<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transaction period from to
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Commission File Number 0-21309
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CENCOM CABLE INCOME PARTNERS II, L.P.
-------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 43-1456575
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12444 Powerscourt Drive - Suite 100
St. Louis, Missouri 63131
- --------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
(Registrant's telephone number, including area code) (314) 965-0555
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
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CENCOM CABLE INCOME PARTNERS II, L.P.
FORM 10-Q - FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
<TABLE>
<CAPTION>
Page
----
Part I. Financial Information
<S> <C>
Item 1. Financial Statements
a. Balance Sheets - March 31, 1999 and December 31, 1998 3
b. Statements of Operations - Three Months Ended March 31, 1999
and 1998 4
c. Statement of Partners' Deficit - Three Months Ended March
31, 1999 5
d. Statements of Cash flows - Three Months Ended March 31, 1999
and 1998 6
e. Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Part II. Other Information
Item 1. Legal Proceedings 15
Item 2. Change in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
Signature Page 17
</TABLE>
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CENCOM CABLE INCOME PARTNERS II, L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
---------- -------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 408,206 $ 267,002
Accounts receivable, net 55,516 52,409
Prepaid expenses and other 54,275 30,844
----------- -----------
Total current assets 517,997 350,255
PROPERTY AND EQUIPMENT 4,325,317 4,156,583
FRANCHISE COSTS, net of accumulated amortization of $1,289,895 and
$1,285,846, respectively 6,472 10,521
DEBT ISSUANCE COSTS, net of accumulated amortization of $95,578 and
$82,545, respectively 195,500 208,533
INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIP 3,370,154 3,171,808
----------- -----------
$ 8,415,440 $ 7,897,700
=========== ===========
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 924,623 $ 1,310,831
Payables to General Partner and affiliates 6,512,283 6,291,552
Subscriber deposits 10,312 10,527
----------- -----------
Total current liabilities 7,447,218 7,612,910
----------- -----------
DEFERRED REVENUE 19,113 19,774
----------- -----------
LONG TERM DEBT 3,800,000 3,800,000
----------- -----------
PARTNERS' DEFICIT:
General Partner -- --
Limited Partners (250,000 units authorized; 90,915 units issued and
outstanding) (2,391,724) (3,075,817)
Note receivable from General Partner (459,167) (459,167)
----------- -----------
Total Partners' deficit (2,850,891) (3,534,984)
----------- -----------
$ 8,415,440 $ 7,897,700
=========== ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
Page 3
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CENCOM CABLE INCOME PARTNERS II, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- ------------
<S> <C> <C>
SERVICE REVENUES $ 1,517,492 $ 1,495,818
----------- -----------
OPERATING EXPENSES:
Operating, general and administrative 749,627 768,214
Depreciation and amortization 111,509 111,716
Management fees - related party 75,875 74,783
----------- -----------
937,011 954,713
----------- -----------
Income from operations 580,481 541,105
----------- -----------
OTHER INCOME (EXPENSE):
Interest income 5,029 7,094
Interest expense (99,762) (107,987)
Equity in income of unconsolidated limited partnership (see Note 2) 198,345 163,783
----------- -----------
103,612 62,890
----------- -----------
Net income $ 684,093 $ 603,995
=========== ===========
NET INCOME ALLOCATION TO PARTNERS' CAPITAL ACCOUNTS:
General Partner $ -- $ --
Common Limited Partners 684,093 603,995
----------- -----------
$ 684,093 $ 603,995
=========== ===========
NET INCOME PER LIMITED PARTNERSHIP UNIT $ 7.52 $ 6.64
=========== ===========
AVERAGE NUMBER OF LIMITED PARTNERSHIP UNITS OUTSTANDING 90,915 90,915
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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CENCOM CABLE INCOME PARTNERS II, L.P.
STATEMENT OF PARTNERS' DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1999
<TABLE>
<CAPTION>
Note
Receivable
From
General Limited General
Partner Partners Partner Total
------- -------- ------- -----
<S> <C> <C> <C> <C>
BALANCE, December 31, 1998 $ --- $ (3,075,817) $(459,167) $ (3,534,984)
Net income (unaudited) --- 684,093 --- 684,093
--------- ------------ ---------- ------------
BALANCE, March 31, 1999 (unaudited) $ --- $ (2,391,724) $(459,167) $ (2,850,891)
========= ============ ========= ============
</TABLE>
The accompanying notes are an integral part of this statement.
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CENCOM CABLE INCOME PARTNERS II, L.P.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 684,093 $ 603,995
Adjustments to reconcile net income to net cash provided by operating activities-
Depreciation and amortization 111,509 111,716
Amortization of debt issuance costs 13,033 13,034
Equity in income of unconsolidated limited partnership (198,345) (163,783)
Changes in assets and liabilities-
Accounts receivable, net (3,107) 15,870
Prepaid expenses and other (23,432) 12,271
Accounts payable and accrued expenses (386,208) (124,688)
Payables to General Partner and affiliates 220,731 173,350
Subscriber deposits (215) (270)
Deferred revenue (661) 279
--------- ---------
Net cash provided by operating activities 417,398 641,774
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (276,194) (71,050)
--------- ---------
Net cash used in investing activities (276,194) (71,050)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on revolving line of credit -- (600,000)
--------- ---------
Net cash used in financing activities -- (600,000)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS 141,204 (29,276)
CASH AND CASH EQUIVALENTS, beginning of period 267,002 220,104
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 408,206 $ 190,828
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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CENCOM CABLE INCOME PARTNERS II, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS:
The financial statements of Cencom Cable Income Partners II, L.P. (the
"Partnership" or "CCIP II") as of March 31, 1999 and 1998, are unaudited;
however, in the opinion of management, such statements include all adjustments
necessary for a fair presentation of the results for the periods presented. The
interim financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Partnership's Form 10-K for the
year ended December 31, 1998. Interim results are not necessarily indicative of
results for a full year.
The accompanying unaudited financial statements have been prepared in accordance
with the rules and regulations of the Securities and Exchange Commission.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.
2. INVESTMENT IN UNCONSOLIDATED LIMITED PARTNERSHIP:
The Partnership owns limited partnership units of Cencom Partners, L.P. ("CPLP")
which provide the Partnership an 84.03% ownership interest in CPLP. The
Partnership accounts for its investment in CPLP using the equity method. For the
three month period ended March 31, 1999, the Partnership recorded equity in
income from its investment in CPLP totaling $198,345.
Summary financial information for the operating results of CPLP, for the three
months ended March 31, 1999 and 1998, which are not consolidated with the
operating results of the Registrant, are as follows:
<TABLE>
<CAPTION>
For the three months ended
-------------------------------------------
March 31, 1999 March 31, 1998
--------------------- ------------------
<S> <C> <C>
Service revenues $ 660,630 $ 630,385
========= =========
Income from operations $ 350,534 $ 325,858
========= =========
Net income $ 236,041 $ 194,910
========= =========
</TABLE>
3. RELATED PARTY
During 1994, Cencom Cable Associates, Inc. assigned its management services
contract with the Partnership to the General Partner. The management services
contract provides for the payment of fees equal to 5% of the Partnership's
annual gross service revenues. Expenses recorded under this contract by the
Partnership for the three months ended March 31, 1999 and 1998 were $75,875 and
$74,783, respectively. Payables to General Partner and affiliates consisted
primarily of deferred management fees, of which $4.4 million and $4.5 million
were deferred at March 31, 1999 and December 31, 1998, respectively. In
addition, payables to General Partner and affiliates included $2.0 million and
$1.9 million non-interest bearing payable to CPLP at March 31, 1999 and 1998,
respectively.
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4. LITIGATION
Abeles v. Cencom Cable Entertainment, Inc., et. al.
On June 17, 1998, approximately 400 limited partners in CCIP II, filed a lawsuit
against the General Partner and Cencom Cable Entertainment, Inc. (collectively
"Cencom Defendants"), and three brokerage firms involved in the original sale of
limited partnership units in the Circuit Court of Jackson County, Missouri. CCE
provided management services to the Partnership and also owned all of the stock
of the General Partner prior to mid-1994.
Plaintiffs allege that the Cencom Defendants are liable for fraud, negligent
misrepresentation or omission, negligence, breach of fiduciary duty, breach of
implied covenants and violations of the Missouri Merchandising Practices Act in
connection with the sale of limited partnership interests in CCIP II commencing
in 1987. Plaintiffs seek recision of the purchase of the securities along with
ancillary damages, actual damages, punitive damages, costs and attorneys' fees.
On August 17, 1998, the Cencom Defendants filed a Motion to Dismiss. On November
5, 1998, the Court heard an oral argument on that motion and a ruling has not
yet been made on this motion. Discovery has been stayed during the pendency of
the Motion to Dismiss.
Wallace v. Wood, et. al.
On June 10, 1997, four limited partners of the Partnership filed a putative
class action suit on behalf of the limited partners presently in Delaware
Chancery Court against the General Partner, Charter Communications, Inc.
("Charter"), certain other Charter affiliates and four present or former
officers of the General Partner. The Plaintiffs subsequently amended their
lawsuit and converted it to a Derivative Action, thus adding the Partnership as
a nominal defendant.
Plaintiffs allege that the Defendants breached the Partnership Agreement and
their fiduciary duties of loyalty and candor in connection with the management
of the Partnership and the sale of the Partnership assets to certain purchasing
affiliates. Plaintiffs seek a declaration that the distribution to the Limited
Partners is improper, request that defendants compensate the Partnership for all
damages suffered as a result of the actions and transactions, including
interest, costs, reasonable attorneys' fees, accountants' and experts' fees and
request an accounting for all monies earned by the properties after the
effective date of the sale to the purchasing affiliates.
On May 19, 1998, Defendants filed a Motion for Judgment on the Pleadings,
seeking dismissal of certain of the defendants from the lawsuit. That motion is
pending before the Court.
The Partnership is not a named defendant in the Jackson County litigation and is
a nominal defendant in the Delaware litigation.
5. SUBSEQUENT EVENTS
On April 1, 1999, CCIP II sold its cable television systems serving
approximately 11,800 basic subscribers in the communities of Angleton, Aqua
Dolce, Belleville, Driscoll, Hempstead, Kingsville, and Sealy, Texas
(collectively, the "Texas Systems"). The purchaser of the Texas Systems was Etan
Industries, Inc. ("Etan"), an unaffiliated third party. The sale price was $20.8
million, subject to working capital adjustments. Net proceeds were used to repay
outstanding bank indebtedness and a payable to CPLP. CCIP II plans to use the
remaining net proceeds, less amounts held in an indemnity escrow, plus the
distribution to be received from CPLP (as described below), to make
distributions to its partners in accordance with the liquidation provisions of
the Partnership Agreement.
On April 1, 1999, CPLP sold its remaining cable television systems serving
approximately 6,400 basic subscribers in the communities in and around LaGrange,
Texas (collectively, the "LaGrange Systems"). The purchaser of the cable
television systems was Etan. The sales price was $11.2 million, subject to
working capital adjustments. The sale of the LaGrange Systems completes CPLP's
dissolution of its cable television assets. CPLP will use net
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proceeds from the sale, less a holdback for contingencies and amounts held in an
indemnity escrow, to satisfy the liabilities and expenses of CPLP with the
remaining funds distributed to its partners, of which 84.03% will ultimately be
distributed to CCIP II.
On April 1, 1999, the bank credit facility was paid off with the proceeds of the
sale of the Texas Systems and was terminated.
In May 1999, the Partnership entered into an Asset Purchase Agreement with
Galaxy Telecom, L.P., an unaffiliated third party, pursuant to which the
remaining northeast Missouri systems would be sold. Consummation of the sale is
subject to regulatory approvals and other conditions to closing, and the closing
is anticipated to occur prior to year-end. Upon sale of the assets, there will
be a holdback of a portion of the purchase price should the buyer seek indemnity
with respect to the purchased assets. If and when this sale is consummated, the
Partnership will have sold all of its cable television assets.
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Item 2: Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
The following table sets forth the approximate number of subscribers of the
Partnership as of the dates indicated.
<TABLE>
<CAPTION>
March 31, December 31, March 31,
1999 1998 1998
--------- ------------ ----------
<S> <C> <C> <C>
Basic Subscribers:
Texas systems (1) 11,800 11,900 11,900
Northeast Missouri systems 1,700 1,700 1,800
------ ------ ------
13,500 13,600 13,700
====== ====== ======
Premium Subscriptions:
Texas systems (1) 5,900 5,900 4,600
Northeast Missouri systems 700 700 700
------ ------ ------
6,600 6,600 5,300
====== ====== ======
</TABLE>
(1) These systems were sold on April 1, 1999.
The following table sets forth certain items in dollars and as a percentage of
total revenues for the periods indicated:
<TABLE>
<CAPTION>
For the Three Months
Ended March 31
--------------
(Unaudited)
1999 1998
-------------------------- ---------------------------
% of % of
Amount Revenue Amount Revenue
------ ------- ------ -------
<S> <C> <C> <C> <C>
Service revenues $1,517,492 100.0% $1,495,818 100.0%
---------- ----- ---------- -----
Operating expenses:
Operating, general and administrative 749,627 49.4 768,214 51.3
Depreciation and amortization 111,509 7.3 111,716 7.5
Management fees - related party 73,206 4.8 74,783 5.0
---------- ----- ---------- -----
934,342 61.5 954,713 63.8
---------- ----- ---------- -----
Income from operations 583,150 38.5 541,105 36.2
---------- ----- ---------- -----
Other income (expense):
Interest income 5,029 0.3 7,094 0.5
Interest expense (99,762) (6.6) (107,987) (7.2)
Equity in income of unconsolidated limited
partnership 198,345 13.1 163,783 10.9
---------- ----- ---------- -----
103,612 6.8 62,890 4.2
---------- ----- ---------- -----
Net income $ 686,762 45.3% $ 603,995 40.4%
========== ===== ========== =====
</TABLE>
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Service Revenues
The Partnership earns substantially all of its revenues from monthly
subscription fees for basic tier, expanded tier, premium channels, equipment
rental and ancillary services provided by its cable television systems. Service
revenues increased by approximately $22,000 or 1.4% for the three months ended
March 31, 1999, when compared to the similar period of 1998.
Premium service subscriptions increased 24.5% from March 31, 1998 to March 31,
1999. The ratio of premium service subscriptions per basic subscriber increased
from 38.7% at March 31, 1998 to 48.9% at March 31, 1999. The Partnership has
begun to offer premium services to subscribers in a packaged format, providing
subscribers with a discount from the combined retail rates of these packaged
services in an effort to maintain premium subscription levels and attract
additional subscriptions.
Operating Expenses
Operating, general and administrative expenses decreased by approximately
$18,600 or 2.4% during the three months ended March 31, 1999 when compared to
the similar period of 1998.
Depreciation and amortization decreased by approximately $200 or 0.2% for the
three months ended March 31, 1999, when compared to the similar period for 1998.
Other Income and Expenses
Interest expense was approximately $100,000 for the three months ended March 31,
1999, which was a decrease of 7.6% versus the similar period of 1998. The
decrease is primarily the result of lower average outstanding indebtedness of
the Partnership during 1999.
Equity in income of unconsolidated limited partnership, which relates to income
recorded by the Partnership for its share of net income recorded by CPLP,
increased approximately $34,600 for the three months ended March 31, 1999 versus
the similar period in 1998.
Net Income
Net income was approximately $687,000 for the three months ended March 31, 1999
versus approximately $604,000 for the three months ended March 31, 1998. The
largest component of this increase was the increase in equity in income of
unconsolidated limited partnership.
Liquidity and Capital Resources
On April 1, 1999, CCIP II sold its cable television systems serving
approximately 11,800 basic subscribers in Texas for a sale price of $20.8
million, subject to working capital adjustments. Net proceeds were used to repay
outstanding bank indebtedness and a payable to CPLP. CCIP II plans to use the
remaining net proceeds, less amounts held in an indemnity escrow, plus the
distribution to be received from CPLP (as described below), to make
distributions to its partners in accordance with the liquidation provisions of
the Partnership Agreement.
On April 1, 1999, CPLP sold its remaining cable television systems serving
approximately 6,400 basic subscribers in Texas for a sale price of $11.2
million, subject to working capital adjustments. The sale of these systems
completes CPLP's dissolution of its cable television assets. CPLP will use net
proceeds from the sale, less a holdback for contingencies and amounts held in an
indemnity escrow, first to satisfy the liabilities and expenses of CPLP with the
remaining funds distributed to its partners, of which 84.03% will be distributed
to CCIP II.
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<PAGE> 12
The Partnership and CPLP both borrowers under a credit agreement (the "Credit
Agreement") providing for borrowings up to $8,500,000 and $7,500,000 by the
Partnership and CPLP, respectively, with each borrower jointly and severally
liable in the event of default. At March 31, 1999, CCIP II had $3,800,000 of
indebtedness outstanding under the Credit Agreement and CPLP had $-0- of
indebtedness outstanding under the Credit Agreement. The debt bore interest at
rates, at the Partnership's option, based on the higher of the prime rate of the
Canadian Imperial Bank of Commerce (the agent bank) or the Federal Funds Rate
plus 3/4 of 1%, or the LIBOR plus applicable margins based upon the
Partnership's leverage ratio at the time of the borrowings. At March 31, 1999,
the interest rate on this outstanding indebtedness was approximately 6.69%. On
April 1, 1999, all outstanding indebtedness under the Credit Agreement was
repaid from the proceeds of the sale of the Texas Systems and the facility was
terminated.
The Partnership made capital expenditures of approximately $276,000 during the
first three months of 1999 in connection with the improvement and upgrading of
the Partnership systems.
Pursuant to the terms of the Partnership Agreement, the Partnership is required
to distribute all cash available for distribution to the Partners within 60 days
after the end of each calendar quarter and, with respect to certain available
refinancing proceeds and certain available sales proceeds, as soon as possible
following completion of the relevant transaction. However, the partnership
suspended distributions to Limited Partners in the fourth quarter of 1993 to
provide greater financial flexibility in meeting its debt covenants and in
making capital expenditures necessary to maintain the Partnership's assets. No
additional distributions have been made other than a special distribution in
June 1997 following the sale of certain assets. CCIP II anticipates making a
distribution to the Limited Partners from the remaining net proceeds of the sale
of the Texas Systems and distribution received from CPLP.
In May 1999, the Partnership entered into an Asset Purchase Agreement with an
unaffiliated third party pursuant to which the remaining northeast Missouri
systems would be sold. Consummation of the sale is subject to regulatory
approvals and other conditions to closing, and the closing is anticipated to
occur prior to year-end. Upon sale of the assets, there will be a holdback of a
portion of the purchase price should the buyer seek indemnity with respect to
the purchased assets. If and when this sale is consummated, the Partnership will
have sold all of its cable television assets.
It is also the General Partner's intention to repay the balance of the
Partnership's outstanding obligations, terminate the Partnership and distribute
all remaining proceeds thereof (subject to a holdback for contingencies) as
expeditiously as possible. At such time as all of the Partnership and the CPLP
systems are sold, and all available CPLP distributions are received by the
Partnership, the Partnership's outstanding obligations will be paid and the
Partnership will be terminated. Upon its termination, the Partnership will cease
to be a public entity and will no longer be subject to the informational
reporting requirements of the Securities Exchange Act of 1934, as amended.
Year 2000 Impact
Many existing computer systems and applications, and other control devices and
embedded computer chips use only two digits (rather than four) to identify a
year in the date field, failing to consider the impact of the upcoming change in
the century. As a result, such systems, applications, devices, and chips could
create erroneous results or might fail altogether unless corrected to properly
interpret data related to the year 2000 and beyond (the "Year 2000 Problem").
These errors and failures may result, not only from a date recognition problem
in the particular part of a system failing, but may also result as systems,
applications, devices and chips receive erroneous or improper data from
third-parties suffering from the Year 2000 Problem. In addition, two interacting
systems, applications, devices or chips, each of which has individually been
fixed so that it will properly handle the Year 2000 Problem, could nonetheless
suffer "integration failure" because their method of dealing with the problem is
not compatible.
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These problems are expected to increase in frequency and severity as the Year
2000 approaches. This issue impacts our owned and licensed computer systems
and equipment used in connection with internal operations, including
- information processing and financial reporting systems,
- customer billing systems,
- customer service systems,
- telecommunication transmission and reception systems, and
- facility systems.
We also rely directly and indirectly, in the regular course of business, on the
proper operation and compatibility of third party systems. The Year 2000 Problem
could cause these systems to fail, err, or become incompatible with our systems.
If we or a significant third party on which we rely fails to become year 2000
ready, or if the Year 2000 Problem cause our systems to become internally
incompatible or incompatible with third party systems, our business could suffer
from material disruption, including the inability to process transactions, send
invoices, accept customer orders or provide customers with our cable services.
We could also face similar disruptions if the Year 2000 Problem causes general
widespread problems or an economic crisis. We cannot now estimate the extent of
these potential disruptions.
We are addressing the Year 2000 Problem with respect to our internal operations
in three stages: (1) inventory and evaluation of our systems, components and
other significant infrastructure to identify those elements that reasonably
could be expected to be affected by the Year 2000 Problem, (2) remediation and
replacement to address problems identified in stage one and (3) testing of the
remediation and replacement carried out in stage two. We formed an executive
Year 2000 Taskforce at the beginning of 1998, have completed stage one, and
anticipate that we will complete stages two and three by August 1999. We plan to
complete all stages for our existing systems by August 1999, but we cannot
determine when such stages would be completed in connection with systems we may
acquire in the near future.
Much of our assessment efforts in stage one have involved, and depend on,
inquiries to third party service providers, who are the suppliers and vendors of
various parts or components of our systems. Certain of these third parties that
have certified the readiness of their products will not certify their
interoperability within our fully integrated systems. We cannot assure you that
these technologies of third parties, on which we rely, we be year 2000 ready or
timely converted into year 2000 compliant systems compatible with our systems.
Moreover, because a full test of our systems, on an integrated basis, would
require a complete shut down of our operations, it is not practicable to conduct
such testing. We have been advised that a plan has been developed to utilize a
third party, in cooperation with other cable operators, to begin testing a
"mock-up" of our major billing and plant components (including pay-per-view
systems) as an integrated system. We are also evaluating the potential impact of
third party failure and integration failure on our systems.
The Partnership cannot be certain that it or third parties supporting its
systems have resolved or will resolve all Year 2000 issues in a timely manner.
Failure by the Partnership or any such third party to successfully address
relevant Year 2000 issues could result in disruptions of the Partnership's
business and the incurrence of significant expenses by the Partnership.
Additionally, the Partnership could be affected by any disruption to third
parties with which the Partnership does business if such third parties have not
successfully address their Year 2000 issues.
Failure to resolve Year 2000 issues could result in improper billing to the
Partnership's subscribers which could have a major impact on the recording of
revenue and the collection of cash as well as create significant customer
dissatisfaction. In addition, failure on the part of the financial institutions
with which the Partnership relies on for its cash collection and management
services could also have significant impact on collections, results of
operations and the liquidity of the Partnership.
We have incurred only immaterial costs to date directly related to addressing
the Year 2000 Problem. We have redeployed internal resources and have
selectively engaged outside vendors to meet the goals of our year 2000 program.
We currently do not estimate the total cost of our year 2000 remediation program
to be material.
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Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a "safe harbor"
for forward looking statements. Certain information included in this Form 10-Q
contains statements that are forward looking, such as statements relating to the
effects of future regulation, future capital commitments, future acquisitions
and the Partnership's success in dealing with the Year 2000 issues. Such
forward-looking information involves important risks and uncertainties that
could significantly affect expected results in the future from those expressed
in any forward-looking statements made by, or on behalf of the Partnership.
These risks and uncertainties include, but are not limited to, uncertainties
relating to economic conditions, acquisitions and divestitures, government and
regulatory policies, the pricing and availability of equipment, materials,
inventories and programming, technological developments, changes in the
competitive environment in which the Partnership operates and the Partnership's
success dealing with Year 2000 issues. Investors are cautioned that all
forward-looking statements involve risks and uncertainties.
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<PAGE> 15
Part II. Other Information
Item 1. Legal Proceedings
Abeles v. Cencom Cable Entertainment, Inc., et. al.
On June 17, 1998, approximately 400 limited partners in CCIP II, filed a lawsuit
against the General Partner and Cencom Cable Entertainment, Inc. (CCE)
(collectively "Cencom Defendants"), and three brokerage firms involved in the
original sale of limited partnership units in the Circuit Court of Jackson
County, Missouri. CCE provided management services to the Partnership and also
owned all of the stock of the General Partner prior to mid-1994.
Plaintiffs allege that the Cencom Defendants are liable for fraud, negligent
misrepresentation or omission, negligence, breach of fiduciary duty, breach of
implied covenants and violations of the Missouri Merchandising Practices Act in
connection with the sale of limited partnership interests in CCIP II commencing
in 1987. Plaintiffs seek recession of the purchase of the securities along with
ancillary damages, actual damages, punitive damages, costs and attorneys' fees.
On August 17, 1998, the Cencom Defendants filed a Motion to Dismiss. On November
5, 1998, the Court heard oral argument on that motion. Discovery has been stayed
during the pendency of the Motion to Dismiss.
Wallace v. Wood, et. al.
On June 10, 1997, four limited partners of the Partnership filed a putative
class action suit on behalf of the limited partners presently in Delaware
Chancery Court against the General Partner, Charter Communications, Inc.
(Charter), certain other Charter affiliates and four present or former officers
of the General Partner. The Plaintiffs subsequently amended their lawsuit and
converted it to a Derivative Action, thus adding the Partnership as a nominal
defendant.
Plaintiffs allege that the Defendants breached the Partnership Agreement and
their fiduciary duties of loyalty and candor in connection with the management
of the Partnership and the sale of the Partnership assets to certain purchasing
affiliates. Plaintiffs seek a declaration that the distribution to the Limited
Partners is improper, request that defendants compensate the Partnership for all
damages suffered as a result of the actions and transactions, including
interest, costs, reasonable attorneys' fees, accountants' and experts' fees and
request an accounting for all monies earned by the properties after the
effective date of the sale to the purchasing affiliates.
On May 19, 1998, Defendants filed a Motion for Judgment on the Pleadings,
seeking dismissal of certain of the defendants from the lawsuit. That motion is
pending before the Court.
The Partnership is not a named defendant in the Jackson County litigation and is
a nominal defendant in the Delaware litigation.
Item 2. Change in Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Page 15
<PAGE> 16
Item 5. Other Information
In May 1999, the Partnership entered into an Asset Purchase Agreement with an
unaffiliated third-party pursuant to which the remaining Northeast Missouri
systems owned by the Partnership would be sold. Consummation of the sale is
subject to regulatory approvals and other conditions to closing, and the closing
is anticipated to occur prior to year-end. Upon sale of the assets, there will
be a holdback of a portion of the purchase price should the buyer seek indemnity
with respect to the purchased assets. If and when this sale is consummated, the
Partnership will have sold all of its cable television assets.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10(bb) Asset Purchase Agreement by and between Cencom Cable Income
Partners II, L.P. and Galaxy Telecom, L.P. dated as of may 5, 1999
27.1 Financial Data Schedule (supplied for the information of the
Commission)
(b) Reports on Form 8-K - None during quarter
On April 15, 1999, CCIP II filed a current report on Form 8-K related
to the sale of cable television systems on April 1, 1999, reported in part I,
Item 2 therein, as follows:
(a) CCIP II sold its cable television systems serving Angleton, Aqua
Dolce, Belleville, Driscoll, Hempstead, Kingsville, and Sealy,
Texas, to an unaffiliated third party for $20.8 million, subject to
working capital adjustments.
(b) CPLP sold its cable television systems serving LaGrange, Texas, to
an unaffiliated third party for $11.2 million, subject to working
capital adjustments.
Pursuant to Article 3 of Regulation S-X, the Form 8-K filing included
certain unaudited pro forma financial information related to the these sale
transactions.
Page 16
<PAGE> 17
CENCOM CABLE INCOME PARTNERS II, L.P.
FOR QUARTER ENDED MARCH 31, 1999
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENCOM CABLE INCOME PARTNERS II, L.P.
By: Cencom Properties II, Inc.
its General Partner
By: /s/ Jerald L. Kent
-----------------------------
Jerald L. Kent
Executive Vice President and
Chief Financial Officer
By: /s/Jerald L. Kent May 13, 1999
------------------------------
Jerald L. Kent
Executive Vice President and
Chief Financial Officer
By: /s/Ralph G. Kelly May 13, 1999
------------------------------
Ralph G. Kelly
Treasurer
Page 17
<PAGE> 1
EXHIBIT 10(bb)
================================================================================
ASSET PURCHASE AGREEMENT
BY AND BETWEEN
CENCOM CABLE INCOME PARTNERS II, L.P.
AND
GALAXY TELECOM, L.P.
DATED AS OF
MAY 5, 1999
================================================================================
<PAGE> 2
May 5, 1999
Ms. Marcy Lifton
Vice President and Senior Counsel
Charter Communications
12444 Powerscourt Drive, Suite 100
St. Louis, MO 63131-3660
Dear Ms. Lifton:
Please accept this letter as notification of Galaxy's intentions for
the transfer of the Canton and LaGrange systems to be placed in the company name
of Galaxy Telecom, L.P. The remaining systems of Center, Frankford, La Belle,
Lewiston, New London and Wayland should be transferred to Galaxy American
Communications, L.L.C., an affiliate company of Galaxy Telecom, L.P.
Please note that the 394's will reflect these company names. If you
have any questions, please feel free to give Ron Voss or myself a call.
Very truly yours,
HOLLY REHDER
Mergers and Acquisitions Coordinator
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<S> <C>
Section 1. Definitions........................................................................................1
1.1 Affiliate................................................................................................1
1.2 Assets...................................................................................................1
1.3 Books and Records........................................................................................1
1.4 Business Day.............................................................................................1
1.5 Closing..................................................................................................1
1.6 Closing Date.............................................................................................1
1.7 Communications Act.......................................................................................2
1.8 Encumbrance..............................................................................................2
1.9 Equipment................................................................................................2
1.10 Equivalent Subscribers.................................................................................2
1.11 Governmental Authority.................................................................................2
1.12 Governmental Permits...................................................................................2
1.13 Intangibles............................................................................................2
1.14 Legal Requirements.....................................................................................3
1.15 Permitted Encumbrances.................................................................................3
1.16 Person.................................................................................................3
1.17 Real Property..........................................................................................3
1.18 Required Consents......................................................................................3
1.19 Seller Contracts.......................................................................................3
1.20 Service Area...........................................................................................3
1.21 Services...............................................................................................3
1.22 System.................................................................................................3
1.23 Other Definitions......................................................................................3
Section 2. Purchase and Sale of Assets........................................................................4
Section 3. Consideration......................................................................................4
3.1 Purchase Price...........................................................................................4
3.2 Adjustments to Base Purchase Price.......................................................................5
3.3 Determination of Adjustments.............................................................................5
3.4 Allocation of Consideration..............................................................................6
Section 4. Assumed Liabilities and Excluded Assets............................................................6
4.1 Assignment and Assumption................................................................................6
4.2 Excluded Assets..........................................................................................6
Section 5. Representations and Warranties of Seller...........................................................7
5.1 Organization and Qualification...........................................................................7
5.2 Authority and Validity...................................................................................7
5.3 No Breach or Violation...................................................................................7
5.4 Assets...................................................................................................7
5.5 Governmental Permits.....................................................................................8
5.6 Revenue and Cash Flow; Seller Contracts..................................................................8
5.7 Real Property............................................................................................8
5.8 Legal Proceedings........................................................................................8
5.9 Legal and Regulatory Matters.............................................................................8
5.10 Patents, Trademarks and Copyrights.....................................................................9
</TABLE>
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<TABLE>
<S> <C>
5.11 Tax Returns............................................................................................9
5.12 System Equipment.......................................................................................9
5.13 System Information.....................................................................................9
5.14 DISCLAIMER OF WARRANTY.................................................................................9
5.15 Schedules.............................................................................................10
5.16 Finders and Brokers...................................................................................10
5.17 Revenue and Cash Flow.................................................................................10
5.18 Homes Passed and Miles of Plant.......................................................................10
Section 6. Buyer's Representations and Warranties............................................................10
6.1 Organization and Qualification..........................................................................10
6.2 Authority and Validity..................................................................................11
6.3 No Breach or Violation..................................................................................11
6.4 Finders and Brokers.....................................................................................11
Section 7. Additional Covenants and Agreements...............................................................11
7.1 Access to Premises and Records..........................................................................11
7.2 Continuity and Maintenance of Operations................................................................11
7.3 Required Consents.......................................................................................12
7.4 Risk of Loss............................................................................................12
7.5 Franchise Extensions....................................................................................12
7.6 Use of Seller's Name....................................................................................12
7.7 Satisfaction of Conditions..............................................................................13
7.8 Confidentiality.........................................................................................13
7.9 Transfer Taxes..........................................................................................13
7.10 Bulk Sales............................................................................................13
7.11 Employees.............................................................................................13
Section 8. Closing...........................................................................................13
Section 9. Conditions to Closing.............................................................................13
9.1 Conditions to the Obligations of Buyer and Seller.......................................................13
9.2 Conditions to the Obligations of Buyer..................................................................14
9.3 Conditions to Obligations of Seller.....................................................................15
9.4 Waiver of Conditions....................................................................................15
Section 10. Termination.......................................................................................15
10.1 Events of Termination.................................................................................15
10.2 Liabilities in Event of Termination...................................................................16
10.3 Procedure Upon Termination............................................................................16
Section 11. Survival of Representations and Warranties; Indemnification.......................................16
11.1 Survival of Representations and Warranties............................................................16
11.2 Indemnification by Seller.............................................................................17
11.3 Indemnification by Buyer..............................................................................17
11.4 Third Party Claims....................................................................................17
11.5 Limitations on Liability by Seller....................................................................18
11.6 Limitations on Indemnification - Buyer................................................................18
Section 12. Miscellaneous.....................................................................................18
12.1 Parties Obligated and Benefited.......................................................................18
12.2 Notices...............................................................................................19
</TABLE>
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<TABLE>
<S> <C>
12.3 Attorneys' Fees.......................................................................................20
12.4 Expenses..............................................................................................20
12.5 Waiver................................................................................................20
12.6 Captions..............................................................................................20
12.7 Choice of Law.........................................................................................20
12.8 Terms.................................................................................................20
12.9 Rights Cumulative.....................................................................................20
12.10 Further Actions.......................................................................................20
12.11 Time..................................................................................................20
12.12 Counterparts..........................................................................................20
12.13 Entire Agreements.....................................................................................20
12.14 Severability..........................................................................................21
12.15 Construction..........................................................................................21
12.16 Right to Specific Performance.........................................................................21
</TABLE>
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<PAGE> 6
LIST OF EXHIBITS AND SCHEDULES
EXHIBITS
A - Bill of Sale and Assignment
B - Assumption Agreement
C - Form of Non-Competition Agreement
D - Deposit Escrow Agreement
E - Indemnity Escrow Agreement
SCHEDULES
1.9 - Equipment
4.2 - Excluded Assets
5.5 - Governmental Permits
5.6 - Seller Contracts
5.7 - Real Property
5.8 - Legal Proceedings
5.9 - Legal and Regulatory Matters
5.13 - System Information
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<PAGE> 7
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT ("Agreement") is made as of the 4th day
of May, 1999, by and between GALAXY TELECOM, L.P., a Delaware limited
partnership ("Buyer"), and CENCOM CABLE INCOME PARTNERS II, L.P., a Delaware
limited partnership ("Seller"), with respect to the following:
A. Seller is engaged in the business of providing cable television
service to subscribers in and around the communities of Center, Frankford,
Lewistown, Wayland, Canton/LaGrange, New London and La Belle, Missouri.
B. Buyer desires to purchase and Seller desires to sell certain assets
of Seller used in connection with that business.
AGREEMENT
In consideration of the above recitals and the mutual agreements stated
in this Agreement, the parties agree as follows:
Section 1. Definitions.
In addition to terms defined elsewhere in this Agreement, the following
capitalized terms, when used in this Agreement, will have the meanings set forth
below:
1.1 Affiliate. 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.
1.2 Assets. The properties, privileges, rights, interests and claims, real
and personal, tangible and intangible, that are owned, leased, or held by Seller
and used primarily in connection with the operation of the Systems, 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, limited to Governmental
Permits, Intangibles, Seller Contracts, Equipment, Books and Records and Real
Property, but excluding any Excluded Assets.
1.3 Books and Records. All records relating solely to the operations of the
Systems and maintained at Seller's local office which manages the Systems,
including available current and historical operations data, subscriber data and
related records, whether in printed or electronic form.
1.4 Business Day. Any day other than Saturday, Sunday or a day on which
banking institutions in New York, New York are required or authorized to be
closed.
1.5 Closing. The consummation of the transactions contemplated by this
Agreement, as described in Section 8, the date of which is referred to as the
Closing Date.
1.6 Closing Date. The date on which the Closing occurs.
<PAGE> 8
1.7 Communications Act. The Communications Act of 1934, as amended by the
Cable Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992, the Telecommunications Act of 1996 and
as may be further amended, and the rules and regulations, policies and published
decisions of the Federal Communications Commission ("FCC") thereunder, as in
effect from time to time.
1.8 Encumbrance. 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).
1.9 Equipment. The tangible personal property listed on Schedule 1.9, all
of which is owned, leased, or used in connection with the operation of the
Systems, including vehicles, electronic devices, distribution plant, head-end
equipment and reception sites, office equipment, and inventory of equipment and
parts.
1.10 Equivalent Subscribers. As of any date and for each franchise area
served by a System, the sum of (a) the total number of individually billed
residential subscribers of Services at Seller's standard monthly rate, and (b)
the number derived by dividing (i) the total monthly billings for sales of basic
cable Services by the System during the most recent month ended prior to the
date of calculation to commercial and bulk subscribers (whether on a discounted
or undiscounted basis but excluding billings in excess of a single month's
charges for any account), by (ii) the sum of the basic cable standard monthly
rate (without discount of any kind) charged by Seller during such month to
single-family households for Services sold by the System in the geographical
area where such commercial or bulk subscriber is located. For purposes of the
foregoing, there will be excluded (i) any subscriber who is more than 60 days
past due from the first date of the period to which the invoice relates in the
payment of any amount in excess of $5 (excluding late fees) payable to Seller,
(ii) any subscriber who has not paid at least one full month's payment for
Services, (iii) that portion of the billings representing an installation,
disconnection, or other non-recurring and non-service charge, a charge for
equipment or for any outlet or connection other than the first outlet or first
connection in any residential unit (e.g., an individual apartment or rental
unit), a charge for any tiered service (whether or not included within premium
programming service) or a pass-through charge for sales taxes, line-itemized
franchise fees, fees charged by the FCC and the like and (iv) any subscriber
pending disconnection.
1.11 Governmental Authority. (i) The United States of America, (ii) any
state, commonwealth territory or possession of the United States of America and
any political subdivision thereof (including counties, municipalities and the
like) or (iii) any agency, authority or instrumentality of any of the foregoing,
including any court, tribunal department, bureau, commission or board.
1.12 Governmental Permits. All franchises, approvals, authorizations,
permits, licenses, easements, registration qualifications, leases, variances and
similar rights obtained from any Governmental Authority to enable Seller to
operate the Systems, including those set forth on Schedule 5.5.
1.13 Intangibles. Certain intangible assets, limited to available current
and historical subscriber lists, accounts receivable, claims (excluding any
claims relating to Excluded Assets), and goodwill, if any, owned or arising from
the operation of the Systems.
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<PAGE> 9
1.14 Legal Requirements. Any statute, ordinance, 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.
1.15 Permitted Encumbrances. The following Encumbrances: (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; and (d) as to Real
Property interests, any easements, rights-of-way, servitudes, permits,
restrictions and minor imperfections or irregularities in title which are
reflected in the public records which do not individually or in the aggregate
materially interfere with the Systems' right to use such Real Property in the
ordinary course of business as it is currently conducted.
1.16 Person. Any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Governmental Authority or other entity.
1.17 Real Property. All assets consisting of realty, including
appurtenances, improvements and fixtures located on such realty, and any other
interests in real property, including leasehold interests in Seller's head-end
sites and leasehold interests and easements, wire crossing permits, rights of
entry used in connection with the operation of the Systems and as described on
Schedule 5.5.
1.18 Required Consents. All franchises, licenses, authorizations, approvals
and consents required under Government Permits, material Seller Contracts or
otherwise for (a) Seller to transfer the Assets to Buyer, (b) Buyer to conduct a
cable television business that owns, leases, uses and operates the Assets; and
(c) Buyer to assume and perform the Governmental Permits, material Seller
Contracts and leasehold interests in Real Property, all as indicated by an
asterisk in Schedules 5.5, 5.6 and 5.7 respectively.
1.19 Seller Contracts. All contracts and agreements (other than Governmental
Permits and those relating to Real Property described on Schedule 5.5 and
Schedule 5.7, respectively), pertaining to the ownership, operation and
maintenance of the Assets or the Systems or used or held for use by the Systems,
including personal property leases, retransmission consents and must carry, as
described on Schedule 5.6.
1.20 Service Area. The area in which Seller operates the Systems.
1.21 Services. The cable television service offered to subscribers of the
Systems.
1.22 System. Each complete cable television reception and distribution
system operation, including a headend, subscriber drops and associated
electronic and other equipment, and which is operated by Seller in and around
each of the following communities: Center, Frankford, Lewistown, Wayland,
Canton/LaGrange, New London and La Belle, Missouri (collectively referred to as
"Systems").
1.23 Other Definitions. The following terms are defined in the Sections
indicated:
Term Section
---- -------
Action 11.4
Accounts Receivable Payment 3.1
Agreement First Paragraph
Assumed Liabilities 4.1
Base Purchase Price 3.1
-3-
<PAGE> 10
Buyer First Paragraph
Buyer Damages 11.5
Deposit 3.1
Excluded Assets 4.2
FCC 1.7
Final Adjustments Report 3.3.2
Indemnified Party 11.4
Indemnifying Party 11.4
Preliminary Adjustments Report 3.3.1
Prime Rate 12.12
Purchase Price 3.1
Seller First Paragraph
Seller Damages 11.6
Survival Period 11.1
Taking 7.8.2
Section 2. Purchase and Sale of Assets. Subject to the terms and conditions
set forth in this Agreement, at the Closing, Seller will sell to Buyer, and
Buyer will purchase from Seller, all of Seller's right, title and interest in,
to and under the Assets.
Section 3. Consideration.
3.1 Purchase Price. The Purchase Price to be paid by Buyer to Seller shall
be calculated and paid as follows:
(a) The Purchase Price for the Assets shall be equal to the sum
of:
(i) an amount equal to One Million One Hundred Seventy
Thousand Four Hundred Fifty and 00/100 Dollars ($1,170,450.00) (the "Base
Purchase Price"), subject to adjustment as provided in Section 3.2 (the
"Purchase Price") and allocated in a schedule as agreed to by Buyer and Seller
pursuant to Section 3.4 of this Agreement; and
(ii) an amount equal to the sum of: (A) ninety percent (90%)
of the customer accounts receivable attributable to the Systems which are not
more than sixty (60) days past due as of the Closing and (B) seventy-five
percent (75%) of the amount of advertising accounts receivable attributable to
the Systems which are not more than sixty (60) days past due as of the Closing
Date (collectively, the "Accounts Receivable Payment").
(b) Upon the execution of this Agreement as a good faith deposit
to be credited toward payment of the Purchase Price on the Closing Date, Buyer
shall deposit Fifty-Eight Thousand Five Hundred Twenty-Three and 00/100 Dollars
($58,523.00) (the "Deposit Escrow") with an escrow agent and pursuant to an
escrow agreement in the form of that attached hereto as Exhibit D (the "Deposit
Escrow").
(c) The Purchase Price and the Accounts Receivable Payment shall
be payable by wire transfer of immediately available funds as follows:
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<PAGE> 11
(i) One Million One Hundred Eleven Thousand Nine Hundred
Twenty-Seven and 00/100 Dollars ($1,111,927.00), as adjusted to reflect
adjustments to the Base Purchase Price pursuant to Section 3.2 and Section 3.3
of this Agreement, plus the Accounts Receivable Payment; and
(ii) Fifty Eight Thousand Five Hundred Twenty Three Dollars
($58,523) (the "Indemnity Escrow") to be deposited on the Closing Date in an
interest bearing account, to be held in escrow for the period beginning on the
Closing Date and ending on December 15, 1999 by an escrow agent to be mutually
and reasonably agreed upon by the parties and pursuant to an escrow agreement in
the form of that attached hereto as Exhibit E (the "Indemnity Escrow
Agreement").
3.2 Adjustments to Base Purchase Price. The Base Purchase Price will be
adjusted as follows:
3.2.1 If the Systems have fewer than 1,734 Equivalent Subscribers
as of the Closing Date, the Base Purchase Price will be reduced by an amount
equal to $675 multiplied by the positive difference between (a) 1,734 and (b)
the number of Equivalent Subscribers as of the Closing Date;
3.2.2 Adjustments on a pro rata basis as of the Closing Date will
be made for all prepaid expenses, accrued expenses (including real and personal
property taxes), prepaid income, advance payments for service, and receivables,
other than receivables covered by the Accounts Receivable Payment, all as
determined in accordance with generally accepted accounting principles as in
effect from time to time, consistently applied, and to reflect the principle
that all expenses and income attributable to the operation of the Systems for
the period prior to the Closing Date are for the account of Seller, and all
expenses and income attributable to the operations of the Systems for the period
on and after the Closing Date are for the account of Buyer;
3.2.3 All funds of third parties on deposit with Seller as of the
Closing Date relating to the Systems will be retained by Seller and credited to
the account of Buyer;
3.2.4 All deposits relating to the Systems that are held by third
parties as of the Closing Date for the account of Seller or as security for
Seller's performance of its obligations (other than with respect to Excluded
Assets), including deposits on leases and deposits for utilities, will be
credited to the account of Seller in their full amounts and will become the
property of Buyer; and
3.3 Determination of Adjustments. Preliminary and final adjustments to the
Base Purchase Price will be determined as follows:
3.3.1 Not later than a date Seller reasonably believes is at least
three (3) Business Days prior to the Closing, Seller will deliver to Buyer a
report (the "Preliminary Adjustments Report"), certified as to completeness and
accuracy by Seller, showing in detail the preliminary determination of the
accounts receivable in Section 3.1 and the adjustments referred to in Section
3.2, which are calculated as of the Closing Date (or as of any other date agreed
by the parties) and any documents substantiating the adjustments proposed in the
Preliminary Adjustments Report. The Preliminary Adjustments Report will include
a detailed calculation of the number of Equivalent Subscribers, the Accounts
Receivable Payment (showing amounts due and their respective aging as of the
Closing Date), and a schedule setting forth advance payments and deposits made
to or by Seller relating to the Systems. Seller also will furnish to Buyer its
billing report for the most current period as of the Closing Date. The estimates
of such adjustments set forth in the Preliminary Adjustments Report shall be the
basis for determining the Purchase Price payable pursuant to Section 3.1.
-5-
<PAGE> 12
3.3.2 Within 45 calendar days after the Closing, Buyer will
deliver to Seller a report (the "Final Adjustments Report"), certified as to
completeness and accuracy by Buyer, showing in detail the final determination of
all adjustments which were not calculated as of the Closing Date and containing
any corrections to the Preliminary Adjustments Report, together with any
documents substantiating the adjustments proposed in the Final Adjustments
Report. Buyer will provide Seller with reasonable access to all records which
Buyer has in its possession and which are necessary for Seller to verify the
Final Adjustments Report.
3.3.3 Within fifteen (15) days after receipt of the Final
Adjustments Report, Seller will give Buyer written notice of Seller's objection,
if any, to the Final Adjustments Report. If Seller makes any such objection, the
parties will agree on the amount, if any, which is not in dispute within ten
(10) days after Buyer's receipt of Seller's notice of objections to the Final
Adjustments Report. Any undisputed amount will serve as an adjustment to the
Base Purchase Price payable under Section 3.1. The portion of the Base Purchase
Price payable under Section 3.1(a), as so adjusted (but excluding any amounts
disputed by Buyer), will be paid by Buyer or Seller within three (3) Business
Days after agreement on the undisputed portion of the Final Adjustments Report.
If Seller and Buyer are unable to agree upon the full amount of such adjustment
within such ten (10) day period, then the matter shall be submitted to a
mutually agreeable nationally recognized independent accounting firm which has
not represented Seller, Buyer or any of their respective Affiliates in the past
five years, which shall render a written decision to Seller and Buyer within
thirty (30) calendar days after it has been retained, which decision shall be
final and whose fees shall be paid one-half by Buyer and one-half by Seller. The
payment required after determination of all disputed amounts will be made by the
responsible party by wire transfer of immediately available funds to the other
party within three Business Days after the final determination.
3.4 Allocation of Consideration. The consideration payable by Buyer under
this Agreement will be allocated among the Assets as set forth in a schedule
agreed to by Buyer and Seller not later than the Closing Date. Buyer and Seller
agree to be bound by the allocation and will not take any position inconsistent
with such allocation and will file all returns and reports with respect to the
transactions contemplated by this Agreement, including all federal, state and
local tax returns, on the basis of such allocation.
Section 4. Assumed Liabilities and Excluded Assets.
4.1 Assignment and Assumption. Seller will assign, and Buyer will assume
and perform, the Assumed Liabilities, which are defined as: (a) Seller's
obligations to subscribers of the Systems for (i) subscriber advance payments
held by Seller as of the Closing Date for Services to be rendered by a System
after the Closing Date, and (ii) the delivery of Services to subscribers of the
Systems after the Closing Date; and (b) obligations accruing and relating to
periods after the Closing Date under or relating to any of the Assets, with all
currently known obligations material to the Systems identified in the schedules
to this Agreement. Buyer will not assume or have any responsibility for any
liabilities or obligations of Seller other than the Assumed Liabilities. In no
event will Buyer assume or have any responsibility for any liabilities or
obligations: (a) associated with the Excluded Assets; or (b) incurred prior to
the Closing Date; except those described in Section 3.2.2.
4.2 Excluded Assets. The Excluded Assets, which will be retained by Seller,
will consist of the following: (a) programming contracts and all other
agreements of Seller that do not pertain exclusively to the Systems; (b)
insurance policies and rights and claims thereunder; (c) bonds, letters of
credit, surety instruments and other similar items; (d) cash and cash
equivalents; (e) Seller's trademarks, trade names,
-6-
<PAGE> 13
service marks, service names, logos and proprietary rights (subject to Buyer's
rights under Section 7.6); (f) Seller's rights under any agreement governing or
evidencing an obligation of Seller for borrowed money; (g) Seller's rights under
any contract, license, authorization, agreement or commitment other than those
creating or evidencing Assumed Liabilities; (h) all rights to tax refunds and
refunds of fees of any nature, in either case relating to the period prior to
the Closing Date; and (i) the Assets described on Schedule 4.2.
Section 5. Representations and Warranties of Seller.
To induce Buyer to enter into this Agreement, Seller represents and
warrants to Buyer, as of the date of this Agreement and as of the Closing, as
follows:
5.1 Organization and Qualification. Seller is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of
Delaware. Seller has all requisite power and authority to own, lease and use the
Assets as they are currently owned, leased and used and to conduct the operate
the Systems as they are currently operated. Seller is duly qualified or licensed
to do business and is in good standing under the laws of each other 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 in 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 Systems or
on the validity, binding effect or enforceability of this Agreement.
5.2 Authority and Validity. Seller has all requisite power and authority to
execute and deliver, to perform its obligations under, and to consummate the
transactions contemplated by, this Agreement. The execution and delivery by
Seller of, the performance by Seller of its obligations under, and the
consummation by Seller of the transactions contemplated by, this Agreement have
been duly authorized by all partnership action required to be taken by Seller.
This Agreement constitutes the valid and binding obligation of Seller,
enforceable against Seller in accordance with its terms, except insofar as
enforceability may be affected by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect affecting
creditors' rights generally or by principles governing the availability of
equitable remedies.
5.3 No Breach or Violation. Subject to obtaining the Required Consents, the
execution, delivery and performance of this Agreement by Seller will not: (a)
violate any provision of Seller's agreement of limited partnership; (b) violate
any Legal Requirement in any material respect; (c) require any consent, approval
or authorization of, or any filing with or notice to, any Person; or (d) (i)
violate, conflict with or constitute a material breach of or default under, (ii)
permit or result in the termination, on 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, Legal Requirements, 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.
5.4 Assets. Seller has good and marketable title to (or, in the case of
Assets that are leased, valid leasehold interests in) the Assets (other than
Real Property, as to which the representations and warranties in Section 5.7
apply). The Assets are free and clear of all Encumbrances of any kind or nature,
except (a) Permitted Encumbrances, (b) restrictions stated in the Governmental
Permits and (c) Encumbrances from Seller's bank lending group which will be
removed and released at or prior to the Closing.
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5.5 Governmental Permits. Copies of the Governmental Permits, all of which
are listed on Schedule 5.5, have been delivered by Seller to Buyer. The
Governmental Permits are valid and in full force and effect, according to their
terms, subject to receipt of extensions for expiration dates as they expire. At
closing, all municipal franchises included in the Governmental Permits shall
expire no earlier than 5 years from the Closing Date, provided that Buyer has
given Seller reasonable assistance in connection with any extensions required.
There is no legal action, government proceeding or investigation, pending or to
Seller's knowledge, threatened, to terminate, suspend or modify any Governmental
Permit, other than to extend expiration dates for franchises due to expire, and
other than with respect to the warranties disclaimed in Section 5.12, Seller is
in compliance in all material respects with the terms and conditions of all the
Governmental Permits.
5.6 Seller Contracts. Copies of Seller Contracts, all of which are listed
on Schedule 5.6, have been provided to Buyer. Each such Seller Contract is in
full force and effect and to Seller's knowledge, each other party thereto is not
in material breach or default of any terms or conditions of any such Seller
Contract.
5.7 Real Property. All of the Real Property interests owned or leased in
connection with the Systems, other than Excluded Assets, are described on
Schedule 5.7 a copy of which has been provided by Seller to Buyer. Seller has
the valid and enforceable right to use and possess all Real Property used in
connection with the Systems and to obtain ingress and egress from such Real
Property. No action based upon the power of eminent domain has been initiated or
to the actual knowledge of Seller threatened against Seller or any of the Assets
by any Governmental Authority which would require the relocation of any headend
or tower facility. Seller has received no notice and is not otherwise aware that
any owned Real Property does not meet all Legal Requirements that are material
to the operation of the Systems and the results of operations therefrom,
specifically including all material zoning and environmental Legal Requirements.
5.8 Legal Proceedings. Other than as set forth on Schedule 5.8 hereto,
there is no judgment or order outstanding, or any action, suit, complaint,
proceeding or investigation by or before any Governmental Authority, court or
arbitrator pending, or to Seller's knowledge, threatened, involving or affecting
all or any part of the Systems or Seller's rights to operate the Systems, except
for matters in the ordinary course covered by workers' compensation or general
liability insurance.
5.9 Legal and Regulatory Matters.
5.9.1 Seller has received no notice claiming a material
violation by Seller or the Systems of any Legal Requirement applicable to the
Systems as they are currently operated and to Seller's knowledge, there is no
basis for any claim that such a violation exists. Notwithstanding the foregoing,
no representation is made in this Section 5.9.1 with respect to the Copyright
Act of 1976 or the Communications Act, as to which the representations in
Sections 5.9.2 and 5.9.3 apply.
5.9.2 Seller has duly filed all cable television registrations
and other material filings which are to be filed by Seller under the
Communications Act. None of the Systems is rate regulated under the
Communications Act. Seller has monitored the Systems for signal leakage and
maintained applicable signal leakage logs, and all filings with the FCC with
respect thereto were complete in all material respects when each such filing was
made. In the past 24 months, Seller has made on a timely basis all requisite
filings and payments with the US Copyright Office pursuant to the Copyright Act
of 1976.
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5.9.3 Other than as set forth in Schedule 5.9 hereto, there is
no proceeding pending before the FCC relating to the Systems nor, to Seller's
knowledge has any subscriber filed a complaint with the FCC pertaining to rates
charged by the Systems. Seller agrees to disclose to Buyer the manner in which
Seller has complied with the applicable rate regulation provisions of the
Communications Act.
5.10 Patents, Trademarks and Copyrights. Seller does not own any patent,
patent right, trademark or copyright and is not a party to any license or
royalty agreement with respect to any patent, trademarks or copyright, except
for licenses respecting program material and obligations under the Copyright Act
of 1976 applicable to cable television systems generally and licenses to use
trademarks owned by Affiliates of Seller. To best of Seller's knowledge, the
current operations of the Systems do not violate or infringe upon the rights of
any Person in any copyright, trademark, service mark, patent, license, trade
secret or the like.
5.11 Tax Returns. Seller has filed all income, franchise, sales, use,
property, excise, payroll and other tax returns required to be filed with the
appropriate Governmental Authority. All taxes, fees and assessments of whatever
nature due and payable by Seller have been paid, except such amounts as are
being contested diligently and in good faith and are not in the aggregate
material to the Systems. There are no outstanding agreements or waivers
extending the statutory period of limitations applicable to any federal, state,
local or foreign income tax return for any period.
5.12 System Equipment. All equipment and other personal property included
with the Assets is sold "AS IS." No representation or warranty is made by Seller
that the design, configuration or condition of the Systems or the items of
equipment and other personal property comprising the Systems comply with the
technical standards of the FCC (including, without limitation, those set forth
in Subpart K of Part 76, Title 47, Code of Federal Regulations), the Federal
Aviation Administration or any franchising authority, and Seller expressly
disclaims any such warranty relating to design, configuration or condition of
the equipment and other personal property comprising the Systems and the
warranty of merchantability or fitness for a particular purpose, with respect to
the design or configuration of the Systems or the items of equipment and other
personal property that comprise the Systems.
5.13 System Information. Schedule 5.13 sets forth the following information
with respect to the Systems: (i) channel lineups, including designation of
service; (ii) a listing of charges for each type of service and band width;
(iii) a list indicating which broadcast stations have elected "must carry" or
retransmission consent pursuant to the 1992 Cable Act; and (iv) number of
Equivalent Subscribers. Such information is true in all material respects as of
the date of such information.
5.14 DISCLAIMER OF WARRANTY. ACKNOWLEDGES AND AGREES THAT SELLER SHALL NOT
BE LIABLE FOR OR BOUND IN ANY MANNER BY, AND BUYER HAS NOT RELIED UPON, ANY
EXPRESS OR IMPLIED, ORAL OR WRITTEN, INFORMATION, WARRANTY, GUARANTY, PROMISE,
STATEMENT, INDUCEMENT, OR REPRESENTATION PERTAINING TO THE BUSINESS, ASSETS,
OPERATIONS, PROSPECTS, INCOME, EXPENSE, OR LIABILITIES OF THE SYSTEMS EXCEPT AS
IS EXPRESSLY SET FORTH IN THIS SECTION 5, ELSEWHERE IN THIS AGREEMENT, OR IN THE
SCHEDULES ATTACHED TO THIS AGREEMENT. BUYER HAS CONDUCTED ITS OWN INSPECTION OF
THE SYSTEMS TO ITS OWN SATISFACTION AND HAS INDEPENDENTLY INVESTIGATED,
ANALYZED, AND APPRAISED THE CONDITION, VALUE, PROSPECTS, AND PROFITABILITY
THEREOF AND THE RISKS ASSOCIATED THEREWITH.
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5.15 Schedules. Any item that could be deemed to be properly disclosable on
more than one Schedule to this Agreement shall be deemed properly disclosed on
all such Schedules if it is disclosed in reasonable detail on any Schedule to
this Agreement to the extent that such disclosure is not misleading.
5.16 Finders and Brokers. 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.
5.17 Revenue and Cash Flow. For the year ended December 31, 1998, the
Systems generated revenues of no less than Six Hundred Twenty Thousand and
00/100 Dollars ($620,000.00) and cash flow of no less than Three Hundred Eight
Thousand and 00/100 ($308,000.00).
5.18 Homes Passed and Miles of Plant. As of March 31, 1999, the Systems pass
approximately 4,075 homes with approximately 72 miles of cable plant.
5.19 Employment Matters
5.19.1 Employees of the Systems as of March 31, 1999 are set
forth on Schedule 5.19.
5.19.2 Buyer shall have no liability or obligation with respect
to any of Seller's benefit plans, or termination thereof, as to any employee
who, after the Closing, becomes an employee of Buyer, and all such liabilities
or obligations relating to the period prior to the Closing Date shall be the
responsibility of Seller. The Closing will not result in any multi-employer plan
liability which could be assessed against Buyer.
5.19.3 Seller is not a party to any contract with any labor
organization, nor has it agreed to recognize any union or other collective
bargaining unit nor has any union or other collective bargaining unit been
certified as representing any of its employees with respect to the operation of
the Systems, (i) there is no representation or organizing effort pending or to
the best of Seller's knowledge threatened against, affecting or involving Seller
or the operation of the Systems, and (ii) Seller has experienced no strikes,
work stoppages, picketing, grievance proceedings, arbitrations, lockouts,
slowdowns, any other labor disputes, claims of unfair labor practices filed or,
to the best of Seller's knowledge threatened to be filed, with respect to the
operation of the Systems. Buyer shall have no liability or obligation with
respect to any unfair labor practices, charges and complaints relating to Seller
which occurred or arose prior to the Closing Date. There are no employment
agreements to which Seller is a party.
5.20 Retransmission Consents. Except as disclosed on Schedule 5.20, no
monies are being paid for retransmission consents with respect to the Systems,
and Seller is not a party to any contract which obligates it to pay monies for
retransmission of signals with respect to the Systems.
Section 6. Buyer's Representations and Warranties.
To induce Seller to enter into this Agreement, Buyer represents and
warrants to Seller, as of the date of this Agreement and as of the Closing, as
follows:
6.1 Organization and Qualification. Buyer is a limited partnership duly
organized, validly existing and in good standing under the laws of Delaware and
has all requisite power and authority to carry on its
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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 other 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 in any such jurisdiction where the
failure to be so qualified or licensed and in good standing would not have a
material adverse effect on Buyer or on the validity, binding effect or
enforceability of this Agreement.
6.2 Authority and Validity. Buyer has all requisite corporate power and
authority to execute and deliver, to perform its obligations under, and to
consummate the transactions contemplated by, 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 action of Buyer, and this
Agreement constitutes the valid and binding obligation of Buyer, enforceable in
accordance with its terms, except insofar as enforceability may be limited or
affected by applicable bankruptcy, insolvency, reorganization moratorium or
similar laws now or hereafter in effect affecting creditors' rights generally or
by principles governing the availability of equitable remedies.
6.3 No Breach or Violation. The execution, delivery and performance of this
Agreement by Buyer will not: (a) violate any provision of the charter or bylaws
of Buyer; (b) violate any Legal Requirement in any material respect; (c) require
any consent, approval or authorization of, or any filing with or notice to, any
Person; or (d) (i) violate, conflict with or constitute a material 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,
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 instrument or other
agreement to which Buyer is a party or by which Buyer or any of its assets is
bound or affected.
6.4 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 could be liable.
Section 7. Additional Covenants and Agreements.
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 reasonable access during normal business hours and upon
reasonable notice to the premises where the books and records of the Systems are
maintained and to the Assets and will furnish to Buyer and its representatives
such information regarding the Systems and the Assets that is readily available
to Seller and such other information as Buyer may from time to time reasonably
request, including applicable financial records relating to the revenue and cash
flow generated by the Systems for the year ended December 31, 1998.
7.2 Continuity and Maintenance of Operations. Except as Buyer may otherwise
agree in writing, until the Closing:, Seller will continue to operate the
Systems in the ordinary course of business, including maintenance of the
distribution plant and proceeding with any capital projects currently underway
substantially consistent with the capital budget provided to Buyer.
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7.3 Required Consents.
7.3.1 Seller will use commercially reasonable efforts, as soon
as practicable, to obtain all the Required Consents, other than those to be
obtained by Buyer pursuant to Section 7.3.2. Buyer will use commercially
reasonable efforts to cooperate with Seller to obtain all Required Consents.
7.3.2 Buyer will use commercially reasonable efforts, as soon as
practicable and in no event later than fifteen (15) days after the date of this
Agreement, to prepare and file with the appropriate Governmental Entity an FCC
Form 394 with respect to each franchise, provided, however, that if an FCC Form
394 is not deemed necessary or appropriate by the parties in order to secure on
a timely basis the necessary Required Consents with respect to any franchise,
then the filing of an FCC Form 394 shall not be deemed required hereunder.
7.4 Risk of Loss. 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, for a period of 20 days after the occurrence of the event,
prevent: (a) normal operation of any material portion of a System, or (b) the
replacement or restoration of the lost or damaged property, Seller will notify
Buyer of that fact within 10 days after such occurrence and Buyer, at any time
within 10 days after receipt of such notice, may, (i) if the System cannot be
returned to normal operations within 120 days from the date of such occurrence,
terminate this Agreement, (ii) delay the Closing (but not later than the date
specified in Section 10.1(b) until such time as the System is returned to normal
operations in all material respects, or (iii) consummate the transactions
contemplated by this Agreement. If Buyer terminates this Agreement pursuant to
this Section 7.4, Buyer and Seller will be discharged of any and all obligations
hereunder and Buyer will receive the Deposit Escrow. If Buyer does not terminate
this Agreement, all insurance proceeds payable as a result of the occurrence of
the event resulting in such loss or damage (to the extent not used to replace or
restore such lost or damaged property) and reasonably necessary for Buyer to
complete the replacement and restoration of such lost of damaged property,
except for any proceeds from business interruption insurance relating to the
loss of revenue for the period prior to the Closing Date, 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.
7.5 Franchise Extensions. Seller will use commercially reasonable efforts
to secure extensions of all franchises listed in Schedule 5.5 for a period of at
least five years beyond the Closing Date, provided that Seller shall not be
obligated hereby to make any cash payments to any franchise authority. Buyer
acknowledges that each franchise authority may require that channel capacity of
the System be increased and that such increase be accomplished within a
specified period of time. For purposes of this Agreement, Buyer and Seller shall
agree upon a commercially reasonable channel increase and completion schedule
that will constitute mutually acceptable franchisee commitments in connection
with such franchise extensions. Buyer agrees to use commercially reasonable
efforts to provide to each franchise authority such information as is requested
by such franchise authority in connection with obtaining the extension. If
requested by Seller, Buyer agrees to be represented, at Buyer's expense, at any
such meetings or hearings as may be scheduled to consider any application or
request, before any franchise authority.
7.6 Use of Seller's Name. For a period not to exceed 90 days after the
Closing Date, Buyer may continue to operate the Systems using the name Charter
Communications and all derivations and abbreviations of such name and related
marks. Within 90 days after the Closing Date, Buyer will discontinue using and
will dispose of all items of stationery, business cards and literature bearing
such names or marks. Notwithstanding the foregoing, Buyer will not be required
to remove or discontinue
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using any such name or mark that is affixed to converters or other items in or
to be used in subscriber homes or properties, or as are used in a similar
fashion making such removal or discontinuation impracticable for Buyer.
7.7 Satisfaction of Conditions. Each party will use commercially reasonable
efforts to satisfy, or to cause to be satisfied, the conditions to the
obligations of the other party to consummate the transactions contemplated by
this Agreement.
7.8 Confidentiality. The parties agree that no public disclosure or
publicity release pertaining to the existence of this Agreement or the subject
matter contained herein shall be issued without their mutual consent.
Notwithstanding the foregoing, such mutual consent shall not be required with
respect to disclosures to the public or to governmental agencies, to the
parties' partners, bankers or investors, or to any stock exchange upon which the
securities of a party (or securities of an affiliate which controls a party) may
be listed made by such party (or such affiliate) as each of their counsel shall
deem necessary to maintain compliance with and to prevent violations of
applicable federal or state laws or the rules of any such stock exchange.
7.9 Transfer Taxes. Sales, transfer, excise and other taxes, if any,
payable by reason of the transactions contemplated hereunder shall be paid by
the party upon whom the applicable law imposes such tax.
7.10 Bulk Sales. Buyer waives compliance with provisions of the Uniform
Commercial Code relating to bulk transfer and similar laws in connection with
the sale of the Assets, subject to the indemnification provisions of Section 11
hereof.
7.11 Employees. No later than 30 days prior to the Closing Date Buyer will
notify Seller of those employees of the Systems that Buyer intends to hire after
the Closing. Buyer will provide to such employees benefits equivalent to those
provided by Buyer to other employees of Buyer or Buyer's cable operator
affiliate.
Section 8. Closing. The Closing will be held on that month-end date that is
at least three days after all conditions to the Closing contained in this
Agreement (other than those based on acts to be performed at the Closing) have
been satisfied or waived, or such other date as may be agreed to by Buyer and
Seller. The Closing will be held at 10:00 a.m. local time at Seller's office
located at 12444 Powerscourt Drive, Suite 400, St. Louis, Missouri 63131, unless
Buyer and Seller agree that it shall be conducted by mail or overnight delivery
service, or at an alternate place and time.
Section 9. Conditions to Closing.
9.1 Conditions to the Obligations of Buyer and Seller. The obligations of
each party to consummate the transactions contemplated by this Agreement to take
place at the Closing are subject to the satisfaction or waiver, to the extent
permitted by applicable Legal Requirements, at or prior to the Closing Date of
the following conditions:
(a) no action, suit or proceeding is pending or threatened by or
before any Governmental Authority and no Legal Requirement has been enacted,
promulgated or issued or become or deemed applicable to any of the transactions
contemplated by this Agreement by any Governmental Authority, which would (i)
prohibit the sale of the Assets to Buyer or (ii) prevent or make illegal the
consummation of any transactions contemplated by this Agreement.
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(b) All of the Required Consents noted with an asterisk (*) on
Schedules 5.5, 5.6 and 5.7 have been obtained or given and are in full force and
effect.
9.2 Conditions to the Obligations of Buyer. The obligations of Buyer to
consummate the transactions contemplated by this Agreement to take place at the
Closing are subject to the satisfaction or waiver, to the extent permitted by
applicable Legal Requirements, at or prior to the Closing Date, of each of the
following conditions:
9.2.1 All representations and warranties of Seller contained in
this Agreement are true in all material respects, in each case on and as of the
Closing Date with the same effect as if made on and as of the Closing Date,
except for changes permitted or contemplated by this Agreement.
9.2.2 Seller in all material respects has performed and complied
with each obligation, agreement, covenant and condition required by this
Agreement to be performed or complied with by Seller at or prior to the Closing.
9.2.3 Seller has executed (or caused to be executed) and
delivered to Buyer each of the following items:
(a) a Bill of Sale and Assignment in the form attached as
Exhibit A;
(b) an Assignment and Assumption Agreement in the form
attached as Exhibit B;
(c) the Indemnity Escrow Agreement in the form attached as
Exhibit E; and
(d) an affidavit of Seller, under penalty of perjury, that
Seller is not a "foreign person" (as defined in the Foreign Investment in Real
Property Tax Act and applicable regulations) and that Buyer is not required to
withhold any portion of the consideration payable under this Agreement under the
provisions of such Act.
9.2.4 Seller has delivered to Buyer evidence that franchise
agreements have been extended to expire at least five years beyond the Closing
Date consistent with Section 7.5.
9.2.5 Seller has delivered releases, in form reasonably
satisfactory to Buyer, of all Encumbrances affecting any of the Assets (other
than Permitted Encumbrances).
9.2.6 Seller has delivered to Buyer: (a) a certificate, dated the
Closing Date, signed by an executive officer of Seller's general partner,
certifying that to his knowledge, (i) all appropriate action authorizing the
execution and delivery of the Closing Documents and the transactions
contemplated thereunder have been taken, and (ii) the conditions set forth in
Sections 9.1, 9.2.1 and 9.2.2 are satisfied; (b) certificates dated within
twenty (20) days of the Closing Date, issued by the States of Delaware and
Missouri, as to the good standing and qualification of Seller; (c) results of
UCC searches in all states and counties in which the Assets are located either
reflecting that the Assets are free from liens or accompanied by appropriate
termination statements, and (d) such other documents as Buyer may reasonably
request in connection with the transactions contemplated by this Agreement.
9.2.7 Seller shall have reasonably cooperated with Buyer in
obtaining, at Buyer's cost and expense, such title insurance with respect to the
Assets as Buyer deems necessary.
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9.2.8 Buyer has received the opinion of Thompson Coburn LLP,
counsel for Seller, and an opinion of Cole, Raywid & Braverman, FCC counsel for
Seller, each dated the Closing Date, as to certain legal matters regarding the
transactions contemplated by this Agreement and in a form reasonably acceptable
to Buyer.
9.2.9 Buyer has received from Seller a Non-Competition Agreement
in the form attached as Exhibit C.
9.3 Conditions to Obligations of Seller. The obligations of Seller to
consummate the transactions contemplated by this Agreement to take place at the
Closing are subject to the completion or waiver by Seller, to the extent
permitted by applicable law, at or prior to the Closing Date, of each of the
following conditions:
9.3.1 Buyer has paid the Base Purchase Price to Seller.
9.3.2 All representations and warranties of Buyer contained in
this Agreement are true and correct in all material respects, in each case on
and as of the Closing Date with the same effect as if made on and as of the
Closing Date, except for changes permitted or contemplated by this Agreement.
9.3.3 Buyer in all material respects has performed and complied
with each obligation, agreement, covenant and condition required by this
Agreement to be performed or complied with by Buyer at or prior to the Closing.
9.3.4 Seller has received the opinion of Dement, Vandivort &
Dement, counsel for Buyer, dated the Closing Date, as to certain legal matters
regarding the transactions contemplated by this Agreement and in a form
reasonably acceptable to Seller.
9.3.5 Buyer has executed and delivered to Seller an Assumption
Agreement in the form attached as Exhibit B.
9.3.6 Buyer has executed and delivered the escrow agreement
applicable to the Indemnity Escrow Agreement in the form attached as Exhibit E.
9.3.7 Buyer has delivered to Seller the following: (a) a
certificate, dated the Closing Date, signed by an executive officer of Buyer,
certifying that to his or her knowledge, (i) all appropriate action authorizing
execution and delivery of the Closing Documents and the transactions
contemplated thereunder have been taken, and (ii) the conditions set forth in
Sections 9.1, 9.3.2 and 9.3.3, are satisfied; (b) certificates dated within
twenty (20) days of the Closing Date, issued by the State of Delaware, as to the
good standing and qualification of Buyer; and (c) such other documents as Seller
may reasonably request in connection with the transactions contemplated by this
Agreement.
9.4 Waiver of Conditions. Any party may waive in writing any or all of the
conditions to its obligations under this Agreement.
Section 10. Termination.
10.1 Events of Termination. This Agreement may be terminated and the
transactions contemplated by this Agreement may be abandoned at any time prior
to the Closing:
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(a) by the mutual written consent of Buyer and Seller;
(b) by either party, if the transactions contemplated by
this Agreement to take place at the Closing have not been consummated by
December 31, 1999, or if any event has occurred that makes it reasonably likely
that any of the conditions to such party's obligation to consummate the
transactions contemplated by this Agreement cannot be met by March 31, 2000, for
any reason other than (i) a breach or default by such party in the performance
of any of its obligations under this Agreement or (ii) the failure of any
material representation or warranty of such party to be accurate;
(c) as otherwise provided in this Agreement.
10.2 Liabilities in Event of Termination. If the transactions contemplated
by this Agreement are not consummated as a result of a material breach by one
party of any of its obligations under this Agreement and the other party is not
in material breach of any of its obligations under this Agreement, the remedy of
specific performance shall be an available remedy to the non-breaching party,
provided, however, that if the non-breaching party does not seek to enforce the
remedy of specific performance, or if such remedy is sought but is not granted,
the only alternative remedy to specific performance that shall be available to
the non-breaching party shall be payment of the Deposit Escrow, which payment
shall constitute liquidated damages for the default by the breaching party and
shall be in full settlement of any damages of any nature or kind that the
non-breaching party may suffer or allege to have suffered as a result of any
breach by the breaching party. If the transactions contemplated by this
Agreement are not completed for any reason other than as set forth in the
preceding sentence, the Buyer shall be entitled to a refund of the Deposit
Escrow.
10.3 Procedure Upon Termination. In the event of the termination of this
Agreement by Buyer or Seller pursuant to this Section 10, notice of such
termination will promptly be given by the terminating party to the other.
Section 11. Survival of Representations and Warranties; Indemnification.
11.1 Survival of Representations and Warranties. The representations and
warranties of Seller in this Agreement and in the documents and instruments to
be delivered by Seller pursuant to this Agreement will survive until six months
after the Closing Date, except that (a) all such representations and warranties
with respect to any federal, state or local taxes or personal injury claims will
survive until the expiration of the applicable statute of limitations (including
any extensions), and (b) all such representations and warranties with respect to
ownership of the Assets in Section 5.4 will survive the Closing and will
continue in full force and effect without limitations. The representations and
warranties of Buyer in this Agreement and in the documents and instruments to be
delivered by Buyer pursuant to this Agreement will survive until six months
after the Closing Date. The periods of survival of the representations and
warranties prescribed by this Section 11.1 are referred to as the "Survival
Period." The liabilities of the parties under their respective representations
and warranties will expire as of the expiration of the applicable Survival
Period; provided, however, that such expiration will not include, extend or
apply to any representation or warranty, the breach of which has been asserted
by Buyer in a written notice to Seller before such expiration or about which
Seller has given Buyer written notice before such expiration indicating that
facts or conditions exist that, with the passage of time or otherwise, can
reasonably be expected to result in a breach (and describing such potential
breach in reasonable detail). The covenants and agreements of the parties in
this Agreement and in the other documents and
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<PAGE> 23
instruments to be delivered by Seller or Buyer pursuant to this Agreement will
survive the Closing and will continue in full force and effect without
limitation.
11.2 Indemnification by Seller. Seller will indemnify defend and hold
harmless Buyer and Buyer's shareholders, directors, officers, employees, agents,
successors and assigns, from and against:
(a) all losses, damages, liabilities, deficiencies, or
obligations of or to Buyer or any such other indemnified Person resulting from
or arising out of (i) any breach of any representation or warranty made by
Seller in this Agreement, (ii) any breach of any covenant, agreement or
obligation of Seller contained in this Agreement, (iii) any act or omission of
Seller with respect to, or any event or circumstance related to, the ownership
or operation of the Assets or the Systems, which act, omission, event or
circumstance occurred or existed prior to or at the Closing Date, without regard
to whether a claim with respect such matter is asserted before or after the
Closing Date, (iv) Seller's failure to comply with the bulk sales provisions of
the UCC, or (v) any liability or obligation not included in the Assumed
Liabilities.
(b) all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from any of the
foregoing.
11.3 Indemnification by Buyer. Buyer will indemnify, defend and hold
harmless Seller and Seller's general partner's shareholders, directors,
officers, employees, agents, successors and assigns, from and against:
(a) all losses, damages, liabilities deficiencies or
obligations of or to Seller or any such other indemnified Person resulting from
or arising out of (i) any breach of any representation or warranty made by Buyer
in this Agreement, (ii) the breach of any covenant, agreement or obligation of
Buyer contained in this Agreement, (iii) the inability of Buyer to pay the
Purchase Price, or (iv) the failure by Buyer to perform any of its obligations
in respect of the Assumed Liabilities; and
(b) all claims, actions, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including settlement costs and reasonable legal, accounting, experts' and other
fees, costs and expenses) incident or relating to or resulting from any of the
foregoing.
11.4 Third Party Claims. Promptly after the receipt by any party of notice
of any claim, action, suit or proceeding by any Person who is not a party to
this Agreement (collectively, an "Action"), which Action is subject to
indemnification under this Agreement, such party (the "Indemnified Party') will
give reasonable written notice to the party from whom indemnification is claimed
(the "Indemnifying Party"). The Indemnified Party will be entitled, at the sole
expense and liability of the Indemnifying Party, to exercise full control of the
defense, compromise or settlement of any such Action unless the Indemnifying
Party, within a reasonable time after the giving of such notice by the
Indemnified Party notifies the indemnified Party in writing of the Indemnifying
Party's intention to assume such defense, and retains legal counsel to conduct
the defense of such Action. The other party will cooperate with the party
assuming the defense, compromise or settlement of any such Action in accordance
with this Agreement in any manner that such party reasonably may request. If the
Indemnifying Party so assumes the defense of any such Action, the Indemnified
Party will have the right to employ separate counsel and to participate in (but
not control) the defense, compromise or settlement of the Action, but the fees
and expenses of such counsel will be at the expense of the Indemnified Party
unless (i) the Indemnifying Party has agreed to pay such fees and expenses, (ii)
any relief other than the payment of money damages
-17-
<PAGE> 24
is sought against the Indemnified Party or (iii) the Indemnified Party will have
been advised by its counsel that there may be one or more defenses available to
it which are different from or additional to those available to the Indemnifying
Party and in any such case that portion of the fees and of such separate counsel
that are reasonably related to matters covered by the indemnity provided in this
Section 11 will be paid by the Indemnifying Party. No Indemnified Party will
settle or compromise any such Action for which it is entitled to indemnification
under this Agreement without the prior written consent of the Indemnifying Party
unless the Indemnifying Party has failed, after reasonable notice, to undertake
control of such Action in the manner provided in this Section 11.4. No
Indemnifying Party will settle or compromise any such Action (A) in which any
relief other than the payment of money damages is sought any Indemnified Party
or (B) in the case of any Action relating to the Indemnified Party's liability
for any tax, if the effect of such settlement would be an increase in the
liability of the Indemnified Party for the payment of any tax for any period
beginning after the Closing Date, unless the Indemnified Party consents in
writing to such compromise or settlement.
11.5 Limitations on Liability by Seller. Seller will not be liable for
indemnification arising solely under Section 11.2(a) for (a) any losses,
damages, liabilities, deficiencies or obligations of or to Buyer or any other
person entitled to indemnification from Seller or (b) any claims, actions,
suits, proceedings, demands, judgments, assessments, fines, interest, penalties,
costs and expenses (including settlement costs and reasonable legal, accounting,
experts' and other fees, costs and expenses) incident or relating to or
resulting from any of the foregoing (the items described in clauses (a) and (b)
collectively being referred to for purposes of this Section 11.5 as "Buyer
Damages") unless the amount of Buyer Damages for which Seller would, but for the
provisions of this Section 11.5, be liable exceeds, on an aggregate basis,
twenty-five thousand dollars, in which case Seller will only be liable for such
Buyer Damages in excess of such amount, which will be due and payable within 15
days after Seller's receipt a statement therefor. The aggregate liability of
Seller to the Indemnified Parties for Buyer Damages shall be limited to the
total outstanding amount available for payment pursuant to the Indemnity Escrow
(the "Indemnity Amount"). Any claim for indemnification for Buyer Damages shall
be made promptly upon discovery thereof, but in no event later than six months
after the Closing Date. Claims for indemnification pursuant to Section 11.2 that
are with respect to federal, state or local taxes, liens or third party claims
incurred prior to the Closing Date must be presented no later than expiration of
the applicable statute of limitations.
11.6 Limitations on Indemnification - Buyer. Buyer will not be liable for
indemnification arising solely under Section 11.3(a) for (a) any losses,
damages, liabilities deficiencies or obligations of or to Seller or any other
person entitled to indemnification from Buyer or (b) any claims, actions, suits,
proceedings, demands, judgments, assessments, fines, interest, penalties, costs
and expenses (including settlement costs and reasonable legal, accounting,
experts' and other fees, costs and expenses) incident or relating to or
resulting from any of the foregoing the items described in clauses (a) and (b)
collectively being referred to for purposes of this Section 11.6 as "Seller
Damages") unless the amount of Seller Damages for which Buyer would, but for the
provisions of this Section 11.6, be liable exceeds, on an aggregate basis,
twenty-five thousand dollars, in which case Buyer will only be liable for such
Seller Damages in excess of such amount, which will be due and payable within 15
days after Buyer's receipt of a statement therefor.
Section 12. Miscellaneous.
12.1 Parties Obligated and Benefited. Subject to the limitations set forth
below, this Agreement will be binding upon the parties and their respective
assigns and successors in interest and will inure solely to
-18-
<PAGE> 25
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. Except for (i) the assignment of this Agreement by Buyer to
one or more of its Affiliates prior to that date which is no more than fifteen
(15) days after the date of this Agreement or (ii) the whole or partial
assignment by Buyer of the right to purchase one or more of the Systems prior to
the Closing Date, no party will assign any of its rights under this Agreement or
delegate any of its duties under this Agreement; provided, however, that in the
event of the assignment by Buyer of the right to purchase one or more of the
Systems pursuant to this Section 12.1, the failure of any assignee to
subsequently consummate the purchase of such System(s) shall not relieve Buyer
of its obligation to purchase such System(s) under this Agreement.
12.2 Notices. Any notice, request, demand, waiver or other communication
required or permitted to be given under this Agreement will be in writing and
will be deemed to have been duly given only if delivered in person or by first
class, prepaid, registered or certified mail, or sent by courier or, if receipt
is confirmed, by telecopier:
To Seller at:
Cencom Cable Income Partners II, L.P.
12444 Powerscourt Drive, Suite 400
St. Louis, Missouri 63131
Attention: Marcy Lifton
Telecopy: 314-965-6640
With a copy to:
Thompson Coburn LLP
One Mercantile Center, Suite 3400
St. Louis, Missouri 63101
Attention: Benjamin H. Hulsey
Telecopy: (314) 552-7000
To Buyer at:
Galaxy Telecom, L.P.
1220 Main Street
Sikeston, Missouri 63801
Attention: Keith Davidson
Telecopy: (573) 471-7281
With a copy to:
Dement, Vandivort & Dement
316 South Kingshighway
Sikeston, Missouri 63801
Attention: William Clayton Vandivort
Telecopy: (573) 471-8282
Any party may change the address to which notices are required to be sent by
giving notice of such change in the manner provided in this Section 12.2. All
notices will be deemed to have been received on
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<PAGE> 26
the date of delivery or on the fifth Business Day after mailing in accordance
with this Section, except that any notice of a change of address will be
effective only upon actual receipt.
12.3 Attorneys' Fees. In the event of any action or suit based upon or
arising out of any alleged breach by any party of any representation, warranty,
covenant or agreement contained in this Agreement, the prevailing party will be
entitled to recover reasonable attorneys' fees and other costs of such action or
suit from the other party.
12.4 Expenses. Except as otherwise expressly provided in this Agreement,
each party will pay all of its expenses, including attorneys', brokers' 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.
12.5 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.
12.6 Captions. This article and section captions of this Agreement are for
convenience only and do not constitute a part of this Agreement.
12.7 Choice of Law. THIS AGREEMENT AND THE RIGHTS OF THE PARTIES UNDER IT
WILL BE GOVERNED BY AND CONSTRUED IN ALL RESPECTS IN ACCORDANCE WITH THE LAWS OF
THE STATE OF MISSOURI, , WITHOUT REGARD TO THE CONFLICTS OF LAWS RULES OF
MISSOURI.
12.8 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 work "include" and derivatives of that word are used in this
Agreement in an illustrative sense rather than in a limiting sense.
12.9 Rights Cumulative. 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.
12.10 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.
12.11 Time. Time is of the essence under this Agreement. 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.
12.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original.
12.13 Entire Agreements. 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
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<PAGE> 27
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.
12.14 Severability. Any term or provision of this Agreement which is invalid
or unenforceable will be ineffective to the extent of such invalidity or
unenforceable without rendering invalid or unenforceable the remaining rights of
the Person intended to be benefited by such provision or any other provisions of
this Agreement.
12.15 Construction. This Agreement has been negotiated by Buyer and Seller
and their respective legal counsel, and legal or equitable principles that might
require the construction of this Agreement or any provision of this Agreement
against the party drafting this Agreement will not apply in any construction or
interpretation of this Agreement.
12.16 Right to Specific Performance. Notwithstanding anything to the contrary
set forth herein or elsewhere, (i) Seller shall be entitled, at its sole
options, to (a) waive compliance by Buyer with any term or provision of this
Agreement (including, without limitation, any closing conditions) and/or (b)
without the posting of any bond or other security, require Buyer to consummate
and specifically perform the purchase of the Systems from Seller in accordance
with all other terms of this Agreement, if necessary through injunction or other
court order or process, if the conditions to the obligations of Buyer to effect
the Closing have been satisfied or are capable of being satisfied if the Closing
were to be held, and (ii) the Buyer shall be entitled, at its sole option to (a)
waive compliance by the Seller with any term or provision of this Agreement
(including, without limitation, any closing conditions) and/or (b) without the
posting of any bond or other security, require Seller to consummate the
specifically perform the sale of Systems to Buyer in accordance with all other
terms of this Agreement, if necessary through injunction or other court order or
process, if the conditions to the obligations of the Seller to effect the
Closing have been satisfied or are capable of being satisfied if the Closing
were to be held. Any such equitable relief granted shall not be exclusive and
Seller or Buyer, as the case may be, shall also be entitled to seek money
damages.
[signatures on next page]
-21-
<PAGE> 28
The parties have executed this Asset Purchase Agreement as of the day
and year first above written.
SELLER:
CENCOM CABLE INCOME PARTNERS II, L.P.
By: Cencom Properties II, Inc., its general partner,
By:
----------------------------------------------------
Name:
----------------------------------------------------
Title:
----------------------------------------------------
BUYER:
GALAXY TELECOM, L.P.
By:
-----------------------------------------------------
Name:
-----------------------------------------------------
Title:
-----------------------------------------------------
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<PAGE> 29
Exhibit A
Bill of Sale
KNOW ALL MEN BY THESE PRESENTS THAT:
CENCOM CABLE INCOME PARTNERS II, L.P., a Delaware limited partnership
("Seller"), for and in consideration of Ten Dollars ($10.00) paid to Seller by
GALAXY TELECOM, L.P., a Delaware limited partnership ("Buyer"), pursuant to that
certain Asset Purchase Agreement, dated May 5, 1999, between Seller and Buyer
(the "Purchase Agreement"), and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, does hereby GRANT,
BARGAIN, SELL, TRANSFER, CONVEY and DELIVER unto Buyer, its successors and
assigns, good and marketable title to all of the assets, properties, rights,
titles and privileges of Seller of every kind, character and description,
whether tangible, intangible, real personal or mixed, of whatever description
and wherever located, involved in, related to, owned, used or held for use
previously in connection with the ownership, use or operation of the Systems,
whether or not required to be listed on Seller's balance sheet in accordance
with GAAP, including, without limitation, all additions, accessions and
substitutions made prior to the Closing Date as permitted pursuant to the terms
of the Purchase Agreement (the "Assets"), but excluding the Excluded Assets,
free and clear of all defaults, liens, claims, charges, encumbrances, security
interests, pledges, restrictions, deeds of trust, mortgages and title
impediments, except for the Permitted Encumbrances, as defined in Section 1.5 of
the Purchase Agreement.
Capitalized terms used but not otherwise defined herein shall have the
meanings given to such terms in the Purchase Agreement.
The Assets shall include (not by way of limitation) the following:
(a) all the rights of Seller under any and all franchises,
licenses (including those required by the FCC, permits, authorizations,
easements, registrations, leases, variances, consents and certificates
and similar rights which authorize or are required in connection with
the operation of the Systems including any applications for any of the
foregoing (collectively, the "Governmental Permits") that are obtained
from or are pending with any federal, state, county, municipal or local
government and any governmental agency, bureau, commission, authority,
body, court (or other judicial body), administrative or executive
agency, legislative or quasi-legislative body, commission, council or
other agency, including any such agency, authority or body responsible
for the issuance or administration of any Governmental Permit or whose
consent is required for the sale and transfer of the Assets (each, a
"Governmental Authority");
(b) all the rights of Seller under any and all subscription
contracts with subscribers of Seller, pole attachment agreements,
access agreements and all other contracts, leases, agreements or
undertakings (other than those that are included in the Excluded Assets
or which constitute Governmental Permits or Real Property), written or
oral, relating primarily to the ownership, operation, use or
maintenance of the Systems or the Assets (the "Contracts").
(C) all of the real property interests of Seller which relate
primarily to the ownership, use, or operation of the Systems, including
fee and office and other leasehold interests, and all improvements
thereon and rights related thereto, such as towers, fixtures,
<PAGE> 30
distribution plant, head-end equipment, subscriber installations,
licenses, easements, right of way and other interests therein
(collectively, the "Real Property");
(d) all accounts receivable owed to Seller in connection with
the operation of the Systems and uncollected as of the Closing Date
(collectively, the "Accounts Receivable");
(e) all subscriber deposits (including converter deposits),
tenant deposits and other amounts collected by Seller for services,
materials or equipment to be supplied from and after and prorated as of
the Closing Date;
(f) all items of tangible personal property owned, used or
held for use by Seller primarily in connection with the operation of
the Systems, including, without limitation, all physical plant and
equipment, including electronic devices, distribution plant, head-end
equipment, reception sites and related equipment, vehicles and all
inventories of materials, supplies, traps, test equipment, spare parts,
converters and tools (collectively, the "Equipment"); and
(g) all files, books, records and subscriber lists owned, used
or held for use by Seller primarily in connection with the Systems that
are maintained by Seller on the premises of the Systems and all other
licenses, permits and operating documents that are owned, used or held
for use by Seller exclusively in connection with the Systems wherever
located;
but, shall not include the Excluded Assets.
Notwithstanding the foregoing, Seller is not transferring any of the
Excluded Assets, as defined in Section 4.2 of the Purchase Agreement, which term
shall mean those items described in Section 4.2 to the Purchase Agreement.
TO HAVE AND TO HOLD, all and singular, the Assets, together with the
rights, titles, and interests thereto in anyway belonging to Buyer, its
successors and assigns, for their own use forever, free and clear of all
defaults, liens, claims, charges, security interests, mortgages, deeds of trust,
encumbrances, pledges, restrictions and title impediments, other than Permitted
Encumbrances, and Seller does hereby bind itself, its successors and assigns, to
warrant and defend the title to the Assets unto the Buyer, its successors and
assigns, to the extent provided in the Purchase Agreement.
Seller shall execute and deliver from time to time hereafter, upon
reasonable request, all such further documents and instruments as may be
necessary to deliver and transfer title in the Assets to Buyer.
This Bill of Sale is executed and delivered by Seller pursuant to the
Purchase Agreement, subject to the covenants, representations and warranties
thereof. No provisions set forth in this Bill of Sale shall be deemed to
enlarge, alter or amend the terms or provisions of the Purchase Agreement. In
the event of any conflict between the provisions of this Bill of Sale and the
Purchase Agreement, the provisions of the Purchase Agreement shall control.
This Bill of Sale shall be governed by and construed in accordance with
the laws of the State of Missouri, without regard to the conflict of law
provisions thereof.
[signature on next page]
-2-
<PAGE> 31
IN WITNESS WHEREOF, CENCOM CABLE INCOME PARTNERS II, L.P., by a duly
authorized officer has executed this Bill of Sale as of the day of ,
------ ------
199 .
--
CENCOM CABLE INCOME PARTNERS II, L.P.
By: Cencom Properties II, Inc., its general partner
By:
------------------------------------------------
Title:
------------------------------------------------
-3-
<PAGE> 32
Exhibit B
Assignment and Assumption Agreement
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT is made as of the ______ day
of __________, 1999, by and among GALAXY TELECOM, L.P., a Delaware limited
partnership ("Buyer"), and CENCOM CABLE INCOME PARTNERS II, L.P., a Delaware
limited partnership ("Seller").
WHEREAS, pursuant to an Asset Purchase Agreement dated the 4th day of
May, 1999 (the "Purchase Agreement"), made between Buyer and Seller, Seller
agreed to sell, and Buyer agreed to purchase certain of the assets owned by
Seller, as more fully described in the Purchase Agreement;
WHEREAS, Section ___ of the Purchase Agreement provides that the Buyer
shall, as of the Closing Date, assume certain of Seller's obligations and
liabilities as described therein; and
WHEREAS, Section ___ of the Purchase Agreement contemplates that this
Assignment and Assumption Agreement be entered into and delivered at Closing.
NOW, THEREFORE, in consideration of the promises, covenants and
agreements contained in the Purchase Agreement, the closing of the transactions
contemplated by the Purchase Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
each of the parties, Seller and Buyer agree as follows:
1. Capitalized terms used but not otherwise defined herein shall have
the meanings given to such terms in the Purchase Agreement.
2. Seller hereby assigns and transfers to Buyer all of the agreements,
franchises, leases, easements and other Contracts disclosed by Seller in the
Schedules to the Purchase Agreement relating to the operations of the Systems
(other than Excluded Assets) (collectively, the "Assumed Obligations").
3. Subject to the terms of Section 3 and the other terms and provisions
of the Purchase Agreement, Buyer hereby assumes and agrees to perform only those
obligations of Seller for which Buyer has received an adjustment pursuant to
Section 3 of the Purchase Agreement and those obligations of Seller arising
under or in connection with the Assumed Obligations. In addition, Buyer shall
assume (i) all obligations relating to the Assets entered into by Seller in the
ordinary course of business consistent with past practices as reflected in the
Seller Financial Statements between the date hereof and the Closing Date (other
than obligations, if any, relating to the Excluded Assets), to the extent such
obligations continue after the Closing and (ii) all liabilities incurred in the
ordinary course of business consistent with past practices as reflected in the
Seller Financial Statements relating to (A) all customer advance payments and
deposits, prepaid advertising revenues and other prepaid revenues or income
received or held by Seller for services to be rendered or obligations to be
performed in connection with the Systems subsequent to the Closing Date, to the
extent Buyer has received an adjustment reflecting such advance payments under
Section 3 of the Purchase Agreement, and (B) the performance of the Contracts
from and after the Closing Date.
4. Seller and Buyer shall execute and deliver from time to time
hereafter, upon reasonable request, all such further documents and instruments,
and shall do and perform all such acts as may be necessary, to give full effect
to the intent and meaning of the Purchase Agreement and this Assignment and
Assumption Agreement.
<PAGE> 33
5. This Assignment and Assumption Agreement is executed and delivered
by Seller and Buyer pursuant to the Purchase Agreement, subject to the
covenants, representations and warranties thereof. No provisions set forth
herein shall be deemed to enlarge, alter or amend the terms or provisions of the
Purchase Agreement. In the event of any conflict between the provisions herein
and the Purchase Agreement, the provisions of the Purchase Agreement shall
control.
6. This Assignment and Assumption Agreement shall be governed by and
construed in accordance with the laws of the State of Missouri.
7. This Assignment and Assumption Agreement may be executed in several
counterparts, all of which taken together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Assignment and
Assumption Agreement to be executed and delivered by their duly authorized
partners or officers as of the day and year first written above.
SELLER:
CENCOM CABLE INCOME PARTNERS II, L.P.
By: Cencom Properties II, Inc., its general partner
By:
------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
BUYER:
GALAXY TELECOM, L.P.
By:
------------------------------------------------
Name:
------------------------------------------------
Title:
------------------------------------------------
-2-
<PAGE> 34
STATE OF____________________________)
)
COUNTY OF___________________________)
On this _______ day of May, 1999, before me, ____________________, a
Notary Public in and for said state, personally appeared
__________________________, _________________ of __________________________, a
___________________, known to me to be the person who executed the within
instrument in behalf of said corporation, which corporation was acting as the
general partner of __________________________, a Delaware limited partnership,
and acknowledged to me that (s)he executed the same for the purposes therein
stated.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the County and State aforesaid, the day and year first above
written.
------------------------------------------
Notary Public
My Commission Expires:
- -----------------------------
STATE OF____________________________)
)
COUNTY OF___________________________)
On this _______ day of May, 1999, before me, ____________________, a
Notary Public in and for said state, personally appeared
__________________________, _________________ of __________________________, a
___________________, known to me to be the person who executed the within
instrument in behalf of said corporation, and acknowledged to me that (s)he
executed the same for the purposes therein stated.
IN TESTIMONY WHEREOF, I have hereunto set my hand and affixed my
official seal in the County and State aforesaid, the day and year first above
written.
------------------------------------------
Notary Public
My Commission Expires:
- -----------------------------
-3-
<PAGE> 35
EXHIBIT C
NON-COMPETITION AGREEMENT
<PAGE> 36
EXHIBIT D
DEPOSIT ESCROW AGREEMENT
<PAGE> 37
EXHIBIT E
INDEMNITY ESCROW AGREEMENT
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 408,206
<SECURITIES> 0
<RECEIVABLES> 55,516
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 517,997
<PP&E> 4,325,317
<DEPRECIATION> 0
<TOTAL-ASSETS> 8,415,440
<CURRENT-LIABILITIES> 7,447,218
<BONDS> 3,800,000
0
0
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</TABLE>
