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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 30, 1996
--------------------------------
Phoenix Leasing Cash Distribution Fund III, A California Limited Partnership
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(Exact name of registrant as specified in its charter)
California 0-16615 68-0062480
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
2401 Kerner Blvd, San Rafael CA 94901-5527
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (415) 485-4500
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Item 2. Acquisition or Disposition of Assets.
(a) Sale of Cable Television Systems.
Phoenix Grassroots Cable Systems, L.L.C., a majority owned subsidiary of Phoenix
Leasing Cash Distribution Fund III (collectively referred to as "the
Partnership") entered into an Asset Purchase Agreement (the "Agreement") with
Frontiervision Operating Partners, L.P. for the sale of cable television systems
and all assets used in the operation of such cable television systems (the
"Cable Television Systems") owned by Phoenix Grassroots Cable Systems, L.L.C.
The assets sold generally consists of cable television headend equipment, cable
plant, franchise agreements, subscriber lists, leased property, land, tools,
vehicles and miscellaneous other assets. The closing date for the sale of the
cable television systems was August 30, 1996. The cable television systems of
Phoenix Grassroots Cable Systems, L.L.C. were sold for a net adjusted cash
purchase price of $9,069,320, of which $200,000 is currently being held as a
deposit in an escrow account for any asserted indemnification claims. The net
carrying value of the assets sold at August 30, 1996 was approximately $8.8
million.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements. None.
(b) Pro Forma Financial Information.
The cable television systems and assets of Phoenix Grassroots Cable Systems,
L.L.C. were acquired through foreclosure upon an outstanding note receivable on
February 14, 1996. The cable television systems were subsequently sold on August
30, 1996. As a result, pro forma financial statements are not being presented
since the historical financial statements as of and for the year ended December
31, 1995 did not include any material operations of the cable television
systems.
(c) Exhibits.
2. Asset Purchase Agreement between Phoenix
Grassroots Cable Systems, L.L.C. and Frontiervision
Operating Partners, L.P.. (40 pages)
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf of the
undersigned hereunto duly authorized.
PHOENIX LEASING CASH DISTRIBUTION FUND III
A CALIFORNIA LIMITED PARTNERSHIP
(Registrant)
Date Title Signature
September 16, 1996 Senior Vice President, /s/ Bryant J. Tong
- ------------------ Financial Operations ------------------
(Principal Accounting Officer) (Bryant J. Tong)
of Phoenix Leasing Incorporated
the General Partner
Exhibit 2 - Page 1
ASSET PURCHASE AGREEMENT
BETWEEN
PHOENIX GRASSROOTS CABLE SYSTEMS, L.L.C.
AND
FRONTIERVISION OPERATING PARTNERS, L.P.
DATED
July 19, 1996
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Exhibit 2 - Page 2
LIST OF EXHIBITS AND SCHEDULES
Exhibit A List of Communities
Exhibit B Form of Opinion of Seller's Counsel
Schedule 2.2 Excluded Assets
Schedule 2.6 Utility Liabilities
Schedule 3.4 Franchises
Schedule 3.5 Real Property
Schedule 3.6 Personal Property
Schedule 3.7 Contracts
Schedule 3.8 Consents
Schedule 3.9 Existing Liens to Be Discharged Prior to Closing
Schedule 3.10 Information on Systems
Schedule 3.11 Financial Statements
Schedule 3.12 Employee Benefit Plans
Schedule 3.13 Employees
Schedule 3.14 Taxes
Schedule 3.15 Claims and Legal Actions
Schedule 3.16 Environmental Matters
Schedule 3.18 Exceptions to Conduct of Business in Ordinary Course
Schedule 3.19 FCC Matters
Schedule 3.20 Bonds and Letters of Credit
Schedule 5.1 Conduct of the Systems
Schedule 5.7 Consent Form
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Exhibit 2 - Page 3
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated July 19, 1996, by and between
FRONTIERVISION OPERATING PARTNERS, L.P., a Delaware limited partnership
("Buyer"), and PHOENIX GRASSROOTS CABLE SYSTEMS, L.L.C. a Delaware limited
liability company ("Seller").
R E C I T A L S:
1. Seller owns and operates cable television systems serving the communities
listed on Exhibit A (collectively, the "Systems").
2. Seller desires to sell, and Buyer wishes to buy, all of Seller's assets
used in the operation of the Systems and the cable television business
related thereto for the price and on the terms and conditions hereinafter
set forth.
A G R E E M E N T S:
In consideration of the above recitals and the covenants and agreements
contained herein, Seller and Buyer agree as follows:
1. DEFINED TERMS
The following terms shall have the following meanings in this Agreement:
1.1"Accounts Receivable" means the right to payment for services billed
by Seller (including, without limitation, those billed to subscribers of the
Systems and those for services and advertising time provided by the Seller) and
unpaid as of the Closing Date.
1.2"Agreement" means this Asset Purchase Agreement.
1.3"Assets" means all the tangible and intangible assets, real,
personal and mixed, comprising or that are otherwise used in connection with the
conduct of the business or operations of the Systems, including, without
limitation, those specified in Section 2.1 but excluding the Excluded Assets.
1.4"Closing" means the consummation of the transactions contemplated by
this Agreement.
1.5"Closing Date" means the date of the Closing specified in Section 7.
1.6"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the regulations thereunder, or any subsequent legislative enactment thereof, as
in effect from time to time.
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Exhibit 2 - Page 4
1.7"Compensation Arrangement" shall mean any plan or compensation
arrangement other than an Employee Plan or a Multiemployer Plan, whether written
or unwritten, which provides to employees or former employees of Seller or any
entity related to Seller (under the terms of Sections 414(b), (c), (m) or (o) of
the Code) with respect to the Systems any compensation or other benefits,
whether deferred or not, in excess of base salary or wages and excluding
overtime pay, including, but not limited to, any bonus or incentive plan, stock
rights plan, deferred compensation arrangement, stock purchase plan, severance
pay plan and any other perquisites and employee fringe benefit plan.
1.8"Consents" means all of the consents, permits or approvals of
government authorities and other third parties necessary to transfer the Assets
to Buyer or otherwise to consummate lawfully the transactions contemplated
hereby in compliance with all contractual obligations to third parties,
including estoppel language reasonably satisfactory to Buyer confirming the
absence of defaults under the applicable Contract or Franchise (as those terms
are defined below).
1.9"Contracts" means all pole attachment and conduit agreements,
personal property leases, subscription agreements with customers for cable
services provided by the Systems, maintenance agreements, retransmission consent
agreements and other agreements, written or oral (including any amendments and
other modifications thereto) to which Seller is a party and that relate to the
Assets or the business or operations of the Systems (other than the Franchises,
programming agreements and any other contracts that are Excluded Assets), and
(i) are in effect on the date hereof and (ii) are entered into by Seller in the
ordinary course of business of the Systems and as permitted by this Agreement
between the date hereof and the Closing Date.
1.10"Employee Plan" shall mean any pension, retirement, profit-sharing,
deferred compensation, vacation, severance, bonus, incentive, medical, vision,
dental, disability, life insurance or any other employee benefit plan as defined
in Section 3(3) of ERISA (other than a Multiemployer Plan) to which Seller or
any entity related to Seller (under the terms of Sections 414(b), (c), (m) or
(o) of the Code) contributes or which Seller or any entity related to Seller
(under the terms of Sections 414(b), (c), (m) or (o) of the Code) sponsors,
maintains or otherwise is bound.
1.11"Equivalent Billing Unit" shall mean an active customer for basic
cable service either in a single household or in a multi-unit dwelling
(including a hotel unit); provided, however, that the number of customers in a
multi-unit dwelling that obtains service on a "bulk-rate" or similar basis shall
be determined by dividing the gross bulk-rate or similar revenue for non-pay
services attributable to such multi-unit dwelling by the basic subscription rate
for individual households subscribing to the same level of service as is
provided to such multi-unit dwelling. For purposes of this definition, an
"active customer" shall mean any person at any given time that is paying for and
receiving any level of cable television service from the Systems who has an
account that is not more than 61 days past due (except for amounts which are
past due pending the resolution of a bona fide dispute or past due amounts of
$10 or less, provided such account is otherwise current). For purposes of this
definition, the number of days past due of a customer account shall be counted
from the date of the bill giving rise to such account or, with respect to coupon
book billings, on the tenth day following the date of the coupon.
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Exhibit 2 - Page 5
1.12"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder, as in effect from time to
time.
1.13"FAA" means the Federal Aviation Administration.
1.14"FCC" means the Federal Communications Commission.
1.15"Franchises" means all municipal, county, state and federal
franchises, franchise applications (if any), domestic satellite, business radio
and other licenses, earth station registrations, and all authorizations and
permits relating to the Systems granted by any governmental instrumentality,
including all amendments thereto and modifications thereof.
1.16"Franchising Authorities" means all governmental authorities which
have issued municipal or county cable franchises relating to the operation of
the Systems or before which are pending any franchise applications filed by the
Seller relating to the operation of the Systems.
1.17"Material Adverse Effect" means a material adverse effect on the
operations, assets, financial condition or value of one or more Systems or on
the ability of the Seller to perform its obligations under this Agreement.
1.18"Multiemployer Plan" means a plan, as defined in ERISA Section
3(37) or 4001(a)(3), to which Seller or any trade or business which would be
considered a single employer with Seller under Section 4001(b)(1) of ERISA
contributes or is required to contribute.
1.19"Permitted Encumbrances" shall mean any of the following liens or
encumbrances: (i) landlord's liens and liens for current taxes, assessments and
governmental charges not yet due or being contested in good faith by appropriate
proceedings; (ii) statutory liens or other encumbrances (excluding liens
securing indebtedness) that are minor or technical defects in title that do not
materially affect the value, marketability or utility of the Assets subject
thereto; (iii) such liens, liabilities or encumbrances as are Assumed
Liabilities; and (iv) restrictions set forth in, or rights granted to
Franchising Authorities as set forth in, the Franchises or applicable laws
relating thereto.
1.20"Personal Property" means all of the machinery, equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant, inventory,
spare parts, supplies and other tangible personal property that are owned or
leased by Seller and used, useful or held for use as of the date hereof in the
conduct of the business or operations of the Systems, plus such additions
thereto and deletions therefrom arising in the ordinary course of business and
as permitted by this Agreement between the date hereof and the Closing Date.
1.21"Purchase Price" means the purchase price specified in Section 2.4,
as adjusted in accordance with this Agreement.
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Exhibit 2 - Page 6
1.22"Real Property" means all of the buildings and other improvements
thereon, leasehold interests in real estate, easements, licenses, rights to
access, rights-of-way and other real property interests that are (i) leased by
Seller and used as of the date hereof in the business or operations of the
Systems; or (ii) owned by Seller and used as of the date hereof in the business
or operations of the Systems, plus such additions thereto and deletions
therefrom arising in the ordinary course of business and permitted by this
Agreement between the date hereof and the Closing Date.
1.23List of Additional Definitions. The following is a list of some
additional terms used in this Agreement and a reference to the Section hereof in
which such term is defined:
Term Section
AAA 10.1
AAA Rules 10.1
Accounting Firm 2.5.6
Additional Financial Statements 5.6
Assumed Liabilities 2.6
Assumption Agreements 7.3.2
Average Two Month Revenue 2.5.3
Balance Sheet 4.6.1
Buyer Preamble
Communications Act 3.4
Claimant 9.4.1
Closing Certificate 2.5.4
Copyright Act 3.19.4
CPS 3.1.9.6
Current Two Month Period 2.5.3
Deposit 2.4.1
Environmental Law 3.16
Environmental Notice 3.16
Environmental Reports 6.1.7
Equity Offering 4.7
Escrow Agent 2.4.1
Escrow Agreement 2.4.1
Estimate 2.5.4
Excluded Assets 2.2
Expiring Franchises 3.4
Financial Statements 3.11
Financing 4.7
Hazardous Substance 3.16
Indemnifying Party 9.4.1
Interim Period 2.5.7
Liens 2.1
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Exhibit 2 - Page 7
Losses 9.2
Post-Closing Certificate 2.5.6
Post-Closing Escrow 2.4.2
Prior Two Month Period 2.5.3
Purchase Price 2.4
Registration Statement 5.6
Required Consents 6.1.4
Response Period 2.5.6
SEC 5.6
Seller Preamble
Signals 3.19.1
Systems Recitals
Tax Returns 3.14
Taxes 3.14
Threshold 9.5
Utility Liabilities 2.6
2.SALE AND PURCHASE OF ASSETS
2.1.Agreement to Sell and Purchase. Subject to the terms and conditions set
forth in this Agreement, Seller hereby agrees to sell, transfer and deliver to
Buyer on the Closing Date, and Buyer agrees to purchase from the Seller on the
Closing Date, all of the Assets, including, without limitation, those described
below, free and clear of any claims, liabilities, security interests, mortgages,
liens, pledges, conditions, title defects, conditional sales agreements, charges
or other liens or encumbrances of any nature whatsoever (collectively, "Liens"),
except for Permitted Encumbrances:
2.1.1.The Personal Property;
2.1.2.The Real Property;
2.1.3.The Franchises;
2.1.4.All subscription agreements with customers for cable
services provided by the Systems;
2.1.5.The Contracts listed on Schedule 3.7 (other than those
constituting Excluded Assets);
2.1.6.Subscriber contracts entered into in the ordinary course
of business and those Contracts in existence on the date hereof and not listed
in Schedule 3.7 which (i) were entered into in the ordinary course of the
Systems' business, (ii) are not material to the operations of any System, (iii)
may be terminated by Buyer, as Seller's assignee, without penalty of any type
not later than one (1) year following the Closing, (iv) do not involve the
performance of any material non-monetary obligation on the part of Buyer, and
(v) do not involve the payment by Buyer, as Seller's assignee, of more than
$10,000 for all such Contracts in the aggregate.
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Exhibit 2 - Page 8
2.1.7.Contracts that are entered into by Seller in the
ordinary course of business of the Systems and as permitted by this Agreement
between the date hereof and the Closing Date;
2.1.8.Such other Contracts (other than those constituting
Excluded Assets) as Buyer may, in its discretion, elect to assume;
2.1.9.The Accounts Receivable;
2.1.10.All of Seller's intangible personal property,
proprietary information, copyrights, trademarks, trade names, technical
information and data, machinery and equipment warranties, maps, computer discs,
and tapes, plans, diagrams, blueprints and schematics, including filings with
the Franchising Authorities and the FCC relating to the Systems;
2.1.11.All choses in action of Seller relating to the Systems;
2.1.12.All books and records relating to the business or
operations of the Systems, including executed copies of the Contracts and all
correspondence and memoranda relating thereto, customer records and all records
required by the Franchising Authorities to be kept, subject to the right of
Seller to have such books and records made available to Seller for a reasonable
period, not to exceed five years from the Closing Date; and
2.1.13.The goodwill and going concern value generated by
Seller with respect to the Systems.
2.2.Excluded Assets. The Assets shall exclude the following
assets (the "Excluded Assets"):
2.2.1.Except to the extent taken into account in making the
prorations under Section 2.5 hereunder, Seller's cash on hand as of the Closing
Date and all other cash in any of Seller's bank or deposit accounts, including,
without limitation, customer advance payments and deposits; any and all bonds,
surety instruments, insurance policies and all rights and claims thereunder,
letters of credit or other similar items and any cash surrender value in regard
thereto, and any stocks, bonds, mutual funds, certificates of deposit and
similar investments;
2.2.2.Any books and records that Seller is required by law to
retain and any correspondence, memoranda, books of account, tax reports and
returns and the like related to the Systems other than those described in
Section 2.1.11, subject to the right of Buyer to have access to and to copy for
five (5) years from the Closing Date, and Seller's corporate minute books and
other books and records related to internal corporate matters and financial
relationships with Seller's lenders and affiliates;
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Exhibit 2 - Page 9
2.2.3.Except to the extent taken into account in making the
prorations under Section 2.5 hereunder, any claims, rights and interest in and
to any refunds of federal, state or local franchise, income or other taxes or
fees of any nature whatsoever for periods prior to the Closing Date including,
without limitation, fees paid to the U.S. Copyright Office or any choses in
action owned by Seller relating to such refunds;
2.2.4.Any Employee Plan, Compensation Arrangement or
Multiemployer Plan;
2.2.5.The name "Phoenix Grassroots Cable Systems, L.L.C."; and
2.2.6.The property described on Schedule 2.2
2.3.Purchase Price. The purchase price for the Assets shall be
Nine Million Six Hundred Thirteen Thousand Two Hundred Fifty Dollars
($9,613,250) (the "Purchase Price"), which amount shall be adjusted as provided
in Section 2.5 below.
2.4.Method of Payment. The Purchase Price shall be paid in
full in the following manner:
2.4.1.Deposit Upon execution and delivery of this Agreement by
Seller and Buyer, Buyer shall deliver to Colorado National Bank ("Escrow
Agent"), the sum of Two Hundred Thousand Dollars ($200,000) (the "Deposit"), to
be held and applied pursuant to the terms of that certain Escrow Agreement (the
"Escrow Agreement"), to be executed concurrently herewith by Buyer, Seller and
Escrow Agent.
2.4.2.Closing Payment; Post-Closing Escrow. At the Closing,
Buyer shall cause to be paid in immediately available funds by wire transfer to
one or more bank accounts designated in writing by Seller prior to the Closing
Date a portion of the Purchase Price equal to Nine Million Four Hundred Thirteen
Thousand Two Hundred Fifty Dollars ($9,413,250), plus or minus, as applicable,
any adjustments made at Closing pursuant to Section 2.5. The Two Hundred
Thousand Dollar ($200,000) Deposit, constituting the balance of the Purchase
Price, will be retained by the Escrow Agent as security for Seller's obligations
to Buyer following the Closing pursuant to the terms of the Escrow Agreement
(the "Post-Closing Escrow"). Pursuant to the Escrow Agreement, (i) six (6)
months following the Closing, $100,000 of the Deposit together with the interest
thereon less the amount of any then asserted indemnification claims shall be
released from the Post-Closing Escrow and paid to Seller, and (ii) twelve (12)
months following the Closing, the balance of the amount in the Post-Closing
Escrow together with the interest thereon less the amount of any then asserted
indemnification claims shall be released from the Post-Closing Escrow and paid
to Seller.
2.4.3.Disposition of Escrow Deposit; Liquidated Damages. At
the Closing, the interest on the Deposit shall be paid by wire transfer of
immediately available funds to Seller as a credit against the Purchase Price or
to Buyer. If the Closing does not occur because of breach by Buyer of its
representations and warranties hereunder or of the covenants and obligations to
be performed by Buyer hereunder, provided Seller has satisfied its obligations
hereunder, and provided further, that all conditions precedent to Buyer's
obligation to close the transactions contemplated herein have been satisfied
then, the Deposit and earnings thereon shall be delivered to Seller as
liquidated damages, which shall be the sole remedy of Seller for such breach,
and Seller shall have no other recourse against Buyer or any of its affiliates
under or in connection with this Agreement or the transactions contemplated
hereby. SELLER AND BUYER HAVE
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Exhibit 2 - Page 10
MADE THIS PROVISION FOR LIQUIDATED DAMAGES BECAUSE IT WOULD BE EXTREMELY
DIFFICULT AND IMPRACTICABLE TO ASCERTAIN AND CALCULATE ON THE DATE HEREOF THE
AMOUNT OF ACTUAL DAMAGES SUSTAINED BY SELLER FOR THE BREACH BY BUYER UNDER THIS
AGREEMENT AND THE FAILURE OF THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT OR THE AMOUNT OF COMPENSATION SELLER SHOULD RECEIVE AS A
RESULT OF BUYER'S BREACH OF DEFAULT, AND SELLER AND BUYER AGREE THAT THESE SUMS
REPRESENT REASONABLE COMPENSATION TO SELLER FOR SUCH BREACH. In any other case,
if the Closing does not occur and this Agreement is terminated, then, the
Deposit and earnings thereon shall be delivered to Buyer. All payments and
releases of funds from escrow by the Escrow Agent shall be made in accordance
with the procedures and provisions set forth in the Escrow Agreement.
2.5.Adjustments and Prorations.
2.5.1.All expenses and other liabilities arising from the
Systems up until midnight on the day prior to the Closing Date, including
franchise fees, pole and other rental charges payable with respect to cable
television service, utility charges, real and personal property taxes and
assessments levied against the Assets, salesperson advances, property and
equipment rentals, applicable copyright or other fees, sales and service
charges, taxes (except for taxes arising from the transfer of the Assets
hereunder), and similar prepaid and deferred items, shall be prorated between
Buyer and Seller in accordance with the principle that Seller shall be
responsible for all expenses, costs and liabilities allocable to the conduct of
the business or operations of the Systems for the period prior to the Closing
Date, and Buyer shall be responsible for all expenses, costs and obligations
allocable to the conduct of the business or operations of the Systems on the
Closing Date and for the period thereafter.
2.5.2.The Purchase Price shall be adjusted at Closing as
follows: (i) by increasing the Purchase Price by an amount equal to (A) 100 % of
the face amount of all Accounts Receivable that are outstanding 30 days or less
from the date of the bill giving rise thereto and (B) 75 % of the face amount of
all Accounts Receivable that are outstanding more than 30 but fewer than 61 days
from the date of the bill giving rise thereto; and (ii) by reducing the Purchase
Price by an amount equal to (w) any customer advance payments (i.e., customer
payments received by Seller prior to Closing but relating to service to be
provided by Buyer after Closing) and customer deposits (including any interest
owing thereon), (x) any other advance payments (i.e., advertising payments
received by Seller prior to Closing but relating to service to be provided by
Buyer after Closing), (y) Accounts Receivable relating to services to be
performed after the Closing and the responsibility for which is assumed by Buyer
under this Agreement and (z) liabilities assumed pursuant to Section 2.6(v).
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Exhibit 2 - Page 11
2.5.3.(a) The Purchase Price shall also be reduced in
accordance with Section 2.5.3(b) below, if the Average Two Month Revenue of the
Systems is less than $269,000. As used herein, "Average Two Month Revenue" shall
mean (i) the sum of advance billings of the Systems for July 1996 and August
1996, plus installation revenues, home shopping revenues, late fees and
advertising revenues for June 1996 and July 1996, plus or minus (as applicable)
debit and credit prorates for June 1996 and July 1996, divided by (ii) two (2).
However, Average Two Month Revenue shall exclude any amounts in excess of
$32,000 per month which are attributable to seasonal subscriber activity. All
determinations hereunder shall be made on a basis consistent with Seller's past
practices and, to the extent not inconsistent with Seller's past practices, in
accordance with generally accepted accounting principles consistently applied.
(b) If the Two Month Average Revenue is less than $269,000,
the Purchase Price shall be reduced proportionately to an amount equal to the
Purchase Price before giving effect to such adjustment multiplied by a fraction,
the numerator of which shall be the Two Month Average Revenue and the
denominator of which shall be $269,000.
2.5.4.Seller shall prepare and submit to the Buyer, not later
than five (5) days prior to the Closing, a written good faith estimate of the
amount of the adjustments to the Purchase Price in accordance with this Section
2.5 (the "Estimate"). The Estimate shall be based upon the books and records of
the Systems, including the Accounts Receivable (including the aging reports),
billing information, revenues and other applicable information as shown on the
latest records of Seller. The Estimate submitted to the Buyer shall be
accompanied by (a) a statement setting forth in reasonable detail the
calculation of the Estimate and (b) a certificate signed by a senior officer of
the Seller certifying that, to the best of such officer's knowledge, but without
any personal liability to such officer, the Estimate was calculated in good
faith in accordance with the provisions of this Section 2.5. The Seller shall
also deliver to the Buyer such other information as may be reasonably requested
by the Buyer to verify the Estimate.
2.5.5.Without limiting Buyer's rights under Section 2.5.6
below, in the event Buyer believes in good faith that the Estimate is or may be
materially inaccurate with respect to the adjustments and prorations to be made
pursuant to this Section 2.5, and if the parties are unable to agree on a
revised Estimate with respect to such adjustments and prorations prior to the
Closing, then Buyer shall have the right to cause a portion of the Purchase
Price equal to the amount in dispute in excess of the Deposit to be added to the
Post-Closing Escrow at Closing, which amount shall be disbursed to Buyer or
Seller, as appropriate, immediately upon completion of the Purchase Price
adjustment procedures set forth in Section 2.5.6 below, irrespective of whether
Buyer has any then pending indemnification claims against Seller.
2.5.6.Within 21 days after the Closing Date, Seller shall
deliver to Buyer a compilation of the adjustments and prorations to be made
pursuant to this Section 2.5, together with such supporting information as Buyer
may reasonably request, certified by a senior officer of Seller, to the best of
such officer's knowledge, but without liability to such officer (the
"Post-Closing Certificate"). In the event Seller fails to deliver to Buyer a
Post-Closing Certificate within such 21 day period, then Buyer may, within 60
days thereafter, prepare a Post-Closing Certificate, in which case the
provisions of this Section 2.5.6 shall be interpreted so as to reverse the roles
of the parties with respect to responses and discrepancies. If Buyer shall
conclude that the Post-Closing Certificate does not accurately reflect the
adjustments and prorations to be made to the Purchase Price in accordance with
this Section 2.5, Buyer shall, within 40 days after the
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Exhibit 2 - Page 12
receipt of the Post-Closing Certificate (such 40 day period being referred to as
the "Response Period"), deliver to Seller its written statement of any
discrepancies believed to exist. If Buyer fails to so notify Seller of any
discrepancies, then the calculations set forth in the Post-Closing Certificate
shall be controlling for all purposes hereof. On or before the fifth (5th)
business day following the earlier to occur of the expiration of the Response
Period and the date Seller receives Buyer's statement of discrepancies, Buyer
shall pay to Seller or Seller shall pay to Buyer, as the case may be, the
amount, if any, owed in accordance with the Post-Closing Certificate as to which
there is no discrepancy. Buyer and Seller shall use good faith efforts to
jointly resolve the discrepancies within fifteen (15) days of Seller's receipt
of Buyer's written statement of discrepancies, which resolution, if achieved,
shall be binding upon all parties to this Agreement and not subject to dispute
or review. If Buyer and Seller cannot resolve the discrepancies to their mutual
satisfaction within such 15 day period, Buyer and Seller shall retain a mutually
acceptable national independent public accounting firm (the "Accounting Firm")
at such firm's San Francisco, California office that has neither been engaged to
perform nor has performed any services to Seller or Buyer or their respective
affiliates during the two years prior to the Closing Date to review the
Post-Closing Certificate together with Buyer's discrepancy statement and any
other relevant documents. The cost of retaining the Accounting Firm shall be
borne equally by Buyer and Seller. The Accounting Firm shall report its
conclusions as to adjustments pursuant to this Section 2.5 which shall be
conclusive on all parties to this Agreement and not subject to dispute or
review. In the event the parties are unable to agree on which accounting firm to
retain, if the Accounting Firm shall not be engaged on terms reasonably
satisfactory to Seller and Buyer within 30 days of Seller's receipt of Buyer's
written statement of discrepancies or if the Accounting Firm shall fail to
render a decision within 45 days of the date it is retained, then the matter
shall be submitted for arbitration in accordance with Section 10 hereof. Within
five (5) days of receipt of the Accounting Firm or Arbitrator's decision, as the
case may be, with respect to such dispute, if Buyer is determined to owe an
amount to Seller, Buyer shall pay such amount thereof to Seller, and if Seller
is determined to owe an amount to Buyer, Seller shall pay such amount thereof to
Buyer. All amounts owed by Buyer or Seller to the other in accordance with this
Section shall be paid in immediately available funds. Unless expressly agreed in
writing by Buyer, no payments by Seller pursuant to this Section 2.5 may be made
from the Post-Closing Escrow.
2.5.7.Absence of Consents. The parties acknowledge that their
intent and agreement is for Seller to transfer the Systems to Buyer at Closing
in an orderly manner without interruption in service, and that certain required
Consents to the transfer to Buyer of Seller's rights under the Contracts and
Franchises relating to the operation of the Systems may not have been obtained
on the Closing Date, or that such rights may not be transferred at the Closing
for other reasons, provided, however, that Buyer shall have no obligation to
close the transactions contemplated hereby in the absence of receiving any
Required Consents and the transfer of such rights. If said transfer is not
completed on the Closing Date, Seller agrees to maintain such Contracts and
Franchises and, should Buyer so request, any insurance policies and performance
bonds related to any non-transferred Franchises, in full force and effect for
the benefit of Buyer (with any casualty insurance policies naming Buyer and
Buyer's lenders as loss payees and any liability insurance policies so
maintained naming Buyer, Buyer's lenders, Seller and such other parties as are
required to be so named as additional insureds) until such transfer is completed
(the "Interim Period"). During the Interim Period, Buyer shall be responsible
for obtaining such Consents, and Seller will provide reasonable assistance to
Buyer but at Buyer's sole cost and expense. Seller also agrees to permit Buyer,
at Buyer's option, to utilize the benefits of such
10
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Exhibit 2 - Page 13
Contracts, Franchises, insurance policies and performance bonds in order to
continue to operate the Systems. Buyer agrees that all expenses incurred by
Seller in complying with the foregoing during the Interim Period (other than
charges for personnel or internal operating, administrative or overhead expenses
of Seller or any creditor of Seller) shall be reimbursed to Seller by Buyer on a
monthly basis, within twenty (20) days after receipt by Buyer of Seller's
reasonably detailed and itemized statement therefor for each calendar month
during the Interim Period.
2.6.Assumption of Liabilities and Obligations. As of the Closing Date,
Buyer shall assume and pay, discharge and perform the following (collectively,
the "Assumed Liabilities"): (i) all the obligations and liabilities of Seller
under the Franchises and the Contracts referenced in Sections 2.1.4, 2.1.5,
2.1.6 and 2.1.7 insofar as they relate to the time period on and after the
Closing Date and arise out of events (other than the Closing itself) occurring
on or after the Closing Date; (ii) all obligations and liabilities of Seller to
customers of the Systems for any advance payments or deposits, if and to the
extent that an adjustment was made to the Purchase Price with respect to such
customers pursuant to Subsection 2.5. above; (iii) all obligations and
liabilities arising out of events occurring on or after the Closing Date related
to Buyer's ownership of the Assets or its conduct of the business or operations
of the Systems on or after the Closing Date; and (iv) Seller's obligations to
the entities listed in Schedule 2.6 for the current and past due pole rental
fees and past due make-ready fees as specifically described in Schedule 2.6
("Utility Liabilities"); provided, however, that in no event shall the amount
assumed by Buyer under this clause (iv) exceed $161,753. All other obligations
and liabilities of Seller shall remain and be the obligations and liabilities of
Seller and shall not become obligations or liabilities of Buyer. Other than the
Assumed Liabilities, Buyer shall not assume or become liable for, and does not
agree to perform or discharge, any liabilities or obligations of Seller.
2.7.Allocation of Purchase Price. As contemplated under Section 1060 of
the Internal Revenue Code, Buyer and Seller shall each submit Form 8594 to the
Internal Revenue Service following the Closing. Such forms shall allocate the
Purchase Price among the Assets consistent with an appraisal to be conducted at
Buyer's expense by an appraiser designated by Buyer.
3.REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as of the date of this Agreement and
as of the Closing Date, as follows:
3.1.Organization, Standing and Authority. Seller is a limited liability
company duly organized, validly existing and in good standing under the laws of
the State of Delaware, and is qualified to conduct business in the States of
Maine and New Hampshire and in each other jurisdiction in which the property
owned, leased or operated by it requires it to be so qualified. Seller has the
requisite power and authority (i) to own, lease and use the Assets as presently
owned, leased and used by Seller, and (ii) to conduct the business and
operations of the Systems as presently conducted by Seller. Seller is not a
participant in any joint venture or partnership or similar agreement with any
other person or entity with respect to any part of the Systems' operations or
the Assets.
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Exhibit 2 - Page 14
3.2.Authorization and Binding Obligation. Seller has the requisite
power and authority to execute and deliver this Agreement and to carry out and
perform all of its other obligations under the terms of this Agreement. All
member, manager and other action by Seller necessary for the authorization,
execution, delivery and performance by Seller of this Agreement has been taken
and such action has not been rescinded, repealed, amended or conditioned in any
manner. This Agreement has been duly executed and delivered by Seller and this
Agreement constitutes the valid and legally binding obligation of Seller,
enforceable against it in accordance with its terms, except (i) as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws from time to time in effect affecting the enforcement
of creditors' rights generally and (ii) as the remedy of specific performance
and injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
3.3.Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by Seller will not violate the certificate of
formation or operating agreement of Seller, or subject to obtaining the Consents
listed on Schedule 3.8, (i) violate any law, judgment, order, ordinance,
injunction, decree, rule or regulation of any court or governmental
instrumentality applicable to Seller with respect to the Assets, or (ii)
conflict with, constitute grounds for termination of, result in a breach of,
constitute a default under, accelerate or permit the acceleration of any
performance required by the terms of, any agreement, instrument, license or
permit to which Seller is a party or may be bound and by which the Assets or the
Systems are affected.
3.4.Franchises. Schedule 3.4 includes a true and complete list of all
Franchises that are held for use in connection with the operations of the
Systems. No other franchises, franchise applications, licenses, registrations,
authorizations or permits are required by applicable law in connection with the
operation of the Systems in the ordinary course of business. True and complete
copies of such Franchises (including any and all amendments thereto) have been
delivered to Buyer and are included in Schedule 3.4. To the best of Seller's
knowledge, each of the Franchises listed on Schedule 3.4 is in full force and
effect in accordance with its terms. No proceedings are pending or, to Seller's
knowledge, threatened, to revoke, terminate, modify or cancel any of such
Franchises. Except as listed on Schedule 3.4, and except for any noncompliance
or default that would not have a Material Adverse Effect, there exists no fact
or circumstance which, with the passage of time or the giving of notice or both,
would constitute a material default under any Franchise, or permit the
Franchising Authority to cancel or terminate the rights thereunder, except upon
the expiration of the full term thereof. For any Franchise that has an unexpired
term of fewer than three (3) years from the date hereof ("Expiring Franchises"),
except for the communities of Greenbush, Maine, Friendship, Maine, Middleton,
New Hampshire and Enfield, New Hampshire, a timely request for renewal has been
submitted to the appropriate Franchising Authority pursuant to Section 626(a) of
the Communications Act of 1934, as amended (the "Communications Act"). Seller
(i) has not been notified by any Franchising Authority of any decision not to
renew or of any finding that would reasonably be expected to serve as a basis
for a decision not to renew (other than in respect of Franchises that have been
renewed after receipt of such notice); and (ii) has no knowledge such notice is
to be received. Seller has not made any commitments (oral or written) to any
Franchising Authority with respect to the Systems other than those contained in
the Franchises, and to Seller's knowledge, no prior owner of any of the Systems
has made any commitment (oral or written) to any Franchising Authority with
respect to any System other than those contained in the
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Exhibit 2 - Page 15
Franchises.
3.5.Real Property. Schedule 3.5 contains a list of all Real Property
interests, including, without limitation, all leases, easements, licenses,
rights to access, rights of way and other real property interests to which
Seller is a party as of the date hereof, but excluding easements, rights of way
and similar interests in real property which are not used or useful in
connection with the operation of the Systems. Seller has good and marketable
title to such interests in Real Property and has quiet enjoyment under all
leasehold interests, free of all Liens except Permitted Encumbrances and Liens
specified in Schedule 3.9.
3.6.Personal Property. Seller has good and marketable title in fee
simple to all Personal Property owned by Seller, and as of the Closing Date none
of the Personal Property will be subject to Liens, except for Permitted
Encumbrances and Liens specified in Schedule 3.9. Schedule 3.6 lists all
Seller's leasehold interests in property owned by others and leasehold interests
in personal property held by others in personal property owned by Seller, in
each case, to the extent such personal property is used in the operation of the
Systems.
3.7.Contracts. Schedule 3.7 lists all Contracts in existence as of the
date hereof except for Contracts fitting within the parameters of Section 2.1.6.
To the best of Seller's knowledge, each of the Contracts listed on Schedule 3.7
is in full force and effect and legally enforceable in accordance with its terms
upon the other parties thereto and, except as disclosed in Schedule 3.7, there
exists no default thereunder. Seller has provided Buyer with true and complete
copies of all Contracts listed on Schedule 3.7. To the best of Seller's
knowledge, Seller has delivered to Buyer all agreements, letters, documentation
and notices relating to any dispute, disagreement or claim arising under or
relating to any of the Contracts or any of the Utility Liabilities.
3.8.Consents. Except for the Consents described in Schedule 3.8, no
consent, approval, permit or authorization of, or declaration to or filing with
any governmental or regulatory authority, or any other third party is required
to consummate this Agreement and the transactions contemplated hereby.
3.9.Complete Systems. The Assets comprise all of the assets necessary
to conduct the business and operations of the Systems as presently conducted.
The Assets are in good working order, ordinary wear and tear excepted. Seller
holds good and marketable title to all Assets free and clear of all Liens other
than Permitted Encumbrances and Liens described on Schedule 3.9. All
indebtedness secured by Liens described on Schedule 3.9 has been paid or
satisfied in full, and all such Liens shall be discharged of record within
twenty(20) days following the date of this Agreement.
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Exhibit 2 - Page 16
3.10.Information on Systems.
3.10.1.The Systems have at least 6900 Equivalent Billing Units
and have the bandwidth capacity set forth on Schedule 3.10.
3.10.2.As of the date hereof, the rates charged to customers
for each class of service and categories of customers for the Systems are set
forth in Schedule 3.10.
3.10.3.The Systems duly and properly carry and deliver the
programming on the channels indicated in Schedule 3.10. Seller has obtained all
required FCC clearances and authorizations for the operation of the Systems in
the manner presently operated.
3.11.Financial Statements.
3.11.1.Schedule 3.11 contains true and complete copies of (i)
financial statements of the Systems containing balance sheets and statements of
income as at and for each month-end of each of the full calendar months through
May 31, 1996 that Seller has owned the Systems (collectively, the "Financial
Statements"). The Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied, subject to normal
recurring year-end adjustments, which will not be material in amount. The
Financial Statements are in accordance with the books and records of the Seller
and present fairly the financial condition of the Systems as at their respective
dates and the results of operations for the periods ended on their respective
dates.
3.11.2.Seller does not have any liability or obligation
related to the Assets or the Systems (whether accrued, absolute, contingent or
otherwise) which is of a nature required to be reflected in financial statements
prepared in accordance with generally accepted accounting principles
consistently applied (including footnotes thereto), including, without
limitation, any liability that might result from an audit of its tax returns,
except for (i) the liabilities and obligations of Seller that are specified and
reserved against in the Financial Statements, to the extent and in the amounts
so specified and reserved against; and (ii) liabilities incurred or accrued in
the ordinary course of business since the date of the most recent Financial
Statements, and which do not in the aggregate have a Material Adverse Effect.
3.11.3.Seller is not insolvent within the meaning of the
Federal Bankruptcy Code or any applicable fraudulent transfer law and will not
be rendered insolvent by virtue of the transactions contemplated herein. Without
limiting the foregoing, the Purchase Price exceeds the total amount of Seller's
liabilities, and Seller will not make any payments or distributions of any kind,
whether in respect of any indebtedness, or otherwise, of any portion of the
Purchase Price to Seller's members or their affiliates until all of Seller's
liabilities to others (excluding Assumed Liabilities) shall have been paid or
satisfied in full or until adequate provision has been made for the payment or
satisfaction thereof.
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Exhibit 2 - Page 17
3.12.Employee Benefit Plans.
3.12.1.All of Seller's Employee Plans and Compensation
Arrangements providing benefits to employees of the Systems are listed and
described in Schedule 3.12, and copies of any such written Employee Plans and
Compensation Arrangements (or related insurance policies) and any amendments
thereto have been made available to Buyer, along with copies of employee
handbooks or similar documents describing such Employee Plans and Compensation
Arrangements that are utilized in connection with the operation of the Systems.
Except as disclosed in Schedule 3.12, there is not now in effect or to become
effective after the date of this Agreement, any new Employee Plan or
Compensation Arrangement or any amendment to an existing Employee Plan or
Compensation Arrangement which will affect the benefits of employees or former
employees of the Systems.
3.12.2.Each of Seller's Employee Plans and Compensation
Arrangements has been administered without material exception in compliance with
its own terms and, where applicable, with ERISA, the Code, the Age
Discrimination in Employment Act and any other applicable federal or state laws.
3.12.3.Except as disclosed in Schedule 3.12, Seller does not
contribute to or has never been required to contribute to any Multiemployer
Plan.
3.12.4.Seller is not aware of the existence of any
governmental audit or examination of any of Seller's Employee Plans or
Compensation Arrangements or of any facts that would lead it to believe that any
such audit or examination is pending or threatened. There exists no action, suit
or claim (other than routine claims for benefits) with respect to any such
Employee Plan or Compensation Arrangement pending or, to the knowledge of
Seller, threatened with respect to any of such Employee Plan or Compensation
Arrangements.
3.12.5.No accumulated funding deficiency (within the meaning
of Section 412 of the Code) exists with respect to any Employee Plan and no
waiver of funding requirements pursuant to Section 412(d) of the Code has been
sought or received with respect to any Employee Plan. None of the Assets are
subject to any lien arising pursuant to Section 412(n) of the Code or Section
4068 of ERISA.
3.12.6.No Employee Plan which is an employee welfare benefit
plan (as defined in Section 3(1) of ERISA), provides for continuing benefits or
coverage for any participant (or beneficiary) after the termination of the
participant's employment except as may be required under Section 4980B of the
Code or applicable state statutory law.
3.13.Labor Relations. Schedule 3.13 lists the names, dates of hire and
current annual salaries of all persons employed by Seller in connection with the
operation of the Systems. Except as disclosed in Schedule 3.13, Seller is not a
party to or subject to any collective bargaining agreements with respect to the
Systems. Seller has no written or oral employment arrangements with any employee
of the Systems, other than (i) oral employment arrangements terminable at will
without penalty or severance obligation; or (ii) those listed in Schedule 3.7.
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Exhibit 2 - Page 18
3.14.Taxes, Returns and Reports. All federal, state and local tax
returns required to be filed by Seller in connection with the operation of the
Systems with respect to any federal, state or local taxes (the "Taxes") have
been filed. Except as set forth in Schedule 3.14, all Taxes which are due and
payable or disputed in good faith have been properly accrued or paid or are
being contested in good faith by appropriate proceedings. Seller has no
knowledge of any legal, administrative or tax proceedings pursuant to which
Seller is or could be made liable for any Taxes, penalties, interest or other
charges, the liability for which could extend to Buyer as transferee of the
Assets, and no event has occurred that could impose on Buyer any transferee
liability for any Taxes, penalties or interest due or to become due from Seller.
3.15.Claims and Legal Actions. Except as set forth in Schedule 3.15,
and except for any investigations and rule-making proceedings affecting the
cable industry generally, there is (i) no legal action, counterclaim, suit,
arbitration; (ii) to the knowledge of Seller, any claim or governmental
investigation; or (iii) any other legal, administrative or tax proceeding, nor
any order, decree or judgment, in progress or pending, or to the knowledge of
Seller, threatened against or relating to the Assets or the business or
operations of the Systems. None of the matters disclosed in Schedule 3.15 could
have a Material Adverse Effect.
3.16.Environmental Matters.
(a) Except as disclosed in Schedule 3.16, to the best of Seller's
knowledge (i) the Real Property is free of all friable asbestos; (ii) no
Hazardous Substance is currently or has ever been located in, on, under or about
any of the Real Property in a manner which violates any Environmental Law in any
material respect or which requires cleanup or corrective action of any kind
under any Environmental Law; (iii) Seller is in past and current compliance
with, is not in violation of, and has no liability under, any Environmental Law;
and all prior owners or occupants of the Real Property occupied and used the
Real Property in compliance with all applicable Environmental Law; (iv) the
Systems are capable of continued operation in compliance with all Environmental
Law; (v) no Hazardous Substances have been used, treated or disposed in, on,
over or under the Real Property, except for such substances which are in such
amounts and of the type typically found in commercial cleaning products or
standard office supplies of businesses similar to Seller's, as to which Seller
is in compliance with all applicable Environmental Law; and (vi) there are no
tanks on or below the surface of the Real Property.
(b) Except as disclosed in Schedule 3.16, Seller has not received any
notice from any governmental authority indicating that the Real Property or any
property adjacent thereto has been or may be placed on any federal or state
"Superfund" or "Superlien" list ("Environmental Notice"). To the best of
Seller's knowledge, there has not been any Environmental Notice with respect to
any of the Real Property received by any prior owner or occupant of the Real
Property which has not been fully satisfied and complied with in a timely
fashion.
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Exhibit 2 - Page 19
(c) Except as disclosed in Schedule 3.16, to the best of Seller's
knowledge, Seller has no liability relating to Seller's ownership or operation
of the Systems for any illness or personal injury to any employee other than
such matters for which claims have been filed under applicable Workers'
Compensation regulations (and to the best of Seller's knowledge, there is no
likely basis for any present or future charge, complaint, action, suit,
proceeding, hearing, investigation, claim or demand (under the common law or
pursuant to statute) against Seller giving rise to any such liability).
(d) As used in this Agreement, the term "Hazardous Substances" includes
any substance heretofore or hereafter designated as "hazardous" or "toxic",
including, without limitation, petroleum and petroleum related substances, or
having characteristics identified as "hazardous" or "toxic" under any
Environmental Law. As used hereunder, the term "Environmental Law" shall include
(i) the Comprehensive Environmental Response, Compensation and Liability Act of
1980, 42 U.S.C. Section 6601, et seq., (ii) the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901, et seq., (iii) the Federal Water Pollution
Control Act, 33 U.S.C. Section 1251, et seq., (iv) the Clean Air Act, 42 U.S.C.
Section 7401, et seq., (v) Safe Drinking Water Act, 42 U.S.C. ss.300f et seq.,
(vi) Toxic Substances Control Act, 15 U.S.C. ss.2601 et seq., (vii) Rivers and
Harbors Act of 1899, 33 U.S.C. ss.401 et seq., (viii) Endangered Species Act of
1973, 16 U.S.C. ss.1531 et seq., (ix) Occupational Safety and Health Act of
1970, 29 U.S.C. ss.651 et seq., and (x) the Community Right to Know Act, 42
U.S.C. Section 11001, et seq., all as amended, and all other laws, rules, and
regulations of any federal, state, or local government (or agency thereof)
concerning release or threatened release of hazardous substances, public health
and safety, or pollution or protection of the environment.
3.17.Compliance with Laws. Seller has complied and is in compliance
with all federal, state and local laws, rules, regulations and ordinances
applicable to the Systems, except for such noncompliance which would not have a
Material Adverse Effect.
3.18.Conduct of Business in Ordinary Course. Except as set forth on
Schedule 3.18, during the entire time that Seller has owned or operated the
Systems, Seller has conducted the business and operations of the Systems only in
the ordinary course and has not suffered any changes, events or conditions other
than matters affecting the cable television industry generally (including,
without limitation, legislative, regulatory or litigation matters) and matters
relating to or arising from local or national economic conditions (including
financial and capital markets) none of which has a Material Adverse Effect.
3.19.FCC and Copyright Compliance.
3.19.1.To the best of Seller's knowledge, Schedule 3.19
contains a true and complete list of all FCC licenses, permits, authorizations
and registrations used in connection with the ownership and operation of the
Systems, true and complete copies of which (to the extent in the possession of
Seller) have been provided to Buyer by Seller. Seller is authorized under all
applicable FCC rules, regulations and orders to distribute the transmissions
(whether television, satellite, radio or otherwise) of video programming or
other information that the Seller makes available to customers of the Systems
(the "Signals") presently being carried to the customers of and by the Systems
and to utilize all carrier frequencies generated by the operations of the
Systems, and is licensed or authorized to operate all the facilities required by
law to be licensed, including without limitation, any business radio and any
cable television relay service stations,
17
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Exhibit 2 - Page 20
being operated as part of the Systems. Except as provided in Schedule 3.19,
Seller's operation of the Systems and of any FCC-licensed or registered facility
used in conjunction with Seller's operation of the Systems, is in compliance
with the FCC's rules and regulations and the provisions of the Communications
Act, except for such noncompliance which would not have a Material Adverse
Effect. All reports, applications, statements, fees and other documents and
payments required by the FCC or any Franchising Authority to be filed and/or to
be paid to the FCC or any Franchising Authority with respect to the ownership
and operation of the Systems (including, without limitation, aeronautical
frequency use notifications, FCC Form 320, FCC Form 325 Schedule A, FCC Form
395-A and FCC Form 159) have been timely filed or paid, as the case may be.
Seller has provided to Buyer true and complete copies of all such filings (to
the extent in Seller's possession) made with respect to the ownership and
operation of the Systems for the past three (3) years. Seller makes available to
customers of the Systems and third parties all equipment and facilities required
under any applicable federal, state and local laws, rules, regulations and
ordinances.
3.19.2.Schedule 3.19 contains a true and complete list of each
System's towers, tower coordinates and total height above ground level of each
tower. All necessary FAA approvals have been obtained with respect to the height
and location of towers used in connection with the operation of the Systems in
the manner presently operated and are listed in Schedule 3.19. Seller has
provided to Buyer true and complete copies of all such FAA approvals and
authorizations obtained in connection with the ownership and operation of the
Systems. The towers are being operated in compliance with applicable FCC and FAA
rules, except for such noncompliance which would not have a Material Adverse
Effect.
3.19.3.As of the date of this Agreement and to the best of
Seller's knowledge, and except as disclosed on Schedule 3.19: (i) Seller is
currently the only person providing or intending to provide wireline or wireless
cable television services or similar video programming or related services
(excluding direct broadcast satellite services) within all or part of the
geographic areas served by the Systems; and (ii) no person other than the Seller
has been granted a presently valid cable television franchise or has a pending
application for a cable television franchise in any of the geographic areas
presently served by the Systems.
3.19.4.Seller has filed and deposited with the U.S. Copyright
Office all statements of account and other documents and instruments, and paid
all royalties, supplemental royalties, fees and other sums to the U.S. Copyright
Office under the Copyright Act of 1976, as amended (the "Copyright Act"), with
respect to the business and operations of the Systems as are required to obtain,
hold and maintain the compulsory license for cable television systems prescribed
in Section 111 of the Copyright Act. Seller has provided to Buyer true and
complete copies of all such statements of account and other documents and
instruments (to the extent in Seller's possession) filed and deposited with the
U.S. Copyright Office in connection with the ownership and operation of the
Systems for the past three (3) years. The Systems are in compliance with the
Copyright Act and the rules and regulations of the U.S. Copyright Office. To the
knowledge of Seller, there is no inquiry, claim, action or demand pending before
the U.S. Copyright Office or from any other party which questions the copyright
filings or payments made by the Systems.
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Exhibit 2 - Page 21
3.19.5.All notices required to be given by the Seller to
subscribers of the Systems have been given in material compliance with the
requirements of the Communications Act and applicable FCC regulations and
policies. Each FCC employment unit operated by Seller with respect to the
Systems is currently in material compliance with the Communications Act and
applicable FCC regulations and policies.
3.19.6.No Franchising Authority or other political subdivision
served by any System has become certified by the FCC to regulate such System's
basic service rate. Seller has not received any complaint on FCC Form 329
concerning the cable programming service ("CPS") rates of any System, and Seller
is not aware of any CPS rate regulation of any System.
3.20.Bonds, Insurance and Letters of Credit. Except as otherwise
specified in Schedule 3.20, each insurance policy, each performance bond and
each letter of credit required to be maintained, or which is maintained covering
the property comprising the Systems and Assets, and/or the operation of the
Systems, is set forth in Schedule 3.20, and a copy of each such policy, letter
of credit or bond has been delivered to Buyer by Seller. Each of such policies,
letters of credit and bonds is current and in full force and effect. Seller has
not received any notice of default under or intended cancellation or nonrenewal
of any such policies, letter of credit or bonds. Seller has not failed to give
any notice or present any claim under any insurance policy or bond in a due and
timely manner, nor has Seller made a claim under any insurance policy or bond or
requested the insurer to defend Seller under a duty to defend provision, which
coverage the insurer denied. There are no pending or threatened requests to make
a draw under any such letter of credit. To the best of Seller's knowledge, no
application for any insurance, letter of credit or bond with respect to the
Assets or the Systems has been denied for any reason. Seller will continue to
maintain in effect through the Closing Date, and for such periods thereafter as
may be required under Section 2.5.7 hereof, those bonds, letters of credit and
insurance policies in connection with the Assets and/or the operation of the
Systems. During such periods, Seller will not take any action or refrain from
taking any action if the taking of such action or failure to take such action,
respectively, adversely affects the insurability of the Assets or the Systems.
3.21.Full Disclosure. To the best of Seller's knowledge, no
representation or warranty made by Seller in this Agreement or in any
certificate, document, or other instrument furnished or to be furnished by
Seller pursuant hereto contains or will contain any untrue statement of a
material fact, or omits or will omit to state any material fact necessary to
make any statement made herein or therein not misleading.
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Exhibit 2 - Page 22
4.REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as of the date of this Agreement and
as of the Closing Date, as follows:
4.1.Organization, Standing and Authority. Buyer is a limited
partnership validly existing and in good standing under the laws of the State of
Delaware and is, or will be prior to Closing, qualified to conduct business as a
foreign limited partnership in the States of Maine and New Hampshire. Buyer has
the requisite partnership power and authority to execute and deliver this
Agreement and to perform and comply with all of the terms, covenants and
conditions to be performed and complied with by Buyer hereunder.
4.2.Authorization and Binding Obligation. Buyer has the partnership
power and authority to execute and deliver this Agreement and to carry out and
perform all of its other obligations under the terms of this Agreement. All
partnership action by Buyer necessary for the authorization, execution, delivery
and performance by Buyer of this Agreement has been taken. This Agreement has
been duly executed and delivered by Buyer and this Agreement constitutes the
valid and legally binding obligation of Buyer, enforceable against it in
accordance with its terms, except (i) as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally; and
(ii) as the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
4.3.Absence of Conflicting Agreements. The execution, delivery and
performance of this Agreement by Buyer will not violate the certificate of
limited partnership or limited partnership agreement of Buyer, or subject to
obtaining any required Consents, (i) require the consent, approval, permit or
authorization of, or declaration to or filing with any governmental or
regulatory authority, or any other third party, (ii) violate any material law,
judgment, order, ordinance, injunction, decree, rule or regulation of any court
or governmental instrumentality, or (iii) conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of, any
material agreement, instrument, license or permit to which Buyer is a party or
by which Buyer may be bound, such that Buyer could not perform hereunder and
acquire or operate the Assets.
4.4.Claims and Legal Actions. Except for any investigations and
rule-making proceedings affecting the cable industry generally, there is (i) no
legal action, counterclaim, suit, arbitration; (ii) to the knowledge of Buyer,
any claim or governmental investigation; or (iii) any other legal,
administrative or tax proceeding, nor any order, decree or judgment, in progress
or pending, or to the knowledge of Buyer, threatened against Buyer or any of its
affiliates which, if adversely determined, would restrain or enjoin the
consummation of the transactions contemplated by this Agreement or declare
unlawful the transactions or events contemplated by this Agreement or cause any
of such transactions to be rescinded.
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Exhibit 2 - Page 23
4.5.Financial Condition. Buyer is not insolvent within the meaning of
the Federal Bankruptcy Code or any applicable fraudulent transfer law and will
not be rendered insolvent by virtue of the transactions contemplated herein.
4.6.Full Disclosure. To the best of Buyer's knowledge, no
representation or warranty made by Buyer in this Agreement or in any
certificate, document, or other instrument furnished or to be furnished by Buyer
pursuant hereto contains or will contain any untrue statement of a material
fact, or omits or will omit to state any material fact necessary to make any
statement made herein or therein not misleading.
5.COVENANTS OF THE PARTIES
5.1.Conduct of the Business of the Systems. Except as expressly
permitted under this Agreement, disclosed on Schedule 5.1 or with the prior
written consent of Buyer, between the date hereof and the Closing Date, Seller
shall do the following:
5.1.1.Seller shall operate the business of the Systems in the
ordinary course of business in accordance with past practices;
5.1.2.Seller shall use reasonable efforts (i) to preserve the
business of the Systems and Assets intact and to preserve the goodwill and
business of the subscribers, advertisers, suppliers and others having business
relations with the Systems; and (ii) to retain the services of the employees of
the Systems;
5.1.3.Seller shall not (i) enter into any transaction or incur
any liability or obligation which, if entered into or incurred prior to the date
of this Agreement, would have been required to be listed on the Schedules
hereto, (ii) sell, lease, hypothecate, transfer or otherwise dispose of any of
the Assets, other than dispositions in the ordinary course of business of assets
where suitable replacements have been made therefor, (iii) grant or agree to
grant any increase in the rates of salaries or compensation payable to employees
of the Systems (other than as required by law and regularly scheduled bonuses
and increases in the ordinary course of business as disclosed on Schedule 3.12
or one-time bonuses to induce employees to remain employed with Seller through
the Closing Date), (iv) provide for any new and material pension, retirement or
other employment benefits for employees of the Systems or any material increase
in any existing benefits (other than as required by law), (v) implement any
retiering or repackaging of cable television programming offered by the Systems;
or (vi) take or agree to take, any of the foregoing actions or any actions that
would (A) make any representation or warranty of Seller contained in this
Agreement untrue or incorrect as of the Closing Date, or (B) result in any of
the conditions to Closing in this Agreement not being satisfied;
5.1.4.Seller shall not cause or permit, by any act or failure
to act, any of the Franchises to expire or to be revoked, suspended, or
modified, or take any action that could reasonably be expected to cause any
governmental authority to institute proceedings for the suspension, revocation,
or material adverse modification of any Franchise, and Seller shall timely file
appropriate requests for renewal pursuant to 626(a) of the Communications Act
with respect to the Franchise for Greenbush, Maine and any other Franchise as to
which such request may be filed pursuant to said Section 626(a);
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Exhibit 2 - Page 24
5.1.5.Seller shall pay all obligations relating to the Systems
as they become due, consistent with past practices, and shall cause all such
obligations to be paid or satisfied as of the Closing Date;
5.1.6.Seller shall not take any action that is inconsistent
with its obligations under this Agreement or that could reasonably be expected
to hinder or delay the consummation of the transactions contemplated by this
Agreement;
5.1.7.Seller shall maintain all of the Assets in good
condition (ordinary wear and tear excepted), consistent with their overall
condition on the date of this Agreement, and shall use, operate, and maintain
all of the Assets in a reasonable manner;
5.1.8.Seller shall maintain inventories at levels consistent
with past practices and in any event at levels not less than the levels
reflected in the most recent Financial Statements;
5.1.9.Seller shall comply in all material respects with all
laws, rules, and regulations applicable or relating to the ownership and
operation of the Systems;
5.1.10.Seller shall not create, assume or permit to exist any
Lien claim, liability, upon the Assets, except for Permitted Encumbrances and
Liens described in Schedule 3.9; and
5.1.11.Seller shall not change customer rates for any service
or charges for remotes or installation, or change billing, disconnect or
marketing practices.
5.1.12.Except for any Assumed Liabilities (including Utility
Liabilities), with respect to any violations of pole attachment agreements or
similar arrangements asserted by the owner of any poles utilized by the Systems,
Seller will take such steps as may be necessary to cure such violations at
Seller's expense. To the extent such violations are not capable of being cured
prior to the Closing and do not involve material risks to Buyer should Buyer
proceed with the Closing prior to such violations having been cured, the parties
shall proceed with the Closing, with the Purchase Price being reduced on the
Closing Date by a mutually agreeable amount to reflect the cost and risk of such
uncured violations.
5.1.13.Seller shall use its best efforts to cause all
conditions in Section 6.1 to be fulfilled on or before the Closing Date.
5.2.Access to Information. Seller shall allow Buyer and its authorized
representatives reasonable access to the Assets and to all other properties,
equipment, books, records, Contracts and documents relating to the Systems for
the purpose of audit and inspection, and furnish or cause to be furnished to
Buyer or its authorized representatives all information with respect to the
affairs and business of the Systems as Buyer may reasonably request.
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Exhibit 2 - Page 25
5.3.Insurance. Seller shall keep the Systems insured in accordance with
customary industry practices until the Closing.
5.4.Notice of Adverse Changes. Between the date of this Agreement and
the Closing Date, Seller shall promptly notify the Buyer in writing of any
materially adverse developments affecting the Systems which become known to the
Seller, including, without limitation, (i) any change in the condition,
financial or otherwise, of the Systems that could have a Material Adverse
Effect, (ii) any damage, destruction or loss (whether or not covered by
insurance) materially and adversely affecting any of the Systems, or (iii) any
notice of any violation, forfeiture, or complaint under any of the Franchises
that could have a Material Adverse Effect.
5.5.Delivery of Financial Information. Seller shall furnish to Buyer
(i) as soon as they are available, but in no event later than thirty (30) days
after the end of each month subsequent to the date of such latest monthly
financial statement through the end of the month preceding the Closing Date,
monthly financial statements prepared on a basis consistent with the Financial
Statements; (ii) as soon as they are available, but in no event later than
fifteen (15) days after the end of each month a report prepared consistent with
past practices showing monthly revenues and subscriber information for the
systems; and (iii) promptly upon request, such other financial information
(including information on billings, installations, disconnects, payables and
receivables) as Buyer may reasonably request. The income statements delivered by
Seller to Buyers pursuant to this section shall be prepared from the books and
records of Seller in accordance with generally accepted accounting principles
consistently applied, shall accurately reflect the books, records, and accounts
of the Systems, shall be complete and correct in all material respects, and
shall present fairly the results of operations of the Systems for the periods
then ended. Promptly after the preparation thereof, Seller shall deliver to the
Buyer copies of any other financial statements, subscriber counts and other
operational data regularly prepared by Seller for its internal use. Seller also
shall provide Buyer on a periodic basis with reports of capital expenditure made
with respect to the Systems.
5.6.Additional Financial Information. Buyer recognizes that Seller
claims to have acquired the Systems pursuant to Section 9505 of the California
Commercial Code and has owned the Systems for a short period of time and,
accordingly, certain data, documents, reports, statements and other information
regarding the Systems may be unavailable. However, Seller recognizes that Buyer
may need additional financial information with respect to the Systems in
connection with a registration statement or other filings to be made by Buyer
with the Securities and Exchange Commission (the "SEC"). Such information may be
required for preparing audited financial statements of the Systems for prior
years and for portions of the current year. Seller agrees to cooperate and to
cause Seller's accountants and auditors to cooperate with Buyer, but at Buyer's
sole cost and expense, in order to enable Buyer to comply with applicable SEC
requirements.
5.7.Consents. Following the execution hereof, Seller shall make (and
Buyer shall assist Seller in making) such applications to the Franchising
Authorities and other third parties, whose Consents are legally or contractually
required for the valid assignment and transfer of the Assets to Buyer, and shall
otherwise use its best efforts to obtain the Required Consents (and shall use
reasonable efforts to obtain the other Consents) as expeditiously as possible.
Such efforts shall include, if necessary, the making of payments or the giving
of other consideration by Seller to third parties to resolve claims (whether
disputed or undisputed) raised by such third parties and not constituting
Assumed Liabilities. Any application to any governmental authority or other
23
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Exhibit 2 - Page 26
third party for any authorization, consent, order, or approval necessary for the
transfer of any Franchise shall be reasonably acceptable to Buyer and such
consent, order or approval shall, in substance, cover the matters specified in
Schedule 5.7 attached hereto. Seller shall not agree to any materially adverse
change in any Franchise or Contract as a condition to obtaining any
authorization, consent, order, or approval necessary for the transfer of such
Franchise or Contract unless Buyer shall otherwise consent. Buyer shall actively
assist Seller in obtaining such Consents and shall actively cooperate with
Seller in the preparation, filing and prosecution of such applications as may
reasonably be necessary. Buyer shall also prepare any applicable Forms 394 with
respect to the Franchises. Notwithstanding the foregoing, Buyer shall have no
obligation to make any payment to any Franchise authority or to any other party
to any Contract in assisting Seller in obtaining any of the Consents,
amendments, releases or agreements described in this section or to agree to any
materially adverse change in any Franchise or other Contract to be assigned to
Buyer. Buyer shall, at Seller's request, promptly furnish Seller with copies of
such documents and information with respect to Buyer, including financial
information and information relating to the cable and other operations of Buyer
and any of its affiliated or related companies, as Seller may reasonably request
in connection with the obtaining of any of the Consents or as may be reasonably
requested by any person in connection with any Consent. Each party shall provide
to the other copies of all Consents as they are received.
5.8.Cooperation. Buyer and Seller shall cooperate fully with each other
and their respective counsel and accountants in connection with any actions
required to be taken as part of their respective obligations under this
Agreement, and Buyer and Seller shall execute such other documents as may be
necessary and desirable to the implementation and consummation of this
Agreement, and otherwise use diligent efforts to consummate the transactions
contemplated hereby and to fulfill their obligations hereunder.
5.9.Taxes, Fees and Expenses. Buyer, on the one hand, and Seller, on
the other hand, shall each pay 50% of all sales, use, transfer or purchase taxes
and fees and application fees, if any, arising out of the transactions
contemplated herein. Each party shall pay its own expenses incurred in
connection with the authorization, preparation, execution and performance of
this Agreement, including all fees and expenses of counsel, accountants, agents
and other representatives.
5.10.Brokers. Buyer and Seller each represents and warrants that
neither it nor any person or entity acting on its behalf has incurred any
liability for any finders' or brokers' fees or commissions in connection with
the transaction contemplated by this Agreement. Buyer agrees to indemnify and
hold harmless Seller against any fee, commission, loss or expense arising out of
any claim by any broker or finder employed or alleged to have been employed by
it, and Seller agrees to indemnify and hold harmless Buyer against any fee,
commission, loss or expense arising out of any claim by any broker or finder
employed or alleged to have been employed by it.
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Exhibit 2 - Page 27
5.11.Risk of Loss.
5.11.1.The risk of loss, damage or destruction to the Systems
from fire, theft or other casualty or cause shall be borne by Seller at all
times up to completion of the Closing. It is expressly understood and agreed
that in the event of any material loss or damage to any material portion of the
Assets from fire, casualty or other cause prior to the Closing, Seller shall
notify Buyer of same in writing immediately. Such notice shall specify with
particularity the loss or damage incurred, the cause thereof, if known or
reasonably ascertainable, and the insurance coverage related thereto.
5.11.2.Notwithstanding any other provision contained in this
Agreement:
(i) In the event there is damage (including loss of revenue)
to the Systems equal to or greater than $50,000 which is not repaired, replaced
or restored prior to the Closing, Buyer, at its sole option upon written notice
to Seller: (A) may elect to consummate the Closing and accept the Assets in
their unrestored condition, in which event Seller shall pay or assign to Buyer
all proceeds of insurance theretofore received or to be received covering the
Assets involved, and the Purchase Price shall be reduced by an amount equal to
any applicable insurance deductible; or (B) may rescind this Agreement and
declare it of no further force and effect, in which event there shall be no
Closing and this Agreement and all the terms and provisions hereof shall
thereupon be deemed null and void and Buyer shall be entitled to a return of the
Deposit and all interest thereon and the parties shall have no further liability
to each other.
(ii) if the damage (including loss of revenue) sustained is
less than $50,000, this Agreement shall remain in full force and effect and the
Purchase Price shall be reduced by an amount equal to the amount of such damage,
and Seller shall retain all proceeds of insurance theretofore received or to be
received covering the Assets involved.
5.11.3.Employee Benefit Matters. Buyer shall have no
obligation to employ any of Seller's employees employed at the Systems. Seller
shall be responsible for and shall cause to be discharged and satisfied in full
all amounts owed to any employee, if any, including, without limitation, wages,
salaries, sick pay, accrued vacation, employment, incentive, compensation or
bonus agreements or other benefits or payments on account of termination,
including, without limitation, the opportunity to elect continued coverage under
a group health plan pursuant to Section 4980B of the Code. Buyer shall not
assume or accept any obligation or liability under any Employee Plan or
Compensation Arrangement, nor shall Buyer be obligated to continue any Employee
Plan or Compensation Arrangement. Without limiting the generality of the
foregoing, Buyer shall not assume any liability under or otherwise be obligated
to continue, any group health plan maintained by Seller. To the extent that the
transactions contemplated by this Agreement may constitute a "qualifying event"
under the provisions of Section 4980B of the Code with respect to any current or
former employee of Seller or any spouse, former spouse, dependent child, or
former dependent child of any such person, Seller and not Buyer shall provide
and be responsible for continuation coverage in accordance with Section 4980B of
the Code. Seller and not Buyer shall provide and be responsible for continuation
coverage to existing qualified beneficiaries who have the right to elect or
retain such continuation coverage in accordance with Section 4980B of the Code.
25
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Exhibit 2 - Page 28
5.12.Noncompetition. Seller covenants and agrees that for a period of
five (5) years from the Closing Date neither it nor any of its affiliates will
own, manage, operate, control or engage, directly or indirectly, in the business
of operating a wireline or wireless video cable television system within the
area currently serviced by the Systems. Notwithstanding the foregoing, nothing
herein shall be construed to prohibit or restrict the ownership of a company's
securities listed on a national securities exchange or the National Association
of Securities Dealers Automated Quotation System, which (A) constitutes less
than 5% of each class of equity of such company, (B) does not constitute control
over such company and (C) is held solely for investment purposes.
5.13.Billing System Transition. Prior to and following the Closing,
Seller will cooperate with Buyer with respect to the conversion of the System's
billing and collection functions to the billing system utilized by Buyer. In
furtherance of the foregoing, for 180 days following the Closing, or until such
earlier time as the Systems' billing and collection functions have been
converted to the system utilized by Buyer, Seller will continue to perform or
cause to be performed all of the Systems' billing and collection services in the
same manner as presently conducted, and Buyer shall reimburse Seller for
Seller's out-of-pocket cost in providing such services.
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER AND SELLER TO CLOSE
6.1.Conditions Precedent to Obligations of Buyer to Close. The
obligations of Buyer to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived, in whole or in part, by Buyer for purposes of
consummating such transactions:
6.1.1.Representations and Warranties. All representations and
warranties of Seller contained in this Agreement shall be true and complete at
and as of the Closing Date as though such representations and warranties were
made at and as of such time except for changes contemplated or permitted by this
Agreement, which changes shall be reflected on revised Schedules as provided in
Section 7.2.3.
6.1.2.Covenants and Conditions. Seller shall have performed
and complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
6.1.3.No Injunction, Etc. No action, suit or other proceeding
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit or obtain
substantial damages in respect of, or which is related to, or arising out of,
this Agreement or the consummation of the transactions contemplated hereby
which, if successful, would have a Material Adverse Effect.
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Exhibit 2 - Page 29
6.1.4.Consents. All Consents designated on Schedule 3.8 with
an asterisk ("Required Consents") shall have been duly obtained and delivered to
Buyer and shall not have been amended, rescinded, repealed or conditioned.
6.1.5.Deliveries. Seller shall have made or stand willing and
able to make all the deliveries to Buyer set forth in Section 7.2.
6.1.6.Material Adverse Change. Between the date of this
Agreement and the Closing Date, there shall have occurred no material adverse
change in the financial condition of the Systems, taken as a whole, other than
matters affecting the cable television industry generally (including without
limitation legislative, regulatory or litigation matters) and matters relating
to or arising from local or national economic conditions (including financial
and capital markets).
6.1.7.Environmental Report. Provided that Buyer shall have
ordered such environmental site assessments not later than ten (10) business
days after the execution of this Agreement, Buyer shall have received, at
Buyer's expense, Phase I environmental site assessments (the "Environmental
Reports") of the Real Property performed by a recognized environmental firm
reasonably satisfactory to Buyer. The Environmental Reports shall show no
environmental condition on or affecting such Real Property that (i) could
reasonably be expected to impair the use or value of such Real Property for the
continued operation of the Systems as presently operated or subject Buyer to any
liability for fines, penalties, or cleanup or response costs if Buyer
consummates this Agreement, or (ii) would cause a reasonable purchaser to
perform further investigation or testing before proceeding with the transfer of
the Real Property.
6.1.8.Title Commitment. Provided that Buyer shall have ordered
such commitments not later than ten (10) days after the execution of this
Agreement, Buyer shall have received, at Buyer's expense, written commitments to
issue owner's and lessee's policies of title insurance, naming Buyer as the
insured, written by a responsible title insurance company authorized to write
title insurance with respect to real estate in the states where the Real
Property is located, which policies shall guarantee good and marketable title to
the Real Property and shall show no exceptions for rights of occupancy or use by
third parties, no gaps in the chain of title, no violations of any applicable
zoning or other ordinance, statute, rule or regulation and no other matter
adversely affecting title to the Real Property and shall otherwise be reasonably
satisfactory to Buyer.
6.1.9.FCC Counsel Satisfaction. Buyer's FCC counsel shall be
reasonably satisfied with the accuracy of Seller's representations and
warranties in this Agreement pertaining to the Franchises and to FCC, FAA and
copyright matters, or if Seller so elects, Seller shall have delivered to Buyer
an opinion of FCC counsel reasonably satisfactory to Buyer in form and
substance.
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Exhibit 2 - Page 30
6.1.10.No Unresolved Default Claims. No Franchising Authority
or any party to any Contract shall have notified Buyer or Seller that any
default exists under any Franchise or Contract, the result of which could be a
Material Adverse Effect, except for such defaults as shall have been waived in
writing prior to the Closing or as shall constitute Assumed Liabilities.
6.2.Conditions Precedent to Obligations of Seller to Close. The
obligations of Seller to consummate the transactions contemplated by this
Agreement to occur at the Closing shall be subject to the satisfaction, on or
before the Closing Date, of each and every one of the following conditions, all
or any of which may be waived, in whole or in part, by Seller for purposes of
consummating such transactions:
6.2.1.Representations and Warranties. All representations and
warranties of Buyer contained in this Agreement shall be true and complete at
and as of the Closing Date as though such representations and warranties were
made at and as of such time except to the extent changes are permitted or
contemplated pursuant to this Agreement.
6.2.2.Covenants and Conditions. Buyer shall have performed and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by it prior to or on the Closing
Date.
6.2.3.No Injunction, Etc. No action, suit or other proceeding
shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit or obtain
substantial damages in respect of, or which is related to, or arising out of,
this Agreement or the consummation of the transaction contemplated hereby which
if successful would have a Material Adverse Effect.
6.2.4.Deliveries. Buyer shall have made or stand willing and
able to make all the deliveries set forth in Section 7.3.
7.CLOSING AND CLOSING DELIVERIES
7.1.Closing. The Closing shall take place at 10:00 a.m. on a date
specified by Buyer upon at least ten (10) days prior written notice to Seller,
which date shall not be earlier than the date all Required Consents of the
issuers of the Franchises shall have been obtained nor later than thirty (30)
days following the satisfaction or waiver of all Closing conditions set forth in
Section 6.1, or on such other date as Buyer and Seller may mutually agree (the
"Closing Date"). The Closing shall be held at the offices of Edwards & Angell,
101 Federal Street, Boston, Massachusetts 02110, or the Closing will be
conducted by mail or at such other place and time as the parties may agree.
7.2.Deliveries by Seller. Prior to or on the Closing Date, Seller shall
deliver to Buyer the following, in form and substance reasonably satisfactory to
Buyer and its counsel:
7.2.1.Transfer Documents. Duly executed bills of sale,
warranty deeds, motor vehicle titles, assignments and other transfer documents
which shall be sufficient to vest good and marketable title to the Assets in the
name of Buyer or its permitted assignees, free and clear of any Liens, except
for Permitted Encumbrances;
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Exhibit 2 - Page 31
7.2.2.Consents. The original of each Consent;
7.2.3.Officer's Certificate. A certificate, dated as of the
Closing Date, executed by the President or a Vice President of Seller,
certifying: (i) that the representations and warranties of Seller contained in
this Agreement are true and complete at and as of the Closing Date as though
made on and as of such time, except for changes contemplated or permitted by
this Agreement, which changes shall be reflected on revised Schedules attached
to such certificate and (ii) that Seller has performed and complied with
covenants, agreements and conditions required by this Agreement to be performed
or complied with by Seller prior to or on the Closing Date;
7.2.4.Secretary's Certificate. A certificate, dated as of the
Closing Date, executed by the Secretary of Seller: (i) certifying that the
resolutions, as attached to such certificate, were duly adopted by Seller's
Manager and members (if required), authorizing and approving the execution of
this Agreement and the consummation of the transaction contemplated hereby and
that such resolutions remain in full force and effect; and (ii) certifying as to
the incumbency of each signatory to this Agreement executed by such Seller; and
7.2.5.Opinions of Counsel. Opinion of Seller's counsel dated
as of the Closing Date, substantially in the form attached hereto as Exhibit B.
7.2.6.Evidence of Payment of Creditors. Evidence reasonably
satisfactory to Buyer of the payment and satisfaction of all indebtedness and
liabilities of Seller to trade creditors, lenders and other third parties.
7.3.Deliveries by Buyer. Prior to or on the Closing Date, Buyer shall
deliver to Seller the following, in form and substance reasonably satisfactory
to Seller and their counsel:
7.3.1.Purchase Price. The Purchase Price, as adjusted, less
the amount of the Deposit;
7.3.2.Assumption Agreements. Appropriate assumption agreements
(the "Assumption Agreements") in form reasonably satisfactory to Buyer pursuant
to which Buyer shall assume the Assumed Liabilities.
7.3.3.Officer's Certificate. A certificate, dated as of the
Closing Date, executed by the President or a Vice President of Buyer, certifying
(i) that the representations and warranties of Buyer contained in this Agreement
are true and complete as of the Closing Date as though made on and as of that
date, except for changes contemplated by this Agreement; and (ii) that Buyer has
performed all of its obligations and complied with all of its covenants set
forth in this Agreement to be performed or complied with by Buyer on or prior to
the Closing Date; and
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Exhibit 2 - Page 32
7.3.4.Secretary's Certificate. A certificate, dated as of the
Closing Date, executed by a senior officer of Buyer: (i) certifying that the
resolutions, as attached to such certificate, were duly adopted by Buyer,
authorizing and approving the execution of this Agreement and the consummation
of the transaction contemplated hereby and that such resolutions remain in full
force and effect; and (ii) certifying as to the incumbency of each signatory to
this Agreement executed by Buyer.
8.TERMINATION
8.1.Method of Termination. This Agreement may be terminated or
abandoned only as follows:
8.1.1.By the mutual consent of Seller and Buyer;
8.1.2.By either party (provided that such party is not then in
breach of any of its representations, warranties or obligations hereunder) by
written notice to the other if the Closing shall not have occurred on or before
November 30, 1996; or
8.1.3.By either party if the other party shall have breached
its obligations hereunder and such breach shall remain uncured for fifteen (15)
days following written notice of such breach from the terminating party.
8.2.Rights Upon Termination.
8.2.1.In the event of a termination of this Agreement pursuant
to Section 8.1.1 or 8.1.2 hereof, each party shall pay the costs and expenses
incurred by it in connection with this Agreement, and no party (or any of its
officers, directors, employees, agents, representatives or stockholders) shall
be liable to any other party for any cost, expense, damage or loss of
anticipated profits hereunder.
8.2.2.In the event of a termination of this Agreement pursuant
to Sections 8.1.3 hereof as a result of any untrue representation, breach of
warranty or nonfulfillment of any covenant by Buyer contained in this Agreement,
Seller shall only have rights provided for in Section 2.4.3 hereof.
8.2.3.In the event of a breach of this Agreement or a
termination of this Agreement pursuant to Sections 8.1.3 hereof as a result of
any untrue representation, breach of warranty or nonfulfillment of any covenant
by Seller contained in this Agreement, Buyer shall have the right to seek all
remedies available to it as provided hereunder or at law or equity, including
the remedy of specific performance. In the event of any action to enforce this
Agreement, Seller hereby waives the defense that there is an adequate remedy at
law.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND
INDEMNIFICATION
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Exhibit 2 - Page 33
9.1.Representations and Warranties. All representations, warranties,
covenants and agreements contained in this Agreement or in any documents or
instruments delivered pursuant hereto shall be deemed continuing
representations, warranties, covenants and agreements, and all such
representations and warranties shall survive the Closing Date for a period
ending on the first anniversary of the Closing Date unless a longer period of
survival is otherwise provided for in this Agreement; provided, however, that
the representations, warranties set forth in Sections 3.5, 3.6 and 3.7, in the
first three sentences of Section 3.4, in the first and third sentences of
Section 3.9, and in Sections 3.16 and 3.17 shall survive through the expiration
of all statutes of limitation (if any) applicable to any claim, right of action
or Losses to which Buyer could be subject in the event of a breach of such
representations and warranties. The written assertion of any claim by Buyer or
Seller against the other hereunder with respect to the breach or alleged breach
of any representation or warranty shall extend the period during which such
representation and warranty survives through the date such claim is resolved.
9.2.Indemnification by Seller. Seller shall indemnify and hold Buyer
harmless against and with respect to, and shall reimburse Buyer on demand for
any and all losses, liabilities, damages and expenses, including, without
limitation, reasonable legal fees and expenses (collectively, "Losses")
resulting from:
9.2.1.Any untrue representation, breach of warranty or
nonfulfillment of any covenant by Seller contained herein;
9.2.2.Any and all obligations of Seller other than Assumed
Liabilities;
9.2.3.The operation or ownership of the Systems or Assets
prior to the Closing Date, including, without limitation, any and all
liabilities arising under the Franchises or the Contracts which relate to events
occurring prior to the Closing Date and any alleged noncompliance with
environmental laws or other laws which relates to events or circumstances
existing prior to the Closing Date; and
9.2.4.Any and all actions, suits, proceedings, claims,
demands, assessments, judgments, costs and expenses, including, without
limitation, reasonable legal fees and expenses, incident to any of the foregoing
or incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.
9.3.Indemnification by Buyer. Provided that the Closing shall have
occurred, Buyer shall indemnify and hold Seller harmless against and with
respect to, and shall reimburse Seller on demand for any and all Losses
resulting from:
9.3.1.Any untrue representation or breach of warranty or
nonfulfillment of any covenant by Buyer contained herein;
9.3.2.Any and all of the Assumed Liabilities;
9.3.3.Buyer's operation or ownership of the Systems or Assets
on and after the Closing Date; and
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Exhibit 2 - Page 34
9.3.4.Any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs and expenses, including reasonable legal fees and
expenses, incident to any of the foregoing or incurred in investigating or
attempting to avoid the same or to oppose the imposition thereof, or in
enforcing this indemnity.
9.4.Procedure for Indemnification. The procedure for indemnification
shall be as follows:
9.4.1.The party claiming indemnification (the "Claimant") shall
give notice to the party from whom indemnification is claimed (the "Indemnifying
Party") of any claim, whether between the parties or brought by a third party,
describing (i) the factual basis for such claim; and (ii) the estimated amount
of the claim, if known. If the claim relates to an action, suit or proceeding
filed by a third party against Claimant, such notice shall be given by Claimant
within ten days after written notice of such action, suit or proceeding was
given to Claimant, provided that failure to give such notice within such ten-day
period shall not bar or otherwise prejudice the Claimant's rights to
indemnification with respect to such third-party action, suit or proceeding
unless the Indemnifying Party is materially prejudiced thereby vis a vis each
third party.
9.4.2.With respect to any claim by a third party as to which the
Claimant is entitled to indemnification hereunder, the Indemnifying Party shall
have the right at its own expense, to participate in or assume control of the
defense of such claim, provided that (i) the Indemnifying Party notifies the
Claimant of its election to do so within 30 days of the date it receives notice
of such third-party claim, (ii) the remedy sought by the third party claimant is
exclusively the payment of money and not any non-monetary remedies and (iii) the
Indemnifying Party waives the provisions of Section 9.5 with respect to such
claim. If the Indemnifying Party elects to assume control of the defense of any
third-party claim, the Claimant shall have the right to participate in the
defense of such claim at its own expense. If the Indemnifying Party does not so
elect to assume control of any third party claim, it shall be bound by the
results obtained by the Claimant with respect to such claim.
9.4.3.If a claim, whether between the parties or by a third party,
requires immediate action, the parties will make every effort to reach a
decision with respect thereto as expeditiously as possible.
9.5.Indemnification Threshold.
Neither party shall have any liability under Section 9.1 or 9.2 for breaches of
representations and warranties by such party unless and until the Losses arising
therefrom exceed in the aggregate $50,000 (the "Threshold"), and if a party's
Losses exceed the Threshold in the aggregate, such party shall be entitled to
recover all of its Losses, including, without limitation, the amount of the
Threshold.
9.6. Interest. Any amount owed by either party to the other under this
Section 9 or under Section 2.5 shall, if not paid within thirty (30) days
following the date demand for such payment is made, bear interest at a rate of
fifteen percent (15%) per annum from the date demand for such payment is made
until payment in full is received.
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Exhibit 2 - Page 35
10.DISPUTE RESOLUTION
10.1.Arbitration. Any controversy, dispute or claim, including, but not
limited to, a claim for specific performance, between Seller and Buyer arising
out of or in connection with, or relating to, this Agreement or the transactions
contemplated hereby or the breach, termination or validity hereof, shall be
finally settled by arbitration conducted expeditiously in accordance with the
Commercial Arbitration Rules (the "AAA Rules") of the American Arbitration
Association (the "AAA") in effect at the time of the commencement of the
arbitration proceeding by a sole arbitrator appointed by the AAA. The arbitrator
shall be an attorney with no less than 15 years experience in the practice of
corporate law (with substantial experience in the acquisition and financing of
cable television systems); provided, however, in the case of an arbitration
proceeding to resolve a dispute with respect to the calculation of the
adjustments to be made to the Purchase Price as contemplated by Section 2.5, the
arbitrator shall be an accountant with a so-called "Big 6" accounting firm that
has not performed any services for Seller or Buyer during the two years prior to
the Closing Date. The arbitration decision or award shall be reasoned and in
writing. Judgment upon the decision or award rendered by the arbitrator may be
entered and specifically enforced in any count having jurisdiction thereof. The
situs for any such arbitration shall be San Francisco, California. A final award
shall be rendered as soon as reasonably possible and in any event within 120
days of the filing with AAA of any demand for arbitration. The parties agree
that the arbitrator shall have the right to shorten the length of any notice
periods or other time periods provided in the AAA Rules and to implement
Expedited Procedures under the AAA rules in order to ensure that the arbitration
process is completed within the time frames provided herein. Buyer, on the one
hand, and Seller, on the other hand, shall each bear 50% of the costs of any
such arbitration, including, without limitation, the fees and expenses of the
arbitrator; provided, however, the arbitrator shall have the right (but not the
obligation) to reapportion Seller's and Buyer's relative shares of such costs in
accordance with the arbitrator's determination of the relative merits of the
parties' respective claims. Notwithstanding the provisions of Section 11.3, any
arbitration held pursuant to the provisions of this section shall be governed by
the Federal Arbitration Act.
10.2.WAIVER OF JURY TRIAL. EACH OF THE PARTIES HEREBY WAIVES THE RIGHT
TO TRIAL BY JURY IN ANY SUIT, ACTION OR OTHER PROCEEDING BROUGHT ON, WITH
RESPECT TO OR IN CONNECTION WITH THIS AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED HEREBY.
10.3.Survival. The provisions of this Section 10 shall survive any
termination of this Agreement for any reason.
11.MISCELLANEOUS
11.1.Notices. All notices, demands and requests required or permitted
to be given under the provisions of this Agreement shall be (i) in writing; (ii)
delivered by personal delivery, facsimile transmission (to be followed promptly
by written confirmation mailed by certified mail as provided below) or sent by
commercial delivery service or certified mail, return receipt requested; (iii)
deemed to have been given on the date of personal delivery, the date of
transmission and receipt of facsimile transmissions, or the date set forth in
the records of the delivery service or on the return receipt; and (iv) addressed
as follows:
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Exhibit 2 - Page 36
If to Seller:
c/o Phoenix Cable, Inc.
10 South Franklin Turnpike
Ramsey, NJ 07446
Attn.: James H. Feeney, President
Facsimile No.: (201) 825-8794
With a copy to:
Frandzel & Share
6500 Wilshire Blvd.
Los Angeles, CA 90048
Attn.: Patricia Y. Trendacosta, Esq.
Facsimile No.: (213) 651-2577
If to Buyer:
FrontierVision Partners, L.P.
1777 South Harrison Street
Suite P-200
Denver, Colorado 80210
Attn.: James C. Vaughn, President
Facsimile No.: (303) 757-6105
With a copy to:
Edwards & Angell
101 Federal Street
Boston, Massachusetts 02110
Attn.: Stephen O. Meredith, Esq.
Facsimile No.: (617) 439-4170
or to any such other persons or addresses as the parties may from time to
time designate in a writing delivered in accordance with this Section 11.1.
11.2.Benefit and Binding Effect. Neither party hereto may assign this
Agreement without the prior written consent of the other party hereto; provided,
however, that Buyer may assign this Agreement to its affiliates and collaterally
assign its rights under this Agreement to its lenders without the consent of
Seller; provided, further, however, that Buyer shall not be released and shall
continue to be fully liable for its obligations hereunder; and provided further
this Agreement is assumed by such assignee (excluding lenders) pursuant to an
assumption agreement reasonably satisfactory to Seller. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
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Exhibit 2 - Page 37
11.3.Governing Law. This Agreement shall be governed, construed and
enforced in accordance with the laws of the State of New Hampshire, without
regard to the conflicts of law principles of such state.
11.4.Headings. The headings herein are included for ease of reference
only and shall not control or affect the meaning or construction of the
provisions of this Agreement.
11.5.Gender and Number. Words used herein, regardless of the gender and
number specifically used, shall be deemed and construed to include any other
gender, masculine, feminine or neuter, and any other number, singular or plural,
as the context requires.
11.6.Entire Agreement. This Agreement, all schedules and exhibits
hereto, and all documents and certificates to be delivered by the parties
pursuant hereto collectively represent the entire understanding and agreement
between Buyer and Seller with respect to the subject matter hereof. All
schedules and exhibits attached to this Agreement shall be deemed part of this
Agreement and incorporated herein, where applicable, as if fully set forth
herein. This Agreement supersedes all prior negotiations between Buyer and
Seller with respect to the transactions contemplated hereby, and all letters of
intent and other writings relating to such negotiations, and cannot be amended,
supplemented or, except as provided in Section 11.8, modified except by an
agreement in writing signed by Buyer and the Seller.
11.7.Further Assurances. Each party covenants that at any time, and
from time to time, before or after the Closing Date, it will execute such
additional instruments and take such actions as may be reasonably requested by
the other parties to confirm or perfect or otherwise to carry out the intent and
purposes of this Agreement.
11.8.Waiver of Compliance; Consents. Except as otherwise provided in
this Agreement, any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, agreement or condition herein may be waived
in writing by the party entitled to the benefits thereof, but such waiver or
failure to insist upon strict compliance with such obligation, representation,
warranty, covenant, agreement or condition shall not operate as a waiver of, or
estoppel with respect to, any subsequent or other failure.
11.9.Severability. If any provision of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable to any extent, the remainder of this Agreement and the application
of such provision to other persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law provided
that the economic and legal substance of the transactions contemplated by this
Agreement is not affected in any manner that is materially adverse to any party
affected by such invalidity or unenforceability.
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Exhibit 2 - Page 38
11.10.Counterparts. This Agreement may be signed in any number of
counterparts with the same effect as if the signature on each such counterpart
were upon the same instrument. A signature delivered by facsimile transmission
shall be deemed an original signature for all purposes under this Agreement.
11.11.No Third Party Beneficiaries. This Agreement constitutes an
agreement solely among the parties hereto, and, is not intended to and will not
confer any rights, remedies, obligations or liabilities, legal or equitable on
any person (including, without limitation, any of Seller's employees) other than
the parties hereto and their respective successors or assigns, or otherwise
constitute any person (including, without limitation, any of Seller's employees)
a third party beneficiary under or by reason of this Agreement.
11.12.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 shall not apply in any
construction or interpretation of this Agreement.
11.13.Time of the Essence. 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 weekend or on day that
is not a business day in New York and in each state in which one or more Systems
is located, the time for the giving of such notice or the performance of such
act will be extended to the next succeeding business day in all such states.
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Exhibit 2 - Page 39
IN WITNESS WHEREOF, this Agreement has been executed by Buyer and
Seller as of the date first above written.
BUYER:
FRONTIERVISION OPERATING PARTNERS,
L.P.
By FrontierVision Partners, L.P., its General Partner
By FVP GP, L.P., its General Partner
By FrontierVision Inc., its General Partner
By: /s/ James C. Vaughn
-----------------------------------
Title: James C. Vaughn, President
SELLER:
PHOENIX GRASSROOTS CABLE SYSTEMS,
L.L.C.
By Phoenix Leasing Incorporated, Its Manager
By: /s/ James H. Feeney
---------------------------------
James H. Feeney, President
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Exhibit 2 - Page 40
AGREEMENT TO BE BOUND
The undersigned hereby agrees to be bound only by the provisions of
Section 5.12 of the foregoing Asset Purchase Agreement (pertaining to
noncompetition) upon the same terms as Seller is bound.
/s/ James H. Feeney
-------------------
James H. Feeney
PHOENIX LEASING INCORPORATED
By: /s/ Gary Martinez
-------------------------------------
Name: Gary Martinez
Title: Senior Vice President
PHOENIX CABLE INCORPORATED
By: /s/ James H. Feeney
-------------------------------------
Name: James H. Feeney
Title: President
37
