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) December 30, 1997
FALCON HOLDING GROUP, L.P.
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(Exact name of Registrant as specified in its charter)
DELAWARE
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(State or other jurisdiction of incorporation or organization)
33-60776 95-4408577
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(Commission File Number) (I.R.S. Employer
Identification Number)
10900 WILSHIRE BOULEVARD -15TH FLOOR
LOS ANGELES, CALIFORNIA 90024
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(Address of principal (Zip Code)
executive offices)
(310) 824-9990
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
On December 30, 1997, Falcon Holding Group, L.P., a Delaware limited
partnership (the "Partnership"), entered into a Contribution and Purchase
Agreement (the "Agreement") with Falcon Communications, L.P., a California
limited partnership ("NewFalcon"), TCI Falcon Holdings, LLC, a Delaware limited
liability company ("TCI"), and certain other persons. The Partnership is a
general partner and limited partner of NewFalcon and TCI is a general partner of
NewFalcon. Reference is made to the copy of the Agreement filed as an exhibit to
this report. The following disclosure is qualified in its entirety by such
reference.
The Agreement contemplates (i) the contribution to NewFalcon by the
Partnership of substantially all of the assets of its cable television systems
serving approximately 680,000 basic subscribers, subject to certain
indebtedness, (ii) and the contribution to NewFalcon by TCI of the assets of
certain cable television systems serving approximately 293,000 basic
subscribers, subject to certain indebtedness. The cable television systems owned
by TCI that are to be contributed to NewFalcon are located in Oregon,
Washington, California, Missouri and Alabama.
Immediately after the Partnership's contribution to NewFalcon and
pursuant to the Agreement, the holders of substantially all of the partnership
interests of Falcon Video Communications Investors, L.P. ("FVCI") (other than
the Partnership) and of Falcon Video Communications, L.P. ("Video") (other than
FVCI) will contribute their interests in FVCI and Video to the Partnership in
exchange for limited partnership interests in the Partnership. FVCI owns
partnership interests in Video, and Video owns cable television systems which
serve approximately 70,000 homes subscribing to cable service. The Partnership
will, in turn, contribute the interests in FVCI and Video to NewFalcon.
Pursuant to the Agreement, the Partnership will redeem a portion of the
limited partnership interests in the Partnership held by certain of its limited
partners (the "Redeemed Partners") in exchange for partnership interests in
NewFalcon, and TCI will purchase those partnership interests in NewFalcon from
the Redeemed Partners for cash. After giving effect to the contributions
provided in the Agreement and such redemption and purchase, the Partnership will
own approximately 53% of the equity in NewFalcon and TCI will own approximately
47% of the equity in NewFalcon.
In connection with the contributions by the Partnership to NewFalcon,
NewFalcon will assume the rights and obligations of the Partnership under the
Indenture for the outstanding 11% Senior Subordinated Notes.
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3
The consummation of the transactions described above is subject to
customary closing conditions, including, without limitation, the Partnership and
TCI obtaining required regulatory and other related consents and to obtaining
satisfactory financing arrangements on acceptable terms. Accordingly, there can
be no assurance that the transactions described above will be successfully
consummated or, if successfully completed, when they might be completed.
FORWARD-LOOKING STATEMENTS IN THIS REPORT ARE MADE PURSUANT TO THE SAFE
HARBOR PROVISIONS OF SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED. INVESTORS ARE CAUTIONED THAT SUCH FORWARD-LOOKING STATEMENTS INVOLVE
RISKS AND UNCERTAINTIES INCLUDING, WITHOUT LIMITATION, THE EFFECTS OF
LEGISLATIVE AND REGULATORY CHANGES; THE NEED FOR REGULATORY APPROVALS; THE
POTENTIAL OF INCREASED LEVELS OF COMPETITION FOR THE PARTNERSHIP; TECHNOLOGICAL
CHANGES; THE NEED TO ARRANGE ADEQUATE FINANCING; POTENTIAL CONFLICTS OF INTEREST
INVOLVING THE GENERAL PARTNER OF THE PARTNERSHIP AND ITS AFFILIATES; AND OTHER
RISKS DETAILED FROM TIME TO TIME IN THE PARTNERSHIP'S ANNUAL REPORT ON FORM 10-K
AND PERIODIC REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial Statements of Business Acquired
Not applicable.
(b) Pro Forma Financial Information
Not applicable.
(c) Exhibits
Exhibit Number Description
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2.1 Contribution and Purchase Agreement,
dated as of December 30, 1997
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Partnership has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
FALCON HOLDING GROUP, L.P.
By: Falcon Holding Group, Inc.,
General Partner
Dated: January 16, 1998 By: /s/ MICHAEL K. MENEREY
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Name: Michael K. Menerey
Title: Secretary and Chief
Financial Officer
Exhibit 2.1
CONTRIBUTION AND PURCHASE AGREEMENT,
DATED AS OF DECEMBER 30, 1997
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CONTRIBUTION AND PURCHASE AGREEMENT,
DATED AS OF DECEMBER 30, 1997
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TABLE OF CONTENTS
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ARTICLE 1 DEFINITIONS
1.1 Terms Defined in this Section................................. 2
1.2 Terms Defined Elsewhere in this Agreement..................... 12
1.3 Terms Generally............................................... 14
ARTICLE 2 CONTRIBUTIONS, REDEMPTIONS, AND PURCHASES
2.1 Contributions to FHGLP........................................ 14
2.2 Contributions to NewFalcon.................................... 15
2.3 Excluded Assets............................................... 18
2.4 Manner of Effecting Contributions............................. 19
2.5 Modification of Contributions................................. 19
2.6 Redemption of FHGLP Interests................................. 20
2.7 Purchase and Sale of NewFalcon Interests...................... 22
2.8 Other Transactions............................................ 23
ARTICLE 3 VALUE OF CONTRIBUTIONS
3.1 General Agreements Regarding Valuation........................ 25
3.2 Fair Market Value of TCI Assets............................... 25
3.3 Fair Market Value of Falcon Video Interests................... 26
3.4 Fair Market Value of Video Investors Interests................ 26
3.5 Fair Market Value of FHGLP Assets............................. 27
3.6 Fair Market Value of FHGLP Interests.......................... 28
3.7 Determination of Adjustments.................................. 29
3.8 Certain Additional Adjustments................................ 31
3.9 Estimated Percentage Interests................................ 34
3.10 Excluded Indebtedness........................................ 34
ARTICLE 4 ASSUMED LIABILITIES
4.1 Assumption of TCI Liabilities................................. 35
4.2 Assumption of FHGLP Liabilities............................... 36
4.3 Liabilities Not Assumed....................................... 36
4.4 Indemnification for Certain Liabilities....................... 37
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ARTICLE 5 AMENDMENT TO FHGLP PARTNERSHIP AGREEMENT
ARTICLE 6 REPRESENTATIONS AND WARRANTIES OF THE FHGLP PARTNERS
6.1 Organization, Standing, and Authority......................... 37
6.2 Authorization and Binding Obligation.......................... 38
6.3 No Consents; Absence of Conflicting Agreements................ 38
6.4 Investment Representations.................................... 38
6.5 Title to Partnership Interests and Mezzanine Securities....... 38
6.6 DISCLAIMER.................................................... 39
ARTICLE 7 REPRESENTATIONS AND WARRANTIES OF TCI ENTITIES
7.1 Organization, Standing, and Authority......................... 39
7.2 Authorization and Binding Obligation.......................... 40
7.3 Absence of Conflicting Agreements; Consents................... 40
7.4 Licenses and Contracts........................................ 40
7.5 Title to and Condition of Real Property and Personal Property. 41
7.6 Intangibles................................................... 42
7.7 Information on Franchises and the TCI Systems................. 42
7.8 Financial Statements.......................................... 45
7.9 Bonds......................................................... 45
7.10 Personnel Matters............................................ 45
7.11 Environmental Laws........................................... 46
7.12 Claims and Legal Actions..................................... 46
7.13 Taxes and Tax Returns........................................ 47
7.14 Compliance with Laws......................................... 47
7.15 Transactions with Affiliates................................. 47
7.16 Conduct of Business in Ordinary Course....................... 48
7.17 Brokers...................................................... 48
7.18 Compliance with Ownership Restrictions....................... 48
7.19 Ellensburg Purchase Agreement and Ellensburg System.......... 49
ARTICLE 8 REPRESENTATIONS AND WARRANTIES OF FHGLP
8.1 Organization, Standing, and Authority......................... 49
8.2 Authorization and Binding Obligation.......................... 49
8.3 Absence of Conflicting Agreements; Consents................... 50
8.4 Licenses and Contracts........................................ 50
8.5 Title to and Condition of Real Property and Personal Property. 51
8.6 Intangibles................................................... 51
8.7 Information on Franchises and the Falcon Systems.............. 51
8.8 Financial Statements.......................................... 54
8.9 Personnel Matters............................................. 54
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8.10 Environmental Laws........................................... 54
8.11 Claims and Legal Actions..................................... 55
8.12 Taxes and Tax Returns........................................ 55
8.13 Compliance with Laws......................................... 55
8.14 Transactions with Affiliates................................. 56
8.15 Conduct of Business in Ordinary Course....................... 56
8.16 Brokers...................................................... 57
8.17 Ownership of Falcon Entities................................. 57
8.18 Enstar....................................................... 57
ARTICLE 9 OPERATIONS OF TCI SYSTEMS PRIOR TO CLOSING
9.1 Generally..................................................... 57
9.2 Compensation.................................................. 58
9.3 Contracts..................................................... 58
9.4 Disposition of Assets......................................... 58
9.5 Liens......................................................... 58
9.6 Franchises.................................................... 58
9.7 No Inconsistent Action........................................ 59
9.8 No Shop....................................................... 59
9.9 Notification of Certain Matters............................... 59
9.10 Changes in Rates and Programming............................. 59
9.11 Waivers...................................................... 60
9.12 Access to Information........................................ 60
9.13 Maintenance of Assets........................................ 61
9.14 Maintenance of Personnel and Plant........................... 61
9.15 Insurance.................................................... 61
9.16 Financial Information........................................ 61
9.17 Compliance with Laws......................................... 61
9.18 Signal Carriage.............................................. 62
ARTICLE 10 OPERATIONS OF FALCON SYSTEMS PRIOR TO CLOSING
10.1 Generally.................................................... 62
10.2 Mergers...................................................... 62
10.3 Disposition of Assets........................................ 62
10.4 Acquisitions................................................. 63
10.5 Indebtedness................................................. 63
10.6 Franchises................................................... 63
10.7 Equity Interests; Dissolution................................ 63
10.8 No Inconsistent Action....................................... 64
10.9 No Shop...................................................... 64
10.10 Notification of Certain Matters............................. 64
10.11 Access to Information....................................... 64
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10.12 Financial Information....................................... 65
10.13 Maintenance of Personnel and Plant.......................... 65
10.14 Maintenance of Assets....................................... 65
10.15 Compliance with Laws........................................ 65
ARTICLE 11 SPECIAL COVENANTS AND AGREEMENTS
11.1 Actions by Falcon Entities................................... 65
11.2 TCI Consents................................................. 66
11.3 Falcon Consents.............................................. 67
11.4 Cooperation.................................................. 67
11.5 Conversion of Billing Systems................................ 68
11.6 Employee Matters............................................. 68
11.7 Title Insurance and Surveys.................................. 70
11.8 Access to Information After Closing.......................... 71
11.9 Signal Sharing Agreement..................................... 71
11.10 Deferred Contributions...................................... 71
11.11 Confidentiality............................................. 74
11.12 Bulk Sales Law.............................................. 74
11.13 Rate Proceedings............................................ 74
11.14 Further Assurances.......................................... 75
11.15 Modifications to Amended FHGLP Agreement.................... 75
11.16 Amended Partnership Agreements, Other Agreements, and
Termination of Agreements................................. 75
11.17 Consent and Agreement of FHGLP Partners..................... 77
11.18 HSR Act..................................................... 78
11.19 Ellensburg, Washington...................................... 78
11.20 Transition Services......................................... 81
11.21 Enstar...................................................... 81
11.22 Tag-Along Rights............................................ 81
ARTICLE 12 CLOSING CONDITIONS
12.1 Conditions to Obligations of NewFalcon and FHGLP............. 82
12.2 Conditions to Obligations of TCI............................. 84
12.3 Conditions to Obligations of Each FHGLP Partner.............. 85
12.4 Standard of Materiality...................................... 86
ARTICLE 13 CLOSING AND CLOSING DELIVERIES
13.1 Time and Place of Closing.................................... 86
13.2 Deliveries by TCI............................................ 88
13.3 Deliveries by NewFalcon...................................... 88
13.4 Deliveries by FHGLP.......................................... 89
13.5 Deliveries by the FHGLP Partners............................. 89
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13.6 Deliveries to Effect Sale of NewFalcon Interests............. 90
ARTICLE 14 TERMINATION RIGHTS
14.1 Termination by Agreement..................................... 90
14.2 Termination by TCI........................................... 90
14.3 Termination by FHGLP......................................... 91
14.4 Rights on Termination........................................ 92
14.5 Specific Performance......................................... 92
ARTICLE 15 MISCELLANEOUS
15.1 Survival of Representations and Warranties................... 93
15.2 Taxes, Fees, and Expenses.................................... 93
15.3 Notices...................................................... 94
15.4 Benefit and Binding Effect................................... 94
15.5 Entire Agreement............................................. 94
15.6 Waiver of Compliance; Consents............................... 95
15.7 Severability................................................. 96
15.8 Governing Law................................................ 96
15.9 Disputed Matters............................................. 96
15.10 Captions.................................................... 98
15.11 Rights Cumulative........................................... 98
15.12 Construction................................................ 99
15.13 Counterparts................................................ 99
Pursuant to Item 601(b)(2) of Regulation S-K, the following exhibits
and schedules have been omitted. Falcon Holdings Group, L.P. will furnish
supplementally to the Securities and Exchange Commission a copy of any such
omitted schedule upon request.
TABLE OF EXHIBITS
Exhibit Description
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Exhibit A Form of Amended FHGLP Agreement
Exhibit B Form of Letter Agreement with Respect to
Tag-along Rights
Exhibit C Form of Opinion of Counsel to TCI
Exhibit D Form of Opinion of Counsel to FHGLP
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TABLE OF SCHEDULES
Schedule Description
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Schedule 2.2(a)(2) Certain Assets of FHGLP
Schedule 2.3(a) Certain Excluded TCI Assets
Schedule 3.5(a) Ownership of Falcon Entities
Schedule 3.5(b) Gross Value of Each Falcon Entity
Schedule 3.6(b)(1) Post-Redemption Percentage Interests of
Redeemed Partners
Schedule 3.6(b)(2) Current Percentage Interests of FHGLP
Partners
Schedule 3.9 FHGLP's Estimate of FHGLP Partners'
Percentage Interests
Schedule 7.1 TCI Entities
Schedule 7.3 TCI Consents
Schedule 7.4 Information Concerning TCI's Licenses and
Contracts
Schedule 7.5 Information Concerning TCI's Real Property
and Real Property Interests
Schedule 7.6 Information Concerning TCI's Intangibles
Schedule 7.7 Information Concerning TCI's Franchises and
the TCI Systems
Schedule 7.8 TCI Financial Information
Schedule 7.9 TCI's Surety and Performance Bonds and
Letters of Credit
Schedule 7.10 TCI Personnel Matters
Schedule 7.11 TCI Environmental Matters
Schedule 7.12 TCI Legal Actions
Schedule 7.14 TCI Legal Compliance
Schedule 7.15 TCI Transactions with Affiliates
Schedule 7.16 Conduct of TCI's Business
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Schedule Description
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Schedule 8.3 Falcon Consents
Schedule 8.4 Information Concerning Falcon's Licenses and
Contracts
Schedule 8.5 Information Concerning Falcon's Real
Property and Real Property Interests
Schedule 8.7 Information Concerning Falcon's Franchises
and the Falcon Systems
Schedule 8.8 Falcon Financial Information
Schedule 8.9 Falcon Personnel Matters
Schedule 8.10 Falcon Environmental Matters
Schedule 8.11 Falcon Legal Actions
Schedule 8.13 Falcon Legal Compliance
Schedule 8.14 Falcon Transactions with Affiliates
Schedule 11.6 Certain Employees
Schedule 15.3 Addresses of the Parties
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CONTRIBUTION AND PURCHASE AGREEMENT
THIS CONTRIBUTION AND PURCHASE AGREEMENT is made and entered into as of
December 30, 1997 by and among Falcon Holding Group, L.P., a Delaware limited
partnership ("FHGLP"); Falcon Communications, L.P., a California limited
partnership ("NewFalcon"); Falcon Holding Group, Inc., a California corporation
(the "General Partner"); TCI Falcon Holdings, LLC, a Delaware limited liability
company ("TCI"); Belo Ventures, Inc., a Delaware corporation ("Belo"); and the
other Persons executing this Agreement.
PRELIMINARY STATEMENT
NewFalcon was organized under the California Revised Limited
Partnership Act on October 23, 1997, pursuant to an Agreement of Limited
Partnership between FHGLP and Stanley S. Itskowitch, which was subsequently
amended and restated by an Amended and Restated Agreement of Limited
Partnership, dated December 30, 1997, between FHGLP and TCI.
The TCI Entities own and operate (or have rights to acquire) certain
cable television systems, and TCI desires to contribute to NewFalcon
substantially all the assets of those cable television systems, subject to
certain liabilities being assumed by NewFalcon or one or more other Falcon
Entities.
Each of the parties to this Agreement (other than NewFalcon, FHGLP,
TCI, Belo, and Mezzanine Lending Associates III, L.P.) owns a partnership
interest in FHGLP, and FHGLP owns certain partnership interests and other equity
interests in certain partnerships and other entities that, directly and
indirectly, own and operate certain cable television systems.
Belo owns a partnership interest in Falcon Video Communications, L.P.,
a Delaware limited partnership ("Falcon Video") and desires to contribute that
partnership interest to FHGLP in exchange for a partnership interest in FHGLP.
The Video Investors Partners own certain partnership interests in
Falcon Video Communications Investors, L.P., a California limited partnership
("Video Investors"), and desire to contribute those partnership interests to
FHGLP in exchange for partnership interests in FHGLP.
Leeway & Co. and Mezzanine Lending Associates III, L.P. hold the
Mezzanine Notes and the Mezzanine Securities issued by Falcon Video and desire
to contribute a portion of their rights under the Mezzanine Notes to Falcon
Video in exchange for partnership interests in Falcon Video and thereafter to
contribute those partnership interests in Falcon Video and their interests in
the Mezzanine Securities to FHGLP in exchange for partnership interests in
FHGLP.
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FHGLP desires to contribute to NewFalcon all interests in the Falcon
Entities held by it and certain other assets, subject to certain liabilities
being assumed by NewFalcon.
Certain of the parties desire to exchange a portion of their
partnership interests in FHGLP for partnership interests in NewFalcon and to
sell those partnership interests in NewFalcon to TCI, and TCI desires to acquire
those partnership interests.
The parties desire to enter into this Agreement to provide for the
transactions described above and certain other matters.
NOW, THEREFORE, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Terms Defined in this Section.
For purposes of this Agreement, the following terms shall have the
following meanings (all terms used in this Agreement that are not defined in
this Section 1.1 shall have the meanings set forth elsewhere in this Agreement
as indicated in Section 1.2):
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, except that
(a) neither NewFalcon, FHGLP, nor any Person controlled by NewFalcon or FHGLP
shall be deemed to be an Affiliate of a FHGLP Partner, TCI, or of any Affiliate
of a FHGLP Partner or TCI solely by virtue of the partnership interest of TCI in
NewFalcon or of such FHGLP Partner in FHGLP; and (b) neither any FHGLP Partner,
TCI, nor any Affiliate of any FHGLP Partner or TCI shall be deemed to be an
Affiliate of any FHGLP Partner, TCI, or of any Affiliate of any FHGLP Partner or
TCI solely by virtue of the partnership interests of TCI and the FHGLP Partners
in NewFalcon and FHGLP, respectively. For purposes of this definition, "control"
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of a Person, whether through the
ownership of voting securities or voting interests, by contract or otherwise.
"Agreement" means this Contribution and Purchase Agreement, as it may
be amended from time to time.
"Amended FHGLP Agreement" means the Fourth Amended and Restated
Agreement of Limited Partnership of FHGLP, to be entered into by the FHGLP
Partners pursuant to this Agreement, substantially in the form attached to this
Agreement as Exhibit A, with any modifications made pursuant to Section 11.15.
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"Assumed TCI Contracts" means (a) all Contracts listed on Schedule 7.4,
other than Contracts that are Excluded TCI Assets and Contracts that are
designated to indicate that such Contracts will not be assumed by NewFalcon or
another Falcon Entity at the Closing, (b) Contracts of TCI in existence on the
date of this Agreement that are not required by Section 7.4 to be listed on
Schedule 7.4, other than Contracts that are Excluded TCI Assets, (c) Contracts
of TCI in existence on the Closing Date that were entered into after the date of
this Agreement in compliance with Section 9.3, other than Contracts that are
Excluded TCI Assets, (d) all other Contracts of TCI in existence on the Closing
Date that FHGLP has agreed in writing will be assumed by NewFalcon or another
Falcon Entity at the Closing, and (e) all subscription agreements with customers
for cable services provided by the TCI Systems in the ordinary course of
business.
"Business Day" means any day (other than a day that is a Saturday or
Sunday) on which banks are permitted to be open for business in the State of
California.
"Cable Act" means Title VI of the Communications Act, and all other
provisions of the Cable Communications Policy Act of 1984, the Cable Television
Consumer Protection and Competition Act of 1992, and the provisions of the
Telecommunications Act of 1996 amending Title VI of the Communications Act, as
such statutes may be amended from time to time.
"Classic Purchase Agreement" means the Asset Purchase Agreement, dated
as of June 27, 1997, among Falcon Classic, Falcon Community Cable, L.P., a
Delaware limited partnership, Falcon Cable Media, a California Limited
Partnership, and Falcon Cable Systems Company II, L.P., a California limited
partnership, as it may be amended from time to time.
"Classic Systems" means those cable television systems in and around
the areas listed on Schedule 8.7 that are owned on the date of this Agreement by
Falcon Classic.
"Closing" means the consummation of the contribution of certain assets
and partnership interests to FHGLP and NewFalcon, the redemption of certain
partnership interests in FHGLP, and the purchase and sale of the NewFalcon
Interests, each as contemplated by this Agreement, as described in Article 13.
"Closing Date" means the date on which the Closing occurs.
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended, as set forth in Section 4980B of the Code and Part 6 of Title
I of ERISA.
"Code" means the Internal Revenue Code of 1986, as amended, and the
rules and regulations thereunder, as in effect from time to time.
"Communications Act" means the Communications Act of 1934, as amended,
and the rules and regulations thereunder, as in effect from time to time.
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"Compensation Arrangement" means any plan or compensation arrangement
other than an Employee Plan, whether written or unwritten, which provides to
employees, former employees, officers, directors, or independent contractors of
any Person, any compensation or other benefits, whether deferred or not, in
excess of base salary or wages and excluding overtime pay, including any bonus
or incentive plan, stock rights plan, deferred compensation arrangement, life
insurance, stock purchase plan, severance pay plan, and any other perquisites
and employee fringe benefit plan; "Compensation Arrangements" of TCI means those
Compensation Arrangements that provide compensation or benefits to employees,
officers, directors, and independent contractors engaged in the operation of the
TCI Systems and "Compensation Arrangements" of Falcon means those Compensation
Arrangements that provide compensation or benefits to employees, officers,
directors, and independent contractors engaged in the operation of the Falcon
Systems.
"Consents" means all of the consents, permits, or approvals of
Governmental Authorities and other third parties necessary to transfer the TCI
Assets to NewFalcon or to any Falcon Entity or otherwise to consummate the
transactions contemplated by this Agreement.
"Contracts" means deeds, leases, easements, rights-of-way, rights of
entry, programming agreements, pole attachment and conduit agreements,
subscriber agreements, affiliation agreements, service agreements, and other
agreements, written or oral (including any amendments and other modifications
thereto); "Contracts" of TCI means those Contracts that relate to the TCI
Systems and "Contracts" of Falcon means those Contracts that relate to the
Falcon Systems.
"Current Assets" means cash on hand or in banks, cash equivalents,
subscriber receivables and other accounts and notes receivable (reduced by
allowances for doubtful accounts), deposits properly characterized as current
assets arising in connection with the business of the Falcon Systems or the TCI
Systems (including deposits attributable to leases of personal property,
deposits under leases of real property, and deposits attributable to
Franchises), and prepaid expenses (including business and license fees, utility
charges, real and personal property Taxes and assessments levied against the
assets of the Falcon Systems or the TCI Systems, property and equipment rentals,
other fees, sales and service charges, insurance premiums, and similar items),
all determined in accordance with GAAP, consistently applied, in the case of the
TCI Systems, with the preparation of the balance sheet for the TCI Systems as at
March 31, 1997 that is included in Schedule 7.8 and, in the case of FHGLP or any
Falcon Entity, with the preparation of the balance sheet for the Falcon Systems
as at March 31, 1997 that is included in Schedule 8.8, subject to the following
provisions:
(a) All subscriber receivables from inactive subscribers
(regardless of aging) and all subscriber receivables that are more than 60 days
past due shall be treated as doubtful accounts.
(b) Current Assets shall not include any assets to the extent
that no Falcon Entity will realize the book value of such assets after the
Closing (for example, prepaid
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insurance with respect to the TCI Systems) or any assets that are not owned by
NewFalcon or another Falcon Entity immediately after the Closing (including any
Excluded TCI Assets or any Excluded Falcon Assets).
(c) Current Assets of the TCI Systems shall not include any
deposits or prepaid expenses under any Contract that is not included in the
Assumed TCI Contracts.
(d) Current Assets shall not include any prepayment of Taxes
arising from the transfer of the TCI Assets pursuant to this Agreement, any
prepayment of Taxes (other than utility Taxes) measured on the revenues, income,
or receipts of any Person, or any prepayment of Taxes imposed in lieu of a Tax
on the revenues, income, or receipts of any Person.
(e) Current Assets shall not include inventory.
"Current Liabilities" means all liabilities (other than Indebtedness
and liabilities not required by GAAP to be shown on a balance sheet), including
subscriber prepayments, unearned income, deposits with respect to services to be
provided by the Falcon Systems or the TCI Systems, trade payables and deferred
expenses (including business and license fees, utility charges, real and
personal property Taxes and assessments levied against the assets of the Falcon
Systems or the TCI Systems, property and equipment rentals, applicable copyright
or other fees, sales and service charges, and similar items), and, with respect
to any Person, intercompany liabilities arising from the payment of any of the
foregoing on behalf of such Person, all determined in accordance with GAAP,
consistently applied, in the case of the TCI Systems, with the preparation of
the balance sheet for the TCI Systems as at March 31, 1997 that is included in
Schedule 7.8 and, in the case of FHGLP or any Falcon Entity, with the
preparation of the balance sheet for the Falcon Systems as at March 31, 1997
that is included in Schedule 8.8, subject to the following provisions:
(a) Current Liabilities of the TCI Systems shall not include
any liability or obligation (or any reserve for any liability or obligation)
that is not assumed by any Falcon Entity (including any employee compensation,
such as accrued vacation (except as provided in Section 11.6(d)), sick leave, or
severance benefits, with respect to employees of the TCI Systems, including
employees of the TCI Systems who are hired by NewFalcon or any other Falcon
Entity at or following the Closing).
(b) Current Liabilities of the TCI Systems shall include any
liability for accrued vacation time that is assumed by any Falcon Entity
pursuant to Section 11.6(d), and Current Liabilities of each Falcon Entity shall
include any liability of such Falcon Entity for accrued vacation time other than
any such liability with respect to employees of the TCI Entities that is assumed
by any Falcon Entity pursuant to Section 11.6(d).
(c) Current Liabilities shall not include any liability or
obligation (or any reserve for any liability or obligation) relating to accrued
sick leave of employees.
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(d) Current Liabilities of the TCI Systems shall not include
any deferred expenses under any Contract that is not included in the Assumed TCI
Contracts.
(e) Current Liabilities of the TCI Systems shall include any
liability assumed by any Falcon Entity to refund (or to credit against payments
otherwise due) any customer deposits or any customer, advertising, or other
advance payments paid to any TCI Entity, and Current Liabilities of each Falcon
Entity shall include any liability of such Falcon Entity to refund (or to credit
against payments otherwise due) any customer deposits or any customer,
advertising, or other advance payments paid to such Falcon Entity.
(f) Current Liabilities shall not include any deferral of
Taxes arising from the transfer of the TCI Assets pursuant to this Agreement,
any deferral of Taxes (other than utility Taxes) measured on the revenues,
income, or receipts of any Person, or any deferral of Taxes imposed in lieu of a
Tax on the revenues, income, or receipts of any Person.
(g) Current Liabilities of a Falcon Entity shall not include
(1) any liability or obligation for which another Falcon Entity is the primary
obligor if such liability or obligation is a Current Liability of such other
Falcon Entity or (2) any liability or obligation arising from any guaranty or
other agreement by such Falcon Entity to pay any liability or obligation for
which another Falcon Entity is the primary obligor if the liability or
obligation of such other Falcon Entity is a Current Liability of such other
Falcon Entity.
(h) Current Liabilities of FHGLP shall not include liabilities
under the Existing Incentive Plan.
"Effective Time" means, as used with respect to certain assets or
liabilities under this Agreement, 12:01 a.m., local time at the relevant
location for determining such assets or liabilities, on the Closing Date.
"Ellensburg Purchase Agreement" means the Asset Purchase Agreement,
dated as of May 23, 1997, between TCI Cablevision of Vermont, Inc. and King
Videocable Company, as it may be amended from time to time.
"Ellensburg System" means the cable television system serving
Ellensburg, Washington, that is owned on the date of this Agreement by King
Videocable Company.
"Employee Pension Benefit Plan" means any employee pension benefit
plan, as defined in Section 3(2) of ERISA, that is subject to Title IV of ERISA,
other than a multiemployer plan, as defined in ERISA Sections 3(37) or
4001(a)(3).
"Employee Plan" means any employee benefit plan, as defined in Section
3(3) of ERISA (other than a multiemployer plan, as defined in ERISA Sections
3(37) or 4001(a)(3)).
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"Environmental Law" means any Legal Requirement pertaining to land use,
air, soil, surface water, groundwater, or any other environmental matter,
including the following federal laws as they may be amended from time to time:
(a) Clean Air Act; (b) Clean Water Act; (c) Resource Conservation and Recovery
Act; (d) Comprehensive Environmental Response, Compensation and Liability Act;
(e) Safe Drinking Water Act; (f) Toxic Substance Control Act; and (g)
Occupational Safety and Health Act.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder, as in effect from time to
time.
"ERISA Affiliate" of any Person means any other Person that, as of the
relevant measuring date under ERISA, was or is required to be treated as a
single employer with such first Person under Section 414 of the Code.
"Existing Incentive Plan" means, collectively, the Falcon Holding
Group, Inc. 1993 Incentive Performance Plan, the Adoption and Assumption
Agreement of the 1993 Incentive Performance Plan, dated as of December 30, 1993,
between the General Partner and FHGLP, the First Amendment to 1993 Incentive
Performance Plan, dated as of December 31, 1993, the Second Amendment to 1993
Incentive Performance Plan, dated as of January 1, 1996, the Third Amendment to
1993 Incentive Performance Plan, dated as of July 1, 1996, and the Fourth
Amendment to 1993 Incentive Performance Plan, dated as of May 1, 1997.
"Falcon Classic" means Falcon Classic Cable Income Properties, L.P., a
California limited partnership.
"Falcon Entity" means any of NewFalcon, Falcon Cable Media, a
California Limited Partnership; Falcon Cablevision, a California Limited
Partnership; Falcon Telecable, a California Limited Partnership; Falcon
Community Cable, L.P., a Delaware limited partnership; Falcon Community Ventures
I, L.P., a Delaware limited partnership; Falcon First, Inc., a Delaware
corporation; Falcon Cable Systems Company II, L.P., a California limited
partnership; Falcon Video; Falcon Media Investors Group, a California Limited
Partnership; Falcon Investors Group, Ltd., a California Limited Partnership;
Falcon Telecable Investors Group, a California Limited Partnership; Falcon
Community Investors, L.P., a California limited partnership; and Video
Investors.
"Falcon Percentage" means the net fair market value of the capital
contributions made by FHGLP pursuant to Section 2.2(a)(2) divided by the sum of
the net fair market values of the capital contributions made by TCI and FHGLP
pursuant to Section 2.2(a), with such net fair market values being determined
for purposes of this definition (1) as if the TCI Adjustments and the Falcon
Adjustments were as set forth in the preliminary settlement statements delivered
pursuant to Section 3.7(b), (2) as if all Retained TCI Assets and, if no
Ellensburg Exclusion Event shall have occurred prior to Closing, all assets of
the Ellensburg System were contributed to NewFalcon at the Closing, and (3)
without regard to any amendment to this Agreement
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<PAGE>
required by Section 3.8 that, as of the Closing Date, has not yet been agreed to
between FHGLP and TCI or determined by arbitration pursuant to Section 15.9.
"Falcon Systems" means those cable television systems in and around the
areas listed on Schedule 8.7 that are owned and operated by the Falcon Entities
and the Classic Systems.
"FCC" means the Federal Communications Commission.
"FHGLP Partners" means the parties to this Agreement, other than
NewFalcon, FHGLP, and TCI.
"Franchise" means any municipal, county, state, or federal cable
television franchise granted by any Governmental Authority in connection with
any cable television system, and any pending franchise applications (if any)
therefor; a "Franchise" of TCI means any Franchise granted in connection with
any of the TCI Systems, and a "Franchise" of Falcon means any Franchise granted
in connection with any of the Falcon Systems.
"Franchising Authority" means any Governmental Authority that has
granted any Franchise or before which any application for a cable television
franchise is pending.
"GAAP" means generally accepted accounting principles as in effect from
time to time in the United States of America.
"Governmental Authority" means any federal, state, or local
governmental authority, including any court or administrative or regulatory
agency.
"Group Health Plan" means any group health plan, as defined in Section
5000(b)(1) of the Code.
"Hazardous Substance" means any pollutant, contaminant, hazardous, or
toxic substance, material, constituent, or waste or any pollutant that is
labeled or regulated as such by any Governmental Authority pursuant to any
Environmental Law or that is labeled or regulated as such by any Governmental
Authority and includes asbestos and asbestos-containing materials and any
material or substance that is: (a) designated as a "hazardous substance"
pursuant to 33 U.S.C. ss. 1317; (b) defined as a "hazardous waste" pursuant to
42 U.S.C. ss. 6903; (c) defined as a "hazardous substance" pursuant to Section
101 of the Comprehensive Environmental Response, Compensation and Liability Act;
or (d) is so designated or defined under any other applicable Legal Requirement.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder, as in effect from
time to time.
"Indebtedness" means, with respect to any Person, (a) debt of such
Person for borrowed money, debt of such Person that represents the deferred
purchase price of property, and similar
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monetary obligations of such Person that are evidenced by bonds, notes,
debentures, or other instruments, capitalized lease obligations, and any
interest accrued but unpaid with respect to liabilities of any of the types
described in this clause (a), but excluding liabilities or obligations with
respect to subscriber deposits, interest rate hedging obligations, other accrued
expenses (other than accrued interest with respect to liabilities of any of the
types described in this clause (a)), trade accounts payable, and other similar
items, (b) guaranties, endorsements, and other contingent obligations of such
Person, whether direct or indirect, in respect of liabilities of any other
Person of any of the types described in clause (a) above (other than
endorsements for collection or deposit in the ordinary course of business), and
(c) liabilities of any other Person of any of the types described in clause (a)
above to the extent of the fair market value of any property of such Person that
secures such liabilities; provided, however, that Indebtedness of any Person
shall not include liabilities or obligations arising under any letter of credit,
performance bond, or similar instrument securing the obligations of such Person
under any cable television franchise, pole attachment agreement, lease, or other
similar agreement entered into in connection with the day-to-day operations of a
cable television system.
"Intangibles" means all copyrights, trademarks, trade names, licenses,
patents, permits, privileges, proprietary information, technical information and
data, machinery and equipment warranties, and other similar intangible property
rights and interests; "Intangibles" of TCI means those Intangibles applied for,
issued to, or owned by any TCI Entity or under which any TCI Entity is licensed
or franchised and used or held for use in the business of the TCI Systems, and
"Intangibles" of Falcon means those Intangibles applied for, issued to, or owned
by any Falcon Entity or by Falcon Classic or under which any Falcon Entity or
Falcon Classic is licensed or franchised and used or held for use in the
business of the Falcon Systems.
"Legal Requirements" means applicable common law and any applicable
statute, ordinance, code, or other law, rule, regulation, order, technical or
other standard, requirement, or procedure enacted, adopted, promulgated, or
applied by any Governmental Authority, including any applicable order, decree,
or judgment that may have been handed down, adopted, or imposed by any
Governmental Authority.
"Licenses" means all domestic satellite, business radio, and other
licenses issued by the FCC, and any pending applications therefor, and all other
licenses, authorizations, and permits issued by any other Governmental Authority
(excluding Franchises), and any pending applications therefor; "Licenses" of TCI
means those Licenses granted to or applied for by any TCI Entity and used or
held for use in connection with the business of the TCI Systems, and "Licenses"
of Falcon means those Licenses granted to or applied for by any Falcon Entity or
Falcon Classic and used or held for use in connection with the business of the
Falcon Systems.
"Material Falcon Contract" means any Contract of Falcon other than any
Franchise and other than any Contract that was entered into in the ordinary
course of business of the Falcon Systems for which the total consideration to be
paid or delivered by any party to such Contract to any other party to such
Contract does not exceed $50,000 in any year and does not exceed $250,000 in the
aggregate.
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"Mezzanine Notes" means the notes in the aggregate original principal
amount of $33,060,733.53, due December 31, 2007, issued and sold by Falcon Video
pursuant to the Amended and Restated Note Purchase Agreement, dated as of May
22, 1992, among Falcon Video, Leeway & Co., and Mezzanine Lending Associates
III, L.P.
"Mezzanine Securities" means the Equity Participation Units and the
Warrants (each as defined in the Amended and Restated Note Purchase Agreement,
dated as of May 22, 1992, among Falcon Video, Leeway & Co., and Mezzanine
Lending Associates III, L.P.).
"NewFalcon Agreement" means the Amended and Restated Agreement of
Limited Partnership of NewFalcon, dated as of December 30, 1997, between FHGLP,
as general partner and limited partner, and TCI, as general partner, as it may
be amended from time to time in accordance with its terms.
"Ownership Restriction" means any provision of the Communications Act,
or any other law subsequently enacted, or any rule, regulation, or policy of the
FCC promulgated thereunder restricting the ownership and control of
communications properties (including cable television systems, television
broadcast stations, radio broadcast stations, telephone companies, and
newspapers), including those relating to cross-ownership and cross-interest, as
those terms are commonly understood in the communications industry.
"Permitted Encumbrance" means any (a) statutory landlord's liens and
liens for current taxes, assessments, and governmental charges not yet due and
payable (or being contested in good faith), (b) zoning laws and ordinances and
similar Legal Requirements, (c) liens, liabilities, or encumbrances that secure
liabilities to be assumed by NewFalcon or another Falcon Entity pursuant to
Article 4; (d) leased interests and mortgagee interests in property owned by
others and leased interests in property leased to others (to the extent those
interests are disclosed in the Schedules to this Agreement); (e) rights reserved
to any Governmental Authority to regulate the affected property; and (f) as to
any Real Property Interest, any easements, rights-of-way, servitudes, permits,
restrictions, and minor imperfections or irregularities in title that are
reflected in the public records and do not materially interfere with the right
or ability to own, use, or operate the underlying Real Property.
"Person" means any natural person, corporation, partnership, trust,
unincorporated organization, association, limited liability company,
Governmental Authority, or other entity.
"Personal Property" means equipment, tools, vehicles, furniture,
leasehold improvements, plant, converters, inventory, spare parts, and other
tangible personal property; "Personal Property" of TCI means that Personal
Property that is owned or leased by a TCI Entity and used or held for use in the
conduct of the business of the TCI Systems, and "Personal Property" of Falcon
means that Personal Property that is owned or leased by a Falcon Entity or
Falcon Classic and used or held for use in connection with the business of the
Falcon Systems.
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<PAGE>
"Real Property" means land and all buildings, fixtures, and other
improvements thereon; "Real Property" of TCI means any Real Property, whether or
not owned by any TCI Entity, that is used in the conduct of the business of the
TCI Systems, and "Real Property" of Falcon means any Real Property, whether or
not owned by any Falcon Entity, that is used in the conduct of the business of
the Falcon Systems.
"Real Property Interests" means fee estates, leasehold interests,
easements, licenses, rights to access, rights-of-way, and other interests in
Real Property; "Real Property Interests" of TCI means any Real Property
Interests that are owned by any TCI Entity and used or held for use in the
conduct of the business of the TCI Systems, and "Real Property Interests" of
Falcon means any Real Property Interests that are owned by any Falcon Entity or
Falcon Classic and used or held for use in the conduct of the business of the
Falcon Systems.
"Rebuild Expenditures" means capital expenditures that specifically
relate to any of the following: (a) any capital project that replaces a portion
of a cable television system's plant with a fiber-to-the-feeder architecture
capable of providing at least 550 MHz of bandwidth (other than plant
replacements in the ordinary course of business); (b) digital compression
equipment that has been installed and which has been demonstrated to be capable
of transmitting digitally compressed video at a ratio of at least 10:1; (c)
advanced analog and digital converters (other than ordinary course
replacements); or (d) headend equipment related to expanding channel capacity.
"Redeemed Partners" means each of the FHGLP Partners listed in the
table in Section 2.6(a) other than any such FHGLP Partner that elects pursuant
to Section 2.6(b) not to be a Redeemed Partner.
"Regulated System" means any cable television system with respect to
which (a) a valid Form 328 was filed by any Governmental Authority on or before
the Closing Date, (b) within one year after the Closing Date, a valid Form 328
was filed by any Governmental Authority with respect to rates that were in
effect prior to the Closing, (c) a valid Form 329 rate complaint was filed with
the FCC on or before the Closing Date, unless such complaint was conclusively
resolved before the Closing, or (d) within one year after the Closing Date, a
valid Form 329 rate complaint was filed with the FCC with respect to rates that
were in effect prior to the Closing.
"Required Consents" means the Consents listed on Schedule 7.3 that have
been designated by FHGLP as Required Consents.
"Signals" means the transmissions (whether television, satellite,
radio, or otherwise) of video or audio programming or other cable-distributed
information that a cable television system offers to its subscribers and other
customers.
"TCI Assets" means all properties, privileges, rights, interests, and
claims, real and personal, tangible and intangible, of every type and
description that are owned, leased, held, used, or held for use in the business
or operations of the TCI Systems in which any TCI Entity
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has any right, title, or interest on the date of this Agreement or in which any
TCI Entity acquires any right, title, or interest before the Closing, including
TCI's Real Property Interests, Personal Property, Licenses, Contracts,
Franchises, and Intangibles, but excluding any Excluded TCI Assets.
"TCI Entities" means TCI and the other parties to this Agreement
identified on Schedule 7.1.
"TCI Percentage" means the net fair market value of the capital
contributions made by TCI pursuant to Section 2.2(a)(1) divided by the sum of
the net fair market values of the capital contributions made by TCI and FHGLP
pursuant to Section 2.2(a), with such net fair market values being determined
for purposes of this definition (1) as if the TCI Adjustments and the Falcon
Adjustments were as set forth in the preliminary settlement statements delivered
pursuant to Section 3.7(b), (2) as if all Retained TCI Assets and, if no
Ellensburg Exclusion Event shall have occurred prior to Closing, all assets of
the Ellensburg System were contributed to NewFalcon at the Closing, and (3)
without regard to any amendment to this Agreement required by Section 3.8 that,
as of the Closing Date, has not yet been agreed to between FHGLP and TCI or
determined by arbitration pursuant to Section 15.9.
"TCI Systems" means the cable television systems in and around the
areas listed on Schedule 7.7 and, to the extent provided in Section 11.19(b),
but subject to Section 7.19, the Ellensburg System. As used in this Agreement,
the term "TCI Systems" shall not include the Ellensburg System except as
provided in Section 11.19(b).
"Taxes" means any federal, state, local, or foreign taxes, assessments,
interest, penalties, deficiencies, fees, and other governmental charges or
impositions.
"Tax Return" means any federal, state, local, or foreign tax return,
report, statement, or other similar filing required to be filed by any Person
with respect to Taxes.
"Third Amendment" means the Third Amended and Restated Agreement of
Limited Partnership of Falcon Holding Group, L.P., dated as of December 28,
1995.
"Video Investors Partners" means each of the FHGLP Partners listed in
the table in Section 3.4.
1.2 Terms Defined Elsewhere in this Agreement.
For purposes of this Agreement, the following terms have the meanings
set forth in the sections indicated:
Term Section
- ---- -------
AAA .................................................... Section 15.9(b)
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Term Section
- ---- -------
Affected FHGLP Partner ................................. Section 15.5(b)
Affected Redeemed Partner .............................. Section 15.5(b)
Arbitration Notice ..................................... Section 15.9(e)
Belo ................................................... Preamble
Ellensburg Exclusion Event ............................. Section 11.19(a)(1)
Excluded Falcon Assets ................................. Section 2.3(b)
Excluded TCI Assets .................................... Section 2.3(a)
Falcon Adjustments ..................................... Section 3.7(a)
Falcon Special Liabilities ............................. Section 3.8(g)
Falcon Video ........................................... Preliminary Statement
FHGLP .................................................. Preamble
Franchise Area ......................................... Section 12.1(d)(1)
General Partner ........................................ Preamble
Hired Employees ........................................ Section 11.6(d)
Management Agreement ................................... Section 11.10(b)(2)
NewFalcon .............................................. Preamble
NewFalcon Interests .................................... Section 2.6(c)
Payment Agreements ..................................... Section 2.8(a)
Retained TCI Assets .................................... Section 11.10(a)
Signal Sharing Agreement ............................... Section 11.9
Subsidiary Falcon Entity ............................... Section 3.5(b)
TCI .................................................... Preamble
TCI Adjustments ........................................ Section 3.7(a)
TCI Special Liabilities ................................ Section 3.8(f)
Tolling Period ......................................... Article 5
Transferable Franchise Area ............................ Section 12.1(d)(3)
Video Investors ........................................ Preliminary Statement
WARN Act ............................................... Section 11.6(b)
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1.3 Terms Generally.
The definitions in Section 1.1 and elsewhere in this Agreement shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context requires, any pronoun includes the corresponding masculine,
feminine, and neuter forms. The words "include," "includes," and "including" are
not limiting. Any reference in this Agreement to a "day" or number of "days"
(without the explicit qualification of "Business") shall be interpreted as a
reference to a calendar day or number of calendar days. If any action or notice
is to be taken or given on or by a particular calendar day, and such calendar
day is not a Business Day, then such action or notice shall be deferred until,
or may be taken or given on, the next Business Day.
ARTICLE 2
CONTRIBUTIONS, REDEMPTIONS, AND PURCHASES
2.1 Contributions to FHGLP.
(a) At the Closing, immediately after the capital
contributions made by TCI and FHGLP pursuant to Section 2.2(a), the redemptions
provided for in Section 2.6, and the purchase and sale of the NewFalcon
Interests pursuant to Section 2.7(a), subject to the terms and conditions set
forth in this Agreement:
(1) Each of Belo, Leeway & Co., and Mezzanine Lending
Associates III, L.P. shall contribute to FHGLP, free and clear of any claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
or encumbrances of any nature whatsoever (other than liens securing obligations
of Falcon Video), all of its partnership interest in Falcon Video, all of its
interest in and under the partnership agreement of Falcon Video, as amended,
and, in the case of Leeway & Co. and Mezzanine Lending Associates III, L.P., all
of its interest in the Mezzanine Securities; and
(2) Each Video Investors Partner shall contribute to
FHGLP, free and clear of any claims, liabilities, security interests, mortgages,
liens, pledges, conditions, charges, or encumbrances of any nature whatsoever
(other than liens securing obligations of Video Investors), all of such Video
Investors Partner's partnership interest in Video Investors and all of such
Video Investors Partner's interest in and under the partnership agreement of
Video Investors, as amended, except that the Falcon Cable Trust will not
contribute to FHGLP that percentage of its partnership interest in Video
Investors equal to (1) one percent of the net fair market value of Video
Investors, as determined in accordance with Section 3.4(a), divided by (2) the
net fair market value of the Falcon Cable Trust's interest in Video Investors,
as determined in accordance with Section 3.4(a) (without regard to Section
3.4(b)).
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(b) In consideration of the contributions provided in Section
2.1(a), Belo, Leeway & Co., Mezzanine Lending Associates III, L.P., and each of
the Video Investors Partners shall receive a limited partnership interest in
FHGLP, having the rights (after giving effect to the other transactions
occurring at the Closing) and being subject to the obligations that are provided
for in the Amended FHGLP Agreement.
2.2 Contributions to NewFalcon.
(a) At the Closing, immediately after the execution and
delivery of the Payment Agreements pursuant to Section 2.8(a) and immediately
before the contributions to FHGLP pursuant to Section 2.1(a), subject to the
terms and conditions set forth in this Agreement and in accordance with the
NewFalcon Agreement:
(1) TCI shall contribute or cause to be contributed
to NewFalcon (A) all of the TCI Assets, including all of TCI's Real Property
Interests, Personal Property, Licenses, Contracts, Franchises, and Intangibles
that are not Excluded TCI Assets, free and clear of any claims, liabilities,
security interests, mortgages, liens, pledges, conditions, charges, or
encumbrances of any nature whatsoever (except for Permitted Encumbrances), less
any of such assets that are disposed of prior to the Closing if such disposition
was permitted by this Agreement, and (B) if TCI so elects pursuant to Section
11.19(c), cash in the amount of $8,189,630.
(2) FHGLP shall contribute or cause to be contributed
to NewFalcon, free and clear of any claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever (except for Permitted Encumbrances and liens securing obligations of
any Falcon Entity or obligations of FHGLP to be assumed by NewFalcon pursuant to
Section 4.2), all of its ownership interest in each of the Falcon Entities (but
not including interests to be contributed to FHGLP pursuant to Section 2.1(a)),
all of FHGLP's rights in and under all contracts, leases, and agreements entered
into by FHGLP in the ordinary course of business in connection with the
management by FHGLP of the Falcon Entities or any other Person, any cash on hand
that FHGLP elects to contribute, other Current Assets, tangible personal
property, fixtures, leasehold improvements, and all other assets used in the
conduct of FHGLP's business, including the other assets described on Schedule
2.2(a)(2), less any of such assets that are disposed of prior to the Closing if
such disposition was permitted by this Agreement, but excluding any Excluded
Falcon Assets.
(b) At the Closing, immediately after the contributions to
FHGLP pursuant to Section 2.1(a), subject to the terms and conditions set forth
in this Agreement and in accordance with the NewFalcon Agreement, FHGLP shall
contribute or cause to be contributed to NewFalcon, free and clear of any
claims, liabilities, security interests, mortgages, liens, pledges, conditions,
charges, or encumbrances of any nature whatsoever (except for Permitted
Encumbrances and liens securing obligations of any Falcon Entity or obligations
of FHGLP to be assumed by NewFalcon pursuant to Section 4.2), all of the
partnership interests to be
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contributed to FHGLP pursuant to Section 2.1(a) and all of its interests in the
Mezzanine Securities (which will be contributed to FHGLP pursuant to Section
2.1(a)).
(c) FHGLP and TCI shall contribute cash to NewFalcon as
provided in this Section 2.2(c).
(1) After the TCI Adjustments and the Falcon
Adjustments are finally determined pursuant to Section 3.7, if the net fair
market value of the capital contributions made by TCI pursuant to Section
2.2(a)(1) divided by the sum of the net fair market values of the capital
contributions made by TCI and FHGLP pursuant to Section 2.2(a) and Section
2.2(b) is less than the TCI Percentage, TCI shall contribute to NewFalcon, at
the time specified in Section 2.2(c)(6) and otherwise in accordance with this
Section 2.2(c), cash in an amount necessary to cause the total capital
contributions made by TCI to NewFalcon pursuant to Section 2.2(a)(1) and this
Section 2.2(c)(1) divided by the sum of the net fair market values of the
capital contributions made by TCI and FHGLP pursuant to Section 2.2(a) and
Section 2.2(b) plus the capital contributions made by TCI to NewFalcon pursuant
to this Section 2.2(c)(1) to equal the TCI Percentage; all net fair market
values for purposes of this Section 2.2(c)(1) and Section 2.2(c)(2) shall be
determined (A) without regard to any amendment to this Agreement required by
Section 3.8 that, as of the Closing Date, had not yet been agreed to between
FHGLP and TCI or determined by arbitration pursuant to Section 15.9, (B) as if
all Retained TCI Assets and, if no Ellensburg Exclusion Event shall have
occurred prior to Closing, all assets of the Ellensburg System were contributed
to NewFalcon at the Closing, and (C) by taking into account the TCI Adjustments
and the Falcon Adjustments as finally determined.
(2) After the TCI Adjustments and the Falcon
Adjustments are finally determined pursuant to Section 3.7, if the net fair
market value of the capital contributions made by FHGLP pursuant to Section
2.2(a)(2) and Section 2.2(b) divided by the sum of the net fair market values of
the capital contributions made by TCI and FHGLP pursuant to Section 2.2(a) and
Section 2.2(b) is less than the Falcon Percentage, FHGLP shall contribute to
NewFalcon, at the time specified in Section 2.2(c)(6) and otherwise in
accordance with this Section 2.2(c), cash in an amount necessary to cause the
total capital contributions made by FHGLP to NewFalcon pursuant to Section
2.2(a)(2), Section 2.2(b), and this Section 2.2(c)(2) divided by the sum of the
net fair market values of the capital contributions made by TCI and FHGLP
pursuant to Section 2.2(a) and Section 2.2(b) plus the capital contributions
made by FHGLP to NewFalcon pursuant to this Section 2.2(c)(2) to equal the
Falcon Percentage.
(3) If any amendment to this Agreement required by
Section 3.8 is agreed to between FHGLP and TCI after the Closing or is
determined by arbitration after the Closing pursuant to Section 15.9, and such
amendment reduces the net fair market value of any assets or partnership
interests contributed to NewFalcon by FHGLP pursuant to Section 2.2(a)(2) or
Section 2.2(b), then FHGLP shall contribute to NewFalcon, at the time specified
in Section 2.2(c)(6) and otherwise in accordance with this Section 2.2(c), cash
in an amount equal to the amount of such reduction.
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(4) If any amendment to this Agreement required by
Section 3.8 is agreed to between FHGLP and TCI after the Closing or is
determined by arbitration after the Closing pursuant to Section 15.9, and such
amendment reduces the net fair market value of the TCI Assets, then TCI shall
contribute to NewFalcon, at the time specified in Section 2.2(c)(6) and
otherwise in accordance with this Section 2.2(c), cash in an amount equal to the
amount of such reduction.
(5) Concurrently with the making of each capital
contribution pursuant to this Section 2.2(c), the party making such capital
contribution shall pay to NewFalcon interest at a rate of 9.0%, compounded
quarterly, from the Closing Date through the date on which such capital
contribution is made, on the amount of such capital contribution, except that,
in the case of a capital contribution resulting from an amendment pursuant to
Section 3.8(f) or Section 3.8(g), such interest shall begin to accrue on the
date specified in such amendment in accordance with Section 3.8(h) as the date
on which NewFalcon or another Falcon Entity incurred the liability, loss, or
damage that produced the TCI Special Liability or Falcon Special Liability that
required such amendment. Interest paid or payable pursuant to this Section
2.2(c)(5) shall not, for purposes of the NewFalcon Agreement, be deemed to be a
Capital Contribution (as defined in the NewFalcon Agreement).
(6) TCI and FHGLP may make their respective capital
contributions and interest payments pursuant to this Section 2.2(c) at any time,
subject to the other provisions of this Section 2.2(c)(6). TCI shall be required
to make capital contributions and interest payments pursuant to this Section
2.2(c) concurrently with, and to the extent of, any distributions to TCI (or any
assignee of any portion of its partnership interest in NewFalcon, including the
NewFalcon Interests) pursuant to the NewFalcon Agreement. FHGLP shall be
required to make capital contributions and interest payments pursuant to this
Section 2.2(c) concurrently with, and to the extent of, any distributions to
FHGLP (or any assignee of any portion of its partnership interest in NewFalcon,
other than the NewFalcon Interests) pursuant to the NewFalcon Agreement.
NewFalcon shall withhold from any distributions to FHGLP or TCI (or any assignee
described in this Section 2.2(c)(6)) pursuant to the NewFalcon Agreement the
amount of its remaining obligations under this Section 2.2(c) and any amount so
withheld shall be treated for purposes of the NewFalcon Agreement and this
Agreement as having been distributed in accordance with the NewFalcon Agreement
on the date on which FHGLP or TCI would otherwise have received such
distribution and contributed or paid (as applicable) in accordance with this
Section 2.2(c) on the same date.
(d) TCI shall make additional capital contributions and
interest payments to NewFalcon after the Closing to the extent provided in
Section 11.10 and Section 11.19.
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2.3 Excluded Assets.
(a) The assets to be contributed to NewFalcon by TCI pursuant
to Section 2.2(a)(1) exclude the following assets (the "Excluded TCI Assets"):
(1) Any TCI Entity's cash on hand as of the Closing
Date and all other cash and cash equivalents in any TCI Entity's bank, savings,
or other depository accounts; any and all insurance policies, letters of credit,
or other similar items and any cash surrender value in regard thereto; and any
stocks, bonds, certificates of deposit, and similar investments;
(2) Any Contracts of TCI other than the Assumed TCI
Contracts;
(3) Any books and records that any TCI Entity is
required by any Legal Requirement to retain, any TCI Entity's corporate minute
books, and any other books and records related to internal corporate matters of
any TCI Entity;
(4) Any claims, rights, and interest in and to any
refunds of Taxes for periods prior to the Effective Time;
(5) All judgments or choses in action of any TCI
Entity relating to the TCI Systems (other than claims arising out of damage,
destruction, or loss of any property or asset used by any TCI Entity in the
business or operations of the TCI Systems on the date of this Agreement or
between the date of this Agreement and the Closing Date to the extent of any
damage or destruction that remains unrepaired, or to the extent of any destroyed
property or asset that remains unreplaced, at the Closing Date);
(6) Any Employee Plan, any Compensation Arrangement,
and any employment or collective bargaining agreements;
(7) Any trademarks, service marks, service names,
logos, and similar proprietary rights incorporating the name "TCI" or
"Tele-Communications, Inc.";
(8) The account books of original entry, general
ledgers, and financial records used in connection with the TCI Systems;
(9) Any insurance policies and rights or claims
thereunder (other than insurance proceeds or claims therefor arising out of (A)
damage, destruction, or loss of any property or asset used by any TCI Entity in
the business or operations of the TCI Systems on the date of this Agreement or
between the date of this Agreement and the Closing Date to the extent of any
damage or destruction that remains unrepaired, or to the extent of any destroyed
property or asset that remains unreplaced, at the Closing Date or (B) any
obligation or liability assumed by NewFalcon or any Falcon Entity pursuant to
Section 4.1(e));
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<PAGE>
(10) Any assets that are used or held for use in
connection with the operations of the cable television system serving Calabasas,
California, other than (A) the Franchise issued by the city of Calabasas,
California, (B) any cable television plant necessary to connect subscribers in
the Franchise Area of the Calabasas, California cable television system with the
location from which the Falcon Entities will transmit Signals to such
subscribers, (C) any Real Property Interests relating to Real Property over
which or through which such cable television plant passes, and (D) any
converters or other Personal Property located in the premises of such
subscribers;
(11) The assets described on Schedule 2.3(a); and
(12) Any digital compression equipment installed
after March 31, 1997 that does not satisfy the requirements of clause (b) of the
definition of Rebuild Expenditures.
(b) The assets to be contributed to NewFalcon by FHGLP
pursuant to Section 2.2(a)(2) exclude any equity interests in each of Falcon
Britannia, L.P., Mine, Inc., Enstar Communications Corp. and any subsidiary of
Enstar Communications Corp., and Duhamel Falcon Cable Mexico L.L.C. (the
"Excluded Falcon Assets").
2.4 Manner of Effecting Contributions.
Any contribution of assets to NewFalcon pursuant to Section 2.2(a)(1)
may be effected through the direct transfer of the applicable assets by TCI or
any TCI Entity (as designated by TCI) to NewFalcon or any other Falcon Entity
(as designated by FHGLP). If the transferee is a Falcon Entity other than
NewFalcon, the transfer shall be deemed for all purposes under this Agreement,
the NewFalcon Agreement, and the partnership agreements or other organizational
documents of the applicable Falcon Entities as a capital contribution to
NewFalcon followed by one or more sequential capital contributions from
NewFalcon to the other Falcon Entities involved.
2.5 Modification of Contributions.
(a) If the TCI Percentage, as calculated immediately prior to
the Closing without regard to this Section 2.5(a), would equal or exceed fifty
percent, then:
(1) FHGLP may elect to amend this Agreement to
increase the amount of Indebtedness of the TCI Entities that will be assumed by
NewFalcon or another Falcon Entity as of the Closing pursuant to Section 4.1(c)
by an amount that does not exceed the lesser of (A) the amount of additional
Indebtedness that, if assumed by NewFalcon or another Falcon Entity as of the
Closing pursuant to Section 4.1(c), would cause the TCI Percentage to be less
than fifty percent, and (B) the amount of additional Indebtedness that may be
assumed by NewFalcon or another Falcon Entity as of the Closing pursuant to
Section 4.1(c) without (A) violating, conflicting with, or resulting in a
material breach of any mortgage, indenture, lease, contract, or other agreement
to which any Falcon Entity is a party, (B) having, in FHGLP's judgment,
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<PAGE>
a material adverse effect on the financial condition of the Falcon Entities, or
(C) having, in TCI's judgment, an adverse tax consequence to TCI.
(2) If NewFalcon and the other Falcon Entities are
unable to assume sufficient additional Indebtedness of the TCI Entities pursuant
to the amendment described in Section 2.5(a)(1) to cause the TCI Percentage to
be less than fifty percent, then FHGLP and TCI shall negotiate in good faith an
amendment to this Agreement (A) to require that FHGLP contribute additional cash
to NewFalcon upon its receipt of distributions from NewFalcon, in a manner
similar to that provided in Section 2.2(c)(6), with interest as provided in
Section 2.2(c)(5), or (B) to exclude one or more cable television systems listed
on Schedule 7.7 from the definition of TCI Systems, such that (among other
things) the assets used in the business or operations of such cable television
systems would not be included in the TCI Assets to be contributed to NewFalcon
pursuant to Section 2.2(a)(1), and the value of such assets (as agreed to by TCI
and FHGLP) would not be reflected in the net fair market value of the TCI Assets
for purposes of this Agreement, so that, after giving effect to such amendment
and the assumption of additional Indebtedness of the TCI Entities pursuant to
the amendment described in Section 2.5(a)(1), the TCI Percentage would be less
than fifty percent. Nothing in this Section 2.5(a)(2) shall obligate FHGLP or
TCI to agree to any amendment to this Agreement to require that FHGLP contribute
additional cash to NewFalcon or to exclude any cable television systems listed
on Schedule 7.7 from the definition of TCI Systems.
(b) Any amendment to this Agreement that FHGLP elects to make
pursuant to Section 2.5(a)(1) or that is agreed to between FHGLP and TCI
pursuant to Section 2.5(a)(2) shall be binding on all other parties to this
Agreement.
2.6 Redemption of FHGLP Interests.
(a) At the Closing, immediately after the contributions to
NewFalcon pursuant to Section 2.2(a), and prior to the contributions to FHGLP
pursuant to Section 2.1(a) and the contributions to NewFalcon pursuant to
Section 2.2(b), subject to the terms and conditions set forth in this Agreement,
each of the Redeemed Partners shall sell, transfer, and deliver to FHGLP, free
and clear of any claims, liabilities, security interests, mortgages, liens,
pledges, conditions, charges, or encumbrances of any nature whatsoever (other
than liens securing obligations of any Falcon Entity or obligations of FHGLP to
be assumed by NewFalcon pursuant to Section 4.2), and FHGLP shall purchase and
redeem from each of the Redeemed Partners, a portion of its partnership interest
in FHGLP having a value equal to the amount specified next to the name of such
Redeemed Partner in the table below:
FHGLP Partner Amount
- ------------- ------
BancBoston Capital, Inc. ........................................... $1,277,703
Boston Ventures IIA Investment Corporation ......................... 297,776
Boston Ventures Limited Partnership II ............................. 11,520,975
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<PAGE>
FHGLP Partner Amount
- ------------- ------
DIS Investments, Inc. .............................................. 4,631,238
Falcon First Communications, L.L.C. ................................ 54,916,126
Hellman & Friedman Capital Partners, A California .................. 17,564,705
Limited Partnership
Hellman & Friedman Capital Partners II, L.P. ....................... 45,047,646
Leeway & Co. ....................................................... 9,262,476
MLC Investors, L.P. ................................................ 9,347,297
James Pinto ........................................................ 319,426
Steven Rattner ..................................................... 233,741
William L. Rogers .................................................. 255,541
Cameron Rogers Trust ............................................... 63,885
(b) Any of BancBoston Capital, Inc., James Pinto, William L.
Rogers, and Cameron Rogers Trust may, by delivering written notice of its or his
election to FHGLP within thirty days after the date of this Agreement, elect not
to be a Redeemed Partner, in which event no portion of such FHGLP Partner's
partnership interest in FHGLP shall be redeemed pursuant to Section 2.6(a),
notwithstanding that such FHGLP Partner is listed in the table in Section
2.6(a).
(c) In consideration for the purchase and redemption from each
of the Redeemed Partners of a portion of such Redeemed Partner's partnership
interest in FHGLP pursuant to Section 2.6(a), FHGLP shall assign, transfer, and
deliver to each of the Redeemed Partners a portion of FHGLP's partnership
interest as a limited partner of NewFalcon representing that percentage of all
partnership interests in NewFalcon equal to the value specified next to the name
of such Redeemed Partner in the table in Section 2.6(a) divided by the sum of
the net fair market values of the capital contributions made to NewFalcon by TCI
and FHGLP pursuant to Section 2.2(a), as determined in accordance with Article
3. The assignment to the Redeemed Partners of such partnership interests in
NewFalcon (the "NewFalcon Interests") shall not entitle any Redeemed Partner to
be admitted as a substitute partner of NewFalcon and no Redeemed Partner shall
be admitted as a substitute partner in NewFalcon by virtue of such assignment.
FHGLP shall retain, and neither the Redeemed Partners nor TCI (as assignee of
the NewFalcon Interests from the Redeemed Partners) shall assume, any obligation
to make additional capital contributions pursuant to Section 2.2(c) with respect
to the NewFalcon Interests.
(d) At the Closing, immediately after the contributions to
NewFalcon pursuant to Section 2.2(a), and prior to the contributions to FHGLP
pursuant to Section 2.1(a) and the
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contributions to NewFalcon pursuant to Section 2.2(b), subject to the terms and
conditions set forth in this Agreement, the General Partner shall sell,
transfer, and deliver to FHGLP, free and clear of any claims, liabilities,
security interests, mortgages, liens, pledges, conditions, charges, or
encumbrances of any nature whatsoever (other than liens securing obligations of
any Falcon Entity or obligations of FHGLP to be assumed by NewFalcon pursuant to
Section 4.2), and FHGLP shall purchase and redeem from the General Partner, a
portion of its partnership interest in FHGLP having a value equal to the
aggregate amount of payments made prior to the Closing pursuant to the amendment
to the Existing Incentive Plan contemplated by Section 2.8(i). In consideration
for the purchase and redemption from the General Partner of a portion of its
partnership interest in FHGLP pursuant to this Section 2.6(d), all obligations
of the General Partner to FHGLP under the Adoption and Assumption Agreement of
the 1993 Incentive Performance Plan, dated as of December 30, 1993, between the
General Partner and FHGLP, and arising out of the payments made prior to the
Closing pursuant to the amendment to the Existing Incentive Plan contemplated by
Section 2.8(i), shall be deemed to be satisfied in full.
2.7 Purchase and Sale of NewFalcon Interests.
(a) At the Closing, immediately after the redemptions
described in Section 2.6(a), subject to the terms and conditions set forth in
this Agreement, each of the Redeemed Partners shall sell, transfer, and deliver
to TCI, free and clear of any claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever (other than liens securing obligations of any Falcon Entity or
obligations of FHGLP to be assumed by NewFalcon pursuant to Section 4.2), all of
its right, title, and interest in the NewFalcon Interest assigned to it pursuant
to Section 2.6(c), for the amount specified next to the name of each Redeemed
Partner in the table in Section 2.6(a). Upon the purchase of the NewFalcon
Interests by TCI, the NewFalcon Interests shall be converted automatically,
without further action by FHGLP or TCI, into partnership interests as a general
partner of NewFalcon. The purchase by TCI of the NewFalcon Interests shall not
affect the respective rights and obligations of FHGLP and TCI under the
NewFalcon Agreement except insofar as the number of Partnership Units (as
defined in the NewFalcon Agreement) assigned to TCI's partnership interest in
NewFalcon, and TCI's Percentage Interest (as defined in the NewFalcon
Agreement), shall be increased thereby.
(b) TCI shall pay to each of the Redeemed Partners, at the
Closing, in immediately available funds, as the purchase price for the NewFalcon
Interests to be purchased and sold pursuant to Section 2.7(a), the amount
specified next to the name of such Redeemed Partner in the table in Section
2.6(a).
(c) Each Redeemed Partner shall deliver to TCI at least two
Business Days prior to the Closing Date wire transfer instructions for the
payment required by Section 2.7(b) to be made to it.
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<PAGE>
2.8 Other Transactions.
(a) Immediately prior to the contributions to NewFalcon
pursuant to Section 2.2(a), FHGLP will enter into agreements (the "Payment
Agreements") with certain Falcon Entities pursuant to which FHGLP will agree,
subject to the consummation of the transactions contemplated by this Agreement,
to pay senior Indebtedness of the Falcon Entities on their behalf, in an amount
equal to the excess of (1) the quotient of the amount of Indebtedness of TCI
assumed by NewFalcon pursuant to Section 4.1(c) divided by TCI's Percentage
Interest (as defined in the NewFalcon Agreement) immediately after the Closing,
after giving effect to TCI's purchase of the NewFalcon Interests, over (2) the
sum of the amount of Indebtedness of TCI assumed by NewFalcon pursuant to
Section 4.1(c) plus the amount of Indebtedness of FHGLP assumed by NewFalcon
pursuant to Section 4.2(a).
(b) Immediately prior to the Closing, Falcon Video shall pay
to Leeway & Co. and Mezzanine Lending Associates III, L.P., as the holders of
the Mezzanine Notes, in immediately available funds, an amount equal to the
outstanding principal amount of the Mezzanine Notes plus, in the aggregate,
one-third of the accrued but unpaid interest thereon as of the Closing Date
(which shall be allocated equally between Leeway & Co. and Mezzanine Lending
Associates III, L.P.) and immediately thereafter shall issue to Leeway & Co. and
Mezzanine Lending Associates III, L.P. partnership interests in Falcon Video
having an aggregate net fair market value equal to two-thirds of the amount of
accrued but unpaid interest on the Mezzanine Notes as of the Closing Date (which
shall be allocated equally between Leeway & Co. and Mezzanine Lending Associates
III, L.P.) in satisfaction of all obligations of Falcon Video with respect to
the Mezzanine Notes. Upon such payment and the issuance of such partnership
interests, all obligations of Falcon Video with respect to the Mezzanine Notes
and all remaining rights of the holders thereof shall be canceled. FHGLP agrees
that any Indebtedness incurred by Falcon Video to finance payments to Leeway &
Co. and Mezzanine Lending Associates III, L.P. pursuant to this Section 2.8(b)
will be nonrecourse debt as defined in Treasury Regulations Section
1.752-1(a)(2).
(c) Immediately prior to the Closing, the General Partner
shall assign 7.4888263% of its interest in FHGLP to Hellman & Friedman Capital
Partners II, L.P. and shall assign 10.9433043% of its interest in FHGLP to
Hellman & Friedman Capital Partners, A California Limited Partnership, and the
General Partner, Hellman & Friedman Capital Partners II, L.P., and Hellman &
Friedman Capital Partners, A California Limited Partnership, agree that such
assignments shall satisfy in full all obligations of the General Partner under
the First Amendment to Convertible Debenture Purchase Agreement, by and among
the General Partner, Hellman & Friedman Capital Partners II, L.P., and Hellman &
Friedman Capital Partners, A California Limited Partnership, and under the Stock
Repurchase Agreement, by and among the General Partner, Hellman & Friedman
Capital Partners II, L.P., and Hellman & Friedman Capital Partners, A California
Limited Partnership.
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<PAGE>
(d) Prior to the Closing, Falcon Cablevision, a California
Limited Partnership, will transfer to FHGLP, in a manner determined by FHGLP,
all of its interest in Enstar Communications Corp.
(e) Immediately following or concurrently with the Closing,
the Falcon Entities will incur Indebtedness, through borrowings by NewFalcon
and, if required, guaranties or similar undertakings by other Falcon Entities,
the proceeds of which will be used to repay certain Indebtedness then in
existence of NewFalcon and other Falcon Entities, including Indebtedness assumed
by NewFalcon and other Falcon Entities at the Closing pursuant to Section 4.1
and Section 4.2 and Indebtedness incurred by Falcon Video to make payments with
respect to the Mezzanine Notes as described in Section 2.8(b). FHGLP will
consult regularly with TCI concerning the structure of such new Indebtedness.
Each party to this Agreement consents to the incurring by NewFalcon and any
other Falcon Entity of new Indebtedness in accordance with this Section 2.8(e)
for the purpose of repaying such existing Indebtedness and consents to the
execution, delivery, and performance by NewFalcon and any Falcon Entity of any
agreements and other instruments required in connection with such new
Indebtedness.
(f) Immediately following the Closing, all obligations of
Falcon Video with respect to the Mezzanine Securities and all rights of
NewFalcon as the holder thereof shall be canceled.
(g) Prior to the Closing, each TCI Entity (other than TCI)
will assign to TCI (directly or through one or more intermediate steps) all of
its right, title, and interest in and to the TCI Assets owned or held by such
TCI Entity.
(h) Prior to the Closing, FHGLP will acquire all of David
Tomick's partnership interest in Video Investors and all of David Tomick's
interest in and under the partnership agreement of Video Investors.
(i) Prior to the Closing, FHGLP will amend the Existing
Incentive Plan to provide for payments by FHGLP at the Closing to Participants
(as defined in the Existing Incentive Plan) in an aggregate amount of $6,554,751
and to reduce FHGLP's obligations to make future payments to Participants (as
defined in the Existing Incentive Plan) under the Existing Incentive Plan by the
amount of such payments. FHGLP will make such payments immediately prior to the
contributions to NewFalcon pursuant to Section 2.2(a).
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ARTICLE 3
VALUE OF CONTRIBUTIONS
3.1 General Agreements Regarding Valuation.
(a) This Article 3 sets forth the method of determining the
net fair market value of various partnership interests and other assets for
purposes of this Agreement. The net fair market value of such partnership
interests and other assets as determined pursuant to this Article 3 shall also
be binding on the parties to this Agreement for purposes of the NewFalcon
Agreement and the Amended FHGLP Agreement, including any calculation of (1) the
amount of the Capital Contributions by TCI and FHGLP to NewFalcon and, based
thereon, the number of Partnership Units assigned to the Partnership Interests
of FHGLP and TCI, and the Percentage Interests of FHGLP and TCI under, and as
defined in, the NewFalcon Agreement, and (2) the amount of the Capital
Contributions by Belo, Leeway & Co., Mezzanine Lending Associates III, L.P., and
each Video Investors Partner to FHGLP and the amount of each FHGLP Partner's
Capital Account as of the Closing and, based thereon, the number of Partnership
Units assigned to each FHGLP Partner's Partnership Interest, and each FHGLP
Partners' Percentage Interest under, and as defined in, the Amended FHGLP
Agreement.
(b) The parties to this Agreement acknowledge and agree that
the valuation of each partnership interest and other asset to be contributed to
FHGLP or NewFalcon pursuant to Section 2.1(a) or Section 2.2, and the value of
the FHGLP Partners' interests in FHGLP immediately prior to such contributions
and the other transactions contemplated by this Agreement, all as determined in
accordance with this Article 3 (including the adjustments expressly provided for
in this Article 3), are negotiated amounts reflecting, among other things, the
FHGLP Partners' agreed allocation of the value of FHGLP among the FHGLP
Partners, taking into account differences in the existing rights and obligations
of their partnership interests in FHGLP, Falcon Video, and Video Investors, and
will not be further adjusted to give effect to any FHGLP Partner's rights or
obligations under the partnership agreement of FHGLP, Falcon Video, and Video
Investors, including accrued preferential rights to income allocations and cash
distributions, regardless of when the Closing under this Agreement occurs.
3.2 Fair Market Value of TCI Assets.
Subject to adjustment as provided elsewhere in this Article 3, the net
fair market value of the TCI Assets for purposes of this Agreement shall equal
(a) $500,224,778, plus (b) the Current Assets of the TCI Systems as of the
Effective Time, plus (c) the amount of Rebuild Expenditures of the TCI Systems
made during the period after March 31, 1997 and prior to the Closing Date, less
(d) the Current Liabilities of the TCI Systems as of the Effective Time, less
(e) the amount of Indebtedness of the TCI Entities that is assumed by NewFalcon
or another Falcon Entity as of the Closing.
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<PAGE>
3.3 Fair Market Value of Falcon Video Interests.
The net fair market value of Belo's partnership interest in Falcon
Video for purposes of this Agreement shall equal (a) the lesser of (1) the
amount of capital contributions made by Belo to Falcon Video (as shown on
Schedule 3.5(a)) and (2) 95.1% of the net fair market value of Falcon Video,
plus (b) 99.0% of the amount by which the net fair market value of Falcon Video
exceeds the aggregate amount of capital contributions made by the partners of
Falcon Video to Falcon Video (as shown on Schedule 3.5(a)), and the net fair
market value of Falcon Video shall equal (a) the amount specified next to the
name of Falcon Video on Schedule 3.5(b), plus (b) the Current Assets of Falcon
Video as of the Effective Time, plus (c) the amount of Rebuild Expenditures of
Falcon Video made during the period after March 31, 1997 and prior to the
Closing Date, less (d) the Current Liabilities of Falcon Video as of the
Effective Time, less (e) the amount of Indebtedness of Falcon Video as of the
Closing (including Indebtedness incurred by Falcon Video to make payments with
respect to the Mezzanine Notes as described in Section 2.8(b)), less (f)
two-thirds of the amount of accrued but unpaid interest on the Mezzanine Notes
as of the Closing Date. The net fair market value of the partnership interest in
Falcon Video of each of Leeway & Co. and Mezzanine Lending Associates III, L.P.
for purposes of this Agreement shall be one-third of the amount of accrued but
unpaid interest on the Mezzanine Notes as of the Closing Date. The net fair
market value of the interest in the Mezzanine Securities of each of Leeway & Co.
and Mezzanine Lending Associates III, L.P. for purposes of this Agreement shall
be $3,000,000.
3.4 Fair Market Value of Video Investors Interests.
(a) Subject to Section 3.4(b), the net fair market value of
each Video Investors Partner's partnership interest in Video Investors for
purposes of this Agreement shall equal the product of (1) the percentage
specified next to the name of such Video Investors Partner in the table below
times (2) the net fair market value of Video Investors, and the net fair market
value of Video Investors shall equal (1) the lesser of (A) the amount of capital
contributions made by Video Investors to Falcon Video (as shown on Schedule
3.5(a)) and (B) 4.9% of the net fair market value of Falcon Video (as determined
for purposes of Section 3.3), plus (2) 1.0% of the amount by which the net fair
market value of Falcon Video (as determined for purposes of Section 3.3) exceeds
the aggregate amount of capital contributions made by the partners of Falcon
Video to Falcon Video (as shown on Schedule 3.5(a)), less (3) the amount of
Indebtedness of Video Investors (other than Indebtedness excluded pursuant to
Section 3.10) as of the Closing:
Video Investors Partner Percentage
- ----------------------- ----------
Falcon Cable Trust .................................................... 51.252%
Hellman & Friedman Capital Partners II, L.P. .......................... 16.258%
Frank J. Intiso ....................................................... 7.000%
Stanley S. Itskowitch ................................................. 7.000%
Michael K. Menerey .................................................... 3.000%
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<PAGE>
(b) The net fair market value of the partnership interest in
Video Investors that is contributed to FHGLP by the Falcon Cable Trust shall be
the value specified in Section 3.4(a) reduced by one percent of the net fair
market value of Video Investors, as determined in accordance with Section 3.4(a)
(taking into account any adjustment thereto as provided elsewhere in this
Article 3).
3.5 Fair Market Value of FHGLP Assets.
The net fair market value of the partnership interests and other assets
of FHGLP that are contributed to NewFalcon pursuant to Section 2.2(a)(2) and
Section 2.2(b) for purposes of this Agreement shall equal (a) the aggregate net
fair market values of FHGLP's interests in the Falcon Entities, plus (b) the
Current Assets of FHGLP as of the Effective Time that are contributed to
NewFalcon pursuant to Section 2.2(a)(2), less (c) the Current Liabilities of
FHGLP as of the Effective Time that are assumed by NewFalcon pursuant to Section
4.2, less (d) the amount of Indebtedness of FHGLP (other than Indebtedness
excluded pursuant to Section 3.10) as of the Closing that is assumed by
NewFalcon pursuant to Section 4.2, where:
(a) the net fair market value of FHGLP's direct interest in
any Falcon Entity shall be the product of (1) FHGLP's percentage ownership
interest in such Falcon Entity (as reflected in the agreements delivered
pursuant to Section 8.17 and shown on Schedule 3.5(a)) times (2) the net fair
market value of such Falcon Entity (except that (A) the net fair market value of
any partnership interest in Falcon Video or Video Investors that is contributed
to FHGLP pursuant to Section 2.1(a) and then contributed by FHGLP to NewFalcon
pursuant to Section 2.2(b) shall be the net fair market value of such
partnership interest as determined pursuant to Section 3.3 or Section 3.4, and
(B) the net fair market value of the partnership interest in Video Investors
that is to be acquired by FHGLP pursuant to Section 2.8(h) and then contributed
by FHGLP to NewFalcon pursuant to Section 2.2(b) shall be the percentage
ownership interest in Video Investors represented by such percentage interest
(as reflected in the agreements delivered pursuant to Section 8.17 and shown on
Schedule 3.5(a)) times the net fair market value of Video Investors), and
(b) the net fair market value of any Falcon Entity shall equal
(1) the amount specified next to the name of such Falcon Entity on Schedule
3.5(b) (except that, if the closing under the Classic Purchase Agreement has not
occurred as of the Closing, the amount shown next to the name of Falcon Cable
Media on Schedule 3.5(b) shall be reduced by $89,503,056), plus (2) with respect
to each other Falcon Entity listed on Schedule 3.5(a) in which it directly owns
an equity interest (each such other Falcon Entity, a "Subsidiary Falcon
Entity"), the product of (A) such Falcon Entity's percentage interest in such
Subsidiary Falcon Entity (as reflected in the agreements delivered pursuant to
Section 8.17 and shown on Schedule 3.5(a)) times (B) the net fair market value
of such Subsidiary Falcon Entity (determined as the net fair
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market value of a Falcon Entity in accordance with this Section 3.5(b)), plus
(3) the Current Assets of such Falcon Entity as of the Effective Time, plus (4)
the amount of Rebuild Expenditures of such Falcon Entity made during the period
after March 31, 1997 and prior to the Closing Date, less (5) the Current
Liabilities of such Falcon Entity as of the Effective Time, less (6) the amount
of Indebtedness of such Falcon Entity (other than Indebtedness excluded pursuant
to Section 3.10) as of the Closing.
3.6 Fair Market Value of FHGLP Interests.
(a) The net fair market value of the partnership interest of
each FHGLP Partner in FHGLP immediately following the redemption of a portion of
the partnership interest of each Redeemed Partner and the General Partner
pursuant to Section 2.6 and the assignment of a portion of the General Partner's
interest in FHGLP to each of Hellman & Friedman Capital Partners II, L.P. and
Hellman & Friedman Capital Partners, A California Limited Partnership, for
purposes of this Agreement shall equal the product of (1) such FHGLP Partner's
post-redemption percentage, as determined pursuant to Section 3.6(b), times (2)
the net fair market value of FHGLP immediately prior to the Closing, and the net
fair market value of FHGLP immediately prior to the Closing shall equal (1) the
fair market value of the Excluded Falcon Assets, as agreed to between the
General Partner and Belo, plus (2) the net fair market value of the partnership
interests and other assets of FHGLP that are contributed to NewFalcon pursuant
to Section 2.2(a)(2), as determined in accordance with Section 3.5 (taking into
account any adjustment thereto as provided elsewhere in this Article 3), plus
(3) the Current Assets of FHGLP as of the Effective Time (other than Current
Assets contributed to NewFalcon pursuant to Section 2.2(a)(2)), less (4) the
amount of any payments made prior to the Closing pursuant to the amendment to
the Existing Incentive Plan contemplated by Section 2.8(i)), to the extent such
payments or any indebtedness incurred in connection with such payments were not
taken into account in calculating Current Assets, Current Liabilities, or
Indebtedness of FHGLP for purposes of this Section 3.6(a), less (5) the Current
Liabilities of FHGLP as of the Effective Time (other than Current Liabilities
assumed by NewFalcon or another Falcon Entity pursuant to Section 4.2), less (6)
Indebtedness of FHGLP as of the Effective Time (other than Indebtedness assumed
by NewFalcon or another Falcon Entity pursuant to Section 4.2), less (7) the
aggregate amount specified next to the names of the Redeemed Partners in the
table in Section 2.6(a) (but excluding the amount specified in such table next
to the name of any FHGLP Partner that elects pursuant to Section 2.6(b) not to
be a Redeemed Partner). The General Partner and Belo agree to negotiate in good
faith to reach an agreement on the value of the Excluded Falcon Assets as soon
as practicable after the date of this Agreement.
(b) Each FHGLP Partner's post-redemption percentage for
purposes of Section 3.6(a) shall be:
(1) In the case of each Redeemed Partner, other than
Steven Rattner, the percentage specified next to the name of such Redeemed
Partner in the table attached as Schedule 3.6(b)(1).
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(2) In the case of each FHGLP Partner that is not a
Redeemed Partner, other than the General Partner, the product of (A) one minus
the sum of (i) the sum of the percentages specified next to the name of each
Redeemed Partner, including Steven Rattner, in the table attached as Schedule
3.6(b)(1) plus (ii) the percentage specified next to the name of the General
Partner in the table attached as Schedule 3.6(b)(1), times (B) the percentage
specified next to the name of such FHGLP Partner in the table attached as
Schedule 3.6(b)(2) divided by the sum of (i) the sum of the percentages
specified next to the name of all FHGLP Partners that are not Redeemed Partners
(including the General Partner) in the table attached as Schedule 3.6(b)(2) plus
(ii) the percentage specified next to the name of Steven Rattner in the table
attached as Schedule 3.6(b)(2).
(3) In the case of Steven Rattner, the sum of (A) the
percentage specified next to his name in the table attached as Schedule
3.6(b)(1) plus (B) the product of (i) one minus the sum of (a) the sum of the
percentages specified next to the name of each Redeemed Partner, including
Steven Rattner, in the table attached as Schedule 3.6(b)(1) plus (b) the
percentage specified next to the name of the General Partner in the table
attached as Schedule 3.6(b)(1), times (ii) the percentage specified next to his
name in the table attached as Schedule 3.6(b)(2) divided by the sum of (a) the
percentages specified next to the name of all FHGLP Partners that are not
Redeemed Partners (including the General Partner) in the table attached as
Schedule 3.6(b)(2) plus (b) the percentage specified next to his name in the
table attached as Schedule 3.6(b)(2).
(4) In the case of the General Partner, the sum of
(A) the percentage specified next to the name of the General Partner in the
table attached as Schedule 3.6(b)(1) plus (B) the product of (i) one minus the
sum of (a) the sum of the percentages specified next to the name of each
Redeemed Partner, including Steven Rattner, in the table attached as Schedule
3.6(b)(1) plus (b) the percentage specified next to the name of the General
Partner in the table attached as Schedule 3.6(b)(1), times (ii) the percentage
specified next to the name of the General Partner in the table attached as
Schedule 3.6(b)(2) divided by the sum of (a) the percentages specified next to
the name of all FHGLP Partners that are not Redeemed Partners (including the
General Partner) in the table attached as Schedule 3.6(b)(2) plus (b) the
percentage specified next to the name of Steven Rattner in the table attached as
Schedule 3.6(b)(2).
3.7 Determination of Adjustments.
(a) Pursuant to Section 9.12 and Section 10.11, both before
and after the Closing, FHGLP and TCI (and their accountants and other authorized
representatives) will have the right to review the financial statements, books,
records, and accounts of the TCI Systems and the Falcon Systems, respectively,
for the purposes of verifying (1) in the case of FHGLP, the amount of Current
Assets and Current Liabilities of the TCI Systems as of the Effective Time, the
amount of Rebuild Expenditures of the TCI Systems made during the period after
March 31, 1997 and prior to the Closing Date, and the amount of Indebtedness of
the TCI Entities that is assumed by NewFalcon or another Falcon Entity as of the
Closing (such amounts, the "TCI Adjustments"), and (2) in the case of TCI, the
amount of Current Assets and Current
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Liabilities of FHGLP and each Falcon Entity as of the Effective Time, the amount
of Rebuild Expenditures of each Falcon Entity made during the period after March
31, 1997 and prior to the Closing Date, and the amount of Indebtedness of FHGLP
and each Falcon Entity as of the Closing (such amounts, the "Falcon
Adjustments").
(b) Not later than ten Business Days before the Closing Date,
TCI shall prepare and deliver to FHGLP a preliminary settlement statement which
shall set forth TCI's good faith estimate of the TCI Adjustments and FHGLP shall
prepare and deliver to TCI a preliminary settlement statement which shall set
forth FHGLP's good faith estimate of the Falcon Adjustments. Each preliminary
settlement statement (1) shall contain all information reasonably necessary to
determine the TCI Adjustments or the Falcon Adjustments, as applicable, to the
extent such amounts can be determined or estimated as of the date of the
preliminary settlement statement, and such other information as may be
reasonably requested by the party to which it is delivered, and (2) shall be
certified by the party delivering the statement to be its good faith estimate of
the TCI Adjustments or the Falcon Adjustments, as applicable, as of the date
thereof.
(c) Not later than ninety days after the Closing Date, FHGLP
will deliver to TCI a statement setting forth FHGLP's determination of the TCI
Adjustments and TCI will deliver to FHGLP a statement setting forth TCI's
determination of the Falcon Adjustments. Each such statement (1) shall contain
all information reasonably necessary to determine the TCI Adjustments or the
Falcon Adjustments, as applicable, and such other information as may be
reasonably requested by the party to which it is delivered, and (2) shall be
certified by the party delivering the statement to be true and complete to its
knowledge as of the date thereof. If the party to which either such statement is
delivered notifies the party delivering the statement of its acceptance of the
statement, or if it fails to notify the party delivering the statement that it
disputes the statement within thirty days after its receipt thereof, the
determination of the TCI Adjustments or the Falcon Adjustments, as applicable,
set forth in such statement shall be conclusive and binding on all parties to
this Agreement.
(d) FHGLP and TCI shall use good faith efforts to agree
between themselves on the amount of the TCI Adjustments and the Falcon
Adjustments. If FHGLP and TCI are unable to reach an agreement with respect to
the amount of the TCI Adjustments and the Falcon Adjustments within sixty days
after the delivery of the later of the two statements to be delivered pursuant
to 3.7(c), the amount of the TCI Adjustments or the Falcon Adjustments in
dispute shall be submitted to mediation and, if necessary, arbitration pursuant
to Section 15.9. For purposes of Section 15.9, no party to this Agreement other
than FHGLP and TCI shall be considered "a party involved in the dispute" being
arbitrated. Any agreement between FHGLP and TCI pursuant to this Section 3.7 as
to the amount of the TCI Adjustments and the Falcon Adjustments (before or after
mediation) or any determination of the amount of the TCI Adjustments and the
Falcon Adjustments determined by arbitration pursuant to Section 15.9, shall be
conclusive and binding on all parties to this Agreement.
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3.8 Certain Additional Adjustments.
(a) If any loss, damage, confiscation, or condemnation of any
of the TCI Assets or any assets of the Falcon Systems occurs prior to the
Closing, and the effect of such loss, damage, confiscation, or condemnation is
to reduce the net fair market value of NewFalcon's interest in the Falcon
Systems and the TCI Systems after the Closing (taking into account any increase
in liabilities and obligations and any reduction in operating cash flow
resulting from such loss, damage, confiscation, or condemnation and any
insurance, condemnation, or other proceeds received or to be received by
NewFalcon or any Falcon Entity as a result of such loss, damage, confiscation,
or condemnation) by more than $1,000,000, then this Agreement shall be amended
to modify the net fair market values of the applicable assets and partnership
interests contributed to FHGLP or NewFalcon pursuant to Section 2.1(a), Section
2.2(a)(1), Section 2.2(a)(2), or Section 2.2(b) solely to take into account such
loss, damage, confiscation, or condemnation.
(b) If (1) any of the representations and warranties of the
TCI Entities in this Agreement is not true at and as of the Closing Date as
though made at and as of such date or if any TCI Entity fails to perform and
comply with any covenant or agreement required by this Agreement to be performed
or complied with by such TCI Entity prior to or on the Closing Date, and (2)
FHGLP delivers a written notice to TCI at or prior to the Closing identifying
any circumstance described in clause (1), and (3) the net fair market value of
NewFalcon's interest in the Falcon Systems and the TCI Systems after the Closing
(taking into account any increase in liabilities and obligations and any
reduction in operating cash flow) is reduced by those circumstances described in
clause (1) that are identified in FHGLP's notice pursuant to clause (2) by more
than $1,500,000, then this Agreement shall be amended to reduce the net fair
market value of the TCI Assets for purposes of Section 3.2 by the lesser of
$12,500,000 or the amount by which the net fair market value of NewFalcon's
interest in the Falcon Systems and the TCI Systems after the Closing (taking
into account any increase in liabilities and obligations and any reduction in
operating cash flow) is reduced by those circumstances described in clause (1)
that are identified in FHGLP's notice pursuant to clause (2).
(c) If (1) any of the representations and warranties of FHGLP
in this Agreement is not true at and as of the Closing Date as though made at
and as of such date or if FHGLP fails to perform and comply with any covenant or
agreement required by this Agreement to be performed or complied with by FHGLP
prior to or on the Closing Date, and (2) TCI delivers a written notice to FHGLP
at or prior to the Closing identifying any circumstance described in clause (1),
and (3) the net fair market value of NewFalcon's interest in the Falcon Systems
and the TCI Systems after the Closing (taking into account any increase in
liabilities and obligations and any reduction in operating cash flow) is reduced
by those circumstances described in clause (1) that are identified in FHGLP's
notice pursuant to clause (2) by more than $1,500,000, then this Agreement shall
be amended to reduce the aggregate net fair market value of FHGLP's interests in
the Falcon Entities for purposes of Section 3.5 by the lesser of $25,000,000 or
the amount by which the net fair market value of NewFalcon's interest in the
Falcon Systems and the TCI Systems after the Closing (taking into account any
increase
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in liabilities and obligations and any reduction in operating cash flow) is
reduced by those circumstances described in clause (1) that are identified in
TCI's notice pursuant to clause (2).
(d) If TCI settles any rate proceeding described in Section
11.13(a) without the prior consent of FHGLP and (1) any Falcon Entity bears any
liability under such settlement that does not constitute a Current Liability of
the TCI Systems for purposes of Section 3.2, or (2) such settlement adversely
affects the rates that can legally be charged by any Falcon Entity after the
Closing, then this Agreement shall be amended to reduce the net fair market
value of the TCI Assets for purposes of Section 3.2 by the amount by which the
net fair market value of NewFalcon's interest in the Falcon Systems and the TCI
Systems after the Closing (taking into account any increase in liabilities and
obligations and any reduction in operating cash flow, considering all relevant
facts and circumstances then existing or reasonably anticipated) is reduced by
such settlement.
(e) If, between the date of this Agreement and the Closing,
the TCI Entities modify or amend in any material respect any Assumed TCI
Contract, enter into any new Contract that will be binding on any Falcon Entity,
or renew or extend any Assumed TCI Contract, and all such modifications,
amendments, new Contracts, renewals, and extensions, taken together, would have
a material adverse effect on the net fair market value of NewFalcon's interest
in the Falcon Systems and the TCI Systems after the Closing, then this Agreement
shall be amended to reduce the net fair market value of the TCI Assets for
purposes of Section 3.2 by the amount by which the net fair market value of
NewFalcon's interest in the Falcon Systems and the TCI Systems after the Closing
(taking into account any increase in liabilities and obligations and any
reduction in operating cash flow) is reduced by such modifications, amendments,
new Contracts, renewals, and extensions.
(f) If the TCI Special Liabilities exceed $500,000, then this
Agreement shall be amended to reduce the net fair market value of the TCI Assets
for purposes of Section 3.2 by the amount by which the TCI Special Liabilities
exceed $500,000. For purposes of this Section 3.8(f), "TCI Special Liabilities"
means the sum of all liabilities, losses, and damages incurred by NewFalcon or
any other Falcon Entity (other than any liability, loss, or damage (i) that
constitutes a Current Liability of the TCI Systems for purposes of Section 3.2,
(ii) for which the net fair market value of the TCI Assets is reduced pursuant
to Section 3.8(b) or Section 3.8(d), (iii) for which the Falcon Entities are
entitled to insurance proceeds as assignee of the rights of the TCI Entities
under any insurance policy, or (iv) for which the Falcon Entities are entitled
to indemnity from TCI pursuant to Section 4.4) arising from:
(1) any determination by any Governmental Authority
that a Regulated System included in the TCI Systems failed to comply prior to
Closing with the rate regulation provisions of the Cable Act or with any Legal
Requirement promulgated, enacted, or taken by any Governmental Authority under
or pursuant to the rate regulation provisions of the Cable Act, or
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(2) any claim, investigation, certification, inquiry,
suit, action, or other proceeding made, instituted, or threatened by any
Governmental Authority arising from, relating to, or in connection with the
application to any Regulated System included in the TCI Systems of any Legal
Requirement referred to in clause (1), insofar as such proceeding relates to the
operations of such Regulated System during the period prior to the Closing (but
excluding any such proceedings relating to the application of such Legal
Requirements to the cable industry generally).
(g) If the Falcon Special Liabilities exceed $1,000,000, then
this Agreement shall be amended to reduce the aggregate net fair market value of
FHGLP's interests in the Falcon Entities for purposes of Section 3.5 by the
amount by which the Falcon Special Liabilities exceed $1,000,000. For purposes
of this Section 3.8(g), "Falcon Special Liabilities" means the sum of all
liabilities, losses, and damages incurred by NewFalcon or any other Falcon
Entity (other than any liability, loss, or damage (i) that constitutes a Current
Liability of any Falcon Entity for purposes of Section 3.5, (ii) for which the
net fair market value of the assets of the Falcon Systems is reduced pursuant to
Section 3.8(c), or (iii) for which the Falcon Entities are entitled to insurance
proceeds under any insurance policies of the Falcon Entities or as assignee of
rights of FHGLP under any insurance policy of FHGLP) arising from:
(1) any determination by any Governmental Authority
that a Regulated System included in the Falcon Systems failed to comply prior to
Closing with the rate regulation provisions of the Cable Act or with any Legal
Requirement promulgated, enacted, or taken by any Governmental Authority under
or pursuant to the rate regulation provisions of the Cable Act, or
(2) any claim, investigation, certification, inquiry,
suit, action, or other proceeding made, instituted, or threatened by any
Governmental Authority arising from, relating to, or in connection with the
application to any Regulated System included in the Falcon Systems of any Legal
Requirement referred to in clause (1), insofar as such proceeding relates to the
operations of such Regulated System during the period prior to the Closing (but
excluding any such proceedings relating to the application of such Legal
Requirements to the cable industry generally), or
(3) the claims, legal actions, and other proceedings
described in items 1 and 6 on Schedule 8.11 and any other claims made by equity
holders of FHGLP, any Person controlled by FHGLP, any Falcon Entity, or any
predecessors of a Falcon Entity for alleged damages suffered as equity holders,
and arising out of events occurring prior to the Closing.
(h) Any amendment pursuant to Section 3.8(f) or Section 3.8(g)
shall specify the date on which NewFalcon or another Falcon Entity incurred any
liability, loss, or damage that constitutes the TCI Special Liability or Falcon
Special Liability, as applicable, for purposes of determining the interest
obligation of TCI or FHGLP, as applicable, under Section 2.2(c)(5).
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(i) FHGLP and TCI shall use good faith efforts to negotiate
any amendment to this Agreement required by this Section 3.8. If FHGLP and TCI
are unable to agree on such an amendment, the matter shall be submitted to
mediation and, if necessary, arbitration pursuant to Section 15.9. For purposes
of Section 15.9, no party to this Agreement other than FHGLP and TCI shall be
considered "a party involved in the dispute" being arbitrated. Any amendment to
this Agreement agreed to between FHGLP and TCI pursuant to this Section 3.8
(before or after mediation) or determined by arbitration pursuant to Section
15.9, shall be conclusive and binding on all parties to this Agreement.
3.9 Estimated Percentage Interests.
Schedule 3.9 represents FHGLP's good faith estimate of (a) the amount
of each FHGLP Partner's Capital Contribution and Capital Account as of the
Closing and, based thereon, each FHGLP Partner's Percentage Interest under, and
as defined in, the Amended FHGLP Agreement, and (b) the amount of the Capital
Contributions of FHGLP and TCI and, based thereon, the Percentage Interests of
FHGLP and TCI under, and as defined in, the NewFalcon Agreement, assuming the
accuracy of the assumptions described on Schedule 3.9.
3.10 Excluded Indebtedness.
(a) In the case of any Indebtedness of FHGLP to a Falcon
Entity or any Indebtedness of a Falcon Entity to FHGLP or another Falcon Entity,
FHGLP shall elect either (1) to exclude such Indebtedness from the total
Indebtedness of the obligor in determining the net fair market value of the
obligor under this Article 3 or (2) to include such Indebtedness in the total
Indebtedness of the obligor in determining the net fair market value of the
obligor under this Article 3 and to exclude an equal amount of Indebtedness from
the total Indebtedness of the obligee in determining the net fair market value
of the obligee under this Article 3.
(b) In the case of any Indebtedness for which more than one of
FHGLP and the Falcon Entities is an obligor (either primarily or secondarily),
FHGLP shall elect to include such Indebtedness in the total Indebtedness of one
of such obligors and to exclude such Indebtedness from the total Indebtedness of
the other obligors in determining the net fair market value of all the obligors
under this Article 3.
(c) In the case of any Indebtedness of FHGLP arising from any
guaranty or other agreement (including the Payment Agreements) by FHGLP to pay
any liability or obligation for which a Falcon Entity is liable, or any
Indebtedness of a Falcon Entity arising from any guaranty or other agreement by
such Falcon Entity to pay any liability or obligation for which FHGLP or another
Falcon Entity is liable, then FHGLP shall elect either (1) to exclude such
Indebtedness from the total Indebtedness of the Person that entered into such
guaranty or other agreement in determining the net fair market value of such
Person under this Article 3 or (2) to include such Indebtedness in the total
Indebtedness of the Person that entered into such guaranty or other agreement in
determining the net fair market value of such Person under this Article 3 and to
exclude the Indebtedness that such Person has guaranteed or
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otherwise agreed to pay pursuant to such guaranty or other agreement from the
total Indebtedness of the Person liable therefor in determining the net fair
market value of the Person liable therefor under this Article 3.
(d) All elections made by FHGLP pursuant to this Section 3.10
shall be made substantially in accordance with the assumptions used in the
preparation of Schedule 3.9 and described therein.
ARTICLE 4
ASSUMED LIABILITIES
4.1 Assumption of TCI Liabilities.
Effective as of the Closing, FHGLP shall cause NewFalcon or one or more
other Falcon Entities to assume and undertake to pay, discharge, and perform:
(a) all obligations of the TCI Entities to customers of the
TCI Systems for (1) customer deposits held by any TCI Entity as of the Closing
that are refundable, to the extent such obligations or liabilities constitute
Current Liabilities of the TCI Systems for purposes of Section 3.2, (2)
customer, advertising, and other advance payments held by any TCI Entity as of
the Closing for services to be rendered by NewFalcon or any of the other Falcon
Entities on or after the Closing Date, to the extent such obligations or
liabilities constitute Current Liabilities of the TCI Systems for purposes of
Section 3.2, and (3) the delivery of cable television service to cable
television service customers and the exhibition of advertising for advertising
customers of the TCI Systems on or after the Closing Date;
(b) obligations accruing and relating to periods on or after
the Closing Date under TCI's Franchises and Licenses and the Assumed TCI
Contracts;
(c) Indebtedness of TCI in an amount equal to the sum of
$275,000,000 plus the aggregate amount specified next to the names of the
Redeemed Partners in the table in Section 2.6(a) (but excluding the amount
specified in such table next to the name of any FHGLP Partner that elects
pursuant to Section 2.6(b) not to be a Redeemed Partner) that is (1) due and
payable in full or is permitted to be prepaid in full at or immediately after
the Closing without premium or penalty and (2) otherwise on terms reasonably
satisfactory to FHGLP;
(d) obligations and liabilities relating to the period prior
to the Effective Time to the extent such obligations or liabilities constitute
Current Liabilities of the TCI Systems for purposes of Section 3.2; and
(e) obligations and liabilities arising from the operations of
the TCI Systems in the ordinary course prior to the Effective Time that are not
described in Section 4.1(d), other than obligations and liabilities to any
Affiliate of any TCI Entity; obligations and liabilities with
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respect to any employees of the TCI Systems who are not Hired Employees;
obligations and liabilities with respect to Hired Employees that the Falcon
Entities are not required to assume pursuant to the express provisions of
Section 11.6(d); obligations and liabilities arising under any Contract that is
not included in the Assumed TCI Contracts; obligations and liabilities with
respect to any Taxes (other than utility Taxes) measured on the revenues,
income, or receipts of any TCI Entity or any Affiliate of a TCI Entity, or any
Taxes imposed in lieu of a Tax on the revenues, income, or receipts of any TCI
Entity or any Affiliate of a TCI Entity; and obligations and liabilities
specifically retained by the TCI Entities pursuant to Section 11.6.
4.2 Assumption of FHGLP Liabilities.
Effective as of the Closing, FHGLP shall cause NewFalcon or one or more
other Falcon Entities to assume and undertake to pay, discharge, and perform all
obligations and liabilities of FHGLP (other than obligations and liabilities of
FHGLP arising under this Agreement), including:
(a) all obligations and liabilities arising under the Amended
and Restated Indenture, dated as of October 29, 1993, between FHGLP and United
States Trust Company of New York, as trustee;
(b) all obligations and liabilities arising under the Payment
Agreements;
(c) all obligations and liabilities (whether now existing or
hereafter arising) of FHGLP under the limited partnership agreements of each of
the Falcon Entities or arising solely by virtue of FHGLP being a general partner
of any of the Falcon Entities; and
(d) all obligations, liabilities, and accrued expenses under
all other contracts, leases, and other agreements to be contributed to NewFalcon
pursuant to Section 2.2(a)(2), including the Existing Incentive Plan (but
excluding any obligation to make payments at the Closing pursuant to the
amendment to the Existing Incentive Plan contemplated by Section 2.8(i)).
4.3 Liabilities Not Assumed.
Notwithstanding any provision of this Agreement to the contrary, except
as expressly provided in Section 4.1, Section 4.2, and Section 11.19(h), neither
NewFalcon nor any other Falcon Entity shall assume by virtue of this Agreement
or the transactions contemplated hereby, and neither NewFalcon nor any other
Falcon Entity shall have any liability for, any obligations or liabilities of
any TCI Entity or of FHGLP of any kind, character, or description whatsoever.
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4.4 Indemnification for Certain Liabilities.
TCI agrees to indemnify and hold harmless each Falcon Entity from any
liability, loss, or damage incurred by such Falcon Entity as a result of its
assumption of any liability or obligation of the TCI Entities pursuant to
Section 4.1(e) to the extent that the amount of insurance proceeds that would
have been obtained by the Falcon Entities had the assumed liability or
obligation been covered by the insurance policies of the Falcon Entities as in
effect at the time the event giving rise to the liability or obligation occurred
exceeds the amount of any insurance proceeds obtained by the Falcon Entities as
assignee of the rights of the TCI Entities under any insurance policy of the TCI
Entities that covers such liability or obligation.
ARTICLE 5
AMENDMENT TO FHGLP PARTNERSHIP AGREEMENT
Each party to this Agreement that is a partner of FHGLP on the date of
this Agreement agrees that Article 15 of the Third Amendment is hereby amended,
effective as of the date of this Agreement, by deleting each date set forth
therein that falls after the date of this Agreement and substituting therefor
the date that is the number of days after such date equal to the number of days
in the Tolling Period. For purposes of this Article 5, "Tolling Period" means
the period beginning on December 1, 1997 and ending ninety days after the
earlier of December 31, 1998 or the date that this Agreement is terminated in
accordance with Article 14.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE FHGLP
PARTNERS
Each FHGLP Partner represents and warrants to NewFalcon, FHGLP, and TCI
as follows:
6.1 Organization, Standing, and Authority.
If such FHGLP Partner is not a natural person, such FHGLP Partner is
duly organized, validly existing, and, if applicable, in good standing under the
laws of its state of incorporation or organization and has all requisite power
and authority to execute and deliver this Agreement and the documents
contemplated hereby, and to perform and comply with all of the terms, covenants,
and conditions to be performed and complied with by such FHGLP Partner hereunder
and thereunder.
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6.2 Authorization and Binding Obligation.
If such FHGLP Partner is not a natural person, the execution, delivery,
and performance of this Agreement by such FHGLP Partner have been duly
authorized by all necessary actions on the part of such FHGLP Partner and its
shareholders, partners, or other persons exercising similar powers. This
Agreement has been duly executed and delivered by such FHGLP Partner and
constitutes its legal, valid, and binding obligation, enforceable against it in
accordance with its terms except as the enforceability of this Agreement may be
affected by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally, and by judicial discretion in the enforcement of equitable remedies.
6.3 No Consents; Absence of Conflicting Agreements.
The execution, delivery, and performance of this Agreement and the
documents contemplated hereby by such FHGLP Partner (with or without the giving
of notice, the lapse of time, or both): (a) do not require the consent of any
third party (including any Governmental Authority); (b) will not conflict with
any provision of the articles of incorporation and by-laws, partnership
agreement, or other organizational documents of such FHGLP Partner, if any; (c)
will not violate or result in a breach of, or contravene any Legal Requirement
applicable to such FHGLP Partner; (d) will not violate, conflict with, or result
in a material breach of any terms of, constitute grounds for termination of,
constitute a default under, or result in the acceleration of any performance
required by the terms of, any mortgage, indenture, lease, contract, agreement,
instrument, license, or permit to which such FHGLP Partner is a party or by
which such FHGLP Partner or its properties may be bound legally; and (e) will
not create any claim, liability, mortgage, lien, pledge, condition, charge,
encumbrance, or other security interest upon any partnership interest held by
such FHGLP Partner to be purchased and redeemed by FHGLP pursuant to this
Agreement.
6.4 Investment Representations.
Each representation in Sections 15.1 through 15.4, Section 15.7, and
Section 15.8 of the Amended FHGLP Agreement is true as if made by such FHGLP
Partner herein.
6.5 Title to Partnership Interests and Mezzanine Securities.
In the case of each Redeemed Partner, such FHGLP Partner holds its
partnership interest in FHGLP, free and clear of all claims, liabilities,
security interests, mortgages, liens, pledges, conditions, charges, and
encumbrances of any nature whatsoever (other than liens securing obligations of
any Falcon Entity or obligations of FHGLP to be assumed by NewFalcon pursuant to
Section 4.2). In the case of Belo, such FHGLP Partner holds its partnership
interest in Falcon Video, free and clear of all claims, liabilities, security
interests, mortgages, liens, pledges, conditions, charges, and encumbrances of
any nature whatsoever (other than liens securing obligations of Falcon Video).
In the case of each Video Investors Partner, such FHGLP Partner holds its
partnership interest in Video Investors, free and clear of all claims,
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liabilities, security interests, mortgages, liens, pledges, conditions, charges,
and encumbrances of any nature whatsoever (other than liens securing obligations
of Video Investors). In the case of each of Leeway & Co. and Mezzanine Lending
Associates III, L.P., such FHGLP Partner holds the Mezzanine Notes and Mezzanine
Securities issued to it, free and clear of all claims, liabilities, security
interests, mortgages, liens, pledges, conditions, charges, and encumbrances of
any nature whatsoever.
6.6 DISCLAIMER.
SUCH FHGLP PARTNER ACKNOWLEDGES THAT NEITHER FHGLP, NEWFALCON, THE
GENERAL PARTNER, NOR TCI (NOR ANY OFFICER, EMPLOYEE, AGENT, OR REPRESENTATIVE OF
ANY OF THEM) HAS MADE ANY REPRESENTATIONS OR WARRANTIES (EXPRESS OR IMPLIED) TO
SUCH FHGLP PARTNER REGARDING OR RELATING TO FHGLP, NEWFALCON, THE FALCON
SYSTEMS, THE TCI SYSTEMS, OR THEIR RESPECTIVE ASSETS AND LIABILITIES, INCLUDING
ANY REPRESENTATION OR WARRANTY (EXPRESS OR IMPLIED) WITH RESPECT TO: (A)
PROJECTIONS OR THE LIKE REGARDING THE FINANCIAL PERFORMANCE OF FHGLP, NEWFALCON,
THE OTHER FALCON ENTITIES, THE FALCON SYSTEMS, OR THE TCI SYSTEMS, OR (B) THE
TAX OR OTHER FINANCIAL CONSEQUENCES OF THE ISSUANCE, HOLDING, OR DISPOSITION OF
PARTNERSHIP INTERESTS IN FHGLP.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF TCI
ENTITIES
Each TCI Entity, jointly and severally, represents and warrants to
FHGLP and NewFalcon as follows:
7.1 Organization, Standing, and Authority.
TCI is a limited liability company duly organized, validly existing,
and in good standing under the laws of Delaware. Each other TCI Entity is a
corporation, limited partnership, or limited liability company duly organized,
validly existing, and in good standing under the laws of the state of
organization listed next to the name of such TCI Entity on Schedule 7.1. Each
TCI Entity has all requisite power and authority to execute and deliver this
Agreement and the documents contemplated hereby, and to perform and comply with
all of the terms, covenants, and conditions to be performed and complied with by
such TCI Entity hereunder and thereunder. Each TCI Entity has all requisite
power and authority to own, lease, and use the TCI Assets as now owned, leased,
and used by the TCI Entities, and to conduct the business and operations of the
TCI Systems as now conducted by them. Each TCI Entity is duly qualified to
transact business in each jurisdiction in which the nature of its business makes
such qualification necessary, except where the failure to be so qualified would
not have a material adverse effect
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on the TCI Systems or impair or hinder the ability of any TCI Entity to perform
its obligations under this Agreement. The TCI Entities (other than TCI)
constitute all Affiliates of TCI Communications, Inc. that own any properties,
privileges, rights, interests, or claims, real or personal, tangible or
intangible, that are owned, leased, held, or used in the business or operations
of the TCI Systems (other than the Excluded TCI Assets).
7.2 Authorization and Binding Obligation.
The execution, delivery, and performance of this Agreement by each TCI
Entity have been duly authorized by all necessary actions on the part of such
TCI Entity and its members and managers, stockholders, or partners, as
applicable. This Agreement has been duly executed and delivered by each TCI
Entity and constitutes the legal, valid, and binding obligation of each TCI
Entity, enforceable against it in accordance with its terms except as the
enforceability of this Agreement may be affected by bankruptcy, insolvency, or
similar laws affecting creditors' rights generally, and by judicial discretion
in the enforcement of equitable remedies.
7.3 Absence of Conflicting Agreements; Consents.
Subject to obtaining the Consents listed on Schedule 7.3, the execution
and delivery by each TCI Entity of this Agreement and the documents contemplated
hereby and the performance by the TCI Entities of their obligations under this
Agreement and the documents contemplated hereby (with or without the giving of
notice, the lapse of time, or both): (a) do not require the consent of any third
party (including any Governmental Authority); (b) will not conflict with any
provision of the operating agreement, partnership agreement, articles of
incorporation and bylaws, or other organizational documents of any TCI Entity;
(c) will not violate, result in a breach of, or contravene any Legal Requirement
applicable to any TCI Entity; (d) will not violate, conflict with, result in a
material breach of any terms of, constitute grounds for termination of,
constitute a default under, or result in the acceleration of any performance
required by the terms of, any mortgage, indenture, lease, contract, agreement,
instrument, license, or permit to which any TCI Entity is a party or by which
any TCI Entity or their respective properties may be bound legally; and (e) will
not create any claim, liability, mortgage, lien, pledge, condition, charge,
encumbrance, or other security interest upon any of the TCI Assets.
7.4 Licenses and Contracts.
Schedule 7.4 includes a list of all Licenses and Contracts of TCI that
are in effect on the date of this Agreement, except for: (a) subscription
agreements with customers for cable services provided by the TCI Systems in the
ordinary course of business, (b) oral employment agreements that are terminable
at will without penalty and miscellaneous service contracts terminable on not
more than ninety days' notice, (c) Franchises listed on Schedule 7.7, (d) other
Contracts entered into in the ordinary course of business, not involving
liabilities under all such contracts exceeding $250,000 in the aggregate, and
(e) Licenses and Contracts of TCI that constitute Excluded TCI Assets other than
pursuant to Section 2.3(a)(2). Schedule 7.4 also lists
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all retransmission consent agreements pursuant to which any broadcast station
listed on Schedule 7.7 is carried by any cable television system included in the
TCI Systems and all Contracts of TCI with respect to leased access channels.
Except as indicated on Schedule 7.4, TCI has delivered to FHGLP true and
complete copies of TCI's Licenses and the Assumed TCI Contracts (together with
all amendments thereto and memoranda of all oral Assumed TCI Contracts). All of
TCI's Licenses and all of the Assumed TCI Contracts are in full force and
effect, and are valid, binding, and enforceable in accordance with their terms.
None of TCI's Licenses and none of the Assumed TCI Contracts would be breached
by virtue of the transactions contemplated by this Agreement, including the
assignment thereof by TCI to NewFalcon or to another Falcon Entity, if the
Consents listed on Schedule 7.3 are obtained. Except as set forth on Schedule
7.4, there is not under any of TCI's Licenses or under any Assumed TCI Contract
any material default by any party thereto, or any event that, after notice or
lapse of time, or both, would constitute such a material default. Except as set
forth on Schedule 7.4, no TCI Entity is aware of any intention by any party to
any of TCI's Licenses or to any material Assumed TCI Contract (a) to terminate
or amend the terms thereof, (b) to refuse to renew the License or Assumed TCI
Contract upon expiration of its term, or (c) to renew the License or Assumed TCI
Contract upon expiration only on terms and conditions that are materially more
onerous than those currently in existence.
7.5 Title to and Condition of Real Property and Personal Property.
Schedule 7.5 contains descriptions of all of TCI's Real Property and
Real Property Interests (excluding unrecorded easements, rights-of-way, or
rights-to-access that are not material to the operation of the TCI Systems) and
all material items of TCI's Personal Property, other than Excluded TCI Assets.
Except as described on Schedule 7.5, the TCI Entity specified on Schedule 7.5
has or will have on the Closing Date good and marketable title to all fee
estates included in TCI's Real Property Interests, good title to all TCI's Real
Property Interests that are not fee estates, and good and valid title or
leasehold interests (as specified on Schedule 7.5) to all TCI's Personal
Property free and clear of all claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever (except for Permitted Encumbrances), except that the TCI Entities
make no representation or warranty as to title to the internal wiring, and
unrecorded dwelling-unit easements, rights of entry, or rights-of-way. All earth
stations, headends, microwave, and other towers, guy anchors, buildings, and
other improvements used in the conduct of the business and operations of the TCI
Systems are located entirely on the Real Property listed on Schedule 7.5. TCI
has delivered to FHGLP true and complete copies of all deeds, leases, or other
material Contracts pertaining to TCI's Real Property, Real Property Interests,
or Personal Property. All of TCI's Real Property and Personal Property (a) is in
good condition and repair (ordinary wear and tear excepted), and (b) subject to
receipt of the Consents listed on Schedule 7.3, is available for immediate use
in the business and operations of the TCI Systems as such business and
operations will be conducted by NewFalcon and the other Falcon Entities after
the Closing. A TCI Entity has full legal and practical access to all of TCI's
Real Property to the extent necessary to permit NewFalcon or another Falcon
Entity to continue to use such Real Property following the Closing substantially
as it is currently being used by the TCI Entities. All items of cable plant and
earth station and
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headend equipment included in TCI's Personal Property (a) have been maintained
in a manner consistent with generally accepted standards of good engineering
practice, and (b) will permit the TCI Systems in all material respects to
operate in accordance with the terms of TCI's Franchises and applicable Legal
Requirements as currently in effect.
7.6 Intangibles.
Schedule 7.6 includes a complete list of all material Intangibles of
TCI (exclusive of those required to be listed on Schedule 7.4 and any Excluded
TCI Assets), all of which are valid, in full force and effect, and uncontested.
TCI has delivered to FHGLP copies of all material documents establishing such
Intangibles. No TCI Entity is aware that it is infringing upon or otherwise
acting adversely to any trademark, trade name, service mark, service name,
copyright, or similar intellectual property right owned by any Person.
7.7 Information on Franchises and the TCI Systems.
(a) Franchise and FCC Matters. Other than TCI's Franchises
listed on Schedule 7.7 and TCI's Licenses listed on Schedule 7.4, the TCI
Entities require no franchise, license, or permit from any Franchising Authority
or the FCC to enable the TCI Entities to carry on the business and operations of
the TCI Systems as now conducted. TCI has delivered to FHGLP true and complete
copies of TCI's Franchises (together with all amendments thereto). All of TCI's
Franchises are in full force and effect, and are valid, binding, and enforceable
in accordance with their terms. None of TCI's Franchises would be breached by
virtue of the transactions contemplated by this Agreement, including the
assignment thereof by TCI to NewFalcon or another Falcon Entity, if the Consents
listed on Schedule 7.3 are obtained. Except as set forth on Schedule 7.7, there
is not under any of TCI's Franchises any material default by any party thereto,
or any event that, after notice or lapse of time, or both, would constitute such
a material default. Except as set forth on Schedule 7.7, no TCI Entity is aware
of any intention by any party to any of TCI's Franchises (a) to terminate or
amend the terms thereof, (b) to refuse to renew the Franchise upon expiration of
its term, or (c) to renew the Franchise upon expiration only on terms and
conditions that are materially more onerous than those currently in existence.
The TCI Entities have given appropriate, timely notices in compliance with the
Cable Act with respect to the renewal of the Franchises listed on Schedule 7.7
and have made copies of such notices available to FHGLP. The TCI Entities have
filed all reports required to be filed with any Franchising Authorities or the
FCC, and such reports as filed were materially correct. Except in accordance
with the express terms of TCI's Franchises in the form delivered to FHGLP, none
of TCI's Franchises grants to any Governmental Authority any right of first
refusal or right to purchase any assets of the TCI Systems. The TCI Entities are
permitted under TCI's Franchises and all Legal Requirements of the FCC to
distribute all Signals of the TCI Systems (except for any inadvertent failure by
the TCI Systems to comply with the FCC's nonduplication and syndicated
exclusivity rules) and to utilize all carrier frequencies generated by the
operations of the TCI Systems, and are licensed in all material respects to
operate all the facilities required by any Legal Requirement to be licensed.
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Each of TCI's Franchises in the form delivered to FHGLP accurately sets forth
the expiration date thereof.
(b) Plant. With respect to the TCI Systems, Schedule 7.7 sets
forth (1) the approximate number of miles of completed operational trunk and
distribution cable; (2) the approximate number of dwellings passed; and (3) the
number of currently fully operational channels. Each cable television system
included in the TCI Systems is operating its activated channels in material
compliance with the terms of all Legal Requirements of the FCC and delivers the
activated channels identified on Schedule 7.7 over the entire system. Schedule
7.7 lists all of the existing towers of the TCI Systems. Except as set forth on
Schedule 7.7, no TCI Entity leases space on any towers of the TCI Systems to any
third party.
(c) Rates; Subscribers; Signals; Frequencies. Schedule 7.7
sets forth, with respect to each cable television system included in the TCI
Systems, (1) as of the date of this Agreement, the rates being charged to
subscribers for each class of service for such system; (2) as of the date
indicated on Schedule 7.7, the approximate number of customers of such system in
each class of service; (3) as of the date indicated on Schedule 7.7, the
approximate aggregate number of customers of all cable television systems wholly
owned, directly or indirectly, by TCI Communications, Inc.; (4) a list of the
signals carried and delivered by such system, including for each signal whether
it is received via microwave, satellite, or off-air reception; and (5) the
bandwidth capacity for such system. Schedule 7.7 lists for each broadcast
station that is carried by any cable television system included in the TCI
Systems whether such broadcast station elected must-carry status or is carried
pursuant to a retransmission consent agreement.
(d) Franchise and Pole Attachment Fees. Schedule 7.7
accurately sets forth the current rates for all franchise fees payable with
respect to TCI's Franchises. The TCI Entities have paid or made an adequate
reserve for all "make ready" or other related charges required under the pole
attachment and conduit agreements of the TCI Systems. Except as disclosed on
Schedule 7.7, no TCI Entity has been notified by any Governmental Authority or
other third party regarding any adjustment to the amount of franchise fees or
pole attachment or conduit fees paid by any TCI Entity to such Governmental
Authority or third party.
(e) Request for Signal Carriage. The TCI Entities have acted
upon all written requests or demands received from television broadcast stations
to carry or to terminate carriage of a television broadcast signal on any cable
television system included in the TCI Systems. No TCI Entity has received any
order from the FCC requiring any cable television system included in the TCI
Systems to carry a television broadcast signal or to terminate carriage of a
television broadcast signal and, to the knowledge of each TCI Entity, no
television broadcast station has filed a written complaint with the FCC claiming
that any TCI Entity carried or refused to carry a television broadcast signal on
any cable television system included in the TCI Systems in violation of the
requirements of the FCC's mandatory broadcast signal carriage rules.
(f) Rate Regulatory Matters. The TCI Entities are charging
rates that are allowable under the rules and regulations promulgated by the FCC
under the Cable Act if and
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to the extent that such rates are subject to regulation by any Governmental
Authority, including any Franchising Authority. TCI has made available to FHGLP
complete and correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215, and
1240 provided to Franchising Authorities with respect to the TCI Systems and
copies of all correspondence with any Franchising Authority relating to rate
regulation generally or specific rates charged to customers of the TCI Systems.
Except as otherwise described on Schedule 7.7, as of the date of this Agreement,
(1) to the knowledge of the TCI Entities, there is no outstanding or unresolved
proceeding or investigation (other than those affecting the cable industry
generally) dealing with or otherwise affecting the rates that any cable
television system included in the TCI Systems can charge (whether for
programming, equipment, installation, service, or otherwise), (2) no cable
television system included in the TCI Systems is subject to any currently
effective order issued by a Governmental Authority that reduced the rates that
any cable television system included in the TCI Systems can charge (whether for
programming, equipment, installation, service, or otherwise), and (3) no local
Governmental Authority has been certified by the FCC as a rate regulating
authority with respect to any cable television system included in the TCI
Systems.
(g) Copyright. Each TCI Entity is entitled to hold and does
hold the compulsory copyright license described in Section 111 of the Copyright
Act of 1976, as amended, and such compulsory copyright license is in full force
and effect and has not been revoked, canceled, encumbered, or adversely affected
in any respect except as may result from any immaterial disputes that may arise
after the date hereof with respect to copyright fees payable with respect to the
operation of the TCI Systems. The TCI Entities have paid all copyright fees that
are due and payable with respect to the operation of the TCI Systems and have
set aside adequate reserves on their books for the payment of all copyright fees
that are not yet due and payable.
(h) Commitments. Except as described on Schedule 7.7, there
are no unfulfilled material commitments for capital improvements that the TCI
Entities are obligated to make in connection with the TCI Systems. All
obligations of the TCI Entities with respect to public, educational, and
governmental channels, and all other obligations to users of the TCI Systems
under Franchises, are accurately set forth in TCI's Franchises in the form
delivered to FHGLP or in Schedule 7.7. Contracts listed on Schedule 7.4 and
delivered to FHGLP accurately set forth all obligations of the TCI Entities with
respect to leased access channels. Except as described on Schedule 7.7, no TCI
Entity has any obligations or liabilities to customers or other users of the TCI
Systems that are material to the business and operations of the TCI Systems
except: (1) with respect to deposits made by such customers or other users; (2)
the obligation to supply services to customers in the ordinary course of
business pursuant to Franchises; and (3) obligations with respect to leased
access channels, public, educational, and governmental channels, and other
similar obligations to other users of the TCI Systems under Franchises and Legal
Requirements. Except as described on Schedule 7.7 or in TCI's Franchises in the
form delivered to FHGLP, no TCI Entity has any liability to provide free service
to any customers of the TCI Systems. Except with respect to deposits for
converters, encoders, decoders, and related equipment, and any other item that
will be included in Current Liabilities of the TCI Systems, no TCI Entity has
any obligation or liability for the refund of
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monies or for the provision of rebates to customers of the TCI Systems. Except
as set forth in TCI's Franchises in the form delivered to FHGLP, no TCI Entity
has made any commitment to any Franchising Authority to maintain a local office
in any location for the TCI Systems. Except as described on Schedule 7.7, no TCI
Entity has made any commitment to any Franchising Authority to pay franchise
fees to any such authority in excess of the amounts set forth in TCI's
Franchises.
7.8 Financial Statements.
TCI has delivered to FHGLP true and complete copies of the unaudited
financial statements and unaudited balance sheets and statements of income for
the TCI Systems that are described on Schedule 7.8. Such financial statements
were prepared in accordance with GAAP and present fairly the results of
operations and financial position of the TCI Systems as at their respective
dates and the results of operations for the periods then ended, except that the
financial statements do not include footnotes or statements of retained earnings
and changes in cash flow and financial position, and are subject to customary
year-end adjustments.
7.9 Bonds.
Schedule 7.9 is a complete list of all surety and performance bonds or
letters of credit maintained in connection with the business and operations of
the TCI Systems.
7.10 Personnel Matters.
Schedule 7.10 contains complete listings of (a) all employees retained
by any TCI Entity with respect to the TCI Systems, their titles and positions,
and a description of all Compensation Arrangements for such employees, (b) all
Employee Plans providing benefits to current or former employees of the TCI
Systems, and (c) all fixed or contingent liabilities or obligations of any TCI
Entity with respect to any person now or formerly employed with respect to the
TCI Systems. TCI has also delivered to FHGLP a complete and accurate description
of the salary and wages paid to all employees retained by any TCI Entity with
respect to the TCI Systems. TCI has made available to FHGLP true and complete
copies of all such Compensation Arrangements and Employee Plans, as well as
employee handbooks, employment contracts, and summary plan descriptions of the
written plans and arrangements listed on Schedule 7.10, and with written
descriptions of the unwritten plans and arrangements listed on Schedule 7.10.
Except as described on Schedule 7.10, no TCI Entity contributes or is required
to contribute to any "multiemployer plan," as defined in ERISA Section 3(37),
with respect to current or former employees of the TCI Systems, nor has any TCI
Entity withdrawn from any such "multiemployer plan." No reportable event, within
the meaning of Title IV of ERISA, has occurred and is continuing with respect to
any Employee Plan covering any individuals employed with respect to the TCI
Systems, and no non-exempt prohibited transaction, within the meaning of Title I
of ERISA, has occurred with respect to any such Employee Plan. No TCI Entity is
a party to or subject to any collective bargaining agreements with respect to
the TCI Systems except as described on Schedule 7.10. Except as described on
Schedule 7.10, no labor union
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or other collective bargaining unit represents or, to the knowledge of each TCI
Entity, claims to represent any of the individuals employed with respect to the
TCI Systems. To the knowledge of each TCI Entity, there is no union organizing
campaign being conducted to solicit cards from employees to authorize a union to
request a National Labor Relations Board certification election with respect to
any individuals employed with respect to the TCI Systems.
7.11 Environmental Laws.
Except as disclosed on Schedule 7.11 hereto, (a) the operation of the
TCI Systems by the TCI Entities and TCI's Real Property comply in all material
respects with all applicable Environmental Laws; and (b) no TCI Entity has used
any of TCI's Real Property for, and has no knowledge that any of TCI's Real
Property has been used for, the manufacture, transportation, treatment, storage,
or disposal of Hazardous Substances, except for any use of Hazardous Substances
(in cleaning fluids, solvents, and other similar substances) that is customary
in the construction, maintenance, and operation of the TCI Assets and the TCI
Systems and in amounts and under circumstances that would not reasonably be
expected to give rise to liability for remediation. Except as described on
Schedule 7.11 hereto, no surface impoundments or underground or aboveground
storage tanks are located on or, to TCI's knowledge, have been located on TCI's
Real Property. TCI has delivered to FHGLP true and complete copies of all
environmental reports and studies that any TCI Entity has commissioned with
respect to TCI's Real Property. To the knowledge of each TCI Entity, no TCI
Entity is the subject of (a) any "Superfund" evaluation or investigation or
proceeding in connection with any of TCI's Real Property, or (b) any
investigation or proceeding of any Governmental Authority evaluating whether any
remedial action is necessary to respond to any release of Hazardous Substances
on or in connection with any of TCI's Real Property.
7.12 Claims and Legal Actions.
Except as set forth on Schedule 7.12, there is no claim, legal action,
arbitration, governmental investigation, or other legal, administrative, or tax
proceeding, nor any order, decree, or judgment, in progress or pending, or, to
the knowledge of any TCI Entity, threatened, (a) against or relating to any TCI
Entity, the TCI Assets, or the TCI Systems, that could materially and adversely
affect the TCI Assets or the financial condition of the TCI Systems, or (b)
relating to TCI's performance of its obligations under this Agreement or its
consummation of the transactions contemplated by this Agreement. To the
knowledge of each TCI Entity, there are no pending written complaints by
customers or other users of the TCI Systems that could materially and adversely
affect the TCI Assets or the financial condition of the TCI Systems. Other than
requests for network nonduplication and syndicated exclusivity or as described
on Schedule 7.12, no written requests have been received by any TCI Entity
during the preceding two years from the FCC, the United States Copyright Office,
or any other Person challenging or questioning the right of the TCI Entities to
operate the TCI Systems.
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7.13 Taxes and Tax Returns.
All federal Tax Returns and all other material Tax Returns required to
be filed with respect to the TCI Entities, the TCI Assets, or the TCI Systems
have been filed with the appropriate Governmental Authorities in all
jurisdictions, and all such Tax Returns properly reflect the liabilities for
Taxes for the periods, property, or events covered thereby. All Taxes shown on
such Tax Returns have been paid.
7.14 Compliance with Laws.
Except as set forth on Schedule 7.14, each TCI Entity has complied
with, and the business and operations of the TCI Systems and the TCI Assets are
in compliance with, in all material respects, all applicable Legal Requirements,
including the following:
(a) The Code, ERISA, and the National Labor Relations Act, as
amended, or other Legal Requirements regarding employment conditions and
practices (including withholding requirements from wages or salaries),
prohibitions upon employment discrimination, and unfair labor practices;
(b) The Communications Act, including FCC filing requirements,
notices to subscribers and FCC equal opportunity rules;
(c) The Cable Act, the FCC rules and regulations promulgated
thereunder, and the must-carry and retransmission consent provisions thereof;
(d) Legal Requirements regarding cumulative leakage index
testing, including the maintenance of appropriate records related thereto and
the correction of any radiation leakage required to be corrected under rules and
regulations of the FCC;
(e) Rules and regulations of the Federal Aviation
Administration; and
(f) The Copyright Act of 1976, as amended.
7.15 Transactions with Affiliates.
No TCI Entity has any agreement, commitment, or pending transactions
with any Affiliate of such TCI Entity (other than another TCI Entity) with
respect to the business and operations of the TCI Systems except as described on
Schedule 7.15.
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7.16 Conduct of Business in Ordinary Course.
From March 31, 1997 through the date of this Agreement, except as
described on Schedule 7.16, the TCI Entities have conducted the business and
operations of the TCI Systems and maintained the TCI Assets only in the ordinary
course and have not:
(a) Suffered any material adverse change in the business,
assets, properties, or financial condition of the TCI Systems, including any
damage, destruction, or loss affecting any TCI Assets, other than any material
adverse change resulting from general economic conditions, governmental
regulation, or other factors that would reasonably be expected to have had a
comparable effect on the Falcon Systems;
(b) Made any material increase in compensation payable or to
become payable to any of the employees or independent contractors of the TCI
Systems, or any bonus payment made or promised to any employee or independent
contractor of the TCI Systems, or any material change in personnel policies,
insurance benefits, or other compensation arrangements affecting the employees
or independent contractors of the TCI Systems, except, in each case, for bonus
payments or similar payments that may be made after the date of this Agreement
and prior to the Closing; or
(c) Made any sale, assignment, lease, or other transfer of any
properties used in the business and operations of the TCI Systems other than
transfers in the normal and usual course of business with suitable replacements
being obtained therefor and transfers from one TCI Entity to another TCI Entity
to facilitate TCI's contribution of the TCI Assets to NewFalcon in accordance
with this Agreement.
7.17 Brokers.
Neither TCI, any Affiliate of TCI, nor any Person acting on behalf of
TCI or any Affiliate of TCI has incurred any liability for any finders' or
brokers' fees or commissions in connection with the transactions contemplated by
this Agreement.
7.18 Compliance with Ownership Restrictions.
Assuming the accuracy of all representations and warranties of FHGLP
contained in this Agreement, the acquisition by TCI of a partnership interest in
NewFalcon as contemplated by this Agreement (taking into account NewFalcon's
ownership of the partnership interests to be contributed by FHGLP pursuant to
Section 2.2(a)(2)) will not cause NewFalcon or any Falcon Entity to be in
violation of any Ownership Restriction.
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7.19 Ellensburg Purchase Agreement and Ellensburg System.
TCI has delivered to FHGLP a true and complete copy of the Ellensburg
Purchase Agreement. Notwithstanding any provision of this Agreement to the
contrary, the Ellensburg System shall not at any time be considered part of the
TCI Systems, and the assets of the Ellensburg System shall therefore not at any
time be considered part of the TCI Assets, for purposes of any representation or
warranty of the TCI Entities in this Article 7.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES OF FHGLP
FHGLP represents and warrants to TCI as follows:
8.1 Organization, Standing, and Authority.
FHGLP is a limited partnership duly organized, validly existing, and in
good standing under the laws of Delaware. FHGLP has all requisite power and
authority to execute and deliver this Agreement and the documents contemplated
hereby, and to perform and comply with all of the terms, covenants, and
conditions to be performed and complied with by FHGLP hereunder and thereunder.
Each Falcon Entity has all requisite power and authority to own, lease, and use
its assets as now owned, leased, and used by the Falcon Entities, and to conduct
the business and operations of the Falcon Systems as now conducted by them. Each
Falcon Entity is duly qualified to transact business in each jurisdiction in
which the nature of its business makes such qualification necessary, except
where the failure to be so qualified would not have a material adverse effect on
the Falcon Systems or impair or hinder the ability of FHGLP to perform its
obligations under this Agreement. Prior to the date of this Agreement, NewFalcon
has not engaged in any business activities or incurred any liabilities.
8.2 Authorization and Binding Obligation.
The execution, delivery, and performance of this Agreement by FHGLP
have been duly authorized by all necessary partnership actions on the part of
FHGLP and its partners. This Agreement has been duly executed and delivered by
FHGLP and constitutes the legal, valid, and binding obligation of FHGLP,
enforceable against it in accordance with its terms except as the enforceability
of this Agreement may be affected by bankruptcy, insolvency, or similar laws
affecting creditors' rights generally, and by judicial discretion in the
enforcement of equitable remedies.
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8.3 Absence of Conflicting Agreements; Consents.
Subject to obtaining the Consents listed on Schedule 8.3, the execution
and delivery by FHGLP of this Agreement and the documents contemplated hereby
and the performance by the Falcon Entities of their obligations under this
Agreement and the documents contemplated hereby (with or without the giving of
notice, the lapse of time, or both): (a) do not require the consent of any third
party (including any Governmental Authority); (b) will not conflict with any
provision of the agreement of limited partnership of FHGLP; (c) will not
violate, result in a breach of, or contravene any Legal Requirement applicable
to FHGLP or any Falcon Entity; (d) will not violate, conflict with, result in a
material breach of any terms of, constitute grounds for termination of,
constitute a default under, or result in the acceleration of any performance
required by the terms of, any mortgage, indenture, lease, contract, agreement,
instrument, license, or permit to which FHGLP or any Falcon Entity is a party or
by which FHGLP or any Falcon Entity or their respective properties may be bound
legally; and (e) will not create any claim, liability, mortgage, lien, pledge,
condition, charge, encumbrance, or other security interest upon any of the
assets of the Falcon Systems or any partnership interests or other assets to be
contributed to NewFalcon pursuant to Section 2.2(a)(2).
8.4 Licenses and Contracts.
Schedule 8.4 includes a list of all Licenses of Falcon issued by the
FCC that are in effect on the date of this Agreement. Except as set forth on
Schedule 8.4, all Licenses and Contracts of Falcon were entered into in the
ordinary course of business of the Falcon Systems. FHGLP has made available to
TCI for its inspection at FHGLP's offices true and complete copies of Falcon's
Licenses and the Material Falcon Contracts (together with all amendments thereto
and memoranda of all oral Material Falcon Contracts). All of Falcon's Licenses
and all of the Material Falcon Contracts are in full force and effect, and are
valid, binding, and enforceable in accordance with their terms. None of Falcon's
Licenses and none of the Material Falcon Contracts would be breached by virtue
of the transactions contemplated by this Agreement if the Consents listed on
Schedule 8.3 are obtained. Except as set forth on Schedule 8.4, there is not
under any of Falcon's Licenses or under any of the Material Falcon Contracts any
material default by any party thereto, or any event that, after notice or lapse
of time, or both, would constitute such a material default. Except as set forth
on Schedule 8.4, no Falcon Entity is aware of any intention by any party to any
of Falcon's Licenses or any of the Material Falcon Contracts (a) to terminate or
amend the terms thereof, (b) to refuse to renew the License or Material Falcon
Contract upon expiration of its term, or (c) to renew the License or Material
Falcon Contract upon expiration only on terms and conditions that are materially
more onerous than those currently in existence.
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8.5 Title to and Condition of Real Property and Personal Property.
Except as described on Schedule 8.5, a Falcon Entity or Falcon Classic
has good and marketable title to all fee estates included in Falcon's Real
Property Interests, good title to all Falcon's Real Property Interests that are
not fee estates, and good and valid title or leasehold interests to all Falcon's
Personal Property free and clear of all claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever (except for Permitted Encumbrances and liens securing Indebtedness of
FHGLP or the Falcon Entities that is disclosed in this Agreement or Indebtedness
of Falcon Classic that is not required to be assumed by any Falcon Entity under
the Classic Purchase Agreement), except that FHGLP makes no representation or
warranty as to title to the internal wiring, and unrecorded dwelling-unit
easements, rights of entry, or rights-of-way. FHGLP has made available to TCI
for its inspection at FHGLP's offices true and complete copies of all deeds or
Material Falcon Contracts pertaining to Falcon's Real Property, Real Property
Interests, or Personal Property. All of Falcon's Real Property and Personal
Property (a) is in good condition and repair (ordinary wear and tear excepted),
and (b) is available for immediate use in the business and operations of the
Falcon Systems. A Falcon Entity or Falcon Classic has full legal and practical
access to all of Falcon's Real Property. All items of cable plant and earth
station and headend equipment included in Falcon's Personal Property (a) have
been maintained in a manner consistent with generally accepted standards of good
engineering practice, and (b) will permit the Falcon Systems in all material
respects to operate in accordance with the terms of Falcon's Franchises and
applicable Legal Requirements as currently in effect.
8.6 Intangibles.
All material Intangibles of Falcon are valid, in full force and effect,
and uncontested. FHGLP has made available to TCI for its inspection at FHGLP's
offices copies of all material documents establishing such Intangibles. No
Falcon Entity is aware that it is infringing upon or otherwise acting adversely
to any trademark, trade name, service mark, service name, copyright, or similar
intellectual property right owned by any Person.
8.7 Information on Franchises and the Falcon Systems.
(a) Franchise and FCC Matters. Other than Falcon's Franchises
listed on Schedule 8.7 and Falcon's Licenses listed on Schedule 8.4, the Falcon
Entities require no franchise, license, or permit from any Franchising Authority
or the FCC to enable the Falcon Entities to carry on the business and operations
of the Falcon Systems as now conducted. FHGLP has made available to TCI for its
inspection at FHGLP's offices true and complete copies of Falcon's Franchises
(together with all amendments thereto). All of Falcon's Franchises are in full
force and effect, and are valid, binding, and enforceable in accordance with
their terms. None of Falcon's Franchises would be breached by virtue of the
transactions contemplated by this Agreement if the Consents listed on Schedule
8.3 are obtained. Except as set forth on Schedule 8.7, there is not under any of
Falcon's Franchises any material default by any party thereto, or any event
that, after notice or lapse of time, or both, would constitute such
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a material default. Except as set forth on Schedule 8.7, no Falcon Entity is
aware of any intention by any party to any of Falcon's Franchises (a) to
terminate or amend the terms thereof, (b) to refuse to renew the Franchise upon
expiration of its term, or (c) to renew the Franchise upon expiration only on
terms and conditions that are materially more onerous than those currently in
existence. The Falcon Entities have given appropriate, timely notices in
compliance with the Cable Act with respect to the renewal of Falcon's Franchises
and have made copies of such notices available to TCI. The Falcon Entities have
filed all reports required to be filed with any Franchising Authorities or the
FCC, and such reports as filed were materially correct. The Falcon Entities are
permitted under Falcon's Franchises and all Legal Requirements of the FCC to
distribute all Signals of the Falcon Systems (except for any inadvertent failure
by the Falcon Systems to comply with the FCC's nonduplication and syndicated
exclusivity rules) and to utilize all carrier frequencies generated by the
operations of the Falcon Systems, and are licensed in all material respects to
operate all the facilities required by any Legal Requirement to be licensed.
(b) Plant. Each cable television system included in the Falcon
Systems is operating its activated channels in material compliance with the
terms of all Legal Requirements of the FCC and delivers the activated channels
over the entire system. Except as set forth on Schedule 8.7, no Falcon Entity
leases space on any towers of the Falcon Systems to any third party.
(c) Franchise and Pole Attachment Fees. The Falcon Entities
have paid or made an adequate reserve for all "make ready" or other related
charges required under the pole attachment and conduit agreements of the Falcon
Systems. Except as disclosed on Schedule 8.7, no Falcon Entity has been notified
by any Governmental Authority or other third party regarding any adjustment to
the amount of franchise fees or pole attachment or conduit fees paid by any
Falcon Entity to such Governmental Authority or third party.
(d) Request for Signal Carriage. The Falcon Entities have
acted upon all written requests or demands received from television broadcast
stations to carry or to terminate carriage of a television broadcast signal on
any cable television system included in the Falcon Systems. No Falcon Entity has
received any order from the FCC requiring any cable television system included
in the Falcon Systems to carry a television broadcast signal or to terminate
carriage of a television broadcast signal and, to the knowledge of each Falcon
Entity, no television broadcast station has filed a written complaint with the
FCC claiming that any Falcon Entity carried or refused to carry a television
broadcast signal on any cable television system included in the Falcon Systems
in violation of the requirements of the FCC's mandatory broadcast signal
carriage rules.
(e) Rate Regulatory Matters. The Falcon Entities are charging
rates that are allowable under the rules and regulations promulgated by the FCC
under the Cable Act if and to the extent that such rates are subject to
regulation by any Governmental Authority, including any Franchising Authority.
FHGLP has made available to TCI for its inspection at FHGLP's offices complete
and correct copies of all FCC Forms 393, 1200, 1205, 1210, 1215, and 1240
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provided to Franchising Authorities with respect to the Falcon Systems and
copies of all correspondence with any Franchising Authority relating to rate
regulation generally or specific rates charged to customers of the Falcon
Systems. Except as otherwise described on Schedule 8.7, as of the date of this
Agreement, (1) to the knowledge of the Falcon Entities, there is no outstanding
or unresolved proceeding or investigation (other than those affecting the cable
industry generally) dealing with or otherwise affecting the rates that any cable
television system included in the Falcon Systems can charge (whether for
programming, equipment, installation, service, or otherwise), (2) no cable
television system included in the Falcon Systems is subject to any currently
effective order issued by a Governmental Authority that reduced the rates that
any cable television system included in the Falcon Systems can charge (whether
for programming, equipment, installation, service, or otherwise), and (3) no
local Governmental Authority has been certified by the FCC as a rate regulating
authority with respect to any cable television system included in the Falcon
Systems.
(f) Copyright. Each Falcon Entity is entitled to hold and does
hold the compulsory copyright license described in Section 111 of the Copyright
Act of 1976, as amended, and such compulsory copyright license is in full force
and effect and has not been revoked, canceled, encumbered, or adversely affected
in any respect except as may result from any immaterial disputes that may arise
after the date hereof with respect to copyright fees payable with respect to the
operation of the Falcon Systems. The Falcon Entities have paid all copyright
fees that are due and payable with respect to the operation of the Falcon
Systems and have set aside adequate reserves on their books for the payment of
all copyright fees that are not yet due and payable.
(g) Commitments. Except as described on Schedule 8.7, there
are no unfulfilled material commitments for capital improvements that the Falcon
Entities are obligated to make in connection with the Falcon Systems. Except as
described on Schedule 8.7, no Falcon Entity has any obligations or liabilities
to customers or other users of the Falcon Systems that are material to the
business and operations of the Falcon Systems except: (1) with respect to
deposits made by such customers or other users; (2) the obligation to supply
services to customers in the ordinary course of business pursuant to Franchises;
and (3) obligations with respect to leased access channels, public, educational,
and governmental channels, and other similar obligations to other users of the
Falcon Systems under Franchises and Legal Requirements. Except with respect to
deposits for converters, encoders, decoders, and related equipment, and any
other item that will be included in Current Liabilities of a Falcon Entity, no
Falcon Entity has any obligation or liability for the refund of monies or for
the provision of rebates to customers of the Falcon Systems. Except as set forth
in Falcon's Franchises, no Falcon Entity has made any commitment to any
Franchising Authority to maintain a local office in any location for the Falcon
Systems. Except as described on Schedule 8.7, no Falcon Entity has made any
commitment to any Franchising Authority to pay franchise fees to any such
authority in excess of the amounts set forth in Falcon's Franchises.
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8.8 Financial Statements.
FHGLP has delivered to TCI true and complete copies of the unaudited
financial statements and unaudited balance sheets and statements of income for
the Falcon Systems that are described on Schedule 8.8. Such financial statements
were prepared in accordance with GAAP and present fairly the results of
operations and financial position of the Falcon Systems as at their respective
dates and the results of operations for the periods then ended, except that the
financial statements do not include footnotes or statements of retained earnings
and changes in cash flow and financial position, and are subject to customary
year-end adjustments.
8.9 Personnel Matters.
FHGLP has delivered to TCI true and complete copies of all Compensation
Arrangements for all employees retained by any Falcon Entity with respect to the
Falcon Systems and all Employee Plans providing benefits to current or former
employees of the Falcon Systems, as well as employee handbooks, employment
contracts, and summary plan descriptions of all written plans and arrangements
encompassed by such Compensation Arrangements and Employee Plans, and with
written descriptions of any such unwritten plans and arrangements. Except as
described on Schedule 8.9, no Falcon Entity contributes or is required to
contribute to any "multiemployer plan," as defined in ERISA Section 3(37), with
respect to current or former employees of the Falcon Systems, nor has any Falcon
Entity withdrawn from any such "multiemployer plan." No reportable event, within
the meaning of Title IV of ERISA, has occurred and is continuing with respect to
any Employee Plan covering any individuals employed with respect to the Falcon
Systems, and no non-exempt prohibited transaction, within the meaning of Title I
of ERISA, has occurred with respect to any such Employee Plan. No Falcon Entity
is a party to or subject to any collective bargaining agreements with respect to
the Falcon Systems except as described on Schedule 8.9. Except as described on
Schedule 8.9, no labor union or other collective bargaining unit represents or,
to the knowledge of each Falcon Entity, claims to represent any of the
individuals employed with respect to the Falcon Systems. To the knowledge of
each Falcon Entity, there is no union organizing campaign being conducted to
solicit cards from employees to authorize a union to request a National Labor
Relations Board certification election with respect to any individuals employed
with respect to the Falcon Systems.
8.10 Environmental Laws.
Except as disclosed on Schedule 8.10 hereto, (a) the operation of the
Falcon Systems by the Falcon Entities and Falcon's Real Property comply in all
material respects with all applicable Environmental Laws; and (b) no Falcon
Entity has used any of Falcon's Real Property for, and has no knowledge that any
of Falcon's Real Property has been used for, the manufacture, transportation,
treatment, storage, or disposal of Hazardous Substances, except for any use of
Hazardous Substances (in cleaning fluids, solvents, and other similar
substances) that is customary in the construction, maintenance, and operation of
the Falcon Systems and in amounts and under circumstances that would not
reasonably be expected to give rise to liability for
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remediation. Except as described on Schedule 8.10 hereto, no surface
impoundments or underground or aboveground storage tanks are located on or, to
FHGLP's knowledge, have been located on Falcon's Real Property. FHGLP has
delivered to TCI true and complete copies of all environmental reports and
studies that any Falcon Entity has commissioned with respect to Falcon's Real
Property. To the knowledge of each Falcon Entity, no Falcon Entity is the
subject of (a) any "Superfund" evaluation or investigation or proceeding in
connection with any of Falcon's Real Property, or (b) any investigation or
proceeding of any Governmental Authority evaluating whether any remedial action
is necessary to respond to any release of Hazardous Substances on or in
connection with any of Falcon's Real Property.
8.11 Claims and Legal Actions.
Except as set forth on Schedule 8.11, there is no claim, legal action,
arbitration, governmental investigation, or other legal, administrative, or tax
proceeding, nor any order, decree, or judgment, in progress or pending, or, to
the knowledge of any Falcon Entity, threatened, (a) against or relating to any
Falcon Entity, its assets, or the Falcon Systems, that could materially and
adversely affect the financial condition of the Falcon Systems, or (b) relating
to FHGLP's performance of its obligations under this Agreement or its
consummation of the transactions contemplated by this Agreement. To the
knowledge of each Falcon Entity, there are no pending written complaints by
customers or other users of the Falcon Systems that could materially and
adversely affect the financial condition of the Falcon Systems. Other than
requests for network nonduplication and syndicated exclusivity or as described
on Schedule 8.11, no written requests have been received by any Falcon Entity
during the preceding two years from the FCC, the United States Copyright Office,
or any other Person challenging or questioning the right of the Falcon Entities
to operate the Falcon Systems.
8.12 Taxes and Tax Returns.
All federal Tax Returns and all other material Tax Returns required to
be filed with respect to the Falcon Entities, their assets, or the Falcon
Systems have been filed with the appropriate Governmental Authorities in all
jurisdictions, and all such Tax Returns properly reflect the liabilities for
Taxes for the periods, property, or events covered thereby. All Taxes shown on
such Tax Returns have been paid.
8.13 Compliance with Laws.
Except as set forth on Schedule 8.13, each Falcon Entity has complied
with, and the business and operations of the Falcon Systems and the assets of
the Falcon Systems are in compliance with, in all material respects, all
applicable Legal Requirements, including the following:
(a) The Code, ERISA, and the National Labor Relations Act, as
amended, or other Legal Requirements regarding employment conditions and
practices (including withholding
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requirements from wages or salaries), prohibitions upon employment
discrimination, and unfair labor practices;
(b) The Communications Act, including FCC filing requirements,
notices to subscribers and FCC equal opportunity rules;
(c) The Cable Act, the FCC rules and regulations promulgated
thereunder, and the must-carry and retransmission consent provisions thereof;
(d) Legal Requirements regarding cumulative leakage index
testing, including the maintenance of appropriate records related thereto and
the correction of any radiation leakage required to be corrected under rules and
regulations of the FCC;
(e) Rules and regulations of the Federal Aviation
Administration; and
(f) The Copyright Act of 1976, as amended.
8.14 Transactions with Affiliates.
No Falcon Entity has any agreement, commitment, or pending transactions
with any Affiliate of such Falcon Entity (other than another Falcon Entity) with
respect to the business and operations of the Falcon Systems except as described
on Schedule 8.14 and except for the Classic Purchase Agreement.
8.15 Conduct of Business in Ordinary Course.
From March 31, 1997 through the date of this Agreement, the Falcon
Entities have conducted the business and operations of the Falcon Systems and
maintained their assets only in the ordinary course and have not:
(a) Suffered any material adverse change in the business,
assets, properties, or financial condition of the Falcon Systems, including any
damage, destruction, or loss affecting any assets of the Falcon Systems, other
than any material adverse change resulting from general economic conditions,
governmental regulation, or other factors that would reasonably be expected to
have had a comparable effect on the TCI Systems;
(b) Made any material increase in compensation payable or to
become payable to any of the employees or independent contractors of the Falcon
Systems, or any bonus payment made or promised to any employee or independent
contractor of the Falcon Systems, or any material change in personnel policies,
insurance benefits, or other compensation arrangements affecting the employees
or independent contractors of the Falcon Systems; or
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(c) Made any sale, assignment, lease, or other transfer of any
properties used in the business and operations of the Falcon Systems other than
in the normal and usual course of business with suitable replacements being
obtained therefor.
8.16 Brokers.
Neither FHGLP, any Affiliate of FHGLP, nor any Person acting on behalf
of FHGLP or any Affiliate of FHGLP has incurred any liability for any finders'
or brokers' fees or commissions in connection with the transactions contemplated
by this Agreement.
8.17 Ownership of Falcon Entities.
FHGLP has delivered to TCI true and complete copies of the partnership
agreements or other organizational documents of each of the Falcon Entities, and
all amendments thereto, as in effect on the date of this Agreement. The
agreements delivered to TCI pursuant to this Section 8.17 accurately describe
the ownership interests of FHGLP and the FHGLP Partners in each Falcon Entity on
the date of this Agreement.
8.18 Enstar.
FHGLP has no plan or intention of disposing of the interest in Enstar
Communications Corp. to be transferred to FHGLP pursuant to Section 2.8(d).
ARTICLE 9
OPERATIONS OF TCI SYSTEMS PRIOR TO CLOSING
Between the date of this Agreement and the Closing, TCI agrees that,
except as otherwise consented to in writing by FHGLP, the TCI Entities will
comply with the following covenants:
9.1 Generally.
The TCI Entities will operate the TCI Systems in the ordinary course of
business consistent with practices followed generally at comparable cable
television systems wholly owned, directly or indirectly, by TCI Communications,
Inc. (except where such conduct would conflict with the following covenants or
with the other obligations of TCI under this Agreement) and use commercially
reasonable efforts to preserve the business of the TCI Systems and their present
relationships with suppliers, customers, and others having business relations
with it. The TCI Entities will make expenditures for marketing, promotion, and
line extensions consistent with practices followed generally at comparable cable
television systems wholly owned, directly or indirectly, by TCI Communications,
Inc.
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9.2 Compensation.
The TCI Entities will not increase annual recurring compensation
payable or to be payable to any person employed in connection with the TCI
Systems, except in accordance with practices followed generally at comparable
cable television systems wholly owned, directly or indirectly, by TCI
Communications, Inc., nor make any material changes to any Compensation
Arrangements or Employee Plans that affect only employees of the TCI Systems.
9.3 Contracts.
The TCI Entities will use reasonable efforts to instruct all employees
and other representatives of the TCI Entities with contracting authority not to
(a) modify or amend in any material respect any Assumed TCI Contract, (b) enter
into any new Contract that will be binding on any Falcon Entity and impose
material obligations on such Falcon Entity, or (c) renew or extend any Assumed
TCI Contract if such Assumed TCI Contract would impose material liabilities
during the term of its renewal or extension; provided, however, that the TCI
Entities shall have no liability to FHGLP or NewFalcon as a result of any such
modification, amendment, new Contract, renewal, or extension except as provided
in Section 3.8(e). TCI will, prior to the Closing Date, deliver to FHGLP a list
of all Contracts entered into between the date of this Agreement and the Closing
Date of the type required to be listed on Schedule 7.4, together with copies of
such Contracts.
9.4 Disposition of Assets.
The TCI Entities will not sell, assign, lease, or otherwise transfer or
dispose of any assets used or held for use in the business or operations of the
TCI Systems, except for assets consumed or disposed of in the ordinary course of
business that are obsolete and no longer usable in the business or operations of
the TCI Systems or are replaced by property of equivalent kind and value, and
except for transfers from one TCI Entity to another TCI Entity to facilitate
TCI's contribution of the TCI Assets to NewFalcon in accordance with this
Agreement.
9.5 Liens.
The TCI Entities will not create, assume, or permit to exist any
security interests, mortgages, liens, pledges, conditions, charges, or
encumbrances of any nature whatsoever (except for Permitted Encumbrances and
security interests, mortgages, liens, or similar encumbrances that will be
removed prior to the Closing) upon any of the TCI Assets.
9.6 Franchises.
Except as expressly required by this Agreement, the TCI Entities will
not do any act or fail to do any act that could reasonably be expected to result
in the expiration, revocation, suspension, non-renewal, or materially adverse
modification of any of TCI's Franchises, or fail to prosecute with due diligence
any applications to any Governmental Authority in connection
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with the business or operations of the TCI Systems. The TCI Entities will timely
file a valid request for renewal under Section 626(a) of the Cable Act with the
proper Governmental Authority with respect to any of TCI's Franchises that will
expire within 33 months after any date between the date of this Agreement and
the Closing Date, and TCI will consult with FHGLP before undertaking any
franchise renewal negotiations.
9.7 No Inconsistent Action.
The TCI Entities will not take any action that is inconsistent in any
material respect with TCI's obligations under this Agreement or that would
reasonably be expected to materially hinder or delay the consummation of the
transactions contemplated by this Agreement.
9.8 No Shop.
Neither TCI, any other TCI Entity, nor any Affiliate, agent, or
representative of TCI or any other TCI Entity will directly or indirectly (a)
solicit or initiate the submission of proposals or offers from any Person for,
(b) participate in any discussions pertaining to, or (c) furnish any information
to any Person other than FHGLP, NewFalcon, and the General Partner relating to,
any direct or indirect acquisition or purchase of all or any significant portion
of any cable television system included in the TCI Systems.
9.9 Notification of Certain Matters.
TCI will promptly notify FHGLP of any fact, event, circumstance, or
action (a) that, if known on the date of this Agreement, would have been
required to be disclosed to FHGLP pursuant to this Agreement, (b) the existence
or occurrence of which would cause any representation or warranty of the TCI
Entities in this Agreement not to be correct if made after such fact, event,
circumstance, or action arose or occurred, or (c) of which any senior executive
officer of TCI has actual knowledge that constitutes a material breach of any
representation or warranty of FHGLP in this Agreement. Each TCI Entity will use
commercially reasonable efforts to cure as quickly as practicable any condition
the existence of which would cause any representation and warranty of the TCI
Entities in this Agreement not to be true at and as of the Closing Date as
though such representation and warranty were made at and as of such date,
regardless of whether such representation and warranty was true when made on the
date of this Agreement.
9.10 Changes in Rates and Programming.
(a) Except as required by applicable Legal Requirements or in
accordance with practices and procedures established and implemented for
substantially all cable television systems wholly owned, directly or indirectly,
by TCI Communications, Inc., the TCI Entities will not (1) change the rates
charged by any cable television system included in the TCI Systems for any class
of service, (2) change any other customer charges or institute any new charges
for customers of any cable television system included in the TCI Systems, or (3)
except as required
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to accommodate the introduction of digital programming services, add or delete
any programming services on any cable television system included in the TCI
Systems or change the mix of programming included in any class of service on any
cable television system included in the TCI Systems.
(b) The TCI Systems will take all necessary actions to
implement any increases in the rates charged by the cable television systems
included in the TCI Systems that are scheduled to be implemented after the date
of this Agreement in accordance with practices and procedures established and
implemented for substantially all cable television systems wholly owned,
directly or indirectly, by TCI Communications, Inc.
9.11 Waivers.
The TCI Entities will not waive any material right relating to the TCI
Systems or the TCI Assets.
9.12 Access to Information.
(a) The TCI Entities will allow NewFalcon, FHGLP, and their
authorized representatives reasonable access, upon reasonable notice, at
NewFalcon's expense, to the TCI Assets and to all other properties, equipment,
books, records, Contracts, and documents relating to the TCI Systems for the
purpose of audit and inspection, and furnish or cause to be furnished to
NewFalcon, FHGLP, and their authorized representatives all information with
respect to the affairs and business of the TCI Systems that NewFalcon or FHGLP
may reasonably request. Any such audit, investigation, or request for
information shall be conducted in such a manner as not to interfere unreasonably
with the TCI Systems. Neither the furnishing of such information to NewFalcon,
FHGLP, or any of their representatives nor any investigation made by NewFalcon
or FHGLP shall affect the right of NewFalcon and FHGLP to rely on any
representation or warranty made by the TCI Entities in this Agreement, all of
which shall survive any furnishing of information or any investigation.
(b) Without limiting the generality of the foregoing, the TCI
Entities shall give FHGLP and its counsel, accountants, and other authorized
representatives reasonable access to their financial records and their
employees, counsel, accountants, and other representatives for the purpose of
preparing and auditing at FHGLP's expense such financial statements as FHGLP
determines, in its judgment, are required or advisable to comply with federal or
state securities laws and the rules and regulations of securities markets as a
result of the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby. TCI agrees that the TCI Entities will
provide one or more audit representation letters as to the information made
available to FHGLP in connection with any audit performed under this Section
9.12(b). The representation letters will be in such form and make all
representations reasonably required by the accountants preparing such audit to
enable them to issue an opinion acceptable to the Securities and Exchange
Commission or other Governmental Authority for purposes of any registration
statement or other governmental filing by FHGLP or any Affiliate of FHGLP that
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requires such audit. The TCI Entities will also request that their independent
accountants provide any consents that are necessary for the inclusion of their
opinion with respect to any audited financial statements prepared by them in any
governmental filing by FHGLP; provided, however, that FHGLP shall pay any
reasonable and customary fees charged by the TCI Entities' independent
accountants for providing any such consent.
9.13 Maintenance of Assets.
The TCI Entities will maintain all of TCI's Personal Property or
replacements therefor and all buildings or other improvements located on TCI's
Real Property in good condition (ordinary wear and tear excepted), and use all
of TCI's Personal Property and all buildings or other improvements located on
TCI's Real Property in a reasonable manner. The TCI Entities will maintain
inventories of converters, spare parts, expendable supplies, and other items
that are customarily maintained in inventory by cable television systems at
levels consistent with past practices (and, in any event, will have at least a
30-day supply of such items on the Closing Date).
9.14 Maintenance of Personnel and Plant.
The TCI Entities will maintain appropriate staff and management
personnel for the TCI Systems consistent with past practices and fulfill
installation requests in accordance with past practices.
9.15 Insurance.
The TCI Entities will maintain insurance policies covering the TCI
Assets and the TCI Systems consistent with the TCI Entities' past practices.
9.16 Financial Information.
TCI will furnish to FHGLP within 45 days after the end of each month
between the date hereof and the Closing Date, a statement of income and expense
for the TCI Systems for the month just ended and such other financial
information as FHGLP may reasonably request.
9.17 Compliance with Laws.
The TCI Entities will comply in all material respects with all Legal
Requirements applicable to the operation of the TCI Systems and the ownership of
the TCI Assets.
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9.18 Signal Carriage.
The TCI Entities will coordinate with FHGLP the channel line-up and the
Signals carried by the TCI Systems. If FHGLP determines that the carriage by the
TCI Systems of any distant Signal would impose a material copyright liability on
any Falcon Entity following the Closing with respect to its operation of the TCI
Systems, then FHGLP may request that the TCI Entities remove such distant Signal
and the TCI Entities will not unreasonably fail to comply with any such request.
ARTICLE 10
OPERATIONS OF FALCON SYSTEMS PRIOR TO CLOSING
Between the date of this Agreement and the Closing, FHGLP agrees that,
except as otherwise consented to in writing by TCI, FHGLP and the Falcon
Entities will comply with the following covenants:
10.1 Generally.
FHGLP and the Falcon Entities will operate the Falcon Systems in the
ordinary course of business consistent with past practices (except where such
conduct would conflict with the following covenants or with the other
obligations of FHGLP under this Agreement and except that FHGLP and the Falcon
Entities may begin to self-insure certain risks that, under their past
practices, have been covered by insurance policies) and use commercially
reasonable efforts to preserve the business of the Falcon Systems and their
present relationships with suppliers, customers, and others having business
relations with it.
10.2 Mergers.
Neither FHGLP nor any Falcon Entity will merge with or consolidate into
any Person (except that, without the consent of TCI, any Falcon Entity may merge
with another Falcon Entity).
10.3 Disposition of Assets.
Neither FHGLP nor any Falcon Entity will sell, assign, lease, or
otherwise transfer or dispose of any assets used or held for use in the business
or operations of the Falcon Systems, except for assets consumed or disposed of
in the ordinary course of business that are obsolete and no longer usable in the
business or operations of the Falcon Systems or are replaced by property of
equivalent kind and value; provided, however, that the limitations of this
Section 10.3 shall not apply to (a) any transfer of assets from FHGLP to a
Falcon Entity or from one Falcon Entity to another Falcon Entity, or (b) any
pledging of assets by FHGLP or any Falcon Entity to secure any Indebtedness of
FHGLP to be assumed by NewFalcon or another Falcon
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Entity pursuant to this Agreement or to secure any Indebtedness of a Falcon
Entity permitted by this Agreement.
10.4 Acquisitions.
Neither FHGLP nor any Falcon Entity will purchase or otherwise acquire
any assets, business, equity interest in another Person, or other property
except in the ordinary course of business; provided, however, that the
limitations of this Section 10.4 shall not apply to (a) any acquisition of
assets by one Falcon Entity from FHGLP or from another Falcon Entity, or (b) the
acquisition of the Classic Systems.
10.5 Indebtedness.
Neither FHGLP nor any Falcon Entity will incur, create, or assume, any
Indebtedness if, after giving effect to such Indebtedness, the Operating Cash
Flow Ratio (as defined in the Amended and Restated Indenture, dated as of
October 29, 1993, between FHGLP and United States Trust Company of New York, as
trustee) would exceed 7.5:1.
10.6 Franchises.
Except as expressly required by this Agreement, the Falcon Entities
will not do any act or fail to do any act that could reasonably be expected to
result in the expiration, revocation, suspension, non-renewal, or materially
adverse modification of any of Falcon's Franchises, or fail to prosecute with
due diligence any applications to any Governmental Authority in connection with
the business or operations of the Falcon Systems; provided, however, that the
Falcon Entities may agree to materially adverse modifications to any of Falcon's
Franchises in connection with the extension or renewal thereof. The Falcon
Entities will timely file a valid request for renewal under Section 626(a) of
the Cable Act with the proper Governmental Authority with respect to any of
Falcon's Franchises that will expire within 33 months after any date between the
date of this Agreement and the Closing Date.
10.7 Equity Interests; Dissolution.
Except as contemplated by Section 2.8(b) and except for any transaction
that would not diminish FHGLP's interest as of the Closing in the assets and
properties of the Falcon Entities, (a) no Falcon Entity will issue any equity
interest or any option, warrant, or other debt or equity interest convertible
into or evidencing the right to acquire (whether or not for additional
consideration) any equity interest, (b) no Falcon Entity will purchase, redeem,
retire, or otherwise acquire any of its equity interests, and (c) no Falcon
Entity will liquidate or dissolve.
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10.8 No Inconsistent Action.
Neither FHGLP nor any Falcon Entity will take any action that is
inconsistent in any material respect with the obligations of FHGLP under this
Agreement or that would reasonably be expected to materially hinder or delay the
consummation of the transactions contemplated by this Agreement.
10.9 No Shop.
Neither FHGLP, any Falcon Entity, nor any Affiliate, agent, or
representative of FHGLP or any Falcon Entity will directly or indirectly (a)
solicit or initiate the submission of proposals or offers from any Person for,
(b) participate in any discussions pertaining to, or (c) furnish any information
to any Person other than TCI and its Affiliates relating to, any direct or
indirect acquisition or purchase of all or any significant portion of any cable
television system included in the Falcon Systems.
10.10 Notification of Certain Matters.
FHGLP will promptly notify TCI of any fact, event, circumstance, or
action (a) that, if known on the date of this Agreement, would have been
required to be disclosed to TCI pursuant to this Agreement, (b) the existence or
occurrence of which would cause any representation or warranty of FHGLP in this
Agreement not to be correct if made after such fact, event, circumstance, or
action arose or occurred, or (c) of which any senior executive officer of FHGLP
has actual knowledge that constitutes a material breach of any representation or
warranty of the TCI Entities in this Agreement. For purposes of the preceding
sentence, the "senior executive officers" of FHGLP are its Chief Executive
Officer, Chief Operating Officer, Executive Vice President and General Counsel,
Chief Financial Officer, and Vice President-Finance and Corporate Development.
Each Falcon Entity will use commercially reasonable efforts to cure as quickly
as practicable any condition the existence of which would cause any
representation and warranty of FHGLP in this Agreement not to be true at and as
of the Closing Date as though such representation and warranty were made at and
as of such date, regardless of whether such representation and warranty was true
when made on the date of this Agreement.
10.11 Access to Information.
FHGLP and the Falcon Entities will allow TCI and its authorized
representatives reasonable access, upon reasonable notice, at TCI's expense, to
all properties, equipment, books, records, Contracts, and documents relating to
the Falcon Systems for the purpose of audit and inspection, and furnish or cause
to be furnished to TCI or its authorized representatives all information with
respect to the affairs and business of the Falcon Systems that TCI may
reasonably request. Any such audit, investigation, or request for information
shall be conducted in such a manner as not to interfere unreasonably with the
Falcon Systems. Neither the furnishing of such information to TCI or its
representatives nor any investigation made by TCI
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shall affect TCI's right to rely on any representation or warranty made by FHGLP
in this Agreement, all of which shall survive any furnishing of information or
any investigation.
10.12 Financial Information.
FHGLP will furnish to TCI within 45 days after the end of each month
between the date hereof and the Closing Date, a statement of income and expense
for the Falcon Systems for the month just ended and such other financial
information as TCI may reasonably request.
10.13 Maintenance of Personnel and Plant.
The Falcon Entities will maintain appropriate staff and management
personnel for the Falcon Systems consistent with past practices and fulfill
installation requests in accordance with past practices.
10.14 Maintenance of Assets.
The Falcon Entities will maintain all of Falcon's Personal Property or
replacements therefor and all buildings or other improvements located on
Falcon's Real Property in good condition (ordinary wear and tear excepted), and
use all of Falcon's Personal Property and all buildings or other improvements
located on Falcon's Real Property in a reasonable manner. The Falcon Entities
will maintain inventories of converters, spare parts, expendable supplies, and
other items that are customarily maintained in inventory by cable television
systems at levels consistent with past practices (and, in any event, will have
at least a 30-day supply of such items on the Closing Date).
10.15 Compliance with Laws.
The Falcon Entities will comply in all material respects with all Legal
Requirements applicable to the operation of the Falcon Systems and the ownership
of any assets used in the business or operations of the Falcon Systems.
ARTICLE 11
SPECIAL COVENANTS AND AGREEMENTS
11.1 Actions by Falcon Entities.
Each statement in this Agreement to the effect that any Falcon Entity
will take or refrain from taking any action constitutes a covenant by FHGLP that
such Falcon Entity will take or refrain from taking such action.
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11.2 TCI Consents.
(a) The TCI Entities shall use their commercially reasonable
efforts to obtain as expeditiously as possible all Consents required for the
performance of their obligations under this Agreement and the documents
contemplated hereby. No such Consent shall include any condition or
qualification that would result in or constitute a material adverse change in
the terms of the Franchise, License, or other Assumed TCI Contract that is the
subject of the Consent, unless otherwise agreed to by FHGLP. Any instrument
evidencing any Consent shall be in form and substance reasonably satisfactory to
FHGLP.
(b) If requested by FHGLP, the TCI Entities will agree to any
undertaking, condition, qualification, or amendment that any Franchising
Authority proposes to impose in connection with its granting of any Consent so
long as no obligations or liabilities with respect to such undertaking,
condition, qualification, or amendment are required to be performed prior to the
Closing and all obligations and liabilities with respect to such undertaking,
condition, qualification, or amendment will be assumed by NewFalcon or another
Falcon Entity at the Closing.
(c) The TCI Entities will submit an FCC Form 394 to each
Franchising Authority that granted any of TCI's Franchises (excluding any
Franchising Authority the Consent of which is not required to assign to any
Falcon Entity the Franchise issued by such Franchising Authority) within fifteen
days after the TCI Entities receive from FHGLP and the Falcon Entities all
information regarding FHGLP or any Falcon Entity that is required to complete
such FCC Form 394.
(d) Nothing in this Agreement shall require any TCI Entity to
make any expenditure or payment of funds or the giving of any other
consideration in order to obtain any Consent required for the performance of
their obligations under this Agreement and the documents contemplated hereby,
except for fees of attorneys for the TCI Entities, filing fees, and other
reasonable fees or out-of-pocket costs (for example, application fees) imposed
by any Franchising Authority, and any costs required to remedy any item of
breach by any TCI Entity with the terms of any Franchise, License, or other
Contract. The TCI Entities shall have the right to contest any claim made by any
Franchising Authority or other Person concerning the occurrence of any such
breach or the amount required to remedy any such breach that is found to occur,
and neither FHGLP nor any Falcon Entity shall have the authority to enter into
any agreement on behalf of any TCI Entity or otherwise commit any TCI Entity
with respect to any such breach, except as provided in Section 11.2(b).
(e) The Falcon Entities will cooperate fully with TCI in
obtaining any necessary Consents, but no Falcon Entity will be required (1) to
make any payment to any Person or Franchising Authority from which such Consent
is sought or (2) to accept any material adverse changes in, or the imposition of
any material adverse condition to, any Franchise, License, or Assumed TCI
Contract as a condition to obtaining any Consent. The Falcon Entities may
participate with TCI in negotiations with Franchising Authorities and other
third parties
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with respect to the Consents. The Falcon Entities will not, without the prior
written consent of TCI, seek amendments or modifications to the Franchises or
other Assumed TCI Contracts, except as provided in Section 11.2(b).
(f) FHGLP shall promptly furnish to any Franchising Authority
or other third party any information regarding the Falcon Entities, including
financial information concerning the Falcon Entities and other information
relating to the cable and other operations of such Falcon Entities (other than
information that FHGLP reasonably deems to be proprietary), that such
Franchising Authority or other third party may reasonably require in connection
with obtaining any Consent, and FHGLP shall promptly furnish to TCI a copy of
any such information provided to such Franchising Authority or other third
party. FHGLP and each TCI Entity shall ensure that its appropriate officers and
employees shall be available to attend, as the Franchising Authority may
reasonably request, any scheduled hearings or meetings in connection with
obtaining such Consent.
11.3 Falcon Consents.
FHGLP and the Falcon Entities shall use their commercially reasonable
efforts to obtain as expeditiously as possible all Consents required for the
performance of their obligations under this Agreement and the documents
contemplated hereby. Nothing in this Agreement shall require FHGLP or any Falcon
Entity to make any expenditure or payment of funds or the giving of any other
consideration in order to obtain any such Consent, except for fees of attorneys
for the Falcon Entities, filing fees, and other reasonable fees or out-of-pocket
costs (for example, application fees) imposed by any Franchising Authority, and
any costs required to remedy any item of breach by FHGLP or any Falcon Entity
with the terms of any Franchise, License, or other Contract. The Falcon Entities
shall have the right to contest any claim made by any Franchising Authority or
other Person concerning the occurrence of any such breach or the amount required
to remedy any such breach that is found to occur, and no TCI Entity shall have
the authority to enter into any agreement on behalf of FHGLP or any Falcon
Entity or otherwise commit FHGLP or any Falcon Entity with respect to any such
breach.
11.4 Cooperation.
The parties to this Agreement will 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
each party shall execute such other documents as may be reasonably necessary and
desirable to the implementation and consummation of this Agreement, and
otherwise shall use its commercially reasonable efforts to consummate the
transactions contemplated by this Agreement and to fulfill its obligations
hereunder.
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11.5 Conversion of Billing Systems.
The TCI Entities shall cooperate with FHGLP and NewFalcon, and provide
such information and take such actions as FHGLP and NewFalcon shall reasonably
request, prior to and following the Closing (subject to the following sentence),
to permit the prompt conversion of the billing systems of the TCI Systems and
the Falcon Systems, at NewFalcon's expense, to a common billing system selected
by FHGLP. The obligations of the TCI Entities under this Section 11.5 shall
terminate on the date that is four months after the Closing except to the extent
that circumstances beyond the control of the Falcon Entities have delayed the
conversion of the billing systems of the TCI Systems and the Falcon Systems
beyond such date.
11.6 Employee Matters.
(a) Except as set forth on Schedule 11.6, the Falcon Entities
shall have the right to offer to employ or engage the services of any employee
of the TCI Systems on terms and conditions of employment or engagement to be
established by the Falcon Entities, consistent with the terms of this Section
11.6. FHGLP may, at such times as shall be arranged by it with TCI, meet with
the employees of the TCI Systems prior to Closing and provide appropriate
information to such employees regarding opportunities for employment by the
Falcon Entities after the Closing.
(b) FHGLP will provide to TCI, within sixty days after the
date of this Agreement, a notice identifying the employees of the TCI Systems to
which the Falcon Entities do not intend to offer employment as of the Closing
Date. The number of employees identified on FHGLP's notice pursuant to this
Section 11.6(b) will be determined by FHGLP substantially in accordance with the
staffing plan that has been prepared by FHGLP and delivered to TCI. The TCI
Entities shall comply, as necessary, with the provisions of the Worker
Adjustment and Retaining Notification Act, as amended (the "WARN Act"), as it
relates to the transactions contemplated by this Agreement, including providing
all affected employees and other necessary persons with any notice that may be
required under the WARN Act. The TCI Entities shall indemnify and hold harmless
the Falcon Entities from and against any liability or other loss arising from
any noncompliance with the WARN Act except to the extent that such noncompliance
results from either (1) FHGLP's failure to deliver to TCI the notice required by
this Section 11.6(b) within sixty days after the date of this Agreement or (2)
the occurrence of the Closing within sixty-five days after FHGLP's delivery of
such notice.
(c) At the option of the TCI Entities, the TCI Entities may
offer employment to the employees identified on FHGLP's notice pursuant to
Section 11.6(b) after the Effective Time or shall terminate such employees
effective prior to the Effective Time. The TCI Entities shall retain all
liabilities with respect to any employees terminated by TCI prior to the
Effective Time.
(d) The Falcon Entities shall assume liabilities for accrued
sick leave and accrued vacation time as of the Effective Time with respect to
any employees of the TCI Entities
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who are employed by the Falcon Entities from and after the Closing (the "Hired
Employees"), except that the Falcon Entities shall not assume any liability for
accrued sick leave or accrued vacation time of any Hired Employee to the extent
that the amount of accrued sick leave or accrued vacation time exceeds the
amount of sick leave or vacation time such Hired Employee would have been
entitled to accrue under the Falcon Entities' sick leave and vacation policies.
Except as provided in the preceding sentence, the TCI Entities, with respect to
their employees, and the Falcon Entities, with respect to their employees, shall
be responsible for satisfying in full all amounts to which such employees are
entitled under applicable Legal Requirements or employment policies of such
employees' employer, including wages, salaries, severance pay, sick pay, accrued
vacation, incentive compensation or bonus agreements, or other benefits or
payments, to the extent relating to the period prior to the Effective Time. The
TCI Entities shall pay to each Hired Employee, in cash, the amount of any
liability for accrued vacation time that is not required to be assumed by the
Falcon Entities pursuant to this Section 11.6(d).
(e) The Falcon Entities shall, from and after the Effective
Time, provide employee benefit plans, programs and policies to the Hired
Employees on the same basis as other similarly situated employees of the Falcon
Entities. Hired Employees shall be given credit for all service with the TCI
Entities, or with any prior owner or operator of a TCI System to the extent that
such employee received such credit from the TCI Entities, under all employee
benefit plans, programs, and policies of the Falcon Entities in which they
become participants for purposes of eligibility and vesting, but not for the
purposes of benefit accrual, and shall not be subject to any waiting periods or
limitations on benefits for pre-existing conditions under employee benefit plans
of the Falcon Entities applicable to the Falcon Entities' employees, including
group health and disability plans, except to the extent any such Hired Employee
was subject to such limitations under the employee benefit plans of the TCI
Entities, and shall be given credit under group health plans applicable to the
Falcon Entities' employees for any deductible previously met by such Hired
Employee under the TCI Entities' group health plans. Notwithstanding the
foregoing, the requirements of this Section 11.6(e) shall not apply to Hired
Employees who are covered by a collective bargaining agreement.
(f) If any Falcon Entity discharges any Hired Employee within
sixty days after the Closing (other than for cause or under any other
circumstance that would not have required payment of severance benefits under
the TCI Entities' severance plans), such Falcon Entity shall pay such discharged
Hired Employee the severance benefits that would have been payable by TCI under
the severance plans described on Schedule 7.10 if such discharge had occurred
immediately prior to the Closing.
(g) The TCI Entities shall retain responsibility for offering
and providing continuation coverage to any qualified beneficiary who is covered
by a group health plan sponsored, maintained, or contributed to by any TCI
Entity or any Affiliate of a TCI Entity and who has experienced a qualifying
event or is receiving such continuation coverage on or prior to the Closing
Date, regardless of whether such qualified beneficiary is offered group health
plan coverage from any Falcon Entity. In the preceding sentence, "continuation
coverage," "qualified beneficiary," "qualifying event," and "group health plan"
have the meanings given such terms
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under Section 4980B of the Code and COBRA. The TCI Entities shall indemnify and
hold harmless the Falcon Entities from and against any liability or other loss
arising from any obligation for which the TCI Entities retain responsibility
under this Section 11.6(g).
(h) Nothing in this Section 11.6 or in any other provision of
this Agreement is intended to confer upon any employee or such employee's legal
representative or heirs any rights as a third-party beneficiary or otherwise or
any remedies of any kind whatsoever under or by reason of this Agreement, or the
transactions contemplated hereby, including any rights of employment or
continued employment.
11.7 Title Insurance and Surveys.
(a) Title Insurance on Owned Property. With respect to each
fee estate included in TCI's Real Property Interests, TCI will obtain and
deliver to FHGLP (1) as soon as practicable after the date of this Agreement, a
title commitment disclosing the condition of title to such fee estate and all
easements, rights of way, and restrictions of record with respect thereto, as of
a date not earlier than the date of this Agreement, accompanied by copies of all
instruments evidencing the scope and extent of all such easements, rights of
way, and restrictions of record, and (2) at or prior to Closing, an ALTA Owner's
Policy of Title Insurance on a form customarily used in the state in which the
property is located, issued by a title insurer satisfactory to FHGLP, in an
amount equal to the fair market value of the property and any improvements
thereon (as reasonably determined by FHGLP), insuring title to such property to
be in the name of NewFalcon (or its designee), subject only to Permitted
Encumbrances.
(b) General Requirements as to Title Insurance Policies. Each
title insurance policy obtained and delivered to FHGLP pursuant to this
Agreement shall, except to the extent that title insurers in the state in which
the applicable property is located are not lawfully permitted to issue such
policies, (1) insure title to the property described in the policy and all
recorded easements benefitting such property, (2) contain an "extended coverage
endorsement" or similar modification insuring over or otherwise eliminating the
general exceptions customarily contained in title policies, (3) contain an
endorsement insuring that the property described in the policy is the same real
estate shown in any survey delivered with respect to such property, (4) contain
a "contiguity" endorsement with respect to any property consisting of more than
one record parcel, and (5) if a survey is required to be obtained pursuant to
Section 11.7(c), not be subject to any survey exception or any defect or
encroachment disclosed by a survey delivered with respect to the property.
(c) Surveys. With respect to any fee estate included in TCI's
Real Property Interests, if FHGLP so requests, TCI will obtain and deliver to
FHGLP as soon as practicable after the date of this Agreement a current survey
of the relevant parcel, prepared and certified to FHGLP and to the title insurer
of such Real Property Interest by a licensed surveyor and conforming to current
ALTA Minimum Detail Requirements for Land Title Surveys, disclosing the location
of all improvements, easements, party walls, sidewalks, roadways, utility lines,
and
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other matters customarily shown on such surveys, and showing access
affirmatively to public streets and roads.
(d) Associated Fees and Costs. TCI shall be responsible for
the costs associated with obtaining the title commitments described above, and
NewFalcon shall be responsible for the costs associated with obtaining the title
insurance policies described above. FHGLP shall be responsible for the costs
associated with obtaining the surveys described above, and, if the Closing
occurs, NewFalcon shall reimburse FHGLP for such costs immediately following the
Closing.
11.8 Access to Information After Closing.
TCI agrees that, following the Closing, each TCI Entity will, upon
reasonable notice (a) allow NewFalcon, FHGLP, and their authorized
representatives reasonable access, at NewFalcon's expense, to the TCI Entities'
books and records, for the purpose of audit, inspection, or investigation
relating to the business, tax, and financial affairs of the Falcon Entities as
well as to any third-party claims made against any Falcon Entity, relating to or
arising from the acquisition, ownership, or conduct of the operations of the TCI
Systems prior to Closing, and (b) furnish or cause to be furnished to NewFalcon,
FHGLP, or their authorized representatives all information with respect to the
TCI Systems as NewFalcon or FHGLP may reasonably request. Any such audit,
investigation, or request for information shall be conducted in such a manner as
not to interfere unreasonably with TCI's business.
11.9 Signal Sharing Agreement.
At the Closing, NewFalcon or another Falcon Entity designated by
NewFalcon and TCI Cablevision of California, Inc. shall enter into a signal
sharing agreement, in form and substance reasonably satisfactory to FHGLP and
TCI, pursuant to which TCI Cablevision of California, Inc. will provide signals
to the cable television system servicing Calabasas, California (the "Signal
Sharing Agreement").
11.10 Deferred Contributions.
If on the date specified for the Closing pursuant to Section 13.1(a),
any Franchise Area is not a Transferable Franchise Area, then, notwithstanding
any other provision of this Agreement, the following provisions shall apply:
(a) At the Closing, TCI shall contribute to NewFalcon, only
those TCI Assets that do not relate solely to a Franchise Area that is not a
Transferable Franchise Area (including any TCI Assets, such as head-ends and
business offices and the Real Property Interests and equipment related thereto,
that may relate both to Transferable Franchise Areas and Franchise Areas that
are not Transferable Franchise Areas). The TCI Assets that are not contributed
to NewFalcon at the Closing in accordance with the preceding sentence are
referred to in this Section 11.10 as the "Retained TCI Assets." From and after
the Closing, TCI or another TCI
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Entity shall retain the Retained TCI Assets, and TCI shall contribute the
Retained TCI Assets to NewFalcon in accordance with the terms of this Section
11.10.
(b) At the Closing:
(1) All conveyancing documents, certificates, and
other documents contemplated by this Agreement to be delivered at the Closing
shall be in the form and substance provided for in this Agreement with such
modifications as are necessary or appropriate to reflect the provisions of this
Section 11.10 and to relate only to the TCI Assets being contributed to
NewFalcon at the Closing.
(2) Each TCI Entity that owns any Retained TCI Assets
and a Falcon Entity designated by FHGLP shall enter into a management agreement
(each, a "Management Agreement"), in form and substance reasonably satisfactory
to FHGLP and TCI, which will provide that the Falcon Entity will manage the
Retained TCI Assets for TCI's benefit and will be entitled to receive and retain
all revenues, and will be responsible for all costs and expenses, attributable
to the operations of such Retained TCI Assets after the Closing.
(c) After the Closing, the TCI Entities and the Falcon
Entities shall continue to undertake, in accordance with this Agreement, to
obtain any Consent necessary to cause any Franchise Area that was not a
Transferable Franchise Area on the Closing Date to become a Transferable
Franchise Area, and the agreements and obligations of the TCI Entities and the
Falcon Entities under Section 11.2 shall be fully applicable in seeking such
Consents after the Closing. TCI shall give FHGLP written notice of the receipt
of any Consent necessary to cause any Franchise Area that was not a Transferable
Franchise Area on the Closing Date to become a Transferable Franchise Area. As
soon as practicable after any Franchise Area that was not a Transferable
Franchise Area on the Closing Date becomes a Transferable Franchise Area, on a
date to be specified by FHGLP, a closing shall be held at which TCI shall
contribute to NewFalcon those Retained TCI Assets relating to such Franchise
Area and NewFalcon and TCI shall execute and deliver conveyancing documents,
certificates, and other documents corresponding to those delivered at the
Closing with such modifications as are necessary or appropriate to reflect the
provisions of this Section 11.10 (including NewFalcon's management of the
Retained TCI Assets) and to relate only to the Retained TCI Assets being
contributed to NewFalcon at such closing. Upon such closing, the applicable
Management Agreement will be terminated insofar as it relates to the Retained
TCI Assets transferred at such closing. The value of such Retained TCI Assets is
reflected in the net fair market value of the TCI Assets as calculated in
accordance with this Agreement, and any such contribution by TCI shall not
increase the amount of capital contributions made by TCI for purposes of the
NewFalcon Agreement.
(d) If the Falcon Entities are legally prevented from
obtaining through a Management Agreement all benefits arising from the operation
of any Retained TCI Assets, then TCI shall contribute to NewFalcon, within
twenty days after the end of each calendar month ending after the Closing, an
amount in cash equal to the net income (or loss) of the TCI Entities
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from the operation of such Retained TCI Assets (exclusive of any extraordinary
gain or loss) for the period from the later of the Closing Date or the first day
of such calendar month through the earlier of the last day of such calendar
month or the date on which such Retained TCI Assets are contributed to
NewFalcon, plus the sum of depreciation, amortization, income tax expense (other
than income tax expense (either positive or negative) attributable to
extraordinary or nonrecurring gains or losses or sales of assets), interest
expense, and other non-cash charges, in each case to the extent deducted in
determining such net income, minus all non-cash items increasing such net income
for such period, and minus capital expenditures relating to such Retained TCI
Assets, all as determined on a consolidated basis in accordance with GAAP
consistently applied. The right to receive such net income, as adjusted, is
reflected in the net fair market value of the TCI Assets as calculated in
accordance with this Agreement, and any such contribution by TCI shall not
increase the amount of capital contributions made by TCI for purposes of the
NewFalcon Agreement.
(e) If the Falcon Entities are legally prevented for a period
of three months from obtaining through a Management Agreement all benefits
arising from the operation of any Retained TCI Assets, then TCI shall undertake
to sell such Retained TCI Assets as soon as practicable for cash on commercially
reasonable terms. Upon the consummation of any sale of Retained TCI Assets, TCI
shall contribute to NewFalcon an amount in cash equal to the net pre-tax
proceeds of such sale together with any net income (calculated as provided in
Section 11.10(d)) of the TCI Entities from the operation of such Retained TCI
Assets for the period from the Closing Date through the consummation of the sale
of such Retained TCI Assets, other than any net income previously contributed to
NewFalcon pursuant to Section 11.10(d). The right to receive such net sale
proceeds and net income in lieu of the Retained TCI Assets, under the
circumstances described in this Section 11.10(e), is reflected in the net fair
market value of the TCI Assets as calculated in accordance with this Agreement,
and neither such contribution by TCI nor TCI's failure to contribute the
Retained TCI Assets shall increase or decrease the amount of capital
contributions made by TCI for purposes of the NewFalcon Agreement.
(f) If any Retained TCI Assets have not been contributed to
NewFalcon or sold pursuant to Section 11.10(e) prior to the dissolution of
NewFalcon pursuant to Article 13 of the NewFalcon Agreement, then, upon the
dissolution of NewFalcon, the Liquidator (as defined in the NewFalcon Agreement)
shall have the authority to sell such Retained TCI Assets on behalf of the owner
thereof in connection with the liquidation of NewFalcon in accordance with the
liquidation procedures in Article 13 of the NewFalcon Agreement. Upon the
consummation of any such sale of the Retained TCI Assets, TCI shall contribute
to NewFalcon an amount in cash equal to the net pre-tax proceeds of such sale
together with any net income (calculated as provided in Section 11.10(d)) of the
TCI Entities from the operation of such Retained TCI Assets for the period from
the Closing Date through the consummation of the sale of such Retained TCI
Assets, other than any net income previously contributed to NewFalcon pursuant
to Section 11.10(d), and NewFalcon shall treat such amount as if it were
proceeds from the liquidating sale of assets of NewFalcon. The right to receive
such net sale proceeds and net income in lieu of the Retained TCI Assets, under
the circumstances described in this Section 11.10(f), is reflected in the net
fair market value of the TCI Assets as calculated in accordance
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with this Agreement, and neither such contribution by TCI nor TCI's failure to
contribute the Retained TCI Assets shall increase or decrease the amount of
capital contributions made by TCI for purposes of the NewFalcon Agreement.
11.11 Confidentiality.
(a) Except as and to the extent required by law or as provided
in Section 11.11(c), each party will keep confidential any information obtained
from any other party in connection with the transactions contemplated by this
Agreement. If this Agreement is terminated, each party will return to the
disclosing party or destroy all information obtained by such party from any
other party in connection with the transactions contemplated by this Agreement.
The obligations of the parties under this Section 11.11(a) will survive the
termination of this Agreement.
(b) Except as provided in Section 11.11(c), no party shall
publish any press release or make any other public announcement concerning this
Agreement or the transactions contemplated hereby without, in the case of any
press release or other public announcement by FHGLP or NewFalcon, the prior
written consent of TCI, which shall not be withheld unreasonably, and, in the
case of any press release or other public announcement by any other party, the
prior written consent of FHGLP, which shall not be withheld unreasonably.
(c) Nothing contained in this Agreement shall prevent any
party from making any filings with Governmental Authorities, including in
connection with any securities filings with any Governmental Authorities or
exchanges that, in its judgment, may be required or advisable in connection with
the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby.
11.12 Bulk Sales Law.
NewFalcon waives compliance by TCI with Article 6 of the Uniform
Commercial Code (regarding bulk sales) as in effect in the states in which the
TCI Assets are located and the business of the TCI Systems is conducted, and TCI
shall be liable for, and hold each Falcon Entity harmless with respect to, any
loss or expense relating to any claims made by creditors with respect to
non-compliance with any such bulk sales law.
11.13 Rate Proceedings.
(a) Prior to Closing, the TCI Entities will diligently pursue
any proceedings currently pending or instituted prior to Closing (other than
those affecting the cable industry generally) dealing with or otherwise
affecting the rates that any cable television system included in the TCI Systems
can charge (whether for programming, equipment, installation, service, or
otherwise), and shall make available to FHGLP upon request copies of any
documents, correspondence, or notices sent by or received by any TCI Entity in
connection with any such rate proceedings. Without the prior consent of FHGLP,
except in connection with any
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settlement with the FCC affecting rates charged for substantially all cable
television systems wholly owned, directly or indirectly, by TCI Communications,
Inc. that are then subject to a valid rate complaint that has been filed with
the FCC, TCI shall not settle any such rate proceeding prior to Closing if (1)
any Falcon Entity would bear any liability under such settlement that would not
constitute a Current Liability of the TCI Systems for purposes of Section 3.2,
or (2) such settlement would adversely affect the rates that could be charged by
any Falcon Entity after the Closing.
(b) If any such rate proceeding remains pending following the
Closing or is instituted following the Closing, (1) NewFalcon shall assume
control of such rate proceeding at its own expense, (2) TCI shall have the right
to participate, at its own expense, in such rate proceeding, to the extent it
relates to periods prior to the Closing, and (3) the TCI Entities shall
cooperate with NewFalcon in its control of any such rate proceeding and shall
promptly deliver to NewFalcon all information reasonably requested by FHGLP in
connection with such rate proceeding. NewFalcon shall have the right in its
discretion to settle any such rate proceeding, except that NewFalcon will not
settle any such rate proceeding without TCI's consent, which shall not be
unreasonably withheld, if TCI would have liability thereunder with respect to
periods prior to the Closing.
11.14 Further Assurances.
After the Closing, the TCI Entities shall take such actions, and
execute and deliver to NewFalcon or another Falcon Entity designated by
NewFalcon such further deeds, bills of sale, assignments, or other transfer
documents as, in the opinion of counsel for FHGLP, may be reasonably necessary
to ensure the full and effective transfer of the TCI Assets to NewFalcon or such
other Falcon Entity pursuant to this Agreement.
11.15 Modifications to Amended FHGLP Agreement.
The General Partner, with the consent of TCI but without the consent of
any other FHGLP Partner, may elect to cause the Amended FHGLP Agreement to be
modified prior to Closing to incorporate the terms of any amendment that the
General Partner could make to the Amended FHGLP Agreement after the Closing
without the consent or approval of any other FHGLP Partner, pursuant to the
terms of the Amended FHGLP Agreement.
11.16 Amended Partnership Agreements, Other Agreements, and Termination
of Agreements.
(a) Prior to the Closing, the Agreement of Limited Partnership
of Falcon Video shall be amended to provide that, upon the issuance to Leeway &
Co. and Mezzanine Lending Associates III, L.P. of partnership interests in
satisfaction of all obligations of Falcon Video with respect to the Mezzanine
Notes, as contemplated by Section 2.8(b), the book values of the assets of
Falcon Video shall be adjusted to equal their respective gross fair market
values and the amount of any increase in the book values of the assets of Falcon
Video shall be
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allocated to the capital accounts of the partners of Falcon Video pursuant to
Treasury Regulations Section 1.704-1(b)(2)(iv)(f).
(b) Immediately after or concurrently with the Closing,
(1) the Falcon Cable Trust and NewFalcon shall enter
into an Amended and Restated Agreement of Limited Partnership of Video
Investors, the terms of which shall (1) reflect the assignment of all
partnership interests in Video Investors (other than the partnership interest
retained by the Falcon Cable Trust) to NewFalcon and the concurrent substitution
of NewFalcon for the prior holders of such partnership interests as a partner in
Video Investors, effective as of the Closing, (2) provide for an adjustment to
the relative percentage interests of NewFalcon and the Falcon Cable Trust to
reflect any contribution to Video Investors by NewFalcon of assets, including
any assets that are contributed to NewFalcon pursuant to this Agreement, so long
as (A) such percentages are adjusted on the basis of the relative value of the
partners' interests in Video Investors immediately prior to such contribution
and the value of the contributions being made to Video Investors, and (B) in the
case of any contribution immediately following the Closing of assets that are
contributed to NewFalcon pursuant to this Agreement, such values are determined
in the manner provided in Article 3, and (3) otherwise substantially conform
with the partnership agreements of other Falcon Entities in which NewFalcon
holds an interest as of the Closing;
(2) Video Investors and NewFalcon shall enter into
an Amended and Restated Agreement of Limited Partnership of Falcon Video, the
terms of which shall (1) reflect the assignment of all partnership interests in
Falcon Video (other than the partnership interest retained by Video Investors)
to NewFalcon and the concurrent substitution of NewFalcon for the prior holders
of such partnership interests as a partner in Falcon Video, effective as of the
Closing, (2) provide for an adjustment to the relative percentage interests of
NewFalcon and Video Investors to reflect any contribution to Falcon Video by
NewFalcon or Video Investors of assets, including any assets that are
contributed to NewFalcon pursuant to this Agreement, so long as (A) such
percentages are adjusted on the basis of the relative value of the partners'
interests in Falcon Video immediately prior to such contribution and the value
of the contributions being made to Falcon Video, and (B) in the case of any
contribution immediately following the Closing of assets that are contributed to
NewFalcon pursuant to this Agreement, such values are determined in the manner
provided in Article 3, and (3) otherwise substantially conform with the
partnership agreements of other Falcon Entities in which NewFalcon holds an
interest as of the Closing;
(3) the partnership agreement of any other Falcon
Entity may be amended (1) to reflect the assignment of FHGLP's partnership
interest in such Falcon Entity to NewFalcon and the concurrent substitution of
NewFalcon for FHGLP as a partner in such Falcon Entity, effective as of the
Closing, and (2) to adjust the relative percentage interests of the partners in
such Falcon Entity to reflect the contribution to such Falcon Entity by
NewFalcon or any other Falcon Entity of assets, including any assets that are
contributed to NewFalcon pursuant to this Agreement, so long as (A) such
percentages are adjusted on the basis of the
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relative value of the partners' interests in such Falcon Entity immediately
prior to such contribution and the value of the contributions being made to such
Falcon Entity, and (B) in the case of any contribution immediately following the
Closing of assets that are contributed to NewFalcon pursuant to this Agreement,
such values are determined in the manner provided in Article 3;
(4) the agreements listed below will be terminated
without any further obligation or liability of any party thereunder:
(A) Second Amended and Restated Side by Side
Agreement among the General Partner, the Falcon Cable Trust, Marc Nathanson, and
Hellman & Friedman Capital Partners II, L.P., dated December 31, 1991, as
amended.
(B) Agreement (regarding management
compensation), dated March 29, 1993, among FHGLP and the partners of FHGLP.
(C) Management Rights Agreement, dated March
29, 1993, between FHGLP and Hellman & Friedman Capital Partners, a California
Limited Partnership.
(D) Management Rights Agreement Dated March
29, 1993, between FHGLP and Hellman & Friedman Capital Partners II, L.P.
(E) letter agreement regarding other
businesses and investment opportunities, dated March 29, 1993, between Hellman &
Friedman Capital Partners II, L.P. and the General Partner.
(F) letter agreement with respect to
tag-along rights, dated as of December 28, 1995, among Marc B. Nathanson, the
Nathanson Entities (as defined therein), and certain other parties.
(G) Co-Sale Agreement, dated as of March 29,
1993, among the General Partner, Hellman & Friedman Capital Partners, A
California Limited Partnership, Hellman & Friedman Capital Partners II, L.P.,
Leeway & Co., MLC Investors, L.P., and DIS Investments, Inc.
11.17 Consent and Agreement of FHGLP Partners.
Each FHGLP Partner consents to the execution, delivery, and performance
of this Agreement by FHGLP and each other FHGLP Partner and to the taking by
FHGLP, each Falcon Entity, and each FHGLP Partner of all actions contemplated by
this Agreement to be taken by such Person. Each FHGLP Partner agrees that any
action that may be taken by FHGLP under this Agreement (including the making of
any election, the waiver of any obligation on the part of any other party, or
the exercise of any other right) may be taken by the General Partner, acting on
behalf of FHGLP, in the General Partner's sole discretion. Each FHGLP Partner
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acknowledges and agrees that the Partnership Option Agreement, dated as of July
15, 1996, between FHGLP and Falcon Cable Trust, and the Partnership Option
Agreement, dated as of July 15, 1996, between FHGLP and Advance TV of
California, Inc., will remain in full force and effect following the Closing.
Subject to the terms and conditions of this Agreement, each FHGLP Partner agrees
to execute and deliver at the Closing the Amended FHGLP Agreement and otherwise
to consummate the transactions contemplated by this Agreement in accordance with
its terms, as it may be amended pursuant to Section 15.5.
11.18 HSR Act.
Each party to this Agreement has determined that neither such party nor
its ultimate parent entity (within the meaning of the HSR Act) is required to
make any filings with the Department of Justice or the Federal Trade Commission
under the HSR Act in connection with the transactions contemplated by this
Agreement. Each party to this Agreement agrees that (a) if FHGLP or TCI
subsequently determines that any filing under the HSR Act is required in
connection with the transactions contemplated by this Agreement, such party and
its Affiliates will cooperate with FHGLP and TCI in causing such filing to be
made as expeditiously as practicable, (b) such party and its Affiliates will
promptly file, after any request by the Department of Justice or the Federal
Trade Commission and after appropriate negotiation with the Department of
Justice or the Federal Trade Commission of the scope of such request, any
information or documents so requested, and (c) such party will furnish FHGLP and
TCI with any correspondence from or to, and notify FHGLP and TCI of any other
communications with, the Department of Justice or the Federal Trade Commission
that relates to the transactions contemplated by this Agreement.
11.19 Ellensburg, Washington.
(a) The TCI Systems shall not include the Ellensburg System if
an Ellensburg Exclusion Event shall have occurred on or before the closing under
the Ellensburg Purchase Agreement.
(1) Subject to Section 11.19(a)(2), an "Ellensburg
Exclusion Event" means any of the following events:
(A) the Ellensburg Purchase Agreement shall
have been terminated or shall have otherwise ceased to be in full force and
effect in accordance with its terms, without the acquisition of the assets of
the Ellensburg System by any TCI Entity (regardless of whether such termination
occurs before or after the Closing);
(B) the Ellensburg Purchase Agreement shall
have been amended or modified in any manner that adversely affects the
Ellensburg System in any material respect without the written consent of FHGLP;
or
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(C) any TCI Entity shall have waived in any
material respect any of its rights or any of King Videocable Company's
obligations under the Ellensburg Purchase Agreement without the written consent
of FHGLP; or
(D) the TCI Entities shall have failed to
comply in all material respects with the terms of the Ellensburg Purchase
Agreement or shall have failed to use commercially reasonable efforts to enforce
their rights under the Ellensburg Purchase Agreement.
(2) An event described in Section 11.19(a)(1) shall
not constitute an Ellensburg Exclusion Event if, at any time prior to the
Closing, FHGLP shall have agreed in writing that such event shall not constitute
an Ellensburg Exclusion Event.
(b) If none of the Ellensburg Exclusion Events occurs prior to
the closing under the Ellensburg Purchase Agreement, then the Ellensburg System
shall be included in the TCI Systems for purposes of this Agreement (subject to
Section 7.19) effective as of the date on which the closing under the Ellensburg
Agreement occurs.
(c) If any of the Ellensburg Exclusion Events occurs prior to
the Closing, then (1) the net fair market value of the TCI Assets contributed to
NewFalcon pursuant to Section 2.2(a)(1) shall be reduced by $8,189,630, and (2)
TCI may elect, by written notice delivered to FHGLP prior to the Closing, to
contribute to NewFalcon at the Closing cash in the amount of $8,189,630.
(d) If the closing under the Ellensburg Purchase Agreement
shall have occurred prior to the Closing and the Ellensburg System is included
in the TCI Systems, then TCI shall contribute the assets of the Ellensburg
System to NewFalcon at the Closing in accordance with Section 2.2(a)(1).
(e) If none of the Ellensburg Exclusion Events shall have
occurred prior to the Closing and the closing under the Ellensburg Purchase
Agreement shall not have occurred prior to the Closing, then:
(1) If any of the Ellensburg Exclusion Events occurs
following the Closing and prior to the closing under the Ellensburg Purchase
Agreement, then TCI shall contribute to NewFalcon cash in the amount of
$8,189,630 and shall pay to NewFalcon interest on such amount at a rate of 9.0%,
compounded quarterly, from the Closing Date through the date on which such
contribution is made. TCI shall make any capital contribution and interest
payment required by this Section 11.19(e)(1) on or before the fifth Business Day
after the occurrence of the Ellensburg Exclusion Event.
(2) If none of the Ellensburg Exclusion Events occurs
following the Closing and prior to the closing under the Ellensburg Purchase
Agreement, then:
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(A) TCI shall contribute the assets of the
Ellensburg System to NewFalcon concurrently with the closing under the
Ellensburg Purchase Agreement, and
(B) concurrently with the contribution of
the assets of the Ellensburg System to NewFalcon, TCI shall pay to NewFalcon
interest at a rate of 9.0%, compounded quarterly, from the Closing Date through
the date on which the assets of the Ellensburg System are contributed to
NewFalcon, on the amount of $8,189,630.
(f) Interest paid or payable pursuant to Section 11.19(e)(1)
or Section 11.19(e)(2)(B) shall not, for purposes of the NewFalcon Agreement, be
deemed to be a Capital Contribution (as defined in the NewFalcon Agreement).
(g) Prior to the occurrence of any Ellensburg Exclusion Event,
the TCI Entities shall (1) as soon as practicable after the time of receipt or
delivery by any TCI Entity, deliver to FHGLP copies of all notices and other
documents received or delivered by any TCI Entity under the Ellensburg Purchase
Agreement, and (2) notify FHGLP promptly upon learning of any material breach or
default under the Ellensburg Purchase Agreement, and (3) notify FHGLP promptly
of any amendment or modification to the Ellensburg Purchase Agreement or any
waiver by any TCI Entity of any of its rights or any of King Videocable
Company's obligations under the Ellensburg Purchase Agreement. The TCI Entities
represent and warrant to FHGLP and NewFalcon that, as of the date of this
Agreement, they are not aware of any material breach or default under the
Ellensburg Purchase Agreement. The TCI Entities shall have no liability to FHGLP
or NewFalcon as a result of any delay in delivering to FHGLP any notice or
document pursuant to this Section 11.19(g) so long as the TCI Entities deliver
to FHGLP each notice and other document required to be delivered pursuant to
this Section 11.19(g) prior to the contribution of the assets of the Ellensburg
System to NewFalcon.
(h) If the Ellensburg System is included in the TCI Systems,
then, upon the contribution of the assets of the Ellensburg System to NewFalcon:
(1) FHGLP shall cause NewFalcon or one or more other
Falcon Entities to assume and undertake to pay, discharge, and perform all
obligations and liabilities with respect to the operations of the Ellensburg
System that are required to be assumed by TCI Cablevision of Vermont, Inc.
pursuant to the Ellensburg Purchase Agreement (but no Falcon Entity shall assume
or otherwise be liable for any other obligations or liabilities of TCI
Cablevision of Vermont, Inc. to King Videocable Company under the Ellensburg
Purchase Agreement or any obligation or liability arising from any breach of the
Ellensburg Purchase Agreement by any TCI Entity);
(2) the TCI Entities shall assign to NewFalcon or a
Falcon Entity designated by NewFalcon all of their respective rights and
benefits under the Ellensburg Purchase Agreement; and
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(3) the TCI Entities shall use commercially
reasonable efforts to afford NewFalcon or a Falcon Entity designated by
NewFalcon with all rights and benefits obtained or that may be obtained by the
TCI Entities under the Ellensburg Purchase Agreement (including rights to
indemnification but excluding any benefits arising from any reduction in the
purchase price to be paid under the Ellensburg Purchase Agreement or any payment
paid or payable by King Videocable Company under the Ellensburg Purchase
Agreement other than pursuant to an indemnification claim) to the same extent as
if all representations, warranties, and covenants of King Videocable Company in
the Ellensburg Purchase Agreement were made for the benefit of NewFalcon.
(i) The occurrence of any Ellensburg Exclusion Event
(including an Ellensburg Exclusion Event described in Section 11.19(a)(1)(D))
shall not constitute a breach by any TCI Entity of any of its obligations under
this Agreement, and no TCI Entity shall have any obligation or liability to
FHGLP or any Falcon Entity as a result of the occurrence of any Ellensburg
Exclusion Event except as expressly provided in this Section 11.19.
11.20 Transition Services.
The TCI Entities will use commercially reasonable efforts to continue
to provide customer service from its regional call centers, nationwide
addressability services, and billing and scheduling functions for advertising
sales for the TCI Systems on a transition basis after the Closing. NewFalcon
will reimburse the TCI Entities for their direct costs incurred in providing
such transition services to the TCI Systems. The obligations of the TCI Entities
under this Section 11.20 shall terminate on the date that is four months after
the Closing except to the extent that circumstances beyond the control of the
Falcon Entities have impaired the ability of the Falcon Entities to provide to
the TCI Systems any of the services to be provided by the TCI Entities under
this Section 11.20.
11.21 Enstar.
FHGLP will not, within two years after the Closing, distribute to any
of its partners with respect to their partnership interests in FHGLP any of the
interest in Enstar Communications Corp. to be transferred to FHGLP pursuant to
Section 2.8(d).
11.22 Tag-Along Rights.
The General Partner agrees that, at the Closing, Marc B. Nathanson and
the Nathanson Entities (as defined in such agreement) will execute and deliver
to each of the other parties named in such agreement, a letter agreement with
respect to tag-along rights substantially in the form attached to this Agreement
as Exhibit B.
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ARTICLE 12
CLOSING CONDITIONS
12.1 Conditions to Obligations of NewFalcon and FHGLP.
All obligations of NewFalcon and FHGLP at the Closing are subject, at
FHGLP's option, to the fulfillment prior to and at the Closing Date of each of
the following conditions (any one or more of which may be waived by FHGLP, in
its discretion):
(a) All representations and warranties of the TCI Entities in
this Agreement shall be true in all material respects at and as of the Closing
Date as though made at and as of such date.
(b) The TCI Entities shall have performed and complied with in
all material respects all covenants and agreements required by this Agreement to
be performed or complied with by the TCI Entities prior to or on the Closing
Date.
(c) Each of the Required Consents shall have been duly
obtained and delivered to FHGLP without any condition or qualification that
would result in or constitute a material adverse change in the terms of the
License or Assumed TCI Contract that is the subject of the Required Consent.
(d) The aggregate number of customers in those Franchise Areas
that are Transferable Franchise Areas shall be at least ninety percent of the
aggregate number of customers in all Franchise Areas. For purposes of this
Agreement:
(1) A "Franchise Area" means any of the geographic
areas in which a TCI Entity is authorized to provide cable television service
pursuant to a municipal, county, or state Franchise or provides cable television
service in any geographic area in which a municipal, county, or state Franchise
is not required pursuant to applicable law;
(2) The number of customers in a Franchise Area
shall be the number of customers set forth next to the name of such Franchise
Area on Schedule 7.7 (regardless of the actual number of customers in such
Franchise Area on the Closing Date); and
(3) A "Transferable Franchise Area" means any
Franchise Area with respect to which (A) any Consent necessary for the
assignment of any municipal, county, or state Franchise for such Franchise Area
in connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained without any condition or qualification that
would result in or constitute a material adverse change in the terms of the
Franchise that is the subject of the Consent, or (B) no Consent is necessary for
the assignment of any municipal, county, or state Franchise for such Franchise
Area in connection with the
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consummation of the transactions contemplated by this Agreement, or (C) no
municipal, county, or state Franchise is required for the provision of cable
television service in the Franchise Area;
(e) The Amended FHGLP Agreement shall have been duly executed
and delivered by each FHGLP Partner.
(f) All waiting periods under the HSR Act applicable to this
Agreement or the transactions contemplated by this Agreement to be consummated
at the Closing shall have expired or been terminated.
(g) TCI shall have made or stand willing and able to make all
the deliveries required to be made by TCI pursuant to Section 13.2 and Section
13.6 and each FHGLP Partner shall have made or stand willing and able to make
all the deliveries required to be made by such FHGLP Partner pursuant to Section
13.5.
(h) FHGLP shall have arranged financing, on terms consistent
with Section 2.8(e) and otherwise acceptable to FHGLP, sufficient to permit the
Falcon Entities to repay in full, concurrently with or immediately following the
Closing, all senior Indebtedness of the Falcon Entities in existence as of the
Closing and, to the extent not otherwise included in such senior Indebtedness,
all Indebtedness incurred by Falcon Video to make payments with respect to the
Mezzanine Notes as described in Section 2.8(b) and all Indebtedness assumed by
NewFalcon or another Falcon Entity at the Closing pursuant to Section 4.1(c).
(i) The transactions described in Section 2.8(b) and Section
2.8(c) shall have been consummated (unless failure of either such transaction to
be consummated resulted from any breach by FHGLP of its obligations in this
Agreement).
(j) There shall not be in effect any judgment, decree, or
order that would prevent or make unlawful the Closing.
(k) The TCI Entities shall not have made any change in the
programming services offered by any cable television system included in the TCI
Systems that would have a material adverse effect on the TCI Systems after the
Closing (unless TCI shall have agreed to compensate the Falcon Entities in an
amount sufficient to offset completely such material adverse effect).
(l) If the Closing is to occur prior to August 1, 1998, the
TCI Entities shall have implemented (or shall have taken all actions required to
be taken before the date on which the Closing is to occur to cause to be
implemented on or before August 1, 1998) increases in the monthly rates payable
by at least ninety percent of the customers of the cable television systems
included in the TCI Systems.
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(m) If the Closing is to occur on or after August 1, 1998, the
TCI Entities shall have implemented increases in the monthly rates payable by at
least ninety percent of the customers of the cable television systems included
in the TCI Systems.
(n) Since March 31, 1997, there shall not have occurred any
material adverse change in the business, assets, properties, or financial
condition of the TCI Systems, including any damage, destruction, or loss
affecting any TCI Assets, other than any material adverse change resulting from
general economic conditions, governmental regulation, or other factors that
would reasonably be expected to have had a comparable effect on the Falcon
Systems.
12.2 Conditions to Obligations of TCI.
All obligations of TCI at the Closing are subject, at TCI's option, to
the fulfillment prior to and at the Closing Date of each of the following
conditions (any one or more of which may be waived by TCI, in its discretion):
(a) All representations and warranties of FHGLP in this
Agreement shall be true in all material respects at and as of the Closing Date
as though made at and as of such date.
(b) FHGLP shall have performed and complied with in all
material respects all covenants and agreements required by this Agreement to be
performed or complied with by them prior to or on the Closing Date.
(c) The aggregate number of customers in those Franchise Areas
that are Transferable Franchise Areas shall be at least ninety percent of the
aggregate number of customers in all Franchise Areas.
(d) The Amended FHGLP Agreement shall have been duly executed
and delivered by or on behalf of each FHGLP Partner.
(e) All waiting periods under the HSR Act applicable to this
Agreement or the transactions contemplated by this Agreement to be consummated
at the Closing shall have expired or been terminated.
(f) NewFalcon shall have made or shall stand willing and able
to make all the deliveries to TCI set forth in Section 13.3, FHGLP shall have
made or shall stand willing and able to make all the deliveries to NewFalcon set
forth in Section 13.4, and each Redeemed Partner shall have made or shall stand
willing and able to make all deliveries set forth in Section 13.6.
(g) NewFalcon shall stand willing and able to repay in full
all Indebtedness of the TCI Entities that will be assumed by NewFalcon or
another Falcon Entity as of the Closing pursuant to Section 4.1(c).
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(h) If all regulatory approvals required for the lawful
consummation of the acquisition of the Classic Systems pursuant to the Classic
Purchase Agreement have been obtained, the closing contemplated by the Classic
Purchase Agreement shall have occurred substantially in accordance with the
terms thereof.
(i) There shall not be in effect any judgment, decree, or
order that would prevent or make unlawful the Closing.
(j) Consummation of the transactions contemplated by this
Agreement would not cause the Operating Cash Flow Ratio of NewFalcon (as defined
in the NewFalcon Agreement) immediately after the Closing to exceed 7.5:1.
(k) Since March 31, 1997, there shall not have occurred any
material adverse change in the business, assets, properties, or financial
condition of the Falcon Systems, including any damage, destruction, or loss
affecting any assets of the Falcon Systems, other than any material adverse
change resulting from general economic conditions, governmental regulation, or
other factors that would reasonably be expected to have had a comparable effect
on the TCI Systems.
12.3 Conditions to Obligations of Each FHGLP Partner.
All obligations of some or all of the FHGLP Partners (as specified
below) at the Closing are subject to the fulfillment prior to and at the Closing
Date of the following conditions:
(a) In the case of each Redeemed Partner, FHGLP shall have
made or shall stand willing and able to make all the deliveries to such Redeemed
Partner set forth in Section 13.4 and TCI shall have delivered to such Redeemed
Partner the amount required to be paid to such Redeemed Partner pursuant to
Section 2.7(b).
(b) In the case of Hellman & Friedman Capital Partners II,
L.P. and Hellman & Friedman Capital Partners, A California Limited Partnership,
the transactions described in Section 2.8(c) shall have been consummated.
(c) In the case of Leeway & Co. and Mezzanine Lending
Associates III, L.P., the transactions described in Section 2.8(b) shall have
been consummated.
(d) In the case of each FHGLP Partner, the Amended FHGLP
Agreement shall have been duly executed and delivered by or on behalf of each
FHGLP Partner (other than such FHGLP Partner), and FHGLP and TCI stand willing
and able to consummate the transactions contemplated by Section 2.2(a) of this
Agreement substantially in accordance with the terms of this Agreement (as it
may be amended pursuant to Section 15.5).
(e) Marc B. Nathanson and the Nathanson Entities (as defined
in such agreement) shall have executed and delivered to each of the other
parties named in such
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agreement, a letter agreement with respect to tag-along rights substantially in
the form attached to this Agreement as Exhibit B.
12.4 Standard of Materiality.
(a) For purposes of Section 12.1, the representations and
warranties of the TCI Entities in this Agreement shall be deemed to be true in
all material respects at and as of the Closing Date as though made at and as of
such date, and the Entities TCI shall be deemed to have performed and complied
with in all material respects all covenants and agreements required by this
Agreement to be performed or complied with by the TCI Entities prior to or on
the Closing Date, if the aggregate effect of the failure of any such
representations and warranties to be true at and as of the Closing Date as
though made at and as of such date and of the failure of the TCI Entities to
have performed and complied with any of such covenants and agreements could not
reasonably be expected to reduce the net fair market value of NewFalcon's
interest in the Falcon Systems and the TCI Systems after the Closing (taking
into account any increase in liabilities and obligations and any reduction in
operating cash flow) by more than $12,500,000.
(b) For purposes of Section 12.2, the representations and
warranties of FHGLP in this Agreement shall be deemed to be true in all material
respects at and as of the Closing Date as though made at and as of such date,
and FHGLP shall be deemed to have performed and complied with in all material
respects all covenants and agreements required by this Agreement to be performed
or complied with by FHGLP prior to or on the Closing Date, if the aggregate
effect of the failure of any such representations and warranties to be true at
and as of the Closing Date as though made at and as of such date and of the
failure of FHGLP to have performed and complied with any of such covenants and
agreements could not reasonably be expected to reduce the net fair market value
of NewFalcon's interest in the Falcon Systems and the TCI Systems after the
Closing (taking into account any increase in liabilities and obligations and any
reduction in operating cash flow) by more than $25,000,000.
ARTICLE 13
CLOSING AND CLOSING DELIVERIES
13.1 Time and Place of Closing.
(a) Closing Date.
(1) Except as provided in Section 13.1(a)(2), Section
13.1(a)(3), or Section 13.1(a)(4), or as otherwise agreed to by TCI and FHGLP,
the Closing shall take place at 10:00 a.m. on a date, to be set by FHGLP on at
least ten Business Days' written notice to each other party, which shall not be
later than the earlier of:
(A) the sixtieth day after the satisfaction
of the last of the conditions specified in Section 12.1(c), Section 12.1(d), and
Section 12.1(f) to be satisfied; or
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(B) the fifteenth Business Day after the
satisfaction of the last of the conditions specified in Section 12.1(c), Section
12.1(d), and Section 12.1(f) to be satisfied (determined, solely for purposes of
this Section 13.1(a)(1)(B), as if Section 12.1(d) required the aggregate number
of customers in Transferable Franchise Areas to be at least ninety-five percent
of the aggregate number of customers in all Franchise Areas).
(2) If FHGLP fails to specify the date for Closing at
least ten Business Days prior to the earlier of the dates specified in Section
13.1(a)(1), then, subject to Section 13.1(a)(3) and Section 13.1(a)(4), the
Closing shall take place on the earlier of the dates specified in Section
13.1(a)(1).
(3) If on the date on which the Closing would
otherwise be required to take place pursuant to Section 13.1(a)(1) or Section
13.1(a)(2), (A) there shall be in effect any judgment, decree, or order that
would prevent or make unlawful the Closing, (B) any other circumstance beyond
the reasonable control of FHGLP shall exist that would prevent the Closing or
the satisfaction of any of the conditions precedent to the obligations of any
party set forth in this Agreement, (C) FHGLP and TCI are negotiating an
amendment to this Agreement pursuant to Section 2.5(a)(2), or (D) any of the
conditions specified in Section 12.1(h), Section 12.1(i), and Section 12.2(h)
shall not be satisfied, then FHGLP may, at its option, postpone the date on
which the Closing is required to take place until such date, to be set by FHGLP
on at least five Business Days' written notice to each other party, as soon as
practicable after such judgment, decree, or order ceases to be in effect, such
other circumstance ceases to exist, such amendment is agreed to, or such
conditions have been satisfied or are capable of being satisfied concurrently
with the Closing; provided, however, that FHGLP's postponement of the date on
which the Closing is required to take place shall not restrict the exercise by
either TCI or FHGLP of its rights under Section 14.2(b) or Section 14.3(b), as
applicable.
(4) If on the date on which the Closing would
otherwise be required to take place pursuant to this Section 13.1(a), FHGLP
shall have notified TCI pursuant to Section 3.8(b) of any circumstance described
in clause (1) of Section 3.8(b) or TCI shall have notified FHGLP pursuant to
Section 3.8(c) of any circumstance described in clause (1) of Section 3.8(c),
then the party receiving such notice may, at its option, postpone the date on
which the Closing is required to take place until a date, to be set by such
party on at least five Business Days' written notice to each other party, that
is not later than the thirtieth day after the date on which the Closing would
otherwise be required to take place pursuant to this Section 13.1(a), so as to
give such party an opportunity to remedy the circumstance described in the
notice received by it pursuant to Section 3.8(b) or Section 3.8(c), as
applicable; provided, however, that a party's postponement of the date on which
the Closing is required to take place shall not restrict the exercise by either
TCI or FHGLP of its rights under Section 14.2(b) or Section 14.3(b), as
applicable, except as provided therein.
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(b) Closing Place. The Closing shall be held at the offices of
Dow, Lohnes & Albertson, PLLC, 1200 New Hampshire Avenue, N.W., Suite 800,
Washington, D.C. 20036, or any other place that is agreed upon by TCI and FHGLP.
13.2 Deliveries by TCI.
On the Closing Date, TCI shall deliver to NewFalcon the following, in
form and substance reasonably satisfactory to FHGLP and its counsel:
(a) Duly executed bills of sale, special warranty deeds, motor
vehicle titles, assignments of TCI's Franchises and Licenses and the Assumed TCI
Contracts, and such other transfer documents which shall be sufficient to vest
good and marketable title to the TCI Assets in the name of NewFalcon (or its
designee), free and clear of any claims, liabilities, security interests,
mortgages, liens, pledges, conditions, charges, or encumbrances of any nature
whatsoever (except for Permitted Encumbrances).
(b) A manually executed copy of any instrument evidencing any
Consent that has been obtained.
(c) Any Management Agreement required pursuant to Section
11.10, duly executed by the appropriate TCI Entities.
(d) The Signal Sharing Agreement, duly executed by TCI
Cablevision of California, Inc.
(e) An opinion of counsel to TCI, dated as of the Closing
Date, substantially in the form attached to this Agreement as Exhibit C.
(f) Such additional documents, information, and materials as
FHGLP shall reasonably request.
13.3 Deliveries by NewFalcon.
On the Closing Date, NewFalcon shall deliver to TCI the following, in
form and substance reasonably satisfactory to TCI and its counsel:
(a) Appropriate assumption agreements, pursuant to which
NewFalcon or one or more other Falcon Entities shall assume the obligations and
liabilities described in Section 4.1 and Section 4.2.
(b) Any Management Agreement required pursuant to Section
11.10, duly executed by the appropriate Falcon Entity.
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(c) The Signal Sharing Agreement, duly executed by NewFalcon
or another Falcon Entity designated by NewFalcon.
(d) An opinion of counsel to FHGLP, dated as of the Closing
Date, substantially in the form attached to this Agreement as Exhibit D.
(e) Such additional documents, information, and materials as
TCI shall reasonably request.
13.4 Deliveries by FHGLP.
(a) On the Closing Date, FHGLP shall deliver to NewFalcon, in
form and substance reasonably satisfactory to TCI and its counsel, duly executed
bills of sale, assignments, and other transfer documents which shall be
sufficient to vest good and marketable title to the assets described in Section
2.2(a)(2) and Section 2.2(b) in the name of NewFalcon, free and clear of any
claims, liabilities, security interests, mortgages, liens, pledges, conditions,
charges, or encumbrances of any nature whatsoever (except for Permitted
Encumbrances and liens securing obligations of any Falcon Entity or obligations
of FHGLP to be assumed by NewFalcon pursuant to Section 4.2).
(b) On the Closing Date, FHGLP shall execute and deliver to
the Redeemed Partners appropriate instruments of conveyance to effect the
assignment to each Redeemed Partner of the NewFalcon Interest to be assigned to
such Redeemed Partner pursuant to Section 2.6(c).
13.5 Deliveries by the FHGLP Partners.
(a) On the Closing Date, each of Belo, Leeway & Co., and
Mezzanine Lending Associates III, L.P. shall execute and deliver appropriate
instruments of conveyance, accompanied by other appropriate certificates and
documents, all reasonably satisfactory to FHGLP in form and substance, to effect
the transfer to FHGLP of the partnership interests and, in the case of Leeway &
Co. and Mezzanine Lending Associates III, L.P., the Mezzanine Securities to be
contributed to FHGLP pursuant to Section 2.1(a)(1), free and clear of any
claims, liabilities, security interests, mortgages, liens, pledges, conditions,
charges, or encumbrances of any nature whatsoever (other than as specified in
Section 2.1(a)(1)).
(b) On the Closing Date, each Video Investors Partner shall
execute and deliver appropriate instruments of conveyance, accompanied by other
appropriate certificates and documents, all reasonably satisfactory to FHGLP in
form and substance, to effect the transfer to FHGLP of the partnership interests
to be contributed to FHGLP pursuant to Section 2.1(a)(2), free and clear of any
claims, liabilities, security interests, mortgages, liens, pledges, conditions,
charges, or encumbrances of any nature whatsoever (other than as specified in
Section 2.1(a)(2)).
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(c) On the Closing Date, each of the Redeemed Partners shall
execute and deliver appropriate instruments of conveyance, accompanied by other
appropriate certificates and documents, all reasonably satisfactory to FHGLP in
form and substance, to effect the transfer to FHGLP of the partnership interests
to be purchased and redeemed by FHGLP pursuant to Section 2.6(a).
(d) On the Closing Date, each FHGLP Partner shall execute and
deliver the Amended FHGLP Agreement.
(e) On the Closing Date, each FHGLP Partner shall execute and
deliver such additional documents, information, and materials as FHGLP shall
reasonably request.
13.6 Deliveries to Effect Sale of NewFalcon Interests.
On the Closing Date, immediately following the deliveries required by
Section 13.2, Section 13.3, Section 13.4, and Section 13.5.
(a) each Redeemed Partner shall execute and deliver to TCI
appropriate instruments of conveyance, accompanied by other appropriate
certificates and documents, all reasonably satisfactory to TCI in form and
substance, to effect the transfer to TCI of such Redeemed Partner's NewFalcon
Interest pursuant to Section 2.6(a), free and clear of any claims, liabilities,
security interests, mortgages, liens, pledges, conditions, charges, or
encumbrances of any nature whatsoever; and
(b) TCI shall pay to each Redeemed Partner, in immediately
available funds, the amount required to be paid to such Redeemed Partner
pursuant to Section 2.7(b).
ARTICLE 14
TERMINATION RIGHTS
14.1 Termination by Agreement.
This Agreement may be terminated at any time prior to the Closing by
agreement between FHGLP and TCI.
14.2 Termination by TCI.
This Agreement may be terminated by TCI prior to the Closing, by
delivering written notice to FHGLP of its election to terminate this Agreement,
under any of the following circumstances (unless any of such circumstances
occurred as a result of the failure of any TCI Entity to act in good faith or as
a result of any breach by the TCI Entities of their representations, warranties,
covenants, or other obligations in this Agreement):
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(a) If on the date on which the Closing is required to take
place pursuant to Section 13.1(a) any of the conditions precedent to the
obligations of TCI set forth in this Agreement has not been satisfied or waived
in writing by TCI.
(b) If the Closing shall not have occurred on or before
September 30, 1998, except that TCI may not elect to terminate this Agreement
pursuant to this Section 14.2(b):
(1) prior to December 31, 1998, if the failure of the
Closing to occur on or before September 30, 1998 resulted from the failure of
either or both of the conditions specified in Section 12.1(d) and Section
12.2(c) to have been satisfied;
(2) after an election by FHGLP to postpone the
Closing pursuant to Section 13.1(a)(4) and on or prior to the date on which the
Closing is required to take place pursuant to Section 13.1(a) (after giving
effect to such postponement), if TCI's failure to comply with Section 9.9
prevented FHGLP from remedying the circumstance described in TCI's notice
pursuant to Section 3.8(c) prior to the date on which the Closing would have
been required to take place pursuant to Section 13.1(a) if FHGLP had not
postponed the Closing pursuant to Section 13.1(a)(4);
(3) after an election by TCI to postpone the
Closing pursuant to Section 13.1(a)(4) and on or prior to the date on which the
Closing is required to take place pursuant to Section 13.1(a) (after giving
effect to such postponement); or
(4) after FHGLP delivers a notice pursuant to Section
13.1(a)(1) and on or prior to the date on which the Closing is to occur as
specified in such notice.
(c) If the TCI Percentage would equal or exceed fifty percent
and FHGLP and TCI were unable to agree on an amendment to this Agreement
pursuant to Section 2.5(a).
14.3 Termination by FHGLP.
This Agreement may be terminated by FHGLP prior to the Closing, by
delivering written notice to TCI of its election to terminate this Agreement,
under any of the following circumstances (unless any of such circumstances
occurred as a result of the failure of any Falcon Entity to act in good faith or
as a result of any breach by FHGLP of its representations, warranties,
covenants, or other obligations in this Agreement):
(a) If on the date on which the Closing is required to take
place pursuant to Section 13.1(a) any of the conditions precedent to the
obligations of FHGLP and NewFalcon set forth in this Agreement has not been
satisfied or waived in writing by FHGLP and NewFalcon.
(b) If the Closing shall not have occurred on or before
September 30, 1998, except that FHGLP may not elect to terminate this Agreement
pursuant to this Section 14.3(b):
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(1) prior to December 31, 1998, if the failure of the
Closing to occur on or before September 30, 1998 resulted from the failure of
either or both of the conditions specified in Section 12.1(d) and Section
12.2(c) to have been satisfied;
(2) after an election by TCI to postpone the Closing
pursuant to Section 13.1(a)(4) and on or prior to the date on which the Closing
is required to take place pursuant to Section 13.1(a) (after giving effect to
such postponement), if FHGLP's failure to comply with Section 10.10 prevented
TCI from remedying the circumstance described in FHGLP's notice pursuant to
Section 3.8(b) prior to the date on which the Closing would have been required
to take place pursuant to Section 13.1(a) if TCI had not postponed the Closing
pursuant to Section 13.1(a)(4); or
(3) after an election by FHGLP to postpone the
Closing pursuant to Section 13.1(a)(4) and on or prior to the date on which the
Closing is required to take place pursuant to Section 13.1(a) (after giving
effect to such postponement).
(c) If the TCI Percentage would equal or exceed fifty percent
and FHGLP and TCI were unable to agree on an amendment to this Agreement
pursuant to Section 2.5(a).
14.4 Rights on Termination.
Upon the termination of this Agreement, (a) each of FHGLP and TCI shall
have all rights and remedies available to it at law or equity as a result of any
breach of any representation, warranty, or covenant made by any other party for
such party's benefit, and (b) no party other than FHGLP and TCI shall have any
rights or remedies arising out of this Agreement or any breach of any
representation, warranty, or covenant made by any party to this Agreement.
14.5 Specific Performance.
The parties recognize that if any party breaches this Agreement and
refuses to perform under the provisions of this Agreement, monetary damages
alone would not be adequate to compensate the other parties for their injury.
Each party shall therefore be entitled, in addition to any other remedies that
may be available, including money damages, to obtain specific performance of the
terms of this Agreement. If any action is brought by any party to enforce this
Agreement, the other parties shall waive the defense that there is an adequate
remedy at law.
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ARTICLE 15
MISCELLANEOUS
15.1 Survival of Representations and Warranties.
(a) All representations and warranties contained in this
Agreement with respect to (1) title to any partnership interest or other asset
to be contributed to FHGLP or NewFalcon pursuant to Section 2.1(a) or Section
2.2, (2) the authority of each party to execute and deliver this Agreement and
the documents contemplated hereby and to perform and comply with the terms,
covenants, and conditions of this Agreement and the documents contemplated
hereby, and (3) the enforceability of this Agreement, shall survive the Closing
indefinitely. All covenants contained in this Agreement that by their terms are
to be performed in whole or in part at or following the Closing shall survive
until fully discharged or performed.
(b) All representations and warranties contained in this
Agreement and not described in Section 15.1(a) and all covenants in this
Agreement that by their terms are only to be performed prior to the Closing
shall not survive the Closing. Except with respect to those representations,
warranties, and covenants that survive the Closing pursuant to Section 15.1(a),
after the Closing, no party shall have any recourse against any other party as a
result of the breach of any representation, warranty, or covenant contained in
this Agreement, and each party hereby unconditionally and irrevocably waives and
releases any and all actual or potential claims that it may have against any
other party (and its officers, directors, stockholders, partners, and
affiliates) as a result of the breach by such party of any representation,
warranty, or covenant contained in this Agreement.
(c) In determining the accuracy of representations and
warranties in this Agreement as of a date other than the date of this Agreement,
any representation and warranty in this Agreement that expressly refers to facts
existing on the date of this Agreement or on any other specified date shall
continue to be construed only to refer to facts existing on the date specified
and shall not be construed as a representation or warranty concerning facts
existing at any later date.
15.2 Taxes, Fees, and Expenses.
(a) NewFalcon shall pay all sales, use, transfer, and
recordation and documentary taxes and fees, if any, arising out of the transfer
of the TCI Assets to NewFalcon pursuant to this Agreement.
(b) Any filing fee required with respect to any filing
required to be made under the HSR Act in connection with the transactions
contemplated by this Agreement shall be paid one-half by FHGLP and one-half by
TCI, and, if the Closing occurs, NewFalcon shall reimburse FHGLP and TCI for
such costs immediately following the Closing.
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(c) Except as otherwise provided in this Agreement, each party
hereto shall pay its own attorney's fees and other expenses incurred in
connection with the authorization, preparation, execution, and performance of
this Agreement. The obligations of the parties under this Section 15.2(c) will
survive the termination of this Agreement.
15.3 Notices.
All notices, demands, and requests required or permitted to be given
under the provisions of this Agreement (a) shall be in writing, (b) may be sent
by telecopy (with automatic machine confirmation), delivered by personal
delivery, or sent by commercial delivery service or certified mail, return
receipt requested, (c) shall be deemed to have been given on the date of actual
receipt, which may be conclusively evidenced by the date set forth in the
records of any commercial delivery service or on the return receipt, and (d)
shall be addressed to the recipient at the address specified in Schedule 15.3
or, with respect to any party, to any other address that such party may from
time to time designate in a writing delivered in accordance with this Section
15.3.
15.4 Benefit and Binding Effect.
No party hereto may assign this Agreement without the prior written
consent of the other parties hereto, except that, if Mezzanine Lending
Associates III, L.P. assigns to any Person all of its interest in the Mezzanine
Notes and the Mezzanine Securities, in accordance with the terms of the
Mezzanine Notes and the Mezzanine Securities, then, without the consent of any
other party, Mezzanine Lending Associates III, L.P. may assign its rights and
delegate its obligations under this Agreement to the assignee of its interest in
the Mezzanine Notes and the Mezzanine Securities, and the Amended FHGLP
Agreement shall be amended to substitute such assignee for Mezzanine Lending
Associates III, L.P. thereunder. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
15.5 Entire Agreement.
(a) This Agreement, and all Schedules and Exhibits hereto
(which are hereby incorporated herein), and all documents and certificates to be
delivered by the parties pursuant hereto collectively represent the entire
understanding and agreement among the parties with respect to the subject matter
hereof. This Agreement supersedes all prior negotiations, letters of intent, or
other writings among the parties with respect to the subject matter hereof, and
cannot be amended, supplemented, or modified except by waiver pursuant to
Section 15.6 or a written agreement which makes specific reference to this
Agreement and which is signed by the party against which enforcement of any such
amendment, supplement, or modification is sought. Notwithstanding the foregoing
provisions of this Section 15.5(a), this Agreement does not impair or otherwise
affect the validity of (1) any consent previously granted by any FHGLP Partner
with respect to the execution, delivery, and performance of this Agreement or
any other
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document or instrument relating to the subject matter of this Agreement or (2)
any power of attorney granted by any FHGLP Partner authorizing any Person to
execute and deliver on behalf of such FHGLP Partner this Agreement or any other
document or instrument relating to the subject matter of this Agreement.
(b) Notwithstanding any provision of this Agreement to the
contrary, this Agreement may be amended, supplemented, or modified by FHGLP and
TCI, without the consent or waiver of any other party, to modify any obligation,
representation, warranty, covenant, or agreement of FHGLP, TCI, or any of their
respective Affiliates under this Agreement, to modify the structure of the
transactions contemplated by this Agreement so as to address tax, accounting,
legal, financing, or other relevant concerns, to permit the consummation prior
to or contemporaneously with the Closing of any transaction that could be
consummated after the Closing without the consent of any party to this Agreement
other than FHGLP, TCI, or any of their respective Affiliates under the Amended
FHGLP Agreement and the NewFalcon Agreement, to increase the net fair market
value of any Falcon Entity to reflect the acquisition by such Falcon Entity
after the date of this Agreement and prior to Closing of any cable television
system (other than the Classic Systems), or for any other reasonable purpose,
except that no amendment, supplement, or modification shall (1) materially
reduce the amount payable to Hellman & Friedman Capital Partners II, L.P. and
Hellman & Friedman Capital Partners, A California Limited Partnership, pursuant
to Section 2.7(b), without the consent of Hellman & Friedman Capital Partners
II, L.P. and Hellman & Friedman Capital Partners, A California Limited
Partnership, (2) materially reduce the amount payable to a Redeemed Partner (the
"Affected Redeemed Partner") pursuant to Section 2.7(b) to a greater extent
(proportionate to their percentage interests in FHGLP on the date of this
Agreement) than such amendment, supplement, or modification reduces the amount
payable to Hellman & Friedman Capital Partners II, L.P. or Hellman & Friedman
Capital Partners, A California Limited Partnership, without the consent of such
Affected Redeemed Partner, or (3) except in the case of an amendment to increase
the net fair market value of any Falcon Entity to reflect the acquisition by
such Falcon Entity after the date of this Agreement and prior to Closing of any
cable television system (other than the Classic Systems), adversely affect the
economic interests of a FHGLP Partner (the "Affected FHGLP Partner") under this
Agreement in any other respect to a greater extent (proportionate to their
percentage interests in FHGLP effective as of the Closing) than such amendment,
supplement, or modification affects the economic interests of any FHGLP Partner
that is controlled directly or indirectly by Marc B. Nathanson through the
ownership of voting securities, without the consent of such Affected FHGLP
Partner.
15.6 Waiver of Compliance; Consents.
Any failure of any of the parties to comply with any obligation,
representation, warranty, covenant, or agreement herein may be waived by the
party entitled to the benefits thereof only by a written instrument signed by
the party granting such waiver, but such waiver or failure to insist upon strict
compliance with such obligation, representation, warranty, covenant, or
agreement shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Notwithstanding any provision of this Agreement to
the contrary, (a) any failure of TCI
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<PAGE>
to comply with any obligation, representation, warranty, covenant, or agreement
herein (except obligations of TCI pursuant to Section 2.7(b) and Section 13.6)
may be waived by FHGLP, without the consent or waiver of any other party, and
any failure of FHGLP to comply with any obligation, representation, warranty,
covenant, or agreement herein (except covenants and agreements expressly made
for the benefit of parties other than TCI) may be waived by TCI, without the
consent or waiver of any other party. Whenever this Agreement requires or
permits consent by or on behalf of any party hereto, such consent shall be given
in writing in a manner consistent with the requirements for a waiver of
compliance as set forth in this Section 15.6.
15.7 Severability.
If any provision hereof 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.
15.8 Governing Law.
This Agreement shall be governed, construed, and enforced in accordance
with the laws of the State of California, without regard to conflicts of law
principles thereunder, and the United States Arbitration Act, to the extent
provided in Section 15.9.
15.9 Disputed Matters.
(a) Generally. If a dispute arises out of or relates to this
Agreement or any alleged breach thereof, the parties involved in the dispute
will attempt in good faith to resolve such dispute through negotiation. Any
party may initiate negotiations by providing written notice in letter form to
the other party or parties involved in the dispute setting forth in general
terms the subject of the dispute. Representatives of each party involved in the
dispute with full settlement authority shall meet at a mutually agreeable time
and place within thirty days of the date of the initial notice in order to
attempt to resolve the dispute. If the dispute is not resolved at this meeting,
the parties involved in the dispute can agree to schedule one or more additional
meetings to attempt to resolve the dispute or any party involved in the dispute
can elect, by written notice to each other party involved in the dispute, to
require that the dispute be submitted for mediation as set forth below.
(b) Mediation. If a dispute arises out of or relates to this
Agreement or any alleged breach thereof and if the dispute is not settled
through negotiation as described in Section 15.9(a), the parties involved in the
dispute agree to submit the dispute for mediation administered by the American
Arbitration Association (or any organization successor thereto) ("AAA") under
its Commercial Mediation Rules before resorting to arbitration. Any party
participating in the negotiation conducted pursuant to Section 15.9(a) may
initiate mediation pursuant to Rule 2 of the AAA's Commercial Mediation Rules.
The parties will cooperate with the AAA and with one another in the appointment
of a mediator and in scheduling the mediation
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proceedings. Unless otherwise agreed by the parties involved in the dispute, the
first mediation session shall be held no later than thirty days after the date
of filing the written request for mediation, and the memorandum provided for
under Rule 9 of the Commercial Mediation Rules shall be provided to the mediator
at least five days prior to the first mediation session. All offers, promises,
conduct, and statements, whether oral or written, made in the course of the
mediation by any of the parties, their agents, employees, experts, and
attorneys, and by the mediator or any AAA employees, shall be confidential and
inadmissible for any purposes, including impeachment, in any arbitration or
other proceeding involving the parties, but evidence that is otherwise
admissible or discoverable shall not be rendered inadmissible or
non-discoverable as a result of its use in the mediation. Any party involved in
the dispute may initiate arbitration with respect to the matters submitted to
mediation by filing a written demand for arbitration with the AAA no sooner than
thirty days after the first mediation session. The mediation may continue after
the commencement of arbitration if the parties involved so agree. Unless
otherwise agreed by the parties involved in the dispute, the mediator shall be
disqualified from serving as arbitrator in the case.
(c) Arbitration. If a dispute arises out of or relates to this
Agreement or any alleged breach thereof, and if the dispute is not resolved
through negotiation and mediation as described in Section 15.9(a) and Section
15.9(b), such dispute shall be settled by arbitration in Phoenix, Arizona, in
accordance with the Commercial Arbitration Rules of the AAA and the
Supplementary Procedures for Large, Complex Disputes of the AAA or other rules
agreed to by the parties involved in the dispute, by a single arbitrator.
(d) United States Arbitration Act. The parties acknowledge
that this Agreement evidences a transaction involving interstate commerce.
Insofar as it applies, the United States Arbitration Act shall govern the
interpretation of, enforcement of, and proceedings pursuant to the arbitration
clause in this Agreement. After arbitration has commenced pursuant to Rule 6 of
the Commercial Arbitration Rules, any party involved in the dispute may make an
application to the arbitrator seeking injunctive relief to maintain the status
quo until such time as the arbitration award is rendered or the dispute is
otherwise resolved.
(e) Request for Arbitration. The party requesting arbitration
shall do so by giving notice to that effect (the "Arbitration Notice") to the
other party or parties involved in the dispute and by filing the notice with the
AAA in accordance with Rule 6 of the Commercial Arbitration Rules. Within thirty
days after the Arbitration Notice is filed, the parties involved in the dispute
shall select an arbitrator using the procedures for arbitrator selection of the
AAA from the arbitrators in the Large, Complex case pool for the Phoenix,
Arizona AAA office.
(f) Administrative Conference and Hearing. Upon selection of
the arbitrator, the parties involved in the dispute shall conduct an initial
administrative conference provided for by the Supplementary Procedures for
Large, Complex Disputes of the AAA at which the parties involved in the dispute
shall agree to a schedule and procedures for the exchange of relevant
information and the hearing and to any other matters the arbitrator or the
parties involved in the dispute deem appropriate. The parties involved in the
dispute may submit to the arbitrator prior
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<PAGE>
to the hearing any written information and may make any oral presentation at the
hearing that the parties involved in the dispute deem appropriate to support
their respective positions with respect to the disputed matter. At any hearing
before the arbitrator at which witnesses present testimony either in person or
telephonically the parties involved in the dispute shall be entitled to cross
examine the witnesses; provided, however, that this provision shall not be
deemed to preclude the ability of any party to present testimony by affidavit in
the arbitration hearing.
(g) Decision and Award. The arbitrator shall render his
written decision and award, including a statement of reasons upon which such
award is based, within thirty days after the arbitration hearing. Except insofar
as the United States Arbitration Act applies to such matters, the agreement to
arbitrate set forth in this Section 15.9 shall be construed, and the legal
relations among the parties shall be determined in accordance with, the
substantive laws of the State of California as provided for in Section 15.8 of
this Agreement. The decision of the arbitrator shall be in writing and shall be
binding upon the parties involved in the dispute, final and non-appealable.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof.
(h) Exclusivity of Arbitration. Except as provided under the
United States Arbitration Act, no action at law or in equity based upon any
dispute that is subject to arbitration under this Section 15.9 shall be
instituted.
(i) Fees and Expenses. All expenses of any arbitration
pursuant to this Section 15.9, including fees and expenses of the parties'
attorneys, fees and expenses of the arbitrator, and fees and expenses of any
witness or the cost of any proof produced at the request of the arbitrator,
shall be borne as determined by the arbitrator. If any party institutes any
action in law or in equity in violation of Section 15.9(h) and any other party
successfully compels arbitration under this Section 15.9, the party instituting
such action shall pay all reasonable expenses incurred by any other party
relating to such action, including reasonable fees and expenses of any other
party's attorneys.
15.10 Captions.
The article and section captions of this Agreement are for convenience
only and do not constitute a part of this Agreement.
15.11 Rights Cumulative.
Except as specified, all rights and remedies of each of the parties
under this Agreement will be cumulative, and the exercise of one or more rights
or remedies will not preclude the exercise of any other right or remedy
available under this Agreement or applicable law.
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<PAGE>
15.12 Construction.
This Agreement has been negotiated by the parties and their respective
legal counsel, and legal or equitable principles that might require the
construction of this Agreement or any provision of this Agreement against the
party drafting this Agreement will not apply in any construction or
interpretation of this Agreement.
15.13 Counterparts.
This Agreement may be executed in any number of counterparts, each of
which, when so executed and delivered, shall be an original, and all of which
counterparts together shall constitute one and the same fully executed
instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Contribution and
Purchase Agreement as of the day first mentioned above.
Falcon Holding Group, L.P.
By Falcon Holding Group, Inc.
By: /s/ Marc B. Nathanson
----------------------
Name: Marc B. Nathanson
Title: Chief Executive Officer
Falcon Communications, L.P.
By Falcon Holding Group, L.P.
By Falcon Holding Group, Inc.
By: /s/ Marc B. Nathanson
----------------------
Name: Marc B. Nathanson
Title: Chief Executive Officer
Falcon Holding Group, Inc.
By: /s/ Marc B. Nathanson
----------------------
Name: Marc B. Nathanson
Title: Chief Executive Officer
Falcon Cable Trust
By: /s/ Marc B. Nathanson
-----------------------
Marc B. Nathanson, trustee
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<PAGE>
Blackhawk Holding Company, Inc.
By: /s/ Marc B. Nathanson
----------------------
Name: Marc B. Nathanson
Title: President
Advance Company, Ltd.
By: /s/ Marc B. Nathanson
----------------------
Name: Marc B. Nathanson
Title: President
Advance TV of California, Inc.
By: /s/ Marc B. Nathanson
----------------------
Name: Marc B. Nathanson
Title: President
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<PAGE>
TCI Falcon Holdings, LLC
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI Cablevision of Alabama, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI of Decatur, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI Cablevision of California, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI of Northern California, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI Cablevision of Missouri, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
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<PAGE>
TCI Cablevision of Oregon, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI of Northern New Jersey, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI Cablevision of Washington, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI Cablevision of Yakima, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI Cablevision of Yakima Valley, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI Cablevision of Okanogan Valley, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
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<PAGE>
Tele-Vue Systems, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
TCI Cablevision of Vermont, Inc.
By: /s/ William R. Fitzgerald
--------------------------
Name: William R. Fitzgerald
Title: Vice President
Belo Ventures, Inc.
By: /s/ Michael D. Perry
--------------------
Name: Michael D. Perry
Title: Vice President/Treasurer
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<PAGE>
Nathanson Family Trust
By: /s/ Ned Robertson
-----------------
Ned Robertson, trustee
/s/ Stanley S. Itskowitch
-------------------------
Stanley S. Itskowitch
/s/ Frank J. Intiso
-------------------
Frank J. Intiso
/s/ Michael K. Menerey
----------------------
Michael K. Menerey
/s/ Leonard J. Baxt
-------------------
Leonard J. Baxt
/s/ Steven Rattner
------------------
Steven Rattner
/s/ Liliane Vladimirschi
------------------------
Liliane Vladimirschi
/s/ Greg Nathanson
------------------
Greg Nathanson
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<PAGE>
Leeway & Co.
By State Street Bank and Trust Company
By: /s/ Kimberly A. Moynihan
------------------------
Name: Kimberly A. Moynihan
Title: Assistant Secretary
MLC Investors, L.P.
By Leeway & Co.
By State Street Bank and Trust Company
By: /s/ Kimberly A. Moynihan
------------------------
Name: Kimberly A. Moynihan
Title: Assistant Secretary
Mezzanine Lending Associates III, L.P.
By Mezzanine Lending Management III, L.P.
By: /s/ Costa Littas
----------------
Name: Costa Littas
Title: Managing Director
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<PAGE>
Toronto Dominion Investments, Inc.
By: /s/ Martha L. Gariepy
---------------------
Name: Martha l. Gariepy
Title: Vice President
Boston Ventures Limited Partnership II
By Boston Ventures Company Limited
Partnership II
By: /s/ Roy F. Coppedge
-------------------
Name: Roy F. Coppedge
Title: General Partner
Boston Ventures IIA Investment Corporation
By: /s/ Roy F. Coppedge
-------------------
Name: Roy F. Coppedge
Title: General Partner
BancBoston Capital, Inc.
By: /s/ William O. Charman
----------------------
Name: William O. Charman
Title: Vice President
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<PAGE>
/s/ James Pinto
----------------
James Pinto
/s/ William L. Rogers
---------------------
William L. Rogers
Cameron Rogers Trust
By: /s/ William L. Rogers
---------------------
Name: William L. Rogers
Title: Trustee
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Hellman & Friedman Capital Partners II,
L.P.
By Hellman & Friedman Investors, L.P.,
its general partner
By Hellman & Friedman Investors, Inc.,
its general partner
By: /s/ Joseph Niehaus
------------------
Name: Joseph Niehaus
Title: Vice President
Hellman & Friedman Capital Partners,
A California Limited Partnership
By Hellman & Friedman Capital Management,
A California Limited Partnership,
its general partner
By Hellman & Friedman Capital Management,
Inc., its general partner
By: /s/ Joseph Niehaus
------------------
Name: Joseph Niehaus
Title: Vice President
DIS Investments, Inc.
By: /s/ Lam Chih Tsung
------------------
Name: Lam Chih Tsung
Title: Director
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<PAGE>
Falcon First Communications, L.L.C.
By Madison Dearborn Partners VI,
its Manager
By: /s/ Paul J. Finnegan
--------------------
Name: Paul J. Finnegan
Title: General Partner
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