONS
If all of the Sales Transactions are approved and consummated and the
Riverside System is sold, the Partnership will have sold all of its assets
(other than cash) and, pursuant to the Partnership Agreement, will be dissolved
and terminated. The Partnership currently anticipates that the net cash proceeds
received from the Sales Transactions, after satisfying or making provision for
the satisfaction of the liabilities of the Partnership (including any amounts
owed to affiliates of the General Partner), would permit the declaration and
payment of distributions to the Limited Partners. See "PRO FORMA FINANCIAL
INFORMATION" for the amount of the Partnership's liabilities as of September 30,
1996.
Assuming all of the Sales Transactions had occurred on September 30, 1996
and that no amounts were used to fund capital expenditures or the liquidity
requirements of the Riverside System, it is estimated that the Pro Forma
Distribution Per Unit would have been $366. On March 29, 1996 the Partnership's
share of the cash proceeds from the sale of the Newport News System was used to
fund a distribution to Limited Partners of $165 per Unit. The Partnership is
unable to predict the amount that Limited Partners would receive upon a sale of
the Partnership's remaining cable television system, the Riverside System. There
is no assurance that any of the Sales Transactions will be consummated. The Pro
Forma Distribution Per Unit, which is based upon the Partnership's historical
financial position at September 30, 1996, does not reflect any contingent
liabilities that might arise subsequent to the date of this Proxy Statement, and
is based on various assumptions with respect to transaction related costs, sales
price adjustments and other matters, as further discussed under "PRO FORMA
FINANCIAL INFORMATION" and "INCOME TAX CONSEQUENCES." The failure to consummate
one or more of the Sales Transactions could delay and would reduce the Pro Forma
Distribution Per Unit. As such, the actual amounts distributed to the Limited
Partners may vary from the Pro Forma Distribution Per Unit.
As described below, the amount by which the Pro Forma Distribution Per Unit
would be reduced if one or more of the Sales Transactions does not close is
dependent upon future events and circumstances. In the event that any of the
Sales Transactions do not close, it is currently the General Partner's intention
to seek a substitute buyer for the Substitute Sale System(s). There is no
assurance that the General Partner could
44
<PAGE> 55
arrange for a Substitute Sales Transaction(s) at an appropriate price or on
terms acceptable to the Partnership. If the General Partner's efforts in
arranging a Substitute Sales Transaction(s) prove to be unsuccessful, the
General Partner would evaluate market, competitive, regulatory, financial and
other conditions (relating to the cable television industry generally and to the
Substitute Sale System(s) specifically) in order to determine whether it would
be in the best interest of the Partnership to use all or a portion of the
available net cash proceeds (after repaying debt as required by the terms of the
Partnership's bank credit facility and repaying any amounts due to TCIC and its
affiliates) from any of the consummated Sales Transactions to fund all or a
portion of any remaining cable television system's(s') liquidity requirements,
including non-discretionary capital expenditures and necessary maintenance costs
as well as the cost of implementing technological advancements or improvements.
Accordingly, the failure to consummate one or more of the Sales Transactions
could delay and would reduce the Pro Forma Distribution Per Unit. See
"BACKGROUND AND REASONS FOR THE SALES TRANSACTIONS -- Reasons for the Sales
Transactions -- Prospects for Future Capital Appreciation of the Sales Systems."
The General Partner expects that any portion of the net cash proceeds not
utilized to fund such non-discretionary capital expenditures, maintenance costs
and the costs of technological advancements or improvements or other obligations
of the Partnership would be available for distribution to the Limited Partners.
Limited Partners will not have an opportunity to vote on such course of action.
The General Partner is in the process of marketing for sale its remaining
cable television system, the Riverside System. There is no assurance that the
General Partner can arrange for a sale of the Riverside System at an appropriate
price or on terms acceptable to the Partnership. If the General Partner is
unable to arrange for a sale of the Riverside System at an appropriate price or
on terms acceptable to the Partnership, the Partnership will continue to operate
the Riverside System. Although no assurance can be given, the General Partner
currently anticipates that any cash proceeds from the Sales Transactions will
not be used to fund the Riverside System's capital expenditures or liquidity
requirements. Limited Partners owning in the aggregate more than 50% of the
Units will have to approve a sale of the Riverside System, including a sale to
an affiliate of the Partnership.
Pursuant to the Partnership Agreement, if the Limited Partners receive
aggregate distributions equal to Payback plus an amount equal to 6% per annum on
their investment, the General Partner's share of distributions increases from 1%
to 25% and the Limited Partners' share decreases from 99% to 75%. However, the
General Partner does not believe that the Limited Partners' aggregate
distributions will equal Payback plus 6% per annum. See "INTERESTS OF TCIC AND
RELATED PARTIES -- Interests of the General Partner" and "Disposition Fee and
Other Payments to the General Partner and its Affiliates" for a description of
the fees and other payments which would be made to the General Partner and its
affiliates in connection with the consummation of the Sales Transactions.
In general, distributions of net cash proceeds are anticipated to occur as
soon as practicable after the date of the last closing of the Sales
Transactions. However, the General Partner may establish different dates for
such distributions if there is a material delay in the closing of any of the
Sales Transactions. Subject to the receipt of any indemnifiable claims against
post closing amounts that will be held in escrow with respect to the Lower
Delaware, St. Mary's or Southern Tennessee Sales ($1,077,500, $765,923 and
$493,750, respectively), it is expected that such amounts will be distributed as
soon as practicable after all, or substantially all, of the balance of the
principal amount of such escrowed funds have been released to the Partnership.
There can be no assurance that distributions of net cash proceeds will take
place on this schedule. In addition, circumstances beyond the control of the
Partnership, such as the existence of contingencies, could affect the timing and
amount of distributions to the Limited and General Partners.
On January 1, 1996, Newport News sold the Newport News System to an
unaffiliated party for cash proceeds of $121,886,000. Pursuant to the terms of
the sale agreement, $5,000,000 of the sales price was held in escrow until
September 27, 1996. The partnership has a 40% ownership interest in Newport
News. Accordingly, in January 1996 the Partnership received $33,696,000 of the
net cash proceeds (after satisfaction of Newport News transaction costs and
liabilities) from the Newport News Sale. In November 1996, the Partnership
received $2.1 million representing the Partnership's share of the amount held in
escrow plus the balance of other amounts held by Newport News. The Partnership
used most of its share of net proceeds
45
<PAGE> 56
received in January 1996 from the Newport News Sale to make distributions to
Presidio, TCIC and the Limited Partners of $67,000, $267,000 and $33,000,000
($165 per Unit), respectively.
In the event that any Sales Transaction approved by the Limited Partners
does not close, it is currently the General Partner's intention to seek a
substitute buyer for the Substitute Sale System(s). There is no assurance that
the General Partner could arrange for a Substitute Sales Transaction(s) for the
Substitute Sale System(s) at an appropriate price or on terms acceptable to the
Partnership. Accordingly, there is no assurance that the sales price for any
Substitute Sales Transaction would be equivalent to the sales price contained in
the applicable Asset Purchase Agreement. Any change to the amount of net sales
proceeds to be received would cause a corresponding change to the Pro Forma
Distribution Per Unit.
COSTS OF THE SALES TRANSACTIONS
The following is an itemized statement of the approximate amount of all
expenses incurred or to be incurred in connection with the Sales Transactions,
all of which will be paid by the Partnership and, with the exception of the
Disposition Fee, will be incurred regardless of the number of Sales Transactions
that are ultimately consummated:
<TABLE>
<S> <C>
Disposition Fees(1).............................................. $2,805,000
Legal fees....................................................... 500,000
Fairness Opinion fees and expenses............................... 250,000
Accounting, solicitation and other fees.......................... 75,000
Printing and mailing costs....................................... 100,000
Filing fees...................................................... 20,000
----------
Total............................................................ $3,750,000
==========
</TABLE>
- ---------------
(1) Assumes all of the Sales Transactions are consummated ($1,293,000
attributable to the Lower Delaware Sale, $919,000 attributable to the St.
Mary's Sale and $593,000 attributable to the Southern Tennessee Sale). Such
amount includes $818,000 that is payable by TCA to the Broker in connection
with the Lower Delaware Sale ($377,000), St. Mary's Sale ($268,000) and
Southern Tennessee Sale ($173,000).
46
<PAGE> 57
INCOME TAX CONSEQUENCES
GENERAL
The following discussion, which was prepared by the General Partner,
summarizes the estimated material pro forma per Unit income tax consequences
arising from the consummation of one and/or all of the Sales Transactions to a
Limited Partner who acquired Units in connection with the Partnership's initial
public offering. Assuming all of the Sales Transactions had occurred on
September 30, 1996 and that no amounts were used to fund capital expenditures or
the liquidity requirements of the Riverside System, it is estimated that the Pro
Forma Distribution Per Unit would have been $366. On March 29, 1996 the
Partnership's share of the cash proceeds from the sale of the Newport News
System was used to fund a distribution to Limited Partners of $165 per Unit. The
Partnership is unable to predict the amount that Limited Partners would receive
upon a sale of the Partnership's remaining cable television system, the
Riverside System. See "PRO FORMA FINANCIAL INFORMATION." This amount has not
been reduced for any non-resident state income taxes which may be required to be
withheld. Such withholding amounts are not deemed to be significant. DUE TO THE
COMPLEXITY OF THE TAX ISSUES INVOLVED, LIMITED PARTNERS ARE URGED TO CONSULT
WITH THEIR PERSONAL TAX ADVISORS REGARDING THE APPLICATION OF THE PRO FORMA
ESTIMATE TO THEIR INDIVIDUAL CIRCUMSTANCES.
FEDERAL
General
The federal income tax consequences will be dependent upon (i) the income
tax rates in effect on the date of a sale and on the date of any liquidation of
the Partnership, (ii) the individual circumstances of each Limited Partner
(including each Limited Partner's tax basis in the Units owned) and (iii) the
timing of the Sales Transactions and liquidation of the Partnership.
The pro forma estimates, which do not reflect the current operations of the
Partnership, assume that the Sales Transactions are consummated on April 1, 1997
and that a Limited Partner is subject to (i) a rate of 28% on capital gains and
(ii) a rate of 31% on ordinary taxable income. For tax years beginning in 1997,
a marginal rate of 31% is applicable to ordinary taxable income ranging from
$99,600 to $151,750 for married individuals filing joint returns and to ordinary
taxable income ranging from $59,750 to $124,650 for single individuals.
All taxable gains realized by a Limited Partner resulting from the Sales
Transactions will be characterized as passive income. Limited Partners should
discuss with their tax advisor the potential for offsetting passive income
realized from the Sales Transactions with passive losses, if any, from other
passive activities of the Limited Partners.
At Risk Basis
Through December 31, 1995, the "at risk" basis of the Limited Partners
ranged from a suspended loss of $33 per Unit to a positive basis of $407 per
Unit depending on the date a Limited Partner was admitted to the Partnership.
The General Partner estimates the 1996 ordinary taxable income from operations
to be approximately $160 per Unit. Therefore, the December 31, 1996 at risk
basis, taking into consideration the December 31, 1995 at risk basis, the 1996
estimated taxable income and the 1996 distribution from the Newport News Sale,
is estimated to range from $13 to $452 per Unit.
Lower Delaware Sale
If the Lower Delaware Sale occurs on April 1, 1997 and the other sales do
not occur, the pro forma gain is estimated to be $90 per Unit.
Approximately 75% of such per Unit gain is estimated to be characterized as
ordinary income under the Internal Revenue Code of 1986, as amended (the "Code")
Section 1245, and approximately 25% of such per Unit gain is estimated to be
characterized as capital gain under Code Section 1231. Based on the
characterization of the pro forma gain and on the assumptions set forth under
the caption "Federal -- General" above, the estimated per Unit federal income
tax resulting from the Lower Delaware Sale is $27 per Unit.
47
<PAGE> 58
St. Mary's Sale
If the St. Mary's Sale occurs on April 1, 1997 and the other sales do not
occur, the pro forma gain is estimated to be $52 per Unit.
Approximately 92% of such per Unit gain is estimated to be characterized as
ordinary income under Code Section 1245 and approximately 8% of such per Unit
gain is estimated to be characterized as capital gain under Code Section 1231.
Based on the characterization of the pro forma gain and on the assumptions set
forth under the caption "Federal -- General" above, the estimated per Unit
federal income tax resulting from the St. Mary's Sale is $16 per Unit.
Southern Tennessee Sale
If the Southern Tennessee Sale occurs on April 1, 1997 and the other sales
do not occur, the pro forma gain is estimated to be $79 per Unit.
Approximately 64% of such per Unit gain is estimated to be characterized as
ordinary income under Code Section 1245 and approximately 36% of such per Unit
gain is estimated to be characterized as capital gain under Code Section 1231.
Based on the characterization of the pro forma gain and on the assumptions set
forth under the caption "Federal -- General" above, the estimated per Unit
federal income tax resulting from the Southern Tennessee Sale is $24 per Unit.
Estimated Aggregate Results of System Sales
If all the Sales Transactions occur on April 1, 1997, the aggregate pro
forma gain from the sale of the Sales Systems is estimated to be $231 per Unit.
Approximately 75% of such per Unit gain is estimated to be characterized as
ordinary income under Code Section 1245 and approximately 25% of such per Unit
gain is estimated to be characterized as capital gain under Code Section 1231.
Based on these characterizations of the pro forma gain and on the assumptions
set forth under the caption "Federal -- General" above, the estimated per Unit
federal income tax resulting from the consummation of all the Sales Transactions
is $70 per Unit. These amounts reflect the estimated results of the Sales
Transactions only and do not include any estimates of ordinary income from
operations of the Sales Systems for 1996 and 1997.
The pro forma gain from the Partnership's share of the sale of the Newport
News System in January 1996 is estimated to be $207 per Unit. Approximately 77%
of such per Unit gain is estimated to be characterized as ordinary income under
Code Section 1245 and approximately 23% of such per Unit gain is estimated to be
characterized as capital gain under Code Section 1231. Based on these
characterizations of the pro forma gain and on the assumptions set forth under
the caption "Federal -- General" above, the estimated per Unit federal income
tax resulting from the Partnership's share of the sale of the Newport News
System is $63 per Unit. These amounts reflect the estimated results of the
Partnership's share of the sale of the Newport News System only and do not
include any estimates of ordinary income from operations of the Newport News
System for 1996.
STATE
Gain recognized on the sale of Partnership assets is generally reported on
the Limited Partner's resident state income tax return. A credit is typically
allowed for taxes paid to other states. The Lower Delaware System is located in
the States of Maryland and Delaware, the St. Mary's System is located in the
State of Maryland and the Southern Tennessee System is located in the State of
Tennessee. Each state requires Limited Partners to file a non-resident income
tax return and to pay state income tax on apportioned Partnership gains.
Maryland has a state income tax withholding law which requires the Partnership
to withhold non-resident state income tax at the rate of 5%. The General Partner
has estimated that the required Maryland withholding on non-resident Limited
Partners resulting from the applicable Sales Transactions will be insignificant.
Limited Partners who are not residents of Maryland may file a nonresident income
tax return to report other sources of income or loss within that state and if
applicable, obtain a refund of any taxes withheld.
48
<PAGE> 59
(This page intentionally left blank)
49
<PAGE> 60
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated balance sheet of
the Partnership as of September 30, 1996 assumes that the consummation of the
Sales Transactions and related distributions to partners had occurred as of such
date. The following unaudited pro forma condensed consolidated statements of
operations for the nine months ended September 30, 1996 and the year ended
December 31, 1995 assume that such events had occurred as of January 1, 1995.
The unaudited pro forma condensed consolidated financial statements are
intended to present the Sales Systems' contributions to the Partnership's
results of operations and financial position for purposes of separately
evaluating the impact of the Sales Transactions. However, because the Sales
Transactions are not contingent upon one another, it is possible that one or
more of the Sales Transactions would not be consummated and, even if all are
consummated, it is possible that the Sales Transactions would not be consummated
at the same time.
Certain calculations of the Pro Forma Distribution Per Unit are included in
note (d) to the unaudited pro forma condensed consolidated financial statements.
Such pro forma calculations, which are based upon the Partnership's historical
financial position at September 30, 1996, have not been reduced for any
non-resident state income taxes that may be required to be withheld by the
Partnership, do not reflect reserves for any contingent liabilities that might
arise subsequent to the date of this Proxy Statement and are based on various
assumptions with respect to transaction related costs, sales price adjustments
and other matters. Accordingly, the actual amounts distributed to the
Partnership's partners will vary from the pro forma distribution amounts to the
extent that the Partnership's September 30, 1996 financial position and/or the
aforementioned pro forma assumptions do not reflect actual amounts or conditions
on the date of closing. See "INCOME TAX CONSEQUENCES."
The unaudited pro forma information does not purport to be indicative of
the financial position or results of operations that actually would have been
obtained if any or all of the Sales Transactions actually had occurred as of the
dates indicated. Furthermore, the financial position and results of operations,
as reflected in the accompanying unaudited pro forma condensed financial
statements, are not necessarily indicative of the financial position and results
of operations that would be obtained in the future in the event that any of the
Sales Transactions are not consummated. These unaudited pro forma condensed
consolidated financial statements should be read in conjunction with the
Partnership's historical consolidated financial statements appearing in the 1996
10-Q and the 1995 10-K.
As described below, the amount by which the Pro Forma Distribution Per Unit
would be reduced if one or more of the Sales Transactions does not close is
dependent upon future events and circumstances. In the event that any of the
Sales Transactions do not close, it is currently the General Partner's intention
to seek a substitute buyer for the Substitute Sale System(s). There is no
assurance that the General Partner could arrange for a Substitute Sales
Transaction(s) at an appropriate price or on terms acceptable to the
Partnership. If the General Partner's efforts in arranging a Substitute Sales
Transaction(s) prove to be unsuccessful, the General Partner would evaluate
market, competitive, regulatory, financial and other conditions (relating to the
cable television industry generally and to the Substitute Sale System(s)
specifically) in order to determine whether it would be in the best interest of
the Partnership to use all or a portion of the available net cash proceeds
(after repaying debt as required by the terms of the Partnership's bank credit
facility and repaying any amounts due to TCIC and its affiliates) from any of
the consummated Sales Transactions to fund all or a portion of any remaining
cable television system's(s') liquidity requirements, including
non-discretionary capital expenditures and necessary maintenance costs as well
as the cost of implementing technological advancements or improvements.
Accordingly, the failure to consummate one or more of the Sales Transactions
could delay and would reduce the Pro Forma Distribution Per Unit.
50
<PAGE> 61
AMERICAN CABLE TV INVESTORS 5, LTD.
(A LIMITED PARTNERSHIP)
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
INCREASE (DECREASE)
----------------------------------------------------------------
SALE OF
SOUTHERN SALE OF SALE OF LOWER OTHER
PARTNERSHIP TENNESSEE ST. MARY'S DELAWARE PRO FORMA PARTNERSHIP
HISTORICAL SYSTEM SYSTEM SYSTEM ADJUSTMENTS PRO FORMA
----------- --------- ---------- ------------- ----------- ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash........................ $ 9,596 $18,681(b) $ 28,927(b) $ 39,300(b) $ (2,000)(b) $ 9,596
(9,937)(b)
(74,026)(b)
(945)(b)
Receivables, prepaids and
other assets, net......... 961 (37)(b) (75)(b) -- -- 849
Property and equipment,
net....................... 39,684 (5,252)(a) (11,612)(a) (12,981)(a) -- 9,839
Franchise costs and other
intangibles, net.......... 30,859 (505)(a) (9,744)(a) (10,123)(a) -- 10,487
Investment in Newport
News...................... 2,074 -- -- -- -- 2,074
------- ------- -------- -------- -------- -------
$83,174 $12,887 $ 7,496 $ 16,196 $ (86,908) $ 32,845
======= ======= ======== ======== ======== =======
LIABILITIES AND PARTNERS'
EQUITY
Cash overdraft.............. $ 6,967 -- -- -- -- $ 6,967
Payables, accruals and other
liabilities............... 12,705 $ (275)(b) $ (636)(b) $ (898)(b) $ (9,937)(b) $ 959
Debt........................ 2,000 -- -- -- (2,000)(b) --
------- ------- -------- -------- -------- -------
Total
liabilities..... 21,672 (275) (636) (898) (11,937) 7,926
(74,026)(d)
Partners' equity............ 61,502 13,162(c) 8,132(c) 17,094(c) (945)(c) 24,919
------- ------- -------- -------- -------- -------
$83,174 $12,887 $ 7,496 $ 16,196 $ (86,908) $ 32,845
======= ======= ======== ======== ======== =======
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
51
<PAGE> 62
AMERICAN CABLE TV INVESTORS 5, LTD.
(A LIMITED PARTNERSHIP)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
INCREASE (DECREASE)
-----------------------------------------------------------
SALE OF
SOUTHERN SALE OF SALE OF LOWER OTHER
PARTNERSHIP TENNESSEE ST. MARY'S DELAWARE PRO FORMA PARTNERSHIP
HISTORICAL SYSTEM(a) SYSTEM(a) SYSTEM(a) ADJUSTMENTS PRO FORMA
----------- --------- ---------- ------------- ------------ ------------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue............................ $20,744 $(2,881) $ (5,075) $(6,558) $ -- $ 6,230
Operating costs and expenses:
Programming, operating, selling,
general and administrative.... 13,329 (1,574) (3,267) (3,753) -- 4,735
Depreciation and
amortization.................. 10,635 (1,090) (2,826) (3,762) -- 2,957
------- ------- ------- ------- ---- -------
23,964 (2,664) (6,093) (7,515) -- 7,692
------- ------- ------- ------- ---- -------
Operating income (loss)....... (3,220) (217) 1,018 957 -- (1,462)
Interest income, net............... 240 -- -- -- 243(e) 483
Share of earnings of Newport
News............................. 39,976 -- -- -- -- 39,976
------- ------- ------- ------- ---- -------
Net earnings (loss)........... $36,996 $ (217) $ 1,018 $ 957 $243 $ 38,997
======= ======= ======= ======= ==== =======
Pro forma net earnings per Unit.... $ 193.03
=======
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
52
<PAGE> 63
AMERICAN CABLE TV INVESTORS 5, LTD.
(A LIMITED PARTNERSHIP)
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
INCREASE (DECREASE)
----------------------------------------------------------
SALE OF
SOUTHERN SALE OF SALE OF LOWER OTHER
PARTNERSHIP TENNESSEE ST. MARY'S DELAWARE PRO FORMA PARTNERSHIP
HISTORICAL SYSTEM(a) SYSTEM(a) SYSTEM(a) ADJUSTMENTS PRO FORMA
----------- --------- ---------- ------------- ----------- -----------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue............................. $26,196 $(3,759) $ (6,161) $(8,069) $ -- $ 8,207
Operating costs and expenses:
Programming, operating,
selling, general and
administrative................. 16,459 (2,126) (3,655) (4,686) -- 5,992
Depreciation and amortization..... 14,604 (1,560) (3,835) (5,096) -- 4,113
------- ------- ------- ------- --- -------
31,063 (3,686) (7,490) (9,782) -- 10,105
------- ------- ------- ------- --- -------
Operating income (loss)........ (4,867) (73) 1,329 1,713 -- (1,898)
Interest income (expense), net...... (844) -- -- -- 925(e) 81
Other income........................ 199 -- -- -- -- 199
Share of losses of
Newport News...................... (652) -- -- -- -- (652)
------- ------- ------- ------- --- -------
Net earnings (loss)............ $(6,164) $ (73) $ 1,329 $ 1,713 $ 925 $(2,270)
======= ======= ======= ======= === =======
Pro forma net loss per Unit......... $(11.24)
=======
</TABLE>
See accompanying notes to pro forma condensed consolidated financial statements.
53
<PAGE> 64
AMERICAN CABLE TV INVESTORS 5, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996 AND DECEMBER 31, 1995
(UNAUDITED)
(a) Represents the elimination of the historical cost of the Sales Systems'
property, equipment, franchise costs and other intangibles and the
elimination of the Sales Systems' results of operations.
(b) Represents the net cash proceeds from the Sales Transactions calculated as
follows (amounts in thousands):
<TABLE>
<CAPTION>
SOUTHERN LOWER
TENNESSEE ST. MARY'S DELAWARE TOTAL
--------- ---------- -------- -------
<S> <C> <C> <C> <C>
Unadjusted sales price(1)............................ $19,750 $ 30,637 $ 43,100 $93,487
Assumed purchase price adjustments(2)................ -- -- (1,534) (1,534)
Payment of 3% Disposition Fee........................ (593) (919) (1,293) (2,805)
Payment of sales tax(3).............................. (238) (230) (75) (543)
Net working capital adjustments(4)................... (238) (561) (898) (1,697)
------- ------ ------ -------
Net cash proceeds before unallocated costs and other
payments........................................... $18,681 $ 28,927 $ 39,300 86,908
======= ====== ======
Repayment of Partnership's debt(5)................... (2,000)
Repayment of amounts due TCIC(6)..................... (9,937)
Payment of other transaction costs(7)................ (945)
-------
Net cash proceeds(8)................................. $74,026
=======
</TABLE>
- ---------------
(1) Pursuant to the Asset Purchase Agreements, $2,337,173 of such sales
price will be placed in escrow and will be subject to indemnifiable
claims by the respective buyers for up to one year following
consummation. Because the General Partner knows of no reason that the
escrow requirements would result in a material sales price adjustment,
the sales prices set forth above assume that 100% of such escrowed
amounts had been received as of September 30, 1996.
(2) Pursuant to the Asset Purchase Agreements, the sales price is subject
to downward adjustment in the event certain minimum subscriber counts
are not met. Because the General Partner believes that it is unlikely
that such potential sales price adjustment would result in a material
adjustment to the sales price, the sales price set forth above assumes
that such minimum subscriber counts had been met as of September 30,
1996.
Pursuant to the Lower Delaware Asset Purchase Agreement, the sales
price is subject to downward adjustment by approximately $1,534,000 in
the event that as of the closing date the Partnership does not have an
agreement to provide cable services to the units of the community of
Sea Colony and notice has been provided to the Partnership that
Mediacom will not be permitted to service such units. Because the
General Partner is uncertain as to whether an agreement can be reached
with Sea Colony, the sales price for the Lower Delaware System, as set
forth above, has been adjusted downward. Additionally, the Lower
Delaware sales price is subject to downward adjustment in the event
that the Partnership has not obtained consent to permit Mediacom to
provide cable services to subscribers of certain private residential
communities within one year after the closing of the Lower Delaware
Sale. Such price adjustment would not result in a material adjustment
to the sales price. The sales price for the Lower Delaware System, as
set forth above, assumes that the consents had been obtained as of
September 30, 1996.
(3) Represents the Partnership's share of state sales tax.
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<PAGE> 65
AMERICAN CABLE TV INVESTORS 5, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
(4) Represents sales price adjustments attributable to receivables, prepaid
expenses, other assets, payables, accruals and other liabilities. It
has been assumed that cash held by the Partnership and the Sales
Systems, net of any cash overdraft positions, would be retained by the
Partnership as a prudent reserve. Accordingly, cash held by the Sales
Systems, net of any cash overdraft positions, has been excluded in
determining net working capital adjustments.
(5) Represents the repayment of the Partnership's bank debt. Such amounts
will be repaid regardless of the number of Sales Transactions that are
consummated.
(6) Represents the repayment of amounts due TCIC. Such amounts will be
repaid regardless of the number of Sales Transactions that are
consummated.
(7) Represents costs for legal fees, fairness opinions, printing,
accounting and other fees. Such amounts have not been allocated to each
of the Sales Systems as such costs are fixed in nature and will not
decrease if all of the Sales Transactions are not consummated.
(8) Amount does not include any other available cash held by the
Partnership.
(c) Represents the gain on the Sales Transactions calculated as follows (amounts
in thousands):
<TABLE>
<CAPTION>
SOUTHERN LOWER
TENNESSEE ST. MARY'S DELAWARE TOTAL
--------- ---------- -------- --------
<S> <C> <C> <C> <C>
Unadjusted sales price(1)......................... $19,750 $ 30,637 $ 43,100 $ 93,487
Assumed purchase price adjustments(2)............. -- -- (1,534) (1,534)
Payment of 3% Disposition Fee..................... (593) (919) (1,293) (2,805)
Payment of sales tax(3)........................... (238) (230) (75) (543)
Net book value of property, equipment, franchise
costs and other intangibles..................... (5,757) (21,356) (23,104) (50,217)
------- ------- ------- -------
Gain before unallocated costs..................... $13,162 $ 8,132 $ 17,094 38,388
======= ======= =======
Payment of other transaction costs(4)............. (945)
-------
Gain.............................................. $ 37,443
=======
</TABLE>
- ---------------
(1) See (1) in note (b) above.
(2) See (2) in note (b) above.
(3) See (3) in note (b) above.
(4) See (7) in note (b) above.
DISTRIBUTION OF NET CASH PROCEEDS
(d) As further described in note 3 to the Partnership's September 30, 1996
historical consolidated financial statements, cash from sales shall be
distributed 99% to the Limited Partners and 1% to the General Partner until
cumulative distributions to the Limited Partners are equal to Payback plus
6% per annum, and thereafter, 25% to the General Partner and 75% to the
Limited Partners. Assuming that all of the Sales Transactions are
consummated, Payback ($100,002,500) would be satisfied with the net cash
proceeds from all of the Sales Transactions. Based on the foregoing, the
aggregate net cash proceeds set
55
<PAGE> 66
AMERICAN CABLE TV INVESTORS 5, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS -- (CONTINUED)
forth in note (b) would be distributed to each class of partners as follows
(amounts in thousands, except unit amounts):
<TABLE>
<S> <C>
General Partner........................................... $ 740
Limited Partners.......................................... 73,286
--------
$ 74,026
========
Pro Forma Distribution Per Unit........................... $ 366
========
Units Outstanding......................................... 200,005
========
</TABLE>
As described in the headnote to these unaudited pro forma condensed
consolidated financial statements, the actual amounts distributed to the
Limited Partners may vary from the foregoing pro forma distribution
amounts.
(e) Represents the interest expense on the Partnership's debt, which is assumed
to be repaid with proceeds from consummation of any of the Sales
Transactions. See (5) in note (b) above.
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<PAGE> 67
AVAILABLE INFORMATION
The 1996 10-Q and the 1995 10-K are being sent to the Limited Partners
simultaneously herewith.
INCORPORATION BY REFERENCE
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Proxy Statement shall be deemed to be modified
or superseded for purposes of this Proxy Statement to the extent that a
statement contained in this Proxy Statement (or in any other subsequently filed
document that also is or is deemed to be incorporated by reference in this Proxy
Statement) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement. This Proxy Statement incorporates the
following documents by reference:
The Partnership's Annual Report, pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), filed on Form 10-K for the year ended
December 31, 1995.
The Partnership's Quarterly Reports, pursuant to the Exchange Act, filed on
Forms 10-Q for the quarters ended March 31, 1996, June 30, 1996 and September
30, 1996, as amended.
The Partnership specifically incorporates by reference herein Item
1 -- Business, Item 2 -- Properties, Item 5 -- Market for the Registrant's
Common Stock and Related Security Holder Matters, Item 6 -- Selected Financial
Data, Item 7 -- Management's Discussion and Analysis of Financial Condition and
Results of Operations and Item 8 -- Financial Statements from the 1995 10-K and
the entire text of the 1996 10-Q.
All documents filed after the date of this Proxy Statement but before the
Special Meeting shall be deemed to be incorporated by reference into this Proxy
Statement. Copies of these documents will be available without charge upon
request to American Cable TV Investors 5, Ltd., c/o Applied Information
Solutions, Inc., 1600 Wynkoop, Suite 300, Denver, Colorado 80202, (800)
843-3293.
OTHER MATTERS
VOTING RIGHTS AND VOTE REQUIRED
The General Partner has fixed the close of business on February 3, 1997 as
the record date (the "Record Date") for the determination of Limited Partners
entitled to notice of and to vote at the Special Meeting. On the Record Date,
200,005 Units, owned by approximately 12,800 Limited Partners, were outstanding
and entitled to vote at the Special Meeting. Each outstanding Unit is entitled
to one vote. To the best of the General Partner's knowledge, no person or group
of persons beneficially own more than five percent of the Units. To the best of
the General Partner's knowledge, no Units are owned by the General Partner or
any of its affiliates.
Approval of each of the Resolutions requires the affirmative vote, either
in person or by proxy, of Limited Partners owning in the aggregate more than 50%
of the Units outstanding on the Record Date. In the event that sufficient votes
to permit approval of one or more of the Resolutions are not represented at the
Special Meeting, the persons named as proxies may propose one or more
adjournments of the Special Meeting to permit the further solicitation of
proxies. Notice of the adjourned meeting need not be given if the time and place
of the adjourned meeting is announced at the Special Meeting (or the adjourned
meeting). Approval of the Resolutions shall not be deemed a consent to the sale
of the Riverside System.
Matters incidental to the conduct of the Special Meeting that are properly
brought before the Special Meeting, including the consideration of any
adjournment or postponement thereof, may be voted upon at the Special Meeting.
The General Partner does not intend to bring any matters before the Special
Meeting other than those set forth in the Notice of Meeting accompanying this
Proxy Statement and does not know of any matters to be brought before the
Special Meeting by others. If any matter should come before the Special Meeting,
it is the
57
<PAGE> 68
intention of the persons named in the accompanying proxy to vote the Units
represented thereby in accordance with their judgment.
Proxies in the form enclosed, properly executed and duly returned, will be
voted at the Special Meeting in accordance with the instructions thereon. If no
instructions are indicated on a properly signed proxy with respect to any or all
of the Resolutions, it will be voted in favor of the Resolutions. Abstentions
and broker non-votes will be counted as votes against the Resolutions.
REVOCABILITY
The enclosed proxy may be revoked at any time before it is voted by giving
notice of such revocation to the General Partner either in writing addressed to
the Partnership at its address set forth above or in person at the Special
Meeting. If given in writing, such notice should be mailed or delivered in time
to be received by the Partnership prior to the Special Meeting. A proxy may also
be revoked by execution of a subsequently dated proxy that is received by the
Partnership prior to the Special Meeting.
NO APPRAISAL RIGHTS
If Limited Partners owning in the aggregate more than 50% of the Units that
are entitled to vote at the Special Meeting vote in favor of any or all of the
Sales Transactions and for the Substitute Sales Transaction, such approval will
bind all Limited Partners including those who vote against any or all of the
Sales Transactions or the Substitute Sales Transaction or abstain from voting at
the Special Meeting. The Partnership Agreement and the Colorado Uniform Limited
Partnership Act, under which the Partnership is governed, do not give rights of
appraisal or similar rights to Limited Partners who dissent from the vote of the
majority in approving or disapproving any of the Resolutions. Accordingly,
dissenting Limited Partners do not have the right to have their interests in the
Partnership appraised and to have the value of those interests returned to them
because they disapprove of the action of Limited Partners owning in the
aggregate more than 50% of the Units.
PROXY SOLICITATION
Proxies may be solicited by personal interview, telephone, telecopier and
telegram by officers and other employees of the General Partner or any of its
affiliates who will not be specifically compensated for such services, but who
will be reimbursed by the Partnership for their out-of-pocket expenses. The
Partnership will request banks, brokers and other custodians, nominees and
fiduciaries to forward solicitation materials to the beneficial owners of the
outstanding Units that such custodians, nominees and fiduciaries own of record.
The Partnership will reimburse such custodians, nominees and fiduciaries for
reasonable out-of-pocket expenses incurred by them in connection with such
activities. An outside solicitation firm, The Herman Group, Inc., has been
retained to assist in the solicitation of proxies (including the mailing of the
solicitation materials, responding to investor questions and, if requested by
the General Partner, telephone calls to Limited Partners). The Herman Group,
Inc. will be paid a fee of $25,000 plus reimbursement of usual and customary
solicitation, tabulation and other out-of-pocket expenses and related fees. The
cost of the solicitation of proxies from the Limited Partners will be borne by
the Partnership. See "OTHER RELEVANT INFORMATION -- Costs of the Sales
Transactions."
INDEPENDENT ACCOUNTANTS
Representatives of KPMG Peat Marwick LLP, the Partnership's independent
accountants, are expected to attend the Special Meeting and make a statement if
they so desire. They will also be available to respond to appropriate questions.
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<PAGE> 69
APPENDIX A
GLOSSARY
Capitalized terms used in this Proxy Statement shall have the meanings set
forth below:
"1992 Cable Act" shall mean the Cable Television Consumer Protection and
Competition Act of 1992.
"1995 10-K" shall mean the Partnership's Annual Report on Form 10-K for the
year ended December 31, 1995.
"1996 10-Q" shall mean the Partnership's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1996, as amended.
"1996 Telecom Act" shall mean the Telecommunications Act of 1996.
"ACT 4" shall mean American Cable TV Investors 4, Ltd., a Colorado limited
partnership.
"Adjusted Total Market Value" shall mean the market value of equity on a
fully-diluted basis plus the value of debt, the value of outstanding
non-convertible or out-of-the-money convertible preferred stock and minority
interests less cash and cash equivalents adjusted to exclude the estimated
public market value of the unconsolidated and non-cable television assets.
"Aggregate Transaction Value" shall mean the total cash or stock purchase
price plus any debt and preferred stock to be assumed less cash and cash
equivalents.
"Alternative Transaction" shall mean, as the context shall require, an
unsolicited better offer for the Lower Delaware, St. Mary's or Southern
Tennessee System received by the Partnership.
"Appraisals" shall mean the appraisals of the Sales Systems, dated as of
December 31, 1994, by Communications Equity.
"Asset Purchase Agreements" shall mean collectively the Lower Delaware
Asset Purchase Agreement, the St. Mary's Asset Purchase Agreement and the
Southern Tennessee Asset Purchase Agreement.
"Basic Penetration" shall mean the ratio of basic subscribers to homes
passed.
"Broker" shall mean Daniels & Associates, L.P., a media properties broker.
"Cablevision" shall mean Cablevision Equities VI, the limited partner of
the General Partner.
"Cable Corp." shall mean Integrated Cable Corp. V, a Delaware corporation
and, until its withdrawal on January 17, 1996, one of the general partners of
the General Partner.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Commitment Expense" shall mean 50% of the dollar amount of all charges and
fees of any financial institution incurred by Gans if the closing of the St.
Mary's Sale does not occur by June 30, 1997.
"Communications Equity" shall mean Communications Equity Associates, Inc.
"Comparable Group" shall mean the nine publicly-traded companies which
Lehman Brothers considered to have assets reasonably comparable to the Sales
Systems.
"Competitive Auction" shall mean the competitive auction pursuant to which
the Lower Delaware, Riverside, St. Mary's and Southern Tennessee Systems were
offered for sale.
"DBS" shall mean direct broadcast satellite.
"Disposition Fee" shall mean the gross fee payable to TCA equal to 3% of
the gross proceeds received in connection with the sale or disposition of the
Partnership's cable television properties.
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<PAGE> 70
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Fairness Opinions" shall mean the opinions, dated January 15, 1997, of
Lehman Brothers regarding the fairness from a financial point of view of each of
the Sales Transactions to the Partnership.
"FCC" shall mean the Federal Communications Commission.
"Gans" shall mean Gans Multimedia Partnership, a Pennsylvania general
partnership.
"General Partner" shall mean IR-TCI Partners V, L.P., a Colorado limited
partnership.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Latest Quarter's Annualized Adjusted System Cash Flow" shall mean
operating income for the quarter ended September 30, 1996, before depreciation,
amortization, management fees, corporate expense allocations and certain other
adjustments, which Lehman Brothers did not believe to be material, provided to
Lehman Brothers by the Partnership, multiplied by four.
"LECs" shall mean local exchange carriers.
"Lehman Brothers" shall mean Lehman Brothers Inc., the financial advisor to
the Partnership.
"LFAs" shall mean local franchising authorities.
"Limited Partners" shall mean the limited partners of the Partnership.
"Lower Delaware Asset Purchase Agreement" shall mean the asset purchase
agreement, dated as December 24, 1996, by and between the Partnership and
Mediacom.
"Lower Delaware Commitment" shall mean a commitment obtained by Mediacom to
finance the purchase of the Lower Delaware System.
"Lower Delaware Escrow" shall mean the $1,077,500 portion of the sales
price for the Lower Delaware System to be retained for one year after the
closing of the Lower Delaware Sale, which is subject to indemnifiable claims by
Mediacom.
"Lower Delaware Sale" shall mean the sale of the Lower Delaware System to
Mediacom for $43,100,000 pursuant to the terms of the Lower Delaware Asset
Purchase Agreement.
"Lower Delaware System" shall mean the cable television system which serves
communities located in and around Lower Delaware and Maryland.
"Mediacom" shall mean Mediacom LLC, a New York limited liability company.
"MMDS" shall mean a multichannel multipoint distribution system.
"MSO" shall mean a multiple system cable operator.
"New Sea Colony Agreement" shall mean a new agreement between the
Partnership and Sea Colony Associates, Inc. assignable to Mediacom with an
expiration date not earlier than the second anniversary of the closing date of
the Lower Delaware Sale.
"Newport News" shall mean Newport News Cablevision, Ltd., a Colorado
limited partnership in which the Partnership has a 40% ownership interest.
"Newport News System" shall mean the cable television system which serves
communities located in and around Newport News, Virginia.
"Ocean Pines Consent" shall mean the consent of Ocean Pines Association,
Inc. to transfer to Mediacom the right to service the community of Ocean Pines.
"OVS" shall mean open video system.
"Partnership" shall mean American Cable TV Investors 5, Ltd., a Colorado
limited partnership.
A-2
<PAGE> 71
"Partnership Agreement" shall mean the Partnership's limited partnership
agreement, dated as of December 15, 1986, as amended and restated as of January
1, 1987.
"Payback" shall mean the aggregate amount of distributions including
certain tax credit allocations to Limited Partners that is equal to the Limited
Partners' original invested capital.
"PCC" shall mean Presidio Cable V Corp., a Delaware corporation.
"PR-TCI Partnerships" shall mean the cable television limited partnerships
in which TCIC and Presidio (as successor to Integrated Resources, Inc.)
indirectly own general and limited partnership interests.
"Premium Penetration" shall mean the ratio of premium subscriptions to
basic subscribers.
"Presidio" shall mean Presidio Capital Corp., a British Virgin Islands
corporation, the successor to Integrated Resources, Inc. and the indirect parent
of Cable Corp.
"Pro Forma Distribution Per Unit" shall mean the pro forma net cash
proceeds available for distribution to Limited Partners, on a per Unit basis in
connection with the Sales Transactions.
"Procedures Letter" shall mean the letter sent to all prospective bidders
by the Broker setting forth specific terms governing the manner in which bids
for the cable television systems should be submitted pursuant to the Competitive
Auction.
"Purchasers" shall mean collectively Mediacom, Gans and Rifkin, the
proposed purchasers of the Sales Systems.
"Recent Transactions" shall mean transactions involving the sale of cable
television systems between November 1995 and November 1996 which Lehman Brothers
deemed to be comparable to the Sales Transactions.
"Record Date" shall mean the close of business on February 3, 1997.
"Regulated Services" shall mean the Sales Systems' basic and tier service
rates and their equipment and installation charges that are regulated under the
1992 Cable Act.
"Resolutions" shall mean the resolutions relating to the approval of the
Sales Transactions and the Substitute Sales Transaction.
"Rifkin" shall mean Rifkin Acquisition Partners, L.L.L.P., a Colorado
limited liability limited partnership.
"Riverside System" shall mean the cable television system which serves
communities located in and around Riverside, California.
"Sales Systems" shall mean collectively the Lower Delaware System, St.
Mary's System and Southern Tennessee System.
"Sales Transactions" shall mean collectively the Lower Delaware Sale, St.
Mary's Sale and Southern Tennessee Sale.
"Sea Colony Adjustment" shall mean the $1,534,126 adjustment to the
purchase price of the Lower Delaware Sale to be made in the event that as of the
closing date the Partnership does not have an agreement to provide cable
services to the units of Sea Colony or has not obtained consent to transfer the
agreement to provide such services to Mediacom.
"Sea Colony Notice" shall mean any notice provided to the Partnership that
Mediacom will not be permitted to service units of the community known as Sea
Colony.
"Southern Tennessee Asset Purchase Agreement" shall mean the asset purchase
agreement, dated as of November 29, 1996, by and between the Partnership and
Rifkin.
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<PAGE> 72
"Southern Tennessee Escrow" shall mean the $493,750 portion of the sales
price for the Southern Tennessee System to be retained for one year after the
closing of the Southern Tennessee Sale, which is the subject of indemnifiable
claims by Rifkin.
"Southern Tennessee Sale" shall mean the sale of the Southern Tennessee
System to Rifkin for $19,750,000 pursuant to the Southern Tennessee Asset
Purchase Agreement.
"Southern Tennessee System" shall mean the cable television system which
serves communities located in and around Southern Tennessee.
"Special Meeting" shall mean the meeting of Limited Partners on March 26,
1997, including adjournments thereof, to vote on the Resolutions.
"St. Mary's Asset Purchase Agreement" shall mean the asset purchase
agreement, dated as of November 27, 1996, by and between the Partnership and
Gans.
"St. Mary's Escrow" shall mean the $765,923 portion of the sales price for
the St. Mary's System to be retained for one year after the closing of the St.
Mary's Sale, which is subject to indemnifiable claims by Gans.
"St. Mary's Sale" shall mean the sale of the St. Mary's System to Gans for
$30,636,900 pursuant to the terms of the St. Mary's Asset Purchase Agreement.
"St. Mary's System" shall mean the cable television system which serves
communities located in and around St. Mary's County, Maryland.
"Substitute Sale System(s)" shall mean the Sales System(s) relating to any
Sales Transaction that is not consummated.
"Substitute Sales Transaction" shall mean a sale of the Substitute Sale
System(s) pursuant to the terms described herein.
"Surviving Claims" shall mean claims by a Purchaser pursuant to the
relevant Asset Purchase Agreement and (i) resulting from a breach of the
representations and warranties with respect to title or tax matters, (ii)
arising from third party claims against such Purchaser and (iii) claims for
breaches of covenants, agreements and obligations to be performed by the
Partnership after the closing date under the applicable Asset Purchase
Agreement.
"TCA" shall mean TCI Cablevision Associates, Inc., a Delaware corporation,
the managing agent of the Sales Systems and an indirect wholly-owned subsidiary
of TCIC.
"TCI" shall mean Tele-Communications, Inc., the ultimate parent of TVI.
"TCIC" shall mean TCI Communications, Inc., a Delaware corporation.
"TVI" shall mean TCI Ventures Five, Inc., a Colorado corporation and the
general partner of the General Partner.
"UAE" shall mean United Artists Entertainment Company.
"Unit" shall mean a unit of limited partnership interest representing a
capital contribution of $500 to the Partnership.
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<PAGE> 73
APPENDIX B-1
LEHMAN BROTHERS
January 15, 1997
IR-TCI Partners V, L.P.
c/o American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, CO 80111
Ladies and Gentlemen:
We understand that American Cable TV Investors 5, Ltd., a Colorado limited
partnership (the "Partnership"), is proposing to sell its interest in the
Southern Tennessee System (the "System") to Rifkin Acquisition Partners,
L.L.L.P. ("Rifkin") or one of Rifkin's affiliates (the "Acquiror") for
consideration of $19,750,000 in cash (the "Proposed Sale Transaction"). The
Proposed Sale Transaction will be consummated pursuant to an Asset Purchase
Agreement by and between the Partnership and the Acquiror (the "Asset Purchase
Agreement"). The consideration to be received by the Partnership in the Proposed
Sale Transaction is subject to certain adjustments including an adjustment based
on working capital prorations and an adjustment based on the number of
subscribers on the first day of the month for the twelve months prior to
closing. The terms and conditions of the Proposed Sale Transaction are set forth
in more detail in the Asset Purchase Agreement.
We have been requested by IR-TCI Partners V, L.P., the general partner of the
Partnership (the "General Partner") to render our opinion with respect to the
fairness, from a financial point of view, to the Partnership of the
consideration to be received by the Partnership in the Proposed Sale
Transaction. We have not been requested to opine as to, and our opinion does not
in any manner address, (i) the Partnership's underlying business decision to
proceed with or effect the Proposed Sale Transaction, (ii) any application of
the proceeds of the Proposed Sale Transaction, including the allocation among
the partners of the Partnership of the proceeds to be received by the
Partnership in the Proposed Sale Transaction, or (iii) the fairness to any
limited partner of the Partnership of the consideration to be distributed to
such limited partner following the consummation of the Proposed Sale
Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Asset Purchase
Agreement and the specific terms of the Proposed Sale Transaction, (2) the
preliminary Proxy Statement filed with the Securities and Exchange Commission on
December 11, 1996, and such other publicly available information concerning the
Partnership and the System that we believe to be relevant to our analysis, (3)
financial and operating information with respect to the business, operations and
assets of the System furnished to us by the Partnership, including without
limitation the confidential memorandum which was distributed to potential
acquirors of the System, (4) the results of efforts by the Partnership and its
advisor, Daniels & Associates, L.P., to solicit indications of interest,
proposals and bids from third parties with respect to an acquisition of the
System, (5) a comparison of the historical financial results and present
financial condition of the System with those of other companies or businesses
that we deemed relevant, and (6) a comparison of the financial terms of the
Proposed Sale Transaction with the financial terms of certain other recent
transactions that we deemed relevant. In addition, we had discussions with the
management of the General Partner concerning the business, operations, assets,
financial condition and prospects of the System and the Partnership and
undertook such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of the management of the General Partner that
they
B-1
<PAGE> 74
are not aware of any facts or circumstances that would make such information
inaccurate or misleading. You are aware that the management of the General
Partner has not prepared, and accordingly, in performing our analysis and in
arriving at our opinion, we did not have access to and were not provided with,
any forecasts of the future financial performance or results of operations of
the System. We also have not conducted a physical inspection of the assets of
the System and have not made or obtained any evaluations or appraisals of any of
the assets or liabilities of the System or the Partnership. Our opinion
necessarily is based upon market, economic and other conditions as they exist
on, and can be evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the date
hereof that, from a financial point of view, the consideration to be received by
the Partnership in the Proposed Sale Transaction is fair to the Partnership.
We will receive a fee for our services which is payable upon the delivery of
this opinion. In addition, the Partnership has agreed to indemnify us for
certain liabilities that may arise out of the rendering of this opinion. We also
have previously rendered various investment banking and financial and strategic
advisory services to Tele-Communications, Inc. ("TCI"), the ultimate parent of
the general partner of the General Partner, and its affiliates and have received
customary fees for such services. In the ordinary course of our business, we
actively trade in the securities of TCI for our own account and for the accounts
of our customers and, accordingly, may at any time hold a long or short position
in such securities.
This opinion is for the use and benefit of the General Partner and is rendered
to the General Partner in connection with its consideration of the Proposed Sale
Transaction. This opinion is not intended to be and does not constitute a
recommendation to any limited partner of the Partnership as to how such limited
partner should vote with respect to the Proposed Sale Transaction.
Very truly yours,
LEHMAN BROTHERS
By: /s/ JEFFREY R. SECHREST
----------------------------------
Jeffrey R. Sechrest
Managing Director
>
B-2
<PAGE> 75
APPENDIX B-2
LEHMAN BROTHERS
January 15, 1997
IR-TCI Partners V, L.P.
c/o American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, CO 80111
Ladies and Gentlemen:
We understand that American Cable TV Investors 5, Ltd., a Colorado limited
partnership (the "Partnership"), is proposing to sell its interest in the St.
Mary's System (the "System") to Gans Multimedia Partnership ("Gans") or one of
Gans' affiliates (the "Acquiror") for consideration of $30,636,900 in cash (the
"Proposed Sale Transaction"). The Proposed Sale Transaction will be consummated
pursuant to an Asset Purchase Agreement by and between the Partnership and the
Acquiror (the "Asset Purchase Agreement"). The consideration to be received by
the Partnership in the Proposed Sale Transaction is subject to certain
adjustments including an adjustment based on working capital prorations and an
adjustment based on the number of subscribers on the first day of the month for
the twelve months prior to closing. The terms and conditions of the Proposed
Sale Transaction are set forth in more detail in the Asset Purchase Agreement.
We have been requested by IR-TCI Partners V, L.P., the general partner of the
Partnership (the "General Partner") to render our opinion with respect to the
fairness, from a financial point of view, to the Partnership of the
consideration to be received by the Partnership in the Proposed Sale
Transaction. We have not been requested to opine as to, and our opinion does not
in any manner address, (i) the Partnership's underlying business decision to
proceed with or effect the Proposed Sale Transaction, (ii) any application of
the proceeds of the Proposed Sale Transaction, including the allocation among
the partners of the Partnership of the proceeds to be received by the
Partnership in the Proposed Sale Transaction, or (iii) the fairness to any
limited partner of the Partnership of the consideration to be distributed to
such limited partner following the consummation of the Proposed Sale
Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Asset Purchase
Agreement and the specific terms of the Proposed Sale Transaction, (2) the
preliminary Proxy Statement filed with the Securities and Exchange Commission on
December 11, 1996, and such other publicly available information concerning the
Partnership and the System that we believe to be relevant to our analysis, (3)
financial and operating information with respect to the business, operations and
assets of the System furnished to us by the Partnership, including without
limitation the confidential memorandum which was distributed to potential
acquirors of the System, (4) the results of efforts by the Partnership and its
advisor, Daniels & Associates, L.P., to solicit indications of interest,
proposals and bids from third parties with respect to an acquisition of the
System, (5) a comparison of the historical financial results and present
financial condition of the System with those of other companies or businesses
that we deemed relevant, and (6) a comparison of the financial terms of the
Proposed Sale Transaction with the financial terms of certain other recent
transactions that we deemed relevant. In addition, we had discussions with the
management of the General Partner concerning the business, operations, assets,
financial condition and prospects of the System and the Partnership and
undertook such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of the management of the General Partner that
they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. You
B-3
<PAGE> 76
are aware that the management of the General Partner has not prepared, and
accordingly, in performing our analysis and in arriving at our opinion, we did
not have access to and were not provided with, any forecasts of the future
financial performance or results of operations of the System. We also have not
conducted a physical inspection of the assets of the System and have not made or
obtained any evaluations or appraisals of any of the assets or liabilities of
the System or the Partnership. Our opinion necessarily is based upon market,
economic and other conditions as they exist on, and can be evaluated as of, the
date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the date
hereof that, from a financial point of view, the consideration to be received by
the Partnership in the Proposed Sale Transaction is fair to the Partnership.
We will receive a fee for our services which is payable upon the delivery of
this opinion. In addition, the Partnership has agreed to indemnify us for
certain liabilities that may arise out of the rendering of this opinion. We also
have previously rendered various investment banking and financial and strategic
advisory services to Tele-Communications, Inc. ("TCI"), the ultimate parent of
the general partner of the General Partner, and its affiliates and have received
customary fees for such services. In the ordinary course of our business, we
actively trade in the securities of TCI for our own account and for the accounts
of our customers and, accordingly, may at any time hold a long or short position
in such securities.
This opinion is for the use and benefit of the General Partner and is rendered
to the General Partner in connection with its consideration of the Proposed Sale
Transaction. This opinion is not intended to be and does not constitute a
recommendation to any limited partner of the Partnership as to how such limited
partner should vote with respect to the Proposed Sale Transaction.
Very truly yours,
LEHMAN BROTHERS
By: /s/ JEFFREY R. SECHREST
----------------------------------
Jeffrey R. Sechrest
Managing Director
B-4
<PAGE> 77
APPENDIX B-3
LEHMAN BROTHERS
January 15, 1997
IR-TCI Partners V, L.P.
c/o American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, CO 80111
Ladies and Gentlemen:
We understand that American Cable TV Investors 5, Ltd., a Colorado limited
partnership (the "Partnership"), is proposing to sell its interest in the Lower
Delaware System (the "System") to Mediacom or one of Mediacom's affiliates (the
"Acquiror") for consideration of $43,100,000 in cash (the "Proposed Sale
Transaction"). The Proposed Sale Transaction will be consummated pursuant to an
Asset Purchase Agreement by and between the Partnership and the Acquiror (the
"Asset Purchase Agreement"). The consideration to be received by the Partnership
in the Proposed Sale Transaction is subject to certain adjustments including an
adjustment based on working capital prorations and an adjustment based on the
number of subscribers on the first day of the month for the twelve months prior
to closing. The terms and conditions of the Proposed Sale Transaction are set
forth in more detail in the Asset Purchase Agreement.
We have been requested by IR-TCI Partners V, L.P., the general partner of the
Partnership (the "General Partner") to render our opinion with respect to the
fairness, from a financial point of view, to the Partnership of the
consideration to be received by the Partnership in the Proposed Sale
Transaction. We have not been requested to opine as to, and our opinion does not
in any manner address, (i) the Partnership's underlying business decision to
proceed with or effect the Proposed Sale Transaction, (ii) any application of
the proceeds of the Proposed Sale Transaction, including the allocation among
the partners of the Partnership of the proceeds to be received by the
Partnership in the Proposed Sale Transaction, or (iii) the fairness to any
limited partner of the Partnership of the consideration to be distributed to
such limited partner following the consummation of the Proposed Sale
Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) the Asset Purchase
Agreement and the specific terms of the Proposed Sale Transaction, (2) the
preliminary Proxy Statement filed with the Securities and Exchange Commission on
December 11, 1996, and such other publicly available information concerning the
Partnership and the System that we believe to be relevant to our analysis, (3)
financial and operating information with respect to the business, operations and
assets of the System furnished to us by the Partnership, including without
limitation the confidential memorandum which was distributed to potential
acquirors of the System, (4) the results of efforts by the Partnership and its
advisor, Daniels & Associates, L.P., to solicit indications of interest,
proposals and bids from third parties with respect to an acquisition of the
System, (5) a comparison of the historical financial results and present
financial condition of the System with those of other companies or businesses
that we deemed relevant, and (6) a comparison of the financial terms of the
Proposed Sale Transaction with the financial terms of certain other recent
transactions that we deemed relevant. In addition, we had discussions with the
management of the General Partner concerning the business, operations, assets,
financial condition and prospects of the System and the Partnership and
undertook such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of the management of the General Partner that
they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. You
B-5
<PAGE> 78
are aware that the management of the General Partner has not prepared, and
accordingly, in performing our analysis and in arriving at our opinion, we did
not have access to and were not provided with, any forecasts of the future
financial performance or results of operations of the System. We also have not
conducted a physical inspection of the assets of the System and have not made or
obtained any evaluations or appraisals of any of the assets or liabilities of
the System or the Partnership. Our opinion necessarily is based upon market,
economic and other conditions as they exist on, and can be evaluated as of, the
date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the date
hereof that, from a financial point of view, the consideration to be received by
the Partnership in the Proposed Sale Transaction is fair to the Partnership.
We will receive a fee for our services which is payable upon the delivery of
this opinion. In addition, the Partnership has agreed to indemnify us for
certain liabilities that may arise out of the rendering of this opinion. We also
have previously rendered various investment banking and financial and strategic
advisory services to Tele-Communications, Inc. ("TCI"), the ultimate parent of
the general partner of the General Partner, and its affiliates and have received
customary fees for such services. In the ordinary course of our business, we
actively trade in the securities of TCI for our own account and for the accounts
of our customers and, accordingly, may at any time hold a long or short position
in such securities.
This opinion is for the use and benefit of the General Partner and is rendered
to the General Partner in connection with its consideration of the Proposed Sale
Transaction. This opinion is not intended to be and does not constitute a
recommendation to any limited partner of the Partnership as to how such limited
partner should vote with respect to the Proposed Sale Transaction.
Very truly yours,
LEHMAN BROTHERS
By: /s/ JEFFREY R. SECHREST
----------------------------------
Jeffrey R. Sechrest
Managing Director
B-6
<PAGE> 79
APPENDIX C
RELEVANT PARTNERSHIP AGREEMENT PROVISIONS
AND PROPOSED AMENDMENT
PROPOSED AMENDMENT
Set forth below is the text of the proposed amendment to the Partnership
Agreement which will be voted upon and adopted in connection with the Sales
Transactions (additions and modifications are indicated by underlining of the
appropriate text):
2. DEFINITION AND GLOSSARY OF TERMS
2.1 The following terms used in this Partnership Agreement shall (unless
otherwise expressly provided herein or unless the context otherwise requires)
have the following respective meanings.
"Lower Delaware System" shall mean the cable television system which serves
communities located in and around Lower Delaware and Maryland.
"Southern Tennessee System" shall mean the cable television system which
serves communities located in and around Shelbyville and Manchester, Tennessee.
"St. Mary's System" shall mean the cable television system which serves
communities located in and around St. Mary's County, Maryland.
* * *
15. RIGHTS, AUTHORITY, POWERS, RESPONSIBILITIES AND DUTIES OF THE GENERAL
PARTNER
15.1 Rights and Powers. The conduct of the Partnership's business shall
be controlled solely by the General Partner in accordance with this Partnership
Agreement. The General Partner shall have all authority, rights and powers
conferred by law and those required or appropriate to the management of the
Partnership business which, by way of illustration but not by way of limitation,
shall, subject only to the provisions of Paragraph 15.4 following, include the
right, authority and power on behalf of, and at the expense of, the Partnership:
* * *
15.1.19 To sell the Lower Delaware System to Mediacom LLC ("Mediacom") or
one of Mediacom's affiliates in accordance with the terms set forth in the Asset
Purchase Agreement dated as of December 24, 1996 between the Partnership and
Mediacom, including, without limitation, in situations where such sale would
result in the sale of all or Substantially All of the Assets of the Partnership
and the termination and dissolution of the Partnership.
* * *
15.1.20 To sell the St. Mary's System to Gans Multimedia Partnership
("Gans") or one of Gans' affiliates in accordance with the terms set forth in
the Asset Purchase Agreement dated as of November 27, 1996 between the
Partnership and Gans, including, without limitation, in situations where such
sale would result in the sale of all or Substantially All of the Assets of the
Partnership and the termination and dissolution of the Partnership.
* * *
15.1.21 To sell the Southern Tennessee System to Rifkin Acquisition
Partners, L.L.L.P. ("Rifkin") or one of Rifkin's affiliates in accordance with
the terms set forth in the Asset Purchase Agreement dated as of November 29,
1996 between the Partnership and Rifkin, including, without limitation, in
situations where such sale would result in the sale of all or Substantially All
of the Assets of the Partnership and the termination and dissolution of the
Partnership.
C-1
<PAGE> 80
15.4 Limitations. Neither the General Partner nor any Affiliate thereof
shall have the authority to:
* * *
15.4.2 Without the approval of the Limited Partners by Majority Vote, sell
all or Substantially All of the Assets of the Partnership in a single sale, or
in multiple sales in the same twelve-month period, except (i) in the liquidation
and winding up of the business of the Partnership upon its termination and
dissolution, (ii) that the General Partner may sell any two Cable TV Systems in
any twelve-month period and (iii) in connection with sales authorized pursuant
to Paragraphs 15.1.19, 15.1.20 and 15.1.21.
* * *
16.2 Voting Rights. Limited Partners shall have the right, by Majority
Vote, except as herein otherwise specified or required by law, to vote only upon
the following matters affecting the basic structure of the Partnership;
* * *
16.2.5 The sale of all or Substantially All of the Assets of the
Partnership in a single sale, or in multiple sales in the same twelve-month
period, except (i) in the liquidation and winding up of the business of the
Partnership upon its termination and dissolution, (ii) that the General Partner
may sell any two Cable TV Systems in any twelve-month period and (iii) in
connection with sales authorized pursuant to Paragraphs 15.1.19, 15.1.20 and
15.1.21.
C-2
<PAGE> 81
INDEPENDENT AUDITORS' REPORT
The Partners
American Cable TV Investors 5, Ltd.:
We have audited the accompanying balance sheets of American Cable TV Investors
5, Ltd. (a Colorado limited partnership) as of December 31, 1995 and 1994, and
the related statements of operations, partners' equity (deficit), and cash flows
for each of the years in the three-year period ended December 31, 1995. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Cable TV Investors 5,
Ltd. as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1995, in conformity with generally accepted accounting principles.
/s/ KPMG PEAT MARWICK LLP
--------------------------------------
KPMG Peat Marwick LLP
Denver Colorado
March 15, 1996
<PAGE> 82
AMERICAN CABLE TV INVESTORS 5, LTD.
5619 DTC Parkway
Englewood, Colorado 80111
THIS PROXY IS SOLICITED ON BEHALF OF THE GENERAL PARTNER
The undersigned hereby appoints Marvin Jones and Ramona Whitman, or
either of them, with full power of substitution, as attorneys, agents and
proxies (the "Proxies") to vote on behalf of the undersigned at the Special
Meeting (the "Special Meeting") of limited partners (the "Limited Partners") of
American Cable TV Investors 5, Ltd. (the "Partnership") called by IR-TCI
Partners V, L.P., the general partner (the "General Partner") of the
Partnership, to be held at 5619 DTC Parkway, Englewood, Colorado 80111 on March
26, 1997 at 11:00 a.m., local time, or any adjournment thereof, for the
following purpose:
To approve three separate sales transactions (or any substitute sales
transaction(s) that the General Partner determines to be in the best interest of
the Limited Partners in the event that any of the proposed sales transactions is
approved by the Limited Partners, but does not close for any reason) which, if
approved and consummated, would result in the sale of a significant portion of
the assets of the Partnership (other than cash) consisting of the Partnership's
ownership interests in the cable television systems (the "Sales Systems") which
serve communities located in and around (i) Lower Delaware and Maryland (the
"Lower Delaware System"), (ii) St. Mary's County, Maryland (the "St. Mary's
System") and (iii) Shelbyville and Manchester, Tennessee (the "Southern
Tennessee System").
AT THE SPECIAL MEETING, LIMITED PARTNERS WILL BE ASKED TO CONSIDER AND
VOTE UPON THE RESOLUTIONS SET FORTH BELOW (THE "RESOLUTIONS"). INDICATE YOUR
VOTE BELOW BY CHECKING THE APPROPRIATE BOXES. YOU MUST VOTE SEPARATELY ON EACH
RESOLUTION.
RESOLUTION 1: SALE OF THE LOWER DELAWARE SYSTEM
1. Consent to the sale of the Lower Delaware System to Mediacom
LLC ("Mediacom") or one of Mediacom's affiliates pursuant to an
Asset Purchase Agreement dated as of December 24, 1996 between
the Partnership and Mediacom.
2. Approve and adopt an amendment to the Partnership's limited
partnership agreement (the "Partnership Agreement") which would
permit the sale of the Lower Delaware System to Mediacom or one
of Mediacom's affiliates.
\ \ FOR \ \ AGAINST \ \ ABSTAIN
The proposals included as part of Resolution 1 are related matters and
shall be considered together at the Special Meeting.
RESOLUTION 2: SALE OF THE ST. MARY'S SYSTEM
1. Consent to the sale of the St. Mary's System to Gans Multimedia
Partnership ("Gans") or one of Gans' affiliates pursuant to an
Asset Purchase Agreement dated as of November 27, 1996 between
the Partnership and Gans.
2. Approve and adopt an amendment to the Partnership Agreement
which would permit the sale of the St. Mary's System to Gans or
one of Gans' affiliates.
\ \ FOR \ \ AGAINST \ \ ABSTAIN
The proposals included as part of Resolution 2 are related matters and
shall be considered together at the Special Meeting.
RESOLUTION 3: SALE OF THE SOUTHERN TENNESSEE SYSTEM
1. Consent to the sale of the Southern Tennessee System to Rifkin
Acquisition Partners, L.L.L.P. ("Rifkin") or one of Rifkin's
affiliates pursuant to an Asset Purchase Agreement dated as of
November 29, 1996 between the Partnership and Rifkin.
2. Approve and adopt an amendment to the Partnership Agreement
which would permit the sale of the Southern Tennessee System to
Rifkin or one of Rifkin's affiliates.
\ \ FOR \ \ AGAINST \ \ ABSTAIN
The proposals included as part of Resolution 3 are related matters
and shall be considered together at the Special Meeting.
<PAGE> 83
RESOLUTION 4: SUBSTITUTE SALE OF THE SALES SYSTEMS
Consent to any substitute sales transaction the General Partner
determines to be in the best interest of the Limited Partners in the event that
any of the Sales System sales (as referenced under Resolutions 1, 2 and 3 above)
is approved by the Limited Partners, but does not close for any reason;
provided, however, that such substitute sales transaction will only be
consummated if (i) the General Partner obtains an opinion from an investment
banking firm of national repute that the consideration to be received pursuant
to any such substitute sales transaction is fair to the Partnership from a
financial point of view, (ii) such substitute sale is consummated within two
years of the date hereof for cash consideration and (iii) the purchaser in such
transaction is not an affiliate of the Partnership. Consent to any substitute
sales transaction shall not be deemed a consent to the sale of the Partnership's
cable television system which serves communities located in and around
Riverside, California.
\ \ FOR \ \ AGAINST \ \ ABSTAIN
LIMITED PARTNERS MUST VOTE ON EACH OF THE RESOLUTIONS SEPARATELY AND
APPROVAL OF ANY RESOLUTION IS NOT DEPENDENT ON APPROVAL OF ANY OTHER RESOLUTION.
THE GENERAL PARTNER RECOMMENDS THAT YOU VOTE FOR APPROVAL OF EACH OF THE
RESOLUTIONS.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE SPECIAL MEETING.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned Limited Partner. If no direction is made on
this card, this proxy will be voted FOR each of the Resolutions for which no
direction is made.
Dated , 1997
---------------------
--------------------------------
Signature
--------------------------------
Signature (if held jointly)
--------------------------------
Title
PLEASE SIGN EXACTLY AS NAME
APPEARS HEREON. WHEN UNITS ARE
HELD BY JOINT TENANTS, BOTH
SHOULD SIGN. WHEN SIGNING AS AN
ATTORNEY, EXECUTOR,
ADMINISTRATOR, TRUSTEE OR
GUARDIAN, PLEASE GIVE FULL TITLE
OF SUCH. IF A CORPORATION,
PLEASE SIGN NAME BY PRESIDENT OR
OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED
PERSON.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED PREPAID ENVELOPE, OR DELIVER TO: THE HERMAN GROUP, INC., 2121 SAN
JACINTO STREET, 26TH FLOOR, DALLAS, TEXAS 75201. FACSIMILE COPIES OF THE PROXY,
PROPERLY COMPLETED AND DULY EXECUTED, WILL BE ACCEPTED AT (214) 999-9393 OR
(214) 999-9348. IF YOU HAVE ANY QUESTIONS, PLEASE CALL THE HERMAN GROUP, INC. AT
(800) 657-8830.
<PAGE> 1
ST. MARY'S COUNTY
- -------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN CABLE TV INVESTORS 5, LTD.
AND
GANS MULTIMEDIA PARTNERSHIP
DATED AS OF
NOVEMBER 27, 1996
- -------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. Definitions.............................................................................................. 1
Accounts Receivable...................................................................................... 1
Adjustment Time.......................................................................................... 1
Affiliate................................................................................................ 1
Alternative Transaction.................................................................................. 1
Assets................................................................................................... 2
Assumed Liabilities...................................................................................... 2
Basic Services........................................................................................... 2
Basic Subscriber Rate.................................................................................... 2
Best of Seller's Knowledge............................................................................... 2
Business................................................................................................. 2
Business Day............................................................................................. 2
Buyer.................................................................................................... 2
Buyer Financial Statement................................................................................ 2
Buyer Interim Financial Statement........................................................................ 2
Cable Act................................................................................................ 2
Capital Project.......................................................................................... 2
Closing.................................................................................................. 3
Closing Date............................................................................................. 3
Code..................................................................................................... 3
Commitment Expense....................................................................................... 3
Communications Act....................................................................................... 3
Consents................................................................................................. 3
Copyright Act............................................................................................ 3
Deposit.................................................................................................. 3
Employer................................................................................................. 3
Employer Plans........................................................................................... 3
Encumbrance.............................................................................................. 3
Environmental Law........................................................................................ 3
Equipment................................................................................................ 3
Equivalent Basic Subscribers............................................................................. 4
ERISA.................................................................................................... 4
Escrow Agent............................................................................................. 4
Escrow Agreement......................................................................................... 4
Exchange Act............................................................................................. 4
Excluded Assets.......................................................................................... 4
Excluded Liabilities..................................................................................... 4
Exhibits................................................................................................. 4
Expanded Basic Services.................................................................................. 5
FCC...................................................................................................... 5
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Final Adjustments Report................................................................................. 5
Franchise Areas.......................................................................................... 5
GAAP..................................................................................................... 5
General Partner.......................................................................................... 5
Governmental Authority................................................................................... 5
Governmental Permits..................................................................................... 5
Hazardous Substances..................................................................................... 5
Homes Passed............................................................................................. 6
HSR Act.................................................................................................. 6
Indemnity Escrow Agent................................................................................... 6
Indemnity Escrow Agreement............................................................................... 6
Intangibles.............................................................................................. 6
IRS...................................................................................................... 6
Legal Requirement........................................................................................ 6
Limited Partners......................................................................................... 6
Management Agreement..................................................................................... 6
Partnership Agreement.................................................................................... 7
Pay TV................................................................................................... 7
Permitted Encumbrances................................................................................... 7
Person................................................................................................... 7
Preliminary Adjustments Report........................................................................... 7
Prime Rate............................................................................................... 7
Purchase Price........................................................................................... 7
Real Property............................................................................................ 7
Regulatory Requirement................................................................................... 7
Required Consents........................................................................................ 7
Schedules................................................................................................ 7
SEC...................................................................................................... 8
Securities Act........................................................................................... 8
Seller................................................................................................... 8
Seller Contracts......................................................................................... 8
Seller's Escrow.......................................................................................... 8
Seller Financial Statements.............................................................................. 8
System................................................................................................... 8
Taking................................................................................................... 8
Tax Return............................................................................................... 8
Taxes.................................................................................................... 8
TCI...................................................................................................... 8
Telecom Act.............................................................................................. 8
Termination Date......................................................................................... 8
WARN Act................................................................................................. 9
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE II....................................................................................................... 9
2. Purchase and Sale of Assets............................................................................. 9
2.1. Purchase and Sale of Assets.................................................................. 9
2.2. Time and Place of Closing.................................................................... 9
ARTICLE III...................................................................................................... 9
3. Consideration........................................................................................... 9
3.1. Consideration for the Assets................................................................. 9
3.2. Purchase Price Prorations.................................................................... 10
3.3. Purchase Price Adjustments................................................................... 10
3.4. Preliminary and Final Settlements............................................................ 11
3.5. Disputed Liabilities......................................................................... 13
3.6. Allocation of Purchase Price................................................................. 13
ARTICLE IV....................................................................................................... 14
4. Assumed Liabilities and Excluded Assets................................................................. 14
4.1. Assignment and Assumption.................................................................... 14
4.2. Excluded Assets.............................................................................. 14
ARTICLE V........................................................................................................ 15
5. Representations and Warranties of Seller................................................................ 15
5.1. Organization and Qualification............................................................... 15
5.2. Authority and Validity....................................................................... 15
5.3. Consents and Approvals; No Violation......................................................... 16
5.4. Complete Systems............................................................................. 16
5.5. Title........................................................................................ 16
5.6. Real Property................................................................................ 17
5.7. Environmental Matters........................................................................ 17
5.8. Compliance with Law; Governmental Permits.................................................... 17
5.9. Seller Contracts............................................................................. 18
5.10. Copyright Compliance......................................................................... 18
5.11. Financial Statements......................................................................... 19
5.12. Legal Proceedings............................................................................ 19
5.13. Employment Matters........................................................................... 19
5.14. System Information........................................................................... 21
5.15. Finders and Brokers.......................................................................... 21
5.16. Tax Matters.................................................................................. 21
5.17. Condition of Equipment....................................................................... 21
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.18. Insurance.................................................................................... 21
5.19. Franchises................................................................................... 21
5.20. Capital Project.............................................................................. 22
ARTICLE VI....................................................................................................... 22
6. Buyer's Representations and Warranties.................................................................. 22
6.1. Organization and Qualification............................................................... 22
6.2. Authority and Validity....................................................................... 22
6.3. No Breach or Violation....................................................................... 22
6.4. Litigation................................................................................... 23
6.5. Financial Statements......................................................................... 23
6.6. Adequate Financing........................................................................... 24
6.7. Finders and Brokers.......................................................................... 24
6.8. Qualification of Buyer....................................................................... 24
ARTICLE VII...................................................................................................... 24
7. Additional Covenants.................................................................................... 24
7.1. Access to Premises and Records............................................................... 24
7.2. Continuity and Maintenance of Operations; Financial Statements............................... 24
7.3. Employee Matters............................................................................. 26
7.4. Franchise Extensions......................................................................... 26
7.5. Environmental Report......................................................................... 26
7.6. Required Consents............................................................................ 26
7.7. HSR Notification............................................................................. 27
7.8. Notification of Certain Matters.............................................................. 27
7.9. Risk of Loss; Condemnation................................................................... 27
7.10. Adverse Changes.............................................................................. 28
7.11. Action By Limited Partners................................................................... 28
7.12. No Solicitation.............................................................................. 29
7.13. Sales and Transfer Taxes and Fees............................................................ 29
7.14. Commercially Reasonable Efforts.............................................................. 30
7.15. Title Insurance.............................................................................. 30
7.16. Non-Competition.............................................................................. 30
7.17. Forms 394.................................................................................... 30
7.18. Fairness Opinion............................................................................. 30
ARTICLE VIII..................................................................................................... 31
8. Conditions Precedent to Obligations of Buyer............................................................ 31
8.1. HSR Act...................................................................................... 31
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
8.2. Governmental or Legal Action................................................................. 31
8.3. Accuracy of Representations and Warranties................................................... 31
8.4. Performance of Agreements.................................................................... 31
8.5. No Material Adverse Change................................................................... 31
8.6. Consents and Extensions...................................................................... 32
8.7. Transfer Documents........................................................................... 32
8.8. Opinions of Seller's Counsel................................................................. 32
8.9. Opinion of Seller's FCC Counsel.............................................................. 32
8.10. Discharge of Liens........................................................................... 32
8.11. Additional Documents and Acts................................................................ 32
8.12. Indemnity Escrow Agreement................................................................... 32
8.13. Certificates................................................................................. 32
8.14. Minimum Subscribers.......................................................................... 32
ARTICLE IX....................................................................................................... 32
9. Conditions Precedent to Obligations of Seller........................................................... 32
9.1. HSR Act...................................................................................... 33
9.2. Governmental or Legal Actions................................................................ 33
9.3. Accuracy of Representations and Warranties................................................... 33
9.4. Performance of Agreements.................................................................... 33
9.5. Consents..................................................................................... 33
9.6. Opinions of Buyer's Counsel.................................................................. 33
9.7. Limited Partner Approval..................................................................... 33
9.8. Payment of Purchase Price.................................................................... 33
9.9. Assumption of Liabilities.................................................................... 33
9.10. Additional Documents and Acts................................................................ 34
9.11. Certificate.................................................................................. 34
9.12. Fairness Opinion............................................................................. 34
9.13. Indemnity Escrow Agreement................................................................... 34
ARTICLE X........................................................................................................ 34
10. Termination............................................................................................. 34
10.1. Events of Termination........................................................................ 34
10.2. Manner of Exercise........................................................................... 36
10.3. Effect of Termination........................................................................ 36
10.4. Liquidated Damages........................................................................... 36
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE XI....................................................................................................... 37
11. Nature and Survival of Representations,
Warranties and Agreements............................................................................... 37
11.1. Nature of Representations, Warranties and Agreements......................................... 37
11.2. Survival of Representations and Warranties................................................... 37
11.3. Time Limitations............................................................................. 37
11.4. Limitations as to Amount..................................................................... 37
ARTICLE XII...................................................................................................... 38
12. Indemnification......................................................................................... 38
12.1. Rights to Indemnification.................................................................... 38
12.2. Procedure for Indemnification................................................................ 38
12.3. Indemnity Escrow............................................................................. 39
ARTICLE XIII..................................................................................................... 39
13. Miscellaneous........................................................................................... 39
13.1. Parties Obligated and Benefitted............................................................. 39
13.2. Press Releases............................................................................... 40
13.3. Notices...................................................................................... 40
13.4. Waiver....................................................................................... 41
13.5. Captions..................................................................................... 41
13.6. CHOICE OF LAW................................................................................ 41
13.7. Nonrecourse.................................................................................. 42
13.8. Terms........................................................................................ 42
13.9. Rights Cumulative............................................................................ 42
13.10. Further Actions.............................................................................. 42
13.11. Time......................................................................................... 42
13.12. Expenses..................................................................................... 42
13.13. Specific Performance......................................................................... 42
13.14. Schedules.................................................................................... 42
13.15. Counterparts................................................................................. 42
13.16. Entire Agreement............................................................................. 43
13.17. Severability................................................................................. 43
</TABLE>
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<PAGE> 8
EXHIBITS
<TABLE>
<S> <C>
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form for Opinion of Seller's Counsel
Exhibit E Form for Opinion of Buyer's Counsel
Exhibit F Form for Opinion of Seller's FCC Counsel
Exhibit G Form of Indemnity Escrow Agreement
SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and Legal Requirements
Schedule 5.4 Complete Systems
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.8(f) FCC Information
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by Closing Date
</TABLE>
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<PAGE> 9
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("AGREEMENT") is made as of the
27th day of November, 1996, by and between AMERICAN CABLE TV INVESTORS 5, LTD.,
a Colorado limited partnership ("SELLER"), and GANS MULTIMEDIA PARTNERSHIP, a
Pennsylvania general partnership ("BUYER").
R E C I T A L S:
A. Seller is engaged in the business of providing cable
television service to subscribers in and around the geographic areas set forth
on Exhibit A.
B. Buyer desires to purchase and Seller desires to sell the
assets of Seller designated in this Agreement used or held for use in connection
with that business, upon the terms and subject to the conditions set forth in
this Agreement.
Accordingly, the parties agree as follows:
ARTICLE I
1. DEFINITIONS.
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable of
Seller representing amounts earned by Seller in connection with its operation of
the Business through the Adjustment Time.
"ADJUSTMENT TIME" shall have the meaning set forth in Section
3.2.
"AFFILIATE" shall mean, with respect to any Person, any other
Person controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"ALTERNATIVE TRANSACTION" shall mean any transaction which
could result in the transfer of control over, or ownership of, all or
substantially all the Assets, including (a) any merger or consolidation of
Seller in which another Person or group of Persons acquires 50% or more of the
partnership interests in Seller or the equity interests of the surviving entity,
as the case may be, (b) any tender offer or exchange offer for partnership
interests in Seller which, if consummated, would result in a Person or group of
Persons (other than the existing partners in such entities as of the date of
this Agreement) owning 50% or more of the partnership interests in Seller or (c)
any sale or other disposition of all or substantially all the Assets.
<PAGE> 10
"ASSETS" shall mean all properties, privileges, rights,
interests and claims, real and personal, tangible and intangible, of every type
and description that are owned, leased, used or held for use in the Business in
which Seller has any right, title or interest or in which Seller acquires any
right, title or interest on or before the Closing Date, including, without
limitation, the System, Accounts Receivable, Governmental Permits, Intangibles,
Seller Contracts, Equipment, inventory and Real Property and including, without
limitation, all of the foregoing disclosed in any Schedule but excluding any
Excluded Assets and any Assets disposed of by Seller in the ordinary course of
business prior to the Closing Date.
"ASSUMED LIABILITIES" shall have the meaning set forth in
Section 4.1.
"BASIC SERVICES" shall mean the lowest tier of cable
television programming sold to subscribers of the System for which a subscriber
served by the System pays a fixed monthly fee to Seller, excluding Expanded
Basic Services, Pay TV and any charges for additional outlets and installation
fees and revenues derived from the rental of converters, remote control devices
and other like charges for equipment.
"BASIC SUBSCRIBER RATE" shall mean, for the System, the
monthly fees and charges derived from the provision of Basic Services to single
family households, as of June 30, 1996, as set forth on SCHEDULE 1.1.
"BEST OF SELLER'S KNOWLEDGE" shall mean the actual knowledge
of Marvin Jones, Ramona Whitman and Mike R. Laigle.
"BUSINESS" shall mean the cable television business conducted
by Seller on the date of this Agreement through the System in and around the
Franchise Areas.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday
or a day on which banking institutions in Denver, Colorado or New York, New York
are required or authorized to be closed.
"BUYER" shall mean the Person identified as such in the
preamble to this Agreement.
"BUYER FINANCIAL STATEMENT" shall have the meaning set forth
in Section 6.5.
"BUYER INTERIM FINANCIAL STATEMENT" shall have the meaning set
forth in Section 6.5.
"CABLE ACT" shall have the meaning set forth in Section 5.8.
"CAPITAL PROJECT" shall have the meaning set forth in Section
5.20.
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<PAGE> 11
"CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement, as described in Article II.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMITMENT EXPENSE" shall have the meaning set forth in
Section 3.3(b).
"COMMUNICATIONS ACT" shall have the meaning set forth in
Section 5.8(c).
"CONSENTS" shall mean any registration with, consent or
approval of, notice to, or action by any Person or Governmental Authority
required to permit the transfer of the Assets to Buyer or permit Seller to
perform any of its other obligations under this Agreement, as set forth on
SCHEDULE 1.2.
"COPYRIGHT ACT" shall mean Title 17 of the United States Code,
as amended, and all rules and regulations thereunder.
"DEPOSIT" shall have the meaning set forth in Section 3.1.
"EMPLOYER" shall have the meaning set forth in Section
5.13(a).
"EMPLOYER PLANS" shall have the meaning set forth in Section
5.13(e).
"ENCUMBRANCE" shall mean any mortgage, lien, security
interest, security agreement, conditional sale or other title retention
agreement, limitation, pledge, option, charge, assessment, restrictive
agreement, restriction, encumbrance, adverse interest, restriction on transfer
or any exception to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
"ENVIRONMENTAL LAW" shall mean any Legal Requirement relating
to pollution or protection of public health, safety or welfare or the
environment, including those relating to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment (including
ambient air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
"EQUIPMENT" shall mean all tangible personal property used or
held for use by Seller in the conduct of the Business and operation of the
System, including without limitation, all electronic devices, trunk and
distribution coaxial and optical fiber cable, amplifiers, power supplies,
conduit, vaults and pedestals, grounding and pole hardware, subscriber's devices
(including converters, encoders, transformers behind television sets and
fittings), headend
3
<PAGE> 12
hardware (including origination, earth stations, transmission and distribution
system), test equipment, vehicles and computers, including the items described
on SCHEDULE 1.3.
"EQUIVALENT BASIC SUBSCRIBERS" shall mean, with respect to
each Franchise Area, as of any date, the number of active customers for Basic
Services either in a single household, a commercial establishment or a
multi-unit dwelling (including a hotel unit); provided, however, that the number
of customers in a commercial establishment or multi-unit dwelling that obtain
service on a "bulk-rate" basis shall be determined for each Franchise Area by
dividing the gross bulk-rate billings for Basic Services and Expanded Basic
Services (but excluding billings from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental or any outlet or
connection other than the first outlet or connection, pass-through charges for
sales taxes, line-itemized franchise fees, fees charged by the FCC and the like)
attributable to such commercial establishment or multi-unit dwelling during the
most recent billing period ended prior to the date of calculation (but excluding
billings in excess of a single month's charge) by the rate charged at the date
of determination to individual households for the highest level of Basic
Services and Expanded Basic Services offered in the Franchise Area, such rate
not to be less than the rate for such Franchise Area set forth on SCHEDULE 1.1
(excluding billings from a la carte tiers or premium services, installation or
other non-recurring charges, converter rental, pass-through charges for sales
taxes, line-itemized franchise fees, fees charged by the FCC and the like). For
purposes of this definition, (i) an "active customer" shall mean, as of any
date, any person, commercial establishment or multi-unit dwelling that is paying
for and receiving Basic Services from the System in that Franchise Area who has
an account that is not more than 60 days past due (except for past due amounts
of $10.00 or less, provided such account is otherwise current) but excluding any
person, commercial establishment or multi-unit dwelling that as of the date of
calculation has not paid in full the charges for at least one month of the
services ordered and (ii) the number of days a customer account is past due
shall be calculated from the first day of the period for which the applicable
billing relates.
"ERISA" shall have the meaning set forth in Section 5.13(b).
"ESCROW AGENT" shall have the meaning set forth in Section
3.1.
"ESCROW AGREEMENT" shall have the meaning set forth in Section
3.1.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of
1934, as amended.
"EXCLUDED ASSETS" shall have the meaning set forth in Section
4.2.
"EXCLUDED LIABILITIES" shall have the meaning set forth in
Section 4.1(b).
"EXHIBITS" shall mean the exhibits prepared and delivered
pursuant to this Agreement.
4
<PAGE> 13
"EXPANDED BASIC SERVICES" shall mean any video programming
provided over the System, regardless of service tier, other than Basic Services,
any new product tier and video programming offered on a per channel or per
program basis, for which a subscriber served by the System pays a fixed monthly
fee to Seller, excluding Pay TV and any charges for additional outlets and
installation fees and revenues derived from the rental of converters, remote
control devices and other like charges for equipment.
"FCC" shall have the meaning set forth in Section 5.8(c).
"FINAL ADJUSTMENTS REPORT" shall have the meaning set forth in
Section 3.4(b).
"FRANCHISE AREAS" shall mean those areas in which Seller is
authorized under one or more Governmental Permits issued by the applicable
franchising authorities to provide cable television service to subscribers
located in such areas through the ownership and operation of the System, as set
forth on SCHEDULE 1.4.
"GAAP" shall mean generally accepted accounting principles as
in effect in the United States of America on the date of this Agreement.
"GENERAL PARTNER" shall mean IR-TCI Partners V, L.P., the
general partner of Seller.
"GOVERNMENTAL AUTHORITY" shall mean any of the following: (a)
the United States of America; (b) any state, commonwealth, territory or
possession of the United States of America and any political subdivision thereof
(including counties, municipalities and the like); or (c) any agency, authority
or instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
"GOVERNMENTAL PERMITS" shall mean all franchises,
authorizations, permits, licenses, easements, registrations, leases, variances
and similar rights obtained from any Governmental Authority which authorize or
are required in connection with the operation of the Business, including those
described on SCHEDULE 1.5.
"HAZARDOUS SUBSTANCES" shall mean any pollutant, contaminant,
chemical, industrial, toxic, hazardous or noxious substance or waste which is
regulated by any Governmental Authority, including without limitation (a) any
petroleum or petroleum compounds (refined or crude), flammable substances,
explosives, radioactive materials or any other materials or pollutants which
pose a hazard or potential hazard to the Real Property or to Persons in or about
the Real Property or cause the Real Property to be in violation of any laws,
regulations or ordinances of federal, state or applicable local governments, (b)
asbestos or any asbestos-containing material of any kind or character, (c)
polychlorinated biphenyls ("PCBs"), as regulated by the Toxic Substances Control
Act, 15 U.S.C. Section 2601 et seq., (d) any materials or substances designated
as "hazardous substances" pursuant to the Clean Water Act, 33 U.S.C. Section
1251 et seq., (e) "economic poison," as defined in the Federal Insecticide,
Fungicide and
5
<PAGE> 14
Rodenticide Act, 7 U.S.C. Section 135 et seq., (f) "chemical substance," "new
chemical substance" or "hazardous chemical substance or mixture" pursuant to the
Toxic Substances Control Act, referred to above, (g) "hazardous substances"
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 U.S.C. Section 9601 et seq. and (h) "hazardous waste" pursuant
to the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.
"HOMES PASSED" shall mean, with respect to the System and as
of June 30, 1996, the total of (a) the number of single family residences
capable of being serviced without further line construction, (b) the number of
units in multi-family residential buildings capable of being serviced without
further line construction and not then governed by bulk-service agreements and
(c) the number of bulk service agreements regardless of the number of units
serviced or the equivalent billing units.
"HSR ACT" shall have the meaning set forth in Section 7.6.
"INDEMNITY ESCROW AGENT" shall mean The Chase Manhattan Bank.
"INDEMNITY ESCROW AGREEMENT" shall mean the Indemnity Escrow
Agreement to be entered into at Closing among Buyer, Seller and the Indemnity
Escrow Agent, in the form attached as Exhibit G.
"INTANGIBLES" shall mean all general intangibles, including
subscriber lists, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use by Seller
in connection with the Business.
"IRS" shall mean the Internal Revenue Service.
"LEGAL REQUIREMENT" shall mean any statute, ordinance, code,
law, rule, regulation, order or other requirement, standard or procedure
enacted, adopted or applied by any Governmental Authority, including judicial
decisions applying common law or interpreting any other Legal Requirement.
"LIMITED PARTNERS" shall mean the Persons who own or hold
units of limited partnership interests in Seller.
"MANAGEMENT AGREEMENT" shall mean the agreement related to the
operation of the System and the other cable systems owned by Seller between
Seller and TCI Cablevision Associates, Inc. (formerly known as Daniels &
Associates, Inc.).
6
<PAGE> 15
"PARTNERSHIP AGREEMENT" shall mean the Amended and Restated
Limited Partnership Agreement of Seller, dated as of January 1, 1987, by and
between IR-TCI Partners V, L.P. (formerly known as IR-Daniels Partners V, L.P.),
as the general partner, and David B. Beyth, as the initial limited partner.
"PAY TV" shall mean premium programming services selected by
and sold to subscribers of the System for monthly fees in addition to the fee
for Basic Services.
"PERMITTED ENCUMBRANCES" shall mean the following: (a) liens
for taxes, assessments and governmental charges not yet due and payable; (b)
zoning laws and ordinances and similar Legal Requirements; (c) rights reserved
to any Governmental Authority to regulate the affected property; (d) as to
leased Assets, interests of lessors and Encumbrances affecting the interests of
the lessors; (e) the Encumbrances described on SCHEDULE 1.6; and (f) any liens,
easements, rights-of-way, servitudes, permits, leases, restrictions and
imperfections or irregularities in title that do not in any material respect,
individually or in the aggregate, affect or impair the value or use of the
affected Asset as it is currently being used by Seller in the Business or
System.
"PERSON" shall mean any natural person, corporation,
partnership, trust, unincorporated organization, association, limited liability
company, Governmental Authority or other entity.
"PRELIMINARY ADJUSTMENTS REPORT" shall have the meaning set
forth in Section 3.4(a).
"PRIME RATE" shall mean the rate of interest quoted from time
to time in The Wall Street Journal as the prime rate.
"PURCHASE PRICE" shall have the meaning set forth in Section
3.1.
"REAL PROPERTY" shall mean all Assets consisting of interests
in real property (including, to the extent applicable, improvements, fixtures
and appurtenances), including the fee and leasehold interests described on
SCHEDULE 1.7.
"REGULATORY REQUIREMENT" shall mean any filing required
pursuant to the Securities Act, the Exchange Act, the HSR Act, state securities
laws (including, but not limited to, state "blue sky" laws) and state corporate
laws (including, but not limited to, takeover statutes).
"REQUIRED CONSENTS" shall mean the Consents designated as such
on SCHEDULE 1.2 by an asterisk.
"SCHEDULES" shall mean the schedules prepared and delivered
pursuant to this Agreement.
7
<PAGE> 16
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLER" shall mean the Person indicated as such in the
preamble to this Agreement.
"SELLER CONTRACTS" shall mean all contracts, agreements and
leases, other than those that are Governmental Permits, to which Seller is a
party and pertain to the ownership, operation or maintenance of the Assets or
the Business, including those described on SCHEDULE 1.8.
"SELLER'S ESCROW" shall have the meaning set forth in Section
3.1.
"SELLER FINANCIAL STATEMENTS" shall have the meaning set forth
in Section 5.11.
"SYSTEM" shall mean a cable television reception and
distribution system operated in the conduct of the Business, consisting of one
or more headends, subscriber drops and associated electronic and other
equipment, and which is, or is capable of being without modification, operated
as an independent system without interconnections to other systems as set forth
on SCHEDULE 1.9.
"TAKING" shall have the meaning set forth in Section 7.7(b).
"TAX RETURN" shall mean any return, report, information return
or other document (including any related or supporting information) filed or
required to be filed with any taxing authority in connection with the
determination, assessment, collection, administration or imposition of any
Taxes.
"TAXES" shall mean all taxes, charges, fees, liens, imposts,
duties or other assessments including, but not limited to, income, withholding,
excise, employment, property, sales, franchise, use and gross receipt taxes,
imposed by the United States or any state, county, local or foreign government
or any subdivision thereof. Such term shall also include any interest, penalties
or additions attributable to such assessments.
"TCI" shall mean TCI Communications, Inc., a Delaware
corporation.
"TELECOM ACT" shall have the meaning set forth in Section
5.8(e).
"TERMINATION DATE" shall mean June 25, 1997; provided,
however, Seller shall have the right, upon five days notice to Buyer, to extend
the Termination Date to a date designated in such notice, which date shall in no
event be later than August 25, 1997; provided further, Seller shall have the
right, upon five days notice to Buyer, to further extend the
8
<PAGE> 17
Termination Date to a date designated in such notice, which date shall in no
event be later than November 24, 1997.
"WARN ACT" shall mean the Worker Adjustment and Retraining
Notification Act.
ARTICLE II
2. PURCHASE AND SALE OF ASSETS.
2.1. PURCHASE AND SALE OF ASSETS. Subject to the satisfaction
of the conditions to each party's obligations set forth in Articles VIII and IX
(or, with respect to any condition not satisfied, the waiver thereof by the
party or parties for whose benefit the condition exists), Seller shall sell,
assign, transfer and deliver to Buyer all of Seller's right, title and interest
in, and Buyer shall purchase, acquire, accept and pay for, the Assets.
2.2. TIME AND PLACE OF CLOSING. Subject to the terms and
conditions of this Agreement, the Closing shall take place at 10:00 a.m. New
York City time on a date specified by notice from Seller to Buyer (but shall not
in any event be prior to the satisfaction or waiver of the conditions to Closing
as set forth in Sections 8.1, 8.6, 9.1, 9.5 and 9.7), in New York, New York at
the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP, or at such other
time or place as the parties may agree; provided, however, the date specified in
such notice shall not be less than 15 nor more than 40 days after the date of
such notice (unless the Termination Date would occur within such 15-day period,
in which event Seller shall have the right to designate any date prior to the
Termination Date as the date of Closing).
ARTICLE III
3. CONSIDERATION.
3.1. CONSIDERATION FOR THE ASSETS. The aggregate consideration
for the Assets shall consist of (i) an amount equal to $30,636,900, subject to
proration as set forth in Section 3.2 and adjustment as set forth in Section 3.3
(the "PURCHASE PRICE") and (ii) the assumption by Buyer of the Assumed
Liabilities. The Purchase Price shall be payable as follows: (a) $765,923 (such
amount, as increased by any earnings thereon and as reduced by any disbursements
or losses on investments, the "DEPOSIT"), payable concurrently with the
execution and delivery of this Agreement in cash by means of wire or interbank
transfer in immediately available funds to the trust account of Kaye, Scholer,
Fierman, Hays & Handler, LLP (the "ESCROW AGENT"), to be held, administered and
distributed for the respective benefits of the parties hereto in accordance with
the terms of this Agreement and the Escrow Agreement among Seller, Buyer and the
Escrow Agent dated the date of this Agreement (the "ESCROW AGREEMENT") in the
form set forth as Exhibit B attached hereto and (b) $30,636,900 payable by Buyer
to Seller, or Seller's designee, at Closing in cash by means of wire or
interbank transfer in immediately available funds, reduced by the amount, if
any, of the Deposit actually released to Seller, or
9
<PAGE> 18
Seller's designee. At Closing, Seller and Buyer shall direct the Escrow Agent to
release the Deposit to Seller, or Seller's designee, in accordance with the
terms of the Escrow Agreement. Simultaneously with the payment of the Purchase
Price, Seller shall deposit $765,923 ("Seller's Escrow") at Closing in cash by
means of wire or interbank transfer of immediately available funds to the
account of the Indemnity Escrow Agent, to be held, administered and distributed
in accordance with the terms of this Agreement and the Indemnity Escrow
Agreement.
3.2. PURCHASE PRICE PRORATIONS. (a) All revenues (other than
Accounts Receivable being purchased by Buyer hereunder) and all expenses arising
from the operations of the Business up until 12:01 a.m. on the Closing Date (the
"ADJUSTMENT TIME"), including, but not limited to, pole rental fees, rental or
other charges payable in respect of the Seller Contracts, sales and use taxes
payable with respect to cable television service and equipment, which shall not
include sales or use taxes arising out of the consummation of the transaction
contemplated hereunder, power and utility charges, real and personal property
taxes and assessments levied against the Assets, applicable franchise, copyright
or other fees, sales and service charges, wages, payroll taxes and payroll
expenses (including accrued vacation pay except to the extent a Purchase Price
adjustment in Buyer's favor is made under Section 3.3) of employees of Employer
who primarily perform services in connection with the operation of the Business
who are employed by Buyer as of the Closing, and other prepaid and deferred
items shall be prorated between Buyer and Seller as of the Adjustment Time in
accordance with GAAP and the principle that Seller shall receive all revenues
(other than Accounts Receivable being purchased by Buyer hereunder) and shall be
responsible for all expenses, costs and liabilities allocable to the period
prior to the Adjustment Time and Buyer shall receive all revenues and shall be
responsible for all expenses, costs and liabilities allocable to the period
after the Adjustment Time.
(b) The amount of each item of revenue prorated under
subsection (a) above, to a party which has not received, and under the terms of
this Agreement will not receive, such revenue shall be deemed a charge against
the other party. The amount of any item of cost or expense prorated under
subsection (a) above to a party which has not paid, and under the terms of this
Agreement will not pay, such cost or expense shall be deemed a charge against
such party. If the aggregate charges allocated to Seller as set forth in this
Section 3.2(b) exceed the aggregate charges allocated to Buyer as set forth in
this Section 3.2(b), the Purchase Price shall be decreased by an amount equal to
the difference between the aggregate charges allocated to Seller and the
aggregate charges allocated to Buyer. If the aggregate charges allocated to
Buyer as set forth in this Section 3.2(b) exceed the aggregate charges allocated
to Seller as set forth in this Section 3.2(b), the Purchase Price shall be
increased by an amount equal to the difference between the aggregate charges
allocated to Buyer and the aggregate charges allocated to Seller.
3.3. PURCHASE PRICE ADJUSTMENTS. (a) The Purchase Price shall
be increased by an amount equal to the aggregate of the following:
(i) the face amount of all Accounts Receivable which,
as of the Closing Date, are outstanding for a period of not more than 60 days
after their respective invoice dates; and
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(ii) to the extent not included in the prorations to
the Purchase Price as set forth in Section 3.2, the dollar amount of all advance
payments to, or deposits with, third parties relating to the Business which, as
of the Closing Date, are for the account of Seller or are security for Seller's
performance of its obligations under any agreement relating to the Business or
any Assets, including, but not limited to, deposits made with lessors and
deposits for utilities to the extent the foregoing will inure to the benefit of
Buyer and are net of known claims or charges against such payments or deposits.
(b) The Purchase Price shall be decreased by an
amount equal to the aggregate of the following:
(i) the dollar amount of the remaining balance, as of
the Closing Date, of all advance payments to, or monies of third parties on
deposit with, Seller relating to the Business, including advance payments and
deposits by customers served by the Business for converters, encoders, decoders,
cable service and related sales;
(ii) the dollar amount of accrued vacation pay of
employees of Employer identified on Schedule 5.13(d) who are employed by Buyer
as of the Closing;
(iii) (a) 50% of the dollar amount of all charges and
fees of any financial institution incurred by Buyer to extend its commitment and
maintain its loan availability necessary to pay the Purchase Price to Seller on
and after June 30, 1997 (the "COMMITMENT EXPENSE"), which Buyer would not have
incurred if the Closing had occurred prior to June 30, 1997; provided, that the
failure to close by such date is not attributable to any default or breach by
Buyer or Seller and (b) 100% of the Commitment Expense if the failure to close
by June 30, 1997 is solely attributable to any default or breach by Seller;
provided, however, that, in either case, the amount by which the Purchase Price
is increased pursuant to this Section 3.3(b)(iii) shall not exceed $125,000; and
(iv) if, as of the Closing Date, the aggregate number
of Equivalent Basic Subscribers served by the System is less than 18,900, an
amount equal to (x) the difference between 18,900 and the aggregate number of
Equivalent Basic Subscribers served by the System as of the Closing Date times
(y) $1,621; provided, that the amount by which the Purchase Price is decreased
pursuant to this Section 3.3(b) (iv) shall not exceed $1,531,845; provided,
however, that if the Preliminary Adjustments Report sets forth a pro forma
determination of the adjustments set forth in this Section 3.3(c) based on an
estimate of the aggregate number of Equivalent Basic Subscribers served by the
System as of the Closing Date being greater than or equal to 17,955, then there
shall be no limitation on the amount by which the Purchase Price may be
decreased pursuant to this Section 3.3(b)(iv).
3.4. PRELIMINARY AND FINAL SETTLEMENTS. Preliminary and final
adjustments to the Purchase Price will be determined as follows:
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(a) At least five Business Days prior to the Closing
Date, Seller will deliver to Buyer a report (the "PRELIMINARY ADJUSTMENTS
REPORT"), prepared in good faith and on a reasonable basis, setting forth in
reasonable detail a pro forma determination as of the Closing Date of the
prorations set forth in Section 3.2 and the adjustments set forth in Section
3.3. The Preliminary Adjustments Report shall be certified by an authorized
officer of the general partner of the General Partner to have been prepared in
good faith and on a reasonable basis.
(b) Within 60 days after the Closing Date, Seller
will deliver to Buyer a report (the "FINAL ADJUSTMENTS REPORT"), prepared in
good faith and on a reasonable basis, setting forth in reasonable detail the
final determination of the prorations set forth in Section 3.2 and the
adjustments set forth in Section 3.3. The Final Adjustments Report shall make
such changes to the Preliminary Adjustments Report as are necessary to cover
those prorations or adjustments which (i) were estimated or were not calculated
as of the Closing Date in the Preliminary Adjustments Report and (ii) were
adjusted in the Preliminary Adjustments Report and which require subsequent
adjustment. The Final Adjustments Report shall be certified by an authorized
officer of the general partner of the General Partner to be true, complete and
correct as of the date it is delivered.
Buyer shall provide Seller with reasonable access to all
records which Buyer has in its possession and which are necessary for Seller to
prepare the Final Adjustments Report. Seller shall provide Buyer with reasonable
access to all records which Seller has in its possession which are necessary for
Buyer to review and verify the Final Adjustments Report.
(c) Within 45 days after receipt of the Final
Adjustments Report, Buyer shall review the Final Adjustments Report and notify
Seller whether or not Buyer accepts all or any of the prorations and adjustments
set forth on the Final Adjustments Report. If Buyer accepts the Final
Adjustments Report with respect to all prorations and adjustments contained
therein, Buyer or Seller, as appropriate, shall, within ten Business Days of
such acceptance, make the following payments: (i) if the Purchase Price
calculated based on the Final Adjustments Report is greater than the Purchase
Price calculated based on the Preliminary Adjustments Report, Buyer shall pay
such difference to Seller in cash by wire or interbank transfer in immediately
available funds, or (ii) if the Purchase Price calculated based on the Final
Adjustments Report is less than the Purchase Price calculated based on the
Preliminary Adjustments Report, Seller shall pay such difference to Buyer in
cash by wire or interbank transfer in immediately available funds. In the event
any payment required by this Section 3.4(c) is not made when due, Seller or
Buyer, as appropriate, shall make the payment required by this Section 3.4(c)
with interest accruing from the date such payment was due at the Prime Rate plus
2.5%.
(d) If Buyer in good faith objects to any prorations
and/or adjustments set forth on the Final Adjustments Report, Buyer shall give
notice thereof to Seller within 45 days after receipt of the Final Adjustments
Report, specifying in reasonable detail the nature and extent of such
disagreement and Buyer and Seller shall have a period of 45 days from Seller's
receipt of such notice in which to resolve such disagreement. If such notice of
objection is not
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received by Seller within 45 days after receipt of the Final Adjustments Report,
it shall be deemed that Buyer has accepted the Final Adjustments Report with
respect to all items set forth therein and within three Business Days after the
expiration of such 45-day period Buyer or Seller, as appropriate, shall make the
payments described in Section 3.4(c). Any disputed amounts which cannot be
agreed to by the parties within 45 days from Seller's receipt of Buyer's notice
of objection to any of the adjustments set forth in the Final Adjustments Report
shall be determined by a nationally recognized accounting firm selected by Buyer
and Seller who has not been employed by Buyer or Seller for two years prior to
the date hereof (the "ACCOUNTANTS") in accordance with the engagement letter set
forth on Exhibit C attached hereto with such changes as may be requested by the
Accountants and approved by Buyer and Seller. The engagement of and the
determination by the Accountants shall be binding on and shall be nonappealable
by Seller and Buyer. In the event that (a) the Purchase Price calculated based
on the determination by the Accountants is less than the Purchase Price
calculated based on the Final Adjustments Report, the fees and expenses payable
to the Accountants shall be paid by Seller or (b) the Purchase Price calculated
based on the determination of the Accountants is greater than or equal to the
Purchase Price calculated based on the Final Adjustments Report, the fees and
expenses payable to the Accountants shall be paid by Buyer. Seller and Buyer
will bear equally the fees and expenses payable to the Accountants in connection
with such determination, unless (a) the determination of the Accountants results
in a payment by Seller to Buyer of an amount which exceeds 10 percent of the
cash amount paid by Buyer to Seller on the Closing Date, in which case the fees
and expenses payable to the Accountants shall be paid by Seller or (b) the
determination of the Accountants results in no payment from Seller to Buyer or
results in an additional payment from Buyer to Seller, in which case the fees
and expenses payable to the Accountants shall be paid by Buyer. Within five
Business Days after the determination by the Accountants of all disputed
prorations and/or adjustments, Buyer or Seller, as appropriate, shall make the
payments described in Section 3.4(c) as if the determinations of the Accountants
were included in the Final Adjustments Report. In the event any payment required
by this Section 3.4(d) is not made when due, Seller or Buyer, as appropriate,
shall make the payment required by this Section 3.4(d) with interest accruing
from the date such payment was due at the Prime Rate plus 2.5%.
3.5. DISPUTED LIABILITIES. If a proration or adjustment to the
Purchase Price is made in Buyer's favor for any liability assumed by Buyer but
is in good faith being contested by Seller as of the Closing Date, and if Buyer
is relieved of this liability, Buyer shall pay to Seller or its designee in cash
(by means of wire or interbank transfer in immediately available funds) an
amount equal to the unpaid portion of this liability within five Business Days
after the date Buyer is relieved of this liability. In the event any payment
required by this Section 3.5 is not made by Buyer when due, Buyer shall make the
payment required by this Section 3.5 with interest accruing from the date such
payment was due at the Prime Rate plus 2.5%.
3.6. ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the classes of assets set forth in Section 1060 of the Code and
the regulations thereunder in the manner agreed to by the parties prior to the
Closing. After the Closing, Seller shall cooperate with Buyer in the
preparation, execution and filing with the IRS of all information
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returns and supplements thereto required to be filed by the parties under
Section 1060 of the Code relating to the allocation of such consideration, and
Seller and Buyer agree to file Form 8594 (or any substitute therefor) when
required by applicable law.
ARTICLE IV
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1. ASSIGNMENT AND ASSUMPTION. (a) Seller will assign, and
Buyer will assume and perform for all periods on or after the Adjustment Time
(and prior to the Assignment Time with respect to liabilities and obligations
for which a Purchase Price Adjustment has been made in Buyer's favor under
Section 3.3) the following liabilities and obligations of Seller (collectively,
the "ASSUMED LIABILITIES"): (A) Seller's obligations to subscribers of the
Business for (i) refunds of subscriber deposits held by Seller as of the Closing
Date in respect of which a Purchase Price adjustment is made in Buyer's favor
under Section 3.3(b), (ii) refunds of subscriber advance payments held by Seller
as of the Closing Date for services to be rendered by the System after the
Closing Date, in respect of which a Purchase Price adjustment is made in Buyer's
favor under Section 3.3(b) and (iii) the delivery of cable television service to
customers of the System after the Closing Date; (B) obligations and liabilities
in respect of which a Purchase Price adjustment in Buyer's favor is made under
Section 3.3 including, but not limited to, accrued but unpaid real and personal
property taxes related to the Assets which correspond to a period of time prior
to the Adjustment Time, expenses accrued under Governmental Permits and Seller
Contracts which correspond to a period of time prior to the Adjustment Time and
certain accrued vacation pay; (C) obligations accruing and relating to periods
on or after the Adjustment Time under Governmental Permits and Seller Contracts;
(D) any taxes accrued and relating to periods on or after the Adjustment Time in
connection with the ownership of the Assets and the ownership of the Assets and
the operation of the Business; and (E) all other liabilities or obligations of
Seller arising out of or relating to the conduct of the Business and incurred in
the ordinary course of business.
(b) Notwithstanding any other provision of this
Agreement, except for the Assumed Liabilities, Buyer will not and shall not
assume or have any responsibility for any liabilities or obligations of Seller
or Employer which arise out of, result from, or relate to the Excluded Assets or
any matters allocable to the period prior to the Adjustment Time, whether
relating to the Assets, the Business, the System or otherwise, unless a Purchase
Price adjustment in Buyer's favor has been made under Section 3.3 (collectively,
the "EXCLUDED LIABILITIES"). Liabilities or obligations which relate to the
Excluded Liabilities shall be the obligation of Seller, which Seller covenants
and agrees to discharge in the ordinary course unless such liability or
obligation is being disputed by Seller in good faith.
4.2. EXCLUDED ASSETS. Excluded from the assets which will be
transferred from Seller to Buyer pursuant to this Agreement (collectively, the
"EXCLUDED ASSETS") are all Seller's right, title and interest in, to and under
the following: (a) all programming agreements
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relating to the Business; (b) all insurance policies and rights and claims
thereunder (except as otherwise provided in Section 7.7(a)); (c) all bonds,
letters of credit, surety instruments and other similar items and any cash
surrender value thereunder; (d) all cash, cash equivalents and securities; (e)
all trademarks, trade names, service marks, service names, logos and similar
proprietary rights used in the Business; (f) any contracts, licenses,
authorizations, agreements or commitments which are not assumed by Buyer
pursuant to this Agreement; (g) the Management Agreement; (h) any asset or
properties owned by Seller that are not used in the Business; (i) all subscriber
deposits and advance payments held by Seller as of the Closing Date in
connection with the operation of the Business for which a Purchase Price
adjustment is made in Buyer's favor under Section 3.3(b); (j) all claims, rights
and interests in and to any refund for federal, state or local franchise, income
or other taxes or fees (including, but not limited to, copyright fees) of any
nature relating to the operation of the Business prior to the Closing Date; (k)
the account books of original entry, general ledgers and financial records used
in connection with the Business, provided that for a period of three years after
the Closing Date, Buyer shall have access to and the right to copy, at its
expense, during usual business hours upon reasonable prior notice to Seller,
portions of such books and records that are relevant to Buyer's ownership and
operation of the System; (l) the retransmission consent agreements relating to
the carriage of WMAR, WRC, WTTG, WBAL, WBFF and WJZ; and (m) those properties,
rights and interests set forth on SCHEDULE 4.2.
ARTICLE V
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as follows:
5.1. ORGANIZATION AND QUALIFICATION. Seller is a limited
partnership duly organized, validly existing and in good standing under the laws
of the state of Colorado and has all requisite partnership power and authority
to own, lease and use the Assets as they are currently owned, leased and used
and to conduct the Business as it is currently conducted. Seller is duly
qualified or licensed to do business and is in good standing under the laws of
each jurisdiction where the Assets are located and the Business is conducted,
except any such jurisdiction where the failure to be so qualified or licensed
and in good standing would not have a material adverse effect on the validity,
binding effect or enforceability of this Agreement, or on the ability of Seller
to perform its obligations under this Agreement.
5.2. AUTHORITY AND VALIDITY. Seller has full partnership power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Seller have been
duly and validly authorized by all necessary action on the part of Seller (other
than, with respect to the sale of the Assets, the approval of such transaction
contemplated by this Agreement by the Limited Partners). The General Partner has
taken all necessary action so that it may recommend that the Limited Partners
approve the
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transactions contemplated by this Agreement. This Agreement has been duly and
validly executed and delivered by Seller and constitutes a valid and binding
obligation of Seller enforceable in accordance with its terms. Except for the
approval by the Limited Partners, no further partnership action on the part of
Seller is required in connection with the consummation of the transactions
contemplated by this Agreement.
5.3. CONSENTS AND APPROVALS; NO VIOLATION. (a) Except for (i)
the Consents, (ii) the consent of the Limited Partners with respect to the
transactions contemplated by this Agreement and (iii) the Regulatory
Requirements, no consent, waiver, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority is required to be
made or obtained by Seller in connection with the execution, delivery and
performance of this Agreement by Seller.
(b) Except as set forth on SCHEDULE 5.3(b), the
execution, delivery and performance of this Agreement by Seller do not and will
not: (a) violate or conflict with any provision of the Partnership Agreement;
(b) violate any Legal Requirement; or (c) (i) violate, conflict with or
constitute a breach of or default under (without regard to requirements of
notice, passage of time or elections of any Person), (ii) permit or result in
the termination, suspension or modification of, (iii) result in the acceleration
of (or give any Person the right to accelerate) the performance of Seller under,
or (iv) result in the creation or imposition of any Encumbrance under, any
Seller Contract or any other instrument evidencing any of the Assets or any
instrument or other agreement to which Seller is a party or by which Seller or
any of its assets is bound or affected, except such violations, conflicts,
breaches, defaults, terminations, suspensions, modifications, and accelerations
which would not, individually or in the aggregate, have a material adverse
effect on the System, the Business, or Seller's ability to perform its
obligations under this Agreement or Buyer's ability to conduct the Business
after the Closing in substantially the same manner in which it is currently
conducted by Seller.
5.4. COMPLETE SYSTEMS. The Assets represent all assets,
properties, franchises, licenses, permits, consents, certificates, authorities,
operating rights, leases, contracts, (with the exception of programming
contracts and retransmission consents which Buyer acknowledges may need to be
replaced in order for Buyer to continue to operate the Business), agreements,
commitments and arrangements reasonably necessary for the conduct of the
Business in the ordinary course in the same manner as that in which such
business is currently conducted by Seller. No property of the type or nature
defined in this Agreement as an "Asset" has been removed, sold, transferred or
conveyed since January 1, 1996, except (i) in the ordinary course of business,
(ii) for property which has been replaced or (iii) for property which was not
necessary for the operation of the Business.
5.5. TITLE. Except as set forth on SCHEDULE 5.5 and for the
Permitted Encumbrances, Seller has, and on the Closing Date will have, good and
marketable title to the Assets. The Assets on the Closing Date will be free and
clear of all Encumbrances of any kind or nature, other than Permitted
Encumbrances.
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5.6. REAL PROPERTY. (a) All the Assets consisting of interests
in Real Property that are material to the conduct of the Business are described
on SCHEDULE 1.7. Seller has valid leasehold interests in Real Property leased by
Seller under written leases or subleases, correct and complete copies of which
have been made available to Buyer.
(b) All easements, rights-of-way and other rights
obtained directly by Seller which are necessary in any material respect for
Seller's current use of any Real Property are valid and in full force and
effect, and, to Seller's knowledge after due inquiry, Seller has not received
any notice with respect to the termination or breach of any of those rights.
5.7. ENVIRONMENTAL MATTERS. (a) To the Best of Seller's
Knowledge, Seller's use of the Real Property complies in all material respects
with all Environmental Laws. Seller has not received written or oral notice of
any claim or investigation based on Environmental Laws which relates to any Real
Property or any operations conducted by Seller on such Real Property.
(b) Seller has provided, or prior to Closing will
provide, Buyer with complete and correct copies of (i) all studies, reports,
surveys or other materials in Seller's possession relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(ii) all notices or other materials in Seller's possession that were received
from any Governmental Authority having the power to administer or enforce any
Environmental Laws relating to current or past ownership, use or operation of
the Real Property or activities at the Real Property and (iii) all materials in
Seller's possession relating to any claim, allegation or action by any private
third party under any Environmental Law.
5.8. COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS. (a) Except as
set forth on SCHEDULE 5.8, the ownership, the leasing and use of the Assets as
they are currently owned, leased and used by Seller and the conduct of the
Business as it is currently conducted by Seller, do not violate any Legal
Requirement, which violation(s), individually or in the aggregate, reasonably
could be expected to have a material adverse effect on the Business. Seller has
not received any notice claiming a material violation by Seller or the Business
of any Legal Requirement applicable to Seller or the Business as it is currently
conducted and, to the Best of Seller's Knowledge, no basis exists for any person
to claim that such a violation exists.
(b) SCHEDULE 1.5 lists all Governmental Permits that
are necessary to the conduct of the Business as it is currently conducted by
Seller. Complete and correct copies of all such Governmental Permits as
currently in effect have been, or prior to the Closing will be, made available
to Buyer. All such Governmental Permits are currently in full force and effect.
There is no action, proceeding or investigation pending or, to the Seller's
knowledge after due inquiry, threatened, relating to the termination, suspension
or modification of any such Governmental Permit and Seller is in compliance in
all material respects with the terms and conditions of all Governmental Permits.
Seller is not in violation of or default under any material provision of any
Governmental Permit, and to the knowledge of Seller based on due inquiry, there
exists no fact or circumstance which, with the passage of time or the giving of
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notice or both, would constitute a violation of or default under any
Governmental Permit, or permit any issuing Governmental Authority to cancel or
terminate the rights thereunder except upon the expiration of the full term
thereof.
(c) The operation of the System has been, and is, in
compliance in all material respects with the Communications Act of 1934, as
amended (as so amended, the "COMMUNICATIONS ACT"), and the rules and regulations
of the Federal Communications Commission (the "FCC"), except that, as to any
rate regulation thereunder, the foregoing is limited to the Best of Seller's
Knowledge. Seller has delivered, or prior to Closing will deliver, to Buyer
complete and correct copies of all reports and filings for the past three years
made or filed pursuant to the Communications Act or FCC rules and regulations
with respect to the Business.
(d) To the Best of Seller's Knowledge, the operation
of the System has been, and is, in compliance in all material respects with the
Cable Television Consumer Protection and Competition Act of 1992 (the "CABLE
ACT"), and the rules and regulations of the FCC promulgated thereunder.
(e) To the Best of Seller's Knowledge, the operation
of the System has been, and is, in compliance in all material respects with the
Telecommunications Act of 1996 (the "TELECOM ACT"), and the rules and
regulations of the FCC promulgated thereunder.
(f) Except to the extent that the failure to comply
with any of the following does not have a material adverse effect on the Assets,
the System or the Business and except as set forth in SCHEDULE 5.8 hereto, where
required, appropriate authorizations from the FCC have been obtained for the use
of all aeronautical frequencies in use in the System and the System is presently
being operated in compliance with such authorizations (and all required
certificates, permits and clearances from governmental agencies, including the
Federal Aviation Administration), with respect to all towers, earth stations,
business radios and frequencies utilized and carried by the System has been
obtained. SCHEDULE 5.8(e) sets forth information identifying aeronautical
frequencies, the geographic coordinate of the approximate center of the System's
service area and the authorized radius of the System.
5.9. SELLER CONTRACTS. SCHEDULE 1.8 lists all Seller Contracts
that are material to the conduct of the Business as it is now conducted.
Complete and correct copies of the Seller Contracts as currently in effect have
been, or prior to the Closing will be, made available to Buyer. Neither Seller
nor, to the Best of Seller's Knowledge, any other party to any Seller Contract
is in any material respect in breach of the performance of its obligations under
any Seller Contract.
5.10. COPYRIGHT COMPLIANCE. Seller has deposited with the
United States Copyright Office all statements of account and other documents and
instruments, and paid all royalties, supplemental royalties, fees and other sums
to the United States Copyright Office, required under the Copyright Act with
respect to the Business and operations of the System as
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are required to obtain, hold and maintain the compulsory copyright license for
cable television systems prescribed in Section 111 of the Copyright Act. Seller
and the System are in material compliance with the Copyright Act. Seller and the
System are entitled to hold and do now hold the compulsory copyright license
described in Section 111 of the Copyright Act, which compulsory copyright
license is in full force and effect and has not been revoked, canceled,
encumbered or materially adversely affected in any manner. Seller has made
available to Buyer complete and correct copies of all reports and filings, and
all reports and filings for the past three years, made or filed pursuant to the
Copyright Act with respect to the Business. Seller has not received any notice
to the effect that the conduct of the Business as currently conducted infringes
on the rights of any Person in any copyright or other intellectual property
right, except as to potential copyright liability arising from the performance,
exhibition or carriage of any music on the System.
5.11. FINANCIAL STATEMENTS. (a) Seller has delivered to Buyer
correct and complete copies of certain financial information for the System for
the years ended December 31, 1995 and December 31, 1994 and the six-month period
ended June 30, 1996 (collectively, the "SELLER FINANCIAL STATEMENTS"). Except
for the absence of footnote disclosures, cash flow statements and statements of
equity and except for estimated, annualized or projected financial information,
the Seller Financial Statements fairly present, in all material respects, the
results of operations of the System for the respective periods ended on such
dates, all in conformity with GAAP consistently applied, and with respect to the
Seller Financial Statements for the six-month period ended June 30, 1996,
subject to normal year-end adjustments (none of which are expected to be
material in amount).
(b) Since the latest date of the Seller Financial
Statements (i) the Business has been operated only in the ordinary course and
(ii) there has been no material adverse change in, and no event has occurred
which, so far as reasonably can be foreseen, is likely, individually or in the
aggregate, to result in any material adverse change in the results of operations
of the Business, other than any change arising out of matters of a general
economic nature or matters (including, but not limited to, competition caused by
or arising from direct broadcast satellite, the Multichannel Multipoint
Distribution Service, legislation, rule making and regulation) affecting the
cable television industry (national or regional) in general.
5.12. LEGAL PROCEEDINGS. Except for any judgments, orders,
actions, suits, proceedings or investigations as may affect the cable television
industry (national or regional) generally, there is no judgment or order
outstanding, or any action, suit, proceeding or investigation by or before any
Governmental Authority or any arbitrator pending or, to Seller's knowledge based
on due inquiry, threatened, involving or affecting any of the Assets or the
Business which, if adversely determined, would have a material adverse effect on
the Assets or the Business or would materially impair the ability of Seller to
perform its obligations under this Agreement.
5.13. EMPLOYMENT MATTERS. (a) Seller does not employ any
individuals in connection with the operation of the Business and does not, and
is not obligated to, maintain or
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contribute to any employee benefit plan, as defined in Section 3(3) of ERISA.
All individuals managing the operations of the Business are employees of TCI or
its Affiliates (other than Seller) (the "EMPLOYER"). The Employer is reimbursed
for employee-related expenses relating to the operations of the Business by
Seller under the Management Agreement or the Partnership Agreement.
(b) To Seller's knowledge after inquiry of Employer, Employer
has complied in all material respects with all Legal Requirements relating to
the employment of labor and those relating to wages, hours, collective
bargaining, unemployment compensation, worker's compensation, equal employment
opportunity, age and disability discrimination, immigration control and the
payment and withholding of taxes with respect to employees of Employer who
primarily perform services in connection with the operation of the Business.
(c) Employer is not a party to any contract with any labor
organization, and Employer has not recognized or agreed to recognize any union
or other collective bargaining unit with respect to employees of Employer who
primarily perform services in connection with the operation of the Business.
Except as set forth on SCHEDULE 5.13(c), no union or other collective bargaining
unit has been certified as representing any of the employees engaged in the
operation of the Business, and, to the Best of Seller's Knowledge, Employer has
not received any request from any party for recognition as a representative of
employees engaged in the operation of the Business for collective bargaining
purposes. Neither Seller nor Employer is party to any agreement, oral or
written, express or implied, that would require Buyer to employ any individual
after the Closing Date.
(d) SCHEDULE 5.13(d) sets forth a true and complete list of
all individuals employed by Employer who primarily perform services with respect
to the operation of the Business. Except as provided on SCHEDULE 5.13(d),
neither Seller nor Employer is a party to any written employment contract,
agreement, commitment or arrangement with any individual identified on SCHEDULE
5.13(d).
(e) Except for those plans described on SCHEDULE 5.13(e) and
in the TCI Employee Handbook dated February, 1995 (the "EMPLOYER PLANS"), which
are sponsored by the Employer, or to which the Employer contributes or is
obligated to contribute, the employees of Employer who primarily perform
services with respect to the operation of the Business do not receive benefits
under any bonus, deferred compensation, pension, profit-sharing, retirement,
severance pay, insurance, stock purchase, stock option, or other fringe benefit
plan, arrangement or practice, or any other employee benefit plan, as defined in
Section 3(3) of ERISA.
(f) Seller has not incurred or taken any action, and to the
Best of Seller's Knowledge, no action or event has occurred, that could cause
Seller to incur any material liability (i) under Section 412 of the Code or
Title IV of ERISA with respect to any Employer Plan that is a single-employer
plan, within the meaning of Section 4001(a)(15) of ERISA, (ii) on account of a
partial or complete withdrawal from any Employer Plan that is a multiemployer
plan, within the meaning of Section 3(37) of ERISA, or on account of any unpaid
contributions
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to any such multiemployer plan, or (iii) for any tax or penalty under Section
4975 of the Code or Section 502(i) of ERISA on account of any prohibited
transaction, within the meaning of Section 4975 of the Code or Section 406 of
ERISA, with respect to any Employer Plan.
5.14. SYSTEM INFORMATION. (a) (i) The number of Equivalent
Basic Subscribers served by the System, the number of subscribers served by the
System taking Expanded Basic Services and the bandwidth of the System and (ii)
to Seller's knowledge based on due inquiry, the number of Homes Passed by the
System and the approximate number of miles of plant included in the Assets, each
as of June 30, 1996, are as set forth on SCHEDULE 5.14.
(b) Seller has filed offset notifications or obtained
appropriate waivers for all aeronautical frequencies currently in use by the
System. Seller's use of such aeronautical frequencies is in compliance with all
applicable FCC rules, regulations and requirements. The System is presently
carrying channels and is providing reception on all such channels in compliance
with the technical standards set forth in all applicable FCC rules, regulations
and requirements.
(c) To the Best of Seller's Knowledge, the System is
the only cable television system presently servicing the area included in the
Franchise Areas or in any area in which Seller operates the Business that does
not require a franchise.
5.15. FINDERS AND BROKERS. Except for its engagement of
Daniels & Associates, L.P. to assist Seller in the solicitation of offers to
purchase the Assets and except for a disposition fee payable by Seller to an
Affiliate pursuant to its Partnership Agreement, Seller has not employed any
financial advisor, broker or finder or incurred any liability for any financial
advisory, brokerage, finder's or similar fee or commission in connection with
the transactions contemplated by this Agreement.
5.16. TAX MATTERS. Except as set forth on SCHEDULE 5.16, (a)
all Tax Returns required to be filed by Seller before the Closing with respect
to the Business or the Assets have been or will be filed on or before the
Closing and (b) all Taxes shown as due or payable before the Closing on such Tax
Returns have been or will be paid when required by law.
5.17. CONDITION OF EQUIPMENT. The Equipment material to the
operation of the System is generally in good repair and operating condition
(subject to normal wear and tear).
5.18. INSURANCE. Seller has maintained insurance policies in
the ordinary course of business which when taken together provide adequate
insurance coverage for the Assets and the operations of the Business for all
risks normally insured against by a Person carrying on the same business as
Seller.
5.19. FRANCHISES. The franchises described on Schedule 1.5 are
the franchises necessary for Seller to operate the System lawfully and in a
manner in which it is presently being
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operated. As of the date of this Agreement, no community serviced by the System
has become certified by the FCC for the purpose of regulating a System's
operations and/or rates.
5.20. CAPITAL PROJECT. By the Closing Date, Seller shall have
completed in good and workmanlike manner the capital project represented to be
undertaken and completed by Seller in the Daniel & Associates, L.P. Information
Memorandum dated May 1996 (the "CAPITAL PROJECT") and the description of the
Capital Project set forth in the memorandum shall be deemed to be incorporated
herein by reference
ARTICLE VI
6. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants to Seller as follows:
6.1. ORGANIZATION AND QUALIFICATION. Buyer is a corporation or
partnership, as the case may be, duly organized, validly existing and in good
standing under the laws of its state of incorporation or formation and has all
requisite corporate or partnership power and authority to carry on its business
as currently conducted and to own, lease, use and operate its assets. Buyer is
duly qualified or licensed to do business and is in good standing under the laws
of each jurisdiction in which the character of the properties owned, leased or
operated by it or the nature of the activities conducted by it makes such
qualification necessary, except where the failure to be so qualified or licensed
and in good standing would not have a material adverse effect on the validity,
binding effect or enforceability of this Agreement or the ability of Buyer to
perform its respective obligations under this Agreement.
6.2. AUTHORITY AND VALIDITY. Buyer has all requisite corporate
or partnership, as the case may be, power and authority to execute, deliver and
perform its obligations under this Agreement. The execution and delivery by
Buyer of, the performance by Buyer of its obligations under, and the
consummation by Buyer of the transactions contemplated by, this Agreement have
been duly authorized by all requisite corporate or partnership action, as the
case may be, of Buyer and no other corporate or partnership proceedings, as the
case may be, on the part of Buyer, are necessary to authorize the execution and
delivery of this Agreement or the performance of Buyer's obligations hereunder.
This Agreement has been duly and validly executed and delivered by Buyer and
constitutes a valid and binding agreement of Buyer, enforceable in accordance
with its terms.
6.3. NO BREACH OR VIOLATION. (a) Except for (i) any consents
that will be obtained by Buyer or waived on or prior to the Closing Date and are
identified on SCHEDULE 6.3(a), (ii) filings and consents which, if not made or
obtained, would not have a material adverse effect on Buyer's ability to perform
its obligations under this Agreement and (iii) the Regulatory Requirements, no
consent, waiver, approval or authorization of, or filing, registration or
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qualification with, any Governmental Authority is required to be made or
obtained by Buyer in connection with the execution, delivery and performance of
this Agreement by Buyer.
(b) The execution, delivery and performance of this
Agreement by Buyer do not and will not: (a) violate or conflict with any
provision of Buyer's Certificate of Incorporation or By-Laws or partnership
agreement, as the case may be, (b) violate any Legal Requirement; or (c) (i)
violate, conflict with or constitute a breach of or default under (without
regard to requirements of notice, passage of time or elections of any Person),
(ii) permit or result in the termination, suspension or modification of, (iii)
result in the acceleration of (or give any Person the right to accelerate) the
performance of Buyer under, or (iv) result in the creation or imposition of any
Encumbrance under, any material contract, agreement, arrangement, commitment or
plan to which Buyer is a party or by which Buyer or any of its assets is bound
or affected, except such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications and accelerations as would not,
individually or in the aggregate, have a material adverse effect on Buyer's
ability to perform its obligations under this Agreement.
6.4. LITIGATION. (a) There are no claims, actions, suits,
proceedings or investigations pending or, to the best of Buyer's knowledge,
threatened, in any court or before any governmental agency or instrumentality,
or before any arbitrator, by or against or affecting or relating to Buyer, or
any of its Affiliates which, if adversely determined, would restrain or enjoin
the consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
(b) There are no judgments, injunctions, orders or
other judicial or administrative mandates outstanding against or affecting Buyer
or any of its Affiliates which would materially hinder or delay the consummation
of the transactions contemplated by this Agreement.
6.5. FINANCIAL STATEMENTS. Buyer has delivered to Seller
copies of its audited financial statements for its last fiscal year ("BUYER
FINANCIAL STATEMENT"). The Buyer Financial Statement and the notes thereto
fairly present the assets, liabilities and financial condition of Buyer as of
the date thereof and the results of operations and cash flows or changes in
financial position, as applicable, of Buyer for the period ended on such date,
all in conformity with GAAP consistently applied, except as may be noted
therein. Buyer has delivered to Seller copies of its unaudited financial
statements for its last fiscal quarter ("BUYER INTERIM FINANCIAL STATEMENT").
Except as noted therein, the Buyer Interim Financial Statement was prepared on a
basis consistent with the Buyer Financial Statement and fairly presents, in
conformity with GAAP consistently applied, the financial position of Buyer as of
such date and the results of operations and cash flows or changes in financial
position, as applicable, for such period, subject to normal year-end adjustments
(none of which are expected to be material in amount), other adjustments noted
therein and the absence of footnotes.
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6.6. ADEQUATE FINANCING. Buyer currently has, or has received
binding commitments pursuant to which one or more lenders or investors have
agreed to loan or contribute to Buyer, all funds necessary to satisfy all its
obligations under this Agreement and with respect to the transactions
contemplated by this Agreement, including its obligations to purchase the Assets
and to pay the Purchase Price to Seller.
6.7. FINDERS AND BROKERS. Buyer has not employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller will in any way
have any liability.
6.8. QUALIFICATION OF BUYER. Buyer knows of no reason why it
cannot obtain the licenses and permits necessary for it to own and operate the
Business in the manner in which it is currently conducted by Seller.
ARTICLE VII
7. ADDITIONAL COVENANTS.
7.1. ACCESS TO PREMISES AND RECORDS. Between the date of
execution and delivery of this Agreement and the Closing Date, Seller will give
Buyer and its representatives, during normal business hours and with reasonable
prior notice, access to the books, records and facilities of the Business and to
the Assets and will furnish to Buyer and its representatives such information
regarding the Business and the Assets as Buyer may from time to time reasonably
request.
7.2. CONTINUITY AND MAINTENANCE OF OPERATIONS; FINANCIAL
STATEMENTS. Except as to actions which Buyer has been advised and to which it
has consented in writing and except as specifically permitted or required by
this Agreement or required by any Legal Requirement, Seller shall:
(a) Operate the Business in the ordinary course
consistent with past practices and will use commercially reasonable efforts to
cause Employer to keep available the services of the employees of the Employer
who are primarily involved in the operation of the Business and to preserve any
beneficial business relationships with subscribers, customers, suppliers,
Governmental Authorities and others having business dealings with Seller
relating to the Business;
(b) Maintain the Assets in operating condition
consistent with past maintenance practices;
(c) Maintain adequate inventories of spare Equipment
consistent with past practice;
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(d) Maintain insurance as in effect on the date of
this Agreement;
(e) Complete the Capital Project and otherwise
conform its operations to its existing capital budget through the Closing Date;
(f) Keep all of its business books, records and files
in the ordinary course of business in accordance with past practices;
(g) Continue to implement its procedures for
disconnection and discontinuance of service to subscribers whose accounts are
delinquent in accordance with those in effect on the date of this Agreement;
(h) Not sell, transfer or assign any Assets other
than in the ordinary course of business;
(i) Use commercially reasonable efforts not to permit
any material amendment to, or cancellation of, any of the Governmental Permits
or Seller Contracts;
(j) Not enter into any contract or commitment for the
acquisition of goods or services relating to the System or the Business
involving an expenditure in excess of $40,000 other than in the ordinary course
of business;
(k) Not modify or change the Basic Subscriber Rate or
any other subscriber rates nor employ any new promotions to obtain subscribers
that provide a discount or other feature that results in rates lower than those
presently in effect other than in the ordinary course of business in accordance
with past practices or with Buyer's written consent; or
(l) Not take or omit to take any action that would
cause Seller to be in breach of any of its representations or warranties in this
Agreement in any material respect, provided, however, that the foregoing shall
not preclude Seller from engaging a financial advisor to render an opinion as to
the fairness, from a financial point of view, of the transactions contemplated
by this Agreement.
Seller shall continue to prepare all periodic statements and
reports historically prepared by it regarding the System and shall deliver to
Buyer, promptly after such statements and reports become available to Seller,
correct and complete copies of unaudited monthly and quarterly income statements
and operating reports for the System that are prepared by or for Seller at any
time between the date of this Agreement and the Closing; provided, that, subject
to the following sentence, Seller shall not be required to make and shall not be
deemed to make any representation or warranty concerning such statements or the
contents of any such information delivered to Buyer. Unless the Closing occurs
on or before April 30, 1997 or Buyer waives the following requirements, Seller
shall deliver to Buyer (i) promptly when available, a copy of the financial
statements for the System for the year ended December 31, 1996, and (ii) at
Closing, if the Closing occurs after May 15, 1997 but before August 15, 1997 or
after August 15, 1997,
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internally prepared financial statements for the System for the three-month or
six-month period ended March 31, 1997 or June 30, 1997, as applicable; except
for the absence of footnote disclosures, cash flow statements and statements of
equity and except for estimated, annualized or projected financial information,
the financial statements delivered pursuant to this sentence shall fairly
present, in all material respects, the results of operations of the System for
the respective periods ended on such dates, all in conformity with GAAP
consistently applied, and with respect to the financial statements for the
three-month and six-month periods ended March 31, 1997 and June 30, 1997,
subject to normal year-end adjustments.
7.3. EMPLOYEE MATTERS. (a) Buyer may offer employment to
certain of the employees of Employer who primarily perform services with respect
to the operation of the Business as of the Closing Date. Not later than February
24, 1997, Buyer shall deliver to Seller a notice containing the names of
employees of the Business whom Buyer intends to hire on the Closing Date;
provided that if the Termination Date is extended by Seller, Buyer may deliver
to Seller a notice no later than 60 Business Days prior to the extended
Termination Date updating the list of employees to which Buyer intends to hire
on the Closing Date. Seller shall undertake to provide to all affected employees
and any other necessary persons any notice that may be required under the WARN
Act.
(b) Nothing in this Section 7.3 or elsewhere in this
Agreement is intended to confer upon any employee of Employer or his or her
legal representative or heirs any rights as a third party beneficiary or
otherwise or any remedies of any nature or kind whatsoever under or by reason of
this Agreement, or the transactions contemplated hereby, including, but not
limited to, any rights of employment or continued employment. All rights and
obligations created by this Agreement are solely between the parties hereto.
7.4. FRANCHISE EXTENSIONS. Seller covenants and agrees that,
as soon as practicable following the execution of this Agreement, it will apply
to the applicable Governmental Authority for an extension (the "EXTENSIONS") of
each franchise described on SCHEDULE 1.5 with an expiration date prior to June
30, 2000. Each such Extension shall have an expiration date no earlier than June
30, 2000 and may include modifications customarily imposed by Governmental
Authorities issuing cable television franchises as a condition to obtaining such
Extension but in any event shall not impose any conditions or obligations which
are materially more burdensome than contained in the current franchise.
7.5. ENVIRONMENTAL REPORT. Buyer may cause to be prepared at
its expense a Phase I environmental report for the Real Property described on
SCHEDULE 1.7. Seller shall cooperate with Buyer and permit access to the Real
Property during normal business hours in order for the Phase I environmental
report to be prepared. Seller shall permit Buyer during normal business hours to
inspect environmental records in the possession of Seller which are necessary
for the preparation of the Phase I environmental report.
7.6. REQUIRED CONSENTS. Seller will use commercially
reasonable efforts to obtain, as soon as practicable and at its expense, all the
Required Consents, in form and
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substance reasonably satisfactory to Buyer; provided, that "commercially
reasonable efforts" for this purpose shall not require Seller to undertake
extraordinary or unreasonable measures to obtain such approvals and consents,
including, but not limited to, the initiation or prosecution of legal
proceedings or the payment of fees in excess of normal and usual filing and
processing fees. Buyer will use commercially reasonable efforts to assist Seller
in its efforts to obtain all the Required Consents and the Extensions, and in
connection therewith will consent to such modifications to any Governmental
Permit that a Governmental Authority may request as a condition to (i) the
transfer of such permit to Buyer and/or (ii) obtaining extension of the term of
such Governmental Permit, provided, however, that Buyer will not be required to
agree to any modifications to a Governmental Permit unless they are customarily
imposed by Governmental Authorities issuing cable television franchises as a
condition to obtaining the consent to the transfer of such franchises and do not
impose upon Buyer any conditions or obligations which are materially more
burdensome than are contained in any such Governmental Permit.
7.7. HSR NOTIFICATION. As soon as practicable after the
execution of this Agreement and if required by applicable Legal Requirements,
Seller and Buyer will each complete and file, or cause to be completed and
filed, any notification and report required to be filed under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"). Each of the parties will take any additional action that may be
necessary, proper or advisable, will cooperate to prevent inconsistencies
between their respective filings and will furnish to each other such necessary
information and reasonable assistance as the other may reasonably request in
connection with its preparation of necessary filings or submissions under the
HSR Act. Buyer and Seller shall use commercially reasonable efforts (including
the filing of a request for early termination) to obtain the early termination
of the waiting period under the HSR Act.
7.8. NOTIFICATION OF CERTAIN MATTERS. Each party will promptly
notify the other of any fact, event, circumstance or action the existence or
occurrence of which would cause any of such party's representations or
warranties under this Agreement not to be true in any material respect.
7.9. RISK OF LOSS; CONDEMNATION. (a) Seller will bear the risk
of any loss or damage to the Assets resulting from fire, theft or other casualty
(except reasonable wear and tear) at all times prior to the Closing. If any such
loss or damage is so substantial as to prevent normal operation of any material
portion of the System, Seller shall promptly notify Buyer of that fact and
Buyer, at any time within 10 days after receipt of such notice, may elect by
written notice to Seller either (i) to waive such defect and proceed toward
consummation of the acquisition of the Assets in accordance with this Agreement
or (ii) to terminate this Agreement pursuant to Section 10.1(c)(v). If Buyer
elects to consummate the acquisition of the Assets notwithstanding such loss or
damage and does so, there will be no adjustment in the Purchase Price on account
of such loss or damage but all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage (to the extent not
previously applied by Seller with respect to such loss or damage) will be
delivered by Seller to Buyer or the rights to such proceeds will be assigned by
Seller to Buyer if not yet paid over to Seller.
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(a) If, prior to the Closing, any part of a material
Asset or an interest in a material Asset is taken or condemned as a result of
the exercise of the power of eminent domain, or if a Governmental Authority
having such power informs Seller or Buyer that it intends to condemn all or any
part of a material Asset (such event being referred to, in either case, as a
"TAKING"), then Buyer may terminate this Agreement pursuant to Section
10.1(c)(vi). If Buyer does not elect to terminate this Agreement then (a) if the
Closing occurs, Buyer shall have the sole right, in the name of Seller, if Buyer
so elects, to negotiate for, claim, contest and receive all damages with respect
to the Taking, (b) Seller shall be relieved of its obligation to convey to Buyer
the Asset or interests that are the subject of the Taking and (c) at the Closing
Seller shall assign to Buyer all of Seller's rights (including the right to
receive payment of damage) with respect to such Taking and shall pay to Buyer
all damages previously paid to Seller with respect to the Taking.
7.10. ADVERSE CHANGES. Seller shall promptly notify Buyer in
writing of any materially adverse developments affecting the Assets, the System
or the Business which become known to Seller, including, but not limited to, (i)
any damage, destruction or loss (whether or not covered by insurance) materially
and adversely affecting any of the Assets, the System or the Business, (ii) any
material notice of violation, forfeiture or complaint under any material
Governmental Permits, (iii) anything which, if not corrected prior to the
Closing Date, will prevent Seller from fulfilling any condition to Closing
described in Article VIII or (iv) matters or events which may have a material
adverse effect upon the Business, the System, or the business activities,
finances, conditions or earnings for the System.
7.11. ACTION BY LIMITED PARTNERS. (a) If required by
applicable Legal Requirements and the Partnership Agreement to consummate the
transactions contemplated by this Agreement, or if the Seller otherwise elects
to do so, the Seller, acting through the General Partner, shall in accordance
with the applicable Legal Requirements and the Partnership Agreement: (i) within
a reasonable period of time (as determined by the General Partner) after the
execution and delivery of this Agreement, duly call, give notice of, convene and
hold a special meeting (the "SPECIAL MEETING") of the Limited Partners for the
purpose of approving the transactions contemplated by this Agreement; and (ii)
subject to its fiduciary duties (as determined by the General Partner after
consultation with independent counsel), include in any proxy statement the
determination and recommendation of the General Partner to the effect that the
General Partner, having determined that this Agreement and the transactions
contemplated hereby are in the best interests of Seller and the Limited
Partners, has approved this Agreement and such transactions and recommends that
the Limited Partners vote in favor of the sale of the Assets to Buyer pursuant
to this Agreement.
(b) As soon as practicable after the execution and
delivery of this Agreement, Seller shall, at its sole cost and expense, file
with the SEC under the Exchange Act, and shall use commercially reasonable
efforts to clear with the SEC and mail to the Limited Partners no later than
February 15, 1997, a proxy statement with respect to the Special Meeting (the
"PROXY STATEMENT"). Seller and Buyer shall cooperate in the preparation of any
Proxy Statement; without limiting the generality of the foregoing, Buyer shall
furnish to Seller the
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information relating to Buyer required by the Exchange Act to be set forth in
the Proxy Statement. Seller agrees that the Proxy Statement shall comply in all
material respects with the Exchange Act and the rules and regulations
thereunder; provided, however, that no agreement is made by Seller with respect
to information supplied by Buyer expressly for inclusion in the Proxy Statement.
Buyer and its counsel shall be given a reasonable opportunity to review the
Proxy Statement prior to the filing thereof with the SEC.
7.12. NO SOLICITATION. (a) Seller shall not, and shall cause
the General Partner, employees, agents and representatives (including, but not
limited to, any investment banker, attorney or accountant retained by Seller)
not to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making of any proposal with respect to any Alternative Transaction, engage
in any negotiations concerning, or provide to any other Person any information
or data relating to, the Business, the System, the Assets or Seller for the
purposes of, or have any discussions with any Person relating to, or otherwise
cooperate in any way with or assist or participate in, facilitate or encourage,
any inquiries or the making of any proposal which constitutes, or may reasonably
be expected to lead to, any effort or attempt by any other Person to seek or to
effect an Alternative Transaction, or agree to or endorse any Alternative
Transaction; provided, however, that nothing contained in this Section 7.12
shall prohibit Seller or the General Partner from making any disclosure to the
Limited Partners that, in the judgment of the General Partner based upon the
advice of independent counsel, is required under applicable Legal Requirements;
and provided, further, that (i) Seller or the General Partner may, upon the
unsolicited request of a third party, furnish information or data (including,
but not limited to, confidential information or data) relating to the Business,
the System, the Assets or Seller for the purposes of facilitating an Alternative
Transaction and participate in negotiations with a Person making (or who may
reasonably be expected to make) an unsolicited proposal regarding an Alternative
Transaction and (ii) following receipt of a proposal for an Alternative
Transaction, Seller or the General Partner may terminate this Agreement pursuant
to Section 10.1(b)(ii).
(b) TCI shall not, and shall cause its Affiliates
which it controls not to, make a proposal to Seller regarding an Alternative
Transaction. The restriction set forth in this Section 7.12(b) shall terminate
on the earlier of (i) the Closing or (ii) termination of this Agreement.
7.13. SALES AND TRANSFER TAXES AND FEES. Buyer and Seller
shall each pay 50 percent of any state or local sales, use, transfer, excise,
documentary or license taxes or fees or any other charge (including filing fees)
imposed by any Governmental Authority as a consequence of the transfer of any
Assets pursuant to this Agreement. Seller shall timely file any sales tax
returns required to be filed with any Governmental Authority as a consequence of
the transfer of any Assets pursuant to this Agreement. Buyer shall cooperate in
the preparation and filing of any submission or application necessary to obtain
any clearance relating to, or, if available, exemption from, any Taxes or fees
described in this Section 7.13.
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7.14. COMMERCIALLY REASONABLE EFFORTS. (a) Seller shall use
commercially reasonable efforts to take all steps within its power, and will
cooperate with Buyer, to cause to be fulfilled those of the conditions to
Buyer's obligations to consummate the transactions contemplated by this
Agreement that are dependent upon its actions, and to execute and deliver such
instruments and take such other reasonable actions as may be necessary or
appropriate in order to carry out the intent of this Agreement and consummate
the transactions contemplated hereby.
(b) Buyer shall use commercially reasonable efforts
to take all steps within its power, and will cooperate with Seller, to cause to
be fulfilled those of the conditions to Seller's obligations to consummate the
transactions contemplated by this Agreement that are dependent upon its actions
and to execute and deliver such instruments and take such other reasonable
actions as may be necessary or appropriate in order to carry out the intent of
this Agreement and consummate the transactions contemplated hereby.
7.15. TITLE INSURANCE. Seller shall cooperate with Buyer if
Buyer elects to obtain title insurance policies on any Real Property owned in
fee or leased. Buyer shall have the sole responsibility for obtaining and paying
for such policies. The parties agree that the obtaining of title insurance on
any Real Property shall not be a condition to the obligation of Buyer to
consummate the transactions contemplated hereby.
7.16. NON-COMPETITION. Each of Seller and the General Partner
hereby covenants and agrees that for the period commencing on the Closing Date
and expiring on the third anniversary thereof, it shall not, directly or
indirectly, compete with Buyer in the provision of terrestrial cable television
video services by means of cable, microwave, fiber optics, satellite receivers
or broadcasts all of which being directed to the delivery of terrestrial cable
television video services to businesses, residences, multi-family dwellings,
hotels, motels, trailers and other users, in any portion of the Franchise Areas
in which the Business operates on the Closing Date. Each of Seller and the
General Partner further covenants that for the period commencing on the Closing
Date and expiring on the third anniversary thereof, it shall not, directly or
indirectly, manage, operate, join, control, participate, or become interested
in, or be connected with (as a consultant, partner, stockholder or investor) any
such terrestrial cable television video service that would compete with Buyer in
the provision of cable television service within any portion of the geographical
area described above, except as a passive investor or stockholder holding less
than five percent of the outstanding voting stock or equity interest in any
corporation or other entity.
7.17. FORMS 394. At Seller's option, Buyer shall prepare, in
form and substance reasonably satisfactory to Seller, within 15 Business Days
after receipt of Seller's written request, and Seller shall file, Forms 394 with
the applicable Governmental Authorities.
7.18. FAIRNESS OPINION. Seller shall use commercially
reasonable efforts to obtain the Fairness Opinion.
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ARTICLE VIII
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer under this Agreement 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 by Buyer, in its sole discretion.
8.1. HSR ACT. If required under applicable Legal Requirements,
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 receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
8.2. GOVERNMENTAL OR LEGAL ACTION. No action, suit or
proceeding shall be pending or threatened by or before any Governmental
Authority and no Legal Requirement shall have been enacted, promulgated or
issued or deemed applicable to any of the transactions contemplated by this
Agreement by any Governmental Authority that would (a) prohibit Buyer's
ownership or operation of all or a material portion of the System, the Business
or the Assets or (b) prevent or make illegal the consummation of the
transactions contemplated by this Agreement.
8.3. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date, with the same effect as though made on and as of the
Closing Date, except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations and warranties
relate solely to a particular date or period, in which case they shall be true
and correct in all material respects on such Closing Date with respect to such
date and period.
8.4. PERFORMANCE OF AGREEMENTS. Seller shall have performed in
all material respects all obligations and agreements and complied, or caused to
be complied with, all covenants and conditions required by this Agreement to be
performed or complied with by Seller at or prior to the Closing Date.
8.5. NO MATERIAL ADVERSE CHANGE. During the period from the
date of this Agreement through and including the Closing Date, there shall not
have occurred any material adverse change in the business, financial condition
or operations of the Business, taken as a whole, other than any change arising
out of matters of a general economic nature or matters (including, but not
limited to, competition caused by or arising from the Multichannel Multipoint
Distribution Service, direct broadcast satellite, legislation, rule making and
regulation) affecting the cable television industry (national or regional)
generally, and Seller shall not have sustained any material loss or damage to
the Assets or the System, whether or not insured, that materially affects the
ability of Seller to conduct the Business in a manner consistent with past
practice.
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8.6. CONSENTS AND EXTENSIONS. Seller shall have delivered to
Buyer evidence, in form and substance reasonably satisfactory to Buyer, that all
the Required Consents and Extensions have been obtained or given.
8.7. TRANSFER DOCUMENTS. Seller shall have delivered to Buyer
customary bills of sale, deeds, assignments and other instruments of transfer
sufficient to convey good and marketable title to the Assets in accordance with
the terms of this Agreement.
8.8. OPINIONS OF SELLER'S COUNSEL. Buyer shall have received
the opinion or opinions of Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel
for Seller, dated the Closing Date, substantially in the form of Exhibit D.
8.9. OPINION OF SELLER'S FCC COUNSEL. Buyer shall have
received the opinion of Cole, Raywid & Braverman, FCC counsel for Seller, dated
the Closing Date, substantially in the form of Exhibit F.
8.10. DISCHARGE OF LIENS. Seller shall have secured the
termination of all material Encumbrances of any nature on the Assets, other than
Permitted Encumbrances.
8.11. ADDITIONAL DOCUMENTS AND ACTS. Seller shall have
delivered or caused to be delivered to Buyer all other documents required to be
delivered pursuant to this Agreement and done or caused to be done all other
acts or things reasonably requested by Buyer to evidence compliance with the
conditions set forth in this Article VIII.
8.12. INDEMNITY ESCROW AGREEMENT. Seller shall have executed
and delivered the Indemnity Escrow Agreement.
8.13. CERTIFICATES. Seller shall have furnished Buyer with
such other certificates of Seller and others, dated as of the Closing Date, to
evidence compliance with the conditions set forth in this Article VIII, as may
be reasonably requested by Buyer.
8.14. MINIMUM SUBSCRIBERS. The aggregate number of Equivalent
Basic Subscribers served by the System as of the Closing Date shall not be less
than 17,955.
ARTICLE IX
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller under the Agreement are subject to
the satisfaction, at or prior to the Closing Date, of each of the following
conditions, any one or more of which may be waived by Seller in its sole
discretion.
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9.1. HSR ACT. If required under applicable Legal Requirements,
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 receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
9.2. GOVERNMENTAL OR LEGAL ACTIONS. No action, suit or
proceeding shall be pending or threatened by or before any Governmental
Authority and no Legal Requirement shall have been enacted, promulgated or
issued or deemed applicable to any of the transactions contemplated by this
Agreement by any Governmental Authority that would (a) prohibit Buyer's
ownership or operation of all or any material portion of the System, the
Business or the Assets or (b) prevent or make illegal the consummation of the
transactions contemplated by this Agreement.
9.3. ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date, with the same effect as though made on and as of the
Closing Date, except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations and warranties
relate solely to a particular date or period, in which case they shall be true
and correct in all material respects on such Closing Date with respect to such
date and period.
9.4. PERFORMANCE OF AGREEMENTS. Buyer shall have performed in
all material respects all obligations and agreements and complied, or caused to
be complied with, all covenants and conditions required by this Agreement to be
performed or complied with by Buyer at or prior to the Closing Date.
9.5. CONSENTS. All Required Consents shall have been obtained
or given.
9.6. OPINIONS OF BUYER'S COUNSEL. Seller shall have received
the opinion or opinions of Hourigan, Kluger, Spohrer & Quinn, P.C., outside
counsel for Buyer, dated the Closing Date, substantially in the form of EXHIBIT
E.
9.7. LIMITED PARTNER APPROVAL. The transactions contemplated
by this Agreement shall have been approved by the affirmative vote of or consent
by the Limited Partners to the extent required by the Partnership Agreement or
if Seller otherwise elects as permitted by Section 7.11.
9.8. PAYMENT OF PURCHASE PRICE. Buyer shall have paid to
Seller the Purchase Price as set forth in Section 3.1.
9.9. ASSUMPTION OF LIABILITIES. Buyer shall have delivered to
Seller a customary assumption of liabilities agreement which is sufficient to
cover Buyer's obligations for the Assumed Liabilities as set forth in Section
4.1.
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9.10. ADDITIONAL DOCUMENTS AND ACTS. Buyer shall have
delivered or caused to be delivered to Seller all other documents required to be
delivered pursuant to this Agreement and done all other acts or things
reasonably requested by Seller to evidence compliance with the conditions set
forth in this Article IX.
9.11. CERTIFICATE. Buyer shall have furnished Seller with such
other certificates of Buyer and others, dated as of the Closing Date, to
evidence compliance with the conditions set forth in this Article IX, as may be
reasonably requested by Seller.
9.12. FAIRNESS OPINION. Seller shall have received an opinion
(the "Fairness Opinion"), in form and substance reasonably satisfactory to
Seller, from its financial advisors as to the fairness, from a financial point
of view, of the transactions contemplated by this Agreement.
9.13. INDEMNITY ESCROW AGREEMENT. Buyer shall have executed
and delivered the Indemnity Escrow Agreement.
ARTICLE X
10. TERMINATION.
10.1. EVENTS OF TERMINATION. This Agreement and the
transactions contemplated by this Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual written consent of Buyer and
Seller;
(b) by Seller:
(i) if the consummation of the transactions
contemplated by this Agreement by Seller would
violate any nonappealable final order, decree or
judgment of any Governmental Authority having
competent jurisdiction;
(ii) following receipt by Seller or the
General Partner of an unsolicited proposal for an
Alternative Transaction to the extent that the
General Partner determines in good faith on the
basis of advice of independent counsel that such
action is necessary or appropriate in order for the
General Partner to act in a manner that is
consistent with its fiduciary obligations under
applicable law;
(iii) if any representation or warranty of
Buyer made herein is untrue in any material respect
(other than a change permitted or contemplated by
this Agreement) and such breach is not cured within
10
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days of Buyer's receipt of a notice from Seller
that such breach exists or has occurred;
if Buyer shall have defaulted in any
material respect in the performance of any material
obligation under this Agreement and such breach is
not cured within 30 days of Buyer's receipt of a
notice from Seller that such default exists or has
occurred; or
(v) if any one or more of the conditions to
Seller's obligations to consummate the Closing as
set forth in Article IX cannot reasonably be
satisfied on or before the Termination Date.
(c) by Buyer:
(i) if the consummation of the transactions
contemplated by this Agreement by Buyer would
violate any nonappealable final order, decree or
judgment of any Governmental Authority having
competent jurisdiction;
(ii) if any representation or warranty of
Seller made herein is untrue in any material
respect (other than due to a change permitted or
contemplated by this Agreement) and such breach is
not cured within 10 days of Seller's receipt of a
notice from Buyer that such breach exists or has
occurred;
(iii) if Seller shall have defaulted in any
material respect in the performance of any material
obligation under this Agreement and such breach is
not cured within 30 days of Seller's receipt of a
notice from Buyer that such default exists or has
occurred;
(iv) if any one or more of the conditions to
Buyer's obligations to consummate the Closing as
set forth in Article VIII cannot reasonably be
satisfied on or before the Termination Date;
(v) within 10 days after receipt by Buyer of
a notice from Seller that the loss or damage to the
Assets resulting from fire, theft or other casualty
is so substantial as to prevent normal operation of
any material portion of the System, as contemplated
by Section 7.9(a);
(vi) following a Taking, as contemplated by
the first sentence of Section 7.9(b);
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(d) Unless the Closing shall have theretofore taken
place, by either party after the Termination Date, provided that the terminating
party is not otherwise in default or breach of this Agreement.
10.2. MANNER OF EXERCISE. In the event of the termination of
this Agreement by either Buyer or Seller, pursuant to Section 10.1, notice
thereof shall forthwith be given to the other party and this Agreement shall
terminate and the transactions contemplated hereunder shall be abandoned without
further action by Buyer or Seller.
10.3. EFFECT OF TERMINATION. (a) Subject to paragraph (b) of
this Section 10.3, in the event of the termination of this Agreement pursuant to
Section 10.1 and prior to the Closing, all obligations of the parties hereunder
shall terminate, except for the respective obligations of the parties under
Section 13.12; provided, however, that no termination of this Agreement shall
(i) except as set forth in Section 10.3(b) and Section 10.4, relieve a
defaulting or breaching party from any liability to the other party or parties
hereto for or in respect of such default or (ii) result in the rescission of any
transaction theretofore consummated hereunder.
(b) If this Agreement is terminated after June 30,
1997 (i) by Seller pursuant to Section 10.1(b)(ii) or (ii) by Buyer pursuant to
Section 10.1(c) solely because Seller is in default or breach of the Agreement
and Buyer is not otherwise in default or breach of this Agreement, Seller shall
promptly (within ten days of termination) pay to Buyer the Commitment Expense
incurred by Buyer, up to $125,000. If this Agreement is terminated by (i) Seller
pursuant to Section 10.1(b)(ii) or (ii) by Buyer pursuant to 10.1(c)(iii) due to
Seller's non-compliance with Section 7.18, Seller shall promptly (within ten
days of termination) pay to Buyer a termination fee of $765,923; provided, that
if Seller terminates this Agreement pursuant to Section 10.1(b)(ii) with respect
to an unsolicited proposal for an Alternative Transaction proposed by a Person
who submitted a written proposal prior to the date of this Agreement to purchase
the System pursuant to the competitive auction conducted by Daniels &
Associates, L.P., then the amount of such termination fee shall be $1,148,884.
Any such termination fee shall be liquidated damages and not a penalty, and upon
receipt thereof Buyer shall be precluded from exercising any other right or
remedy available under this Agreement or applicable law.
10.4. LIQUIDATED DAMAGES. Provided Seller is not in default of
this Agreement and in the absence of any right of Buyer to terminate this
Agreement under Section 10.1(c) above, in the event of (i) the breach or default
by Buyer of its obligations under this Agreement and (ii) the termination of
this Agreement prior to the Closing, Seller shall have the option, upon notice
from Seller to Buyer given as provided in the Escrow Agreement, to receive as
liquidated damages, and not as a penalty, the Deposit. In the event Seller
elects to receive the Deposit as liquidated damages as set forth in this Section
10.4, Buyer shall promptly (but in no event more than two Business Days after
receipt of such notice) take all action required under the Escrow Agreement to
cause the Deposit to be released to Seller. If Seller elects to receive the
Deposit as liquidated damages as set forth in this Section 10.4, Seller shall,
upon receipt of the Deposit, be precluded from exercising any other right or
remedy available under this Agreement or applicable law.
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ARTICLE XI
11. NATURE AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND AGREEMENTS.
11.1. NATURE OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Neither party will be deemed to have made any representation, warranty, covenant
or agreement except as set forth in this Agreement. Without limiting the
generality of the foregoing, neither party will be liable or bound in any manner
by any express or implied representation, warranty, covenant or agreement that
is made by any employee, agent or other Person representing or purporting to
represent such party.
11.2. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller and Buyer in this Agreement and in the
documents and instruments to be delivered by Seller and Buyer pursuant to this
Agreement shall survive the Closing as and to the extent only set forth in this
Article XI.
11.3. TIME LIMITATIONS. If the Closing occurs, Seller shall
have no liability to Buyer with respect to any representation or warranty or any
covenant, agreement or obligation to the extent required to be performed or
complied with prior to the Closing Date, unless on or before the first
anniversary of the Closing Date Seller is given written notice by Buyer
asserting a claim with respect thereto and specifying the factual basis of that
claim in reasonable detail to the extent then known by Buyer. If the Closing
occurs, Buyer shall have no liability to Seller with respect to any
representation or warranty or any covenant, agreement or obligation to the
extent required to be performed or complied with prior to the Closing Date,
unless on or before the first anniversary of the Closing Date Buyer is given
written notice by Seller of a claim with respect thereto and specifying the
factual basis of that claim in reasonable detail to the extent then known by
Seller. A claim with respect to any covenants to be performed or complied with
by Buyer or Seller after the Closing Date may be asserted at any time.
11.4. LIMITATIONS AS TO AMOUNT. (a) If the Closing occurs,
Seller shall have no liability (for indemnification or otherwise) with respect
to any failure or breach of any representation or warranty or any covenant,
agreement or obligation to the extent required to be performed on or prior to
the Closing Date until the total of all damages with respect to such failure or
breach exceeds $50,000, and then only for damages in excess of $50,000.
(b) If the Closing occurs, Buyer shall have no
liability (for indemnification or otherwise) with respect to any failure or
breach of any representation or warranty or any covenant, agreement, or
obligation to the extent required to be performed on or before the Closing Date
until the total of all damages with respect to such failure or breach exceeds
$50,000, and then only for damages in excess of $50,000.
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(c) If the Closing occurs, Seller's aggregate
liability (for indemnification or otherwise) with respect to any failure or
breach of any representation or warranty or any covenant, agreement or
obligation to the extent required to be performed on or prior to the Closing
Date shall be limited to Buyer's right to make an indemnification claim against
Seller under Article XII and shall be further limited as set forth in Section
12.3.
(d) If the Closing occurs, Buyer's aggregate
liability (for indemnification or otherwise) with respect to any failure or
breach of any representation or warranty or any covenant, agreement or
obligation to the extent required to be performed on or prior to the Closing
Date shall be limited to $765,923.
ARTICLE XII
12. INDEMNIFICATION.
12.1. RIGHTS TO INDEMNIFICATION. Subject to the limitations
set forth in Sections 11.3 and 11.4, Seller agrees to indemnify and hold
harmless Buyer against any loss, liability, claim, damage or expense (including,
but not limited to, reasonable attorneys' fees and disbursements) arising from
(a) any claim for brokerage or agent's or finder's commissions or compensation
in respect of the transactions contemplated by this Agreement by any Person
purporting to act on behalf of Seller, (b) any claim that Buyer is liable for
the Excluded Liabilities and (c) Seller's failure or breach of any
representation, warranty, covenant, agreement or obligation made or required to
be performed by Seller under this Agreement. Subject to the limitations set
forth in Sections 11.3 and 11.4, Buyer agrees to indemnify and hold harmless
Seller against any loss, liability, claim, damage or expense (including, but not
limited to, reasonable attorneys' fees and disbursements) arising from (a) any
claim for brokerage or agent's or finder's commissions or compensation in
respect of the transactions contemplated by this Agreement by any Person
purporting to act on behalf of Buyer or, (b) the failure to perform the
obligations of the Assumed Liabilities or (c) Buyer's failure or breach of any
representation, warranty, covenant, agreement or obligation made or required to
be performed by Buyer under this Agreement.
12.2. PROCEDURE FOR INDEMNIFICATION. Promptly after receipt by
an indemnified party under Section 12.1 of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is prejudiced thereby. In case any such action shall
be brought against an indemnified party and it shall promptly give notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, within
ten Business Days of receipt of such notice, to assume the defense thereof with
counsel satisfactory to such indemnified party and, after notice from the
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indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such section for any fees of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party in connection with the
defense thereof, other than reasonable costs of investigation. If an
indemnifying party assumes the defense of such action, (a) no compromise or
settlement thereof may be effected by the indemnifying party without the
indemnified party's consent unless (i) there is no finding or admission of any
violation of law or any violation of the rights of the indemnified party and no
effect on any other claims that may be made against the indemnified party and
(ii) the sole relief provided is monetary damages that are paid in full by the
indemnifying party and (b) the indemnifying party shall have no liability with
respect to any compromise or settlement thereof effected without its consent
(which shall not be unreasonably withheld). If notice is given within ten
Business Days to an indemnifying party of the commencement of any action and it
does not, within ten days after the indemnified party's notice is given, give
notice to the indemnified party of its election to assume the defense thereof,
the indemnifying party shall be bound by any determination made in such action
or any compromise or settlement thereof effected by the indemnified party.
Notwithstanding the foregoing, if an indemnified party determines in good faith
that there is a reasonable probability that an action may adversely affect it or
its Affiliates other than as a result of monetary damages, such indemnified
party may, by notice to the indemnifying party, assume the exclusive right to
defend, compromise or settle such action, but the indemnifying party shall not
be bound by any determination of an action so defended or any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld).
12.3. INDEMNITY ESCROW. Buyer acknowledges and agrees that
recourse against the Seller's Escrow is its sole and exclusive remedy in the
event of a claim against Seller with respect to any representation or warranty
or any covenant, agreement or obligation, whether for indemnification pursuant
to Article XI or this Article XII or otherwise; provided, however, that this
limitation shall not apply to claims by Buyer for breaches of covenants to be
performed or complied with by Seller after the Closing Date.
ARTICLE XIII
13. MISCELLANEOUS.
13.1. PARTIES OBLIGATED AND BENEFITTED. (a) Subject to the
limitations set forth in clauses (b) and (c) below, this Agreement will be
binding upon the parties and their respective assigns and successors in interest
and will inure solely to the benefit of the parties and their respective assigns
and successors in interest, and no other Person will be entitled to any of the
benefits conferred by this Agreement.
(b) Without the prior written consent of the other
parties, no party will assign any of its rights under this Agreement or delegate
any of its duties under this Agreement; provided, that Buyer may assign this
Agreement to any Affiliate of Buyer without Seller's
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consent; provided, however, that notwithstanding such assignment Buyer shall
remain obligated to Seller pursuant to the terms and conditions of this
Agreement.
13.2. PRESS RELEASES. Except as required by applicable law
based on the advice of independent counsel, neither party shall make any public
announcement, press release or Form 8-K filing under the Exchange Act with the
SEC or any other filing with any other regulatory agency with respect to the
transactions contemplated by this Agreement, without the prior written approval
of the other party. Prior to the Closing Date (or at any time if the Closing
does not occur), Buyer shall, and shall cause its officers, directors and
representatives to, keep confidential and not disclose to any Person (other than
its officers, employees and representatives) or use (except in connection with
the transactions contemplated hereby, including, but not limited to, efforts to
obtain from Governmental Authorities and third parties Required Consents and
Extensions to the transactions contemplated hereby and the operation of the
Business) all non-public information obtained by Buyer pursuant to this
Agreement. Except as permitted by Section 7.12 (a) hereof, prior to and
following the closing, Seller shall, and shall cause its officers, employees and
representatives to, keep confidential and not disclose to any Person or use
(except in connection with preparing Tax Returns, conducting proceedings
relating to Taxes or the Excluded Liabilities and, prior to the Closing Date, as
required in conduct of the Business) any non-public information relating to the
Business, and any information relating to Buyer. Buyer agrees to the inclusion
of a description of the transactions contemplated by this Agreement in a letter
to the Limited Partners. This Section 13.2 shall not be violated by disclosure
pursuant to court order or as otherwise required by law, on condition that
notice of the requirement for such disclosure is given to the other party hereto
prior to making any disclosure and the party subject to such requirement
cooperates as the other may reasonably request in resisting it.
13.3. NOTICES. All notices, consents, approvals, demands,
requests and other communications required or desired to be given hereunder must
be given in writing, shall refer to this Agreement, and shall be sent by
registered or certified mail, return receipt requested, by hand delivery, by
facsimile or by overnight courier service, addressed to the parties hereto at
their addresses set forth below, or such other addresses as they may designate
by like notice:
To Seller:
American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Marvin Jones
Facsimile No.: (303) 488-3219
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With copies to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Lynn Toby Fisher, Esq.
Facsimile No.: (212) 836-7152
To Buyer:
Gans Multimedia Partnership
217 E. Ninth Street
Hazleton, Pennsylvania 18201
Attention; Joseph S. Gans
Facsimile No.: (717) 459-0963
With a copy to:
Hourigan, Kluger, Spohrer & Quinn, P.C.
700 Mellon Bank Center
Wilkes-Barre, Pennsylvania 18701
Attention: Terrence J. Herron, Esq.
Facsimile No.: (717) 829-3460
Any notice from a party hereto may be given by such party's
respective attorneys. Any notice or other communications made hereunder shall be
deemed to have been given (i) if delivered personally, by overnight courier
service or by facsimile, on the date received, or (ii) if by registered or
certified mail, return receipt requested, five business days after mailing.
13.4. WAIVER. This Agreement or any of its provisions may not
be waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
13.5. CAPTIONS. The article and section captions of this
Agreement are for convenience only and do not constitute a part of this
Agreement.
13.6. CHOICE OF LAW. THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO THE
PERFORMED IN THAT STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
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13.7. NONRECOURSE. Notwithstanding anything in this Agreement
to the contrary, in any action brought by reason of this Agreement or the
transactions contemplated hereby, no judgment shall be sought or obtained
against any of the general or limited partners of Seller or enforced against any
of such partners or any of their assets.
13.8. TERMS. Terms used with initial capital letters will have
the meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than a limiting sense.
13.9. RIGHTS CUMULATIVE. Except as set forth in Section 10.4,
all rights and remedies of each of the parties under this Agreement will be
cumulative, and the exercise of one or more rights or remedies will not preclude
the exercise of any other right or remedy available under this Agreement or
applicable law.
13.10. FURTHER ACTIONS. Seller and Buyer will execute and
deliver to the other, from time to time at or after the Closing, for no
additional consideration and at no additional cost to the requesting party, such
further assignments, certificates, instruments, records, or other documents,
assurances or things as may be reasonably necessary to give full effect to this
Agreement and to allow each party fully to enjoy and exercise the rights
accorded and acquired by it under this Agreement.
13.11. TIME. If the last day permitted for the giving of any
notice or the performance of any act required or permitted under this Agreement
falls on a day which is not a Business Day, the time for the giving of such
notice or the performance of such act will be extended to the next succeeding
Business Day.
13.12. EXPENSES. Except as otherwise expressly provided in
this Agreement, each party will pay all of its expenses, including attorneys'
and accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
13.13. SPECIFIC PERFORMANCE. The parties agree that
irreparable damages would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, in addition to any other remedy to which they
are entitled at law or in equity.
13.14. SCHEDULES. Any disclosure made on a Schedule to this
Agreement will be deemed included on any other Schedule to which such disclosure
may be pertinent.
13.15. COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original.
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13.16. ENTIRE AGREEMENT. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are incorporated in
and constitute a part of this Agreement) contains the entire agreement of the
parties and supersedes all prior oral or written agreements and understandings
with respect to the subject matter. This Agreement may not be amended or
modified except by a writing signed by the parties.
13.17. SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefitted by such provision or
any other provisions of this Agreement.
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IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER: AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By:/s/ Marvin Jones
----------------------------
Name: Marvin Jones
Title: President
BUYER: GANS MULTIMEDIA PARTNERSHIP
By: Cable TV, Inc., Managing General Partner
By: /s/ Joseph S. Gans
---------------------------
Name: Joseph S. Gans
Title: President
With respect to Section 7.12(b) only:
TCI COMMUNICATIONS, INC.
By:/s/ William R. Fitzgerald
-----------------------------------
Name: William R. Fitzgerald
Title: Senior Vice President
With respect to Section 7.16 only:
IR-TCI PARTNERS V, L.P.
By: TCI Ventures Five, Inc., its general partner
By: /s/ Marvin Jones
-------------------------------
Name: Marvin Jones
Title: President
44
<PAGE> 53
List of Schedules and Exhibits
Pursuant to
Asset Purchase Agreement
of American Cable TV Investors 5, Ltd.
for AMERICAN CABLE TV OF ST. MARY'S COUNTY
<TABLE>
EXHIBITS
<S> <C>
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form of Opinion of Seller's Counsel
Exhibit E Form of Opinion of Buyer's Counsel
Exhibit F Form of Opinion of Seller's FCC Counsel
Exhibit G Form of Indemnity Escrow Agreement
SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and Legal Requirements
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.8 Compliance with Law
Schedule 5.8(f) FCC Information
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by Closing Date
</TABLE>
<PAGE> 54
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
EXHIBIT A
GEOGRAPHIC AREAS OF SELLER'S BUSINESS
St. Mary's County, Maryland
Leonardtown, Maryland
North Beach, Maryland
Chesapeake, Maryland
Lothian, Maryland
Exhibit A -- Page 1
<PAGE> 55
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of _________, 1996, by and among
American Cable TV Investors 5, Ltd., a Colorado limited partnership ("Seller")
and Gans Multimedia Partnership, a ______ limited partnership ("Buyer"), and
Kaye, Scholer, Fierman, Hays & Handler, LLP, a New York limited liability
partnership, as escrow agent ("Escrow Agent").
Seller and Buyer have entered into an Asset Purchase
Agreement, dated as of _________, 1996, to sell and purchase certain cable
television assets (the "Agreement"). Pursuant to the Agreement, Kaye, Scholer,
Fierman, Hays & Handler, LLP, was designated as the escrow agent thereunder.
Escrow Agent has agreed to act as an escrow agent pursuant to the terms of this
Escrow Agreement. Capitalized terms used but not defined herein shall have the
meanings set forth in the Agreement.
It is agreed as follows:
1. ESCROW FUND. Buyer has, pursuant to Section 3.1 of the
Agreement, deposited $765,922.50 in cash by means of wire or interbank transfer
in immediately available funds in Escrow Agent's "Kaye, Scholer, Fierman, Hays &
Handler, LLP Attorney Trust Account No. 040-0251-95; Attention: Gregory Ciolek,"
at The Chase Manhattan Bank, 55 Water Street, New York, New York 10041 -- ABA
No. 021000128 to be held in escrow pursuant to the terms of the Agreement (such
amount, together with any earnings thereon, being the "Escrow Fund"), to be held
and disbursed by Escrow Agent in accordance with this Escrow Agreement.
2. DISBURSEMENT.
2.1 NOTICES. Escrow Agent shall pay over the Escrow Fund upon
receipt of a written notice, in the form attached hereto as Exhibit I, as
follows: (a) upon receipt of such notice executed by Seller directing the Escrow
Agent to pay the Escrow Fund over to Buyer, to Buyer; (b) upon receipt of such
notice executed by Buyer directing the Escrow Agent to pay the Escrow Fund over
to Seller, to Seller; or (c) upon receipt of such notice executed by Buyer and
Seller, to the parties and in the amounts specified in the notice.
2.2 AGREEMENT OF SELLER AND BUYER. Seller and Buyer have
agreed that (i) the Escrow Fund shall be disbursed in accordance with the terms
of this Escrow Agreement and the Agreement, (ii) at the Closing Seller and Buyer
shall instruct Escrow Agent to disburse the
Exhibit B -- Page 1
<PAGE> 56
Escrow Fund to Seller or Seller's designee and (iii) unless the Closing shall
theretofore have taken place or unless an unresolved claim against the Escrow
Fund remains outstanding, on the date which is 30 days after the termination of
the Agreement pursuant to Article X thereof, Seller and Buyer shall instruct
Escrow Agent to disburse the Escrow Fund to Buyer.
2.3 RELIANCE ON NOTICE. Upon receipt of the appropriate notice
described in Section 2.1, Escrow Agent shall pay the Escrow Fund in accordance
with Section 2.1, and Escrow Agent shall not be subject to any liability to any
party for doing so. Seller and Buyer each agrees not to assert (and shall
actively resist any attempt to assert on their behalf) any claim against Escrow
Agent for making a payment in accordance with this Section.
3. INVESTMENT OF ESCROW FUND. Escrow Agent shall invest the
Escrow Fund in (a) interest bearing accounts in, or certificates of deposit of,
The Chase Manhattan Bank, (b)(i) obligations of the United States of America,
(ii) United States government securities of agencies of the United States
government which are guaranteed by the United States government or (iii)
securities of governmental agencies, if the same are covered by a bank
repurchase agreement, or (c) for periods of less than seven days each,
non-interest bearing accounts at The Chase Manhattan Bank. Escrow Agent may
invest the Escrow Fund in one or more of the investments permitted by the
preceding sentence, and may change those investments from time to time, all as
it may determine in its sole and absolute discretion. Escrow Agent shall have no
duty to maximize the return on the Escrow Fund and shall be fully protected in
making any investment or combination of investments permitted by this Section.
4. ESCROW AGENT AS COUNSEL TO SELLER. Buyer hereby
acknowledges that it is aware that Escrow Agent is acting as counsel to Seller
in connection with the Agreement, this Escrow Agreement and other matters, and
agrees that Escrow Agent's acting under this Escrow Agreement shall not affect
its ability to act as counsel to Seller in any matter, including, but not
limited to, any claim, action or proceeding with respect to this Escrow
Agreement or the disposition of or entitlement to the Escrow Fund.
5. ESCROW AGENT.
5.1 GENERAL. Escrow Agent shall act as escrow agent and hold
and disburse the Escrow Fund pursuant to the terms and conditions of this Escrow
Agreement. Its duties under this Escrow Agreement shall cease upon disbursement
of the Escrow Fund.
5.2 LIQUIDATION OF INVESTMENTS. Unless otherwise directed by
notice executed by Seller and Buyer, all payments required by Section 2 shall be
made in cash by means of wire or interbank transfer in immediately available
funds. When necessary to provide funds in order to make any payments required by
Section 2, Escrow Agent shall liquidate any investments held by it as it may, in
its sole and absolute discretion, determine to be necessary to make such
Exhibit B -- Page 2
<PAGE> 57
payments. Escrow Agent shall have no liability for losses upon the liquidation
of any such investments.
5.3 LIMITED DUTIES. Escrow Agent undertakes to perform only
such duties as are expressly set forth in this Escrow Agreement. Escrow Agent
shall incur no liability whatsoever to any other party hereto, except for Escrow
Agent's own willful misconduct in its capacity as escrow agent.
5.4 RELIANCE ON NOTICES. Escrow Agent may rely and shall be
protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper party or parties.
Escrow Agent may conclusively presume that the undersigned have full power and
authority to instruct Escrow Agent on behalf of the respective party for which
they have signed.
5.5 LIMITED RESPONSIBILITIES. Escrow Agent's sole
responsibility upon receipt of the notice specified in Section 2.1 requiring
payment pursuant to the terms of this Escrow Agreement is to pay the Escrow Fund
to such party as is specified in accordance with Section 2.1, and Escrow Agent
shall have no duty to determine (and shall not be affected by any knowledge
concerning) the validity, authenticity or enforceability of any specification,
certification made in or information contained in such notices.
5.6 ACTION IN GOOD FAITH. Escrow Agent shall not be liable for
any action taken by it in good faith and believed by it to be authorized or
within the rights or powers conferred upon it by this Escrow Agreement, and may
consult with counsel (including partners or any attorneys employed by Escrow
Agent) of its own choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.7 RESIGNATION. Escrow Agent may resign and be discharged
from its duties or obligations hereunder by giving notice of such resignation to
Seller and Buyer specifying a date upon which such resignation shall take
effect, whereupon a successor escrow agent, which shall be a bank or trust
company with an office in New York City, shall be appointed by Seller. Escrow
Agent shall be entitled to pay the Escrow Fund to any successor escrow agent so
appointed. In the event no successor escrow agent has been appointed by the date
specified in the notice of resignation given by Escrow Agent, Escrow Agent shall
be entitled (but not required) to deliver the Escrow Fund as set out in Section
5.8(b) and shall be thereupon relieved of all further responsibility.
5.8 DISPUTES. In the event of a dispute between the parties,
or if Escrow Agent shall be uncertain as to the proper disposition of the Escrow
Fund, Escrow Agent shall be entitled (but not required) (a) to retain the Escrow
Fund pending direction as to the disposition
Exhibit B -- Page 3
<PAGE> 58
thereof by a final order, from which no further appeal may be taken, of a court
of competent jurisdiction, or (b) to deliver the Escrow Fund into the United
States District Court for the Southern District of New York and, upon giving
notice to Seller and Buyer of such action, shall thereupon be relieved of all
further responsibility.
5.9 INDEMNIFICATION; ESCROW AGENT'S INTEREST IN ESCROW FUND.
(a) Seller and Buyer hereby jointly and severally agree to indemnify Escrow
Agent and all partners and employees thereof for, and to hold such persons
harmless against, any loss, liability, damage or expense incurred without bad
faith on the part of such persons arising out of or in connection with the
Escrow Agent's entering into and/or performing under this Escrow Agreement,
including, but not limited to, the cost and expense (including, but not limited
to, attorneys' fees, which may consist in whole or in part of the time charges
at their standard rates of partners of and attorneys employed by Escrow Agent)
of investigation and defending themselves against any claim or liability, and
including taxes, penalties, additions to tax or interest that are incurred by
the Escrow Agent with respect to taxes imposed on the Escrow Fund or any income
earned or derived therefrom.
(b) Seller and Buyer hereby (i) jointly and severally agree
that Escrow Agent shall be entitled to (x) withdraw from the Escrow Fund all
sums due or reasonably likely to become due to Escrow Agent on account of
Seller's and Buyer's indemnification obligations set forth above, and (y)
withhold a portion of the income earned on or derived from the Escrow Fund and
pay such withheld amount to the proper taxing authorities on behalf of the
Escrow Fund to satisfy any tax imposed on such income, and (ii) grant to Escrow
Agent a first priority lien on and security interest in and to the Escrow Fund
for the purposes of securing satisfaction by Seller and Buyer of their
indemnification obligations to Escrow Agent.
6. ESCROW AGENT NOT AFFECTED BY OTHER AGREEMENTS. This Escrow
Agreement expressly sets forth all the duties of Escrow Agent with respect to
any and all matters pertinent hereto. No implied duties or obligations shall be
read into this Escrow Agreement against Escrow Agent. Escrow Agent, in its
capacity as such, shall not be bound by the provisions of any agreement among
the parties to this Escrow Agreement and shall have no duty to inquire into, or
to take into account its knowledge of, the terms and conditions of any agreement
made or entered into in connection with this Escrow Agreement, including, but
not limited to, the Agreement.
7. AUTHORIZED SIGNATORIES. Seller hereby authorizes Marvin
Jones, and Buyer hereby authorizes __________, to receive and execute all
notices required to be given hereunder, and either party may authorize other
officers to sign on its behalf by notice to the other party.
Exhibit B -- Page 4
<PAGE> 59
8. NOTICES. All notices, consents, approvals, demands,
requests and other communications required or desired to be given hereunder must
be given in writing, shall refer to this Escrow Agreement, and shall be sent by
registered or certified mail, return receipt requested, by hand delivery, by
facsimile or by overnight courier service, addressed to the parties hereto at
their addresses set forth below, or such other addresses as they may designate
by like notice:
(a) If to Seller:
American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Marvin Jones
Facsimile No.: (303) 488-3219
with a copy to:
Lynn Toby Fisher, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Facsimile No.: (212) 836-7152
(b) If to Buyer:
Gans Multimedia Partnership
217 E. Ninth Street
Hazleton, Pennsylvania 18201
Attention: Joseph S. Gans
Facsimile No.: (717) 459-0963
with a copy to:
Hourigan, Kluger, Spohrer & Quinn, P.C.
700 Mellon Bank Center
Wilkes-Barre, Pennsylvania 18701
Attention: Terrence J. Herron, Esq.
Facsimile No.: (717) 829-3460
Exhibit B -- Page 5
<PAGE> 60
(c) If to Escrow Agent:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Lynn Toby Fisher, Esq. and
Alan Capilupi, Director of Finance
Facsimile No.: (212) 836-8689
9. MISCELLANEOUS.
9.1 JURISDICTION. Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Escrow Agreement
shall be brought against any of the parties in the courts of the State of New
York in the County of New York, or, if it has or can acquire jurisdiction, in
the United States District Court for the Southern District of New York, and each
of the parties hereby consents to the exclusive jurisdiction of such courts (and
of the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein. Process in any such action or proceeding
may be served anywhere in the world, whether within or without the State of New
York.
9.2 CAPTIONS. The captions in this Escrow Agreement are for
convenience or reference only and shall not be given any effect in the
interpretation of this Escrow Agreement.
9.3 NO WAIVER. The failure of a party to insist upon strict
adherence to any term of this Escrow Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Escrow Agreement. Any
waiver must be in writing.
9.4 EXCLUSIVE AGREEMENT; AMENDMENT; ASSIGNMENT; NO THIRD PARTY
RIGHTS. This Escrow Agreement supersedes all prior agreements among the parties
with respect to its subject matter, is intended as a complete and exclusive
statement of the terms of the agreement among the parties with respect thereto,
and cannot be changed or terminated orally. No party may assign any rights or
delegate any of its duties under this Escrow Agreement, but this Escrow
Agreement shall be binding upon and inure to the benefit of the successors to
the business and assets of Seller and Buyer and to any successor escrow agent
appointed in accordance with Section 5.7. No third party shall have any rights
hereunder.
9.5 COUNTERPARTS. This Escrow Agreement may be executed in
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
Exhibit B -- Page 6
<PAGE> 61
9.6 GOVERNING LAW. This Escrow Agreement and all amendments
hereof and waivers and consents hereunder shall be governed by, and all disputes
arising hereunder shall be resolved in accordance with, the internal law of the
State of New York, without regard to the conflicts of law principles thereof.
9.7 TREATMENT OF ESCROW FUND. It is understood and agreed
among the parties hereto that Buyer will be treated as the owner of the Escrow
Fund and Escrow Agent shall report the income, if any, that is earned on, or
derived from, the Escrow Fund as income of Buyer in the taxable year or years in
which such income is properly includible.
AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By:
-------------------------
Name:
Title:
GANS MULTIMEDIA PARTNERSHIP
By: Cable TV, Inc.
its Managing General Partner
By:
-------------------------
Name:
Title:
Exhibit B -- Page 7
<PAGE> 62
KAYE, SCHOLER, FIERMAN,
HAYS & HANDLER, LLP
as Escrow Agent
By:
-------------------------------
Name:
-------------------------
Partner
Exhibit B -- Page 8
<PAGE> 63
EXHIBIT I
FORM OF JOINT NOTICE
TO ESCROW AGENT
[DATE]
To: Kaye, Scholer, Fierman, Hays & Handler, LLP
as Escrow Agent ("Escrow Agent") under
the Escrow Agreement dated ________, 1996,
by and among American Cable TV Investors 5, Ltd.,
Gans Multimedia Partnership and the Escrow Agent (the "Escrow Agreement")
Dear Sirs:
You are hereby instructed and directed to pay the Escrow Fund
(as defined in the Escrow Agreement) to the following corporation:
Payee: [NAME]
-----------------------------
[ADDRESS]
-----------------------------
Very truly yours,
AMERICAN CABLE TV INVESTORS 5, LTD.
By:
-----------------------------
GANS MULTIMEDIA PARTNERSHIP
By: Cable TV Inc.,
its Managing General Partner
Exhibit B -- Page 9
<PAGE> 64
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
EXHIBIT C
FORM OF ENGAGEMENT LETTER
[ACCOUNTANT'S LETTERHEAD]
_______ __, 1997
American Cable TV Investors 5, Ltd.
c/o TCI Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Gans Multimedia Partnership
217 E. Ninth Street
Hazleton, Pennsylvania 18201
Dear _____________:
This letter is to confirm our understanding of the agreed-upon procedures to be
performed in connection with the sale of assets by American Cable TV Investors
5, Ltd. (the "SELLER") to Gans Multimedia Partnership (the "BUYER") pursuant to
the Asset Purchase Agreement dated _______ __, 1996 (the "AGREEMENT").
Capitalized terms not otherwise defined in this Letter shall have the meanings
set forth in the Agreement.
This letter describes the objective of the review and nature of the services we
will provide. It also includes an overview of the procedures we intend to
perform, describes the type of report we intend to issue, and includes an
estimate of our fees.
Based upon our discussions with you, we believe the following proposed
procedures are those requested by you in connection with the Final Adjustments
Report, as described in Section 3.4 of the Agreement:
1. Obtain the Preliminary and Final Adjustments Reports, prepared by the
Partnership (the "ADJUSTMENTS") as contemplated by Sections 3.4(a) and
3.4(b) of the Agreement.
Exhibit C -- Page 1
<PAGE> 65
2. Obtain the appropriate Accounts Receivable aging and recalculate the
adjustment as contemplated by Section 3.3(a)(i) of the Agreement.
3. Obtain third party invoice or other appropriate documentation of
prepaid real and personal property taxes and other prepaid fees and
expenses identified by you. Recalculate the relevant adjustments, as
contemplated by Section 3.3(a)(ii) of the Agreement, based on a
proration as of the Closing Date on the basis of the period covered by
such payment.
4. Agree advance payments to, or deposits with, third parties; advance
payments to, or monies of third parties on deposit with, Seller;
accrued and unpaid real and personal property taxes; and other accrued
and unpaid expenses, as defined in Sections 3.3(a)(ii) and 3.3(b) of
the Agreement, to the appropriate account(s) per the most recent
general ledger of Seller.
We will perform the aforementioned procedure(s) and report our findings to you.
We will report to you any differences noted in performing Steps 2 through 4,
regardless of amount.
Due to the nature of the engagement our fees will be based upon time and
expenses required to complete the engagement. We estimate that our total fees
including expenses will not exceed $________.
Because the above procedures do not constitute an audit made in accordance with
generally accepted auditing standards, we will not be expressing an opinion on
any of the accounts specified or items referred to above. Our report is intended
solely for the information and use of the managements of Seller and Buyer and
should not be used for any other purpose.
If the foregoing is in accordance with your understanding please sign the copy
of this letter in the space provided and return it to us.
Very truly yours,
[ACCOUNTANT]1
- --------
1 A NATIONALLY RECOGNIZED ACCOUNTING FIRM WILL BE SELECTED BY BUYER AND
SELLER.
Exhibit C -- Page 2
<PAGE> 66
ACCEPTED BY:
- ------------------------- ------------------------ -------------
Seller's Signature Title Date
- ------------------------- ------------------------ -------------
Buyer's Signature Title Date
[PARAGRAPHS 2, 3 AND 4 ABOVE WILL ONLY BE INCLUDED IN THE ENGAGEMENT LETTER TO
THE EXTENT THAT ANY AMOUNTS ABOUT WHICH SELLER AND BUYER DISAGREE PURSUANT TO
SECTION 3.4(d) OF THE AGREEMENT FALL WITHIN THE CATEGORIES DESCRIBED IN THOSE
PARAGRAPHS. THE PARTIES ACKNOWLEDGE THAT THE PROCEDURES TO BE FOLLOWED BY THE
NATIONALLY RECOGNIZED ACCOUNTING FIRM TO BE SELECTED BY SELLER AND BUYER ("THE
ACCOUNTANT") WILL DEPEND ON WHAT THE ACCOUNTANT IS REQUESTED TO PERFORM BY
SELLER AND BUYER AND THE ACCOUNTANT'S CONCURRENCE THAT SUCH PROCEDURES CAN BE
PERFORMED BY THEM.]
Exhibit C -- Page 3
<PAGE> 67
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
EXHIBIT D
FORM OF OPINION OF SELLER'S COUNSEL
_______________ __, 1997
Gans Multimedia Partnership
217 E. Ninth Street
Hazleton, Pennsylvania 18201
Gentlemen:
We have acted as counsel to American Cable TV Investors 5,
Ltd., a Colorado limited partnership ("SELLER"), in connection with the sale
today by Seller of certain of Seller's assets (the "ASSETS") delineated in the
Asset Purchase Agreement dated _________, 1996 (the "AGREEMENT") between you and
Seller. This opinion is given pursuant to Section 8.8 of the Agreement.
Capitalized terms not otherwise defined herein are defined as set forth in the
Agreement.
This Opinion Letter is governed by, and shall be interpreted
in accordance with, the Legal Opinion Accord (the "ACCORD") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. Except as herein the Law of the
State of New York. Insofar as our opinion pertains to matters of Colorado law,
we have relied upon the opinion of Colorado counsel, Cohen, Brame & Smith, P.C.,
dated _______________, 1997, a copy of which is attached hereto.
Based on the foregoing it is our opinion that:
1. Seller is a validly existing limited partnership under the
laws of the State of Colorado.
2. The Agreement is enforceable against Seller.
Exhibit D -- Page 1
<PAGE> 68
3. The execution and delivery of the Agreement by Seller and
the performance by Seller of its terms do not breach or result in a violation of
the Certificate of Limited Partnership or the agreement of limited partnership
of Seller.
This opinion is rendered solely for your information and
assistance in connection with the above transaction, and may not be relied upon
by any other person or for any other purpose without our prior written consent.
Very truly yours,
Exhibit D -- Page 2
<PAGE> 69
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
EXHIBIT E
FORM OF OPINION OF BUYER'S COUNSEL
______________ __, 1997
American Cable TV Investors 5, Ltd.
c/o TCI Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Gentlemen:
We have acted as counsel to Gans Multimedia Partnership, a
_________________ limited partnership (the "BUYER") in connection with the
purchase today by 1996 (the "AGREEMENT") between you and Buyer. This opinion is
given pursuant to Section 9.6 of the Agreement. Capitalized terms not otherwise
defined herein are defined as set forth in the Agreement.
This Opinion Letter is governed by, and shall be interpreted
in accordance with, the Legal Opinion Accord (the "ACCORD") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations, all as more particularly
described in the Accord, and this Opinion Letter should be read in conjunction
therewith.
Based on the foregoing, it is our opinion that:
1. Buyer is validly existing in good standing under the laws
of the State of ____________.
2. The Agreement is enforceable against Buyer.
3. The execution and delivery of the Agreement by Buyer and
the performance by Buyer of its terms do not breach with or result in a
violation of the Certificate of Limited Partnership or agreement of limited
partnership of Buyer.
Exhibit E -- Page 1
<PAGE> 70
This opinion is rendered solely for your information and
assistance in connection with the above transaction, and may not be relied upon
by any other person or for any other purpose without our prior written consent.
Very truly yours,
Exhibit E -- Page 2
<PAGE> 71
ACT 5
AMERICAN CABLE TV OF ST. MARY'S COUNTY
Exhibit F
Form for Opinion of Seller's FCC Counsel
__________, 1997
Gans Multimedia Partnership
217 East Ninth Street
Hazleton, Pennsylvania 18201
Re: American Cable TV Investors 5, Ltd.
Ladies and Gentlemen:
This letter is furnished to you pursuant to Section 8.9 of the
Asset Purchase Agreement, dated as of ____________ __, 1996 (the "Agreement"),
between American Cable TV Investors 5, Ltd., a Colorado limited partnership
("Seller") and Gans Multimedia Partnership, a Pennsylvania general partnership
("Buyer").
As communications counsel for Seller, we are engaged in the
representation of Seller before the Federal Communications Commission ("FCC") in
connection with its cable television business in the communities identified in
Schedule I hereto (the "System"). We have examined such records, certificates
and other documents and have considered such questions of law as relate to the
Seller and the System as we have deemed necessary or appropriate for purposes of
this opinion. This opinion is limited to the Communications Act of 1934, as
amended (the "Communications Act"), the Rules and Regulations of the FCC (the
"FCC Regulations") and Section 111 of the Copyright Act of 1976 (17 U.S.C.
Section 111) (the "Copyright Act") as applicable to the System as operated by
Seller. Except as specifically provided, we offer no opinion as to the Seller's
compliance with the Cable Television Consumer Protection and Competition Act of
1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992), or those FCC regulations
promulgated pursuant to such Act.
In rendering this opinion, we have assumed the genuineness of
signatures on documents and the conformity to the original of all copies
examined by or submitted to us of photocopies or conformed copies. As to various
questions of fact in connection with this opinion, we have relied upon
examination of available files of our office, those of the FCC and the United
States Copyright Office (the "Copyright Office"), and pertinent statements and
representations of officers, directors and responsible representatives of the
Seller. We have not undertaken an independent field investigation to verify the
accuracy of this information, and express no opinion regarding technical matters
or matters that would require on-scene knowledge of the System's operations,
technical or engineering matters, or local franchising matters.
Based upon and limited by the foregoing and except as set
forth in Schedule II hereto, we are of the opinion that, as of the date set
forth above:
1. Seller holds all licenses, permits and authorizations required from
the FCC to operate the System in the manner in which we have been advised that
it is being operated, which licenses, permits and authorizations are listed in
Schedule I hereto. Each such license, permit and authorization has been issued
by the FCC, remains in full
Exhibit F -- Page 1
<PAGE> 72
force and effect, and transfer thereof to Buyer on the Closing Date as defined
in the Agreement has been approved by the FCC, to the extent such approval is
required.
2. All materially required FCC filings required to be made by Seller
in connection with its operation of the System have been made, including, but
not limited to, Registration Statements and FCC Annual Report Forms 325,
Schedule A, to the extent such forms are required. All FCC authorizations needed
to utilize the frequencies currently used by the Systems have been obtained.
3. Basic Signal Leakage Performance Reports (FCC Annual Report Forms
320) for 1990-1996, are on file with the FCC for each community unit operated by
the System. Although those forms indicate passing test results, we render no
opinion as to the methodology or accuracy of the actual measurements taken.
4. EEO Annual Report Forms 395(A) have been filed with the FCC for
each employment unit associated with the System for calendar years 1988-1996.
Except as noted in Schedule II, the employment unit has been certified by the
FCC for calendar years 1988-1996.
5. To the best of our knowledge, Seller has provided subscriber
privacy notices to subscribers of the System on an annual basis since 1986.
Seller also provides these notices to new subscribers at the time of
installation. Our opinion is limited to the fact that such notices have been
provided, and we express no opinion as to whether the contents of such notices
comply with the requirements of the Communications Act or FCC regulations.
6. To the best of our knowledge, based on information provided by
Seller, the System is carrying all of the "must-carry" signals required to be
carried pursuant to Federal Law. Except as set forth in Schedule II hereto, to
the best of our knowledge, based on information provided by Seller, there have
been no "must carry" complaints filed at the FCC against the System.
7. There is no FCC judgment, decree or order which has been issued
against Seller with respect to the system, nor is there any FCC action,
proceeding or investigation pending or, to the best of our knowledge, threatened
by the FCC against Seller with respect to the System.
8. The timely filing of the periodic Statements of Account and
accompanying royalty fees qualifies the Seller for a compulsory license for the
carriage of the broadcast signals utilized by the System. Seller has filed all
required Statements of Account and supplements thereto, and, to the best of our
knowledge, has timely paid its statutory royalties for all accounting periods
beginning at least as early as the first accounting period of 1993, and all
primary transmissions listed in the latest Statements of Account qualify for a
compulsory copyright license. Although we render no opinion as to the
methodology or calculations used to determine "gross receipts" for copyright
purposes, there have been no inquiries received from the Copyright Office or any
other party which challenge or question either the computation or amount of any
royalty payments or the validity of the Statements of Account, and there is no
claim, action or demand for copyright infringement or for non-payment of
royalties, pending or, to the best of our knowledge, threatened against the
Seller.
9. Except for any necessary FCC approvals which have been obtained,
the execution, delivery and performance of this Agreement does not require the
approval of the FCC, will not result in any violation of the rules and
regulations of the FCC, and will not cause any forfeiture or impairment of any
FCC license, authorization or permit of Seller.
This opinion has been prepared solely for your use in
connection with the closing of transactions under the Agreement, and may not be
relied upon by, filed with or furnished to any other person or entity without
the prior written consent of this firm.
Exhibit F -- Page 2
<PAGE> 73
Very truly yours,
COLE, RAYWID & BRAVERMAN, L.L.P.
By:_________________________
Exhibit F -- Page 3
<PAGE> 74
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
EXHIBIT G
INDEMNITY ESCROW AGREEMENT
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attn: Barbara L. Strohmeier
Re: Indemnity Escrow Agreement
Ladies and Gentlemen:
This Indemnity Escrow Agreement is hereby accepted as of
___________, 1997, by and between American Cable TV Investors 5, Ltd., a
Colorado limited partnership ("SELLER") and Gans Multimedia Partnership, a
_______ limited partnership ("BUYER"), who have entered into an Asset Purchase
Agreement, dated as of ____________, 1996, to sell and purchase certain cable
television assets (the "ASSET PURCHASE AGREEMENT"). Capitalized terms used but
not otherwise defined in this Indemnity Escrow Agreement shall have the meanings
set forth in the Asset Purchase Agreement.
It is agreed as follows:
1. Deposit and Investments. Buyer and Seller have, pursuant
to Section 3.1 of the Asset Purchase Agreement, deposited $765,923 (the
"DEPOSIT") in an account at The Chase Manhattan Bank, as escrow agent (the
"ESCROW AGENT"). The Deposit may be invested in Investment Securities (as
defined below). The Deposit shall be held in escrow (the "ESCROW") by Escrow
Agent pursuant to this Indemnity Escrow Agreement. The Escrow Agent shall
continue to invest the Deposit in Investment Securities in accordance with the
joint written instructions of Seller and Buyer. The term "Investment Securities"
means (a) interest bearing accounts in, or certificates of deposit of, The Chase
Manhattan Bank, (b) (i) obligations of the United States of America, (ii) United
States government securities of agencies of the United States government which
are guaranteed by the United States government or (iii) securities of
Exhibit G -- Page 1
<PAGE> 75
governmental agencies, if the same are covered by a bank repurchase agreement,
or (c) for periods of less than seven days each, non-interest bearing accounts
at The Chase Manhattan Bank.
2. Holdings of Deposit. The Escrow Agent shall hold and
disburse the Deposit pursuant to the terms of this Indemnity Escrow Agreement
and the Asset Purchase Agreement.
3. Disbursement of Earnings, Etc. All interest, earnings, and
gains received by the Escrow Agent from the investment of the Deposit shall be
distributed monthly to Seller. In connection with the investment of the Deposit,
Seller shall provide the Escrow Agent with its taxpayer identification number.
4. Disbursement Instructions.
a. Anything in this Indemnity Escrow Agreement to the contrary
notwithstanding, Escrow Agent is authorized and directed to deliver and disburse
the Deposit, or any part of the Deposit, as directed from time to time in joint
written instructions of Buyer and Seller.
b. Seller and Buyer have agreed that the Deposit will be
disbursed in accordance with the terms of this Indemnity Escrow Agreement and
the Asset Purchase Agreement.
c. Unless a claim against the Deposit, or any part of the
Deposit remains outstanding, Seller and Buyer have agreed that on the first
Business Day after the first anniversary of the Closing Date, Seller and Buyer
shall instruct Escrow Agent to disburse the Deposit, or any part of the Deposit
which is not subject to a claim, to Seller or Seller's designee.
5. Claims Against the Deposit by Buyer. The following
provisions shall control with respect to claims made against the Deposit by
Buyer:
a. If Buyer wishes to make a claim against the Deposit, Buyer
will send a notice of such claim to Escrow Agent and Seller. Any such notice
will state that Buyer is making a claim under Article XII of the Asset Purchase
Agreement. Any notice of a claim made shall specify the factual basis of such
claim in reasonable detail to the extent known by Buyer.
b. If Seller disputes the right of Buyer to obtain the
Deposit, or any part of the Deposit, Seller, within ten Business Days after
receipt of the notice as provided in Paragraph 4(a), shall send a notice to
Escrow Agent and Buyer stating that Seller disputes the right of Buyer to obtain
the Deposit, or any part of the Deposit, and will include in such notice a
description in reasonable detail of the basis for disputing such claim. Escrow
Agent shall continue to hold the
Exhibit G -- Page 2
<PAGE> 76
Deposit (or the part thereof which is subject to a dispute) until advised in
writing by Seller and Buyer that such dispute has been resolved, in which case
Escrow Agent shall disburse the Deposit pursuant to said writing; provided that,
if a suit or action is commenced for collection of the Deposit or part thereof
and Escrow Agent is so advised in writing, Escrow Agent shall, unless otherwise
advised in writing by Seller and Buyer, continue to hold the Deposit or the part
thereof which is the subject of such suit or action until final disposition of
such suit or action. Upon the final disposition of such suit or action, Escrow
Agent shall disburse the Deposit or part thereof which is subject to such suit
or action in accordance with the determination of the court in which such suit
or action was pending.
c. If Seller fails to notify Escrow Agent within the period
described in Paragraph 4(b) that it contests Buyer's claim to the Deposit (or
any part thereof), Escrow Agent shall, within 5 Business Days, disburse the
Deposit (or any part thereof which is subject to a claim by Buyer that Seller
fails to timely contest) to Buyer.
6. Termination. If no claims have been made against the
amount of the Deposit remaining in the Escrow on the first Business Day after
the first anniversary of the Closing Date, Escrow Agent shall disburse such
remaining amount of the Deposit to Seller at the address set forth below.
7. Rights, Duties, and Liabilities of Escrow Agent.
a. Escrow Agent shall have no duty to know or determine the
performance or non-performance of any provision of any agreement between the
parties to this Indemnity Escrow Agreement, including, but not limited to, the
Asset Purchase Agreement, which shall not bind Escrow Agent in any manner.
Escrow Agent assumes no responsibility for the validity or sufficiency of any
document or paper or payment deposited or called for under this Indemnity Escrow
Agreement except as may be expressly and specifically set forth in this
Indemnity Escrow Agreement, and the duties and responsibilities of Escrow Agent
under this Indemnity Escrow Agreement are limited to those expressly and
specifically stated in this Indemnity Escrow Agreement.
b. Escrow Agent shall not be personally liable for any act it
may do or omit to do under this Indemnity Escrow Agreement as such agent while
acting in good faith and in the exercise of its own best judgment, and any act
done or omitted by it pursuant to the written advice of its counsel shall be
conclusive evidence of such good faith. Escrow Agent shall have the right at any
time to consult with its counsel upon any question arising under this Indemnity
Escrow Agreement and shall incur no liability for any delay reasonably required
to obtain the advice of counsel.
c. Other than those notices or demands expressly provided in
this Indemnity Escrow Agreement, Escrow Agent is expressly authorized to
disregard any and all notices or
Exhibit G -- Page 3
<PAGE> 77
demands given by Seller or Buyer, or by any other person, firm, or corporation,
excepting only orders or process of court, and Escrow Agent is expressly
authorized to comply with and obey any and all final process, orders, judgments,
or decrees of any court, and to the extent Escrow Agent obeys or complies with
any thereof of any court, it shall not be liable to any party to this Indemnity
Escrow Agreement or to any other person, firm, or corporation by reason of such
compliance.
d. In consideration of the acceptance of this Escrow by Escrow
Agent (as evidenced by its signature below), Seller and Buyer agree, for
themselves and their successors and assigns, to pay Escrow Agent its charges,
fees, and expenses as contemplated by this Indemnity Escrow Agreement. As
between Buyer and Seller, they shall each be responsible for one-half of such
charges, fees and expenses. The escrow fees or charges, as distinguished from
other expenses under this Indemnity Escrow Agreement, shall be as written below
the Escrow Agent's signature at the time of acceptance of this Indemnity Escrow
Agreement. Such sum is intended as compensation for Escrow Agent's ordinary
services as contemplated by this Indemnity Escrow Agreement and shall be paid as
described above. In the event Escrow Agent renders services not provided for in
this Indemnity Escrow Agreement, Escrow Agent shall be entitled to receive from
Buyer and Seller reasonable compensation and reasonable costs, if any, for such
extraordinary services, and such compensation and costs shall be borne equally
by Buyer and Seller.
e. Escrow Agent shall be under no duty or obligation to
ascertain the identity, authority, or right of Seller or Buyer (or their agents)
to execute or deliver or purport to execute or deliver this Indemnity Escrow
Agreement or any documents or papers or payments deposited or called for or
given under this Indemnity Escrow Agreement.
f. Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations or by reason of laches in respect of
this Indemnity Escrow Agreement or any documents or papers deposited with Escrow
Agent.
g. In the event of any dispute among the parties to this
Indemnity Escrow Agreement as to the facts or as to the validity or meaning of
any provision of this Indemnity Escrow Agreement, or any other fact or matter
relating to this Indemnity Escrow Agreement or to the transactions between
Seller and Buyer, Escrow Agent is instructed that it shall be under no
obligation to act, except in accordance with this Indemnity Escrow Agreement or
under process or order of court or, if there by no such process or order, until
it has filed or caused to be filed an appropriate action interpleading the
Seller and Buyer and delivering the Deposit (or the portion of the Deposit in
dispute) to such court, and Escrow Agent shall sustain no liability for its
failure to act pending such process of court or order or interpleader of action.
8. Modification of Indemnity Escrow Agreement. The provisions
of this Indemnity Escrow Agreement may be supplemented, altered, amended,
modified, or revoked by
Exhibit G -- Page 4
<PAGE> 78
writing only, signed by Buyer and Seller and approved in writing by Escrow
Agent, and upon payment of all fees, costs and expenses incident thereto.
9. Assignment of Indemnity Escrow Agreement. No assignment,
transfer, conveyance, or hypothecation of any right, title, or interest in and
to the subject matter of this Indemnity Escrow Agreement shall be binding upon
any party, including Escrow Agent, unless all fees, costs, and expenses incident
thereto shall have been paid and then only upon the assent thereto by all
parties in writing.
10. Notice. Any notice required or desired to be given to
Buyer or Seller shall be deemed to have been given only if it is given in the
manner set forth in Section 13.3 of the Asset Purchase Agreement. Notice to
Escrow Agent may be given in the manner set forth in Section 13.3 of the Asset
Purchase Agreement to Escrow Agent's address set forth above (Facsimile No.:
(212) 270-4823) or at such other address as Escrow Agent may direct by giving
notice to Buyer and Seller.
11. Indemnity Escrow Agreement Binding. The undertakings and
agreements contained in this Indemnity Escrow Agreement shall bind and inure to
the benefit of the parties to this Indemnity Escrow Agreement and their
respective heirs, personal representatives, successors, and assigns.
12. Counterparts. This Indemnity Escrow Agreement may be
executed in one or more counterparts, each of which will be deemed an original.
Whenever pursuant to this Indemnity Escrow Agreement Buyer and Seller are to
deliver a jointly signed writing to Escrow Agent or jointly advise Escrow Agent
in writing, such writing may in each and all cases be signed jointly or in
counterparts and such counterparts shall be deemed to be one instrument.
Very truly yours,
SELLER:
AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI PARTNERS, V, L.P.,
its general partner
By: TCI Ventures Five, Inc., its
general partner
By:________________________
Name:
Title:
Exhibit G -- Page 5
<PAGE> 79
BUYER:
GANS MULTIMEDIA PARTNERSHIP
By: _________________________,
its general partner
By:________________________
Name:
Title:
ACCEPTED this ___ day of ____________, 1997.
THE CHASE MANHATTAN BANK
By: __________________________
Name:
Title:
Fee: [$2,000] Inception Fee.
Exhibit G -- Page 6
<PAGE> 80
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 1.1
SUBSCRIBER RATES
Monthly Subscriber Rates
as of June 30, 1996
<TABLE>
<S> <C>
Basic Subscriber Rate
Leonardtown system $ 9.85
Northbeach system 9.92
Boones system No charge
---------
Total $19.72
Expanded Basic
Leonardtown system $11.73
Northbeach system 12.16
Boones system 17.33
------
Total $41.22
Total Basic and Expanded Basic $60.94
</TABLE>
Schedule 1.1 -- Page 1
<PAGE> 81
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 1.2
CONSENTS
1. Town of Leonardtown.*
2. St. Mary's County.*
3. Town of North Beach.*
4. Town of Chesapeake Beach.*
5. Department of the Navy.*
6. Boones's Mobile Estates, pursuant to a lease, dated September 5, 1984,
between Boones's Mobile Estates and Eastern Communications of Maryland,
Inc., as assigned to American Cable TV Investors 5, Ltd. by Simmons
Communications Company, L.P.**
7. Southern Maryland Electric Cooperative, Inc. pursuant to a Pole
Attachment Agreement, dated May 15, 1990, between Southern Maryland
Electric Cooperative, Inc. and Simmons Communications Company, L.P, as
amended and as assigned to American Cable TV Investors 5, Ltd. on May
19, 1992.
8. Chesapeake and Potomac Telephone Company of Maryland, pursuant to a
License Agreement for Pole Attachments, dated August 1, 1993, between
the Chesapeake and Potomac Telephone Company of Maryland and American
Cable TV Investors 5, Ltd.
9. Baltimore Gas and Electric Company, pursuant to a Pole/Trench License
Agreement, dated August 31, 1987, between Baltimore Gas and Electric
Company and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
10. Amber Meadows Joint Venture, pursuant to an Agreement Authorizing the
Construction, Operation and Maintenance of a CATV System, dated August
13, 1987, between Amber Meadows Joint Venture and Simmons
Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
- --------
* Required consent.
** Notice only required.
Schedule 1.2 -- Page 1
<PAGE> 82
11. St. Mary's College, pursuant to an Agreement for the Construction,
Operation and Maintenance of CATV System, dated January 17, 1994,
between Saint Mary's College and American Cable TV Investors 5, Ltd.
12. Bernard F. Beavan and Elizabeth Ann Beavan, pursuant to a Lease
Agreement, dated July 9, 1981, among Bernard F. Beavan and Elizabeth
Ann Beavan and CATV Leonardtown, Inc., as amended and as assigned to
American Cable TV Investors 5, Ltd.
13. Michael J. Herman, David Zalkind and Julie H. Zalkind, pursuant to a
Lease Agreement, dated September 1, 1991, among Michael J. Herman,
David Zalkind and Julie H. Zalkind and Simmons Communications Company,
L.P., as amended and as assigned to American Cable TV Investors 5, Ltd.
14. Hickory Hills Townhomes Limited Partnership, pursuant to a Bulk Cable
Television Multiple-Unit Agreement, dated July 31, 1995, between
Hickory Hills Townhomes Limited Partnership and American Cable TV
Investors 5, Ltd.**
15. Peggs View, pursuant to an Agreement for Construction and Operation of
a CATV System, dated September 28, 1992, between Peggs View and
American Cable TV Investors 5, Ltd.**
16. Placid Harbor, pursuant to a Bulk Cable Television Multiple Unit
Agreement, dated June 15, 1995, between Placid Harbor and American
Cable TV Investors 5, Ltd.**
17. WJLA-TV, pursuant to a Retransmission Consent Agreement, dated June 27,
1994, between WJLA-TV and TCI Cable Management Corporation.
18. Lenders, pursuant to a Revolving Credit Agreement, dated as of June 30,
1992, among American Cable TV Investors 5, Ltd., Various Financial
Institutions, Bank of America, Illinois f/k/a Continental Bank, N.A.
and NationsBank of Texas, N.A. and all financing and security documents
relating thereto.(1)
19. TCI Cablevision Associates, Inc. f/k/a Daniels & Associates, Inc.,
pursuant to a Management Agreement, dated May 14, 1987, between TCI
Cablevision Associates, Inc. f/k/a Daniels & Associates, Inc. and
American Cable TV Investors 5, Ltd.
- --------
(1) The proceeds from the sale of the System will be used to repay any
amount of the loan outstanding as of the Closing Date.
** Notice only required.
Schedule 1.2 -- Page 2
<PAGE> 83
20. Federal Communications Commission for the licenses listed on Schedule
1.5*
- --------
* Required consent.
Schedule 1.2 -- Page 3
<PAGE> 84
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 1.3
EQUIPMENT
Distribution Equipment
<TABLE>
<CAPTION>
LEONARDTOWN NORTH BEACH BOONES
=========== =========== ======
<S> <C> <C> <C>
YEAR UPGRADED/REBUILT: Partial 1989
HOMES PASSED AT 12/31/95: 22,299 1,663 450
EBUS AT 12/31/95 16,541 1,241 276
MILES OF PLANT:
Aerial 395.7 14.5 0
Underground 176.8 4.3 3.6
-------- ------- -----
Total 572.5 18.8 3.6
DENSITY: 39 88 125
CHANNELS:
CHANNEL CAPACITY: 42 42 42
IN USE: Basic: 14 14 11
Expanded Tier: 21 18 9
Premium: 6 5 4
PPV/Other: -- -- --
------- ------- -----
Total 41 37 24
</TABLE>
<TABLE>
<S> <C> <C> <C>
BANDWITH: 330 MHz 330 MHz 330 MHz
CABLE:
Fiber: AT&T N/A N/A
Trunk: .750 Times/CommScope .750 Times/CommScope .750 Times/CommScope
Feeder: .500 Times/CommScope .500 Times/CommScope .500 Times/CommScope
Drops: RG-6, RG-11 Times/ RG-6, RG-11 Times/ RG-6, RG-11 Times/
CommScope CommScope CommScope
PLANT ELECTRONICS:
Amplifiers Magnavox Magnavox Magnavox
Longest Amplifier Cascade 54 7 4
TAPS: Eagle, Regal, Magnavox Eagle, Regal, Magnavox Eagle, Regal, Magnavox
PREMIUM SECURITY:
Addressable No No No
Positive/Negative Traps Eagle Positive - St. Mary's Eagle Positive - St. Mary's Eagle Positive - St. Mary's
Eagle/Rio - Negative Eagle Pico - Negative
CONVERTERS:
Addressable N/A N/A N/A
Standard Jerrold, Hamlin, SA Jerrold, Hamlin, SA Jerrold, Hamlin, SA
</TABLE>
HEADEND EQUIPMENT
Schedule 1.3 -- Page 1
<PAGE> 85
<TABLE>
<CAPTION>
Leonardtown North Beach Boones
=========== =========== ======
<S> <C> <C> <C>
HEADEND LOCATION: Next to 145 Greenbriar 7804 Old Bayside Water Water Tower, Boones
Road Tower Mobile Estates
PROPERTY OWNED/LEASED: Leased Leased Leased
TOWER TYPE/SIZE: 170' Guyed* 150' Water Tower 150' Water Tower
EARTH STATIONS: 2 - 5.0 meter 1 - 5.0 meter 1 - 4.3 meter
1 - 2.8 meter 1 - 4.3 meter 1 - 5.0 meter
1 - 4.3 meter 2 - 2.8 meter (unused) 1 - 2.3 meter (unused)
RECEIVERS: 27 - Microdyne 23 - SA 13 - SA
MODULATORS: 28 - SA 24 - SA 13 - SA
PROCESSORS: 13 - SA 14 - SA 11 - SA
STEREO ENCODERS: N/A N/A N/A
SCRAMBLER/ENCODERS: N/A N/A N/A
DESCRAMBLERS: 27 - Videocipher 23 - Videocipher 13 - Videocipher
AD INSERTION EQUIPMENT: Sony AO Lieutenant N/A N/A
BACKUP POWER SUPPLY: Yes Yes Yes
</TABLE>
- ------------------------------------
* Plans to install a new 190' self-support tower should be complete by
year-end 1996.
Schedule 1.3 -- Page 2
<PAGE> 86
VEHICLE LIST
<TABLE>
<CAPTION>
YEAR MAKE/MODEL OWNED/LEASED
==== ========== ============
<S> <C> <C>
1991 Ford F-150 Owned
1992 Ford Aerostar Owned
1992 Ford Aerostar Owned
1993 GMC Pickup Owned
1993 GMC Pickup Owned
1993 GMC Pickup Owned
1993 GMC Pickup Owned
1993 GMC Jimmy Owned
1993 GMC Bucket Owned
1993 GMC Bucket Owned
1994 GMC Pickup Owned
1994 GMC Pickup Owned
1994 GMC Pickup Owned
1995 GMC Pickup Owned
1995 GMC Pickup Owned
1995 GMC Pickup Owned
1995 GMC Pickup Owned
1995 GMC Pickup Owned
1995 GMC Pickup Owned
1995 GMC Pickup Owned
1995 GMC Bucket Owned
1996 GMC Pickup Owned
1996 GMC Pickup Owned
Total Number of Vehicles 23
</TABLE>
Schedule 1.3 -- Page 3
<PAGE> 87
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 1.4
FRANCHISE AREAS
1. City of Chesapeake Beach
2. City of Leonardtown
3. City of North Beach
4. Patuxent River Naval Air Station
5. St. Mary's County
Schedule 1.4--Page 1
<PAGE> 88
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 1.5
GOVERNMENTAL PERMITS
FRANCHISE AUTHORITIES:
1. Town of Chesapeake Beach cable television franchise.
2. City of Leonardtown cable television franchise.
3. Town of North Beach cable television franchise.
4. Department of the Navy, Patuxent River Naval Air Station cable
television franchise.
5. St. Mary's County cable television franchise.
FCC LICENSES AND REGISTRATIONS:
<TABLE>
<CAPTION>
Type Call Sign City, State
---- --------- -----------
<S> <C> <C>
ES WT99 Leonardtown, MD
ES E860751 North Beach (Chesapeake), MD
ES E860718 Boones MME (Lothian), MD
IB * KNAF340 Leonardtown (Charlotte), MD
IB * WNUT599 Leonardtown (Great Mills), MD
</TABLE>
- -----------------
* Consent required to transfer.
Schedule 1.5 -- Page 1
<PAGE> 89
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 1.6
PERMITTED ENCUMBRANCES
None.
Schedule 1.6 -- Page 1
<PAGE> 90
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 1.7
REAL PROPERTY
<TABLE>
<CAPTION>
City Description Location Owned/Leased
- ---- ----------- -------- ------------
<S> <C> <C> <C>
Boones's Headend Boones's Mobile Estates Leased
Leonardtown Headend Greenbriar Road Leased
Hollywood Office 10 Airport View Leased
Drive
Chesapeake Beach Headend Old Bayside Road Leased
North Beach Office 8924 Chesapeake Leased
Avenue
</TABLE>
Schedule 1.7--Page 1
<PAGE> 91
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 1.8
SELLER CONTRACTS
1. Pole Attachment Agreement, dated May 15, 1990, between Southern
Maryland Electric Cooperative, Inc. and Simmons Communications Company,
L.P., as amended and as assigned to American Cable TV Investors 5, Ltd.
on May 19, 1992.
2. CATV License Agreement for Pole Attachments, dated August 1, 1993,
between the Chesapeake and Potomac Telephone Company of Maryland and
American Cable TV Investors 5, Ltd.
3. Pole/Trench License Agreement, dated August 31, 1987, between Baltimore
Gas and Electric Company and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
4. Right of Entry, dated August 13, 1987, between Amber Meadows Joint
Venture and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
5. Cable TV Service Agreement, dated May 9, 1989, between John A. Adams
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
6. Right of Entry, dated June 7, 1988, between Thomas E. Bailey and
Simmons Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
7. Cable TV Service Agreement, dated May 27, 1988, between Baycrest
Partners I and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
8. Cable TV Service Agreement, dated September 21, 1990, between RAR
Associates Development Corporation and Simmons Communications Company,
L.P., as assigned to American Cable TV Investors 5, Ltd.
9. Cable TV Service Agreement, dated May 29, 1987, between Edward B.
Howlin, Inc. and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
Schedule 1.8 -- Page 1
<PAGE> 92
10. Cable TV Service Agreement, dated May 11, 1988, between William F.
Boothe and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
11. Letter Agreement authorizing installation and operation of CATV system
in an apartment building, dated August 27, 1986, between Breton Bay
Garden Apartments and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
12. Cable TV Service Agreement, dated September 1, 1987, between Cameron
Apartments and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
13. Cable TV Service Agreement, dated July 1, 1987, between Heritage Manor
Homes of Lexington Park Inc. and Simmons Communications Company, L.P.,
as assigned to American Cable TV Investors 5, Ltd.
14. Cable TV Service Agreement, dated June 20, 1988, between Cedar Cove
Yacht Basin, Inc. and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
15. Cable TV Service Agreement, dated July 24, 1989, between Chancellors
Run Associates Limited Partnership and Simmons Communications Company,
L.P., as assigned to American Cable TV Investors 5, Ltd.
16. Cable TV Service Agreement, dated December 15, 1987, between Kettler
Brothers, Inc., as agent for Windward Key Associates, Limited and
Simmons Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
17. Permission to Install Cable Television System, dated December 10, 1987,
between Chesapeake Station Home Owners Association, Inc. and Simmons
Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
18. Cable TV Service Agreement, dated September 18, 1987, between Paragon
Builders, Inc. and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
19. Cable TV Service Agreement, dated March 1, 1988, between Wilson Copsey
(Copsey Apartments) and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
20. Cable TV Service Agreement, dated May 5, 1988, between Swarey Builders
(Beechwood Estates) and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
Schedule 1.8 -- Page 2
<PAGE> 93
21. Cable TV Service Agreement, dated May 5, 1988, between Swarey Builders
(Countryside Garden Apartments) and Simmons Communications Company,
L.P., as assigned to American Cable TV Investors 5, Ltd.
22. Cable TV Service Agreement, dated May 5, 1988, between Swarey Builders
( Countryside Townhouses) and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
23. Cable TV Service Agreement, dated November 18, 1987, between Charles
and Anne Lumpkin (Country Lane Apartments) and Simmons Communications
Company, L.P., as assigned to American Cable TV Investors 5, Ltd.
24. Cable TV Service Agreement, dated December 5, 1987, between John
Cullison (Cullison Sheet Metal) and Simmons Communications Company,
L.P., as assigned to American Cable TV Investors 5, Ltd.
25. Cable TV Service Agreement, dated September 9, 1988, between Debbie
Drury (Drury Apartments) and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
26. Cable TV Service Agreement, dated May 2, 1988, between L&M Partnership
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
27. Cable TV Service Agreement, dated August 22, 1988, between Fowler
Enterprises Inc. and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
28. Cable TV Service Agreement, dated August 25, 1989, between Foxchase
Village Associates Limited Partnership and Simmons Communications
Company, L.P., as assigned to American Cable TV Investors 5, Ltd.
29. Letter Agreement Authorizing Right of Way, dated March 24, 1989,
between Edward Greenwell and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
30. Cable TV Service Agreement, dated February 23, 1990, between Greenview
Village Apartments and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
31. Cable TV Service Agreement, dated July 22, 1988, between Harding
Apartments and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
Schedule 1.8 -- Page 3
<PAGE> 94
32. Cable TV Service Agreement, dated October 25, 1989, between Hai
Management Inc. (Great Mills Ct.) and Simmons Communications Company,
L.P., as assigned to American Cable TV Investors 5, Ltd.
33. Cable TV Service Agreement, dated October 25, 1989, between Hai
Management Inc. (Joe Baker Village) and Simmons Communications Company,
L.P., as assigned to American Cable TV Investors 5, Ltd.
34. Cable TV Service Agreement, dated November 24, 1986, between Heritage
Manor Homes of Lexington Park, Inc. and Simmons Communications Company,
L.P., as assigned to American Cable TV Investors 5, Ltd.
35. Cable TV Service Agreement, dated June 7, 1988, between William Wilson
Higgs (Higgs Apartments) and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
36. Cable TV Service Agreement, dated March 15, 1988, between Carl Edwards
(Hilton Run) and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
37. Cable TV Service Agreement, dated February 27, 1992, between
Corporation for Shelter Management and Simmons Communications Company,
L.P., as assigned to American Cable TV Investors 5, Ltd.
38. Cable TV Service Agreement, dated November 26, 1990, between R&H
Properties and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
39. Bulk Discount Cable Television Service Agreement, dated October 15,
1990, between K-Mart No. 3586 and Simmons Communications Company, L.P.,
as assigned to American Cable TV Investors 5, Ltd. (Inactive)
40. Cable TV Service Agreement, dated January 28, 1988, between La Grande
Estate Camping Resort and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
41. Letter guaranteeing 29 subscribers, dated March 5, 1996, between
Potomac Land, Ltd. and American Cable TV Investors 5, Ltd.
42. Cable TV Service Agreement, dated May 5, 1988, between Swarey Builders
(Laurel Ridge) and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
Schedule 1.8 -- Page 4
<PAGE> 95
43. Letter Authorizing Installation of CATV, dated March 26, 1984, between
Laskin Curley Inc. and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.*
44. Cable TV Service Agreement, dated December 4, 1989, between Lexwood
Apartments and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
45. Letter, dated March 26, 1984, from Brian C. Philipp to Simmons Cable TV
of Leonardstown consenting to wiring, as assigned to American Cable TV
Investors 5, Ltd.
46. Letter Agreement Authorizing Installation and Maintenance of a CATV
System, dated October 1, 1986, between Mattingly Apartments and Simmons
Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
47. Cable TV Service Agreement, dated January 24, 1990, between Maryland
Manor Mobile Home Park and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
48. Cable TV Service Agreement, dated October 19, 1988, between Paragon
Properties and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
49. Cable TV Service Agreement, dated January 24, 1990, between National
Mobile Home Park and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
50. Cable TV Service Agreement, dated January 29, 1988, between Bernadine
and Richard Nesline (Tall Timbers) and Simmons Communications Company,
L.P., as assigned to American Cable TV Investors 5, Ltd.
51. Letter Agreement Authorizing Installation and Maintenance of a CATV
System, dated March 12, 1985, between New Town Village and Simmons
Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
52. Cable TV Service Agreement, dated February 15, 1989, between Wayne Cook
(Park Hall Mall) and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
- --------
* A portion of the underlying property has been foreclosed upon, and is
now owned by a new owner. The validity of this contract is in question,
and it is intended that an agreement to replace this contract will be
negotiated with the new owner of the property.
Schedule 1.8 -- Page 5
<PAGE> 96
53. CATV System Right-of-Way Easement, dated December 12, 1979, between
Pautexent Court and CATV Leonardtown, as assigned by Simmons
Communications Company L.P. to American Cable TV Investors 5, Ltd.
54. Cable TV Service Agreement, dated September 21, 1990, between St.
Mary's Housing Authority and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
55. Cable TV Service Agreement, dated October 3, 1988, between Route 347
Realty Corp. and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
56. Cable TV Service Agreement, dated January 8, 1988, between Evan L.
Perisho (Perisho Apartments) and Simmons Communications Company, L.P.,
as assigned to American Cable TV Investors 5, Ltd.
57. Cable TV Service Agreement, dated April 18, 1988, between Don Albaugh
(The Pines) and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
58. Cable TV Service Agreement, dated January 7, 1988, between Pulliam &
Wise and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
59. Pre-Wire Agreement, dated July 9, 1992, between Lexington Park Assoc.,
Ltd. Partnership and American Cable TV Investors 5, Ltd.
60. Cable TV Service Agreement, dated April 5, 1988, between Seaforth
Partnership and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
61. Cable TV Service Agreement, dated September 1, 1987, between Serenity
Farms and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
62. Letter Agreement Authorizing Installation and Maintenance of a CATV
System, dated February 25, 1987, between St. Mary's Nursing Center and
Simmons Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
63. Cable TV Service Agreement, dated February 23, 1990, between Southern
Mobile Home Park and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
Schedule 1.8 -- Page 6
<PAGE> 97
64. Cable TV Service Agreement, dated May 9, 1989, between St. Mary's One
Limited Partnership and Simmons Communications Company, L.P.
65. Cable TV Service Agreement, dated November 2, 1988, between St. Inigoes
General Store (Hart Corp.) and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
66. Cable TV Service Agreement, dated December 24, 1987, between Shirley A.
Skrabacz (T&S Apartments) and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
67. Cable TV Service Agreement, dated January 2, 1988, between Swann's
Store (Apartments) and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
68. Cable TV Service Agreement, dated October 27, 1987, between Walter W.
Sawyer and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
69. Cable TV Service Agreement, dated February 21, 1989, between Interstate
General Company L.P. and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
70. Cable TV Service Agreement, dated February 2, 1988, between
Clifford/Jones Partnership and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
71. Apartment Community Agreement, dated August 20, 1987, between Valley
Drive-Lexington Park Limited Partnership and Simmons Communications
Company, L.P., as assigned to American Cable TV Investors 5, Ltd.
72. Cable TV Service Agreement, dated March 26, 1990, between Kenneth R.
Vibbert and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
73. Cable TV Service Agreement, dated October 6, 1987, between Village Barn
South Apartments and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
74. Right-of-Way Agreement, dated October 28, 1986, between Deborah Wahl
and Triad CATV, Inc., as assigned to American Cable TV Investors 5,
Ltd. by Simmons Communications Company, L.P.
Schedule 1.8 -- Page 7
<PAGE> 98
75. Right-of-Way Agreement, dated October 28, 1986, between John Wieck and
Triad CATV, Inc., as assigned to American Cable TV Investors 5, Ltd. by
Simmons Communications Company, L.P.
76. Right-of-Way Agreement, dated October 28, 1986, between James and
Kathleen Riley and Triad CATV, Inc., as assigned to American Cable TV
Investors 5, Ltd. by Simmons Communications Company, L.P.
77. Right-of-Way Agreement, dated October 28, 1986, between Charles Moore
and Triad CATV, Inc., as assigned to American Cable TV Investors 5,
Ltd. by Simmons Communications Company, L.P.
78. Right-of-Way Agreement, dated October 28, 1986, between Robert J. Nicke
and Triad CATV, Inc., as assigned to American Cable TV Investors 5,
Ltd. by Simmons Communications Company, L.P.
79. Right-of-Way Agreement, dated October 28, 1986, between Leonard
Blankenship and Triad CATV, Inc., as assigned to American Cable TV
Investors 5, Ltd. by Simmons Communications Company, L.P.
80. Cable TV Service Agreement, dated September 4, 1987, between Alva V.
Watson and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
81. Cable TV Service Agreement, dated October 6, 1987, between John S.
Weiner and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
82. Cable TV Service Agreement, dated January 19, 1988, between J. Berkman
Norris and Wheatley Content Apartments and Simmons Communications
Company, L.P., as assigned to American Cable TV Investors 5, Ltd.
83. Cable TV Service Agreement, dated September 1, 1987, between Winter's
Apartments (William E. Winters, Jr.) and Simmons Communications
Company, L.P., as assigned to American Cable TV Investors 5, Ltd.
84. Lease, dated July 19, 1981, as amended, between Bernard F. Beavan and
Elizabeth Ann Beavan and CATV Leonardtown, Inc., as amended on June 28,
1991, as amended and as assigned to American Cable TV Investors 5, Ltd.
85. Lease, dated September 1, 1991, as amended, between Michael J. Herman,
David Zalkind and Julie H. Zalkind and Simmons Communications Company,
L.P., as amended and as assigned to American Cable TV Investors 5, Ltd.
Schedule 1.8 -- Page 8
<PAGE> 99
86. Lease, dated January 29, 1985, between the Town of North Beach and
Triad CATV, Inc., as assigned to American Cable TV Investors 5, Ltd. by
Simmons Communications Company, L.P.
87. Lease, dated October 25, 1984, between the Town of Chesapeake Beach and
Triad CATV, Inc., as amended on March 1, 1989, as assigned to American
Cable TV Investors 5, Ltd. by Simmons Communications Company, L.P.
88. Lease, dated September 5, 1984, between Boones's Mobile Estates and
Eastern Communications of Maryland, Inc., as assigned to American Cable
TV Investors 5, Ltd. by Simmons Communications Company, L.P.
89. Postage Meter Rental Agreement, dated July 2, 1985, between Pitney
Bowes Inc. and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
90. Photocopier Rental Agreement, dated May 3, 1991, between Mitchell
Business Equipment and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
91. Advertising Sales Agreement, dated November 15, 1990, between NuAd,
Inc. and Simmons Communications Company, L.P., as extended by American
Cable TV Investors 5, Ltd.
92. Bulk Discount Cable Television Service Agreement, dated July 1, 1990,
between Lexington Park Super 8 Motel, Inc. and Simmons Communications
Company, L.P., as assigned to American Cable TV Investors 5, Ltd.
93. Bulk Discount Cable Television Service Agreement, dated March 4, 1991,
between Swans Hotel, a G&H Properties corporation and Simmons
Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
94. Cable Television Bulk Billing Agreement, dated November 15, 1994,
between Wildewood Village Association, Inc. and American Cable TV
Investors 5, Ltd.
95. Bulk Discount Cable Television Service Agreement, dated May 4, 1989,
between Patuxent Inn and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
96. Cable Television Easement and Maintenance Agreement, dated December 27,
1993, between St. Mary's Hospital and American Cable TV Investors 5,
Ltd.
Schedule 1.8 -- Page 9
<PAGE> 100
97. Bulk Discount Cable Television Service Agreement, dated August 1, 1991,
between A&E Motel and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
98. Bulk Discount Cable Television Service Agreement, dated May 6, 1991,
between Belvedere Motor Inn n/k/a Days Inn and Simmons Communications
Company, L.P., as assigned to American Cable TV Investors 5, Ltd.
99. Cable Television Bulk Billing Agreement, dated August 19, 1993, between
Leonardtown Motel (Relax Inn) and American Cable TV Investors 5, Ltd.
100. Bulk Discount Cable Television Service Agreement, dated August 1, 1990,
between Bailey's Apartments and Simmons Communications Company, L.P.,
as assigned to American Cable TV Investors 5, Ltd.
101. Bulk Cable Television Multiple-Unit Agreement, dated July 31, 1995,
between Hickory Hills Townhomes Limited Partnership and American Cable
TV Investors 5, Ltd.
102. Agreement for the Construction and Operation of a CATV System, dated
January 17, 1994, between St. Mary's College and American Cable TV
Investors 5, Ltd.
103. Bulk Discount Cable Television Service Agreement, between Vex Dunn
(Navy Lodge) and American Cable TV Investors 5, Ltd. [NOT YET EXECUTED]
104. Agreement for the Construction and Operation of a CATV System, dated
September 28, 1992, between Peggs View and American Cable TV Investors
5, Ltd.
105. Bulk Cable Television Multiple-Unit Agreement, dated June 15, 1995,
between Placid Harbor and American Cable TV Investors 5, Ltd.
106. Cable Television Bulk Billing Agreement, dated March 14, 1995, between
Lore's Apartment and American Cable TV Investors 5, Ltd.
107. Cable TV Service Agreement, dated August 10, 1987, among St. Mary's
Home for the Elderly, Inc. and St. Mary's Home for the Elderly II, Inc.
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
108. Bulk Discount Cable Television Service Agreement, dated August 10,
1990, between Teitel Financial Corporation and Simmons Communications
Company, L.P., as assigned to American Cable TV Investors 5, Ltd.
109. Retransmission Consent Agreement, dated June 27, 1994, between WJLA-TV
and TCI Cable Management Corporation.
Schedule 1.8 -- Page 10
<PAGE> 101
110. Retransmission Consent Agreement, dated November 5, 1993, between The
Detroit News, Inc. (licensee of WUSA) and TCI Cable Management
Corporation.
111. Retransmission Consent Agreement, dated June 6, 1993, between Paramount
Stations Group of Washington Inc. (on behalf of WDCA) and TCI Cable
Management Corporation.
112. Revolving Credit Agreement, dated as of June 30, 1993, among American
Cable TV Investors 5, Ltd., Various Financial Institutions and Bank of
America, Illinois f/k/a Continental Bank, N.A. and NationsBank of
Texas, N.A. and all financing and security documents relating thereto.
113. Management Agreement, dated May 14, 1987, between TCI Cablevision
Associates, Inc. f/k/a Daniels & Associates, Inc. and American Cable TV
Investors 5, Ltd.
114. Letter Agreement, Authorizing Easement Over Rims Property, dated June
21, 1991, between Maryland Department of Natural Resources and Simmons
Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
Schedule 1.8 -- Page 11
<PAGE> 102
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 1.9
SYSTEM
American Cable TV of St. Mary's County comprising the System included
in the Franchise Areas set forth in Schedule 1.4.
Schedule 1.9 -- Page 1
<PAGE> 103
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 4.2
EXCLUDED ASSETS
Revolving Credit Agreement, dated as of June 30, 1992, between American
Cable TV Investors 5, Ltd., Various Financial Institutions, Bank of America,
Illinois f/k/a Continental Bank, N.A. and NationsBank of Texas, N.A. (including
all financing and security documents relating thereto).
Schedule 4.2 -- Page 1
<PAGE> 104
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.3 (b)
VIOLATIONS OF PARTNERSHIP AGREEMENT AND LEGAL REQUIREMENTS
If consents to transfer the franchises and FCC licenses listed
on Schedule 1.5 which require consent to transfer are not obtained, Seller may
be deemed to have violated a Legal Requirement.
If consents to the assignment of the following agreements are
not obtained or notices are not given as required by the terms of the
agreements, such agreements may be terminated:
1. Pole Attachment Agreement, dated May 15, 1990, between Southern
Maryland Electric Cooperative, Inc. and Simmons Communications Company,
L.P, as amended and assigned to American Cable TV Investors 5, Ltd. on
May 19, 1992.
2. License Agreement for Pole Attachments, dated August 1, 1993, between
the Chesapeake and Potomac Telephone Company of Maryland and American
Cable TV Investors 5, Ltd.
3. Pole/Trench License Agreement, dated August 31, 1987, between Baltimore
Gas and Electric Company and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
4. Right of Entry, dated August 13, 1987, between Amber Meadows Joint
Venture and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
5. Agreement for the Construction, Operation and Maintenance of CATV
System, dated January 17, 1994, between Saint Mary's College and
American Cable TV Investors 5, Ltd.
6. Retransmission Consent Agreement, dated December 1, 1993, between
WJLA-TV and TCI Cable Management Corporation.
7. Management Agreement, dated May 14, 1987, between TCI Cablevision
Associates, Inc. f/k/a Daniels & Associates, Inc. and American Cable TV
Investors 5, Ltd.
8. Lease Agreement, dated July 9, 1981, among Bernard F. Beavan and
Elizabeth Ann Beaven and CATV Leonardtown, Inc., as amended and as
assigned to American Cable TV Investors 5, Ltd.
Schedule 5.3 -- Page 1
104
<PAGE> 105
9. Lease Agreement, dated September 1, 1991, among Michael J. Herman,
David Zalkin and Julie H. Zalkind and Simmons Communications Company,
L.P., as amended and as assigned to American Cable TV Investors 5, Ltd.
10. Lease, dated September 5, 1984, between Boones's Mobile Estates and
Eastern Communications of Maryland, Inc., as assigned to American Cable
TV Investors 5, Ltd. by Simmons Communications Company, L.P.
11. Bulk Cable Television Multiple Unit Agreement, dated July 31, 1995,
between Hickory Hills Townhomes Limited Partnership and American Cable
TV Investors 5, Ltd.
12. Agreement for Construction and Operation of a CATV System, dated
September 28, 1992, between Peggs View and American Cable TV Investors
5, Ltd.
13. Bulk Cable Television Multiple Unit Agreement, dated June 15, 1995,
between Placid Harbor and American Cable TV Investors 5, Ltd.
14. Revolving Credit Agreement, dated as of June 30, 1992, among American
Cable TV Investors 5, Ltd, various financial institutions, Bank of
America, Illinois f/k/a/ Continental Bank, N.A. and NationsBank of
Texas, N.A. and all financing and security documents relating thereto.*
- --------
* Proceeds from the sale of the System will be used to repay any amount
of the loan outstanding as of the Closing Date.
Schedule 5.3 -- Page 2
<PAGE> 106
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.5
ENCUMBRANCES ON SELLER'S TITLE
Assets of American Cable TV Investors 5, Ltd. have been
pledged as collateral under the Revolving Credit Agreement, dated as of June 30,
1992, among American Cable TV Investors 5, Ltd., Various Financial Institutions,
Bank of America, Illinois f/k/a Continental Bank, N.A. and NationsBank of Texas,
N.A., including all financing and security documents relating thereto. All
encumbrances related to the foregoing shall be satisfied at or prior to Closing
by Seller and the Lenders thereto.
Schedule 5.5 -- Page 1
<PAGE> 107
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.8
COMPLIANCE WITH LAW
None.
Schedule 5.8 -- Page 1
<PAGE> 108
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.8(f)
FCC INFORMATION
<TABLE>
<CAPTION>
Aeronautical Frequencies: Channel Visual or Control Carriers (MHz)
- ------------------------ ------- -------------------------------
<S> <C> <C>
--- 108.6250
--- 117.4750
--- 117.5250
--- 117.5750
--- 123.4875
--- 123.5125
--- 123.5375
--- 135.4875
--- 135.5125
--- 135.5375
A-2 109.2750
A-1 115.2750
A(14) 121.2625
B(15) 127.2625
C(16) 133.2625
L(25) 229.2625
M(26) 235.2625
N(27) 241.2625
O(28) 247.2625
P(29) 253.2625
Q(30) 259.2625
R(31) 265.2625
S(32) 271.2625
T(33) 277.2625
U(34) 283.2625
V(35) 289.2625
</TABLE>
Schedule 5.8(f) -- Page 1
<PAGE> 109
<TABLE>
<S> <C> <C>
W(36) 295.2625
AA(37) 301.2625
BB(38) 307.2625
CC(39) 313.2625
DD(40) 319.2625
EE(41) 325.2625
FF(42) 331.2750
GG(43) 337.2625
HH(44) 343.2625
II(45) 349.2625
JJ(46) 355.2625
KK(47) 361.2625
LL(48) 367.2625
MM(49) 373.2625
NN(50) 379.2625
OO(51) 385.2625
PP(52) 391.2625
QQ(53) 397.2625
</TABLE>
Geographic Coordinate of
Approximate Center of Service Latitude 38" - 18' - 33" North
Area: Longitude 76" - 38' - 16" West
Authorized Radius of System: 35 Miles
56 Kilometers
Schedule 5.8(f) -- Page 2
<PAGE> 110
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.12
There is currently pending a class action lawsuit in the
Circuit Court for Baltimore City, Burch, et al. v. United Cable Television of
Baltimore, et al, Case No. 95311038/CL204287. The lawsuit was initially filed
against just the cable system in the city of Baltimore. The complaint was
recently amended to include Tele-Communications, Inc., UCTC of Baltimore, Inc.,
TCI Cablevision of Maryland, Inc., TCI Cable, Inc., UCTC of Baltimore, Inc., TCI
Cablevision of Maryland, Inc., TCI Cable Management, Inc. and TCI Southeast,
Inc. as defendants. Although the class that was previously certified by the
Court included only customers in Baltimore, the Plaintiffs are now seeking to
expand the class to include TCI-affiliated customers in the entire state of
Maryland, including the System served by Seller. Currently, the lawsuit is in
the discovery process and is scheduled to go to trial within the first 6 months
of 1997.
The plaintiffs are alleging that the five dollar ($5.00)
administrative fee assessed by the Company violates the Consumer Protection Act,
Maryland Code Annotated, CL Section 13-101 et seq; that the administrative fee
constitutes impermissible liquidated damages in violation of state law, Maryland
Code Annotated, CL Section 2-718; and, that the fee is a breach of implied
covenant of good faith and fair dealing.
Schedule 5.12 -- Page 1
<PAGE> 111
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.13(c)
EMPLOYMENT MATTERS
None.
Schedule 5.13(c)
<PAGE> 112
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.13(d)
EMPLOYEES
OFFICE/ADMINISTRATION
Delores Chase
Lisa Hegedus
Amber Mick
Brenda Campbell
Ellie Cantrell
Barbara Jones
Nancy Miedzinski
Sondra Sahli
Kathryn Shamblin
Kathy Underwood
TECHNICAL
Michael Laigle
Gerald Orris
Raymond Leone
Ronald McKenzie
Robert Pilkerton
Wanda Jones
Brad Harris
Richard Milan
Jason Brown
Charles Burroughs
Michael Cain
Greg Collinson
James Day
Robert Harim
Douglas Owen
Kenneth Thompson
Lonnie Thompson
Darry Tunick
John Wilfong
Jason Jager
James Butler
Sam Cooper
William Dement
MARKETING
Donna Callis
Schedule 5.13(d) -- Page 1
<PAGE> 113
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.13(e)
EMPLOYER PLANS
CIGNA Health Maintenance Organization
CIGNA Preferred Provider Organization Plan
1995 TCI Benefits Plan
Schedule 5.13(e) -- Page 1
<PAGE> 114
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.14
SYSTEM INFORMATION
AS OF JUNE 30, 1996
<TABLE>
<S> <C>
Number of Equivalent Basic Subscribers: 18,324
Number of Subscribers of Expanded
Basic Services: 17,952
Bandwidth: 330 MHz
Homes Passed by the System: 26,469
Number of Miles of Plant: 703.67
Fiber: 15.2
------
718.87
</TABLE>
Schedule 5.14 -- Page 1
<PAGE> 115
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 5.16
TAXES
All Tax Returns required to be filed for the year ended December 31,
1996 and Taxes due or payable on such Tax Returns are anticipated to be filed
and paid by Seller no later than June 30, 1997.
Schedule 5.16 -- Page 1
<PAGE> 116
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF ST. MARY'S COUNTY
SCHEDULE 6.3(a)
CONSENTS TO BE OBTAINED OR WAIVED BY CLOSING DATE
First Union National Bank of North Carolina, as Agent to the
Lenders, and Mellon Bank, N.A., as Co-Agent.
Schedule 6.3(a) -- Page 1
<PAGE> 117
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of November 27, 1996, by and among
American Cable TV Investors 5, Ltd., a Colorado limited partnership ("Seller")
and Gans Multimedia Partnership, a Pennsylvania general partnership ("Buyer"),
and Kaye, Scholer, Fierman, Hays & Handler, LLP, a New York limited liability
partnership, as escrow agent ("Escrow Agent").
Seller and Buyer have entered into an Asset Purchase
Agreement, dated as of November 27, 1996, to sell and purchase certain cable
television assets (the "Agreement"). Pursuant to the Agreement, Kaye, Scholer,
Fierman, Hays & Handler, LLP, was designated as the escrow agent thereunder.
Escrow Agent has agreed to act as an escrow agent pursuant to the terms of this
Escrow Agreement. Capitalized terms used but not defined herein shall have the
meanings set forth in the Agreement.
It is agreed as follows:
1. ESCROW FUND. Buyer has, pursuant to Section 3.1 of the
Agreement, deposited $765,923.00 in cash by means of wire or interbank transfer
in immediately available funds in Escrow Agent's "Kaye, Scholer, Fierman, Hays &
Handler, LLP Attorney Trust Account No. 040-0251-95; Attention: Gregory Ciolek,"
at The Chase Manhattan Bank, 55 Water Street, New York, New York 10041 -- ABA
No. 021000128 to be held in escrow pursuant to the terms of the Agreement (such
amount, together with any earnings thereon, being the "Escrow Fund"), to be held
and disbursed by Escrow Agent in accordance with this Escrow Agreement.
2. DISBURSEMENT.
2.1 NOTICES. Escrow Agent shall pay over the Escrow Fund upon
receipt of a written notice, in the form attached hereto as Exhibit I, as
follows: (a) upon receipt of such notice executed by Seller directing the Escrow
Agent to pay the Escrow Fund over to Buyer, to Buyer; (b) upon receipt of such
notice executed by Buyer directing the Escrow Agent to pay the Escrow Fund over
to Seller, to Seller; or (c) upon receipt of such notice executed by Buyer and
Seller, to the parties and in the amounts specified in the notice.
2.2 AGREEMENT OF SELLER AND BUYER. Seller and Buyer have
agreed that (i) the Escrow Fund shall be disbursed in accordance with the terms
of this Escrow Agreement and the Agreement, (ii) at the Closing Seller and Buyer
shall instruct Escrow Agent to disburse the Escrow Fund to Seller or Seller's
designee and (iii) unless the Closing shall theretofore have taken place or
unless an unresolved claim against the Escrow Fund remains outstanding, on the
date which is 30 days after the termination of the Agreement pursuant to Article
X thereof, Seller and Buyer shall instruct Escrow Agent to disburse the Escrow
Fund to Buyer.
2.3 RELIANCE ON NOTICE. Upon receipt of the appropriate notice
described in Section 2.1, Escrow Agent shall pay the Escrow Fund in accordance
with Section 2.1, and Escrow Agent shall not be subject to any liability to any
party for doing so. Seller and Buyer
<PAGE> 118
each agrees not to assert (and shall actively resist any attempt to assert on
their behalf) any claim against Escrow Agent for making a payment in accordance
with this Section.
3. INVESTMENT OF ESCROW FUND. Escrow Agent shall invest the
Escrow Fund in (a) interest bearing accounts in, or certificates of deposit of,
The Chase Manhattan Bank, (b) (i) obligations of the United States of America,
(ii) United States government securities of agencies of the United States
government which are guaranteed by the United States government or (iii)
securities of governmental agencies, if the same are covered by a bank
repurchase agreement, or (c) for periods of less than seven days each,
non-interest bearing accounts at The Chase Manhattan Bank. Escrow Agent may
invest the Escrow Fund in one or more of the invest ments permitted by the
preceding sentence, and may change those investments from time to time, all as
it may determine in its sole and absolute discretion. Escrow Agent shall have no
duty to maximize the return on the Escrow Fund and shall be fully protected in
making any investment or combination of investments permitted by this Section.
4. ESCROW AGENT AS COUNSEL TO SELLER. Buyer hereby
acknowledges that it is aware that Escrow Agent is acting as counsel to Seller
in connection with the Agreement, this Escrow Agreement and other matters, and
agrees that Escrow Agent's acting under this Escrow Agreement shall not affect
its ability to act as counsel to Seller in any matter, including, but not
limited to, any claim, action or proceeding with respect to this Escrow
Agreement or the disposition of or entitlement to the Escrow Fund.
5. ESCROW AGENT.
5.1 GENERAL. Escrow Agent shall act as escrow agent and hold
and disburse the Escrow Fund pursuant to the terms and conditions of this Escrow
Agreement. Its duties under this Escrow Agreement shall cease upon disbursement
of the Escrow Fund.
5.2 LIQUIDATION OF INVESTMENTS. Unless otherwise directed by
notice executed by Seller and Buyer, all payments required by Section 2 shall be
made in cash by means of wire or interbank transfer in immediately available
funds. When necessary to provide funds in order to make any payments required by
Section 2, Escrow Agent shall liquidate any investments held by it as it may, in
its sole and absolute discretion, determine to be necessary to make such
payments. Escrow Agent shall have no liability for losses upon the liquidation
of any such investments.
5.3 LIMITED DUTIES. Escrow Agent undertakes to perform only
such duties as are expressly set forth in this Escrow Agreement. Escrow Agent
shall incur no liability whatsoever to any other party hereto, except for Escrow
Agent's own willful misconduct in its capacity as escrow agent.
5.4 RELIANCE ON NOTICES. Escrow Agent may rely and shall be
protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper
2
<PAGE> 119
party or parties. Escrow Agent may conclusively presume that the undersigned
have full power and authority to instruct Escrow Agent on behalf of the
respective party for which they have signed.
5.5 LIMITED RESPONSIBILITIES. Escrow Agent's sole
responsibility upon receipt of the notice specified in Section 2.1 requiring
payment pursuant to the terms of this Escrow Agreement is to pay the Escrow Fund
to such party as is specified in accordance with Section 2.1, and Escrow Agent
shall have no duty to determine (and shall not be affected by any knowledge
concerning) the validity, authenticity or enforceability of any specification,
certifica tion made in or information contained in such notices.
5.6 ACTION IN GOOD FAITH. Escrow Agent shall not be liable for
any action taken by it in good faith and believed by it to be authorized or
within the rights or powers conferred upon it by this Escrow Agreement, and may
consult with counsel (including partners or any attorneys employed by Escrow
Agent) of its own choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.7 RESIGNATION. Escrow Agent may resign and be discharged
from its duties or obligations hereunder by giving notice of such resignation to
Seller and Buyer specifying a date upon which such resignation shall take
effect, whereupon a successor escrow agent, which shall be a bank or trust
company with an office in New York City, shall be appointed by Seller. Escrow
Agent shall be entitled to pay the Escrow Fund to any successor escrow agent so
appointed. In the event no successor escrow agent has been appointed by the date
specified in the notice of resignation given by Escrow Agent, Escrow Agent shall
be entitled (but not required) to deliver the Escrow Fund as set out in Section
5.8(b) and shall be thereupon relieved of all further responsibility.
5.8 DISPUTES. In the event of a dispute between the parties,
or if Escrow Agent shall be uncertain as to the proper disposition of the Escrow
Fund, Escrow Agent shall be entitled (but not required) (a) to retain the Escrow
Fund pending direction as to the disposition thereof by a final order, from
which no further appeal may be taken, of a court of competent jurisdiction, or
(b) to deliver the Escrow Fund into the United States District Court for the
Southern District of New York and, upon giving notice to Seller and Buyer of
such action, shall thereupon be relieved of all further responsibility.
5.9 INDEMNIFICATION; ESCROW AGENT'S INTEREST IN ESCROW FUND.
(a) Seller and Buyer hereby jointly and severally agree to indemnify Escrow
Agent and all partners and employees thereof for, and to hold such persons
harmless against, any loss, liability, damage or expense incurred without bad
faith on the part of such persons arising out of or in connection with the
Escrow Agent's entering into and/or performing under this Escrow Agreement,
including, but not limited to, the cost and expense (including, but not limited
to, attorneys' fees, which may consist in whole or in part of the time charges
at their standard rates of partners of and attorneys employed by Escrow Agent)
of investigation and defending themselves against any
3
<PAGE> 120
claim or liability, and including taxes, penalties, additions to tax or interest
that are incurred by the Escrow Agent with respect to taxes imposed on the
Escrow Fund or any income earned or derived therefrom.
(b) Seller and Buyer hereby (i) jointly and severally agree
that Escrow Agent shall be entitled to (x) withdraw from the Escrow Fund all
sums due or reasonably likely to become due to Escrow Agent on account of
Seller's and Buyer's indemnification obligations set forth above, and (y)
withhold a portion of the income earned on or derived from the Escrow Fund and
pay such withheld amount to the proper taxing authorities on behalf of the
Escrow Fund to satisfy any tax imposed on such income, and (ii) grant to Escrow
Agent a first priority lien on and security interest in and to the Escrow Fund
for the purposes of securing satisfaction by Seller and Buyer of their
indemnification obligations to Escrow Agent.
6. ESCROW AGENT NOT AFFECTED BY OTHER AGREEMENTS. This Escrow
Agreement expressly sets forth all the duties of Escrow Agent with respect to
any and all matters pertinent hereto. No implied duties or obligations shall be
read into this Escrow Agreement against Escrow Agent. Escrow Agent, in its
capacity as such, shall not be bound by the provisions of any agreement among
the parties to this Escrow Agreement and shall have no duty to inquire into, or
to take into account its knowledge of, the terms and conditions of any agreement
made or entered into in connection with this Escrow Agreement, including, but
not limited to, the Agreement.
7. AUTHORIZED SIGNATORIES. Seller hereby authorizes Marvin
Jones, and Buyer hereby authorizes Joseph Gans, to receive and execute all
notices required to be given hereunder, and either party may authorize other
officers to sign on its behalf by notice to the other party.
8. NOTICES. All notices, consents, approvals, demands,
requests and other communications required or desired to be given hereunder must
be given in writing, shall refer to this Escrow Agreement, and shall be sent by
registered or certified mail, return receipt requested, by hand delivery, by
facsimile or by overnight courier service, addressed to the parties hereto at
their addresses set forth below, or such other addresses as they may designate
by like notice:
(a) If to Seller:
American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Marvin Jones
Facsimile No.: (303) 488-3219
4
<PAGE> 121
with a copy to:
Lynn Toby Fisher, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Facsimile No.: (212) 836-7152
(b) If to Buyer:
Gans Multimedia Partnership
217 E. Ninth Street
Hazleton, Pennsylvania 18201
Attention: Joseph S. Gans
Facsimile No.: (717) 459-0963
with a copy to:
Hourigan, Kluger, Spohrer & Quinn, P.C.
700 Mellon Bank Center
Wilkes-Barre, Pennsylvania 18701
Attention: Terrence J. Herron, Esq.
Facsimile No.: (717) 829-3460
(c) If to Escrow Agent:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Lynn Toby Fisher, Esq. and
Alan Capilupi, Director of Finance
Facsimile No.: (212) 836-8689
9. MISCELLANEOUS.
9.1 JURISDICTION. Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Escrow Agreement
shall be brought against any of the parties in the courts of the State of New
York in the County of New York, or, if it has or can acquire jurisdiction, in
the United States District Court for the Southern District of New York, and each
of the parties hereby consents to the exclusive jurisdiction of such courts (and
of the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein. Process in any such action or proceeding
may be served anywhere in the world, whether within or without the State of New
York.
5
<PAGE> 122
9.2 CAPTIONS. The captions in this Escrow Agreement are for
convenience or reference only and shall not be given any effect in the
interpretation of this Escrow Agreement.
9.3 NO WAIVER. The failure of a party to insist upon strict
adherence to any term of this Escrow Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Escrow Agreement. Any
waiver must be in writing.
9.4 EXCLUSIVE AGREEMENT; AMENDMENT; ASSIGNMENT; NO THIRD PARTY
RIGHTS. This Escrow Agreement supersedes all prior agreements among the parties
with respect to its subject matter, is intended as a complete and exclusive
statement of the terms of the agreement among the parties with respect thereto,
and cannot be changed or terminated orally. No party may assign any rights or
delegate any of its duties under this Escrow Agreement, but this Escrow
Agreement shall be binding upon and inure to the benefit of the successors to
the business and assets of Seller and Buyer and to any successor escrow agent
appointed in accordance with Section 5.7. No third party shall have any rights
hereunder.
9.5 COUNTERPARTS. This Escrow Agreement may be executed in
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
9.6 GOVERNING LAW. This Escrow Agreement and all amendments
hereof and waivers and consents hereunder shall be governed by, and all disputes
arising hereunder shall be resolved in accordance with, the internal law of the
State of New York, without regard to the conflicts of law principles thereof.
6
<PAGE> 123
9.7 TREATMENT OF ESCROW FUND. It is understood and agreed
among the parties hereto that Buyer will be treated as the owner of the Escrow
Fund and Escrow Agent shall report the income, if any, that is earned on, or
derived from, the Escrow Fund as income of Buyer in the taxable year or years in
which such income is properly includible.
AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By: /s/ Marvin Jones
-------------------------
Name: Marvin Jones
Title: President
GANS MULTIMEDIA PARTNERSHIP
By: Cable TV, Inc.
its Managing General Partner
By: /s/ Joseph S. Gans
-----------------------------
Name: Joseph S. Gans
Title: President
KAYE, SCHOLER, FIERMAN,
HAYS & HANDLER, LLP
as Escrow Agent
By: /s/ Lynn Toby Fisher
-----------------------------
Name: Lynn Toby Fisher
----------------------
Partner
7
<PAGE> 124
EXHIBIT I
FORM OF JOINT NOTICE
TO ESCROW AGENT
[DATE]
To: Kaye, Scholer, Fierman, Hays & Handler, LLP
as Escrow Agent ("Escrow Agent") under
the Escrow Agreement dated November 2, 1996,
by and among American Cable TV Investors 5, Ltd.,
Gans Multimedia Partnership and the Escrow Agent (the "Escrow Agreement")
Dear Sirs:
You are hereby instructed and directed to pay the Escrow Fund
(as defined in the Escrow Agreement) to the following corporation:
Payee: [NAME]
---------------------
[ADDRESS]
---------------------
Very truly yours,
AMERICAN CABLE TV INVESTORS 5, LTD.
By:
---------------------------
GANS MULTIMEDIA PARTNERSHIP
By: Cable TV Inc.,
its Managing General Partner
8
<PAGE> 1
SOUTHERN TENNESSEE
================================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN CABLE TV INVESTORS 5, LTD.
AND
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
DATED AS OF
NOVEMBER 29, 1996
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I.........................................................................................................1
1. Definitions..............................................................................................1
Accountants..............................................................................................1
Accounts Receivable......................................................................................1
Adjustment Time..........................................................................................1
Affiliate................................................................................................1
Alternative Transaction..................................................................................1
Assets...................................................................................................2
Assumed Liabilities......................................................................................2
Basic Services...........................................................................................2
Basic Subscriber Rate....................................................................................2
Best of Seller's Knowledge...............................................................................2
Business.................................................................................................2
Business Day.............................................................................................2
Buyer....................................................................................................2
Buyer Financial Statement................................................................................2
Buyer Interim Financial Statement........................................................................2
Cable Act................................................................................................2
Closing..................................................................................................3
Closing Date.............................................................................................3
Code.....................................................................................................3
Communications Act.......................................................................................3
Consents.................................................................................................3
Copyright Act............................................................................................3
Deposit..................................................................................................3
Employer.................................................................................................3
Employer Plans...........................................................................................3
Encumbrance..............................................................................................3
Environmental Law........................................................................................3
Equipment................................................................................................3
Equivalent Basic Subscribers.............................................................................4
ERISA....................................................................................................4
Escrow Agent.............................................................................................4
Escrow Agreement.........................................................................................4
Exchange Act.............................................................................................4
Excluded Assets..........................................................................................4
Excluded Liabilities.....................................................................................4
Exhibits.................................................................................................4
Extension................................................................................................5
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FCC......................................................................................................5
Final Adjustments Report.................................................................................5
Franchise Areas..........................................................................................5
Franchise Fee............................................................................................5
GAAP.....................................................................................................5
General Partner..........................................................................................5
Governmental Authority...................................................................................5
Governmental Permits.....................................................................................5
Hazardous Substances.....................................................................................5
Homes Passed.............................................................................................6
HSR Act..................................................................................................6
Indemnity Escrow Agent...................................................................................6
Indemnity Escrow Agreement...............................................................................6
Intangibles..............................................................................................6
IRS......................................................................................................6
Legal Requirement........................................................................................6
Limited Partners.........................................................................................6
Management Agreement.....................................................................................6
Must Carry Election......................................................................................6
1996 Financial Statements................................................................................7
Partnership Agreement....................................................................................7
Pay TV...................................................................................................7
Permitted Encumbrances...................................................................................7
Person...................................................................................................7
Preliminary Adjustments Report...........................................................................7
Prime Rate ..............................................................................................7
Purchase Price...........................................................................................7
Real Property............................................................................................7
Regulatory Requirement...................................................................................7
Required Consents........................................................................................7
Retransmission Consent Agreements........................................................................8
Schedules................................................................................................8
SEC......................................................................................................8
Securities Act...........................................................................................8
Seller...................................................................................................8
Seller Contracts.........................................................................................8
Seller's Escrow..........................................................................................8
Seller Financial Statements..............................................................................8
System...................................................................................................8
Taking...................................................................................................8
Tax Return ..............................................................................................8
Taxes....................................................................................................8
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
TCI......................................................................................................8
Telecom Act..............................................................................................9
Termination Date.........................................................................................9
WARN Act.................................................................................................9
ARTICLE II........................................................................................................9
2. Purchase and Sale of Assets..............................................................................9
2.1 Purchase and Sale of Assets...................................................................9
2.2 Time and Place of Closing.....................................................................9
ARTICLE III......................................................................................................10
3. Consideration...........................................................................................10
3.1 Consideration for the Assets.................................................................10
3.2 Purchase Price Prorations....................................................................10
3.3 Purchase Price Adjustments...................................................................11
3.4 Preliminary and Final Settlements............................................................12
3.5 Disputed Liabilities.........................................................................14
3.6 Allocation of Purchase Price.................................................................14
ARTICLE IV.......................................................................................................14
4. Assumed Liabilities and Excluded Assets.................................................................14
4.1 Assignment and Assumption....................................................................14
4.2 Excluded Assets..............................................................................15
ARTICLE V........................................................................................................15
5. Representations and Warranties of Seller................................................................15
5.1 Organization and Qualification...............................................................15
5.2 Authority and Validity.......................................................................16
5.3 Consents and Approvals; No Violation.........................................................16
5.4 Complete Systems.............................................................................16
5.5 Title........................................................................................17
5.6 Real Property................................................................................17
5.7 Environmental Matters........................................................................17
5.8 Compliance with Law; Governmental Permits....................................................17
5.9 Seller Contracts.............................................................................18
5.10 Copyright Compliance.........................................................................18
5.11 Financial Statements.........................................................................19
5.12 Legal Proceedings............................................................................19
</TABLE>
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
5.13 Employment Matters...........................................................................19
5.14 System Information...........................................................................21
5.15 Finders and Brokers..........................................................................21
5.16 Tax Matters..................................................................................21
5.17 Condition of Assets..........................................................................21
5.18 Regulation of Rates..........................................................................21
5.19 Insurance....................................................................................21
5.20 No Other Commitment to Sell..................................................................21
ARTICLE VI.......................................................................................................22
6. Buyer's Representations and Warranties..................................................................22
6.1 Organization and Qualification...............................................................22
6.2 Authority and Validity.......................................................................22
6.3 No Breach or Violation.......................................................................22
6.4 Litigation...................................................................................23
6.5 Financial Statements.........................................................................23
6.6 Adequate Financing...........................................................................23
6.7 Finders and Brokers..........................................................................23
6.8 Qualification of Buyer.......................................................................24
ARTICLE VII......................................................................................................24
7. Additional Covenants....................................................................................24
7.1 Access to Premises and Records...............................................................24
7.2 Continuity and Maintenance of Operations; Financial Statements;
Correspondence...............................................................................24
7.3 Employee Matters.............................................................................26
7.4 Franchise Extension..........................................................................26
7.5 Environmental Report.........................................................................26
7.6 Consents.....................................................................................27
7.7 HSR Notification.............................................................................27
7.8 Notification of Certain Matters..............................................................28
7.9 Risk of Loss; Condemnation...................................................................28
7.10 Adverse Changes..............................................................................28
7.11 Action By Limited Partners...................................................................29
7.12 No Solicitation..............................................................................29
7.13 Sales and Transfer Taxes and Fees............................................................30
7.14 Commercially Reasonable Efforts..............................................................30
7.15 Title Insurance..............................................................................30
7.16 FCC Form 626.................................................................................31
7.17 Forms 394....................................................................................31
</TABLE>
iv
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE VIII.....................................................................................................31
8. Conditions Precedent to Obligations of Buyer............................................................31
8.1 HSR Act......................................................................................31
8.2 Governmental or Legal Action.................................................................31
8.3 Accuracy of Representations and Warranties...................................................31
8.4 Performance of Agreements....................................................................31
8.5 No Material Adverse Change...................................................................32
8.6 Consents and Extensions......................................................................32
8.7 Transfer Documents...........................................................................32
8.8 Opinions of Seller's Counsel.................................................................32
8.9 Opinion of Seller's FCC Counsel..............................................................32
8.10 Discharge of Liens...........................................................................32
8.11 Noncompete Agreement.........................................................................32
8.12 Additional Documents and Acts................................................................32
8.13 Indemnity Escrow Agreement...................................................................33
8.14 1996 Financial Statements....................................................................33
8.15 Certificates.................................................................................33
ARTICLE IX.......................................................................................................33
9. Conditions Precedent to Obligations of Seller...........................................................33
9.1 HSR Act......................................................................................33
9.2 Governmental or Legal Actions................................................................33
9.3 Accuracy of Representations and Warranties...................................................33
9.4 Performance of Agreements....................................................................33
9.5 Consents.....................................................................................34
9.6 Opinions of Buyer's Counsel..................................................................34
9.7 Limited Partner Approval.....................................................................34
9.8 Payment of Purchase Price....................................................................34
9.9 Assumption of Liabilities....................................................................34
9.10 Additional Documents and Acts................................................................34
9.11 Certificate..................................................................................34
9.12 Fairness Opinion.............................................................................34
9.13 Indemnity Escrow Agreement...................................................................34
9.14 Environmental Remediation....................................................................34
ARTICLE X........................................................................................................35
10. Termination.............................................................................................35
10.1 Events of Termination........................................................................35
</TABLE>
v
<PAGE> 7
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
10.2 Manner of Exercise...........................................................................37
10.3 Effect of Termination........................................................................37
10.4 Liquidated Damages...........................................................................37
ARTICLE XI.......................................................................................................38
11. Nature and Survival of Representations, Warranties and Agreements.......................................38
11.1 Nature of Representations, Warranties and Agreements.........................................38
11.2 Survival of Representations and Warranties...................................................38
11.3 Time Limitations.............................................................................38
11.4 Limitations as to Amount.....................................................................38
ARTICLE XII......................................................................................................39
12. Indemnification.........................................................................................39
12.1 Rights to Indemnification....................................................................39
12.2 Procedure for Indemnification................................................................39
12.3 Indemnity Escrow.............................................................................40
ARTICLE XIII.....................................................................................................40
13. Miscellaneous...........................................................................................40
13.1 Parties Obligated and Benefitted.............................................................40
13.2 Press Releases...............................................................................41
13.3 Notices......................................................................................41
13.4 Waiver.......................................................................................42
13.5 Captions.....................................................................................42
13.6 CHOICE OF LAW................................................................................42
13.7 Nonrecourse..................................................................................42
13.8 Dispute Resolution...........................................................................42
13.9 Power of Attorney............................................................................43
13.10 Terms........................................................................................43
13.11 Rights Cumulative............................................................................43
13.12 Further Actions..............................................................................43
13.13 Time.........................................................................................43
13.14 Expenses.....................................................................................43
13.15 Specific Performance.........................................................................43
13.16 Schedules....................................................................................44
13.17 Counterparts.................................................................................44
13.18 Entire Agreement.............................................................................44
13.19 Severability.................................................................................44
</TABLE>
vi
<PAGE> 8
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form for Opinion of Seller's Counsel
Exhibit E Form for Opinion of Buyer's Counsel
Exhibit F Form of Indemnity Escrow Agreement
Exhibit G Form of Opinion of Seller's FCC Counsel
Exhibit H Form of Noncompetition Agreement
SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and Legal Requirements
Schedule 5.4 Complete Systems
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.7 Environmental
Schedule 5.8 Compliance with Law
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by Closing Date
</TABLE>
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ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("AGREEMENT") is made as of the
29th day of November, 1996, by and between AMERICAN CABLE TV INVESTORS 5, LTD.,
a Colorado limited partnership ("SELLER"), and RIFKIN ACQUISITION PARTNERS,
L.L.L.P., a Colorado limited liability limited partnership ("BUYER").
R E C I T A L S:
A. Seller is engaged in the business of providing cable
television service to subscribers in and around the geographic areas set forth
on Exhibit A.
B. Buyer desires to purchase and Seller desires to sell the
assets of Seller designated in this Agreement used or held for use in connection
with that business, upon the terms and subject to the conditions set forth in
this Agreement.
Accordingly, the parties agree as follows:
ARTICLE I
1. DEFINITIONS.
"ACCOUNTANTS" shall have the meaning set forth in Section
3.4(d).
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable of
Seller representing amounts earned by Seller in connection with its operation of
the Business through the Adjustment Time.
"ADJUSTMENT TIME" shall have the meaning set forth in Section
3.2.
"AFFILIATE" shall mean, with respect to any Person, any other
Person controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"ALTERNATIVE TRANSACTION" shall mean any transaction which
could result in the transfer of control over, or ownership of, all or
substantially all the Assets, including (a) any merger or consolidation of
Seller in which another Person or group of Persons acquires 50% or more of the
partnership interests in Seller or the equity interests of the surviving entity,
as the case may be, (b) any tender offer or exchange offer for partnership
interests in Seller which, if
<PAGE> 10
consummated, would result in a Person or group of Persons (other than the
existing partners in such entities as of the date of this Agreement) owning 50%
or more of the partnership interests in Seller or (c) any sale or other
disposition of all or substantially all the Assets.
"ASSETS" shall mean all properties, privileges, rights,
interests and claims, real and personal, tangible and intangible, of every type
and description that are owned, leased, used or held for use in the Business in
which Seller has any right, title or interest or in which Seller acquires any
right, title or interest on or before the Closing Date, including Accounts
Receivable, Governmental Permits, Intangibles, Seller Contracts, Equipment and
Real Property but excluding any Excluded Assets and any Assets disposed of by
Seller in the ordinary course of business prior to the Closing Date.
"ASSUMED LIABILITIES" shall have the meaning set forth in
Section 4.1.
"BASIC SERVICES" shall mean the lowest tier of cable
television programming sold to subscribers of the System for which a subscriber
served by the System pays a fixed monthly fee to Seller, excluding Expanded
Basic Services, Pay TV and any charges for additional outlets and installation
fees and revenues derived from the rental of converters, remote control devices
and other like charges for equipment.
"BASIC SUBSCRIBER RATE" shall mean, for the System, the
predominant monthly fees and charges derived from the provision of Basic
Services to single family households, as of June 30, 1996, as set forth on
SCHEDULE 1.1.
"BEST OF SELLER'S KNOWLEDGE" shall mean the actual knowledge
of Marvin Jones, Ramona Whitman, Greg Butler, Deborah Amacher and Marie Ferris.
"BUSINESS" shall mean the cable television business conducted
by Seller on the date of this Agreement through the System in and around the
Franchise Areas.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday
or a day on which banking institutions in Denver, Colorado or New York, New York
are required or authorized to be closed.
"BUYER" shall mean the Person identified as such in the
preamble to this Agreement.
"BUYER FINANCIAL STATEMENT" shall have the meaning set forth
in Section 6.5.
"BUYER INTERIM FINANCIAL STATEMENT" shall have the meaning set
forth in Section 6.5.
"CABLE ACT" shall have the meaning set forth in Section 5.8.
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<PAGE> 11
"CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement, as described in Article II.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMUNICATIONS ACT" shall have the meaning set forth in
Section 5.8(c).
"CONSENTS" shall mean any registration with, consent or
approval of, notice to, or action by any Person or Governmental Authority
required to permit the transfer of the Assets to Buyer or permit Seller to
perform any of its other obligations under this Agreement, all of which are set
forth on SCHEDULE 1.2.
"COPYRIGHT ACT" shall mean Title 17 of the United States Code,
as amended, and all rules and regulations thereunder.
"DEPOSIT" shall have the meaning set forth in Section 3.1.
"EMPLOYER" shall have the meaning set forth in Section
5.13(a).
"EMPLOYER PLANS" shall have the meaning set forth in Section
5.13(e).
"ENCUMBRANCE" shall mean any mortgage, lien, security
interest, security agreement, conditional sale or other title retention
agreement, limitation, pledge, option, charge, assessment, restrictive
agreement, restriction, encumbrance, adverse interest, restriction on transfer
or any exception to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
"ENVIRONMENTAL LAW" shall mean any Legal Requirement relating
to pollution or protection of public health, safety or welfare or the
environment, including those relating to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment (including
ambient air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
"EQUIPMENT" shall mean all electronic devices, trunk and
distribution coaxial and optical fiber cable, amplifiers, power supplies,
conduit, vaults and pedestals, grounding and pole hardware, subscriber's devices
(including converters, encoders, transformers behind television sets and
fittings), headend hardware (including origination, earth stations, transmission
and distribution system), test equipment, vehicles and other tangible personal
property owned, leased, used or held for use by Seller in connection with the
Business, including the items described on SCHEDULE 1.3.
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<PAGE> 12
"EQUIVALENT BASIC SUBSCRIBERS" shall mean, with respect to
each Franchise Area, as of any date, the number of active customers for Basic
Services either in a single household, a commercial establishment or a
multi-unit dwelling (including a hotel unit); provided, however, that the number
of customers in a commercial establishment or multi-unit dwelling that obtain
service on a "bulk-rate" basis shall be determined for each Franchise Area by
dividing the gross bulk-rate billings for Basic Services and Expanded Basic
Services (but excluding billings from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental or any outlet or
connection other than the first outlet or connection, pass-through charges for
sales taxes, line-itemized franchise fees, fees charged by the FCC and the like)
attributable to such commercial establishment or multi-unit dwelling during the
most recent billing period ended prior to the date of calculation (but excluding
billings in excess of a single month's charge) by the rate charged at the date
of determination to individual households for the highest level of Basic
Services and Expanded Basic Services offered in the Franchise Area, such rate
not to be less than the rate for such Franchise Area set forth on SCHEDULE 1.1
(excluding billings from a la carte tiers or premium services, installation or
other non-recurring charges, converter rental, pass-through charges for sales
taxes, line-itemized franchise fees, fees charged by the FCC and the like). For
purposes of this definition, (i) an "active customer" shall mean, as of any
date, any person, commercial establishment or multi-unit dwelling that is paying
for and receiving Basic Services from the System in that Franchise Area who has
an account that is not more than 60 days past due (except for past due amounts
of $10.00 or less, provided such account is otherwise current) but excluding any
person, commercial establishment or multi-unit dwelling that as of the date of
calculation has not paid in full the charges for at least two months of the
services ordered and (ii) the number of days a customer account is past due
shall be calculated from the first day of the period for which the applicable
billing relates.
"ERISA" shall have the meaning set forth in Section 5.13(b).
"ESCROW AGENT" shall have the meaning set forth in Section
3.1.
"ESCROW AGREEMENT" shall have the meaning set forth in Section
3.1.
"EXCHANGE ACT" shall mean the Securities and Exchange Act of
1934, as amended.
"EXCLUDED ASSETS" shall have the meaning set forth in Section
4.2.
"EXCLUDED LIABILITIES" shall have the meaning set forth in
Section 4.1(b).
"EXHIBITS" shall mean the exhibits prepared and delivered
pursuant to this Agreement.
"EXPANDED BASIC SERVICES" shall mean any video programming
provided over the System, regardless of service tier, other than Basic Services,
any new product tier and video programming offered on a per channel or per
program basis, for which a subscriber served by the
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<PAGE> 13
System pays a fixed monthly fee to Seller, excluding Pay TV and any charges for
additional outlets and installation fees and revenues derived from the rental of
converters, remote control devices and other like charges for equipment.
"EXTENSION" shall have the meaning set forth in Section 7.4.
"FCC" shall have the meaning set forth in Section 5.8(c).
"FINAL ADJUSTMENTS REPORT" shall have the meaning set forth in
Section 3.4(b).
"FRANCHISE AREAS" shall mean those areas in which Seller is
authorized under one or more Governmental Permits issued by the applicable
franchising authorities to provide cable television service to subscribers
located in such areas through the ownership and operation of the System, as set
forth on SCHEDULE 1.4.
"FRANCHISE FEE" shall mean the percentage of Seller's gross
revenues to be paid to a Governmental Authority as specified in the applicable
franchise agreement.
"GAAP" shall mean generally accepted accounting principles as
in effect in the United States of America on the date of this Agreement.
"GENERAL PARTNER" shall mean IR-TCI Partners V, L.P., the
general partner of Seller.
"GOVERNMENTAL AUTHORITY" shall mean any of the following: (a)
the United States of America; (b) any state, commonwealth, territory or
possession of the United States of America and any political subdivision thereof
(including counties, municipalities and the like); or (c) any agency, authority
or instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
"GOVERNMENTAL PERMITS" shall mean all franchises,
authorizations, permits, licenses, easements, registrations, leases, variances
and similar rights obtained from any Governmental Authority which authorize or
are required in connection with the operation of the Business, including those
described on SCHEDULE 1.5.
"HAZARDOUS SUBSTANCES" shall mean any pollutant, contaminant,
chemical, industrial, toxic, hazardous or noxious substance or waste which is
regulated by any Governmental Authority, including (a) any petroleum or
petroleum compounds (refined or crude), flammable substances, explosives,
radioactive materials or any other materials or pollutants which pose a hazard
or potential hazard to the Real Property or to Persons in or about the Real
Property or cause the Real Property to be in violation of any laws, regulations
or ordinances of federal, state or applicable local governments, (b) asbestos or
any asbestos-containing material of any kind or character, (c) polychlorinated
biphenyls ("PCBs"), as regulated by the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., (d) any materials or
5
<PAGE> 14
substances designated as "hazardous substances" pursuant to the Clean Water Act,
33 U.S.C. Section 1251 et seq., (e) "economic poison," as defined in the Federal
Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. Section 135 et seq., (f)
"chemical substance," "new chemical substance" or "hazardous chemical substance
or mixture" pursuant to the Toxic Substances Control Act, referred to above, (g)
"hazardous substances" pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq. and (h)
"hazardous waste" pursuant to the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.
"HOMES PASSED" shall mean, with respect to the System and as
of June 30, 1996, the total of (a) the number of single family residences
capable of being serviced without further line construction, (b) the number of
units in multi-family residential buildings capable of being serviced without
further line construction and not then governed by bulk-service agreements and
(c) the number of bulk service agreements regardless of the number of units
serviced or the equivalent billing units.
"HSR ACT" shall have the meaning set forth in Section 7.6.
"INDEMNITY ESCROW AGENT" shall mean The Chase Manhattan Bank.
"INDEMNITY ESCROW AGREEMENT" shall mean the Indemnity Escrow
Agreement to be entered into at Closing among Buyer, Seller and the Indemnity
Escrow Agent, in the form attached as Exhibit F.
"INTANGIBLES" shall mean all general intangibles, including
subscriber lists, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use by Seller
in connection with the Business.
"IRS" shall mean the Internal Revenue Service.
"LEGAL REQUIREMENT" shall mean any statute, ordinance, code,
law, rule, regulation, order or other requirement, standard or procedure
enacted, adopted or applied by any Governmental Authority, including judicial
decisions applying common law or interpreting any other Legal Requirement.
"LIMITED PARTNERS" shall mean the Persons who own or hold
units of limited partnership interests in Seller.
"MANAGEMENT AGREEMENT" shall mean the agreement related to the
operation of the System and the other cable systems owned by Seller between
Seller and TCI Cablevision Associates, Inc. (formerly known as Daniels &
Associates, Inc.).
"MUST CARRY ELECTION" shall mean the exercise by WXMT of its
must carry rights pursuant to Section 4 of the Cable Act.
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<PAGE> 15
"1996 FINANCIAL STATEMENTS" shall have the meaning set forth
in Section 7.2.
"PARTNERSHIP AGREEMENT" shall mean the Amended and Restated
Limited Partnership Agreement of Seller, dated as of January 1, 1987, by and
between IR-TCI Partners V, L.P. (formerly known as IR-Daniels Partners V, L.P.),
as the general partner, and David B. Beyth, as the initial limited partner.
"PAY TV" shall mean premium programming services selected by
and sold to subscribers of the System for monthly fees in addition to the fee
for Basic Services.
"PERMITTED ENCUMBRANCES" shall mean the following: (a) liens
for taxes, assessments and governmental charges not yet due and payable; (b)
zoning laws and ordinances and similar Legal Requirements; (c) rights reserved
to any Governmental Authority to regulate the affected property; (d) as to
leased Assets, interests of lessors and Encumbrances affecting the interests of
the lessors; (e) the Encumbrances described on SCHEDULE 1.6; and (f) any liens,
easements, rights-of-way, servitudes, permits, leases, restrictions and
imperfections or irregularities in title that do not in any material respect,
individually or in the aggregate, affect or impair the value or use of the
affected Asset as it is currently being used by Seller.
"PERSON" shall mean any natural person, corporation,
partnership, trust, unincorporated organization, association, limited liability
company, Governmental Authority or other entity.
"PRELIMINARY ADJUSTMENTS REPORT" shall have the meaning set
forth in Section 3.4(a).
"PRIME RATE" shall mean the rate of interest quoted from time
to time in The Wall Street Journal as the prime rate.
"PURCHASE PRICE" shall have the meaning set forth in Section
3.1.
"REAL PROPERTY" shall mean all Assets consisting of interests
in real property (including, to the extent applicable, improvements, fixtures
and appurtenances), including the fee and leasehold interests described on
SCHEDULE 1.7.
"REGULATORY REQUIREMENT" shall mean any filing required
pursuant to the Securities Act, the Exchange Act, the HSR Act, state securities
laws (including, but not limited to, state "blue sky" laws) and state corporate
laws (including, but not limited to, takeover statutes).
"REQUIRED CONSENTS" shall mean the Consents designated as such
on SCHEDULE 1.2 by an asterisk.
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<PAGE> 16
"RETRANSMISSION CONSENT AGREEMENTS" shall mean the
retransmission consent agreements with respect to the carriage of broadcast
television signals between TCI Cable Management and each of WSMV and WTVF.
"SCHEDULES" shall mean the schedules prepared and delivered
pursuant to this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLER" shall mean the Person indicated as such in the
preamble to this Agreement.
"SELLER CONTRACTS" shall mean all contracts, agreements and
leases, other than those that are Governmental Permits, to which Seller is a
party and pertain to the ownership, operation or maintenance of the Assets or
the Business, including those described on Schedule 1.8.
"SELLER'S ESCROW" shall have the meaning set forth in Section
3.1.
"SELLER FINANCIAL STATEMENTS" shall have the meaning set forth
in Section 5.11.
"SYSTEM" shall mean a cable television reception and
distribution system operated in the conduct of the Business, consisting of one
or more headends, subscriber drops and associated electronic and other
equipment, and which is, or is capable of being without modification, operated
as an independent system without interconnections to other systems as set forth
on SCHEDULE 1.9.
"TAKING" shall have the meaning set forth in Section 7.7(b).
"TAX RETURN" shall mean any return, report, information return
or other document (including any related or supporting information) filed or
required to be filed with any taxing authority in connection with the
determination, assessment, collection, administration or imposition of any
Taxes.
"TAXES" shall mean all taxes, charges, fees, liens, imposts,
duties or other assessments including, but not limited to, income, withholding,
excise, employment, property, sales, franchise, use and gross receipt taxes,
imposed by the United States or any state, county, local or foreign government
or any subdivision thereof. Such term shall also include any interest, penalties
or additions attributable to such assessments.
"TCI" shall mean TCI Communications, Inc., a Delaware
corporation.
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<PAGE> 17
"TELECOM ACT" shall have the meaning set forth in Section
5.8(e).
"TERMINATION DATE" shall mean June 27, 1997; provided,
however, Seller and Buyer shall each have the right, upon five days notice to
the other, to extend the Termination Date to a date designated in such notice,
which date shall in no event be later than August 26, 1997; provided further,
Seller shall have the right, upon five days notice to Buyer, to further extend
the Termination Date to a date designated in such notice, which date shall in no
event be later than November 24, 1997.
"WARN ACT" shall mean the Worker Adjustment and Retraining
Notification Act.
ARTICLE II
2. PURCHASE AND SALE OF ASSETS.
2.1 PURCHASE AND SALE OF ASSETS. Subject to the satisfaction
of the conditions to each party's obligations set forth in Articles VIII and IX
(or, with respect to any condition not satisfied, the waiver thereof by the
party or parties for whose benefit the condition exists), Seller shall sell,
assign, transfer and deliver to Buyer all of Seller's right, title and interest
in, and Buyer shall purchase, acquire, accept and pay for, the Assets free and
clear of and expressly excluding all debts, liabilities, obligations, taxes,
liens and encumbrances (other than Permitted Encumbrances) of any kind,
character or description, whether accrued, absolute, contingent or otherwise
(and whether or not reflected or reserved against in the balance sheets, books
of account and records of the Seller), except as otherwise expressly provided in
Section 4.1 hereof.
2.2 TIME AND PLACE OF CLOSING. Subject to the terms and
conditions of this Agreement, the Closing shall take place at 10:00 a.m. New
York City time on a date specified by notice (the "CLOSING NOTICE") from Seller
to Buyer (but shall not in any event be prior to the satisfaction or waiver of
the conditions to Closing as set forth in Articles VIII and IX), in New York,
New York at the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP, or at
such other time or place as the parties may agree; provided, however, the date
specified in the Closing Notice shall not be less than 10 nor more than 30 days
after the date the Closing Notice is given; provided, further that if the
Termination Date would otherwise occur within such 10-day period, the
Termination Date shall be extended to the date which is 10 days after the date
the Closing Notice is given (or the next Business Day if such date is not a
Business Day).
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<PAGE> 18
ARTICLE III
3. CONSIDERATION.
3.1 CONSIDERATION FOR THE ASSETS. The aggregate consideration
for the Assets shall consist of (i) an amount equal to $19,750,000, subject to
proration as set forth in Section 3.2 and adjustment as set forth in Section 3.3
(the "PURCHASE PRICE") and (ii) the assumption by Buyer of the Assumed
Liabilities. The Purchase Price shall be payable as follows: (a) $493,750 (such
amount, as increased by any earnings thereon and as reduced by any disbursements
or losses on investments, the "DEPOSIT"), payable concurrently with the
execution and delivery of this Agreement in cash by means of wire or interbank
transfer in immediately available funds to the trust account of Kaye, Scholer,
Fierman, Hays & Handler, LLP (the "ESCROW AGENT"), to be held, administered and
distributed for the respective benefits of the parties hereto in accordance with
the terms of this Agreement and the Escrow Agreement among Seller, Buyer and the
Escrow Agent dated the date of this Agreement (the "ESCROW AGREEMENT") in the
form set forth as Exhibit B attached hereto and (b) $19,750,000 payable by Buyer
to Seller, or Seller's designee, at Closing in cash by means of wire or
interbank transfer in immediately available funds, reduced by the amount, if
any, of the Deposit actually released to Seller, or Seller's designee. At
Closing, Seller and Buyer shall direct the Escrow Agent to release the Deposit
to Seller, or Seller's designee, in accordance with the terms of the Escrow
Agreement. Simultaneously with the payment of the Purchase Price, Seller shall
deposit $493,750 (such amount, as increased by any earnings thereon and as
reduced by any disbursements or losses on investments, "SELLER'S ESCROW") in
cash by means of wire or interbank transfer of immediately available funds to
the account of the Indemnity Escrow Agent, to be held, administered, and
distributed in accordance with the terms of this Agreement and the Indemnity
Escrow Agreement.
3.2 PURCHASE PRICE PRORATIONS. (a) All revenues (other than
Accounts Receivable being purchased by Buyer hereunder) and all expenses arising
from the operations of the Business up until 12:01 a.m. on the Closing Date (the
"ADJUSTMENT TIME"), including, but not limited to, pole rental fees, rental or
other charges payable in respect of the Seller Contracts, sales and use taxes
payable with respect to cable television service and equipment, which shall not
include sales or use taxes arising out of the consummation of the transaction
contemplated hereunder, power and utility charges, real and personal property
taxes and assessments levied against the Assets, applicable franchise, copyright
or other fees, sales and service charges, wages, payroll taxes and payroll
expenses (including accrued vacation pay except to the extent a Purchase Price
adjustment in Buyer's favor is made under Section 3.3) of employees of Employer
who primarily perform services in connection with the operation of the Business
who are employed by Buyer as of the Closing, and other prepaid and deferred
items shall be prorated between Buyer and Seller as of the Adjustment Time in
accordance with GAAP and the principle that Seller shall receive all revenues
(other than Accounts Receivable being purchased by Buyer hereunder) and shall be
responsible for all expenses, costs and liabilities allocable to the period
prior to the Adjustment Time and Buyer shall receive all revenues and shall be
responsible for all expenses, costs and liabilities allocable to the period
after the Adjustment Time.
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(b) The amount of each item of revenue prorated
under subsection (a) above, to a party which has not received, and under the
terms of this Agreement will not receive, such revenue shall be deemed a charge
against the other party. The amount of any item of cost or expense prorated
under subsection (a) above to a party which has not paid, and under the terms of
this Agreement will not pay, such cost or expense shall be deemed a charge
against such party. If the aggregate charges allocated to Seller as set forth in
this Section 3.2(b) exceed the aggregate charges allocated to Buyer as set forth
in this Section 3.2(b), the Purchase Price shall be decreased by an amount equal
to the difference between the aggregate charges allocated to Seller and the
aggregate charges allocated to Buyer. If the aggregate charges allocated to
Buyer as set forth in this Section 3.2(b) exceed the aggregate charges allocated
to Seller as set forth in this Section 3.2(b), the Purchase Price shall be
increased by an amount equal to the difference between the aggregate charges
allocated to Buyer and the aggregate charges allocated to Seller.
3.3 PURCHASE PRICE ADJUSTMENTS. (a) The Purchase Price shall
be increased by an amount equal to the aggregate of the following:
(i) (a) 95% of the face amount of all Accounts
Receivable which, as of the Adjustment Time, are outstanding for a period of not
more than 30 days after their respective invoice dates and (b) 85% of the face
amount of all Accounts Receivable which, as of the Adjustment Time, are
outstanding for a period of more than 30 days but not more than 60 days after
their respective invoice dates; and
(ii) to the extent not included in the
prorations to the Purchase Price as set forth in Section 3.2, the dollar amount
of all advance payments to, or deposits with, third parties relating to the
Business which, as of the Closing Date, are for the account of Seller or are
security for Seller's performance of its obligations under any agreement
relating to the Business or any Assets, including, but not limited to, deposits
made with lessors and deposits for utilities.
(b) The Purchase Price shall be decreased by an
amount equal to the aggregate of the following:
(i) the dollar amount of the remaining balance, as
of the Closing Date, of all advance payments to, or monies of third parties on
deposit with, Seller relating to the Business, including advance payments and
deposits by customers served by the Business for converters, encoders, decoders,
cable service and related sales;
(ii) the dollar amount of accrued vacation pay of
employees of Employer identified on Schedule 5.13(d) who are employed by Buyer
as of the Closing;
(iii) if, as of the Closing Date, the aggregate
number of Equivalent Basic Subscribers served by the System is less than 11,500,
an amount equal to (x) the difference between 11,500 and the aggregate number of
Equivalent Basic Subscribers served by the System as of the Closing Date times
(y) $1,717; and
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(iv) 100% of the dollar amount of any deductibles
paid, or to be paid, under insurance policies for which insurance proceeds are
payable to Buyer pursuant to Section 7.9(a).
(c) If the Purchase Price is decreased pursuant to
Section 3.3(b)(iii), Seller shall deliver to Buyer at Closing a list of each of
the System's subscribers who, as of the Closing Date, have not qualified as an
Equivalent Basic Subscriber because they have not paid in full at least two
months of the services ordered. The Purchase Price shall be increased by an
amount equal to (x) the number of subscribers on such list who, as of the date
which corresponds to the Closing Date for the month following the month during
which the Closing occurs, qualify as Equivalent Basic Subscribers, times (y)
$1,717; provided, that, the amount by which the Purchase Price is increased
pursuant to this Section 3.3(c) shall not exceed the amount by which the
Purchase Price is decreased pursuant to Section 3.3(b)(iii). Any increase to the
Purchase Price pursuant to this Section 3.3(c) shall be reflected as an
adjustment to the Purchase Price on the Final Adjustments Report.
3.4 PRELIMINARY AND FINAL SETTLEMENTS. Preliminary and final
adjustments to the Purchase Price will be determined as follows:
(a) At least five Business Days prior to the
Closing Date, Seller will deliver to Buyer a report (the "PRELIMINARY
ADJUSTMENTS REPORT"), prepared in good faith and on a reasonable basis, setting
forth in reasonable detail a pro forma determination as of the Closing Date of
the prorations set forth in Section 3.2 and the adjustments set forth in Section
3.3 (other than Section 3.3(c)). The Preliminary Adjustments Report shall be
certified by an authorized officer of the general partner of the General Partner
to have been prepared in good faith and on a reasonable basis.
(b) Within 60 days after the Closing Date, Seller
will deliver to Buyer a report (the "FINAL ADJUSTMENTS REPORT"), prepared in
good faith and on a reasonable basis, setting forth in reasonable detail the
final determination of the prorations set forth in Section 3.2 and the
adjustments set forth in Section 3.3 (including Section 3.3(c)). The Final
Adjustments Report shall make such changes to the Preliminary Adjustments Report
as are necessary to cover those prorations or adjustments which (i) were
estimated or were not calculated as of the Closing Date in the Preliminary
Adjustments Report and (ii) were adjusted in the Preliminary Adjustments Report
and which require subsequent adjustment. The Final Adjustments Report shall be
certified by an authorized officer of the general partner of the General Partner
to be true, complete and correct as of the date it is delivered.
Buyer shall provide Seller with reasonable access to all
records which Buyer has in its possession and which are necessary for Seller to
prepare the Final Adjustments Report.
(c) Within 30 days after receipt of the Final
Adjustments Report, Buyer shall review the Final Adjustments Report and notify
Seller whether or not Buyer accepts all or any of the prorations and adjustments
set forth on the Final Adjustments Report. If Buyer
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accepts the Final Adjustments Report with respect to all prorations and
adjustments contained therein, Buyer or Seller, as appropriate, shall, within
five Business Days of such acceptance, make the following payments: (i) if the
Purchase Price calculated based on the Final Adjustments Report is greater than
the Purchase Price calculated based on the Preliminary Adjustments Report, Buyer
shall pay such difference to Seller in cash by wire or interbank transfer in
immediately available funds, or (ii) if the Purchase Price calculated based on
the Final Adjustments Report is less than the Purchase Price calculated based on
the Preliminary Adjustments Report, Seller shall pay such difference to Buyer in
cash by wire or interbank transfer in immediately available funds, and such
amounts to be paid by Seller shall not be subject to the limitations of Article
XII or reduce the Seller's Escrow; provided that Buyer may, at its option, seek
payment of such amounts from Seller's Escrow. In the event any payment required
by this Section 3.4(c) is not made when due, Seller or Buyer, as appropriate,
shall make the payment required by this Section 3.4(c) with interest accruing
from the date such payment was due at the Prime Rate plus 5%.
(d) If Buyer in good faith objects to any
prorations and/or adjustments set forth on the Final Adjustments Report, Buyer
shall give notice thereof to Seller within 30 days after receipt of the Final
Adjustments Report, specifying in reasonable detail the nature and extent of
such disagreement and Buyer and Seller shall have a period of 30 days from
Seller's receipt of such notice in which to resolve such disagreement. If such
notice of objection is not received by Seller within 30 days after receipt of
the Final Adjustments Report, it shall be deemed that Buyer has accepted the
Final Adjustments Report with respect to all items set forth therein and within
three Business Days after the expiration of such 30-day period Buyer or Seller,
as appropriate, shall make the payments described in Section 3.4(c). Any
disputed amounts which cannot be agreed to by the parties within 30 days from
Seller's receipt of Buyer's notice of objection to any of the adjustments set
forth in the Final Adjustments Report shall be determined by a nationally
recognized accounting firm selected by Seller and Buyer which has not regularly
rendered accounting or auditing services to Seller or Buyer or any of their
respective Affiliates within two years prior to the date of this Agreement (the
"Accountants") in accordance with the engagement letter set forth on Exhibit C
attached hereto with such changes as may be requested by the Accountants and
approved by Seller and Buyer. The engagement of and the determination by the
Accountants shall be binding on and shall be nonappealable by Seller and Buyer.
In the event that (a) the Purchase Price calculated based on the determination
by the Accountants is less than the Purchase Price calculated based on the Final
Adjustments Report, the fees and expenses payable to the Accountants shall be
paid by Seller or (b) the Purchase Price calculated based on the determination
of the Accountants is greater than or equal to the Purchase Price calculated
based on the Final Adjustments Report, the fees and expenses payable to the
Accountants shall be paid by Buyer. Within five Business Days after the
determination by the Accountants of all disputed prorations and/or adjustments,
Buyer or Seller, as appropriate, shall make the payments described in Section
3.4(c) as if the determinations of the Accountants were included in the Final
Adjustments Report. In the event any payment required by this Section 3.4(d) is
not made when due, Seller or Buyer, as appropriate, shall make the payment
required by this Section 3.4(d) with interest accruing from the date such
payment was due at the Prime Rate plus 5%.
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3.5 DISPUTED LIABILITIES. If a proration or adjustment to the
Purchase Price is made in Buyer's favor for any liability assumed by Buyer but
is in good faith being contested by Seller as of the Closing Date, and if Buyer
is relieved of this liability, Buyer shall pay to Seller or its designee in cash
(by means of wire or interbank transfer in immediately available funds) an
amount equal to the unpaid portion of this liability within five Business Days
after the date Buyer is relieved of this liability. In the event any payment
required by this Section 3.5 is not made by Buyer when due, Buyer shall make the
payment required by this Section 3.5 with interest accruing from the date such
payment was due at the Prime Rate plus 5%.
3.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the classes of assets set forth in Section 1060 of the Code and
the regulations thereunder in the manner agreed to by the parties prior to the
Closing. After the Closing, Seller shall cooperate with Buyer in the
preparation, execution and filing with the IRS of all information returns and
supplements thereto required to be filed by the parties under Section 1060 of
the Code relating to the allocation of such consideration, and Seller and Buyer
agree to file Form 8594 (or any substitute therefor) when required by applicable
law.
ARTICLE IV
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 ASSIGNMENT AND ASSUMPTION. (a) Seller will assign, and
Buyer will assume and perform as they become due, for all periods on or after
the Adjustment Time (and prior to the Adjustment Time with respect to
liabilities and obligations for which a Purchase Price Adjustment is made in
Buyer's favor under Section 3.3), the following liabilities and obligations of
Seller (collectively, the "ASSUMED LIABILITIES"): (A) Seller's obligations to
subscribers of the Business for (i) refunds of subscriber deposits held by
Seller as of the Closing Date in respect of which a Purchase Price adjustment is
made in Buyer's favor under Section 3.3(b), (ii) refunds of subscriber advance
payments held by Seller as of the Closing Date for services to be rendered by
the System after the Closing Date, in respect of which a Purchase Price
adjustment is made in Buyer's favor under Section 3.3(b) and (iii) the delivery
of cable television service to customers of the System after the Closing Date in
a manner consistent with past practice; (B) obligations and liabilities in
respect of which a Purchase Price adjustment in Buyer's favor is made under
Section 3.3 including, but not limited to, accrued but unpaid real and personal
property taxes related to the Assets which correspond to a period of time prior
to the Adjustment Time, expenses accrued under Governmental Permits and Seller
Contracts which correspond to a period of time prior to the Adjustment Time and
certain accrued vacation pay; (C) obligations accruing and relating to periods
on or after the Adjustment Time under Governmental Permits and Seller Contracts;
(D) any taxes accrued on or after the Adjustment Time in connection with the
ownership of the Assets and the ownership of the Assets and the operation of the
Business; and (E) all other liabilities of Seller arising out of or relating to
the conduct of the Business and incurred in the ordinary course of business.
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(b) Except for the Assumed Liabilities, Buyer will
not assume or have any responsibility for any liabilities or obligations of
Seller which arise out of, result from, or relate to, (i) the Excluded Assets or
(ii) the conduct of the Business prior to the Adjustment Time (except to the
extent a Purchase Price adjustment in Buyer's favor is made under Section
3.3(b)) (collectively, the "EXCLUDED LIABILITIES"). Seller shall indemnify
Buyer, in accordance with Article XII, against any claim that Buyer is liable
for the Excluded Liabilities.
4.2 EXCLUDED ASSETS. Excluded from the assets which will be
transferred from Seller to Buyer pursuant to this Agreement (collectively, the
"EXCLUDED ASSETS") are all Seller's right, title and interest in, to and under
the following: (a) all programming agreements relating to the Business; (b) all
insurance policies and rights and claims thereunder (except as otherwise
provided in Section 7.7(a)); (c) all bonds, letters of credit, surety
instruments and other similar items and any cash surrender value thereunder; (d)
all cash, cash equivalents and securities; (e) all trademarks, trade names,
service marks, service names, logos and similar proprietary rights used in the
Business; provided, that Buyer shall have the right to use such proprietary
rights for the period commencing on the Closing Date and expiring 90 days after
the Closing Date; (f) any contracts, licenses, authorizations, agreements or
commitments which are not assumed by Buyer pursuant to this Agreement; (g) the
Management Agreement; (h) any asset or properties owned by Seller that are not
used in the Business; (i) all subscriber deposits and advance payments held by
Seller as of the Closing Date in connection with the operation of the Business
for which a Purchase Price adjustment is made in Buyer's favor under Section
3.3(b); (j) all claims, rights and interests in and to any refund for federal,
state or local franchise, income or other taxes or fees (including, but not
limited to, copyright fees) of any nature relating to the operation of the
Business prior to the Closing Date; (k) the account books of original entry,
general ledgers and financial records used in connection with the Business,
provided that for a period of three years after the Closing Date, Buyer shall
have access to and the right to copy, at its expense, during usual business
hours upon reasonable prior notice to Seller, portions of such books and records
that are relevant to Buyer's ownership and operation of the System; (l) the
retransmission consent agreements relating to the carriage of WKRN and WZTV; and
(m) those properties, rights and interests set forth on SCHEDULE 4.2.
ARTICLE V
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Seller represents and warrants to Buyer as follows:
5.1 ORGANIZATION AND QUALIFICATION. Seller is a limited
partnership duly organized, validly existing and in good standing under the laws
of the state of Colorado and has all requisite partnership power and authority
to own, lease and use the Assets as they are currently owned, leased and used
and to conduct the Business as it is currently conducted. Seller is duly
qualified or licensed to do business and is in good standing under the laws of
Tennessee.
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5.2 AUTHORITY AND VALIDITY. Seller has full partnership power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Seller have been
duly and validly authorized by all necessary action on the part of Seller (other
than, with respect to the sale of the Assets, the approval of such transaction
contemplated by this Agreement by the Limited Partners). The General Partner has
taken all necessary action so that it may recommend that the Limited Partners
approve the transactions contemplated by this Agreement. This Agreement has been
duly and validly executed and delivered by Seller and constitutes a valid and
binding obligation of Seller enforceable in accordance with its terms. Except
for the approval by the Limited Partners, no further partnership action on the
part of Seller is required in connection with the consummation of the
transactions contemplated by this Agreement.
5.3 CONSENTS AND APPROVALS; NO VIOLATION. (a) Except for (i)
the Consents, (ii) the consent of the Limited Partners with respect to the
transactions contemplated by this Agreement and (iii) the Regulatory
Requirements, no consent, waiver, approval or authorization of, or filing,
registration or qualification with, any Governmental Authority is required to be
made or obtained by Seller in connection with the execution, delivery and
performance of this Agreement by Seller.
(b) Except as set forth on SCHEDULE 5.3(B), the
execution, delivery and performance of this Agreement by Seller do not and will
not: (a) violate or conflict with any provision of the Partnership Agreement;
(b) violate any Legal Requirement; or (c) (i) violate, conflict with or
constitute a breach of or default under (without regard to requirements of
notice, passage of time or elections of any Person), (ii) permit or result in
the termination, suspension or modification of, (iii) result in the acceleration
of (or give any Person the right to accelerate) the performance of Seller under,
or (iv) result in the creation or imposition of any Encumbrance under, any
Seller Contract or any other instrument evidencing any of the Assets or any
instrument or other agreement to which Seller is a party or by which Seller or
any of its assets is bound or affected, except such violations, conflicts,
breaches, defaults, terminations, suspensions, modifications, and accelerations
which would not, individually or in the aggregate, have a material adverse
effect on the System, the Business, or Seller's ability to perform its
obligations under this Agreement or Buyer's ability to conduct the Business
after the Closing in substantially the same manner in which it is currently
conducted by Seller.
5.4 COMPLETE SYSTEMS. Except as set forth on SCHEDULE 5.4, the
Assets represent all assets, properties, franchises, licenses, permits,
consents, certificates, authorities, operating rights, leases, contracts, (with
the exception of programming contracts and retransmission consents which Buyer
acknowledges may need to be replaced in order for Buyer to continue to operate
the Business), agreements, commitments and arrangements reasonably necessary for
the conduct of the Business in the ordinary course in the same manner as that in
which such business is currently conducted by Seller.
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5.5 TITLE. Except as set forth on SCHEDULE 5.5 and for the
Permitted Encumbrances, Seller has, and on the Closing Date will have, good and
marketable title to the Assets. The Assets on the Closing Date will be free and
clear of all Encumbrances of any kind or nature, other than Permitted
Encumbrances.
5.6 REAL PROPERTY. (a) All the Assets consisting of interests
in Real Property that are material to the conduct of the Business are described
on SCHEDULE 1.7. Seller has valid leasehold interests in Real Property leased by
Seller under written leases or subleases, correct and complete copies of which
have been made available to Buyer.
(b) All material easements, rights-of-way and other
rights which are necessary in any material respect for Seller's current use of
any Real Property are valid and in full force and effect, and, to the Best of
Seller's Knowledge, Seller has not received any notice with respect to the
termination or breach of any of those rights.
5.7 ENVIRONMENTAL MATTERS. (a) Except as set forth on SCHEDULE
5.7, to the Best of Seller's Knowledge, Seller's use of the Real Property
complies in all material respects with all Environmental Laws. Seller has not
received written notice or, to the Best of Seller's Knowledge, oral notice of
any claim or investigation based on Environmental Laws which relates to any Real
Property or any operations conducted by Seller on such Real Property.
(b) Seller has provided, or prior to Closing will
provide, Buyer with complete and correct copies of (i) all studies, reports,
surveys or other materials in Seller's possession relating to the presence or
alleged presence of Hazardous Substances at, on or affecting the Real Property,
(ii) all notices or other materials in Seller's possession that were received
from any Governmental Authority having the power to administer or enforce any
Environmental Laws relating to current or past ownership, use or operation of
the Real Property or activities at the Real Property and (iii) all materials in
Seller's possession relating to any claim, allegation or action by any private
third party under any Environmental Law.
5.8 COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS. (a) Except as
set forth on SCHEDULE 5.8, the ownership, leasing and use of the Assets as they
are currently owned, leased and used by Seller and the conduct of the Business
as it is currently conducted by Seller, do not violate any Legal Requirement,
which violation(s), individually or in the aggregate, reasonably could be
expected to have a material adverse effect on the Business. Seller has not
received any notice claiming a violation by Seller or the Business of any Legal
Requirement applicable to Seller or the Business as it is currently conducted
and, to the Best of Seller's Knowledge, no basis exists for any person to claim
that such a violation exists.
(b) SCHEDULE 1.5 lists all Governmental Permits
that are material to the conduct of the Business as it is currently conducted by
Seller, together with the expiration date of each Governmental Permit and any
Franchise Fee charged, as of June 30, 1996, by the applicable Governmental
Authority. Complete and correct copies of all such Governmental Permits as
currently in effect have been, or prior to the Closing will be, made available
to Buyer. All such
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Governmental Permits are currently in full force and effect. There is no action,
proceeding or investigation pending or, to the Best of Seller's Knowledge,
threatened, relating to the termination, suspension or modification of any such
Governmental Permit and Seller is in compliance in all material respects with
the terms and conditions of all Governmental Permits.
(c) The operation of the System has been, and is,
in compliance in all material respects with the Communications Act of 1934, as
amended (as so amended, the "COMMUNICATIONS ACT"), and the rules and regulations
of the Federal Communications Commission (the "FCC"), except that, as to any
rate regulation thereunder the foregoing is limited to the Best of Seller's
Knowledge. Seller has delivered, or prior to Closing will deliver, to Buyer
complete and correct copies of all reports and filings for the past three years
made or filed pursuant to the Communications Act or FCC rules and regulations
with respect to the Business.
(d) To the Best of Seller's Knowledge, the
operation of the System has been, and is, in compliance in all material respects
with the Cable Television Consumer Protection and Competition Act of 1992 (the
"CABLE ACT"), and the rules and regulations of the FCC promulgated thereunder.
All broadcast television signals carried by the System pursuant to the
Retransmission Consent Agreements and Must Carry Election are being carried in
compliance in all material respects with the Communications Act and the Cable
Act. Copies of the Retransmission Consent Agreements and Must Carry Election
have been provided to Buyer by Seller.
(e) To the Best of Seller's Knowledge, the
operation of the System has been, and is, in compliance in all material respects
with the Telecommunications Act of 1996 (the "TELECOM ACT"), and the rules and
regulations of the FCC promulgated thereunder.
5.9 SELLER CONTRACTS. SCHEDULE 1.8 lists all Seller Contracts
that are material to the conduct of the Business as it is now conducted.
Complete and correct copies of the Seller Contracts as currently in effect have
been, or prior to the Closing will be, made available to Buyer. Neither Seller
nor, to the Best of Seller's Knowledge, any other party to any Seller Contract
is in any material respect in breach of the performance of its obligations under
any Seller Contract.
5.10 COPYRIGHT COMPLIANCE. Seller has deposited with the
United States Copyright Office all statements of account and other documents and
instruments, and paid all royalties, supplemental royalties, fees and other sums
to the United States Copyright Office, required under the Copyright Act with
respect to the Business and operations of the System as are required to obtain,
hold and maintain the compulsory copyright license for cable television systems
prescribed in Section 111 of the Copyright Act. Seller and the System are in
material compliance with the Copyright Act. Seller and the System are entitled
to hold and do now hold the compulsory copyright license described in Section
111 of the Copyright Act, which compulsory copyright license is in full force
and effect and has not been revoked, canceled, encumbered or materially
adversely affected in any manner. Seller has made available to Buyer
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complete and correct copies of all reports and filings, and all reports and
filings for the past three years, made or filed pursuant to the Copyright Act
with respect to the Business. Seller has not received any notice to the effect
that the conduct of the Business as currently conducted infringes on the rights
of any Person in any copyright or other intellectual property right, except as
to potential copyright liability arising from the performance, exhibition or
carriage of any music on the System.
5.11 FINANCIAL STATEMENTS. (a) Seller has delivered to Buyer
correct and complete copies of certain financial information for the System for
the years ended December 31, 1995 and December 31, 1994 and the six-month period
ended June 30, 1996 (collectively, the "SELLER FINANCIAL STATEMENTS"). Except
for the absence of footnote disclosures, cash flow statements and statements of
equity and except for estimated, annualized or projected financial information,
the Seller Financial Statements fairly present, in all material respects, the
results of operations of the System for the respective periods ended on such
dates, all in conformity with GAAP consistently applied, and with respect to the
Seller Financial Statements for the six-month period ended June 30, 1996,
subject to normal year-end adjustments (none of which are expected to be
material in amount).
(b) Since the latest date of the Seller Financial
Statements (i) the Business has been operated only in the ordinary course and
(ii) there has been no material adverse change in, and no event has occurred
which, so far as reasonably can be foreseen, is likely, individually or in the
aggregate, to result in any material adverse change in the results of operations
of the Business, other than any change arising out of matters of a general
economic nature or matters (including, but not limited to, competition caused by
or arising from direct broadcast satellite, the Multichannel Multipoint
Distribution Service, legislation, rule making and regulation) affecting the
cable television industry (national or regional) in general.
5.12 LEGAL PROCEEDINGS. Except as set forth on SCHEDULE 5.12,
and except for any judgments, orders, actions, suits, proceedings or
investigations as may affect the cable television industry (national or
regional) generally, there is no judgment or order outstanding, or any action,
suit, proceeding or investigation by or before any Governmental Authority or any
arbitrator pending or, to the Best of Seller's Knowledge, threatened, involving
or affecting any of the Assets or the Business which, if adversely determined,
would have a material adverse effect on the Assets or the Business or would
materially impair the ability of Seller to perform its obligations under this
Agreement.
5.13 EMPLOYMENT MATTERS. (a) Seller does not employ any
individuals in connection with the operation of the Business and does not, and
is not obligated to, maintain or contribute to any employee benefit plan, as
defined in Section 3(3) of ERISA. All individuals managing the operations of the
Business are employees of TCI or its Affiliates (other than Seller) (the
"EMPLOYER"). The Employer is reimbursed for employee-related expenses relating
to the operations of the Business by Seller under the Management Agreement or
the Partnership Agreement.
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(b) To the Best of Seller's Knowledge after inquiry
of Employer, Employer has complied in all material respects with all Legal
Requirements relating to the employment of labor and those relating to wages,
hours, collective bargaining, unemployment compensation, worker's compensation,
equal employment opportunity, age and disability discrimination, immigration
control and the payment and withholding of taxes with respect to employees of
Employer who primarily perform services in connection with the operation of the
Business.
(c) Employer is not a party to any contract with
any labor organization, and Employer has not recognized or agreed to recognize
any union or other collective bargaining unit with respect to employees of
Employer who primarily perform services in connection with the operation of the
Business. Except as set forth on SCHEDULE 5.13(c), no union or other collective
bargaining unit has been certified as representing any of the employees engaged
in the operation of the Business, and, to the Best of Seller's Knowledge,
Employer has not received any request from any party for recognition as a
representative of employees engaged in the operation of the Business for
collective bargaining purposes. Neither Seller nor Employer is party to any
agreement, oral or written, express or implied, that would require Buyer to
employ any individual after the Closing Date.
(d) SCHEDULE 5.13(d) sets forth a true and complete
list of all individuals employed by Employer who primarily perform services with
respect to the operation of the Business together with the employees' salaries
or wages as of June 30, 1996. Except as provided on SCHEDULE 5.13(d), neither
Seller nor Employer is a party to any written employment contract, agreement,
commitment or arrangement with any individual identified on SCHEDULE 5.13(d).
(e) Except for those plans described on SCHEDULE
5.13(e) and in the TCI Employee Handbook dated February, 1995 (the "EMPLOYER
PLANS"), which are sponsored by the Employer, or to which the Employer
contributes or is obligated to contribute, the employees of Employer who
primarily perform services with respect to the operation of the Business do not
receive benefits under any bonus, deferred compensation, pension,
profit-sharing, retirement, severance pay, insurance, stock purchase, stock
option, or other fringe benefit plan, arrangement or practice, or any other
employee benefit plan, as defined in Section 3(3) of ERISA.
(f) Seller has not incurred or taken any action,
and to the Best of Seller's Knowledge, no action or event has occurred, that
could cause Seller to incur any material liability (i) under Section 412 of the
Code or Title IV of ERISA with respect to any Employer Plan that is a
single-employer plan, within the meaning of Section 4001(a)(15) of ERISA, (ii)
on account of a partial or complete withdrawal from any Employer Plan that is a
multiemployer plan, within the meaning of Section 3(37) of ERISA, or on account
of any unpaid contributions to any such multiemployer plan, or (iii) for any tax
or penalty under Section 4975 of the Code or Section 502(i) of ERISA on account
of any prohibited transaction, within the meaning of Section 4975 of the Code
or Section 406 of ERISA, with respect to any Employer Plan.
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5.14 SYSTEM INFORMATION. (i) The number of Equivalent Basic
Subscribers served by the System, the number of subscribers served by the System
taking Expanded Basic Services, the bandwidth of the System and channel line up
of the System and (ii) to the Best of Seller's Knowledge, the number of Homes
Passed by the System and the approximate number of miles of plant included in
the Assets, each as of June 30, 1996, are as set forth on SCHEDULE 5.14. The
Basic Subscriber Rate and rate for Expanded Basic Services, each as of June 30,
1996, are as set forth on SCHEDULE 1.1.
5.15 FINDERS AND BROKERS. Except for its engagement of Daniels
& Associates, L.P. to assist Seller in the solicitation of offers to purchase
the Assets and except for a disposition fee payable by Seller to an Affiliate
pursuant to its Partnership Agreement, Seller has not employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement.
5.16 TAX MATTERS. Except as set forth on SCHEDULE 5.16, (a)
all Tax Returns required to be filed by Seller before the Closing with respect
to the Business or the Assets have been or will be filed on or before the
Closing and (b) all Taxes shown as due or payable before the Closing on such Tax
Returns have been or will be paid when required by law.
5.17 CONDITION OF ASSETS. The tangible Assets, taken as a
whole, are in generally good working condition and repair, normal wear and tear
excepted, and are capable of being used to deliver CATV services to the present
subscriber base in a manner consistent with past practices of Seller.
5.18 REGULATION OF RATES. As of the date hereof, none of the
political entities or authorities which have granted a Governmental Permit have
been, or have applied to be, certified to regulate CATV rates charged by the
Seller pursuant to the Cable Act and the rules and regulations of the FCC.
Solely as of the date hereof, Seller has not received any notice of receipt by
the FCC of any complaints on Form 329 of tier rates. Seller has not received any
notice that it has any obligation or liability to refund any portion of the
revenue received by Seller from the subscribers of the System as of the date
hereof. There has been no correspondence sent by or delivered to Seller within
the past year or, to the Best of Seller's Knowledge, within the past three
years, in any way relating to the regulation of CATV rates (other than
transmittal of rules themselves, regulations and rulemakings and general
announcements that are not specifically related to the regulation of rates of
the System), from the FCC or any other Governmental Authority.
5.19 INSURANCE. Seller has maintained insurance policies in
the ordinary course of business which when taken together provide insurance
coverage for the Assets and the operations of the Business as is customary for
similar businesses similarly situated.
5.20 NO OTHER COMMITMENT TO SELL. No material part of the
System or the Assets is directly or indirectly subject in any manner to any
written or oral commitment or any
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arrangement for the sale, transfer, assignment, or disposition thereof, in whole
or in part, except pursuant to this Agreement.
ARTICLE VI
6. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants to Seller as follows:
6.1 ORGANIZATION AND QUALIFICATION. Buyer is a limited
liability limited partnership duly organized, validly existing and in good
standing under the laws of its state of formation and has all requisite
partnership power and authority to carry on its business as currently conducted
and to own, lease, use and operate its assets. Buyer is duly qualified or
licensed to do business and is in good standing under the laws of each
jurisdiction in which the character of the properties owned, leased or operated
by it or the nature of the activities conducted by it makes such qualification
necessary, except where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on the validity, binding
effect or enforceability of this Agreement or the ability of Buyer to perform
its respective obligations under this Agreement.
6.2 AUTHORITY AND VALIDITY. Buyer has all requisite
partnership power and authority to execute, deliver and perform its obligations
under this Agreement. The execution and delivery by Buyer of, the performance by
Buyer of its obligations under, and the consummation by Buyer of the
transactions contemplated by, this Agreement have been duly authorized by all
requisite partnership action of Buyer and no other partnership proceedings on
the part of Buyer are necessary to authorize the execution and delivery of this
Agreement or the performance of Buyer's obligations hereunder. This Agreement
has been duly and validly executed and delivered by Buyer and constitutes a
valid and binding agreement of Buyer enforceable in accordance with its terms.
6.3 NO BREACH OR VIOLATION. (a) Except for (i) any consents
that will be obtained by Buyer or waived on or prior to the Closing Date and are
identified on SCHEDULE 6.3(a), (ii) filings and consents which, if not made or
obtained, would not have a material adverse effect on Buyer's ability to perform
its obligations under this Agreement and (iii) the Regulatory Requirements, no
consent, waiver, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority is required to be made or
obtained by Buyer in connection with the execution, delivery and performance of
this Agreement by Buyer.
(b) The execution, delivery and performance of this
Agreement by Buyer do not and will not: (a) violate or conflict with any
provision of Buyer's Certificate of Incorporation or By-Laws or partnership
agreement, as the case may be, (b) violate any Legal Requirement; or (c) (i)
violate, conflict with or constitute a breach of or default under (without
regard to requirements of notice, passage of time or elections of any Person),
(ii) permit or result in the termination, suspension or modification of, (iii)
result in the acceleration of (or give any
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Person the right to accelerate) the performance of Buyer under, or (iv) result
in the creation or imposition of any Encumbrance under, any material contract,
agreement, arrangement, commitment or plan to which Buyer is a party or by which
Buyer or any of its assets is bound or affected, except such violations,
conflicts, breaches, defaults, terminations, suspensions, modifications and
accelerations as would not, individually or in the aggregate, have a material
adverse effect on Buyer's ability to perform its obligations under this
Agreement.
6.4 LITIGATION. (a) There are no claims, actions, suits,
proceedings or investigations pending or, to the best of Buyer's knowledge,
threatened, in any court or before any governmental agency or instrumentality,
or before any arbitrator, by or against or affecting or relating to Buyer or any
of its Affiliates which, if adversely determined, would restrain or enjoin the
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
(b) There are no judgments, injunctions, orders or
other judicial or administrative mandates outstanding against or affecting Buyer
or any of its Affiliates which would materially hinder or delay the consummation
of the transactions contemplated by this Agreement.
6.5 FINANCIAL STATEMENTS. Buyer has delivered to Seller copies
of its audited financial statements for its last fiscal year ("BUYER FINANCIAL
STATEMENT"). The Buyer Financial Statement and the notes thereto fairly present
the assets, liabilities and financial condition of Buyer as of the date thereof
and the results of operations and cash flows or changes in financial position,
as applicable, of Buyer for the period ended on such date, all in conformity
with GAAP consistently applied, except as may be noted therein. Buyer has
delivered to Seller copies of its unaudited financial statements for its last
fiscal quarter ("BUYER INTERIM FINANCIAL STATEMENT"). Except as noted therein,
the Buyer Interim Financial Statement was prepared on a basis consistent with
the Buyer Financial Statement and fairly presents, in conformity with GAAP
consistently applied, the financial position of Buyer as of such date and the
results of operations and cash flows or changes in financial position, as
applicable, for such period, subject to normal year-end adjustments (none of
which are expected to be material in amount), other adjustments noted therein
and the absence of footnotes.
6.6 ADEQUATE FINANCING. Buyer is able to obtain, through
borrowings under existing lines of credit, all funds necessary to satisfy all
its obligations under this Agreement and with respect to the transactions
contemplated by this Agreement, including its obligations to purchase the Assets
and to pay the Purchase Price to Seller.
6.7 FINDERS AND BROKERS. Buyer has not employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller will in any way
have any liability.
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6.8 QUALIFICATION OF BUYER. Buyer knows of no reason why it
cannot obtain the licenses and permits necessary for it to own and operate the
Business in the manner in which it is currently conducted by Seller.
ARTICLE VII
7. ADDITIONAL COVENANTS.
7.1 ACCESS TO PREMISES AND RECORDS. Between the date of
execution and delivery of this Agreement and the Closing Date, Seller will give
Buyer and its representatives, during normal business hours and with reasonable
prior notice, access to the books and records of the Business and to the Assets
and will furnish to Buyer and its representatives such information regarding the
Business and the Assets as Buyer may from time to time reasonably request.
7.2 CONTINUITY AND MAINTENANCE OF OPERATIONS; FINANCIAL
STATEMENTS; CORRESPONDENCE RELATING TO CATV RATES. Except as to actions which
Buyer has been advised and to which it has consented in writing and except as
specifically permitted or required by this Agreement or required by any Legal
Requirement, Seller shall:
(a) Operate the Business in the ordinary course
consistent with past practices and will use commercially reasonable efforts to
cause Employer to keep available the services of the employees of the Employer
who are primarily involved in the operation of the Business and to preserve any
beneficial business relationships with customers, suppliers and others having
business dealings with Seller relating to the Business;
(b) Maintain the Assets in operating condition;
(c) Maintain adequate inventories of spare
Equipment consistent with past practice;
(d) Maintain insurance as in effect on the date of
this Agreement;
(e) Keep all of its business books, records and
files in the ordinary course of business in accordance with past practices;
(f) Continue to implement its procedures for
connection of service and disconnection and discontinuance of service to
subscribers whose accounts are delinquent in accordance with those in effect on
the date of this Agreement;
(g) Not sell, transfer or assign any Assets other
than in the ordinary course of business;
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(h) Use commercially reasonable efforts not to
permit any material amendment to, or cancellation of, any of the Governmental
Permits or Seller Contracts;
(i) Not enter into any contract or commitment for
the acquisition of goods or services relating to the System or the Business
involving an expenditure in excess of $50,000 other than in the ordinary course
of business;
(j) Not take or omit to take any action that would
cause Seller to be in breach of any of its representations or warranties in this
Agreement in any material respect, provided, however, that the foregoing shall
not preclude Seller from engaging a financial advisor to render an opinion as to
the fairness, from a financial point of view, of the transactions contemplated
by this Agreement; or
(k) Not extend either of two leases for the Real
Property located at 209 Thompson Street, Shelbyville, Tennessee or 2161
Hillsboro Boulevard, Manchester, Tennessee for a period beyond one year from its
current date of expiration or extension, as applicable, without Buyer's written
consent, which consent may not be unreasonably withheld; provided, that Buyer
shall be deemed to have consented thereto if Buyer has not given Seller written
notice of its refusal to give consent, setting forth the reason for such
refusal, within three Business Days of Buyer's receipt of Seller's written
request for consent; provided, further, that Buyer's refusal to give consent to
an increase in rental rate to reflect current market conditions at the time of
extension of such lease shall be deemed to be unreasonable.
Seller shall deliver to Buyer, promptly after such statements
and reports become available to Seller, correct and complete copies of the
unaudited income statement and operating reports for the Business for the year
ended December 31, 1996 (the "1996 FINANCIAL STATEMENTS") and unaudited monthly
income statements and operating reports (the "MONTHLY FINANCIAL STATEMENTS") and
unaudited quarterly income statements and operating reports (the "QUARTERLY
FINANCIAL STATEMENTS") for the Business that are prepared by or for Seller at
any time between the date of this Agreement and the Closing. Except for the
absence of footnote disclosures, cash flow statements and statements of equity
and except for estimated, annualized or projected financial information, the
1996 Financial Statements and Quarterly Financial Statements shall fairly
present, in all material respects, the results of operations of the System for
the respective periods ended on such dates, all in conformity with GAAP
consistently applied, and with respect to the Quarterly Financial Statements,
subject to normal year-end adjustments (none of which are expected to be
material in amount); provided, that, Seller shall not be required to make and
shall not be deemed to make any representation or warranty concerning the
accuracy of the contents of the Quarterly Financial Statements for the nine
months ended September 30, 1996 or the Monthly Financial Statements.
Seller shall deliver to Buyer any correspondence received by
Seller between the date of this Agreement and the Closing Date, in any way
relating to the regulation of CATV rates (other than transmittal of rules
themselves, regulations and rulemakings and general
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announcements that are not specifically related to the regulation of rates of
the System), from the FCC or any other Governmental Authority.
7.3 EMPLOYEE MATTERS. (a) Buyer may offer employment to the
employees of Employer listed on Schedule 5.13(d) who primarily perform services
with respect to the operation of the Business as of the Closing Date. Not later
than February 27, 1997, Buyer shall deliver to Seller a notice containing the
names of employees of the Business whom Buyer intends to hire on the Closing
Date; provided, that if the Termination Date is extended by Seller or Buyer,
Buyer may deliver to Seller a notice no later than 60 Business Days prior to the
extended Termination Date updating the lists of employees which Buyer intends to
hire on the Closing Date. Seller shall undertake to provide to all affected
employees and any other necessary persons any notice that may be required under
the WARN Act. Except as provided herein, Employer shall retain all liabilities
arising prior to the Adjustment Time relating to the employees of Employer,
including severance.
(b) Nothing in this Section 7.3 or elsewhere in
this Agreement is intended to confer upon any employee of Employer or his or her
legal representative or heirs any rights as a third party beneficiary or
otherwise or any remedies of any nature or kind whatsoever under or by reason of
this Agreement, or the transactions contemplated hereby, including, but not
limited to, any rights of employment or continued employment. All rights and
obligations created by this Agreement are solely between the parties hereto.
7.4 FRANCHISE EXTENSION. Seller covenants and agrees that, as
soon as practicable following the execution of this Agreement, it will apply to
the applicable Governmental Authority for an extension (the "EXTENSION") of the
franchise described on SCHEDULE 1.5 with an expiration date prior to June 30,
2000. Seller shall use commercially reasonable efforts to obtain the Extension
for such franchise to an expiration date of March 10, 2005, but in no event
shall the Extension have an expiration date earlier than June 30, 2000. The
Extension may include modifications customarily imposed by Governmental
Authorities issuing cable television franchises as a condition to obtaining the
Extension but in any event such modifications shall not impose any conditions or
obligations which are materially more burdensome than contained in the current
franchise.
7.5 ENVIRONMENTAL REPORT. Buyer may cause to be prepared and
delivered at its expense, within 30 days after the date of this Agreement, a
Phase I environmental report and, within 60 days after the date of this
Agreement, a Phase II environmental report for the Real Property described on
Schedule 1.7. Seller shall cooperate with Buyer and permit access to such Real
Property during normal business hours in order for Buyer or its representatives
to inspect such property and the related environmental records in the possession
of Seller, as necessary for the preparation of the Phase I environmental report
or Phase II environmental report. Buyer shall deliver to Seller a copy of each
environmental report within three Business Days of receipt of such report by
Buyer. Subject to Section 10.1(b)(vi), if such environmental reports disclose
one or more adverse environmental conditions, Seller shall assume full
responsibility for remediation of each such environmental condition and shall
bear all expenses incurred in connection
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therewith; provided, that Seller concludes, in its reasonable judgment, that the
cost of all such remediation shall not exceed $200,000 in which case Seller
shall have the sole right to direct such remediation; provided, further, that if
Buyer agrees to bear any costs of remediation in excess of $200,000, Buyer shall
assume responsibility for overseeing the remediation of each such environmental
condition in consultation with Seller.
7.6 CONSENTS. Seller will use commercially reasonable efforts
to obtain, as soon as practicable and at its expense, (i) all the Required
Consents, in form and substance reasonably satisfactory to Buyer; provided, that
"commercially reasonable efforts" for purposes of this Section 7.6 and for
purposes of Section 7.4 shall not require Seller to undertake extraordinary or
unreasonable measures to obtain such approvals and consents, including, but not
limited to, the initiation or prosecution of legal proceedings or the payment of
fees in excess of normal and usual filing and processing fees (other than any
costs that may be incurred to remedy any noncompliance with the terms of any
Governmental Permit). Buyer will use commercially reasonable efforts to assist
Seller in its efforts to obtain all the Required Consents and the Extensions,
and in connection therewith will consent to such modifications to any
Governmental Permit that a Governmental Authority may request as a condition to
(i) the transfer of such permit to Buyer and/or (ii) obtaining extension of the
term of such Governmental Permit, provided, however, that Buyer will not be
required to agree to any modifications to a Governmental Permit unless they are
customarily imposed by Governmental Authorities issuing cable television
franchises as a condition to obtaining the consent to the transfer of such
franchises and do not impose upon Buyer any conditions or obligations which are
materially more burdensome than are contained in any such Governmental Permit.
If Buyer gives Seller notice that Buyer desires to grant a security interest in
Buyer's rights under any agreement or instrument that is the subject of a
Required Consent, Seller will use commercially reasonable efforts to obtain, and
Buyer will use commercially reasonable efforts to assist Seller in its effort to
obtain, the consent required to grant a security interest, provided, that Buyer
shall be responsible for the payment of any fees in connection therewith, and
provided further that no such consent shall be a condition to the obligations of
Buyer under this Agreement.
7.7 HSR NOTIFICATION. As soon as practicable after the
execution of this Agreement and if required by applicable Legal Requirements,
Seller and Buyer will each complete and file, or cause to be completed and
filed, any notification and report required to be filed under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"). Each of the parties will take any additional action that may be
necessary, proper or advisable, will cooperate to prevent inconsistencies
between their respective filings and will furnish to each other such necessary
information and reasonable assistance as the other may reasonably request in
connection with its preparation of necessary filings or submissions under the
HSR Act. Buyer and Seller shall use commercially reasonable efforts (including
the filing of a request for early termination) to obtain the early termination
of the waiting period under the HSR Act. Buyer and Seller shall each bear
one-half of any required filing fee under the HSR Act.
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7.8 NOTIFICATION OF CERTAIN MATTERS. Each party will promptly
notify the other of any fact, event, circumstance or action the existence or
occurrence of which would cause any of such party's representations or
warranties under this Agreement not to be true in any material respect.
7.9 RISK OF LOSS; CONDEMNATION. (a) Seller will bear the risk
of any loss or damage to the Assets resulting from fire, theft or other casualty
(except reasonable wear and tear) at all times prior to the Closing. If any such
loss or damage is so substantial as to prevent normal operation of any material
portion of the System, Seller shall promptly notify Buyer of that fact and
Buyer, at any time within 10 days after receipt of such notice, may elect by
written notice to Seller either (i) to waive such defect and proceed toward
consummation of the acquisition of the Assets in accordance with this Agreement
or (ii) to terminate this Agreement pursuant to Section 10.1(c)(v). If Buyer
elects to consummate the acquisition of the Assets notwithstanding such loss or
damage and does so, there will be no adjustment in the Purchase Price on account
of such loss or damage (other than a Purchase Price adjustment under Section
3.3(b)(iv)) but all insurance proceeds payable as a result of the occurrence of
the event resulting in such loss or damage (to the extent not previously applied
by Seller with respect to such loss or damage) will be delivered by Seller to
Buyer or the rights to such proceeds will be assigned by Seller to Buyer if not
yet paid over to Seller. In the event that any Assets are damaged or destroyed
prior to the Closing Date but such loss or damage is not so substantial as to
prevent normal operation of any material portion of the System, Seller shall use
commercially reasonable efforts to repair or replace, prior to the Closing Date,
any such Assets with items of like value and quality.
(b) If, prior to the Closing, any part of a
material Asset or an interest in a material Asset is taken or condemned as a
result of the exercise of the power of eminent domain, or if a Governmental
Authority having such power informs Seller or Buyer that it intends to condemn
all or any part of a material Asset (such event being referred to, in either
case, as a "TAKING"), then Buyer may terminate this Agreement pursuant to
Section 10.1(c)(vi). If Buyer does not elect to terminate this Agreement then
(a) if the Closing occurs, Buyer shall have the sole right, in the name of
Seller, if Buyer so elects, to negotiate for, claim, contest and receive all
damages with respect to the Taking, (b) Seller shall be relieved of its
obligation to convey to Buyer the Asset or interests that are the subject of the
Taking and (c) at the Closing Seller shall assign to Buyer all of Seller's
rights (including the right to receive payment of damage) with respect to such
Taking and shall pay to Buyer all damages previously paid to Seller with respect
to the Taking.
7.10 ADVERSE CHANGES. Seller shall promptly notify Buyer in
writing of any materially adverse developments affecting the Assets, the System
or the Business which become known to Seller, including, but not limited to, (i)
any damage, destruction or loss (whether or not covered by insurance) materially
and adversely affecting any of the Assets, the System or the Business, (ii) any
material notice of violation, forfeiture or complaint under any material
Governmental Permits or (iii) anything which, if not corrected prior to the
Closing Date, will prevent Seller from fulfilling any condition to Closing
described in Article VIII.
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7.11 ACTION BY LIMITED PARTNERS. (a) If required by applicable
Legal Requirements and the Partnership Agreement to consummate the transactions
contemplated by this Agreement, or if the Seller otherwise elects to do so, the
Seller, acting through the General Partner, shall in accordance with the
applicable Legal Requirements and the Partnership Agreement: (i) within a
reasonable period of time (as determined by the General Partner) after the
execution and delivery of this Agreement, duly call, give notice of, convene and
hold a special meeting (the "SPECIAL MEETING") of the Limited Partners for the
purpose of approving the transactions contemplated by this Agreement; and (ii)
subject to its fiduciary duties (as determined by the General Partner after
consultation with independent counsel), include in any proxy statement the
determination and recommendation of the General Partner to the effect that the
General Partner, having determined that this Agreement and the transactions
contemplated hereby are in the best interests of Seller and the Limited
Partners, has approved this Agreement and such transactions and recommends that
the Limited Partners vote in favor of the sale of the Assets to Buyer pursuant
to this Agreement.
(b) As soon as practicable after the execution and
delivery of this Agreement, Seller shall file with the SEC under the Exchange
Act, and shall use commercially reasonable efforts to clear with the SEC and
mail to the Limited Partners no later than February 15, 1997, a proxy statement
with respect to the Special Meeting (the "PROXY STATEMENT"). Seller and Buyer
shall cooperate in the preparation of any Proxy Statement; without limiting the
generality of the foregoing, Buyer shall furnish to Seller the information
relating to Buyer required by the Exchange Act to be set forth in the Proxy
Statement. Seller agrees that the Proxy Statement shall comply in all material
respects with the Exchange Act and the rules and regulations thereunder;
provided, however, that no agreement is made by Seller with respect to
information supplied by Buyer expressly for inclusion in the Proxy Statement.
Buyer and its counsel shall be given a reasonable opportunity to review the
Proxy Statement prior to the filing thereof with the SEC.
7.12 NO SOLICITATION. (a) Seller shall not, and shall cause
the General Partner, employees, agents and representatives (including, but not
limited to, any investment banker, attorney or accountant retained by Seller)
not to, initiate, solicit or encourage, directly or indirectly, any inquiries or
the making of any proposal with respect to any Alternative Transaction, engage
in any negotiations concerning, or provide to any other Person any information
or data relating to, the Business, the System, the Assets or Seller for the
purposes of, or have any discussions with any Person relating to, or otherwise
cooperate in any way with or assist or participate in, facilitate or encourage,
any inquiries or the making of any proposal which constitutes, or may reasonably
be expected to lead to, any effort or attempt by any other Person to seek or to
effect an Alternative Transaction, or agree to or endorse any Alternative
Transaction; provided, however, that nothing contained in this Section 7.12
shall prohibit Seller or the General Partner from making any disclosure to the
Limited Partners that, in the judgment of the General Partner based upon the
advice of independent counsel, is required under applicable Legal Requirements;
and provided, further, that (i) Seller or the General Partner may, upon the
unsolicited request of a third party, furnish information or data (including,
but not limited to, confidential information or data) relating to the Business,
the System, the Assets or
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Seller for the purposes of facilitating an Alternative Transaction and
participate in negotiations with a Person making (or who may reasonably be
expected to make) an unsolicited proposal regarding an Alternative Transaction
and (ii) following receipt of a proposal for an Alternative Transaction, Seller
or the General Partner may terminate this Agreement pursuant to Section
10.1(b)(ii).
(b) Each of TCI and Tele-Communications, Inc. shall
not, and shall cause its Affiliates which it controls not to, make a proposal to
Seller regarding an Alternative Transaction. The restriction set forth in this
Section 7.12(b) shall terminate on the earlier of (i) the Closing or (ii)
termination of this Agreement.
7.13 SALES AND TRANSFER TAXES AND FEES. Buyer and Seller shall
each pay one-half of any state or local sales, use, transfer, excise,
documentary or license taxes or fees or any other charge (including filing fees)
imposed by any Governmental Authority as a consequence of the transfer of any
Assets pursuant to this Agreement. Seller shall timely file any sales tax
returns required to be filed with any Governmental Authority as a consequence of
the transfer of any Assets pursuant to this Agreement. Buyer shall cooperate in
the preparation and filing of any submission or application necessary to obtain
any clearance relating to, or, if available, exemption from, any Taxes or fees
described in this Section 7.13.
7.14 COMMERCIALLY REASONABLE EFFORTS. (a) Seller shall use
commercially reasonable efforts to take all steps within its power, and will
cooperate with Buyer, to cause to be fulfilled those of the conditions to
Buyer's obligations to consummate the transactions contemplated by this
Agreement that are dependent upon its actions, and to execute and deliver such
instruments and take such other reasonable actions as may be necessary or
appropriate in order to carry out the intent of this Agreement and consummate
the transactions contemplated hereby.
(b) Buyer shall use commercially reasonable efforts
to take all steps within its power, and will cooperate with Seller, to cause to
be fulfilled those of the conditions to Seller's obligations to consummate the
transactions contemplated by this Agreement that are dependent upon its actions
and to execute and deliver such instruments and take such other reasonable
actions as may be necessary or appropriate in order to carry out the intent of
this Agreement and consummate the transactions contemplated hereby.
7.15 TITLE INSURANCE. Seller shall cooperate with Buyer if
Buyer elects to obtain title insurance policies on any Real Property owned in
fee or leased. Buyer shall have the sole responsibility for obtaining and paying
for such policies. The parties agree that the obtaining of title insurance on
any Real Property shall not be a condition to the obligation of Buyer to
consummate the transactions contemplated hereby. Seller shall deliver to Buyer,
prior to Closing, complete and correct copies of all deeds, surveys and title
insurance policies, in Seller's possession, on any Real Property
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7.16 FCC FORM 626. Seller shall file on a timely basis a Form
626 with the applicable Governmental Authority for each franchise with an
expiration date earlier than the third anniversary of the Closing Date.
7.17 FORMS 394. At Seller's option, Buyer shall prepare, in
form and substance reasonably satisfactory to Seller, within 15 Business Days
after receipt of Seller's written request, and Seller shall file, Forms 394 with
the applicable Governmental Authorities.
ARTICLE VIII
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer under this Agreement 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 by Buyer, in its sole discretion.
8.1 HSR ACT. If required under applicable Legal Requirements,
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 receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
8.2 GOVERNMENTAL OR LEGAL ACTION. No action, suit or
proceeding shall be pending or threatened by any Governmental Authority and no
Legal Requirement shall have been enacted, promulgated or issued or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority that would (a) prohibit Buyer's ownership or operation of
all or a material portion of the System, the Business or the Assets or (b)
prevent or make illegal the consummation of the transactions contemplated by
this Agreement.
8.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date, with the same effect as though made on and as of the
Closing Date, except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations and warranties
relate solely to a particular date or period, in which case they shall be true
and correct in all material respects on such Closing Date with respect to such
date and period.
8.4 PERFORMANCE OF AGREEMENTS. Seller shall have performed in
all material respects all obligations and agreements and complied, or caused to
be complied with, all covenants and conditions required by this Agreement to be
performed or complied with by Seller at or prior to the Closing Date.
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8.5 NO MATERIAL ADVERSE CHANGE. During the period from the
date of this Agreement through and including the Closing Date, there shall not
have occurred any material adverse change in the business, financial condition
or operations of the Business, taken as a whole, other than any change arising
out of matters of a general economic nature or matters (including, but not
limited to, competition caused by or arising from the Multichannel Multipoint
Distribution Service, direct broadcast satellite, legislation, rule making and
regulation) affecting the cable television industry (national or regional)
generally, and Seller shall not have sustained any material loss or damage to
the Assets or the System, whether or not insured, that materially affects the
ability of Seller to conduct the Business in a manner consistent with past
practice.
8.6 CONSENTS AND EXTENSIONS. Seller shall have delivered to
Buyer evidence, in form and substance reasonably satisfactory to Buyer, that all
the Required Consents and Extensions have been obtained, and no Required Consent
shall impose upon Buyer any conditions or obligations which are materially more
burdensome than are contained in the underlying document for which consent has
been obtained, provided, that the Required Consents for the leases for the Real
Property located at 209 Thompson Street, Shelbyville, Tennessee and 2161
Hillsboro Boulevard, Manchester, Tennessee may provide for an increased rental
rate to reflect current market conditions.
8.7 TRANSFER DOCUMENTS. Seller shall have delivered to Buyer
customary bills of sale, deeds, assignments and other instruments of transfer
sufficient to convey good and marketable title to the Assets in accordance with
the terms of this Agreement.
8.8 OPINIONS OF SELLER'S COUNSEL. Buyer shall have received
the opinion or opinions of Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel
for Seller, dated the Closing Date, substantially in the form of EXHIBIT D.
8.9 OPINION OF SELLER'S FCC COUNSEL. Buyer shall have received
the opinion of Cole, Raywid & Braverman, FCC counsel for Seller, dated the
Closing Date, substantially in the form of Exhibit G.
8.10 DISCHARGE OF LIENS. Seller shall have secured the
termination of all Encumbrances of any nature on the Assets, other than
Permitted Encumbrances.
8.11 NONCOMPETE AGREEMENT. Each of TCI, Tele-Communications,
Inc., Seller and the General Partner shall have executed and delivered to Buyer
a noncompetition agreement, substantially in the form attached as Exhibit H.
8.12 ADDITIONAL DOCUMENTS AND ACTS. Seller shall have
delivered or caused to be delivered to Buyer all other documents required to be
delivered pursuant to this Agreement and done or caused to be done all other
acts or things reasonably requested by Buyer to evidence compliance with the
conditions set forth in this Article VIII.
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8.13 INDEMNITY ESCROW AGREEMENT. Seller shall have executed
and delivered the Indemnity Escrow Agreement.
8.14 1996 FINANCIAL STATEMENTS. Seller shall have delivered to
Buyer correct and complete copies of the 1996 Financial Statements.
8.15 CERTIFICATES. Seller shall have furnished Buyer with such
other certificates of Seller and others, dated as of the Closing Date, to
evidence compliance with the conditions set forth in this Article VIII, as may
be reasonably requested by Buyer.
ARTICLE IX
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller under the Agreement are subject to
the satisfaction, at or prior to the Closing Date, of each of the following
conditions, any one or more of which may be waived by Seller in its sole
discretion.
9.1 HSR ACT. If required under applicable Legal Requirements,
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 receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
9.2 GOVERNMENTAL OR LEGAL ACTIONS. No action, suit or
proceeding shall be pending or threatened by any Governmental Authority and no
Legal Requirement shall have been enacted, promulgated or issued or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority that would (a) prohibit Buyer's ownership or operation of
all or any material portion of the System, the Business or the Assets or (b)
prevent or make illegal the consummation of the transactions contemplated by
this Agreement.
9.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date, with the same effect as though made on and as of the
Closing Date, except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations and warranties
relate solely to a particular date or period, in which case they shall be true
and correct in all material respects on such Closing Date with respect to such
date and period.
9.4 PERFORMANCE OF AGREEMENTS. Buyer shall have performed in
all material respects all obligations and agreements and complied, or caused to
be complied with, all
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<PAGE> 42
covenants and conditions required by this Agreement to be performed or complied
with by Buyer at or prior to the Closing Date.
9.5 CONSENTS. All Required Consents shall have been obtained
or given.
9.6 OPINIONS OF BUYER'S COUNSEL. Seller shall have received
the opinion or opinions of Baker & Hostetler, outside counsel for Buyer, dated
the Closing Date, substantially in the form of EXHIBIT E.
9.7 LIMITED PARTNER APPROVAL. The transactions contemplated by
this Agreement shall have been approved by the affirmative vote of or consent by
the Limited Partners to the extent required by the Partnership Agreement or if
Seller otherwise elects as permitted by Section 7.9.
9.8 PAYMENT OF PURCHASE PRICE. Buyer shall have paid to Seller
the Purchase Price as set forth in Section 3.1.
9.9 ASSUMPTION OF LIABILITIES. Buyer shall have delivered to
Seller a customary assumption of liabilities agreement which is sufficient to
cover Buyer's obligations as set forth in Section 4.1.
9.10 ADDITIONAL DOCUMENTS AND ACTS. Buyer shall have delivered
or caused to be delivered to Seller all other documents required to be delivered
pursuant to this Agreement and done all other acts or things reasonably
requested by Seller to evidence compliance with the conditions set forth in this
Article IX.
9.11 CERTIFICATE. Buyer shall have furnished Seller with such
other certificates of Buyer and others, dated as of the Closing Date, to
evidence compliance with the conditions set forth in this Article IX, as may be
reasonably requested by Seller.
9.12 FAIRNESS OPINION. On or before February 1, 1997, Seller
shall have received an opinion, in form and substance reasonably satisfactory to
Seller, from its financial advisors as to the fairness, from a financial point
of view, of the transactions contemplated by this Agreement.
9.13 INDEMNITY ESCROW AGREEMENT. Buyer shall have executed and
delivered to Seller the Indemnity Escrow Agreement.
9.14 ENVIRONMENTAL REMEDIATION. In the event that any Phase I
environmental report or Phase II environmental report prepared at Buyer's
request pursuant to Section 7.5 discloses one or more adverse environmental
conditions which Seller shall have concluded, in its reasonable judgment, that
the cost of such remediation shall not exceed $200,000, Seller and Buyer shall
have agreed that remediation of such condition(s) has been completed and Seller
has no further obligation with respect thereto.
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<PAGE> 43
ARTICLE X
10. TERMINATION.
10.1 EVENTS OF TERMINATION. This Agreement and the
transactions contemplated by this Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual written consent of Buyer and
Seller;
(b) by Seller:
(i) if the consummation of the transactions
contemplated by this Agreement by Seller would
violate any nonappealable final order, decree or
judgment of any Governmental Authority having
competent jurisdiction;
(ii) following receipt by Seller or the
General Partner of an unsolicited proposal for an
Alternative Transaction with a proposed purchase
price greater than or equal to $21,725,000 to the
extent that the General Partner determines in good
faith on the basis of advice of independent counsel
that such action is necessary or appropriate in
order for the General Partner to act in a manner
that is consistent with its fiduciary obligations
under applicable law; provided, however, that
Seller may not terminate this Agreement pursuant to
this clause (ii) with respect to an unsolicited
proposal for an Alternative Transaction submitted
by a Person, or a Person known by the General
Partner in its reasonable business judgment to be
an Affiliate of such Person, who submitted a
written proposal on October 7, 1996 to purchase the
System pursuant to the competitive auction
conducted by Daniels & Associates;
(iii) if any representation or warranty of
Buyer made herein is untrue in any material respect
(other than a change permitted or contemplated by
this Agreement) and such breach is not cured within
10 days of Buyer's receipt of a notice from Seller
that such breach exists or has occurred;
(iv) if Buyer shall have defaulted in any
material respect in the performance of any material
obligation under this Agreement and such breach is
not cured within 30 days of Buyer's receipt of a
notice from Seller that such default exists or has
occurred;
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<PAGE> 44
(v) if the conditions to Seller's obligations
to consummate the Closing as set forth in Article
IX cannot reasonably be satisfied on or before the
Termination Date; or
(vi) if any Phase I environmental report or
Phase II environmental report for the Real Property
prepared at Buyer's request pursuant to Section 7.5
discloses one or more adverse environmental
conditions and Seller concludes, in its reasonable
judgment, that the cost of remediation of such
condition(s) will exceed $200,000; provided that
termination pursuant to this Section 10.1(b)(vi)
shall not be effective, and shall be void ab
initio, in the event that within three Business
Days after receipt of Seller's notice of
termination pursuant to Section 10.2 Buyer delivers
notice to Seller that Buyer will bear all costs in
connection with such remediation in excess of
$200,000.
(c) by Buyer:
(i) if the consummation of the transactions
contemplated by this Agreement by Buyer would
violate any nonappealable final order, decree or
judgment of any Governmental Authority having
competent jurisdiction;
(ii) if any representation or warranty of
Seller made herein is untrue in any material
respect (other than due to a change permitted or
contemplated by this Agreement) and such breach is
not cured within 10 days of Seller's receipt of a
notice from Buyer that such breach exists or has
occurred;
(iii) if Seller shall have defaulted in any
material respect in the performance of any material
obligation under this Agreement and such breach is
not cured within 30 days of Seller's receipt of a
notice from Buyer that such default exists or has
occurred;
(iv) if the conditions to Buyer's obligations
to consummate the Closing as set forth in Article
VIII cannot reasonably be satisfied on or before
the Termination Date;
(v) within 10 days after receipt by Buyer of
a notice from Seller that the loss or damage to the
Assets resulting from fire, theft or other casualty
is so substantial as to prevent normal operation of
any material portion of the System, as contemplated
by Section 7.9(a); or
(vi) following a Taking, as contemplated by
the first sentence of Section 7.9(b).
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<PAGE> 45
(d) Unless the Closing shall have theretofore taken
place, by either party after the Termination Date, provided that the terminating
party is not otherwise in default or breach of this Agreement.
10.2 MANNER OF EXERCISE. In the event of the termination of
this Agreement by either Buyer or Seller, pursuant to Section 10.1, notice
thereof shall forthwith be given to the other party and this Agreement shall
terminate and the transactions contemplated hereunder shall be abandoned without
further action by Buyer or Seller.
10.3 EFFECT OF TERMINATION. (a) Subject to paragraph (b) of
this Section 10.3, in the event of the termination of this Agreement pursuant to
Section 10.1 and prior to the Closing, all obligations of the parties hereunder
shall terminate, except for the respective obligations of the parties under
Section 13.14; provided, however, that no termination of this Agreement shall
(i) except as set forth in Section 10.3(b) and Section 10.4, relieve a
defaulting or breaching party from any liability to the other party or parties
hereto for or in respect of such default or (ii) result in the rescission of any
transaction theretofore consummated hereunder.
(b) If this Agreement is terminated by Seller
pursuant to Section 10.1(b)(ii), Seller shall promptly pay to Buyer a
termination fee of $493,750 (the "Termination Fee"). If (i) the Termination Date
is extended by Seller or Buyer to a date later than August 26, 1997, (ii) this
Agreement is terminated by Seller pursuant to Section 10.1(d) prior to the date
which is 360 days from the date of this Agreement, and (iii) Buyer is not in
default or breach of this Agreement, Seller shall promptly pay Buyer a
Termination Fee in the event Seller accepts a proposal for an Alternative
Transaction on or before November 24, 1997. The Termination Fee shall be
liquidated damages and not a penalty, and upon receipt thereof Buyer shall be
precluded from exercising any other right or remedy available under this
Agreement or applicable law.
10.4 LIQUIDATED DAMAGES. Provided Seller is not in default of
this Agreement, in the event of (i) the breach or default by Buyer of its
obligations under this Agreement and (ii) the termination of this Agreement
prior to the Closing, Seller shall have the option, upon notice from Seller to
Buyer given as provided in the Escrow Agreement, to receive as liquidated
damages, and not as a penalty, the Deposit. In the event Seller elects to
receive the Deposit as liquidated damages as set forth in this Section 10.4,
Buyer shall promptly (but in no event more than two Business Days after receipt
of such notice) take all action required under the Escrow Agreement to cause the
Deposit to be released to Seller. If Seller elects to receive the Deposit as
liquidated damages as set forth in this Section 10.4, Seller shall, upon receipt
of the Deposit, be precluded from exercising any other right or remedy available
under this Agreement or applicable law.
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ARTICLE XI
11. NATURE AND SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
11.1 NATURE OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Neither party will be deemed to have made any representation, warranty, covenant
or agreement except as set forth in this Agreement or in any certificate or
other instruments to be delivered by Seller or Buyer pursuant to this Agreement.
Without limiting the generality of the foregoing, neither party will be liable
or bound in any manner by any express or implied representation, warranty,
covenant or agreement that is made by any employee, agent or other Person
representing or purporting to represent such party.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller and Buyer in this Agreement and in the
documents and instruments to be delivered by Seller and Buyer pursuant to this
Agreement shall survive the Closing only as and to the extent set forth in this
Article XI.
11.3 TIME LIMITATIONS. If the Closing occurs, except as set
forth below, Seller shall have no liability to Buyer with respect to any
representation or warranty or any covenant, agreement or obligation to the
extent required to be performed or complied with prior to the Closing Date,
unless on or before the first anniversary of the Closing Date Seller is given
written notice by Buyer asserting a claim with respect thereto and specifying
the factual basis of that claim in reasonable detail to the extent then known by
Buyer. If the Closing occurs, Buyer shall have no liability to Seller with
respect to any representation or warranty or any covenant, agreement or
obligation to the extent required to be performed or complied with prior to the
Closing Date, unless on or before the first anniversary of the Closing Date
Buyer is given written notice by Seller of a claim with respect thereto and
specifying the factual basis of that claim in reasonable detail to the extent
then known by Seller. A claim with respect to any covenants to be performed or
complied with by Buyer or Seller after the Closing Date may be asserted at any
time. Notwithstanding the foregoing, indemnification claims for the breach of
the representations in Sections 5.5 and 5.16 and indemnification claims arising
from any third party claim asserted against Buyer arising from the Excluded
Liabilities may be made by Buyer at any time.
11.4 LIMITATIONS AS TO AMOUNT. (a) If the Closing occurs,
Seller shall have no liability (for indemnification or otherwise) with respect
to any failure or breach of any representation or warranty or any covenant,
agreement or obligation to the extent required to be performed on or prior to
the Closing Date until the total of all damages with respect to such failure or
breach exceeds $50,000 but then for the entire amount of such damages, including
those not in excess of $50,000.
(b) If the Closing occurs, Buyer shall have no
liability (for indemnification or otherwise) with respect to any failure or
breach of any representation or
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<PAGE> 47
warranty or any covenant, agreement, or obligation to the extent required to be
performed on or before the Closing Date until the total of all damages with
respect to such failure or breach exceeds $50,000 but then for the entire amount
of such damages, including those not in excess of $50,000.
(c) If the Closing occurs, Seller's aggregate
liability (for indemnification or otherwise) with respect to any failure or
breach of any representation or warranty or any covenant, agreement or
obligation to the extent required to be performed on or prior to the Closing
Date shall be limited to Buyer's right to make an indemnification claim against
Seller under Article XII and shall be further limited as set forth in Section
12.3.
ARTICLE XII
12. INDEMNIFICATION.
12.1 RIGHTS TO INDEMNIFICATION. Subject to the limitations set
forth in Sections 11.3 and 11.4, Seller agrees to indemnify and hold harmless
Buyer against any loss, liability, claim, damage or expense (including, but not
limited to, reasonable attorneys' fees and disbursements) arising from (a) any
claim for brokerage or agent's or finder's commissions or compensation in
respect of the transactions contemplated by this Agreement by any Person
purporting to act on behalf of Seller, (b) any claim that Buyer is liable for
the Excluded Liabilities and (c) Seller's failure or breach of any
representation, warranty, covenant, agreement or obligation made or required to
be performed by Seller under this Agreement or any document, certificate or
agreement delivered pursuant to this Agreement. Subject to the limitations set
forth in Sections 11.3 and 11.4, Buyer agrees to indemnify and hold harmless
Seller against any loss, liability, claim, damage or expense (including, but not
limited to, reasonable attorneys' fees and disbursements) arising from (a) any
claim for brokerage or agent's or finder's commissions or compensation in
respect of the transactions contemplated by this Agreement by any Person
purporting to act on behalf of Buyer, (b) the failure to perform the obligations
of the Assumed Liabilities or (c) Buyer's failure or breach of any
representation, warranty, covenant, agreement or obligation made or required to
be performed by Buyer under this Agreement or any document, certificate or
agreement delivered pursuant to this Agreement.
12.2 PROCEDURE FOR INDEMNIFICATION. Promptly after receipt by
an indemnified party under Section 12.1 of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is prejudiced thereby. In case any such action shall
be brought against an indemnified party and it shall promptly give notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, within
ten Business Days of receipt of such notice, to assume the
39
<PAGE> 48
defense thereof with counsel satisfactory to such indemnified party and, after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under such section for any fees of other counsel or any
other expenses, in each case subsequently incurred by such indemnified party in
connection with the defense thereof, other than reasonable costs of
investigation. If an indemnifying party assumes the defense of such action, (a)
no compromise or settlement thereof may be effected by the indemnifying party
without the indemnified party's consent unless (i) there is no finding or
admission of any violation of law or any violation of the rights of the
indemnified party and no effect on any other claims that may be made against the
indemnified party and (ii) the sole relief provided is monetary damages that are
paid in full by the indemnifying party and (b) the indemnifying party shall have
no liability with respect to any compromise or settlement thereof effected
without its consent (which shall not be unreasonably withheld). If notice is
given to an indemnifying party of the commencement of any action and it does
not, within ten days after the indemnified party's notice is given, give notice
to the indemnified party of its election to assume the defense thereof, the
indemnifying party shall be bound by any determination made in such action or
any compromise or settlement thereof effected by the indemnified party.
Notwithstanding the foregoing, if an indemnified party determines in good faith
that there is a reasonable probability that an action may adversely affect it or
its Affiliates other than as a result of monetary damages, such indemnified
party may, by notice to the indemnifying party, assume the exclusive right to
defend, compromise or settle such action, but the indemnifying party shall not
be bound by any determination of an action so defended or any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld).
12.3 INDEMNITY ESCROW. Buyer acknowledges and agrees that
recourse against the Seller's Escrow is its sole and exclusive remedy in the
event of a claim against Seller with respect to any representation or warranty
or any covenant, agreement or obligation, whether for indemnification pursuant
to Article XI or this Article XII or otherwise; provided, however, that this
limitation shall not apply to claims by Buyer for (i) breaches of covenants to
be performed or complied with by Seller after the Closing Date, (ii) breaches of
representations or warranties set forth in Sections 5.5 and 5.16 and (iii) third
party claims asserted against Buyer arising from the Excluded Liabilities for
which Buyer acknowledges and agrees that its first recourse shall be against the
Seller's Escrow, to the extent there are funds available.
ARTICLE XIII
13. MISCELLANEOUS.
13.1 PARTIES OBLIGATED AND BENEFITTED. (a) Subject to the
limitations set forth in clauses (b) and (c) below, this Agreement will be
binding upon the parties and their respective assigns and successors in interest
and will inure solely to the benefit of the parties and their respective assigns
and successors in interest, and no other Person will be entitled to any of the
benefits conferred by this Agreement.
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<PAGE> 49
(b) Employer shall be deemed a third party
beneficiary of Buyer's obligations as set forth in Section 7.3(b).
(c) Without the prior written consent of the other
parties, no party will assign any of its rights under this Agreement or delegate
any of its duties under this Agreement; provided, that Buyer may assign this
Agreement to any Affiliate or subsidiary of Buyer without Seller's consent;
provided, further, that notwithstanding any such assignment Buyer shall remain
obligated to Seller pursuant to the terms and conditions of this Agreement.
13.2 PRESS RELEASES. Except as required by applicable law
based on the advice of independent counsel, neither party shall make any public
announcement, press release or Form 8-K filing under the Exchange Act with the
SEC or any other filing with any other regulatory agency with respect to the
transactions contemplated by this Agreement, without the prior written approval
of the other party.
13.3 NOTICES. All notices, consents, approvals, demands,
requests and other communications required or desired to be given hereunder must
be given in writing, shall refer to this Agreement, and shall be sent by
registered or certified mail, return receipt requested, by hand delivery, by
facsimile or by overnight courier service, addressed to the parties hereto at
their addresses set forth below, or such other addresses as they may designate
by like notice:
To Seller:
American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Marvin Jones
Facsimile No.: (303) 488-3219
With copies to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Lynn Toby Fisher, Esq.
Facsimile No.: (212) 836-7152
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<PAGE> 50
To Buyer at:
Rifkin Acquisition Partners, L.L.L.P.
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Attention: Kevin Allen
Facsimile No.: (303) 322-3553
With a copy to:
Baker & Hostetler
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203
Attention: Stuart G. Rifkin
Facsimile No.: (303) 861-7805
Any notice from a party hereto may be given by such party's
respective attorneys. Any notice or other communications made hereunder shall be
deemed to have been given (i) if delivered personally, by overnight courier
service or by facsimile, on the date received, or (ii) if by registered or
certified mail, return receipt requested, five business days after mailing.
13.4 WAIVER. This Agreement or any of its provisions may not
be waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
13.5 CAPTIONS. The article and section captions of this
Agreement are for convenience only and do not constitute a part of this
Agreement.
13.6 CHOICE OF LAW. THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO THE
PERFORMED IN THAT STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
13.7 NONRECOURSE. Notwithstanding anything in this Agreement
to the contrary, subject only to the proviso of Section 12.3, no judgment shall
be sought or obtained against any of the general or limited partners of Seller
or enforced against any of such partners or any of their assets in any action
brought by reason of this Agreement or the transactions contemplated hereby.
13.8 DISPUTE RESOLUTION. Any dispute relating to this
Agreement, or the breach thereof, shall in the first instance be the subject of
a meeting between Seller and Buyer within 30 days following written notice of
the dispute. The meeting shall be attended by
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<PAGE> 51
individuals with decision-making authority regarding the matter in question. If
the parties cannot agree upon a resolution of the dispute within the 30-day
period referenced above, the dispute may be submitted by Seller or Buyer to
arbitration. Such arbitration shall be conducted in Denver, Colorado before a
single arbitrator appointed by the American Arbitration Association then in
effect. The award of such arbitrator shall be final and may be entered by Seller
or Buyer in any court of competent jurisdiction. The arbitration award may grant
a reimbursement to the prevailing party of all of its fees and expenses,
including reasonable attorneys' fees.
13.9 POWER OF ATTORNEY. Seller agrees that, effective as of
the Closing Date, it hereby constitutes and appoints Buyer, its successors and
assigns, the true and lawful attorney of Seller in the name of Buyer or in the
name of Seller, to endorse, collect and deposit any checks, drafts or other
instruments payable to Seller which relate to payments for goods and/or services
provided by Seller or Buyer in connection with the System.
13.10 TERMS. Terms used with initial capital letters will have
the meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than a limiting sense.
13.11 RIGHTS CUMULATIVE. Except as set forth in Section 10.4,
all rights and remedies of each of the parties under this Agreement will be
cumulative, and the exercise of one or more rights or remedies will not preclude
the exercise of any other right or remedy available under this Agreement or
applicable law.
13.12 FURTHER ACTIONS. Seller and Buyer will execute and
deliver to the other, from time to time at or after the Closing, for no
additional consideration and at no additional cost to the requesting party, such
further assignments, certificates, instruments, records, or other documents,
assurances or things as may be reasonably necessary to give full effect to this
Agreement and to allow each party fully to enjoy and exercise the rights
accorded and acquired by it under this Agreement.
13.13 TIME. If the last day permitted for the giving of any
notice or the performance of any act required or permitted under this Agreement
falls on a day which is not a Business Day, the time for the giving of such
notice or the performance of such act will be extended to the next succeeding
Business Day.
13.14 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
13.15 SPECIFIC PERFORMANCE. The parties agree that irreparable
damages would occur if any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached by
Seller. It is accordingly agreed that Buyer
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<PAGE> 52
shall be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, in addition to any
other remedy to which they are entitled at law or in equity.
13.16 SCHEDULES. Any disclosure made on a Schedule to this
Agreement will be deemed included on any other Schedule to which such disclosure
may be pertinent.
13.17 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original.
13.18 ENTIRE AGREEMENT. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are incorporated in
and constitute a part of this Agreement) contains the entire agreement of the
parties and supersedes all prior oral or written agreements and understandings
with respect to the subject matter. This Agreement may not be amended or
modified except by a writing signed by the parties.
13.19 SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefitted by such provision or
any other provisions of this Agreement.
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<PAGE> 53
IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER: AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By: /s/ Marvin Jones
------------------------------------------
Name: Marvin Jones
Title: President
BUYER: RIFKIN ACQUISITION PARTNERS,
L.L.L.P.
By: Rifkin Acquisition Management, L.P.,
its General Partner
By: RT Investments Corp., its
General Partner
By: /s/ Kevin B. Allen
-------------------------------
Name: Kevin B. Allen
Title: Vice President
With respect to Section 7.12(b) only:
TELE-COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett
-------------------------------
Name: Stephen M. Brett
Title: Executive Vice President
<PAGE> 54
With respect to Section 7.12(b) only:
TCI COMMUNICATIONS, INC.
By: /s/ William R. Fitzgerald
-------------------------------
Name: Wiliam R. Fitzgerald
Title: Senior Vice President
<PAGE> 55
List of Schedules and Exhibits
Pursuant to
Asset Purchase Agreement
of American Cable TV Investors 5, Ltd.
for AMERICAN CABLE TV OF SOUTHERN TENNESSEE
<TABLE>
<CAPTION>
EXHIBITS
<S> <C> <C>
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form of Opinion of Seller's Counsel
Exhibit E Form of Opinion of Buyer's Counsel
Exhibit F Form of Indemnity Escrow Agreement
Exhibit G Form of Opinion of Seller's FCC Counsel
Exhibit H Form of Noncompetition Agreement
SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and Legal Requirements
Schedule 5.4 Complete Systems
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.7 Environmental
Schedule 5.8 Compliance with Law
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by Closing Date
</TABLE>
<PAGE> 56
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
EXHIBIT A
GEOGRAPHIC AREAS OF SELLER'S BUSINESS
City of Shelbyville, Tennessee
Bedford County, Tennessee
Bell Buckle, Tennessee
Wartrace, Tennessee
City of Manchester, Tennessee
Coffee County, Tennessee
Exhibit A -- Page 1
<PAGE> 57
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
EXHIBIT B
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of November __, 1996, by and among
American Cable TV Investors 5, Ltd., a Colorado limited partnership ("Seller")
and Rifkin Acquisition Partners, L.L.L.P., a Colorado limited liability limited
partnership ("Buyer"), and Kaye, Scholer, Fierman, Hays & Handler, LLP, a New
York limited liability partnership, as escrow agent ("Escrow Agent").
Seller and Buyer have entered into an Asset Purchase
Agreement, dated as of November __, 1996, to sell and purchase certain cable
television assets (the "Agreement"). Pursuant to the Agreement, Kaye, Scholer,
Fierman, Hays & Handler, LLP, was designated as the escrow agent thereunder.
Escrow Agent has agreed to act as an escrow agent pursuant to the terms of this
Escrow Agreement. Capitalized terms used but not defined herein shall have the
meanings set forth in the Agreement.
It is agreed as follows:
1. ESCROW FUND. Buyer has, pursuant to Section 3.1 of the
Agreement, deposited $493,750 in cash by means of wire or interbank transfer in
immediately available funds in Escrow Agent's "Kaye, Scholer, Fierman, Hays &
Handler, LLP Attorney Trust Account No. 040-0251-95; Attention: Gregory Ciolek,"
at The Chase Manhattan Bank, 55 Water Street, New York, New York 10041 -- ABA
No. 021000128 to be held in escrow pursuant to the terms of the Agreement (such
amount, together with any earnings thereon, being the "Escrow Fund"), to be held
and disbursed by Escrow Agent in accordance with this Escrow Agreement.
2. DISBURSEMENT.
a. NOTICES. Escrow Agent shall pay over the Escrow Fund upon
receipt of a written notice, in the form attached hereto as Exhibit I, as
follows: (a) upon receipt of such notice executed by Seller directing the Escrow
Agent to pay the Escrow Fund over to Buyer, to Buyer; (b) upon receipt of such
notice executed by Buyer directing the Escrow Agent to pay the Escrow Fund over
to Seller, to Seller; or (c) upon receipt of such notice executed by Buyer and
Seller, to the parties and in the amounts specified in the notice.
b. AGREEMENT OF SELLER AND BUYER. Seller and Buyer have agreed
that (i) the Escrow Fund shall be disbursed in accordance with the terms of this
Escrow Agreement and
Exhibit B--Page 1
<PAGE> 58
the Agreement, (ii) at the Closing Seller and Buyer shall instruct Escrow Agent
to disburse the Escrow Fund to Seller or Seller's designee and (iii) unless the
Closing shall theretofore have taken place or unless an unresolved claim against
the Escrow Fund remains outstanding, on the date which is five Business Days
after the termination of the Agreement pursuant to Article X thereof, Seller and
Buyer shall instruct Escrow Agent to disburse the Escrow Fund to Buyer.
c. RELIANCE ON NOTICE. Upon receipt of the appropriate notice
described in Section 2.1, Escrow Agent shall pay the Escrow Fund in accordance
with Section 2.1, and Escrow Agent shall not be subject to any liability to any
party for doing so. Seller and Buyer each agrees not to assert (and shall
actively resist any attempt to assert on their behalf) any claim against Escrow
Agent for making a payment in accordance with this Section.
3. INVESTMENT OF ESCROW FUND. Escrow Agent shall invest the
Escrow Fund in (a) interest bearing accounts in, or certificates of deposit of,
The Chase Manhattan Bank or (b) (i) obligations of the United States of America,
(ii) United States government securities of agencies of the United States
government which are guaranteed by the United States government or (iii)
securities of governmental agencies, if the same are covered by a bank
repurchase agreement. Escrow Agent may invest the Escrow Fund in one or more of
the investments permitted by the preceding sentence, and may change those
investments from time to time, all as it may determine in its sole and absolute
discretion. Escrow Agent shall have no duty to maximize the return on the Escrow
Fund and shall be fully protected in making any investment or combination of
investments permitted by this Section.
4. ESCROW AGENT AS COUNSEL TO SELLER. Buyer hereby
acknowledges that it is aware that Escrow Agent is acting as counsel to Seller
in connection with the Agreement, this Escrow Agreement and other matters, and
agrees that Escrow Agent's acting under this Escrow Agreement shall not affect
its ability to act as counsel to Seller in any matter, including, but not
limited to, any claim, action or proceeding with respect to this Escrow
Agreement or the disposition of or entitlement to the Escrow Fund.
5. ESCROW AGENT.
a. GENERAL. Escrow Agent shall act as escrow agent and hold
and disburse the Escrow Fund pursuant to the terms and conditions of this Escrow
Agreement. Its duties under this Escrow Agreement shall cease upon disbursement
of the Escrow Fund.
b. LIQUIDATION OF INVESTMENTS. Unless otherwise directed by
notice executed by Seller and Buyer, all payments required by Section 2 shall be
made in cash by means of wire or interbank transfer in immediately available
funds. When necessary to provide funds in order to make any payments required by
Section 2, Escrow Agent shall liquidate any investments held by it as it may, in
its sole and absolute discretion, determine to be necessary to make such
Exhibit B--Page 2
<PAGE> 59
payments. Escrow Agent shall have no liability for losses upon the liquidation
of any such investments.
c. LIMITED DUTIES. Escrow Agent undertakes to perform only
such duties as are expressly set forth in this Escrow Agreement. Escrow Agent
shall incur no liability whatsoever to any other party hereto, except for Escrow
Agent's own willful misconduct in its capacity as escrow agent.
d. RELIANCE ON NOTICES. Escrow Agent may rely and shall be
protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper party or parties.
Escrow Agent may conclusively presume that the undersigned have full power and
authority to instruct Escrow Agent on behalf of the respective party for which
they have signed.
e. LIMITED RESPONSIBILITIES. Escrow Agent's sole
responsibility upon receipt of the notice specified in Section 2.1 requiring
payment pursuant to the terms of this Escrow Agreement is to pay the Escrow Fund
to such party as is specified in accordance with Section 2.1, and Escrow Agent
shall have no duty to determine (and shall not be affected by any knowledge
concerning) the validity, authenticity or enforceability of any specification,
certification made in or information contained in such notices.
f. ACTION IN GOOD FAITH. Escrow Agent shall not be liable for
any action taken by it in good faith and believed by it to be authorized or
within the rights or powers conferred upon it by this Escrow Agreement, and may
consult with counsel (including partners or any attorneys employed by Escrow
Agent) of its own choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
g. RESIGNATION. Escrow Agent may resign and be discharged from
its duties or obligations hereunder by giving notice of such resignation to
Seller and Buyer specifying a date upon which such resignation shall take
effect, whereupon a successor escrow agent, which shall be a bank or trust
company with an office in New York City, shall be appointed by Seller. Escrow
Agent shall be entitled to pay the Escrow Fund to any successor escrow agent so
appointed. In the event no successor escrow agent has been appointed by the date
specified in the notice of resignation given by Escrow Agent, Escrow Agent shall
be entitled (but not required) to deliver the Escrow Fund to The Chase Manhattan
Bank, who shall be deemed the successor escrow agent.
h. DISPUTES. In the event of a dispute between the parties, or
if Escrow Agent shall be uncertain as to the proper disposition of the Escrow
Fund, Escrow Agent shall be entitled (but not required) to retain the Escrow
Fund pending direction as to the disposition
Exhibit B--Page 3
<PAGE> 60
thereof by a final and unappealable order of a court of competent jurisdiction
or an award of an arbitrator or panel of arbitrators.
i. INDEMNIFICATION; ESCROW AGENT'S INTEREST IN ESCROW FUND.
(a) Seller and Buyer hereby jointly and severally agree to indemnify Escrow
Agent and all partners and employees thereof for, and to hold such persons
harmless against, any loss, liability, damage or expense incurred without bad
faith on the part of such persons arising out of or in connection with the
Escrow Agent's entering into and/or performing under this Escrow Agreement,
including, but not limited to, the cost and expense (including, but not limited
to, attorneys' fees, which may consist in whole or in part of the time charges
at their standard rates of partners of and attorneys employed by Escrow Agent)
of investigation and defending themselves against any claim or liability, and
including taxes, penalties, additions to tax or interest that are incurred by
the Escrow Agent with respect to taxes imposed on the Escrow Fund or any income
earned or derived therefrom.
(b) Seller and Buyer hereby (i) jointly and severally agree
that Escrow Agent shall be entitled to (x) withdraw from the Escrow Fund all
sums due or reasonably likely to become due to Escrow Agent on account of
Seller's and Buyer's indemnification obligations set forth above, and (y)
withhold a portion of the income earned on or derived from the Escrow Fund and
pay such withheld amount to the proper taxing authorities on behalf of the
Escrow Fund to satisfy any tax imposed on such income, and (ii) grant to Escrow
Agent a first priority lien on and security interest in and to the Escrow Fund
for the purposes of securing satisfaction by Seller and Buyer of their
indemnification obligations to Escrow Agent.
6. ESCROW AGENT NOT AFFECTED BY OTHER AGREEMENTS. This Escrow
Agreement expressly sets forth all the duties of Escrow Agent with respect to
any and all matters pertinent hereto. No implied duties or obligations shall be
read into this Escrow Agreement against Escrow Agent. Escrow Agent, in its
capacity as such, shall not be bound by the provisions of any agreement among
the parties to this Escrow Agreement and shall have no duty to inquire into, or
to take into account its knowledge of, the terms and conditions of any agreement
made or entered into in connection with this Escrow Agreement, including, but
not limited to, the Agreement.
7. AUTHORIZED SIGNATORIES. Seller hereby authorizes Marvin
Jones, and Buyer hereby authorizes Kevin Allen, to receive and execute all
notices required to be given hereunder, and either party may authorize other
officers to sign on its behalf by notice to the other party.
8. NOTICES. All notices, consents, approvals, demands,
requests and other communications required or desired to be given hereunder must
be given in writing, shall refer to this Escrow Agreement, and shall be sent by
registered or certified mail, return receipt requested,
Exhibit B--Page 4
<PAGE> 61
by hand delivery, by facsimile or by overnight courier service, addressed to the
parties hereto at their addresses set forth below, or such other addresses as
they may designate by like notice:
(a) If to Seller:
American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Marvin Jones
Facsimile No.: (303) 488-3219
with a copy to:
Lynn Toby Fisher, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Facsimile No.: (212) 836-7152
(b) If to Buyer:
Rifkin Acquisition Partners, L.L.L.P.
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Attention: Kevin Allen
Facsimile No.: (303) 322-3553
with a copy to:
Baker & Hostetler
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203-1264
Attention: Stuart G. Rifkin, Esq.
Facsimile No.: (303) 861-7805
Exhibit B--Page 5
<PAGE> 62
(c) If to Escrow Agent:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Lynn Toby Fisher, Esq. and
Alan Capilupi, Director of Finance
Facsimile No.: (212) 836-8689
9. MISCELLANEOUS.
a. DISPUTE RESOLUTION. Any dispute relating to this Escrow
Agreement, or the breach thereof, shall in the first instance be the subject of
a meeting between Seller and Buyer within 15 days following written notice of
the dispute. The meeting shall be attended by individuals with decision-making
authority regarding the matter in question. If the parties cannot agree upon a
resolution of the dispute within the 30-day period following receipt of notice
referenced above, the dispute may be submitted by Seller or Buyer to
arbitration. Such arbitration shall be conducted in Denver, Colorado before a
single arbitrator appointed by the American Arbitration Association then in
effect. The award of such arbitrator shall be final and may be entered by Seller
or Buyer in any court of competent jurisdiction. The arbitration award may grant
a reimbursement to the prevailing party of all of its fees and expenses,
including reasonable attorneys' fees.
c. JURISDICTION. Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Escrow Agreement
which is not submitted to arbitration as set forth in Section 9.1 shall be
brought against any of the parties in the courts of the State of New York in the
County of New York, or, if it has or can acquire jurisdiction, in the United
States District Court for the Southern District of New York, and each of the
parties hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any such action or proceeding may be
served anywhere in the world, whether within or without the State of New York.
c. CAPTIONS. The captions in this Escrow Agreement are for
convenience or reference only and shall not be given any effect in the
interpretation of this Escrow Agreement.
d. NO WAIVER. The failure of a party to insist upon strict
adherence to any term of this Escrow Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Escrow Agreement. Any
waiver must be in writing.
Exhibit B--Page 6
<PAGE> 63
e. EXCLUSIVE AGREEMENT; AMENDMENT; ASSIGNMENT; NO THIRD PARTY
RIGHTS. This Escrow Agreement supersedes all prior agreements among the parties
with respect to its subject matter, is intended as a complete and exclusive
statement of the terms of the agreement among the parties with respect thereto,
and cannot be changed or terminated orally. No party may assign any rights or
delegate any of its duties under this Escrow Agreement, but this Escrow
Agreement shall be binding upon and inure to the benefit of the successors to
the business and assets of Seller and Buyer and to any successor escrow agent
appointed in accordance with Section 5.7. No third party shall have any rights
hereunder.
f. COUNTERPARTS. This Escrow Agreement may be executed in
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
g. GOVERNING LAW. This Escrow Agreement and all amendments
hereof and waivers and consents hereunder shall be governed by, and all disputes
arising hereunder shall be resolved in accordance with, the internal law of the
State of New York, without regard to the conflicts of law principles thereof.
h. TREATMENT OF ESCROW FUND. It is understood and agreed among
the parties hereto that Buyer will be treated as the owner of the Escrow Fund
and Escrow Agent shall report the income, if any, that is earned on, or derived
from, the Escrow Fund as income of Buyer in the taxable year or years in which
such income is properly includible.
AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By:___________________________
Name:
Title:
Exhibit B--Page 7
<PAGE> 64
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By: Rifkin Acquisition Management, L.P.,
its General Partner
By: RT Investment Corp., its
General Partner
By:____________________________________________
Name:
Title:
KAYE, SCHOLER, FIERMAN,
HAYS & HANDLER, LLP
as Escrow Agent
By:____________________________________________________
Name:
Partner
Exhibit B--Page 8
<PAGE> 65
EXHIBIT I
FORM OF JOINT NOTICE
TO ESCROW AGENT
[DATE]
To: Kaye, Scholer, Fierman, Hays & Handler, LLP
as Escrow Agent ("Escrow Agent") under
the Escrow Agreement dated ________, 1996,
by and among American Cable TV Investors 5, Ltd.,
Rifkin Acquisition Partners, L.L.L.P. and the
Escrow Agent (the "Escrow Agreement")
Dear Sirs:
You are hereby instructed and directed to pay the Escrow Fund
(as defined in the Escrow Agreement) to the following corporation:
Payee: _______[NAME]_________
_______[ ]_________
Very truly yours,
AMERICAN CABLE TV INVESTORS 5, LTD.
By:_______________________________________
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By:_______________________________________
Exhibit B--Page 9
<PAGE> 66
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
EXHIBIT C
FORM OF ENGAGEMENT LETTER
[ACCOUNTANT'S LETTERHEAD]
_______ __, 1997
American Cable TV Investors 5, Ltd.
c/o TCI Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Rifkin Acquisition Partners, L.L.L.P.
306 South Monroe Street, Suite 600
Denver, Colorado 80209
Dear _____________:
This letter is to confirm our understanding of the agreed-upon procedures to be
performed in connection with the sale of assets by American Cable TV Investors
5, Ltd. (the "SELLER") to Rifkin Acquisition Partners, L.L.L.P. (the "BUYER")
pursuant to the Asset Purchase Agreement dated _______ __, 1996 (the
"AGREEMENT"). Capitalized terms not otherwise defined in this Letter shall have
the meanings set forth in the Agreement.
This letter describes the objective of the review and nature of the services we
will provide. It also includes an overview of the procedures we intend to
perform, describes the type of report we intend to issue, and includes an
estimate of our fees.
Based upon our discussions with you, we believe the following proposed
procedures are those requested by you in connection with the Final Adjustments
Report, as described in Section 3.4 of the Agreement:
Exhibit C--Page 1
<PAGE> 67
1. Obtain the Preliminary and Final Adjustments Reports, prepared by the
Partnership (the "ADJUSTMENTS") as contemplated by Sections 3.4(a) and
3.4(b) of the Agreement.
2. Obtain the appropriate Accounts Receivable aging and recalculate the
adjustment as contemplated by Section 3.3(a)(i) of the Agreement.
3. Obtain third party invoice or other appropriate documentation of
prepaid real and personal property taxes and other prepaid fees and
expenses identified by you. Recalculate the relevant adjustments, as
contemplated by Section 3.3(a)(ii) of the Agreement, based on a
proration as of the Closing Date on the basis of the period covered by
such payment.
4. Agree advance payments to, or deposits with, third parties; advance
payments to, or monies of third parties on deposit with, Seller;
accrued and unpaid real and personal property taxes; and other accrued
and unpaid expenses, as defined in Sections 3.3(a)(ii) and 3.3(b) of
the Agreement, to the appropriate account(s) per the most recent
general ledger of Seller.
We will perform the aforementioned procedure(s) and report our findings to you.
We will report to you any differences noted in performing Steps 2 through 4,
regardless of amount.
Due to the nature of the engagement our fees will be based upon time and
expenses required to complete the engagement. We estimate that our total fees
including expenses will not exceed $-----.
Because the above procedures do not constitute an audit made in accordance with
generally accepted auditing standards, we will not be expressing an opinion on
any of the accounts specified or items referred to above. Our report is intended
solely for the information and use of the managements of Seller and Buyer and
should not be used for any other purpose.
If the foregoing is in accordance with your understanding please sign the copy
of this letter in the space provided and return it to us.
Very truly yours,
ACCOUNTANT(1)
- --------
1 A NATIONALLY RECOGNIZED ACCOUNTING FIRM WILL BE SELECTED BY BUYER AND
SELLER.
Exhibit C--Page 2
<PAGE> 68
ACCEPTED BY:
- ---------------------- ---------------------- --------------
Seller's Signature Title Date
- ---------------------- ---------------------- --------------
Buyer's Signature Title Date
[PARAGRAPHS 2, 3 AND 4 ABOVE WILL ONLY BE INCLUDED IN THE ENGAGEMENT LETTER TO
THE EXTENT THAT ANY AMOUNTS ABOUT WHICH SELLER AND BUYER DISAGREE PURSUANT TO
SECTION 3.4(d) OF THE AGREEMENT FALL WITHIN THE CATEGORIES DESCRIBED IN THOSE
PARAGRAPHS. THE PARTIES ACKNOWLEDGE THAT THE PROCEDURES TO BE FOLLOWED BY THE
NATIONALLY RECOGNIZED ACCOUNTING FIRM TO BE SELECTED BY SELLER AND BUYER ("THE
ACCOUNTANT") WILL DEPEND ON WHAT THE ACCOUNTANT IS REQUESTED TO PERFORM BY
SELLER AND BUYER AND THE ACCOUNTANT'S CONCURRENCE THAT SUCH PROCEDURES CAN BE
PERFORMED BY THEM.]
Exhibit C--Page 3
<PAGE> 69
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
EXHIBIT D
FORM OF OPINION OF SELLER'S COUNSEL
___________________, 1997
Rifkin Acquisition Partners, L.L.L.P.
306 South Monroe Street, Suite 600
Denver, Colorado 80209
Gentlemen:
We have acted as counsel to American Cable TV Investors 5,
Ltd., a Colorado limited partnership ("SELLER"), in connection with the sale
today by Seller of certain of Seller's assets (the "ASSETS") delineated in the
Asset Purchase Agreement dated __________, 1996 (the "AGREEMENT") between you
and Seller. This opinion is given pursuant to Section 8.8 of the Agreement.
Capitalized terms not otherwise defined herein are defined as set forth in the
Agreement.
This Opinion Letter is governed by, and shall be interpreted
in accordance with, the Legal Opinion Accord (the "ACCORD") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. Except as herein provided, the
law covered by the opinions expressed herein is limited to the Federal Law of
the United States and the Law of the State of New York. Insofar as our opinion
pertains to matters of Colorado law, we have relied upon the opinion of Colorado
counsel, Cohen, Brame and Smith, P.C., dated _________, 1997, a copy of which is
attached hereto.
Based on the foregoing it is our opinion that:
1. Seller is a validly existing limited partnership under the
laws of the State of Colorado.
2. The Agreement is enforceable against Seller.
3. The execution and delivery of the Agreement and the Other
Agreements identified on Schedule 1 hereto by Seller and the performance by
Seller of their terms do not
Exhibit D--Page 1
<PAGE> 70
breach or result in a violation of the Certificate of Limited Partnership or the
agreement of limited partnership of Seller.
We hereby confirm to you that, there are no actions or
proceedings against Seller, pending or overtly threatened in writing, before any
court, governmental agency or arbitrator, which (i) seek to affect the
enforceability of the Agreement or (ii) involve or affect any of the Assets or
the Business which, if adversely determined would have a material adverse effect
on the Assets or the Business.
This opinion is rendered solely for your information and
assistance in connection with the above transaction, and may not be relied upon
by any other person or for any other purpose without our prior written consent.
Very truly yours,
Exhibit D--Page 2
<PAGE> 71
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
EXHIBIT E
FORM OF OPINION OF BUYER'S COUNSEL
________________________, 1997
American Cable TV Investors 5, Ltd.
c/o TCI Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Gentlemen:
We have acted as counsel to Rifkin Acquisition Partners,
L.L.L.P., a Colorado limited liability limited partnership (the "BUYER"), in
connection with the purchase today by Buyer of certain of your assets (the
"ASSETS") delineated in the Asset Purchase Agreement dated _________, 1996 (the
"AGREEMENT") between you and Buyer. This opinion is given pursuant to Section
9.6 of the Agreement. Capitalized terms not otherwise defined herein are defined
as set forth in the Agreement.
This Opinion Letter is governed by, and shall be interpreted
in accordance with, the Legal Opinion Accord (the "ACCORD") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith.
Based on the foregoing, it is our opinion that:
1. Buyer is validly existing in good standing under the laws
of the State of Colorado.
2. The Agreement is enforceable against Buyer.
3. The execution and delivery of the Agreement by Buyer and
the performance by Buyer of its terms do not breach with or result in a
violation of the Certificate of Limited Liability Limited Partnership or the
agreement of limited partnership of Buyer.
Exhibit E--Page 1
<PAGE> 72
This opinion is rendered solely for your information and
assistance in connection with the above transaction, and may not be relied upon
by any other person or for any other purpose without our prior written consent.
Very truly yours,
Exhibit E--Page 2
<PAGE> 73
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
EXHIBIT F
INDEMNITY ESCROW AGREEMENT
The Chase Manhattan Bank
270 Park Avenue
New York, NY 10017
Attn: Barbara L. Strohmeier
Re: Indemnity Escrow Agreement
Ladies and Gentlemen:
This Indemnity Escrow Agreement is hereby accepted as of
___________, 1997, by and between American Cable TV Investors 5, Ltd., a
Colorado limited partnership ("SELLER") and Rifkin Acquisition Partners,
L.L.L.P., a Colorado limited liability limited partnership ("BUYER"), who have
entered into an Asset Purchase Agreement, dated as of ____________, 1996, to
sell and purchase certain cable television assets (the "ASSET PURCHASE
AGREEMENT"). Capitalized terms used but not otherwise defined in this Indemnity
Escrow Agreement shall have the meanings set forth in the Asset Purchase
Agreement.
It is agreed as follows:
1. Deposit and Investments. Buyer and Seller have, pursuant to
Section 3.1 of the Asset Purchase Agreement, deposited $493,750 (such amount,
together with any earnings thereto, being the "DEPOSIT") in an account at The
Chase Manhattan Bank, as escrow agent (the "ESCROW AGENT"). The Deposit may be
invested in Investment Securities (as defined below). The Deposit shall be held
in escrow (the "ESCROW") by Escrow Agent pursuant to this Indemnity Escrow
Agreement. The Escrow Agent shall continue to invest the Deposit in Investment
Securities in accordance with the joint written instructions of Seller and Buyer
or, if no instructions are given, in interest bearing accounts at The Chase
Manhattan Bank. The term "Investment Securities" means (a) interest bearing
accounts in, or certificates of deposit of, The Chase Manhattan Bank or, (b) (i)
obligations of the United States of America, (ii) United States government
securities of agencies of the United States government which are guaranteed by
the
Exhibit F -- Page 1
<PAGE> 74
United States government or (iii) securities of governmental agencies, if the
same are covered by a bank repurchase agreement.
2. Holdings of Deposit. The Escrow Agent shall hold and
disburse the Deposit pursuant to the terms of this Indemnity Escrow Agreement
and the Asset Purchase Agreement.
3. Disbursement of Earnings, Etc. All interest, earnings, and
gains received by the Escrow Agent from the investment of the Deposit shall be
distributed pursuant to the terms of this Indemnity Escrow Agreement. In
connection with the investment of the Deposit, Seller and Buyer shall provide
the Escrow Agent with their taxpayer identification number.
4. Disbursement Instructions.
a. Anything in this Indemnity Escrow Agreement to the contrary
notwithstanding, Escrow Agent is authorized and directed to deliver and disburse
the Deposit, or any part of the Deposit, as directed from time to time in joint
written instructions of Buyer and Seller.
b. Seller and Buyer have agreed that the Deposit will be
disbursed in accordance with the terms of this Indemnity Escrow Agreement and
the Asset Purchase Agreement.
c. Unless a claim against the Deposit, or any part of the
Deposit remains outstanding, Seller and Buyer have agreed that on the fifth
Business Day after the first anniversary of the Closing Date, Seller and Buyer
shall instruct Escrow Agent to disburse the Deposit, or any part of the Deposit
which is not subject to a claim, to Seller or Seller's designee.
5. Claims Against the Deposit by Buyer. The following
provisions shall control with respect to claims made against the Deposit by
Buyer:
a. If Buyer wishes to make a claim against the Deposit, Buyer
will send a notice of such claim to Escrow Agent and Seller. Any such notice
will state that Buyer is making a claim under Article XII of the Asset Purchase
Agreement. Any notice of a claim made shall specify the factual basis of such
claim in reasonable detail to the extent known by Buyer.
b. If Seller disputes the right of Buyer to obtain the
Deposit, or any part of the Deposit, Seller, within ten Business Days after
receipt of the notice as provided in Paragraph 4(a), shall send a notice to
Escrow Agent and Buyer stating that Seller disputes the right of Buyer to obtain
the Deposit, or any part of the Deposit, and will include in such notice a
description in reasonable detail of the basis for disputing such claim. Escrow
Agent shall continue to hold the Deposit (or the part thereof which is subject
to a dispute) until advised in writing by Seller and
Exhibit F -- Page 2
<PAGE> 75
Buyer that such dispute has been resolved, in which case Escrow Agent shall
disburse the Deposit pursuant to said writing; provided that, if a suit, action
or arbitration proceeding (as provided for in the Asset Purchase Agreement) is
commenced for collection of the Deposit or part thereof and Escrow Agent is so
advised in writing, Escrow Agent shall, unless otherwise advised in writing by
Seller and Buyer, continue to hold the Deposit or the part thereof which is the
subject of such suit, action or arbitration proceeding until final disposition
of such suit, action or arbitration proceeding. Upon the final disposition of
such suit, action or arbitration proceeding, Escrow Agent shall disburse the
Deposit or part thereof which is subject to such suit, action or arbitration
proceeding in accordance with the determination of (i) the court in which such
suit or action was pending or (ii) the arbitrator.
c. If Seller fails to notify Escrow Agent within the period
described in Paragraph 4(b) that it contests Buyer's claim to the Deposit (or
any part thereof), Escrow Agent shall, within 5 Business Days, disburse the
Deposit (or any part thereof which is subject to a claim by Buyer that Seller
fails to timely contest) to Buyer.
6. Termination. If no claims have been made against the amount
of the Deposit remaining in the Escrow on the fifth Business Day after the first
anniversary of the Closing Date, Escrow Agent shall disburse such remaining
amount of the Deposit (together with all interest thereon) to Seller at the
address set forth below.
7. Rights, Duties, and Liabilities of Escrow Agent.
a. Escrow Agent shall have no duty to know or determine the
performance or non-performance of any provision of any agreement between the
parties to this Indemnity Escrow Agreement, including, but not limited to, the
Asset Purchase Agreement, which shall not bind Escrow Agent in any manner.
Escrow Agent assumes no responsibility for the validity or sufficiency of any
document or paper or payment deposited or called for under this Indemnity Escrow
Agreement except as may be expressly and specifically set forth in this
Indemnity Escrow Agreement, and the duties and responsibilities of Escrow Agent
under this Indemnity Escrow Agreement are limited to those expressly and
specifically stated in this Indemnity Escrow Agreement.
b. Escrow Agent shall not be personally liable for any act it
may do or omit to do under this Indemnity Escrow Agreement as such agent while
acting in good faith and in the exercise of its own best judgment, and any act
done or omitted by it pursuant to the written advice of its counsel shall be
conclusive evidence of such good faith. Escrow Agent shall have the right at any
time to consult with its counsel upon any question arising under this Indemnity
Escrow Agreement and shall incur no liability for any delay reasonably required
to obtain the advice of counsel.
Exhibit F -- Page 3
<PAGE> 76
c. Other than those notices or demands expressly provided in
this Indemnity Escrow Agreement, Escrow Agent is expressly authorized to
disregard any and all notices or demands given by Seller or Buyer, or by any
other person, firm, or corporation, excepting only orders or process of court,
and Escrow Agent is expressly authorized to comply with and obey any and all
final process, orders, judgments, or decrees of any court, and to the extent
Escrow Agent obeys or complies with any thereof of any court, it shall not be
liable to any party to this Indemnity Escrow Agreement or to any other person,
firm, or corporation by reason of such compliance.
d. In consideration of the acceptance of this Escrow by Escrow
Agent (as evidenced by its signature below), Seller and Buyer agree, for
themselves and their successors and assigns, to pay Escrow Agent its charges,
fees, and expenses as contemplated by this Indemnity Escrow Agreement. As
between Buyer and Seller, they shall each be responsible for one-half of such
charges, fees and expenses. The escrow fees or charges, as distinguished from
other expenses under this Indemnity Escrow Agreement, shall be as written below
the Escrow Agent's signature at the time of acceptance of this Indemnity Escrow
Agreement. Such sum is intended as compensation for Escrow Agent's ordinary
services as contemplated by this Indemnity Escrow Agreement and shall be paid as
described above. In the event Escrow Agent renders services not provided for in
this Indemnity Escrow Agreement, Escrow Agent shall be entitled to receive from
Buyer and Seller reasonable compensation and reasonable costs, if any, for such
extraordinary services, and such compensation and costs shall be borne equally
by Buyer and Seller.
e. Escrow Agent shall be under no duty or obligation to
ascertain the identity, authority, or right of Seller or Buyer (or their agents)
to execute or deliver or purport to execute or deliver this Indemnity Escrow
Agreement or any documents or papers or payments deposited or called for or
given under this Indemnity Escrow Agreement.
f. Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations or by reason of laches in respect of
this Indemnity Escrow Agreement or any documents or papers deposited with Escrow
Agent.
g. In the event of any dispute among the parties to this
Indemnity Escrow Agreement as to the facts or as to the validity or meaning of
any provision of this Indemnity Escrow Agreement, or any other fact or matter
relating to this Indemnity Escrow Agreement or to the transactions between
Seller and Buyer, Escrow Agent is instructed that it shall be under no
obligation to act, except in accordance with this Indemnity Escrow Agreement or
under process or order of court or, if there by no such process or order, until
it has filed or caused to be filed an appropriate action interpleading the
Seller and Buyer and delivering the Deposit (or the portion of the Deposit in
dispute) to such court, and Escrow Agent shall sustain no liability for its
failure to act pending such process of court or order or interpleader of action.
Exhibit F -- Page 4
<PAGE> 77
8. Modification of Indemnity Escrow Agreement. The provisions
of this Indemnity Escrow Agreement may be supplemented, altered, amended,
modified, or revoked by writing only, signed by Buyer and Seller and approved in
writing by Escrow Agent, and upon payment of all fees, costs and expenses
incident thereto.
9. Assignment of Indemnity Escrow Agreement. No assignment,
transfer, conveyance, or hypothecation of any right, title, or interest in and
to the subject matter of this Indemnity Escrow Agreement shall be binding upon
any party, including Escrow Agent, unless all fees, costs, and expenses incident
thereto shall have been paid and then only upon the assent thereto by all
parties in writing.
10. Notice. Any notice required or desired to be given to
Buyer or Seller shall be deemed to have been given only if it is given in the
manner set forth in Section 13.3 of the Asset Purchase Agreement. Notice to
Escrow Agent may be given in the manner set forth in Section 13.3 of the Asset
Purchase Agreement to Escrow Agent's address set forth above (Facsimile No.:
(212) 270-4823) or at such other address as Escrow Agent may direct by giving
notice to Buyer and Seller.
11. Indemnity Escrow Agreement Binding. The undertakings and
agreements contained in this Indemnity Escrow Agreement shall bind and inure to
the benefit of the parties to this Indemnity Escrow Agreement and their
respective heirs, personal representatives, successors, and assigns.
Exhibit F -- Page 5
<PAGE> 78
12. Counterparts. This Indemnity Escrow Agreement may be
executed in one or more counterparts, each of which will be deemed an original.
Whenever pursuant to this Indemnity Escrow Agreement Buyer and Seller are to
deliver a jointly signed writing to Escrow Agent or jointly advise Escrow Agent
in writing, such writing may in each and all cases be signed jointly or in
counterparts and such counterparts shall be deemed to be one instrument.
Very truly yours,
SELLER:
AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI PARTNERS, V, L.P.,
its general partner
By: TCI Ventures Five, Inc., its
general partner
By:________________________
Name:
Title:
BUYER:
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By: Rifkin Acquisition Management, L.P.,
its General Partner
By: RT Investment Corp., its
General Partner
By:__________________________
Name:
Title:
Exhibit F -- Page 6
<PAGE> 79
ACCEPTED this ___ day of ____________, 1997.
THE CHASE MANHATTAN BANK
By: __________________________
Name:
Title:
Fee: [$2,000] Inception Fee.
Exhibit F -- Page 7
<PAGE> 80
ACT 5
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
EXHIBIT G
FORM FOR OPINION OF SELLER'S FCC COUNSEL
__________, 1997
Rifkin Acquisition Partners, L.L.L.P
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Re: American Cable TV Investors 5, Ltd.
Ladies and Gentlemen:
This letter is furnished to you pursuant to Section 8.9 of the
Asset Purchase Agreement, dated as of ____________ __, 1996 (the "Agreement"),
between American Cable TV Investors 5, Ltd., a Colorado limited partnership
("Seller") and Rifkin Acquisition Partners, a Colorado limited liability limited
partnership ("Buyer").
As communications counsel for Seller, we are engaged in the
representation of Seller before the Federal Communications Commission ("FCC") in
connection with its cable television business in the communities identified in
Schedule I hereto (the "System"). We have examined such records, certificates
and other documents and have considered such questions of law as relate to the
Seller and the System as we have deemed necessary or appropriate for purposes of
this opinion. This opinion is limited to the Communications Act of 1934, as
amended (the "Communications Act"), the Rules and Regulations of the FCC (the
"FCC Regulations") and Section 111 of the Copyright Act of 1976 (17 U.S.C.
Section 111) (the "Copyright Act") as applicable to the System as operated by
Seller. Except as specifically provided, we offer no opinion as to the Seller's
compliance with the Cable Television Consumer Protection and Competition Act of
1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992), or those FCC regulations
promulgated pursuant to such Act.
In rendering this opinion, we have assumed the genuineness of
signatures on documents and the conformity to the original of all copies
examined by or submitted to us of photocopies or conformed copies. As to various
questions of fact in connection with this opinion, we have relied upon
examination of available files of our office, those of the FCC and
Exhibit G -- Page 1
<PAGE> 81
the United States Copyright Office (the "Copyright Office"), and pertinent
statements and representations of officers, directors and responsible
representatives of the Seller. We have not undertaken an independent field
investigation to verify the accuracy of this information, and express no opinion
regarding technical matters or matters that would require on-scene knowledge of
the System's operations, technical or engineering matters, or local franchising
matters.
Based upon and limited by the foregoing and except as set
forth in Schedule II hereto, we are of the opinion that, as of the date set
forth above:
1. Seller holds all licenses, permits and authorizations required from
the FCC to operate the System in the manner in which we have been advised that
it is being operated, which licenses, permits and authorizations are listed in
Schedule I hereto. Each such license, permit and authorization has been issued
by the FCC, remains in full force and effect, and transfer thereof to Buyer on
the Closing Date as defined in the Agreement has been approved by the FCC, to
the extent such approval is required.
2. All materially required FCC filings required to be made by Seller in
connection with its operation of the System have been made, including, but not
limited to, Registration Statements and FCC Annual Report Forms 325, Schedule A,
to the extent such forms are required. All FCC authorizations needed to utilize
the frequencies currently used by the Systems have been obtained.
3. Basic Signal Leakage Performance Reports (FCC Annual Report Forms
320) for 1990-1996, are on file with the FCC for each community unit operated by
the System. Although those forms indicate passing test results, we render no
opinion as to the methodology or accuracy of the actual measurements taken.
4. EEO Annual Report Forms 395(A) have been filed with the FCC for each
employment unit associated with the System for calendar years 1988-1996. Except
as noted in Schedule II, the employment unit has been certified by the FCC for
calendar years 1988-1996.
5. To the best of our knowledge, Seller has provided subscriber privacy
notices to subscribers of the System on an annual basis since 1986. Seller also
provides these notices to new subscribers at the time of installation. Our
opinion is limited to the fact that such notices have been provided, and we
express no opinion as to whether the contents of such notices comply with the
requirements of the Communications Act or FCC regulations.
6. To the best of our knowledge, based on information provided by
Seller, the System is carrying all of the "must-carry" signals required to be
carried pursuant to Federal Law. To the best of our knowledge, based on
information provided by Seller, Seller has obtained all necessary retransmission
consents for the broadcast signals currently carried on the system. Except as
set
Exhibit G -- Page 2
<PAGE> 82
forth in Schedule II hereto, to the best of our knowledge, based on information
provided by Seller, there have been no "must carry" complaints filed at the FCC
against the System.
7. Based solely upon the information provided by Seller as to antenna
structure, height, location and proximity to any aircraft landing areas, all
antenna structures that we have been advised as being utilized by Seller in
connection with its operation of the System are in compliance with the FCC's
tower registration requirements. These antenna structures are listed in Schedule
I hereto. We express no opinion as to compliance with any requirements of Part
17 of the FCC's rules (such as antenna structure, marking and lighting
requirements) other than those delineating the circumstances under which
notification to the Federal Aviation Administration and FCC is required.
8. There is no FCC judgment, decree or order which has been issued
against Seller with respect to the system, nor is there any FCC action,
proceeding or investigation pending or, to the best of our knowledge, threatened
by the FCC against Seller with respect to the System.
9. The timely filing of the periodic Statements of Account and
accompanying royalty fees qualifies the Seller for a compulsory license for the
carriage of the broadcast signals utilized by the System. Seller has filed all
required Statements of Account and supplements thereto, and, to the best of our
knowledge, has timely paid its statutory royalties for all accounting periods
beginning at least as early as the first accounting period of 1993, and all
primary transmissions listed in the latest Statements of Account qualify for a
compulsory copyright license. Although we render no opinion as to the
methodology or calculations used to determine "gross receipts" for copyright
purposes, there have been no inquiries received from the Copyright Office or any
other party which challenge or question either the computation or amount of any
royalty payments or the validity of the Statements of Account, and there is no
claim, action or demand for copyright infringement or for non-payment of
royalties, pending or, to the best of our knowledge, threatened against the
Seller.
10. Except for any necessary FCC approvals which have been obtained,
the execution, delivery and performance of this Agreement does not require the
approval of the FCC, will not result in any violation of the rules and
regulations of the FCC, and will not cause any forfeiture or impairment of any
FCC license, authorization or permit of Seller.
Exhibit G -- Page 3
<PAGE> 83
This opinion has been prepared solely for your use in
connection with the closing of transactions under the Agreement, and may not be
relied upon by, filed with or furnished to any other person or entity without
the prior written consent of this firm.
Very truly yours,
COLE, RAYWID & BRAVERMAN, L.L.P.
By:_________________________
Exhibit G -- Page 4
<PAGE> 84
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
EXHIBIT H
NONCOMPETITION AGREEMENT
NONCOMPETITION AGREEMENT dated as of _____________, 1997 (the "CLOSING
DATE") among TCI Communications, Inc., a Delaware corporation ("TCIC"),
TeleCommunications, Inc. ("TCI") and Rifkin Acquisition Partners, L.L.L.P., a
Colorado limited liability limited partnership ("RIFKIN").
Recitals
A. Each of TCI and TCIC is an indirect parent entity of the general
partner of American Cable TV Investors 5, Ltd. ("ACT 5").
B. ACT 5 and Rifkin have entered into an Asset Purchase Agreement,
dated as of __________, 1996 (the "AGREEMENT"), pursuant to which on the date
hereof ACT 5 has conveyed to Rifkin substantially all of the assets of ACT 5's
cable television system operating in the Franchise Areas set forth on Exhibit A
attached hereto (the "SYSTEM").
C. The Agreement provides that, as a condition to Rifkin's obligation
to perform each of its obligations at Closing under the Agreement, TCI and TCIC
will execute and deliver this Noncompetition Agreement.
D. As consideration for TCI and TCIC, in addition to ACT 5 and IR-TCI
Partners V, L.P., each entering into a covenant not to compete, Rifkin will pay
to ACT 5 a portion of the Purchase Price equal to $_____________ [to be agreed
upon by Rifkin and ACT 5 prior to Closing].
E. All capitalized terms not otherwise defined herein shall have the
meanings ascribed in the Agreement.
Accordingly, the parties agree as follows:
Exhibit H -- Page 1
<PAGE> 85
1. Acknowledgements. Each of TCI, TCIC and Rifkin acknowledges that the
agreements and covenants contained herein are essential to protect the Business
of ACT 5 acquired by Rifkin pursuant to the Agreement.
2. Covenant Not to Compete. For the period commencing on the Closing
Date and expiring on the third anniversary thereof, each of TCI and TCIC shall
not, and shall cause its Affiliates which it controls, not to, without the prior
written consent of Rifkin, to compete with Rifkin by selling or attempting to
provide any wireline cable television services, data transmission, telephone
services or security alarm monitoring (but specifically excluding video
programming provided by TCI or its Affiliates to other cable television
operators) delivered by means of terrestrial cable within a 20 mile radius of
the areas served by the System on the Closing Date. This paragraph 2 shall not
be applicable to InterMedia Partners or any Affiliate of InterMedia Partners of
which Leo J. Hindrey, Jr. is currently, directly or indirectly, the managing
general partner.
Exhibit H -- Page 2
<PAGE> 86
3. Scope of Noncompetition Agreement. The scope of this Noncompetition
Agreement in time, geography and types and limits of activities is reasonable
and necessary for the protection of Buyer.
4. Rights and Remedies Upon Breach; Specific Performance. Because of
the unique nature of the assets comprising the System, Rifkin will not have an
adequate remedy at law if TCI or TCIC breaches this Noncompetition Agreement.
Accordingly, Rifkin shall be entitled upon application to any court of competent
jurisdiction, to an injunction prohibiting any violation of this Noncompetition
Agreement, in addition to any other rights or remedies to which Rifkin may be
entitled at law or in equity. Each of TCI and TCIC hereby waives and covenants
not to assert in any action or proceeding, any claim or defense that there
exists an adequate remedy at law for breach of this Noncompetition Agreement.
5. Blue-Penciling. If this Noncompetition Agreement is found by any
court of competent jurisdiction to be too broad in extent, whether as to
activities restricted, the time period of such restrictions or geographic areas
in which such activities are restricted, this Noncompetition Agreement shall
nevertheless remain effective but shall be deemed amended to the extent
considered by such court to be reasonable, and shall be fully enforceable as so
amended.
6. Assignment; Amendment. All of the terms and provisions of this
Noncompetition Agreement shall be binding upon and inure to the benefit of and
be enforceable by the parties hereto and their respective successors and
permitted assigns. This Noncompetition Agreement shall not be assignable by TCI
or TCIC without the prior written consent of Rifkin. This Noncompetition
Agreement may be amended only by written agreement of the parties hereto.
Exhibit H -- Page 3
<PAGE> 87
7. Applicable Law. The validity, performance and enforcement of this
Noncompetition Agreement shall be governed by the laws of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Noncompetition
Agreement as of the date first written above.
TELE-COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
TCI COMMUNICATIONS, INC.
By:__________________________
Name:
Title:
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By:__________________________
Name:
Title:
Exhibit H -- Page 4
<PAGE> 88
EXHIBIT A
Shelbyville System:
City of Shelbyville
Bell Buckle
Wartrace
Bedford County
Manchester System:
City of Manchester
Coffee County
Exhibit H -- Page 5
<PAGE> 89
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 1.1
SUBSCRIBER RATES
<TABLE>
<CAPTION>
SHELBYVILLE: Monthly Subscriber Rates
Effective June 30, 1996
-----------------------
<S> <C>
Basic Subscriber Rate: $ 9.94
Expanded Basic Services Rate: 10.65(1)
-------
Total Basic and Expanded Basic: $ 20.59
<CAPTION>
MANCHESTER: Monthly Subscriber Rates
Effective June 30, 1996
-----------------------
Basic Subscriber Rate: $ 10.33
Expanded Basic Services Rate: 10.83(2)
-------
Total Basic and Expanded Basic: 21.16
</TABLE>
- --------
(1) Expanded Basic Services Rate for existing senior citizen subscribers as
of June 30, 1996 is $9.58.
(2) Expanded Basic Services Rate for existing senior citizen subscribers as
of June 30, 1996 is $9.26.
Schedule 1.1 -- Page 1
<PAGE> 90
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 1.2
CONSENTS
1. City of Shelbyville.*
2. City of Bell Buckle.*
3. Town of Wartrace*
4. City of Manchester.**
5. Coffee County.**
6. Bedford County (expiring 10/7/2006)**
7. Bedford County (expiring 4/10/97)**
8. Duck River Electric Membership Corporation, pursuant to a License
Agreement for Pole Attachments, dated May 14, 1988, between Duck River
Electric Membership Corporation and American Cable TV Investors 5, Ltd.
9. Shelbyville Electric Power, Water & Sewerage System, pursuant to a Pole
Attachment Agreement, dated June 1, 1994, between Shelbyville Electric
Power, Water & Sewerage System and American Cable TV Investors 5, Ltd.
10. BellSouth Telecommunications, Inc., pursuant to a License Agreement for
Pole Attachments, dated June 1, 1993, between BellSouth
Telecommunications, Inc. and American Cable TV Investors 5, Ltd.
11. Omkar, Inc. d/b/a Hampton Inn, pursuant to a Bulk Cable Television
Multiple Unit Agreement, dated January 1, 1995, between Omkar, Inc.
d/b/a Hampton Inn and American Cable TV Investors 5, Ltd.**
12. Ambassador Motel, pursuant to a Bulk Cable Television Multiple Unit
Agreement, dated January 1, 1996, between American Cable TV Investors
5, Ltd. and Ambassador Motel.**
- --------
* Required consent.
** Notice only required.
Schedule 1.2
<PAGE> 91
13. Travelers Inn, pursuant to a Bulk Multiple Unit Service Agreement,
dated January 1, 1995, between Travelers Inn and American Cable TV
Investors 5, Ltd.**
14. Scottish Inn, pursuant to a Cable Television Multiple Unit Agreement,
dated January 1, 1995, between Scottish Inn and American Cable TV
Investors 5, Ltd.**
15. D and M Associates, Inc. d/b/a Days Inn of Manchester, pursuant to a
Bulk Cable Television Multiple-Unit Agreement, dated January 1, 1995,
between D and M Associates, Inc. d/b/a Days Inn of Manchester and
American Cable TV Investors 5, Ltd.**
16. Cumberland Inn, pursuant to a Bulk Cable Television Multiple-Unit
Agreement, dated January 1, 1995, between Cumberland Inn and American
Cable TV Investors 5, Ltd.**
17. Comfort Inn, pursuant to a Bulk Cable Television Multiple-Unit
Agreement, dated January 1, 1995, between Comfort Inn and American
Cable TV Investors 5, Ltd.**
18. R.K. Corporation, pursuant to a Bulk Cable Television Multiple-Unit
Agreement, dated January 1, 1995, between R.K. Corporation (Econolodge)
and American Cable TV Investors 5, Ltd.**
19. Lenders, pursuant to a Revolving Credit Agreement, dated June 30, 1992,
among American Cable TV Investors 5, Ltd., Various Financial
Institutions and Bank of America f/k/a Continental Bank, N.A. and
NationsBank of Texas, N.A., including all financing and security
documents relating thereto.(1)
20. Glenoak Convalescent Center, pursuant to a Bulk Cable Television
Multiple Unit Agreement, dated January 1, 1995, between American Cable
TV Investors 5, Ltd. and Glenoak Convalescent Center.**
21. Shelbyville Inn, pursuant to a Bulk Cable Television Multiple Unit
Agreement, dated January 1, 1995, between American Cable TV Investors
5, Ltd. and the Shelbyville Inn.**
22. Shelbyville Housing Authority, pursuant to a Bulk Cable Television
Multiple Unit Agreement, dated January 1, 1995, between Shelbyville
Housing Authority and American Cable TV Investors 5, Ltd.**
- --------
(1) The proceeds from the sale of the System will be used to repay any
amount of the loan outstanding as of the Closing Date.
* Required consent.
** Notice only required.
Schedule 1.2
<PAGE> 92
23. Federal Communications Commission for the transfer of licenses listed
on Schedule 1.5.*
24. TCI Cablevision Associates, Inc. f/k/a Daniels & Associates, Inc.,
pursuant to a Management Agreement, dated May 14, 1987, between TCI
Cablevision Associates, Inc. f/k/a Daniels & Associates, Inc. and
American Cable TV Investors 5, Ltd.
25. Lloyd Simmons and Peggy Simmons, pursuant to a Lease Agreement, dated
January 16, 1992, between Lloyd Simmons and Peggy Simmons and American
Cable TV Investors 5, Ltd.*
26. Manchester Partners, pursuant to a Lease, dated November 12, 1991,
between Manchester Partners and American Cable TV Investors 5, Ltd.
d/b/a United Artists Cable of Tennessee, as amended December 1, 1993.*
- --------------
* Required consent.
** Notice only required.
Schedule 1.2
<PAGE> 93
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 1.3
EQUIPMENT
DISTRIBUTION EQUIPMENT:
<TABLE>
<CAPTION>
SHELBYVILLE MANCHESTER
----------- ----------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
YEAR UPGRADED/REBUILT: 1988 1980
HOMES PASSED AT 12/31/95: 7,796 6,628
MILES OF PLANT:
Aerial 160.1 183.7
Underground 2.3 7.7
---- ----
Total 162.4 191.4
DENSITY: 48 35
CHANNELS:
CHANNEL CAPACITY: 37 38
IN USE:
Basic: 14 15
Expanded Tier: 17 17
Premium: 5 5
PPV/Other: 1 1
-- --
Total: 37 38
BANDWIDTH: 300 MHz 300 MHz
CABLE:
Fiber: 12.8 miles 6 count 5.8 miles 6 count
Trunk: CommScope .875 and .750 CommScope .875 and .750
Feeder: CommScope .625 and .500 CommScope .625 and .500
Drops: RG-6, RG-11 RG-6
PLANT ELECTRONICS:
Amplifiers SA push/pull SA
Longest Amplifier Cascade 23 27
TAPS: Regal, Magnavox SA, Regal, Magnavox, RMS
PREMIUM SECURITY:
Addressable No No
Positive/Negative Traps Eagle Negative E, G, H, I Positive traps Channels 7, 12, R, F,
Positive 12 H
CONVERTERS:
Addressable Jerrold 550 Jerrold 550
Standard Regal RR-92 Regal, Hamlin
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Schedule 1.3--Page 1
<PAGE> 94
HEADEND EQUIPMENT:
<TABLE>
<CAPTION>
SHELBYVILLE MANCHESTER
----------- ----------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEADEND LOCATION: 823 Wartrace Bell Buckle Road 596 Perry Road
Wartrace, TN Manchester, TN
HEADEND SITE - OWNED/LEASED: Owned Owned
TOWER TYPE/SIZE: 180' Guyed 250' Guyed
EARTH STATIONS: 1 - SA 4.5 meter 2 - 6 meter
1 - Anixter 5.0 meter 1 - 5 meter
1 - Comtek 3.8 meter 1 - 4.5 meter
1 - 2.8 meter
RECEIVERS: 29 - SA 6600 30 - SA 6600
1 - SportCom Wegener 1815-03 1 - SportCom Controller
MODULATORS: 26 - SA 6350 23 - SA 6350
3 - Jerrold Commander IV 2 - Wegener 1601
PROCESSORS: 75 - SA 6150 8 - SA 6150
STEREO ENCODERS: N/A 1 - Jerrold Commander IV
SCRAMBLER/ENCODERS: 1 - Pico 5 - Eagle EE-2001
DESCRAMBLERS: 29 - Videocipher II 28 - Eagle Videocipher I
AD INSERTION EQUIPMENT: 2 - Sony 3/4 inch 2 - Channelmatic Switcher
CCV-202A
1 - Channel control unit 202 2 - Sony Player VP-7020
1 - Channelmatic Network 1 - B-Mac/Compression
Switcher DRD
2 - SA Modulator 6330
BACKUP POWER SUPPLY: 1 General propane generator General 93A04822-S
1 - AT&T Lightguide
Distribution Shelf
1 - AT&T LaserLink II
Laser
1 - Weather Star
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Schedule 1.3--Page 2
<PAGE> 95
<TABLE>
<CAPTION>
VEHICLE LIST:
VEHICLE
MAKE/ IDENTIFICATION OWNED/
SYSTEM YEAR MODEL NUMBER LEASED
------ ---- ----- ------ ------
SHELBYVILLE
- -----------
<S> <C> <C> <C> <C>
1993 GMC 1500 1GTEC14H1PZ537176 Owned
1993 GMC 1500 1GTEC14H7PZ537036 Owned
1992 GMC 3500 1GDKC34N6NJ522040 Owned
1992 GMC 1500 1GTEC14H3NZ532428 Owned
--------------
Total Number of 4
Vehicles
MANCHESTER
- ----------
1996 GMC 3500 1GDKC34J9TJ513228 Owned
HDCC
bucket
truck
1995 GMC 1500 1GTEC14H5SZ517814 Owned
Sierra
1994 GMC 1500 1GTEC14H8CE541378 Owned
Sierra
1993 GMC 1500 1GTEC14H9PZ537216 Owned
Sierra
1992 GMC 1500 1GTEC14H8NZ532294 Owned
Sierra
--------------
Total Number of 5
Vehicles
Total Number of 9
Vehicles
</TABLE>
Schedule 1.3--Page 3
<PAGE> 96
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV SOUTHERN TENNESSEE
SCHEDULE 1.4
FRANCHISE AREAS
SHELBYVILLE SYSTEM:
FRANCHISE AUTHORITY
City of Shelbyville
City of Bell Buckle
Town of Wartrace
Bedford County
MANCHESTER SYSTEM:
FRANCHISE AUTHORITY
City of Manchester
Coffee County
Schedule 1.4--Page 1
<PAGE> 97
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 1.5
GOVERNMENTAL PERMITS
<TABLE>
<CAPTION>
FRANCHISE AUTHORITY: EXPIRATION DATE: FRANCHISE FEE:
- -------------------- ---------------- --------------
<S> <C> <C>
City of Shelbyville cable television 3/10/2005 5%
franchise.
City of Bell Buckle cable television 8/8/2000 None
franchise.
Town of Wartrace cable television 8/8/2000 None
franchise.
City of Manchester cable television 1/26/2026 3%**
franchise.
Coffee County cable television franchise.* 1/26/2026 3%**
County of Bedford cable television 10/7/2006 5%
franchise.
4/10/1997 None
County of Bedford cable television
franchise.
</TABLE>
FCC LICENSES AND REGISTRATIONS:
<TABLE>
<CAPTION>
Type Call Sign City, State Expiration Date
- ---- --------- ----------- ---------------
<S> <C> <C> <C>
ES WJ78 Shelbyville, TN 8/28/2001
ES WU36 Manchester, TN 9/19/2004
IB * WSZ739 Shelbyville, TN 9/2/97
</TABLE>
* Consent required to transfer.
** The relevant franchise agreements allow the respective franchise authority,
with proper notice, to increase the franchise fee up to 5%.
Schedule 1.5
<PAGE> 98
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 1.6
PERMITTED ENCUMBRANCES
None.
Schedule 1.6
<PAGE> 99
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 1.7
REAL PROPERTY
LEASED PROPERTY:
<TABLE>
<CAPTION>
SYSTEM LESSOR USE ADDRESS
------ ------ --- -------
<S> <C> <C> <C>
Shelbyville Lloyd Simmons and Office 209 Thompson Street
Peggy Simmons Shelbyville
- -----------------------------------------------------------------------------------------------------------------------
Manchester * Manchester Partners Office 2161 Hillsboro Blvd.
Manchester
- -----------------------------------------------------------------------------------------------------------------------
OWNED PROPERTY:
SYSTEM USE/SYSTEM ADDRESS
------ ---------- -------
- -----------------------------------------------------------------------------------------------------------------------
Shelbyville Headend 823 Bell Buckle/Wartrace
Road
Wartrace
- -----------------------------------------------------------------------------------------------------------------------
Manchester Headend 596 Perry Road
Manchester
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Lease expired. Request for renewal has been made, but lessor has not
responded.
Schedule 1.7
<PAGE> 100
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 1.8
SELLER CONTRACTS
1. License Agreement for Pole Attachments, dated May 14, 1988, between
Duck River Electric Membership Corporation and American Cable TV
Investors 5, Ltd.
2. License Agreement for Pole Attachments, dated June 1, 1993, between
BellSouth Telecommunications, Inc. and American Cable TV Investors 5,
Ltd.
3. Pole Attachment Agreement, dated June 1, 1994, between Shelbyville
Electric Power, Water & Sewerage System and American Cable TV Investors
5, Ltd.
4. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Omkar, Inc. d/b/a Hampton Inn and American Cable TV Investors
5, Ltd.
5. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1996,
between American Cable TV Investors 5, Ltd. and Ambassador Motel.
6. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
Travelers Inn and American Cable TV Investors 5, Ltd.
7. Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Scottish Inn and American Cable TV Investors 5, Ltd.
8. Bulk Cable Television Multiple-Unit Agreement, dated January 1, 1995,
between D and M Associates, Inc. d/b/a Days Inn of Manchester and
American Cable TV Investors 5, Ltd.
9. Bulk Cable Television Multiple-Unit Agreement, dated January 1, 1995,
between Cumberland Inn and American Cable TV Investors 5, Ltd.
10. Bulk Cable Television Multiple-Unit Agreement, dated January 1, 1995,
between Comfort Inn and American Cable TV Investors 5, Ltd.
11. Bulk Cable Television Multiple-Unit Agreement, dated January 1, 1995,
between R.K. Corporation (Econolodge) and American Cable TV Investors
5, Ltd.
Schedule 1.8--Page 1
<PAGE> 101
12. Revolving Credit Agreement, dated June 30, 1992, among American Cable
TV Investors 5, Ltd., Various Financial Institutions and Bank of
America, Illinois f/k/a Continental Bank, N.A. and NationsBank of
Texas, N.A., and all financing and security arrangements relating
thereto.
13. Management Agreement, dated May 14, 1987, between TCI Cablevision
Associates, Inc. f/k/a Daniels & Associates, Inc. and American Cable TV
Investors 5, Ltd.
14. Easement and Construction Agreement, dated September 21, 1993, between
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable of
Tennessee and Pat Marsh.
15. Easement and Construction Agreement, dated September 1, 1993, between
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable of
Tennessee and R.S. Pollaek.
16. Letter Agreement Authorizing Right-of-Way, dated August 6, 1993,
between American Cable TV Investors 5, Ltd. d/b/a United Artists Cable
of Tennessee and George Dennis.
17. Easement and Construction Agreement, dated September 1, 1993, between
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable of
Tennessee and Erine Dill.
18. Easement and Construction Agreement, dated September 24, 1993, between
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable of
Tennessee and William D. Hart.
19. Lease Agreement, dated January 16, 1992, between Lloyd Simmons and
Peggy Simmons and American Cable TV Investors 5, Ltd.
20. Lease Renewal, dated November 27, 1993, between American Cable TV
Investors 5, Ltd. d/b/a United Artists Cable of Tennessee, and
Brandywine Real Estate Management Services Corporation.
21. Lease Renewal, dated November 27, 1993, between American Cable TV
Investors 5, Ltd. d/b/a United Artists Cable of Tennessee and Parkmoore
Management Corporation.
22. Lease, dated November 12, 1991, between Manchester Partners and
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable of
Tennessee, as amended December 1, 1993.
23. Warranty Deed, dated April 21, 1993, between Vicki Bramblett and
American Cable TV Investors 5, Ltd.
24. Cable Television Easement and Maintenance Agreement, dated September
15, 1993, between The Webb School and American Cable TV Investors 5,
Ltd, as amended on September 26, 1995.
Schedule 1.8--Page 2
<PAGE> 102
25. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and Blue Ribbon Inn, as amended on
March 20, 1996.
26. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
Budget Motel and American Cable TV Investors 5, Ltd.
27. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and Suburban Motel.
28. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and the Magnolia Motel, as amended
on February 1, 1995.
29. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Glenoak Convalescent
Center.
30. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Shelbyville Housing Authority and American Cable TV Investors
5, Ltd.
31. Amendment to Bulk Cable Television Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and Shivani Corporation.
32. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and Thompson Motel.
33. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between American Cable TV Investors 5, Ltd. and the Shelbyville Inn.
34. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and A.L. Stephenson.
35. Bulk Multiple Unit Service Agreement, dated February 24, 1995, between
American Cable TV Investors 5, Ltd. and John Roche (Oakwood Park).
36. Bulk Multiple Unit Service Agreement, dated March 3, 1995, between
American Cable TV Investors 5, Ltd. and Idrihd Vohre (Bedford Motor
Court).
37. Cable Television Bulk Billing Agreement, dated October 25, 1991,
between Bedford County General Hospital and American Cable TV Investors
5, Ltd, as amended on March 14, 1996.
38. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and Trucker's Inn.
Schedule 1.8--Page 3
<PAGE> 103
39. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and Best Western/Old Fort Motor
Inn.
40. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and Professional Manor.
41. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and Coffee County Medical Center.
42. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
American Cable TV Investors 5, Ltd. and Park Motel.
43. Retransmission Consent Agreement, dated September 17, 1993, between
WSMV and American Cable TV Investors 5, Ltd. d/b/a United Artists Cable
of Tennessee.
44. Retransmission Consent Agreement, dated September 2, 1993, between WTVF
and American Cable TV Investors 5, Ltd. d/b/a United Artists Cable of
Tennessee.
Schedule 1.8--Page 4
<PAGE> 104
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 1.9
SYSTEM
American Cable TV of Southern Tennessee comprising the System
included in the Franchise Areas set forth in Schedule 1.4.
Schedule 1.9
<PAGE> 105
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 4.2
EXCLUDED ASSETS
Revolving Credit Agreement, dated June 30, 1992, among
American Cable TV Investors 5, Ltd., Various Financial Institutions and Bank of
America, Illinois f/k/a Continental Bank, N.A. and NationsBank of Texas, N.A.,
and all financing and security documents relating thereto.
Schedule 4.2
<PAGE> 106
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.3(b)
VIOLATIONS OF PARTNERSHIP AGREEMENT AND LEGAL REQUIREMENTS
If consents to transfer the franchises and FCC licenses listed
on Schedule 1.5 are not obtained or notice is not given as required by the terms
of the underlying documents, Seller may be deemed to have violated a Legal
Requirement.
If consents to the assignment of the following agreements are
not obtained or notices are not given as required by the terms of the
agreements, such agreements may be terminated:
1. License Agreement for Pole Attachments, dated May 14, 1988, between
Duck River Electric Membership Corporation and American Cable TV
Investors 5, Ltd.
2. License Agreement for Pole Attachments, dated June 1, 1994, between
Shelbyville Electric Power, Water & Sewerage System and American Cable
TV Investors 5, Ltd.
3. License Agreement for Pole Attachments, dated June 1, 1993, between
BellSouth Telecommunications, Inc. and American Cable TV Investors 5,
Ltd.
4. Management Agreement, dated May 14, 1987, between TCI Cablevision
Associates, Inc. f/k/a Daniels & Associates, Inc. and American Cable TV
Investors 5, Ltd.
5. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Omkar, Inc. d/b/a Hampton Inn and American Cable TV Investors
5, Ltd.
6. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1996,
between Ambassador Motel and American Cable TV Investors 5, Ltd.
7. Bulk Multiple Unit Service Agreement, dated January 1, 1995, between
Travelers Inn and American Cable TV Investors 5, Ltd.
8. Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Scottish Inn and American Cable TV Investors 5, Ltd.
9. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between D and M Associates d/b/a Days Inn of Manchester and American
Cable TV Investors 5, Ltd.
Schedule 5.3(b)--Page 1
<PAGE> 107
10. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Cumberland Inn and American Cable TV Investors 5, Ltd.
11. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Comfort Inn and American Cable TV Investors 5, Ltd.
12. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between R.K. Corporation (Econolodge) and American Cable TV Investors
5, Ltd.
13. Revolving Credit Agreement, dated June 30, 1992, among American Cable
TV Investors 5, Ltd., various financial institutions and Bank of
America f/k/a/ Continental Bank, N.A. and NationsBank of Texas, N.A.,
including all financing and security documents relating thereto.(1)
14. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Glenoak Convalescent Center and American Cable TV Investors 5,
Ltd.
15. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between the Shelbyville Inn and American Cable TV Investors 5, Ltd.
16. Bulk Cable Television Multiple Unit Agreement, dated January 1, 1995,
between Shelbyville Housing Authority and American Cable TV Investors
5, Ltd.
17. The agreements marked with an asterisk on Schedule 1.2 represent
Required Consents.
18. Lease Agreement, dated January 16, 1992, between Lloyd Simmons and
Peggy Simmons and American Cable TV Investors 5, Ltd.
19. Lease, dated November 12, 1991, between Manchester Partners and
American Cable TV Investors 5, Ltd. d/b/a United Artists Cable of
Tennessee, as amended December 1, 1993.
- --------
(1) The proceeds from the sale of the System will be used to repay
any amount of the loan outstanding as of the Closing Date.
Schedule 5.3(b)--Page 2
<PAGE> 108
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.4
COMPLETE SYSTEMS
None.
Schedule 5.4
<PAGE> 109
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.5
ENCUMBRANCES ON SELLER'S TITLE
Assets of American Cable TV Investors 5, Ltd. have been
pledged as collateral under the Revolving Credit Agreement, dated as of June 30,
1992, among American Cable TV Investors 5, Ltd., Various Financial Institutions
and Bank of America, Illinois f/k/a Continental Bank, N.A. and NationsBank of
Texas, N.A. (including all financing and security documents relating thereto).
All encumbrances related to the foregoing shall be satisfied and removed at or
prior to Closing by Seller and the Lenders thereto.
Schedule 5.5
<PAGE> 110
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.7
ENVIRONMENTAL
None.
Schedule 5.7
<PAGE> 111
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.8
COMPLIANCE WITH LAW
As of the date of this Agreement, Seller may not have paid the
5% franchise fee in connection with the County of Bedford cable television
franchise.
Schedule 5.8
<PAGE> 112
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.12
LEGAL PROCEEDINGS
None.
Schedule 5.12
<PAGE> 113
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.13(c)
EMPLOYMENT MATTERS
None.
Schedule 5.13(c)
<PAGE> 114
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.13(d)
EMPLOYEES
<TABLE>
<CAPTION>
SYSTEM NAME SALARY/WAGES
OFFICE/ADMINISTRATION
<S> <C> <C>
Shelbyville Marie Faris $32,175/year
Shelbyville Sandy Gilmore $10.50/hour
Shelbyville Kristie Bryan $8.80/hour
Shelbyville Keri McCullough $7.50/hour
Manchester Deborah Amacher $32,175/year
Manchester Jeanette Gray $6.75/hour
Manchester Karen Paulsen $7.50/hour
Manchester Joy Malone $9.10/hour
TECHNICAL
Shelbyville Billy Watkins $15.50/hour
Shelbyville Stan Marsh $8.75/hour
Shelbyville Jamie Boyce $10.66/hour
Shelbyville Mark Bryant* $7.50/hour
Manchester Terry Sanders* $7.00/hour
Manchester Brian Langham $12.00/hour
Manchester Michael Jones $11.50/hour
Manchester Shannon Frame $7.75/hour
</TABLE>
* Not employed as of June 30, 1996. Chris Stone was employeed during such
period, and earned $11.00/hour until his employment terminated in
August of 1996.
Schedule 5.3(d)
<PAGE> 115
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.13(e)
EMPLOYER PLANS
CIGNA Health Maintenance Organization.
CIGNA Preferred Provider Organization Plan.
1995 TCI Benefits Plan.
Schedule 5.3(e)
<PAGE> 116
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.14
SYSTEM INFORMATION
AS OF JUNE 30, 1996
Number of Equivalent Basic Subscribers: 11,471
Number of Subscribers of Expanded
Basic Services: 10,555
Bandwidth: 300 MHz
Homes Passed by the System: 14,504
Number of Miles of Plant: 361.02
Channel Lineup:
<TABLE>
<CAPTION>
SHELBYVILLE: MANCHESTER:
BUDGET CABLE: BUDGET CABLE:
<S> <C> <C> <C>
2 WKRN ABC Nashville 2 WKRN ABC Nashville
3 WZTV FOX Nashville 3 WZTV FOX Nashville
4 WSMV NBC Nashville 4 WSMV NBC Nashville
5 WTVF CBS Nashville 5 WTVF CBS Nashville
6 QVC 6 LOCAL
7 LOCAL 7 SHOWTIME*
</TABLE>
Schedule 5.14 -- Page 1
<PAGE> 117
<TABLE>
<S> <C> <C> <C>
8 WDCN PBS Nashville 8 WDCN PBS Nashville
9 C-Span 9 C-Span
10 The Family Channel 10 WHTN
11 The Weather Channel 11 The Weather Channel
12 ENCORE* 12 ENCORE*
13 CMT 13 CMT
14 WHTN 14 The Family Channel
SHELBYVILLE: MANCHESTER:
15 Arts & Entertainment 15 DISNEY*
16 WXMT - Channel 30 Nashville 16 WXMT
17 Arts & Entertainment
18 QVC
19 HBO*
20 Nickelodeon
PLUS SERVICE: PLUS SERVICE:
17 USA 21 CINEMAX*
18 CINEMAX* 22 American
Movie Classics
20 HBO* 23 CNN Cable
News Network
21 SHOWTIME* 24 MTV
</TABLE>
Schedule 5.14
<PAGE> 118
<TABLE>
<S> <C> <C> <C>
22 DISNEY* 25 TBS Atlanta
Superstation
23 CNN Cable 26 WGN Chicago
News Network Superstation
24 TBS Atlanta 27 ESPN
Superstation
25 Discovery 28 Discovery
26 VH-1 29 TNN The
Nashville
Network
27 WGN Chicago 30 CNBC
Superstation
28 TNT Turner 31 VH-1/Comedy
Network Central
Television
29 American 32 The Nostalgia
Movie Classics Channel
30 TNN The 33 Headline News
Nashville
Network
31 MTV 34 Sportsouth
32 CNBC 35 USA
SHELBYVILLE: MANCHESTER:
33 Nickelodeon 36 TNT Turner
Network
Television
34 Headline News 37 Lifetime
35 Sportsouth 38 BET Black
Entertainment
Television
</TABLE>
Schedule 5.14
<PAGE> 119
<TABLE>
<S> <C>
36 ESPN 40 Pay Per View*
37 Lifetime
38 BET Black
Entertainment
Television
40 Pay Per View*
</TABLE>
- --------------
* Available for an additional monthly fee.
Schedule 5.14
<PAGE> 120
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 5.16
TAXES
All Tax Returns required to be filed for the year ended
December 31, 1996 and Taxes due or payable on such Tax Returns are anticipated
to be filed and paid by Seller no later than June 30, 1997.
Schedule 5.16
<PAGE> 121
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF SOUTHERN TENNESSEE
SCHEDULE 6.3(a)
CONSENTS TO BE OBTAINED OR WAIVED BY CLOSING DATE
None.
Schedule 6.3(a)
<PAGE> 122
ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of November 29, 1996, by and among
American Cable TV Investors 5, Ltd., a Colorado limited partnership ("Seller")
and Rifkin Acquisition Partners, L.L.L.P., a Colorado limited liability limited
partnership ("Buyer"), and Kaye, Scholer, Fierman, Hays & Handler, LLP, a New
York limited liability partnership, as escrow agent ("Escrow Agent").
Seller and Buyer have entered into an Asset Purchase
Agreement, dated as of November 29, 1996, to sell and purchase certain cable
television assets (the "Agreement"). Pursuant to the Agreement, Kaye, Scholer,
Fierman, Hays & Handler, LLP, was designated as the escrow agent thereunder.
Escrow Agent has agreed to act as an escrow agent pursuant to the terms of this
Escrow Agreement. Capitalized terms used but not defined herein shall have the
meanings set forth in the Agreement.
It is agreed as follows:
1 ESCROW FUND. Buyer has, pursuant to Section 3.1 of the Agreement,
deposited $493,750 in cash by means of wire or interbank transfer in
immediately available funds in Escrow Agent's "Kaye, Scholer, Fierman,
Hays & Handler, LLP Attorney Trust Account No. 040-0251-95; Attention:
Gregory Ciolek," at The Chase Manhattan Bank, 55 Water Street, New
York, New York 10041 -- ABA No. 021000128 to be held in escrow pursuant
to the terms of the Agreement (such amount, together with any earnings
thereon, being the "Escrow Fund"), to be held and disbursed by Escrow
Agent in accordance with this Escrow Agreement.
2 DISBURSEMENT.
2.1 NOTICES. Escrow Agent shall pay over the Escrow Fund upon
receipt of a written notice, in the form attached hereto as Exhibit I, as
follows: (a) upon receipt of such notice executed by Seller directing the Escrow
Agent to pay the Escrow Fund over to Buyer, to Buyer; (b) upon receipt of such
notice executed by Buyer directing the Escrow Agent to pay the Escrow Fund over
to Seller, to Seller; or (c) upon receipt of such notice executed by Buyer and
Seller, to the parties and in the amounts specified in the notice.
2.2 AGREEMENT OF SELLER AND BUYER. Seller and Buyer have
agreed that (i) the Escrow Fund shall be disbursed in accordance with the terms
of this Escrow Agreement and the Agreement, (ii) at the Closing Seller and Buyer
shall instruct Escrow Agent to disburse the Escrow Fund to Seller or Seller's
designee and (iii) unless the Closing shall theretofore have taken place or
unless an unresolved claim against the Escrow Fund remains outstanding, on the
date which is five Business Days after the termination of the Agreement pursuant
to Article X thereof, Seller and Buyer shall instruct Escrow Agent to disburse
the Escrow Fund to Buyer.
2.3 RELIANCE ON NOTICE. Upon receipt of the appropriate notice
described in Section 2.1, Escrow Agent shall pay the Escrow Fund in accordance
with Section 2.1, and Escrow Agent shall not be subject to any liability to any
party for doing so. Seller and Buyer each agrees not to assert (and shall
actively resist any attempt to assert on their behalf) any claim against Escrow
Agent for making a payment in accordance with this Section .
3 INVESTMENT OF ESCROW FUND. Escrow Agent shall invest the Escrow Fund in
(a) interest bearing accounts in, or certificates of deposit of, The
Chase Manhattan Bank or (b) (i) obligations of the United States of
America, (ii) United States government securities of agencies of the
United States government which are guaranteed by the United States
government or (iii) securities of governmental agencies, if the same
are covered by a bank repurchase agreement. Escrow Agent may invest the
Escrow Fund in one or more of the investments permitted by the
preceding sentence, and may change those investments from time to time,
all as it may determine in its sole and absolute discretion. Escrow
Agent shall have no duty to maximize the return on the Escrow Fund and
shall be fully protected in making any investment or combination of
investments permitted by this Section .
<PAGE> 123
4 ESCROW AGENT AS COUNSEL TO SELLER. Buyer hereby acknowledges that it is
aware that Escrow Agent is acting as counsel to Seller in connection
with the Agreement, this Escrow Agreement and other matters, and agrees
that Escrow Agent's acting under this Escrow Agreement shall not affect
its ability to act as counsel to Seller in any matter, including, but
not limited to, any claim, action or proceeding with respect to this
Escrow Agreement or the disposition of or entitlement to the Escrow
Fund.
5 ESCROW AGENT.
5.1 GENERAL. Escrow Agent shall act as escrow agent and hold
and disburse the Escrow Fund pursuant to the terms and conditions of this Escrow
Agreement. Its duties under this Escrow Agreement shall cease upon disbursement
of the Escrow Fund.
5.2 LIQUIDATION OF INVESTMENTS. Unless otherwise directed by
notice executed by Seller and Buyer, all payments required by Section 2 shall be
made in cash by means of wire or interbank transfer in immediately available
funds. When necessary to provide funds in order to make any payments required by
Section 2, Escrow Agent shall liquidate any investments held by it as it may, in
its sole and absolute discretion, determine to be necessary to make such
payments. Escrow Agent shall have no liability for losses upon the liquidation
of any such investments.
5.3 LIMITED DUTIES. Escrow Agent undertakes to perform only
such duties as are expressly set forth in this Escrow Agreement. Escrow Agent
shall incur no liability whatsoever to any other party hereto, except for Escrow
Agent's own willful misconduct in its capacity as escrow agent.
5.4 RELIANCE ON NOTICES. Escrow Agent may rely and shall be
protected in acting or refraining from acting upon any written notice,
instruction or request furnished to it hereunder and believed by it to be
genuine and to have been signed or presented by the proper party or parties.
Escrow Agent may conclusively presume that the undersigned have full power and
authority to instruct Escrow Agent on behalf of the respective party for which
they have signed.
5.5 LIMITED RESPONSIBILITIES. Escrow Agent's sole
responsibility upon receipt of the notice specified in Section 2.1 requiring
payment pursuant to the terms of this Escrow Agreement is to pay the Escrow Fund
to such party as is specified in accordance with Section 2.1, and Escrow Agent
shall have no duty to determine (and shall not be affected by any knowledge
concerning) the validity, authenticity or enforceability of any specification,
certification made in or information contained in such notices.
5.6 ACTION IN GOOD FAITH. Escrow Agent shall not be liable for
any action taken by it in good faith and believed by it to be authorized or
within the rights or powers conferred upon it by this Escrow Agreement, and may
consult with counsel (including partners or any attorneys employed by Escrow
Agent) of its own choice and shall have full and complete authorization and
protection for any action taken or suffered by it hereunder in good faith and in
accordance with the opinion of such counsel.
5.7 RESIGNATION. Escrow Agent may resign and be discharged
from its duties or obligations hereunder by giving notice of such resignation to
Seller and Buyer specifying a date upon which such resignation shall take
effect, whereupon a successor escrow agent, which shall be a bank or trust
company with an office in New York City, shall be appointed by Seller. Escrow
Agent shall be entitled to pay the Escrow Fund to any successor escrow agent so
appointed. In the event no successor escrow agent has been appointed by the date
specified in the notice of resignation given by Escrow Agent, Escrow Agent shall
be entitled (but not required) to deliver the Escrow Fund to The Chase Manhattan
Bank, who shall be deemed the successor escrow agent.
5.8 DISPUTES. In the event of a dispute between the parties,
or if Escrow Agent shall be uncertain as to the proper disposition of the Escrow
Fund, Escrow Agent shall be entitled (but not required) to
2
<PAGE> 124
retain the Escrow Fund pending direction as to the disposition thereof by a
final and unappealable order of a court of competent jurisdiction or an award of
an arbitrator as set forth in Section 9.1 hereof.
5.9 INDEMNIFICATION; ESCROW AGENT'S INTEREST IN ESCROW FUND.
(a) Seller and Buyer hereby jointly and severally agree to indemnify Escrow
Agent and all partners and employees thereof for, and to hold such persons
harmless against, any loss, liability, damage or expense incurred without bad
faith on the part of such persons arising out of or in connection with the
Escrow Agent's entering into and/or performing under this Escrow Agreement,
including, but not limited to, the cost and expense (including, but not limited
to, attorneys' fees, which may consist in whole or in part of the time charges
at their standard rates of partners of and attorneys employed by Escrow Agent)
of investigation and defending themselves against any claim or liability, and
including taxes, penalties, additions to tax or interest that are incurred by
the Escrow Agent with respect to taxes imposed on the Escrow Fund or any income
earned or derived therefrom.
(b) Seller and Buyer hereby (i) jointly and severally agree
that Escrow Agent shall be entitled to (x) withdraw from the Escrow Fund all
sums due or reasonably likely to become due to Escrow Agent on account of
Seller's and Buyer's indemnification obligations set forth above, and (y)
withhold a portion of the income earned on or derived from the Escrow Fund and
pay such withheld amount to the proper taxing authorities on behalf of the
Escrow Fund to satisfy any tax imposed on such income, and (ii) grant to Escrow
Agent a first priority lien on and security interest in and to the Escrow Fund
for the purposes of securing satisfaction by Seller and Buyer of their
indemnification obligations to Escrow Agent.
6 ESCROW AGENT NOT AFFECTED BY OTHER AGREEMENTS. This Escrow Agreement
expressly sets forth all the duties of Escrow Agent with respect to any
and all matters pertinent hereto. No implied duties or obligations
shall be read into this Escrow Agreement against Escrow Agent. Escrow
Agent, in its capacity as such, shall not be bound by the provisions of
any agreement among the parties to this Escrow Agreement and shall have
no duty to inquire into, or to take into account its knowledge of, the
terms and conditions of any agreement made or entered into in
connection with this Escrow Agreement, including, but not limited to,
the Agreement.
7 AUTHORIZED SIGNATORIES. Seller hereby authorizes Marvin Jones, and
Buyer hereby authorizes Kevin Allen, to receive and execute all notices
required to be given hereunder, and either party may authorize other
officers to sign on its behalf by notice to the other party.
8 NOTICES. All notices, consents, approvals, demands, requests and other
communications required or desired to be given hereunder must be given
in writing, shall refer to this Escrow Agreement, and shall be sent by
registered or certified mail, return receipt requested, by hand
delivery, by facsimile or by overnight courier service, addressed to
the parties hereto at their addresses set forth below, or such other
addresses as they may designate by like notice:
(a) If to Seller:
American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Marvin Jones
Facsimile No.: (303) 488-3219
with a copy to:
Lynn Toby Fisher, Esq.
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
3
<PAGE> 125
Facsimile No.: (212) 836-7152
(b) If to Buyer:
Rifkin Acquisition Partners, L.L.L.P.
360 South Monroe Street, Suite 600
Denver, Colorado 80209
Attention: Kevin Allen
Facsimile No.: (303) 322-3553
with a copy to:
Baker & Hostetler
303 East 17th Avenue, Suite 1100
Denver, Colorado 80203-1264
Attention: Stuart G. Rifkin, Esq.
Facsimile No.: (303) 861-7805
(c) If to Escrow Agent:
Kaye, Scholer, Fierman, Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention:Lynn Toby Fisher, Esq. and
Alan Capilupi, Director of Finance
Facsimile No.: (212) 836-8689
9 MISCELLANEOUS.
9.1 DISPUTE RESOLUTION. Any dispute relating to this Escrow
Agreement, or the breach thereof, shall in the first instance be the subject of
a meeting between Seller and Buyer within 15 days following written notice of
the dispute. The meeting shall be attended by individuals with decision-making
authority regarding the matter in question. If the parties cannot agree upon a
resolution of the dispute within the 30-day period following receipt of notice
referenced above, the dispute may be submitted by Seller or Buyer to
arbitration. Such arbitration shall be conducted in Denver, Colorado before a
single arbitrator appointed by the American Arbitration Association then in
effect. The award of such arbitrator shall be final and may be entered by Seller
or Buyer in any court of competent jurisdiction. The arbitration award may grant
a reimbursement to the prevailing party of all of its fees and expenses,
including reasonable attorneys' fees.
9.2 JURISDICTION. Any action or proceeding seeking to enforce
any provision of, or based on any right arising out of, this Escrow Agreement
which is not submitted to arbitration as set forth in Section 9.1 shall be
brought against any of the parties in the courts of the State of New York in the
County of New York, or, if it has or can acquire jurisdiction, in the United
States District Court for the Southern District of New York, and each of the
parties hereby consents to the exclusive jurisdiction of such courts (and of the
appropriate appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any such action or proceeding may be
served anywhere in the world, whether within or without the State of New York.
9.3 CAPTIONS. The captions in this Escrow Agreement are for
convenience or reference only and shall not be given any effect in the
interpretation of this Escrow Agreement.
9.4 NO WAIVER. The failure of a party to insist upon strict
adherence to any term of this Escrow Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term of this Escrow Agreement. Any
waiver must be in writing.
4
<PAGE> 126
9.5 EXCLUSIVE AGREEMENT; AMENDMENT; ASSIGNMENT; NO THIRD PARTY
RIGHTS. This Escrow Agreement supersedes all prior agreements among the parties
with respect to its subject matter, is intended as a complete and exclusive
statement of the terms of the agreement among the parties with respect thereto,
and cannot be changed or terminated orally. No party may assign any rights or
delegate any of its duties under this Escrow Agreement, but this Escrow
Agreement shall be binding upon and inure to the benefit of the successors to
the business and assets of Seller and Buyer and to any successor escrow agent
appointed in accordance with Section 5.7. No third party shall have any rights
hereunder.
9.6 COUNTERPARTS. This Escrow Agreement may be executed in
counterparts, each of which shall be considered an original, but all of which
together shall constitute the same instrument.
9.7 GOVERNING LAW. This Escrow Agreement and all amendments
hereof and waivers and consents hereunder shall be governed by, and all disputes
arising hereunder shall be resolved in accordance with, the internal law of the
State of New York, without regard to the conflicts of law principles thereof.
5
<PAGE> 127
9.8 TREATMENT OF ESCROW FUND. It is understood and agreed
among the parties hereto that Buyer will be treated as the owner of the Escrow
Fund and Escrow Agent shall report the income, if any, that is earned on, or
derived from, the Escrow Fund as income of Buyer in the taxable year or years in
which such income is properly includible.
AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By: /s/ Marvin Jones
--------------------------
Name: Marvin Jones
Title: President
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By: Rifkin Acquisition Management, L.P.,
its General Partner
By: RT Investment Corp., its
General Partner
By: /s/ Kevin B. Allen
--------------------------
Name: Kevin B. Allen
Title: Vice President
KAYE, SCHOLER, FIERMAN,
HAYS & HANDLER, LLP
as Escrow Agent
By: /s/ Lynn Toby Fisher
---------------------------
Name: Lynn Toby Fisher
Partner
<PAGE> 128
EXHIBIT I
FORM OF JOINT NOTICE
TO ESCROW AGENT
[DATE]
To: Kaye, Scholer, Fierman, Hays & Handler, LLP
as Escrow Agent ("Escrow Agent") under
the Escrow Agreement dated ________, 1996,
by and among American Cable TV Investors 5, Ltd.,
Rifkin Acquisition Partners, L.L.L.P. and the
Escrow Agent (the "Escrow Agreement")
Dear Sirs:
You are hereby instructed and directed to pay the Escrow Fund
(as defined in the Escrow Agreement) to the following corporation:
Payee: _______[NAME]_________
_____[_______]________
Very truly yours,
AMERICAN CABLE TV INVESTORS 5, LTD.
By:_______________________________________
RIFKIN ACQUISITION PARTNERS, L.L.L.P.
By:_______________________________________
<PAGE> 1
LOWER DELAWARE/MARYLAND
- --------------------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
AMERICAN CABLE TV INVESTORS 5, LTD.
AND
MEDIACOM LLC
DATED AS OF
DECEMBER 24, 1996
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
PAGE
ARTICLE I....................................................... 1
1. Definitions............................................ 1
Accountants............................................ 1
Accounts Receivable.................................... 1
Ad Insertion Agreement................................. 1
Adjustment Time........................................ 1
Affiliate ............................................ 1
Alternative Transaction................................ 1
Angola Consent......................................... 2
Assets ............................................ 2
Assumed Liabilities.................................... 2
Basic Services......................................... 2
Basic Subscriber Rate.................................. 2
Best of Seller's Knowledge............................. 2
Business ............................................ 2
Business Day........................................... 2
Buyer ............................................ 2
Buyer Financial Statement.............................. 3
Cable Act ............................................ 3
Closing ............................................ 3
Closing Date........................................... 3
Code ............................................ 3
Communications Act..................................... 3
Commitment ............................................ 3
Consents ............................................ 3
Copyright Act.......................................... 3
Deposit ............................................ 3
Employer ............................................ 3
Employer Plans......................................... 3
Encumbrance............................................ 3
Environmental Law...................................... 3
Equipment ............................................ 4
Equivalent Basic Subscribers........................... 4
ERISA ............................................ 4
Escrow Agent........................................... 4
Escrow Agreement....................................... 4
Exchange Act........................................... 5
Excluded Assets........................................ 5
Excluded Liabilities................................... 5
i
<PAGE> 3
PAGE
Exhibits ......................................... 5
Expanded Basic Services............................. 5
FCC ......................................... 5
Final Adjustments Report............................ 5
Franchise Areas..................................... 5
GAAP ......................................... 5
General Partner..................................... 5
Governmental Authority.............................. 5
Governmental Permits................................ 5
Hazardous Substances................................ 6
Homes Passed........................................ 6
HSR Act ......................................... 6
Initial Termination Date............................ 6
Intangibles......................................... 6
IRS ......................................... 6
Legal Requirement................................... 6
Limited Partners.................................... 6
Management Agreement................................ 6
Material Adverse Change in the Financial Markets.... 7
Ocean Pines Consent................................. 7
Partnership Agreement............................... 7
Pay TV ......................................... 7
Permitted Encumbrances.............................. 7
Person ......................................... 7
Preliminary Adjustments Report...................... 7
Prime Rate ......................................... 7
Purchase Price...................................... 7
Real Property....................................... 7
Regulatory Requirement.............................. 8
Remediation......................................... 8
Required Consents................................... 8
Schedules ......................................... 8
Sea Colony Consent.................................. 8
SEC ......................................... 8
Securities Act...................................... 8
Seller ......................................... 8
Seller Contracts.................................... 8
Seller Financial Statements......................... 8
Service Area........................................ 8
System ......................................... 8
Taking ......................................... 8
Tax Return ......................................... 9
Taxes ......................................... 9
ii
<PAGE> 4
PAGE
TCI ..................................................... 9
Telecom Act..................................................... 9
Termination Date................................................ 9
Tunnell Properties Consent...................................... 9
Units ..................................................... 9
WARN Act ..................................................... 9
ARTICLE II............................................................... 9
2. Purchase and Sale of Assets..................................... 9
2.1 Purchase and Sale of Assets.......................... 9
2.2 Time and Place of Closing............................ 10
ARTICLE III.............................................................. 10
3. Consideration................................................... 10
3.1 Consideration for the Assets......................... 10
3.2 Purchase Price Prorations............................ 10
3.3 Purchase Price Adjustments........................... 11
3.4 Preliminary and Final Settlements.................... 17
3.5 Disputed Liabilities................................. 18
3.6 Allocation of Purchase Price......................... 19
ARTICLE IV............................................................... 19
4. Assumed Liabilities and Excluded Assets......................... 19
4.1 Assignment and Assumption............................ 19
4.2 Excluded Assets...................................... 20
ARTICLE V................................................................ 20
5. Representations and Warranties of Seller........................ 20
5.1 Organization and Qualification....................... 20
5.2 Authority and Validity............................... 21
5.3 Consents and Approvals; No Violation................. 21
5.4 Complete Systems..................................... 22
5.5 Title................................................ 22
5.6 Real Property........................................ 22
5.7 Environmental Matters................................ 23
5.8 Compliance with Law; Governmental Permits............ 24
5.9 Seller Contracts..................................... 25
5.10 Copyright Compliance................................. 25
5.11 Financial Statements................................. 25
iii
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
<S> <C> <C> <C>
5.12 Legal Proceedings............................................... 26
5.13 Employment Matters.............................................. 26
5.14 System Information.............................................. 27
5.15 Finders and Brokers............................................. 28
5.16 Tax Matters..................................................... 28
5.17 Inventory....................................................... 28
5.18 Insurance....................................................... 28
5.19 Accounts Receivable............................................. 28
5.20 Restoration..................................................... 28
5.21 Equipment....................................................... 28
5.22 Microwave Replacement........................................... 28
ARTICLE VI.......................................................................... 29
6. Buyer's Representations and Warranties..................................... 29
6.1 Organization and Qualification.................................. 29
6.2 Authority and Validity.......................................... 29
6.3 No Breach or Violation.......................................... 29
6.4 Litigation...................................................... 30
6.5 Financial Statements............................................ 30
6.6 Adequate Financing.............................................. 30
6.7 Finders and Brokers............................................. 30
6.8 Qualification of Buyer.......................................... 30
ARTICLE VII......................................................................... 31
7. Additional Covenants....................................................... 31
7.1 Access to Premises and Records.................................. 31
7.2 Continuity and Maintenance of Operations; Financial Statements.. 31
7.3 Employee Matters................................................ 33
7.4 Franchise Extensions............................................ 34
7.5 Environmental Report............................................ 34
7.6 Consents........................................................ 35
7.7 HSR Notification................................................ 36
7.8 Notification of Certain Matters................................. 36
7.9 Risk of Loss; Condemnation...................................... 37
7.10 Adverse Changes................................................. 37
7.11 Action by Limited Partners...................................... 37
7.12 No Solicitation................................................. 38
7.13 Sales and Transfer Taxes and Fees............................... 39
7.14 Commercially Reasonable Efforts................................. 39
7.15 Title Insurance................................................. 39
7.16 Non-Competition................................................. 39
</TABLE>
iv
<PAGE> 6
PAGE
7.17 Financing Commitment.................................. 40
7.18 Forms 394............................................. 40
7.19 UCC Lien and Judgment Searches........................ 40
7.20 Seller Financial Statements........................... 40
7.21 Ad Insertion Agreement................................ 41
ARTICLE VIII.............................................................. 41
8. Conditions Precedent to Obligations of Buyer..................... 41
8.1 HSR Act............................................... 41
8.2 Governmental or Legal Action.......................... 41
8.3 Accuracy of Representations and Warranties............ 41
8.4 Performance of Agreements............................. 41
8.5 No Material Adverse Change............................ 41
8.6 Consents and Extensions............................... 42
8.7 Transfer Documents.................................... 42
8.8 Opinions of Seller's Counsel.......................... 42
8.9 Discharge of Liens.................................... 42
8.10 Extension of Ad Insertion Agreement................... 42
8.11 Opinion of Seller's FCC Counsel....................... 42
8.12 Additional Documents and Acts......................... 42
8.13 Certificates.......................................... 42
ARTICLE IX................................................................ 43
9. Conditions Precedent to Obligations of Seller.................... 43
9.1 HSR Act............................................... 43
9.2 Governmental or Legal Actions......................... 43
9.3 Accuracy of Representations and Warranties............ 43
9.4 Performance of Agreements............................. 43
9.5 Consents.............................................. 43
9.6 Opinions of Buyer's Counsel........................... 43
9.7 Limited Partner Approval.............................. 43
9.8 Payment of Purchase Price............................. 44
9.9 Assumption of Liabilities............................. 44
9.10 Closing of Another System............................. 44
9.11 Additional Documents and Acts......................... 44
9.12 Certificates.......................................... 44
9.13 Fairness Opinion...................................... 44
v
<PAGE> 7
PAGE
ARTICLE X................................................................. 44
10. Termination...................................................... 44
10.1 Events of Termination................................. 44
10.2 Manner of Exercise.................................... 46
10.3 Effect of Termination................................. 46
10.4 Liquidated Damages.................................... 48
ARTICLE XI................................................................ 48
11. Nature and Survival of Representations, Warranties and Agreements 48
11.1 Nature of Representations, Warranties and Agreements.. 48
11.2 Survival of Representations and Warranties............ 48
11.3 Time Limitations...................................... 48
11.4 Limitations as to Amount.............................. 49
ARTICLE XII............................................................... 49
12. Indemnification.................................................. 49
12.1 Rights to Indemnification............................. 49
12.2 Procedure for Indemnification......................... 50
12.3 Deposit............................................... 51
ARTICLE XIII.............................................................. 51
13. Miscellaneous.................................................... 51
13.1 Parties Obligated and Benefitted...................... 51
13.2 Press Releases and Confidentiality.................... 51
13.3 Notices............................................... 52
13.4 Waiver................................................ 53
13.5 Captions.............................................. 53
13.6 CHOICE OF LAW......................................... 53
13.7 Nonrecourse........................................... 53
13.8 Terms................................................. 53
13.9 Rights Cumulative..................................... 53
13.10 Further Actions....................................... 53
13.11 Time.................................................. 54
13.12 Expenses.............................................. 54
13.13 Specific Performance.................................. 54
13.14 Additional Remedies................................... 54
13.15 Waiver of Remedies.................................... 54
13.16 Schedules............................................. 55
13.17 Counterparts.......................................... 55
vi
<PAGE> 8
13.18 Entire Agreement...................................... 55
13.19 Severability.......................................... 55
EXHIBITS
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form for Opinion of Seller's Counsel
Exhibit E Form for Opinion of Buyer's Counsel
Exhibit F Form of Opinion of Seller's FCC Counsel
SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and Legal Requirements
Schedule 5.4 Complete Systems
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.9 Seller Contracts
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by Closing Date
vii
<PAGE> 9
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("AGREEMENT") is made as of the
24th day of December, 1996, by and between AMERICAN CABLE TV INVESTORS 5, LTD.,
a Colorado limited partnership ("SELLER"), and MEDIACOM LLC, a New York limited
liability company ("BUYER").
R E C I T A L S:
A. Seller is engaged in the business of providing cable
television service to subscribers in and around the geographic areas set forth
on Exhibit A.
B. Buyer desires to purchase and Seller desires to sell the
assets of Seller designated in this Agreement used or held for use in connection
with that business, upon the terms and subject to the conditions set forth in
this Agreement.
Accordingly, the parties agree as follows:
ARTICLE I
1. DEFINITIONS.
"ACCOUNTANTS" shall have the meaning set forth in Section 3.4.
"ACCOUNTS RECEIVABLE" shall mean all accounts receivable of
Seller representing amounts earned by Seller in connection with its operation of
the Business through the Adjustment Time.
"AD INSERTION AGREEMENT" shall have the meaning set forth in
Section 7.21.
"ADJUSTMENT TIME" shall have the meaning set forth in Section
3.2.
"AFFILIATE" shall mean, with respect to any Person, any other
Person controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"ALTERNATIVE TRANSACTION" shall mean any transaction which
could result in the transfer of control over, or ownership of, all or
substantially all the Assets, including (a) any merger or consolidation of
Seller in which another Person or group of Persons acquires 50% or
<PAGE> 10
more of the partnership interests in Seller or the equity interests of the
surviving entity, as the case may be, (b) any tender offer or exchange offer for
partnership interests in Seller which, if consummated, would result in a Person
or group of Persons (other than the existing partners in such entities as of the
date of this Agreement) owning 50% or more of the partnership interests in
Seller or (c) any sale or other disposition of all or substantially all the
Assets.
"ANGOLA CONSENT" shall mean the consent of Angola-by-the-Bay
Property Owners Association Inc. (or any successor thereto) to permit the
transfer to Buyer of the Agreement to Construct, Maintain and Operate a Cable
Television System, dated September 8, 1975, between Angola-by-the-Bay Property
Owners Association Inc. and CATV Sussex Limited Partnership, as assigned to
Seller.
"ASSETS" shall mean all properties, privileges, rights,
interests and claims, real and personal, tangible and intangible, of every type
and description that are owned, leased, used or held for use in the Business in
which Seller has any right, title or interest or in which Seller acquires any
right, title or interest on or before the Closing Date, including Accounts
Receivable, Governmental Permits, Intangibles, Seller Contracts, Equipment and
Real Property but excluding any Excluded Assets and any Assets disposed of by
Seller in the ordinary course of business prior to the Closing Date.
"ASSUMED LIABILITIES" shall have the meaning set forth in
Section 4.1.
"BASIC SERVICES" shall mean the lowest tier of cable
television programming sold to subscribers of the System for which a subscriber
served by the System pays a fixed monthly fee to Seller, excluding Expanded
Basic Services, Pay TV and any charges for additional outlets and installation
fees and revenues derived from the rental of converters, remote control devices
and other like charges for equipment.
"BASIC SUBSCRIBER RATE" shall mean, for the System, the
predominant monthly fees and charges derived from the provision of Basic
Services to single family households, as of June 30, 1996, as set forth on
SCHEDULE 1.1.
"BEST OF SELLER'S KNOWLEDGE" shall mean the actual knowledge
of Seller after reasonable inquiry of Marvin Jones, Ramona Whitman and David
Kane.
"BUSINESS" shall mean the cable television business conducted
by Seller through the System in and around the Franchise Areas.
"BUSINESS DAY" shall mean any day other than Saturday, Sunday
or a day on which banking institutions in Denver, Colorado or New York, New York
are required or authorized to be closed.
"BUYER" shall mean the Person identified as such in the
preamble to this Agreement.
2
<PAGE> 11
"BUYER FINANCIAL STATEMENT" shall have the meaning set forth
in Section 6.5.
"CABLE ACT" shall have the meaning set forth in Section 5.8.
"CLOSING" shall mean the consummation of the transactions
contemplated by this Agreement, as described in Article II.
"CLOSING DATE" shall mean the date on which the Closing
occurs.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMUNICATIONS ACT" shall have the meaning set forth in
Section 5.8(c).
"COMMITMENT" shall have the meaning set forth in Section 7.17.
"CONSENTS" shall mean any registration with, consent or
approval of, notice to, or action by any Person or Governmental Authority
required to permit the transfer of the Assets to Buyer or permit Seller to
perform any of its other obligations under this Agreement, as set forth on
SCHEDULE 1.2.
"COPYRIGHT ACT" shall mean Title 17 of the United States Code,
as amended, and all rules and regulations thereunder.
"DEPOSIT" shall have the meaning set forth in Section 3.1.
"EMPLOYER" shall have the meaning set forth in Section
5.13(a).
"EMPLOYER PLANS" shall have the meaning set forth in Section
5.13(e).
"ENCUMBRANCE" shall mean any mortgage, lien, security
interest, security agreement, conditional sale or other title retention
agreement, limitation, pledge, option, charge, assessment, restrictive
agreement, restriction, encumbrance, adverse interest, restriction on transfer
or any exception to or defect in title or other ownership interest (including
reservations, rights of way, possibilities of reverter, encroachments,
easements, rights of entry, restrictive covenants, leases and licenses).
"ENVIRONMENTAL LAW" shall mean any Legal Requirement relating
to pollution or protection of public health, safety or welfare or the
environment, including those relating to emissions, discharges, releases or
threatened releases of Hazardous Substances into the environment (including
ambient air, surface water, ground water or land), or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Substances.
3
<PAGE> 12
"EQUIPMENT" shall mean all electronic devices, trunk and
distribution coaxial and optical fiber cable, amplifiers, power supplies,
conduit, vaults and pedestals, grounding and pole hardware, subscriber's devices
(including converters, encoders, transformers behind television sets and
fittings), headend hardware (including origination, earth stations, transmission
and distribution system), test equipment, vehicles and other tangible personal
property owned, leased, used or held for use by Seller in connection with the
Business, including the items described on SCHEDULE 1.3.
"EQUIVALENT BASIC SUBSCRIBERS" shall mean, with respect to
each Franchise Area, as of any date, the number of active customers for Basic
Services either in a single household, a commercial establishment or a
multi-unit dwelling (including a hotel unit); provided, however, that the number
of customers in a commercial establishment or multi-unit dwelling that obtain
service on a "bulk-rate" basis shall be determined for each Franchise Area by
dividing the gross bulk-rate billings for Basic Services and Expanded Basic
Services (but excluding billings from a la carte tiers or premium services,
installation or other non-recurring charges, converter rental or any outlet or
connection other than the first outlet or connection, pass-through charges for
sales taxes, line-itemized franchise fees, fees charged by the FCC and the like)
attributable to such commercial establishment or multi-unit dwelling during the
most recent billing period ended prior to the date of calculation (but excluding
billings in excess of a single month's charge) by the rate charged at the date
of determination to individual households for the highest level of Basic
Services and Expanded Basic Services offered in the Franchise Area, such rate
not to be less than the rate for such Franchise Area set forth on SCHEDULE 1.1
(excluding billings from a la carte tiers or premium services, installation or
other non-recurring charges, converter rental, pass-through charges for sales
taxes, line-itemized franchise fees, fees charged by the FCC and the like). For
purposes of this definition, (i) an "active customer" shall mean, as of any
date, any person, commercial establishment or multi-unit dwelling that is paying
for and receiving Basic Services from the System in that Franchise Area who has
an account that is not more than 60 days past due (except for past due amounts
of $10.00 or less, provided such account is otherwise current) but excluding any
person, commercial establishment or multi-unit dwelling that as of the date of
calculation has not paid in full the charges for at least one month of the
services ordered or who has been obtained as a subscriber by offers made,
promotions conducted or discounts given outside of the ordinary course of
business, or whose account has been compromised or written off other than in the
ordinary course of business consistent with past practices for reasons such as
interrupted service but not for the purpose of making it qualify as an "active
customer," and (ii) the number of days a customer account is past due shall be
calculated from the first day of the period for which the applicable billing
relates.
"ERISA" shall have the meaning set forth in Section 5.13(b).
"ESCROW AGENT" shall have the meaning set forth in Section
3.1.
"ESCROW AGREEMENT" shall have the meaning set forth in Section
3.1.
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"EXCHANGE ACT" shall mean the Securities and Exchange Act of
1934, as amended.
"EXCLUDED ASSETS" shall have the meaning set forth in Section
4.2.
"EXCLUDED LIABILITIES" shall have the meaning set forth in
Section 4.1(b).
"EXHIBITS" shall mean the exhibits prepared and delivered
pursuant to this Agreement.
"EXPANDED BASIC SERVICES" shall mean any video programming
provided over the System, regardless of service tier, other than Basic Services,
any new product tier and video programming offered on a per channel or per
program basis, for which a subscriber served by the System pays a fixed monthly
fee to Seller, excluding Pay TV and any charges for additional outlets and
installation fees and revenues derived from the rental of converters, remote
control devices and other like charges for equipment.
"FCC" shall have the meaning set forth in Section 5.8(c).
"FINAL ADJUSTMENTS REPORT" shall have the meaning set forth in
Section 3.4(b).
"FRANCHISE AREAS" shall mean those areas in which Seller is
authorized under one or more Governmental Permits issued by the applicable
franchising authorities to provide cable television service to subscribers
located in such areas through the ownership and operation of the System, as set
forth on SCHEDULE 1.4.
"GAAP" shall mean generally accepted accounting principles as
in effect in the United States of America on the date of this Agreement.
"GENERAL PARTNER" shall mean IR-TCI Partners V, L.P., the
general partner of Seller.
"GOVERNMENTAL AUTHORITY" shall mean any of the following: (a)
the United States of America; (b) any state, commonwealth, territory or
possession of the United States of America and any political subdivision thereof
(including counties, municipalities and the like); or (c) any agency, authority
or instrumentality of any of the foregoing, including any court, tribunal,
department, bureau, commission or board.
"GOVERNMENTAL PERMITS" shall mean all franchises,
authorizations, permits, licenses, easements, registrations, leases, variances
and similar rights obtained from any Governmental Authority which authorize or
are required in connection with the operation of the Business, as described on
SCHEDULE 1.5.
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"HAZARDOUS SUBSTANCES" shall mean any pollutant, contaminant,
chemical, industrial, toxic, hazardous or noxious substance or waste which is
regulated by any Governmental Authority, including, but not limited to (a) any
petroleum or petroleum compounds (refined or crude), flammable substances,
explosives, radioactive materials or any other materials or pollutants which
pose a hazard or potential hazard to the Real Property or to Persons in or about
the Real Property or cause the Real Property to be in violation of any Legal
Requirement of any Governmental Authority, (b) asbestos or any
asbestos-containing material of any kind or character, (c) polychlorinated
biphenyls ("PCBs"), as regulated by the Toxic Substances Control Act, 15 U.S.C.
Section 2601 et seq., (d) any materials or substances designated as "hazardous
substances" pursuant to the Clean Water Act, 33 U.S.C. Section 1251 et seq., (e)
"chemical substance," "new chemical substance" or "hazardous chemical substance
or mixture" as defined in the Toxic Substances Control Act, referred to above,
(f) "hazardous substances" pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. Section 9601 et seq. and (g)
"hazardous waste" pursuant to the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq.
"HOMES PASSED" shall mean, with respect to the System and as
of June 30, 1996, the total of (a) the number of single family residences
capable of being serviced without further line construction, (b) the number of
units in multi-family residential buildings capable of being serviced without
further line construction and not then governed by bulk-service agreements and
(c) the number of bulk service agreements regardless of the number of units
serviced or the equivalent billing units.
"HSR ACT" shall have the meaning set forth in Section 7.6.
"INITIAL TERMINATION DATE" shall mean June 30, 1997.
"INTANGIBLES" shall mean all general intangibles, including
subscriber lists, claims (excluding any claims relating to Excluded Assets),
patents, copyrights and goodwill, if any, owned, used or held for use by Seller
in connection with the Business.
"IRS" shall mean the Internal Revenue Service.
"LEGAL REQUIREMENT" shall mean any statute, ordinance, code,
law, rule, regulation, order or other requirement, standard or procedure
enacted, adopted or applied by any Governmental Authority, including judicial
decisions applying common law or interpreting any other Legal Requirement.
"LIMITED PARTNERS" shall mean the Persons who own or hold
units of limited partnership interests in Seller.
"MANAGEMENT AGREEMENT" shall mean the agreement related to the
operation of the System and the other cable systems owned by Seller between
Seller and TCI Cablevision Associates, Inc. (formerly known as Daniels &
Associates, Inc.).
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"MATERIAL ADVERSE CHANGE IN THE FINANCIAL MARKETS" shall mean
a change in the U.S. financial markets that has a material adverse effect,
generally, on the ability to obtain debt or equity financing.
"OCEAN PINES CONSENT" shall mean the consent of Ocean Pines
Association (or any successor thereto) to permit the transfer to Buyer of the
Agreement for the Construction and Operation of a Cable Television System, dated
February 1, 1978, between Triad CATV, Inc. and Ocean Pines Association, as
assigned to Seller.
"PARTNERSHIP AGREEMENT" shall mean the Amended and Restated
Limited Partnership Agreement of Seller, dated as of January 1, 1987, by and
between IR-TCI Partners V, L.P. (formerly known as IR-Daniels Partners V, L.P.),
as the general partner, and David B. Beyth, as the initial limited partner.
"PAY TV" shall mean premium programming services selected by
and sold to subscribers of the System for monthly fees in addition to the fee
for Basic Services.
"PERMITTED ENCUMBRANCES" shall mean the following: (a) liens
for taxes, assessments and governmental charges not yet due and payable; (b)
zoning laws and ordinances and similar Legal Requirements; (c) rights reserved
to any Governmental Authority to regulate the affected property; (d) as to
leased Assets, interests of lessors and Encumbrances affecting the interests of
the lessors; (e) the Encumbrances described on SCHEDULE 1.6; and (f) any liens,
easements, rights-of-way, servitudes, permits, leases, restrictions and
imperfections or irregularities in title that do not in any material respect,
individually or in the aggregate, affect or impair the value or use of the
affected Asset as it is currently being used by Seller.
"PERSON" shall mean any natural person, corporation,
partnership, trust, unincorporated organization, association, limited liability
company, Governmental Authority or other entity.
"PRELIMINARY ADJUSTMENTS REPORT" shall have the meaning set
forth in Section 3.4(a).
"PRIME RATE" shall mean the rate of interest quoted from time
to time in The Wall Street Journal as the prime rate.
"PURCHASE PRICE" shall have the meaning set forth in Section
3.1.
"REAL PROPERTY" shall mean all Assets consisting of interests
in real property (including, to the extent applicable, improvements, fixtures
and appurtenances), including fee and leasehold interests, as described on
SCHEDULE 1.7.
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"REGULATORY REQUIREMENT" shall mean any filing required
pursuant to the Securities Act, the Exchange Act, the HSR Act, state securities
laws (including, but not limited to, state "blue sky" laws) and state corporate
laws (including, but not limited to, takeover statutes).
"REMEDIATION" shall have the meaning set forth in Section 7.5.
"REQUIRED CONSENTS" shall mean the Consents designated as such
on SCHEDULE 1.2 by an asterisk.
"SCHEDULES" shall mean the schedules prepared and delivered
pursuant to this Agreement.
"SEA COLONY CONSENT" shall mean an agreement between Seller
and Sea Colony Associates, Inc. (or any successor thereto), assignable to Buyer,
to provide Basic Services to the Units with an expiration date no earlier than
the second anniversary of the Closing Date.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
"SELLER" shall mean the Person indicated as such in the
preamble to this Agreement.
"SELLER CONTRACTS" shall mean all contracts, agreements and
leases, other than those that are Governmental Permits, to which Seller is a
party and pertain to the ownership, operation or maintenance of the Assets or
the Business, including those described on SCHEDULE 1.8.
"SELLER FINANCIAL STATEMENTS" shall have the meaning set forth
in Section 5.11.
"SERVICE AREA" shall mean any area within a Franchise Area
where businesses, residences, multi-family dwellings, hotels, motels, trailers
and other users are capable of being serviced with terrestrial cable television
services without further line construction as of the Closing Date excluding
those areas where TCI is providing terrestrial cable television services by
means of cable, microwave, fiber optics, satellite receivers or broadcasts as of
the Closing Date.
"SYSTEM" shall mean a cable television reception and
distribution system operated in the conduct of the Business, consisting of one
or more headends, subscriber drops and associated electronic and other
equipment, and which is, or is capable of being without modification, operated
as an independent system without interconnections to other systems, as set forth
on SCHEDULE 1.9.
"TAKING" shall have the meaning set forth in Section 7.7(b).
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<PAGE> 17
"TAX RETURN" shall mean any return, report, information return
or other document (including any related or supporting information) filed or
required to be filed with any taxing authority in connection with the
determination, assessment, collection, administration or imposition of any
Taxes.
"TAXES" shall mean all taxes, charges, fees, liens, imposts,
duties or other assessments including, but not limited to, income, withholding,
excise, employment, property, sales, franchise, use and gross receipt taxes,
imposed by the United States or any state, county, local or foreign government
or any subdivision thereof. Such term shall also include any interest, penalties
or additions attributable to such assessments.
"TCI" shall mean TCI Communications, Inc., a Delaware
corporation.
"TELECOM ACT" shall have the meaning set forth in Section
5.8(e).
"TERMINATION DATE" shall mean July 22, 1997; provided however,
Seller shall have the right upon five days notice to Buyer, to extend the
Termination Date to a date designated in such notice, which date shall in no
event be later than September 22, 1997; provided further, Seller shall have the
right, upon five days notice to Buyer to further extend the Termination Date to
a date designated in such notice, which date shall in no event be later than
December 19, 1997.
"TUNNELL PROPERTIES CONSENT" shall mean the consent of
Pot-Nets, Inc. (or any successor thereto) to permit the transfer to Buyer of the
Agreement Granting a Cable Television Franchise, dated as of November 20, 1973,
by and between CATV Sussex Company and Pot-Nets, Inc., as assigned to Seller.
"UNITS" shall mean the number of Equivalent Basic Subscribers
attributable to the units of Sea Colony determined in accordance with the
definition of "Equivalent Basic Subscribers".
"WARN ACT" shall mean the Worker Adjustment and Retraining
Notification Act.
ARTICLE II
2. PURCHASE AND SALE OF ASSETS.
2.1 PURCHASE AND SALE OF ASSETS. Subject to the satisfaction
of the conditions to each party's obligations set forth in Articles VIII and IX
(or, with respect to any condition not satisfied, the waiver thereof by the
party or parties for whose benefit the condition exists), Seller shall sell,
assign, transfer and deliver to Buyer all of Seller's right, title and interest
in, and Buyer shall purchase, acquire, accept and pay for, the Assets.
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<PAGE> 18
2.2 TIME AND PLACE OF CLOSING. Subject to the terms and
conditions of this Agreement, the Closing shall take place at 10:00 a.m. New
York City time on a date specified by notice from Seller or Buyer to the other
(but shall not in any event be prior to the satisfaction or waiver of the
conditions to Closing as set forth in Articles VIII and IX or no later than ten
Business Days after satisfaction or waiver of all conditions to Closing as set
forth in Articles VIII and IX), in New York, New York at the offices of Kaye,
Scholer, Fierman, Hays & Handler, LLP, or at such other time or place as the
parties may agree; provided, however, the date specified in such notice shall
not be less than 10 nor more than 30 days after the date of such notice (unless
the Termination Date would occur within such 10-day period, in which event
Seller or Buyer shall have the right to designate any date prior to the
Termination Date as the date of Closing); provided, further, that if Seller
gives Buyer notice designating a date for Closing prior to June 23, 1997 and
Buyer has not yet obtained the Commitment, Buyer shall have the right to
designate the date for Closing, which shall be on or prior to June 23, 1997.
ARTICLE III
3. CONSIDERATION.
3.1 CONSIDERATION FOR THE ASSETS. The aggregate consideration
for the Assets shall consist of (i) an amount equal to $43,100,000, subject to
proration as set forth in Section 3.2 and adjustment as set forth in Section 3.3
(the "PURCHASE PRICE") and (ii) the assumption by Buyer of the Assumed
Liabilities. The Purchase Price shall be payable as follows: (a) $1,077,500 (the
"DEPOSIT"), payable concurrently with the execution and delivery of this
Agreement in cash by means of wire or interbank transfer in immediately
available funds to the account of The Chase Manhattan Bank (the "ESCROW AGENT"),
to be held, administered and distributed for the respective benefits of the
parties hereto in accordance with the terms of this Agreement and the Escrow
Agreement among Seller, Buyer and the Escrow Agent dated the date of this
Agreement (the "ESCROW AGREEMENT") in the form set forth as Exhibit B attached
hereto, and (b) $42,022,500, as adjusted by the prorations and adjustments set
forth in the Preliminary Adjustments Report but subject to Sections 3.3(c), (d)
and (e) and to the last sentence of Section 3.4(a), payable by Buyer to Seller,
or Seller's designee, at Closing in cash by means of wire or interbank transfer
in immediately available funds. At Closing, Seller and Buyer shall direct the
Escrow Agent to release any interest, earnings and gains then accrued on the
Deposit to Buyer, or Buyer's designee, in accordance with the terms of the
Escrow Agreement and Escrow Agent shall retain the Deposit, in accordance with
the terms of the Escrow Agreement, for the satisfaction of indemnification
claims by Buyer against Seller, if any, pursuant to Article XII.
3.2 PURCHASE PRICE PRORATIONS. (a) All revenues (other than
Accounts Receivable being purchased by Buyer hereunder) and all expenses arising
from the operations of the Business up until 12:01 a.m. on the Closing Date (the
"ADJUSTMENT TIME"), including, but not limited to, pole rental fees, rental or
other charges payable in respect of the Seller Contracts, sales and use taxes
payable with respect to cable television service and equipment (which shall not
include sales or use taxes arising out of the consummation of the transaction
contemplated
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hereunder), power and utility charges, real and personal property taxes and
assessments levied against the Assets, applicable franchise, copyright or other
fees, sales and service charges, wages, payroll taxes and payroll expenses
(including accrued vacation pay except to the extent a Purchase Price adjustment
in Buyer's favor is made under Section 3.3) of employees of Employer who
primarily perform services in connection with the operation of the Business who
are employed by Buyer as of the Closing, and other prepaid and deferred items
shall be prorated between Buyer and Seller as of the Adjustment Time in
accordance with GAAP and the principle that Seller shall receive all revenues
(other than Accounts Receivable being purchased by Buyer hereunder) and shall be
responsible for all expenses, costs and liabilities allocable to the period
prior to the Adjustment Time and Buyer shall receive all revenues and shall be
responsible for all expenses, costs and liabilities allocable to the period
after the Adjustment Time.
(b) The amount of each item of revenue prorated under
subsection (a) above, to a party which has not received, and under the terms of
this Agreement will not receive, such revenue shall be deemed a charge against
the other party. The amount of any item of cost or expense prorated under
subsection (a) above to a party which has not paid, and under the terms of this
Agreement will not pay, such cost or expense shall be deemed a charge against
such party. If the aggregate charges allocated to Seller as set forth in this
Section 3.2(b) exceed the aggregate charges allocated to Buyer as set forth in
this Section 3.2(b), the Purchase Price shall be decreased by an amount equal to
the difference between the aggregate charges allocated to Seller and the
aggregate charges allocated to Buyer. If the aggregate charges allocated to
Buyer as set forth in this Section 3.2(b) exceed the aggregate charges allocated
to Seller as set forth in this Section 3.2(b), the Purchase Price shall be
increased by an amount equal to the difference between the aggregate charges
allocated to Buyer and the aggregate charges allocated to Seller.
3.3 PURCHASE PRICE ADJUSTMENTS. (a) The Purchase Price shall
be increased by an amount equal to the aggregate of the following:
(i) (a) 100% of the face amount of all Accounts
Receivable which, as of the Closing Date, are outstanding for a period of not
more than 30 days after their respective invoice dates and (b) 85% of the face
amount of all Accounts Receivable which, as of the Closing Date, are outstanding
for a period of more than 30 days but not more than 60 days after their
respective invoice dates; and
(ii) to the extent not included in the prorations to
the Purchase Price as set forth in Section 3.2, the dollar amount of all advance
payments to, or deposits with, third parties relating to the Business which, as
of the Closing Date, are for the account of Seller or are security for Seller's
performance of its obligations under any agreement relating to the Business or
any Assets, including, but not limited to, deposits made with lessors and
deposits for utilities.
(b) The Purchase Price shall be decreased by an amount equal
to the sum of (i) the dollar amount of the remaining balance, as of the Closing
Date, of all advance payments to, or monies of third parties on deposit with,
Seller relating to the Business, including
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advance payments and deposits by customers served by the Business for
converters, encoders, decoders, cable service and related sales, (ii) the dollar
amount of accrued vacation pay of employees of Employer identified on Schedule
5.13(d) who are employed by Buyer as of the Closing and (iii) if the average of
the aggregate number of Equivalent Basic Subscribers served by the System
(excluding the Units) as of the Closing Date and as of the first day of the
month for the eleven months prior to the month during which the Closing occurs
(the "SUBSCRIBER AVERAGE") is less than 27,582, an amount equal to (x) the
difference between 27,582 and the Subscriber Average times (y) $1,507.
(c)(i) If as of the Closing Date Seller has obtained
the Sea Colony Consent, then no adjustment shall be made to the Purchase Price
other than as provided for in Sections 3.2 and 3.3(a) and (b); provided,
however, that if the weighted average rate charged under such agreement for the
provision of Basic Services (the "CLOSING RATE") is less than $13.09 per unit of
Sea Colony per month, the Purchase Price shall be decreased by an amount equal
to (x) $1,534,126 (the "SEA COLONY ADJUSTMENT") minus (y) the Units calculated
using the Closing Rate times $1,507.
(ii) If as of the Closing Date, (x) Seller has not
obtained the Sea Colony Consent and (y) Seller has received written notice from
Carl M. Freeman Associates, Inc. (or any successor thereto) that Buyer will not
be permitted to provide Basic Services to the Units after the Closing Date (a
"SEA COLONY NOTICE"), then the Purchase Price shall be decreased by an amount
equal to the Sea Colony Adjustment.
(iii) If as of the Closing Date Seller (x) has not
obtained the Sea Colony Consent, (y) has not received a Sea Colony Notice and
(z) is not providing Basic Services to the Units, then the Purchase Price shall
be decreased by an amount equal to the Sea Colony Adjustment and at Closing
Buyer shall place into escrow an amount equal to the Sea Colony Adjustment.
(iv) If as of the Closing Date Seller (x) has not
obtained the Sea Colony Consent, (y) has not received a Sea Colony Notice and
(z) is providing Basic Services to the Units, then at Closing Seller shall place
into escrow a portion of the Purchase Price equal in amount to the Sea Colony
Adjustment.
(v) Any funds placed into escrow pursuant to
paragraph (iii) or (iv) of this Section 3.3(c) shall be released (together with
any interest earned thereon) as follows:
(x) if Buyer does not provide, or ceases to provide, Basic Services to
the Units prior to the first anniversary of the Closing Date and does not
commence or recommence providing such services for a continuous period of 180
days, then on the 181st day:
(i) to Seller, an amount equal to 50% of any revenue
attributable to the provision of cable services to the Units for the period from
the Closing Date to the date Buyer ceases providing such services; and
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(ii) the balance to Buyer;
provided, that if within 180 days after the first date on which Buyer does not
provide, or ceases to provide, Basic Services to the Units, Buyer commences or
recommences providing such services to the Units, then on the fifth Business Day
after Buyer commences or recommences providing such services:
(A) to Buyer, an amount equal to 50% of any loss in revenue to
Buyer attributable to cable services to the Units for the period from the date
Buyer does not provide or ceases to provide Basic Services to the Units to the
date of commencement of such services based on an amount per month equal to the
average monthly revenue received or accrued (in accordance with GAAP) by Seller
for the Units for the twelve months prior to Closing (the "UNITS REVENUE"); and
(B) the balance to Seller;
provided, further, that if the rate charged by Buyer for the provision of Basic
Services (the "NEW RATE") is less than $13.09 per unit of Sea Colony per month,
then on the fifth Business Day after such agreement:
(1) to Buyer, an amount equal to 50% of any loss in revenue
attributable to cable services to the Units for the period from the date Buyer
does not provide or ceases to provide Basic Services to the Units to the date of
commencement of such services based on an amount per month equal to the Unit
Revenue plus an amount equal to (a) the Sea Colony Adjustment minus (b) the
Units calculated using the New Rate times $1,507; and
(2) the balance to Seller;
(y) if Buyer enters into a written agreement to provide Basic Services
to the Units, then on the fifth Business Day after such agreement:
(i) to Buyer, an amount equal to 50% of any loss in revenue to
Buyer attributable to cable services to the Units for the period from the date
Buyer does not provide or ceases to provide Basic Services to the Units to the
date of commencement of such services based on an amount per month equal to the
Units Revenue; and
(ii) the balance to Seller;
provided, however, that if the New Rate charged under Buyer's agreement for the
provision of Basic Services is less than $13.09 per unit of Sea Colony per
month, then on the fifth Business Day after such agreement:
(A) to Buyer, an amount equal to 50% of any loss in revenue
attributable to cable services to the Units for the period from the date Buyer
does not provide or ceases to provide
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Basic Services to the Units to the date of commencement of such services based
on an amount per month equal to the Units Revenue plus an amount equal to (a)
the Sea Colony Adjustment minus (b) the Units calculated using the New Rate
times $1,507; and
(B) the balance to Seller; or
(z) if Buyer commences or recommences providing Basic Services to the
Units without having entered into an agreement therefor and, on the first
anniversary of the Closing Date, is regularly so providing such services, then,
on the first anniversary of the Closing Date:
(i) to Buyer, an amount equal to 50% of any loss in revenue to
Buyer attributable to cable services to the Units for the period from the date
Buyer does not provide or ceases to provide Basic Services to the Units to the
date of commencement or recommencement of such services based on an amount per
month equal to the Units Revenue; and
(ii) the balance to Seller;
provided, however, that if the New Rate actually charged by Buyer for the
provision of Basic Services is less than $13.09 per Unit of Sea Colony per
month, then
(A) to Buyer, 50% of any loss in revenue to Buyer attributable
to cable services to the Units for the period from the date Buyer does not
provide or ceases to provide Basic Services to the Units to the date of
commencement or recommencement of such services based on an amount per month
equal to the Units Revenue, plus an amount equal to (a) the Sea Colony
Adjustment minus (b) the Units calculated using the New Rate times $1,507; and
(B) the balance to Seller.
(vi) If the Subscriber Average calculated as of the
earlier of the Closing Date and April 30, 1997 is greater than 27,582, then any
adjustment to the Purchase Price and any amount to be placed into escrow by
Seller or Buyer pursuant to paragraphs (iii) and (iv) of this Section 3.3(c)
shall be decreased by an amount equal to the difference between 27,582 and the
Subscriber Average calculated as of the earlier of the Closing Date and April
30, 1997, times $1,507.
(vii) If (A) the Purchase Price is adjusted pursuant
to paragraph (ii) of this Section 3.3(c) or any portion of the escrow funds are
released to Buyer pursuant to Section 3.3(c)(v)(x)(ii) and (B)(i) on or prior to
the first anniversary of the Closing Date Buyer enters into a written agreement
to commence or recommence providing Basic Services to the Units or (ii) on the
first anniversary of the Closing Date Buyer is in fact regularly providing such
services (whether or not pursuant to an agreement), then Buyer shall pay to
Seller an amount equal to (i)(a) the amount of the Sea Colony Adjustment or (b)
if the New Rate is less than $13.09 per unit of Sea Colony per month, an amount
equal to the Units calculated using the New Rate times $1,507 minus (ii) 50% of
any loss in revenue to Buyer attributable to cable services to the Units
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for the period from the date Buyer does not provide or ceases to provide Basic
Services to the Units to the date of commencement of such services based on an
amount per month equal to the Units Revenue; such payment shall be made to
Seller in cash (by means of interbank transfer in immediately available funds)
within 10 Business Days of commencement of such services but in no event later
than the first anniversary of the Closing Date.
(d) If as of the Closing Date Seller has not obtained
the Tunnell Properties Consent, then at Closing Seller shall place into escrow a
portion of the Purchase Price equal to (a) the average number of Equivalent
Basic Subscribers that are the subject of the Tunnell Properties Consent
included in the Subscriber Average times (b) $1,507 (the "TUNNELL PROPERTIES
ADJUSTMENT"). The Tunnell Properties Adjustment shall be released from escrow
(together with any interest earned thereon) as follows:
(x) if Buyer does not provide, or ceases to provide, Basic Services to
the Tunnell Properties Subscribers and does not commence or recommence providing
such services for a continuous period of 45 days, then on the 46th day:
(i) to Seller, an amount equal to 50% of any revenue
attributable to the provision of cable services to the subscribers that are the
subject of the Tunnell Properties Consent (the "TUNNELL PROPERTIES SUBSCRIBERS")
from the Closing Date to the date Buyer ceases providing such services; and
(ii) the balance to Buyer;
(y) if Seller obtains the Tunnell Properties Consent or Buyer enters
into a written agreement to provide Basic Services to the Tunnell Properties
Subscribers, then on the fifth Business Day after the date of such agreement:
(i) to Buyer, an amount equal to 50% of any loss in revenue
attributable to cable services to the Tunnell Properties Subscribers for the
period from the date Buyer does not provide or ceases to provide Basic Services
to the Tunnell Properties Subscribers to the date of commencement of such
services based on an amount per month equal to the average monthly revenue
received or accrued (in accordance with GAAP) by Seller for the Tunnell
Properties Subscribers for the twelve months prior to Closing (the "TUNNELL
REVENUE") and
(ii) the balance to Seller; or
(z) if not theretofor released, then on the date which is the first
anniversary of the Closing, to Seller.
If (A) any portion of the Tunnell Properties Adjustment is released from escrow
to Buyer pursuant to Section 3.3(d)(x)(ii) and (B)(i) on or prior to the first
anniversary of the Closing Buyer enters into a written agreement to commence
providing Basic Services to the Tunnell Properties Subscribers or (ii) on the
first anniversary of the Closing Date Buyer is in fact
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<PAGE> 24
regularly providing such services (whether or not pursuant to an agreement),
then Buyer shall pay to Seller an amount equal to (i) the Tunnell Properties
Adjustment minus (ii) 50% of any loss of revenue attributable to cable services
to the Tunnell Properties Subscribers for the period from the date Buyer does
not provide or ceases to provide such services to the date of commencement or
recommencement of such services based on an amount per month equal to the
Tunnell Revenue.
(e) If as of the Closing Date Seller has not obtained
the Angola Consent, then at Closing Seller shall place into escrow a portion of
the Purchase Price equal to (a) the average number of Equivalent Basic
Subscribers that are the subject of the Angola Consent included in the
Subscriber Average times (b) $1,507 (the "ANGOLA ADJUSTMENT"). The Angola
Adjustment shall be released from escrow (together with any interest earned
thereon) as follows:
(x) if Buyer does not provide, or ceases to provide, Basic Services to
the Angola Subscribers and does not commence or recommence providing such
services for a continuous period of 45 days, then on the 46th day:
(i) to Seller, an amount equal to 50% of any revenue
attributable to the provision of cable services to the subscribers that are the
subject of the Angola Consent (the "ANGOLA SUBSCRIBERS") from the Closing Date
to the date Buyer does ceases providing such services; and
(ii) the balance to Buyer;
(y) if Seller obtains the Angola Consent or Buyer enters into a
written agreement to provide Basic Services to the Angola Subscribers, then on
the fifth Business Day after the date of such agreement:
(i) to Buyer, an amount equal to 50% of any loss in revenue
attributable to cable services to the Angola Subscribers for the period from the
date Buyer does not provide or ceases to provide Basic Services to the Angola
Subscribers to the date of commencement of such services based on an amount per
month equal to the average monthly revenue received or accrued (in accordance
with GAAP) by Seller for the Angola Subscribers for the twelve months prior to
Closing (the "ANGOLA REVENUE"); and
(ii) the balance to Seller; or
(z) if not theretofor released, then on the date which is the first
anniversary of the Closing, to Seller.
If (A) any portion of the Angola Adjustment is released from escrow to Buyer
pursuant to Section 3.3(e)(x)(ii) and (B)(i) on or prior to the first
anniversary of the Closing Buyer enters into a written agreement to commence
providing Basic Services to the Angola Subscribers or (ii) on or prior to the
first anniversary of the Closing Date Buyer is in fact regularly providing such
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services (whether or not pursuant to an agreement), then Buyer shall pay to
Seller an amount equal to (i) the Angola Adjustment minus (ii) 50% of any loss
of revenue attributable to cable services to the Angola Subscribers for the
period from the date Buyer does not provide or ceases to provide such services
to the date of commencement or recommencement of such services based on an
amount per month equal to the Angola Revenue.
3.4 PRELIMINARY AND FINAL SETTLEMENTS. Preliminary and final
adjustments to the Purchase Price will be determined as follows:
(a) At least ten Business Days prior to the Closing
Date, Seller will deliver to Buyer a report (the "PRELIMINARY ADJUSTMENTS
REPORT"), prepared in good faith and on a reasonable basis, setting forth in
reasonable detail Seller's estimate as of the Closing Date of the prorations set
forth in Section 3.2 and the adjustments set forth in Section 3.3. The
Preliminary Adjustments Report shall be certified by an authorized officer of
the general partner of the General Partner to have been prepared in good faith
and on a reasonable basis. Seller shall provide Buyer with such information as
Buyer may reasonably request to verify the proposed prorations and adjustments.
If Buyer gives notice to Seller that it reasonably believes that any of the
proposed prorations or adjustments are materially incorrect and the parties are
unable to resolve the dispute prior to Closing, the disputed amount shall be
deposited with the Escrow Agent, to be administered and distributed in
accordance with the terms of this Agreement and the Escrow Agreement, pending
final resolution of the adjustments pursuant to Section 3.4(b).
(b) Within 60 days after the Closing Date, Seller
will deliver to Buyer a report (the "FINAL ADJUSTMENTS REPORT"), prepared in
good faith and on a reasonable basis, setting forth in reasonable detail the
final determination of the prorations set forth in Section 3.2 and the
adjustments set forth in Section 3.3. The Final Adjustments Report shall make
such changes to the Preliminary Adjustments Report as are necessary to cover
those prorations or adjustments which (i) were estimated or were not calculated
as of the Closing Date in the Preliminary Adjustments Report and (ii) were
adjusted in the Preliminary Adjustments Report and which require subsequent
adjustment. The Final Adjustments Report shall be certified by an authorized
officer of the general partner of the General Partner to be true, complete and
correct as of the date it is delivered.
Buyer shall provide Seller with reasonable access to all
records which Buyer has in its possession and which are necessary for Seller to
prepare the Final Adjustments Report. Seller shall provide Buyer with reasonable
access to all records which Seller has in its possession which are necessary for
Buyer to review and verify the Final Adjustments Report.
(c) Within 30 days after receipt of the Final
Adjustments Report, Buyer shall review the Final Adjustments Report and notify
Seller whether or not Buyer accepts all or any of the prorations and adjustments
set forth on the Final Adjustments Report. If Buyer accepts the Final
Adjustments Report with respect to all prorations and adjustments contained
therein, Buyer or Seller, as appropriate, shall, within ten Business Days of
such acceptance, make the following payments: (i) if the Purchase Price
calculated based on the Final Adjustments
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Report is greater than the Purchase Price calculated based on the Preliminary
Adjustments Report, Buyer shall pay such difference to Seller in cash by wire or
interbank transfer in immediately available funds, or (ii) if the Purchase Price
calculated based on the Final Adjustments Report is less than the Purchase Price
calculated based on the Preliminary Adjustments Report, Seller shall pay such
difference to Buyer in cash by wire or interbank transfer in immediately
available funds. In the event any payment required by this Section 3.4(c) is not
made when due, Seller or Buyer, as appropriate, shall make the payment required
by this Section 3.4(c) with interest accruing from the date such payment was due
at the Prime Rate plus 5%.
(d) If Buyer in good faith objects to any prorations
and/or adjustments set forth on the Final Adjustments Report, Buyer shall give
notice thereof to Seller within 30 days after receipt of the Final Adjustments
Report, specifying in reasonable detail the nature and extent of such
disagreement and Buyer and Seller shall have a period of 30 days from Seller's
receipt of such notice in which to resolve such disagreement. If such notice of
objection is not received by Seller within 30 days after receipt of the Final
Adjustments Report, it shall be deemed that Buyer has accepted the Final
Adjustments Report with respect to all items set forth therein and within ten
Business Days after the expiration of such 30-day period Buyer or Seller, as
appropriate, shall make the payments described in Section 3.4(c). Any disputed
amounts which cannot be agreed to by the parties within 30 days from Seller's
receipt of Buyer's notice of objection to any of the adjustments set forth in
the Final Adjustments Report shall be determined by a nationally recognized
accounting firm selected by Buyer and Seller which has not been employed by
Buyer or Seller for two years prior to the date hereof (the "ACCOUNTANTS") in
accordance with the engagement letter set forth on Exhibit C attached hereto
with such changes as may be requested by the Accountants and approved by Seller
and Buyer. The engagement of and the determination by the Accountants shall be
binding on and shall be nonappealable by Seller and Buyer. In the event that (a)
the Purchase Price calculated based on the determination of the Accountants is
less than the Purchase Price calculated based on the Final Adjustments Report,
the fees and expenses payable to the Accountants shall be paid by Seller or (b)
the Purchase Price calculated based on the determination of the Accountants is
greater than or equal to the Purchase Price calculated based on the Final
Adjustments Report, the fees and expenses payable to the Accountants shall be
paid by Buyer. Within ten Business Days after the determination by the
Accountants of all disputed prorations and/or adjustments, Buyer or Seller, as
appropriate, shall make the payments described in Section 3.4(c) as if the
determinations of the Accountants were included in the Final Adjustments Report.
In the event any payment required by this Section 3.4(d) is not made when due,
Seller or Buyer, as appropriate, shall make the payment required by this Section
3.4(d) with interest accruing from the date such payment was due at the Prime
Rate plus 5%.
3.5 DISPUTED LIABILITIES. If a proration or adjustment to the
Purchase Price is made in Buyer's favor for any liability assumed by Buyer but
is in good faith being contested by Seller as of the Closing Date, and if Buyer
is relieved of this liability, Buyer shall pay to Seller or its designee in cash
(by means of wire or interbank transfer in immediately available funds) an
amount equal to the unpaid portion of this liability within five Business Days
after the date
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Buyer receives written notice and such additional documentation as Buyer may
reasonably request, all in form and substance reasonably acceptable to Buyer,
that it is relieved of this liability. In the event any payment required by this
Section 3.5 is not made by Buyer when due, Buyer shall make the payment required
by this Section 3.5 with interest accruing from the date such payment was due at
the Prime Rate plus 5%.
3.6 ALLOCATION OF PURCHASE PRICE. The Purchase Price shall be
allocated among the classes of assets set forth in Section 1060 of the Code and
the regulations thereunder in the manner agreed to by the parties prior to the
Closing. After the Closing, Seller shall cooperate with Buyer in the
preparation, execution and filing with the IRS of all information returns and
supplements thereto required to be filed by the parties under Section 1060 of
the Code relating to the allocation of such consideration, and Seller and Buyer
agree to file Form 8594 (or any substitute therefor) when required by applicable
law.
ARTICLE IV
4. ASSUMED LIABILITIES AND EXCLUDED ASSETS.
4.1 ASSIGNMENT AND ASSUMPTION. (a) Seller will assign, and
Buyer will assume and perform, all liabilities and obligations of Seller arising
out of the conduct of the Business, but excluding the Excluded Liabilities
(collectively, the "ASSUMED LIABILITIES"). Without limiting the generality of
the foregoing, the Assumed Liabilities shall include the following liabilities
and obligations of Seller: (A) Seller's obligations to subscribers of the
Business for (i) refunds of subscriber deposits held by Seller as of the Closing
Date in respect of which a Purchase Price adjustment is made in Buyer's favor
under Section 3.3(b), (ii) refunds of subscriber advance payments held by Seller
as of the Closing Date for services to be rendered by the System after the
Closing Date, in respect of which a Purchase Price adjustment is made in Buyer's
favor under Section 3.3(b) and (iii) the delivery of cable television service to
customers of the System after the Closing Date in a manner consistent with past
practice; (B) obligations and liabilities in respect of which a Purchase Price
adjustment in Buyer's favor is made under Section 3.3 including, but not limited
to, accrued but unpaid real and personal property taxes related to the Assets
which correspond to a period of time prior to the Adjustment Time, expenses
accrued under Governmental Permits and Seller Contracts which correspond to a
period of time prior to the Adjustment Time and certain accrued vacation pay;
(C) obligations accruing and relating to periods on or after the Adjustment Time
under Governmental Permits and Seller Contracts; and (D) any taxes accrued from
or after the Adjustment Time in connection with the ownership of the Assets and
the ownership of the Assets and the operation of the Business.
(b) Buyer will not assume or have any responsibility
for any liabilities or obligations of Seller which arise out of, result from, or
relate to, (i) the Excluded Assets or (ii) the conduct of the Business prior to
the Adjustment Time (except to the extent a Purchase Price adjustment in Buyer's
favor was made under Section 3.3(b)) (collectively, the "EXCLUDED LIABILITIES").
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4.2 EXCLUDED ASSETS. Excluded from the assets which will be
transferred from Seller to Buyer pursuant to this Agreement (collectively, the
"EXCLUDED ASSETS") are all assets not specifically identified in this Agreement
as being transferred from Seller to Buyer. Without limiting the foregoing,
"Excluded Assets" shall include all Seller's right, title and interest in, to
and under the following: (a) all programming agreements relating to the
Business; (b) all insurance policies and rights and claims thereunder (except as
otherwise provided in Section 7.9(a)); (c) all bonds, letters of credit, surety
instruments and other similar items and any cash surrender value thereunder; (d)
all cash, cash equivalents and securities; (e) all trademarks, trade names,
service marks, service names, logos and similar proprietary rights used in the
Business, provided that Buyer shall have the right to use such proprietary
rights for the period commencing on the Closing Date and expiring 120 days after
the Closing Date; (f) any contracts, licenses, authorizations, agreements or
commitments which are not assumed by Buyer pursuant to this Agreement; (g) the
Management Agreement; (h) any asset or properties owned or leased by Seller that
are not used in the Business; (i) all subscriber deposits and advance payments
held by Seller as of the Closing Date in connection with the operation of the
Business for which a Purchase Price adjustment is made in Buyer's favor under
Section 3.3(b); (j) all claims, rights and interests in and to any refund for
federal, state or local franchise, income or other taxes or fees (including, but
not limited to, copyright fees) of any nature relating to the operation of the
Business prior to the Closing Date; (k) the account books of original entry,
general ledgers and financial records used in connection with the Business,
provided that for a period of three years after the Closing Date, Buyer shall
have access to and the right to copy, at its expense, during usual business
hours upon reasonable prior notice to Seller, portions of such books and records
that are relevant to Buyer's ownership and operation of the System; (l) the
retransmission consent agreements relating to the carriage of WMAR, WBAL, WTTG
and WJZ; and (m) those properties, rights and interests set forth on SCHEDULE
4.2.
ARTICLE V
5. REPRESENTATIONS AND WARRANTIES OF SELLER.
Except with respect to Sections 5.1(b), 5.2(b) and 5.3(c), as
to which TCI and the General Partner, severally as to itself only, and not
Seller, represent and warrant to Buyer, Seller represents and warrants to Buyer
as follows:
5.1 ORGANIZATION AND QUALIFICATION. (a) Seller is a limited
partnership duly organized, validly existing and in good standing under the laws
of the state of Colorado and has all requisite partnership power and authority
to own, lease and use the Assets as they are currently owned, leased and used
and to conduct the Business as it is currently conducted. Seller is duly
qualified or licensed to do business and is in good standing under the laws of
each jurisdiction where the Assets are located and the Business is conducted,
except any such jurisdiction where the failure to be so qualified or licensed
and in good standing would not have a material adverse effect on the validity,
binding effect or enforceability of this Agreement, or on the ability of Seller
to perform its obligations under this Agreement.
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(b) Each of TCI and the General Partner is a
corporation or limited partnership, as the case may be, duly organized, validly
existing and in good standing under the laws of its state of incorporation or
formation.
5.2 AUTHORITY AND VALIDITY. (a) Seller has full partnership
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Seller have been
duly and validly authorized by all necessary action on the part of Seller (other
than, with respect to the sale of the Assets, the approval of such transaction
contemplated by this Agreement by the Limited Partners). The General Partner has
taken all necessary action so that it may recommend that the Limited Partners
approve the transactions contemplated by this Agreement. This Agreement has been
duly and validly executed and delivered by Seller and constitutes a valid and
binding obligation of Seller enforceable in accordance with its terms. Except
for the approval by the Limited Partners, no further partnership action on the
part of Seller is required in connection with the consummation of the
transactions contemplated by this Agreement.
(b) Each of TCI and the General Partner has all
requisite corporate or partnership, as the case may be, power and authority to
execute, deliver and perform its obligations under this Agreement. The execution
and delivery by each of TCI and the General Partner of, and the performance by
each of TCI and the General Partner of its respective obligations under, this
Agreement have been duly authorized by all requisite corporate or partnership
action, as the case may be, of TCI and the General Partner, as the case may be,
and no other corporate or partnership proceedings, as the case may be, on the
part of TCI or the General Partner, as the case may be, are necessary to
authorize the execution and delivery of this Agreement or the performance of
TCI's or the General Partner's respective obligations hereunder. This Agreement
has been duly and validly executed and delivered by each of TCI and the General
Partner and constitutes a valid and binding agreement of each of TCI and the
General Partner, enforceable in accordance with its terms.
5.3 CONSENTS AND APPROVALS; NO VIOLATION. (a) Except for (i)
the Consents, (ii) filings, consents or other actions which, if not made or
obtained, would not have a material adverse effect on any of the Assets material
to the Business, the System, the Business, Seller's ability to perform its
obligations under this Agreement or Buyer's ability to conduct the Business
after the Closing in substantially the same manner in which it is currently
conducted by Seller, (iii) the consent of the Limited Partners with respect to
the transactions contemplated by this Agreement and (iv) the Regulatory
Requirements, no consent, waiver, action, approval or authorization of, or
filing, registration or qualification with, any Person or Governmental Authority
is required to be made or obtained by Seller in connection with the execution,
delivery and performance of this Agreement by Seller.
(b) Except as set forth on SCHEDULE 5.3(b), the
execution, delivery and performance of this Agreement by Seller do not and will
not: (a) violate or conflict with any provision of its Certificate of Limited
Partnership or the Partnership Agreement; (b) violate any
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Legal Requirement; or (c)(i) violate, conflict with or constitute a breach of
or default under (without regard to requirements of notice, passage of time or
elections of any Person), (ii) permit or result in the termination, suspension
or modification of, (iii) result in the acceleration of (or give any Person the
right to accelerate) the performance of Seller under, or (iv) result in the
creation or imposition of any Encumbrance under, any Seller Contract or any
other instrument evidencing any of the Assets or any instrument or other
agreement to which Seller is a party or by which Seller or any of its assets is
bound or affected, except such violations, conflicts, breaches, defaults,
terminations, suspensions, modifications, and accelerations which would not,
individually or in the aggregate, have a material adverse effect on the Assets,
taken as a whole, the System, the Business, or Seller's ability to perform its
obligations under this Agreement or Buyer's ability to conduct the Business
after the Closing in substantially the same manner in which it is currently
conducted by Seller.
(c) The execution, delivery and performance of this
Agreement by each of TCI and the General Partner do not and will not violate or
conflict with any provision of TCI's or the General Partner's respective
Certificate of Incorporation or By-Laws or Certificate of Limited Partnership or
partnership agreement, as the case may be.
5.4 COMPLETE SYSTEMS. Except as set forth on SCHEDULE 5.4, the
Assets represent all assets, properties, franchises, licenses, permits,
consents, certificates, authorities, operating rights, leases, contracts (with
the exception of programming contracts and retransmission consents included in
the Excluded Assets which Buyer acknowledges may need to be replaced in order
for Buyer to continue to operate the Business), agreements, commitments and
arrangements owned or used by Seller in the Business and reasonably necessary
for the conduct of the Business in the ordinary course in the same manner as
that in which the Business is currently conducted by Seller.
5.5 TITLE. Except as set forth on SCHEDULE 5.5 and for the
Permitted Encumbrances, Seller has, and on the Closing Date will have and will
transfer to Buyer, good and marketable title to the Assets. The Assets on the
Closing Date will be free and clear of all Encumbrances of any kind or nature,
other than Permitted Encumbrances.
5.6 REAL PROPERTY. (a) All the Assets consisting of interests
in Real Property that are material to the conduct of the Business are described
on SCHEDULE 1.7. Seller has valid leasehold interests in Real Property leased by
Seller under written leases or subleases, correct and complete copies of which
have been made available to Buyer.
(b) All easements, rights-of-way and other rights
which are necessary in any material respect for Seller's current use of any Real
Property are valid and in full force and effect, and, since July 1, 1992 and, to
the Best of Seller's Knowledge with respect to all periods prior thereto, Seller
has not received any written notice with respect to the termination or breach of
any of those rights.
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(c) Seller has not given or received any written
notice of the termination of any lease for Real Property. All leases and
subleases pursuant to which any of the Real Property is occupied or used are
valid, subsisting, binding and enforceable in accordance with their respective
terms and there are no existing defaults thereunder or events that with notice
or lapse of time or both would constitute defaults thereunder. To the Best of
Seller's Knowledge, subject to the receipt of any necessary Consents, the
consummation of the transactions contemplated by this Agreement will not result
in any termination of any lease for Real Property.
(d) There is no condemnation, eminent domain,
expropriation or similar proceedings pending or, to the Best of Seller's
Knowledge, threatened against any of the Real Property which, if adversely
determined, would have a material adverse effect on the Assets, the Business or
the System.
(e) There are not pending or, to the Best of Seller's
Knowledge, threatened, any special assessments or any pending proceedings for
changes in the zoning with respect to the Real Property or any part thereof and
Seller has not received any notice of the desire of any public authority or
other entity to take or use any Real Property or any part thereof. All
structures on the Real Property are structurally sound and in good operating
condition and repair (reasonable wear and tear excepted). Each parcel of Real
Property has access (either direct or by an easement included among the Assets)
to all public roads, utilities, and other services necessary for the operation
of the System with respect to such parcel. Seller has complied with all notices
or orders to correct violations of Legal Requirements issued by any Governmental
Authority having jurisdiction against or affecting any of the Real Property.
5.7 ENVIRONMENTAL MATTERS. (a) Except as set forth on SCHEDULE
5.7 and except for any adverse environmental condition(s) which may be
identified in any environmental report prepared and delivered pursuant to
Section 7.5, to the Best of Seller's Knowledge, Seller's use of the Real
Property complies in all material respects with all Environmental Laws. Seller
has not received written notice or, to the Best of Seller's Knowledge, oral
notice of any claim or investigation based on Environmental Laws which relates
to any Real Property or any operations conducted by Seller on such Real
Property.
(b) Seller has provided Buyer with complete and
correct copies of (i) all studies, reports, samplings, test results, surveys,
submissions, correspondence or other materials in the possession of Seller, TCI
or any of TCI's direct or indirect wholly-owned subsidiaries relating to the
presence or alleged presence of Hazardous Substances at, on or affecting the
Real Property, (ii) all notices or other materials in the possession of Seller,
or TCI or any of TCI's direct or indirect wholly-owned subsidiaries that were
received from any Governmental Authority having the power to administer or
enforce any Environmental Laws relating to current or past ownership, use or
operation of the Real Property or activities at the Real Property and (iii) all
materials in the possession of Seller, TCI or any of TCI's direct or indirect
wholly-owned subsidiaries relating to any claim, allegation or action by any
private third party under any Environmental Law.
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(c) Except for any adverse environmental condition(s)
which may be identified in any Phase I environmental report prepared and
delivered pursuant to Section 7.5, Seller does not know or have any reason to
know of: (i) the presence, release or threatened release of any Hazardous
Substances in, on, to, from or under the Real Property; (ii) the use, treatment,
storage, disposal or transportation of Hazardous Substance in, on, to, from or
under the Real Property; (iii) any judicial or administrative proceedings
regarding Hazardous Substances or Environmental Laws in connection with the Real
Property or, to the Best of Seller's Knowledge, any threat thereof; or (iv) any
other matter relating to Hazardous Substances or threats to public health or the
environment in connection with the Real Property.
5.8 COMPLIANCE WITH LAW; GOVERNMENTAL PERMITS. (a) Except as
set forth on SCHEDULE 5.8, the ownership, leasing and use of the Assets as they
are currently owned, leased and used by Seller and the conduct of the Business
as it is currently conducted by Seller, do not violate any Legal Requirement,
which violation(s), individually or in the aggregate, reasonably could be
expected to have a material adverse effect on the Assets, taken as a whole, the
System or the Business. Seller has not received any notice claiming a material
violation by Seller or the Business of any Legal Requirement applicable to
Seller or the Business as it is currently conducted and, to the Best of Seller's
Knowledge, no basis exists for any person to claim that such a violation exists.
(b) SCHEDULE 1.5 lists all Governmental Permits that
are material to the conduct of the Business as it is currently conducted by
Seller. Complete and correct copies of all such Governmental Permits as
currently in effect have been, or prior to Closing will be, made available to
Buyer. All such Governmental Permits are currently in full force and effect.
There is no action, proceeding or investigation pending or, to the Best of
Seller's Knowledge, threatened, relating to the termination, suspension or
modification of any such Governmental Permit and Seller is in compliance in all
material respects with the terms and conditions of all Governmental Permits and
no other Governmental Permits are required in connection with the operation of
the Business in the manner in which it is currently conducted by Seller.
(c) The operation of the System has been, and is, in
compliance in all material respects with the Communications Act of 1934, as
amended (as so amended, the "COMMUNICATIONS ACT"), and the rules and regulations
of the Federal Communications Commission (the "FCC"), except that, as to any
rate regulation thereunder (other than with respect to the operation of the
System in Unincorporated Sussex County, Delaware) the foregoing is limited to
the Best of Seller's Knowledge. Seller has delivered, or prior to Closing will
deliver, to Buyer complete and correct copies of all reports and filings for the
past three years made or filed pursuant to the Communications Act or FCC rules
and regulations with respect to the Business.
(d) To the Best of Seller's Knowledge, the operation
of the System has been, and is, in compliance in all material respects with the
Cable Television Consumer Protection and Competition Act of 1992 (the "CABLE
ACT"), and the rules and regulations of the FCC promulgated thereunder.
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(e) To the Best of Seller's Knowledge, the operation
of the System has been, and is, in compliance in all material respects with the
Telecommunications Act of 1996 (the "TELECOM ACT"), and the rules and
regulations of the FCC promulgated thereunder.
(f) With the exception of Delaware Public Service
Commission, as of the date of this Agreement no Governmental Authority has
notified Seller of its application to be certified to regulate rates or its
attempt to regulate rates with respect to the System.
(g) The rates charged by the System as of the date of
this Agreement are in compliance in all material respects with current FCC rate
regulations.
5.9 SELLER CONTRACTS. SCHEDULE 1.8 lists each Seller Contract,
as of the date of this Agreement, that is (i) material to the conduct of the
Business as it is now conducted, (ii) involves annual payments in excess of
$10,000 or (iii) is not terminable without material penalty on 90 days' notice
or less. Complete and correct copies of the Seller Contracts as currently in
effect have been made available to Buyer. Neither Seller nor, to the Best of
Seller's Knowledge, any other party to any Seller Contract is in any material
respect in breach of the performance of its obligations under any Seller
Contract. Except as set forth on SCHEDULE 5.9, Seller has not received any
written notice with respect to termination of any Seller Contract that is
material to the conduct of the Business as it is now conducted.
5.10 COPYRIGHT COMPLIANCE. Seller has deposited with the
United States Copyright Office all statements of account and other documents and
instruments, and paid all royalties, supplemental royalties, fees and other sums
to the United States Copyright Office, required under the Copyright Act with
respect to the Business and operations of the System as are required to obtain,
hold and maintain the compulsory copyright license for cable television systems
prescribed in Section 111 of the Copyright Act and the rules and regulations of
the United States Copyright Office promulgated thereunder. Seller and the System
are in material compliance with the Copyright Act. Seller and the System are
entitled to hold and do now hold the compulsory copyright license described in
Section 111 of the Copyright Act, which compulsory copyright license is in full
force and effect and has not been revoked, canceled, encumbered or materially
adversely affected in any manner. Seller has made available to Buyer complete
and correct copies of all reports and filings, and all reports and filings for
the past three years, made or filed pursuant to the Copyright Act with respect
to the Business. Seller has not received any notice to the effect that the
conduct of the Business as currently conducted infringes on the rights of any
Person in any copyright or other intellectual property right, except as to
potential copyright liability arising from the performance, exhibition or
carriage of any music on the System relating to claims made by music licensing
organizations (such as ASCAP, BMI and SESAC) that operators of cable television
systems are responsible for payment of music performing rights license fees for
certain music cablecast on such systems.
5.11 FINANCIAL STATEMENTS. (a) Seller has delivered to Buyer
correct and complete copies of certain financial information for the System for
the years ended December 31, 1995 and December 31, 1994 and the nine-month
period ended September 30, 1996 (collectively,
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the "SELLER FINANCIAL STATEMENTS"). Except for the absence of footnote
disclosures, cash flow statements and statements of equity and except for
estimated, annualized or projected financial information, the Seller Financial
Statements fairly present, in all material respects, the results of operations
of the System for the respective periods ended on such dates, all in conformity
with GAAP consistently applied with full allocations of all costs, expenses and
overhead associated with operating the System, and with respect to the Seller
Financial Statements for the nine-month period ended September 30, 1996, subject
to normal year-end adjustments (none of which are expected to be material in
amount). Seller has delivered correct and complete copies of balance sheets and
capital expenditure reports for the System as of December 31, 1994, December 31,
1995 and September 30, 1996, each prepared in the ordinary course of business.
(b) Since the latest date of the Seller Financial
Statements (i) the Business has been operated only in the ordinary course and
(ii) there has been no material adverse change in, and no event has occurred
which, so far as reasonably can be foreseen, is likely, individually or in the
aggregate, to result in any material adverse change in the results of operations
of the Business, other than any change arising out of matters of a general
economic nature or matters (including, but not limited to, competition caused by
or arising from direct broadcast satellite, the Multichannel Multipoint
Distribution Service, legislation, rule making and regulation) affecting the
cable television industry (national or regional) in general.
5.12 LEGAL PROCEEDINGS. Except as set forth on SCHEDULE 5.12,
and except for any judgments, orders, actions, suits, proceedings or
investigations as may affect the cable television industry (national or
regional) generally, there is no judgment or order outstanding, or any action,
suit, proceeding or investigation by or before any Governmental Authority or any
arbitrator pending or, to the Best of Seller's Knowledge, threatened, involving
or affecting any of the Assets or the Business which, if adversely determined,
would have a material adverse effect on the Assets or the Business or would
materially impair the ability of Seller to perform its obligations under this
Agreement.
5.13 EMPLOYMENT MATTERS. (a) Seller does not employ any
individuals in connection with the operation of the Business and does not, and
is not obligated to, maintain or contribute to any employee benefit plan, as
defined in Section 3(3) of ERISA. All individuals managing the operations of the
Business are employees of TCI or its Affiliates (other than Seller) (the
"EMPLOYER"). The Employer is reimbursed for employee-related expenses relating
to the operations of the Business by Seller under the Management Agreement or
the Partnership Agreement.
(b) To the Best of Seller's Knowledge, Employer has
complied in all material respects with all Legal Requirements relating to the
employment of labor and those relating to wages, hours, collective bargaining,
unemployment compensation, worker's compensation, equal employment opportunity,
age and disability discrimination, immigration control and the payment and
withholding of taxes with respect to employees of Employer who primarily perform
services in connection with the operation of the Business.
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(c) Employer is not a party to any contract with any
labor organization, and Employer has not recognized or agreed to recognize any
union or other collective bargaining unit with respect to employees of Employer
who primarily perform services in connection with the operation of the Business.
To the Best of Seller's Knowledge after reasonable inquiry of Employer, and
except as set forth on SCHEDULE 5.13(c), no union or other collective bargaining
unit has been certified as representing any of the employees engaged in the
operation of the Business, and, to the Best of Seller's Knowledge after
reasonable inquiry of Employer, Employer has not received any request from any
party for recognition as a representative of employees engaged in the operation
of the Business for collective bargaining purposes. Neither Seller nor Employer
is party to any agreement, oral or written, express or implied, that would
require Buyer to employ any individual after the Closing Date.
(d) SCHEDULE 5.13(d) sets forth a true and complete
list of all individuals employed by Employer who primarily perform services with
respect to the operation of the Business together with their position and salary
as of the date of this Agreement and their date of hire by Employer. Neither
Seller nor Employer is a party to any written employment contract, agreement,
commitment or arrangement with any individual identified on SCHEDULE 5.13(d).
(e) Except for those plans described on SCHEDULE
5.13(e) and in the TCI Employee Handbook dated February, 1995 (the "EMPLOYER
PLANS"), which are sponsored by the Employer, or to which the Employer
contributes or is obligated to contribute, the employees of Employer who
primarily perform services with respect to the operation of the Business do not
receive benefits under any bonus, deferred compensation, pension,
profit-sharing, retirement, severance pay, insurance, stock purchase, stock
option, or other fringe benefit plan, arrangement or practice, or any other
employee benefit plan, as defined in Section 3(3) of ERISA.
(f) Seller has not incurred or taken any action, and
to the Best of Seller's Knowledge, no action or event has occurred, that could
cause Seller to incur any material liability (i) under Section 412 of the Code
or Title IV of ERISA with respect to any Employer Plan that is a single-employer
plan, within the meaning of Section 4001(a)(15) of ERISA, (ii) on account of a
partial or complete withdrawal from any Employer Plan that is a multiemployer
plan, within the meaning of Section 3(37) of ERISA, or on account of any unpaid
contributions to any such multiemployer plan, or (iii) for any tax or penalty
under Section 4975 of the Code or Section 502(i) of ERISA on account of any
prohibited transaction, within the meaning of Section 4975 of the Code or
Section 406 of ERISA, with respect to any Employer Plan.
5.14 SYSTEM INFORMATION. The number of Equivalent Basic
Subscribers served by the System, the number of subscribers served by the System
taking Expanded Basic Services and the bandwidth of the System, the approximate
number of Homes Passed by the System and the approximate number of miles of
plant included in the Assets, each as of June 30, 1996, are as set forth on
SCHEDULE 5.14. Approximately twenty-eight percent of miles of plant included in
the System are built to at least 450 MHz. As of the date of this Agreement,
there are no pending complaints by subscribers or other users of the System.
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5.15 FINDERS AND BROKERS. Except for its engagement of Daniels
& Associates, L.P. to assist Seller in the solicitation of offers to purchase
the Assets and except for a disposition fee payable by Seller to an Affiliate
pursuant to its Partnership Agreement, Seller has not employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement.
5.16 TAX MATTERS. Except as set forth on SCHEDULE 5.16, (a)
all Tax Returns required to be filed by Seller before the Closing with respect
to the Business or the Assets have been or will be filed on or before the
Closing and (b) all Taxes shown as due or payable before the Closing on such Tax
Returns have been or will be paid when required by law. To the Best of Seller's
Knowledge, there are no outstanding deficiencies or assessments of tax, interest
or penalties which could be imposed on Buyer or could reasonably be expected to
constitute or result in a lien on the Assets in Buyer's hands.
5.17 INVENTORY. The inventory of the System has been
maintained at adequate levels for the operation of the Business (for an ordinary
cycle of thirty days) consistent with the past practices of Seller.
5.18 INSURANCE. Seller has maintained insurance policies in
the ordinary course of business which when taken together provide insurance
coverage for the Assets and the operations of the Business as is customary for
similar businesses similarly situated.
5.19 ACCOUNTS RECEIVABLE. The Accounts Receivable arose from
bona fide transactions in the ordinary course of business and reflect credit
terms consistent with the past practices of Seller.
5.20 RESTORATION. No property of any Person has been damaged,
destroyed, disturbed or removed in the process of construction or maintenance of
the System, which has not been, or will not be, prior to the Closing, repaired,
restored or replaced and as to which an adequate reserve has not been
established by Seller.
5.21 EQUIPMENT. The Equipment is and will be at Closing in
adequate condition and repair to operate the business as currently conducted
(reasonable wear and tear excepted).
5.22 MICROWAVE REPLACEMENT. As of the date of this Agreement,
Seller has completed the replacement of all AML microwave transmissions with
fiber plant.
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ARTICLE VI
6. BUYER'S REPRESENTATIONS AND WARRANTIES.
Buyer represents and warrants to Seller as follows:
6.1 ORGANIZATION AND QUALIFICATION. Buyer is a limited
liability company, duly organized, validly existing and in good standing under
the laws of its state of formation and has all requisite limited liability
company power and authority to carry on its business as currently conducted and
to own, lease, use and operate its assets. Buyer is duly qualified or licensed
to do business and is in good standing under the laws of each jurisdiction in
which the character of the properties owned, leased or operated by it or the
nature of the activities conducted by it makes such qualification necessary,
except where the failure to be so qualified or licensed and in good standing
would not have a material adverse effect on the validity, binding effect or
enforceability of this Agreement or the ability of Buyer to perform its
respective obligations under this Agreement.
6.2 AUTHORITY AND VALIDITY. Buyer has all requisite limited
liability company power and authority to execute, deliver and perform its
obligations under this Agreement. The execution and delivery by Buyer of, the
performance by Buyer of its obligations under, and the consummation by Buyer of
the transactions contemplated by, this Agreement have been duly authorized by
all requisite limited liability company action of Buyer and no other limited
liability company proceedings on the part of Buyer are necessary to authorize
the execution and delivery of this Agreement or the performance of Buyer's
obligations hereunder. This Agreement has been duly and validly executed and
delivered by Buyer and constitutes a valid and binding agreement of Buyer
enforceable in accordance with its terms.
6.3 NO BREACH OR VIOLATION. (a) Except for (i) any consents
that will be obtained by Buyer or waived on or prior to the Closing Date and are
identified on SCHEDULE 6.3(a), (ii) filings and consents which, if not made or
obtained, would not have a material adverse effect on Buyer's ability to perform
its obligations under this Agreement and (iii) the Regulatory Requirements, no
consent, waiver, approval or authorization of, or filing, registration or
qualification with, any Governmental Authority is required to be made or
obtained by Buyer in connection with the execution, delivery and performance of
this Agreement by Buyer.
(b) The execution, delivery and performance of this
Agreement by Buyer do not and will not: (a) violate or conflict with any
provision of Buyer's Articles of Organization or operating agreement, (b)
violate any Legal Requirement; or (c) (i) violate, conflict with or constitute a
breach of or default under (without regard to requirements of notice, passage of
time or elections of any Person), (ii) permit or result in the termination,
suspension or modification of, (iii) result in the acceleration of (or give any
Person the right to accelerate) the performance of Buyer under, or (iv) result
in the creation or imposition of any Encumbrance under, any material contract,
agreement, arrangement, commitment or plan to which Buyer is a
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party or by which Buyer or any of its assets is bound or affected, except such
violations, conflicts, breaches, defaults, terminations, suspensions,
modifications and accelerations as would not, individually or in the aggregate,
have a material adverse effect on Buyer's ability to perform its obligations
under this Agreement.
6.4 LITIGATION. (a) There are no claims, actions, suits,
proceedings or investigations pending or, to the best of Buyer's knowledge,
threatened, in any court or before any governmental agency or instrumentality,
or before any arbitrator, by or against or affecting or relating to Buyer or any
of its Affiliates which, if adversely determined, would restrain or enjoin the
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
(b) There are no judgments, injunctions, orders or
other judicial or administrative mandates outstanding against or affecting Buyer
or any of its Affiliates which would materially hinder or delay the consummation
of the transactions contemplated by this Agreement.
6.5 FINANCIAL STATEMENTS. Buyer has delivered to Seller copies
of its unaudited financial statements for the period March 12, 1996 through June
30, 1996 ("BUYER FINANCIAL STATEMENT"). The Buyer Financial Statement fairly
present, in conformity with GAAP consistently applied except as may be noted
therein, the assets, liabilities and financial condition of Buyer as of the date
thereof and the results of operations and cash flows or changes in financial
position, as applicable, of Buyer for the period ended on such date, subject to
normal year-end adjustments (none of which are expected to be material in
amount), other adjustments noted therein and the absence of footnotes.
6.6 ADEQUATE FINANCING. Although as of the date of this
Agreement Buyer does not have a Commitment, Buyer has no reason to believe that
on or prior to June 23, 1997 it will not have received binding commitments
pursuant to which one or more lenders or investors will have agreed to loan or
contribute to Buyer, all funds necessary to satisfy all its obligations under
this Agreement and with respect to the transactions contemplated by this
Agreement, including its obligations to purchase the Assets and to pay the
Purchase Price to Seller.
6.7 FINDERS AND BROKERS. Buyer has not employed any financial
advisor, broker or finder or incurred any liability for any financial advisory,
brokerage, finder's or similar fee or commission in connection with the
transactions contemplated by this Agreement for which Seller will in any way
have any liability.
6.8 QUALIFICATION OF BUYER. Buyer knows of no reason why it
cannot be the transferee of the assignable licenses and permits from Seller
necessary for it to own and operate the Business in the manner in which it is
currently conducted by Seller.
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ARTICLE VII
7. ADDITIONAL COVENANTS.
7.1 ACCESS TO PREMISES AND RECORDS. Between the date of
execution and delivery of this Agreement and the Closing Date, Seller will give
Buyer and its representatives (including its auditors, accountants, lenders and
potential investors), during normal business hours and with reasonable prior
notice, access to the books and records of the Business, the Assets, the manager
of the System and the employees of Employer listed on Schedule 5.13(d) and will
furnish to Buyer and its representatives such information regarding the Business
and the Assets as Buyer may from time to time reasonably request; provided, that
Buyer shall have access to the employees of Employer listed on Schedule 5.13(d),
other than the manager of the System, solely for purposes of determining which
employees Buyer intends to offer employment as of the Closing Date.
7.2 CONTINUITY AND MAINTENANCE OF OPERATIONS; FINANCIAL
STATEMENTS. Except as to actions which Buyer has been advised and to which it
has consented in writing and except as specifically permitted or required by
this Agreement or required by any Legal Requirement, Seller shall:
(a) Operate the Business in the ordinary course
consistent with past practices and will use commercially reasonable efforts to
cause Employer to keep available the services of the employees of the Employer
who are primarily involved in the operation of the Business and to preserve any
beneficial business relationships with customers, suppliers and others having
business dealings with Seller relating to the Business;
(b) Maintain the Assets in adequate condition to
operate the Business as currently conducted, subject to normal wear and tear,
consistent with past practice;
(c) Maintain adequate inventories of spare Equipment
consistent with past practice;
(d) Maintain all bonds and insurance as in effect on
the date of this Agreement;
(e) Keep all of its business books, records and files
in the ordinary course of business in accordance with past practices;
(f) Continue to implement its procedures for
disconnection and discontinuance of service to subscribers whose accounts are
delinquent in accordance with those in effect on the date of this Agreement;
(g) Not sell, transfer or assign any Assets other
than in the ordinary course of business;
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(h) Use commercially reasonable efforts not to permit
any material amendment to, or cancellation of, any of the Governmental Permits
or Seller Contracts;
(i) Not enter into any contract or commitment for the
acquisition of goods or services relating to the System or the Business
involving an expenditure (i) less than or equal to $40,000 other than in the
ordinary course of business consistent with past practice or (ii) in excess of
$40,000 without Buyer's written consent which may not be unreasonably withheld;
provided, that Buyer shall be deemed to have consented thereto if Buyer has not
given Seller written notice of its refusal to give consent, setting forth the
reason for such refusal, within five Business Days of Buyer's receipt of
Seller's written request for consent;
(j) Not take or omit to take any action that would
cause Seller to be in breach of any of its representations or warranties in this
Agreement in any material respect, provided, however, that the foregoing shall
not preclude Seller from engaging a financial advisor to render an opinion as to
the fairness, from a financial point of view, of the transactions contemplated
by this Agreement;
(k) Pay, consistent with past practice, all accounts
payable and other debts, liabilities and obligations of the System and the
Business;
(l) Report and write off Accounts Receivable in
accordance with past practices;
(m) Not create, assume or permit to exist any
Encumbrance (other than Permitted Encumbrances);
(n) Comply in all material respects with all
applicable Legal Requirements;
(o) Maintain service quality of the Business at a
level at least consistent with past practices.
(p) Use commercially reasonable efforts to cause
Employer not to increase the compensation or change any benefits available to
employees who work in the Business except as required pursuant to existing
written agreements or except in the ordinary course of business consistent with
past practice;
(q) Use commercially reasonable efforts to cause
Employer to withhold and pay when due all Taxes relating to the employees of the
Business and shall withhold and pay when due all Taxes relating to the Assets,
the Business and/or the System;
(r) File with the FCC all reports required to be
filed under applicable FCC rules and regulations, and otherwise comply with all
Legal Requirements with respect to the System; and
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(s) Not implement any new marketing program, policy
or practices, or implement any rate change, retiering or repackaging, except in
the ordinary course of business consistent with past practices.
Seller shall deliver to Buyer, promptly after such statements
and reports become available to Seller, correct and complete copies of unaudited
monthly and quarterly income statements and operating reports for the Business
that are prepared by or for Seller at any time between the date of this
Agreement and the Closing; provided, that Seller shall not be required to make
and shall not be deemed to make any representation or warranty concerning the
accuracy of the contents of any such information delivered to Buyer.
Seller shall deliver to Buyer, promptly after execution
thereof, correct and complete copies of each Seller Contract entered into by
Seller after the date of this Agreement; upon such delivery each such agreement
which has been entered into by Seller in compliance with the provisions of
Section 7.2(i) shall be deemed to be included on Schedule 1.8 for all purposes
of this Agreement; provided, however, that any contract or commitment for which
Buyer's consent is required pursuant to Section 7.2(i) shall not be deemed to be
included on Schedule 1.8 if Buyer has reasonably withheld its consent thereto.
Buyer shall deliver to Seller promptly after such statements
and reports become available to Buyer, correct and complete copies of Buyer's
audited financial statements for the fiscal year ended December 31, 1996, which
statements and the notes thereto shall fairly present the assets, liabilities
and financial condition of Buyer as of the date thereof and the results of
operations and cash flows or changes in financial position, as applicable, of
Buyer for the period ended on such date, all in conformity with GAAP
consistently applied, except as may be noted therein. Unless the Closing occurs
on or before June 30, 1997, Buyer shall deliver to Seller promptly when
available correct and complete copies of Buyer's unaudited financial statements
for the three-months ended March 30, 1997 and each fiscal quarter thereafter
which are available prior to Closing, which statements and the notes thereto
shall fairly present the assets, liabilities and financial condition of Buyer as
of the date thereof and the results of operations and cash flows or changes in
financial position, as applicable, of Buyer for the period ended on such date,
all in conformity with GAAP consistently applied, except as may be noted
therein.
7.3 EMPLOYEE MATTERS. (a) Buyer may offer employment upon such
terms and conditions of employment as Buyer may establish, to certain of the
employees of Employer who primarily perform services with respect to the
operation of the Business as of the Closing Date; provided, that if, prior to
the date which is 180 days after the Closing Date, Buyer terminates the
employment of any employee listed on Schedule 5.13(d) employed by Buyer as of
the Closing Date other than "for cause" as described in the Summary Plan
Description of Telecommunications Inc. Severance Pay Plan effective July 1, 1996
(the "Severance Plan"), Buyer shall pay to such terminated employee the
severance benefit payments which such employee would have been entitled to
receive had it been terminated by Employer as of the Closing Date in an amount
and upon such terms as set forth in the Severance Plan (but in no event more
than six months' severance benefits for any employee); provided, further, Buyer
shall
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not be required to make any such severance payments with respect to any employee
who is hired by TCI or any of its direct or indirect wholly-owned subsidiaries
(including Employer) within 45 Business Days of his termination of employment by
Buyer. Not later than March 24, 1997, Buyer shall deliver to Seller a notice
containing the names of employees of the Business to whom Buyer intends to offer
employment on the Closing Date (the "Employee List"); provided, that (i) if the
Closing has not occurred, Buyer may deliver to Seller a notice updating the
Employee List on the date which is 150 days after the date of this Agreement and
(ii) if the Termination Date is extended by Seller, Buyer may deliver to Seller
a notice no later than 60 Business Days prior to the extended Termination Date
updating the Employee List; provided, however, that any notice delivered by
Buyer updating the Employee List shall not be deemed effective if the Closing
occurs fewer than 60 Business Days after delivery to Seller of such updated
Employee List. TCI shall cause Employer to terminate the employment of all such
employees hired by Buyer as of the Adjustment Time. Seller shall undertake to
provide to all affected employees and any other necessary persons any notice
that may be required under the WARN Act. Except as provided herein, Employer
shall retain all liabilities arising prior to the Adjustment Time relating to
employees, including severance obligations.
(b) For the period commencing on the date of this
Agreement and expiring on the date which is 180 days after the Closing Date, TCI
shall not, and shall cause its direct and indirect wholly-owned subsidiaries
including Employer not to, solicit, or offer employment to, any employee of
Employer set forth on Schedule 5.13(d) who primarily performs services with
respect to the operation of the Business as of the date of this Agreement;
provided, however, that after the Closing Date, each of TCI and its direct and
indirect wholly-owned subsidiaries including Employer may hire any such employee
that Buyer does not employ as of the Closing Date or whose employment Buyer
terminates after the Closing Date.
(c) Nothing in this Section 7.3 or elsewhere in this
Agreement is intended to confer upon any employee of Employer or his or her
legal representative or heirs any rights as a third party beneficiary or
otherwise or any remedies of any nature or kind whatsoever under or by reason of
this Agreement, or the transactions contemplated hereby, including, but not
limited to, any rights of employment or continued employment. All rights and
obligations created by this Agreement are solely between the parties hereto.
7.4 FRANCHISE EXTENSIONS. Seller covenants and agrees that, as
soon as practicable following the execution of this Agreement, it will apply to
the applicable Governmental Authority for an extension (the "EXTENSIONS") of
each franchise described on SCHEDULE 1.5 with an expiration date prior to June
30, 2000. Each such Extension shall have an expiration date no earlier than June
30, 2000 and shall otherwise be on substantially the terms and conditions of the
current franchises, subject to modifications customarily imposed by Governmental
Authorities, but which shall not impose any conditions or obligations which are
materially more burdensome than contained in the current franchise.
7.5 ENVIRONMENTAL REPORT. (a) Buyer may cause to be prepared
and delivered at its expense within 60 days after the date of this Agreement, a
Phase I environmental
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report for the Real Property. Seller shall cooperate with Buyer and permit
access to such Real Property during normal business hours in order for Buyer or
its representatives to inspect such property and the related environmental
records in the possession of Seller, as necessary for the preparation of the
Phase I environmental report. Buyer shall deliver to Seller a copy of any such
environmental report within five Business Days of receipt of such report by
Buyer. If such environmental report discloses one or more adverse environmental
conditions which require remediation under applicable Environmental Law, Seller
shall assume full responsibility for remediation of each such environmental
condition(s) to the extent required by applicable Environmental Law (the
"REMEDIATION") and shall bear all expenses incurred in connection therewith;
provided, that Seller shall not be obligated to spend more than $200,000 in
connection with the Remediation. Buyer shall give Seller notice confirming that
Buyer has delivered to Seller all environmental reports to be prepared pursuant
to this Section 7.5, and Seller shall notify Buyer within twenty Business Days
after its receipt of such notice if Seller concludes, in its reasonable
judgment, that it is or will be unable to complete the Remediation for $200,000
or less (the "REMEDIATION NOTICE"). If Seller gives a Remediation Notice, then
Buyer may terminate this Agreement pursuant to Section 10.1(c)(vii) by notice to
Seller given within five Business Days of the Remediation Notice; provided, that
if within five Business Days after receipt by Seller of Buyer's notice of
termination pursuant to Section 10.1(c)(vii), Seller gives notice to Buyer that
Seller agrees to bear all costs of Remediation in excess of $200,000, such
termination shall be void ab initio and this Agreement shall be deemed not to
have been terminated. If Buyer does not terminate this Agreement pursuant to
Section 10.1(c)(vii) within such five Business Day period, (i) Buyer shall be
deemed to have assumed all liabilities and obligations in connection with the
Remediation as of the Closing Date, (ii) Buyer shall receive a credit at the
Closing in the amount of $200,000 less the aggregate of all amounts paid by
Seller to third parties in connection with the Remediation and (iii) after the
Closing Date Seller shall have no obligation or liability with respect to the
Remediation or otherwise in connection with any condition referred to in any
report prepared and/or delivered pursuant to this Section 7.5.
(b) If Seller concludes, in its reasonable judgment, that the
cost of the Remediation will not exceed $200,000 or Seller agrees to bear any
costs of Remediation in excess of $200,000, then Seller shall have the sole
right to direct the Remediation; provided, that if Buyer agrees to bear any
costs of Remediation in excess of $200,000, then from and after the Closing
Buyer may assume responsibility for overseeing the Remediation.
(c) In the event that Seller assumes full responsibility for
the Remediation and such Remediation has not been completed prior to the
Closing, then from and after the Closing and until Seller and Buyer shall have
agreed that Remediation has been completed, Buyer shall cooperate with Seller
and permit access to the Real Property to Seller and its representatives during
normal business hours in order for the Remediation to be completed..
7.6 CONSENTS. Seller will use commercially reasonable efforts
to obtain, as soon as practicable and at its expense, all the Consents and the
Extensions, in form and substance reasonably satisfactory to Buyer; provided,
that "commercially reasonable efforts" for purposes of this Section 7.6 shall
not require Seller or Buyer to undertake extraordinary or unreasonable
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measures to obtain such approvals and consents, including, but not limited to,
the initiation or prosecution of legal proceedings or the payment of fees in
excess of normal and usual filing and processing fees. Concurrently with the
execution and delivery of this Agreement, Buyer is delivering to Seller "highly
confident" letters of Chase Manhattan Bank, N.A. with respect to Buyer's equity
and its debt financing and after the date hereof shall deliver to Seller such
other materials requested by Seller appropriate for Seller to use in connection
with seeking the Consents and the Extensions. Buyer will use commercially
reasonable efforts to assist Seller in its efforts to obtain all the Consents
and the Extensions, and in connection therewith will consent to such
modifications to any agreement that is the subject of the Ocean Pines Consent,
Tunnell Properties Consent, Sea Colony Consent or Angola Consent or any
Governmental Permit that Ocean Pines Association, Inc. (or its successor), Pot
Nets, Inc. (or its successor), Carl M. Freeman Associates Inc., as successor to
Sea Colony, Inc. (or its successor), Angola-by-the-Bay Property Owners
Association Inc. (or its successor) or a Governmental Authority, as the case may
be, may request as a condition to (i) the transfer of such agreement or
Governmental Permit to Buyer and/or (ii) obtaining extension of the term of such
Governmental Permit, provided, however, that Buyer will not be required to agree
to any modifications to a Governmental Permit unless they are customarily
imposed by Governmental Authorities issuing cable television franchises as a
condition to obtaining the consent to the transfer of such franchises and do not
impose upon Buyer any conditions or obligations which are materially more
burdensome than are presently contained in any such Governmental Permit; and
provided, further, that Buyer will not be required to agree to any modifications
to any agreement that is the subject of the Ocean Pines Consent, Tunnell
Properties Consent, Sea Colony Consent or Angola Consent that will impose upon
Buyer any conditions or obligations which are materially more burdensome than
presently contained in any such agreement, provided, that any change in rates
charged for Basic Services contained in the Sea Colony Consent which is
reflected in a purchase price adjustment pursuant to Section 3.3 shall not be
deemed to be a condition or obligation which is materially more burdensome.
7.7 HSR NOTIFICATION. As soon as practicable after the
execution of this Agreement and if required by applicable Legal Requirements,
Seller and Buyer will each complete and file, or cause to be completed and
filed, any notification and report required to be filed under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"). Each of the parties will take any additional action that may be
necessary, proper or advisable, will cooperate to prevent inconsistencies
between their respective filings and will furnish to each other such necessary
information and reasonable assistance as the other may reasonably request in
connection with its preparation of necessary filings or submissions under the
HSR Act. Buyer and Seller shall use commercially reasonable efforts (including
the filing of a request for early termination) to obtain the early termination
of the waiting period under the HSR Act.
7.8 NOTIFICATION OF CERTAIN MATTERS. Each party will promptly
notify the other of any fact, event, circumstance or action the existence or
occurrence of which would cause any of such party's representations or
warranties under this Agreement not to be true in any material respect.
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7.9 RISK OF LOSS; CONDEMNATION. (a) Seller will bear the risk
of any loss or damage to the Assets resulting from fire, theft or other casualty
(except reasonable wear and tear) at all times prior to the Closing. If any such
loss or damage is so substantial as to prevent normal operation of any material
portion of the System, Seller shall promptly notify Buyer of that fact and
Buyer, at any time within 10 days after receipt of such notice, may elect by
written notice to Seller either (i) to waive such defect and proceed toward
consummation of the acquisition of the Assets in accordance with this Agreement
or (ii) to terminate this Agreement pursuant to Section 10.1(c)(v). If Buyer
elects to consummate the acquisition of the Assets notwithstanding such loss or
damage and does so, there will be no adjustment in the Purchase Price on account
of such loss or damage but all insurance proceeds payable as a result of the
occurrence of the event resulting in such loss or damage (to the extent not
previously applied by Seller with respect to such loss or damage) will be
delivered by Seller to Buyer or the rights to such proceeds will be assigned by
Seller to Buyer if not yet paid over to Seller.
(b) If, prior to the Closing, any part of a material
Asset or an interest in a material Asset is taken or condemned as a result of
the exercise of the power of eminent domain, or if a Governmental Authority
having such power informs Seller or Buyer that it intends to condemn all or any
part of a material Asset (such event being referred to, in either case, as a
"TAKING"), then Buyer may terminate this Agreement pursuant to Section
10.1(c)(vi). If Buyer does not elect to terminate this Agreement then (a) if the
Closing occurs, Buyer shall have the sole right, in the name of Seller, if Buyer
so elects, to negotiate for, claim, contest and receive all damages with respect
to the Taking, (b) Seller shall be relieved of its obligation to convey to Buyer
the Asset or interests that are the subject of the Taking and (c) at the Closing
Seller shall assign to Buyer all of Seller's rights (including the right to
receive payment of damage) with respect to such Taking and shall pay to Buyer
all damages previously paid to Seller with respect to the Taking.
7.10 ADVERSE CHANGES. Seller shall promptly notify Buyer in
writing of any materially adverse developments affecting the Assets, the System
or the Business which become known to Seller, including, but not limited to, (i)
any damage, destruction or loss (whether or not covered by insurance) materially
and adversely affecting any of the Assets, the System or the Business, (ii) any
notice of violation, forfeiture or complaint under any material Governmental
Permits or (iii) anything which, if not corrected prior to the Closing Date,
will prevent Seller from fulfilling any condition to Closing described in
Article VIII.
7.11 ACTION BY LIMITED PARTNERS. (a) If required by applicable
Legal Requirements and the Partnership Agreement to consummate the transactions
contemplated by this Agreement, or if the Seller otherwise elects to do so, the
Seller, acting through the General Partner, shall in accordance with the
applicable Legal Requirements and the Partnership Agreement: (i) within a
reasonable period of time (as determined by the General Partner) after the
execution and delivery of this Agreement, duly call, give notice of, convene and
hold a special meeting (the "SPECIAL MEETING") of the Limited Partners for the
purpose of approving the transactions contemplated by this Agreement; and (ii)
subject to its fiduciary duties (as determined by the General Partner after
consultation with independent counsel), include in any
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proxy statement the determination and recommendation of the General Partner to
the effect that the General Partner, having determined that this Agreement and
the transactions contemplated hereby are in the best interests of Seller and the
Limited Partners, has approved this Agreement and such transactions and
recommends that the Limited Partners vote in favor of the sale of the Assets to
Buyer pursuant to this Agreement.
(b) As soon as practicable after the execution and
delivery of this Agreement, Seller shall file with the SEC under the Exchange
Act, and shall use commercially reasonable efforts to clear with the SEC and
mail to the Limited Partners no later than February 15, 1997, a proxy statement
with respect to the Special Meeting (the "PROXY STATEMENT"). Buyer shall furnish
to Seller the information relating to Buyer as reasonably requested by Seller
required by the Exchange Act to be set forth in the Proxy Statement. Seller
agrees that the Proxy Statement shall comply in all material respects with the
Exchange Act and the rules and regulations thereunder; provided, however, that
no agreement is made by Seller with respect to information supplied by Buyer
expressly for inclusion in the Proxy Statement. Buyer and its counsel shall be
given a reasonable opportunity to review the Proxy Statement prior to the filing
of the definitive Proxy Statement with the SEC.
7.12 NO SOLICITATION. (a) Each of Seller and the General
Partner shall not, and shall cause its respective employees, agents and
representatives (including, but not limited to, any investment banker, attorney
or accountant retained by Seller) not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making of any proposal with respect
to any Alternative Transaction, engage in any negotiations concerning, or
provide to any other Person any information or data relating to, the Business,
the System, the Assets or Seller for the purposes of, or have any discussions
with any Person relating to, or otherwise cooperate in any way with or assist or
participate in, facilitate or encourage, any inquiries or the making of any
proposal which constitutes, or may reasonably be expected to lead to, any effort
or attempt by any other Person to seek or to effect an Alternative Transaction,
or agree to or endorse any Alternative Transaction; provided, however, that
nothing contained in this Section 7.12 shall prohibit Seller or the General
Partner from making any disclosure to the Limited Partners that, in the judgment
of the General Partner based upon the advice of independent counsel, is required
under applicable Legal Requirements; and provided, further, that (i) Seller or
the General Partner may, upon the unsolicited request of a third party, furnish
information or data (including, but not limited to, confidential information or
data) relating to the Business, the System, the Assets or Seller for the
purposes of facilitating an Alternative Transaction and participate in
negotiations with a Person making (or who may reasonably be expected to make) an
unsolicited proposal regarding an Alternative Transaction and (ii) following
receipt of a proposal for an Alternative Transaction, Seller or the General
Partner may terminate this Agreement pursuant to Section 10.1(b)(ii).
(b) TCI shall not, and shall cause its Affiliates
which it controls not to, make a proposal to Seller regarding an Alternative
Transaction. The restriction set forth in this Section 7.12(b) shall terminate
on the earlier of (i) the Closing or (ii) termination of this Agreement.
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7.13 SALES AND TRANSFER TAXES AND FEES. Buyer and Seller shall
each pay 50 percent of any state or local sales, use, transfer, excise,
documentary or license taxes or fees or any other charge (including filing fees)
imposed by any Governmental Authority as a consequence of the transfer of any
Assets pursuant to this Agreement. Seller shall timely file any sales tax
returns required to be filed with any Governmental Authority as a consequence of
the transfer of any Assets pursuant to this Agreement. Buyer shall cooperate as
reasonably requested in the preparation and filing of any submission or
application necessary to obtain any clearance relating to, or, if available,
exemption from, any Taxes or fees described in this Section 7.13.
7.14 COMMERCIALLY REASONABLE EFFORTS. (a) Seller shall use
commercially reasonable efforts to take all steps within its power, and will
cooperate with Buyer, to cause to be fulfilled those of the conditions to
Buyer's obligations to consummate the transactions contemplated by this
Agreement that are dependent upon its actions, and to execute and deliver such
instruments and take such other reasonable actions as may be necessary or
appropriate in order to carry out the intent of this Agreement and consummate
the transactions contemplated hereby.
(b) Buyer shall use commercially reasonable efforts
to take all steps within its power, and will cooperate with Seller, to cause to
be fulfilled those of the conditions to Seller's obligations to consummate the
transactions contemplated by this Agreement that are dependent upon its actions
and to execute and deliver such instruments and take such other reasonable
actions as may be necessary or appropriate in order to carry out the intent of
this Agreement and consummate the transactions contemplated hereby.
7.15 TITLE INSURANCE. Seller shall cooperate with Buyer if
Buyer elects to obtain title insurance policies on any Real Property owned in
fee or leased. Buyer shall have the sole responsibility for obtaining and paying
for such policies. The parties agree that the obtaining of title insurance on
any Real Property shall not be a condition to the obligation of Buyer to
consummate the transactions contemplated hereby.
7.16 NON-COMPETITION. For the period commencing on the Closing
Date and expiring on the fifth anniversary thereof, each of Seller, the General
Partner and TCI hereby covenants and agrees that it shall not, and TCI hereby
covenants and agrees that it shall cause its direct and indirect wholly-owned
subsidiaries not to, directly or indirectly, compete with Buyer in the provision
of terrestrial cable television video services by means of cable, microwave,
fiber optics, satellite receivers or broadcasts all of which being directed to
the delivery of terrestrial cable television video services to businesses,
residences, multi-family dwellings, hotels, motels, trailers and other users, in
any Service Area in which the Business operates on the Closing Date. For the
period commencing on the Closing Date and expiring on the fifth anniversary
thereof, each of Seller, the General Partner and TCI further covenants that it
shall not, and TCI further covenants that it shall cause its direct and indirect
wholly-owned subsidiaries not to, directly or indirectly, manage, operate, join,
control, participate, or become interested in, or be connected with (as a
consultant, partner, stockholder or investor) any such terrestrial cable
television video service that would compete with Buyer in the provision of cable
television service within any
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portion of the geographical area described above, except as a passive investor
or stockholder holding less than five percent of the outstanding voting stock or
equity interest in any corporation or other entity.
7.17 FINANCING COMMITMENT. No later than June 23, 1997, Buyer
shall have obtained, and delivered to Seller a true and correct copy of, a
commitment (in form and substance satisfactory to Seller in its reasonable
judgment) of a reputable financial institution to provide to Buyer the funds
necessary (at any time to and including December 19, 1997) which together with
Buyer's then existing resources enable it to satisfy all of Buyer's obligations
under this Agreement and with respect to the transactions contemplated by this
Agreement, including its obligation to purchase the Assets and to pay the
Purchase Price, with funding subject only to (a) the satisfaction of the
conditions to Closing set forth in Article VIII, (b) there having occurred no
Material Adverse Change in the Financial Markets after the date of such
commitment and (c) there having occurred no material adverse change in the
financial condition of Buyer after the date of such commitment (the
"Commitment"). Without limiting the foregoing, the Commitment shall not be
subject to any condition with respect to equity funding (except a condition, if
any, which such financial institution has confirmed, in writing to Seller, has
been satisfied prior to the Initial Termination Date).
7.18 FORMS 394. Unless Seller and Buyer agree to waive filing
of Forms 394 with respect to a Governmental Authority, (i) within 15 Business
Days after the date of this Agreement, Seller shall deliver to Buyer all
information available to Seller necessary for Buyer to prepare Forms 394 and
(ii) within 15 Business Days after the necessary information has been supplied
by Seller, Buyer shall prepare, in form and substance reasonably satisfactory to
Seller, and Seller shall file, Forms 394 with the applicable Governmental
Authorities.
7.19 UCC LIEN AND JUDGMENT SEARCHES. Seller shall deliver to
Buyer a copy of all UCC lien and judgment searches which Seller has obtained and
any bringdowns thereto which Seller may obtain prior to Closing in connection
with the transactions contemplated by this Agreement.
7.20 SELLER FINANCIAL STATEMENTS. Seller agrees that from and
after the date of this Agreement it shall, at Buyer's cost and expense (i) use
its commercially reasonable efforts to make promptly available to Buyer, upon
Buyer's request, such financial statements, financial statement schedules and
other financial information relating to the System and the Business, in form and
substance reasonably satisfactory to Seller and Buyer, which Buyer may be
required to include in any registration statement, report or other document
which Buyer may file with the SEC or any applicable state securities commission,
and shall direct KPMG Peat Marwick to cooperate in connection therewith and (ii)
use its commercially reasonable efforts to obtain promptly for Buyer, upon
Buyer's request, any consent, report, opinion or letter of KPMG Peat Marwick, in
form and substance reasonably satisfactory to Seller and Buyer, required to be
filed by Buyer under applicable regulations of the SEC or any applicable state
securities commission in connection therewith.
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7.21 AD INSERTION AGREEMENT. No later than 90 days after the
date of this Agreement, Buyer shall give Seller written notice of whether it
intends to assume the Letter Agreement, dated February 1, 1994, between TCI
Cablevision of Eastern Shore and American Cable Television of Lower Delaware
(the "AD INSERTION AGREEMENT").
ARTICLE VIII
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER.
The obligations of Buyer under this Agreement 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 by Buyer, in its sole discretion.
8.1 HSR ACT. If required under applicable Legal Requirements,
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 receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
8.2 GOVERNMENTAL OR LEGAL ACTION. No action, suit or
proceeding shall be pending or threatened by any Governmental Authority and no
Legal Requirement shall have been enacted, promulgated or issued or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority that would (a) prohibit Buyer's ownership or operation of
all or a material portion of the System, the Business or the Assets or (b)
prevent or make illegal the consummation of the transactions contemplated by
this Agreement.
8.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date, with the same effect as though made on and as of the
Closing Date, except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations and warranties
relate solely to a particular date or period, in which case they shall be true
and correct in all material respects on such Closing Date with respect to such
date and period.
8.4 PERFORMANCE OF AGREEMENTS. Seller shall have performed in
all material respects all obligations and agreements and complied, or caused to
be complied with, all covenants and conditions required by this Agreement to be
performed or complied with by Seller at or prior to the Closing Date.
8.5 NO MATERIAL ADVERSE CHANGE. During the period from the
date of this Agreement through and including the Closing Date, there shall not
have occurred any material adverse change in the business, financial condition
or operations of the Assets, taken as a whole,
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the System or the Business, other than any change arising out of matters of a
general economic nature or matters (including, but not limited to, competition
caused by or arising from the Multichannel Multipoint Distribution Service,
direct broadcast satellite, legislation, rule making and regulation) affecting
the cable television industry (national or regional) generally, and Seller shall
not have sustained any material loss or damage to the Assets or the System,
whether or not insured, that materially affects the ability of Seller to conduct
the Business in a manner consistent with past practice.
8.6 CONSENTS AND EXTENSIONS. Seller shall have delivered to
Buyer evidence, in form and substance reasonably satisfactory to Buyer, that all
the Required Consents and Extensions have been obtained or given.
8.7 TRANSFER DOCUMENTS. Seller shall have delivered to Buyer
customary bills of sale, deeds, assignments and other instruments of transfer
sufficient to convey good and marketable title to the Assets in accordance with
the terms of this Agreement, in form and substance reasonably satisfactory to
Buyer.
8.8 OPINIONS OF SELLER'S COUNSEL. Buyer shall have received
the opinion or opinions of Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel
for Seller, dated the Closing Date, substantially in the form of EXHIBIT D.
8.9 DISCHARGE OF LIENS. Seller shall have secured the
termination or removal of all Encumbrances of any nature on the Assets, other
than Permitted Encumbrances.
8.10 EXTENSION OF AD INSERTION AGREEMENT. In the event that
Buyer gives notice to Seller in accordance with Section 7.21 of its intention to
assume the Ad Insertion Agreement, such agreement shall have been extended on
terms similar to those contained in the existing agreement for a period of one
year from the Closing Date.
8.11 OPINION OF SELLER'S FCC COUNSEL. Buyer shall have
received the opinion of Cole, Raywid & Braverman, FCC counsel for Seller, dated
the Closing Date, substantially in the form of EXHIBIT F.
8.12 ADDITIONAL DOCUMENTS AND ACTS. Seller shall have
delivered or caused to be delivered to Buyer all other documents required to be
delivered pursuant to this Agreement and done or caused to be done all other
acts or things reasonably requested by Buyer to evidence compliance with the
conditions set forth in this Article VIII.
8.13 CERTIFICATES. Seller shall have furnished Buyer with such
other certificates of Seller and others, dated as of the Closing Date, to
evidence compliance with the conditions set forth in this Article VIII, as may
be reasonably requested by Buyer.
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ARTICLE IX
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER.
The obligations of Seller under the Agreement are subject to
the satisfaction, at or prior to the Closing Date, of each of the following
conditions, any one or more of which may be waived by Seller in its sole
discretion.
9.1 HSR ACT. If required under applicable Legal Requirements,
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 receipt
of any objection or the commencement or threat of any litigation by a
Governmental Authority of competent jurisdiction to restrain the consummation of
the transactions contemplated by this Agreement.
9.2 GOVERNMENTAL OR LEGAL ACTIONS. No action, suit or
proceeding shall be pending or threatened by any Governmental Authority and no
Legal Requirement shall have been enacted, promulgated or issued or deemed
applicable to any of the transactions contemplated by this Agreement by any
Governmental Authority that would (a) prohibit Buyer's ownership or operation of
all or any material portion of the System, the Business or the Assets or (b)
prevent or make illegal the consummation of the transactions contemplated by
this Agreement.
9.3 ACCURACY OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer contained in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date, with the same effect as though made on and as of the
Closing Date, except for such changes permitted or contemplated by the terms of
this Agreement and except insofar as any of such representations and warranties
relate solely to a particular date or period, in which case they shall be true
and correct in all material respects on such Closing Date with respect to such
date and period.
9.4 PERFORMANCE OF AGREEMENTS. Buyer shall have performed in
all material respects all obligations and agreements and complied, or caused to
be complied with, all covenants and conditions required by this Agreement to be
performed or complied with by Buyer at or prior to the Closing Date.
9.5 CONSENTS. All Required Consents shall have been obtained
or given.
9.6 OPINIONS OF BUYER'S COUNSEL. Seller shall have received
the opinion or opinions of Cooperman Levitt Winikoff Lester & Newman, P.C.,
outside counsel for Buyer, dated the Closing Date, substantially in the form of
EXHIBIT E.
9.7 LIMITED PARTNER APPROVAL. The transactions contemplated by
this Agreement shall have been approved by the affirmative vote of or consent by
the Limited
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Partners to the extent required by the Partnership Agreement or if Seller
otherwise elects as permitted by Section 7.11.
9.8 PAYMENT OF PURCHASE PRICE. Buyer shall have paid to Seller
the Purchase Price as set forth in Section 3.1.
9.9 ASSUMPTION OF LIABILITIES. Buyer shall have delivered to
Seller a customary assumption of liabilities agreement in form and substance
reasonably acceptable to Buyer and Seller which is sufficient to cover Buyer's
obligations as set forth in Section 4.1.
9.10 CLOSING OF ANOTHER SYSTEM. In the event that, subsequent
to the date of this Agreement but prior to the Closing Date, Seller and Buyer
enter into an agreement for the sale by Seller of any cable television system to
Buyer other than the System, the closing of the sale of such other system shall
have occurred or shall occur contemporaneously with the Closing hereunder.
9.11 ADDITIONAL DOCUMENTS AND ACTS. Buyer shall have delivered
or caused to be delivered to Seller all other documents required to be delivered
pursuant to this Agreement and done all other acts or things reasonably
requested by Seller to evidence compliance with the conditions set forth in this
Article IX.
9.12 CERTIFICATES. Buyer shall have furnished Seller with such
other certificates of Buyer and others, dated as of the Closing Date, to
evidence compliance with the conditions set forth in this Article IX, as may be
reasonably requested by Seller.
9.13 FAIRNESS OPINION. Seller shall have received an opinion,
in form and substance reasonably satisfactory to Seller, from its financial
advisors as to the fairness, from a financial point of view, of the transactions
contemplated by this Agreement.
ARTICLE X
10. TERMINATION.
10.1 EVENTS OF TERMINATION. This Agreement and the
transactions contemplated by this Agreement may be terminated at any time prior
to the Closing:
(a) by the mutual written consent of Buyer and
Seller;
(b) by Seller:
(i) if the consummation of the transactions
contemplated by this Agreement by Seller would violate any nonappealable final
order, decree or judgment of any Governmental Authority having competent
jurisdiction;
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(ii) following receipt by Seller or the General
Partner of an unsolicited proposal for an Alternative Transaction to the extent
that the General Partner determines in good faith on the basis of advice of
independent counsel that such action is necessary or appropriate in order for
the General Partner to act in a manner that is consistent with its fiduciary
obligations under applicable law;
(iii) if any representation or warranty of Buyer made
herein is untrue in any material respect (other than a change permitted or
contemplated by this Agreement) and such breach is not cured within 10 days of
Buyer's receipt of a notice from Seller that such breach exists or has occurred;
(iv) if Buyer shall have defaulted in any material
respect in the performance of any material obligation under this Agreement and
such breach is not cured within 30 days of Buyer's receipt of a notice from
Seller that such default exists or has occurred;
(v) if the conditions to Seller's obligations to
consummate the Closing as set forth in Article IX cannot reasonably be satisfied
on or before the Termination Date;
(vi) on any date from June 23, 1997 to and including
the Initial Termination Date, if Buyer has not obtained the Commitment required
by Section 7.17, and at any time thereafter if the Commitment is terminated; or
(vii) within five Business Days of the date which is
60 days from the date of this Agreement, if Seller has not obtained the Ocean
Pines Consent, or within five Business Days the date which is 90 days from the
date of this Agreement, if Seller has not obtained the Ocean Pines Consent.
(c) by Buyer:
(i) if the consummation of the transactions
contemplated by this Agreement by Buyer would violate any nonappealable final
order, decree or judgment of any Governmental Authority having competent
jurisdiction;
(ii) if any representation or warranty of Seller made
herein is untrue in any material respect (other than due to a change permitted
or contemplated by this Agreement) and such breach is not cured within 10 days
of Seller's receipt of a notice from Buyer that such breach exists or has
occurred;
(iii) if Seller shall have defaulted in any material
respect in the performance of any material obligation under this Agreement and
such breach is not cured within 30 days of Seller's receipt of a notice from
Buyer that such default exists or has occurred;
(iv) if the conditions to Buyer's obligations to
consummate the Closing as set forth in Article VIII cannot reasonably be
satisfied on or before the Termination Date;
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(v) within 10 days after receipt by Buyer of a notice
from Seller that the loss or damage to the Assets resulting from fire, theft or
other casualty is so substantial as to prevent normal operation of any material
portion of the System, as contemplated by Section 7.9(a);
(vi) following a Taking, as contemplated by the first
sentence of Section 7.9(b);
(vii) if Seller notifies Buyer that, in its
reasonable judgment, the cost of the Remediation will exceed $200,000, as
contemplated by Section 7.5(a); provided, that Seller has not agreed to bear all
costs of the Remediation in excess of $200,000; or
(viii) within five Business Days of the date which is
90 days from the date of this Agreement, if Seller has not obtained the Ocean
Pines Consent.
(d) Unless the Closing shall have theretofore taken
place, by either party after the Termination Date, provided that the terminating
party is not otherwise materially in default or breach of this Agreement.
10.2 MANNER OF EXERCISE. In the event of the termination of
this Agreement by either Buyer or Seller, pursuant to Section 10.1, notice
thereof shall forthwith be given to the other party and this Agreement shall
terminate and the transactions contemplated hereunder shall be abandoned without
further action by Buyer or Seller.
10.3 EFFECT OF TERMINATION. (a) Subject to paragraphs (b),
(c), (d) and (e) of this Section 10.3, in the event of the termination of this
Agreement pursuant to Section 10.1 and prior to the Closing, all obligations of
the parties hereunder shall terminate, except for the respective obligations of
the parties under Section 13.12; provided, however, that no termination of this
Agreement shall (i) except as set forth in paragraphs (b), (c), (d) and (e) of
this Section 10.3 and Section 10.4, relieve a defaulting or breaching party from
any liability to the other party or parties hereto for or in respect of such
default or (ii) result in the rescission of any transaction theretofore
consummated hereunder. For purposes of this Section 10.3 and Section 10.4, the
failure to obtain the Commitment on or prior to June 23, 1997 or the termination
of the Commitment at any time thereafter shall be deemed to be a breach or
default by Buyer of its obligations under this Agreement.
(b) If this Agreement is terminated by Seller
pursuant to Section 10.1(b)(ii), (i) Buyer shall be entitled to an immediate
return of the Deposit and (ii) Seller shall simultaneously with such notice of
termination (which notice of termination shall not be effective unless and until
such payment is made and action is taken) take all action required under the
Escrow Agreement to cause the Deposit (together with all interest earned
thereon) to be released to Buyer and pay to Buyer a termination fee of
$1,077,500; provided, that if Seller terminates this Agreement pursuant to
10.1(b)(ii) with respect to an unsolicited proposal for an Alternative
Transaction proposed by a person who submitted a written proposal prior to the
date
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of this Agreement to purchase the System pursuant to the competitive auction
conducted by Daniels & Associates, L.P., then the amount of such termination fee
shall be $2,155,000. Any such termination fee shall be liquidated damages and
not a penalty, and upon receipt thereof and the Deposit Buyer shall be precluded
from exercising any other right or remedy available under this Agreement or
applicable law.
(c) If this Agreement is terminated for any reason
other than pursuant to Section 10.1(b)(ii), Section 10.1(b)(iii), Section
10.1(b)(iv) or Section 10.1(b)(vi) and Buyer is not otherwise in default or
breach of this Agreement, Buyer shall be entitled to the immediate return of the
Deposit (together with all interest earned thereon), and Seller shall promptly
(but in no event more than two Business Days after the date of termination of
this Agreement) take all action required under the Escrow Agreement to cause the
Deposit (together with all interest earned thereon) to be released to Buyer.
(d) If this Agreement is terminated by Seller
pursuant to Section 10.1(b)(vi) on or prior to the Initial Termination Date, and
if prior to such termination, (i) there has occurred a Material Adverse Change
in the Financial Markets since the date of this Agreement and (ii) Seller has
received written notice from Buyer that its failure to have the Commitment was
due solely to such Material Adverse Change in the Financial Markets (which
notice shall state with particularity the events which constitute such change),
then Seller's damages for the termination of this Agreement shall be limited to
$3,026,700. In any action or proceeding to determine damages for termination of
this Agreement, Buyer shall have the burden to prove that the provisions of this
paragraph (d) are applicable to such termination.
(e) If (i) this Agreement is extended by Seller
beyond the Initial Termination Date and is subsequently terminated by Seller
pursuant to Section 10.1(b)(vi) and (ii) at any time after the Initial
Termination Date but prior to the Closing the Commitment is terminated solely
because there has been a Material Adverse Change in the Financial Markets
following the Initial Termination Date, Seller's damages shall be limited to
$3,026,700; provided, that if prior to such termination (x) all conditions to
Closing set forth in Articles VIII and IX, other than Section 9.10, have been
satisfied and (y) Buyer has given written notice to Seller stating that Buyer is
prepared to consummate the transactions contemplated by this Agreement and
requesting that Seller waive the condition to Closing set forth in Section 9.10
(the "Waiver Notice"), then Seller shall be deemed to have waived all damages
hereunder for termination of this Agreement if thereafter the conditions to
Closing set forth in Article VIII have been satisfied and Buyer is unable to
consummate the transactions contemplated by this Agreement solely because the
Commitment was terminated by the issuing financial institution after the date of
the Waiver Notice and the Commitment was so terminated solely because a
"material adverse change," as defined (on commercially reasonable terms, but
specifically excluding any material adverse change of or relating to the Buyer
or its business or financial condition) in the Commitment, occurred after the
date of the Waiver Notice. In any action or proceeding to determine damages for
termination of this Agreement, Buyer shall have the burden to prove that the
provisions of this paragraph (e) are applicable to such termination.
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(f) Subject to Section 10.4, if this Agreement is
terminated (i) pursuant to Section 10.1(b)(vi) or (ii) for any reason other than
pursuant to Section 10.1(b)(vi) or pursuant to Section 10.1(b)(ii), and Buyer is
in default or breach of this Agreement, then in either such case the Deposit
shall continue to be held by Escrow Agent in accordance with the terms of the
Escrow Agreement pending final resolution of any claims for damages arising from
Buyer's default or breach of this Agreement or as otherwise directed by Seller
and Buyer.
10.4 LIQUIDATED DAMAGES. Provided that Seller is not in
material default of this Agreement, in the event of (i) the breach or default by
Buyer of its obligations under this Agreement and (ii) the termination of this
Agreement prior to the Closing pursuant to Section 10.1(b)(iii), (iv) or (vi)
(but subject to Section 10.3(e)), Seller shall have the option, upon notice from
Seller to Buyer given as provided in the Escrow Agreement, to receive as
liquidated damages, and not as a penalty, the Deposit. In the event Seller
elects to receive the Deposit (together with all interest earned thereon) as
liquidated damages as set forth in this Section 10.4, Buyer shall promptly (but
in no event more than five Business Days after receipt of such notice of
termination) take all action required under the Escrow Agreement to cause the
Deposit (together with all interest earned thereon) to be released to Seller. If
Seller elects to receive the Deposit as liquidated damages as set forth in this
Section 10.4, Seller shall, upon receipt of the Deposit (together with all
interest earned thereon), be precluded from exercising any other right or remedy
available under this Agreement or applicable law.
ARTICLE XI
11. NATURE AND SURVIVAL OF REPRESENTATIONS,
WARRANTIES AND AGREEMENTS.
11.1 NATURE OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
Neither party will be deemed to have made any representation, warranty, covenant
or agreement except as set forth in this Agreement. Without limiting the
generality of the foregoing, neither party will be liable or bound in any manner
by any express or implied representation, warranty, covenant or agreement that
is made by any employee, agent or other Person representing or purporting to
represent such party.
11.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Seller and Buyer in this Agreement and in the
documents and instruments to be delivered by Seller and Buyer pursuant to this
Agreement shall survive the Closing only as and to the extent set forth in this
Article XI.
11.3 TIME LIMITATIONS. If the Closing occurs, except as set
forth below, Seller shall have no liability to Buyer with respect to any
representation or warranty or any covenant, agreement or obligation to the
extent required to be performed or complied with prior to the Closing Date,
unless on or before the first anniversary of the Closing Date Seller is given
written notice by Buyer asserting a claim with respect thereto and specifying
the factual basis of that
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claim in reasonable detail to the extent then known by Buyer. If the Closing
occurs, Buyer shall have no liability to Seller with respect to any
representation or warranty or any covenant, agreement or obligation to the
extent required to be performed or complied with prior to the Closing Date,
unless on or before the first anniversary of the Closing Date Buyer is given
written notice by Seller of a claim with respect thereto and specifying the
factual basis of that claim in reasonable detail to the extent then known by
Seller. A claim with respect to any covenants to be performed or complied with
by Buyer or Seller after the Closing Date may be asserted at any time.
Notwithstanding the foregoing, indemnification claims for the breach of the
representations in Sections 5.5 and 5.16 and indemnification claims arising from
any third party claim asserted against Buyer arising from the Excluded
Liabilities may be made by Buyer at any time.
11.4 LIMITATIONS AS TO AMOUNT. (a) If the Closing occurs,
Seller shall have no liability (for indemnification or otherwise) with respect
to any failure or breach of any representation or warranty or any covenant,
agreement or obligation to the extent required to be performed on or prior to
the Closing Date until the total of all damages with respect to all such
failures or breaches exceeds in the aggregate $50,000, and then only for damages
in excess of $50,000.
(b) If the Closing occurs, Buyer shall have no
liability (for indemnification or otherwise) with respect to any failure or
breach of any representation or warranty or any covenant, agreement, or
obligation to the extent required to be performed on or before the Closing Date
until the total of all damages with respect to all such failures or breaches
exceeds in the aggregate $50,000, and then only for damages in excess of
$50,000.
(c) If the Closing occurs, Seller's aggregate
liability (for indemnification or otherwise) with respect to any failure or
breach of any representation or warranty or any covenant, agreement or
obligation to the extent required to be performed on or prior to the Closing
Date shall be limited to Buyer's right to make an indemnification claim against
Seller under Article XII and shall be further limited as set forth in Section
12.3.
ARTICLE XII
12. INDEMNIFICATION.
12.1 RIGHTS TO INDEMNIFICATION. Subject to the limitations set
forth in Sections 11.3 and 11.4, Seller agrees to indemnify and hold harmless
Buyer against any loss, liability, claim, damage or expense (including, but not
limited to, reasonable attorneys' fees, accountants' fees and disbursements)
arising from (a) any claim for brokerage or agent's or finder's commissions or
compensation in respect of the transactions contemplated by this Agreement by
any Person purporting to act on behalf of Seller, (b) any claim that Buyer is
liable for the Excluded Liabilities and (c) Seller's failure or breach of any
representation, warranty, covenant, agreement or obligation made or required to
be performed by Seller under this
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Agreement (and specifically excluding any representation, warranty, covenant,
agreement or obligation of TCI or the General Partner, as to which Seller shall
have no obligations to Buyer). Subject to the limitations set forth in Sections
11.3 and 11.4, Buyer agrees to indemnify and hold harmless Seller against any
loss, liability, claim, damage or expense (including, but not limited to,
reasonable attorneys' fees, accountants' fees and disbursements) arising from
(a) any claim for brokerage or agent's or finder's commissions or compensation
in respect of the transactions contemplated by this Agreement by any Person
purporting to act on behalf of Buyer, (b) the failure to perform the obligations
of the Assumed Liabilities, (c) Buyer's failure or breach of any representation,
warranty, covenant, agreement or obligation made or required to be performed by
Buyer under this Agreement and (d) if Buyer has the right to terminate this
Agreement pursuant to Section 7.5(a) and does not give notice to terminate this
Agreement pursuant to Section 10.1(c)(vii), then after the Closing any claim
with respect to any environmental condition disclosed or any report prepared and
delivered pursuant to Section 7.5.
12.2 PROCEDURE FOR INDEMNIFICATION. Promptly after receipt by
an indemnified party under Section 12.1 of notice of the commencement of any
action, such indemnified party shall, if a claim in respect thereof is to be
made against an indemnifying party under such section, give notice to the
indemnifying party of the commencement thereof, but the failure so to notify the
indemnifying party shall not relieve it of any liability that it may have to any
indemnified party except to the extent the indemnifying party demonstrates that
the defense of such action is prejudiced thereby. In case any such action shall
be brought against an indemnified party and it shall promptly give notice to the
indemnifying party of the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish, within
ten Business Days of receipt of such notice, to assume the defense thereof with
counsel of its choice and reasonably satisfactory to such indemnified party and,
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not be
liable to such indemnified party under such section for any fees of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party in connection with the defense thereof, other than reasonable
costs of investigation. If an indemnifying party assumes the defense of such
action, (a) no compromise or settlement thereof may be effected by the
indemnifying party without the indemnified party's consent unless (i) there is
no finding or admission of any violation of law or any violation of the rights
of the indemnified party and no effect on any other claims that may be made
against the indemnified party and (ii) the sole relief provided is monetary
damages that are paid in full by the indemnifying party and (b) the indemnifying
party shall have no liability with respect to any compromise or settlement
thereof effected without its consent (which shall not be unreasonably withheld).
If notice is given to an indemnifying party of the commencement of any action
and it does not, within ten Business Days after the indemnified party's notice
is given, give notice to the indemnified party of its election to assume the
defense thereof, the indemnifying party shall be bound by any determination made
in such action or any compromise or settlement thereof effected by the
indemnified party. Notwithstanding the foregoing, if an indemnified party
determines in good faith that there is a reasonable probability that an action
may adversely affect it or its Affiliates other than as a result of monetary
damages, such indemnified party may, by notice to the indemnifying party, assume
the exclusive right to
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defend, compromise or settle such action, but the indemnifying party shall not
be bound by any determination of an action so defended or any compromise or
settlement thereof effected without its consent (which shall not be unreasonably
withheld).
12.3 DEPOSIT. Buyer acknowledges and agrees that recourse
against the Deposit up to an aggregate amount of $1,077,500 is its sole and
exclusive remedy in the event of a claim against Seller with respect to any
representation or warranty or any covenant, agreement or obligation, whether for
indemnification pursuant to Article XI or this Article XII or otherwise;
provided, however, that this limitation shall not apply to claims by Buyer for
(i) breaches of covenants, agreements or obligations to be performed or complied
with by Seller after the Closing Date, (ii) breaches of representations or
warranties set forth in Sections 5.5 and 5.16 and (iii) third party claims
asserted against Buyer arising from the Excluded Liabilities for which Buyer
acknowledges and agrees that its first recourse shall be against the Deposit, to
the extent there are funds available.
ARTICLE XIII
13. MISCELLANEOUS.
13.1 PARTIES OBLIGATED AND BENEFITTED. (a) Subject to the
limitations set forth in clauses (b) and (c) below, this Agreement will be
binding upon the parties and their respective assigns and successors in interest
and will inure solely to the benefit of the parties and their respective assigns
and successors in interest, and no other Person will be entitled to any of the
benefits conferred by this Agreement.
(b) Without the prior written consent of the other
parties, no party will assign any of its rights under this Agreement or delegate
any of its duties under this Agreement; provided, that Buyer may assign this
Agreement to any Affiliate or subsidiary of Buyer without Seller's consent;
provided, however, that notwithstanding such assignment Buyer shall remain
obligated to Seller pursuant to the terms and conditions of this Agreement.
13.2 PRESS RELEASES AND CONFIDENTIALITY. Except as required by
applicable law based on the advice of counsel, neither party shall make any
public announcement, press release or Form 8-K filing under the Exchange Act
with the SEC or any other filing with any other regulatory agency with respect
to the transactions contemplated by this Agreement, without the prior written
approval of the other party. Prior to the Closing Date (or at any time if the
Closing does not occur), Buyer shall, and shall cause its members, officers,
directors, employees, lenders, potential investors, auditors, accountants and
representatives to, keep confidential and not disclose to any Person (other than
its members, officers, directors, employees, lenders, potential investors,
auditors, accountants and representatives) or use any information relating to
Seller, the General Partner, Tele-Communications, Inc., TCI or any of TCI's
direct or indirect wholly-owned subsidiaries and (except in connection with the
transactions contemplated hereby, including, but not limited to, efforts to
obtain from Governmental Authorities and third parties
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Extensions and Required Consents to the transactions contemplated hereby and the
operation of the Business) all non-public information obtained by Buyer pursuant
to this Agreement. Prior to and following the Closing, Seller shall, and shall
cause its officers, employees and representatives to, keep confidential and not
disclose to any Person or use any information relating to Buyer and (except in
connection with preparing Tax returns, conducting proceedings relating to Taxes
or the Excluded Liabilities and, prior to the Closing Date, as required in the
conduct of the Business or as permitted by Section 7.12) any non-public
information relating to the Business. Buyer agrees to the inclusion of a
description of the transactions contemplated by this Agreement in a letter to
the Limited Partners. This Section 13.2 shall not be violated by disclosure
pursuant to court order or as otherwise required by law, on condition that
notice of the requirement for such disclosure is given to the other party hereto
prior to making any disclosure and the party subject to such requirement
cooperates as the other may reasonably request in resisting it.
13.3 NOTICES. All notices, consents, approvals, demands,
requests and other communications required or desired to be given hereunder must
be given in writing, shall refer to this Agreement, and shall be sent by
registered or certified mail, return receipt requested, by hand delivery, by
facsimile or by overnight courier service, addressed to the parties hereto at
their addresses set forth below, or such other addresses as they may designate
by like notice:
To Seller:
American Cable TV Investors 5, Ltd.
5619 DTC Parkway
Englewood, Colorado 80111
Attention: Marvin Jones
Facsimile No.: (303) 488-3219
With copies to:
Kaye, Scholer, Fierman,
Hays & Handler, LLP
425 Park Avenue
New York, New York 10022
Attention: Lynn Toby Fisher, Esq.
Facsimile No.: (212) 836-7152
To Buyer at:
Mediacom LLC
90 Crystal Run Road, Suite 406-A
Middletown, NY 10940
Attention: Rocco Commisso
Facsimile No.: (914) 692-9099
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With a copy to:
Cooperman Levitt Winikoff Lester & Newman, P.C.
800 Third Avenue
New York, New York 10022
Attention: Robert Winikoff
Facsimile No.: (212) 755-2839
Any notice from a party hereto may be given by such party's
respective attorneys. Any notice or other communications made hereunder shall be
deemed to have been given (i) if delivered personally, by overnight courier
service or by facsimile, on the date received, or (ii) if by registered or
certified mail, return receipt requested, five business days after mailing.
13.4 WAIVER. This Agreement or any of its provisions may not
be waived except in writing. The failure of any party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
13.5 CAPTIONS. The article and section captions of this
Agreement are for convenience only and do not constitute a part of this
Agreement.
13.6 CHOICE OF LAW. THIS AGREEMENT AND THE LEGAL RELATIONS
BETWEEN THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED IN THAT STATE, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES.
13.7 NONRECOURSE. Notwithstanding anything in this Agreement
to the contrary, in any action brought by reason of this Agreement or the
transactions contemplated hereby, no judgment shall be sought or obtained
against any of the general or limited partners of Seller or enforced against any
of such partners or any of their assets.
13.8 TERMS. Terms used with initial capital letters will have
the meanings specified, applicable to both singular and plural forms, for all
purposes of this Agreement. The word "include" and derivatives of that word are
used in this Agreement in an illustrative sense rather than a limiting sense.
13.9 RIGHTS CUMULATIVE. Except as set forth in Section 10.4,
all rights and remedies of each of the parties under this Agreement will be
cumulative, and the exercise of one or more rights or remedies will not preclude
the exercise of any other right or remedy available under this Agreement or
applicable law.
13.10 FURTHER ACTIONS. Seller and Buyer will execute and
deliver to the other, from time to time at or after the Closing, for no
additional consideration and at no additional cost
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to the requesting party, such further assignments, certificates, instruments,
records, or other documents, assurances or things as may be reasonably necessary
to give full effect to this Agreement and to allow each party fully to enjoy and
exercise the rights accorded and acquired by it under this Agreement.
13.11 TIME. If the last day permitted for the giving of any
notice or the performance of any act required or permitted under this Agreement
falls on a day which is not a Business Day, the time for the giving of such
notice or the performance of such act will be extended to the next succeeding
Business Day.
13.12 EXPENSES. Except as otherwise expressly provided in this
Agreement, each party will pay all of its expenses, including attorneys' and
accountants' fees, in connection with the negotiation of this Agreement, the
performance of its obligations and the consummation of the transactions
contemplated by this Agreement.
13.13 SPECIFIC PERFORMANCE. Seller and Buyer agree that
irreparable damages would occur if any of the provisions of this Agreement were
not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that Seller and Buyer shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, in addition to any other remedy to which they
are entitled at law or in equity; provided, however, that Seller shall not be
entitled to enforce specifically the terms and provisions hereof if Buyer would
be required, as a result of such enforcement, to accept financing on terms which
are not commercially reasonable in order to fund the Purchase Price. Buyer
acknowledges and agrees that financing terms similar to those existing under its
senior debt facility agented by The Chase Manhattan Bank are deemed to be
commercially reasonable.
13.14 ADDITIONAL REMEDIES. Buyer, TCI and the General Partner
agree that irreparable harm would occur if any of the obligations of TCI or the
General Partner set forth in Sections 7.3 and 7.16 were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that Buyer shall be entitled to an injunction or injunctions
to prevent breaches of Sections 7.3 and 7.16 and to enforce specifically the
terms and provisions of Sections 7.3 and 7.16 in any court of the United States
or any state having jurisdiction, in addition to any other remedy to which they
are entitled at law or in equity. Buyer shall be entitled to any remedy
available at law or in equity with respect to a breach by TCI or the General
Partner of its respective representations, warranties or covenants in this
Agreement.
13.15 WAIVER OF REMEDIES. Each of Seller and Buyer hereby
waives any claim for damages and any right to bring any action, cause of action,
suit, demand or damage in law or equity which it may have against the other
arising from termination of this Agreement pursuant to Section 10.(b)(vii) or
10.1(c)(viii); provided, however, that neither Seller nor Buyer shall be
precluded from bringing any action or suit arising from any default or breach of
this Agreement.
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13.16 SCHEDULES. Any disclosure made on a Schedule to this
Agreement will be deemed included on any other Schedule to which such disclosure
may be pertinent.
13.17 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which will be deemed an original.
13.18 ENTIRE AGREEMENT. This Agreement (including the
Schedules and Exhibits referred to in this Agreement, which are incorporated in
and constitute a part of this Agreement) contains the entire agreement of the
parties and supersedes all prior oral or written agreements and understandings
with respect to the subject matter. This Agreement may not be amended or
modified except by a writing signed by the parties.
13.19 SEVERABILITY. Any term or provision of this Agreement
which is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefitted by such provision or
any other provisions of this Agreement.
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IN WITNESS WHEREOF the parties hereto have executed this
Agreement as of the day and year first above written.
SELLER: AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P.,
its general partner
By: TCI Ventures Five, Inc.,
its general partner
By: /s/ Marvin L. Jones
-------------------------
Name: Marvin L. Jones
Title: President
BUYER: MEDIACOM LLC
By: /s/ Rocco B. Commisso
-------------------------
Name: Rocco B. Commisso
Title: Its Manager
With respect to Sections 5.1(b), 5.2(b), 5.3(c),
7.3, 7.12(b), 7.16 and 13.14 only:
TCI COMMUNICATIONS, INC.
By: /s/ Steve Brett
---------------------------
Name: Steve Brett
Title: Exec. Vice President
<PAGE> 65
With respect to Sections 5.1(b), 5.2(b), 5.3(c),
7.12(a), 7.16 and 13.14 only:
IR-TCI PARTNERS V, L.P.
By: TCI Ventures Five, Inc., its
general partner
By: /s/ Marvin L. Jones
----------------------------
Name: Marvin L. Jones
Title: President
<PAGE> 66
List of Schedules and Exhibits
Pursuant to
Asset Purchase Agreement
of American Cable TV Investors 5, Ltd.
for AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
EXHIBITS
Exhibit A Geographic Areas of Seller's Business
Exhibit B Escrow Agreement
Exhibit C Form of Engagement Letter
Exhibit D Form of Opinion of Seller's Counsel
Exhibit E Form of Opinion of Buyer's Counsel
Exhibit F Form of Opinion of Seller's FCC Counsel
SCHEDULES
Schedule 1.1 Subscriber Rates
Schedule 1.2 Consents
Schedule 1.3 Equipment
Schedule 1.4 Franchise Areas
Schedule 1.5 Governmental Permits
Schedule 1.6 Permitted Encumbrances
Schedule 1.7 Real Property
Schedule 1.8 Seller Contracts
Schedule 1.9 System
Schedule 4.2 Excluded Assets
Schedule 5.3(b) Violations of Partnership Agreement and Legal
Requirements
Schedule 5.4 Complete Systems
Schedule 5.5 Encumbrances on Seller's Title
Schedule 5.7 Environmental
Schedule 5.8 Compliance with Law
Schedule 5.9 Seller Contracts
Schedule 5.12 Legal Proceedings
Schedule 5.13(c) Employment Matters
Schedule 5.13(d) Employees
Schedule 5.13(e) Employer Plans
Schedule 5.14 System Information
Schedule 5.16 Taxes
Schedule 6.3(a) Consents to be Obtained or Waived by Closing Date
<PAGE> 67
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
EXHIBIT A
GEOGRAPHIC AREAS OF SELLER'S BUSINESS
Delaware
The residential and recreational areas known as Angola-by-the-Bay
Town of Bethany Beach
Town of Dagsboro
Unincorporated Sussex County
Town of Frankford
Town of Millsboro
Town of Millville
Town of Oceanview
Town of Selbyville
Town of South Bethany
Long Neck
The private residential community known as Sea Colony*
The private residential community known as Ocean Pines
Maryland
Town of Willards
Unincorporated Wicomico County
Town of Pittsville
Worcester County
* The successor to Sea Colony, Inc. has given notice of its intention to
terminate its agreement at the end of its term on May 8, 1997
Exhibit A -- Page 1
<PAGE> 68
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
EXHIBIT B
ESCROW AGREEMENT
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attn: Barbara L. Strohmeier, Vice President, 20th floor
William Ponce, Assistant Trust Officer, 20th floor
Re: Escrow Agreement
Ladies and Gentlemen:
This Escrow Agreement is hereby accepted as of __________ __,
1996, by American Cable TV Investors 5, Ltd. ("Seller") and Mediacom LLC
("Buyer") who have entered into an Asset Purchase Agreement, dated as of
___________ __, 1996, to sell and purchase certain cable television assets (the
"Asset Purchase Agreement"). Capitalized terms used but not otherwise defined in
this Escrow Agreement shall have the meanings set forth in the Asset Purchase
Agreement.
It is agreed as follows:
1. Deposit and Investments. Buyer has, pursuant to Section 3.1
of the Asset Purchase Agreement, deposited $1,077,500 (the "Deposit") in an
account at The Chase Manhattan Bank, as escrow agent (the "Escrow Agent"). The
Deposit may be invested in Investment Securities (as defined below). The Deposit
shall be held in escrow by Escrow Agent pursuant to this Escrow Agreement. The
Escrow Agent shall continue to invest the Deposit in Investment Securities in
accordance with the joint written instructions of Seller and Buyer or, if no
instructions are given, in interest bearing accounts at The Chase Manhattan
Bank. The term "Investment Securities" means (a) interest bearing accounts in
The Chase Manhattan Bank or (b) (i) obligations of the United States of America,
(ii) United States government securities of agencies of the United States
government which are guaranteed by the United States government or (iii)
securities of governmental agencies, if the same are covered by a bank
repurchase agreement.
2. Holdings of Deposit. The Escrow Agent shall hold and
disburse the Deposit pursuant to the terms of this Escrow Agreement and the
Asset Purchase Agreement.
Exhibit B -- Page 1
<PAGE> 69
3. Retention of Earnings, Etc. All interest, earnings, and
gains received by the Escrow Agent from the investment of the Deposit prior to
the Closing Date (the "Deposit Interest") shall be reinvested and held as part
of the Deposit and disbursed in accordance with the terms of this Escrow
Agreement. All interest, earnings and gains received by Escrow Agent from the
investment of the Deposit on or after the Closing Date (the "Post-Closing
Interest") shall be distributed in accordance with the terms of this Escrow
Agreement. In connection with the investment of the Deposit, Seller and Buyer
shall provide the Escrow Agent with their respective taxpayer identification
numbers.
4. Disbursement Instructions.
(a) Anything in this Escrow Agreement to the contrary
notwithstanding, Escrow Agent is authorized and directed to deliver and disburse
the Deposit, or any part of the Deposit, and the Deposit Interest, or any part
of the Deposit Interest, as directed from time to time in joint written
instructions of Seller and Buyer.
(b) Seller and Buyer have agreed that the Deposit, the Deposit
Interest and the Post-Closing Interest, if any, will be disbursed in accordance
with the terms of this Escrow Agreement.
(c) Seller and Buyer have agreed that no less than two
Business Days prior to Closing Seller and Buyer shall instruct Escrow Agent to
disburse any Deposit Interest to Buyer or Buyer's designee on the Closing Date
in accordance with Buyer's written instructions to the Escrow Agent.
(d) Unless the Closing shall have theretofore taken place or
unless an unresolved claim has been asserted against the Deposit in accordance
with Section 5 or Section 6 and remains outstanding, Seller and Buyer have
agreed that on the date which is 10 Business Days after the termination of the
Asset Purchase Agreement Seller and Buyer shall instruct Escrow Agent in writing
to disburse the Deposit and any Deposit Interest to Buyer or Buyer's designee.
(e) Unless a claim against the Deposit, or any part of the
Deposit remains outstanding, Seller and Buyer have agreed that on the first
Business Day after the first anniversary of the Closing Date, Seller and Buyer
shall instruct Escrow Agent in writing to disburse the Deposit, or any part of
the Deposit which is not subject to a claim, together with any Post-Closing
Interest thereon to Seller or Seller's designee.
5. Claims Against the Deposit by Seller Prior to Closing. The
following provisions shall control with respect to claims made against the
Deposit by Seller prior to Closing:
(a) If Seller wishes to make a claim against the Deposit, or
any part of the Deposit, Seller will send a notice of such claim to Escrow Agent
and Buyer. Any such notice
Exhibit B -- Page 2
<PAGE> 70
will state that Seller is making a claim under the Asset Purchase Agreement. Any
notice of a claim made shall specify the factual basis of such claim in
reasonable detail to the extent known by Seller.
(b) If Buyer disputes the right of Seller to obtain the
Deposit, or any part of the Deposit, Buyer, within ten Business Days after
receipt of the notice as provided in Paragraph 5(a), shall send a notice to
Escrow Agent and Seller stating that Buyer disputes the right of Seller to
obtain the Deposit, or any part of the Deposit, and will include in such notice
a description in reasonable detail of the basis for disputing such claim to the
extent known by Buyer. Escrow Agent shall continue to hold the Deposit (or the
part thereof which is subject to a dispute) until advised in writing by Buyer
and Seller that such dispute has been resolved, in which case Escrow Agent shall
disburse the Deposit (or such part thereof) pursuant to such writing together
with any Deposit Interest earned thereon; provided that, if a suit or action is
commenced for collection of the Deposit (or any part thereof) and Escrow Agent
is so advised in writing, Escrow Agent shall, unless otherwise advised in
writing by Seller and Buyer, continue to hold the Deposit or the part thereof
which is the subject of such suit or action together with any Deposit Interest
earned thereon until final disposition of such suit or action. Upon the final
disposition of such suit or action, Escrow Agent shall disburse the Deposit or
part thereof which is subject to such suit or action together with any Deposit
Interest earned thereon in accordance with the determination of the court in
which such suit or action was pending.
(c) If Buyer fails to notify Escrow Agent within the time
period described in Paragraph 5(b) that it contests Seller's claim to the
Deposit (or any part thereof), Escrow Agent shall disburse the Deposit (or any
part thereof which is subject to a claim by Seller that Buyer fails to timely
contest) together with any Deposit Interest earned thereon to Seller.
6. Claims Against the Deposit by Buyer Prior to Closing. The
following provisions shall control with respect to claims made against the
Deposit by Buyer prior to Closing:
(a) If Buyer wishes to make a claim against the Deposit, or
any part thereof, Buyer will send a notice of such claim to Escrow Agent and
Seller. Any such notice will state that Buyer is making a claim under the Asset
Purchase Agreement. Any notice of a claim made shall specify the factual basis
of such claim in reasonable detail to the extent known by Buyer.
(b) If Seller disputes the right of Buyer to obtain the
Deposit, or any part of the Deposit, Seller, within ten Business Days after
receipt of the notice as provided in Paragraph 6(a), shall send a notice to
Escrow Agent and Buyer stating that Seller disputes the right of Buyer to obtain
the Deposit, or any part of the Deposit, and will include in such notice a
description in reasonable detail of the basis for disputing such claim to the
extent known by Seller. Escrow Agent shall continue to hold the Deposit (or the
part thereof which is subject to a dispute) until advised in writing by Seller
and Buyer that such dispute has been resolved, in which case Escrow Agent shall
disburse the Deposit (or such part thereof) pursuant to said writing together
with any Deposit Interest earned thereon; provided that, if a suit or action is
Exhibit B -- Page 3
<PAGE> 71
commenced for collection of the Deposit (or any part thereof) and Escrow Agent
is so advised in writing, Escrow Agent shall, unless otherwise advised in
writing by Seller and Buyer, continue to hold the Deposit or the part thereof
which is the subject of such suit or action together with any Deposit Interest
earned thereon until final disposition of such suit or action. Upon the final
disposition of such suit or action, Escrow Agent shall disburse the Deposit or
part thereof which is subject to such suit or action together with any Deposit
Interest earned thereon in accordance with the determination of the court in
which such suit or action was pending.
(c) If Seller fails to notify Escrow Agent within the period
described in Paragraph 6(b) that it contests Buyer's claim to the Deposit (or
any part thereof), Escrow Agent shall disburse the Deposit (or any part thereof
which is subject to a claim by Buyer that Seller fails to timely contest)
together with any Deposit Interest earned thereon to Buyer.
7. Claims Against the Deposit by Buyer After the Closing. The
following provisions shall control with respect to claims made against the
Deposit by Buyer after the Closing:
(i) If Buyer wishes to make a claim against the Deposit, or
any part thereof, Buyer will send a notice of such claim to Escrow Agent and
Seller. Any such notice will state that Buyer is making a claim under Article
XII of the Asset Purchase Agreement. Any notice of a claim made shall specify
the factual basis of such claim in reasonable detail to the extent known by
Buyer.
(ii) If Seller disputes the right of Buyer to obtain the
Deposit, or any part of the Deposit, Seller, within ten Business Days after
receipt of the notice as provided in Paragraph 7(a), shall send a notice to
Escrow Agent and Buyer stating that Seller disputes the right of Buyer to obtain
the Deposit, or any part of the Deposit, and will include in such notice a
description in reasonable detail of the basis for disputing such claim. Escrow
Agent shall continue to hold the Deposit (or the part thereof which is subject
to a dispute) together with any Post-Closing Interest earned thereon until
advised in writing by Seller and Buyer that such dispute has been resolved, in
which case Escrow Agent shall disburse the Deposit (or such part thereof)
together with any Post-Closing Interest earned thereon pursuant to said writing;
provided that, if a suit or action is commenced for collection of the Deposit or
part thereof and Escrow Agent is so advised in writing, Escrow Agent shall,
unless otherwise advised in writing by Seller and Buyer, continue to hold the
Deposit or the part thereof which is the subject of such suit or action together
with any Post-Closing Interest earned thereon until final disposition of such
suit or action. Upon the final disposition of such suit or action, Escrow Agent
shall disburse the Deposit or part thereof which is subject to such suit or
action together with any Post-Closing Interest earned thereon in accordance with
the determination of the court in which such suit or action was pending.
(iii) If Seller fails to notify Escrow Agent within the period
described in Paragraph 7(b) that it contests Buyer's claim to the Deposit (or
any part thereof), Escrow Agent
Exhibit B -- Page 4
<PAGE> 72
shall disburse the Deposit (or any part thereof which is subject to a claim by
Buyer that Seller fails to timely contest) together with any Post-Closing
Interest earned thereon to Buyer.
(iv) Notwithstanding the foregoing, the maximum amount that
Escrow Agent shall disburse to Buyer for all claims against the Deposit together
with any Post-Closing Interest earned thereon pursuant to this Section 7 in the
aggregate shall not exceed $1,077,500. Within five Business Days of disbursing
such amount, Escrow Agent shall disburse any additional amounts then held by it
to Seller.
8. Closing Adjustments Escrow. If any additional amount of
money is deposited with Escrow Agent pursuant to Section 3.4(a) of the Asset
Purchase Agreement (such amount together with any interest, earnings and gains
thereon, the "Closing Adjustments Escrow"), the Escrow Agent shall receive and
hold the Closing Adjustments Escrow in a separate escrow account pursuant to
this Escrow Agreement. The Escrow Agent shall invest the Closing Adjustments
Escrow in Investment Securities in accordance with the joint written
instructions of Seller and Buyer or, if no instructions are given, in interest
bearing accounts at The Chase Manhattan Bank. The Closing Adjustments Escrow
shall be released from escrow, in whole or in part, from time to time:
(a) upon the Escrow Agent's receipt of joint written
instructions of Seller and Buyer, in accordance with such instructions; or
(b) pursuant to a final and unappealable order of a court of
competent jurisdiction.
9. Termination. This Escrow Agreement shall terminate when
Escrow Agent has disbursed the entire amount of the Deposit together with any
and all interest earned thereon.
10. Rights, Duties, and Liabilities of Escrow Agent.
(a) Escrow Agent shall have no duty to know or determine the
performance or non-performance of any provision of any agreement between the
parties to this Escrow Agreement, including, but not limited to, the Asset
Purchase Agreement, which shall not bind Escrow Agent in any manner. Escrow
Agent assumes no responsibility for the validity or sufficiency of any document
or paper or payment deposited or called for under this Escrow Agreement except
as may be expressly and specifically set forth in this Escrow Agreement, and the
duties and responsibilities of Escrow Agent under this Escrow Agreement are
limited to those expressly and specifically stated in this Escrow Agreement.
(b) Escrow Agent shall not be personally liable for any act it
may do or omit to do under this Escrow Agreement as such agent while acting in
good faith and in the exercise of its own best judgment, and any act done or
omitted by it pursuant to the written advice of its counsel shall be conclusive
evidence of such good faith. Escrow Agent shall have the right at
Exhibit B -- Page 5
<PAGE> 73
any time to consult with its counsel upon any question arising under this Escrow
Agreement and shall incur no liability for any delay reasonably required to
obtain the advice of counsel.
(c) Other than those notices or demands expressly provided in
this Escrow Agreement, Escrow Agent is expressly authorized to disregard any and
all notices or demands given by Seller or Buyer, or by any other person, firm,
or corporation, excepting only orders or process of court, and Escrow Agent is
expressly authorized to comply with and obey any and all final processes,
orders, judgments, or decrees of any court, and to the extent Escrow Agent obeys
or complies with any thereof of any court, it shall not be liable to any party
to this Escrow Agreement or to any other person, firm, or corporation by reason
of such compliance.
(d) In consideration of the acceptance of the Deposit and
Closing Adjustments Escrow, if any, to be held in escrow by Escrow Agent (as
evidenced by its signature below), Seller and Buyer agree, for themselves and
their successors and assigns, to pay Escrow Agent its charges, fees and expenses
as contemplated by this Escrow Agreement. As between Seller and Buyer, they
shall each be responsible for one-half of such charges, fees and expenses. The
escrow fees or charges shall be as written below the Escrow Agent's signature.
In the event Escrow Agent renders services not provided for in this Escrow
Agreement, Escrow Agent shall be entitled to receive from Seller and Buyer
reasonable compensation and reasonable costs, if any, for such extraordinary
services, and such compensation and costs shall be borne equally by Seller and
Buyer.
(e) Escrow Agent acting in good faith shall be under no duty
or obligation to ascertain the identity, authority, or right of Seller or Buyer
(or their agents) to execute or deliver or purport to execute or deliver this
Escrow Agreement or any documents or papers or payments deposited or called for
or given under this Escrow Agreement.
(f) Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations or by reason of laches in respect of
this Escrow Agreement or any documents or papers deposited with Escrow Agent.
(g) In the event of any dispute among the parties to this
Escrow Agreement as to the facts of default or as to the validity or meaning of
any provision of this Escrow Agreement, or any other fact or matter relating to
this Escrow Agreement or to the transactions between Seller and Buyer, Escrow
Agent is instructed that it shall be under no obligation to act, except in
accordance with this Escrow Agreement or under process or order of court or, if
there be no such process or order, until it has filed or caused to be filed an
appropriate action interpleading Seller and Buyer and delivering the Deposit (or
the portion of the Deposit in dispute) together with any Deposit Interest earned
thereon or Closing Adjustments Escrow (or the portion of the Closing Adjustments
Escrow in dispute), as applicable, to such court, and Escrow Agent shall sustain
no liability for its failure to act pending such process of court or order or
interpleader of action.
Exhibit B -- Page 6
<PAGE> 74
11. Modification of Escrow Agreement. The provisions of this
Escrow Agreement may be supplemented, altered, amended, modified, or revoked by
writing only, signed by Seller and Buyer and approved in writing by Escrow
Agent, and upon payment of all fees, costs and expenses of Escrow Agent incident
thereto.
12. Assignment of Escrow Agreement. No assignment, transfer,
conveyance, or hypothecation of any right, title, or interest in and to the
subject matter of this Escrow Agreement (other than an assignment by Buyer to an
affiliate of Buyer) shall be binding upon any party, including Escrow Agent,
unless all fees, costs, and expenses incident thereto shall have been paid and
then only upon the assent thereto by all parties in writing.
13. Notice. Any notice required or desired to be given to
Seller or Buyer shall be deemed to have been given only if it is given in the
manner set forth in Section 13.3 of the Asset Purchase Agreement. Notice to
Escrow Agent may be given in the manner set forth in Section 13.3 of the Asset
Purchase Agreement to Escrow Agent's address set forth above (Facsimile No.:
(212) 270-4823) or at such other address as Escrow Agent may direct by giving
notice to Seller and Buyer.
14. Escrow Agreement Binding. The undertakings and agreements
contained in this Escrow Agreement shall bind and inure to the benefit of the
parties to this Escrow Agreement and their respective successors, and assigns.
15. Counterparts. This Escrow Agreement may be executed in one
or more counterparts, each of which will be deemed an original. Whenever
pursuant to this Escrow Agreement Seller and Buyer are to deliver a jointly
signed writing to Escrow Agent or jointly advise Escrow Agent in writing, such
writing may in each and all cases be signed jointly or in counterparts and such
counterparts shall be deemed to be one instrument.
Exhibit B -- Page 7
<PAGE> 75
16. Governing Law. This Escrow Agreement shall be governed by
and continued in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that state (without regard to its conflict
of law principles).
Very truly yours,
SELLER:
AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P., its general partner
By: TCI Ventures Five, Inc., its general partner
By:_______________________________
Name:
Title:
BUYER:
MEDIACOM LLC
By: _________________________
Name:
Title:
ACCEPTED this ___ day of _________, 1996
THE CHASE MANHATTAN BANK
By: __________________________
Name:
Title:
Fee: $2,000 Inception Fee
Exhibit B -- Page 8
<PAGE> 76
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
EXHIBIT C
FORM OF ENGAGEMENT LETTER
[ACCOUNTANT'S LETTERHEAD]
_______ __, 1997
American Cable TV Investors 5, Ltd.
c/o TCI Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Mediacom LLC
90 Crystal Run Road, Suite 406-A
Middletown, NY 10940
Attention: Rocco Commisso
Dear _____________:
This letter is to confirm our understanding of the agreed-upon procedures to be
performed in connection with the sale of assets by American Cable TV Investors
5, Ltd. (the "SELLER") to Mediacom LLC (the "BUYER") pursuant to the Asset
Purchase Agreement dated _______ __, 1996 (the "AGREEMENT"). Capitalized terms
not otherwise defined in this Letter shall have the meanings set forth in the
Agreement.
This letter describes the objective of the review and nature of the services we
will provide. It also includes an overview of the procedures we intend to
perform, describes the type of report we intend to issue, and includes an
estimate of our fees.
Based upon our discussions with you, we believe the following proposed
procedures are those requested by you in connection with the Final Adjustments
Report, as described in Section 3.4 of the Agreement:
1. Obtain the Preliminary and Final Adjustments Reports, prepared by the
Partnership (the "ADJUSTMENTS") as contemplated by Sections 3.4(a) and
3.4(b) of the Agreement.
Exhibit C -- Page 1
<PAGE> 77
2. Obtain the appropriate Accounts Receivable aging and recalculate the
adjustment as contemplated by Section 3.3(a)(i) of the Agreement.
3. Obtain third party invoice or other appropriate documentation of prepaid
real and personal property taxes and other prepaid fees and expenses
identified by you. Recalculate the relevant adjustments, as contemplated
by Section 3.3(a)(ii) of the Agreement, based on a proration as of the
Closing Date on the basis of the period covered by such payment.
4. Agree advance payments to, or deposits with, third parties; advance
payments to, or monies of third parties on deposit with, Seller; accrued
and unpaid real and personal property taxes; and other accrued and unpaid
expenses, as defined in Sections 3.3(a)(ii) and 3.3(b) of the Agreement,
to the appropriate account(s) per the most recent general ledger of
Seller.
We will perform the aforementioned procedure(s) and report our findings to you.
We will report to you any differences noted in performing Steps 2 through 4,
regardless of amount.
Due to the nature of the engagement our fees will be based upon time and
expenses required to complete the engagement. We estimate that our total fees
including expenses will not exceed $_____.
Because the above procedures do not constitute an audit made in accordance with
generally accepted auditing standards, we will not be expressing an opinion on
any of the accounts specified or items referred to above. Our report is intended
solely for the information and use of the managements of Seller and Buyer and
should not be used for any other purpose.
If the foregoing is in accordance with your understanding please sign the copy
of this letter in the space provided and return it to us.
Very truly yours,
[ACCOUNTANT](1)
ACCEPTED BY:
_____________________________ _____
_______________________
Seller's Signature Title
Date
_____________________________ _____
_______________________
__________________
* A NATIONALLY RECOGNIZED ACCOUNTING FIRM WILL BE SELECTED BY BUYER AND
SELLER.
Exhibit C -- Page 2
<PAGE> 78
Buyer's Signature Title
Date
[PARAGRAPHS 2, 3 AND 4 ABOVE WILL ONLY BE INCLUDED IN THE ENGAGEMENT LETTER TO
THE EXTENT THAT ANY AMOUNTS ABOUT WHICH SELLER AND BUYER DISAGREE PURSUANT TO
SECTION 3.4(d) OF THE AGREEMENT FALL WITHIN THE CATEGORIES DESCRIBED IN THOSE
PARAGRAPHS. THE PARTIES ACKNOWLEDGE THAT THE PROCEDURES TO BE FOLLOWED BY THE
NATIONALLY RECOGNIZED ACCOUNTING FIRM TO BE SELECTED BY SELLER AND BUYER ("THE
ACCOUNTANT") WILL DEPEND ON WHAT THE ACCOUNTANT IS REQUESTED TO PERFORM BY
SELLER AND BUYER AND THE ACCOUNTANT'S CONCURRENCE THAT SUCH PROCEDURES CAN BE
PERFORMED BY THEM.]
Exhibit C -- Page 3
<PAGE> 79
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
EXHIBIT D
FORM OF OPINION OF SELLER'S COUNSEL
_______________ __, 1997
Mediacom LLC
90 Crystal Road, Suite 406-A
Middletown, NY 10940
Gentlemen:
We have acted as counsel to American Cable TV Investors 5,
Ltd., a Colorado limited partnership ("SELLER"), in connection with the sale
today by Seller of certain of Seller's assets (the "ASSETS") delineated in the
Asset Purchase Agreement dated __________, 1996 (the "AGREEMENT") between you
and Seller. This opinion is given pursuant to Section 8.8 of the Agreement.
Capitalized terms not otherwise defined herein are defined as set forth in the
Agreement.
This Opinion Letter is governed by, and shall be interpreted
in accordance with, the Legal Opinion Accord (the "ACCORD") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith. Except as herein provided, the
law covered by the opinions expressed herein is limited to the Federal Law of
the United States and the Law of the State of New York. Insofar as our opinion
pertains to matters of Colorado law, we have relied upon the opinion of Colorado
counsel, Cohen, Brame and Smith, P.C., dated ______________, 1997, a copy of
which is attached hereto.
Based on the foregoing it is our opinion that:
1. Seller is a validly existing limited partnership under the
laws of the State of Colorado.
2. The Agreement is enforceable against Seller.
3. The execution and delivery of the Agreement by Seller and
the performance by Seller of its terms do not breach or result in a violation or
default of the Certificate of Limited Partnership or the agreement of limited
partnership of Seller.
<PAGE> 80
We hereby confirm to you that, there are no actions or
proceedings against Seller, pending or overtly threatened in writing, before any
court, governmental agency or arbitrator, which (i) seek to affect the
enforceability of the Agreement or (ii) involve or affect any of the Assets or
the Business which, if adversely determined, would have a material adverse
effect on the Assets or the Business.
A copy of this Opinion Letter may be delivered by you to
[lending bank(s)] in connection with the closing of the financing pursuant to
the Commitment, and such person(s) may rely on this opinion as if it were
addressed and had been delivered to [it] [them] on the date hereof. Subject to
the foregoing, this opinion is rendered solely for your information and
assistance in connection with the above transaction, and may not be relied upon
by any other person or for any other purpose without our prior written consent.
Very truly yours,
<PAGE> 81
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
EXHIBIT E
FORM OF OPINION OF BUYER'S COUNSEL
______________ __, 1997
American Cable TV Investors 5, Ltd.
c/o TCI Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111
Gentlemen:
We have acted as counsel to Mediacom LLC, a New York limited
liability company (the "BUYER") in connection with the purchase today by Buyer
of certain of your assets (the "ASSETS") delineated in the Asset Purchase
Agreement dated _____________, 1996 (the "AGREEMENT") between you and Buyer.
This opinion is given pursuant to Section 9.6 of the Agreement. Capitalized
terms not otherwise defined herein are defined as set forth in the Agreement.
This Opinion Letter is governed by, and shall be interpreted
in accordance with, the Legal Opinion Accord (the "ACCORD") of the ABA Section
of Business Law (1991). As a consequence, it is subject to a number of
qualifications, exceptions, definitions, limitations on coverage and other
limitations, all as more particularly described in the Accord, and this Opinion
Letter should be read in conjunction therewith.
Based on the foregoing, it is our opinion that:
1. Buyer is validly existing in good standing under the laws
of the State of New York.
2. The Agreement is enforceable against Buyer.
3. The execution and delivery of the Agreement by Buyer and
the performance by Buyer of its terms do not breach with or result in a
violation of the Articles of Organization or Operating Agreement of Buyer.
<PAGE> 82
This opinion is rendered solely for your information and
assistance in connection with the above transaction, and may not be relied upon
by any other person or for any other purpose without our prior written consent.
Very truly yours,
<PAGE> 83
ACT 5
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
Exhibit F
Form for Opinion of Seller's FCC Counsel
__________, 1997
Mediacom LLC
90 Crystal Run Road, Suite 406-A
Middletown, New York 10940
Re: American Cable TV Investors 5, Ltd.
Ladies and Gentlemen:
This letter is furnished to you pursuant to Section 8.9 of the
Asset Purchase Agreement, dated as of ____________ __, 1996 (the "Agreement"),
between American Cable TV Investors 5, Ltd., a Colorado limited partnership
("Seller") and Mediacom LLC, a New York limited liability company ("Buyer").
As communications counsel for Seller, we are engaged in the
representation of Seller before the Federal Communications Commission ("FCC") in
connection with its cable television business in the communities identified in
Schedule I hereto (the "System"). We have examined such records, certificates
and other documents and have considered such questions of law as relate to the
Seller and the System as we have deemed necessary or appropriate for purposes of
this opinion. This opinion is limited to the Communications Act of 1934, as
amended (the "Communications Act"), the Rules and Regulations of the FCC (the
"FCC Regulations") and Section 111 of the Copyright Act of 1976 (17 U.S.C.
Section 111) (the "Copyright Act") as applicable to the System as operated by
Seller. Except as specifically provided, we offer no opinion as to the Seller's
compliance with the Cable Television Consumer Protection and Competition Act of
1992, Pub. L. No. 102-385, 106 Stat. 1460 (1992), or those FCC regulations
promulgated pursuant to such Act.
In rendering this opinion, we have assumed the genuineness of
signatures on documents and the conformity to the original of all copies
examined by or submitted to us of photocopies or conformed copies. As to various
questions of fact in connection with this opinion, we have relied upon
examination of available files of our office, those of the FCC and the United
States Copyright Office (the "Copyright Office"), and pertinent statements and
representations of officers, directors and responsible representatives of the
Seller. We have not undertaken an independent field investigation to verify the
accuracy of this information, and express no opinion regarding technical matters
or matters that would require on-scene knowledge of the System's operations,
technical or engineering matters, or local franchising matters.
Based upon and limited by the foregoing and except as set
forth in Schedule II hereto, we are of the opinion that, as of the date set
forth above:
1. Seller holds all licenses, permits and authorizations required from
the FCC to operate the System in the manner in which we have been advised that
it is being operated, which licenses, permits and authorizations are listed in
Schedule I hereto. Each such license, permit and authorization has been issued
by the FCC, remains in full force and effect, and transfer thereof to Buyer on
the Closing Date as defined in the Agreement has been approved by the FCC, to
the extent such approval is required.
<PAGE> 84
2. All materially required FCC filings required to be made by Seller
in connection with its operation of the System have been made, including, but
not limited to, Registration Statements and FCC Annual Report Forms 325,
Schedule A, to the extent such forms are required. All FCC authorizations needed
to utilize the frequencies currently used by the System in the 108-137 MHz bands
and 225-400 Mhz bands have been obtained. These frequencies, the geographic
service areas and the authorized radii of the System are listed on Schedule I
hereto.
3. Basic Signal Leakage Performance Reports (FCC Annual Report Forms
320) for 1990-1996, are on file with the FCC for each community unit operated by
the System. Although those forms indicate passing test results, we render no
opinion as to the methodology or accuracy of the actual measurements taken.
4. EEO Annual Report Forms 395(A) have been filed with the FCC for
each employment unit associated with the System for calendar years 1988-1996.
Except as noted in Schedule II, the employment unit has been certified by the
FCC for calendar years 1988-1996.
5. To the best of our knowledge, Seller has provided subscriber
privacy notices to subscribers of the System on an annual basis since 1986.
Seller also provides these notices to new subscribers at the time of
installation. Our opinion is limited to the fact that such notices have been
provided, and we express no opinion as to whether the contents of such notices
comply with the requirements of the Communications Act or FCC regulations.
6. To the best of our knowledge, based on information provided by
Seller, the System is carrying all of the "must-carry" signals required to be
carried pursuant to Federal Law. Except as set forth in Schedule II hereto, to
the best of our knowledge, based on information provided by Seller, there have
been no "must carry" complaints filed at the FCC against the System.
7. Based solely upon the information provided by Seller as to antenna
structure height, location and proximity to any aircraft landing areas, all
antenna structures that we have been advised as being utilized by Seller in
connection with its operation of the System are in compliance with the FCC's
tower registration requirements. These antenna structures are listed in Schedule
I hereto. We express no opinion as to compliance with any requirements of Part
17 of the FCC's rules (such as antenna structure marking and lighting
requirements) other than those delineating the circumstances under which
notification to the Federal Aviation Administration and FCC is required.
8. There is no FCC judgment, decree or order which has been issued
against Seller with respect to the system, nor is there any FCC action,
proceeding or investigation pending or, to the best of our knowledge, threatened
by the FCC against Seller with respect to the System.
9. The timely filing of the periodic Statements of Account and
accompanying royalty fees qualifies the Seller for a compulsory license for the
carriage of the broadcast signals utilized by the System. Seller has filed all
required Statements of Account and supplements thereto, and, to the best of our
knowledge, has timely paid its statutory royalties for all accounting periods
beginning at least as early as the first accounting period of 1993, and all
primary transmissions listed in the latest Statements of Account qualify for a
compulsory copyright license. Although we render no opinion as to the
methodology or calculations used to determine "gross receipts" for copyright
purposes, there have been no inquiries received from the Copyright Office or any
other party which challenge or question either the computation or amount of any
royalty payments or the validity of the Statements of Account, and there is no
claim, action or demand for copyright infringement or for non-payment of
royalties, pending or, to the best of our knowledge, threatened against the
Seller.
10. Except for any necessary FCC approvals which have been obtained,
the execution, delivery and performance of this Agreement does not require the
approval of the FCC, will not result in any violation of the rules and
regulations of the FCC, and will not cause any forfeiture or impairment of any
FCC license, authorization or permit of Seller.
<PAGE> 85
Except as set forth in the following sentence, this opinion
has been prepared solely for your use in connection with the closing of
transactions under the Agreement, and may not be relied upon by, filed with or
furnished to any other person or entity without the prior written consent of
this firm. Each of the lenders and agents named in your Amended and Restated
Credit Agreement is authorized to rely on this opinion to the same extent as if
it had been addressed to them.
Very truly yours,
COLE, RAYWID & BRAVERMAN, L.L.P.
By:_________________________
<PAGE> 86
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 1.1
SUBSCRIBER RATES
ALL AREAS EXCEPT OCEAN PINES:
<TABLE>
<CAPTION>
Monthly Subscriber Rates
Effective June 30, 1996
<S> <C>
Basic Subscriber Rate: $ 19.55
Expanded Basic Services Rate: N/A
Total Basic and Expanded Basic: $ 19.55
OCEAN PINES, MARYLAND:
<CAPTION>
Monthly Subscriber Rates
Effective June 30, 1996
<S> <C>
Basic Subscriber Rate: $ 10.45
Expanded Basic Services Rate: 5.69
-------
Total Basic and Expanded Basic: $ 16.14
</TABLE>
Schedule 1.1 -- Page 1
<PAGE> 87
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 1.2
CONSENTS
1. Town of Bethany Beach.*
2. Wicomico County, Maryland.* **
3. Town of Pittsville.*
4. Town of Willards.*
5. Town of Frankford.*
6. Town of Millsboro.**
7. Town of Ocean View.**
8. Town of Dagsboro.**
9. Delaware Public Service Commission.*
10. Town of Milville.**
11. Town of Selbyville.**
12. Town of South Bethany.**
- --------
* Required consent.
** Notice required.
Schedule 1.2 - Page 1
<PAGE> 88
13. Sea Colony Inc., pursuant to a Bulk Account Agreement, dated May 8,
1972, between Sea Colony Inc. and CATV General Corporation, as assigned
to American Cable TV Investors 5, Ltd. by notice.***
14. Ocean Pines Association, Inc., pursuant to an Agreement for the
Construction and Operation of a Cable Television System, dated February
1, 1978, between Triad CATV, Inc. and Ocean Pines Association, as
assigned to American Cable TV Investors 5, Ltd. by Simmons
Communications Company, L.P.*
15. Delaware Electric Cooperative, Inc., pursuant to an Agreement for Joint
Use of Electric Utility Poles, dated October 1, 1984, between Simmons
Communications Company, L.P. and Delaware Electric Cooperative, Inc.
and Letter, dated June 29, 1992, from Delaware Electric Cooperative,
Inc. to American Cable TV Investors 5, Ltd. and Simmons Communications
Company, L.P.
16. The Chesapeake and Potomac Telephone Company of Maryland, pursuant to a
License Agreement for Pole Attachments, dated May 28, 1992, between the
Chesapeake and Potomac Telephone Company of Maryland and American Cable
TV Investors 5, Ltd.
17. Delmarva Power and Light Company, pursuant to a License Agreement for
Cable Television Pole Attachments, dated April 20, 1993, between
Delmarva Power and Light Company and American Cable TV Investors 5,
Ltd.
18. Delmarva Power and Light Company, pursuant to a License Agreement for
Cable Television Pole Attachments, dated October 29, 1992, between
Delmarva Power and Light Company and American Cable TV Investors 5,
Ltd.
19. George and Barbara Hudson, pursuant to a Lease Agreement, dated May 26,
1981, between George and Barbara Hudson and Lower Delaware CATV, Inc.,
as assigned to American Cable TV Investors 5, Ltd. by Simmons
Communications Company, L.P.**
20. Caldabaugh Communications, Inc., pursuant to a Tower and Property
Lease, dated August 19, 1994, between Caldabaugh Communications, Inc.
and American Cable TV Investors 5, Ltd.
21. Worcester County Sanitation District, pursuant to a Lease Agreement,
dated July 1, 1989, between Simmons Communications Company, L.P. and
Worcester County Sanitation District, as assigned to American Cable TV
Investors 5, Ltd.
- --------
*** The successor to Sea Colony Inc. has given notice of its intention to
terminate this agreement at the end of its term on May 8, 1997.
** Notice required.
* Required Consent.
Schedule 1.2 - Page 2
<PAGE> 89
22. Parker Enterprises, pursuant to a Lease Agreement, dated December 22,
1995 as amended July 1, 1996, between Parker Enterprises and American
Cable TV Investors 5, Ltd.*
23. Melody Cooper, pursuant to a Lease Agreement, dated July 1, 1991,
between Melody Cooper and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.*
24. Simmons Communications Company, L.P., pursuant to a Tower Space and
Ground Lease Agreement, dated June 30, 1992, between Simmons
Communications Company, L.P. and American Cable TV Investors 5, Ltd.*
25. Lenders, pursuant to a Revolving Credit Agreement, dated as of June 30,
1992, among American Cable TV Investors 5, Ltd., Various Financial
Institutions, Bank of America, Illinois f/k/a Continental Bank, N.A.
and NationsBank of Texas, N.A.(1)
26. TCI Cablevision Associates, Inc. f/k/a Daniels & Associates, Inc.,
pursuant to a Management Agreement, dated May 14, 1987, between TCI
Cablevision Associates, Inc. f/k/a Daniels & Associates, Inc. and
American Cable TV Investors 5, Ltd.
27. Federal Communications Commission for the transfer of licenses listed
on Schedule 1.5.*
28. WBOC, Inc., pursuant to a Retransmission Consent Agreement, dated
January 1, 1996, between WBOC, Inc. and TCI Southeast, Inc.
29. Pot-Nets, Inc., pursuant to agreement granting a cable television
franchise, dated as of November 20, 1973, by and between CATV Sussex
Company and Pot-Nets, Inc., as assigned to American Cable TV Investors
5, Ltd.
30. Elva Johnson, pursuant to a Lease Agreement, dated September 29, 1988,
between Elva Johnson and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
31. Bell Atlantic, pursuant to a Pole Attachment Agreement, dated January
17, 1969, between The Diamond State Telephone Company n/k/a Bell
Atlantic and Lower Delaware CATV, Inc., as assigned to Simmons
Communications Company, L.P., as subsequently assigned to American
Cable TV Investors 5, Ltd.
- ---------
* Required consent.
(1) The proceeds from the sale of the System will be used to repay any
amount of the loan outstanding as of the Closing Date.
Schedule 1.2 - Page 3
<PAGE> 90
32. Bell Atlantic, pursuant to a Pole Attachment Agreement, dated June 10,
1969, between The Diamond State Telephone Company n/k/a Bell Atlantic
and Lower Delaware CATV, Inc., as assigned to Simmons Communications
Company, L.P., as subsequently assigned to American Cable TV Investors
5, Ltd.
33. Angola-by-the-Bay Property Owners Association Inc., pursuant to an
Agreement to Construct, Maintain and Operate a Cable Television
System, dated September 8, 1975, between Angola-by-the-Bay Property
Owners Association Inc. and CATV Sussex Limited Partnership, as
assigned to American Cable TV Investors 5, Ltd.
Schedule 1.2 - Page 4
<PAGE> 91
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 1.3
EQUIPMENT
<TABLE>
<CAPTION>
DISTRIBUTION EQUIPMENT:
- --------------------------------------------------------------------------------
<S> <C>
YEAR UPGRADED/REBUILT: 1990
- --------------------------------------------------------------------------------
HOMES PASSED AT 12/31/95: 34,425
- --------------------------------------------------------------------------------
MILES OF PLANT:
Aerial 420.3
Underground 325.0
-----
Total 745.3
- --------------------------------------------------------------------------------
DENSITY: 46
- --------------------------------------------------------------------------------
CHANNELS:
CHANNEL CAPACITY: 36
IN USE:
Ocean Pines:
Basic: 12
Expanded Tier: 16
Premium: 6
PPV/Other: 1
--
Total: 35
All Others:
Basic: 28
Expanded Tier: N/A
Premium: 6
PPV/Other: 1
Total: 35/36 channels
- --------------------------------------------------------------------------------
BANDWIDTH: 300 MHz
- --------------------------------------------------------------------------------
CABLE:
Fiber: 64.7 miles
Trunk: .750, .500
Feeder: .500, .412
Drops: RG-6, RG-59, RG-11
- --------------------------------------------------------------------------------
PLANT ELECTRONICS:
Amplifiers Magnavox, Jerrold
Longest Amplifier Cascade 46
- --------------------------------------------------------------------------------
TAPS: Magnavox, Regal, Eagle
- --------------------------------------------------------------------------------
PREMIUM SECURITY:
Addressable PPV, Disney
Positive/Negative Traps Positive traps - HBO, Cinemax, Starz, Encore,
Showtime. Negative traps in Ocean Pines for
tier.
- --------------------------------------------------------------------------------
</TABLE>
Schedule 1.3 - Page 1
<PAGE> 92
<TABLE>
<CAPTION>
DISTRIBUTION EQUIPMENT:
- --------------------------------------------------------------------------------
<S> <C>
CONVERTERS:
Addressable 4,420 - Jerrold DPV 7212/V5B
Standard 2,500
- --------------------------------------------------------------------------------
</TABLE>
NOTE: "EQUIPMENT" SPECIFICALLY EXCLUDES THE EQUIPMENT LISTED IN ITEM 2 OF
SCHEDULE 4.2.
Schedule 1.3 - Page 2
<PAGE> 93
HEADEND EQUIPMENT:
<TABLE>
<CAPTION>
MILLSBORO, DELAWARE
OMAR, DELAWARE HEADEND MICROWAVE RECEIVE SITE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEADEND LOCATION: 3/4 mile ENE of Omar on Route 1 mile west of Rte. 24 on
353, Omar, Delaware Rte. 299, Angola, Delaware
- ---------------------------------------------------------------------------------------------------------------------
PROPERTY OWNED/LEASED: Leased Leased
- ---------------------------------------------------------------------------------------------------------------------
TOWER TYPE/SIZE: 180' Galvanized 350' Galvanized
- ---------------------------------------------------------------------------------------------------------------------
EARTH STATIONS: 3 - 4 meter SA N/A
2 - 4 meter Unknown Mfg.
- ---------------------------------------------------------------------------------------------------------------------
RECEIVERS: 1 - Microwave Receiver 1 - Channelmaster
23 - Standard Satellite Microwave Receiver
2 - Jerrold DSR 1500 1 - Hughes Microwave
Receiver
- ---------------------------------------------------------------------------------------------------------------------
MODULATORS: 6 - SA 6350 N/A
24 - TVM 550S STANDARD
1 - Jerrold C6M
- ---------------------------------------------------------------------------------------------------------------------
PROCESSORS: 5 - SA 6150 N/A
- ---------------------------------------------------------------------------------------------------------------------
STEREO ENCODERS: N/A N/A
- ---------------------------------------------------------------------------------------------------------------------
SCRAMBLER/ENCODERS: 5 - Eagle EE2001 N/A
2 - Jerrold MVPII
- ---------------------------------------------------------------------------------------------------------------------
DESCRAMBLERS: 22 - IRDII N/A
2 - DSR 1500
- ---------------------------------------------------------------------------------------------------------------------
BACKUP POWER SUPPLY: Generac - 16kW 5 HP B&S gas generator
25 KW-GENSET: 5kW
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Schedule 1.3 - Page 3
<PAGE> 94
<TABLE>
<CAPTION>
HEADEND EQUIPMENT:
WILLARDS, MARYLAND MICROWAVE OCEAN PINES, MARYLAND
RECEIVE SITE (1) MICROWAVE RECEIVE SITE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
HEADEND LOCATION: Willards Ocean Pines
- -----------------------------------------------------------------------------------------------------------------------
PROPERTY OWNED/LEASED: Leased Leased
- -----------------------------------------------------------------------------------------------------------------------
TOWER TYPE/SIZE: 170' Water Tower 133' Water Tower
- -----------------------------------------------------------------------------------------------------------------------
EARTH STATIONS: N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
RECEIVERS: 1 - Channelmaster Microwave 1 - Channelmaster
Receiver Microwave Receiver
- -----------------------------------------------------------------------------------------------------------------------
MODULATORS: N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
PROCESSORS: N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
STEREO ENCODERS: N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
SCRAMBLER/ENCODERS: N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
DESCRAMBLERS: N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
BACKUP POWER SUPPLY: N/A N/A
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
- -------------------
(1) Serves all subscribers in Maryland except those in Ocean Pines.
Schedule 1.3 - Page 4
<PAGE> 95
VEHICLE LIST:
YEAR MAKE/MODEL OWNED/LEASED
1992 GMC Jimmy Owned
1993 GMC C-1500 Owned
1993 GMC C-1500 Owned
1993 GMC C-3500 Owned
1993 GMC C-3500 Owned
1993 GMC Jimmy Owned
1993 GMC C-1500 Owned
1993 GMC C-1500 Owned
1993 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-1500 Owned
1995 GMC C-3500 Owned
1995 GMC C-3500 Owned
1995 Chevrolet Van Owned
1995 Chevrolet Van Owned
1996 GMC C-3500 Owned
1996 GMC C-3500 Owned
Total Number of Vehicles 26
Schedule 1.3 - Page 5
<PAGE> 96
OFFICE INVENTORY AS OF NOVEMBER 26, 1996:
ITEM QUANTITY
- ---- --------
Binder Racks 2
3-Shelf Bookcase 4
4-Shelf Bookcase 2
Cash Registers 2
Computer carts 2
Computer work stations 4
Copier (Panasonic)
Computers:
PC's 7
MAC's 2
Laser jet printers 3
Apple printers 2
Epson MDL Printer 1
Cabledata CRTs 16
Cabledata CD Modem 1
Cabledata Printer 2
Motorola Codex Modem 1
Penril VCX 100 1
Dell CRT 1
Credenza 3
Drafting Table 1
Desks 32
Desk Organizers 26
Fan (floor) 1
Fax machines 2
File cabinets:
2-drawer lateral 1
4-drawer lateral 4
2-drawer 6
4-drawer 9
6-drawer map 2
base for map files 1
3-drawer cabinet 1
5-drawer 1
6-drawer cabinet 1
small wooden cabinet 1
2-door floor cabinet (tall) 6
Microfilm machine 1
Microwave 1
Plastic binder machine 1
Refrigerator 1
Radio (2-way) 1
Safe 2
Schedule 1.3 - Page 6
<PAGE> 97
Sofa 1
Tape recorder 1
Tables:
2'x4' folding 1
5'x9' folding 1
2'x6' folding 1
30x72' 1
Large 2
Small 2
Conference 1
Coffee table (glass) 1
Telephones:
Rolm system 1
PC for phone system 1
Printer for phone system 1
Phones 28
Televisions 19
Trimline phone 1
Typewriters 2
Typewriter tables 4
VCRs 2
VCR (3/4 tape player) 1
Schedule 1.3 - Page 7
<PAGE> 98
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 1.4
FRANCHISE AREAS
DELAWARE
Town of Bethany Beach
Town of Dagsboro
Delaware Public Service Comm. (a/k/a Unincorporated Sussex County)
Town of Frankford
Town of Millsboro
Town of Millville
Town of Ocean View
Town of Selbyville
Town of South Bethany
MARYLAND
Town of Willards
Wicomico County
Town of Pittsville
Worcester County*
- ----------------
* Worcester County does not issue franchise agreements.
Schedule 1.4 -- Page 1
<PAGE> 99
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 1.5
GOVERNMENTAL PERMITS
FRANCHISE AUTHORITIES:
1. Town of Bethany Beach cable television franchise.
2. Town of Dagsboro cable television franchise ordinance.
3. Delaware Public Service Commission proposed cable TV franchise
consolidation.
4. Town of Frankford, Delaware cable television franchise.
5. Town of Millsboro cable television franchise.
6. Town of Millville cable television franchise.
7. Town of Ocean View cable television franchise.
8. Town of Selbyville cable television franchise.
9. Town of South Bethany cable television franchise.
10. Town of Willards cable television franchise.
11. Wicomico County, Maryland cable television franchise.
12. Town of Pittsville cable television franchise.
FCC LICENSES AND REGISTRATIONS:
TYPE CALL SIGN CITY, STATE
- ---- --------- -----------
CARS WBB814 Omar, DE
CARS WAN672 Omar (Angola), DE
ES* E7275 Omar, DE
IB* WPAR888 Omar (Oak Orchard), DE
- ---------------
* Consent required to transfer.
Schedule 1.5
<PAGE> 100
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 1.6
PERMITTED ENCUMBRANCES
None.
Schedule 1.6
<PAGE> 101
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 1.7
REAL PROPERTY
LEASED PROPERTY:
- --------------------------------------------------------------------------------
LESSOR USE ADDRESS
- --------------------------------------------------------------------------------
George & Barbara Hudson Omar Headend Site County Road 353,
Omar, Delaware
- --------------------------------------------------------------------------------
Elva Johnson Sussex Microwave County Road 299,
Receive Site Northeast of
Millsboro, Delaware
- --------------------------------------------------------------------------------
Town of Willards, Maryland Willards Microwave Main Street
Receive Site Willards, Maryland
- --------------------------------------------------------------------------------
Worcester County Sanitation District Ocean Pines Section 6
Microwave Receive Sandyhook Road
Site Ocean Pines, Berlin,
Maryland
- --------------------------------------------------------------------------------
Parker Enterprises, Inc. Dagsboro, Delaware Route 133
Office Country Village
Square
Dagsboro, Delaware
- --------------------------------------------------------------------------------
D&L Enterprises, Inc. Willards, Maryland Dock Street
Office Willards, Maryland
- --------------------------------------------------------------------------------
Simmons Communications Company, L.P.* Tower Space Lease
- --------------------------------------------------------------------------------
Caldabaugh Communications, Inc.* Tower Space Lease
- --------------------------------------------------------------------------------
OWNED PROPERTY:
None
- ----------
* Tower Space Leases appear on this Schedule only to the extent that they
confer rights in real property to the Seller.
Schedule 1.7
<PAGE> 102
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 1.8
SELLER CONTRACTS
1. Cable Television Bulk Billing Agreement, dated December 13, 1993,
between American Cable TV Investors 5, Ltd. and Carl M. Freeman
Associates.
2. Bulk Account Agreement, dated May 8, 1972, between Sea Colony Inc. and
CATV General Corporation, as assigned to American Cable TV Investors 5,
Ltd. by notice.*
3. Agreement for the Construction and Operation of a Cable Television
System, dated February 1, 1978, between Triad CATV, Inc. and Ocean
Pines Association, as assigned to American Cable TV Investors 5, Ltd.
by Simmons Communications Company, L.P.
4. Agreement for Joint Use of Electric Utility Poles, dated October 1,
1984, between Simmons Communications Company, L.P. and Delaware
Electric Cooperative, Inc., and Letter, dated June 29, 1992, from
Delaware Electric Cooperative, Inc. to American Cable TV Investors 5,
Ltd. and Simmons Communications Company, L.P.
5. Agreement for the Use of Poles, dated July 1, 1992, between American
Cable TV Investors 5, Ltd. and Choptank Electric Cooperative, Inc.
6. License Agreement for Pole Attachments, dated May 28, 1992, between The
Chesapeake and Potomac Telephone Company of Maryland and American Cable
TV Investors 5, Ltd.
7. License Agreement for Cable Television Pole Attachments, dated April
20, 1993, between Delmarva Power and Light Company and American Cable
TV Investors 5, Ltd.
8. License Agreement for Cable Television Pole Attachments, dated October
29, 1992, between Delmarva Power and Light Company and American Cable
TV Investors 5, Ltd.
9. Cable TV Service Agreement, dated January 21, 1988, between Winding
Creek Village Property Owners' Association and Simmons Communications
Company, L.P., as assigned to American Cable TV Investors 5, Ltd.
- ----------
* The successor to Sea Colony Inc. has given notice of its intention to
terminate this agreement at the end of its term on May 8, 1997.
Schedule 1.8 - Page 1
<PAGE> 103
10. Cable TV Service Agreement, dated January 21, 1988, between Indian
River Land Co. and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
11. Cable TV Service Agreement, dated January 21, 1988, between Steen
Associates and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
12. Cable TV Service Agreement, dated January 21, 1988, between Wilgus
Development Corp. and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
13. Cable TV Service Agreement, dated January 21, 1988, between Murray's
Enterprises Inc. and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
14. Cable TV Service Agreement, dated January 22, 1988, between Seabreak
Homeowners Assoc. and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
15. Cable TV Service Agreement, dated March 27, 1990, between Gulfstream
Development Corp. and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
16. Cable TV Service Agreement, dated December 3, 1990, between Jerry
Matyiro and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
17. Cable TV Service Agreement, dated February 20, 1991, between Cripple
Creek Properties, L.P. and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
18. Cable TV Service Agreement, dated January 24, 1989, between Isaacs and
Moore Farms Inc. and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
19. Cable TV Service Agreement, dated October 24, 1988, between Quality
Plus Contractors Inc. and Simmons Communications Company, L.P., as
assigned to American Cable TV Investors 5, Ltd.
Schedule 1.8 - Page 2
<PAGE> 104
20. Right of Way Agreement, dated December 28, 1987, between George E.
Powell and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
21. Cable TV Service Agreement, dated August 14, 1990, between J. Max
Trapp, III and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
22. Cable TV Wiring Agreement, dated December 10, 1989, between Mary Lou
Brittingham and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
23. Cable TV Wiring Agreement, dated December 7, 1989, between John J.
Frederick, Jr. and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
24. Cable TV Wiring Agreement, dated January 9, 1990, between Anthony and
Anna DiGiorgio and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
25. Cable TV Wiring Agreement, dated December 9, 1989, between William
Joyce and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
26. Cable TV Wiring Agreement, dated December 7, 1989, between James Gordon
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
27. Cable TV Wiring Agreement, dated December 27, 1989, between Lucette and
Anita KuBo and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
28. Cable TV Wiring Agreement, dated December 13, 1989, between Gina and
Jerome Adams and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
29. Cable TV Wiring Agreement, dated January 10, 1990, between Auley Long
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
Schedule 1.8 - Page 3
<PAGE> 105
30. Cable TV Wiring Agreement, dated May 9, 1990, between Auley and Eva
Long and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
31. Cable TV Wiring Agreement, dated December 9, 1989, between Wallace
Owens and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
32. Cable TV Wiring Agreement, dated December 9, 1989, between Jack
Kerrigan and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
33. Cable TV Wiring Agreement, dated December 9, 1989, between Christie and
John Selway and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
34. Cable TV Wiring Agreement, dated December 7, 1989, between Frank
O'Brien and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
35. Cable TV Wiring Agreement, dated December 6, 1989, between William
Waterman and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
36. Cable TV Wiring Agreement, dated December 29, 1989, between Barbara
Pitt and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
37. Cable TV Wiring Agreement, dated December 11, 1989, between Gary
Timmons and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
38. Cable TV Wiring Agreement, dated January 8, 1990, between Hermann and
Beverly Ascherl and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
39. Cable TV Wiring Agreement, dated December 7, 1989, between David Bryant
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
Schedule 1.8 - Page 4
<PAGE> 106
40. Cable TV Wiring Agreement, dated December 9, 1989, between Tammy Cash
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
41. Cable TV Wiring Agreement, dated December 7, 1989, between Ethyl Myers
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
42. Cable TV Wiring Agreement, dated December 22, 1989, between Carl Deming
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
43. Cable TV Wiring Agreement, dated December 9, 1989, between Kevin and
Vicki Fitzgerald and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
44. Cable TV Wiring Agreement, dated December 9, 1989, between Roger and
Pauline McCabe and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
45. Cable TV Wiring Agreement, dated December 7, 1989, between Ruxton and
Deborah Novicki and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
46. Cable TV Wiring Agreement, dated January 6, 1990, between George Harp
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
47. Cable TV Wiring Agreement, dated December 7, 1989, between Deborah
Urban and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
48. Cable TV Wiring Agreement, dated December 7, 1989, between James and
Mary Gallagher and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
49. Cable TV Wiring Agreement, dated December 7, 1989, between Bill and
Bonnie Greer and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
50. Cable TV Wiring Agreement, dated December 7, 1989, between Floyd
Allmond and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
Schedule 1.8 - Page 5
<PAGE> 107
51. Cable TV Wiring Agreement, dated December 9, 1989, between Mike and
Catherine Moravec and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
52. Cable TV Wiring Agreement, dated December 7, 1989, between Armand
Boulanger and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
53. Cable TV Wiring Agreement, dated December 9, 1989, between Bradley
Hopkins and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
54. Cable TV Wiring Agreement, dated December 26, 1989, between Clarence
Rourk and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
55. Cable TV Wiring Agreement, dated December 15, 1989, between Lee
Williams and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
56. Cable TV Wiring Agreement, dated December 7, 1989, between David
Helweick and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
57. Cable TV Wiring Agreement, dated December 10, 1989, between George
Diehl and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
58. Cable TV Wiring Agreement, dated December 10, 1989, between Donald
Wright and Simmons Communications Company, L.P., as assigned to
American Cable TV Investors 5, Ltd.
59. Cable TV Wiring Agreement, dated December 7, 1989, between Kenneth
Davis and Simmons Communications Company, L.P., as assigned to American
Cable TV Investors 5, Ltd.
60. Cable Television Service Agreement, dated February 22, 1989, between
Simmons Communications Company, L.P. and Saint Martins Group, Inc., as
assigned to American Cable TV Investors 5, Ltd.
61. Cable TV Service Agreement, dated June 10, 1988, between Solgar Realty
and Simmons Communications Company, L.P., as assigned to American Cable
TV Investors 5, Ltd.
Schedule 1.8 - Page 6
<PAGE> 108
62. Cable Television Service Agreement, dated November 1, 1989, between
Simmons Communications and James W. Latchum, as assigned to American
Cable TV Investors 5, Ltd.
63. Lease Agreement, dated May 26, 1981, between George and Barbara Hudson
and Lower Delaware CATV, Inc., as assigned to American Cable TV
Investors 5, Ltd.
64. Lease Agreement, dated September 29, 1988, between Elva Johnson and
Simmons Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
65. Lease Agreement, dated April 15, 1991, between Simmons Communications
Company, L.P. and the Town of Willards, as assigned to American Cable
TV Investors 5, Ltd.
66. Tower and Property Lease, dated August 19, 1994, between Caldabaugh
Communications, Inc. and American Cable TV Investors 5, Ltd.
67. Lease Agreement, dated July 1, 1989, between Simmons Communications
Company, L.P. and Worcester County Sanitation District, as assigned to
American Cable TV Investors 5, Ltd.
68. Lease Agreement, dated December 22, 1995 as amended July 1, 1996,
between Parker Enterprises and American Cable TV Investors 5, Ltd.
69. Lease Agreement, dated July 1, 1991, between Melody Cooper and Simmons
Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
70. Tower Space and Ground Lease Agreement, dated June 30, 1992, between
Simmons Communications Company, L.P. and American Cable TV Investors 5,
Ltd.
71. Lease Agreement between First Television Corporation and American Cable
Television.
72. Lease Agreement, dated June 30, 1992, between Marcus Cable and American
Cable Television.
73. Letter Agreement Regarding Advertising Sales, dated February 1, 1994,
between TCI Cablevision of Eastern Shore and American Cable Television.
74. Revolving Credit Agreement, dated as of June 30, 1992, among American
Cable TV Investors 5, Ltd, Various Financial Institutions, Bank of
America, Illinois f/k/a Continental Bank, N.A. and NationsBank of
Texas, N.A. (including all financing and security documents relating
thereto).
Schedule 1.8 - Page 7
<PAGE> 109
75. Management Agreement, dated May 14, 1987, between TCI Cablevision
Associates, Inc. f/k/a Daniels & Associates, Inc. and American Cable TV
Investors 5, Ltd.
76. Retransmission Consent Agreement, dated August 30, 1993, between
Paramount Stations Group of Philadelphia Incorporated and TCI
Management Corporation.
77. Retransmission Consent Agreement, dated August 5, 1993, between
WMGM-TV40 and American Cable TV of Lower Delaware.
78. Retransmission Consent Agreement, dated September 28, 1993, between
WMDT-TV and TCI Cable Management Corporation.
79. Retransmission Consent Agreement, dated January 1, 1996, between WBOC,
Inc. and TCI Southeast, Inc.
80. Letter Agreement, dated February 1, 1994, between TCI Cablevision of
Eastern Shore ("Eastern") and American Cable Television of Lower
Delaware, regarding, among other things, the allocation of the
responsibility for all capital costs relating to the ad insertion
equipment to Eastern, the performance by Eastern of routine tape deck
maintenance and the sharing of ad sales revenue.*
81. Agreement to construct, operate and maintain a Cable Television System,
dated as of November 20, 1973, between CATV Sussex Company and
Pot-Nets, Inc., as assigned to American Cable TV Investors 5, Ltd.
82. Pole Attachment Agreement, dated January 17, 1969, between The Diamond
State Telephone Company n/k/a Bell Atlantic and Lower Delaware CATV,
Inc., as assigned to Simmons Communications Company, L.P., as
subsequently assigned to American Cable TV Investors 5, Ltd.
83. Pole Attachment Agreement, dated June 10, 1969, between The Diamond
State Telephone Company n/k/a Bell Atlantic and Lower Delaware CATV,
Inc., as assigned to Simmons Communications Company, L.P., as
subsequently assigned to American Cable TV Investors 5, Ltd.
84. Special Indemnification Agreement, dated July 1, 1992, between Simmons
Communications Company, L.P. and American Cable TV Investors 5, Ltd.
85. Agreement to Construct, Maintain and Operate a Cable Television System,
dated September 8, 1975, between Angola-by-the-Bay Property Owners
Association Inc. and CATV Sussex Limited Partnership, as assigned to
American Cable TV Investors 5, Ltd.
Schedule 1.8 - Page 8
<PAGE> 110
86. Cable Television Service Agreement for Multiple Dwelling Unit, dated as
of December 11, 1989, between White Horse Park Community Owners
Association, Inc. and Simmons Communications Company, L.P., as assigned
to American Cable TV Investors 5, Ltd.
- ------------------
* This agreement will terminate effective upon the Closing subject to
Sections 7.21 and 8.10 of the Agreement.
Schedule 1.8 - Page 9
<PAGE> 111
CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 1.9
SYSTEM
American Cable TV of Lower Delaware/Maryland comprising the
System included in the Franchise Areas set forth in Schedule 1.4.
Schedule 1.9
<PAGE> 112
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 4.2
EXCLUDED ASSETS
1. Revolving Credit Agreement dated as of June 30, 1992, among American
Cable TV Investors 5, Ltd., Various Financial Institutions and Bank of America,
Illinois f/k/a Continental Bank, N.A. and NationsBank of Texas, N.A. (including
all financing and security documents relating thereto).
2. Insertion Equipment:
Quantity: Item:
--------- -----
4 Texscan Racks
24 Sony 7020 Decks with BKU 702 Cards installed
4 Spare decks same as above
6 Texscan ComSerters 294D
3 Wegner Chassis
14 Wegner Cards for the following Networks:
CNN, ESPN, USA, CNBC, DISC, HLN, MTV,
TNN, TNT, HTS, NICK AND FAMILY
1 Switcher
1 Monitor
1 Modem
Weather Channel
Equipment:
Quantity: Item:
--------- -----
1 Starlit
1 Audio Limiter
1 Sony 7020 Deck with BKU 702 Cards installed
Photo Ad Channel
Equipment:
Schedule 4.2 -- Page 1
<PAGE> 113
Quantity: Item:
--------- -----
1 DFI Multi Image file server with keyboard and monitor
1 Routing Switcher (10x1)
1 Surge protected power strip
1 Rack with 4 sets of slide rails
1 US Robotics Modem
1 Realistic Radio
3 Sony 7020 Decks with BKU 701 Cards installed
1 Tech Electronic PVC 5 controller unit
3. Special Indemnification Agreement, dated July 1, 1992, between
Simmons Communications Company, L.P. and American Cable TV Investors 5, Ltd.
Schedule 4.2 -- Page 2
<PAGE> 114
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.3(B)
VIOLATIONS OF PARTNERSHIP AGREEMENT AND LEGAL REQUIREMENTS
If consents to transfer the franchises and FCC licenses listed
on Schedule 1.5 are not obtained or notice is not given as required by the terms
of the underlying documents, Seller may be deemed to have violated a Legal
Requirement.
If consents to the assignment of the following agreements are
not obtained or notices are not given as required by the terms of the
agreements, such agreements may be terminated:
1. Bulk Account Agreement, dated May 8, 1972, between Sea Colony Inc. and
CATV General Corporation, as assigned to American Cable TV Investors 5,
Ltd. by notice.*
2. Agreement for the Construction and Operation of a Cable Television
System, dated February 1, 1978, between Triad CATV, Inc. and Ocean
Pines Association, as assigned to American Cable TV Investors 5, Ltd.
by Simmons Communications Company, L.P.
3. Agreement for Joint Use of Electric Utility Poles, dated October 1,
1984, between Simmons Communications Company, L.P. and Delaware
Electric Cooperative, Inc., and Letter, dated June 29, 1992, from
Delaware Electric Cooperative to Simmons Communications Company, L.P.
and American Cable TV Investors 5, Ltd.
4. License Agreement for Pole Attachments, dated May 28, 1992, between The
Chesapeake and Potomac Telephone Company of Maryland and American Cable
TV Investors 5, Ltd.
5. License Agreement for Cable Television Pole Attachments, dated April
20, 1993, between Delmarva Power and Light Company and American Cable
TV Investors 5, Ltd.
- ---------
* The successor to Sea Colony Inc. has given notice of its intention to
terminate this agreement at the end of its term on May 8, 1997.
Schedule 5.3(b) - Page 1
<PAGE> 115
6. License Agreement for Cable Television Pole Attachments, dated October
29, 1992, between Delmarva Power and Light Company and American Cable
TV Investors 5, Ltd.
7. Lease Agreement, dated May 26, 1981, between George and Barbara Hudson
and Lower Delaware CATV, Inc., as assigned to American Cable TV
Investors 5, Ltd. by Simmons Communications Company, L.P.
8. Tower and Property Lease, dated August 19, 1994, between Caldabaugh
Communications, Inc. and American Cable TV Investors 5, Ltd.
9. Lease Agreement, dated July 1, 1989, between Simmons Communications
Company, L.P. and Worcester County Sanitation District, as assigned to
American Cable TV Investors 5, Ltd.
10. Lease Agreement, dated December 22, 1995 as amended July 1, 1996,
between John Parker d/b/a Parker Enterprises and American Cable TV
Investors 5, Ltd.
11. Lease Agreement, dated July 1, 1991, between Melody Cooper and Simmons
Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
12. Tower Space and Ground Lease Agreement, dated June 30, 1992, between
Simmons Communications Company, L.P. and American Cable TV Investors 5,
Ltd.
13. Management Agreement, dated May 14, 1987, between TCI Cablevision
Associates, Inc. f/k/a Daniels & Associates and American Cable TV
Investors 5, Ltd.
14. Retransmission Consent Agreement, dated January 1, 1996, between WBOC,
Inc. and TCI Southeast, Inc.
15. The agreement referred to in item 3 of Schedule 4.2 will terminate
effective upon the Closing.
16. Agreement granting a cable television franchise, dated as of November
20, 1973, by and between CATV Sussex Company and Pot-Nets, Inc., as
assigned to American Cable TV Investors 5, Ltd.
- ---------
Schedule 5.3(b) - Page 2
<PAGE> 116
17. Revolving Credit Agreement, dated as of June 30, 1992, among American
Cable TV Investors 5, Ltd., various financial institutions, Bank of
America, Illinois f/k/a Continental Bank, N.A. and NationsBank of
Texas, N.A., and all financing and security documents relating
thereto.*
18. Lease Agreement, dated September 29, 1988, between Elva Johnson and
Simmons Communications Company, L.P., as assigned to American Cable TV
Investors 5, Ltd.
19. Pole Attachment Agreement, dated January 17, 1969, between The Diamond
State Telephone Company n/k/a Bell Atlantic and Lower Delaware CATV,
Inc., as assigned to Simmons Communications Company, L.P., as
subsequently assigned to American Cable TV Investors 5, Ltd.
20. Pole Attachment Agreement, dated June 10, 1969, between The Diamond
State Telephone Company n/k/a Bell Atlantic and Lower Delaware CATV,
Inc., as assigned to Simmons Communications Company, L.P., as
subsequently assigned to American Cable TV Investors 5, Ltd.
21. Agreement to Construct, Maintain and Operate a Cable Television System,
dated September 8, 1975, between Angola-by-the-Bay Property Owners
Association, Inc. and CATV Sussex Limited Partnership, as assigned to
American Cable TV Investors 5, Ltd.
- ---------
* The proceeds from the sale of the System will be used to repay the
amount of the loan outstanding as of the Closing Date.
Schedule 5.3(b) - Page 3
<PAGE> 117
CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.4
COMPLETE SYSTEMS
See item 2 of Schedule 4.2.
Schedule 5.4
<PAGE> 118
CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.5
ENCUMBRANCES ON SELLER'S TITLE
Assets of American Cable TV Investors 5, Ltd. have been pledged as
collateral under the Revolving Credit Agreement dated as of June 30, 1992
between American Cable TV Investors 5, Ltd., Various Financial Institutions and
Bank of America Illinois f/k/a Continental Bank, N.A. and NationsBank of Texas,
N.A., including all financing and security documents relating thereto. All
encumbrances related to the foregoing shall be satisfied and removed at or prior
to Closing by Seller and the Lenders thereto.
Schedule 5.5
<PAGE> 119
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.7
ENVIRONMENTAL
None.
Schedule 5.7
<PAGE> 120
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.8
COMPLIANCE WITH LAW
None.
Schedule 5.8
<PAGE> 121
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.9
SELLER CONTRACTS
Seller has received written notice from Carl M. Freeman Associates, Inc.,
as successor to Sea Colony, Inc., of its intention to terminate the Bulk Account
Agreement, dated May 8, 1972, between Sea Colony, Inc. and CATV General
Corporation, as assigned to American Cable TV Investors 5, Ltd., at the end of
its term on May 8, 1997.
Schedule 5.9
<PAGE> 122
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.12
LEGAL PROCEEDINGS
None.
Schedule 5.12
<PAGE> 123
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.13(C)
EMPLOYMENT MATTERS
None.
Schedule 5.13(c)
<PAGE> 124
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.13(d)
EMPLOYEES
<TABLE>
<CAPTION>
NAME POSITION DATE OF HIRE CURRENT SALARY
<S> <C> <C> <C>
Tim Baker Technical Supervisor 07/01/84 $ 31,400.00 YR
Kevin Brady Locator 05/18/95 $ 7.80 HR
Rose Brittingham CSSR 05/15/95 $ 7.00 HR
Debbie Brown CSTR 11/16/89 $ 8.58 HR
Mary Carey CSSR (P/T) 07/29/86 $ 7.00 HR
William Carmine System Technician 09/15/73 $ 16.81 HR
Nancy Chorman Special Prod. Manager 04/01/82 $ 26,800.00 YR
Dannette Clark CSTR 01/03/89 $ 8.58 HR
William Clark Installer 11/14/94 $ 7.68 HR
Robert Cykosky Installer 12/11/94 $ 7.14 HR
Bill Ennis Technical Supervisor 09/05/78 $ 31,500.00 YR
Christopher Evick Technician 01/18/93 $ 9.53 HR
Irene Gianesses Administrative Assistant 10/10/94 $ 9.62 HR
Carmen Harmon CSSR 12/28/94 $ 7.80 HR
Joy Hastings Office Manager 12/04/95 $ 27,500.00 YR
Robert Hochstedler Service Technician 03/25/96 $ 10.20 HR
Mike Kelly Service Technician 06/10/96 $ 10.20 HR
Randall King Service Technician 10/15/90 $ 11.23 HR
Bradley Lewis Installer 06/29/96 $ 7.00 HR
Joe Longfellow Construction Supervisor 03/01/79 $ 36,262.00 YR
June Loveland CSSR 06/25/90 $ 8.24 HR
Dane Martin Headend Technician 04/15/78 $ 15.68 HR
Michael Mellon Service Technician 06/03/91 $ 10.51 HR
Steve Parker Installer 08/12/96 $ 7.50 HR
Barbara Perez CSSR 08/06/90 $ 8.42 HR
Nate Purnell Construction Laborer 04/13/93 $ 8.32 HR
Bruce Redden Service Technician 04/01/79 $ 14.44 HR
John Renshaw Installer 08/29/94 $ 8.30 HR
David Rickards System Technician 03/03/80 $ 16.15 HR
Edith Rickards CSTR 03/24/86 $ 9.72 HR
Kim Roberts CSSR 07/17/91 $ 8.32 HR
Alan Scott Advanced Installer 06/03/83 $ 11.58 HR
Jerry Shockley Service Technician 03/05/79 $ 14.28 HR
</TABLE>
Schedule 5.13(d) -- Page 1
<PAGE> 125
<TABLE>
<CAPTION>
NAME POSITION DATE OF HIRE CURRENT SALARY
<S> <C> <C> <C>
Valerie Stevens Advanced CSSR 03/16/87 $ 9.88 HR
Trina Toomey CSSR 05/15/95 $ 7.58 HR
Roberta Truitt MIS Coordinator 03/01/78 $ 12.50 HR
John Wallo Warehouse 02/21/89 $ 8.32 HR
Mark Wheatley Installer 10/02/95 $ 7.14 HR
Joe Wilkerson Service Technician 01/24/90 $ 11.30 HR
Norma Williams CSSR 05/15/95 $ 7.47 HR
</TABLE>
Schedule 5.13(d) -- Page 2
<PAGE> 126
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.13(e)
EMPLOYER PLANS
1995 TCI Benefits Plan.
CIGNA Traditional Plan.
Schedule 5.13(e)
<PAGE> 127
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.14
SYSTEM INFORMATION
AS OF JUNE 30, 1996
<TABLE>
<S> <C>
Number of Equivalent Basic Subscribers: 28,849
Number of Subscribers of Expanded
Basic Services: 4,646
Bandwidth: 300 MHz
Homes Passed by the System: 34,728
Number of Miles of Plant:
Aerial: 424.7
Underground: 330.5
</TABLE>
Schedule 5.14
<PAGE> 128
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 5.16
TAXES
All Tax Returns required to be filed for the year ended December 31, 1996 and
Taxes due or payable on such Tax Returns are anticipated to be filed and paid by
Seller no later than June 30, 1997.
Schedule 5.16
<PAGE> 129
AMERICAN CABLE TV INVESTORS 5, LTD.
AMERICAN CABLE TV OF LOWER DELAWARE/MARYLAND
SCHEDULE 6.3(a)
CONSENTS TO BE OBTAINED OR WAIVED BY CLOSING DATE
None.
Schedule 6.3(a)
<PAGE> 130
The Chase Manhattan Bank
270 Park Avenue
New York, New York 10017
Attn: Barbara L. Strohmeier, Vice President, 20th floor
William Ponce, Assistant Trust Officer, 20th floor
Re: Escrow Agreement
Ladies and Gentlemen:
This Escrow Agreement is hereby accepted as of December 24,
1996, by American Cable TV Investors 5, Ltd. ("Seller") and Mediacom LLC
("Buyer") who have entered into an Asset Purchase Agreement, dated as of
December 6, 1996, to sell and purchase certain cable television assets (the
"Asset Purchase Agreement"). Capitalized terms used but not otherwise defined in
this Escrow Agreement shall have the meanings set forth in the Asset Purchase
Agreement.
It is agreed as follows:
1. Deposit and Investments. Buyer has, pursuant to Section 3.1
of the Asset Purchase Agreement, deposited $1,077,500 (the "Deposit") in an
account at The Chase Manhattan Bank, as escrow agent (the "Escrow Agent"). The
Deposit may be invested in Investment Securities (as defined below). The Deposit
shall be held in escrow by Escrow Agent pursuant to this Escrow Agreement. The
Escrow Agent shall continue to invest the Deposit in Investment Securities in
accordance with the joint written instructions of Seller and Buyer or, if no
instructions are given, in interest bearing accounts at The Chase Manhattan
Bank. The term "Investment Securities" means (a) interest bearing accounts in
The Chase Manhattan Bank or (b) (i) obligations of the United States of America,
(ii) United States government securities of agencies of the United States
government which are guaranteed by the United States government or (iii)
securities of governmental agencies, if the same are covered by a bank
repurchase agreement.
2. Holdings of Deposit. The Escrow Agent shall hold and
disburse the Deposit pursuant to the terms of this Escrow Agreement and the
Asset Purchase Agreement.
3. Retention of Earnings, Etc. All interest, earnings, and
gains received by the Escrow Agent from the investment of the Deposit prior to
the Closing Date (the "Deposit Interest") shall be reinvested and held as part
of the Deposit and disbursed in accordance with the terms of this Escrow
Agreement. All interest, earnings and gains received by Escrow Agent from the
investment of the Deposit on or after the Closing Date (the "Post-Closing
Interest") shall be distributed in accordance with the terms of this Escrow
Agreement. In connection with the investment of the Deposit, Seller and Buyer
shall provide the Escrow Agent with their respective taxpayer identification
numbers.
<PAGE> 131
4. Disbursement Instructions.
(a) Anything in this Escrow Agreement to the contrary
notwithstanding, Escrow Agent is authorized and directed to deliver and disburse
the Deposit, or any part of the Deposit, and the Deposit Interest, or any part
of the Deposit Interest, as directed from time to time in joint written
instructions of Seller and Buyer.
(b) Seller and Buyer have agreed that the Deposit, the Deposit
Interest and the Post-Closing Interest, if any, will be disbursed in accordance
with the terms of this Escrow Agreement.
(c) Seller and Buyer have agreed that no less than two
Business Days prior to Closing Seller and Buyer shall instruct Escrow Agent to
disburse any Deposit Interest to Buyer or Buyer's designee on the Closing Date
in accordance with Buyer's written instructions to the Escrow Agent.
(d) Unless the Closing shall have theretofore taken place or
unless an unresolved claim has been asserted against the Deposit in accordance
with Section 5 or Section 6 and remains outstanding, Seller and Buyer have
agreed that on the date which is 10 Business Days after the termination of the
Asset Purchase Agreement Seller and Buyer shall instruct Escrow Agent in writing
to disburse the Deposit and any Deposit Interest to Buyer or Buyer's designee.
(e) Unless a claim against the Deposit, or any part of the
Deposit remains outstanding, Seller and Buyer have agreed that on the first
Business Day after the first anniversary of the Closing Date, Seller and Buyer
shall instruct Escrow Agent in writing to disburse the Deposit, or any part of
the Deposit which is not subject to a claim, together with any Post-Closing
Interest thereon to Seller or Seller's designee.
5. Claims Against the Deposit by Seller Prior to Closing. The
following provisions shall control with respect to claims made against the
Deposit by Seller prior to Closing:
(a) If Seller wishes to make a claim against the Deposit, or
any part of the Deposit, Seller will send a notice of such claim to Escrow Agent
and Buyer. Any such notice will state that Seller is making a claim under the
Asset Purchase Agreement. Any notice of a claim made shall specify the factual
basis of such claim in reasonable detail to the extent known by Seller.
(b) If Buyer disputes the right of Seller to obtain the
Deposit, or any part of the Deposit, Buyer, within ten Business Days after
receipt of the notice as provided in Paragraph 5(a), shall send a notice to
Escrow Agent and Seller stating that Buyer disputes the right of Seller to
obtain the Deposit, or any part of the Deposit, and will include in such notice
a description in reasonable detail of the basis for disputing such claim to the
extent known by Buyer. Escrow Agent shall continue to hold the Deposit (or the
part thereof which is subject to a dispute) until advised in writing by Buyer
and Seller that such dispute has been resolved, in which case Escrow
2
<PAGE> 132
Agent shall disburse the Deposit (or such part thereof) pursuant to such writing
together with any Deposit Interest earned thereon; provided that, if a suit or
action is commenced for collection of the Deposit (or any part thereof) and
Escrow Agent is so advised in writing, Escrow Agent shall, unless otherwise
advised in writing by Seller and Buyer, continue to hold the Deposit or the part
thereof which is the subject of such suit or action together with any Deposit
Interest earned thereon until final disposition of such suit or action. Upon the
final disposition of such suit or action, Escrow Agent shall disburse the
Deposit or part thereof which is subject to such suit or action together with
any Deposit Interest earned thereon in accordance with the determination of the
court in which such suit or action was pending.
(c) If Buyer fails to notify Escrow Agent within the time
period described in Paragraph 5(b) that it contests Seller's claim to the
Deposit (or any part thereof), Escrow Agent shall disburse the Deposit (or any
part thereof which is subject to a claim by Seller that Buyer fails to timely
contest) together with any Deposit Interest earned thereon to Seller.
6. Claims Against the Deposit by Buyer Prior to Closing. The
following provisions shall control with respect to claims made against the
Deposit by Buyer prior to Closing:
(a) If Buyer wishes to make a claim against the Deposit, or
any part thereof, Buyer will send a notice of such claim to Escrow Agent and
Seller. Any such notice will state that Buyer is making a claim under the Asset
Purchase Agreement. Any notice of a claim made shall specify the factual basis
of such claim in reasonable detail to the extent known by Buyer.
(b) If Seller disputes the right of Buyer to obtain the
Deposit, or any part of the Deposit, Seller, within ten Business Days after
receipt of the notice as provided in Paragraph 6(a), shall send a notice to
Escrow Agent and Buyer stating that Seller disputes the right of Buyer to obtain
the Deposit, or any part of the Deposit, and will include in such notice a
description in reasonable detail of the basis for disputing such claim to the
extent known by Seller. Escrow Agent shall continue to hold the Deposit (or the
part thereof which is subject to a dispute) until advised in writing by Seller
and Buyer that such dispute has been resolved, in which case Escrow Agent shall
disburse the Deposit (or such part thereof) pursuant to said writing together
with any Deposit Interest earned thereon; provided that, if a suit or action is
commenced for collection of the Deposit (or any part thereof) and Escrow Agent
is so advised in writing, Escrow Agent shall, unless otherwise advised in
writing by Seller and Buyer, continue to hold the Deposit or the part thereof
which is the subject of such suit or action together with any Deposit Interest
earned thereon until final disposition of such suit or action. Upon the final
disposition of such suit or action, Escrow Agent shall disburse the Deposit or
part thereof which is subject to such suit or action together with any Deposit
Interest earned thereon in accordance with the determination of the court in
which such suit or action was pending.
(c) If Seller fails to notify Escrow Agent within the period
described in Paragraph 6(b) that it contests Buyer's claim to the Deposit (or
any part thereof), Escrow Agent shall disburse the Deposit (or any part thereof
which is subject to a claim by Buyer that Seller fails to timely contest)
together with any Deposit Interest earned thereon to Buyer.
3
<PAGE> 133
7. Claims Against the Deposit by Buyer After the Closing. The
following provisions shall control with respect to claims made against the
Deposit by Buyer after the Closing:
(i) If Buyer wishes to make a claim against the Deposit, or
any part thereof, Buyer will send a notice of such claim to Escrow Agent and
Seller. Any such notice will state that Buyer is making a claim under Article
XII of the Asset Purchase Agreement. Any notice of a claim made shall specify
the factual basis of such claim in reasonable detail to the extent known by
Buyer.
(ii) If Seller disputes the right of Buyer to obtain the
Deposit, or any part of the Deposit, Seller, within ten Business Days after
receipt of the notice as provided in Paragraph 7(a), shall send a notice to
Escrow Agent and Buyer stating that Seller disputes the right of Buyer to obtain
the Deposit, or any part of the Deposit, and will include in such notice a
description in reasonable detail of the basis for disputing such claim. Escrow
Agent shall continue to hold the Deposit (or the part thereof which is subject
to a dispute) together with any Post-Closing Interest earned thereon until
advised in writing by Seller and Buyer that such dispute has been resolved, in
which case Escrow Agent shall disburse the Deposit (or such part thereof)
together with any Post-Closing Interest earned thereon pursuant to said writing;
provided that, if a suit or action is commenced for collection of the Deposit or
part thereof and Escrow Agent is so advised in writing, Escrow Agent shall,
unless otherwise advised in writing by Seller and Buyer, continue to hold the
Deposit or the part thereof which is the subject of such suit or action together
with any Post-Closing Interest earned thereon until final disposition of such
suit or action. Upon the final disposition of such suit or action, Escrow Agent
shall disburse the Deposit or part thereof which is subject to such suit or
action together with any Post-Closing Interest earned thereon in accordance with
the determination of the court in which such suit or action was pending.
(iii) If Seller fails to notify Escrow Agent within the period
described in Paragraph 7(b) that it contests Buyer's claim to the Deposit (or
any part thereof), Escrow Agent shall disburse the Deposit (or any part thereof
which is subject to a claim by Buyer that Seller fails to timely contest)
together with any Post-Closing Interest earned thereon to Buyer.
(iv) Notwithstanding the foregoing, the maximum amount that
Escrow Agent shall disburse to Buyer for all claims against the Deposit together
with any Post-Closing Interest earned thereon pursuant to this Section 7 in the
aggregate shall not exceed $1,077,500. Within five Business Days of disbursing
such amount, Escrow Agent shall disburse any additional amounts then held by it
to Seller.
8. Closing Adjustments Escrow. If any additional amount of
money is deposited with Escrow Agent pursuant to Section 3.4(a) of the Asset
Purchase Agreement (such amount together with any interest, earnings and gains
thereon, the "Closing Adjustments Escrow"), the Escrow Agent shall receive and
hold the Closing Adjustments Escrow in a separate escrow account pursuant to
this Escrow Agreement. The Escrow Agent shall invest the Closing Adjustments
Escrow in Investment Securities in accordance with the joint written
instructions of Seller and Buyer or, if no instructions are given, in interest
bearing accounts at The Chase
4
<PAGE> 134
Manhattan Bank. The Closing Adjustments Escrow shall be released from escrow, in
whole or in part, from time to time:
(a) upon the Escrow Agent's receipt of joint written
instructions of Seller and Buyer, in accordance with such instructions; or
(b) pursuant to a final and unappealable order of a court of
competent jurisdiction.
9. Termination. This Escrow Agreement shall terminate when
Escrow Agent has disbursed the entire amount of the Deposit and Closing
Adjustments Escrow, if any, together with any and all interest earned thereon.
10. Rights, Duties, and Liabilities of Escrow Agent.
(a) Escrow Agent shall have no duty to know or determine the
performance or non-performance of any provision of any agreement between the
parties to this Escrow Agreement, including, but not limited to, the Asset
Purchase Agreement, which shall not bind Escrow Agent in any manner. Escrow
Agent assumes no responsibility for the validity or sufficiency of any document
or paper or payment deposited or called for under this Escrow Agreement except
as may be expressly and specifically set forth in this Escrow Agreement, and the
duties and responsibilities of Escrow Agent under this Escrow Agreement are
limited to those expressly and specifically stated in this Escrow Agreement.
(b) Escrow Agent shall not be personally liable for any act it
may do or omit to do under this Escrow Agreement as such agent while acting in
good faith and in the exercise of its own best judgment, and any act done or
omitted by it pursuant to the written advice of its counsel shall be conclusive
evidence of such good faith. Escrow Agent shall have the right at any time to
consult with its counsel upon any question arising under this Escrow Agreement
and shall incur no liability for any delay reasonably required to obtain the
advice of counsel.
(c) Other than those notices or demands expressly provided in
this Escrow Agreement, Escrow Agent is expressly authorized to disregard any and
all notices or demands given by Seller or Buyer, or by any other person, firm,
or corporation, excepting only orders or process of court, and Escrow Agent is
expressly authorized to comply with and obey any and all final processes,
orders, judgments, or decrees of any court, and to the extent Escrow Agent obeys
or complies with any thereof of any court, it shall not be liable to any party
to this Escrow Agreement or to any other person, firm, or corporation by reason
of such compliance.
(d) In consideration of the acceptance of the Deposit and
Closing Adjustments Escrow, if any, to be held in escrow by Escrow Agent (as
evidenced by its signature below), Seller and Buyer agree, for themselves and
their successors and assigns, to pay Escrow Agent its charges, fees and expenses
as contemplated by this Escrow Agreement. As between Seller and Buyer, they
shall each be responsible for one-half of such charges, fees and expenses. The
escrow fees or charges shall be as written below the Escrow Agent's signature.
In the event
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Escrow Agent renders services not provided for in this Escrow Agreement, Escrow
Agent shall be entitled to receive from Seller and Buyer reasonable compensation
and reasonable costs, if any, for such extraordinary services, and such
compensation and costs shall be borne equally by Seller and Buyer.
(e) Escrow Agent acting in good faith shall be under no duty
or obligation to ascertain the identity, authority, or right of Seller or Buyer
(or their agents) to execute or deliver or purport to execute or deliver this
Escrow Agreement or any documents or papers or payments deposited or called for
or given under this Escrow Agreement.
(f) Escrow Agent shall not be liable for the outlawing of any
rights under any statute of limitations or by reason of laches in respect of
this Escrow Agreement or any documents or papers deposited with Escrow Agent.
(g) In the event of any dispute among the parties to this
Escrow Agreement as to the facts of default or as to the validity or meaning of
any provision of this Escrow Agreement, or any other fact or matter relating to
this Escrow Agreement or to the transactions between Seller and Buyer, Escrow
Agent is instructed that it shall be under no obligation to act, except in
accordance with this Escrow Agreement or under process or order of court or, if
there be no such process or order, until it has filed or caused to be filed an
appropriate action interpleading Seller and Buyer and delivering the Deposit (or
the portion of the Deposit in dispute) together with any Deposit Interest earned
thereon or Closing Adjustments Escrow (or the portion of the Closing Adjustments
Escrow in dispute), as applicable, to such court, and Escrow Agent shall sustain
no liability for its failure to act pending such process of court or order or
interpleader of action.
11. Modification of Escrow Agreement. The provisions of this
Escrow Agreement may be supplemented, altered, amended, modified, or revoked by
writing only, signed by Seller and Buyer and approved in writing by Escrow
Agent, and upon payment of all fees, costs and expenses of Escrow Agent incident
thereto.
12. Assignment of Escrow Agreement. No assignment, transfer,
conveyance, or hypothecation of any right, title, or interest in and to the
subject matter of this Escrow Agreement (other than an assignment by Buyer to an
affiliate of Buyer) shall be binding upon any party, including Escrow Agent,
unless all fees, costs, and expenses incident thereto shall have been paid and
then only upon the assent thereto by all parties in writing.
13. Notice. Any notice required or desired to be given to
Seller or Buyer shall be deemed to have been given only if it is given in the
manner set forth in Section 13.3 of the Asset Purchase Agreement. Notice to
Escrow Agent may be given in the manner set forth in Section 13.3 of the Asset
Purchase Agreement to Escrow Agent's address set forth above (Facsimile No.:
(212) 270-4823) or at such other address as Escrow Agent may direct by giving
notice to Seller and Buyer.
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14. Escrow Agreement Binding. The undertakings and agreements
contained in this Escrow Agreement shall bind and inure to the benefit of the
parties to this Escrow Agreement and their respective successors, and assigns.
15. Counterparts. This Escrow Agreement may be executed in one
or more counterparts, each of which will be deemed an original. Whenever
pursuant to this Escrow Agreement Seller and Buyer are to deliver a jointly
signed writing to Escrow Agent or jointly advise Escrow Agent in writing, such
writing may in each and all cases be signed jointly or in counterparts and such
counterparts shall be deemed to be one instrument.
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16. Governing Law. This Escrow Agreement shall be governed by
and continued in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that state (without regard to its conflict
of law principles).
Very truly yours,
SELLER:
AMERICAN CABLE TV INVESTORS 5, LTD.
By: IR-TCI Partners V, L.P., its general partner
By: TCI Ventures Five, Inc., its general partner
By: /s/ Marvin L. Jones
-----------------------------
Name: Marvin L. Jones
Title: President
BUYER:
MEDIACOM LLC
By: /s/ Rocco B. Commisso
------------------------------
Name: Rocco B. Commisso
Title: its Manager
ACCEPTED this ___ day of December, 1996
THE CHASE MANHATTAN BANK
By: /s/ G.A. Marzolla
----------------------------
Name: G.A. Marzolla
Title: Vice President
Fee: $2,000 Inception Fee
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