Quarterly Report — Form 10-Q Filing Table of Contents
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1: 10-Q Time Warner Inc. HTML 816K
2: EX-10.2 EX-10.2 Amendment No.2 to Asset Purchase Agreement HTML 1.74M
3: EX-10.3 EX-10.3 Amendment No.3 to Asset Purchase Agreement 7 26K
4: EX-10.4 EX-10.4 Letter Agreement Dated as of June 21, 2006 8 31K
5: EX-10.5 EX-10.5 Letter Agreement Dated as of June 21, 2006 3 14K
6: EX-10.6 EX-10.6 Amendment No.4 to Asset Purchase Agreement HTML 23K
7: EX-31.1 EX-31.1 Section 302 Certification of Peo 2± 11K
8: EX-31.2 EX-31.2 Section 302 Certification of Pfo 2± 11K
9: EX-32 EX-32 Section 906 Certification of Peo/Pfo 1 7K
EX-10.2 — EX-10.2 Amendment No.2 to Asset Purchase Agreement
EX-10.2 AMENDMENT NO.2 TO ASSET PURCHASE AGREEMENT
Exhibit 10.2
[With reference
to Exhibits A and B, inserted text is highlighted and deleted text is in square brackets]
EXECUTION
COPY
AMENDMENT NO. 2 TO
ASSET PURCHASE AGREEMENT BETWEEN
ADELPHIA COMMUNICATIONS CORPORATION AND
TIME WARNER NY CABLE LLC
This Amendment No. 2, dated June 21, 2006 (this “Amendment”),
amends the Asset Purchase Agreement, between Adelphia Communications
Corporation (“Seller”) and Time Warner NY Cable LLC (“Buyer”),
dated as of April 20, 2005, as amended by Amendment No.1, dated June 24,2005 (the “June Amendment”) and as otherwise amended to date (as so
amended, the “TWNY Purchase Agreement”). Capitalized terms used but not
otherwise defined herein shall have the respective meanings ascribed to them in
the TWNY Purchase Agreement.
WHEREAS, the parties hereto desire to amend the TWNY
Purchase Agreement pursuant to Section 9.2 thereof.
NOW, THEREFORE, in consideration of the foregoing, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. The TWNY Purchase Agreement shall be amended by
inserting or deleting, as applicable, the marked changes set forth on the
blackline attached hereto as Exhibit A.
2. In the event a Reversion Notice is delivered by Seller
to Buyer on or prior to the earlier of (x) July 31, 2006 and (y) the
entry of both the 363 Order and the Transaction Order (as defined in the
Friendco Purchase Agreement) (unless, in the case of this clause
(y), Seller has determined in good faith that the Plan is more likely to
be consummated in a reasonable timeframe than are both the 363 Sale and
the JV Plan (taking into account whether each of the 363 Order and the
Transaction Order (as defined in the Friendco Purchase Agreement) is a Final
Order, but only if Buyer and Friendco, respectively, have acknowledged in
writing that the 363 Order and the Transaction Order (as defined under the
Friendco Purchase Agreement) satisfy Section 6.2(g) of the TWNY
Purchase Agreement and Section 6.2(g) of the Friendco Purchase
Agreement, respectively)), the amendments made to the TWNY Purchase Agreement
pursuant to Paragraph 1 of this Amendment shall be voided as of the date such Reversion
Notice is delivered and the TWNY Purchase Agreement shall be deemed to be
unchanged by Paragraph 1 of this Amendment, except that the marked changes set
forth on the blackline attached hereto as Exhibit B will remain in
effect. Capitalized terms used in this Paragraph 2 shall have the respective
meanings ascribed to them in Exhibit A hereto.
3. Paragraph 1 of this Amendment shall not in any way
supersede or alter the amendments to the TWNY Purchase Agreement set forth in
the June Amendment or any notice, request, demand, approval, consent or
other
communication delivered or executed in connection with
the TWNY Purchase Agreement, except to the extent expressly inconsistent
therewith.
4. Buyer,
Seller and Friendco agree to amend that certain expanded transaction letter
agreement, by and among, Buyer, Seller and Friendco, dated as of April 20,2005, to reflect, in the case of a 363 Sale (as defined in Exhibit A
hereto), the amendments set forth in Exhibit A hereto in a mutually
satisfactory manner.
5. Except
as specifically amended by this Amendment, the TWNY Purchase Agreement shall
remain in full force and effect and is hereby ratified and confirmed; itbeingunderstoodthat, for the avoidance of doubt, the
phrases “the date hereof” and “the date of this Agreement”, and any
substantially similar phrase, shall be deemed to refer to April 20, 2005. Subject
to Paragraph 2, this Amendment shall be construed as one with the TWNY Purchase
Agreement, and the TWNY Purchase Agreement shall, where the context requires,
be read and construed so as to incorporate this Amendment.
6. This Amendment shall be governed by and construed in
accordance with the TWNY Purchase Agreement.
7. This Amendment may be executed in
one or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same Amendment.
2
IN WITNESS WHEREOF, the parties have executed or
caused this Amendment to be executed as of the date first written above.
Form of Adelphia Registration Rights and Sale Agreement
Exhibit 5.15(a)(i)
—
Form of Expanded
Agreement
ANNEXES
Annex A
—
Seller Disclosure
Schedule
Annex B
—
Buyer Disclosure Schedule
-5-
ASSET PURCHASE AGREEMENT, dated as
of April 20, 2005, between Adelphia Communications Corporation, a Delaware
corporation (“Seller”), and Time Warner NY Cable LLC, a Delaware limited
liability company that has elected to be classified as a corporation for United
States federal income tax purposes (“Buyer”). Capitalized terms used but
not otherwise defined herein shall have the respective meanings ascribed to
such terms in Article I.
W I T N
E S S E T H:
WHEREAS, Seller and certain of its
Affiliates are debtors and debtors in possession (the “Debtors”) under
chapter 11 of title 11 of the United States Code, 11 U.S.C. §§101 et seq. (the “Bankruptcy Code”),
having each commenced voluntary cases (jointly administered as No. 02-41729
(REG)) (the “Reorganization Case”) on or after June 10, 2002 (the “Petition
Date”) in the Bankruptcy Court;
WHEREAS, Seller and its Affiliates
are engaged in the business of operating Systems providing customers with
analog and digital video services, high-speed Internet access and other
services, including telephony services, in the geographical areas listed on Schedule
A of the Seller Disclosure Schedule and on Schedule A of the Seller
Disclosure Schedule (as defined in the Friendco Purchase Agreement) to the
Friendco Purchase Agreement, and are engaged in the other businesses and have
such other holdings as are set forth on Schedule B of the Seller
Disclosure Schedule (together, the “Business”);
WHEREAS, Time Warner Cable Inc., a
Delaware corporation (“Parent”), and its Subsidiaries, including Buyer,
are engaged in the business of operating Systems providing customers with
analog and digital video services, high-speed Internet access and other
services, including telephony services, in the geographical areas listed on Schedule
C of the Buyer Disclosure Schedule (the “Parent Business”);
WHEREAS, Seller desires to sell and
assign, and to cause certain of its Affiliates to sell and assign, to Buyer and
Buyer desires to purchase and assume from Seller and such Affiliates certain
Assets and Liabilities of the Business, as more particularly set forth herein,
including the Systems servicing the geographical areas listed in Part 1 of
Schedule A of the Seller Disclosure Schedule (the “Group 1 Systems”),
Part 2A of Schedule A of the Seller Disclosure Schedule (the “Group
2 Systems”) and Part 2B of Schedule A of the Seller Disclosure
Schedule (the “MCE Systems” and, together with the Group 1 Systems and
Group 2 Systems, the “Acquired Systems”);
WHEREAS, the parties intend that the
Transaction shall constitute a taxable transaction for all income Tax purposes
and, for the avoidance of doubt, the Transaction shall not be governed by
Sections 351 or 368(a) of the Code (or similar provisions of state, local
or foreign Tax Law, as applicable);
WHEREAS, simultaneously with the
execution hereof, Seller and Comcast Corporation, a Pennsylvania corporation (“Friendco”),
are entering into an Asset Purchase Agreement (together with the schedules and
exhibits thereto, all as
amended from time to time with the
approval of Buyer and disregarding the effectiveness of any waiver by Friendco
not approved by Buyer and any waiver by Seller not approved by Buyer to the
extent it adversely affects Buyer, the “Friendco Purchase Agreement”)
pursuant to which Seller has agreed to sell and assign, and to cause certain of
its Affiliates to sell and assign, to Friendco and Friendco has agreed to
purchase and assume from Seller and such Affiliates on the terms set forth
therein, certain Assets and Liabilities of the Business, as more particularly
set forth therein (the “Friendco Business”);
WHEREAS, simultaneously with the
execution hereof, Parent, Friendco and certain of their Affiliates are entering
into the Exchange Agreement, pursuant to which Buyer and/or certain of its
Affiliates will convey to Friendco and/or certain of its Affiliates and
Friendco and/or certain of its Affiliates will assume from Buyer and/or certain
of its Affiliates the Business Related to the Group 1 Systems and the Group 1
Shared Assets and Liabilities (the “Group 1 Business”), together with
additional Systems owned and managed by certain of Parent’s Subsidiaries, in
exchange for a portion of the Friendco Business, together with additional
Systems owned and managed by Friendco or its Affiliates, all as more
specifically set forth in the Exchange Agreement (the “Exchange”);
WHEREAS, upon consummation of the
Transaction and the Exchange, the portion of the Business retained by Buyer
will be (a) that portion of the Business Related to the Group 2 Systems, (b) that
portion of the Business Related to the MCE Systems and (c) the Group 2
Shared Assets and Liabilities (collectively, the “Group 2 Business” and
together with the Group 1 Business, the “Acquired Business”); provided,
however, that the Acquired Business shall exclude the Assets and
Liabilities identified on Schedule D of the Seller Disclosure Schedule;
WHEREAS, as an inducement to Seller
to enter into this Agreement, simultaneously with the execution hereof, Parent,
Buyer and Seller are entering into a Parent Agreement pursuant to which Parent
is guaranteeing the performance of Buyer hereunder (the “Parent Agreement”);
WHEREAS, prior to or at the Closing,
Seller, Buyer and an escrow agent to be mutually selected by Buyer and Seller
(the “Escrow Agent”) will enter into an escrow agreement in form and
substance reasonably acceptable to Buyer and Seller (the “Escrow Agreement”);
WHEREAS, in connection with the
Transaction, Seller and/or its Affiliates, on the one hand, and Buyer, Parent
and/or certain of Parent’s Controlled Affiliates, on the other hand, shall
enter into the other Ancillary Agreements; and
WHEREAS,
the Debtors have agreed to file the Plan, the JV Plan and the 363 Motion with the Bankruptcy
Court to implement the Transaction upon the terms and subject to the conditions
set forth herein.
2
NOW, THEREFORE, in consideration of
the premises and the mutual representations, warranties, covenants and
undertakings contained herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section 1.1 Certain Definitions. As used in this
Agreement, the following terms have the meanings set forth below:
“363
Motion” means the motion filed by Seller and its Affiliates with the
Bankruptcy Court on May 26, 2006 seeking entry of the 363 Order, as
amended, supplemented or modified from time to time in accordance with Section 5.13,
together with any exhibits thereto.
“363
Order” means an order of the Bankruptcy Court pursuant to sections 105, 363
and 365 of the Bankruptcy Code, which satisfies the requirements of Section 5.13
and authorizes and approves the 363 Sale.
“363
Sale” means the consummation of the Transaction pursuant to sections 105,
363 and 365 of the Bankruptcy Code.
“Accounts Receivable” means,
with respect to each Specified Business, all Subscriber, trade and other
accounts and notes receivable, and other miscellaneous receivables of such
Specified Business arising out of the sale or other disposition of goods or
services of such Specified Business.
“Acquire” means to directly
or indirectly acquire, receive in exchange or redemption, subscribe for,
purchase (by merger, consolidation, combination, recapitalization or other
reorganization) or otherwise obtain an interest in, by operation of Law or
otherwise.
“Acquired Business” has the
meaning set forth in the Recitals.
“Acquired Systems” has the
meaning set forth in the Recitals.
“Acquisition” has the meaning
set forth in Section 5.10.
“Acquisition Proposal” has
the meaning set forth in Section 5.10.
“Additional
Discharge” means, (a) with respect to any Person[,] except as
otherwise provided in the Plan and/or the Confirmation Order (or, to the extent approved
by Buyer (such approval not to be unreasonably withheld), such other plan that
includes such Person as a debtor and the confirmation order of the Bankruptcy
Courtapproving such plan and
effecting the Additional Discharge), the discharge and/or equivalent effect
granted pursuant to such confirmation order and sections 363, 1123 and
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1141 of
the Bankruptcy Code, and in each case prior to or at the Closing, (i) of
such Person, as a debtor in possession, from all Liabilities, (ii) of
interests of, and rights, interests and Claims of the holders of Claims against
and interests in, such Person and (iii) of Encumbrances on, or interests
of other Persons (other than Seller and its Affiliates) in, the Transferred
Assets that are related to such Person; itbeingunderstoodthat an Additional Discharge may occur pursuant to the Plan or (b) to
the extent the Transaction occurs pursuant to a 363 Sale, the functional
equivalent of subparagraph (a) in terms of its effect on Buyer, each
Specified Business, the Transferred Assets and the Assumed Liabilities granted
pursuant to the 363 Order and sections 105, 363 and 365 of the Bankruptcy Code.
“Additional Financial Statements”
has the meaning set forth in Section 5.11(b).
“Additional Reorganization Case”
has the meaning set forth in Section 5.13(h).
“Adelphia
Registration Rights and Sale Agreement” means the Registration Rights and
Sale Agreement, by and between Seller and Parent, to be entered into in the
case of a 363 Sale as of the Closing in the form attached hereto as Exhibit 1.1(c).
“Affiliate” means, with
respect to any Person, any other Person directly or indirectly controlling,
controlled by, or under common control with, such Person as of the date on
which, or at any time during the period for which, the determination of
affiliation is being made. For purposes of this definition, the term “control”
(including the correlative meanings of the terms “controlled by” and “under
common control with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. For purposes of
this Agreement, (i) none of Seller or any of its Affiliates shall be
deemed to be an Affiliate of any of Buyer, Parent, TWX, Friendco or any of
their respective Affiliates, (ii) none of Buyer, Parent, TWX or any of
their Affiliates shall be deemed to be an Affiliate of any of Seller, Friendco
or any of their respective Affiliates, (iii) none of Friendco or any of
its Affiliates shall be deemed to be an Affiliate of any of Seller, Buyer,
Parent, TWX or any of their respective Affiliates, (iv) each Managed Cable
Entity shall be deemed to be an Affiliate of Seller, (v) no member of the
family of John Rigas shall be deemed to control Seller or any of its Affiliates
and (vi) each of the Tele-Media Entities shall be deemed to be an
Affiliate of Seller.
“Aggregate Consideration”
means the Purchase Price plus the Assumed Liabilities, as adjusted pursuant to
this Agreement.
“Aggregate Purchase Price Value”
means $14,114,000,000.
“Aggregate Value of the Purchase
Shares” means $4,960,000,000.
“Agreement” means this Asset
Purchase Agreement.
4
“Alternate
Plan” has the meaning set forth in Section 5.10(b).
“Amended and Restated By-laws”
means the Amended and Restated By-laws of Parent, in the form of Exhibit 1.1(a),
as the same may be amended, supplemented or modified from time to time (provided,
that any such amendment, supplement or modification shall not (i) amend,
modify or supplement Article VI or XII of such Amended and Restated
By-laws or (ii) to the extent relating to any other matter, (A) affect
Seller or its stakeholders in a manner that is adverse relative to the manner
in which it affects TWX as a stockholder of Parent or (B) adversely affect
Seller or its stakeholders in any material respect).
“Amended and Restated Charter”
means the Amended and Restated Certificate of Incorporation of Parent, in the
form of Exhibit 1.1(b), as the same may be amended, supplemented or
modified from time to time (provided, that any such amendment,
supplement or modification shall not (i) amend, modify or supplement Article VI
or IX of such Amended and Restated Charter or (ii) to the extent relating
to any other matter, (A) affect Seller or its stakeholders in a manner
that is adverse relative to the manner in which it affects TWX as a stockholder
of Parent or (B) adversely affect Seller or its stakeholders in any material respect).
“Ancillary Agreements” means
the Parent Agreement, the Escrow Agreement, the Transfer Tax Escrow Agreement,
the Adelphia Registration Rights and Sale Agreement and each
MCE Management Agreement, and the instruments and other agreements required to
be delivered pursuant to Sections 2.9 and 2.10, including any Bill of Sale.
“Applicable Employees” has
the meaning set forth in Section 5.8(e).
“Applicable Monthly Rate” has
the meaning set forth in the definition of “Permitted Promotion.”
“Asset Transferring Subsidiary”
means those Subsidiaries of Seller that have any right, title or other interest
in, to or under any Transferred Assets.
“Assets” means any asset,
property or right, wherever located (including in the possession of vendors or
other third parties or elsewhere), whether real, personal or mixed, tangible,
intangible or contingent, in each case whether or not recorded or reflected or
required to be recorded or reflected on the books and records or financial
statements of any Person, and all right, title, interest and claims therein.
“Assigned Contracts” has the
meaning set forth in Section 5.13(b).
“Assignment and Assumption
Agreement” means an agreement in form and substance reasonably acceptable
to Seller and Buyer, providing for the effective assignment of any Assigned
Contracts or other Transferred Assets Related to such Specified Business and
the assumption of the Assumed Liabilities Related to such Specified Business
other than, in each case, the Transferred Real Property Leases.
5
“Assumed Cure Costs” means
the amounts designated as Assumed Cure Costs pursuant to Section 5.13(d) and
the Cure Costs related to the Franchises for each of the localities listed on Schedule
A of the Seller Disclosure Schedule.
“Assumed Liabilities” means,
with respect to each Specified Business, only the following Liabilities of
Seller or any of its Affiliates that are Debtors (or which become subject to an
MCE Discharge or an Additional Discharge) that are Related to such Specified
Business, in each case to the extent allocated to such Specified Business as
required by Section 2.3: (i) Liabilities
attributable to actions, omissions, circumstances or conditions to the extent
occurring following the Closing to the extent so allocated to such Specified
Business or any of the Transferred Assets allocated to such Specified Business
pursuant to the Designated Allocation, including under the Assigned Contracts
and Authorizations, (ii) Liabilities of such Specified Business arising in
the Ordinary Course of Business since the Petition Date but only to the extent
of the amount reflected in the Closing Net Liabilities Amount used in
calculating the Final Adjustment Amount for such Specified Business, (iii) the
following Liabilities: (A) Liabilities
to provide severance pay and benefits pursuant to Section 5.8(d), (B) Liabilities
for all expenses and benefits with respect to claims incurred by Transferred
Employees or their covered dependents on or after the Closing Date pursuant to Section 5.8(f) and
(C) Liabilities to provide accrued but unused vacation and with respect to
sale bonuses due under the Adelphia Communications Corporation Sale Bonus
Program (the “Sale Bonus Program”) to Transferred Employees pursuant to Section 5.8(k) but
only to the extent of the amount reflected in the Closing Net Liabilities
Amount used in calculating the Final Adjustment Amount for such Specified
Business, (iv) the Assumed Cure Costs, (v) the Liabilities Related to
such Specified Business described in the proviso to the second sentence of Section 5.13(d),
(vi) all Liabilities of such Specified Business set forth on Schedule
1.1(a) of the Seller Disclosure Schedule, (vii) Assumed Taxes, (viii) Liabilities
in respect of Environmental Self-Audit Deficiencies or Environmental Transfer
Act Liabilities, in each case (with respect to this clause (viii)), to the
extent and only to the extent such Liabilities consist solely of monetary
obligations (but only to the extent of the amount reflected in the Closing Net
Liabilities Amount used in calculating the Final Adjustment Amount for such
Specified Business) or non-monetary obligations agreed to by Buyer pursuant to Section 5.16
and (ix) Liabilities of such Specified Business under purchase orders
outstanding as of the Closing but only to the extent of the amount reflected in
the Closing Net Liabilities Amount used in calculating the Final Adjustment
Amount for such Specified Business.
“Assumed Taxes” means, with
respect to each Specified Business, any Taxes imposed with respect to such
Specified Business or any Transferred Assets Related thereto or any income or
gain derived with respect thereto for the taxable periods, or portions thereof,
beginning after the Closing.
“Audited Financial Statements”
has the meaning set forth in Section 3.7(a).
“Audits”
has the meaning set forth in Section 5.7(c).
6
“Authorization” means any
Governmental Authorization or Non-Governmental Authorization.
“Background Check” has the
meaning set forth in Section 5.8(a).
“Bankruptcy Code” has the
meaning set forth in the Recitals.
“Bankruptcy Court” means the
United States Bankruptcy Court for the Southern District of New York or, with
respect to a Managed Cable Entity or Non-Debtor Subsidiary, the United States
Bankruptcy Court in which any chapter 11 case that includes such Managed Cable
Entity or Non-Debtor Subsidiary is pending.
“Bankruptcy Rules” means the
Federal Rules of Bankruptcy Procedure as promulgated by the United States
Supreme Court under section 2075 of title 28 of the United States Code
applicable to the Reorganization Case, and any Local Rules of the
Bankruptcy Court.
“Base Net Liabilities Amount”
means, with respect to each Specified Business, $0.00.
“Base Subscriber Number”
means, with respect to each Specified Business, the number of Basic Subscribers
of such Specified Business corresponding to the month prior to the month in
which the Closing occurs, as set forth on Schedule 1.1(b) of the
Seller Disclosure Schedule; provided, however, that, except for
purposes of calculating the Initial Disputed MCE System Adjustment Amount pursuant
to Section 2.7(a), in the event any Disputed MCE Systems exist as of the
Closing, then the Base Subscriber Number for the Group 2 Business shall be
reduced by the aggregate of the MCE Base Subscriber Numbers for all such
Disputed MCE Systems.
“Basic Subscriber” means a “Basic
Video Customer” as determined pursuant to the Seller Subscriber Accounting
Policy.
“Benefit
Plans” has the meaning set forth in Section 3.10(a).
“Bill of Sale” means, with
respect to each Specified Business, an agreement in form and substance
reasonably acceptable to Seller and Buyer, transferring the tangible personal
property included in the Transferred Assets Related to such Specified Business.
“Board” has the meaning set
forth in Section 5.10.
“Books
and Records” means, with respect to each Specified Business, all books,
ledgers, files, reports, records, manuals, maps and engineering data, tests,
drawings, blueprints, schematics, lists, plans and processes and all files of
correspondence and records concerning Subscribers and prospective Subscribers
of any Cable System of such Specified Business or concerning signal or program
carriage and all correspondence with Government Entities, including all reports
filed by or on
7
behalf
of Seller or any of its Affiliates with the FCC and statements of account filed
by or on behalf of Seller or any of its Affiliates with the United States
Copyright Office, all Tax Returns of Seller or any of its Affiliates (including
workpapers) and tax software to the extent directly related thereto and other
materials (in any form or medium) of, or maintained for, such Specified
Business, but excluding any such items to the extent (i) they are included
in or primarily related to any Excluded Assets or Excluded Liabilities or (ii) with
respect to any such items related to Employees, any Law prohibits their
transfer; provided, however, that Books and Records shall include
copies of any items excluded pursuant to the foregoing clause (i).
“Broadband Industry” means
the industries in which any Specified Business and the Parent Business operate
as of the date hereof and as such industries develop from time to time.
“Budget” has the meaning set
forth in Section 5.2(s).
“Business” has the meaning
set forth in the Recitals.
“Business Day” means any day
other than a Saturday, a Sunday or a day on which banks in New York City are
authorized or obligated by Law or executive order to close.
“Buyer” has the meaning set
forth in the Preamble.
“Buyer Adverse Tax Event”
means any change in Tax Law or Proposed Change in Tax Law that has a reasonable
possibility (or, in the case of any Proposed Change in Tax Law (i) by a
Specified HWMC Member or a Specified SFC Member, or (ii) that is a
Non-Referred Proposal, a reasonable probability) of being enacted or adopted
and such change in Tax Law or Proposed Change in Tax Law (assuming in the case
of a Proposed Change in Tax Law, such Proposed Change in Tax Law were enacted
pursuant to its terms) would cause Buyer, based upon Buyer’s consultation with
Paul, Weiss, Rifkind, Wharton & Garrison LLP or other tax counsel
reasonably selected by Buyer, not to conclude both (A) that Buyer should
have an aggregate tax basis in the Transferred Assets that includes the fair
market value of the Aggregate Consideration, and (B) that there should be
no special limitations on Buyer’s ability to depreciate or amortize the
Transferred Assets, in each case, because of (1) the method by which Buyer
will acquire the Transferred Assets in the Transaction or (2) the fact
that Seller or any of its Affiliates is a party to the Reorganization Case or
any other special circumstances of the Seller or any of its Affiliates; provided,
however, that the net effects of such change in Tax Law or of such
Proposed Change in Tax Law insofar as it relates to Buyer’s aggregate tax basis
in the Transferred Assets and Buyer’s ability to depreciate or amortize the
Transferred Assets are adverse to Buyer other than in a de minimis manner; provided, further,
that the adverse effects of such change in Tax Law or Proposed Change in Tax
Law cannot be avoided by accelerating or deferring the Closing Date of the
Transaction or by restructuring the Transaction, in each case in a manner
reasonably satisfactory to Buyer and Seller (and that such acceleration,
deferral or restructuring is in fact implemented). Buyer agrees that assuming
the Closing Date was the date hereof, Buyer would conclude that Buyer’s basis
should include the fair market value of the Aggregate Consideration
8
and there should be no such special
limitations on Buyer’s ability to depreciate or amortize the Transferred
Assets.
“Buyer Class 1
Representations and Warranties” has the meaning set forth in Section 6.3(a).
“Buyer Class 2
Representations and Warranties” has the meaning set forth in Section 6.3(a).
“Buyer Discharge Amount” has
the meaning ascribed to such term in the Friendco Purchase Agreement.
“Buyer Disclosure Schedule”
means the Buyer Disclosure Schedule attached hereto as Annex B.
“Buyer Indemnification Deadline”
has the meaning set forth in Section 7.1.
“Buyer Indemnified Parties”
has the meaning set forth in Section 7.2(a).
“Buyer JV Partner” has the
meaning ascribed to such term in the Friendco Purchase Agreement.
“Buyer Managed MCE System”
has the meaning set forth in Section 2.7(c).
“Buyer
Plan” has the meaning set forth in Section 5.8(h).
“Buyer Required Approvals”
means all consents, approvals, waivers, authorizations, notices and filings
from or with a Government Entity that are listed on Schedule 1.1(a) of
the Buyer Disclosure Schedule other than the LFA Approvals; provided, however, that Schedule
1.1(a) shall be deemed to exclude (a) in the case of a 363 Sale,
the requirements related to the entry of the Confirmation Order in the fourth
and fifth bullet points on such schedule and (b) in all cases, the NYSE
approval in the third bullet point on such schedule.
“Buyer’s
401(k) Plan” has the meaning set forth in Section 5.8(j).
“Buyer’s Statement” has the
meaning set forth in Section 2.6(b).
“Cable Act” means Title VI of
the Communications Act, 47 U.S.C. §§521 et
seq.
“Cable System” means, with
respect to each Specified Business, each System that is Related to such
Specified Business.
“Cap Amount” means the Group
1 Cap Amount or the Group 2 Cap Amount, as the case may be.
9
“Capital Expenditure Adjustment
Amount” means, with respect to each Specified Business, an amount equal to
the Target Capital Expenditure Amount minus
the Closing Capital Expenditure Amount for such Specified Business. Except to
the extent (and only to the extent) the consent of Buyer is obtained as
contemplated in the proviso to the definition of “Closing Capital Expenditure
Amount,” in no event will the Capital Expenditure Adjustment Amount be a
negative number.
“Capital Lease” means any
lease that is required to be classified and accounted for as a capital lease
under GAAP.
“Cash Consideration” has the
meaning set forth in Section 2.5(b).
“CERCLA” means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980.
“Chapter 11 Expenses” means (a) any
and all costs incurred and expenses paid or payable by Seller or any of its
Affiliates in connection with the Sale Process, the Transaction or the
transactions contemplated by the Friendco Purchase Agreement, other than costs
that Buyer has expressly agreed to pay pursuant to this Agreement and (b) the
following costs and expenses related to the administration of the
Reorganization Case or the reorganization case of any Managed Cable Entity or
Non-Debtor Subsidiary: (i) obligations
to pay any professionals’ fees and expenses in connection with the
Reorganization Case incurred by Seller, its Affiliates, the Committees, and any
other compensation or expenses payable in connection with the Reorganization
Case (including fees of attorneys, accountants, investment bankers, financial
advisors, auditors and consultants), other than fees and expenses Buyer has
expressly agreed to pay pursuant to this Agreement, (ii) fees and expenses
payable to the US Trustee under section 1930 of title 28, United States Code, (iii) fees
and expenses of the members of the Committees, (iv) fees and expenses of
the trustees of existing indentures of Seller and (v) fees and expenses
related to the DIP Facility.
“Chosen Courts” has the
meaning set forth in Section 9.10.
“Claim” means a claim (as
defined in section 101(5) of the Bankruptcy Code) against a Debtor.
“Claim Notice” has the
meaning set forth in Section 7.4(a).
“Class 1 Representations and
Warranties” has the meaning set forth in Section 6.2(a).
“Class 2 Representations and
Warranties” has the meaning set forth in Section 6.2(a).
“Closing” means the closing
of the Transaction.
“Closing Adjustment Amount”
means, with respect to each Specified Business, the sum (expressed as a
positive, if positive, or as a negative, if negative) of (i)
10
the Net Liabilities Adjustment
Amount for such Specified Business, minus
(ii) the Subscriber Adjustment Amount for such Specified Business, minus (iii) the Capital Expenditure
Adjustment Amount for such Specified Business.
“Closing Capital Expenditure
Amount” means, as to each Specified Business, the sum of all capital
expenditures incurred by Seller and its Affiliates in respect of such Specified
Business consistent with the Budget and in the Ordinary Course of Business (and
excluding any amounts incurred or paid in connection with any casualty or
damage), subsequent to December 31, 2004 and up to and including the end
of the month immediately preceding the Closing Date or, if the Closing occurs
on a month-end, up to and including such month; provided, however,
that any capital expenditures incurred or paid for in excess of the aggregate
amount set forth in the Budget for such Specified Business shall be included in
the determination of Closing Capital Expenditure Amount only to the extent that
Buyer shall have consented to such expenditures prior to the incurrence
thereof.
“Closing Date” has the
meaning set forth in Section 2.8.
“Closing Net Liabilities Amount”
means, with respect to each Specified Business, the Current Assets of such Specified
Business minus the Total
Liabilities of such Specified Business.
“Closing Subscriber Number”
means, with respect to each Specified Business, as of the Closing, the number
of Eligible Basic Subscribers of such Specified Business.
“Code” means the Internal
Revenue Code of 1986.
“Collective Bargaining Agreements”
means, with respect to each Specified Business, the collective bargaining
agreements covering Employees listed on Schedule 1.1(c) of the
Seller Disclosure Schedule and identified as Related to such Specified
Business.
“Committees” means (i) the
committee appointed by the US Trustee to represent the interests of the
unsecured creditors of the Debtors, (ii) the committee appointed by the US
Trustee to represent the interests of equity holders of the Debtors, (iii) any
other committee appointed by the US Trustee in connection with the
Reorganization Case and (iv) any committee appointed by the US Trustee in
the reorganization case of any Managed Cable Entity or Non-Debtor
Subsidiary.
“Communications Act” means
the Communications Act of 1934.
“Condemnation Proceeds”
means, with respect to any Specified Business, all amounts payable or paid to
Seller or any of its Affiliates as proceeds of (i) a condemnation or other
taking of any Asset Related to such Specified Business by any Government Entity
following December 31, 2004 or (ii) the exercise of any Purchase
Right Related to such Specified Business following December 31, 2004.
11
“Confidential Information”
has the meaning set forth in Section 5.1(e).
“Confirmation
Hearing” means the hearing held by the Bankruptcy Court to consider
confirmation of the Plan.
“Confirmation
Order” means an order or judgment of the Bankruptcy Court confirming the
Plan pursuant to section 1129 of the Bankruptcy Code, satisfying the
requirements of Section 5.13.
“Contract” means any
agreement, contract, lease or sublease, license or sublicense, purchase order,
arrangement, commitment, indenture, note, security, instrument, consensual
obligation, promise, covenant or undertaking, including all franchises,
rights-of-way, bulk service, commercial service or multiple dwelling unit
agreements, access agreements, programming agreements, signal supply
agreements, agreements with community groups, commercial leased access
agreements, capacity license agreements, partnership, joint venture or other
similar agreements or arrangements, and advertising interconnect agreements, or
any other agreement, in each case, whether written or oral, and all rights
associated therewith.
“Contract Categories Expected to
be Assumed” means the following categories of Contracts, in each case to
the extent Related to a Specified Business:
(iii) bulk service, commercial service or multiple dwelling unit
Subscriber Contracts;
(iv) Contracts (including open purchase orders) relating to
Fixtures and Equipment and any other tangible personal property (excluding
motor vehicles), in each case only if Related exclusively to a specific Cable
System;
(v) local
Cable System leased access agreements required by Law;
(vi) Rights-of-Way;
(vii) Real Property Leases (excluding leases that would be
Excluded Assets pursuant to Section 2.2(h)(i)) and Transferred Real
Property Subleases;
(viii) Franchises and Authorizations (other than state certificates
of public convenience and necessity and similar state telecommunications
Authorizations);
(ix) advertising interconnect and local advertising sale
Contracts (other than advertising representation Contracts, except as set forth
on Schedule 1.1(e) of the Seller Disclosure Schedule); and
12
(x) software
licenses and related maintenance agreements, in each case only if Related
exclusively to a specific Cable System.
“Controlled Affiliate” means,
with respect to any Person, any Affiliate of such Person that is controlled
directly or indirectly by such Person.
“Cost Center” means a so
called cost center as used by Seller for internal management and bookkeeping
purposes.
“CPA Firm” means KPMG LLP or
such other firm of independent certified public accountants as to which Seller
and Buyer shall mutually agree.
“Cure Costs” means, with
respect to any Contract, the costs and expenses payable under section 365 of
the Bankruptcy Code in connection with the assumption and/or assignment of such
Contract.
“Current Assets” means, with
respect to each Specified Business, the current assets of such Specified
Business included in the Transferred Assets as of the Closing (after giving
effect to the Transaction), as would be reflected on the face of a balance
sheet for such Specified Business (excluding any footnotes thereto) prepared in
accordance with GAAP, consistently applied (to the extent GAAP was previously
applied) for such Specified Business; provided, however, that in
no event shall Current Assets include (A) inventory, (B) any Assets
with respect to Taxes (including duty and tax refunds and prepayments) and net
operating losses of Seller or any of its Affiliates, (C) investments in
Subsidiaries, (D) Assets held for sale (other than in connection with the
Exchange), (E) Condemnation Proceeds, (F) Insurance Claims (except to
the extent (and only to the extent) relating to an Assumed Liability), (G) Accounts
Receivable related to Programming Agreements, (H) pre-paid insurance
premiums and maintenance expenses (to the extent paid under Contracts other
than Assigned Contracts) or (I) prepaid expenses except to the extent the
Specified Business will receive the benefit thereof within one year of the
Closing; provided, further, that Current Assets to be acquired
under purchase orders outstanding as of the Closing will, for purposes hereof,
be treated as being owned by the relevant Specified Business as of the Closing
regardless of whether they would otherwise be treated as such under GAAP but
subject in any event to the remainder of this definition. For purposes of
determining Current Assets in respect of any Disputed MCE System, all
references above to the Closing shall be deemed to mean, with respect to any
Disputed MCE System, the MCE Closing.
“Debtors” has the meaning set
forth in the Recitals.
“Delayed Transfer Asset” has
the meaning set forth in Section 2.11.
“Derivative 2003 Financial
Statements” has the meaning set forth in Section 3.7(a).
“Derivative 2004 Financial
Statements” has the meaning set forth in Section 3.7(a).
13
“Derivative Audited Financial
Statements” has the meaning set forth in Section 5.11(b).
“Derivative Unallocated 2004
Financial Statements” has the meaning set forth in Section 3.7(a).
“Designated Allocation” has
the meaning set forth in Section 2.1.
“Designated Litigation” means
the litigation set forth on Schedule 1.1(f) of the Seller
Disclosure Schedule.
“Digital Subscriber” means a “Digital
Customer” as determined pursuant to the Seller Subscriber Accounting Policy.
“DIP Facility” means the
Third Amended and Restated Credit and Guaranty Agreement, dated as of February 25,2005, among Seller, the Subsidiaries of Seller identified therein and the
financial institutions identified therein, and any related documents,
agreements and instruments.
“Discharge”
means, (a) except
as otherwise provided in the Plan and/or the Confirmation Order, the discharge
or equivalent granted pursuant to the Confirmation Order, and sections 363,
1123 and 1141 of the Bankruptcy Code, (i) of Seller and its Affiliates
that are Debtors, as debtors in possession, from all Liabilities, (ii) of
interests of, and rights, interest and Claims of the holders of Claims against
and interests in, Seller and its Affiliates that are Debtors and (iii) of
Encumbrances on, or interests of Persons (other than Seller or its Affiliates)
in, the Transferred Assets or (b) to the extent the Transaction occurs pursuant to a 363
Sale, the functional equivalent of subparagraph (a) in terms of its effect
on Buyer, each Specified Business, the Transferred Assets and the Assumed
Liabilities granted pursuant to the 363 Order and sections 105, 363 and 365 of
the Bankruptcy Code.
“Disclosure Statement” has
the meaning set forth in Section 5.13(a).
“Disclosure Statement Motion”
has the meaning set forth in Section 5.13(a).
“Disputed MCE System” has the
meaning set forth in Section 2.7(a).
“Disputed MCE System Adjustment
Amount” means, with respect to the Disputed MCE Systems sold to Buyer
pursuant to Section 2.7(c), the sum of the Net Liabilities Adjustment
Amount in respect of such Disputed MCE Systems as determined pursuant to the
last sentence of Section 2.7(c) plus
the Initial Disputed MCE System Adjustment Amount in respect of such
Disputed MCE Systems.
“Eligible Basic Subscriber”
means a Basic Subscriber who, as of the Measurement Date, is a paying customer (A) who
subscribes to at least the lowest level of video programming offered by an
Acquired System, (B) who has been installed, and (C) either (1) whose
rate of service for all services (not including any installation costs)
14
provided to such Basic Subscriber is
not subject to any discount or promotion as of the Measurement Date or for any
period thereafter other than (x) as to any Cable System, the customary
package rates applicable to such Cable System as in effect as of March 31,2005 as may be subsequently increased by Seller or, with the consent of Buyer
not to be unreasonably withheld, reduced by Seller or (y) standard
employee rate discounts or (2) who is a Qualified Customer who is subject
to no discount or promotion other than a Permitted Promotion or an Historic
Promotion. For the avoidance of doubt, the customary reduction in the HSI rate
applicable to any HSI-only subscriber who subscribes to video services shall
not be considered a discount or promotion for purposes of the definition of “Eligible
Basic Subscriber.”
“Employees” means all current
and former employees who are or were primarily employed in connection with the
Acquired Business and all employees of the Business identified on Schedule
5.8(a)(ii) of the Seller Disclosure Schedule. Employees does not
include (a) any employees performing services in Puerto Rico or outside of
the United States or (b) any individual performing services in connection
with the Acquired Business who Seller or its Affiliates has classified as an
independent contractor as of immediately prior to the Closing Date.
“Encumbrance” means any lien,
pledge, charge, security interest, option, right of first refusal, mortgage,
easement, right of way, lease, sublease, license, sublicense, adverse claim,
title defect, encroachment, other survey defect, or other encumbrance of any
kind, including, with respect to real property, any covenant or restriction
relating thereto. For purposes of this Agreement, a Person shall be deemed to
own subject to an Encumbrance any Asset that it has acquired or holds subject
to the interest of a vendor or lessor under any conditional sale agreement,
Capital Lease or other title retention agreement relating to such Asset.
“Environmental Law” means any
Law (including common law), Governmental Authorization or agreement with any
Government Entity or third party relating to (i) the protection of the
environment or human health and safety (including air, surface water, ground
water, drinking water supply, and surface or subsurface land or structures), (ii) the
exposure to, or the use, storage, recycling, treatment, generation,
transportation, processing, handling, labeling, management, release or disposal
of, any Hazardous Substance or (iii) noise, odor or electromagnetic
emissions.
“Environmental Permits” means
all licenses, permits, certificates and other authorizations and approvals
issued by or obtained from a Government Entity relating to or required by
Environmental Laws.
“Environmental Self-Audit”
means, subject to Section 5.16, the self-audit to be conducted by
Seller pursuant to an agreement between the United States Environmental
Protection Agency and Seller relating to compliance with Environmental Laws.
“Environmental Self-Audit
Deficiencies” means any deficiencies identified as a result of the
performance of the Environmental Self-Audit, including
15
current or historical violations of,
or actual or potential Liabilities under, any Environmental Law.
“Environmental Transfer Act
Liabilities” means any Liabilities arising out of compliance with the
Connecticut Transfer Act or the New Jersey Industrial Site Recovery Act as a
result of the completion of the Transaction or the Exchange.
“Equipment Leases” means all
leases for vehicles included in the Fixtures and Equipment and all Capital
Leases of other Fixtures and Equipment.
“Equity Security” has the
meaning ascribed to such term in Rule 405 promulgated under the Securities
Act as in effect on the date hereof and, in any event, shall also include (i) any
capital stock of a corporation, any partnership interest, any limited liability
company interest and any other equity interest, (ii) any security or right
convertible into, exchangeable for, or evidencing the right to subscribe for
any such stock, equity interest or security referred to in clause (i), (iii) any
stock appreciation right, contingent value right or similar security or right
that is derivative of any such stock, equity interest or security referred to
in clause (i) or (ii), and (iv) any contract to grant, issue, award,
convey or sell any of the foregoing.
“ERISA” means the Employee
Retirement Income Security Act of 1974.
“ERISA Affiliate” has the
meaning set forth in Section 3.10(c).
“Escrow Account” has the
meaning set forth in Section 2.5.
“Escrow Agent” has the
meaning set forth in the Recitals.
“Escrow Agreement” has the
meaning set forth in the Recitals.
“Escrow Amount” has the
meaning set forth in Section 2.5.
“Escrow Payment” means, as to
any amount payable from the Escrow Account, an aggregate amount payable, first,
in cash , and, to the extent no cash remains in the Escrow Account, in Purchase
Shares or, if applicable, MCE Purchase Shares (where each share is valued at
the Per Share Value of the Purchase Shares) ; provided, however,
that (i) the cash portion of such
amount shall be increased by (A) in respect of the portion of any cash
payment pursuant to Section 2.6(f) , interest on such portion from
the date of the Closing to the date of payment at LIBOR calculated on a 365-day
basis, and (B) in respect of the portion of any cash payment pursuant to Section 7.2,
interest on such portion at LIBOR calculated on a 365-day basis from the
date notice of the Losses for which indemnification is sought was delivered
until the date of payment of indemnification by the Indemnifying Party, and (ii) the
stock portion of such amount shall be increased by Interim Dividends made in
respect of such shares.
“Estimated Closing Adjustment
Amount” has the meaning set forth in Section 2.6(a).
16
“Exchange” has the meaning
set forth in the Recitals.
“Exchange Act” means the
Securities Exchange Act of 1934.
“Exchange Agreement” means
the Exchange Agreement, dated as of the date hereof, by and among Friendco,
Comcast Cable Communications Holdings, Inc., Comcast of Georgia, Inc.,
TCI Holdings, Inc., Parent, Buyer and Urban Cable Works of Philadelphia,
L.P.
“Excluded Assets” has the
meaning set forth in Section 2.2.
“Excluded Claim” means any
claim to the extent (and only to the extent) relating to (i) the failure
of the Purchase Shares to have been issued in compliance with section 1145 of
the Bankruptcy Code or Section 5 of the Securities Act, as applicable, or (ii) the
failure of Parent to be deemed a successor to Seller in accordance with Rule 12(g)-3
of the Exchange Act.
“Excluded
Liabilities” means, notwithstanding anything to the contrary in this
Agreement, all Liabilities of Seller or any of its Affiliates other than the
Assumed Liabilities. For the avoidance of doubt, Excluded Liabilities shall
include (i) Liabilities to the extent related to the Excluded Assets,
including Liabilities under any Contract that is not an Assigned Contract
(other than as set forth in clause (v) of the definition of “Assumed
Liabilities”), (ii) subject to clause (ii) of the definition of “Assumed
Liabilities” (except with respect to litigation that is pending or threatened
as of the Closing), Liabilities to the extent arising in connection with the
ownership, use, operation or maintenance of the Transferred Assets or the
conduct of any Specified Business on or prior to the Closing, including those
arising under or related to (A) Environmental Laws (other than as
expressly provided in clause (viii) of the definition of “Assumed
Liabilities”) or (B) any Claim (other than under clauses (ii) (except
with respect to litigation that is pending or threatened as of the Closing),
(iii), (iv), (v), (vii), (viii) or (ix) of the definition of “Assumed
Liabilities”) including any Claim in respect of Losses to Persons or property,
and any Claim relating to any filings made by Seller or any of its Affiliates
under the Exchange Act or the Securities Act (other than any Excluded Claim), (iii) Liabilities
under any Indebtedness of Seller or any of its Affiliates, (iv) except for
the Assumed Cure Costs, Liabilities for Cure Costs, (v) Liabilities for
Chapter 11 Expenses, (vi) Excluded Taxes, (vii) Intercompany
Payables, (viii) Liabilities related to the SEC/DOJ Matters, including any
SEC/DOJ Settlement, (ix) Liabilities for any Claims filed against Seller
or any other Debtor after the bar date established in the Reorganization Case, (x) Liabilities
that are subject to the Discharge, any MCE Discharge or any Additional
Discharge, (xi) except as provided in clause (iii) of the definition of “Assumed
Liabilities,” Liabilities under any Benefit Plan, including under the Adelphia
Communications Corporation Key Employee Continuity Program, the Amended and
Restated Adelphia Communications Corporation Performance Retention Plan, the
Sale Bonus Program and any Stock Award, (xii) Liabilities identified as
Excluded Liabilities in Sections 5.2(j), 5.8(a) and 5.8(q), (xiii)
Liabilities to Seller, any member of the Rigas family, any Managed Cable Entity
or any of their respective Affiliates other than Liabilities under this
Agreement or any Ancillary Agreement, (xiv)
17
except
pursuant to Section 5.13(d), Liabilities in respect of Rejection Claims
and (xv) Liabilities allocated to the Friendco Business pursuant to the proviso
to Section 2.3.
“Excluded Taxes” means any
Taxes imposed with respect to any Specified Business or any Transferred Assets
Related thereto or any income or gain derived with respect thereto, in each
case, other than Assumed Taxes. For the avoidance of doubt, Excluded Taxes
shall include any income Tax liability payable by Seller or its Subsidiaries in
respect of the Transaction.
“Expanded Agreement” has the
meaning set forth in Section 5.15(a)(i).
“Extended Outside Date” has
the meaning set forth in Section 8.2.
“FCC” means the Federal
Communications Commission.
“Final Adjustment Amount”
means, with respect to each Specified Business, the Closing Adjustment Amount
as set forth in the Buyer’s Statement for such Specified Business and, in the
event of a Seller’s Objection, as adjusted by either the agreement of Buyer and
Seller, or by the CPA Firm, acting pursuant to Section 2.6.
“Final MCE Purchase Price”
means the Initial MCE Purchase Price in respect of all Disputed MCE Systems the
Assets of which are to be transferred to Buyer at the MCE Closing plus the Disputed MCE System Adjustment
Amount in respect of all such Disputed MCE Systems.
“Final
Order” means an order or judgment of the Bankruptcy Court, or other court
of competent jurisdiction with respect to the subject matter, (i) which
has not been reversed, stayed, modified, amended, enjoined, set aside, annulled
or suspended, (ii) with respect to which no request for a stay, motion or
application for reconsideration or rehearing, notice of appeal or petition for
certiorari is filed within the deadline provided by applicable statute or
regulation or as to which any appeal that has been taken or any petition for
certiorari that has been or may be filed has been resolved by the highest court
to which the order or judgment was appealed or from which certiorari was sought
and (iii) as to which the deadlines for filing such request, motion,
petition, application, appeal or notice referred to in clause (ii) above
have expired; provided, however, that a request for a stay,
appeal, motion to reconsider or petition for certiorari referred to in clause (ii) shall
be disregarded for purposes of such clause if such appeal, motion to reconsider
or petition for certiorari would not, individually or in the aggregate,
reasonably be expected to be materially adverse to the Transaction, any
Specified Business, Parent or any of its Affiliates (in the case of Parent or
its Affiliates, only to the extent related to the Transaction and not in their
capacity as creditors or, with respect to Plan distribution matters,
equityholders) (taking into account whether such request for a stay, appeal,
motion to reconsider or petition for certiorari would be rendered moot under
the doctrine of “equitable mootness” as a result of the occurrence of the
Closing and any findings of the Bankruptcy Court contained in any such order or
judgment, including under section 363(m) of the Bankruptcy Code).
18
“Final
Transfer Tax Determination” has the meaning set forth in Section 5.7(c).
“Financial Advisors” has the
meaning set forth in Section 4.26.
“Financial Information” has
the meaning set forth in Section 5.11(a).
“Fixtures and Equipment”
means, with respect to each Specified Business, all furniture, office
equipment, furnishings, fixtures, vehicles, equipment, testing equipment,
computers, set-top boxes, tools, electronic devices, towers, tower equipment,
trunk and distribution cable, other aboveground and underground cable, decoders
and spare decoders for scrambled satellite signals, amplifiers, microwave
equipment, power supplies, conduits, vaults and pedestals, grounding and pole
hardware, installed subscriber devices (including drop lines, converters, encoders,
transformers behind television sets and fittings), headends and hubs
(origination, transmission and distribution systems) hardware, spare parts,
supplies and closed circuit devices, inventory, other physical Assets (other
than real property) and other tangible personal property Related to such
Specified Business, wherever located.
“Franchise” means, with
respect to each Specified Business, each franchise, as such term is defined in
the Communications Act, granted by a Government Entity authorizing the
construction, upgrade, maintenance or operation of any part of the Cable
Systems that are part of such Specified Business.
“Friendco” has the meaning
set forth in the Recitals.
“Friendco Business” has the
meaning set forth in the Recitals.
“Friendco Purchase Agreement”
has the meaning set forth in the Recitals.
“Friendco Purchase Price” has
the meaning ascribed to the term “Purchase Price” in the Friendco Purchase
Agreement.
“Friendco
Registration Rights Agreement” means that certain Registration Rights
Agreement, dated as of March 31, 2003, as amended (except to the extent
any amendment after June 21, 2006 would adversely affect Seller), by and
among TWE Holdings II Trust, a Delaware statutory trust, TWX and Parent.
“Friendco Transaction” means
the Redemptions and the Exchange.
“Friendco Transferred Assets”
has the meaning ascribed to the term “Transferred Assets” in the Friendco
Purchase Agreement.
“Fully Diluted Basis” means
all Equity Securities of Parent, without regard to any restrictions or conditions
with respect to the exercisability of such Equity Securities, other than (i) any
Equity Securities issued following the date hereof on arm’s length terms for fair consideration,
as determined in good faith by Parent’s board of directors or any committee
thereof, and, in connection with any such issuance to TWX or
19
any of its Affiliates (other than
Parent or its wholly owned Subsidiaries), also subject to Section 5.3(c),
and (ii) any Equity Securities issued following the date hereof pursuant
to employee stock option or restricted stock programs (A) as approved by
Parent’s board of directors or compensation committee from time to time
pursuant to which Permitted Parent Incentive Awards are issued or (B) in
connection with any acquisition transaction satisfying clause (i) of this
definition.
“GAAP” means United States
generally accepted accounting principles in effect from time to time.
“Government Antitrust Entity”
means any Government Entity with jurisdiction over the enforcement of any U.S.
Antitrust Law or other similar Law.
“Government Entity” means any
federal, state or local court, administrative body or other governmental or
quasi-governmental entity with competent jurisdiction.
“Governmental Authorizations”
means, with respect to each Specified Business, all licenses (including cable
television relay service, business radio and other licenses issued by the FCC
or any other Government Entity), permits (including construction permits),
certificates, waivers, amendments, consents, Franchises (including similar
authorizations or permits), exemptions, variances, expirations and terminations
of any waiting period requirements (including pursuant to the HSR Act), other
actions by, and notices, filings, registrations, qualifications, declarations
and designations with, and other authorizations and approvals Related to such
Specified Business and issued by or obtained from a Government Entity or Self-Regulatory
Organization.
“Group 1 Business” has the
meaning set forth in the Recitals.
“Group 1 Cap Amount” means
$296,700,000, plus any amounts
paid into the Escrow Account by Buyer minus
any amounts paid out of the Escrow Account to Buyer, in each such case after
Closing with respect to adjustments in respect of the Group 1 Business under
Sections 2.6(f) and 2.7(c).
“Group 1 Shared Assets and
Liabilities” means the Shared Assets and Liabilities that are allocated to
the Group 1 Business as set forth on Schedule 1.1(h) of the Seller
Disclosure Schedule and any other Assets or Liabilities (other than those
solely Related to the Group 1 Business), as applicable, that are allocated to
the Group 1 Business pursuant to the Designated Allocation or the proviso to Section 2.3.
“Group 1 Systems” has the
meaning set forth in the Recitals.
“Group 1 Threshold Amount”
means $74,000,000.
“Group 2 Business” has the
meaning set forth in the Recitals.
“Group 2 Cap Amount” means
$267,900,000, plus any amounts
paid into the Escrow Account by Buyer minus
any amounts paid out of the Escrow Account to
20
Buyer, in each such case after Closing
with respect to adjustments in respect of the Group 2 Business under Sections
2.6(f) and 2.7(c).
“Group 2 Shared Assets and
Liabilities” means the Shared Assets and Liabilities that are allocated to
the Group 2 Business as set forth on Schedule 1.1(h) of the Seller
Disclosure Schedule and any other Assets or Liabilities (other than those
solely Related to the Group 2 Business), as applicable, that are allocated to
the Group 2 Business pursuant to the Designated Allocation or the proviso to Section 2.3.
“Group 2 Systems” has the
meaning set forth in the Recitals.
“Group 2 Threshold Amount”
means $67,000,000.
“Hazardous Substance” means
any substance that is listed, defined, designated or classified as hazardous,
toxic or otherwise harmful under applicable Laws or is otherwise regulated by a
Government Entity, including petroleum products and byproducts, asbestos-containing
material, polychlorinated biphenyls, lead-containing products and mold.
“Historic Promotion” means,
as to any Basic Subscriber (other than Subscribers that only receive the lowest
tier of service (i.e., lifeline or “B1 only” Subscribers)), any discount or
promotion that (i) such Basic Subscriber is subject to as of the date
hereof (without any modification, extension or renewal thereof after the date
hereof) and (ii) does not extend beyond twelve months following the date
hereof.
“HSI Subscriber” means an “HSI
Customer” as determined pursuant to the Seller Subscriber Accounting Policy.
“HSR Act” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
“Incremental
Transfer Tax Dispute Notice” has the meaning set forth in Section 5.7(c).
“Incremental
Transfer Taxes” has the meaning set forth in Section 5.7(c).
“Incremental
Transfer Tax Return Notice” has the meaning set forth in Section 5.7(c).
“Indebtedness” of any Person
shall mean, without duplication, (i) all indebtedness of such Person for
money borrowed or with respect to deposits or advances of any kind, whether
short-term or long-term and whether secured or unsecured and whether
or not required to be disclosed on a balance sheet or in the related notes to
financial statements under GAAP, (ii) the undrawn face amount of, and
unpaid reimbursement obligations in respect of, all letters of credit and
bankers’ acceptances issued for the account of such Person, (iii) obligations
under any Capital Lease, (iv) all obligations of such Person evidenced by
bonds, debentures, notes or other similar
21
instruments, (v) all
obligations of such Person upon which interest charges are customarily paid
(excluding trade accounts payable and accrued obligations in the ordinary
course of business) excluding Cure Costs or Rejection Claims, (vi) all
obligations of such Person under conditional sale or other title retention
agreements relating to Assets purchased by such Person, (vii) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services (excluding trade accounts payable and accrued obligations
in the ordinary course of business), (viii) all obligations of such Person
in respect of interest rate protection agreements, foreign currency exchange
agreements or other interest or exchange rate hedging arrangements, (ix) all
obligations of such Person to purchase, redeem, retire, defease or otherwise
acquire for value any Equity Securities of such Person or any trust or
Subsidiary of such Person (including any preferred stock of such Person or any
obligations of such Person in respect of trust preferred, but excluding any
such obligations under the Investment Documents listed on Schedule 1.1(i) of
the Seller Disclosure Schedule and provided that such Investment Documents have
been made available to Buyer prior to the date hereof), (x) any “keep well”
or other agreement to maintain the financial condition of another Person (other
than a wholly owned Subsidiary of such Person), (xi) any arrangement having the
economic effect of any of the foregoing, (xii) any indebtedness of the types
referred to in clauses (i) through (xi) above of another Person that is
guaranteed directly or indirectly by such Person or secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise,
to be secured by) the Assets of such Person, whether or not the obligations
secured thereby have been assumed, (xiii) renewals, extensions, refundings,
deferrals, restructurings, amendments and modifications of any such
indebtedness, obligation or guarantee and (xiv) any interest, charges or
penalties in respect of any of the foregoing.
“Indemnified Parties” has the
meaning set forth in Section 7.2(a).
“Indemnifying Party” has the
meaning set forth in Section 7.4(a).
“Initial Disputed MCE System
Adjustment Amount” has the meaning set forth in Section 2.7(a).
“Initial MCE Purchase Price”
has the meaning set forth in Section 2.7(a).
“Insurance Claims” means,
with respect to each Specified Business, all title, property, casualty, fire
or, to the extent it relates to periods following the Closing, business
interruption, insurance proceeds received or receivable by such Specified
Business in respect of any Transferred Asset or Assumed Liability, all title,
property, casualty, fire or, to the extent it relates to periods following the
Closing, business interruption, insurance proceeds (to the extent not already
expended (including expenditures of other monies) by Seller or any Affiliate of
Seller to restore or replace the lost or damaged Asset, which replacement Asset
shall be a Transferred Asset) received or receivable by such Specified Business
in respect of any Asset damaged or lost after December 31, 2004 and which,
if not so damaged or lost, would have been a Transferred Asset and all
insurance proceeds received or receivable by such Specified Business in
22
respect of business interruption of
such Specified Business to the extent relating to any period after the Closing.
“Insurance Policies” has the
meaning set forth in Section 3.23.
“Intellectual Property”
means, as they exist anywhere in the world, (i) trademarks, service marks,
brand names, certification marks, collective marks, logos, symbols, trade
dress, trade names, and other indicia of origin, all applications and
registrations for the foregoing, and all goodwill associated therewith and
symbolized thereby, including all renewals of same, (ii) inventions and
discoveries, whether patentable or not, and all patents, invention disclosures
and applications therefor, and designs and improvements claimed therein,
including divisions, continuations, continuations-in-part and
renewal applications, and including renewals, reexaminations, interferences,
extensions and reissues, (iii) trade secrets, confidential information and
know-how, including processes, schematics, business methods, formulae,
drawings, prototypes, models, designs, customer lists and supplier lists, (iv) published
and unpublished works of authorship, whether copyrightable or not (including
databases and other compilations of information), including mask rights and
computer software (including all source code, object code, specifications,
designs and documentation related to such programs), copyrights therein and
thereto, registrations and applications therefor, and all renewals, extensions,
restorations and reversions thereof, (v) domain names, Internet addresses
and other computer identifiers, web sites, web pages and similar rights
and items, and (vi) any other intellectual property or proprietary rights
to the extent entitled to legal protection as such.
“Intellectual Property Assignment
Agreement” means, with respect to each Specified Business, an agreement in
form and substance reasonably acceptable to Seller and Buyer, providing for the
assignment of the Transferred Intellectual Property Related to such Specified
Business.
“Intercompany Payables”
means, with respect to each Specified Business, all account, note or loan
payables (including credit balance intercompany receivables), whether or not
recorded on the books of Seller or any of its Affiliates, for goods or services
purchased by such Specified Business or provided to such Specified Business, or
advances (cash or otherwise) or any other extensions of credit to such
Specified Business, in each case from Seller or any of its Affiliates,
including amounts recorded on the Derivative 2004 Financial Statements, whether
current or non-current, as either intercompany, affiliate or related
party payables, on a gross or net basis.
“Intercompany Receivables”
means, with respect to each Specified Business, all account, note or loan
receivables, whether or not recorded on the books of Seller or any of its
Affiliates, for goods or services sold or provided by such Specified Business
to Seller, any of its Affiliates or advances (cash or otherwise) or any other
extensions of credit made by such Specified Business to Seller or any of its
Affiliates, including amounts recorded on the Derivative 2004 Financial
Statements, whether current or non-current, as either intercompany,
affiliate or related party receivables, on a gross or net basis.
23
“Interim Dividends” means,
with respect to any shares of Parent Class A Common Stock delivered after
the Closing, any dividends declared and paid between the Closing and the
delivery of such shares, plus (to the extent of any dividends paid in cash)
interest from the respective dates on which such dividends were paid to the
date of payment, at LIBOR calculated on a 365-day basis; itbeingunderstoodthat the holder of such shares shall be entitled to
receive any dividends declared but not paid between the Closing and the
delivery of such shares upon the payment of such dividend to the holders of
Parent Class A Common Stock.
“Intermediate Subsidiary” has
the meaning set forth in Section 3.2(a).
“Investment Documents” means
the documents governing any Transferred Investment.
“Investment Entity” means any
issuer of a Transferred Investment.
“Investment Entity Securities”
means, with respect to each Investment Entity, the Equity Securities of such
Investment Entity.
“IRS” means the United States
Internal Revenue Service.
“JV Plan” has the meaning set forth in the
Friendco Purchase Agreement.
“Knowledge”
means (i) with respect to Seller and its Affiliates, the collective actual
knowledge of any of Seller’s executive officers, the vice president of law and
governmental affairs, the vice president for engineering, the vice president
for finance, the vice president of financial planning, the vice president —
treasurer, the applicable regional senior vice presidents, the applicable
direct reports to the regional senior vice presidents, including the senior
executive officer of each Cable System or group of Cable Systems, the most
senior employee that is responsible for tax matters (currently, the vice
president of taxation), the senior officer responsible for environmental
matters including the Environmental Self-Audit and each regional vice president
of finance, each regional vice president of engineering, and each regional vice
president of law and governmental affairs, and (ii) with respect to Buyer,
the collective actual knowledge of Buyer’s Chief Executive Officer, and any of
Parent’s executive officers, applicable executive vice presidents and
applicable division presidents and each group vice president of finance.
“Law” means any law, statute,
ordinance, rule, regulation, code, order, judgment, injunction or decree
enacted, issued, promulgated, enforced or entered by a Government Entity or
Self-Regulatory Organization.
“Lease Assignment Agreement”
means, with respect to each Specified Business, one or more agreements in form
and substance reasonably acceptable to Seller and Buyer and reasonably necessary
to cause such agreements to be recordable, assigning to Buyer the Transferred
Real Property Leases Related to such Specified Business.
24
“Leased Real Property” means
real property subject to the Real Property Leases.
“LFA Approvals” means all
consents, approvals or waivers required to be obtained from Government Entities
with respect to the transfer or change in control of Franchises in connection
with the Transaction and, except for purposes of Section 6.2(e), the
Exchange.
“Liabilities” means any and
all Indebtedness, losses, claims, charges, demands, actions, damages,
obligations, payments, costs and expenses, sums of money, bonds, indemnities
and similar obligations, covenants, contracts, controversies, omissions, make
whole agreements and similar obligations, and other liabilities, including all
contractual obligations, whether due or to become due, fixed, contingent or
absolute, inchoate or otherwise, matured or unmatured, liquidated or
unliquidated, accrued or not accrued, asserted or not asserted, known or
unknown, determined, determinable or otherwise, whenever or however arising,
including, those arising under any Law, principles of common law (including out
of any contract or tort based on negligence or strict liability) action,
threatened or contemplated action (including the costs and expenses of demands,
assessments, judgments, settlements and compromises relating thereto and attorneys’
fees and any and all costs and expenses (including allocated costs of in-house
counsel and other personnel), whatsoever reasonably incurred in investigating,
preparing or defending against any such actions or threatened or contemplated
actions), order or consent decree of any Government Entity or any award of any
arbitrator or mediator of any kind, and those arising under any contract,
commitment or undertaking, whether or not the same would be required by GAAP to
be recorded or reflected in financial statements or disclosed in the notes
thereto.
“LIBOR” means the six-month
Interbank Official Rate with respect to deposits in Dollars which appears on
the Telerate Page 3750 as of 11:00 a.m., London time, on the day that
is two business days in London preceding the Closing.
“Losses” has the meaning set
forth in Section 7.2(a).
“Managed Cable Entity” means,
with respect to an MCE System, each Person (other than the Debtors, Buyer and
its Affiliates) that owns or purports to own any Equity Security or profits
interest in such MCE System.
“Material Adverse Effect”
means (i) a material adverse effect on the business, condition (financial
or otherwise), Assets or results of operations of any Specified Business (or,
solely for purposes of Section 6.2(f), any Specified Business or the
Acquired Business), taken as a whole, or (ii) a material impairment or
delay of Seller’s or its Affiliates’ ability to effect the Closing or to
perform its obligations under this Agreement or any Ancillary Agreement to
which it is a party; provided, however, that none of the
following (or the results thereof) shall be taken into account: (A) any change in Law or accounting
standards or interpretations thereof that is of general application; (B) any
change in general economic or business conditions or industry-wide or
financial market conditions generally; (C) except with respect to Sections
3.4, 3.5,
25
6.1(f) and 6.2(e), any adverse
effect as a result of the execution or announcement of this Agreement, the
Ancillary Agreements, the Transaction or the transactions contemplated by the
Ancillary Agreements; and (D) any loss of Subscribers reflected in the
Base Subscriber Number for such Specified Business (or, solely for purposes of Section 6.2(f),
any or all Specified Businesses ) and any loss of Subscribers to the extent
reflected in the Subscriber Change used in calculating the Final Adjustment
Amount for such Specified Business (or, solely for purposes of Section 6.2(f),
any or all Specified Businesses).
“MCE Base Subscriber Number”
means, with respect to each MCE System, the number of Basic Subscribers of such
MCE System corresponding to the month prior to the month in which the Closing
occurs, as set forth on Schedule 1.1(j) of the Seller Disclosure
Schedule.
“MCE Closing” has the meaning
set forth in Section 2.7(c).
“MCE
Discharge” means, with respect to each MCE System, (a) except as otherwise
provided in the Plan and/or the Confirmation Order (or, to the extent approved
by Buyer (such approval not to be unreasonably withheld), such other plan that
includes the applicable Managed Cable Entity as a debtor and the confirmation
order of the Bankruptcy Courtapproving
such plan and effecting the MCE Discharge[)], the discharge and/or equivalent
effect granted pursuant to such confirmation order and sections 363, 1123 and
1141 of the Bankruptcy Code or the equivalent effect pursuant to any other
governmental proceeding to the extent approved by Buyer (such approval not to
be unreasonably withheld; itbeingunderstoodthat
it would be reasonable for Buyer to refuse to grant such approval if such other
governmental proceeding would not have the same effect as a bankruptcy
discharge in all respects relative to the Transaction), of (i) each
applicable Managed Cable Entity, as a debtor in possession, from Liabilities, (ii) interests
of, and rights, interest and Claims of the holders of Claims against and
interests in, such MCE System and Managed Cable Entity and (iii) Encumbrances
on, or interests of Persons (other than Seller and its Affiliates) in, the
Transferred Assets that are Related to such MCE System; itbeingunderstoodthat an MCE Discharge may occur pursuant to the Plan[.] or (b) to
the extent the Transaction occurs
pursuant to a 363 Sale, the functional equivalent of subparagraph (a) in
terms of its effect on Buyer, each Specified Business, the Transferred Assets
and the Assumed Liabilities granted pursuant to the 363 Order, and sections
105, 363 and 365 of the Bankruptcy Code.
“MCE Financial Statements”
has the meaning set forth in Section 5.11(b).
“MCE Fraction” means, with
respect to the Disputed MCE Systems transferred to Buyer at the MCE Closing
(or, as used in the definitions of “MCE Subscriber Cap Component” and “MCE
Subscriber Basket Component,” with respect to all Disputed MCE Systems not
transferred to Buyer at the Closing), a fraction, the numerator of which is the
aggregate number of Basic Subscribers served by such Disputed MCE Systems and
the denominator of which is the aggregate number of Basic Subscribers served by
all Group 2 Systems and MCE Systems, in each case as of December 31, 2004.
26
“MCE Management Agreement”
has the meaning set forth in Section 2.7(b).
“MCE Period” has the meaning
set forth in Section 2.7(b).
“MCE Purchase Price” means
$390,000,000.
“MCE Purchase Shares” has the
meaning set forth in Section 2.7(c).
“MCE Resolution” has the
meaning set forth in Section 2.7(b).
“MCE Subscriber Basket Component”
means the Subscriber Basket set forth on Schedule 1.1(q)(i) of the
Seller Disclosure Schedule with respect to the Group 2 Systems multiplied by
the MCE Fraction.
“MCE Subscriber Cap Component”
means the Subscriber Cap set forth with respect to the Group 2 Systems on Schedule
1.1(q)(ii) of the Seller Disclosure Schedule multiplied by the MCE
Fraction.
“MCE Systems” has the meaning
set forth in the Recitals.
“Measurement Date” means the
subscriber cut-off date during the calendar month immediately preceding the
month in which the Closing occurs.
“Most Recent Balance Sheet”
means, with respect to each Specified Business, the unaudited balance sheet
included in the Derivative 2004 Financial Statements for such Specified
Business.
“Multiemployer
Plan” has the meaning set forth in Section 3.10(a).
“Net Liabilities Adjustment
Amount” means, with respect to each Specified Business, the Closing Net
Liabilities Amount minus the Base
Net Liabilities Amount of such Specified Business, expressed as a positive, if
positive, or as a negative, if negative.
“Non-Debtor Subsidiaries” has
the meaning set forth in Section 5.13(h).
“Non-Debtor Transfer” has the
meaning set forth in Section 5.13(h).
“Non-Governmental
Authorizations” means, with respect to each Specified Business, all
licenses, permits (including construction permits), certificates, waivers,
amendments, consents, franchises, exemptions, variances, expirations and
terminations of any waiting period requirements, other actions by, and notices,
filings, registrations, qualifications, declarations and designations with, any
Person and other authorizations and approvals that are Related to such
Specified Business other than Governmental Authorizations.
27
“Non-Referred Proposal” has
the meaning set forth in the definition of “Proposed Change in Tax Law.”
“Notice Period” has the
meaning set forth in Section 7.4(a).
“NYSE” means the New York
Stock Exchange.
“OCB Contract” means, with
respect to each Specified Business, a Contract Related to such Specified
Business that (i) (A) is in a Contract Category Expected to be
Assumed, (B) is entered into in the Ordinary Course and (C) contains no
Special Terms (provided, that
with respect to Contracts described on Schedule 1.1(k)(i) of the
Seller Disclosure Schedule, clause (i) of the definition of “Special Terms”
shall be disregarded for purposes of this definition) or (ii) is set forth
on Schedule 1.1(k)(ii) of the Seller Disclosure Schedule; provided,
however, that any Contract that would otherwise be an OCB Contract and
which cannot be assigned to Buyer at the Closing without consent or waivers of
a third party that are not obtained by the Closing (and the use and benefits of
which cannot in all material respects be provided to Buyer pursuant to Section 2.11)
shall be deemed not to be an OCB Contract; provided, further,
that Buyer shall be entitled to remove from Schedule 1.1(k)(i) of
the Seller Disclosure Schedule any Contract that was amended in any material
respect prior to the date hereof if such amendment is not identified with such
Contract on Schedule 1.1(k)(i).
“Offering
Financial Information” has the meaning set forth in Section 5.11(a).
“Ordinary Course” or “Ordinary
Course of Business” means (i) with respect to each Specified Business,
the conduct of such Specified Business as a going concern in accordance with
Seller’s normal day-to-day customs, practices and procedures,
without regard to the Sale Process (it being
understood that the use of regional or national resources utilized by a
Cable System shall be deemed to be so conducted if utilized in accordance with
Seller’s normal, day-to-day customs, practices and procedures in the Business
as applied to such Cable System), and (ii) with respect to the Parent
Business, the conduct of the Parent Business as a going concern in accordance
with Parent’s normal day-to-day customs, practices and procedures,
except to the extent such customs, practices and procedures relate to
transactions entered into following the date hereof that have the intended
effect of benefiting any Affiliate of Parent (other than any Subsidiary of
Parent) at the expense of Parent or any Subsidiary of Parent in a manner that
would deprive Parent or any Subsidiary of Parent of the benefit they would
otherwise have obtained if the transaction were to have been effected on terms
that were negotiated on an arm’s length basis.
“Outside Date” has the
meaning set forth in Section 8.2.
“Owned Real Property” means,
with respect to each Specified Business, all fee interests in real property
(including improvements thereon) Related to such Specified Business, including
those listed on Schedule 1.1(l) of the Seller Disclosure Schedule
and identified as Related to such Specified Business.
28
“Parent” has the meaning set
forth in the Recitals.
“Parent Agreement” has the
meaning set forth in the Recitals.
“Parent Audited Financial
Statements” has the meaning set forth in Section 4.9(a).
“Parent Basic Subscriber”
means a paying customer who subscribes to at least the lowest level of video
programming offered by the Parent Cable Systems as determined pursuant to the
Parent Subscriber Accounting Policy.
“Parent
Benefit Plans” has the meaning set forth in Section 4.12(a).
“Parent Business” has the
meaning set forth in the Recitals.
“Parent Cable System” means
each System that is Related to the Parent Business.
“Parent Capital Stock” has
the meaning set forth in Section 4.4(b).
“Parent Class A Common Stock”
has the meaning set forth in Section 2.5(c).
“Parent Class B Common Stock”
has the meaning set forth in Section 4.4(b).
“Parent Digital Subscriber”
means a paying customer who subscribes to any level of service received via
digital technology (including the digital guide tier, digital basic tier,
digital sports tier and digital movie tier) from the Parent Cable Systems as
determined pursuant to the Parent Subscriber Accounting Policy.
“Parent Franchise” means each
franchise, as such term is defined in the Communications Act, granted by a
Government Entity authorizing the construction, upgrade, maintenance or
operation of any part of the Parent Cable Systems.
“Parent Governmental
Authorizations” means all licenses (including cable television relay
service, business radio and other licenses issued by the FCC or any other
Government Entity), permits (including construction permits), certificates,
waivers, amendments, consents, franchises (including similar authorizations or
permits), exemptions, variances, expirations and terminations of any waiting
period requirements (including pursuant to the HSR Act), other actions by, and
notices, filings, registrations, qualifications, declarations and designations
with, and other authorizations and approvals Related to the Parent Business and
issued by or obtained from a Government Entity or Self-Regulatory
Organization.
“Parent HSD Subscriber” means
a paying customer who subscribes to high speed data service offered by the
Parent Cable Systems as determined pursuant to the Parent Subscriber Accounting
Policy.
29
“Parent Material Adverse Effect”
means (i) a material adverse effect on the business, condition (financial
or otherwise), Assets or results of operations of the Parent Business, taken as
a whole or (ii) a material impairment or delay of Parent’s or its
Controlled Affiliates’ ability to effect the Closing or to perform its
obligations under this Agreement or any Ancillary Agreement to which it is a
party; provided, however, that none of the following (or the
results thereof) shall be taken into account:
(A) any change in Law or accounting standards or interpretations
thereof that is of general application; (B) any change in general economic
or business conditions or Broadband Industry-wide or financial market
conditions generally; and (C) except with respect to Sections 4.6, 4.7 and
6.1(f), any adverse effect as a result of the execution or announcement of this
Agreement, the Ancillary Agreements, the Transaction or the transactions
contemplated by the Ancillary Agreements.
“Parent Material Contracts”
means those Contracts set forth on Schedule 4.17(a) of the Buyer
Disclosure Schedule.
“Parent Preferred Stock” has
the meaning set forth in Section 4.4(b).
“Parent Real Property” means
all fee interests in real property (including improvements thereon) Related to
the Parent Business.
“Parent Redemption” means the
redemption of the Parent Class A Common Stock pursuant to the Parent
Redemption Agreement.
“Parent Redemption Agreement”
means the Redemption Agreement, dated as of the date hereof, by and among
Friendco, Comcast Cable Communications Holdings, Inc., MOC Holdco II, Inc.,
TWE Holdings I Trust, TWE Holdings II Trust, Cable Holdco II Inc., TWE Holding
I LLC, TWX and Parent.
“Parent Subscriber” means any
Parent Basic Subscriber, Parent Digital Subscriber or Parent HSD Subscriber.
“Parent Subscriber Accounting
Policy” has the meaning set forth in Section 4.18(e).
“Per Share Value of the Purchase
Shares” means the amount obtained by dividing the Aggregate Value of the
Purchase Shares by the aggregate number of Purchase Shares that would be
delivered by Buyer at the Closing before giving effect to any adjustment
thereto pursuant to Section 2.6(f) or 2.7.
“Permitted
Assignee” has the meaning set forth in Section 9.3.
“Permitted Encumbrances”
means (i) Encumbrances reflected or reserved against or otherwise
disclosed in the Most Recent Balance Sheet, (ii) mechanics’, materialmen’s,
warehousemen’s, carriers’, workers’, or repairmen’s liens or other similar
common law or statutory Encumbrances arising or incurred in the Ordinary Course
and that are not material in amount or effect on any Specified Business or are
being contested in good faith by appropriate proceedings, (iii) liens for
Taxes, assessments and other
30
governmental charges that are not
due or payable or are being contested in good faith by appropriate proceedings,
(iv) with respect to real property, (A) easements, quasi-easements,
licenses, covenants running with the land, rights-of-way, rights of
re-entry, restrictions or other similar encumbrances, conditions or
restrictions that would be disclosed on current title reports or surveys, which
do not, individually or in the aggregate with one or more other Encumbrances,
interfere in any material respect with the right or ability to own, use, enjoy
or operate such real property as currently used or operated or to convey good
and indefeasible fee simple title to the same (with respect to Owned Real
Property) or materially detract from the value of such real property, (B) zoning,
building, subdivision or other similar requirements or restrictions, provided,
that the same are not violated in any material respect by the existing
improvements or the current use and operation of such real property, and (C) Transferred
Real Property Subleases which do not, individually or in the aggregate with one
or more other Encumbrances, interfere in any material respect with the right or
ability to use, enjoy or operate such real property as currently used or
operated or materially detract from the value of such real property, (v) Encumbrances,
other than Encumbrances on real property, incurred in the Ordinary Course that
are not material to any Specified Business, (vi) any transfer restrictions
set forth in any Assigned Contract (other than any such restriction that could
reasonably be expected, individually or in the aggregate, to adversely affect
the Transaction or the Exchange in any material respect) and (vii) Encumbrances
imposed by any Contract or any Law governing a Franchise, provided, that
in the case of clauses (i), (ii), (iii), (iv) (as to any Encumbrances that
can be satisfied solely through the payment of money) and (v), any such
Encumbrance shall be a Permitted Encumbrance only to the extent that such
Encumbrance (x) shall be discharged pursuant to the Discharge or, with
respect to MCE Systems or Transferred Assets owned by Non-Debtor Subsidiaries,
an MCE Discharge or Additional Discharge, respectively, or (y) is
reflected in the Closing Net Liabilities Amount used in calculating the Final
Adjustment Amount.
“Permitted Parent Incentive
Awards” means an amount of Equity Securities that, during the 12-month
period commencing on the date hereof, does not exceed 1.5% of the outstanding
Equity Securities of Parent calculated on a Fully Diluted Basis and, for each 90-day
period thereafter, does not exceed an additional 0.375% of the outstanding
Equity Securities of Parent calculated on a Fully Diluted Basis (provided,
that (i) no more than ten percent of Permitted Parent Incentive Awards
shall be shares of restricted stock and (ii) any such employee stock
option shall not be issued at less than fair market value as determined in good
faith by Parent’s board of directors or compensation committee).
“Permitted Promotion” means,
as to any Basic Subscriber (other than Subscribers that only receive the lowest
tier of service (i.e., lifeline or “B1 only” Subscribers)), any discount or
promotion (i) which does not extend beyond two months following the
Closing Date or provide for a discount equal to (or in excess of) the entire
Applicable Monthly Rate in any consecutive months or in more than any one month
if such discount or promotion is for a period of less than four months and (ii) the
dollar amounts or values of which do not (A) exceed, over the life of such
discount or promotion, an amount equal to two times the full monthly rate card
pricing applicable to
31
all services provided to such
Subscriber (the “Applicable Monthly Rate”) or (B) exceed 50% of an
amount equal to the product of (x) the Applicable Monthly Rate multiplied
by (y) the number of months (including any fraction thereof) in the life
of such discount or promotion.
“Person” means an individual,
a corporation, a partnership, an association, a limited liability company, a Government
Entity, a trust, a labor union or other entity or organization.
“Petition Date” has the
meaning set forth in the Recitals.
“Plan”
means the chapter 11 plan filed by Seller and/or its Affiliates in connection
with the Reorganization Case, providing, among other things, for the
effectuation of the Transaction, as amended from time to time, and satisfying
the requirements of Section 5.13.
“Primarily Related” means,
with respect to any business or System, owned or held primarily by, required
primarily for, or used, intended for use, leased, licensed, accrued, reserved
or incurred primarily in connection with, such business or System, including to
the extent allocated thereto pursuant to Schedule 1.1(m) of the
Seller Disclosure Schedule.
“Pro Rata Payment” means, as
to any amount, an aggregate amount of cash and Purchase Shares (where each
Purchase Share is valued at the Per Share Value of the Purchase Shares) equal
to such amount and allocated as between cash and Purchase Shares such that
35.14% of such amount shall be in the form of Purchase Shares and 64.86% of
such amount shall be in cash; provided, however, that (i) the
cash portion of such amount shall be increased by (A) any Interim Dividend
paid in cash on the Purchase Shares included in such Pro Rata Payment and (B) in
respect of the portion of any cash payment by Buyer pursuant to (x) Section 2.6(f),
interest on such portion (without giving effect to the foregoing clause (A))
from the date of the Closing, as applicable, to the date of payment at LIBOR
calculated on a 365-day basis and (y) Section 7.2, interest on
such portion (without giving effect to the foregoing clause (A)) at LIBOR
calculated on a 365-day basis from the date notice of the Losses for
which indemnification is sought was delivered until the date of payment of
indemnification by the Buyer Indemnifying Party and (ii) the stock portion
of such amount shall be increased by Interim Dividends paid in stock on the
Purchase Shares included in such Pro Rata Payment.
“Programming Agreement” means
any Contract pursuant to which Seller or any of its Affiliates has the right to
carry audio and/or video content or programming (or pay for or otherwise
provide compensation with regard to cable television programming) on any Cable
System and all related arrangements, including with respect to programming and
launch initiatives and support; provided, that “Programming Agreement”
shall not include any local Cable System leased access agreement required by
Law.
32
“Proposed Change in Tax Law”
means a proposal published in writing by (i) the President of the United
States, (ii) the U.S. Treasury Department or any official on behalf of the
U.S. Treasury Department (including the Office of Tax Policy), (iii) the
Commissioner of the Internal Revenue Service or any official on behalf of the
Internal Revenue Service, (iv) the House Ways and Means Committee or any
member thereof (each such member, except for the chair and ranking minority
member, a “Specified HWMC Member”), (v) the Senate Finance
Committee or any member thereof (each such member, except for the chair and
ranking minority member, a “Specified SFC Member”) or (vi) any
other Congressional Committee (any such proposal that is not reported out of
such Congressional Committee for sequential referral to either the House Ways
and Means Committee or the Senate Finance Committee, a “Non-Referred
Proposal”).
“Protections Order” means an
order of the Bankruptcy Court approving Section 5.10 and Article VIII
pursuant to sections 105, 363, 503(b) and 364 of the Bankruptcy Code.
“Proximate Cause Party” has
the meaning set forth in Section 8.2.
“Purchase Price” has the
meaning set forth in Section 2.5(c).
“Purchase Price Allocation
Schedule” has the meaning set forth in Section 5.7(d).
“Purchase Price Per Subscriber”
means $3,810.
“Purchase Rights” means any
purchase options, rights of first refusal or other rights that any Person may
have (under the terms of any franchise or otherwise) to purchase all or any
portion of a System owned or operated by any Person as a result of the
Transaction or the transfer of any System pursuant to the Exchange.
“Purchase Shares” has the
meaning set forth in Section 2.5(c).
“Qualified Customer” means a
Basic Subscriber who, prior to the Closing, has been billed and, prior to one
month following the Closing, has paid (disregarding payments subject to any
rebates or similar programs) for services delivered during the period
commencing two months prior to the Measurement Date and ending on the Measurement
Date an amount no less than (i) for each month in such period, 50% of the
Applicable Monthly Rate or (ii) 66.67% of the Applicable Monthly Rate in
respect of any single month during such period. For the avoidance of doubt, in
calculating a Qualified Customer for purposes of the Estimated Closing
Adjustment Amount and the condition set forth in the second sentence of Section 6.2(h),
the parties shall assume that no payments will be made by such Basic Subscriber
after the Closing.
“Rate Regulatory Matter”
means any proceeding or investigation with respect to a Cable System arising
out of or related to the Cable Act (other than those affecting the cable
television industry generally) dealing with, limiting or affecting the rates
which can be charged by such Cable System for programming, equipment,
installation, service or otherwise.
33
“Real Property Leases” means,
with respect to each Specified Business, those leases, subleases, license
agreements, and sublicense agreements, together with all extensions, supplements,
amendments, other modifications and nondisturbance agreements relating thereto,
governing real property Related to such Specified Business, including those
with respect to the real properties listed on Schedule 1.1(n) of
the Seller Disclosure Schedule and identified as Related to such Specified
Business.
“Real Property Sublease”
means, with respect to any Specified Business, any lease, sublease, license or
sublicense, together with all extensions, supplements, amendments and other
modifications relating thereto, pursuant to which the Owned Real Property or
the Leased Real Property (or any portion thereof) Related to such Specified
Business is leased, subleased, licensed or sublicensed to others.
“Redemptions” means the
transactions that are the subject matter of the Parent Redemption Agreement and
of the TWE Redemption Agreement, including the Parent Redemption and the TWE
Redemption.
“Registered” means issued by,
registered with, renewed by, or the subject of a pending application before,
any Government Entity or domain name registrar.
“Rejected Contracts” has the
meaning set forth in Section 5.13(b).
“Rejection Claim” means, with
respect to a Contract, any Claim arising out of (i) the termination of
such Contract or the rejection of such Contract under section 365 of the
Bankruptcy Code or (ii) a breach of or default under any such Contract
entered into following the Petition Date as a result of the termination,
rejection or breach of such Contract as a result of Buyer’s determination not
to make such Contract an Assigned Contract, in each case assuming such
termination, rejection or breach occurred as of the earlier of (A) the
date on which such Contract is terminated or rejected or (B) the Closing
Date.
“Related” means, with respect
to any business or System, owned or held by, required for, or used, intended
for use, leased, licensed, accrued, reserved or incurred in connection with,
such business or System.
“Related to the Parent Business”
means owned or held by, required for, used or intended for use, leased or
licensed in connection with, the Parent Business as conducted by Parent and its
Affiliates prior to the Closing.
“Remainder
Plan” means, in the case of a 363 Sale, a chapter 11 plan, other than the
JV Plan, filed by Seller and/or its Affiliates in connection with the
Reorganization Case, providing for, among other things, the distribution of the
proceeds of the Transaction (to the extent not otherwise provided for in the JV
Plan) to the creditors and stakeholders of Seller and/or its Affiliates, but
not for the effectuation of the Transaction (other than with respect to the
distribution of the proceeds of the Transaction to the extent not otherwise
provided for in the JV Plan), and satisfying the requirements of Section 5.13(j).
34
“Reorganization Case” has the
meaning set forth in the Recitals.
“Retained Books and Records”
has the meaning set forth in Section 5.1(d).
“Reversion
Notice” has the meaning set forth in Section 8.6(a).
“Rigas Litigation” means the
litigation described on Schedule 1.1(o) of the Seller Disclosure
Schedule.
“Rights-of-Way” means, with
respect to each Specified Business, the written rights-of-way
easements, rights of access, rights of use, pole line or joint line agreements,
underground conduit agreements, crossing agreements, railroad agreements,
leases, subleases, licenses, sublicenses and other similar interests in real
property (other than Owned Real Property and Leased Real Property), together
with all extensions, supplements, amendments, other modifications and nondisturbance
agreements relating thereto, Related to such Specified Business.
“Rights-of-Way Assignment
Agreement” means, with respect to each Specified Business, an agreement in
form and substance reasonably acceptable to Seller and Buyer and, to the extent
relating to Transferred Rights-of-Way that are currently recorded, reasonably
necessary to cause such assignments to be in recordable form, assigning to
Buyer the Transferred Rights-of-Way Related to such Specified Business.
“Sale Bonus Program” has the
meaning set forth in the definition of “Assumed Liabilities.”
“Sale Process” means the
formal sale process of Seller’s Business announced by Seller on April 22,2004 and commenced by Seller in September 2004.
“Schedule A Part” has the
meaning set forth in the definition of “System Group.”
“SEC” means the Securities
and Exchange Commission.
“SEC/DOJ Matters” means (i) the
civil enforcement action captioned Securities
and Exchange Commission v. Adelphia Communications Corporation, John J. Rigas,
Timothy J. Rigas, Michael J. Rigas, James P. Rigas, James R. Brown and Michael
C. Mulcahey, filed on July 24, 2002, alleging various
securities fraud claims arising out of the Rigas family’s alleged misconduct,
and the Department of Justice’s investigation related thereto, in each case as
amended, modified and/or supplemented from time to time, and any related action
or investigation commenced from time to time and (ii) any and all other
Claims that the SEC or Department of Justice may have against Seller or any of
its Affiliates (other than any Excluded Claim); provided, that, solely
for purposes of Section 6.1(c), clause (ii) shall be deemed to
exclude any such Claims that shall not have been asserted or threatened by the
SEC or Department of Justice as of the Closing Date.
35
“SEC/DOJ Settlement” means a
settlement, dismissal or other resolution of the SEC/DOJ Matters in full and
pursuant to which after the Closing no Specified Business or any owner thereof
shall have any Liability (including risk of criminal prosecution), including
any obligation with respect to behavioral relief or similar action or
limitation other than obligations not greater than those set forth in the form
of letter agreement delivered by representatives of Friendco to representatives
of Seller and Buyer on April 17, 2005.
“Securities Act” means the
Securities Act of 1933.
“Self-Regulatory
Organization” means the National Association of Securities Dealers, Inc.,
the American Stock Exchange, the NYSE, any national securities exchange (as
defined in the Exchange Act) or any other similar self-regulatory body or
organization.
“Seller” has the meaning set
forth in the Preamble.
“Seller Audited Financial
Statements” has the meaning set forth in Section 5.11(b).
“Seller Confidentiality Agreement”
means the letter agreement, dated October 22, 2004, among Seller, Friendco
and TWX, as amended by the letter agreement, dated November 9, 2004, the
letter agreement, dated January 7, 2005 and the letter agreement dated as
of the date hereof.
“Seller Disclosure Schedule”
means the disclosure schedule attached hereto as Annex A.
“Seller Indemnified Parties”
has the meaning set forth in Section 7.3.
“Seller Required Approvals”
means, with respect to each Specified Business, all consents, approvals,
waivers, authorizations, notices and filings, (a) required to be obtained
by Seller or any of its Affiliates from, or to be given by Seller or any of its
Affiliates to, or made by Seller or any of its Affiliates with, any Person, in
connection with the execution, delivery and performance by Seller or any of its
Affiliates of this Agreement, the Ancillary Agreements and the agreements
contemplated thereby to which it is (or will be) a party, the failure of which
to obtain or make would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, other than the [Confirmation]Transaction
Order and the LFA Approvals, or (b) that are listed on Schedule 1.1(p) of
the Seller Disclosure Schedule and identified as Related to such Specified
Business.
“Seller
Severance Plan” has the meaning set forth in Section 5.8(c).
“Seller Subscriber Accounting
Policy” has the meaning set forth in Section 3.16(e).
“Seller’s
401(k) Plan” has the meaning set forth in Section 5.8(j).
36
“Seller’s Objection” has the
meaning set forth in Section 2.6(c).
“Seller’s Statement” has the
meaning set forth in Section 2.6(a).
“Shared Assets and Liabilities”
means the Assets and Liabilities set forth on Schedule 1.1(h) of
the Seller Disclosure Schedule and any other Assets required to have been
listed thereon in order for the representation and warranty in Section 3.20(b) to
be true and correct.
“Significant Subsidiary” of
any Person means a Subsidiary of such Person that would constitute a “significant
subsidiary” (within the meaning of Rule 102 of Regulation S-X of the
SEC).
“SOA” means the Sarbanes-Oxley
Act of 2002.
“Special Term” has the
meaning set forth in Section 3.15(b).
“Specified Business” means
each of the Group 1 Business and the Group 2 Business.
“Specified HWMC Member” has
the meaning set forth in the definition of “Proposed Change in Tax Law.”
“Specified SFC Member” has
the meaning set forth in the definition of “Proposed Change in Tax Law.”
“Specified Systems” means
each of the Group 1 Systems, the Group 2 Systems and the MCE Systems.
“Stock Awards” has the
meaning set forth in Section 5.8(q).
“Sublease Assignment Agreement”
means, with respect to each Specified Business, one or more agreements in form
and substance reasonably acceptable to Seller and Buyer and reasonably
necessary to cause such agreements to be recordable, assigning to Buyer the
Transferred Real Property Subleases Related to such Specified Business.
“Subscriber” means any Basic
Subscriber, Digital Subscriber or HSI Subscriber.
“Subscriber Accounting System”
has the meaning set forth in Section 5.23.
“Subscriber Adjustment Amount”
means, with respect to each Specified Business, the product of (i) Purchase
Price Per Subscriber multiplied by
(ii) if (A) the absolute value of the Subscriber Change is less than
or equal to the Subscriber Basket, zero and (B) the absolute value of the
Subscriber Change is greater than the Subscriber Basket, (1) if the
Subscriber Change is a negative amount, the sum of the Subscriber Change plus the Subscriber Basket for such Specified
Business and (2) if the Subscriber
37
Change is a positive amount, the sum
of the Subscriber Change minus the
Subscriber Basket for such Specified Business.
“Subscriber Basket” means,
with respect to each Specified Business, the number of Basic Subscribers set
forth opposite such Specified Business in Schedule 1.1(q)(i) of the
Seller Disclosure Schedule; provided, however, that the
Subscriber Basket allocated to the Group 2 Business shall be reduced by the MCE
Subscriber Basket Component (if there are any Disputed MCE Systems).
“Subscriber Cap” means, with
respect to each Specified Business, the number of Basic Subscribers set forth
with respect to such Specified Business in Schedule 1.1(q)(ii) of
the Seller Disclosure Schedule; provided, however, that the
Subscriber Cap allocated to the Group 2 Business shall be reduced by the MCE
Subscriber Cap Component (if there are any Disputed MCE Systems).
“Subscriber Change” means,
with respect to each Specified Business, the Base Subscriber Number for such
Specified Business minus the
Closing Subscriber Number for such Specified Business, expressed as a positive,
if positive, or as a negative, if negative; provided, that, except for
purposes of calculating the Subscriber Adjustment Amount for each Disputed MCE
System pursuant to Section 2.7(a),
the absolute value of the Subscriber Change shall not exceed the
Subscriber Cap for such Specified Business.
“Subsequent Adjustment Amount”
has the meaning set forth in Section 2.6(f).
“Subsidiary” means, with
respect to any Person, any entitywhether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interests having by their terms voting power to elect a majority
of the board of directors or other persons performing similar functions is
directly or indirectly owned or controlled by such Person or by one or more of
its respective Subsidiaries; it being
understood that (i) Bright House Networks, LLC shall be deemed not to
be a Subsidiary of Parent or any of its Affiliates so long as its day-to-day
operations are managed by Advance Publications, Inc., a New York
corporation, Advance/Newhouse Partnership, a New York general partnership, or
any of their respective Affiliates pursuant to the Partnership Agreement for
Time Warner Entertainment-Advance/Newhouse Partnership, a New York general
partnership (“TWE-A/N”), (ii) TWE-A/N shall be deemed a wholly
owned, indirect Subsidiary of Parent, and (iii) the Tele-Media Entities
shall be deemed to be Subsidiaries of Seller.
“Superior
Alternate Plan” has the meaning set forth in Section 5.10(b).
“Superior Proposal” has the
meaning set forth in Section 5.10(a).
“System” means (i) a
cable system, as such term is defined in the Communications Act, and (ii) to
the extent relating to areas referred to on a Schedule A Part as a
non-primary Cost Center, a multichannel video programming distribution system
operated through (A) bulk, commercial or multiple dwelling units, (B) satellite
38
master antenna television units or (C) former
Verizon cable systems in Thousand Oaks, Oxnard, Port Hueneme and El Rio,
California.
“System Group” means, with
respect to each Specified Business and each Specified Business (as defined in
the Friendco Purchase Agreement), the Systems that are a part of such Specified
Business as set forth in the applicable part of Schedule A of the Seller
Disclosure Schedule or Schedule A of the Seller Disclosure Schedule (as defined
in the Friendco Asset Purchase Agreement) (each, a “Schedule A Part”).
“Target Capital Expenditure
Amount” means, with respect to each Specified Business, the aggregate
amount of capital expenditures budgeted to be made in respect thereof,
respectively, subsequent to December 31, 2004 and up to and including the
end of the month immediately preceding the Closing Date or, if the Closing
occurs on a month-end, up to and including such month, as set forth in the
Budget; provided, however, that in the event any Disputed MCE
Systems exist as of the Closing, then the Target Capital Expenditure Amount in
respect of the Group 2 Business shall be reduced by the amounts included in the
Budget in respect of each Disputed MCE System through the month ending (i) on
the Closing Date if the Closing occurs on a month-end or (ii) immediately
prior to the Closing Date if the Closing does not occur on a month-end (itbeingunderstoodthat the amounts included in the Budget
in respect of each Disputed MCE System shall be deemed for purposes hereof to
equal the amounts included in the Budget in respect of all MCE Systems
multiplied by the quotient obtained by dividing (x) the aggregate number
of Basic Subscribers served by such Disputed MCE System as of December 31,2004 by (y) the aggregate number of Basic Subscribers served by all MCE
Systems as of December 31, 2004); provided, further, that,
if the Subscriber Change for a Specified Business is a positive number, the
Target Capital Expenditure Amount for such Specified Business shall be reduced
by an amount equal to the lesser of (A) the product of the Subscriber
Change multiplied by $210.00 and (B) (1) with respect to the Group 1
Business, $21,100,000 and (2) with respect to the Group 2 Business,
$19,100,000.
“Tax Law” means the Code,
final, temporary or proposed Treasury regulations, published pronouncements of
the U.S. Treasury Department or IRS, court decisions or other relevant binding
legal authority (and similar provisions, pronouncements, decisions and other
authorities of state, local and foreign Law).
“Tax Return” shall mean any
report, return or other information (including any attached schedules or any
amendments to such report, return or other information) required to be supplied
to or filed with a Government Entity with respect to any Tax, including an
information return, claim for refund, amended return, declaration, or estimated
Tax returns in connection with the determination, assessment, collection or
administration of any income Tax.
“Taxes” means all federal,
state or local and all foreign taxes, including income, gross receipts,
windfall profits, value added, severance, property, production, sales, use,
duty, license, excise, franchise, employment, withholding or similar taxes
(including any payment required to be made to any state abandoned property
administrator or other public official pursuant to an abandoned property, escheat
or
39
similar Law) together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or penalties.
“Tele-Media Entities” means
each of TMC Holding Corporation, a Delaware corporation, TMC Holdings, LLC, a
Delaware limited liability company, Adelphia Company of Western Connecticut, a
Connecticut corporation, Tele-Media Investment Partnership, L.P., a Delaware
limited partnership, Eastern Virginia Cablevision, L.P., a Delaware limited
partnership, Eastern Virginia Cablevision Holdings LLC, a Delaware limited
liability company, Tele-Media Company of Hopewell-Prince George, a Virginia
general partnership, Tele-Media Company of Tri-States, L.P., a Delaware limited
partnership, CMA Cablevision Associates VII, L.P., a Pennsylvania limited
partnership, and CMA Cablevision Associates XI, L.P., a Pennsylvania limited
partnership.
“Third Party Claim” has the
meaning set forth in Section 7.4(a).
“Third Party Confidentiality
Agreement” has the meaning set forth in Section 5.21.
“Total Liabilities” means,
with respect to each Specified Business, all Liabilities, expressed as a
positive number, of such Specified Business as of the Closing (after giving
effect to the Transaction), as would be reflected on the face of a balance
sheet (excluding any footnotes thereto) prepared in accordance with GAAP
consistently applied (to the extent GAAP was previously applied) for such
Specified Business; provided, however, that Total Liabilities
shall include the following: accounts payable,
accrued expenses (including all accrued vacation time, sick days, paid time
off, copyright fees, franchise fees and other license fees or charges),
Liabilities with respect to unearned income and advance payments (including
subscriber prepayments and deposits for converters, encoders, cable television
service and related sales) and interest, if any, required to be paid on advance
payments; provided, further, that (a) in no event shall
Total Liabilities include (i) Liabilities that constitute Assumed
Liabilities pursuant to clauses (iii) (other than part (C) thereof), (iv) (other
than accrued but unpaid Franchise fees and any reserves for Franchise fee
audits), (v), (vi), and (vii) of the definition of “Assumed Liabilities”
or (ii) Excluded Liabilities, and (b) Liabilities (i) under the
Sale Bonus Program included in clause (iii)(C) of the definition of “Assumed
Liabilities” and (ii) under purchase orders outstanding as of the Closing
will be treated, for purposes hereof, as part of the Total Liabilities of the
relevant Specified Business as of the Closing regardless of whether they would
otherwise be treated as such under GAAP but subject in any event to the
remainder of this definition. For purposes of determining Total Liabilities in
respect of any Disputed MCE System, all references above to the Closing shall
be deemed to mean, with respect to any Disputed MCE System, the MCE Closing.
“Transaction” means the
transactions that are the subject of this Agreement, including the purchase and
sale of the Transferred Assets and the assumption of the Assumed Liabilities; provided,
however, that Transaction shall not include the Friendco Transaction.
40
“Transaction
Order” means the Confirmation Order or the 363 Order, as applicable.
“Transfer
Tax Escrow Account” means an interest bearing account held by the Escrow
Agent, which shall be established pursuant to the Transfer Tax Escrow
Agreement; it being understood that (X) in all events the total amount to
be deposited in the Transfer Tax Escrow Account by Seller shall not exceed (i) $10,000,000
minus (ii) any amounts paid by Seller to Buyer in respect of Incremental
Transfer Taxes and (Y) Seller shall pay all reasonable costs necessary to
establish and maintain such account.
“Transfer
Tax Escrow Agreement” shall mean an escrow agreement to be executed at the
Closing, in form and substance mutually agreeable to Buyer and Seller (each
acting reasonably and in good faith), which shall set forth the terms pursuant
to which funds shall be deposited to and released from the Transfer Tax Escrow
Account pursuant to the terms of Section 5.7(c).
“Transfer Tax Returns” has
the meaning set forth in Section 5.7(c)(ii).
“Transfer Taxes” has the
meaning set forth in Section 5.7(c)(i).
“Transferred Assets” has the
meaning set forth in Section 2.1.
“Transferred Cash” has the
meaning set forth in Section 2.1(a).
“Transferred Employees” has
the meaning set forth in Section 5.8(e)(ii).
“Transferred Employees’ Records”
means all personnel files related to the Transferred Employees, but not
including any files the transfer of which would be prohibited by Law.
“Transferred Intellectual
Property” means, with respect to each Specified Business, the Intellectual
Property owned by Seller or its Affiliates and Related to such Specified
Business, including that set forth on Schedule 1.1(r) of the Seller
Disclosure Schedule and identified as Related to such Specified Business.
“Transferred Intellectual
Property Contracts” means, with respect to each Specified Business, (i) the
licenses, sublicenses, distributor agreements and permissions, and royalty
agreements concerning Intellectual Property to which Seller or any of its
Affiliates is a party and which are Related to such Specified Business and are
Assigned Contracts and (ii) the rights and entitlements, including the
right to receive royalty payments, pursuant to any licenses, sublicenses,
distributor agreements and permissions or royalty agreements to which Seller or
any of its Affiliates is a party and under which a third party licensee obtains
benefits pursuant to section 365(n) of the Bankruptcy Code and which are
Related to such Specified Business and are Assigned Contracts.
“Transferred Investment
Assignment Agreement” means, with respect to each Specified Business, an
agreement in form and substance reasonably acceptable to
41
Seller and Buyer, providing for the
assignment and assumption of Transferred Investments Related to such Specified
Business.
“Transferred Investments”
means, with respect to each Specified Business, (i) the Equity Securities
identified on Schedule 1.1(s)(i) of the Seller Disclosure Schedule and
allocated to such Specified Business pursuant to the Designated Allocation, itbeingunderstoodthat, by written notice to Seller
delivered on one or more occasions and no fewer than 10 Business Days prior to
the Closing, Buyer shall be entitled to remove any item from Schedule 1.1(s)(i) of
the Seller Disclosure Schedule with respect to which any material Investment
Document was not provided to Buyer prior to the date hereof, and (ii) those
Equity Securities identified on Schedule 1.1(s)(ii) of the Seller
Disclosure Schedule that Buyer selects to be allocated to a Specified Business,
itbeingunderstoodthat such selection shall be
made in the same manner, and subject to the same conditions, as are applicable
to the selection of Contracts as Assigned Contracts pursuant to Section 5.13
(with the determination of whether or not an item will be treated as an OCB
Contract made on the basis of the primary agreement containing the business
terms applicable to the applicable Investment Entity).
“Transferred Joint Venture
Parents” has the meaning ascribed to such term in the Friendco Purchase
Agreement.
“Transferred Leased Real Property”
means Leased Real Property that is the subject of a Transferred Real Property
Lease.
“Transferred Owned Real Property”
means Owned Real Property that is not an Excluded Asset pursuant to Section 2.2(h).
“Transferred Real Property Leases”
means Real Property Leases that are Assigned Contracts.
“Transferred Real Property
Subleases” means Real Property Subleases that are Assigned Contracts and
that relate to (i) the Transferred Owned Real Property or (ii) the
Transferred Leased Real Property.
“Transferred Rights-of-Way”
means all Rights-of-Way, provided that to the extent a Right-of-Way is a
Contract, Transferred Rights-of-Way shall mean Rights-of-Way that are Assigned
Contracts.
“Transitional Services” has
the meaning set forth in Section 5.24.
“TWE” means Time Warner
Entertainment Company, L.P., a Delaware limited partnership.
“TWE-A/N” has the meaning set
forth in the definition of “Subsidiary.”
“TWE Redemption” means the
redemption of limited partnership interests in TWE pursuant to the TWE
Redemption Agreement.
42
“TWE Redemption Agreement”
means the Redemption Agreement, dated as of the date hereof, by and among
Friendco, Comcast Cable Communications Holdings, Inc., MOC Holdco I, LLC,
TWE Holdings I Trust, Cable Holdco III LLC, TWE, TWX and Parent.
“TWX” means Time Warner Inc.,
a Delaware corporation.
“TWX Agreement” means that
certain Agreement, dated March 31, 2003, between TWX, Parent and an
Affiliate of Friendco.
“TWX Confidentiality Agreement”
means the letter agreement, dated November 9, 2004, between TWX and
Seller.
“Unallocated Shared Assets and
Liabilities” means those Assets and Liabilities (and the related revenue
and expenses) identified as such on Schedule 1.1(h) of the Seller
Disclosure Schedule.
“Union Employee” has the
meaning set forth in Section 5.8(b).
“U.S. Antitrust Laws” means
the Sherman Act, the Clayton Act, the HSR Act, the Federal Trade Commission
Act, and all other federal and state statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines, and other Laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade.
“US Trustee” means the United
States Trustee for Region 2 or such other region in which the reorganization
case of any Managed Cable Entity or Non-Debtor Subsidiary is pending.
“WARN” means the Worker
Adjustment and Retraining Notification Act.
Section 1.2 Other Interpretive Provisions. Unless
the express context otherwise requires:
(a) the words “hereof,”“herein,”
and “hereunder” and words of similar import, when used in this Agreement, shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement;
(b) the terms defined in
the singular have a comparable meaning when used in the plural, and vice versa;
(c) the terms “Dollars”
and “$” mean United States Dollars;
(d) any payment
hereunder to be made in the form of shares of Parent Class A Common Stock
shall be made only in whole shares and, in lieu of payment of any fractional
shares, a cash payment shall be made in an amount equal to the value of such
fractional shares valued at the Per Share Value of the Purchase Shares;
43
(e) references herein to
a specific Section, Subsection, Recital, Schedule or Exhibit shall refer,
respectively, to Sections, Subsections, Recitals, Schedules or Exhibits of this
Agreement;
(f) wherever the word “include,”“includes,” or “including” is used in this Agreement, it shall be deemed to be
followed by the words “without limitation”;
(g) references herein to
any gender include each other gender;
(h) references herein to
any Person include such Person’s heirs, executors, personal representatives,
administrators, successors and assigns; provided, however, that
nothing contained in this clause (h) is intended to authorize any
assignment or transfer not otherwise permitted by this Agreement;
(i) references herein
to a Person in a particular capacity or capacities exclude such Person in any
other capacity;
(j) references herein
to any contract or agreement (including this Agreement) mean such contract or
agreement as amended, supplemented or modified from time to time in accordance
with the terms thereof;
(k) with respect to the
determination of any period of time, the word “from” means “from and including”
and the words “to” and “until” each means “to but excluding”;
(l) references herein
to any Law or any license mean such Law or license as amended, modified,
codified, reenacted, supplemented or superseded in whole or in part, and in
effect from time to time;
(m) references herein to
any Law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise;
(n) references herein to
sections of the Code shall be construed to also refer to any successor
sections;
(o) the rules of
construction contained in section 102 of the Bankruptcy Code (except section
102(8) of the Bankruptcy Code) shall apply; and
(p) in the event of any
inconsistency between the terms of the Plan, the JV Plan, the Remainder Plan or the
363 Motion and this Agreement, the terms of this Agreement
shall control.
ARTICLE II
PURCHASE AND SALE OF THE SPECIFIED BUSINESSES
Section 2.1 Purchase and Sale of Assets. Subject
to Sections 2.7, 2.11 and 5.13(h), on the terms and subject to the conditions
set forth herein, at the Closing, Seller
44
shall, and shall cause each of its
Affiliates to, sell, convey, transfer, assign and deliver to Buyer, and Buyer
shall purchase from Seller and each of its Affiliates (x) the Transferred
Investments and (y) all of Seller’s and each of its Affiliates’ Assets
that are Related to the Acquired Business, including the Acquired Systems,
except for the Excluded Assets (clauses (x) and (y), collectively, the “Transferred
Assets”), free and clear of all Encumbrances, other than Permitted
Encumbrances (or, in the case of the Transferred Investments, Encumbrances
under the Investment Documents), including the following:
(a) all
cash and cash equivalents consisting of (i) petty cash-on-hand, (ii) Condemnation
Proceeds and (iii) Insurance Claims (collectively, the “Transferred
Cash”);
(d) Transferred
Intellectual Property and Transferred Intellectual Property Contracts;
(e) Books
and Records;
(f) Fixtures
and Equipment;
(g) Transferred
Real Property Leases;
(h) Transferred
Real Property Subleases;
(i) Transferred
Owned Real Property;
(j) Transferred
Rights-of-Way;
(k) Insurance
Claims and Condemnation Proceeds to the extent not included under subsection (a) above;
(l) except
as set forth in Section 2.2(k), all claims (and the proceeds related
thereto) available to or being pursued by Seller or any of its Affiliates to
the extent related to the Transferred Assets, the Assumed Liabilities or the
ownership, use, function or value of any Transferred Asset;
(m) all
credits, prepaid expenses, advance payments, security deposits, prepaid items
and duties to the extent related to a Transferred Asset;
(n) to
the extent their transfer is not prohibited by Law, all Authorizations held by
Seller or any of its Affiliates and all applications therefor;
(o) all
guaranties, representations, warranties, indemnities and similar rights in
favor of Seller or any of its Affiliates to the extent related to any
Transferred Asset, except to the extent included in Excluded Assets;
45
(p) all
other current assets; and
(q) all
rights of Seller set forth in Section 5.12 of the Friendco Purchase
Agreement;
provided, that the sale, conveyance, transfer, assignment or
delivery of a Transferred Asset shall, except as otherwise directed by Buyer in
a manner consistent with the like allocations of Friendco pursuant to the
Friendco Purchase Agreement (provided, that the effect of any such
allocation so directed by Buyer that is different than the allocation that
would occur in the absence of such direction shall be disregarded for the
purposes of making any determination with respect to (x) the
representations, warranties or covenants of Seller herein, (y) the Closing
Adjustment Amount and (z) the satisfaction of the conditions set forth in Article VI,
in each case, to the extent such determination would be different (but in the
case of the Closing Adjustment Amount, only to the extent the aggregate Closing
Adjustment Amount and the Closing Adjustment Amount (as defined in the Friendco
Purchase Agreement) would be different) as a result of such direction), be
allocated among each of the Specified Businesses and the Friendco Business in
the following manner (provided, that (A) in no event will any of
the following allocations result in the transfer of subscribers from one System
Group to another and (B) any allocation of capital expenditures shall be
made in accordance with Schedule 5.2(s) of the Seller Disclosure
Schedule or, if not addressed in such Schedule as set forth below): if such Transferred Asset is (i) Related
only to a single Specified Business and not to the Friendco Business, to such
Specified Business, (ii) included in the Group 1 Shared Assets and
Liabilities pursuant to Schedule 1.1(h) of the Seller Disclosure
Schedule, to the Group 1 Business, (iii) included in the Group 2 Shared
Assets and Liabilities pursuant to Schedule 1.1(h) of the Seller
Disclosure Schedule, to the Group 2 Business, (iv) solely Related to the
Friendco Business or allocated to the Friendco Business pursuant to Schedule
1.1(f) of the Seller Disclosure Schedule (as defined in the Friendco
Purchase Agreement), to the Friendco Business, (v) is readily divisible,
Related to more than one of the Group 1 Business, the Group 2 Business and the
Friendco Business and not allocated pursuant to clause (i), (ii), (iii) or
(iv), allocated to such Group 1 Business, Group 2 Business and/or Friendco
Business to which it is Related pro rata based on the number of Basic
Subscribers served by such Group 1 Business, Group 2 Business or Friendco
Business (as applicable) as of the Closing and (vi) not allocated pursuant
to clause (i), (ii), (iii), (iv) or (v) and is (A) Primarily
Related to the Friendco Business, to the Friendco Business, (B) Primarily
Related to the Group 1 Business, to the Group 1 Business or (C) not
Primarily Related to the Friendco Business or the Group 1 Business, to the
Group 2 Business (the allocation of such assets pursuant to this proviso to
this Section 2.1, the “Designated Allocation”). Notwithstanding
anything to the contrary in this Section 2.1, any Asset included in the
Unallocated Shared Assets and Liabilities that is not a Transferred Asset
pursuant to the Designated Allocation shall not be deemed to be a Transferred
Asset.
Section 2.2 Excluded Assets. Notwithstanding
anything herein to the contrary, from and after the Closing, Seller and its
Affiliates shall retain, and there shall be excluded from the sale, conveyance,
assignment or transfer to Buyer hereunder, and the
46
Transferred Assets shall not
include, any of the Friendco Transferred Assets (except as set forth in Section 5.15)or the following Assets (collectively, the
“Excluded Assets”):
(a) all
Assets with respect to Taxes (including duty and tax refunds and prepayments)
and net operating losses of Seller or any of its Affiliates;
(b) except
to the extent set forth in Section 5.1(d), all Tax Returns of Seller or
any of its Affiliates and all Books and Records (including working papers) and
tax software to the extent directly related thereto;
(c) all
insurance policies and rights thereunder other than the Insurance Claims;
(d) all
credits, prepaid expenses, deferred charges, advance payments, security
deposits and prepaid items, in each case, only to the extent related to any
Asset that is not a Transferred Asset;
(e) all
cash and cash equivalents, except for the Transferred Cash;
(f) all
Intercompany Receivables;
(g) all
Contracts (including all Third Party Confidentiality Agreements) other than
Assigned Contracts;
(h) (i) any
Owned Real Property that, and any lease (other than a lease designated by Buyer
as an Assigned Contract) for real property that, (A) is vacant, (B) contains
only inactive headends, inactive hubsites or inactive optical transition nodes
or (C) is solely residential in nature and (ii) the Owned Real
Property set forth on Schedule 2.2(h) of the Seller Disclosure
Schedule; provided, however, that, from time to time prior to the
Closing but no later than ten Business Days prior to the Closing, Buyer may
designate any other Owned Real Property to be included on such Schedule 2.2(h) of
the Seller Disclosure Schedule;
(i) all
Programming Agreements (other than any retransmission consent agreement that is
an Assigned Contract);
(j) all
Assets listed on Schedule 2.2(j) of the Seller Disclosure Schedule;
(k) (i) all
claims (and proceeds related thereto) set forth on Schedule 2.2(k) of
the Seller Disclosure Schedule relating to (A) the Rigas Litigation or (B) the
Designated Litigation, (ii) all other claims (and proceeds related
thereto) that Seller or any of its Affiliates may make after the date hereof to
the extent not affecting any Specified Business (including any Transferred
Asset or Assumed Liability) in any material respect and (iii) any claims
of Seller or its Affiliates against Seller or any of its Affiliates (other than
any claim against any Investment Entity) to the extent not affecting any
Specified Business (including any Transferred Asset or Assumed Liability);
47
(l) all
personnel records, other than the Transferred Employees’ Records;
(m) all
rights in connection with and Assets of the Benefit Plans;
(n) except
for the Transferred Investments, all Equity Securities or other rights of
Seller or any of its Affiliates in any other Person, including any Asset
Transferring Subsidiary;
(o) Assets
allocated to the Friendco Business pursuant to the Designated Allocation; and
(p) state
certificates of public convenience and necessity or similar state telecommunication
Authorizations except for those that Buyer designates in writing as Transferred
Assets at least ten Business Days prior to the Closing.
Section 2.3 Assumption of Liabilities. On the
terms and subject to the conditions set forth herein and in partial consideration
of the sale of the Transferred Assets, at the Closing, Buyer shall assume and
discharge or perform when due all the Assumed Liabilities; it being understoodthat the assumption of an Assumed
Liability shall, except as otherwise allocated by Buyer in a manner consistent
with the like allocations of Friendco pursuant to the Friendco Purchase
Agreement (provided, that the effect of any such allocation so directed
by Buyer that is different than the allocation that would occur in the absence
of such direction shall be disregarded for the purposes of making any
determination with respect to (x) the representations, warranties or
covenants of Seller herein, (y) the Closing Adjustment Amount and (z) the
satisfaction of the conditions set forth in Article VI, in each case, to
the extent such determination would be different (but in the case of the
Closing Adjustment Amount, only to the extent the aggregate Closing Adjustment
Amount and the Closing Adjustment Amount (as defined in the Friendco Purchase Agreement)
would be different) as a result of such direction), be allocated among each of
the Specified Businesses and the Friendco Business in the following
manner: if such Assumed Liability is (i) Related
only to a single Specified Business and not to the Friendco Business, to such
Specified Business, (ii) included in the Group 1 Shared Assets and
Liabilities pursuant to Schedule 1.1(h) of the Seller Disclosure
Schedule, to the Group 1 Business, (iii) included in the Group 2 Shared
Assets and Liabilities pursuant to Schedule 1.1(h) of the Seller
Disclosure Schedule, to the Group 2 Business, (iv) solely Related to the
Friendco Business or allocated to the Friendco Business pursuant to Schedule
1.1(f) of the Seller Disclosure Schedule (as defined in the Friendco
Purchase Agreement), to the Friendco Business and (v) not allocated
pursuant to clause (i), (ii), (iii) or (iv), then to the Friendco
Business, to the extent Related to the Friendco Business, to the Group 1
Business, to the extent Related to the Group 1 Business, and to the Group 2
Business, to the extent Related to the Group 2 Business (which allocations
shall be made in each case after giving effect to the allocations to each such
Friendco Business and Specified Business pursuant to the Designated Allocation).
Section 2.4 Excluded Liabilities. Seller and its
Affiliates shall retain and be responsible for all Excluded Liabilities. Notwithstanding
anything to the contrary in this
48
Agreement, Buyer shall not assume,
and neither Buyer nor any of its Affiliates shall have any Liability for, any
Liability of Seller or any Affiliate of Seller that is not expressly assumed by
Buyer pursuant to Section 2.3.
Section 2.5 Purchase Price. On the terms and
subject to the conditions set forth herein, in consideration of the sale of the
Transferred Assets, at the Closing, Buyer shall:
(a) assume
the Assumed Liabilities;
(b) pay
to Seller, an aggregate amount in cash equal to $9,154,000,000, as adjusted
pursuant to Sections 2.6(a)[ and],
2.6(f) and
8.6(a) (as so adjusted, the “Cash Consideration”);
and
(c) cause
Parent to issue and deliver, on behalf of Buyer, to Seller, such number of
shares of Parent’s Class A Common Stock, par value $0.01 per share (the “Parent
Class A Common Stock”), as shall represent 16% of the outstanding Equity
Securities of Parent calculated on a Fully Diluted Basis (after giving effect
to such issuance and assuming for purposes of such calculation the completion
of the Redemption pursuant to the Parent Redemption Agreement but without giving effect to any adjustment
pursuant to Section 2.6 or 2.7), subject to adjustment of such number of
shares pursuant to Sections 2.6(f) and 2.7 (as so adjusted, the “Purchase
Shares” and, together with the Cash Consideration, the “Purchase Price”);
provided, however, that, in lieu of payment to Seller,
Buyer shall deliver or cause to be delivered, at the Closing, 4% of the
Purchase Price in the form of a Pro Rata Payment (after giving effect to any
adjustment thereof that is effected as of the Closing) (collectively, as such
amount may be increased in accordance with Section 2.6(f) or 2.7(c),
the “Escrow Amount”) to be held by the Escrow Agent in an account, the
cash component of which shall bear interest (the “Escrow Account”),
pursuant to the Escrow Agreement, which Escrow Amount shall be paid in whole or
in part in accordance with the terms of the Escrow Agreement to (i) the
Buyer Indemnified Parties to the extent necessary to satisfy any obligation of
Seller pursuant to Section 7.2(a), (ii) Buyer to the extent necessary
to satisfy a payment obligation of Seller, if any, pursuant to Section 2.6(f) or
2.7(d), (iii) Seller, on the date that is six months following the Closing
Date, to the extent of the excess, if any, of 33% of the Escrow Amount
deposited at the Closing over the sum of (A) all amounts paid pursuant to
the immediately preceding clauses (i) and (ii), plus (B) the maximum amount that could reasonably be
expected to be necessary to satisfy all claims by the Buyer Indemnified Parties
pursuant to Section 7.2(a) asserted on or prior to such date, and (iv) Seller
to the extent of any remaining funds and/or shares in the Escrow Account as of
the Buyer Indemnification Deadline (subject, with respect only to the MCE
Purchase Shares, to Section 2.7(d)), except to the extent of the maximum
amount that could reasonably be expected to be necessary to satisfy all claims
by the Buyer Indemnified Parties pursuant to Section 7.2(a) asserted
on or prior to the Buyer Indemnification Deadline (subject, with respect only
to the MCE Purchase Shares, to Section 2.7(d)). All amounts payable from
the Escrow Account shall be paid in the form of an Escrow Payment. Any Escrow
Payment or Pro Rata Payment to be made hereunder shall be made (x) in
respect of any distribution of shares of Parent Class A
49
Common Stock by (I) delivery of
stock certificates representing such shares, registered in the name of Buyer or
Seller, as the case may be, or (II) confirmation of a book-entry transfer
of such shares in form and substance reasonably satisfactory to Buyer or
Seller, as the case may be, and the Escrow Agent, and (y) in respect of
any distribution of cash, by wire transfer of immediately available funds to an
account designated by Buyer or Seller, as the case may be, at least five
Business Days prior to such payment.
Section 2.5A Purchase Shares. For the
avoidance of doubt, 156.380952 shares of Parent Class A Common Stock would
be the number of shares required to be delivered pursuant to Section 2.5(c) at
the Closing (before giving effect to any adjustment under Section 2.6 or
2.7) assuming that (a) the number of outstanding Equity Securities as of
the date hereof is as represented in Sections 4.4(b)(i) and (b)(ii), (b) the
Equity Securities subject to redemption under the Parent Redemption Agreement
is 179 shares of Parent Class A Common Stock, and (c) no additional
Equity Securities were issued by Parent on or after the date hereof in
violation of Section 5.3 hereof; provided that if any pro rata stock
dividend (or any stock split or similar recapitalization) is effected between
the date hereof and Closing as permitted hereunder then such number of shares
would be adjusted accordingly (by operation of the definition of Fully Diluted
Basis).
Section 2.6 Closing Adjustment Amount.
(a) No
later than ten Business Days prior to the Closing Date, Seller shall prepare,
or cause to be prepared, and deliver to Buyer, with respect to each Specified
Business, a statement (each, a “Seller’s Statement”), which shall set
forth Seller’s good faith estimate of the Closing Adjustment Amount which shall
be determined in accordance with this Agreement (the “Estimated Closing
Adjustment Amount”). Each Seller’s Statement shall be accompanied by a
certification of Seller’s Chief Financial Officer to the effect that such
Seller’s Statement has been prepared in good faith in accordance with this
Agreement based on the books and records of such Specified Business and be
reasonably satisfactory to Buyer. If the sum of the Estimated Closing
Adjustment Amounts for the Specified Businesses is a negative number, then the
Cash Consideration payable at the Closing shall be decreased by the absolute
value of such sum. If the sum of the Estimated Closing Adjustment Amounts for
the Specified Businesses is a positive number, then the Cash Consideration
payable at the Closing shall be increased by such sum.
(b) As
soon as practicable but in no event more than 90 days following the Closing,
Buyer shall prepare, or cause to be prepared, and deliver to Seller, with respect
to each Specified Business, a statement (each, a “Buyer’s Statement”) of
the actual Closing Adjustment Amount, as of the Closing Date, which shall be
determined in accordance with this Agreement. Each Buyer’s Statement shall be
accompanied by a certification of Buyer’s Chief Financial Officer to the effect
that such Buyer’s Statement has been prepared in accordance with this Agreement
based on the books and records of such Specified Business.
(c) Seller
and Seller’s accountants shall complete their review of each of the Buyer’s
Statements and Buyer’s calculations of the Closing Adjustment Amount
50
within 30 days after delivery
thereof by Buyer. In the event that Seller determines in good faith that any
Buyer’s Statement has not been prepared in accordance with this Agreement,
Seller shall, on or before the last day of such 30-day period, so inform
Buyer in writing setting forth a specific description of the basis of Seller’s
determination and the adjustments to such Buyer’s Statement and the
corresponding adjustments to the applicable Closing Adjustment Amount that
Seller believes should be made in accordance with this Agreement (a “Seller’s
Objection”). If no Seller’s Objection is received by Buyer on or before the
last day of such 30-day period, then the Closing Adjustment Amount set
forth in a Buyer’s Statement shall be final and binding upon Seller. Buyer
shall have 30 days from its receipt of a Seller’s Objection to review and
respond to such Seller’s Objection.
(d) If
Seller and Buyer are unable to resolve all of their disagreements with respect
to the proposed adjustments set forth in any Seller’s Objection within 15 days
following the completion of Buyer’s review of such Seller’s Objection, they
shall refer any remaining disagreements to the CPA Firm which, acting as
experts and not as arbitrators, shall determine, in accordance with this
Agreement based on the books and records of the applicable Specified Business,
and only with respect to the remaining differences so submitted (and within the
range of dispute between Buyer’s Statement and Seller’s Objection with respect
to each such difference), whether and to what extent, if any, any Closing
Adjustment Amount requires adjustment. Buyer and Seller shall instruct the CPA
Firm to deliver its written determination to Buyer and Seller no later than 30
days after the remaining differences underlying any such Seller’s Objection are
referred to the CPA Firm. The CPA Firm’s determination shall be conclusive and
binding upon Buyer and Seller and their respective Affiliates. With respect to
each Seller’s Objection, the fees and disbursements of the CPA Firm shall be
borne equally by Seller and Buyer. Buyer and Seller shall make readily
available to the CPA Firm all relevant books and records and any work papers
(including those of the parties’ respective accountants, to the extent
permitted by such accountants) relating to the determination of any Closing
Adjustment Amount and all other items reasonably requested by the CPA Firm in
connection therewith.
(e) Buyer
shall provide to Seller and its accountants full access to the books and
records of each Specified Business and to any other information, including work
papers of its accountants (to the extent permitted by such accountants), and to
any employees during regular business hours and on reasonable advance notice,
to the extent reasonably necessary for Seller to review each Buyer’s Statement,
to prepare a Seller’s Objection, if any, and to prepare materials for
presentation to the CPA Firm in connection with Section 2.6(d). Seller and
its accountants shall have full access to all information used by Buyer in
preparing such Buyer’s Statement, including the work papers of its accountants
(to the extent permitted by such accountants).
(f) Upon
satisfaction of the applicable procedures of this Section 2.6, the
Purchase Price shall be adjusted with respect to each Specified Business by an
amount equal to (i) the Final Adjustment Amount of such Specified Business
minus (ii) the Estimated
Closing Adjustment Amount of such Specified Business (the “Subsequent
Adjustment Amount”). If the Subsequent Adjustment Amount is a positive
number, then
51
the Purchase Price allocated to
such Specified Business shall be increased by the Subsequent Adjustment Amount
and Buyer shall promptly (and in any event within five Business Days) after the
final determination thereof pay to the Escrow Agent, for deposit into the
Escrow Account, a Pro Rata Payment equal to the Subsequent Adjustment Amount. If
the Subsequent Adjustment Amount is a negative number, then the Purchase Price
allocated to such Specified Business shall be decreased by the absolute value
of the Subsequent Adjustment Amount and Buyer shall be entitled to an Escrow
Payment equal to the Subsequent Adjustment Amount from the Escrow Account
promptly (and in any event within five Business Days) after the final
determination of the Subsequent Adjustment Amount; provided, however,
that, to the extent the payment obligations pursuant to this sentence exceed
the remaining funds in the Escrow Account, Seller shall promptly (and in any
event with five Business Days) after the final determination of the Subsequent
Adjustment Amount, pay such excess amount to Buyer by wire transfer of
immediately available funds to an account designated by Buyer.
Section
2.7 MCE Systems.
(a) Notwithstanding
anything to the contrary contained herein, if any MCE System has not been
finally determined to be wholly owned by Seller or its wholly owned
Subsidiaries (itbeingunderstoodthat, for
purposes of this Section 2.7(a), if Seller has the right to cause the
transfer of good and marketable title to the Assets of any MCE System (free and
clear of all Encumbrances other than Permitted Encumbrances) to Buyer (or has
otherwise arranged for such transfer to occur at the Closing to the reasonable
satisfaction of Buyer), such Disputed MCE System shall be deemed to be wholly
owned by Seller) or has been finally determined to be so owned but as to which
there has not been an MCE Discharge as of the date on which the Seller’s
Statements are delivered under Section 2.6(a) (each such MCE System,
a “Disputed MCE System”), then (i) the geographical areas serviced
by such Disputed MCE System shall be deemed not to be listed on Schedule A
of the Seller Disclosure Schedule and such Disputed MCE System shall be deemed
not to be included in the Group 2 Business or otherwise Related to the Group 2
Business or the Acquired Business, (ii) any Assets, Liabilities or
Employees that would, but for clause (i) above, have been Transferred
Assets, Assumed Liabilities or Transferred Employees shall be deemed not to be
Transferred Assets, Assumed Liabilities or Transferred Employees, respectively,
(iii) the Closing shall be effected without such Disputed MCE System, (iv) the
Purchase Price (before adjustment under Section 2.6) shall be reduced by
an aggregate amount equal to the product of (A) the MCE Purchase Price
multiplied by (B) the quotient obtained by dividing (1) the aggregate
number of Basic Subscribers served by all such Disputed MCE Systems as of December 31,2004 by (2) the aggregate number of Basic Subscribers served by all MCE
Systems as of December 31, 2004, such reduction to be applied solely to
the Purchase Shares (where each Purchase Share is valued at the Per Share Value
of the Purchase Shares) (the amount of such Purchase Share reduction with
respect to each such Disputed MCE System, the “Initial MCE Purchase Price”),
(v) the Seller’s Statement delivered in respect of the Group 2 Business
shall be prepared to reflect the foregoing and (vi) with respect to the
Disputed MCE Systems, the determination of the Closing Adjustment Amount
(calculated as to each such Disputed MCE System separately as if it were its
own Specified Business and assuming the Net Liabilities Adjustment Amount for
each
52
such Disputed MCE System is zero)
shall be made in accordance with Section 2.6 except that the Subscriber
Cap shall not apply to the determination of the Subscriber Adjustment Amount
and there shall be no adjustment to the Purchase Price at the Closing as a
result of such determination (the amount by which the Purchase Price would have
been adjusted (expressed as a negative if decreased and as a positive if
increased) in respect of each such Disputed MCE System as determined pursuant to
this clause (vi), the “Initial Disputed MCE System Adjustment Amount”).
(b) With
respect to any Disputed MCE System, Seller shall (i) use commercially reasonable efforts to cause each
such Disputed MCE System to be bound by a written management agreement with
Buyer (or its designee) as of the Closing, in form and substance reasonably
acceptable to Buyer and Seller (each such agreement, an “MCE Management
Agreement”), and (ii) continue during the succeeding 15 months (the “MCE
Period”) using commercially reasonable efforts to obtain full direct or
indirect ownership of, and an MCE Discharge with respect to, such Disputed MCE
System (itbeingunderstoodthat, for purposes of
this Section 2.7(b), if Seller has the right to cause the transfer of good
and marketable title to the Assets of any MCE System (free and clear of all
Encumbrances other than Permitted Encumbrances) to Buyer (or has otherwise
arranged for such transfer to occur at the MCE Closing to the reasonable
satisfaction of Buyer), such Disputed MCE System shall be deemed to be wholly
owned by Seller) (an “MCE Resolution”). Buyer shall not have any
obligation to enter into an MCE Management Agreement unless Buyer is provided
with reasonably satisfactory evidence of (A) the enforceability of such MCE
Management Agreement from and after the Closing, (B) the authority of the
counterpart(ies) to enter into and perform such MCE Management Agreement and to
bind such Disputed MCE System and (C) unless the MCE System is held by
Seller or the Liabilities of such Disputed MCE System under the applicable MCE
Management Agreement are guaranteed by Seller, the
creditworthiness of such MCE System (or such other Person who or such
instrument that guarantees the Liabilities of such MCE System pursuant to the
applicable MCE Management Agreement). Seller shall notify Buyer of any MCE
Resolution as promptly as practicable and in any event within three Business
Days of obtaining any such MCE Resolution and shall provide Buyer with such
information and documentation related thereto as Buyer reasonably requests.
(c) As
to any Disputed MCE System that is the subject of an MCE Resolution that occurs
prior to the expiration of the MCE Period, and with respect to which (i) Buyer
(or its designee) enters into an MCE Management Agreement that has not been
terminated in accordance with its terms (other than by Seller as a direct
result of a breach by Buyer (or its designee)) or rejected and remains in full
force and effect until the completion of the MCE Closing (a “Buyer Managed
MCE System”) or (ii) Buyer (or its designee) does not enter into such
an MCE Management Agreement but, within 60 days of such MCE Resolution, Buyer
makes an election to purchase such Disputed MCE System, the parties agree that
Seller shall sell, or cause to be sold, to Buyer and Buyer shall purchase from
Seller (or the applicable transferor which Seller causes to sell) the Assets of
such Disputed MCE Systems in exchange for shares (the “MCE Purchase Shares”)
of Parent Class A Common Stock (where each such share is valued at the Per
Share Value of the Purchase Shares) in an amount equal to the estimated
Final MCE
53
Purchase Price (to the extent
related to the Net Liabilities Adjustment Amount in respect of such Disputed
MCE Systems, determined in accordance with Section 2.6(a) applied mutatis mutandis)to be delivered by Buyer to Seller at a
single closing (the “MCE Closing”), plus any Interim Dividends thereon,
that, subject to satisfaction of the conditions set forth in Sections 6.1, 6.2
(other than, without limiting Section 2.7(d)(ii), Sections 6.2(a), 6.2(f) (but
only if Buyer is a Proximate Cause Party) and 6.2(h)) and 6.3 (other than,
without limiting Section 2.7(d)(ii), Sections 6.3(a) and 6.3(e))
(applied with respect to such Disputed MCE Systems (treating such Systems as a
Specified Business) and applied with respect to the MCE Purchase Shares
(treating such MCE Purchase Shares as Purchase Shares) mutatis mutandis), shall occur on the
fifth Business Day following the earlier of (A) the expiration of the MCE
Period and (B) the date all Disputed MCE Systems have been subject to an
MCE Resolution; provided, however, that 4% of the MCE Purchase
Shares so delivered plus any Interim Dividends thereon will be deposited in the
Escrow Account. At the MCE Closing, the parties will assign or assume, as
applicable, the Transferred Assets and Assumed Liabilities with respect to each
such Disputed MCE System (treating such System as a Specified Business) that
would have been assigned and assumed as if the Closing had been delayed until
the date of the MCE Closing and shall execute such conveyance, assumption and
other instruments as are required
pursuant to Sections 2.9 and 2.10 (applied with respect to such Disputed
MCE Systems (treating such Systems as a Specified Business) and applied with
respect to the MCE Purchase Shares (treating such MCE Purchase Shares as
Purchase Shares) mutatis mutandis.
For purposes of determining the Disputed MCE System Adjustment Amount, the Net
Liabilities Adjustment Amount in respect of each such Disputed MCE System shall
be determined as of the date of the MCE Closing and
subsequently adjusted in
accordance with Section 2.6 applied mutatis
mutandis (treating each such System as a Specified Business) except
that any resulting adjustments shall be made[ solely], first, in MCE Purchase Shares and, thereafter,
in cash, where each MCE Purchase Share is valued at the Per
Share Value of the Purchase Shares.
(d) In
connection with the transfer to Buyer of any Disputed MCE Systems, (i) Assumed
Liabilities related to such Disputed MCE Systems shall be deemed to have been
assumed effective as of the date of the MCE Closing only, and (ii) at, and
as a condition to, the MCE Closing, (A) Seller shall be deemed to have
restated the representations and warranties in Article III in respect of
such Disputed MCE Systems (x) with respect to the Class 2
Representations and Warranties, as of the date made and as of the Closing, and (y) with
respect to the Class 1 Representations and Warranties, as of the date made
and as of the MCE Closing, (B) Seller shall deliver to Buyer a certificate
certifying to the satisfaction of Section 6.2(a) with respect to such
Disputed MCE Systems (treating such Disputed MCE Systems as if they were a
Specified Business and multiplying all applicable monetary and materiality
thresholds by the MCE Fraction) (x) with respect to the Class 2
Representations and Warranties, as of the Closing, and (y) with respect to
the Class 1 Representations and Warranties, as of the MCE Closing, (C) Article VII
shall apply to such Disputed MCE Systems mutatis
mutandis (including by multiplying the applicable basket and cap
amounts by the MCE Fraction), provided, that, notwithstanding Section 7.1,
all the representations and warranties in Article III shall, with respect
to such Disputed MCE Systems, survive the MCE Closing until the expiration of
the later of the survival period in Section 7.1 and twelve months after
the
54
date of the MCE Closing (and the
Buyer Indemnification Deadline shall be extended with respect to such Disputed
MCE Systems by a corresponding period), (D) Buyer shall deliver to Seller
a certificate certifying as to the truth and accuracy of the first sentence of Section 4.5
as to the MCE Purchase Shares as of the MCE Closing and (E) Sections 2.11
and 5.12 shall apply mutatis mutandis.
For purposes of any covenants in this Agreement governing the parties hereto
following the Closing and any Ancillary Agreement, any Assets related to any
such Disputed MCE Systems which are transferred to Buyer after Closing under
this Section 2.7 shall become part of the Group 2 Business as of the time
of the MCE Closing.
Section 2.8 Closing. The Closing shall take place at the
offices of Paul, Weiss, Rifkind, Wharton & Garrison LLP, 1285 Avenue
of the Americas, New York, New York10019-6064 at 10:00 a.m. New
York City time, on the last Business Day of the calendar month in which the
conditions set forth in Article VI (other than those conditions that by
their nature are to be satisfied at the Closing but subject to the fulfillment
or waiver of those conditions) have been satisfied or waived, unless such
conditions have not been so satisfied or waived (other than those conditions
that by their nature are to be satisfied at the Closing but subject to the fulfillment
or waiver of those conditions) by the fifth Business Day preceding the last
Business Day of such calendar month, in which case the Closing shall take place
on the last Business Day of the next calendar month (or at such other time and
place as the parties hereto may mutually agree); provided, however,
that the Closing shall not occur prior to the earliest of (a) immediately
following the closing of the Redemption under the Parent Redemption Agreement, (b) 30
days following the date on which the conditions set forth in Article VI
(other than those conditions that by their nature are to be satisfied at the
Closing but subject to the fulfillment or waiver of those conditions) have been
satisfied or waived (provided, that the Outside Date or the Extended
Outside Date, as the case may be, shall be extended to the last Business Day of
the calendar month in which the end of such 30-day period occurs if the
Outside Date or Extended Outside Date, as the case may be, would otherwise
occur prior to such last Business Day), and (c) the termination of the
Parent Redemption Agreement. The date on which the Closing occurs is called the
“Closing Date.”
Section 2.9 Deliveries by Buyer. At the Closing, Buyer shall:
(a) deliver
to Seller, the Cash Consideration less the cash portion of the Escrow Amount to
be delivered at Closing in immediately available funds by wire transfer to an
account which has been designated by Seller at least two Business Days prior to
the Closing Date;
(b) deliver,
or cause to be delivered, to Seller, (i) stock certificates representing
the Purchase Shares (less the stock portion of the Escrow Amount to be
delivered at the Closing), duly endorsed for transfer or accompanied by
executed stock transfer powers or other appropriate instruments of assignment
and transfer or (ii) confirmation of a book-entry transfer of the Purchase
Shares (less the stock portion of the Escrow Amount to be delivered at the
Closing) in form and substance reasonably satisfactory to Buyer and Seller, in
each case, free and clear of all Encumbrances, other
55
than those arising as a result of
the ownership of such Purchase Shares by the recipient thereunder or under
applicable securities Laws;
(c) deliver
to the Escrow Agent, (i) the cash portion of the Escrow Amount to be
delivered at Closing in immediately available funds by wire transfer to the
Escrow Agent and (ii) the stock portion of the Escrow Amount to be
delivered at Closing, by (A) delivery of stock certificates representing
such stock portion of the Escrow Amount or (B) confirmation of a
book-entry transfer of such stock portion of the Escrow Amount in form and
substance reasonably satisfactory to Buyer, Seller and the Escrow Agent, each
to be held by the Escrow Agent in the Escrow Account;
(d) deliver
to Seller (or to the applicable Affiliate of Seller), with respect to each
Specified Business, such bills of sale, instruments of assumption and other
instruments or documents, in form and substance reasonably acceptable to Seller
and Buyer, as may be reasonably necessary to effect, in each case in accordance
with the terms of this Agreement (x) the assumption by Buyer of the
Assumed Liabilities Related to such Specified Business and (y) the
conveyance, transfer and assignment to Buyer of the Transferred Assets Related
to such Specified Business, including the following:
(i) a
duly executed counterpart of one or more Bills of Sale;
(ii) a duly executed counterpart of one or more Assignment and
Assumption Agreements;
(iii) evidence of the obtaining of, or, with respect to Buyer
Required Approvals that only require notice or filing, the notice or filing
with respect to, the Buyer Required Approvals;
(iv) a duly executed counterpart of one or more Transferred
Investment Assignment Agreements;
(v) a
duly executed counterpart of one or more Intellectual Property Assignment
Agreements;
(vi) a duly executed counterpart of one or more Lease Assignment
Agreements;
(vii) a duly executed counterpart of one or more Sublease
Assignment Agreements;
(viii) a duly executed counterpart of one or more Rights-of-Way
Assignment Agreements;
(ix) the certificate to be delivered pursuant to Section 6.3(d);
(x) a
duly executed counterpart of the Escrow Agreement and, in the case of a 363 Sale, if a
deposit is to be made into the Transfer Tax Escrow Account, the Transfer Tax
Escrow Agreement;
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(xi) duly executed counterparts of such other customary
instruments of transfer, assumptions, filings or documents, in form and
substance reasonably satisfactory to Buyer and Seller, as may be reasonably
required to give effect to this Agreement; [and]
(e) deliver
to Seller the opinion of counsel referred to in Section 6.3(f)[.]; and
(f) in
the case of a 363 Sale, cause Parent to deliver to Seller a duly executed
counterpart of the Adelphia Registration Rights and Sale Agreement;
Section 2.10 Deliveries by Seller. At the Closing, Seller shall
deliver, or cause to be delivered, to Buyer, with respect to each Specified
Business, such bills of sale, instruments of assumption and other instruments
or documents, in form and substance reasonably acceptable to Seller and Buyer,
as may be reasonably necessary to effect, in each case in accordance with the
terms of this Agreement (x) the assumption by Buyer of the Assumed
Liabilities Related to such Specified Business and (y) the conveyance,
transfer and assignment to Buyer of the Transferred Assets Related to such
Specified Business, including the following:
(a) a
duly executed counterpart of one or more Bills of Sale;
(b) a
duly executed counterpart of one or more Assignment and Assumption Agreements;
(c) a
duly executed counterpart of one or more Transferred Investment Assignment
Agreements;
(d) a
duly executed counterpart of one or more Intellectual Property Assignment
Agreements;
(e) a
duly executed counterpart of one or more Lease Assignment Agreements;
(f) a
duly executed counterpart of one or more Sublease Assignment Agreements;
(g) a
duly executed counterpart of one or more Rights-of-Way Assignment Agreements;
(h) special
warranty deeds (or local equivalent) in respect of the Transferred Owned Real
Property Related to such Specified Business;
(i) duly
executed certifications from Seller and each Subsidiary that in this
Transaction will be a transferor described in Treasury Regulations Section 1.1445-1(g)(3) that
Seller and such Subsidiaries are not foreign Persons within the meaning set
forth in Treasury Regulation Section 1.1445-2(b)(2)(iii)(A); itbeingunderstoodthat, notwithstanding anything to the
contrary contained herein, if Seller fails
57
to provide Buyer with such
certifications, Buyer shall be entitled to withhold a portion of the Purchase
Price in accordance with Section 1445 of the Code and the applicable
Treasury Regulations;
(j) the
Books and Records Related to such Specified Business that are Transferred
Assets (it being understood that Books and
Records located on real property interests conveyed to Buyer at the Closing
shall be deemed delivered pursuant to this Section 2.10(j));
(k) evidence
of the obtaining of, or, with respect to Seller Required Approvals that only
require notice or filing, the notice or filing with respect to, the Seller
Required Approvals or any LFA Approvals, in each case, Related to such
Specified Business;
(l) the
certificate to be delivered pursuant to Section 6.2(d);
(m) a
certified copy of the Transaction Order and the Confirmation
Order for
the JV Plan (including any amendments thereto);
(n) duly
executed counterparts of instruments providing Buyer the limited, irrevocable right,
in the name, place and stead of Seller and any of its Affiliates, as
attorney-in-fact of Seller and any of its Affiliates, to cash, deposit, endorse
or negotiate checks received on or after the Closing Date made out to Seller or
any of its Affiliates in payment for cable television, high speed Internet,
telephony and related services and charges provided by the Specified Systems
Related to such Specified Business, and evidence of written instructions to the
lock-box service provider or similar agents of Seller and any of its
Affiliates to promptly forward to Buyer upon receipt all such cash, deposits
and checks representing accounts receivable of such Specified Systems;
(o) to
the extent available using commercially reasonable efforts, (i) subject only
to Permitted Encumbrances, such certificates and affidavits of Seller or its
applicable Affiliate as may be reasonably requested by Buyer’s title insurance
company necessary and satisfactory to Buyer in connection with the issuance of
title insurance with respect to any Owned Real Property or Leased Real Property
Related to such Specified Business and (ii) customary gap indemnities
covering Seller’s acts for the period between Closing and the recording of the
applicable deed or assignment of lease with respect to such Owned Real Property
or Leased Real Property; provided, that, except with respect to the
customary gap indemnities described in clause (ii) above, such
certificates or affidavits shall be deemed not to have been reasonably
requested if they would increase, in each case other than in a de minimis manner, the Liability of Seller
or any of its Affiliates beyond the liability that would be incurred by Seller
or its applicable Affiliates under a special warranty deed or would contain
representations that are more extensive than those set forth in this Agreement;
(p) the
Transferred Cash Related to such Specified Business in immediately available
funds by wire transfer to an account which has been designated by Buyer at
least two Business Days prior to the Closing Date (itbeingunderstoodthat
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Transferred Cash shall be deemed
delivered if it is either (i) located on real property interests being
conveyed to Buyer at Closing or (ii) held in accounts assigned to Buyer
pursuant to duly executed instruments of assignment that are reasonably
satisfactory to Buyer);
(q) stock
certificates (or other comparable evidence of ownership, if issued)
representing the Transferred Investments Related to such Specified Business,
duly endorsed for transfer or accompanied by executed stock transfer powers or
other appropriate instruments of assignment and transfer;
(r) a
duly executed counterpart of the Escrow Agreement;
(s) [(r)] in the case of a 363 Sale, a duly
executed counterpart of the Adelphia Registration Rights and Sale Agreement and, if a
deposit is to be made into the Transfer Tax Escrow Account, the Transfer Tax
Escrow Agreement; and
(t) [(s)] duly executed counterparts of such other
customary instruments of transfer, assumptions, filings or documents, in form
and substance reasonably satisfactory to Buyer and Seller, as may be reasonably
required to give effect to this Agreement.
Section 2.11 Non-Assignability of Assets.
(a) Without
limiting Sections 6.1(f) and 6.2(e), if and to the extent that the
transfer or assignment from Seller or any of its Affiliates to Buyer of any
Transferred Asset would be a violation of applicable Law with respect to such
Transferred Asset or otherwise adversely affect the rights of the applicable
transferee thereunder as a result of the failure to obtain or make any consent,
approval, waiver, authorization, notice or filing required to be made in
connection with the Transaction, then the transfer or assignment to Buyer of
such Transferred Asset (each, a “Delayed Transfer Asset”) shall be
automatically deemed deferred and any such purported transfer or assignment
shall be null and void until such time as all legal impediments are removed
and/or Authorizations have been made or obtained; itbeingunderstoodthat no adjustment to the Purchase Price will be made as a result of the
failure to transfer or assign any Delayed Transfer Asset.
(b) If
the transfer or assignment of any Transferred Asset (other than, at the
Closing, a Transferred Asset Related to a Disputed MCE System) intended to be
transferred or assigned hereunder is not consummated prior to or at the Closing
as a result of the failure to obtain any Authorization, then Seller or its
Affiliate shall thereafter, directly or indirectly, hold such Transferred Asset
for the use and benefit of Buyer (at the expense of Buyer), insofar as
reasonably possible. In addition, to the extent not prohibited by Law, Seller
shall take or cause to be taken such other actions as may be reasonably
requested by Buyer in order to place Buyer, insofar as reasonably possible, in
the same position as if such Transferred Asset had been transferred as
contemplated hereby and so that all the benefits and burdens relating to such
Transferred Asset, including possession, use, risk of loss, potential for gain,
and dominion, control and command over such Transferred Asset, are to inure
from and after the Closing to Buyer.
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To the extent permitted by Law and
to the extent otherwise permissible in light of any required Authorization,
Buyer shall be entitled to, and shall be responsible for, the management of any
Transferred Assets not yet transferred to it as a result of this Section 2.11
and the parties hereto agree to use commercially reasonable efforts to
cooperate and coordinate with respect thereto.
(c) If
and when the Authorizations, the absence of which caused the deferral of
transfer of any Transferred Asset pursuant to this Section 2.11, are
obtained, the transfer of the applicable Transferred Asset to Buyer shall
automatically and without further action be effected in accordance with the
terms of this Agreement and the applicable Ancillary Agreements.
(d) Prior
to the Closing Date, Seller shall deliver to Buyer a list identifying, in
reasonable detail and to the Knowledge of Seller, the Delayed Transfer Assets
and the Authorizations required therefor.
(e) The
parties hereto further agree that, assuming as set forth in Section 2.11(b) that
all or substantially all of the benefits and burdens relating to the
Transferred Assets inure to Buyer, (i) any Delayed Transferred Assets
referred to in this Section 2.11(e) shall be treated for all income
Tax purposes as Assets of Buyer and (ii) neither Buyer nor Seller shall
take, and each of Buyer and Seller shall prevent any of their respective
Affiliates from taking, any position inconsistent with such treatment for any
income Tax purposes (unless required by a change in applicable income Tax Law
or a good faith resolution of a contest).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller
represents and warrants to Buyer that, except as set forth on the Seller
Disclosure Schedule, as of the date hereof and as of the Closing:
Section 3.1 Organization and Qualification. Seller is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and has all requisite corporate power and authority to own,
lease and operate its Assets, and to carry on each Specified Business as
currently conducted. Seller is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction where the ownership or
operation of the Transferred Assets or the conduct of each Specified Business
requires such qualification, except for failures to be so qualified or in good
standing, as the case may be, that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Prior to the date
hereof, Seller has made available to Buyer a true and complete copy of Seller’s
certificate of incorporation and bylaws, each as amended and in effect as of
the date hereof.
Section 3.2 Subsidiaries and Transferred Investments.
(a) Schedule
3.2(a) of the Seller Disclosure Schedule sets forth a true and
complete list of each Asset Transferring Subsidiary, together with its jurisdiction
of
60
organization. The Asset
Transferring Subsidiaries are the only Subsidiaries of Seller that have any
right, title or other interest in or to the Assets of Seller and its Affiliates
that are Related to the Acquired Business. Except for the Non-Debtor
Subsidiaries, all of the Asset Transferring Subsidiaries and Intermediate
Subsidiaries are Debtors. Each Asset Transferring Subsidiary and each
Intermediate Subsidiary is duly organized, validly existing, and in good
standing under the laws of its jurisdiction of organization and, in the case of
the Asset Transferring Subsidiaries, has all requisite corporate or similar
power and authority to own, lease and operate its Assets and to carry on its
portion of each Specified Business as currently conducted, except for failures
to be in good standing that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each Asset
Transferring Subsidiary and each Intermediate Subsidiary is duly qualified to
do business and is in good standing as a foreign corporation or other entity in
each jurisdiction where the ownership or operation of its Assets or the conduct
of its business requires such qualification, except for failures to be so duly
organized, validly existing, qualified or in good standing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except to the extent of any Claims that will be discharged (or
the functional equivalent thereof in terms of its effect on Buyer, each
Specified Business, the Transferred Assets and the Assumed Liabilities)
pursuant to the Discharge (or, as applicable, the MCE Discharge or an
Additional Discharge), (i) Seller owns, directly or indirectly, through
one or more other Subsidiaries (each such Subsidiary that is not also an Asset
Transferring Subsidiary is referred to herein as an “Intermediate Subsidiary”),
all right, title and interest in and to all of the outstanding Equity
Securities of the Asset Transferring Subsidiaries and (ii) all of the
outstanding Equity Securities of the Asset Transferring Subsidiaries and
Intermediate Subsidiaries have been duly authorized, and are validly issued,
fully paid and non-assessable. Except to the extent of any Claims that
will be discharged (or the functional equivalent thereof in terms of its effect
on Buyer, each Specified Business, the Transferred Assets and the Assumed
Liabilities) pursuant to the Discharge (or, as applicable, the MCE Discharge or
an Additional Discharge), Seller has, directly or indirectly, good and valid
title to the Equity Securities of each Asset Transferring Subsidiary and each
Intermediate Subsidiary, free and clear of all Encumbrances, other than
Permitted Encumbrances and Encumbrances that do not and will not affect the
Transferred Assets or the Transaction.
(b) Schedule
3.2(b) of the Seller Disclosure Schedule sets forth a true and
complete list of each Investment Entity, the Equity Securities of Seller and
its Affiliates in each Investment Entity and, to the Knowledge of Seller, with
respect to those Investment Entities identified on Schedule 3.2(b)(i) of
the Seller Disclosure Schedule, the jurisdiction of organization and authorized
and outstanding Equity Securities of such Investment Entities. Seller has
provided or made available to Buyer true and complete copies of the Investment
Documents. Except to the extent of any Claims that will be discharged (or the
functional equivalent thereof in terms of its effect on Buyer, each Specified
Business, the Transferred Assets and the Assumed Liabilities) pursuant to the
Discharge (or, as applicable, the MCE Discharge or an Additional Discharge),
the outstanding Equity Securities held by Seller or any of its Affiliates in
respect of each Transferred Investment identified on Schedule 3.2(b)(i) of
the Seller Disclosure Schedule
61
and, to the Knowledge of Seller, in
respect of any other Investment Entities, have been duly authorized, and are
validly issued, fully paid and non-assessable.
(c) Except
to the extent of any Claims that will be discharged (or the functional
equivalent thereof in terms of its effect on Buyer, each Specified Business,
the Transferred Assets and the Assumed Liabilities) pursuant to the Discharge
(or, as applicable, the MCE Discharge or an Additional Discharge), Seller has
good and valid title to the Transferred Investments, free and clear of all
Encumbrances, other than as set forth in any Investment Document, and upon
delivery by Seller and/or any of its Affiliates of the Transferred Investments
at Closing, good and valid title to the Transferred Investments, free and clear
of all Encumbrances, other than as set forth in any Investment Document and
those resulting from Buyer’s ownership, will pass to Buyer. Except for the
Transferred Investments, none of Seller or any of its Affiliates owns, directly
or indirectly, any Equity Securities of any Person (other than a Subsidiary of
Seller) or has any direct or indirect equity or ownership interest in any
business (other than any business operated by a Subsidiary of Seller), or is a
member of or participant in any partnership, joint venture or similar Person
(other than a Subsidiary of Seller) that is Related to the Acquired Business or
the Friendco Business.
Section 3.3 Corporate Authorization.
(a) Seller
has, with respect to Section 5.10 and Article VIII, full corporate
power and authority to execute and deliver this Agreement, and to perform its
obligations hereunder. The execution, delivery and performance by Seller of
this Agreement, with respect to Section 5.10 and Article VIII, have
been duly and validly authorized and no additional corporate, shareholder or
similar authorization or consent is required in connection with the execution,
delivery and performance by Seller of this Agreement.
(b) Without
limiting Section 3.3(a), subject to the entry of the [Confirmation]Transaction
Order and its effectiveness at the Closing, (i) Seller has full corporate
power and authority to execute and deliver this Agreement and each of the
Ancillary Agreements to which it is a party, and to perform its obligations
hereunder and thereunder and (ii) the execution, delivery and performance
by Seller of this Agreement and each of the Ancillary Agreements to which it is
a party have been duly and validly authorized and no additional corporate,
shareholder or similar authorization or consent is required in connection with
the execution, delivery and performance by Seller of this Agreement or any of
the Ancillary Agreements to which it is a party.
(c) Each
Affiliate of Seller has or prior to the Closing will have, subject to the entry
of the [Confirmation]Transaction Order and its effectiveness at
the Closing, full corporate, partnership or similar power and authority to
execute and deliver each Ancillary Agreement or Closing document to which it is
(or will be) a party and to perform its obligations thereunder. Subject to the
entry of the [Confirmation]Transaction Order, the execution, delivery
and performance by each Affiliate of Seller of each Ancillary Agreement or
Closing document to which it is (or will be) a party has been or prior to the
Closing will have been duly and validly
62
authorized, and no additional
corporate authorization or consent is or will be required in connection with
the execution, delivery and performance by any Affiliate of Seller of the
Ancillary Agreements or Closing documents to which such Affiliate is (or will
be) a party or signatory.
(d) At
a meeting duly called and held, the Board and the board of directors (or
similar governing body) of each Asset Transferring Subsidiary (other than the
Tele-Media Entities (without limiting Section 5.6(h))) has by the
requisite vote (i) determined that this Agreement and the Transaction are
in the best interests of Seller, such Asset Transferring Subsidiaries and their
respective stakeholders, (ii) approved and adopted this Agreement and (iii) resolved
to cause each Asset Transferring Subsidiary to perform its obligations under
the Ancillary Agreements to which it is (or will be) a party.
Section 3.4 Consents and Approvals. No consent, approval,
waiver, authorization, notice or filing is required to be obtained by Seller or
any of its Affiliates from, or to be given by Seller or any of its Affiliates
to, or made by Seller or any of its Affiliates with, any Person (and assuming
solely for this purpose that all Contracts Related to the Acquired Business
shall constitute Assigned Contracts but, for purposes of Section 6.2(a) only,
excluding any Contract that is not an Assigned Contract if the consent,
approval, waiver, authorization, notice or filing is required only to the
extent such Contract would have been an Assigned Contract), in connection with (a) the
execution, delivery and performance by Seller or any of its Affiliates of Section 5.10
and Article VIII and (b) other than the entry by the Bankruptcy Court
of the [Confirmation]Transaction Order (or the entry of an order pursuant
to section 365[(f)] of the Bankruptcy Code authorizing the assumption and, if
applicable, assignment of Assigned Contracts), the execution, delivery and
performance by Seller or any of its Affiliates of the remainder of this
Agreement and the Ancillary Agreements to which it is (or will be) a party,
other than, in the case of this clause (b) only, the consents, approvals,
waivers, authorizations, notices or filings the failure of which to obtain or
make would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
Section 3.5 Non-Contravention. The execution, delivery
and performance by Seller and its Affiliates of this Agreement and the
Ancillary Agreements to which they are a party, and the consummation of the
transactions contemplated hereby and thereby (and assuming solely for this
purpose that all Contracts Related to the Acquired Business shall constitute
Assigned Contracts but, for purposes of Section 6.2(a) only,
excluding any Contract that is not an Assigned Contract), do not and will not (a) violate
any provision of the articles of incorporation, bylaws or other organizational
documents of Seller or any of its Affiliates, (b) assuming (i) the
entry of the [Confirmation]Transaction Order (or the entry of an order pursuant
to section 365[(f)] of the Bankruptcy Code authorizing the assumption and, if
applicable, assignment of Assigned Contracts), and (ii) the receipt of all
consents, approvals, waivers and authorizations and the making of the notices
and filings set forth on Schedule 3.4 of the Seller Disclosure Schedule
with respect to any Person which is not a Government Entity or Self-Regulatory
Organization (which assumption shall not apply to Section 5.10 and Article VIII),
conflict with, or result in the breach of, or constitute a default under, or
63
result in the termination,
cancellation, modification or acceleration of any right or obligation of Seller
or any of its Affiliates under, or result in a loss of any benefit to which
Seller or any of its Affiliates is entitled under, any Contract, or result in
the creation of any Encumbrance upon any of the Transferred Assets or give rise
to any Purchase Right, in each case, whether after the filing of notice or the
lapse of time or both, or (c) assuming the entry of the [Confirmation]Transaction
Order and the receipt of all consents, approvals, waivers and authorizations
and the making of notices and filings set forth on Schedule 3.4 of the
Seller Disclosure Schedule with respect to Government Entities or Self-Regulatory
Organizations or required to be made or obtained by Buyer (which assumption
shall not apply to Section 5.10 and Article VIII), violate or result
in a breach of or constitute a default under any Law to which Seller or any of
its Affiliates is subject, or under any Governmental Authorization, except for
(which exception shall not apply to Section 5.10 and Article VIII),
in the cases of clauses (b) and (c), conflicts, breaches, terminations,
defaults, cancellations, accelerations, losses, violations, Encumbrances or
Purchase Rights that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 3.6 Binding Effect. Subject to the Bankruptcy Court’s
entry of the [Confirmation]Transaction Order and its effectiveness at the
Closing, this Agreement and each of the Ancillary Agreements dated the date
hereof is, and each other Ancillary Agreement will constitute, when executed
and delivered by Seller and each Affiliate of Seller party to such agreements
and by Buyer and the other parties thereto, a valid and legally binding
obligation of Seller and each Affiliate of Seller party to such agreements, enforceable
against Seller and each such Affiliate in accordance with their respective
terms. Notwithstanding the foregoing, Section 5.10 and Article VIII
constitute valid and legally binding obligations of Seller, enforceable against
Seller in accordance with their respective terms. Upon the Bankruptcy Court’s
entry of the [Confirmation]Transaction Order and subject to its effectiveness at
the Closing, each of the unexecuted Ancillary Agreements to be entered into on
or prior to the Closing Date, when executed and delivered by Seller and each
Affiliate of Seller party to such agreements and by Buyer and the other parties
thereto, will constitute a valid and legally binding obligation of Sellerand each Affiliate of Seller party to such
agreements, enforceable against Sellerand
each such Affiliate in accordance with its terms.
Section 3.7 Financial Statements.
(a) Set
forth on Schedule 3.7(a) of the Seller Disclosure Schedule is a
copy of (i) the consolidated audited balance sheets and audited statements
of income, stockholders’ equity and cash flows for Seller and its Affiliates
for the fiscal years ended December 31, 2001, December 31, 2002, and December 31,2003 (the “Audited Financial Statements”), (ii) the unaudited
balance sheet and unaudited statements of income, stockholders’ equity and cash
flows of each Specified Business, but including the Excluded Assets and the
Excluded Liabilities to the extent Related to such Specified Business, at and
for the fiscal year ended December 31, 2003 (but not including, except
with respect to the unaudited statements of income, Unallocated Shared Assets
and Liabilities), in each case derived from the Audited Financial Statements
for the corresponding time period (the “Derivative 2003 Financial Statements”),
(iii) the
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unaudited balance sheet and
unaudited statements of income, stockholders’ equity and cash flows for each
Specified Business, but including the Excluded Assets and the Excluded
Liabilities Related to such Specified Business, at and for the fiscal year ended
December 31, 2004 (but not including, except with respect to the unaudited
statements of income, Unallocated Shared Assets and Liabilities) (the “Derivative
2004 Financial Statements”) and (iv) the unaudited balance sheet and
unaudited statements of income, stockholders’ equity and cash flows for the
Unallocated Shared Assets and Liabilities at and for the fiscal year ended December 31,2004 (the “Derivative Unallocated 2004 Financial Statements”). The
Audited Financial Statements have been prepared from the books and records of
Seller and its Affiliates in accordance with GAAP consistently applied (except
as may be indicated in the notes thereto), and fairly present, in all material
respects, the financial condition and results of operations, stockholders’
equity and cash flows of Seller and its Affiliates (assuming the exclusion of
the MCE Systems and the MCE Systems (as defined in the Friendco Purchase
Agreement) from the Business) as of the dates thereof or for the periods then
ended. The Derivative 2003 Financial Statements and the Derivative 2004
Financial Statements have been specially prepared from the books and records of
Seller and its Affiliates in accordance with GAAP consistently applied (except
as may be indicated in the notes thereto) and fairly present, in all material
respects, the financial condition and results of operations, stockholders’
equity and cash flows of each such Specified Business (including the MCE
Systems) as of the dates thereof or for the periods then ended, subject to the
absence of footnotes and similar presentation items therein and excluding the
Unallocated Shared Assets and Liabilities (other than the related revenues and
expenses). The Derivative Unallocated 2004 Financial Statements have been
specially prepared from the books and records of Seller and its Affiliates in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto) and fairly present, in all material respects, the Unallocated
Shared Assets and Liabilities as of December 31, 2004 or for the period
ended thereon.
(b) The
Chief Executive Officer and the Chief Financial Officer of Seller and any
Significant Subsidiary of Seller have disclosed, based on their most recent
evaluation, to Seller’s auditors and the audit committee of the Board (i) all
significant deficiencies in the design or operation of internal controls that
could adversely affect Seller’s or any of Seller’s Affiliates’ ability to
record, process, summarize and report financial data and have identified for
Seller’s auditors any material weaknesses in internal controls and (ii) any
fraud, whether or not material, that involves management or other employees who
have a significant role in Seller’s or any of Seller’s Subsidiaries’ internal
controls. Copies of all disclosures described in the foregoing sentence have
been made available to Buyer. Seller and its consolidated Subsidiaries have
established and maintain disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) under the Exchange Act); such disclosure
controls and procedures are designed to ensure that material information
relating to Seller, including its consolidated Subsidiaries, is made known to
Seller’s Chief Executive Officer and its Chief Financial Officer by others
within those entities; and such disclosure controls and procedures are
effective in alerting Seller’s Chief Executive Officer and its Chief Financial
Officer to material information of the nature required to be disclosed in
periodic reports pursuant to the Exchange Act in a timely fashion.
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(c) The financial
statements prepared by Seller and delivered to Buyer pursuant to Section 5.11(a) shall,
when so delivered, be prepared from the books and records of Seller and its
Affiliates in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto), and fairly present, in all material respects,
the financial condition and results of operations, stockholders’ equity and
cash flows of each Specified Business as of the dates thereof or the period
then ended, subject to, in the case of interim financial statements, normal
year-end adjustments and the absence of footnotes and similar presentation
items therein.
(d) The Additional
Financial Statements prepared by Seller and delivered to Buyer pursuant to Section 5.11(b) shall,
when so delivered, be prepared from the books and records of Seller and its
Affiliates in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto), and will fairly present, in all material
respects, the financial condition and results of operations, stockholders’
equity and cash flows of (i) in the case of the Seller Audited Financial
Statements, Seller and its Affiliates (assuming, with respect to any period
prior to January 1, 2004, the exclusion of the MCE Systems and the MCE
Systems (as defined in the Friendco Purchase Agreement) from the Business), (ii) in
the case of the Derivative Audited Financial Statements, each such Specified
Business (assuming, with respect to any period prior to January 1, 2004,
the exclusion of the MCE Systems and the MCE Systems (as defined in the
Friendco Purchase Agreement) from such Specified Business) and (iii) in
the case of the MCE Financial Statements, the MCE Systems, in each case as of
the dates thereof or for the periods then ended, subject, solely in the case of
the MCE Financial Statements, to the absence of footnotes and similar
presentation items therein.
Section 3.8 Litigation
and Claims.
(a) Except (i) to
the extent of any Claims that will be discharged (or the functional equivalent
thereof in terms of its effect on Buyer, each Specified Business, the
Transferred Assets and the Assumed Liabilities) pursuant to the Discharge (or,
as applicable, the MCE Discharge or an Additional Discharge) and, to the
Knowledge of Seller, not arising from actions, omissions or circumstances
continuing as of the Closing and affecting or otherwise relating to Seller or
any of its Affiliates, the Transferred Assetsor any Specified Business and (ii) for
the SEC/DOJ Matters and the pendency of the Reorganization Case, there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
proceedings or investigations pending against, or, to the Knowledge of Seller,
threatened against or affecting, or otherwise relating to Seller or any of its
Affiliates, the Transferred Assets, any Specified Business or the Transaction,
other than those that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
(b) Except (i) to
the extent of any Claims that will be discharged (or the functional equivalent
thereof in terms of its effect on Buyer, each Specified Business, the
Transferred Assets and the Assumed Liabilities) pursuant to the Discharge (or,
as applicable, the MCE Discharge or an Additional Discharge) and, to the
Knowledge of Seller, not arising from actions, omissions or circumstances
continuing as of the Closing and affecting or otherwise relating to Seller or
any of its Affiliates, the Transferred Assets
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or any Specified Business and (ii) for
the SEC/DOJ Matters and the pendency of the Reorganization Case, none of
Seller, any of its Affiliates or any of the Transferred Assets is subject to
any order, writ, judgment, award, injunction or decree of any court or
governmental or regulatory authority of competent jurisdiction or any
arbitrator or arbitrators, other than those that would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
Section 3.9 Taxes.
(a) All material Tax
Returns with respect to each Specified Business or any Transferred Assets that
are required to be filed have been filed (or extensions have been duly
obtained) and all amounts shown to be due and owing or to be withheld thereon
have been duly and timely paid or withheld as the case may be (except for the
period prior to the commencement of the applicable
Reorganization Case, that may not be paid except pursuant to [a
Plan]an order of, or plan confirmed by, the
Bankruptcy Court); provided, that, solely for purposes
of Section 6.2(a), this Section 3.9(a) shall be qualified by the
Knowledge of Seller.
(b) There is no materiallien
for Taxes upon any of the Transferred Assets nor is any taxing authority in the
process of imposing, or has threatened to impose, any materiallien
for Taxes on any of the Transferred Assets, other than liens for Taxes that are
not yet due and payable or for Taxes the validity or amount of which is being
contested by Seller or one of its Affiliates in good faith by appropriate
action and for which appropriate provision has been made in accordance with
GAAP; provided, that, solely for purposes of Section 6.2(a), this Section 3.9(b) shall
be qualified by the Knowledge of Seller.
(c) Seller and its
Affiliates have each withheld from their respective employees, independent
contractors, creditors, stockholders and third parties and timely paid to the
appropriate taxing authority proper and accurate amounts in all material
respects for all taxable periods, or portions thereof, ending on or before the
Closing Date in compliance with all Tax withholding and remitting provisions of
applicable laws and have each complied in all material respects with all
withholdingTax information reporting provisions of all
applicable Laws; provided, that, solely for purposes of Section 6.2(a),
this Section 3.9(c) shall be qualified by the Knowledge of Seller.
(d) None of the
Transferred Assets: (i) is property required to be treated as being owned
by another Person pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986, (ii) constitutes “tax-exempt
use property” within the meaning of Section 168(h)(1) of the Code or (iii) is
“tax-exempt bond financed property” within the meaning of Section 168(g)(5) of
the Code.
Section 3.10 Employee
Benefits.
(a) All benefit and
compensation plans, programs, contracts, policies, agreements or arrangements,
including any trusts (including any trusts required in the
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future as a result of the
Transaction or otherwise), trust instruments, funding arrangements or insurance
contracts, any “employee benefit plans” within the meaning of Section 3(3) of
ERISA, including any multiemployer pension plans within the meaning of Section 3(37)
of ERISA (each, a “Multiemployer Plan”), any pension, profit-sharing,
savings, retirement, deferred compensation, stock option, stock purchase, stock
appreciation rights, stock based, incentive, bonus, workers’ compensation,
short term disability, sick leave, group insurance, hospitalization, medical,
dental, life, cafeteria or flexible spending, vacation, continuity, sale bonus,
retention, fringe benefit, employee loan and severance plans and all
employment, collective bargaining, consulting, severance and change in control
agreements, plans, policies, programs or arrangements whether formal or
informal, written or oral, and all amendments thereto, under which (i) any
Employee, director or consultant of Seller or any of its Affiliates has any
present or future right to benefits and which are contributed to, sponsored by
or maintained by Seller or any of its Affiliates, or (ii) Seller or any of
its ERISA Affiliates has any present or future liability (whether contingent or
otherwise) (the “Benefit Plans”), are listed on Schedule 3.10(a) of
the Seller Disclosure Schedule. Each Benefit Plan which is intended to be
qualified under Section 401(a) of the Code has received a favorable
determination letter from the Internal Revenue Service National Office and has
been separately identified. Seller has provided or made available to Buyer true
and complete copies of all Benefit Plans (or with respect to any individual
employment agreements shall provide such agreements to Buyer no later than
fourteen Business Days following the date hereof) and, with respect to each
Benefit Plan, to the extent applicable, all related service agreements,
summaries, summary plan descriptions, actuarial reports, the most recently
filed Forms 5500 and the most recent determination letters.
(b) All Benefit Plans,
other than Multiemployer Plans, have been established, maintained and
administered in substantial compliance with all applicable Laws, including
ERISA and the Code. Neither Seller nor any of its Affiliates has engaged in a
transaction with respect to any Benefit Plan that is subject to ERISA that
could subject Seller to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA. No actions, suits, claims,
litigation, audits, investigations, administrative proceedings or disputes are
pending, or, to Seller’s Knowledge threatened, with respect to (i) any
Benefit Plan that would be material to any Specified Business or (ii) any
Seller stock fund or trust in any Benefit Plan, and, to Seller’s Knowledge, no
facts or circumstances exist that could give rise to any such actions, suits,
claims, litigation, audits, investigations, administrative proceedings or
disputes.
(c) Neither Seller nor
any other entity which, together with Seller, would be treated as a single employer
under Section 4001 of ERISA or Section 414 of the Code (an “ERISA
Affiliate”) contributes to or has in the past six years sponsored,
maintained or contributed to any defined benefit pension plan (as defined in Section 3(35)
of ERISA) or is subject to Section 412 of the Code or Section 302 of
ERISA.
(d) Neither Seller nor
any of its ERISA Affiliates has, within the six years preceding the date of
this Agreement, or expects to incur any obligation to contribute to, or any
withdrawal liability under Subtitle E of Title IV of ERISA with respect to, a
Multiemployer Plan (whether based on contributions of Seller or an ERISA
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Affiliate) nor do Seller or any of
its ERISA Affiliates have any Liabilities under any such plan that remain
unsatisfied.
(e) There has been no
amendment to, or announcement by Seller or any of its Affiliates (whether or
not written) in respect of the Employees relating to any Benefit Plan which
would increase materially the expense of maintaining such Benefit Plan above
the level of the expense incurred therefor for the most recent fiscal year,
except as would not directly or indirectly adversely affect Buyer or Parent.
(f) Neither Seller nor
any of its Affiliates has incurred any current or projected liability in
respect of post-employment or post-retirement health, medical or
life insurance benefits for current, former or retired employees of Seller or
any of its Affiliates, except as required to avoid an excise tax under Section 4980B
of the Code or otherwise, or as may be required pursuant to any other
applicable Law.
(g) No Benefit Plan is a
split-dollar life insurance program or otherwise provides for loans to
executive officers (within the meaning of the SOA).
(h) As of the date
hereof with respect to those Employees listed on Schedule 5.8(a)(ii) of
the Seller Disclosure Schedule and as of the date hereof and as of the Closing
Date with respect to all other Employees, no Benefit Plan exists that, as a
result of the execution of this Agreement or the Transaction (whether alone or
in connection with any subsequent event(s)), will (i) entitle any
Employee, director or consultant of Seller or any of its Affiliates to
severance pay or any increase in severance pay upon any termination of
employment after the date of this Agreement, (ii) accelerate the time of
payment or vesting or result in any payment or funding (through a grantor trust
or otherwise) of compensation or benefits under, increase the amount payable or
result in any other material obligation pursuant to, any of the Benefit Plans, (iii) limit
or restrict the right of Seller or any of its Affiliates to merge, amend or
terminate any of the Benefit Plans or (iv) result in payments under any of
the Benefit Plans which would subject any recipient of the payments to excise
taxes under Section 4999 of the Code.
(i) To the extent that,
after the Closing, Parent operates each Specified Business in the same manner
operated by Seller and its Affiliates during the six-month period prior
to the Closing, Parent will not incur any Liability under WARN or any other
applicable Law other than on account of any action or inaction taken by Parent
or Buyer following the Closing Date relating to plant closings or employee
separations or severance pay.
(j) Neither Seller nor
any of its Affiliates has any material Liability with respect to any
misclassification of any person as an independent contractor rather than as an
employee, or with respect to any employee leased from another employer, except
as would not directly or indirectly adversely affect Buyer or Parent.
Section 3.11 Compliance
with Laws. Each Specified Business and all of the Transferred Assets have
since July 1, 2003 and currently are being conducted, held and operated in
compliance with all applicable Laws and Governmental Authorizations,
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including the Communications Act,
the Cable Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992, the Telecommunications Act of 1996, the
Copyright Act of 1976 and all rules and regulations of the FCC and the
United States Copyright Office, except for failures to comply that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Since July 1, 2003 and, to the Knowledge of Seller, and
except to the extent of any Claims that will be discharged (or the functional
equivalent thereof in terms of its effect on Buyer, each Specified Business,
the Transferred Assets and the Assumed Liabilities) pursuant to the Discharge
(or, as applicable, the MCE Discharge or an Additional Discharge), prior to July 1,2003, neither Seller nor any of its Affiliates has received any notice alleging
any violation by Seller or any of its Affiliates under any applicable Law for a
violation, except for violations that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, each Specified Business has all Governmental Authorizations
necessary for the conduct of such Specified Business as currently conducted and
such Governmental Authorizations are in full force and effect. Nothing in this
representation is intended to address any compliance matter that is
specifically addressed by Sections 3.10 (Employee Benefits), 3.12
(Environmental Matters), 3.14 (Labor) and 3.17 (Franchises). Schedule 3.11
of the Seller Disclosure Schedule sets forth, with respect to each Specified
Business, each Governmental Authorization issued by the FCC, each Governmental
Authorization for the provision of telephony services and each other material
Governmental Authorization, in each case Related to such Specified Business.
Section 3.12 Environmental
Matters.
(a) Each Specified
Business, the Owned Real Property and the Transferred Assets are in compliance
in all material respects with all applicable Environmental Laws and
Environmental Permits and there are no material Liabilities under any
Environmental Law with respect to any Specified Business, the Owned Real
Property or the Transferred Assets.
(b) As of the date
hereof, none of Seller or any of its Affiliates (nor, to Seller’s Knowledge,
any predecessor in interest) has received from any Person any notice, demand,
claim, letter, citation, summons, order or request for information, relating to
any material violation or alleged violation of, or any material Liability
under, any Environmental Law in connection with or affecting any Specified
Business, the Owned Real Property or the Transferred Assets.
(c) There are no
material complaints filed, penalties assessed, writs, injunctions, decrees,
orders or judgments outstanding, or any material actions, suits, proceedings or
investigations pending or, to Seller’s Knowledge, threatened, relating to
compliance with or Liability under any Environmental Law affecting any
Specified Business, the Owned Real Property or the Transferred Assets.
(d) There are no
underground storage tanks, asbestos-containing materials, lead-based products
or polychlorinated biphenyls on, at or under any of the
70
Owned Real Property or Transferred
Assets other than in compliance in all material respects with all Environmental
Laws; provided, that, solely for purposes of Section 6.2(a), this Section 3.12(d) shall
be deemed to exclude any such items of which Seller does not have Knowledge.
(e) None of the Owned
Real Property or the Transferred Assets nor any property to which Hazardous
Substances located on or resulting from the use of any Owned Real Property or
Transferred Assets have been transported, nor any property to which Seller has,
directly or indirectly, transported or arranged for the transportation of any
Hazardous Substances is listed or, to Seller’s Knowledge, proposed for listing
on the National Priorities List promulgated pursuant to CERCLA, or CERCLIS (as
defined in CERCLA) or on any similar federal, state, local or foreign list of
sites requiring investigation or cleanup.
(f) All material
Environmental Permits Related to any Specified Business, the Owned Real Property
or the Transferred Assets are valid, are in full force and effect, are
transferable and, except as would not, individually or in the aggregate,
reasonably be expected to be material, will not be terminated or impaired or
become terminable as a result of the transactions contemplated hereby.
(g) As of the date
hereof, there has been no material environmental investigation, study, audit,
test, review or other analysis conducted of which Seller has Knowledge in
relation to any Owned Real Property or the Transferred Assets which has not
been delivered to Buyer at least ten days prior to the date hereof.
Section 3.13 Intellectual
Property. Seller and its Affiliates own the Transferred Intellectual
Property free and clear of any material Encumbrances other than Permitted
Encumbrances. The Transferred Intellectual Property that is Registered is
subsisting and enforceable in all material respects. None of the Transferred
Intellectual Property or, to the Knowledge of Seller, the Intellectual Property
that is provided to Seller and its Affiliates pursuant to the Transferred
Intellectual Property Contracts, is subject to any outstanding order, judgment
or decree adversely affecting Seller’s or its Affiliates’ use thereof or rights
thereto as currently used by Seller and its Affiliates in each Specified
Business. Neither Specified Business and none of the Transferred Assets
infringes or has infringed or otherwise violates or has violated any Person’s
Intellectual Property rights in any material respect. To the Knowledge of
Seller, no Person is infringing or otherwise violating any Intellectual
Property rights of Seller or its Affiliates in the Transferred Intellectual
Property or the Intellectual Property that is provided to Seller and its
Affiliates pursuant to the Transferred Intellectual Property Contracts, other
than violations that would not, individually or in the aggregate, reasonably be
likely to have a Material Adverse Effect. Immediately after the Closing, Buyer
or its designated Affiliate will own the Transferred Intellectual Property and
hold the Transferred Intellectual Property Contracts on terms and conditions
that are the same in all material respects as those in effect immediately prior
to the Closing, except to the extent that any of the Transferred Intellectual
Property is the subject of a license back to Friendco or any of its Affiliates
pursuant to Section 5.12 of the Friendco Purchase Agreement. None of
Seller, any of its Affiliates or any Specified Business has infringed or
otherwise violated the
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Intellectual Property rights of any
Person except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
Section 3.14 Labor.
(a) Except for the
Collective Bargaining Agreements, none of Seller or any of its Affiliates is a
party to or bound by any labor agreement, union contract or collective
bargaining agreement respecting any of the Employees, nor are there any
Employees represented by a collectively bargained unit or labor organization
who are not covered by a Collective Bargaining Agreement.
(b) Seller and its
Affiliates are in compliance in all material respects with all labor Laws
applicable to any Specified Business and the Employees, and are not engaged in
any unfair labor practices, as defined in the National Labor Relations Act or
other Law applicable to Employees. There are no outstanding unfair labor
practice charges pending before the National Labor Relations Board with respect
to any Employee.
(c) There is no pending
or, to the Knowledge of Seller, threatened strike, shutdown, dispute, walkout
or other work stoppage or any union organizing effort by, or with respect
to, any of the Employees.
[(a) ](a)Schedule 3.15(a) of the Seller
Disclosure Schedule contains, with respect to each Specified Business, Seller’s
good faith estimate, as of the date hereof, of the number of Contracts (other
than Programming Agreements, Franchises and Governmental Authorizations) to
which Seller or any of its Affiliates or any of their respective Assets are
party, bound or subject which are executory and are Related to such Specified
Business. Such list represents Seller’s good faith estimate of the number of
such Contracts in each of the categories set forth on Schedule 3.15(a) of
the Seller Disclosure Schedule, and indicates as to each category, the number
of such Contracts that (i) were entered into prior to the Petition Date, (ii) were
entered into following the Petition Date or (iii) Relate to any Specified
Business and any other business of Seller or its Affiliates, including any part
of the Friendco Business.
(b) Except as set forth
on Schedule 3.15(b) of the Seller Disclosure Schedule, none of the
Contracts of Seller or any of its Affiliates Related to a Specified Business
contains any of the following terms or provisions (each such term or provision,
a “Special Term”):
(i) consideration payable or receivable
by Seller or any of its Affiliates in excess of $100,000 in any twelve month
period or in excess of $1,000,000 over the remaining term;
(ii) limitations on the freedom of Seller
or any of its Affiliates to compete in any line of business, with any Person or
in any geographic area, and which would
72
limit the freedom of Buyer or any
of its Affiliates to do so after the Closing Date if it were an Assigned
Contract;
(iii) so-called “most favored nation”
provisions or any similar provision requiring Seller or any of its Affiliates
to offer a third party terms or concessions at least as favorable as those
offered to one or more other parties, or which would require Buyer or any of
its Affiliates to do so after the Closing Date if it were an Assigned Contract;
(iv) any terms that do not reflect in all
material respects those that would be obtained in arm’s length negotiations;
(v) any exclusivity provision or
provision that requires the purchase of all or a given portion of a party’s
requirements or any other similar provision that would, in each case, bind
Buyer or its Affiliates after the Closing if it were an Assigned Contract;
(vi) any terms for the benefit of any
members of the Rigas family (except terms for the general benefit of holders of
Equity Securities in Seller or any of its Affiliates), Seller, any Managed
Cable Entity or any of its or their current or former Affiliates or associates
(as defined in Rule 405 under the Securities Act), in each case that would
continue to benefit any such Person after the Closing if it were an Assigned
Contract;
(vii) any provision relating to the use by
third parties of any of the Transferred Assets to provide telephone, Internet
or data services other than in Contracts with Subscribers of any such services
and other than under the Contracts listed on Schedule 3.15(b)(vii) of
the Seller Disclosure Schedule; or
(viii) with respect to any Contract entered
into following the entry of the [Confirmation]Transaction Order, any provision that
directly or indirectly restricts (or imposes a penalty or loss of benefit upon)
the assignment or transfer of the rights or obligations thereunder to Buyer,
Friendco or their Affiliates.
(c) Schedule 3.15(c) of
the Seller Disclosure Schedule contains a true and complete list, as of the
date hereof, of all Contracts (other than Equipment Leases and Programming
Agreements) to which Seller or any of its Affiliates or any of their respective
Assets are party, bound or subjectthat Relate to more than
one Specified Business or to both a Specified Business and any part of the
Friendco Business.
(d) Subject to the entry
of the [Confirmation Order]Transaction Order (and/or the entry of an order prior to the Closing pursuant to
section 365 of the Bankruptcy Code authorizing the assumption and, if
applicable, assignment of Assigned Contracts), all Assigned Contracts will be, when assumed by
Seller and assigned to Buyer hereunder and under the [Confirmation]Transaction Order (or such other order),
in full force and effect and will be enforceable against each party thereto in
accordance with the express terms thereof and any violation, breach or event of
default, or alleged violation, breach or event of default, or event or
condition that, after notice or
73
lapse of time or both, would
constitute a violation, breach or event of default thereunder on the part of
Seller or any of its Affiliates existing prior to such assumption and
assignment will be fully discharged and Buyer shall have no responsibility
therefor except for any Assumed Cure Costs. To the Knowledge of Seller, no
other party to any Contract of Seller or any of its Affiliates is in default,
violation or breach of such Contract, and there are no disputes pending or
threatened under any such Contract other than those defaults, violations,
breaches and disputes that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. In the last five
years, none of Seller or any of its Affiliates has made any material claim
under any Contract pursuant to which any of the Cable Systems were acquired.
Section 3.16 Cable
System and Subscriber Information.
(a) Except for the
Friendco Transferred Assets, none of Seller or any of its Affiliates, directly
or indirectly, owns any Systems other than the Cable Systems listed on Schedule
3.16(a) of the Seller Disclosure Schedule.
(b) Except for the MCE
Systems and the Friendco Transferred Assets, none of Seller or any of its
Affiliates, directly or indirectly, manages or operates any Systems which it
does not, directly or indirectly, wholly own.
(c) None of Seller or
any of its Affiliates, directly or indirectly, owns any Systems that it does not,
directly or indirectly, manage and operate.
(d) Schedule 3.16(d) of
the Seller Disclosure Schedule sets forth the aggregate number of Basic
Subscribers, Digital Subscribers and HSI Subscribers of each Specified Business
(detailed by Cable System) as of December 31, 2004. Each such aggregate
number has been determined in accordance with the Seller Subscriber Accounting
Policy.
(e) Schedule 3.16(e) of
the Seller Disclosure Schedule sets forth Seller’s policy with respect to
calculating subscribers (the “Seller Subscriber Accounting Policy”).
(f) Schedule 3.16(f) of
the Seller Disclosure Schedule sets forth the average total revenue per Basic
Subscriber of each Specified Business as of December 31, 2004.
(g) Schedule 3.16(g) of
the Seller Disclosure Schedule sets forth the Basic Subscriber monthly churn
rate for each Specified Business as of December 31, 2004.
(h) Schedule 3.16(h) of
the Seller Disclosure Schedule sets forth a true and complete list of the Cost
Centers comprising each Specified Business.
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Section 3.17 Franchises.
(a) Schedule 3.17(a) of
the Seller Disclosure Schedule sets forth (i) a true and complete list of
each Franchise operated by Seller or any of its Affiliates, detailed by
Specified Business, Cable System and Cost Center and (ii) Seller’s good
faith estimate of the number of Basic Subscribers served by each such Franchise
as of December 31, 2004. Except as disclosed by Seller to Buyer prior to
the date of this Agreement, the Cable Systems are in compliance with the
applicable Franchises in all material respects. There are no material ongoing
or, to the Knowledge of Seller, threatened audits or similar proceedings
undertaken by Government Entities with respect to the Franchises.
(b) Except as disclosed
by Seller to Buyer prior to the date of this Agreement, (i) each of the
Franchises is in full force and effect in all material respects, and a valid
request for renewal has been duly and timely filed under Section 626 of
the Communications Act with the proper Government Entity with respect to each
of the Franchises that has expired or will expire within 30 months after the
date of this Agreement, (ii) notices of renewal have been filed pursuant
to the formal renewal procedures established by Section 626(a) of the
Communications Act, (iii) there are no applications relating to any
Franchises pending before any Government Entity that are material to any
Specified Business, (iv) none of Seller or any of its Affiliates has
received notice from any Person that any Franchise will not be renewed or that
the applicable Government Entity has challenged or raised any material
objection to or, as of the date hereof, otherwise questioned in any material
respect, a Seller’s request for any such renewal under Section 626 of the
Communications Act, and Seller and its Affiliates have duly and timely complied
in all material respects with any and all inquiries and demands by any and all
Government Entities made with respect to Seller’s or such Affiliates’ requests
for any such renewal, (v) none of Seller, any of its Affiliates or any
Government Entity has commenced or requested the commencement of an
administrative proceeding concerning the renewal of a material Franchise as
provided in Section 626(c)(1) of the Communications Act, and (vi) to
the Knowledge of Seller, there exist no facts or circumstances that make it
likely that any material Franchise shall not be renewed or extended on
commercially reasonable terms.
(c) With respect to the
Franchises, none of Seller or any of its Affiliates has made any material
commitment to any Government Entity except (i) as set forth in the
Contracts listed on Schedule 3.17(c)(i) of the Seller Disclosure
Schedule, true and complete copies of which have been made available to Buyer
prior to March 31, 2005, and (ii) such other Franchise commitments
that (A) are commercially reasonable given the relevant Franchise and
locality and (B) do not contain unfulfilled commitments except (1) those
commitments reflected in the Budget or the Derivative 2004 Financial Statements
(provided, that any commitment so reflected only in part will be deemed
to be covered by this exception only to the extent so reflected) and (2) those
commitments that are not material relative to Seller’s operations or financial
performance in the applicable Franchise area.
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(d) Set forth on Schedule
3.17(d) of the Seller Disclosure Schedule is a list of each Franchise
subject to a Purchase Right and except as set forth on such Schedule no such
Purchase Right provides for purchase thereunder at a price less than fair
market value or a third party offer price.
Section 3.18 Network
Architecture. Schedule 3.18 of the Seller Disclosure Schedule sets
forth a true and complete statement (detailed by Cable System) as of December 31,2004 (or, in the case of clauses (c) and (f), as of the date hereof), of (a) the
approximate number of plant miles (aerial and underground) for each headend
located in each Specified Business, (b) the approximate bandwidth
capability expressed in MHz of each such headend, (c) the stations and
signals carried by each such headend and the channel position of each such
signal and station, (d) the approximate number of multiple dwelling units
served by such Specified Business, (e) the approximate number of homes
passed in such Specified Business as reflected in the system records of Seller
or any of its Affiliates, (f) a description of basic and optional or tier
services available and the rates charged for each such Specified Business, (g) the
bandwidth capacity of each Cable System in such Specified Business for each
headend, and (h) the municipalities served by each of the Cable Systems in
such Specified Business and the public service numbers of such municipalities.
Section 3.19 Absence of
Changes. Since the date of the Most Recent Balance Sheet, Seller and its
Affiliates have conducted each Specified Business only in the Ordinary Course,
and each Specified Business has not experienced any event, occurrence,
condition or circumstance, and, to Seller’s Knowledge, no event, occurrence,
condition or circumstance is threatened, other than those that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 3.20 Assets.
(a) Other than the
Excluded Assets, the right, title and interest of Seller and its Affiliates in
the Transferred Assets constitute all of the Assets of Seller and its
Affiliates owned or held by, used or intended for use, leased, licensed,
accrued, reserved, allocated or incurred in connection with the conduct of any
Specified Business in all material respects as currently conducted and,
immediately after the Closing, shall be sufficient for Buyer to continue to
operate and conduct such Specified Business in all material respects as
currently conducted. At the Closing (after giving effect to the Transaction),
Buyer or its designated Affiliate will have good and marketable title to (or in
the case of Transferred Assets that are leased, valid leasehold interests in)
the Transferred Assets free and clear of any Encumbrances, other than Permitted
Encumbrances (or in the case of the Transferred Investments, Encumbrances under
the Investment Documents), and those created by Buyer or its Affiliates.
(b) The Shared Assets
and Liabilities are the only Assets and Liabilities of Seller or any of its
Affiliates that Relate to both of the Specified Businesses or to any Specified
Business and any other business of Seller or its Affiliates, including any part
of the Friendco Business.
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(c) The Friendco
Transferred Assets are the only Assets that are Primarily Related to the Cable
Systems being purchased by Friendco. None of the Friendco Transferred Assets
are Primarily Related to any Specified Business except to the extent Buyer has
otherwise so consented. Other than the Friendco Transferred Assets, the
Transferred Assets and the Excluded Assets, there are no Assets of Seller or
any of its Affiliates Related to the Business.
(d) Schedule 3.20(d) of
the Seller Disclosure Schedule sets forth a true and complete list of all of
the material Assets Related to each Specified Business owned, held by, leased
or licensed by any Subsidiary of Seller that is not a Debtor.
(e) Other than the
Tele-Media Entities, the Transferred Investments and the wholly owned
Subsidiaries of Seller and as set forth on Schedule 3.20(e) of the
Seller Disclosure Schedule, Seller and its Affiliates have no Equity Security
in any Person which holds Assets Primarily Related to the operations and
business conducted by the Cable Systems.
Section 3.21 Real
Property.
(a) Schedule 3.21(a) of
the Seller Disclosure Schedule sets forth a complete and accurate list of all
the Real Property Leases and Real Property Subleases, in each case providing
for annual payments in excess of $50,000. Seller has delivered to Buyer true
and complete copies of each of such Real Property Leases and Real Property
Subleases.
(b) Schedule 3.21(b) of
the Seller Disclosure Schedule sets forth the address and/or location and the
general use within each Specified Business of each Owned Real Property and each
Leased Real Property listed on Schedule 3.21(a) of the Seller
Disclosure Schedule.
(c) Subject to the entry
of the [Confirmation Order]Transaction Order
(and/or the entry of an order prior to the Closing pursuant to section 365 of the
Bankruptcy Code authorizing the assumption and, if applicable, assignment of
Assigned Contracts), all Transferred Real Property Leases and
Transferred Rights-of-Way, when assumed by Seller or its Affiliates and
assigned to Buyer or its Affiliates pursuant to this Agreement and the [Confirmation]Transaction Order (or such other order),
will be in full force and effect and will be enforceable against each party
thereto in accordance with the express terms thereof and will not require any
consent of any Person or any payment thereunder in respect of such assignment
(unless such payment is made by Seller or any of its Affiliates on or prior to
the Closing) and any violation, breach or event of default, or event or
condition that, after notice or lapse of time or both (to the extent required),
would constitute a violation, breach or event of default thereunder on the part
of Seller or any of its Affiliates existing prior to such assumption and
assignment will be fully discharged and none of Buyer nor any of its Affiliates
shall have any responsibility therefor. To the Knowledge of Seller, no other
party to any Transferred Real Property Lease or Transferred Right-of-Way is in
default, violation or breach of such Transferred Real Property Lease or
Transferred Right-of-Way and there
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are no disputes pending or
threatened thereunder other than those defaults, violations, breaches and
disputes that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Neither the Transferred Owned Real
Property nor the Transferred Leased Real Property is subject to any material
Real Property Sublease.
(d) Seller has not
received notice and has no Knowledge of any pending, threatened or contemplated
material condemnation proceeding affecting the Transferred Owned Real Property
or the Leased Real Property or any part thereof, or of any sale or other
disposition of the Transferred Owned Real Property or the Leased Real Property
or any part thereof in lieu of condemnation.
Section 3.22 Absence of
Liabilities. Except to the extent of any Claims that will be discharged (or
the functional equivalent thereof in terms of its effect on Buyer, each
Specified Business, the Transferred Assets and the Assumed Liabilities)
pursuant to the Discharge (or, as applicable, the MCE Discharge or an
Additional Discharge), each Specified Business has no Liabilities and there is
no existing condition, situation or set of circumstances that, individually or
in the aggregate, would reasonably be expected to result in a Liability of any
Specified Business, other than (a) Liabilities specifically reflected,
reserved against or otherwise disclosed in the Derivative 2004 Financial
Statements or, only with respect to Liabilities included in the Unallocated
Shared Assets and Liabilities that become Assumed Liabilities pursuant to Section 2.3,
the Derivative Unallocated 2004 Financial Statements, (b) Excluded
Liabilities and (c) Liabilities that were incurred in the Ordinary Course
of Business since the date of the Derivative 2004 Financial Statements and that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
Section 3.23 Insurance.
Schedule 3.23 of the Seller Disclosure Schedule lists all material
insurance policies covering the properties, assets, employees and operations of
the Business (including policies providing property, casualty, liability and
workers’ compensation coverage) (the “Insurance Policies”). All of the
Insurance Policies or renewals thereof are in full force and effect in all
material respects. With such exceptions as would not be material, all premiums
due in respect of the Insurance Policies have been paid by Seller or its
Affiliate and Seller and its Affiliates are otherwise in compliance with the
terms of such policies. Seller carries sufficient third party insurance to
insure in all material respects all reasonable insurable risks of the Business.
Following the Closing, the Insurance Policies shall continue to provide
coverage with respect to acts, omissions and events occurring prior to the
Closing in accordance with their terms as if the Closing had not occurred. To
the Knowledge of Seller, there has not been any threatened termination of,
material premium increase (other than with respect to customary annual premium
increases) with respect to, or material alteration of coverage under, any
Insurance Policy.
Section 3.24 Friendco
Purchase Agreement. Seller has previously delivered to Buyer a true and
complete copy of the Friendco Purchase Agreement as of the date hereof. Except
for the Friendco Purchase Agreement and the JV Documents and any Ancillary
Agreements (each as defined in the Friendco Purchase Agreement) to which
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Friendco or any of its Affiliates is
party, Seller and/or any of its Affiliates, on the one hand, and Friendco
and/or any of its Affiliates, on the other hand, are not party to any Contract
related to the Transaction or the Friendco Transaction.
Section 3.25 Transactions
with Affiliates. Except for this Agreement, the Ancillary Agreements to
which it is a party and any Liability arising under this Agreement or any such
Ancillary Agreement, from and after the Closing, none of Buyer or its
respective Subsidiaries shall, as a result of the Transaction, be bound by any
Contract or any other arrangement of any kind whatsoever with, or have any
Liability to, Seller, any Managed Cable Entity or any of their respective
Affiliates.
Section 3.26 Finders’
Fees. Except for UBS Securities LLC and Allen & Company LLC, whose
fees will be paid by Seller, there is no investment banker, broker, finder or
other intermediary that has been retained by or is authorized to act on behalf
of Seller or any of its Affiliates who might be entitled to any fee or
commission in connection with the Transaction.
Section 3.27 No Other
Representations or Warranties. Except for the representations and
warranties contained in this Article III, neither Seller nor any other
Person makes any other express or implied representation or warranty on behalf
of Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to
Seller that, except as set forth on the Buyer Disclosure Schedule, as of the
date hereof and as of the Closing:
Section 4.1 Organization
and Qualification.
(a) Buyer is a limited
liability company duly organized, validly existing and in good standing under
the laws of Delaware. Buyer has all requisite limited liability company power
and authority to own and operate its Assets and to carry on its business as
currently conducted. Buyer has made available to Seller a true and complete
copy of Buyer’s limited liability company agreement, as amended and in effect
as of the date hereof.
(b) Parent is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware. Parent has all requisite corporate power and authority to own
and operate its Assets and to carry on its business as currently conducted. Buyer
has made available to Seller a true and complete copy of Parent’s certificate
of incorporation and bylaws, each as amended and in effect as of the date
hereof.
(a) Schedule 4.2(a) of
the Buyer Disclosure Schedule sets forth a true and complete list of each
Significant Subsidiary of Parent and each other Subsidiary of
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Parent that is not directly or
indirectly wholly owned by Parent or its Significant Subsidiaries, together
with its jurisdiction of organization and its authorized and outstanding Equity
Securities as of the date hereof. Each Subsidiary of Parent is duly organized,
validly existing, and in good standing under the laws of its jurisdiction of
organization and has all requisite corporate or similar power and authority to
own, lease and operate its Assets and to carry on its portion of the Parent
Business as currently conducted and is duly qualified to do business and is in
good standing as a foreign corporation or other entity in each jurisdiction
where the ownership or operation of its Assets or the conduct of its business
requires such qualification, except for failures to be so duly organized,
validly existing, qualified or in good standing that would not, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect. Buyer has provided or made available to Seller true and complete copies
of the certificate of incorporation and bylaws (or similar organizational
documents) of each of the Significant Subsidiaries of Parent as in effect as of
the date hereof. As of the date hereof, Parent owns, directly or indirectly,
through one or more of its other Subsidiaries, all right, title and interest in
and to all outstanding Equity Securities of the Subsidiaries indicated as owned
by it on Schedule 4.2(a) of the Buyer Disclosure Schedule. All of
the outstanding Equity Securities of the Subsidiaries of Parent have been duly
authorized, and are validly issued, fully paid and non-assessable.
(b) As of the date
hereof and except in respect of any of the following rights that are for the
benefit of any Person that is, directly or indirectly, a wholly owned Subsidiary
of Parent, (i) there are no preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements or commitments of any
character under which the Subsidiaries of Parent are or may become obligated to
issue or sell, or giving any Person a right to subscribe for or acquire, or in
any way dispose of, any shares of the Equity Securities of the Subsidiaries of
Parent, and no securities or obligations evidencing such rights are authorized,
issued or outstanding, (ii) the outstanding Equity Securities of the
Subsidiaries of Parent are not subject to any voting trust agreement or other
Contract restricting or otherwise relating to the voting, dividend rights or
disposition of such Equity Securities and (iii) there are no phantom stock
or similar rights providing economic benefits based, directly or indirectly, on
the value or price of the Equity Securities of the Subsidiaries of Parent.
Section 4.3 Corporate
Authorization.
(a) Buyer has full
limited liability company power and authority to execute and deliver this
Agreement and to perform its obligations hereunder. The execution, delivery and
performance by Buyer of this Agreement have been duly and validly authorized
and no additional limited liability company member or similar authorization or
consent is required in connection with the execution, delivery and performance
by Buyer of this Agreement.
(b) Parent has full
corporate power and authority to execute and deliver the Parent Agreement and
to perform its obligations thereunder. The execution, delivery and performance
by Parent of the Parent Agreement have been duly and validly
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authorized and no additional
corporate, shareholder or similar authorization or consent is required in
connection with the execution, delivery and performance by Parent of the Parent
Agreement.
(c) Prior to the
Closing, each of Buyer, Parent and Parent’s Subsidiaries (other than Buyer)
will have full limited liability company, corporate, partnership or similar
power and authority to execute and deliver each of the Ancillary Agreements to
which it will be a party and to perform its obligations thereunder. Prior to
the Closing, the execution, delivery and performance by each of Buyer, Parent
and Parent’s Subsidiaries (other than Buyer) of each of the Ancillary
Agreements to which it will be a party will have been duly and validly
authorized and no additional limited liability company member, shareholder or
similar authorization or consent will be required in connection with the
execution, delivery and performance by each of Buyer, Parent and Parent’s
Subsidiaries (other than Buyer) of any of the Ancillary Agreements to which it
will be a party.
Section 4.4 Buyer
Interests and Parent Capital Stock.
(a) As of the date
hereof, Parent owns directly all right, title and interest in and to all
outstanding Equity Securities of Buyer. As of the Closing, Buyer will be a
Subsidiary of Parent.
(b) As of the date
hereof, (i) the authorized capital stock of Parent (the “Parent Capital
Stock”) consists of (A) 1,000 shares of common stock, of which (1) 925
have been designated Parent Class A Common Stock, and (2) 75 have
been designated Class B Common Stock, par value $0.01 per share (the “Parent
Class B Common Stock”), and (B) 1,000 shares of preferred stock,
par value $0.01 per share (the “Parent Preferred Stock”); (ii) there
are issued and outstanding (A) 925 shares of Parent Class A Common
Stock and 75 shares of Parent Class B Common Stock and (B) no shares
of Parent Preferred Stock; (iii) except for the Parent Capital Stock,
there are no Equity Securities of Parent issued, reserved for issuance or
outstanding; (iv) the Parent Capital Stock and any other Equity Securities
of Parent have been duly authorized, and are validly issued, fully paid and
nonassessable; (v) there are no preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights, redemption
rights, repurchase rights, agreements, arrangements or commitments of any
character under which Parent is or may become obligated to issue or sell, or
giving any Person a right to subscribe for or acquire, or in any way dispose
of, any shares of Parent Capital Stock or other Equity Securities of Parent,
and no securities or obligations evidencing such rights are authorized, issued
or outstanding; (vi) the outstanding Parent Capital Stock and other Equity
Securities of Parent are not subject to any voting trust agreement or other
contract, agreement or arrangement restricting or otherwise relating to the
voting, dividend rights or disposition of such stock or other Equity
Securities; (vii) there are no phantom stock or similar rights providing
economic benefits based, directly or indirectly, on the value or price of the
Parent Capital Stock or other Equity Securities of Parent; (viii) there
are not any bonds, debentures, notes or other Indebtedness of Parent having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which holders of the Parent Capital Stock may
vote; and
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(ix) there are not any
outstanding contractual obligations of Parent or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of capital stock of Parent.
(c) As of the Closing,
the Purchase Shares (before adjustments under Section 2.6 or 2.7) shall
represent 16% of the total outstanding Equity Securities of Parent calculated
on a Fully Diluted Basis, after giving effect to the issuance of the Purchase
Shares and assuming for purposes of such calculation the consummation of the
Redemption under the Parent Redemption Agreement but without giving effect to
any adjustments under Section 2.6 or 2.7; provided, however,
that Equity Securities issued pursuant to clause (ii) of the definition of
“Fully Diluted Basis” shall not exceed the Permitted Parent Incentive Awards; provided,
further, that such limitation shall not apply to any Equity Securities
issued as contemplated by clause (ii)(B) of the definition of “Fully
Diluted Basis.”
Section 4.5 Purchase
Shares. Upon issuance, the Purchase Shares will be duly authorized, validly
issued, fully paid and nonassessable, and free and clear of all Encumbrances of
any kind whatsoever, including any preemptive rights, rights of first refusal,
call options, subscription rights or any similar rights under any provision of
applicable Law, the charter documents or bylaws of Parent or any of its
Subsidiaries or any Contract to which Parent is a party or otherwise bound and
subject to applicable securities Laws. At the Closing, Parent will have
sufficient authorized but unissued shares of Parent Capital Stock for Buyer to
meet its obligation to cause Parent to deliver the Purchase Shares under this
Agreement. Upon consummation of the Transaction, good and valid title to the
Purchase Shares will pass to the recipients thereof from Buyer, free and
clear of any Encumbrances, other than those arising as a result of the
ownership of such Purchase Shares by [the]any
recipient thereof or under applicable securities Laws.
Section 4.6 Consents
and Approvals. No consent, approval, waiver, authorization, notice or
filing is required to be obtained by Buyer, Parent or any of Parent’s
Affiliates from, or to be given by Buyer, Parent or any of Parent’s Affiliates
to, or made by Buyer, Parent or any of Parent’s Affiliates with, any Person in
connection with the execution, delivery and performance by Buyer of this
Agreement and by Buyer, Parent or any of Parent’s Affiliates of the Ancillary
Agreements to which it is a party, other than the consents, approvals, waivers,
authorizations, notices or filings the failure of which to obtain, give or make
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
Section 4.7 Non-Contravention.
The execution, delivery and performance by Buyer of this Agreement and the
execution, delivery and performance by each of Buyer and Parent of each of the
Ancillary Agreements to which it is a party, and the consummation of the transactions
contemplated hereby and thereby, do not and will not (a) violate any
provision of the certificate of incorporation, bylaws or other organizational
documents of Buyer, Parent or any of Parent’s Affiliates, (b) assuming the
receipt of all consents, approvals, waivers and authorizations and the making
of notices and filings set forth on Schedule 4.6 of the Buyer Disclosure
Schedule with respect to any
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Person which is not a Government
Entity or Self-Regulatory Organization, conflict with, or result in the breach
of, or constitute a default under, or result in the termination, cancellation,
modification or acceleration (whether after the filing of notice or the lapse
of time or both) of any right or obligation of Buyer, Parent or any of Parent’s
Affiliates, under, or result in a loss of any benefit to which Buyer, Parent or
any of Parent’s Affiliates is entitled under, any Contract to which any of them
is a party or result in the creation of any Encumbrance upon any of their
Assets or give rise to any Purchase Right or (c) assuming the receipt of
all consents, approvals, waivers and authorizations and the making of notices
and filings set forth on Schedule 4.6 of the Buyer Disclosure Schedule
with respect to Government Entities or Self-Regulatory Organizations or
required to be made or obtained by Seller, violate or result in a breach of or
constitute a default under any Law to which Buyer, Parent or any of Parent’s
Affiliates is subject, or under any Parent Governmental Authorization, other
than, in the case of clauses (b) and (c), conflicts, breaches,
terminations, defaults, cancellations, accelerations, losses, violations or
Encumbrances that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
Section 4.8 Binding
Effect. This Agreement and each of the Ancillary Agreements dated the date
hereof is, and each other Ancillary Agreement will constitute, when executed
and delivered by Buyer and each Affiliate of Buyer party to such agreements and
by Seller and the other parties thereto, a valid and legally binding obligation
of Buyer and each Affiliate of Buyer party to such agreements, enforceable
against Buyer and each such Affiliate in accordance with their respective
terms.
Section 4.9 Financial
Statements.
(a) Set forth on Schedule
4.9(a) of the Buyer Disclosure Schedule is a copy of the consolidated
audited balance sheets and audited statements of income, stockholders’ equity
and cash flows for Parent (and its predecessors in interest, as the case may
be) and its Subsidiaries for the fiscal years ended December 31, 2002, December 31,2003 and December 31, 2004 (the “Parent Audited Financial Statements”).
The Parent Audited Financial Statements have been prepared from the books and
records of Parent in accordance with GAAP consistently applied, and fairly
present, in all material respects, the financial condition and results of
operations and cash flows of Parent as of the dates thereof or the periods then
ended.
(b) The Chief Executive
Officer and the Chief Financial Officer of Parent have disclosed, based on
their most recent evaluation, to Parent’s auditors and the audit committee of
Parent’s board of directors (i) all significant deficiencies in the design
or operation of internal controls that could adversely affect Parent’s or any
of Parent’s Affiliates’ ability to record, process, summarize and report
financial data and have identified for Parent’s auditors any material
weaknesses in the internal controls and (ii) any fraud, whether or not
material, that involves management or other employees who have a significant
role in Parent’s internal controls. Copies of all disclosures described in the
foregoing sentence have been made available to Seller. Parent and its
Significant Subsidiaries have established and maintain disclosure controls and
procedures (as such term is defined in Rule 13a-15(e) under the
Exchange Act); such disclosure controls and
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procedures are designed to ensure
that material information relating to Parent, including its Significant
Subsidiaries, is made known to Parent’s Chief Executive Officer and its Chief
Financial Officer by others within those entities; and such disclosure controls
and procedures are effective in alerting Parent’s Chief Executive Officer and
its Chief Financial Officer to material information of the nature required to
be disclosed in periodic reports pursuant to the Exchange Act in a timely
fashion.
Section 4.10 Litigation
and Claims. There are no civil, criminal or administrative actions, suits,
demands, claims, hearings, proceedings or investigations pending against, or,
to the Knowledge of Buyer, threatened against or affecting, or otherwise
relating to Parent or any of its Affiliates, or the Transaction, other than
those that would not, individually or in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect. None of Parent or any of its
Affiliates is subject to any order, writ, judgment, award, injunction or decree
of any court or governmental or regulatory authority of competent jurisdiction
or any arbitrator or arbitrators, other than those that would not, individually
or in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect. To the Knowledge of Buyer, as of the date hereof, the matters described
in the Current Report on Form 8-K, filed December 15, 2004, by
TWX with the SEC would not reasonably be expected to have a Parent Material
Adverse Effect.
Section 4.11 Taxes.
Each of Parent and its Subsidiaries has filed all Tax Returns required to have
been filed (or extensions have been duly obtained) and has paid all Taxes
required to have been paid by it, except where failure to file such Tax Returns
or pay such Taxes would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
Section 4.12 Employee
Benefits. Except as would not, individually or in the aggregate, reasonably
be expected to have a Parent Material Adverse Effect:
(a) all material benefit
and compensation plans, programs, contracts, policies or arrangements,
including any trusts, trust instruments and insurance contracts forming a part
thereof, any “employee benefit plans” within the meaning of Section 3(3) of
ERISA, any deferred compensation, stock option, stock purchase, stock
appreciation rights, stock based, incentive, bonus, workers’ compensation,
short term disability, vacation, retention and severance plans and all
employment, collective bargaining, consulting, severance and change in control
agreements, and all amendments thereto, in each case under which any current or
former employee of Parent has any right to benefits and which are contributed
to, sponsored by or maintained by Parent (the “Parent Benefit Plans”),
have been maintained in substantial compliance with their terms and with the
requirements prescribed by any applicable statutes, orders, rules and
regulations, including ERISA and the Code;
(b) each Parent Benefit
Plan that is intended to be qualified under an applicable provision of the Code
or any regulation thereunder, including Section 401(a) of the Code,
is so qualified and has been so qualified during the period since its adoption;
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(c) each
trust created under any such Parent Benefit Plan is exempt from tax and has
been so exempt since its creation and, to the Knowledge of Buyer, nothing has
occurred with respect to the operation of any Parent Benefit Plan that would
cause the loss of such qualification or exemption; and
(d) the
Transaction will not result in any new or additional Liability of Parent or any
of its Subsidiaries under any Parent Benefit Plan that would not have been a
Liability of Parent or any of its Subsidiaries absent the consummation of the
Transaction.
Section 4.13 Compliance
with Laws. The Parent Business has been since July 1, 2003 and is
being conducted in compliance with all applicable Laws and Parent Governmental
Authorizations, including the Communications Act, the Cable Communications
Policy Act of 1984, the Cable Television Consumer Protection and Competition
Act of 1992, the Telecommunications Act of 1996, the Copyright Act of 1976 and
all rules and regulations of the FCC and the United States Copyright Office,
except for failures to comply that would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect. Neither Parent
nor any of its Affiliates has received any notice alleging any material
violation by Parent or any of its Subsidiaries under any applicable Law, except
for violations that have been cured or that would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent
has all Parent Governmental Authorizations necessary for the conduct of the
Parent Business as currently conducted other than those the absence of which
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect. Nothing in this representation is intended to
address any compliance matter that is specifically addressed by Sections 4.12
(Employee Benefits), 4.14 (Environmental Matters), 4.16 (Labor) and 4.19
(Parent Franchises).
Section 4.14 Environmental
Matters.
(a) Since
July 1, 2003, the Parent Business and the Parent Real Property have been
in material compliance with all applicable Environmental Laws and there are no
material Liabilities under any Environmental Law with respect to the Parent
Business.
(b) Since
July 1, 2003, none of Parent or any of its Subsidiaries (nor, to Buyer’s
Knowledge, any predecessor in interest) has received from any Person any
notice, demand, claim, letter or request for information, relating to any
material violation or alleged material violation of, or any material Liability
under, any Environmental Law in connection with or affecting the Parent
Business or the Parent Real Property.
(c) There
are no writs, injunctions, decrees, orders or judgments outstanding, or any
actions, suits, proceedings or investigations pending or, to Buyer’s Knowledge,
threatened, relating to material compliance with or material Liability under
any Environmental Law affecting the Parent Business or the Parent Real
Property.
(d) To
Buyer’s Knowledge, there are no underground storage tanks, asbestos containing
materials, lead based products or polychlorinated biphenyls on any of
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the Parent Real Property other than
as in compliance in all material respects with all Environmental Laws.
Section 4.15 Intellectual
Property. Except as would not, individually or in the aggregate, reasonably
be expected to have a Parent Material Adverse Effect, as of the Closing Date,
Parent or its Subsidiaries will own or have a valid license or other right to
use the Intellectual Property necessary to conduct the Parent Business
substantially as currently conducted. Parent has not received any notice that (a) use
of such Intellectual Property in the Parent Business substantially as currently
used by Parent and its Subsidiaries infringes or otherwise violates any Person’s
Intellectual Property rights or (b) any Person is infringing or otherwise
violating any Intellectual Property rights of Parent or its Subsidiaries in
such Intellectual Property, that, in either such case, would, individually or
in the aggregate, reasonably be expected to have a Parent Material Adverse
Effect.
Section 4.16 Labor.
(a) None
of Parent or any of its Subsidiaries is a party to or bound by any material
labor agreement, union contract or collective bargaining agreement respecting the
employees of Parent and its Subsidiaries, nor are there any employees of Parent
or its Subsidiaries represented by a collectively bargained unit or labor
organization who are not covered by a Collective Bargaining Agreement.
(b) Parent
and its Subsidiaries are in compliance in all material respects with all labor
Laws applicable to the Parent Business and the employees of Parent, and are not
engaged in any unfair labor practices, as defined in the National Labor
Relations Act or other Law applicable to employees of Parent and its
Subsidiaries. There are no outstanding unfair labor practice charges pending
before the National Labor Relations Board with respect to any employees of
Parent.
(c) There
is no pending, or to the Knowledge of Buyer threatened, strike, walkout or
other work stoppage or any union organizing effort by any of the employees
of Parent and its Subsidiaries.
(a) Except
for such Contracts or arrangements as are entered into between the date hereof
and the Closing and that are not prohibited by this Agreement, neither Parent
nor any of its Subsidiaries is bound by or subject to (i) except for
programming agreements or Contracts with Affiliates, any Contract that is
material (as such term is defined in Item 601(b)(10) of Regulation S-K
promulgated under the Securities Act) to the Parent Business, (ii) any
programming agreement involving consideration in excess of $25,000,000 in any
twelve month period, (iii) any Contract involving consideration in excess
of $1,000,000 in any twelve month period with any Affiliate of Parent (other
than any Subsidiary of Parent) or having the intended effect of benefiting any
Affiliate of Parent (other than any Subsidiary of Parent) at the expense of
Parent or any Subsidiary of Parent in a manner that would deprive Parent or
such Parent
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Subsidiary of the benefit it would
otherwise have obtained if the transaction were to have been effected on terms
that were on an arm’s length basis or (iv) any material Contract with
Friendco or any of its Affiliates (A) related to or entered into in
connection with the Transaction or (B) in connection with the sale or
exchange of any Transferred Assets or any Transferred Assets (as defined in the
Friendco Purchase Agreement).
(b) All
Parent Material Contracts are in full force and effect and are enforceable
against each party thereto in accordance with the express terms thereof. There
does not exist under any Contract to which Parent or any of its Affiliates is a
party or by which its Assets are bound any violation, breach or event of
default, or alleged violation, breach or event of default, or event or
condition that, after notice or lapse of time or both, would constitute a
violation, breach or event of default thereunder on the part of Parent or any
of its Affiliates or, to the Knowledge of Buyer, any other party thereto,
except for such violations, breaches, events or conditions that would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect. There are no disputes pending or threatened under any
Contract to which Parent or any of its Subsidiaries is a party or by which its
Assets are bound other than those disputes that would not, individually or in
the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
All of the Parent Material Contracts set forth on Schedule 4.17(a)(iii) of
the Buyer Disclosure Schedule were entered into on an arm’s length basis and in
the Ordinary Course of Business.
Section 4.18 Parent
Cable Systems and Subscriber Information.
(a) None
of Parent or any of its Subsidiaries, directly or indirectly, owns any Systems
other than the Parent Cable Systems listed on Schedule 4.18(a) of
the Buyer Disclosure Schedule.
(b) None
of Parent or any of its Subsidiaries, directly or indirectly, manages or
operates any Systems which it does not, directly or indirectly, wholly own.
(c) None
of Parent or any of its Subsidiaries, directly or indirectly, owns any Systems
that it does not, directly or indirectly, manage and operate.
(d) Schedule
4.18(d) of the Buyer Disclosure Schedule sets forth the aggregate
number of Parent Basic Subscribers, Parent Digital Subscribers and Parent HSD
Subscribers as of December 31, 2004. Each such aggregate number has been
determined in accordance with the Parent Subscriber Accounting Policy.
(e) Schedule
4.18(e) of the Buyer Disclosure Schedule sets forth Parent’s policy
with respect to calculating Parent Subscribers (the “Parent Subscriber
Accounting Policy”).
(f) Schedule
4.18(f) of the Buyer Disclosure Schedule sets forth the average total
revenue per Parent Basic Subscriber as of December 31, 2004.
(g) Schedule
4.18(g) of the Buyer Disclosure Schedule sets forth the Parent Basic
Subscriber monthly churn rate for the Parent Business as of December 31,
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2004. Each such aggregate number
has been determined in accordance with the Parent Subscriber Accounting Policy.
Section 4.19 Parent
Franchises.
(a) Schedule
4.19(a) of the Buyer Disclosure Schedule sets forth a true and
complete list of each Parent Franchise operated by Parent or any of its
Subsidiaries as of the date hereof, detailed by Parent Cable System. The Parent
Cable Systems are in compliance with the applicable Parent Franchises except
for such failures to comply that would not, individually or in the aggregate,
reasonably be expected to have a Parent Material Adverse Effect. As of the date
hereof, there are no material ongoing or, to the Knowledge of Buyer, threatened
audits or similar proceedings undertaken by Government Entities with respect to
the Parent Franchises.
(b) Each
of the Parent Franchises is in full force and effect in all material respects,
and as of the date hereof a valid request for renewal has been duly and timely
filed under Section 626 of the Communications Act with the proper
Government Entity with respect to each of the Franchises that has expired or
will expire within 30 months after the date of this Agreement. None of Parent
or any of its Subsidiaries has received notice as of the date hereof from any
Person that any Parent Franchise will not be renewed or that the applicable
Government Entity has challenged or raised any objection to or otherwise
questioned a Parent’s request for any such renewal under Section 626 of
the Communications Act, and Parent and its Subsidiaries have duly and timely
complied in all material respects with any and all inquiries and demands by any
and all Government Entities made with respect to Parent’s or such Subsidiaries’
requests for any such renewal.
(c) With
respect to the Parent Franchises, none of Parent or any of its Subsidiaries has
made any commitments to any Government Entity, except any commitments that
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
Section 4.20 Network
Architecture. Schedule 4.20 of the Buyer Disclosure Schedule sets
forth in all material respects a true and complete statement as of December 31,2004, of (a) the approximate number of plant miles (aerial and
underground) for each division of the Parent Business, (b) the approximate
bandwidth capability expressed in MHz of each such division of the Parent
Business, (c) the stations and signals carried by each such division and
the channel position of each such signal and station of the Parent Business, (d) the
approximate number of bulk accounts served by the Parent Cable Systems, (e) the
approximate number of homes passed in the Parent Business as reflected in the
system records of Parent or any of its Affiliates, (f) a description of basic
and optional or tier services available from each such division of the Parent
Business and the rates charged for each, (g) the channel capacity of each
such division of the Parent Business, and (h) the municipalities served by
each such division of the Parent Business and the community unit numbers of
such municipalities.
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Section 4.21 Absence of
Changes. Since December 31, 2004, the Parent Business has not
experienced any event, occurrence, condition or circumstance, and, to Buyer’s
Knowledge, no event, occurrence, condition or circumstance is threatened that,
individually or in the aggregate, has had or is reasonably expected to have, a
Parent Material Adverse Effect.
Section 4.22 Assets.
The Assets held by Parent and its Subsidiaries constitute all the Assets and
rights of Parent and its Subsidiaries owned, used or held for use primarily in
connection with the conduct of the Parent Business in all material respects as
currently conducted.
Section 4.23 Absence of
Liabilities. The Parent Business has no Liabilities and there is no
existing condition, situation or set of circumstances that, individually or in
the aggregate, would reasonably be expected to result in a Liability of the
Parent Business, other than (a) Liabilities specifically reflected, reserved
against or otherwise disclosed in the Parent Audited Financial Statements and (b) Liabilities
that were incurred since the date of the Parent Audited Financial Statements
and that would not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect.
Section 4.24 Friendco
Agreements.
(a) Buyer
has delivered to Seller true and complete copies of the Parent Redemption
Agreement, TWE Redemption Agreement and Exchange Agreement, each as in effect
as of the date hereof.
(b) Each
of the Parent Redemption Agreement, the TWE Redemption Agreement and the
Exchange Agreement constitutes a valid and legally binding obligation of each
of Buyer, Parent and any of their Affiliates that are parties thereto,
enforceable against each of them in accordance with its terms.
(c) As
of the date hereof, except for the Exchange Agreement, the TWE Redemption
Agreement and the Parent Redemption Agreement, none of Buyer or its Affiliates
have entered into any material agreements or understandings with Friendco or
any of its Affiliates Relating to any of the Transferred Assets or otherwise in
connection with the Transaction or the Friendco Transaction.
Section 4.25 No On-Sale
Agreements. Except with respect to the Transaction, the Exchange or the
Redemptions, as of the date hereof, Buyer and its Affiliates have not entered
into any binding agreement with any third party (other than Seller) with
respect to a purchase and sale transaction, whether by merger, stock sale,
asset sale or otherwise, for any of the Transferred Assets.
Section 4.26 Finders’
Fees. Except for Bear, Stearns & Co. Inc. and Lehman Brothers Inc.
(the “Financial Advisors”), whose fees will be paid by Buyer, there is
no investment banker, broker, finder or other intermediary that has been
retained by or is authorized to act on behalf of Buyer or any Affiliate of
Buyer who might be entitled to any fee or commission in connection with the
Transaction.
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Section 4.27 Opinion of
Financial Advisors. The board of directors of Parent and the Managing
Member of Buyer have received the opinions of the Financial Advisors, each
dated April 19, 2005, to the effect that, as of such date and subject to
the assumptions, qualifications and other limitations set forth therein, (i) to
the Parent, the consideration to be paid in the Parent Redemption, (ii) to
TWE, the consideration to be paid in the TWE Redemption, and (iii) to
Parent and Buyer, the consideration to be received in the Exchange are fair
from a financial point of view. The opinions were delivered solely for the use
and benefit of the board of directors of Parent, the managing member of Buyer
and the board of representatives of TWE and may not be relied upon by Seller or
any third party or used for any other purpose without the prior approval of the
Financial Advisors, which approval shall not be implied by inclusion of this
representation in the Agreement.
Section 4.28 [Section 4.29]
No Other Representations or Warranties. Except for the representations
and warranties contained in this Article IV, neither Buyer nor any other
Person makes any other express or implied representation or warranty on behalf
of Buyer.
ARTICLE V
COVENANTS
Section 5.1 Access and Information.
(a) From
the date hereof until the Closing (and, with respect to any Disputed MCE
System, until the expiration of the MCE Period), subject to applicable Laws,
Seller shall (i) afford Buyer and its authorized representatives
reasonable access, during regular business hours, upon reasonable advance
notice, to the Employees, each Specified Business, the Friendco Business,
Assets that will be Transferred Assets as of the Closing and the Friendco
Transferred Assets, (ii) furnish, or cause to be furnished, to Buyer any
financial and operating data and other information with respect to each
Specified Business or in furtherance of the Transaction or the Exchange as
Buyer from time to time reasonably requests, including, subject to Section 5.11,
by providing to Buyer or its accountants sufficient information (A) for
the preparation of the pro-forma balance sheet and statements of income,
stockholders’ equity and cash flows for the Parent Business (in each case, if
requested, assuming the Friendco Transaction and/or the Exchange have occurred)
and (B) regarding compliance by Seller and its Affiliates with the
requirements of the SOA with respect to the Business, and (iii) instruct
the Employees, and its counsel and financial advisors to cooperate with Buyer
in its investigation of each Specified Business and the Friendco Business, including
instructing its accountants to give Buyer access to their work papers; provided,
however, that in no event shall Buyer have access to any information
that, based on advice of Seller’s counsel, would (A) reasonably be
expected to create Liability under applicable Laws, including U.S. Antitrust
Laws, or waive any material legal privilege (provided, that in such
latter event Buyer and Seller shall use commercially reasonable efforts to
cooperate to permit disclosure of such information in a manner consistent with
the preservation of such legal privilege), (B) result in the disclosure of
any trade secrets of third parties or
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(C) violate any obligation of
Seller with respect to confidentiality so long as, with respect to
confidentiality, to the extent specifically requested by Buyer, Seller has made
commercially reasonable efforts to obtain a waiver regarding the possible
disclosure from the third party to whom it owes an obligation of
confidentiality; it being understood that
Buyer shall not conduct any environmental sampling without the prior written
consent of Seller, which consent may be withheld in Seller’s reasonable
discretion. All requests made pursuant to this Section 5.1(a) shall
be directed to an executive officer of Seller or such Person or Persons as may
be designated by Seller. All information received pursuant to this Section 5.1(a) shall,
prior to the Closing, be governed by the terms of the Seller Confidentiality
Agreement. No information or knowledge obtained in any investigation by Buyer pursuant
to this Section 5.1(a) shall affect or be deemed to modify any
representation or warranty made by Seller hereunder.
(b) From
the date hereof until the Closing, subject to applicable Laws, Buyer shall, and
shall cause Parent and its Controlled Affiliates to, (i) afford Seller and
its authorized representatives reasonable access, during regular business hours
and upon reasonable advance notice, to the Parent Business, (ii) furnish,
or cause to be furnished, to Seller any financial and operating data and other
information with respect to the Parent Business, the Exchange, the Redemptions
or in furtherance of the Transaction as Seller from time to time reasonably
requests and (iii) instruct its employees, and its counsel and financial
advisors to cooperate with Seller in its investigation of the Parent Business
including instructing its accountants to give Seller access to their work
papers; provided, however, that in no event shall Seller have
access to any information that, based on advice of Buyer’s counsel, would (A) reasonably
be expected to create Liability under applicable Laws, including U.S. Antitrust
Laws, or waive any material legal privilege (provided, that in such
latter event Buyer and Seller shall use commercially reasonable efforts to
cooperate to permit disclosure of such information in a manner consistent with
the preservation of such legal privilege), (B) result in the disclosure of
any trade secrets of third parties or (C) violate any obligation of Parent
with respect to confidentiality so long as, with respect to confidentiality, to
the extent specifically requested by Seller, Buyer or Parent has made
commercially reasonable efforts to obtain a waiver regarding the possible
disclosure from the third party to whom it owes an obligation of
confidentiality; itbeingunderstoodthat Seller shall not conduct any environmental sampling
without the prior written consent of Buyer, which consent may be withheld in
Buyer’s absolute discretion. All requests made pursuant to this Section 5.1(b) shall
be directed to an executive officer of Buyer or such Person or Persons as may
be designated by Buyer. All information received pursuant to this Section 5.1(b) shall
be governed by the terms of the TWX Confidentiality Agreement. No information
or knowledge obtained in any investigation by Seller pursuant to this Section 5.1(b) shall
affect or be deemed to modify any representation or warranty made by Buyer
hereunder.
(c) Following
the Closing and until all applicable statutes of limitations (including periods
of waiver) have expired, Buyer agrees to retain all Books and Records in
existence on the Closing Date, and to the extent permitted by Law and
confidentiality obligations existing as of the Closing Date, grant to Seller
and its representatives during regular business hours and subject to reasonable
rules and regulations, the right, at the expense of Seller, (i) to
inspect and copy the Books and
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Records and (ii) to have
personnel of Buyer made reasonably available to them or have Buyer otherwise
cooperate to the extent reasonably necessary, including in connection with (A) preparing
and filing Tax Returns and/or any Tax inquiry, audit, investigation or dispute,
(B) any litigation or investigation[ or], (C) the claims
resolution, plan confirmation, plan administration and case
closing processes in the Reorganization Case or (D) the preparation of any of
the Financial Information, Offering Financial Information, Quarterly Reports or
Annual Reports required to be prepared or filed pursuant to Section 5.11
or 5.19, respectively; provided, however, that
in no event shall Seller have access to any information that, based on advice
of Buyer’s counsel, would (1) reasonably be expected to create Liability
under applicable Laws, including U.S. Antitrust Laws, or waive any material
legal privilege (provided, that in such latter event Buyer and Seller
shall use commercially reasonable efforts to cooperate to permit disclosure of
such information in a manner consistent with the preservation of such legal
privilege), (2) result in the disclosure of any trade secrets of third
parties or (3) violate any obligation of Buyer with respect to
confidentiality (provided, that with respect to clause (3), to the
extent specifically requested by Seller, Buyer or Parent has in good faith
sought to obtain a waiver regarding the possible disclosure from the third
party to whom it owes an obligation of confidentiality). In no event shall
Seller or its representatives have access to the Tax Returns of Buyer. No Books
and Records shall be destroyed by Buyer without first advising Seller in
writing and giving Seller a reasonable opportunity to obtain possession thereof
at the transferee’s expense. All information received pursuant to this Section 5.1(c) shall
be governed by the terms of Section 5.1(e).
(d) Following
the Closing and until all applicable statutes of limitations (including periods
of waiver) have expired (and with respect to Tax Returns, until the later of (I) the
five year anniversary of the Closing and (II) the expiration of the
statute of limitations with respect to such Tax Return), Seller agrees to
retain all Books and Records in existence on the Closing Date and not
transferred to Buyer (the “Retained Books and Records”), and to the
extent permitted by Law and confidentiality obligations existing as of the
Closing Date, (i) convey to Buyer copies of any Tax Returns of Seller or
its Subsidiaries relating to periods (or portions thereof) ending on or after December 31,1999 and on or before the Closing (including any amended Tax Returns relating
to such periods that are filed by Seller after the Closing) (ii) grant to
Buyer and its representatives the right, at the expense of Buyer and subject to
reasonable rules and regulations, to inspect and make copies of any other
Tax Returns of Seller or any of its Subsidiaries relating to periods (or
portions thereof) ending on or before the Closing and any workpapers and tax
software related to the Tax Returns described in clauses (i) or (ii) hereof,
(iii) grant to Buyer and its representatives during regular business hours
and subject to reasonable rules and regulations the right to inspect and
make copies of Retained Books and Records not described in clauses (i) or (ii) hereof,
and (iv) grant to Buyer and its representatives during regular business
hours and subject to reasonable rules and regulations, the right, at the
expense of Buyer, to have personnel of Seller made reasonably available to them
or have Seller otherwise cooperate to the extent reasonably necessary, in each
case, including in connection with (A) preparing and filing Tax Returns
and/or any Tax inquiry, audit, investigation or dispute or (B) any
litigation or investigation; provided, however, that in no event
may Buyer or its representatives inspect, examine, review, distribute or
disclose in any form the specific contents of any of
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Seller’s or its Subsidiaries’
income or franchise Tax Returns (or copies thereof) provided by Seller either
at Closing or at a later date or of workpapers or tax software related to any
such income or franchise Tax Returns (or copies thereof) until the specific
contents of such income or franchise Tax Returns become relevant to Buyer in
connection with (x) preparing and filing Tax Returns, or (y) any Tax
inquiry, audit, investigation or dispute with a Government Entity, in each
case, at which time Buyer may use such Tax Returns and related workpapers and
tax software (or copies thereof) for purposes reasonably related to the
activities described in (x) or (y) above; provided, further,
that in no event shall Buyer or its representatives have access to any
information that, based on advice of Seller’s counsel, would (1) reasonably
be expected to create Liability under applicable Laws, including U.S. Antitrust
Laws, or waive any material legal privilege (provided, that in such
latter event Buyer and Seller shall use commercially reasonable efforts to
cooperate to permit disclosure of such information in a manner consistent with
the preservation of such legal privilege), (2) result in the disclosure of
any trade secrets of third parties or (3) violate any obligation of Seller
with respect to confidentiality (provided, that with respect to clause
(3), to the extent specifically requested by Buyer or Parent, Seller has in
good faith sought to obtain a waiver regarding the possible disclosure from the
third party to whom it owes an obligation of confidentiality). No Retained
Books and Records shall be destroyed by Seller without first advising Buyer in
writing and giving Buyer a reasonable opportunity to obtain possession thereof
at the transferee’s expense.
(e) From
and after the Closing, Seller and its Affiliates shall keep confidential any
non-public information in their possession Related to the Business or related
to the Transferred Assets (any such information that is required to keep
confidential pursuant to this sentence shall be referred to as “Confidential
Information”). Neither Seller nor its Affiliates shall disclose, or permit
any of their respective directors, officers, employees or representatives to
disclose, any Confidential Information to any other Person or use such
information to the detriment of Buyer or its Affiliates; provided, that
such party may use and disclose any such information (i) once it has been
publicly disclosed (other than by such party in breach of its obligations under
this Section 5.1(e)) or (ii) to the extent that such party may, in
the reasonable judgment of its counsel, be compelled by Law to disclose any of
such information, such party may disclose such information if it has used
commercially reasonable efforts, and has afforded Buyer the opportunity, to
obtain an appropriate protective order, or other satisfactory assurance of
confidential treatment, for the information compelled to be disclosed. Except
in respect of Excluded Assets and Excluded Liabilities, the Seller
Confidentiality Agreement shall terminate upon the Closing with no further
Liability thereunder on the part of any party thereto.
Section 5.2 Conduct
of Business. During the period from the date hereof to the Closing (and,
following the Closing, with respect to any Disputed MCE System that is not a
Buyer Managed MCE System, until the expiration of the MCE Period), except as
otherwise expressly contemplated by this Agreement, as set forth on Schedule
5.2 of the Seller Disclosure Schedule or as Buyer otherwise agrees in
writing in advance, Seller shall (x) conduct, and shall cause its
Affiliates to conduct, each Specified Business in the Ordinary Course and in
accordance with applicable material Laws (including, subject to
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Section 5.2(s),
completing line extensions, placing conduit or cable in new developments,
fulfilling installation requests and work on existing and planned construction
projects), (y) use its commercially reasonable efforts to preserve intact
each Specified Business and its relationship with its customers, suppliers,
creditors and employees (itbeingunderstoodthat
no increases in any compensation or any incentive compensation or similar
compensation shall be required in respect thereof except to the extent such
increase is required in the Ordinary Course of Business) and (z) use its
commercially reasonable efforts to perform and honor all of its post-petition
obligations under any Contract as they become due and otherwise discharge and satisfy
all Liabilities thereunder as and when they become due. During the period from
the date hereof to the Closing (and, following the Closing, with respect to any
Disputed MCE System that is not a Buyer Managed MCE System, until the
expiration of the MCE Period), except as otherwise contemplated by this
Agreement or any Ancillary Agreement or as Buyer shall otherwise consent (provided,
that Buyer shall respond as soon as reasonably practicable but in no event
later than five Business Days following receipt of Seller’s written request for
such response) or as set forth in the applicable sections of Schedule 5.2
of the Seller Disclosure Schedule, Seller shall, and shall cause each of its
Affiliates to, with respect to each Specified Business:
(a) not
incur, create or assume any Encumbrance on any of its Assets other than a
Permitted Encumbrance;
(b) not
sell, lease, license, transfer or dispose of any Assets other than in the
Ordinary Course of Business; provided, however, that in any
event, such Assets shall not (i) constitute a Cable System or material
portion thereof or (ii) include any Equity Securities of any Asset
Transferring Subsidiary (other than in connection with a transfer to Seller or
any of its wholly owned Subsidiaries that is an Asset Transferring Subsidiary
and a Debtor);
(c) not
(i) assume pursuant to an order of the Bankruptcy Court any OCB Contract, (ii) enter
into any Contract in the Contract Categories Expected to be Assumed that
contains any Special Terms (except with respect to clause (i) of the
definition thereof), (iii) modify, renew (except in respect of
Governmental Authorizations pursuant to Section 5.2(r)), suspend, abrogate
or amend in any material respect (including the addition of any Special Term)
any (A) Governmental Authorization that is material, (B) Contract
Related to any Specified Business that is material or that contains Special
Terms (except with respect to clause (i) of the definition thereof), (C) retransmission
consent agreement (in a manner which would result in any compensation being
payable thereunder, other than compensation that is customary, consistent with
Seller’s past practice and, in any event, non-monetary), (D) Third Party
Confidentiality Agreement or (E) Contract listed on Schedule 1.1(k)(ii) of
the Seller Disclosure Schedule (other than, with respect to this clause (E),
with the consent of Buyer, such consent not to be unreasonably withheld (other
than in the case of extending the term or amending with like effect any lease
on Schedule 1.1(k)(ii), with respect to which such consent shall be at
Buyer’s discretion)), (iv) reject or terminate any Contract Related to any
Specified Business or (v) with respect to any Contract Related to any
Specified Business, take any
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action outside the Ordinary Course
of Business or fail to take any action in the Ordinary Course of Business;
(d) not
declare, set aside or pay any dividend or distribution on any Investment Entity
Securities;
(e) not
amend any of the Investment Documents;
(f) not
issue, sell, pledge, transfer (other than to Seller or any wholly owned
Subsidiary of Seller; provided, that any such wholly owned Subsidiary
shall be an Asset Transferring Subsidiary and a Debtor), dispose of or encumber
any Investment Entity Securities;
(g) not
split, combine, subdivide, reclassify or redeem, or purchase or otherwise
acquire, any Investment Entity Securities;
(h) provide
prompt written notice to Buyer of Seller or any of its Affiliates entering into
any OCB Contract that is material to any Specified Business;
(i) not
dispose of, license or permit to abandon, invalidate or lapse any rights in, to
or for the use of any material Transferred Intellectual Property;
(j) not
(i) increase the compensation of any Employee or current director of
Seller or any of its Subsidiaries, except for increases in salary or wage rates
in the Ordinary Course of Business or as required by the terms of agreements or
plans currently in effect and listed on Schedule 3.10(a) of the
Seller Disclosure Schedule or with respect to any Employee listed on Schedule
5.8(a)(ii) of the Seller Disclosure Schedule, (ii) establish,
amend, pay, agree to grant or increase any special bonus, sale bonus, stay
bonus, retention bonus, deal bonus, emergence award or change in control bonus
or any other benefit under Seller’s Performance Retention Plan or other plan,
agreement, award or arrangement, other than any such award, entitlement or
arrangement that will be fully paid and satisfied on or prior to the Closing
Date (other than any sale bonus under the Sale Bonus Program as provided below
or as otherwise provided in the parenthetical at the end of this clause (ii) with
respect to awards other than awards under the Sale Bonus Program or Seller’s
Performance Retention Plan) and the Liabilities of which will be Excluded
Liabilities or, with respect to any sale bonus under the Sale Bonus Program, to
the extent (but only to the extent) any such sale bonus amount is reflected in
the Closing Net Liabilities Amount used in calculating the Final Adjustment
Amount (provided, however, that an award, entitlement or
arrangement under this clause (ii) granted to an Employee listed on Schedule
5.8(a)(ii) of the Seller Disclosure Schedule may be paid by Seller in
accordance with its terms; provided, further, that (x) all payments
that pursuant to the term of such award, entitlement or arrangement are to be
paid on or prior to the Closing shall be paid by Seller on or prior to the
Closing and (y) if Buyer offers employment to any such Employee pursuant
to Section 5.8(a) and such Employee becomes a Transferred Employee,
Seller shall fully pay and satisfy any such award, entitlement or arrangement
as to such individual on or prior to the Closing Date), (iii) except as
provided in clause (ii) or as required by Law, establish, adopt, enter
into,
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amend or terminate any Benefit Plan
(other than any broad based health or welfare plan) or any plan, agreement,
program, policy, trust, fund or other arrangement that would be a Benefit Plan
if it were in existence as of the date of this Agreement, (iv) hire any
employee for any Specified Business with annual compensation in excess of the
amount of compensation for a Person in a similar position consistent with past
practice, other than to fill vacancies arising in the Ordinary Course of Business,
(v) enter into any new employment or severance agreements or amend any
such existing agreement with any Employee (provided, that the foregoing
shall not restrict Seller from taking any such action with respect to an
Employee listed on Schedule 5.8(a)(ii) of the Seller Disclosure
Schedule so long as Parent or Buyer, as applicable, will not be bound by any
such action (including as it may relate to the terms of employment of any such
Employee pursuant to Section 5.8 hereof) if the Employee becomes employed
by Parent or Buyer in connection with the Transaction), (vi) establish,
adopt, enter into, amend or terminate any plan, policy or arrangement providing
for severance or termination pay or benefits (provided, that the
foregoing shall not restrict Seller from taking any such action so long as
Parent or Buyer, as applicable, will not be bound by any such action (including
as it may relate to the terms of any offer to any Employee pursuant to Section 5.8(a) hereof)
if any Employee covered thereby becomes employed by Parent or Buyer in
connection with the Transaction), or (vii) engage in any hiring practices
that are not in the Ordinary Course of Business;
(k) not
make any material loans, advances or capital contributions to, or investments
in, any other Person (other than, to the extent not in violation of applicable
Law, customary loans or advances to employees in amounts not material to the
maker of such loan or advance and other than to any Subsidiary of Seller in the
Ordinary Course);
(l) not
settle any claims, actions, arbitrations, disputes or other proceedings that
would result in Seller or any of its Affiliates being enjoined in any respect
material to the Transaction or any Specified Business or that would affect any
Specified Business after the Closing (other than in a de minimis manner);
(m) not
make any material change in any method of accounting, keeping of books of
account or accounting practices or in any material method of Tax accounting of
Seller or any of its Subsidiaries unless required (i) by a concurrent
change in GAAP or applicable Law or (ii) upon prior written notice to
Buyer, in order to comply with any GAAP requirements or FASB interpretations or
in order to comply with the view of Seller’s independent auditors;
(n) except
for capital expenditures, which shall be governed by Section 5.2(s), not
Acquire any Assets or any business (including Equity Securities) in one or a
series of related transactions, other than (i) pursuant to agreements in
effect as of the date hereof that were disclosed to Buyer prior to the date
hereof, (ii) Assets used by Seller in the Ordinary Course of Business
(which Assets do not constitute a System, a business unit, division or all or
substantially all of the Assets of the transferor), (iii) any interest in
or Assets of any entity which nominally owns any interest in any MCE System and
(iv) any Equity Securities in any Tele-Media Entity;
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(o) use
commercially reasonable efforts to continue normal marketing, advertising and
promotional expenditures with respect to each Specified Business;
(p) use
commercially reasonable efforts to (i) maintain or cause to be maintained (A) the
Transferred Assets in adequate condition and repair for their current use in
the Ordinary Course, ordinary wear and tear excepted, and (B) in full
force and effect the Insurance Policies (with the same amounts and scopes of
coverage) with respect to the Transferred Assets and the operation of each
Specified Business and (ii) enforce in good faith the rights under the
Insurance Policies;
(q) use
commercially reasonable efforts to perform all post-petition obligations under
all of the Franchises, other material Governmental Authorizations and Assigned
Contracts without material breach or default and pay all post-Petition Date
Liabilities arising thereunder in the Ordinary Course of Business;
(r) use
commercially reasonable efforts to renew any material Governmental
Authorizations which expire prior to the Closing Date;
(s) use
commercially reasonable efforts to make capital expenditures and operate in
accordance with the capital and operating budget set forth on Schedule 5.2(s) of
the Seller Disclosure Schedule (the “Budget”) and, in the case of capital expenditures, on a line item basis;
(t) maintain
inventory sufficient for the operation of each Specified Business in the
Ordinary Course of Business;
(u) not
engage in any marketing, Subscriber installation or collection practices other
than in the Ordinary Course of Business;
(v) not
convert any billing systems used by any Specified Business;
(w) use
commercially reasonable efforts to implement all rate changes provided for in
the Budget and except for rate increases provided for in the Budget not change
the rate charged for any level of cable television, telephony or high speed data
services;
(x) except
as required by applicable Law (including applicable must-carry laws), not add
or voluntarily delete any channels from any Cable System, or change the channel
lineup in any Cable System or commit to do any of the foregoing in the future;
except for (i) pending channel additions and deletions or changes in
channel lineups to the extent customer notifications have, as of the date
hereof, been mailed or otherwise made in a manner permitted by each applicable
Franchise; (ii) channel additions or changes in lineups as required in
order to fulfill distribution commitments or broadcast station retransmission
consent obligations (in either case, existing as of the date hereof) pursuant
to existing Contracts, and solely to the extent the commitment and/or
obligation must, pursuant to such Contract, be satisfied prior to the Closing
Date; (iii) channel additions, migrations or changes in channel lineups in
connection with headend consolidations (provided, however, that
no new channels may be added to a system
97
unless immediately prior to the
headend consolidation, the channel was so carried on one headend or the other, provided,
further, that if such channel is carried on both headends and the
channel is not carried on the same tier or level of service on the two
headends, then after such consolidation, the channel shall be carried on the
tier or level of service of the dominant headend); (iv) the addition of
one or more of the channels listed on Schedule 5.2(x)(iv) of the
Seller Disclosure Schedule in connection with a system upgrade; (v) the
roll-out of any video on demand service listed on Schedule 5.2(x)(v) of
the Seller Disclosure Schedule or any free video on demand services for which
Seller is not required to pay any fee or consideration; (vi) the addition
of one or more of the high definition services listed on Schedule 5.2(x)(vi) of
the Seller Disclosure Schedule, which additions shall not, except as otherwise
noted on Schedule 5.2(x)(vi) of the Seller Disclosure Schedule,
require Seller to pay any fee or consideration for such services; or (vii) the
addition of the high definition signal of a NBC, ABC, CBS, or Fox station that
is licensed to the same designated market area as the system on which such
signal is being launched, so long as such signal is a simulcast of such station’s
analog signal, to the extent Seller is not required to pay any fee or
consideration for such high definition signal;
(y) not
file a cost-of-service rate justification;
(z) use
commercially reasonable efforts to launch telephony and video on demand
services in the Cable Systems identified on Schedule 5.2(z) of the
Seller Disclosure Schedule substantially in accordance with the timetable set
forth on such Schedule 5.2(z), and provide Buyer with written notice promptly
following any such launch;
(aa) continue to conduct the Business in accordance with, and not
make any change to, the Seller Subscriber Accounting Policy, including as to
disconnects;
(bb) not transfer the employment duties of any Applicable Employee
from any Cable System to a different Cable System or business unit other than
in the Ordinary Course of Business;
(cc) use commercially reasonable efforts to maintain or cause to
be maintained its Books and Records and accounts with respect to each Specified
Business in the usual, regular and ordinary manner on a basis consistent with
past practice;
(dd) give or cause to be given to Buyer, and its counsel,
accountants and other representatives, (i) as
soon as reasonably possible, but in any event prior to the date of submission
to the appropriate Government Entity, copies of all FCC rate Forms 1205, 1210,
1235, and 1240, and simultaneous with, or as soon as reasonably possible after
submission to the appropriate Government Entity, any other FCC Forms required
under the regulations of the FCC promulgated under the Cable Act that are
prepared with respect to any of the Cable Systems and (ii) as soon as
reasonably possible after filing copies of all copyright returns filed in
connection with any Cable System; provided, that, in the case of clause
(i), before any such FCC Forms 1205, 1210, 1235, or 1240 are filed, Seller and
Buyer shall consult in good faith concerning the contents of such forms; and
98
(ee) not announce an intention, authorize or enter into any
agreement or commitment with respect to any of the foregoing.
Section 5.3 Conduct
of Parent Business. During the period from the date hereof to the Closing,
except as otherwise expressly contemplated by this Agreement, the Parent
Redemption Agreement, the TWE Redemption Agreement, the Exchange Agreement, as
set forth on Schedule 5.3 of the Buyer Disclosure Schedule or as Seller
otherwise agrees in writing in advance, Buyer shall, and shall cause Parent and
its Subsidiaries to, use commercially reasonable efforts to preserve intact the
Parent Business and its relationship with its material customers, suppliers,
creditors and key employees (itbeingunderstoodthat
no increases in any compensation or any incentive compensation or similar
compensation shall be required in respect thereof except to the extent such
increase is required in the Ordinary Course of Business). Without limiting the
generality of the foregoing, during the period from the date hereof to the
Closing, except as otherwise contemplated by this Agreement or any Ancillary
Agreement or as Seller shall otherwise consent (which consent shall not be
unreasonably withheld and, provided, that Seller shall respond as soon
as reasonably practicable but in no event later than five Business Days
following receipt of Buyer’s written request for such response) or as set forth
in the applicable sections of Schedule 5.3 of the Buyer Disclosure
Schedule, Buyer shall not, and shall cause Parent and each its Subsidiaries not
to:
(a) sell,
lease, license, transfer or dispose of any Assets (itbeingunderstoodthat for purposes of this Section 5.3(a), Assets do not include
Equity Securities of Parent or cash or cash equivalents) for consideration not
consisting primarily of Systems other than (i) in the Ordinary Course of
Business, (ii) pursuant to the Friendco Transaction or (iii) Assets
which, in the aggregate, the fair market value of the total consideration
therefor would not exceed the amount specified on Schedule 5.3(a)(iii) of
the Buyer Disclosure Schedule;
(b) declare,
set aside or pay any dividend or distribution on any shares of Parent Capital
Stock or other Equity Security in Parent or any of its Subsidiaries other than
dividends or distributions by any Subsidiary of Parent to Parent or another
Subsidiary of Parent;
(c) enter
into any transaction (other than pursuant to any Contract in effect as of the
date hereof) having the intended effect of benefiting any Affiliate of Parent
(other than any Subsidiary of Parent) at the expense of Parent or any
Subsidiary of Parent in a manner that would deprive Parent or any such
Subsidiary of the benefit they would otherwise have obtained if the transaction
were to have been effected on terms that were on an arm’s length basis or any
transaction that does not satisfy the requirements of Article VI of Parent’s
bylaws, as in effect as of the date hereof;
(d) except
pursuant to Section 5.4, amend the certificate of incorporation, bylaws or
other organizational documents of Parent in a manner adverse to Seller or its
stakeholders;
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(e) issue
any shares of Parent Capital Stock or other Equity Securities of Parent other
than (i) Equity Securities issued following the date hereof on arm’s-length
terms for consideration determined in good faith by Parent’s board of directors
or any committee thereof to be fair, including, subject to Section 5.3(c),
Equity Securities issued to TWX or any of its Affiliates (other than Parent or
its wholly owned Subsidiaries), and (ii) Equity Securities issued
following the date hereof pursuant to employee option or restricted stock
programs approved by Parent’s board of directors or the compensation committee
thereof; provided, however, that Equity Securities issued
pursuant to clause (ii) of this sentence shall not exceed the Permitted
Parent Incentive Awards; provided, however, that such limitation
shall not apply to any Equity Securities issued as contemplated by clause (ii)(B) of
the definition of “Fully Diluted Basis”;
(f) settle
any claims, actions, arbitrations, disputes or other proceedings not involving
a Government Entity that would result in Parent or any of its Affiliates being
enjoined in any respect material to the Transaction; or
(g) authorize
or enter into any agreement or commitment with respect to any of the foregoing;
provided, however, that, except in respect of Sections
5.3(c) and 5.3(d), the foregoing limitations shall not restrict
transactions solely among or between Parent and any of its direct or indirect
Subsidiaries.
Section 5.4 Amended
and Restated Charter and Amended and Restated By-laws. On or prior to the
Closing, Buyer will cause Parent to (a) file the Amended and Restated
Charter with the Secretary of State of the State of Delaware and (b) adopt
the Amended and Restated By-laws. Buyer will cause Parent (i) for a period
of two years following the Closing, not to enter into any merger pursuant to Section 253
of the Delaware General Corporation Law and (ii) for a period of eighteen
months following the Closing, not to issue any Equity Securities to any Person
(other than, subject to Section 5.3(c) and, following the Closing,
the Amended and Restated By-laws, TWX and its Affiliates (other than Parent or
its wholly owned Subsidiaries)) that have a higher vote per share than the
Parent Class A Common Stock.
Section 5.5 Listing
of Purchase Shares.
(a) [.
Subject]Following
delivery of the Reversion Notice, subject to there being a
SEC/DOJ Settlement and Seller having satisfied the covenant in Section 5.19(a),
Buyer shall, and shall cause Parent and its Subsidiaries to[,] use commercially
reasonable efforts to cause[,] ([a]i) (A) effective
as of the Closing, the Purchase Shares to be either registered under the
Securities Act or exempt from any such registration under section 1145 of the
Bankruptcy Code and (B) effective as of the Closing (or as of such later
date that is required by the SEC but in any event no later than two weeks
following the Closing), the Purchase Shares to be listed for
trading on the NYSE [and (b]or, if such listing on the NYSE has not been effected within
a reasonable period following the Closing, the Nasdaq Stock Market and (ii) (A) effective
as of the MCE Closing, the MCE Purchase Shares to be either registered under
the Securities Act or
100
exempt from any such registration
and [to be listed for trading on the NYSE](B) effective as promptly as
practicable following the MCE Closing, the MCE Purchase Shares, to be listed
for trading on the NYSE or, if such listing on the NYSE has not been effected
within a reasonable period following the Closing, the Nasdaq Stock Market. Buyer
covenants and agrees that if a Remainder Plan is consummated prior to the
completion of the Initial Sale (as defined in the Adelphia Registration Rights
and Sale Agreement), Buyer shall, and shall cause Parent and its Subsidiaries
to use commercially reasonable efforts to cause, effective as of the effective
date of the Remainder Plan (or as of such later date that is required by the
SEC but in any event no later than two weeks following such consummation), the
Purchase Shares to be listed for trading on the NYSE or, if such listing on the
NYSE has not been effected within a reasonable period following the date of the
consummation of the Remainder Plan, the Nasdaq Stock Market; provided, however,
that Seller shall have provided Buyer with prior written notice of the intended
date of consummation of the Remainder Plan at least thirty days prior to such
date of consummation.
(b) Seller
covenants and agrees that if (i) a Remainder Plan is confirmed prior to
the Initial Registration Statement (as defined in the Adelphia Registration
Rights and Sale Agreement) being declared effective by the SEC or (ii) the
Transaction is effected pursuant to the Plan, then, in each such case, Seller
shall not Transfer (as defined in the Adelphia Registration Rights and Sale
Agreement) Purchase Shares prior to (A) in the case of clause (b)(i), the
earlier of the date on which the Purchase Shares have been registered under the
Exchange Act and two weeks following the effective date on which the Remainder
Plan is consummated and (B) in the case of clause (b)(ii), the earlier of
the date on which the Purchase Shares have been registered under the Exchange
Act and two weeks following the Closing; provided, however, that
the foregoing shall not limit the transfer of a portion of the Purchase Shares
to the United States pursuant to the SEC/DOJ Settlement.
(c) Seller
shall not transfer or distribute any of the Purchase Shares to the United
States pursuant to the SEC/DOJ Settlement prior to the time that Purchase
Shares are distributed to other stakeholders and claimants of the Debtors
pursuant to the Remainder Plan, unless the transferee is (in Buyer’s reasonable
determination) bound by the same restrictions (including underwriter lock-ups)
as those applicable to Seller under the Registration Rights and Sale Agreement.
Buyer and Seller agree (and Buyer shall cause Parent) to allow the transferee
to participate in any registration of Seller’s Purchase Shares on terms no less
favorable than those applicable to Seller.
Section 5.6 Commercially
Reasonable Efforts.
(a) Subject
to the Bankruptcy Code and any orders of the Bankruptcy Court, Seller and Buyer
shall, and Buyer shall cause Parent to, cooperate and use their respective
commercially reasonable efforts to fulfill as promptly as practicable the
conditions precedent to the other party’s obligations hereunder and shall use
their
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respective commercially reasonable
efforts to fulfill as promptly as practicable the conditions precedent to their
obligations hereunder to the extent they have the ability to control the
satisfaction of such obligations. Without limiting the generality of the
foregoing, Seller and Buyer shall, and Buyer shall cause Parent to, (i) make
all filings and submissions required by the U.S. Antitrust Laws and any other
Laws, and promptly file any additional information requested as soon as
practicable after receipt of such request therefor and promptly file any other
information that is necessary, proper or advisable to permit consummation of
the Transaction and the Exchange and (ii) use commercially reasonable
efforts to obtain and maintain all Seller Required Approvals and Buyer Required
Approvals in form and substance reasonably satisfactory to Buyer and Seller. In
connection with the foregoing, Seller and Buyer will, and Buyer will cause
Parent to, endeavor to consummate the Transaction without (or with minimal)
costs, conditions, limitations or restrictions associated with the grant of
such Seller Required Approvals and Buyer Required Approvals.
(b) Notwithstanding
anything to the contrary herein, nothing in this Agreement shall require Buyer
or Parent to agree to or to effect any divesture, hold separate or similar
agreement with respect to any business or Assets or agree to enter into, or
amend, or agree to amend, any Contracts or governmental authorizations or take
or refrain from taking any other action or conduct any business in any manner
if doing so would reasonably be expected, individually or in the aggregate, to
have (i) an adverse impact (other than a de
minimis adverse impact)on
TWX or any of its Affiliates (excluding Parent and its Subsidiaries) or any of
their respective businesses or Assets (excluding businesses and Assets of
Parent and its Subsidiaries) or (ii) an adverse impact that is material to
the Parent Business or the Transferred Assets or would materially constrain the
operations of Parent and its Subsidiaries or of the Transferred Assets; it being
understood that the incurrence of legal, accounting, investment banking and
other customary forms of transaction expenses and the commitment of reasonable
management time and effort shall not be considered an adverse impact for the
purpose of this clause (ii).
(c) No
later than 45 days following the date hereof, Buyer and Seller shall, and Buyer
shall cause Parent to, provide each other (or shall cause their respective
Subsidiaries to provide) with all necessary documentation to allow filing of
FCC Forms 394 with respect to the Franchises with respect to which a LFA
Approval is or may be required. Buyer and Seller shall, and Buyer shall cause
Parent to, use commercially reasonable efforts to cooperate with one another
and, no later than 60 days following the date hereof, file with the applicable
Government Entity FCC Forms 394 for each of the Franchises with respect to
which a LFA Approval is or may be required. Buyer and Seller shall, and Buyer
shall cause Parent to, cooperate and use their commercially reasonable efforts
to have Buyer enter into a substitute performance bond arrangement with respect
to those Assets of each Specified Business the transfer of which to Buyer would
require Buyer to enter into such a substitute bond arrangement, on
substantially the same terms as the substitute bond arrangement with respect to
such Assets in effect as of the date hereof. Notwithstanding anything to the
contrary herein, Seller shall not accept, agree to or accede to any
modifications or amendments to, or in connection with, or any conditions to the
transfer of, any Franchises that are not approved by Buyer in writing,
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such approval not to be
unreasonably withheld; provided, however, that if Seller affords
Buyer reasonable notice of, and opportunity to attend and participate in,
meetings or other discussions relating to LFA Approvals where modifications,
amendments or conditions are expected to be discussed or negotiated, Buyer
shall approve any such modifications, amendments or conditions that are
approved by Seller so long as such modifications, amendments or conditions are
commercially reasonable and are similar in nature, extent and impact (giving
due consideration to such factors as the relative size of the Franchise
involved, the proximity of other Franchises, the financial and operational
impact of the change and the precedential impact thereof) to modifications,
amendments or conditions agreed to by Parent or Buyer or Friendco in connection
with material acquisitions of cable assets effected since 2001. In addition, if
Buyer seeks any LFA Approval pursuant to this Transaction, Buyer shall agree to
any modifications, amendments or conditions that are commercially reasonable
and are similar in nature, extent and impact (giving due consideration to such
factors as the relative size of the Franchise involved, the proximity of other
Franchises, the financial and operational impact of the change and the
precedential impact thereof) to modifications, amendments or conditions agreed
to by Parent or Buyer or Friendco in connection with material acquisitions of
cable assets effected since 2001.
(d) Each
of the parties hereto agrees to execute and deliver such other documents,
certificates, agreements and other writings and to take such other commercially
reasonable actions as may be necessary or desirable in order to evidence,
consummate or implement expeditiously the transactions contemplated by this
Agreement and to vest in Buyer good and marketable title to the Transferred
Assets to the same extent as held by Seller and its Affiliates, free and clear
of all Encumbrances other than, in the case of Transferred Assets, Permitted
Encumbrances, and in the case of the Transferred Investments, Encumbrances
under the Investment Documents.
(e) Seller
and Buyer shall, and Buyer shall cause Parent to, cooperate with each other and
shall furnish to the other party all information reasonably necessary or
desirable in connection with making any filing under the HSR Act, and in
connection with resolving any investigation or other inquiry by any Government
Antitrust Entity with respect to the Transaction and the Exchange; provided,
however, that Buyer shall reimburse Seller for the reasonable
out-of-pocket costs, if any, incurred by Seller as a result of such cooperation
solely to the extent it relates to the consummation of the Exchange. Each of
the parties shall promptly inform the other party of any communication with,
and any proposed understanding, undertaking or agreement with, any Government
Entity regarding any such filings or any such transaction. Seller and Buyer
shall not, and Buyer shall cause Parent not to, participate in any meeting with
any Government Antitrust Entity in respect of any such filings, investigation
or other inquiry without giving the other party prior notice of, and the
opportunity to participate in, such meeting. The parties hereto will consult
and cooperate with one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with all meetings,
actions and proceedings under or relating to the HSR Act (including, with
respect to making a particular filing, by providing copies of all such
documents (other than those that will not be publicly available) to the non-filing
party and their advisors
103
prior to filing and, if requested,
giving due consideration to all reasonable additions, deletions or changes
suggested in connection therewith); provided, however, that in no
event shall Buyer or Seller be required to furnish, or Buyer be required to
cause Parent to furnish, any information that, based on advice of such party’s
counsel, would reasonably be expected to create any potential Liability under
applicable Laws, including U.S. Antitrust Laws, or would constitute a waiver of
any material legal privilege (provided, that in such latter event Buyer
and Seller shall use commercially reasonable efforts to cooperate to permit
disclosure of such information in a manner consistent with the preservation of
such legal privilege).
(f) In
furtherance and not in limitation of the foregoing, each of Buyer and Seller
agrees to make, and Buyer agrees to cause Parent to make, as promptly as
practicable, (i) an appropriate filing of a Notification and Report Form pursuant
to the HSR Act with respect to the Transaction and the Exchange (which filing
shall be made in any event within 20 Business Days of the date hereof), (ii) appropriate
filings with the FCC, and any state public service commissions having
jurisdiction over any Transferred Assets or any services provided by any
Specified Business or the Assets of or services provided by the Parent Business
with respect to the Transaction and the Exchange, and (iii) all other
necessary filings with other Government Entities relating to the Transaction
and the Exchange, and to use commercially reasonable efforts to cause the
expiration or termination of the applicable waiting periods under the HSR Act
and the receipt of the Seller Required Approvals and the Buyer Required
Approvals under such other Laws or from such authorities or third parties as
soon as practicable; provided, however, that Buyer shall
reimburse Seller for the reasonable out-of-pocket costs, if any, incurred by
Seller as a result of such cooperation solely to the extent it relates to the
consummation of the Exchange.
(g) Each
of Seller and Buyer shall, and Buyer shall cause Parent to, give (or shall
cause their respective Subsidiaries to give) any notices to third parties, and
use, and cause their respective Subsidiaries to use, commercially reasonable
efforts to obtain any third party (excluding Government Entities) consents
related to or required in connection with the Transaction and the Exchange that
are Seller Required Approvals or Buyer Required Approvals; provided, however,
that Buyer shall reimburse Seller for the reasonable out-of-pocket costs, if
any, incurred by Seller as a result of such cooperation solely to the extent it
relates to the consummation of the Exchange.
(h) Seller
shall, and shall cause its Affiliates to, take all actions as may be necessary
or desirable in order that, as of the Closing, all of the Assets (other than
any Equity Securities or other Excluded Assets) of the Tele-Media Entities and
each of their respective Subsidiaries shall constitute Transferred Assets.
(i) Notwithstanding
anything in this Agreement to the contrary, Buyer shall have the sole
responsibility for any filing, submission or other action (including, for the
avoidance of doubt, obtaining any required LFA Approval) that is necessary,
proper or advisable to permit the consummation of the Exchange (it being understood that Seller shall use its
commercially reasonable efforts to cooperate with Buyer with respect to any
action required to be taken by Buyer pursuant to this sentence; provided,
however, that
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Buyer shall reimburse Seller for
the reasonable out-of-pocket costs, if any, incurred by Seller as a result of
such cooperation solely to the extent it relates to the consummation of the
Exchange.
(j) After
the Closing, Buyer shall, in the Ordinary Course of Business of Parent, use its
commercially reasonable efforts to bill and collect from each Basic Subscriber
that is potentially a Qualified Customer any amounts due and payable in respect
of services delivered to such Basic Subscriber prior to the Closing.
Section 5.7 Tax
Matters.
(a) Proration
of Taxes. To the extent necessary to determine the liability for Taxes for
a portion of a taxable year or period that begins before and ends after the
Closing, the determination of the Taxes for the portion of the year or period
ending on, and the portion of the year or period beginning after, the Closing
shall be determined by assuming that the taxable year or period ended as of the
close of business on the Closing, except that those annual property taxes and
exemptions, allowances or deductions that are calculated on an annual basis
shall be prorated on a time basis. For the avoidance of doubt, (i) any
Taxes that are apportioned to the portion of a taxable period that ends on the
Closing pursuant to this Section 5.7(a) shall be Excluded Taxes and (ii) any
Taxes that are apportioned to the portion of a taxable period beginning after
the Closing pursuant to this Section 5.7(a) shall be Assumed Taxes.
(b) Tax
Returns. Buyer shall not file any amended Tax Returns with respect to the
Transferred Assets that include periods ending on or prior to the Closing
without Seller’s written consent, which shall not be unreasonably withheld or
delayed.
(c) Transfer
Taxes.
(i) To
the extent not otherwise exempt to the fullest extent permitted by section 1146(c) of
the Bankruptcy Code and except as otherwise provided in this Section 5.7(c)(i),
all federal, state, local or foreign or other excise, sales, use, value added,
transfer (including real property transfer or gains), stamp, documentary,
filing, recordation and other similar taxes and fees that may be imposed or
assessed as a result of the Transaction, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties (“Transfer Taxes”), shall, subject to the provisos to
Sections 5.7(c)(iii) and 5.7(c)(v), be borne by Buyer, except that,
with respect to the 363 Sale, if an exemption from Transfer Taxes under section
1146 of the Bankruptcy Code is not available but would more likely than not
have been available if the Transaction had been consummated under a chapter 11
plan of reorganization of Seller and its Affiliates, Seller shall pay all such
incremental Transfer Taxes payable with respect to the 363 Sale (such Transfer
Taxes, “Incremental Transfer Taxes”) (it being understood that Seller
shall bear the burden of proving that it is not the case that it is more likely
than not that section 1146 of the Bankruptcy Code would have exempted such
Transfer Taxes if the Transaction had been consummated under such plan of
reorganization).
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(ii) Any Tax Returns that must be filed in connection with
Transfer Taxes (“Transfer Tax Returns”) shall be prepared by Buyer and
Buyer shall prepare such Transfer Tax Returns in a manner consistent with the
allocation of the Aggregate Consideration pursuant to Section 5.7(d); provided,
however, that if Buyer and Seller do not jointly agree to a Purchase
Price Allocation Schedule as provided in Section 5.7(d) and
except as provided in Section 5.7(c)([iii]iv), any such Transfer Tax Return shall be
prepared by Buyer in good faith in a manner consistent with the purchase price
allocation of Buyer or Seller that Buyer and Seller, as the case may be, use
for Tax purposes, that results in the higher aggregate Transfer Tax liability
with respect to each applicable jurisdiction. The party filing any Transfer Tax
Return (or similar form claiming an applicable exemption from Transfer Taxes)
pursuant to this Section 5.7 shall furnish a copy of such Transfer Tax
Return (or similar form) to the other party.
(iii) (A)
Except as set forth in Section 5.7(c)(iv), (a) all Transfer Tax
Returns shall be filed by Buyer, (b) Buyer shall reasonably cooperate with
Seller to determine and agree upon the appropriate amount of Incremental
Transfer Taxes due in respect of the Transaction and, no later than 10 Business
Days prior to the expected Closing Date, Buyer shall use commercially
reasonable efforts to provide Seller with a written notice setting forth the
amount of Incremental Transfer Taxes, if any, that Buyer believes are due in
respect of the Transaction (the “Incremental Transfer Tax Return Notice”),
(c) no later than 5 Business Days thereafter, if Seller in good faith
believes the amount of Incremental Transfer Taxes due in respect of the
Transaction is less than the amount of Incremental Transfer Taxes indicated in
the Incremental Transfer Tax Return Notice, Seller shall deliver written notice
to Buyer setting forth Seller’s reasonable good faith belief as to the amount
of Incremental Transfer Taxes that are due in respect of the Transaction (an “Incremental
Transfer Tax Dispute Notice”), (d) on the Closing, (X) if Seller
has not delivered an Incremental Transfer Tax Dispute Notice, Seller shall pay
to Buyer the amount of Incremental Transfer Taxes indicated on the Incremental Transfer
Tax Return Notice and (Y) if Seller has delivered an Incremental Transfer
Tax Dispute Notice, Seller shall pay to Buyer the amount set forth on the
Incremental Transfer Tax Dispute Notice and the difference between the amount
set forth on the Incremental Transfer Tax Return Notice and the amount set
forth on the Incremental Transfer Tax Dispute Notice shall be deposited by
Seller in the Transfer Tax Escrow Account, (e) Buyer shall file Transfer
Tax Returns consistent with its own good faith determination of the appropriate
amount of Incremental Transfer Taxes due and shall be responsible for remitting
all amounts shown as due on such Transfer Tax Returns to the appropriate
Government Entity, and (f) all disagreements as to the amount of
Incremental Transfer Taxes due that pertain to valuation of assets transferred
and for which amounts have been deposited in the Transfer Tax Escrow Account
pursuant to Section 5.7(c)(iii)(A)(d) shall be resolved by the CPA
Firm. The CPA Firm shall determine the appropriate valuation and, based on such
determination, Buyer and Seller will instruct the Escrow Agent to distribute
amounts from the Transfer Tax Escrow Account to Buyer or Seller, as the case
may be, in accordance with such determination (it being understood that the
costs of the CPA Firm in connection with the resolution of a dispute under
clause (f) of this Section
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5.7(c)(iii)(A) shall be borne by Seller and shall be treated as
Incremental Transfer Taxes for purposes of this Agreement). Any dispute
regarding an amount of Incremental Transfer Taxes for which a resolution
procedure is not described in clause (f) of this Section 5.7(c)(iii)(A) shall
be resolved only by a final, nonappealable, and non-reviewable determination by
the relevant authority (“Final Transfer Tax Determination”) and funds in
the Transfer Tax Escrow Account shall be distributed only in accordance with
such Final Transfer Tax Determination.
(B) Notwithstanding
anything to the contrary in Section 5.7(c)(iii)(A), (a) if, prior to
the date on which the Seller is obligated to make payments to Buyer pursuant to
Section 5.7(c)(iii)(A)(d), the Bankruptcy Court has issued a ruling
providing for an exemption of Transfer Taxes under section 1146, Seller shall
not be obligated to pay any amounts to Buyer pursuant to Section 5.7(c)(iii)(A)(d) to
the extent such amounts represent Transfer Taxes that pursuant to such ruling
are not payable, but shall instead deposit in the Transfer Tax Escrow Account
such amounts as are identified as Incremental Transfer Taxes in the Incremental
Transfer Tax Return Notice and with respect to which the Bankruptcy Court
ruling providing for exemption of Transfer Taxes under section 1146 is
appealable or has been appealed, (b) to the extent that the Bankruptcy
Court has issued a ruling providing for an exemption of Transfer Taxes under
section 1146 and the Bankruptcy Court’s ruling is reversed on appeal by any
Final Determination, Incremental Transfer Taxes due under the appellate court’s
ruling shall be paid, first, from Transfer Tax Escrow Account available funds
and, second, Seller shall promptly pay to Buyer any amount by which such taxes
exceed such available funds, and (c) if the Bankruptcy Court issues a
ruling providing for an exemption from Transfer Taxes under section 1146 and
such ruling is issued after the Seller has made payments to Buyer under Section 5.7(c)(iii)(A)(d),
then to the extent such payments would have been deposited in the Transfer Tax
Escrow Account pursuant to Section 5.7(c)(iii)(B)(a) had the ruling been
issued before the payments were made, Buyer shall transfer to the Transfer Tax
Escrow Account any portion of such payments that it has not yet remitted to a
Governmental Entity under Section 5.7(c)(iii)(A)(e), and in the case of
any portion of such payments already remitted to a Governmental Entity, Buyer
shall seek to obtain a refund and shall transfer any such amounts refunded to
the Transfer Tax Escrow Account (it being understood that Seller shall
reimburse Buyer for any reasonable costs incurred by Buyer in seeking such
refund claim and that any such costs shall be treated as Incremental Transfer
Taxes for purposes of this Agreement). Amounts placed in the Transfer Tax
Escrow Account pursuant to clause (c) of Section 5.7(c)(iii)(B) shall
be distributed to Buyer or Seller in accordance with a Final Transfer Tax
Determination.
(C) Notwithstanding
anything to the contrary in Sections 5.7(c)(iii)(A) or (B), Seller shall
hold Buyer harmless for any Losses with respect to Incremental Transfer Taxes.
(iv) [(III) Except as provided in the following proviso, all
Transfer Tax Returns shall be filed by Buyer, and Buyer shall be responsible
for
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remitting all amounts shown as due on such
Transfer Tax Returns to the appropriate Government Entity; provided, however,
that, in]In
the case of any Transfer Tax Return in which Seller’s purchase price allocation
would result in a higher aggregate Transfer Tax liability than Buyer’s purchase
price allocation (w) Buyer shall prepare such Transfer Tax Return unless
Seller reasonably determines that the positions taken on such Transfer Tax
Return as prepared by Buyer would reasonably be expected to give rise to a
material risk of civil and/or criminal penalties (other than interest) if
challenged by the applicable Government Entity, in which case, Seller may
prepare such Transfer Tax Return, (x) Seller shall be responsible for
filing such Transfer Tax Return and for remitting all amounts shown as due
thereon to the appropriate Government Entity, (y) notwithstanding any
other provision of this Section 5.7(c) to the contrary, Buyer shall
pay to Seller an amount equal to the Transfer Tax liability that would have
resulted if such return had been prepared by Buyer (it being understood that,
for purposes of this clause (y), (A) the Transfer Tax Return that would
have been prepared by Buyer shall be determined by using (1) [the ]Buyer’s
purchase price allocation[,] and (2) Buyer’s interpretation of applicable
Tax Law as reflected in the Transfer Tax Return prepared by Buyer pursuant to
clause ([x) hereof]w) hereof and (B) Buyer shall have no obligation to pay
Seller any amount in respect of Incremental Transfer Taxes),
and (z) Seller shall have sole responsibility for the balance of the
Transfer Tax liability with respect to such Transfer Tax Return (including any
amount in respect of Incremental Transfer Taxes). Buyer and
Seller shall (and shall cause each of their respective Affiliates to) cooperate
in the timely completion and filing of all such Transfer Tax Returns,
and Buyer and Seller shall (and shall cause each of their respective Affiliates
to) execute such documents in connection with such filings as shall have been
required by Law or reasonably requested by the other party.
(v) [(IV)]Buyer
shall control the conduct of any audit, claim, contest or administrative or
judicial proceeding (collectively, “Audits”) relating to [such
]Transfer Taxes[,] subject to Seller’s right to make any statement or report to
any tax authority reflecting the purchase price allocation prepared by Seller; provided,
however, that Seller shall be entitled to make any such statement and/or
report only (A) to the extent Seller reasonably determines [is]it reasonably necessary to rebut any
presumption under applicable Tax Law that would otherwise deem Seller to have
agreed to and adopted the purchase price allocation prepared by Buyer in the
absence of such statement or report and (B) if such presumption could
reasonably be expected to result in an adverse effect on Seller other than a de
minimis adverse effect; provided, further, that with respect to any
Audit relating to a Transfer Tax Return with respect to Incremental Transfer
Taxes, Buyer (X) shall defend such Audit in good faith (it being
understood that reasonable expenses incurred by Buyer in connection with the
defense of any such Audit that are properly allocable to the portion of the
Audit relating to Incremental Transfer Taxes shall be borne by Seller and shall
be treated as Incremental Transfer Taxes for purposes of this Agreement), (Y) shall
consult with Seller in good faith in connection with the defense of such Audit,
including by providing Seller with all documents provided to Buyer by the
relevant Government Entities and all submissions by Buyer to the relevant
Government Entities, and (Z) shall not settle such Audit to the extent
relating to Incremental Transfer Taxes without Seller’s consent, which consent
shall not be unreasonably withheld or
108
delayed. If
Buyer or Seller receives any written notice of assessment or other claim from
any Government Entity with respect to Transfer Taxes for which the other party
may be liable pursuant to this Section 5.7(c), the notified party shall
notify the other party in writing of the receipt of such notice of assessment
or other claim promptly after the receipt thereof.
(vi) [(V)]Any
additional Transfer Taxes resulting from an adverse determination by a
Government Entity shall be borne by Buyer or Seller, as the case may be,
consistent with the provisions of Section 5.7(c)(i);
provided, however, that, so long as the adverse determination by the applicable
Government Entity does not relate directly to purchase price allocation, Seller
shall be responsible for any such additional Transfer Taxes to the extent that
such additional Transfer Taxes are attributable to the use of Seller’s purchase
price allocation rather than Buyer’s purchase price allocation. Seller shall not
be relieved of any liability for Incremental Transfer Taxes under this Section 5.7(c)(vi) by
reason of the fact that such Incremental Transfer Taxes were not set forth on
an Incremental Transfer Tax Return Notice.
(vii) [(VI)]Any
Transfer Taxes resulting from any subsequent increase in the Purchase Price
pursuant to this Agreement shall be borne in accordance with the provisions of
this Section 5.7(c).
(viii) [(VII)] Buyer
and Seller shall cooperate in good faith to minimize the amount of Transfer
Taxes that may be imposed or assessed as a result of the Transaction, including
pursuant to one or more restructuring transactions consummated pursuant to the
Plan[ prior to the Closing; provided, that Buyer and Seller conclude in
good faith that such restructuring would have a more likely than not
probability of prevailing if challenged by the applicable Government Entity.], JV Plan and/or
the 363 Sale.
(d) Determination
and Allocation of Purchase Price. Seller and Buyer undertake to act in good
faith to jointly agree to a schedule setting forth the allocation of the
Aggregate Consideration among the Transferred Assets (the “Purchase Price
Allocation Schedule”) for Tax purposes. If Seller and Buyer so agree within
180 days of the Closing Date, Seller and Buyer shall, and Seller and Buyer
shall cause each of their respective Affiliates, (i) to report the
federal, state, and local income and other Tax consequences of the Transaction
contemplated herein in a manner consistent with such Purchase Price Allocation
Schedule and (ii) not to take any position inconsistent therewith for any
Tax purposes (unless required by a change in applicable Tax Law or as a result
of a good faith resolution of a contest). If Seller and Buyer do not so agree
within 180 days of the Closing Date, each of Seller and Buyer may prepare their
own purchase price allocation and, for the avoidance of doubt and except as
provided in [Sections]Section 5.7(c)[(iii) and
5.7(c)(v),] each of Buyer and Seller will have no liability to the other for
any additional Taxes that may be imposed by any Government Entity as a result
of inconsistencies between the respective allocations of Buyer and Seller.
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(e) Employee
Withholding and Reporting Matters. With respect to those Transferred
Employees who are employed by Buyer within the same calendar year as the
Closing, Buyer shall, in accordance with and to the extent permitted pursuant
to Revenue Procedure 2004-53, 2004-34 I.R.B. 320, assume all
responsibility for preparing and filing Form W-2, Wage and Tax
Statement, Form 941, Employer’s Quarterly Federal Tax Return, Form W-4,
Employee’s Withholding Allowance Certificate and Form W-5, Earned
Income Credit Advance Payment Certificate. Seller and Buyer agree to comply
with the procedures described in Section 5 of the Revenue Procedure 2004-53.
Notwithstanding any provision of this Agreement, all Taxes required to have
been withheld by Seller and its Subsidiaries from their respective employees
and independent contractors with respect to any taxable periods, or portions
thereof, ending on or before the Closing shall be Excluded Liabilities and
shall not be treated as Assumed Liabilities.
(f) Consistent
Treatment. The parties intend that the Transaction shall constitute a
taxable transaction and, for the avoidance of doubt, the Transaction shall not
be governed by Sections 351 or 368(a) of the Code (or similar provisions
of state, local or foreign Tax law, as applicable). The parties agree to, and
to cause their respective Affiliates to, treat the Transaction in the foregoing
manner for all income Tax purposes (unless otherwise required by a change in
applicable income Tax law or as a result of a good faith resolution of a
contest).
(g) Notice
of Buyer Adverse Tax Event. If any change in Tax Law or Proposed Change in
Tax Law occurs and Buyer or Paul, Weiss, Rifkind, Wharton & Garrison
LLP (or such other counsel that Buyer selects to represent Buyer with respect
to the Transaction) believes that such change in Tax Law or such Proposed
Change in Tax Law has a reasonable possibility of constituting a Buyer Adverse
Tax Event as of the Closing Date, Buyer shall within ten Business Days of such
determination provide written notice to Seller describing the change in Tax Law
or the Proposed Change in Tax Law and a statement that such change in Tax Law
or Proposed Change in Tax Law may constitute a Buyer Adverse Tax Event as of
the Closing Date (a “Buyer Adverse Tax Event Notice”). Upon reasonable
request by Seller, Buyer will make its counsel reasonably available to Seller
to discuss why Buyer believes the described change in Tax Law or Proposed
Change in Tax Law has a possibility of constituting a Buyer Adverse Tax Event.
Section 5.8 Post-Closing
Obligations of each Specified Business to Certain Employees.
(a) Seller
shall provide to Buyer no later than 14 Business Days following the date
hereof, a copy of each employment agreement or other individual agreement
governing the terms and conditions of any Applicable Employee’s employment
entered into with any Applicable Employee and a schedule of each Applicable
Employee with his or her title, job location, employer, primary place of
residence, salary or wage rate, commission status, bonus opportunity, date of
hire, level or other job classification, full or part time status, “exempt” or “non-exempt”
status, whether such Applicable Employee is part of a collective bargaining
unit and regularly scheduled work shift, as applicable, and shall supplement
such schedule no later than 60
110
Business Days following the date
hereof, indicating for each Applicable Employee, such Applicable Employee’s
direct supervisor and most recent performance rating or evaluation. In addition,
no later than 55 Business Days prior to the Closing Date, Seller shall update
such schedule, including with respect to each Applicable Employee’s direct
supervisor and most recent performance rating or evaluation. No later than 40
Business Days prior to the Closing Date, Buyer shall make offers of employment
commencing on the Closing Date to all Applicable Employees, and such offers
shall be contingent upon (i) the Closing, (ii) such Employee being an
Applicable Employee on the Closing Date and (iii) such Applicable Employee’s
satisfaction of customary employment conditions applicable to all Parent
employees which customary employment conditions are set forth on Schedule
5.8(a)(i) of the Buyer Disclosure Schedule (itbeingunderstoodthat such conditions will not include the evaluation of prior
performance) (the “Background Check”); provided, however,
that Buyer shall have no obligation to extend an offer of employment to any
Employee who as of the date hereof or as of the Closing Date is identified by
job function, description or title or otherwise noted on Schedule 5.8(a)(ii) of
the Seller Disclosure Schedule. Buyer shall, and shall cause Parent to,
cooperate with Seller from and after the date hereof to communicate with
Applicable Employees other than those set forth on Schedule 5.8(a)(ii) of
the Seller Disclosure Schedule regarding the anticipated offers of employment
to be made by Buyer to such Applicable Employees hereunder. Offers of
employment required by this Section 5.8(a) shall be for a position of
similar or greater status, authority, duties and aggregate compensation
(excluding any equity-based compensation, severance, retention, sale, stay,
special bonus, emergence or other change in control payments or awards or any
similar compensation or award) as such Employee enjoys with Seller and/or its
Affiliates immediately prior to the Closing Date, that is within a 50-mile
radius from such Employee’s primary place of residence as of the Closing Date,
and with any such additional rights and benefits as are prescribed by this Section 5.8.
Consistent with and subject to the foregoing and the other terms of this
Agreement, Buyer shall have the right to establish the terms and conditions
under which such offers will be made. No later than two Business Days following
the date offers are required to be made hereunder, Buyer shall provide to
Seller a list of the Applicable Employees who do not satisfy the Background
Check, by job position or name and region, and as to whom Buyer as a result of
such Background Check failure has not made offers of employment pursuant to
this Section 5.8(a). The parties hereto shall cooperate with each other to
give effect to this Section 5.8(a) and neither Seller nor its
Affiliates shall take any actions that would interfere with the Applicable
Employees so offered employment from becoming employed by Buyer as of the
Closing Date. If any Employee, other than a Transferred Employee, becomes
entitled to any payments or benefits under any severance policy, plan,
agreement, arrangement or program which exists or arises or may be deemed to
exist or arise, under any applicable Law or otherwise, as a result of the
consummation of the Transaction or otherwise, Seller shall be liable for such
amounts, which Liability shall constitute an Excluded Liability except to the
extent Buyer does not comply with the requirement to offer employment on the
terms set forth in this Section 5.8(a).
(b) Beginning
on the Closing Date and ending no earlier than the first anniversary of the
Closing Date, Buyer shall, or shall cause Parent to, provide each Transferred
Employee, other than any Transferred Employee included in a collective
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bargaining unit covered by the
Collective Bargaining Agreements as in effect on the Closing Date (each, a “Union
Employee”) with, at Buyer’s sole discretion, either compensation and
employee benefits that are (i) no less favorable in the aggregate
(excluding any equity-based compensation, severance, retention, sale, stay,
special bonus, emergence or other change in control payments or awards or any
similar compensation or award) than the compensation and employee benefits
provided to each such Transferred Employee immediately prior to the Closing
Date or (ii) substantially comparable in the aggregate (excluding any
severance) to the compensation and employee benefits provided to similarly
situated employees of Parent; provided, that for purposes of any
equity-based compensation, such employees shall be deemed newly hired employees
of Parent. In addition, to the extent Parent maintains a tax-qualified defined
benefit pension plan, from and after the date each Transferred Employee
satisfies the applicable eligibility and service requirements of any such plan
as in effect on any date of determination, such Transferred Employee shall
participate in such plan to the same extent as similarly situated employees of
Parent. With respect to Union Employees, Buyer will retain any and all of the
rights and obligations it may have pursuant to applicable labor Law.
(c) Notwithstanding
Section 5.8(b), beginning on the Closing Date, Buyer shall, or shall cause
Parent to, for a period ending no earlier than the first anniversary of the
Closing Date, maintain a severance plan for the benefit of each Transferred
Employee, other than any Union Employee, that is no less favorable to
Transferred Employees than the Amended and Restated Adelphia Communications
Corporation Severance Plan effective September 21, 2004 (the “Seller
Severance Plan”) and which includes the same general terms and conditions regarding
eligibility and exclusion from eligibility for severance pay and benefits as
the Seller Severance Plan. It is intended that this Section 5.8(c) shall
not result in any duplication of benefits to any Transferred Employee.
(d) To
the extent (and only to the extent) set forth on Schedule 5.8(d) of
the Seller Disclosure Schedule, Buyer shall assume all Liabilities and
obligations to provide any severance pay and benefits to any Transferred
Employee whose employment is terminated following the Closing. Buyer shall
reimburse Seller for any severance costs incurred with respect to any Employee
who is not offered employment by Buyer pursuant to this Transaction in the
event Parent or any of its Subsidiaries hires such Employee within three months
after the Closing.
(e) For
purposes of this Agreement, (i) “Applicable Employees” means all
of the following:
(A) All persons who are active Employees on the Closing
Date, including Employees on vacation and Employees on a regularly scheduled
day off from work. Employees on temporary leave for purposes of jury or annual
two-week national service/military duty shall be deemed to be active
Employees;
(B) Employees who on the Closing Date are on nonmedical
leave of absence; provided, however, that no such Employee shall
be guaranteed reinstatement to active service if his return to employment is
contrary to the terms of his
112
leave, unless otherwise required by applicable Law (for purposes of the
foregoing, nonmedical leave of absence shall include maternity or paternity
leave, leave under the Family and Medical Leave Act of 1993, educational leave,
military leave with veteran’s reemployment rights under federal Law, or
personal leave, unless any of such is determined to be a medical leave); and
(C) Employees who on the Closing Date are on disability
or medical leave and for whom it has been 180 calendar days or less since their
last day of active employment; provided, however, that no such
Employee shall be guaranteed reinstatement to active service if he is incapable
of working in accordance with the policies, practices and procedures of Buyer;
and
(ii) “Transferred Employees” means those Applicable
Employees who accept offers of employment with Buyer.
(f) Seller
shall retain responsibility for and continue to pay all medical, life
insurance, disability and other welfare plan expenses and benefits for each
Transferred Employee with respect to claims incurred by such Transferred
Employee or his or her covered dependents prior to the Closing Date except to
the extent (and only to the extent) such liabilities are reflected in the
determination of the Closing Net Liabilities used in the determination of the
Final Adjustment Amount for the Specified Business in which such Transferred
Employee is employed. Buyer shall be responsible for all expenses and benefits
with respect to claims incurred by Transferred Employees or their covered
dependents on or after the Closing Date. For purposes of this paragraph, a
claim is deemed incurred: (i) in
the case of medical or dental benefits, when the services that are the subject
of the claim are performed, (ii) in the case of life insurance, when the
death occurs, (iii) in the case of long-term disability benefits,
when the Employee becomes disabled, and (iv) in the case of workers
compensation benefits, when the event giving rise to the benefits occurs.
(g) With
respect to any plan that is a “welfare benefit plan” (as defined in Section 3(1) of
ERISA), or any plan that would be a “welfare benefit plan” (as defined in Section 3(1) of
ERISA) if it were subject to ERISA, maintained by Parent, Buyer shall (i) provide
coverage for Transferred Employees under its medical, dental and health plans
as of the Closing Date in accordance with the terms of such plans, (ii) cause
there to be waived any pre-existing conditions, actively at work
requirements and waiting periods or other eligibility requirements to the
extent such conditions, requirements or waiting periods were satisfied by a
Transferred Employee under a corresponding Benefit Plan, and (iii) cause
such plans to honor any expenses incurred by the Transferred Employees and
their dependents or beneficiaries under similar plans of Seller and its
Affiliates during the portion of the calendar year in which the Closing Date
occurs for purposes of satisfying applicable deductible, co-insurance and
maximum out-of-pocket expenses.
(h) Transferred
Employees shall be given credit for purposes of eligibility and vesting and
other entitlement to benefits or rights, under each employee benefit plan of
Parent (each, a “Buyer Plan”) in which such Transferred Employees are or
become eligible to participate, for all service (including service with Seller
or any of its
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Affiliates) for which such
Transferred Employees were credited for such purposes under a corresponding
Benefit Plan of Seller prior to the Closing Date; provided, however,
that nothing in this Section 5.8(h) shall result in any duplication
of benefits.
(i) Except
as required by applicable Law, as of the Closing Date, the Transferred
Employees shall cease to accrue further benefits under the employee benefit
plans and arrangements maintained by Seller and its Affiliates. From and after
the Closing, Seller shall remain solely responsible for any and all Liabilities
in respect of the Employees, including the Transferred Employees, related to
the Benefit Plans, except as otherwise provided in this Section 5.8. None
of Buyer or any of its Affiliates shall assume or have transferred to them the
sponsorship of any of the Benefit Plans or any other benefit plans or
arrangements maintained by Seller or any of its Affiliates, including any
non-qualified deferred compensation or rabbi trust plans or arrangements,
pursuant to or in connection with the Transaction.
(j) Seller
shall take all actions necessary to fully vest the Transferred Employees in
their account balances under Seller’s tax-qualified 401(k) plan (“Seller’s
401(k) Plan”) effective as of the Closing Date. In accordance with the
terms of the applicable plan, each Transferred Employee shall be eligible to
participate in a Parent-sponsored defined contribution plan intended to qualify
under Sections 401(a) and 401(k) of the Code (“Buyer’s 401(k) Plan”).
Buyer shall take all actions reasonably necessary to permit beginning as soon
as reasonably practical following the Closing Date each Transferred Employee
who has received an eligible rollover distribution (as defined in Section 402(c)(4) of
the Code) from Seller’s 401(k) Plan to roll over the distribution, to an
account in Buyer’s 401(k) Plan.
(k) With
respect to any accrued but unused vacation time (including flexible time-off
and sick pay) to which any Transferred Employee is entitled pursuant to the
vacation policy applicable to such Transferred Employee immediately prior to
the Closing Date, Buyer shall, to the extent permitted by applicable Law,
assume the liability for such accrued vacation and allow such Transferred
Employee to use such accrued vacation to the extent such Transferred Employee
would have been entitled to such accrued vacation based on his level and years
of service under the vacation policy of Parent in effect as of the Closing Date
as if such Transferred Employee had been employed by Buyer during such
Transferred Employee’s employment with Seller; provided, however,
that if the Transferred Employee’s accrued vacation is greater than the amount
of vacation to which such Transferred Employee would have been entitled under
Parent’s vacation policy, Buyer shall pay to such Transferred Employee within
90 days of the Closing Date an amount in cash equal to the difference but only
to the extent of the amount reflected in the Closing Net Liabilities Amount
used in calculating the Final Adjustment Amount for the Specified Business in
which such Transferred Employee is employed. With respect to any sale bonuses
under the Sale Bonus Program, Seller shall be responsible for the payment to
all Employees of that portion of the bonus that is to be paid on the “First
Sale Bonus Payment
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Date” (as defined in the Sale Bonus
Program), which bonuses shall be paid prior to or on the Closing. Buyer shall
be responsible for the payment to Transferred Employees on a timely basis of
any sale bonuses under the Sale Bonus Program to be paid after the “First Sale
Bonus Payment Date” but only to the extent of the amount reflected in the
Closing Net Liabilities Amount used in calculating the Final Adjustment Amount
for the Specified Business in which such Transferred Employee is employed.
(l) Buyer
shall be responsible for providing or discharging any and all notifications,
benefits and liabilities to Transferred Employees and governmental authorities
required by WARN or by any other applicable Law relating to plant closings or
employee separations that are required (i) to be provided after the
Closing or (ii) with respect to any plant closing or mass layoff that
occurs within the 60-day period immediately following the Closing. Seller
agrees to cooperate in preparing and distributing any notices that Buyer may
desire to provide prior to the Closing. No later than five Business Days prior
to the Closing Date, Seller shall provide Buyer with a schedule setting forth
each Employee whose employment was terminated or is anticipated to be
terminated during the six month period prior to the Closing Date and the work
location of such Employee.
(m) Buyer
shall assume any liability under COBRA arising from the actions (or inactions)
of Buyer or its Affiliates with respect to the Transferred Employees after the
Closing Date. Seller shall retain all obligations with respect to continued
coverage under COBRA (and any similar state Law), Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder for all Employees, including Applicable Employees, who do not become
Transferred Employees. Notwithstanding the immediately preceding sentence, to
the extent required by Treasury Regulation Section 54.4980B-9,
Q&A-8(c), Buyer shall perform all obligations under COBRA and the
foregoing provisions of the Code and ERISA with respect to each employee of
Seller who is an “M&A qualified beneficiary” with respect to the
Transaction, as such term is defined by Treasury Regulation section 54.4980B-9,
Q&A-4.
(n) For
Employees who participate in Seller’s short term incentive bonus program,
including the Short-Term Incentive Plan, Sales Incentive Plan and Marketing
Incentive Plan, Seller shall be responsible for paying their respective annual
bonuses for the period from the January 1 immediately preceding the
Closing Date through the Closing (pro-rated for the partial year) and shall pay
such bonuses to such Employees no later than the Closing; and, solely with
respect to Transferred Employees who participated immediately prior to the
Closing Date in such Seller’s short term incentive bonus programs, Buyer shall
be responsible for paying respective annual bonuses for the period from the
Closing Date through the December 31 immediately following the Closing
Date pro-rated for the partial year.
(o) With
respect to any Transferred Employee who becomes employed by Friendco or any of
its Affiliates pursuant to the Exchange Agreement, references to any benefit
plans maintained by Buyer or Parent shall be deemed to be references to benefit
plans maintained by Friendco or its Affiliates and references to similarly
situated employees of Buyer shall be deemed to be references to similarly
situated employees of Friendco or its Affiliates.
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(p) The
parties hereto hereby acknowledge and agree that no provision of this Agreement
shall be construed to create any right to any compensation or benefits
whatsoever on the part of any Employee or other future, present or former
employee of Seller or any of its Affiliates. Nothing in this Section 5.8
or elsewhere in this Agreement shall be deemed to make any employee of the
parties or their respective Affiliates a third party beneficiary of this Section 5.8
or any rights relating hereto.
(q) The
parties hereto hereby acknowledge and agree that Buyer shall have no Liability
in respect of any award to any Employee, director, consultant, independent
contractor or other service provider of Seller or its Affiliates with respect
to any shares of Seller’s Equity Securities, whether existing on the date
hereof or arising in the future (“Stock Awards”), and that all
Liabilities related to such Stock Awards shall be Excluded Liabilities.
(r) Seller
agrees that, notwithstanding anything in this Agreement to the contrary, the
payments of awards under the Amended and Restated Adelphia Communications
Corporation Performance Retention Plan shall in no event be made in Equity
Securities of Buyer, Parent or any Affiliate of Parent and shall be satisfied
in full by Seller prior to or on the Closing.
Section 5.9 Ancillary
Agreements. At the Closing, Seller shall and shall cause each of its
Affiliates party to an unexecuted Ancillary Agreement to, execute and deliver
each unexecuted Ancillary Agreement to which it is a party, and Buyer shall
execute and deliver each of the unexecuted Ancillary Agreements to be executed by
it.
Section 5.10 Acquisition
Proposals. Except as otherwise provided in this Section 5.10, Seller
agrees that neither it nor any of its Subsidiaries nor any of their respective
directors, officers or employees shall, and that it shall direct its Subsidiaries
and its and its Subsidiaries’ agents and representatives and use its best
efforts to cause its and its Subsidiaries’ agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its Subsidiaries) not to, directly or indirectly, initiate, solicit or
encourage any inquiries or the making of any proposal or offer with respect to
a merger, reorganization (including an Alternate Plan), share exchange,
consolidation or similar transaction involving (directly or indirectly), or any
purchase (directly or though a proposed investment in Equity Securities, debt
securities or claims of creditors) of 10% or more of the Transferred Assets
Related to the Business or of the outstanding Equity Securities of Seller or any
of its Affiliates directly or indirectly owning Assets Related to the Business
(any such proposal or offer being hereinafter referred to as an “Acquisition
Proposal” and any such transaction, an “Acquisition”); provided,
however, that the foregoing shall not restrict Seller from renewing the “exit
financing” of the Debtors on substantially the same terms as in effect as of March 31,2005. Seller further agrees that neither it nor any of its Subsidiaries nor any
of their respective directors, officers or employees shall, and that it shall
direct its Subsidiaries and its and its Subsidiaries’ agents and
representatives and use its best efforts to cause its and its Subsidiaries’
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
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information
or data to or have any discussions with any Person relating to, an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal. Seller agrees that it will take the necessary steps to
promptly inform the Persons referred to in the first sentence of this Section 5.10
of the obligations undertaken in this Section 5.10 and to cause them to
cease immediately any current activities that are inconsistent with this Section 5.10.
Notwithstanding the foregoing, nothing contained in this Agreement shall
prevent Seller or its board of directors (the “Board”) from:
(a) (i) complying
with its disclosure obligations under Law or the Bankruptcy Code with regard to
an Acquisition Proposal, or (ii) prior to the commencement of the
Confirmation Hearing[,] on May 15, 2006, in response to an
unsolicited bona fide Acquisition Proposal, (A) (1) providing
information to (including discussing any due diligence issues, requests or
clarifications with) a Person with whom Seller executes a confidentiality
agreement on terms no less favorable to Seller than those contained in the
Seller Confidentiality Agreement (as in effect prior to amendment on the date
hereof), other than any restrictions on such Person’s ability to make or amend
an Acquisition Proposal and (2) following receipt of a bona fide
unsolicited Acquisition Proposal from such a Person, engaging in discussions
with such Person to the extent such discussions are confined to clarifying any
term of such Acquisition Proposal or (B) engaging in any negotiations or
discussions with any Person who has made such an Acquisition Proposal if and
only to the extent that in each such case referred to in clauses (A) and (B) above,
(1) the Board determines in good faith after consultation with outside
legal counsel that the directors of Seller should take such action in order to
comply with their fiduciary duties under applicable Law, (2) such
Acquisition Proposal involves the direct or indirect acquisition by one or more
third parties of at least 66-2/3% of (x) all Assets Related to the
Business or (y) the outstanding Equity Securities of Seller and (3) in
each such case referred to in clause (B) above, the Board determines in
good faith (after consultation with its financial and legal advisors) that such
Acquisition Proposal, if accepted, is reasonably likely to be consummated, taking
into account all legal, financial and regulatory aspects of the proposal and
the Person making the proposal, and if consummated, would result in a
transaction more favorable (taking into account, without limitation, financial
terms of any termination fee that may be payable pursuant to Section 8.5(b))
to Seller’s stakeholders from a financial point of view than the Transaction
(any such more favorable Acquisition Proposal being referred to in this
Agreement as a “Superior Proposal”). Seller or any of its Subsidiaries
shall notify Buyer promptly (but in no event later than 24 hours) after receipt
by Seller or any of its Subsidiaries (or any of their respective directors,
officers, employees or advisors) of any Acquisition Proposal, any indication
that a third party is considering making an Acquisition Proposal or any request
for information relating to the Transferred Assets, any Specified Business,
Seller or any of its Subsidiaries or for access to any Specified Business or
any of the Transferred Assets by any third party that may be considering
making, or has made, an Acquisition Proposal. Seller shall provide such notice
orally and in writing and shall identify the third party making, and the terms
and conditions of, any such Acquisition Proposal, indication or request. Seller
shall keep Buyer fully informed, on a current basis, of the status and details
of any such Acquisition Proposal, indication or request. Seller shall promptly
provide Buyer with any non-public information concerning Seller’s
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business, present or future
performance, financial condition or results of operations, provided to any
third party that was not previously provided to Buyer; and
(b) (i)
prior to the commencement of the Confirmation Hearing[,] on May 15,2006, engaging in any negotiations or discussions concerning
an Alternate Plan with the Committees, the stakeholders of Seller or its
Affiliates or their respective advisors (in each case (other than in the case
of Committees) with whom Seller enters into, or has entered into, a
confidentiality agreement on customary terms under the circumstances that
restricts such stakeholder (other than with respect to any other stakeholder
who is subject to a substantially similar confidentiality agreement or to the
Committees) from (x) disclosing any confidential information regarding
Seller and its Affiliates, Buyer and its Affiliates, or information regarding
an Alternate Plan, including the status thereof, and (y) making public
statements regarding any of the foregoing), but only to the extent that (A) the
Board determines in good faith after consultation with outside legal counsel
that the directors of Seller should take such action in order to comply with
their fiduciary duties under applicable Law and (B) the Board determines
in good faith (after consultation with its financial and legal advisors) that
such Alternate Plan, if pursued and assuming (for purposes of determining the
right to engage in negotiations or discussions pursuant to this Section 5.10(b),
but not for purposes of the definition of “Superior Alternate Plan”) the
support of Seller’s stakeholders therefor, is reasonably likely to be
consummated, taking into account all legal, financial and regulatory aspects of
the proposed Alternate Plan and, if consummated, would result in a transaction
more favorable (taking into account, without limitation, the financial terms of
any termination fee that may be paid pursuant to Section 8.5(b)) to the
stakeholders of Seller and its Affiliates from a financial point of view than
the Transaction (any such more favorable Alternate Plan being referred to in
this Agreement as a “Superior Alternate Plan”) or (ii) after entry
of a Confirmation Order satisfying the condition set forth in Section 6.2(g) (but
only for so long as such Confirmation Order is in effect), planning for an
Alternate Plan that involves the emergence of Debtors as standalone entities
with no greater than a 10% additional equity contribution (other than existing
Claims), including engaging in any negotiations or discussions concerning an
Alternate Plan with stakeholders of Seller or its Affiliates or their advisors,
preparing (but not filing) a disclosure statement with respect to such
Alternate Plan and preparing and negotiating any intercreditor agreements; provided,
however, that such Alternate Plan provides that it can only be confirmed
and effective if this Agreement is terminated in accordance with its terms and
such planning does not involve any action or omission that could reasonably be
expected to materially impair or materially delay the Transaction; provided,
further, that nothing in this Section 5.10(b) shall permit any
public statements or filings with the Bankruptcy Court or any other court by or
on behalf of Seller or its Affiliates. Seller shall notify Buyer of its
engagement in discussions concerning an Alternate Plan and shall keep Buyer
reasonably informed, on a current basis, of material developments that could
reasonably be expected to result in an Alternate Plan. For purposes of this
Agreement, an “Alternate Plan” is any plan under chapter 11 of the
Bankruptcy Code (other than the Plan or the JV Plan) or any
liquidation under chapter 7 of the Bankruptcy Code. Without limiting any other
obligation set forth in this Agreement, Seller shall, in connection with the
activities permitted under this Section 5.10(b), use commercially
reasonable efforts to enforce any confidentiality obligations of
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the Committees and any obligations
under the confidentiality agreements described in this Section 5.10(b).
Section 5.11 Additional
Financial Information.
(a) Seller
shall use commercially reasonable efforts, and shall cause its Affiliates to
use commercially reasonable efforts, to provide Buyer with financial statements
and related information (collectively, “Financial Information”)
sufficient to permit Parent or its Affiliates to fulfill [its]their
obligations to [include]provide financial disclosure relating to
each Specified Business and, if required, the Friendco Business and the MCE
Systems, on a timely basis in any report under the Exchange Act and,
if Buyer, Parent or any of Parent’s Affiliates undertakes an offering of
securities prior to the Closing, the Securities Act in any relevant offering document
(itbeingunderstoodthat the foregoing shall not
require Seller to file or furnish any periodic or current reports that are
required to be filed prior to the date hereof under the Exchange Act with the
SEC (which reports are addressed by Section 5.19)). Following the
Closing, Seller shall provide, as promptly as reasonably practicable, to Buyer
the following financial information (the “Offering Financial Information”),
if required by the SEC, in connection with any securities offering in
connection with this Transaction, the Adelphia Registration Rights and Sale Agreement
or the Friendco Registration Rights Agreement: (i) the Seller’s Quarterly
Report on Form 10-Q for the most recently completed fiscal quarter
as of the date of the Closing and Annual Report on Form 10-K for the
most recently completed fiscal year as of the date of the Closing and (ii)(A) if
such report, registration statement or any amendment or supplement to any of
the foregoing is filed or a registration statement for such offering becomes
effective, prior to November 12, 2006, unaudited interim financial
statements as of June 30, 2006 and for the period commencing January 1,2006 and ending on June 30, 2006 for each Specified Business (including
the MCE Systems) and a corresponding period in the 2005 fiscal year, (B) if
such report, registration statement or any amendment or supplement to any of
the foregoing is filed or a registration statement for such offering becomes
effective, on or after November 12, 2006 but prior to February 14,2007, unaudited interim financial statements as of September 30, 2006 and
for the period commencing January 1, 2006 and ending on September 30,2006 for each Specified Business (including the MCE Systems) and a
corresponding period in the 2005 fiscal year, (C) if such report,
registration statement or any amendment or supplement to any of the foregoing
is filed or a registration statement for such offering becomes effective, on or
after February 14, 2007 but prior to May 15, 2007, audited financial
statements as of and for the fiscal year ending December 31, 2006 for each
Specified Business (including the MCE Systems), (D) unaudited financial
information for each Specified Business (including the MCE Systems) with
respect to the period beginning on the day after the most recently completed
fiscal quarter as of the date of the Closing and ending on the date of the
Closing, (E) the financial statements and related information required by
clauses (ii)(A), (B), (C) and (D) of this Section 5.11(a) for
each Specified Business (as defined in the Friendco Purchase Agreement) and (F) to
the extent able to be produced through the use of commercially reasonable
efforts, any other financial statements and related information that is
required by the SEC or the rules of the
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stock exchange or automated quotation system on which the Parent Class A
Common Stock is to be listed with respect to any period ending on or prior to
the Closing Date; provided, that in no event shall Seller be required to
provide Offering Financial Information with respect to any Specified Business
or the MCE Systems to the extent (i) such Offering Financial Information
is in respect of any time following the Closing or (ii) the SEC permits
the provision of Offering Financial Information with respect to Seller as a
whole instead. If some
or all of the Financial Information is included in or incorporated by reference
into a prospectus for an offering of securities by Parent or any of Parent’s
Subsidiaries prior to the Closing, Seller shall, and shall cause its Affiliates
to, use commercially reasonable efforts to cause the independent auditors of
Seller to provide customary assistance to Buyer, Parent or such Subsidiary and
its underwriters in connection with such financing, including the provision of
consent and comfort letters addressed to the [SEC]Parent, comfort
letters addressed to the underwriters, participation in due diligence matters
with respect to such offering and assistance in responding to comments or
questions from the SEC with respect to the Financial Information. Buyer shall
reimburse Seller for the reasonable costs and expenses incurred by Seller
pursuant to this Section 5.11(a), including reasonable out-of-pocket costs
and any incremental costs and expenses necessary to comply with this Section 5.11(a) (including
all necessary incentive compensation) (unless and to the extent compliance with
this Section 5.11(a) is waived by Buyer prior to the incurrence of
such costs and expenses). Seller shall give Buyer reasonable advance notice of
the type and the amount of such costs and expenses prior to the incurrence
thereof.
(b) As
soon as reasonably practicable (and, in any event, prior to the Closing),
Seller shall, and shall cause its Affiliates to, use commercially reasonable
efforts, to provide Buyer with a copy of (i) the consolidated audited
balance sheets and audited statements of income, stockholders equity and cash
flows for each Specified Business reflecting the allocation of Shared Assets
and Liabilities pursuant to the Designated Allocation and Section 2.3
(assuming, with respect to any period prior to January 1, 2004, the
exclusion of the MCE Systems and the MCE Systems (as defined in the Friendco
Purchase Agreement) from each such Specified Business), at and for the fiscal
years ended December 31, 2002 (unless statements at and for the fiscal
year ended December 31, 2005 are provided as set forth below), December 31,2003, December 31, 2004, and, if the Closing shall not have occurred on or
prior to March 31, 2006 (or if such statements are otherwise available) December 31,2005 (the “Derivative Audited Financial Statements”), (ii) the
consolidated audited balance sheets and audited statements of income,
stockholders’ equity and cash flows for Seller and its Affiliates for the
fiscal years ended December 31, 2004, and, if the Closing shall not have
occurred on or prior to March 31, 2006 (or if such statements are
otherwise available), December 31, 2005 (the “Seller Audited Financial
Statements”), and (iii) the unaudited balance sheets and unaudited
statements of income, stockholders’ equity and cash flows for each MCE System
for the fiscal years ended December 31, 2002 (unless the Derivative
Audited Financial Statements include
consolidated audited balance sheets and audited statements of income,
stockholders equity and cash flows for each Specified Business for the fiscal
year ended December 31, 2005 are provided as set forth above), and December 31,2003 (the “MCE Financial Statements” and, together with the Derivative
Audited Financial Statements and the Seller Audited Financial Statements, the “Additional
Financial
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Statements”); provided, that Buyer shall reimburse
Seller for the reasonable costs and expenses incurred by Seller in connection
with the preparation of the Derivative Audited Financial Statements and the MCE
Financial Statements, including reasonable out-of-pocket costs and any
incremental costs and expenses necessary to comply with this Section 5.11(b) (including
all necessary incentive compensation). Seller shall give Buyer reasonable
advance notice of the type and the amount of such costs and expenses prior to
the incurrence thereof.
(c) Buyer
shall use its commercially reasonable efforts to obtain relief from the staff
of the SEC from Parent’s obligations to include financial statements with
respect to periods ending on or prior to December 31, 2002 required by Section 5.11(a) or
Section 5.11(b) in Parent’s filings under the Securities Act or
Exchange Act. Seller shall cooperate with Buyer in respect of the obtaining of
any such relief.
Section 5.12 Post-Closing
Consents.
(a) Subsequent
to the Closing, and subject to Section 2.11, Seller shall and shall cause
its Affiliates to continue to use commercially reasonable efforts to obtain in
writing as promptly as possible any consent, authorization or approval
necessary or commercially advisable in connection with the Transaction which
was not obtained on or before the Closing in form and substance reasonably
satisfactory to Buyer.
(b) Without
limiting Section 5.12(a), in the event that a Closing under this Agreement
occurs without the receipt of all LFA Approvals, Buyer and Seller shall, and
Buyer shall cause Parent to, act in good faith to obtain any remaining LFA
Approvals following the Closing. Until such time as all LFA Approvals have been
obtained, Buyer covenants and agrees to use commercially reasonable efforts to
satisfy all obligations of Seller or any of its Affiliates arising after the
Closing under each Franchise agreement corresponding to a LFA Approval that has
not been obtained. Buyer and Seller agree to enter into such arrangements as
are reasonably necessary to cause Seller not to be in breach under each such
Franchise agreement and to permit Buyer to receive the economic benefits of
each such Franchise agreement.
(c) Buyer
and Seller agree, assuming as set forth in Section 5.12(b) that all
or substantially all of the economic benefits relating to a remaining Franchise
inure to Buyer, (i) that any remaining Franchises described in Section 5.12(b) shall
be treated for all income Tax purposes as Assets of Buyer as of the Closing and
(ii) not to take, and to prevent any of their respective Affiliates from
taking, any position inconsistent with such treatment for any income Tax
purposes (unless required by a change in applicable income Tax Law or a good
faith resolution of a contest).
Section 5.13 Bankruptcy
Proceedings.
(a) Seller
shall, as soon as reasonably practicable after the date hereof, but no later
than 45 days hereafter, file with the Bankruptcy Court (i) a Disclosure
Statement with respect to the Plan intended to meet the requirements of section
1125(b) of the Bankruptcy Code and this Section 5.13 (as amended from
time to time in
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accordance with this Agreement, the
“Disclosure Statement”), (ii) a motion to approve, among other
things, the Disclosure Statement (the “Disclosure Statement Motion”),
and (iii) the Plan. Seller shall, and shall cause each of its Affiliates
to, commence appropriate proceedings before the Bankruptcy Court and otherwise
use commercially reasonable efforts to obtain approval of the Disclosure
Statement and the Plan (except to the extent Seller is pursuing or has consummated
the 363 Sale and the JV Plan) as expeditiously as possible and, after May 19,2006 and prior to delivery of the Reversion Notice, to obtain approval of the
363 Sale, the JV Plan and any required disclosure statement for the JV Plan and
entry of the 363 Order, in each case, as expeditiously as
possible. Seller shall, and shall cause its Affiliates to, provide in the
Disclosure Statement a range of values determined by Seller after consultation
with Buyer; provided, that the midpoint of such range shall equal the
Aggregate Value of the Purchase Shares; provided, however, that,
based on changes, events or circumstances first arising or occurring following
the date hereof, Seller may, after consultation with Buyer and its counsel,
change the midpoint and the range in order that the statements contained in the
Disclosure Statement in respect of the value of the Purchase Shares would not
be misleading or result in a violation of any applicable Law by Seller; provided,
further, that any such change shall be disregarded for purposes of this
Agreement, including the amount of the Aggregate Value of the Purchase Shares
or Per Share Value of the Purchase Shares. The Plan, any and all exhibits and
attachments to the Plan, the Disclosure Statement, and the Disclosure Statement
Motion,
the 363 Motion and the JV Plan, and any and all exhibits and attachments to the
JV Plan, any required disclosure statement for the JV Plan, and
the orders approving the same (including the [Confirmation]Transaction
Order), and any amendment or supplement to any of the foregoing, (A) to
the extent affecting the terms of the Transaction, the Transferred Assets, the
Assumed Liabilities, Parent or its Affiliates (in the case of Parent or its
Affiliates, only to the extent related to the Transaction or an interest in the
Transferred Joint Venture Parents (other than with respect to Plan or JV Plan
distribution matters) and not in their capacity as creditors or, with respect
to Plan or
JV Plan distribution matters, equityholders), shall be, except in the
case of the 363 Motion and the 363 Order, in all material
respects reasonably acceptable and, in the case of the 363 Motion and the 363 Order,
in all respects reasonably acceptable, in form and substance
to, and shall not be filed until consented to by, Buyer, which consent shall
not be unreasonably withheld[, (B)]; (B) without limiting clause (A) with
respect to the 363 Motion and the 363 Order, shall not
otherwise contain any provision (including any provision relating to the
allocation of distributable proceeds among Seller’s stakeholders), or otherwise
have an effect, that would, individually or in the aggregate, reasonably be
expected to materially impair or materially delay the Transaction; itbeingunderstoodthat any allocation of distributable proceeds that
does not violate the absolute priority rule or any proposed waiver of the
absolute priority rule as may be contemplated by the Plan that is reasonably
expected to be consented to by the affected classes shall not be deemed to
materially impair or materially delay the Transaction, (C) shall not
contain any provision providing for an Alternate Plan, including the so-called “toggle
plan”, (D) shall not treat Buyer or its Affiliates, in their capacities as
creditors or equityholders, in a discriminatory manner as compared to similarly
classified stakeholdersand (E) without
limiting the generality of the foregoing, in the case of the [Confirmation]Transaction
Order, shall contain the
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finding that Buyer is a good faith
purchaser of the Transferred Assets pursuant to section 363(m) of the
Bankruptcy Code unless Buyer’s actions which have been determined by the
Bankruptcy Court to have not been in good faith preclude such a finding. Buyer
shall refrain from taking any actions in connection herewith that are not in
good faith (as determined by the Bankruptcy Court) and that would preclude a
finding that Buyer is a good faith purchaser of the Transferred Assets pursuant
to section 363(m) of the Bankruptcy Code. Seller shall provide Buyer and
its counsel with copies of all material motions, applications, supporting
papers and notices prepared by Seller (including forms of orders and notices to
interested parties) relating in any way to the Disclosure Statement, the Plan, the 363 Sale,
the JV Plan, any required disclosure statement for the JV Plan
or the Transaction prior to the filing of such documents and shall provide
Buyer, to the extent practicable, with a reasonable opportunity to review and
comment on same. Seller shall consult with Buyer prior to taking any action in
or with respect to the Reorganization Case that could reasonably be expected,
individually or in the aggregate, to (x) be inconsistent with this
Agreement or the Transaction, (y) materially impair or materially delay
the Transaction or (z) relate to any material information provided by
Buyer for inclusion in the Disclosure Statement or any required disclosure statement for
the JV Plan or have an adverse effect on the Transaction, the
Transferred Assets, the Assumed Liabilities, Parent or its Affiliates (in the
case of Parent or its Affiliates, only to the extent related to the Transaction
or an interest in the Transferred Joint Venture Parents (other than with
respect to Plan or JV Plan distribution matters) and not in their
capacity as creditors or, with respect to Plan or JV Plan
distribution matters, equityholders). Buyer shall provide Seller with all
information concerning Buyer, Parent and its Controlled Affiliates as is
required or reasonably advisable to be included in the Disclosure Statement or anyrequired
disclosure statement for the JV Plan and is requested by Seller,
including (to the extent so reasonably advisable) all information that would be
required to be set forth in a registration statement on Form S-1
under the Securities Act. Any information delivered by Buyer or Seller for
inclusion in the Disclosure Statement or any required disclosure statement for
the JV Plan will be intended to satisfy the requirements of
section 1125(a) of the Bankruptcy Code.
(b) No
later than 70 days prior to the Confirmation Hearing, Seller shall deliver to
Buyer a true and complete list of all Contracts Related to each Specified
Business (other than Programming Agreements but including retransmission
consent agreements) entered into prior to such seventieth day (provided,
that between such seventieth day and the Confirmation Hearing, Seller shall
promptly update such list to reflect Contracts Related to each Specified
Business (other than Programming Agreements but including retransmission
consent agreements) entered into during such period) which shall include the
following, each of which must be satisfactory in form and substance to Buyer in
its reasonable discretion: (i) a
list of Contracts (other than Programming Agreements but including
retransmission consent agreements) which Seller or any Affiliate has rejected
pursuant to an order of the Bankruptcy Court (the “Rejected Contracts”);
(ii) a list of Contracts (other than Programming Agreements but including
retransmission consent agreements) which Seller or any Affiliate has assumed
pursuant to an order of the Bankruptcy Court; (iii) with respect to each
such Contract that is not a Rejected Contract, (A) Seller’s good faith
estimate of the Cure Costs in respect of such Contract, (B) Seller’s
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good faith estimate of the
Rejection Claims in respect of such Contract and (C) whether such Contract
was entered into on or following the Petition Date. No later than 40 days prior
to the Confirmation Hearing, Buyer shall provide Seller with a list of
Contracts to be assumed, if applicable, by Seller or any of its Affiliates and
assigned by Seller or any of its Affiliates to Buyer with respect to each
Specified Business (as further identified by Buyer pursuant to the provisions
of this Section 5.13(b), the “Assigned Contracts”). As promptly as
practicable following the determination of the Assigned Contracts by Buyer and
in any event no later than 20 days prior to the Confirmation Hearing, Seller or
its Affiliates, as the case may be, shall commence appropriate proceedings
before the Bankruptcy Court and otherwise take all necessary actions in order
to determine Cure Costs with respect to any Assigned Contract entered into
prior to the Petition Date. Notwithstanding the foregoing, prior to the
Closing, Buyer may identify (x) any Assigned Contract as one that Buyer no
longer desires to have assigned to it and such Contract shall for all purposes
of this Agreement, including Section 5.13(c), and any Ancillary Agreement
be deemed not to be an Assigned Contract and (y) any Contract entered into
by Seller of any of its Affiliates following entry of the [Confirmation]Transaction
Order that is Related to any Specified Business as an Assigned Contract and
such Contract shall for all purposes of this Agreement be deemed to be an
Assigned Contract. At the direction of Buyer, Seller shall, or shall cause its
Affiliates to, as the case may be, take all necessary actions and, if
necessary, promptly commence appropriate proceedings before the Bankruptcy
Court in order to effect the assumption of any Assigned Contract by Seller or
any of its Affiliates and the assignment of such Contract to Buyer at the
Closing pursuant to the Plan or the 363 Order (and/or an order pursuant to section 365 of
the Bankruptcy Code authorizing the assumption and, if applicable, assignment
of the Assigned Contracts). Following the Closing, Seller
shall not, and shall cause each of its Affiliates not to, amend, modify,
terminate or abrogate any Assigned Contract. Seller shall, and shall cause each
of its Affiliates to, take all actions such that each OCB Contract that is not
an Assigned Contract shall be terminated or rejected as of the Closing.
(c) Seller
shall use its commercially reasonable efforts to make available to Buyer as
promptly as practicable after the date hereof (or, in the case of Contracts
entered into after the date hereof, as promptly thereafter as practicable) true
and complete copies of each of the Contracts Related to each Specified Business
(other than Programming Agreements but including retransmission consent
agreements) and of each of the Contracts listed, or required to be listed, in Schedule
3.15(b) of the Seller Disclosure Schedule, and true and complete
summaries of the terms of any such oral Contracts; itbeingunderstoodthat, in any event, such copies and summaries shall be made available in
respect of the Contracts listed on the list delivered pursuant to the first
sentence of Section 5.13(b) no later than 70 days prior to the
Confirmation Hearing.
(d) Other
than the Assumed Cure Costs, Seller shall be liable for all Cure Costs, and
Buyer shall have no Liability to any Seller Indemnified Party, the estate of Seller
or any of its Affiliates or to any non-debtor party to any Contract in
connection therewith; provided, however, that if the amount of
the Cure Costs in respect of any Assigned Contract that is not an OCB Contract
is greater than the amount that would be paid to the non-debtor party to
such Contract on account of a Rejection Claim in respect
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of such Contract, taking into
consideration the likely recovery on account of such Rejection Claim under [the]a chapter 11 plan
of Seller and/or its Affiliates, including a Remainder Plan
(as Seller and Buyer mutually agree, or, in the absence of such agreement, as
may be determined by the Bankruptcy Court), then such excess, but only such
excess, shall be deemed to constitute an Assumed Cure Cost. Seller shall also
be liable for all Claims, including Rejection Claims, in respect of any
Contract that is not an Assigned Contract, and Buyer shall have no Liability to
any Seller Indemnified Party, the estate of Seller or any of its Affiliates or
to any non-debtor party to any such Contract in connection therewith; provided,
however, that if the amount that would be paid to the non-debtor party
to an OCB Contract that is not an Assigned Contract on account of a Rejection
Claim in respect of such OCB Contract, taking into consideration the likely
recovery on account of such Rejection Claim under [the]a chapter 11 plan of Seller and/or its
Affiliates, including a Remainder Plan, is greater than the
Cure Costs with respect to such OCB Contract (in either case as Seller and Buyer
mutually agree, or, in the absence of such agreement, as may be determined by
the Bankruptcy Court), then, subject to such OCB Contract having been made
available to Buyer for at least 70 days prior to the Confirmation Hearing (or,
in the case of Contracts entered into after such seventieth day, as promptly
thereafter as practicable), such excess, but only such excess, shall constitute
an Assumed Liability. Subject to approval of the Bankruptcy Court (which
approval Seller shall use commercially reasonable efforts to obtain), Buyer (or
its designee) shall be entitled to assume and maintain control, on behalf of
Seller and any of its Affiliates, of the litigation and settlement of any
dispute over any Assumed Cure Costs with respect to any Franchise or, in
respect of any OCB Contract, any Rejection Claim that is an Assumed Liability. Seller
shall not, and shall cause each of its Affiliates not to, without the prior
written consent of Buyer (not to be unreasonably withheld), settle, compromise
or offer to settle or compromise any Liability in respect of (i) Cure
Costs under such Assigned Contract that is not an OCB Contract or under any
Franchise unless Seller shall have assumed all Liabilities in respect thereof
and shall have agreed to release Buyer from all Liabilities in respect of any
and all Cure Costs under such Assigned Contract or such Franchise or (ii) any
Rejection Claim in respect of any OCB Contract unless Seller shall have assumed
all Liabilities in respect thereof and shall have agreed to release Buyer from
all Liabilities in respect of any and all Rejection Claims caused by or arising
out of any such settlement or compromise and Seller shall consult with and, in
each case, provide Buyer a meaningful opportunity to participate in any such litigation
or settlement.
(e) Any
motion, application or other court document filed with, and the proposed orders
submitted to, the Bankruptcy Court seeking authorization to assume and assign
or reject or terminate any Contracts Relating to any Specified Business or the
Business shall be provided to Buyer in advance of filing (with a reasonable
opportunity to review and comment on same) and shall be (i) to the extent relating to the
363 Motion, the 363 Order or the 363 Sale, in form and substance reasonably
satisfactory to Buyer in all respects and (ii) in all other cases,
in form and substance reasonably satisfactory to Buyer in all material respects.
On or prior to the Closing, Seller shall, and shall cause its Affiliates to,
cure any and all defaults and breaches under and satisfy (or with respect to
any Assumed Liability or obligation that cannot be rendered non-contingent and
liquidated prior to the Closing Date, make effective provision satisfactory
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to Buyer and the Bankruptcy Court
for satisfaction from funds of Seller) any Liability (other than as to Assumed
Cure Costs) arising from or relating to pre-Closing periods under the Assigned
Contracts so that such Contracts may be assumed by Seller or its Affiliates and
assigned to Buyer in accordance with the provisions of section 365 of the
Bankruptcy Code and this Agreement. On or prior to the Closing, Seller shall,
and shall cause its Affiliates to, pay or make adequate reserve for all Cure
Costs other than the Assumed Cure Costs.
(f) Seller
shall, and shall cause its Affiliates to, and Buyer shall, and shall cause
Parent to, each use commercially reasonable efforts, and cooperate, assist and
consult with each other, as promptly as practicable, to secure approval of the
Disclosure Statement, confirmation of the Plan (except to the extent Seller is pursuing
or has consummated the 363 Sale) and consummation of the [transactions
contemplated by the Plan and this Agreement. Neither the Plan nor the
Disclosure Statement nor]Transaction and, after May 19, 2006 and prior to the
delivery of the Reversion Notice, entry of the 363 Order, approval of any
required disclosure statement for the JV Plan and confirmation of the JV Plan. None
of the Plan, the 363 Motion, the 363 Order, the JV Plan, the Disclosure Statement,
any required disclosure statement for the JV Plan or any
other material document relating to the transactions contemplated hereby shall
be amended, modified, supplemented, withdrawn or revoked (i) if such
amendment, modification, supplement, withdrawal or revocation (A) relates
to the 363 Motion or the 363 Order or (B) affects the
terms of the Transaction, the Transferred Assets, the Assumed Liabilities,
Parent or its Affiliates (in the case of Parent or its Affiliates, only to the
extent related to the Transaction or an interest in the Transferred Joint
Venture Parents (other than with respect to Plan or JV Plan
distribution matters) and not in their capacity as creditors or, with respect
to Plan or
JV Plan distribution matters, equityholders), without the
consent of Buyer (provided, that such consent shall not be unreasonably
withheld) or (ii) without limiting clause (i)(A), if such
amendment, modification, supplement, withdrawal or revocation would contain or
alter any provision (including as to the allocation of distributable proceeds
among Seller’s stakeholders), that would, individually or in the aggregate,
reasonably be expected to materially impair or materially delay the Transaction.
For the avoidance of doubt, the parties hereto acknowledge and agree that it
would not be unreasonable for Buyer to decline to consent to any Plan or JV Plan
modification which would require the payment of additional consideration by
Buyer under the Plan or JV
Plan or which would reduce or impair the Transferred
Assets or increase the Assumed Liabilities.
(g) If
an order, judgment or ruling of a court of competent jurisdiction in the
Reorganization Case is entered denying entry of (or vacating), or that is
inconsistent with the entry of, a [Confirmation]Transaction Order
satisfying the condition set forth in Section 6.2(g), Seller and Buyer
will cooperate and otherwise use commercially reasonable efforts to prosecute
diligently the entry of a [Confirmation]Transaction Order
satisfying the condition set forth in Section 6.2(g). If the [Confirmation]Transaction
Order or any other orders of the Bankruptcy Court relating to this Agreement,
the Disclosure Statement or the disclosure statement for the JV
Plan, the solicitation of acceptances of the Plan or the JV Plan, confirmation
of the Plan
or the JV Plan, the 363 Motion, the 363 Order or the Remainder
Plan shall be
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appealed by any party (or a
petition for certiorari or motion for reconsideration, amendment,
clarification, modification, vacation, stay, rehearing or reargument shall be
filed with respect to any such order), Seller and Buyer will cooperate in
taking such steps to prosecute diligently such appeal, petition or motion, each
of Seller and Buyer shall use commercially reasonable efforts to obtain an
expedited resolution of any such appeal, petition or motion and any expenses
incurred by Seller in connection therewith shall be borne by Seller.
(h) Seller
shall either (i) (A) cause the Subsidiaries of Seller listed on Schedule
5.13(h) of the Seller Disclosure Schedule or any other non-debtor
Subsidiary of Seller that acquires Assets Related to the Acquired Business (the
“Non-Debtor Subsidiaries”) to file a petition for relief under chapter
11 of the Bankruptcy Code (the “Additional Reorganization Case”), (B) take
all steps reasonably necessary to obtain approval by the Bankruptcy Court of
the Transaction as it relates to the Non-Debtor Subsidiaries and (C) obtain
an Additional Discharge for the Non-Debtor Subsidiaries, in each case as
expeditiously as possible under the Bankruptcy Code and the Bankruptcy Rules,
and in any event prior to the Closing, or (ii) subject to the prior
approval of the Bankruptcy Court, cause each Non-Debtor Subsidiary to transfer
any Assets of such Non-Debtor Subsidiary to a Debtor in exchange for payment of
adequate consideration (provided, that such transfer shall be reasonably
satisfactory to Buyer in all material respects and shall render such Assets
subject to the Discharge) (such transfer, a “Non-Debtor Transfer”). Seller
shall, and shall cause each Non-Debtor Subsidiary to, (x) provide Buyer
and its counsel with copies of all material motions, applications, supporting
papers and notices prepared by Seller or such Non-Debtor Subsidiary (including
forms of orders and notices to interested parties) relating in any way to an
Additional Reorganization Case or Non-Debtor Transfer prior to the filing of
such documents and (y) provide Buyer, to the extent practicable, with a
reasonable opportunity to review and comment on same. Seller shall, and shall
cause each Non-Debtor Subsidiary to, consult with Buyer prior to taking any
action in or with respect to any Additional Reorganization Case or Non-Debtor
Transfer. For purposes of Sections 2.1 and 2.3 (including any related
definitions), unless otherwise directed in writing by Buyer (and only to the
extent set forth in such writing), each Non-Debtor Subsidiary shall only be
considered an Affiliate of Seller if and only to the extent such Non-Debtor
Subsidiary shall have performed the actions and satisfied the requirements set
forth in clause (i) or (ii) of this Section 5.13(h).
(i) Seller
shall, and shall cause each of its Affiliates to, use commercially reasonable
efforts to maintain the exclusive periods pursuant to section 1121(d) of
the Bankruptcy Code during which the Debtors may file a plan or plans of
reorganization and solicit acceptances thereof.
(j) Any
Remainder Plan, any and all exhibits and attachments to any Remainder Plan, and
any amendment or supplement to any Remainder Plan, (i) to the extent
affecting the terms of the Transaction (including any Transfer (as defined in
the Adelphia Registration Rights and Sale Agreement) of Purchase Shares), the
Transferred Assets, the Assumed Liabilities, Parent or its Affiliates (in the case
of Parent or its Affiliates, only to the extent related to the Transaction or
an
127
interest in the Transferred Joint Venture Parents (other than with
respect to Remainder Plan distribution matters) and not in their capacity as
creditors or, with respect to Remainder Plan distribution matters,
equityholders), shall be in all material respects reasonably acceptable in form
and substance to, and shall not be filed until consented to by, Buyer, which
consent shall not be unreasonably withheld, (ii) shall not treat Buyer or
its Affiliates, in their capacities as creditors or equityholders, in a
discriminatory manner as compared to similarly classified stakeholders and (iii) shall
not conflict with, derogate from or otherwise contain any provision that is inconsistent
in any manner adverse to Buyer with (1) the 363 Order, the confirmation
order with respect to the JV Plan, this Agreement or any Ancillary Agreement or
(2) the availability of section 1145 of the Bankruptcy Code to exempt the
issuance of the Purchase Shares from registration under the Securities Act and
state securities laws. In connection with any Remainder Plan, Seller shall, and
shall cause its Affiliates to, use commercially reasonable efforts to have any
such Remainder Plan provide that (A) the distribution of the Purchase
Shares to the creditors and stakeholders of the Debtors shall be pursuant to
section 1145 of the Bankruptcy Code, (B) the sale of the Transferred
Assets pursuant to the 363 Order was in contemplation, and in furtherance, of
the Remainder Plan and (C) for the ratification of any finding in the 363
Order that section 1146 of the Bankruptcy Code was and remains applicable with
respect to the Transferred Assets. Following confirmation of the Remainder
Plan, Seller shall keep Buyer reasonably informed as to all material
developments in respect of the implementation of the Remainder Plan, including
the timing and amount of any distribution of Purchase Shares or the
establishment of any reserves that include Purchase Shares.
Section 5.14 Equipment
Leases. Seller shall, and shall cause its Affiliates to, pay the remaining
balances on any Equipment Leases and shall deliver title to all vehicles and
Fixtures and Equipment covered by such Equipment Leases free and clear of all
Encumbrances to Buyer at the Closing.
Section 5.15 Expanded
Transaction. In the event that the Friendco Purchase Agreement is
terminated prior to the Closing as a result of actions by, or failure to obtain
Governmental Authorizations from, any Government Antitrust Entity or the FCC,
then:
(a) the
following provisions shall become effective upon notice to Buyer by Seller of
such termination:
(i) at
the Closing, an aggregate amount of consideration equal to the Purchase Price
(as defined in the Friendco Purchase Agreement) minus the Aggregate Buyer
Discharge Amount (as defined in the agreement attached hereto as Exhibit 5.15(a)(i),
the “Expanded Agreement”), subject to adjustments pursuant to Section 2.6(a),
2.6(f), 2.7
and [2.7,]8.6(a), shall be added to the Purchase
Price in Section 2.5 hereunder; provided, that any such
consideration to be delivered by Buyer pursuant to this Section 5.15 shall
be satisfied, at Buyer’s election, with any combination of cash, which shall be
deemed to constitute part of the Cash Consideration, or shares of Parent Class A
Common Stock (valued at the Per Share Value of the Purchase Shares),
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which shall be deemed to constitute
additional Purchase Shares for purposes of this Agreement;
(ii) each of the Group 1 Business and the Group 2 Business as
defined in the Friendco Purchase Agreement shall be deemed to be a Specified
Business hereunder, each referred to herein as the “Group 1 Friendco Business”
and “Group 2 Friendco Business,” respectively, applying references herein to
such Specified Businesses as would have been applied under the Friendco
Purchase Agreement; provided, that, the preamble in Sections 6.1
and 6.2 of the Friendco Purchase Agreement shall be incorporated into Sections
6.1 and 6.2, respectively, with respect to the Group 2 Friendco Business;
(iii) the JV Interests and Transferred Investments to have been
acquired by Friendco or its Affiliates under the Friendco Purchase Agreement
shall be added to Section 2.1(x) and the Transferred Assets and
Specified Systems to have been acquired directly by Friendco or its Affiliates
under the Friendco Purchase Agreement shall be deemed to be included in
Transferred Assets and Specified Systems hereunder (provided, that Books
and Records (as defined in the Friendco Purchase Agreement) shall be deemed to
include Excluded Books and Records (as defined in the Friendco Purchase
Agreement), and at the Closing, Seller shall deliver the Excluded Books and
Records (as defined in the Friendco Purchase Agreement) to Buyer);
(iv) the Assumed Liabilities to have been assumed by Friendco or
its Affiliates under the Friendco Purchase Agreement shall be deemed to be
included in Assumed Liabilities hereunder;
(v) all
representations, warranties, covenants and agreements made by Seller or any of
its Affiliates pursuant to the Friendco Purchase Agreement (or any Ancillary Agreements, as defined
therein) shall be deemed to have been made to Buyer hereunder (and under the
corresponding provisions hereof to the extent applicable), including under all
escrow arrangements, all conditions to Friendco’s obligations thereunder
(including Section 6.2(j) thereof, but without regard to the
application of clause (x) thereof) shall be deemed to be included in Section 6.2
hereof, and the Seller Disclosure Schedules delivered thereunder (a true and
complete copy of which Seller has provided to Buyer as of the date hereof)
shall be deemed to have been delivered with the Seller Disclosure Schedules
hereunder;
(vi) Section 6.1(i) shall be deleted;
(vii) the following shall be added at the end of Section 6.2:
“(m) Buyer shall have received satisfactory
evidence of the consummation of the Joint Venture Transactions (as defined in
the Expanded Agreement).”;[ and ]
(viii) each of the Outside Date and the Extended Outside Date shall
be extended for six months[.];
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(ix) prior
to effecting the transactions contemplated by this Section 5.15 and the
Expanded Agreement, Seller and Buyer shall make such other modifications to
this Agreement as are reasonably acceptable to each of Seller and Buyer,
including such modifications as are necessary to give effect to Amendment No. 2
to the Friendco Purchase Agreement, dated as of June 21, 2006; and
(b) Seller
shall, and shall cause each of its Affiliates to, assign all of its rights
under the Friendco Purchase Agreement to Buyer.
Section 5.16 Environmental Matters.
(a) Environmental
Self-Audit. Seller shall provide copies of all correspondence, audits,
assessments, agreements, proposals and other documentation relating to the
Environmental Self-Audit to Buyer. Prior to the Closing Date, Seller shall
cooperate and consult with Buyer in the (i) negotiation of any agreement
with the United States Environmental Protection Agency or any other relevant
Government Entity relating to the Environmental Self-Audit, (ii) development
and negotiation of the scope of the Environmental Self-Audit and (iii) development
and negotiation of corrective action and remedies with respect to the
Environmental Self-Audit Deficiencies. In any agreement with the United States
Environmental Protection Agency or any other relevant Government Entity entered
into prior to the Closing Date with respect to the Environmental Self-Audit,
Seller shall not agree to any remedies that impose obligations to act or
refrain from acting after the Closing Date except to the extent that such
remedies (A) can be satisfied solely through the payment of monetary
damages or (B) are reasonably acceptable to Buyer; provided, that
Buyer shall not be required to agree to non-monetary obligations that could
reasonably be expected to involve more than de
minimis expenditures by Buyer or its Affiliates after the Closing.
(b) Property
Transfer Laws. Seller shall take all actions required by the Connecticut
Transfer Act and the New Jersey Industrial Site Recovery Act, to the extent
such actions are required as a result of this Transaction, provided that
Seller shall not take any actions or enter into any agreement relating to the
Connecticut Transfer Act or the New Jersey Industrial Site Recovery Act that
will impose binding obligations to act or refrain from acting after the Closing
Date except to the extent that such remedies (i) can be satisfied solely
through the payment of monetary damages or (ii) are reasonably acceptable
to Buyer; provided, that Buyer shall not be required to agree to
non-monetary obligations that could reasonably be expected to involve more than
de minimis expenditures by Buyer or its Affiliates after
the Closing.
(c) Notice
and Information. If at any time prior to the Closing, any material
environmental investigation, study, audit, test, review or other analysis in
relation to any Owned Real Property or Transferred Asset is conducted, Seller
shall (i) promptly notify Buyer thereof and (ii) subject to
applicable Law, keep Buyer informed as to the progress of any such proceeding.
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Section 5.17 SOA
Compliance. Prior to the Closing, Seller shall use reasonable efforts, and
shall cause its Affiliates and its and their respective representatives to use
reasonable efforts, to take all actions that Buyer may reasonably request, and
to cooperate and to cause the representatives of Seller and its Affiliates to
cooperate in the taking of such actions, to enable each Specified Business,
immediately following the Closing, to satisfy the applicable obligations under Sections
302, 404 and 906 of the SOA and the other requirements of the SOA with respect
to the Cable Systems, including establishing and maintaining adequate
disclosure controls and procedures and internal controls over financial
reporting as such terms are defined in the SOA; itbeingunderstoodthat, Seller has material weakness in its internal controls.
Section 5.18 Franchise
Expirations. From and after the date hereof until the Closing, Seller
shall, and shall cause its Affiliates to, use commercially reasonable efforts
to obtain renewals or valid extensions of any Franchises which expire on or
before December 31, 2007, in the Ordinary Course of Business. Seller shall
not, and shall cause its Affiliates not to, agree or accede to any material
modifications or amendments to or in connection with, or the imposition of any
material condition to the renewal or extension of, any of the Franchises that
are not reasonably acceptable to Buyer determined in a manner consistent with
the proviso to Section 5.6(c); provided, however, that if
the LFA Approval in respect of such Franchise is not obtained in connection
with any such renewal or extension (after Buyer has complied with its
obligations under Section 5.6(c)) Seller shall only agree or accede to any
such modifications or amendments that are reasonably acceptable to Buyer
(without regard to the proviso to Section 5.6(c)). Upon reasonable prior
notice, Seller shall, and shall cause its Affiliates to, allow representatives
of Buyer to attend meetings and hearings before applicable Government Entities
in connection with the renewal or extension of any Franchise or Governmental
Authorization. Nothing in this Section 5.18 shall limit the obligations of
Buyer or Seller pursuant to Section 5.6(c).
Section 5.19 Exchange Act
Filings. Prior to the Closing, Seller shall use commercially reasonable
efforts to file (a) all reports and other materials required to be filed
by Seller with the SEC pursuant to and in compliance with the Exchange Act
(other than with respect to timing), including Section 12 thereof, with
respect to any period ending on or prior to the Closing Date, and (b) the
Disclosure Statement as an exhibit to a Current Report on Form 8-K. Notwithstanding
the foregoing, Seller shall not be required to file quarterly reports for
fiscal quarters ended in 2001, 2002 or 2003 or annual reports for the fiscal
years ending on or before December 31, 2002 if (and only to the extent), (a) the
staff of the SEC shall have provided Buyer with adequate assurance that such
reports are not required to be filed in order for Parent to be deemed current
in its filings under the Exchange Act following the Closing or (b) Seller
shall have previously used such commercially reasonable effort to the
reasonable satisfaction of Buyer. Buyer shall reimburse Seller for all
reasonable costs and expenses incurred by Seller pursuant to this Section 5.19
with respect to the preparation of quarterly reports required to be filed for
fiscal quarters ended in 2001, 2002 or 2003 or annual reports for the fiscal
years ending on December 31, 2001 and December 31, 2002, including
reasonable out-of-pocket costs and any incremental costs and expenses incurred
in respect of the individuals preparing such reports necessary to comply with
this Section 5.19, including all necessary incentive
131
compensation, unless and to the
extent compliance with the requirement to file such reports is waived by Buyer
prior to the incurrence of such costs and expenses. Seller shall give Buyer
reasonable advance notice of the type and the amount of such costs and expenses
prior to the incurrence thereof. Buyer shall use its commercially reasonable
efforts to obtain relief from the staff of the SEC with respect to Parent being
deemed current in its filings under the Exchange Act following the Closing
without the reports required by this Section 5.19. Seller shall cooperate
with Buyer in respect of the obtaining of any such relief. Following the Closing, Seller shall (i) file
all Quarterly Reports on Form 10-Q for any fiscal quarters commencing
after March 31, 2006 that are completed prior to the Closing Date (to the
extent not previously filed) (and/or, as applicable, file the Annual Report on Form 10-K
for the fiscal year completed prior to the Closing Date) and shall either file
the Quarterly Reports on Form 10-Q for the fiscal quarter that began
prior to the Closing Date and that is completed following the Closing Date or,
subject to clause (ii) of this sentence, provide such financial statements
in respect of operations required to be contained therein directly to Buyer for
purposes of any pro forma presentations in respect each Specified Business
(including the MCE Systems) and each Specified Business (as defined in the
Friendco Purchase Agreement), and (ii) to the extent required by the SEC
or the stock exchange or automated quotation system on which the Parent Class A
Common Stock is to be listed, until such time as the Purchase Shares are
registered under Section 12 of the Exchange Act, file all reports and
other materials required to be filed by Seller with the SEC pursuant to and in
compliance with the Exchange Act (other than with respect to timing).
Section 5.20 Cooperation
upon Inquiries as to Rates. If at any time prior to Closing, any Government
Entity commences a Rate Regulatory Matter with respect to a Cable System,
Seller shall (a) promptly notify Buyer and (b) subject to applicable
Law, keep Buyer informed as to the progress of any such proceeding. Without the
prior consent of Buyer, which consent shall not be unreasonably withheld or
delayed, Seller shall not, and shall cause its Affiliates not to, settle any
such Rate Regulatory Matter, either before or after Closing, if (i) Buyer
or any of its Affiliates would have any Liability under such settlement other
than an obligation to pay money in an amount not greater than $50,000, which
obligation is fully reflected in the Closing Net Liabilities Amount used in
calculating the Final Adjustment Amount, or (ii) such settlement would
reduce the rates permitted to be charged by Buyer after the Closing below the
rates set forth on Schedule 3.18 of the Seller Disclosure Schedule or
otherwise then in effect.
Section 5.21 Third
Party Confidentiality Agreements. After the Closing and for so long as
reasonably necessary, Seller shall use reasonable efforts to, and shall cause
its applicable Affiliates to use reasonable efforts to, enforce each
confidentiality agreement entered into by Seller or any such Affiliate with any
third party in connection with the Sale Process or otherwise in connection with
the Reorganization Case (each, a “Third Party Confidentiality Agreement”),
on behalf of Buyer and its Affiliates to the extent such confidentiality
agreement relates to the Acquired Business.
Section 5.22 Enforcement.
Buyer will take all necessary action to enforce and perform on a timely basis
its rights and obligations, respectively, set forth in the Parent
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Agreement. Buyer will take all
necessary action to cause Parent to enforce and perform on a timely basis
Parent’s rights and obligations, respectively, set forth in the TWX Agreement. Seller
shall, and shall cause each of its Affiliates to, timely enforce all of its
rights and perform all of its obligations, under the Friendco Purchase
Agreement.
Section 5.23 Subscriber
Reports. Within 30 days following the end of each calendar month commencing
August 2005 through the Closing, Seller shall provide Buyer with a written
report setting forth the following information with respect to each Specified
Business as of the end of such calendar month:
(a) the number of Basic Subscribers served by such Specified
Business, (b) the number of Basic Subscribers in such Specified Business
whose rate of service is subject to any discount or promotion (or rebates or
similar programs) as of the subscriber cut-off date for such calendar month and
(c) the discounts or promotions (or rebates or similar programs) offered
by such Specified Business during such calendar month, and the geographic areas
in which each such discount or promotion (or rebate or similar program) is
offered. Seller shall, in consultation with Buyer commencing as promptly as
practicable following the date hereof, develop and, no later than 90 days prior
to the Closing, implement, an accounting system reasonably acceptable to Buyer,
(i) which would reasonably be expected to accurately track the number of
Eligible Basic Subscribers (in accordance with the definition thereof) and (ii) the
results of which are traceable to Seller’s billing system and capable of being
verified, using commercially reasonable efforts, as part of the computation of
and resolution of disputes regarding the Subscriber Adjustment Amount pursuant
to Section 2.6 (such accounting system, the “Subscriber Accounting
System”).
Section 5.24 Transitional
Services. Seller shall provide to Buyer, with respect to each Specified
Business, upon written request from Buyer received by Seller no later than 30
days prior to the Closing Date, such services as may be reasonably requested by
Buyer in connection with the operation of such Specified Business for a
commercially reasonable transition period following the Closing to allow for
conversion of existing or replacement services, in each case to the extent and
only to the extent Seller or its Affiliates retains the Assets and employees necessary
to allow the provision of such services (“Transitional Services”). In
addition, between the date hereof and the Closing, Seller shall use
commercially reasonable efforts to cooperate with Buyer to assist Buyer in
developing and implementing a plan of transition. Buyer shall promptly
reimburse Seller for the reasonable out-of-pocket costs and any incremental
costs and expenses necessary to provide Transitional Services. All other terms
and conditions for the provision of Transitional Services shall be reasonably
satisfactory to both Buyer and Seller and subject to applicable Law.
ARTICLE VI
CONDITIONS TO CLOSING
Section 6.1 Conditions
to the Obligations of Buyer and Seller. The obligations of the parties
hereto to effect the Closing are subject to the satisfaction (or waiver by both
parties) prior to the Closing of the following conditions:
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(a) Bankruptcy
Court Approval. The [Confirmation]Transaction Order
shall have been entered by the Bankruptcy Court, shall be a Final Order and
shall be in full force and effect, and, except in the case of a 363 Sale,
the Plan shall be effective in accordance with its terms.
(b) Consummation
of the Plan. [All]Other than in the case of a 363 Sale, all
conditions precedent to consummation of the Plan shall have been satisfied or
waived in accordance with the terms of the Plan
and the Plan shall be consummated
substantially contemporaneously with the Closing.
(c) SEC/DOJ
Matters. There shall have been a SEC/DOJ Settlement.
(d) HSR.
The waiting periods applicable to the consummation of the Transaction under the
HSR Act shall have expired or been terminated.
(e) No
Prohibition. No Law shall be in effect prohibiting the Transaction.
(f) Consents
and Approvals. All Seller Required Approvals and all Buyer Required
Approvals shall have been obtained, in each case in form and substance
reasonably satisfactory to both parties.
(g) Registration
of Purchase Shares. [Unless]Other than in the case of a 363 Sale and
except if the issuance of the Purchase Shares pursuant to the
Plan and the terms of this Agreement is exempted from any registration under
the Securities Act pursuant to the Confirmation Order or a no-action letter
from the staff of the SEC, a registration statement in respect of the Purchase
Shares shall have been declared effective by the SEC and no stop order
suspending the effectiveness of such registration shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
[The]Other
than in the case of a 363 Sale and subject to Section 5.5(b), at such time
as the Purchase Shares are distributed to the Debtors’ claimants and
stakeholders pursuant to the Plan, the Purchase Shares shall
be freely tradable and not subject to any resale restrictions except to the
extent that the holder thereof is an Affiliate of Parent or an underwriter (as
defined in section 1145(b) of the Bankruptcy Code).
(h) [Listing
of Purchase Shares. The Purchase Shares shall have been approved for
listing on the NYSE, subject only to official notice of issuance.]Intentionally
Omitted.
(i) Cross-Conditionality.
Subject to Section 5.15, the closing under the Friendco Purchase Agreement
shall have occurred contemporaneously with the Closing.
Section 6.2 Conditions
to the Obligation of Buyer. The obligation of Buyer to effect the Closing
is subject to the satisfaction (or waiver by Buyer) prior to the Closing of the
following conditions:
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(a) Representations
and Warranties. The representations and warranties in Section 3.1, Section 3.2(a) (other
than the first sentence thereof), Sections 3.3 through 3.6 and Sections 3.24
through 3.26 (the “Class 1 Representations and Warranties”; all
other representations and warranties contained in Article III, the “Class 2
Representations and Warranties”) that are qualified as to materiality or
Material Adverse Effect shall be true and correct, and the Class 1
Representations and Warranties that are not so qualified shall be true and
correct in all material respects, in each case, at the time made and as of the
Closing Date as if made at and as of such time (except, in each case, to the
extent expressly made as of an earlier date, in which case as of such earlier
date). The Class 2 Representations and Warranties (other than Section 3.19
(but only to the extent related to any event, occurrence, condition or
circumstance first occurring after the date hereof), Section 3.20(b) or
the first two sentences of Section 3.20(c), assuming, as to Sections 3.20(b) and
3.20(c), the information delivered pursuant to such Sections was prepared by
Seller in good faith) shall be true and correct (without giving effect to any
materiality or Material Adverse Effect qualifiers set forth therein) at the
time made and as of the Closing Date as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
earlier date), except where the failure of such Class 2 Representations
and Warranties to be true and correct has not and would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
(b) Covenants.
Each of the covenants and agreements of Seller to be performed on or prior to
the Closing shall have been duly performed in all material respects.
(c) Ancillary
Agreements. Seller and its Affiliates shall have executed and delivered the
Ancillary Agreements to which they are a party except (i) those Ancillary
Agreements the failure of which to have been executed and delivered would not
reasonably be expected, individually or in the aggregate, to impair the benefit
of the Transaction to Buyer (other than in a de
minimis manner), taking into account Section 2.11, (ii)
in respect of LFA Approvals not obtained as of the Closing and (iii) those
Ancillary Agreements required to be delivered pursuant to Section 2.10(s) the
failure of which to have been delivered would not reasonably be expected,
individually or in the aggregate, to materially impair the benefit of the
Transaction to Buyer.
(d) Certificate.
Buyer shall have received a certificate, signed on behalf of Seller by the
Chief Executive Officer or Chief Financial Officer of Seller, dated the Closing
Date, to the effect that the conditions set forth in Sections 6.2(a), 6.2(b) and
6.2(f) have been satisfied.
(e) Franchises.
Except as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect, all LFA Approvals shall have been obtained,
and all Purchase Rights (other than in connection with the Exchange) shall have
been waived, in respect of each Specified Business on or prior to the Closing; provided,
that this condition shall be deemed not to have been satisfied until the
earliest of (i) the date upon which this condition would be satisfied if
the foregoing Material Adverse Effect exception were omitted, (ii) 30 days
following the date the condition
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would have been satisfied but for
this proviso and (iii) six Business Days prior to the Outside Date.
(f) No
Material Adverse Change. Since the date of this Agreement, no event or
condition has occurred that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect.
(g) Bankruptcy
Plan and [Confirmation]Transaction Order. The [Confirmation
Order and]Transaction
Order issued by, and, other than in the case of a 363 Sale,
the Plan, confirmed by, the Bankruptcy Court shall, to the extent relating to
or affecting the Transaction, the Transferred Assets, the Assumed Liabilities,
Parent or its Affiliates (in the case of Parent or its Affiliates, only to the
extent related to the Transaction or an interest in the Transferred Joint
Venture Parents (other than with respect to Plan or JV Plan
distribution matters) and not in their capacity as creditors or, with respect
to Plan or JV Plan distribution matters, equityholders), be in all material
respects satisfactory to Buyer in its reasonable discretion (provided that, in
the case of a 363 Sale, the 363 Order shall be in all respects satisfactory to
Buyer in its reasonable discretion) and, without limiting the
generality of the foregoing, the [Confirmation]Transaction Order
shall contain the finding that Buyer is a good faith purchaser of the
Transferred Assets pursuant to section 363(m) of the Bankruptcy Code
unless Buyer’s actions have been determined by the Bankruptcy Court to have not
been in good faith preclude such a finding.
(h) Subscribers.
At least 60 days prior to the Closing, Seller shall have implemented the
Subscriber Accounting System. The number of Eligible Basic Subscribers served
by each Specified Business shall be at least equal to (i) the Base
Subscriber Number for such Specified Business minus
(ii) the Subscriber Basket for such Specified Business minus (iii) the Subscriber Cap for
such Specified Business.
(i) Intentionally
Omitted.
(j) No
Buyer Adverse Tax Event. There shall not have been a Buyer Adverse Tax
Event that is in existence as of the Closing.
(k) Financial
Information. Seller shall have provided Buyer with all Financial
Information and the Additional Financial Statements contemplated by Section 5.11
to be
provided prior to the Closing (disregarding for this purpose
all references therein to “commercially reasonable efforts”) except to the
extent Buyer has obtained relief from the SEC with respect thereto or has
failed to comply with its obligations under Section 5.11([d]c).
Section 6.3 Conditions
to the Obligation of Seller. The obligation of Seller to effect the Closing
is subject to the satisfaction (or waiver by Seller) prior to the Closing of
the following conditions:
(a) Representations
and Warranties. The representations and warranties in Sections 4.1 through
4.8 and 4.24 (the “Buyer Class 1 Representations and Warranties”;
all other representations and warranties contained in Article IV, the “Buyer
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Class 2 Representations and
Warranties”) that are
qualified as to materiality or Parent Material Adverse Effect shall be true and
correct, and the Buyer Class 1 Representations and Warranties that are not
so qualified shall be true and correct in all material respects, in each case,
at the time made and as of the Closing Date as if made at and as of such time
(except, in each case, to the extent expressly made as of an earlier date, in
which case as of such earlier date). The Buyer Class 2 Representations and
Warranties shall be true and correct (without giving effect to any materiality
or Parent Material Adverse Effect qualifiers set forth therein) at the time
made and as of the Closing Date as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such
earlier date), except where the failure of such Buyer Class 2
Representations and Warranties to be true and correct has not and would not,
individually or in the aggregate, reasonably be expected to result in a Parent
Material Adverse Effect.
(b) Covenants.
Each of the covenants and agreements of Buyer to be performed on or prior to
the Closing shall have been duly performed in all material respects.
(c) Ancillary
Agreements. Buyer shall have, and shall have caused Parent to have,
executed and delivered the Ancillary Agreements to which it is a party except (i) those
Ancillary Agreements the failure of which to have been executed and delivered
would not reasonably be expected, individually or in the aggregate, to impair
the benefit of the Transaction to Seller (other than in a de minimis manner), (ii) in respect
of LFA Approvals not obtained as of the Closing and (iii) the Ancillary
Agreements required to be delivered pursuant to Section 2.9(d)(xi) the
failure of which to have been delivered would not reasonably be expected,
individually or in the aggregate, to materially impair the benefit of the
Transaction to Seller.
(d) Certificate.
Seller shall have received a certificate, signed on behalf of Buyer by the
Chief Executive Officer or Chief Financial Officer of Buyer, dated the Closing
Date, to the effect that the conditions set forth in Sections 6.3(a), 6.3(b) and
6.3(e) have been satisfied.
(e) No
Material Adverse Change. Since the date of this Agreement, no event or
condition has occurred that, individually or in the aggregate, has had or would
reasonably be expected to have a Parent Material Adverse Effect.
(f) Legal
Opinion. Seller shall have received an opinion of counsel that the Purchase
Shares have been validly issued in accordance with the laws of the State of
Delaware.
(g) Bankruptcy
Plan and [Confirmation]Transaction Order. The Confirmation
Order and,
other than in the case of a 363 Sale, the final Plan shall not differ in a manner that would be
materially adverse to Seller and its Affiliates from the confirmation order and
the Plan[, respectively,] or, in the case of the 363 Sale, the JV Plan
proposed by Seller to the Bankruptcy Court in accordance with Section 5.13.
In the
case of the 363 Sale, the 363 Order shall be reasonably satisfactory to Seller
in all material respects.
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(h) Amended
and Restated Charter and Amended and Restated By-laws. The Amended
and Restated Charter shall have been filed with the Secretary of State of the
State of Delaware and shall be effective as of immediately following the
Closing. The Amended and Restated By-laws shall have been duly adopted by
Parent and shall be effective as of immediately following the Closing.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES
Section 7.1 Survival.
The representations and warranties of Buyer contained in this Agreement shall
expire upon the Closing. The representations and warranties of Seller contained
in this Agreement shall survive the Closing for the period set forth in this Section 7.1.
Subject to Section 2.7(d), all representations and warranties made by
Seller contained in this Agreement and all claims with respect thereto shall
terminate upon the expiration of twelve months after the Closing Date (the “Buyer
Indemnification Deadline”); itbeingunderstoodthat
in the event notice of any claim for indemnification under this Article VII
has been given (within the meaning of Section 9.1) prior to the Buyer
Indemnification Deadline, the representations and warranties that are the
subject of such indemnification claim shall survive with respect to such claim
until such time as such claim is finally resolved.
Section 7.2 Indemnification
by Seller.
(a) Seller
hereby agrees that from and after the Closing it shall indemnify, defend and
hold harmless Buyer, its Affiliates, and their respective directors, officers,
shareholders, partners, members, attorneys, accountants, agents,
representatives and employees (other than the Transferred Employees) and their
heirs, successors and permitted assigns, each in their capacity as such (the “Buyer
Indemnified Parties” and, together with the Seller Indemnified Parties, the
“Indemnified Parties”) from, against and in respect of any damages,
losses, charges, Liabilities, claims, demands, actions, suits, proceedings,
payments, judgments, settlements, assessments, deficiencies, taxes, interest,
penalties, and costs and expenses (including removal costs, remediation costs,
closure costs, fines, penalties and expenses of investigation and ongoing
monitoring, reasonable attorneys’ fees, and reasonable out of pocket
disbursements) (collectively, “Losses”) imposed on, sustained, incurred
or suffered by, or asserted against, any of the Buyer Indemnified Parties,
whether in respect of third party claims, claims between the parties hereto, or
otherwise, directly or indirectly relating to, arising out of or resulting from
(i) subject to Section 7.2(b), any breach of any representation or
warranty made by Seller contained in this Agreement for the period such
representation or warranty survives, (ii) any breach of any covenant or
agreement of Seller contained in this Agreement and (iii) any Excluded
Asset or Excluded Liability.
(b) Seller
shall not be liable to the Buyer Indemnified Parties for any Losses with
respect to the matters contained in Section 7.2(a)(i):
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(i) until
any such Losses in respect of the Group 1 Business exceed an aggregate amount
equal to the Group 1 Threshold Amount, and then for all such Losses in excess
of $42,000,000, up to an aggregate amount not to exceed the Group 1 Cap Amount;
provided, however, that the limitations herein regarding the
Group 1 Threshold Amount shall not apply to the Class 1 Representations
and Warranties; and
(ii) until any such Losses in respect of the Group 2 Business
exceed an aggregate amount equal to the Group 2 Threshold Amount, and then for
all such Losses in excess of $38,000,000, up to an aggregate amount not to
exceed the Group 2 Cap Amount; provided, however, that the
limitations herein regarding the Group 2 Threshold Amount shall not apply to the
Class 1 Representations and Warranties.
(c) Subject
to Section 7.8, the Buyer Indemnified Parties shall be entitled to receive
payment only from the Escrow Account with respect to any Liability of Seller
for any Losses under Section 7.2(a) and, with respect to each
Specified Business, only up to an aggregate amount not to exceed the Cap Amount
applicable to such Specified Business. Notwithstanding anything to the contrary
in this Agreement, Seller shall not be liable for any Losses that (i) are
reflected in the Closing Net Liabilities Amount used in calculating the Final
Adjustment Amount to the extent and only to the extent so reflected or (ii) have
been actually discharged (or the functional equivalent thereof in terms of its
effect on Buyer, each Specified Business, the Transferred Assets and the
Assumed Liabilities) pursuant to the Discharge (or, as applicable, the MCE
Discharge or an Additional Discharge) to the extent and only to the extent so
discharged (or such functional equivalent).
Section 7.3 Indemnification
by Buyer. Buyer hereby agrees that from and after the Closing it shall
indemnify, defend and hold harmless Seller and its Affiliates and their
respective directors, officers, stakeholders, partners, members, attorneys,
accountants, agents, representatives and employees and their heirs, successors
and permitted assigns, each in their capacity as such (the “Seller
Indemnified Parties”) from, against and in respect of any Losses imposed
on, sustained, incurred or suffered by, or asserted against, any of the Seller
Indemnified Parties, whether in respect of third party claims, claims between
the parties hereto, or otherwise, directly or indirectly relating to, arising
out of or resulting from (a) the Assumed Liabilities Related to each
Specified Business, (b) any breach of a covenant or agreement of Buyer
contained in this Agreement or (c) the Transferred Assets Related to each
Specified Business, each Specified Business or the Transferred Employees to the
extent attributable to the operation or ownership of the Transferred Assets
Related to such Specified Business or such Specified Business, or the
employment of the Transferred Employees following the Closing. Notwithstanding
anything to the contrary set forth in this Agreement, to the extent that any
Seller Indemnified Party is or becomes a shareholder or other equity holder of
Parent or any of its Affiliates, indemnification hereunder shall not include
Losses suffered by such Seller Indemnified Party (or its Affiliates) in such
shareholder or other equity holder capacity by reason of (i) the
indemnities being provided by Buyer hereunder or (ii) Losses suffered in
such capacity in respect of any Transferred Assets or Assumed Liabilities.
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Section 7.4 Third
Party Claim Indemnification Procedures.
(a) In
the event that any written claim or demand for which an indemnifying party (an “Indemnifying
Party”) may have liability to any Indemnified Party hereunder is asserted
against or sought to be collected from any Indemnified Party by a third party
(a “Third Party Claim”), such Indemnified Party shall promptly, but in
no event more than thirty days following such Indemnified Party’s receipt of a
Third Party Claim, notify the Indemnifying Party in writing of such Third Party
Claim, the amount or the estimated amount of damages sought thereunder to the
extent then ascertainable (which estimate shall not be conclusive of the final
amount of such Third Party Claim), any other remedy sought thereunder, any
relevant time constraints relating thereto and, to the extent practicable, any
other material details pertaining thereto (a “Claim Notice”); provided,
however, that the failure timely to give a Claim Notice shall not affect
the rights of an Indemnified Party hereunder except to the extent that such
failure has a material prejudicial effect on the defenses or other rights
available to the Indemnifying Party with respect to such Third Party Claim. The
Indemnifying Party shall have 15 days (or such lesser number of days set forth
in the Claim Notice as may be required by court proceeding in the event of a
litigated matter) after receipt of the Claim Notice (the “Notice Period”)
to notify the Indemnified Party that it desires to defend the Indemnified Party
against such Third Party Claim; provided, however, that the Indemnifying
Party shall not be entitled to assume or maintain control of the defense of any
Third Party Claim and shall pay the fees and expenses of counsel retained by
the Indemnified Party if (i) the Third Party Claim relates to or arises in
connection with any criminal proceeding, action, indictment, allegation or
investigation, (ii) the Third Party Claim seeks injunctive or equitable
relief against the Indemnified Party, (iii) the Indemnifying Party has
failed to defend or is failing to defend in good faith the Third Party Claim, (iv) the
Indemnifying Party and the Indemnified Party are both named parties to the
proceedings and the Indemnified Party shall have reasonably concluded that
representation of both parties by the same counsel would be inappropriate due
to actual or potential differing interests between them or (v) in the case
of a Buyer Indemnified Party, it is reasonably likely that the Losses arising
from such Third Party Claim will exceed the amount such Buyer Indemnified Party
will be entitled to recover as a result of the limitations set forth in Section 7.2(b);
provided, further, that prior to assuming control of such
defense, the Indemnifying Party must acknowledge that it would have an
indemnity obligation for any Losses resulting from such Third Party Claim.
(b) In
the event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against a Third
Party Claim and subject to Section 7.4(a), the Indemnifying Party shall
have the right to defend the Indemnified Party by appropriate proceedings and
shall have the sole power to direct and control such defense at its expense. Once
the Indemnifying Party has duly assumed the defense of a Third Party Claim, the
Indemnified Party shall have the right, but not the obligation, to participate
in any such defense and to employ separate counsel of its choosing. Subject to Section 7.4(a),
the Indemnified Party shall participate in any such defense at its expense. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle, compromise or offer to settle or compromise any
Third Party Claim unless (i) the Indemnifying Party shall have agreed to
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indemnify and hold the Indemnified
Party harmless from and against any and all Losses caused by or arising out of
any such settlement or compromise, (ii) such settlement or compromise
shall include as an unconditional term thereof the giving by the claimant of a
release of the Indemnified Party, reasonably satisfactory to the Indemnified
Party, from all Liability with respect to such Third Party Claim and (iii) such
settlement or compromise would not result in (A) the imposition of a
consent order, injunction or decree that would restrict the future activity or
conduct of the Indemnified Party or any of its Affiliates, (B) a finding
or admission of a violation of Law or violation of the rights of any Person by
the Indemnified Party or any of its Affiliates, (C) a finding or admission
that would have an adverse effect on other claims made or threatened against
the Indemnified Party or any of its Affiliates, or (D) any monetary
liability of the Indemnified Party that will not be promptly paid or reimbursed
by the Indemnifying Party.
(c) If
the Indemnifying Party (i) is not entitled to defend a Third Party Claim, (ii) elects
not to defend the Indemnified Party against a Third Party Claim, whether by not
giving the Indemnified Party timely notice of its desire to so defend or
otherwise or (iii) after assuming the defense of a Third Party Claim,
fails to take reasonable steps necessary to defend diligently such Third Party
Claim within ten days after receiving written notice from the Indemnified Party
to the effect that the Indemnifying Party has so failed, the Indemnified Party
shall have the right but not the obligation to assume its own defense; itbeingunderstoodthat the Indemnified Party’s right to
indemnification for a Third Party Claim shall not be adversely affected by
assuming the defense of such Third Party Claim. The Indemnified Party shall not
settle a Third Party Claim for which the Indemnifying Party shall have monetary
liability hereunder without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
Section 7.5 Consequential
Damages; Materiality; Interest. Notwithstanding anything to the contrary
contained in this Agreement, no Person shall be liable under this Article VII
for any consequential, punitive, special, incidental or indirect damages,
including lost profits, except to the extent awarded by a court of competent
jurisdiction in connection with a Third Party Claim, except to the extent the
Loss arises out of an intentional or willful breach by the non-claiming party
and the Loss was reasonably foreseeable. Any computation of Losses hereunder in
respect of a breach of representation or warranty shall measure such Losses
without giving effect to any qualifier for materiality or Material Adverse
Effect set forth therein. Amounts payable in respect of any Losses under Section 7.3
shall bear interest at LIBOR calculated on a 365-day basis from the date
notice of the Losses for which indemnification is sought was delivered until
the date of payment of indemnification by the Indemnifying Party. Amounts
payable in respect of any Losses under Section 7.2 shall bear interest as
set forth in the definition of “Escrow Payment.”
Section 7.6 Payments.
The Indemnifying Party shall pay all amounts payable pursuant to this Article VII,
promptly following receipt from an Indemnified Party of a bill, together with
all accompanying reasonably detailed back up documentation, by (a) in the
case of a payment by Seller, making an Escrow Payment from the Escrow Account,
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subject to the proviso to the last
sentence in Section 2.6(f) with respect to the matters set forth in Section 2.6(f) (including
as applied to any MCE System in accordance with Section 2.7(c)), and (b) in
the case of a payment by Buyer, wire transfer of immediately available funds,
in an amount equal to the Loss that is the subject of indemnification
hereunder, unless the Indemnifying Party in good faith disputes the Loss, in
which event it shall so notify the Indemnified Party. In any event, the
Indemnifying Party shall pay to the Indemnified Party (i) in the case of a
payment by Seller, an Escrow Payment from the Escrow Account, subject to the
proviso to the last sentence in Section 2.6(f) with respect to the
matters set forth in Section 2.6(f) (including as applied to any MCE
System in accordance with Section 2.7(c)), and (ii) in the case of a
payment by Buyer, by wire transfer of immediately available funds, in each case
in an amount equal to the amount of any Loss (and any interest thereon) for
which it is liable hereunder no later than three days following any final determination
of such Loss and the Indemnifying Party’s liability therefor. A “final
determination” shall exist when (A) the parties to the dispute have
reached an agreement in writing, (B) a court of competent jurisdiction
shall have entered a final and non appealable order or judgment, or (C) an
arbitration or like panel shall have rendered a final non appealable
determination with respect to disputes the parties have agreed to submit
thereto.
Section 7.7 Characterization
of Indemnification Payments. All payments made by an Indemnifying Party to
an Indemnified Party in respect of any claim pursuant to this Article VII
shall be treated as adjustments to the Purchase Price for all income Tax
purposes but shall not affect the Escrow Amount (other than to the extent of
any payment hereunder); provided, however, that any payments
pursuant to this Article VII that represent interest payable under Section 7.5
shall be treated as (a) deductible to the Indemnifying Party and (b) taxable
to the Indemnified Party. The parties agree to treat, and to cause their
respective Affiliates to treat, any such payments in the foregoing manner, for
all income Tax purposes (unless otherwise required by a change in applicable
income Tax Law or as a result of a good faith resolution of a contest).
Section 7.8 Remedies.
From and after the Closing, the rights and remedies of Seller and Buyer under
this Article VII shall be exclusive and in lieu of any and all other
rights and remedies which Seller and Buyer may have under this Agreement or
otherwise against each other with respect to the Transaction for monetary
relief with respect to (a) any breach of any representation or warranty or
any failure to perform any covenant or agreement set forth in this Agreement,
other than those which are intentional or willful and other than those in (i) the
proviso to the last sentence in Section 2.6(f) (including as applied
to any MCE System in accordance with Section 2.7(c)), (ii) to the
extent related to any obligation with respect to Incremental Transfer Taxes, Section 5.7(c) (iii) Section 5.13(j) and
(iv) the Escrow Agreement, the Transfer Tax Escrow Agreement, the Adelphia
Registration Rights and Sale Agreement and each MCE Management Agreement
and (b) the Assumed Liabilities or the Excluded Liabilities, and, except as set
forth above, Buyer and Seller each expressly waives any and
all other rights or causes of action it or its Affiliates may have against the
other party or its Affiliates for monetary relief now or in the future under
any Law with respect to the Transaction; it being acknowledged and agreed that
Buyer, in its sole discretion, may exercise its rights and remedies with
respect to any matter relating to Section 5.13(j)
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or
the Adelphia Registration Rights and Sale Agreement against the Escrow Account
and/or the Seller and, to the extent exercised against Seller, such rights and
remedies shall constitute an administrative expense under section 507(a)(1) of
the Bankruptcy Code; it being further acknowledged and agreed that Buyer shall
exercise its rights and remedies with respect to any matter relating to
Incremental Transfer Taxes pursuant to Section 5.7(c), first, against the
Transfer Tax Escrow Account and, to the extent the Transfer Tax Escrow Account
is not sufficient, in its sole discretion against the Escrow Account and/or the
Seller and, to the extent exercised against Seller, such rights and remedies
shall constitute an administrative expense under section 507(a)(1) of the
Bankruptcy Code.
ARTICLE VIII
TERMINATION
Section 8.1 Termination
by Mutual Consent. This Agreement may be terminated at any time prior to
the Closing by mutual written agreement of Seller and Buyer.
Section 8.2 Termination
by Either Buyer or Seller. This Agreement may be terminated at any time
prior to the Closing by Buyer or Seller, by giving written notice of
termination to the other party, if (a) subject to Section 2.8(b), the
Closing shall not have occurred on or before July 31, 2006 (the “Outside
Date”) so long as the party proposing to terminate has not breached in any
material respect any of its representations, warranties, covenants or other
agreements under this Agreement in any manner that shall have proximately
contributed to the failure of the Closing to so occur (such breaching party, a “Proximate
Cause Party”); provided, however, that if any Government
Antitrust Entity has not completed its review of the Transaction or the
transactions contemplated by the Friendco Purchase Agreement by such time, or
either party determines in good faith at such time that additional time is
necessary in order to forestall any action to restrain, enjoin or prohibit the
Transaction or the transactions contemplated by the Friendco Purchase Agreement
by any Government Antitrust Entity, and, in either such case, all conditions set
forth in Article VI (other than Section 6.1(d)) have been satisfied
or waived in writing by the party entitled to the benefit thereof or are
immediately capable of being satisfied, then in either such case, such date may
be extended by either party to a date not beyond October 31, 2006(the
“Extended Outside Date”); provided, further, that if the
Closing has not occurred by such date as a result of the failure to satisfy Section 6.1(i) by
reason of actions by, or failure to obtain Governmental Authorizations from,
any Governmental Antitrust Entity or the FCC, then such date shall be extended
for an additional six months following the date that the Extended Outside Date
would otherwise occur or (b) any Law (other than an order, judgment or
ruling contemplated by Section 8.3(d)(ii) or 8.4(c)(ii)) permanently
restraining, enjoining or otherwise prohibiting consummation of the Transaction
shall become final and non-appealable.
Section 8.3 Termination
by Seller. This Agreement may be terminated at any time prior to the
Closing by Seller, by written notice to Buyer:
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(a) prior
to the commencement of the Confirmation Hearing[,] on May 15, 2006,
if (i) as of the date of such termination, Seller is not in breach of Section 5.10,
(ii) the Board authorizes Seller, subject to complying with the terms of
this Agreement, to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and Seller notifies Buyer in
writing that it intends to enter into such an agreement, attaching the most
current version of such agreement (and all related agreements) to such notice (provided,
that if such intention changes Seller shall promptly notify Buyer of that fact)
and (iii) Buyer does not make, within five Business Days of receipt of
Seller’s written notification of its intention to enter into a binding
agreement for a Superior Proposal, an offer which, thereafter, the Board
determines, in good faith after consultation with its financial advisors, is at
least as favorable to the stakeholders of Seller as is the Superior Proposal
(taking into account, without limitation, financial terms of any termination
fee that may be payable pursuant to Section 8.5(b) and the likelihood
of consummation);
(b) if
there has been a breach of any representation, warranty, covenant or agreement
made by Buyer in this Agreement such that an executive officer of Buyer would
be unable to deliver the closing certificate to Seller regarding Buyer’s
representations and warranties and Buyer’s performance of its obligations as
required pursuant to Section 6.3(a) and Section 6.3(b),
respectively, and such breach or condition is not curable or, if curable, is
not cured within 60 days after written notice thereof is given by Seller to
Buyer; provided, however, that if, with respect to any such
breach or condition that cannot reasonably be expected to be cured within 60
days, Buyer is diligently proceeding to cure such breach, this Agreement may
not be terminated pursuant to this Section 8.3(b) for so long as (i) such
breach is reasonably likely to be cured prior to the date on which this
Agreement would otherwise be terminated under Section 8.2 and (ii) Buyer
continues such efforts to cure; provided, further, that the right
to terminate this Agreement pursuant to this Section 8.3(b) shall not
be available to Seller if as of such time it is a Proximate Cause Party;
(c) prior
to the commencement of the Confirmation Hearing[,] on May 15, 2006,
if (i) as of the date of such termination, Seller is not in breach of Section 5.10,
(ii) the Board authorizes Seller to file a Superior Alternate Plan with
the Bankruptcy Court and Seller notifies Buyer in writing that it intends to
file such Superior Alternate Plan, attaching the most current version of such
Superior Alternate Plan (and all related agreements and supporting
documentation) to such notice (provided, that if such intention changes
Seller shall promptly notify Buyer of that fact) and (iii) Buyer does not
make, within ten Business Days of receipt of Seller’s written notification of
its intention to file a Superior Alternate Plan, an offer which, thereafter,
the Board determines, in good faith after consultation with its financial
advisors, is at least as favorable to the stakeholders of Seller as is the
Superior Alternate Plan (taking into account, without limitation, financial
terms of any termination fee that may be payable pursuant to Section 8.5(b) and
the likelihood of consummation); or
(d) if
(i) at any time after the conclusion of voting on the Plan as established
by the Bankruptcy Court, Seller’s stakeholders who are entitled to vote on the
Plan vote in sufficient number and amount against the Plan such that the Plan
is not
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otherwise capable of being
confirmed by the Bankruptcy Court or (ii) subject to compliance by Seller
with the first sentence of Section 5.13(g), at any time after the
expiration of 150 days following the entry of an order, judgment or ruling by a
court of competent jurisdiction in the Reorganization Case denying entry of (or
vacating), or that is inconsistent with the entry of, a Confirmation Order
satisfying the condition set forth in Section 6.2(g), the Bankruptcy Court
shall not have thereafter entered a Confirmation Order satisfying the condition
set forth in Section 6.2(g); provided, however, that Seller
may only terminate this Agreement pursuant to this Section 8.3(d)(ii) if
at such time it would not reasonably be expected that a Confirmation Order
satisfying the condition set forth in Section 6.2(g) shall be entered
prior to the Outside Date.
Section 8.4 Termination
by Buyer. This Agreement may be terminated at any time prior to the Closing
by Buyer, by written notice to Seller:
(a) if
there has been a breach of any representation, warranty, covenant or agreement
made by Seller in this Agreement (assuming entry of the Confirmation Order)
such that an executive officer of Seller would be unable to deliver the closing
certificate to Buyer regarding Seller’s representations and warranties and
Seller’s performance of its obligations as required pursuant to Section 6.2(a) and
Section 6.2(b), respectively, and such breach is not curable or, if
curable, is not cured within 60 days after written notice thereof is given by
Buyer to Seller; provided, however, that if, with respect to any
such breach or condition that cannot reasonably be expected to be cured within
60 days, Seller is diligently proceeding to cure such breach, this Agreement
may not be terminated pursuant to this Section 8.4(a) for so long as (i) such
breach is reasonably likely to be cured prior to the date on which this
Agreement would otherwise be terminated under Section 8.2 and (ii) Seller
continues such efforts to cure;
(b) if
(i) Seller has not, by October 15, 2005, filed all motions reasonably
necessary to obtain the Confirmation Order or (ii) if the Protections
Order is vacated or modified in any material respect following the date hereof (except as
modified pursuant to the order of the Bankruptcy Court entered on June 16,2006);
(c) if
(i) at any time after the conclusion of voting on the Plan as established
by the Bankruptcy Court, Seller’s stakeholders who are entitled to vote on the
Plan vote in sufficient number and amount against the Plan such that the Plan
is not otherwise capable of being confirmed by the Bankruptcy Court or (ii) subject
to compliance by Buyer with the first sentence of Section 5.13(g), at any
time after the expiration of 150 days following the entry of an order, judgment
or ruling by a court of competent jurisdiction in the Reorganization Case
denying entry of (or vacating), or that is inconsistent with the entry of, a
Confirmation Order satisfying the condition set forth in Section 6.2(g),
the Bankruptcy Court shall not have thereafter entered a Confirmation Order
satisfying the condition set forth in Section 6.2(g); provided, however,
that Buyer may only terminate this Agreement pursuant to this Section 8.3(c)(ii) if
at such time it would not reasonably be expected that a Confirmation Order
satisfying the condition set forth in Section 6.2(g) shall be entered
prior to the Outside Date; or
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(d) following
(i) the conversion of the Reorganization Case into one or more cases under
chapter 7 of the Bankruptcy Code or (ii) the appointment of a chapter 11
trustee in the Reorganization Case;
provided, however, that the right to terminate this
Agreement pursuant to Section 8.4(a), (b) or (c) shall not be
available to Buyer if as of such time it is a Proximate Cause Party.
Section 8.5 Effect of
Termination.
(a) In
the event of the termination of this Agreement in accordance with Article VIII,
this Agreement shall thereafter become void and have no effect, and no party
hereto shall have any Liability to the other party hereto or their respective
Affiliates, or their respective directors, officers or employees, except for
the obligations of the parties hereto contained in this Section 8.5 and in
Sections 9.1, 9.4, 9.6, 9.7, 9.10, 9.11 and 9.13 (and any related definitional
provisions set forth in Article I), and except that nothing in this Section 8.5
shall relieve any party from liability for any willful breach of this Agreement
that arose prior to such termination.
(b) In
the event that (i) this Agreement is terminated by Seller pursuant to Section 8.2(a) prior
to the entry of a [Confirmation]Transaction Order satisfying the condition set forth in Section 6.2(g) and a Transaction
Order (as defined under the Friendco Purchase Agreement) satisfying the
condition set forth in Section 6.2(g) of the Friendco Purchase
Agreement, neither of which has[ not] been vacated by a court
of competent jurisdiction and Buyer is not a Proximate Cause Party as of the
date of such termination, or (ii) this Agreement is terminated (A) by
Seller pursuant to [Section]Sections 8.3(a), 8.3(c) or 8.3(d) or
(B) by Buyer pursuant to Section 8.4(a) (but, with respect to
the representations and warranties of Seller, only in the case of a willful
breach by Seller), 8.4(b) or 8.4(c) except, in the case of this
clause (ii)(B), in the event that Buyer is a Proximate Cause Party as of the
date of such termination, then Seller shall pay Buyer, by wire transfer of
immediately available funds, a termination fee of $352,850,000 payable upon the
earlier of consummation of an Acquisition or the effective date of a chapter 11
plan of Seller and/or one or more of its Affiliates approved by the Bankruptcy
Court, which plan involves a substantial portion of the Assets of Seller and
its Affiliates.
(c) The
obligation of Seller to pay the amount payable under Section 8.5(b) (and
the payment thereof) shall be absolute and unconditional, other than as set forth in Section 8.6(a);
such payment shall be an administrative expense under section 507[(a)]([1]a)(1) of
the Bankruptcy Code and shall be payable as specified herein and not subject to
any defense, claim, counterclaim, offset, recoupment, or reduction of any kind
whatsoever.
Section 8.6 363
Fee and Credit.
(a) In
the event that (i) prior to the earlier of (x) July 31, 2006 and
(y) the entry of both the 363 Order and the Transaction Order (as defined
in the Friendco Purchase Agreement) (unless, in the case of this clause (y),
Seller has
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determined in good faith that the Plan is more likely to be consummated
in a reasonable timeframe than are both the 363 Sale and the JV Plan (taking
into account whether each of the 363 Order and the Transaction Order (as
defined in the Friendco Purchase Agreement) is a Final Order, but only if Buyer
and Friendco, respectively, have acknowledged in writing that the 363 Order and
the Transaction Order (as defined under the Friendco Purchase Agreement)
satisfy Section 6.2(g) and Section 6.2(g) of the Friendco
Purchase Agreement, respectively)), Seller does not deliver a written notice to
Buyer that it will not pursue the 363 Sale (the “Reversion Notice”), (ii) neither
this Agreement nor the Friendco Purchase Agreement is terminated by Buyer or
Friendco prior to September 1, 2006 (other than in the event that (A) Friendco
terminates the Friendco Purchase Agreement, (B) the expansion of the
Transaction described in Section 5.15 occurs and (C) all the conditions
of either party’s obligation to consummate the Transaction (other than any
condition that by its nature is to be satisfied at the Closing except for the
conditions set forth in Section 6.3(a) and Section 6.3(b)) are
satisfied other than, due to Seller being a Proximate Cause Party, the
conditions set forth in Sections 6.1(a), 6.1(b), 6.1(c), 6.1(i), 6.2(g), 6.2(k) and
6.3(g)) and (iii) the Closing does not occur on or prior to August 31,2006 (other than (A) if Buyer is a Proximate Cause Party or Friendco is a
Proximate Cause Party (as defined in the Friendco Purchase Agreement), (B) if
the FCC approval has not been obtained or (C) if a Parent Material Adverse
Effect has occurred), then (1) the Purchase Price will be reduced by
$352,850,000 and (2) in the event that this Agreement is terminated in
accordance with its terms, the Seller shall pay Buyer, by wire transfer of
immediately available funds, a termination fee of $352,850,000, payable upon
the earlier of consummation of an Acquisition or the effective date of a
chapter 11 plan of Seller and/or one or more of its Affiliates approved by the
Bankruptcy Court, which plan involves a substantial portion of the Assets of
Seller and its Affiliates. Notwithstanding anything to the contrary contained
in this Agreement, in no event will Seller have any obligation to make any
payment under Section 8.6(a) to the extent a payment has been made
under Section 8.5(b) nor will Seller have obligation to make any
payment under Section 8.5(b) to the extent Seller has made any
payment under Section 8.6(a).
(b) The
obligation of Seller to pay or credit the amount payable under Section 8.6(a) (and
the payment or credit thereof) shall be absolute and unconditional, other than
as set forth in Section 8.6(a); such payment shall be an administrative
expense under section 507(a)(1) of the Bankruptcy Code and such payment or
credit shall be payable or creditable as specified herein and not subject to
any defense, claim, counterclaim, offset, recoupment, or reduction of any kind whatsoever.
Section 8.7 Termination by
Seller. Notwithstanding
anything to the contrary contained in this Agreement, Seller may not terminate
this Agreement prior to September 1, 2006 (other than pursuant to Section 8.3(b)).
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ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices.
All notices, requests, demands, approvals, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly given and
made if served by personal delivery upon the party for whom it is intended or
delivered by registered or certified mail, return receipt requested, or if sent
by telecopier or email, provided that the telecopy or email is promptly
confirmed by telephone confirmation thereof, to the Person at the address set
forth below, or such other address as may be designated in writing hereafter,
in the same manner, by such Person:
Section 9.2 Amendment;
Waiver. Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Buyer and Seller, or in the case of a waiver, by the party
against whom the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive
of any rights or remedies provided by Law except as otherwise specifically
provided in Article VII.
Section 9.3 No
Assignment or Benefit to Third Parties. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors, legal representatives and permitted assigns. No party to this
Agreement may assign any of its rights or transfer or delegate any of its
obligations under this Agreement, by operation of Law or otherwise, without the
prior written consent of the other party hereto, except, in whole or in part, (a) as
provided in Section 9.5, (b) with respect to Seller’s rights and
obligations, [following the Closing to any entity]to a limited
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number
of entities acting on behalf
of Seller’s estate [(provided, that no]that are designated by Seller and reasonably
acceptable (including in terms of the number of entities and the form and
identity of each such entity) to the Buyer (each, a “Permitted Assignee”);
providedthat (i) each such Permitted Assignee shall agree
in writing to be bound by the obligations and Liabilities of the Seller set
forth in this Agreement and (ii) such assignment by
Seller under this [clause (b) will relieve Seller of its Liabilities
hereunder]Section 9.3
shall not relieve Seller of any of its obligations or Liabilities under this
Agreement unless Seller provides the Buyer with a guarantee of the obligations
and Liabilities of such Permitted Assignee under this Agreement that is in form
and substance reasonably acceptable to the Buyer), (c) to
Friendco under the Exchange Agreement and (d) by Buyer to one or more
direct or indirect wholly owned Subsidiaries of Buyer (provided, that
Buyer identifies such Subsidiary and the rights and obligations to be assigned
on or before Closing; provided, further, that no such assignment
by Buyer to a wholly owned Subsidiary under this clause (d) will relieve
Buyer of its Liabilities hereunder). Any assignment or transfer permitted
hereunder shall be evidenced in writing signed by the assignor and assignee, a
copy of which shall be delivered to the other party hereto. In
connection with any assignment by Seller of its rights and obligations under
the Friendco Purchase Agreement to any Permitted Assignees (as defined in the
Friendco Purchase Agreement), such Permitted Assignees (as defined in the
Friendco Purchase Agreement) will agree, in form and substance reasonably
acceptable to Buyer, to be bound by and liable for Seller’s obligations and
Liabilities hereunder; provided, that no such agreement will relieve
Seller of any of its obligations or Liabilities hereunder. In
connection with any assignment, transfer or delegation by Buyer to Friendco as
permitted above, Buyer shall be relieved of any Liability so assigned,
transferred or delegated to the extent Seller has the right to enforce in full
against Friendco any such Liability. Nothing in this Agreement, express or
implied, is intended to confer upon any Person other than Buyer, Seller, the
Indemnified Parties and their respective successors, legal representatives and
permitted assigns, any rights or remedies under or by reason of this Agreement.
Section 9.4 Entire
Agreement. This Agreement (including all Schedules and Exhibits) and the
Ancillary Agreements executed as of the date hereof contain the entire
agreement between the parties hereto with respect to the subject matter hereof
and thereof and supersede all prior agreements and understandings, oral or
written, with respect to such matters, except for the TWX Confidentiality Agreement and the
Seller Confidentiality Agreement, which shall remain in full force and effect
except as otherwise provided herein.
Section 9.5 Debtor
Obligations Joint and Several; Fulfillment of Obligations. The Transaction
Order shall provide that Seller shall, and shall cause each
of its Affiliates to, cause, each and every Debtor, including each that is an
Asset Transferring Subsidiary hereunder, to agree for the benefit of Buyer,
except to the extent any Liability is limited to the Escrow Account as a result
of the limitations set forth in Article VII, to be jointly and severally
liable for any breach or violation of Seller’s representations, warranties or
covenants hereunder and to execute and deliver such Contracts and take such
further action as may be reasonably requested by Buyer to evidence the intent
and effect of the foregoing (including, for the avoidance of doubt, the
inclusion, except to the
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extent
any Liability is limited to the Escrow Account as a result of the limitations
set forth in Article VII, of an express undertaking of such joint and
several liability in the Plan, the JV Plan and/or the Remainder Plan). Any obligation
of any party to any other party under this Agreement, or any of the Ancillary
Agreements, which obligation is performed, satisfied or fulfilled completely
and without any adverse legal implications to the obligee, by an Affiliate of
such party, shall be deemed to have been performed, satisfied or fulfilled by
such party.
Section 9.6 Public
Disclosure. Notwithstanding anything to the contrary contained herein, no
press release or similar public announcement or communication shall be made or
caused to be made relating to this Agreement and the Transaction (including, for
the avoidance of doubt, the transactions that are the subject of the Adelphia
Registration Rights and Sale Agreement) unless specifically
approved in advance by both parties hereto, except that a party hereto may issue
any press release or make any public announcement or communication relating to
this Agreement and the Transaction (including, for the avoidance of doubt,
the transactions that are the subject of the Adelphia Registration Rights and
Sale Agreement) that may be required by any applicable Law
(including any listing requirement) without such approval if, to the extent
practicable, such party has used commercially reasonable efforts to obtain the
approval of the other party before issuing such press release or making such
public announcement or communication.
Section 9.7 Expenses.
Except as otherwise expressly provided in this Agreement, whether or not the
Closing occurs, all costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the party
incurring such costs and expenses.
Section 9.8 Schedules.
(a) The
disclosure of any matter in any Section relating to representations of the
Seller Disclosure Schedule or the Buyer Disclosure Schedule shall not be deemed
to constitute an admission by Seller or Buyer or to otherwise imply that any
such matter is material for the purposes of this Agreement, unless the
inclusion of such matter in such Schedule is required to make the
representation true. A matter set forth in one Schedule of the Seller
Disclosure Schedule or Buyer Disclosure Schedule pertaining to Article III
or IV, as applicable, need not be set forth in any other Schedule of such
disclosure schedule pertaining to Article III or IV, as applicable, or on
a Schedule corresponding to any other Section of Article III or IV,
as applicable, so long as its relevance to such other Schedule or Section is
readily apparent on the face of the information so disclosed. A matter set
forth in one Schedule of the Seller Disclosure Schedule or Buyer Disclosure
Schedule pertaining to Article V (which shall in no event address matters
occurring prior to the date hereof) need not be set forth on a Schedule
corresponding to any Section of Article III or IV, as applicable, so
long as (a) its relevance to such other Schedule or Section is
readily apparent on the face of the information so disclosed and (b) such
matter does not qualify the representations
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and warranties set forth in
Articles III or IV, as applicable, to the extent such representations and
warranties are made as of the date hereof or as of another specific date prior
to the date hereof.
(b) No
later than ten Business Days prior to the Closing, Seller may deliver to Buyer
an update to Schedule 3.8(a) and Schedule 3.8(b) of the
Seller Disclosure Schedule but only in respect of matters that will be
discharged (or the functional equivalent thereof in terms of its effect on
Buyer, each Specified Business, the Transferred Assets and the Assumed
Liabilities) pursuant to the Discharge (or, as applicable, the MCE Discharge or
an Additional Discharge) but arise from actions, omissions or circumstances
continuing as of the Closing. No matter added to Schedule 3.8(a) or
Schedule 3.8(b) of the Seller Disclosure Schedule pursuant to the
preceding sentence will be treated as set forth on any other Schedule as a
result of the second sentence of Section 9.8(a).
(c) When
an area is set forth on one Schedule A Part as a primary Cost Center and
another Schedule A Part as a non-primary Cost Center, the following shall
apply in determining the Systems and System Group to which it relates: (i) for the Schedule A Part with
respect to which such area is the primary Cost Center, such Schedule will be
deemed to exclude the Subscribers, and Assets primarily related to those
Subscribers, included in the applicable non-primary Cost Center(s) and (ii) for
any given Schedule A Part with respect to which such area is a non-primary
Cost Center, such Schedule A Part will be deemed to include only the
Subscribers, and Assets primarily related to those Subscribers, included in the
applicable non-primary Cost Center.
Section 9.9 Bulk
Sales. Seller and Buyer agree to waive compliance with Article 6 of
the Uniform Commercial Code as adopted in each of the jurisdictions in which
any of the Transferred Assets are located to the extent that such Article is
applicable to the transactions contemplated hereby.
Section 9.10 Governing
Law; Submission to Jurisdiction; Selection of Forum; Waiver of Trial by Jury.
THE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. Each
party hereto agrees that it shall bring any action or proceeding in respect of
any claim arising out of or related to this Agreement or the transactions
contained in or contemplated by this Agreement and the Ancillary Agreements,
exclusively in (a) the Bankruptcy Court so long as the Reorganization Case
remains open and (b) after the completion of the Reorganization Case or in
the event that the Bankruptcy Court determines that it does not have
jurisdiction, the United States District Court for the Southern District of New
York or any New York State court sitting in New York City (together with the Bankruptcy
Court, the “Chosen Courts”), and solely in connection with claims
arising under this Agreement or the transactions that are the subject of this
Agreement or any of the Ancillary Agreements (i) irrevocably submits to
the exclusive jurisdiction of the Chosen Courts, (ii) waives any objection
to laying venue in any such action or proceeding in the Chosen Courts, (iii) waives
any objection that the Chosen Courts are an inconvenient forum or do not have
jurisdiction over any party hereto and (iv) agrees that service of process
upon such party in any such action or proceeding shall be effective if notice
is
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given in accordance with Section 9.1.
Seller irrevocably designates The Corporation Trust Company as its agent and
attorney-in-fact for the acceptance of service of process and making an
appearance on its behalf in any such claim or proceeding and for the taking of
all such acts as may be necessary or appropriate in order to confer
jurisdiction over it before the Chosen Courts and Seller stipulates that such
consent and appointment is irrevocable and coupled with an interest. Each party
hereto irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
Section 9.11 Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original, and all of which shall constitute one and the same
Agreement.
Section 9.12 Headings.
The heading references herein and the table of contents hereof are for
convenience purposes only, and shall not be deemed to limit or affect any of
the provisions hereof.
Section 9.13 Severability.
The provisions of this Agreement shall be deemed severable and the invalidity
or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
Section 9.14 Specific
Enforcement. The parties agree that irreparable damage would occur and that
the parties would not have any adequate remedy at Law in the event that any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of Section 5.10 or Article VIII and to enforce specifically the terms
and provisions of such Sections and, following entry of the [Confirmation]Transaction
Order, the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement, such rights being in
addition to any other remedy to which the parties are entitled at Law or in
equity. The parties waive any requirement for security or the posting of any
bond or other surety in connection with any temporary or permanent award or
injunctive, mandatory or other equitable relief.
[Remainder of page intentionally left blank.]
153
IN
WITNESS WHEREOF, the parties have executed or caused this Agreement to be
executed as of the date first written above.
ARTICLE II SALE OF REGISTRABLE SECURITIES; TRANSFER
RESTRICTIONS
8
2.1
Sale of Registrable Securities
8
2.2
Grant of Rights
9
2.3
Transfer Restrictions
9
2.4
Rule 144 Sales
9
2.5
Transfers to and from Escrow Agent
10
2.6
Transfer under Section 1145 Exemption
10
2.7
Transfer pursuant to SEC/DOJ Settlement
10
ARTICLE III REPRESENTATIONS AND WARRANTIES
10
3.1
Certain Acknowledgments of the Stockholder
10
3.2
Representations and Warranties of the Stockholder
11
3.3
Representations and Warranties of the Issuer
12
ARTICLE IV INITIAL REGISTRATION AND SALE; DEMAND
REGISTRATION; AND
FINAL REGISTRATION
13
4.1
Initial Registration
13
4.2
Demand Registration
14
4.3
Final Registration
15
4.4
Underwriting
18
4.5
Termination Event
18
ARTICLE V INCIDENTAL OR “PIGGY-BACK” REGISTRATION
18
5.1
Issuer Incidental Registration
18
5.2
Stockholder Incidental Registration
18
ARTICLE VI REGISTRATION PROCEDURES
19
6.1
Obligations of the Issuer
19
6.2
Obligations of the Stockholder
23
6.3
Notice to Discontinue; Blackout Periods
24
6.4
Reports and Materials to be Filed under the
Securities Act and the
Exchange Act
25
6.5
Registration Expenses
26
6.6
Confidentiality
27
6.7
Lock-Up Agreements
27
6.8
Selection of Underwriters
28
Page
6.9
Priority
29
6.10
Pricing
30
ARTICLE VII INDEMNIFICATION
30
7.1
Indemnification by the Issuer
30
7.2
Indemnification by the Stockholder
30
7.3
Conduct of Indemnification Proceedings
31
7.4
Contribution
32
ARTICLE VIII MISCELLANEOUS
32
8.1
Recapitalizations, Exchanges, etc.
32
8.2
Notices
33
8.3
Entire Agreement; No Inconsistent Agreements
34
8.4
Further Assurances
34
8.5
Other Agreements
34
8.6
No Third-Party Beneficiaries
34
8.7
Assignment
35
8.8
Amendments and Waivers
35
8.9
Severability
35
8.10
Counterparts and Signature
36
8.11
Interpretation
36
8.12
GOVERNING LAW
36
8.13
Submission to Jurisdiction; Selection of Forum;
Waiver of Trial by Jury
36
8.14
Remedies
37
8.15
Comcast Letter Agreement
37
ii
REGISTRATION RIGHTS AND
SALE AGREEMENT(1)
REGISTRATION RIGHTS AND
SALE AGREEMENT, dated as of [•], 2006 (this “Agreement”), by and
between Adelphia Communications Corporation, a Delaware corporation (“Adelphia”),
for itself and each of its Debtors (as defined below), and Time Warner Cable
Inc., a Delaware corporation (the “Issuer”).
WHEREAS, Adelphia and
certain of its Affiliates are debtors and debtors in possession (the “Debtors”)
under chapter 11 of title 11 of the United States Code, 11 U.S.C. §§101 et seq. (the “Bankruptcy Code”), having each
commenced voluntary cases (jointly administered as No. 02-41729
(REG)) on or after June 10, 2002 in the Bankruptcy Court (the “Bankruptcy
Case”);
WHEREAS, pursuant to that
certain Asset Purchase Agreement, dated as of April 20, 2005 (as amended,
the “TW NY APA”), by and between Adelphia and Time Warner NY Cable LLC,
a Delaware limited liability company and a subsidiary of the Issuer (“TW NY”),
TW NY will purchase certain assets and assume certain liabilities from Adelphia
and certain of its affiliates and related parties (the “Adelphia Transaction”);
WHEREAS, the aggregate
consideration payable to Adelphia pursuant to the TW NY APA consists, in part,
of the Purchase Shares;
WHEREAS, pursuant to that
certain Amendment No. 2 to the TW NY APA, TW NY and Adelphia have agreed
to amend the TW NY APA to provide for, among other things, the Adelphia
Transaction to be effected pursuant to section 363 of the Bankruptcy Code (the “APA
Amendment”);
WHEREAS, as an inducement
to TW NY to enter into the APA Amendment, Adelphia has agreed to sell or cause
the sale of at least 33-1¤3% (inclusive of
the overallotment option, if any) of the Purchase Shares in a firm-commitment
underwritten public offering pursuant to the terms of this Agreement; and
WHEREAS, pursuant to the
TW NY APA, TW NY is causing the Issuer to enter into this Agreement.
NOW, THEREFORE, in
consideration of the mutual covenants and agreements set forth herein and for
good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
(1)
To
be entered into at Closing; assumes Bankruptcy Order obtained.
ARTICLE I
DEFINITIONS
1.1 Certain
Definitions. As used in this Agreement, and unless the context requires a
different meaning, the following terms have the meanings indicated:
“Additional
Disposition” means a transaction that is registered pursuant to Section 4.3(b).
“Additional
Registration” means any registration of sale of Registrable Securities
pursuant to either Section 4.3(b)(i) or Section 4.3(b)(ii).
“Additional
Registration Event” means that the following conditions are met: (A) the
Section 1145 Exemption was not available as contemplated by Section 4.3(a)(x);
(B) the Stockholder either (i) did not have the ability to sell
Registrable Securities pursuant to the Demand Registration under Section 4.2
or (ii) did not exercise its right to request a Demand Registration under Section 4.2;
and (C) the Registrable Securities are not then eligible to be sold under Rule 144.
“Additional
Registration Statement” means a registration statement effecting an
Additional Registration filed pursuant to the Securities Act.
“Adelphia” has the
meaning set forth in the preamble to this Agreement.
“Adelphia Claimants”
means the creditors and stakeholders of the Debtors in the Bankruptcy Case.
“Adelphia Financial
Information” means the Offering Financial Information as defined in the TW
NY APA.
“Adelphia Transaction”
has the meaning set forth in the recitals to this Agreement.
“Affiliate” means,
with respect to any Person, any other Person directly or indirectly
controlling, controlled by, or under common control with, such Person as of the
date on which, or at any time during the period for which, the determination of
affiliation is being made. For purposes of this definition, the term “control”
(including the correlative meanings of the terms “controlled by” and “under
common control with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of such Person, whether through the
ownership of voting securities or by contract or otherwise. For purposes of
this Agreement, (a) none of Adelphia or any of its Affiliates shall be
deemed to be an Affiliate of any of the Issuer or any of its Affiliates and (b) none
of the Issuer or any of its Affiliates shall be deemed to be an Affiliate of
any of Adelphia or any of its Affiliates.
“Agreement” has
the meaning set forth in the recitals to this Agreement.
2
“APA Amendment”
has the meaning set forth in the recitals to this Agreement.
“Bankruptcy Case”
has the meaning set forth in the recitals to this Agreement.
“Bankruptcy Code”
has the meaning set forth in the recitals to this Agreement.
“Bankruptcy Court”
has the meaning set forth in the TW NY APA.
“Blackout Period”
has the meaning set forth in Section 6.3(b).
“Business Day”
means any day other than a Saturday, a Sunday or a day on which banks in
New York City are authorized or obligated by law or executive order to
close.
“Buyer Indemnified
Party” has the meaning set forth in the TW NY APA.
“Class A Common
Stock” means the Class A Common Stock, par value $0.01 per share, of
the Issuer.
“Closing” has the
meaning set forth in the TW NY APA.
“Co-Managers” has
the meaning set forth in Section 6.8
“Comcast” means
Comcast Corporation, a Pennsylvania corporation.
“Comcast Registration
Rights Agreement” means that certain Registration Rights Agreement, dated
as of March 31, 2003, as amended, by and among TWE Holdings II Trust, TWX
and the Issuer.
“Comcast Letter
Agreement” means that certain Letter Agreement entered into on June [ ], 2006 by and among Comcast, TWE
Holdings II Trust, Adelphia and the Issuer.
“Commission” means
the Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.
“Counterparty”
means any underwriter, broker or dealer with respect to a Disposition.
“Debtors” has the
meaning set forth in the recitals to this Agreement.
“Demand Registrable
Securities” has the meaning set forth in Section 4.2(a).
3
“Demand Registration”
has the meaning set forth in Section 4.2(a)
“Demand Registration
Statement” has the meaning set forth in Section 4.2(a).
“Demand Sale”
means the sale of the Demand Registrable Securities under the Demand
Registration Statement in a single firm-commitment underwritten public
offering.
“Disclosure Package”
means, with respect to any Disposition, (i) the preliminary Prospectus, (ii) each
Free Writing Prospectus and (iii) all other information, in each case,
that is deemed, under Rule 159 under the Securities Act, to have been
conveyed to purchasers of securities (including Purchase Shares) at the
applicable time.
“Disposition”
means any of the Initial Sale, the Demand Sale, the Final Distribution and each
Additional Disposition, as applicable.
“Escrow Account”
has the meaning set forth in the TW NY APA.
“Escrow Agent” has
the meaning set forth in the TW NY APA.
“Escrow Agreement”
has the meaning set forth in the TW NY APA.
“Exchange Act”
means the Securities Exchange Act of 1934, as amended.
“Filing Notice”
has the meaning set forth in Section 5.2(a).
“Final Distribution”
has the meaning set forth in Section 4.3(c).
“Final Distribution
Notice” has the meaning set forth in Section 4.3(a).
“Final Registrable
Securities” has the meaning set forth in Section 4.3(a).
“Final Registration”
has the meaning set forth in Section 4.3(a).
“Final Registration
Statement” has the meaning set forth in 4.3(a).
“Financial Information
Requirement” means (a) delivery by Adelphia to TW NY or the Issuer of
the Offering Financial Information in accordance with Section 5.11(a) of
the TW NY APA and Section 6.2(a) of this Agreement, (b) the
filing of Quarterly Reports on Form 10-Q required to be filed by
Adelphia pursuant to the last sentence of Section 5.19 of the TW NY APA
without regard to clause (ii) thereof and (c) the filing of any
Annual Report on Form 10-K required to be filed by Adelphia pursuant
to the last sentence of Section 5.19 of TW NY APA, in each case, prior to
15 days
4
following the date such
information or filing is required to be provided or made pursuant to the TW NY
APA, the Exchange Act or Section 6.2(a) of this Agreement, as
applicable.
“Free Writing
Prospectus” means each “free writing prospectus” (as defined in Rule 405
under the Securities Act).
“Governmental Entity”
means any federal, state or local court, administrative body or other
governmental or quasi-governmental entity with competent jurisdiction.
“Incidental Registration”
has the meaning set forth in Section 5.2.
“Indemnified Party”
has the meaning set forth in Section 7.3.
“Indemnifying Party”
has the meaning set forth in Section 7.3.
“Initial Number of
Shares” means the number of shares of the Initial Registrable Securities.
“Initial Registrable
Securities” means shares of Class A Common Stock representing at least
33-1¤3%
of the Purchase Shares (inclusive of the overallotment option, if any).
“Initial Registration”
has the meaning set forth in Section 4.1(a).
“Initial Registration
Deadline” has the meaning set forth in Section 4.1(a).
“Initial Registration
Statement” has the meaning set forth in Section 4.1(a).
“Initial Sale” has
the meaning set forth in Section 2.1(b).
“Initial Sale
Commencement Date” means, with respect to the Initial Sale, the earlier of
the date on which (x) the distribution of a preliminary Prospectus occurs
and (y) the “road show” commences.
“Initial Sale Deadline”
has the meaning set forth in Section 2.1(b).
“Initial Sale
Extension Period” has the meaning set forth in Section 2.1(b).
“Inspector” has
the meaning set forth in Section 6.1(f).
“Issuer” has the
meaning set forth in the preamble to this Agreement.
5
“Issuer Securities”
means (a) for purposes of Section 6.9, securities of the Issuer proposed
to be offered to the public for the account of the Issuer in a transaction
registered under the Securities Act, together with securities of the Issuer to
be offered to the public for the account of another Person other than the
Stockholder that are proposed to be included in such offering pursuant to Section 5.2
and (b) for all other purposes, securities of the Issuer proposed to be
offered to the public for the account of the Issuer in a transaction registered
under the Securities Act.
“Liability” has
the meaning set forth in Section 7.1.
“Lock-up Agreement”
has the meaning set forth in Section 6.7.
“Majority Managing
Underwriters” means a majority of the Managing Underwriters, excluding the
Managing Underwriter, if any, selected by Comcast as contemplated by the last
sentence of Section 6.8 of this Agreement.
“Managing Underwriter”
means, with respect to an offering, the lead book-running managing underwriter(s) for
such offering.
“NASD” means the
National Association of Securities Dealers, Inc.
“NYSE” means the
New York Stock Exchange.
“Permitted Assignee”
has the meaning set forth in Section 8.7.
“Person” means any
individual, firm, corporation, partnership, limited liability company, “group”
(as such term is used in Rule 13d-3 under the Exchange Act), trust,
incorporated or unincorporated association, joint venture, joint stock company,
labor union, Governmental Entity or other entity of any kind, and shall include
any successor (by merger or otherwise) of such entity.
“Prospectus” means
the prospectus related to any Registration Statement (including a prospectus
that discloses information previously omitted from a prospectus filed as part
of an effective Registration Statement in reliance on Rule 415 under the
Securities Act), as amended or supplemented by any amendment, pricing term
sheet, Free Writing Prospectus or prospectus supplement, including
post-effective amendments, and all materials incorporated by reference in such
prospectus.
“Purchase Shares”
has the meaning set forth in the TW NY APA; itbeingunderstood
that Purchase Shares shall include all shares of Class A Common Stock
delivered by the Issuer or TW NY pursuant to the TW NY APA, including, for the
avoidance of doubt, to Adelphia or the Escrow Agent.
“Records” has the
meaning set forth in Section 6.1(f).
“Registrable
Securities” means each of the following: (a) the Purchase Shares and (b) any
shares of Class A Common Stock or any other equity securities issued or
issuable to the Stockholder or the Permitted Assignee in respect of any Purchase
6
Shares by way of a
conversion, exchange, replacement, stock dividend or stock split or other
distribution in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization, spin-off or otherwise and any
shares of Class A Common Stock or voting common stock or other equity
securities issuable upon conversion, exercise or exchange thereof. As to any
particular Registrable Securities, once issued, such securities shall cease to
be Registrable Securities when (1) a Registration Statement with respect
to the sale of such securities shall have become effective under the Securities
Act and such securities shall have been disposed of in accordance with such
Registration Statement, (2) they shall have been Transferred to the public
pursuant to Rule 144 (or any successor provision then in effect) under the
Securities Act, (3) they shall have been otherwise transferred, and, in
accordance with Section 3.1, new certificates (or other evidences of
ownership) for them not bearing a legend restricting further transfer shall
have been delivered, or (4) they shall have ceased to be outstanding.
“Registration”
means each of the Initial Registration, the Demand Registration, each
Additional Registration or the Final Registration.
“Registration Actions”
has the meaning set forth in Section 6.3(b).
“Registration Expenses”
has the meaning set forth in Section 6.5.
“Registration
Statement” means a registration statement filed pursuant to the Securities
Act, including the Initial Registration Statement, the Demand Registration
Statement, each Additional Registration Statement and the Final Registration
Statement, and any supplements or amendments thereto.
“Remainder Plan”
has the meaning set forth in the TW NY APA.
“Restricted Distribution”
has the meaning set forth in Section 8.14(b).
“Section 1145
Exemption” means the exemption contemplated by section 1145 of the
Bankruptcy Code pursuant to which the distribution to the Adelphia Claimants of
the then remaining Registrable Securities would not be subject to the
registration requirements of the Securities Act.
“SEC/DOJ Settlement”
has the meaning set forth in the TW NY APA.
“Securities Act”
means the Securities Act of 1933.
“Stockholder”
means Adelphia or the Permitted Assignee.
“Stockholder Counsel”
means a firm of legal counsel designated by the Stockholder.
“Termination Event”
means the consummation by Adelphia of a chapter 11 plan of reorganization
pursuant to which at least 75% of the then remaining
7
Registrable Securities
(other than those then held in the Escrow Account) are distributed to the
Adelphia Claimants pursuant to section 1145 of the Bankruptcy Code upon the
consummation of such plan; providedthat the Registrable
Securities shall have been approved for listing on the NYSE or the Nasdaq Stock
Market at or prior to two weeks after such consummation unless (i) the
Issuer has not complied with Section 6.1(j) in all material respects or (ii) 90%
of the then remaining Registrable Securities have been so distributed.
“Transfer” means,
with respect to any Registrable Security, the offer for sale, sale, pledge,
transfer or other disposition or encumbrance (or any transaction or device that
is designed to or could be expected to result in the transfer or the
disposition by any Person at any time in the future) of such Registrable
Security, and shall include the entering into of any swap, hedge or other
derivatives transaction or other transaction that transfers to another in whole
or in part any rights, economic benefits or risks of ownership, including by
way of settlement by delivery of such Registrable Security or other securities
in cash or otherwise.
“TWE Holdings II
Trust” means TWE Holdings II Trust, a Delaware statutory trust.
“TW NY” has the
meaning set forth in the recitals to this Agreement.
“TW NY APA” has
the meaning set forth in the recitals to this Agreement.
“TWX” means Time
Warner Inc. (f/k/a AOL Time Warner Inc.), a Delaware corporation.
1.2 Capitalized Terms. Capitalized
terms used herein and in the Schedules hereto and not otherwise defined
shall have the respective meanings ascribed to them in the TW NY APA.
1.3 Successor Laws, Rules, Regulations
and Forms. All references to laws, rules, regulations and forms in this
Agreement shall be deemed to be references to the comparable successor thereto
in effect at the time.
ARTICLE
II
SALE OF
REGISTRABLE SECURITIES; TRANSFER RESTRICTIONS
2.1 Sale of Registrable Securities.
(a) General. The
Stockholder hereby agrees to Transfer or cause the Transfer of Registrable
Securities solely in accordance with and subject to the terms and conditions
set forth in this Agreement.
(b) Initial Sale.
Subject to the Initial Registration Statement having been declared effective by
the Commission:
8
(i) the Issuer and the
Stockholder, together with the Managing Underwriters, shall jointly determine
when the Initial Sale Commencement Date shall occur; itbeingunderstoodthat (A) such date shall be no later than such time as would be
necessary to have the Initial Sale occur by the Initial Sale Deadline and (B) the
Issuer and the Stockholder shall cooperate in good faith to ensure that such
date shall be mutually beneficial to the Stockholder and the Issuer; and
(ii) no later than three
months after the date on which the Initial Registration Statement is declared
effective by the Commission (the “Initial Sale Deadline”), the
Stockholder shall, pursuant to the Initial Registration Statement, sell all of
the Initial Registrable Securities pursuant to a single firm-commitment
underwritten public offering (the “Initial Sale”); provided, however,
that such three month period shall be extended for a period of time equal
to the length of: (A) any Blackout
Period; plus (B) the number of days that elapse from (1) the date any
written notice contemplated by Section 6.3(a)
is given by the Issuer to (2) the date on which the Issuer delivers to the
Stockholder the supplement or amendment contemplated by
Section 6.3(a) or the date on which a supplement or amendment contemplated
by Section 6.3(a) is no longer necessary; plus (C) a period of time
of up to three months to the extent that the Majority Managing Underwriters
determine that the offering should be delayed due to market conditions; plus (D) a
period of time of up to three months to the extent the Majority Managing
Underwriters determine that any material event at the Issuer has occurred that
would reasonably be expected to adversely affect the offering price of the
Initial Registrable Securities in any material respect relative to what the
offering price would be expected to be in the absence of such extension; plus (E) the
period during which a stop order issued by the Commission is in effect; provided,further, that in addition
to any extension described above, the Stockholder may delay the Initial Sale no
more than once (unless such delay is immediately followed by an extension
described in clause (A), (B), (C), (D) or (E) above, in which case
the Stockholder may, pursuant to this proviso, delay the Initial Sale one
additional time for each separate delay period or one or more of the extensions
described in clauses (A), (B), (C), (D) or (E) above is in effect)
and by up to seventy-two hours if (x) such delay would not require
any additional sales efforts by the Issuer and (y) the Managing
Underwriters unanimously agree that such delay will not adversely affect the
offering or the Initial Sale. The parties acknowledge and agree that any
extension or delay described above shall begin to run upon its occurrence regardless of whether a prior extension is in
effect.
2.2 Grant of Rights. The Issuer
hereby grants registration rights to the Stockholder upon the terms and
conditions set forth in this Agreement.
2.3 Transfer Restrictions. Except
as expressly provided for in this Agreement and subject to any Lock-up
Agreements, the Stockholder shall not, directly or indirectly, Transfer any
Registrable Securities.
2.4 Rule 144 Sales. Following
the completion of the Initial Sale and subject to any Lock-up Agreements, the
Stockholder may effect a Transfer of any of the
9
remaining Registrable
Securities then held by the Stockholder pursuant to Rule 144 under the
Securities Act.
2.5 Transfers to and from Escrow Agent.
The Stockholder may Transfer Registrable Securities to and from the Escrow
Agent pursuant to the Escrow Agreement.
2.6 Transfer under Section 1145
Exemption. Subject to any Lock-up Agreements, the Stockholder may effect a
Transfer of Registrable Securities to the Adelphia Claimants pursuant to the Section 1145
Exemption.
2.7 Transfer pursuant to SEC/DOJ
Settlement. The Stockholder may Transfer Registrable Securities to the
United States pursuant to the SEC/DOJ Settlement.
ARTICLE
III
REPRESENTATIONS
AND WARRANTIES
3.1 Certain Acknowledgments of the
Stockholder. The Stockholder acknowledges that all Registrable Securities
will be issued pursuant to an exemption from registration under the Securities
Act and applicable state securities laws and agrees not to Transfer such
Registrable Securities in any transaction which would be in violation of the
Securities Act or applicable state securities law. The Stockholder acknowledges
that the following legend will appear on the certificates for the Registrable
Securities reflecting the foregoing restriction. The Issuer shall, at the
request of the Stockholder, remove from each certificate evidencing Registrable
Securities the following legend if the Registrable Securities are being
Transferred pursuant to a Registration Statement or distributed to the Adelphia
Claimants pursuant to the Section 1145 Exemption or if the Issuer is
reasonably satisfied (based upon an opinion of counsel or other evidence) that
the securities evidenced thereby may be publicly sold without registration
under the Securities Act; provided, however, that the Issuer or
Issuer’s counsel shall not be required to deliver an opinion of counsel to the
effect that the securities evidenced thereby may be publicly sold without
registration under the Securities Act unless Stockholder Counsel shall have
delivered an opinion, upon which the Issuer and Issuer’s counsel are entitled
to rely, to the effect that the securities evidenced thereby may be publicly
sold without registration under the Securities Act.
“THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, THE SECURITIES OR “BLUE SKY” LAWS OF ANY STATE OR ANY OTHER
SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED,
PLEDGED, HYPOTHECATED, OR OTHERWISE ASSIGNED, EXCEPT (I) PURSUANT TO A
REGISTRATION STATEMENT WITH RESPECT TO SUCH SECURITIES WHICH IS EFFECTIVE UNDER
ALL APPLICABLE SECURITIES LAWS, OR (II) UPON THE FURNISHING TO TIME WARNER
CABLE INC. BY THE
10
HOLDER OF THIS
CERTIFICATE OF AN OPINION OF COUNSEL OR OTHER EVIDENCE REASONABLY ACCEPTABLE TO
TIME WARNER CABLE INC. THAT SUCH SECURITIES ARE NOT REQUIRED TO BE REGISTERED
UNDER APPLICABLE SECURITIES LAWS.”
3.2 Representations and Warranties of
the Stockholder. The Stockholder hereby represents and warrants to the
Issuer as follows:
(a) Power, Binding
Agreement. The Stockholder is a corporation duly organized, validly
existing and in good standing under the laws of Delaware. The Stockholder has
all requisite corporate power and authority to enter into this Agreement. The
execution, delivery and performance by the Stockholder of this Agreement have
been duly and validly authorized and no additional corporate, shareholder or
similar authorization or consent is required in connection with the execution,
delivery and performance by the Stockholder of this Agreement. This Agreement
constitutes a valid and legally binding obligation of the Stockholder and
(assuming due execution and delivery by the other parties hereto) is
enforceable in accordance with its terms
except as the indemnification and contribution provisions contained in Article VII
may be held to be unenforceable as against public policy.
(b) No Conflicts.
(i) The execution,
delivery and performance by the Stockholder of this Agreement does not, and the
consummation by the Stockholder of the transactions contemplated by this
Agreement will not, (A) violate any provision of the charter, by-laws or
other organizational document of the Stockholder, (B) conflict with, or
result in any violation or breach of, or constitute (with or without notice or
lapse of time, or both) a default (or give rise to a right of termination,
cancellation, modification or acceleration of any right or obligation) under,
require a consent or waiver under, constitute a change in control under, or
result in the imposition of any lien on the Stockholder’s assets under, any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, license, contract, agreement or instrument to which the Stockholder is a
party or by which it or any of its properties or assets may be bound, or (C) conflict
with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to the Stockholder or any of its properties or assets, except in the
case of clauses (B) and (C) of this Section 3.2(b)(i) for
any such conflicts, violations, breaches, defaults, terminations,
cancellations, accelerations or liens as would not, individually or in the
aggregate, have a material adverse effect on the ability of the Stockholder to
consummate the transactions contemplated by this Agreement or the effectiveness
of any Registration Statement.
(ii) No consent,
approval, license, permit, order or authorization of, or registration,
declaration, notice or filing with, any Governmental Entity or any other Person
is required by or with respect to the Stockholder in connection with the
execution, delivery and performance of this Agreement by the Stockholder or the
consummation by the Stockholder of the transactions contemplated by this
Agreement,
11
other than the
approval by the Bankruptcy Court (which approval has been obtained as of the
date hereof) and, with respect to any Registration or Incidental Registration,
the filings and other actions required by the Securities Act, the Exchange Act,
the rules of any stock exchange or automated quotation system on which the
Registrable Securities are to be listed, the rules of any self-regulatory
organization and state securities or “blue sky” laws, and except for any such
consents, approvals, licenses, permits, orders or authorization, registration,
declaration, notices or filings as would not, individually or in the aggregate,
have a material adverse effect on the ability of the Stockholder to consummate
the transactions contemplated by this Agreement or the effectiveness of any
Registration Statement.
3.3 Representations and Warranties of
the Issuer. The Issuer hereby represents and warrants to the Stockholder as
follows:
(a) Power, Binding
Agreement. The Issuer is a corporation duly organized, validly existing and
in good standing under the laws of Delaware. The Issuer has all requisite
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder. The execution, delivery and performance by
the Issuer of this Agreement have been duly and validly authorized and no
additional corporate, shareholder or similar authorization or consent is
required in connection with the execution, delivery and performance by the
Issuer of this Agreement. This Agreement constitutes a valid and legally
binding obligation of the Issuer, and (assuming due execution and delivery by
the other parties hereto) is enforceable in accordance with its terms, except
as the indemnification and contribution provisions contained in Article VII
may be held to be unenforceable as against public policy and except as such
enforceability may be limited by applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws affecting creditors’
rights generally and by general equitable principles (whether considered in a
proceeding in equity or at law).
(b) No Conflicts.
(i) The execution,
delivery and performance by the Issuer of this Agreement does not, and the
consummation by the Issuer of the transactions contemplated by this Agreement
will not, (A) violate any provision of the charter, by-laws or other
organizational document of the Issuer, (B) conflict with, or result in any
violation or breach of, or constitute (with or without notice or lapse of time,
or both) a default (or give rise to a right of termination, cancellation,
modification or acceleration of any right or obligation) under, require a
consent or waiver under, constitute a change in control under, or result in the
imposition of any lien on the Issuer’s assets under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or instrument to which the Issuer is a party or by
which it or any of its properties or assets may be bound, or (C) conflict
with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to the Issuer or any of its properties or assets, except in the case
of clauses (B) and (C) of this
Section 3.3(b)(i) for any such conflicts, violations, breaches, defaults,
terminations, cancellations, accelerations or liens
12
as would not,
individually or in the aggregate, have a material adverse effect on the Issuer
or on the ability of the Issuer to consummate the transactions contemplated by
this Agreement or the effectiveness of any Registration Statement.
(ii) No consent,
approval, license, permit, order or authorization of, or registration,
declaration, notice or filing with, any Governmental Entity or any other Person
is required by or with respect to the Issuer in connection with the execution,
delivery and performance of this Agreement by the Issuer or the consummation by
the Issuer of the transactions contemplated by this Agreement, other than, with
respect to any Registration or Incidental Registration, filings and other
actions required by the Securities Act, the Exchange Act, the rules of any
stock exchange or automated quotation system on which the Registrable Securities
are to be listed, the rules of any self-regulatory organization and state
securities or “blue sky” laws, and except for any such consents, approvals,
licenses, permits, orders or authorization, registration, declaration, notices
or filings as would not, individually or in the aggregate, have a material
adverse effect on the Issuer or on the ability of the Issuer to consummate the
transactions contemplated by this Agreement or the effectiveness of any
Registration Statement.
ARTICLE
IV
INITIAL
REGISTRATION AND SALE; DEMAND REGISTRATION;
AND FINAL REGISTRATION
4.1 Initial Registration.
(a) Effective Initial
Registration. Subject to Section 6.3, the Issuer shall use
commercially reasonable efforts (itbeingunderstoodthat
expenses incurred in connection with the preparation and filing of the Initial
Registration Statement and the listing of the Initial Registrable Securities
shall not be a factor in the measurement of such commercially reasonable
efforts) to:
(i) as promptly as
reasonably practicable following the Closing, prepare and file a Registration
Statement on Form S-1 or other appropriate form under the Securities
Act (the “Initial Registration Statement”) covering the Initial Sale of
the Initial Registrable Securities on a delayed basis pursuant to Rule 415
under the Securities Act (the “Initial Registration”); itbeingunderstoodthat such Initial Sale shall be effected solely by
means of a single firm-commitment underwritten public offering;
(ii) subject to
extensions consented to by Adelphia (such consent not to be unreasonably
withheld), cause the Initial Registration Statement to be declared effective by
the Commission as promptly as reasonably practicable after such filing but not
later than the later of (A) five months following the Closing and (B) January 31,2007 (such later date, the “Initial Registration Deadline”); itbeingunderstoodthat the Issuer and the Stockholder shall cooperate in
good faith to ensure that, subject to the Initial Registration Deadline, the
Initial Registration Statement shall
13
be declared
effective at a time that is mutually beneficial to the Issuer and the
Stockholder; and
(iii) keep the Initial
Registration Statement continuously effective until the date which is the
earlier of (A) the time at which the Initial Registrable Securities
required to be sold pursuant to this Agreement have been sold and (B) the
Initial Sale Deadline (subject to extension pursuant to Section 2.1(b)(ii)).
(b) Method of
Disposition. The sale of Initial Registrable Securities pursuant to the
Initial Registration Statement shall be made solely by means of a single
firm-commitment underwritten public offering.
4.2 Demand Registration.
(a) Request for
Demand Registration. Subject to any Lock-up Agreements, at any time after the Initial Sale and prior to the effective
date of the Remainder Plan, the Stockholder may make a single written
request to the Issuer to register the Demand Sale of up to the number of
Registrable Securities remaining after the completion of the Initial Sale
stated in such request (the “Demand Registrable Securities”) on the
appropriate form under the Securities Act (the “Demand Registration
Statement”); providedhowever, that the Issuer shall not be
obligated to effect the Demand Registration unless the reasonably expected net
proceeds to the Stockholder from the Demand Sale of the Demand Registrable
Securities are, as determined at the time of such request, in excess of $250
million (the “Demand Registration”).
(b) Effective Demand
Registration. Subject to Section 6.3, the Issuer shall use
commercially reasonable efforts (itbeingunderstoodthat
expenses incurred in connection with the preparation and filing of the Demand
Registration Statement and the listing
of the Demand Registrable Securities shall not be a factor in the measurement
of such commercially reasonable efforts) to:
(i) prepare and file
the Demand Registration Statement as promptly as reasonably practicable after
the Issuer receives the request under Section 4.2(a);
(ii) cause the Demand
Registration Statement to be declared effective by the Commission as promptly
as reasonably practicable after the Issuer receives such request under Section 4.2(a);
and
(iii) keep the Demand
Registration Statement continuously effective until the earlier of (A) the
completion of the Demand Sale and (B) three months after the date the
Demand Registration Statement is declared effective by the Commission; provided,
however, that such three month period shall be extended for a period of
time equal to the length of: (1) any Blackout Period; plus (2) the
number of days that elapse from (x) the date any written notice
contemplated by Section 6.3(a) is given by the Issuer to (y) the date
on which the Issuer delivers to the Stockholder the supplement or amendment
contemplated by
14
Section 6.3(a);
plus (3) a period of time of up to three months to the extent that the
Majority Managing Underwriters determine that the offering should be delayed
due to market conditions; plus (4) a period of time of up to three months
to the extent the Majority Managing Underwriters determine that any material
event at the Issuer has occurred that would reasonably be expected to adversely
affect the offering price of the Initial Registrable Securities relative to
what the offering price would be expected to be in the absence of such
extension; plus (5) the period during which a stop order issued by the
Commission is in effect. The parties acknowledge and agree that any extension
described above shall begin to run upon its occurrence regardless of whether a
prior extension is in effect.
(c) Method of
Disposition. The sale of Demand Registrable Securities pursuant to the
Demand Registration Statement shall be made solely by means of a single
firm-commitment underwritten public offering.
(d) Revocation of Demand
Registration. During the term of this Agreement, the Stockholder may revoke
the Demand Registration prior to the effective date of the Demand Registration
Statement; providedthat such revoked Demand Registration shall
count as the Demand Registration for purposes of this Agreement unless the
Stockholder has promptly reimbursed the Issuer for all Registration Expenses
arising from, in connection with or relating to, such revoked Demand
Registration; provided, further, that (i) the Stockholder
may revoke the Demand Registration following the filing of the Demand
Registration Statement only on one occasion during the term of this Agreement,
and (ii) once the “road show” in respect of the Demand Sale pursuant to
the Demand Registration has commenced, if the Stockholder revokes the Demand
Registration, the Issuer shall not be obligated to resume such “road show” that
has commenced or to attend or participate in any other “road show” in respect
of the Demand Registration. Upon the revocation of the Demand Registration, the
Issuer shall be permitted to withdraw the Demand Registration Statement and
shall have no further obligation or other Liability pursuant to this Section 4.2
with respect to such Demand Registration.
(e) Financial
Information Requirement. Notwithstanding anything to the contrary in this
Agreement, the Issuer shall not have any obligation to register the Demand
Registrable Securities pursuant to this Section 4.2 if Adelphia fails to
satisfy the Financial Information Requirement.
(f) Reduction of
Demand Registrable Securities. Notwithstanding the foregoing, if the
Stockholder has requested a Demand Registration in accordance with Section 4.2(a),
and the number of Demand Registrable Securities the Stockholder is permitted to
include in the offering covered by such Demand Registration is reduced,
pursuant to Section 6.9 and/or the Comcast Letter Agreement, to below 50%
of the number of Demand Registrable Securities originally requested by the
Stockholder because of the inclusion of shares of Class A Common Stock
held by another stockholder of the Issuer, the Stockholder shall be entitled to
make a request for another Demand Registration pursuant to this Section 4.2.
15
4.3 Final Registration.
(a) Effective Final
Registration. Subject to any Lock-up Agreements, if at any time either
(x) any party to this Agreement shall reasonably determine that the Section 1145
Exemption is not available to effect the distribution (coincident with the
effective date of any Remainder Plan) of the then remaining Registrable
Securities (the “Final Registrable Securities”), based on an order of
the Bankruptcy Court, clear statements made by the staff of the Commission or
the inability of counsel to such party
to deliver an opinion to the effect that the Section 1145 Exemption is
available, and with the concurrence of the other parties hereto (which
concurrence shall not be unreasonably withheld) (providedthat as
promptly as practicable following such determination, such party shall provide
the other party with written notice of such determination together with a copy
of such order or memorandum setting forth the communication with the staff of
the Commission or such party’s counsel), or `) the Issuer shall deliver
written notice to the Stockholder electing, in its sole discretion, to effect
the distribution of the Final Registrable Securities to the Adelphia Claimants
pursuant to the terms of this Section 4.3 and not in reliance on section
1145 of the Bankruptcy Code (providedthat the Issuer may not
make such election if such election would reasonably be expected to result in a
material delay (including any delay pursuant to Section 6.3) relative to
when such distribution would occur pursuant to a chapter 11 plan of
reorganization resulting in a Termination Event or would otherwise adversely
affect such distribution in any material respect) (each such notice pursuant to
clause (x) or (y) above, a “Final Distribution Notice”), then,
subject to Section 6.3, as promptly as reasonably practicable following
delivery of the Final Distribution Notice, the Issuer shall use commercially
reasonable efforts (itbeingunderstoodthat
expenses incurred in connection with the preparation and filing of a
registration statement and the listing of the Final Registrable Securities to
be distributed pursuant to the Final Registration Statement shall not be a
factor in the measurement of such commercially reasonable efforts) to:
(i) prepare and file as
promptly as reasonably possible following delivery of the Final Distribution
Notice no more than one Registration Statement on the appropriate form under
the Securities Act (the “Final Registration Statement”) effecting
registration (the “Final Registration”) of such transactions involving
Final Registrable Securities as are required by the Commission to be registered
so that such Final Registrable Securities, when issued to the Adelphia
Claimants in such transactions, will be freely tradable by such Adelphia
Claimants and not subject to any resale restrictions, except to the extent that
any such Adelphia Claimant is an Affiliate of the Issuer or an underwriter (as
defined in section 1145(b) of the Bankruptcy Code);
(ii) cause the Final
Registration Statement to be declared effective by the Commission as promptly
as reasonably practicable after delivery of a Final Distribution Notice; and
(iii) keep the Final
Registration Statement continuously effective until the time at which the Final
Distribution has been completed and the Class A Common Stock distributed
thereby is freely tradable in the hands of the distributees,
16
except to the
extent that any such distributee is an Affiliate of the Issuer or an
underwriter (as defined in section 1145(b) of the Bankruptcy Code); provided,
however, that in no event shall the Issuer be required to keep the Final
Registration Statement effective for more than a six month period following the
date on which the relevant chapter 11 plan of reorganization of Adelphia and/or
any of its Affiliates becomes effective.
(b) Additional
Registration. Notwithstanding the foregoing:
(i) If the Issuer makes
the election contemplated by Section 4.3(a)(y) and the Stockholder
makes a written request, the Issuer shall file one additional Registration
Statement to enable the Stockholder to distribute any remaining Registrable
Securities to the Adelphia Claimants, to the extent required by the Commission
so that such Registrable Securities, when issued to the Adelphia Claimants in
such distribution, will be freely tradable by such Adelphia Claimants and not
subject to any resale restrictions, except to the extent that any such Adelphia
Claimant is an Affiliate of the Issuer or an underwriter (as defined in section
1145(b) of the Bankruptcy Code). Any such registration pursuant to this Section 4.3(b)(i) shall
be subject to Section 6.3 and shall otherwise be governed by clauses (i) through
(iii) of Section 4.3(a) above, except that the words “delivery of the
Final Distribution Notice” in Section 4.3(a)(i) and (ii) shall
be replaced with the words “delivery of the notice under Section 4.3(b)(i).”
(ii) If an Additional
Registration Event occurs and the Stockholder makes a written request, the
Issuer shall file one additional Registration Statement to register the public
offering by the Stockholder of the then remaining Registrable Securities for
cash in transactions not involving an underwriter or other intermediary (but
not any resale transactions by the recipients of such Registrable Securities). Any
such registration pursuant to this Section 4.3(b)(ii) shall be
subject to Section 6.3 and shall otherwise be governed by clauses (i) through
(iii) of Section 4.3(a) above, except that (x) the words “delivery
of the Final Distribution Notice” in Section 4.3(a)(i) and (ii) shall
be replaced with the words “delivery of the notice under Section 4.3(b)(ii)”,
and (y) the Issuer shall not be required to keep effective the
Registration Statement filed pursuant to this Section 4.3(b)(ii) for
more than one month after the date of its effectiveness.
(c) Method of
Disposition. The Final Registration Statement shall be used solely to
effect (i) a distribution by the Stockholder of all Final Registrable
Securities to the Adelphia Claimants pursuant to a chapter 11 plan of
reorganization confirmed by the Bankruptcy Court and (ii) to the extent
required by the Commission so that the Final Registrable Securities, when
issued to the Adelphia Claimants in such transactions, will be freely tradable
by such Adelphia Claimants and not subject to any resale restrictions (except
to the extent that any such Adelphia Claimant is an Affiliate of the Issuer or
an underwriter (as defined in section 1145(b) of the Bankruptcy Code)),
the resale of the Registrable Securities (such distribution described in
clauses (i) and (ii), the “Final Distribution”).
17
(d) Restrictions on
Solicitation of Votes. The Stockholder and the Issuer shall reasonably
consult with each other no less than 60 days prior to the making of any
solicitation of votes of the Adelphia Claimants with respect to a Final
Distribution and shall use commercially reasonable efforts to determine, based
on clear statements made by the staff of the Commission, a final order of the
Bankruptcy Court or an opinion of counsel, whether the Section 1145
Exemption is available. The Stockholder, the Issuer and their respective
Affiliates shall not make and shall not cause to be made any solicitation of a
vote of Adelphia Claimants with respect to the Final Distribution unless either
(i) the Final Registration Statement covering such Final Distribution and
the related solicitation of the votes of Adelphia Claimants is effective (or,
to the extent permitted by securities laws and regulations, filed) at the time
of such solicitation, or (ii) the Stockholder and the Issuer have
reasonably determined, based on clear statements made by the staff of the
Commission, a final order of the Bankruptcy Court or an opinion of counsel to
the effect that the Section 1145 Exemption is available.
4.4 Underwriting.
The Initial Sale and the Demand Sale shall each be in the form of a single
firm-commitment underwritten public offering, and the Managing Underwriters and
Co-Managers for the Initial Sale and the Demand Sale shall be selected in
accordance with Section 6.8.
4.5 Termination
Event. Notwithstanding anything in this Agreement to the contrary, if at
any time a Termination Event shall occur, the Issuer and the Stockholder shall
have no further obligation or any other Liability under this Agreement (except
for any Liability arising prior to such date) and the Issuer may immediately
withdraw or terminate any Registration Statement, whether or not effective as
of such time.
ARTICLE V
INCIDENTAL
OR “PIGGY-BACK” REGISTRATION
5.1 Issuer Incidental Registration.
At any time after the Closing, in connection with either the Initial
Registration or, if applicable, the Demand Registration (but not in connection
with the Final Registration), the Issuer shall have the right, subject to the
limitations set forth in Section 6.9, to register Issuer Securities or
securities for the account of any stockholder of the Issuer other than the
Stockholder; provided, however, that (i) the Issuer shall
not include any securities for the account of another Person (other than
pursuant to the Comcast Registration Rights Agreement) if inclusion of such
securities will adversely affect the relevant Disposition in any material
respect (itbeingunderstoodthat any potential or
actual reductions pursuant to Section 6.9 shall not be considered in the
determination of any such adverse effect), and (ii) the Issuer shall not
include any securities of the Issuer for the account of any Person other than
the Stockholder unless such Person accepts the terms of the underwritten
offering as agreed upon between the Managing Underwriters and the Stockholder.
18
5.2 Stockholder Incidental Registration.
(a) At any time after
the completion of the Initial Sale, subject to any Lock-up Agreements, if the
Issuer proposes to file a Registration Statement with respect to an offering of
securities (other than debt securities, or non-participating preferred equity
securities, which are not exchangeable for or convertible into or otherwise
linked to the common equity of the Issuer) by the Issuer for its own account or
for the account of any stockholder of the Issuer other than the Stockholder
(other than (i) a registration statement on Form S-4 or S-8
or (ii) a registration statement relating to the issuance of securities as
consideration in any acquisition by the Issuer), then the Issuer shall give
written notice (a “Filing Notice”) of such proposed filing to the
Stockholder at least five Business Days before the anticipated filing date,
which notice shall describe the proposed registration and distribution and
offer the Stockholder the opportunity to register the number of Registrable
Securities as the Stockholder requests (an “Incidental Registration”).
(b) If the Stockholder
has made a written request to the Issuer to participate in the Incidental
Registration within five Business Days after receipt of the Filing Notice, the
Issuer shall permit the Stockholder to include up to all of its Registrable
Securities (subject to the limitations set forth in Section 6.9) in such
offering on the same terms and conditions as the securities of the Issuer or
for the account of such other stockholder, as the case may be, included therein.
In connection with any Incidental Registration under this Section 5.2
involving an underwritten offering, the Issuer shall not be required to include
any Registrable Securities in such underwritten offering unless the Stockholder
accepts the terms of the underwritten offering as agreed upon by the Issuer and
such other stockholders, if any.
ARTICLE
VI
REGISTRATION
PROCEDURES
6.1 Obligations of the Issuer. In
connection with any Registration pursuant to Article IV or Incidental
Registration in which the Stockholder is including Registrable Securities
pursuant to Article V:
(a) the Issuer shall (i) before
filing a Registration Statement, Prospectus, Free Writing Prospectus or any
amendments or supplements thereto, provide Stockholder Counsel and any
other Inspector with a reasonable opportunity to review and comment on such
Registration Statement, each Prospectus included therein and each Free Writing
Prospectus (and each amendment or supplement thereto) to be filed with the
Commission, subject to such documents being under the Issuer’s control and (ii) notify
the Stockholder, Stockholder Counsel, and each other party participating in
such distribution of Registrable Securities of any stop order issued or
threatened by the Commission and use commercially reasonable action required to
prevent the entry of such stop order or to remove it if entered;
19
(b) the Issuer shall, as
promptly as practicable, prepare and file with the Commission such amendments
and supplements to such Registration Statement and the Prospectus as may be
necessary to keep such Registration Statement effective as required by Article IV
of this Agreement and as required to remove, or prevent the issuance of, any
stop order issued or threatened by the Commission;
(c) the Issuer shall
furnish to the Stockholder, prior to filing a Registration Statement, at least
one conformed copy of such Registration Statement as is proposed to be filed,
and thereafter shall promptly furnish such number of conformed copies of such
Registration Statement, each amendment and supplement thereto (in each case
including all exhibits thereto), and the Prospectus included therein (including
each preliminary Prospectus and any Prospectus filed under Rule 424 under
the Securities Act) as the Stockholder may reasonably request in order to
facilitate the disposition of the Registrable Securities; in addition, the
Issuer shall promptly after receipt furnish to the Stockholder copies of the
portions of any and all transmittal letters and any other correspondence
(including comment letters) with the Commission or any other Governmental
Entity in respect of such Registration Statement or amendment or supplement
thereto and that relate to the sections entitled “Plan of Distribution” or “Selling
Stockholder” or other sections containing information provided by the
Stockholder pursuant to Section 6.2, and the Stockholder shall have the
right to request that, subject to the terms of this Agreement, the Issuer
modify any such information contained in such Registration Statement or amendment
and supplement thereto pertaining to the Stockholder in such sections, and the
Issuer shall use commercially reasonable efforts to comply with such request (provided,
however, that the Issuer shall not have any obligation to modify any
information if the Issuer reasonably expects that so doing would cause the
Registration Statement to contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading);
(d) the Issuer shall use
commercially reasonable efforts (i) to register or qualify all Registrable
Securities and other securities covered by the Registration Statement under
such other securities or “blue sky” laws of such States of the United States of
America where an exemption is not available and as the Stockholder shall
reasonably request, (ii) to keep such registration or qualification in
effect during the period during which the Registration Statement is required to
be effective pursuant to this Agreement, (iii) to obtain the withdrawal of
any order or other determination suspending such registration or qualification
during the period during which the Registration Statement is required to be
effective pursuant to this Agreement and (iv) to take any other action
which may be reasonably necessary or advisable to enable the Stockholder to
consummate the Disposition of the relevant Registrable Securities in such
jurisdictions, except that the Issuer shall not for any such purpose be
required to (A) qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of this
clause (iv) be obligated to be so qualified, (B) subject itself to
taxation in any such jurisdiction or (C) consent to general service of
process in any such jurisdiction;
20
(e) the Issuer shall
enter into and perform customary agreements (including underwriting and
indemnification and contribution agreements in customary form with the Managing
Underwriters, Co-Managers or other Counterparty and reasonably acceptable to
the Counterparty) and take such other commercially reasonable actions as are
required in order to expedite or facilitate each Disposition (other than the
Final Distribution or an Additional Disposition) and shall provide all
reasonable cooperation, including causing appropriate officers to attend and
participate in “road shows,” including other information meetings organized by
the Counterparty, customary for similar dispositions; provided, however,
that the Issuer and such officers shall not be obligated to attend or
participate in more than one “road show” in connection with each such
Disposition, unless such “road show” has been interrupted pursuant to Section 6.3,
in which case such officers shall continue to be obligated to attend or
participate in one more “road show”;
(f) the Issuer shall
make available at reasonable times for inspection by the Stockholder, the
Counterparties participating in any Disposition (other than the Final
Distribution or an Additional Disposition), Stockholder Counsel and any
attorney, accountant or other agent retained by any Counterparty (each, an “Inspector”
and collectively, the “Inspectors”), all financial and other records,
corporate documents of the Issuer and its Subsidiaries (collectively, the “Records”)
as are reasonably necessary to enable them to exercise their due diligence
responsibilities, and cause the Issuer’s and its Subsidiaries’ officers,
directors and employees, and the independent public accountants of the Issuer, to
discuss the business and affairs of the Issuer and its Subsidiaries, to supply
promptly all information reasonably requested by any such Inspector in
connection with such Registration Statement and to otherwise reasonably
cooperate in the due diligence process of the Inspectors; provided, however,
that the Issuer shall be under no obligation to provide any information to the
Stockholder, such Counterparties, Stockholder Counsel or any Inspector, and no
such party shall have access to any information that (x) consists of the
Tax Returns (as defined in the TW NY APA) of the Issuer or (y) based on
advice of the Issuer’s counsel, would (i) reasonably be expected to create
any Liability under applicable law, or waive any material legal privilege (providedthat in such latter event the Issuer shall use commercially reasonable
efforts to cooperate to permit disclosure of such information in a manner
consistent with the preservation of such legal privilege), (ii) result in
the disclosure of any trade secrets of third parties; or (iii) violate any
obligation of the Issuer with respect to confidentiality (providedthat,
with respect to clause (iii), to the extent specifically requested by the
Stockholder, the Issuer has in good faith sought to obtain a waiver regarding
the possible disclosure from the third party to whom it owes an obligation of
confidentiality);
(g) in preparation for
any Disposition (other than the Final Distribution or an Additional
Disposition), the Issuer shall use commercially reasonable efforts to obtain “cold
comfort” letters addressed to the Issuer and the Counterparties and dated the
effective date of the Registration Statement and the date of the closing under
the agreement relating to such Disposition from the Issuer’s independent public
accountants, relating to the Issuer’s financial information, in customary form
and covering such matters of the type customarily covered by “cold comfort”
letters delivered in a firm-commitment underwritten public offering;
21
(h) the Issuer shall use
commercially reasonable efforts to furnish, at the request of the Stockholder,
on the date such Registrable Securities are delivered to the Counterparties for
sale pursuant to such Registration Statement (other than the Final Registration
Statement or an Additional Registration Statement), a signed opinion, dated
such date, of counsel representing the Issuer for the purposes of such
Disposition (other than the Final Distribution or an Additional Disposition),
addressed to the Counterparties, covering such legal matters with respect to
such Disposition in respect of which such opinion is being given as the
Counterparties and the Stockholder may reasonably request and are customarily
included in such opinions relating to transactions similar to such Disposition;
(i) the Issuer shall
comply with all applicable rules and regulations of the Commission,
and make available to its security holders, as soon as reasonably practicable
but no later than fifteen months after the effective date of the
Registration Statement, an earnings statement covering a period of twelve
months beginning after the effective date of the Registration Statement, in a
manner that satisfies the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder;
(j) with respect to any
Disposition or a distribution of Registrable Securities to the Adelphia
Claimants pursuant to the Section 1145 Exemption, the Issuer shall use
commercially reasonable efforts to cause all Purchase Shares to be listed on
the NYSE and to thereafter comply with all applicable rules of the NYSE,
at or prior to the time of the relevant Disposition or completion of the
distribution pursuant to the Section 1145 Exemption, as the case may be,
so as to permit the continued listing of such securities on the NYSE, and if
such listing on the NYSE has not been effected within a reasonable period of
time following the first Disposition under this Agreement or completion of the
distribution pursuant to the Section 1145 Exemption, as the case may be,
the Issuer shall use commercially reasonable efforts to cause all Purchase
Shares to be listed on the Nasdaq Stock Market and thereafter shall use
commercially reasonable efforts to comply with all applicable rules of the
Nasdaq Stock Market so as to permit the continued listing of such securities on
the Nasdaq Stock Market;
(k) the Issuer shall use
commercially reasonable efforts to cause all Registrable Securities covered by
the Registration Statement to be registered with or approved by such
Governmental Entities as may be necessary in the written opinion of counsel to
the Issuer or Stockholder Counsel to enable the Stockholder to consummate the
Disposition of such Registrable Securities within the United States of America;
(l) the Issuer shall
timely keep Stockholder Counsel advised as to the initiation and progress of
any Registration or Incidental Registration;
(m) the Issuer shall
cooperate with the Stockholder and each underwriter participating in the
Disposition (other than the Final Distribution or an Additional Disposition) of
such Registrable Securities and their respective counsel in connection with any
filings required to be made with the NASD;
22
(n) during the time
when a Prospectus is required to be delivered under the Securities Act, the
Issuer shall promptly give notice to the Stockholder (i) of the receipt by
the Issuer of any notification with respect to the suspension of the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threat in writing
of any proceeding for such purpose, (ii) of the occurrence of any of the
events described in Section 6.3(b) that results in the Issuer delaying or
not taking a Registration Action; and (iii) of the determination by the
Issuer that a post-effective amendment to a Registration Statement will be
filed with the Commission; and
(o) the Issuer shall use
commercially reasonable efforts to promptly take all other steps necessary to
effect the registration of the Registrable Securities contemplated hereby.
6.2 Obligations of the Stockholder.
(a) In connection with
any Disposition, the Stockholder shall (i) promptly furnish to the Issuer
in writing such information with respect to the Stockholder and the Disposition
as the Issuer may reasonably request or as may be required by law for use in
connection with any related Registration Statement or Prospectus and all
information required to be disclosed in order to make the information
previously furnished to the Issuer by the Stockholder not materially misleading
or necessary to cause such Registration Statement not to omit a material fact
with respect to the Stockholder necessary in order to make the statements
therein not misleading and (ii) provide the Issuer with the Adelphia
Financial Information for use in the preparation of any Registration Statement
in a timely manner so as to enable the Issuer to comply with its obligations
under Article IV and Sections 6.1 and 6.3 of this Agreement.
(b) The Stockholder
shall comply with the Securities Act and the Exchange Act and all applicable
state securities laws and comply with all applicable regulations in connection
with the registration and the Disposition of the Registrable Securities.
(c) The Stockholder
shall enter into and perform customary agreements (including underwriting and
indemnification and contribution agreements in customary form with the Managing
Underwriters or any other Counterparty and reasonably acceptable to the
Counterparty) and take such other commercially reasonable actions as are
required in order to expedite or facilitate the Disposition and shall provide
all reasonable cooperation customary for similar dispositions.
(d) In connection with
any Disposition, the Stockholder and its Affiliates shall not use any Free
Writing Prospectus without the prior written consent of the Issuer.
(e) In connection with
any Disposition, the Stockholder shall use commercially reasonable efforts to
assist the Issuer in responding to portions of any and all transmittal letters
and any other correspondence (including comment letters) from
23
the Commission
or any other Governmental Entity in respect of any Registration Statement or
amendment or supplement thereto to the extent that such portions pertain to the
Stockholder, the Adelphia Financial Information or the information the
Stockholder has provided pursuant to Section 6.2; itbeingunderstoodthat most relevant information is likely to be in the possession of the
Issuer or Comcast.
(f) In preparation for
any Disposition (other than the Final Distribution or an Additional
Disposition), the Stockholder and Adelphia shall use commercially reasonable
efforts to obtain “cold comfort” letters addressed to the Issuer and the
Counterparties and dated the effective date of the Registration Statement and
the date of the closing under the agreement relating to such Disposition from
Adelphia’s independent public accountants with respect to the Adelphia
Financial Information in customary form and covering such matters of the type
customarily covered by “cold comfort” letters delivered in a firm-commitment
underwritten public offering.
(g) In connection with
the registration process with respect to each Disposition, the Stockholder and
Adelphia shall:
(i) use commercially
reasonable efforts to cause the independent auditor of Adelphia to provide any
consents with respect to the Adelphia Financial Information that are required
for offerings registered under the Securities Act; and
(ii) use commercially
reasonable efforts to cause the independent auditor of Adelphia to cooperate in
each Disposition, including by participating in meetings, drafting sessions and
due diligence sessions and cooperating with the Issuer in good faith to respond
to any comments from the Commission or any other Governmental Entity with
respect to the Adelphia Financial Information.
6.3 Notice to Discontinue; Blackout
Periods.
(a) The Issuer shall
promptly notify the Stockholder (i) upon discovery that, or upon the
happening of any event as a result of which, the Prospectus or the Registration
Statement includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or of the occurrence of any event specified in Section 6.3(b)
that results in the Issuer delaying or not taking a Registration Action, (ii) of
the issuance by the Commission of any stop order suspending the effectiveness
of the Registration Statement or (iii) of any written request by the Commission
for (A) amendments to the Registration Statement or any document
incorporated or deemed to be incorporated by reference in the Registration
Statement, (B) supplements or amendments to the Prospectus or (C) additional
information. Immediately following any such event (x) upon the request of
the Issuer, the Stockholder shall suspend the use of the Prospectus and shall
not sell or distribute any Registrable Securities pursuant to the Registration
Statement until the Stockholder has received copies of the supplemented or
amended Prospectus or until it is advised by the Issuer that the Prospectus may
be used, and (y) the Issuer shall use commercially
24
reasonable
efforts to, as promptly as practicable or in the case of an event specified in Section 6.3(b),
by the end of the Blackout Period (as defined below), if necessary, prepare and
file a post-effective amendment to the Registration Statement or a supplement
or amendment to the related Prospectus or any document that would be
incorporated by reference into the Registration Statement and Prospectus so
that the Registration Statement does not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading, and such Prospectus
does not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading
and promptly thereafter deliver to the Stockholder a reasonable number of
copies of the supplement or amendment of such Prospectus complying with the
foregoing, and, in the case of a post-effective amendment to a Registration
Statement, use commercially reasonable efforts to cause it to be declared
effective as promptly as is reasonably practicable.
(b) The Issuer shall not
be required to file any Registration Statement pursuant to this Agreement, file
any amendment thereto, furnish any supplement or amendment to a Prospectus
included in a Registration Statement, make any other filing with the
Commission, cause any Registration Statement or other filing with the
Commission to become effective, or take any similar action (collectively, “Registration
Actions”) and may withdraw any Registration Statement or other filing with
the Commission, and any and all sales of Registrable Securities by a holder
thereof pursuant to a Registration Statement shall be suspended for a period of
time (each such period, a “Blackout Period”) for so long as, in the good
faith judgment of the Issuer (as evidenced by a certificate of an officer of
the Issuer), such Registration Action would (i) materially interfere with
business activities or plans of the Issuer, (ii) adversely affect the
Issuer or the Issuer’s trading markets, (iii) require the disclosure of
material non-public information which disclosure would be detrimental to the
Issuer, (iv) require the inclusion of financial statements of the Issuer
or any business acquired by the Issuer that are not then available or (v) be
prohibited by the Comcast Letter Agreement for the periods set forth therein. Upon
the occurrence of any condition described in clause (i), (ii), (iii), (iv) or
(v) of the first sentence of this
Section 6.3(b), the Issuer shall give prompt notice thereof to the
Stockholder if it intends to delay any of the Registration Actions and/or
suspend sales of Registrable Securities. Upon the termination of the condition
described in clause (i), (ii), (iii), (iv) or (v) of the first
sentence of this Section 6.3(b), the Issuer shall give prompt notice to
the Stockholder and shall promptly proceed with the Registration Actions and
make any other filing with the Commission required of it or terminate any
suspension of sales or distribution it has put into effect and shall take such
other commercially reasonable actions to permit the Disposition of Registrable
Securities as contemplated by this Agreement.
(c) In the event that
the Issuer declares a Blackout Period pursuant to Section 6.3(b) with
respect to the Demand Registration, the Stockholder shall have the right to
revoke such Demand Registration without such request counting as a revocation
of a Demand Registration for purposes of Section 4.2(d)
25
and without
any liability for Registration Expenses arising from, in connection with or
relating to, such revoked Demand Registration.
6.4 Reports and Materials to be Filed
under the Securities Act and the Exchange Act. The Issuer shall timely file
the reports and materials required to be filed by it under the Securities Act
and the Exchange Act and the rules and regulations adopted by the
Commission thereunder (including but not limited to the reports under Sections
13 and 15(d) of the Exchange Act referred to in subparagraph (c) of Rule 144)
and, following the completion of the Initial Sale, shall take all commercially
reasonable actions as the Stockholder or any broker or dealer facilitating a
sale of Registrable Securities may reasonably request to enable the Stockholder
to sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144
under the Securities Act, as such Rule may be amended from time to time,
or (b) any similar rules or regulations hereafter adopted by the
Commission. Upon the request of the Stockholder, the Issuer shall deliver to
the Stockholder a written statement as to whether it has complied with such
requirements.
6.5 Registration Expenses. The
Issuer shall pay all Registration Expenses (as defined below) arising from or
incident to the Initial Registration; provided, however,
that the Stockholder shall bear the expense of any broker’s commission or
underwriter’s discount, fee or commission relating to the Initial Registrable Securities
included in the Initial Registration and the Initial Sale and the fees,
disbursements and expenses of the Stockholder’s counsel and accountants (except
to the extent such accountants’ expenses are contemplated to be paid by the
Issuer pursuant to the TW NY APA). The Stockholder shall pay all Registration
Expenses arising from or incident to the Demand Registration, the Final
Registration, each Additional Registration, the Demand Sale, the Final
Distribution and each Additional Disposition, including the expense of any
broker’s commission or underwriter’s discount, fee or commission relating to
such Registration and Disposition, provided, however, that the
Issuer shall bear the portion of the Registration Expenses that is equal to the
incremental amount incurred as a result of the participation of the Issuer or
any Person other than the Stockholder in a Demand Sale, Final Distribution or
Additional Disposition. In connection with any Incidental Registration, the
Stockholder shall bear the portion of the Registration Expenses that is equal
to the incremental amount incurred as a result of the Stockholder’s
participation in the Incidental Registration. The Issuer shall pay all fees and
expenses payable in connection with the listing of the securities on any
securities exchange. “Registration Expenses” means all expenses arising
from or incident to any Registration or Incidental Registration, including any
and all expenses incident to performance of or compliance with any registration
or marketing of securities pursuant to this Agreement, including: (a) the
fees, disbursements and expenses of Issuer’s counsel and accountants in
connection with this Agreement and the performance of the Issuer’s counsel and
accountants in connection with this Agreement and the performance of the Issuer’s
obligations hereunder; (b) all expenses, including filing fees, in
connection with the preparation, printing and filing of any Registration
Statement, any Prospectus or preliminary Prospectus, any other offering
document and amendments and supplements thereto and the mailing and delivering
of copies thereof to any underwriters and dealers;
26
(c) the cost of
printing or producing any agreements among underwriters, underwriting
agreements, and blue sky or legal investment memoranda, any selling agreements
and any other documents in connection with the offering, sale, distribution or
delivery of the securities to be disposed of; (d) all expenses in
connection with the qualification of the securities to be disposed of for
offering and sale or distribution under state securities laws, including the
fees and disbursements of counsel for the underwriters in connection with such
qualification and in connection with any blue sky and legal investment surveys;
(e) the filing fees incident to securing any required review by the NASD
of the terms of the sale or distribution of the securities to be disposed of; (f) transfer
agents’ and registrars’ fees and expenses and the fees and expenses of any
other agent or trustee appointed in connection with such offering; (g) all
security engraving and security printing expenses; (h) any other fees and
disbursements of underwriters customarily paid by the issuers of securities;
and (i) the costs and expenses of the Issuer relating to analyst or
investor presentations or any “road show” undertaken in connection with the
registration and/or marketing of any Registrable Securities. Without limiting
the generality of the foregoing, in no event shall the Issuer or any of its
Affiliates bear any Registration Expenses of or relating to resales of Class A
Common Stock by Adelphia Claimants in the Final Distribution or any Additional
Distribution.
6.6 Confidentiality. Any Records
provided in connection with Section 6.1(f) that the Issuer determines, in
good faith, to be confidential and which it notifies the Inspectors are
confidential shall not be publicly disclosed by the Inspectors (and the
Inspectors shall confirm their agreement in writing in advance to the Issuer if
the Issuer shall so request) unless (a) the disclosure of such Records is
necessary, in the Issuer’s reasonable judgment, to avoid or correct a
misstatement or omission in the Registration Statement, (b) the release of
such Records is ordered pursuant to a subpoena or other order from a court of competent
jurisdiction after exhaustion of all appeals therefrom or (c) the
information in such Records was known to the Inspectors on a non-confidential
basis prior to its disclosure by the Issuer or has been made generally
available to the public or otherwise becomes available on a non-confidential
basis. The Stockholder agrees that it shall, upon learning that disclosure of
such Records is sought in a court of competent jurisdiction, give prompt notice
to the Issuer and allow the Issuer, at the Issuer’s expense, to undertake
appropriate action to prevent disclosure of the Records deemed confidential.
6.7 Lock-Up Agreements.
(a) If requested in
writing by any Managing Underwriter in connection with the Initial
Registration, Demand Registration or any Incidental Registration, each of the
Stockholder and the Issuer shall execute and deliver agreements (“Lock-up
Agreements”) containing such customary restrictions on its ability to
Transfer Registrable Securities as such Managing Underwriter may reasonably
request; providedthat such restrictions shall be the same for
all parties to this Agreement (except that, with respect to the Final
Distribution or any distribution under section 1145 of the Bankruptcy Code, if
agreed to by the Managing Underwriters, the restriction on the Stockholder may
be shorter than that applicable to the Issuer) and shall not have a duration in
excess of the shortest period required by the Managing Underwriters and in any
event not more than
27
180 days after
the completion of such offering. Any Lock-up Agreements shall not prohibit the
filing of the Final Registration Statement (and the Registration Actions
related thereto) or the solicitation of votes of the Adelphia Claimants with
respect to the approval of the Final Distribution. Any Lock-up Agreements
executed by the Stockholder shall contain provisions naming the Issuer as
intended third-party beneficiaries thereof and requiring the prior written
consent of the Issuer for any amendments thereto or waivers thereof. Any
Lock-up Agreements executed by the Issuer shall contain provisions naming the
Stockholder as intended third-party beneficiaries thereof and requiring the
prior written consent of the Stockholder for any amendments thereto or waivers
thereof.
(b) The Issuer shall use
best efforts to cause all of its executive officers and directors to execute
lock-up agreements that contain restrictions that are no less restrictive than
the restrictions contained in the Lock-up Agreements executed by the Issuer. The
terms of any underwriting agreement entered into under this Agreement shall
provide that the Managing Underwriters will not waive the lock-up provisions
applicable to any 5% or greater stockholder of the Issuer (other than Comcast
or TWE Holdings II Trust) without granting a similar waiver to the Stockholder.
In addition, such underwriting agreement shall also provide that to the extent
any other stockholder (other than Comcast or TWE Holdings II Trust) has shares
being sold in the same registration as the Stockholder, such stockholder shall
be subject to a lock-up agreement containing restrictions at least as
restrictive as those imposed on the Stockholder.
6.8 Selection of Underwriters. In
connection with the Initial Registration and the Demand Registration, the
Issuer and the Stockholder shall select, in the aggregate, three
nationally-recognized investment banking firms as the Managing Underwriters and
such number of (x) additional Managing Underwriters and (y) nationally-recognized
investment banking firms as co-lead managers (or the equivalent) (the “Co-Managers”),
in each case, as determined by the Issuer in its discretion, and in accordance
with the following:
(a) the Issuer shall
have the right to select two of the three Managing Underwriters, the identity
of which shall be subject to the consent of the Stockholder, such consent not
to be unreasonably withheld;
(b) the Stockholder
shall have the right to select one of the three Managing Underwriters, the
identity of which shall be subject to the consent of the Issuer, such consent
not to be unreasonably withheld;
(c) if the Issuer elects
to have additional Managing Underwriters, each of the Issuer and the
Stockholder shall have the right to select the same number of such additional
Managing Underwriters (in each case, subject to the consent of the other party,
such consent not to be unreasonably withheld);
(d) each of the Issuer
and the Stockholder shall have the right to select the same number of
Co-Managers (in each case, subject to the consent of the
28
other party
with respect to the identity of such Co-Managers, such consent not to be
unreasonably withheld); and
(e) the Issuer shall
have the right, in its sole discretion, to designate the global coordinator(s) and
the stabilization agent.
Notwithstanding the
foregoing, in the event that Comcast exercises its right to select one co-lead
manager (or the equivalent) with respect to the offering pursuant to Section 6.9
of the Comcast Registration Rights Agreement, any co-lead manager (or the equivalent)
selected by Comcast shall serve as a Co-Manager in connection with such
offering but shall be in addition to any of the Managing Underwriters,
additional Managing Underwriters or Co-Managers described above.
6.9 Priority. In any public
offering of equity securities of the Issuer (including pursuant to Article IV
or Article V), if any Managing Underwriter determines in good faith that
the registration of all or part of such securities requested to be included
would have a material and adverse effect on the success of such offering, then
the securities to be included in such offering shall be reduced by the Managing
Underwriter as follows:
(a) with respect to any
Registration,
(i) first, from any
Issuer Securities or other securities (other than debt securities, or
non-participating preferred equity securities, not exchangeable for or
convertible into or otherwise linked to the common equity of the Issuer) for
the account of the Issuer and any Person other than the Stockholder proposed to
be included in such offering, until such Issuer Securities have, if necessary,
been reduced to zero; and
(ii) second, subject to
clause (c) below, from any Registrable Securities held by the Stockholder;
(b) with respect to any
other public offering,
(i) first, from any
Registrable Securities held by the Stockholder to be included in such offering,
until such Registrable Securities have, if necessary, been reduced to zero; and
(ii) second, from any
Issuer Securities or other securities (other than debt securities, or
non-participating preferred equity securities, not exchangeable for or
convertible into or otherwise linked to the common equity of the Issuer) for
the account of the Issuer and any stockholder of the Issuer other than the
Stockholder proposed to be included in such offering.
Notwithstanding the foregoing, no reduction pursuant
to this Section 6.9 shall be made in the number of Initial Registrable
Securities required to be included in the Initial Registration or the Initial
Sale pursuant to Sections 2.1 and 4.1 unless one or more holders of Issuer
Securities other than the Stockholder and the Issuer are participating in the
Initial Registration or the Initial Sale, in which case such reduction shall be
made pro
29
rata (unless the
stockholders participating in the offering agree otherwise, subject to the
proviso below) as to all securities (other than debt securities, or
non-participating preferred equity securities, not exchangeable for or
convertible into or otherwise linked to the common equity of the Issuer)
proposed to be included in such offering; provided, however, that
in all events, following any such reductions, such offering shall include a
number of shares of Class A Common Stock equal to or greater than the
Initial Number of Shares. If the number of shares of Class A Common Stock
sold by the Stockholder and the other selling stockholders in such offering
equals or exceeds the Initial Number of Shares, the Stockholder shall be deemed
to have satisfied its obligations under
Section 2.1(b)(ii).
6.10 Pricing. The offering price of
the Registrable Securities and the gross spread in a Disposition (other than
the Final Distribution or an Additional Disposition) shall be determined by the
Stockholder, following consultation with the Issuer and in accordance with the
recommendations of the Managing Underwriters and, in the case of the Initial Sale, as
necessary to effectuate such Disposition.
ARTICLE
VII
INDEMNIFICATION
7.1 Indemnification by the Issuer. The
Issuer agrees to indemnify and hold harmless the Stockholder, its partners,
directors, officers, trustees, other Affiliates, agents and representatives and
each Person who controls (within the meaning of Section 15 of the
Securities Act) the Stockholder from and against any and all losses, claims,
damages, liabilities and expenses, or any action or proceeding in respect
thereof (including reasonable costs of investigation and reasonable attorneys’
fees and expenses) (each, a “Liability” and collectively, “Liabilities”)
arising out of or based upon (a) any untrue statement or alleged untrue
statement of a material fact contained in the Disclosure Package, the
Registration Statement, the Prospectus or in any amendment or supplement
thereto; and (b) the omission or alleged omission to state in the
Disclosure Package, the Registration Statement, the Prospectus or in any
amendment or supplement thereto any material fact required to be stated therein
or necessary to make the statements therein not misleading; provided, however,
that the Issuer shall not be liable (i) in any such case to the extent
that any such Liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
Disclosure Package, Registration Statement, Prospectus or preliminary
prospectus or amendment or supplement thereto in reliance upon and in
conformity with written information furnished to the Issuer by or on behalf of
the Stockholder (including the information provided pursuant to Section 6.2),
specifically for inclusion therein or, in the case of information provided
pursuant to Section 6.2(a)(ii), for use in the preparation thereof; and (ii) for
any Liability if (A) the Issuer has notified the Stockholder to suspend
use of the Prospectus pursuant to Section 6.3(a) or (b); (B) the
Stockholder continues to use the relevant Prospectus notwithstanding such
notice; and (C) such Liability arises from or is based upon an untrue
statement or alleged untrue statement of any material fact or
30
omission to state a
material fact that was cured in the supplemented or amended Prospectus
contemplated by Section 6.3(a) or (b).
7.2 Indemnification by the Stockholder.
In connection with any
offering (including any Disposition) in which the Stockholder is participating
pursuant to Article IV or Article V, the Stockholder agrees to
indemnify and hold harmless the Issuer, any underwriter retained by the Issuer,
their respective directors, officers, other Affiliates and each Person who
controls the Issuer or such underwriter (within the meaning of Section 15
of the Securities Act) from and against any and all Liabilities arising out of
or based upon (a) any untrue statement or alleged untrue statement of a
material fact contained in the Disclosure Package, the Registration Statement,
the Prospectus or in any amendment or supplement thereto; and (b) the
omission or alleged omission to state in the Disclosure Package, the
Registration Statement, the Prospectus or in any amendment or supplement
thereto any material fact required to be stated therein or necessary to make
the statements therein not misleading to the extent such Liabilities arise out
of or are based upon written information furnished by the Stockholder or on the
Stockholder’s behalf specifically for inclusion in or, in the case of
information provided pursuant to Section 6.2(a)(ii), for use in the preparation of, the Disclosure
Package, the Registration Statement, the Prospectus or any amendment or
supplement thereto relating to the Registrable Securities as provided in Section 6.2;
provided, however, that the liability of the Indemnifying Party
under this Section 7.2 shall
be limited to the amount of net proceeds received by the Stockholder in the
transaction giving rise to such Liability.
7.3 Conduct of Indemnification
Proceedings. Any Person entitled to indemnification under this Article VII
(each, an “Indemnified Party”) agrees to give prompt written notice to
each indemnifying party (each, an “Indemnifying Party”) after the
receipt by the Indemnified Party of any written notice of the commencement of
any action, suit, proceeding or investigation or threat thereof made in writing
for which the Indemnified Party intends to claim indemnification or
contribution pursuant to this Agreement; provided, however, that
the failure so to notify the Indemnifying Party shall not relieve the Indemnifying
Party of any Liability that it may have to the Indemnified Party hereunder
(except to the extent that the Indemnifying Party forfeits rights or defenses
or is otherwise prejudiced by reason of such failure). If notice of
commencement of any such action is given to the Indemnifying Party as
above provided, the Indemnifying Party shall be entitled to participate in and,
to the extent it may wish, jointly with any other Indemnifying Party similarly
notified, to assume the defense of such action at its own expense, with
counsel chosen by it. The Indemnified Party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel shall be paid by the Indemnified Party
unless (a) the Indemnifying Party agrees to pay the same or (b) the
named parties to any such action (including any impleaded parties) include both
the Indemnifying Party and the Indemnified Party and such parties have been
advised by such counsel that either (i) representation of such Indemnified
Party and the Indemnifying Party by the same counsel would be inappropriate
under applicable standards of professional conduct or would present a conflict
of interest; or (ii) there may be one or more legal defenses available to
the Indemnified Party which are different
31
from, inconsistent with
or additional to those available to the Indemnifying Party. In any of the cases
specified in the immediately preceding sentence, the Indemnifying Party shall
not be liable for the fees and expenses of more than one separate firm of
attorneys (in addition to any local counsel) for all Indemnified Parties. No
Indemnifying Party shall be liable for any settlement entered into without its
written consent, which consent shall not be unreasonably withheld. No
Indemnifying Party shall, without the consent of such Indemnified Party, effect
any settlement of any pending or threatened proceeding in respect of which such
Indemnified Party is a party and indemnity has been sought hereunder by such
Indemnified Party, unless such settlement includes an unconditional release of
such Indemnified Party from all Liability for claims that are the subject
matter of such proceeding.
7.4 Contribution. If the
indemnification provided for in this Article VII shall for any reason be
held by a court of competent jurisdiction to be unavailable to an Indemnified
Party, in respect of any Liability, then, in lieu of the amount paid or payable
under Section 7.1 or 7.2, as the case may be, the Indemnified Party and the
Indemnifying Party shall contribute to the aggregate Liabilities in such
proportion as is appropriate to reflect the relative fault of the Issuer and
the Stockholder in connection with the statements or omissions which resulted
in such loss, claim, damage or liability, or action or proceeding in respect
thereof, as well as any other relevant equitable considerations (the relative
fault of the Issuer and the Stockholder to be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Issuer or the Stockholder and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission). The parties hereto acknowledge that in no event
shall the obligation of any Indemnifying Party to contribute under this Section 7.4
exceed the amount that such Indemnifying Party would have been obligated to pay
by way of indemnification if the indemnification provided for under Section 7.1
or 7.2 had been available under the circumstances. The Issuer and the
Stockholder agree that it would not be just and equitable if contribution
pursuant to this Section 7.4 were determined by pro rata allocation or by
any other method of allocation that does not take account of the equitable
considerations referred to in the first sentence of this Section 7.4. No
Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
ARTICLE
VIII
MISCELLANEOUS
8.1 Recapitalizations, Exchanges, etc.
The provisions of this Agreement shall apply to the full extent set forth
herein with respect to (a) the Purchase Shares, (b) any and all
shares of voting common stock of the Issuer (excluding any such securities that
are freely transferable without registration under the Securities Act) into
which the Purchase Shares are converted, exchanged or substituted in any
recapitalization or other capital reorganization by the Issuer and (c) any
and all equity securities (excluding any
32
such securities that are
freely transferable without registration under the Securities Act) of the
Issuer or any of its Affiliates or any successor or assign or acquiror of the
Issuer or any of its Affiliates (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in conversion of, in exchange
for, in substitution of or as a distribution on, the Purchase Shares and shall
be appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the date hereof. The
Issuer shall cause any such Affiliate, successor or assign or acquiror (whether
by merger, consolidation, sale of assets or otherwise) to enter into a new
registration rights agreement with respect to such equity securities with the
Stockholder on terms no less favorable to the Stockholder than the terms
provided under this Agreement as a condition of any such transaction.
8.2 Notices. All notices, requests,
claims and demands and other communications hereunder shall be in writing and
shall be deemed duly delivered (a) four Business Days after being
sent by registered or certified mail, return receipt requested, postage
prepaid, or (b) one Business Day after being sent by facsimile
transmission (provided the sender retains confirmation thereof) or for next
Business Day delivery, fees prepaid, via a reputable nationwide overnight
courier service, in each case to the intended recipient as set forth below:
Any party to this
Agreement may give any notice or other communication hereunder using any other
means (including personal delivery, messenger service, telecopy or ordinary
mail), but no such notice or other communication shall be deemed to have been
duly given unless and until it actually is received by the office of the party
for whom it is intended during business hours on a Business Day in the place of
receipt. Any party to this Agreement may change the address to which notices
and other communications hereunder are to be delivered by giving the other
parties to this Agreement notice in the manner herein set forth.
8.3 Entire Agreement; No Inconsistent
Agreements. This Agreement constitutes the entire agreement among the
parties hereto and supersedes any prior understandings, agreements or
representations by or among the parties hereto, or any of them, written or
oral, with respect to the subject matter hereof.
8.4 Further Assurances. Each of the
parties shall execute such documents and perform such further acts as may be
reasonably required or desirable to carry out or to perform the provisions of
this Agreement.
34
8.5 Other Agreements. Nothing
contained in this Agreement shall be deemed to be a waiver of, or release from,
any obligations any party hereto may have under the TW NY APA.
8.6 No Third-Party Beneficiaries. Except
as provided in Article VII or Section 8.7, this Agreement is not
intended, and shall not be deemed, to confer any rights or remedies upon any
Person other than the parties hereto and their respective successors and
permitted assigns or to otherwise create any third-party beneficiaries hereto.
8.7 Assignment. This Agreement
shall be binding upon and inure to the benefit of and shall be enforceable by
the parties hereto and their respective successors and assigns. Concurrently
with or immediately following the effective time of the Remainder Plan, Adelphia
may Transfer the Purchase Shares then held by Adelphia and, in connection
therewith, may assign this Agreement and the rights hereunder to a limited
number of entities acting on behalf of Adelphia’s estate designated by Adelphia
(such number and the form and identity of each entity to be) reasonably
acceptable to the Issuer (each, a “Permitted Assignee”); providedthat each such Permitted Assignee (a) shall, effective upon such
assignment, be deemed to be a party hereto and to have made the representations
and warranties in Section 3.1 and 3.2 as to itself; (b) shall agree
in writing to be bound by the obligations of the Stockholder set forth in this
Agreement and (c) shall agree in writing to be bound by the obligations of
Adelphia set forth in Section 5.5(c) of the TW NY APA; provided,
further that such assignment by Adelphia under this Section 8.7
shall relieve Adelphia of any further obligation and Liability under this
Agreement arising after the date of assignment if, but only if, Adelphia
provides the Issuer with an indemnification agreement (in form and substance
reasonably satisfactory to the Issuer, itbeingunderstoodthat the amount or nature of the remaining assets or liabilities of
Adelphia shall not be a factor in such determination) indemnifying the Issuer
for any breach of the obligations and Liabilities of the Permitted Assignee
under this Agreement.
8.8 Amendments and Waivers. Except
as otherwise provided herein, the provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, unless consented to in writing by the
Issuer and the Stockholder with respect to any amendment or supplement and by
the party to this Agreement entitled to the benefit in the case of a waiver or
consent.
8.9 Severability. The provisions of
this Agreement shall be deemed severable and any term or provision of this
Agreement that is invalid or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction declares that any term or
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, the parties hereto agree that the
court making such determination shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace any invalid or
unenforceable term or provision with a term or provision that is valid and
enforceable
35
and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court
does not exercise the power granted to it in the prior sentence, the parties
hereto agree to replace such invalid or unenforceable term or provision with a
valid and enforceable term or provision that shall achieve, to the extent
possible, the economic, business and other purposes of such invalid or
unenforceable term and the remainder of this Agreement and the application of
such provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
8.10 Counterparts and Signature. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original but all of which together shall be considered one and the
same agreement and shall become effective when counterparts have been signed by
each of the parties hereto and delivered to the other parties, itbeingunderstoodthat all parties need not sign the same counterpart. This
Agreement may be executed and delivered by facsimile transmission.
8.11 Interpretation. When reference is
made in this Agreement to an Article or Section, such reference shall be
to an Article or Section of this Agreement, unless otherwise
indicated. The headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no rule of
strict construction shall be applied against any party. Whenever the context
may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. Whenever the words “include,”“includes” or “including”
are used in this Agreement, they shall be deemed to be followed by the words “without
limitation.”
8.12 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING
EFFECT TO ANY CHOICE OR CONFLICT OF LAWS PROVISION OR RULE (WHETHER OF THE
STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE
APPLICATION OF LAWS OF ANY JURISDICTIONS OTHER THAN THOSE OF THE STATE OF NEW
YORK.
8.13 Submission to Jurisdiction; Selection
of Forum; Waiver of Trial by Jury. Each party hereto agrees that it shall
bring any action or proceeding in respect of any claim arising out of or
related to this Agreement or the transactions contained in or contemplated by
this Agreement exclusively in (a) the Bankruptcy Court so long as the
36
Bankruptcy Case remains
open and (b) after the completion of the Bankruptcy Case or in the event
that the Bankruptcy Court determines that it does not have jurisdiction, the
United States District Court for the Southern District of New York or any
New York State court sitting in New York City (together with the
Bankruptcy Court, the “Chosen Courts”), and solely in connection with
claims arising under this Agreement or the transactions that are the subject of
this Agreement (i) irrevocably submits to the exclusive jurisdiction of
the Chosen Courts, (ii) waives any objection to laying venue in any such
action or proceeding in the Chosen Courts, (iii) waives any objection that
the Chosen Courts are an inconvenient forum or do not have jurisdiction over
any party hereto and (iv) agrees that process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any such court; providedthat service
of process upon such party in any such action or proceeding shall be effective
if notice is given in accordance with Section 8.2. The Stockholder
irrevocably designates The Corporation Trust Company as its agent and
attorney-in-fact for the acceptance of service of process and making an
appearance on its behalf in any such claim or proceeding and for the taking of
all such acts as may be necessary or appropriate in order to confer
jurisdiction over it before the Chosen Courts and the Stockholder stipulates
that such consent and appointment is irrevocable and coupled with an interest. Each
party hereto irrevocably waives any and all right to trial by jury in any legal
proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby.
8.14 Remedies.
(a) Any and all remedies
herein expressly conferred upon a party shall be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy shall not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which the parties are entitled at law or in equity.
(b) Any breach by the
Stockholder of the representations or warranties, covenants or agreement set
forth in this Agreement shall be deemed a covenant breach by Adelphia pursuant
to the TW NY APA and Adelphia shall indemnify, defend and hold harmless TW NY
(on its own behalf and/or on behalf of the Issuer or any other Buyer
Indemnified Party) from, against and in respect of any Losses imposed on,
sustained, incurred or suffered by, or asserted against, any of such Persons,
whether in respect of third party claims, claims between the parties hereto, or
otherwise, directly or indirectly relating to, arising out of or resulting from
such breach. TW NY, the Issuer and any other Buyer Indemnified Party shall have
the right, each in its sole discretion, to exercise its rights and remedies
with respect to such Loss against either the Escrow Account, the Stockholder or
Adelphia and, to the extent exercised against Adelphia, such
37
rights and
remedies shall constitute an administrative expense under section 507(a)(1) of
the Bankruptcy Code.
8.15 Comcast Letter Agreement. If
compliance by any of the parties hereto with the Comcast Letter Agreement would
otherwise result in a violation of this Agreement, such violation shall be
deemed to be automatically waived by the other parties hereto.
[Remainder of
page intentionally left blank]
38
IN WITNESS WHEREOF, the
undersigned have executed, or have caused to be executed, this Agreement on the
date first written above.
ASSET PURCHASE AGREEMENT, dated as of April 20,2005, between Adelphia Communications Corporation, a Delaware corporation (“Seller”),
and Time Warner NY Cable LLC, a Delaware limited liability company that has
elected to be classified as a corporation for United States federal income tax
purposes (“Buyer”). Capitalized terms used but not otherwise defined
herein shall have the respective meanings ascribed to such terms in Article I.
W I T N
E S S E T H:
WHEREAS, Seller and certain of its Affiliates are
debtors and debtors in possession (the “Debtors”) under chapter 11 of
title 11 of the United States Code, 11 U.S.C. §§101 et seq. (the “Bankruptcy Code”), having each
commenced voluntary cases (jointly administered as No. 02-41729
(REG)) (the “Reorganization Case”) on or after June 10, 2002 (the “Petition
Date”) in the Bankruptcy Court;
WHEREAS, Seller and its Affiliates are engaged in the
business of operating Systems providing customers with analog and digital video
services, high-speed Internet access and other services, including
telephony services, in the geographical areas listed on Schedule A of
the Seller Disclosure Schedule and on Schedule A of the Seller
Disclosure Schedule (as defined in the Friendco Purchase Agreement) to the
Friendco Purchase Agreement, and are engaged in the other businesses and have
such other holdings as are set forth on Schedule B of the Seller
Disclosure Schedule (together, the “Business”);
WHEREAS, Time Warner Cable Inc., a Delaware
corporation (“Parent”), and its Subsidiaries, including Buyer, are
engaged in the business of operating Systems providing customers with analog
and digital video services, high-speed Internet access and other
services, including telephony services, in the geographical areas listed on Schedule
C of the Buyer Disclosure Schedule (the “Parent Business”);
WHEREAS, Seller desires to sell and assign, and to
cause certain of its Affiliates to sell and assign, to Buyer and Buyer desires
to purchase and assume from Seller and such Affiliates certain Assets and
Liabilities of the Business, as more particularly set forth herein, including
the Systems servicing the geographical areas listed in Part 1 of Schedule
A of the Seller Disclosure Schedule (the “Group 1 Systems”), Part 2A
of Schedule A of the Seller Disclosure Schedule (the “Group 2 Systems”)
and Part 2B of Schedule A of the Seller Disclosure Schedule (the “MCE
Systems” and, together with the Group 1 Systems and Group 2 Systems, the “Acquired
Systems”);
WHEREAS, the parties intend that the Transaction
shall constitute a taxable transaction for all income Tax purposes and, for the
avoidance of doubt, the Transaction shall not be governed by Sections 351 or
368(a) of the Code (or similar provisions of state, local or foreign Tax
Law, as applicable);
WHEREAS, simultaneously with the execution hereof,
Seller and Comcast Corporation, a Pennsylvania corporation (“Friendco”),
are entering into an Asset Purchase Agreement (together with the schedules and
exhibits thereto, all as
amended from time to time with the approval of Buyer and
disregarding the effectiveness of any waiver by Friendco not approved by Buyer
and any waiver by Seller not approved by Buyer to the extent it adversely
affects Buyer, the “Friendco Purchase Agreement”) pursuant to which
Seller has agreed to sell and assign, and to cause certain of its Affiliates to
sell and assign, to Friendco and Friendco has agreed to purchase and assume
from Seller and such Affiliates on the terms set forth therein, certain Assets
and Liabilities of the Business, as more particularly set forth therein (the “Friendco
Business”);
WHEREAS, simultaneously with the execution hereof,
Parent, Friendco and certain of their Affiliates are entering into the Exchange
Agreement, pursuant to which Buyer and/or certain of its Affiliates will convey
to Friendco and/or certain of its Affiliates and Friendco and/or certain of its
Affiliates will assume from Buyer and/or certain of its Affiliates the Business
Related to the Group 1 Systems and the Group 1 Shared Assets and Liabilities (the
“Group 1 Business”), together with additional Systems owned and managed
by certain of Parent’s Subsidiaries, in exchange for a portion of the Friendco
Business, together with additional Systems owned and managed by Friendco or its
Affiliates, all as more specifically set forth in the Exchange Agreement (the “Exchange”);
WHEREAS, upon consummation of the Transaction and the
Exchange, the portion of the Business retained by Buyer will be (a) that
portion of the Business Related to the Group 2 Systems, (b) that portion
of the Business Related to the MCE Systems and (c) the Group 2 Shared
Assets and Liabilities (collectively, the “Group 2 Business” and
together with the Group 1 Business, the “Acquired Business”); provided,
however, that the Acquired Business shall exclude the Assets and
Liabilities identified on Schedule D of the Seller Disclosure Schedule;
WHEREAS, as an inducement to Seller to enter into
this Agreement, simultaneously with the execution hereof, Parent, Buyer and
Seller are entering into a Parent Agreement pursuant to which Parent is
guaranteeing the performance of Buyer hereunder (the “Parent Agreement”);
WHEREAS, prior to or at the Closing, Seller, Buyer
and an escrow agent to be mutually selected by Buyer and Seller (the “Escrow
Agent”) will enter into an escrow agreement in form and substance
reasonably acceptable to Buyer and Seller (the “Escrow Agreement”);
WHEREAS, in connection with the Transaction, Seller
and/or its Affiliates, on the one hand, and Buyer, Parent and/or certain of
Parent’s Controlled Affiliates, on the other hand, shall enter into the other
Ancillary Agreements; and
WHEREAS, the Debtors have agreed to file the Plan
with the Bankruptcy Court to implement the Transaction upon the terms and
subject to the conditions set forth herein.
2
NOW, THEREFORE, in consideration of the premises and
the mutual representations, warranties, covenants and undertakings contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be legally bound, agree as follows:
ARTICLE I
DEFINITIONS AND TERMS
Section
1.1 Certain Definitions. As
used in this Agreement, the following terms have the meanings set forth below:
“Accounts Receivable” means, with respect to
each Specified Business, all Subscriber, trade and other accounts and notes
receivable, and other miscellaneous receivables of such Specified Business
arising out of the sale or other disposition of goods or services of such
Specified Business.
“Acquire” means to directly or indirectly
acquire, receive in exchange or redemption, subscribe for, purchase (by merger,
consolidation, combination, recapitalization or other reorganization) or
otherwise obtain an interest in, by operation of Law or otherwise.
“Acquired Business” has the meaning set forth
in the Recitals.
“Acquired Systems” has the meaning set forth
in the Recitals.
“Acquisition” has the meaning set forth in Section 5.10.
“Acquisition Proposal” has the meaning set
forth in Section 5.10.
“Additional Discharge” means, with respect to
any Person, except as otherwise provided in the Plan and the Confirmation Order
(or, to the extent approved by Buyer (such approval not to be unreasonably
withheld), such other plan that includes such Person as a debtor and the
confirmation order of the Bankruptcy Courtapproving
such plan and effecting the Additional Discharge), the discharge and/or
equivalent effect granted pursuant to such confirmation order and sections 363,
1123 and 1141 of the Bankruptcy Code, and in each case prior to or at the
Closing, (i) of such Person, as a debtor in possession, from all
Liabilities, (ii) of interests of, and rights, interests and Claims of the
holders of Claims against and interests in, such Person and (iii) of
Encumbrances on, or interests of other Persons (other than Seller and its
Affiliates) in, the Transferred Assets that are related to such Person; itbeingunderstoodthat an Additional Discharge may occur
pursuant to the Plan.
“Additional Financial Statements” has the
meaning set forth in Section 5.11(b).
“Additional Reorganization Case” has the
meaning set forth in Section 5.13(h).
3
“Affiliate” means, with respect to any Person,
any other Person directly or indirectly controlling, controlled by, or under
common control with, such Person as of the date on which, or at any time during
the period for which, the determination of affiliation is being made. For
purposes of this definition, the term “control” (including the correlative
meanings of the terms “controlled by” and “under common control with”), as used
with respect to any Person, means the possession, directly or indirectly, of
the power to direct or cause the direction of the management policies of such
Person, whether through the ownership of voting securities or by contract or
otherwise. For purposes of this Agreement, (i) none of Seller or any of
its Affiliates shall be deemed to be an Affiliate of any of Buyer, Parent, TWX,
Friendco or any of their respective Affiliates, (ii) none of Buyer,
Parent, TWX or any of their Affiliates shall be deemed to be an Affiliate of
any of Seller, Friendco or any of their respective Affiliates, (iii) none
of Friendco or any of its Affiliates shall be deemed to be an Affiliate of any
of Seller, Buyer, Parent, TWX or any of their respective Affiliates, (iv) each
Managed Cable Entity shall be deemed to be an Affiliate of Seller, (v) no
member of the family of John Rigas shall be deemed to control Seller or any of
its Affiliates and (vi) each of the Tele-Media Entities shall be deemed to
be an Affiliate of Seller.
“Aggregate Consideration” means the Purchase
Price plus the Assumed Liabilities, as adjusted pursuant to this Agreement.
“Aggregate Purchase Price Value” means
$14,114,000,000.
“Aggregate Value of the Purchase Shares” means
$4,960,000,000.
“Agreement” means this Asset Purchase
Agreement.
“Alternate Plan” has the meaning set forth in Section 5.10(b).
“Amended and Restated By-laws” means the
Amended and Restated By-laws of Parent, in the form of Exhibit 1.1(a),
as the same may be amended, supplemented or modified from time to time (provided,
that any such amendment, supplement or modification shall not (i) amend,
modify or supplement Article VI or XII of such Amended and Restated
By-laws or (ii) to the extent relating to any other matter, (A) affect
Seller or its stakeholders in a manner that is adverse relative to the manner
in which it affects TWX as a stockholder of Parent or (B) adversely affect
Seller or its stakeholders in any material respect).
“Amended and Restated Charter” means the
Amended and Restated Certificate of Incorporation of Parent, in the form of Exhibit 1.1(b),
as the same may be amended, supplemented or modified from time to time (provided,
that any such amendment, supplement or modification shall not (i) amend,
modify or supplement Article VI or IX of such Amended and Restated Charter
or (ii) to the extent relating to any other matter, (A) affect Seller
or its stakeholders in a manner that is adverse relative to the manner in which
it affects TWX as a stockholder of Parent or (B) adversely affect Seller
or its stakeholders in any material
respect).
4
“Ancillary Agreements” means the Parent
Agreement, the Escrow Agreement and each MCE Management Agreement, and the
instruments and other agreements required to be delivered pursuant to Sections
2.9 and 2.10, including any Bill of Sale.
“Applicable Employees” has the meaning set
forth in Section 5.8(e).
“Applicable Monthly Rate” has the meaning set
forth in the definition of “Permitted Promotion.”
“Asset Transferring Subsidiary” means those
Subsidiaries of Seller that have any right, title or other interest in, to or
under any Transferred Assets.
“Assets” means any asset, property or right,
wherever located (including in the possession of vendors or other third parties
or elsewhere), whether real, personal or mixed, tangible, intangible or
contingent, in each case whether or not recorded or reflected or required to be
recorded or reflected on the books and records or financial statements of any
Person, and all right, title, interest and claims therein.
“Assigned Contracts” has the meaning set forth
in Section 5.13(b).
“Assignment and Assumption Agreement” means an
agreement in form and substance reasonably acceptable to Seller and Buyer,
providing for the effective assignment of any Assigned Contracts or other
Transferred Assets Related to such Specified Business and the assumption of the
Assumed Liabilities Related to such Specified Business other than, in each
case, the Transferred Real Property Leases.
“Assumed Cure Costs” means the amounts
designated as Assumed Cure Costs pursuant to Section 5.13(d) and the
Cure Costs related to the Franchises for each of the localities listed on Schedule
A of the Seller Disclosure Schedule.
“Assumed Liabilities” means, with respect to
each Specified Business, only the following Liabilities of Seller or any of its
Affiliates that are Debtors (or which become subject to an MCE Discharge or an
Additional Discharge) that are Related to such Specified Business, in each case
to the extent allocated to such Specified Business as required by Section 2.3: (i) Liabilities attributable to actions,
omissions, circumstances or conditions to the extent occurring following the
Closing to the extent so allocated to such Specified Business or any of the
Transferred Assets allocated to such Specified Business pursuant to the
Designated Allocation, including under the Assigned Contracts and
Authorizations, (ii) Liabilities of such Specified Business arising in the
Ordinary Course of Business since the Petition Date but only to the extent of
the amount reflected in the Closing Net Liabilities Amount used in calculating
the Final Adjustment Amount for such Specified Business, (iii) the
following Liabilities: (A) Liabilities
to provide severance pay and benefits pursuant to Section 5.8(d), (B) Liabilities
for all expenses and benefits with respect to claims incurred by Transferred
Employees or their covered dependents on or after the Closing Date pursuant to Section 5.8(f) and
(C) Liabilities to provide accrued but unused vacation and with respect to
sale bonuses due under the Adelphia Communications Corporation Sale Bonus
Program (the “Sale Bonus
5
Program”) to
Transferred Employees pursuant to Section 5.8(k) but only to the
extent of the amount reflected in the Closing Net Liabilities Amount used in
calculating the Final Adjustment Amount for such Specified Business, (iv) the
Assumed Cure Costs, (v) the Liabilities Related to such Specified Business
described in the proviso to the second sentence of Section 5.13(d), (vi) all
Liabilities of such Specified Business set forth on Schedule 1.1(a) of
the Seller Disclosure Schedule, (vii) Assumed Taxes, (viii) Liabilities
in respect of Environmental Self-Audit Deficiencies or Environmental Transfer
Act Liabilities, in each case (with respect to this clause (viii)), to the
extent and only to the extent such Liabilities consist solely of monetary
obligations (but only to the extent of the amount reflected in the Closing Net
Liabilities Amount used in calculating the Final Adjustment Amount for such
Specified Business) or non-monetary obligations agreed to by Buyer pursuant to Section 5.16
and (ix) Liabilities of such Specified Business under purchase orders
outstanding as of the Closing but only to the extent of the amount reflected in
the Closing Net Liabilities Amount used in calculating the Final Adjustment
Amount for such Specified Business.
“Assumed Taxes” means, with respect to each
Specified Business, any Taxes imposed with respect to such Specified Business
or any Transferred Assets Related thereto or any income or gain derived with
respect thereto for the taxable periods, or portions thereof, beginning after
the Closing.
“Audited Financial Statements” has the meaning
set forth in Section 3.7(a).
“Authorization” means any Governmental
Authorization or Non-Governmental Authorization.
“Background Check” has the meaning set forth
in Section 5.8(a).
“Bankruptcy Code” has the meaning set forth in
the Recitals.
“Bankruptcy Court” means the United States
Bankruptcy Court for the Southern District of New York or, with respect to a
Managed Cable Entity or Non-Debtor Subsidiary, the United States Bankruptcy
Court in which any chapter 11 case that includes such Managed Cable Entity or
Non-Debtor Subsidiary is pending.
“Bankruptcy Rules” means the Federal Rules of
Bankruptcy Procedure as promulgated by the United States Supreme Court under
section 2075 of title 28 of the United States Code applicable to the
Reorganization Case, and any Local Rules of the Bankruptcy Court.
“Base Net Liabilities Amount” means, with
respect to each Specified Business, $0.00.
“Base Subscriber Number” means, with respect
to each Specified Business, the number of Basic Subscribers of such Specified
Business corresponding to the month prior to the month in which the Closing
occurs, as set forth on Schedule 1.1(b) of the Seller Disclosure
Schedule; provided, however, that, except for purposes of
6
calculating the Initial Disputed MCE System Adjustment
Amount pursuant to Section 2.7(a), in the event any Disputed MCE Systems
exist as of the Closing, then the Base Subscriber Number for the Group 2
Business shall be reduced by the aggregate of the MCE Base Subscriber Numbers
for all such Disputed MCE Systems.
“Basic Subscriber” means a “Basic Video
Customer” as determined pursuant to the Seller Subscriber Accounting Policy.
“Benefit Plans” has the meaning set forth in Section 3.10(a).
“Bill of Sale” means, with respect to each
Specified Business, an agreement in form and substance reasonably acceptable to
Seller and Buyer, transferring the tangible personal property included in the
Transferred Assets Related to such Specified Business.
“Board” has the meaning set forth in Section 5.10.
“Books and Records” means, with respect to
each Specified Business, all books, ledgers, files, reports, records, manuals,
maps and engineering data, tests, drawings, blueprints, schematics, lists,
plans and processes and all files of correspondence and records concerning
Subscribers and prospective Subscribers of any Cable System of such Specified
Business or concerning signal or program carriage and all correspondence with
Government Entities, including all reports filed by or on behalf of Seller or
any of its Affiliates with the FCC and statements of account filed by or on
behalf of Seller or any of its Affiliates with the United States Copyright
Office, all Tax Returns of Seller or any of its Affiliates (including
workpapers) and tax software to the extent directly related thereto and other
materials (in any form or medium) of, or maintained for, such Specified
Business, but excluding any such items to the extent (i) they are included
in or primarily related to any Excluded Assets or Excluded Liabilities or (ii) with
respect to any such items related to Employees, any Law prohibits their
transfer; provided, however, that Books and Records shall include
copies of any items excluded pursuant to the foregoing clause (i).
“Broadband Industry” means the industries in
which any Specified Business and the Parent Business operate as of the date
hereof and as such industries develop from time to time.
“Budget” has the meaning set forth in Section 5.2(s).
“Business” has the meaning set forth in the
Recitals.
“Business Day” means any day other than a
Saturday, a Sunday or a day on which banks in New York City are authorized or
obligated by Law or executive order to close.
“Buyer” has the meaning set forth in the
Preamble.
7
“Buyer Adverse Tax Event” means any change in
Tax Law or Proposed Change in Tax Law that has a reasonable possibility (or, in
the case of any Proposed Change in Tax Law (i) by a Specified HWMC Member
or a Specified SFC Member, or (ii) that is a Non-Referred Proposal, a
reasonable probability) of being enacted or adopted and such change in Tax Law
or Proposed Change in Tax Law (assuming in the case of a Proposed Change in Tax
Law, such Proposed Change in Tax Law were enacted pursuant to its terms) would
cause Buyer, based upon Buyer’s consultation with Paul, Weiss, Rifkind, Wharton &
Garrison LLP or other tax counsel reasonably selected by Buyer, not to conclude
both (A) that Buyer should have an aggregate tax basis in the Transferred
Assets that includes the fair market value of the Aggregate Consideration, and (B) that
there should be no special limitations on Buyer’s ability to depreciate or
amortize the Transferred Assets, in each case, because of (1) the method
by which Buyer will acquire the Transferred Assets in the Transaction or (2) the
fact that Seller or any of its Affiliates is a party to the Reorganization Case
or any other special circumstances of the Seller or any of its Affiliates; provided,
however, that the net effects of such change in Tax Law or of such
Proposed Change in Tax Law insofar as it relates to Buyer’s aggregate tax basis
in the Transferred Assets and Buyer’s ability to depreciate or amortize the
Transferred Assets are adverse to Buyer other than in a de minimis manner; provided, further,
that the adverse effects of such change in Tax Law or Proposed Change in Tax
Law cannot be avoided by accelerating or deferring the Closing Date of the
Transaction or by restructuring the Transaction, in each case in a manner
reasonably satisfactory to Buyer and Seller (and that such acceleration,
deferral or restructuring is in fact implemented). Buyer agrees that assuming
the Closing Date was the date hereof, Buyer would conclude that Buyer’s basis
should include the fair market value of the Aggregate Consideration and there
should be no such special limitations on Buyer’s ability to depreciate or
amortize the Transferred Assets.
“Buyer Class 1 Representations and Warranties”
has the meaning set forth in Section 6.3(a).
“Buyer Class 2 Representations and Warranties”
has the meaning set forth in Section 6.3(a).
“Buyer Discharge Amount” has the meaning
ascribed to such term in the Friendco Purchase Agreement.
“Buyer Disclosure Schedule” means the Buyer
Disclosure Schedule attached hereto as Annex B.
“Buyer Indemnification Deadline” has the
meaning set forth in Section 7.1.
“Buyer Indemnified Parties” has the meaning
set forth in Section 7.2(a).
“Buyer JV Partner” has the meaning ascribed to
such term in the Friendco Purchase Agreement.
8
“Buyer Managed MCE System” has the meaning set
forth in Section 2.7(c).
“Buyer Plan” has the meaning set forth in Section 5.8(h).
“Buyer Required Approvals” means all consents,
approvals, waivers, authorizations, notices and filings from or with a
Government Entity that are listed on Schedule 1.1(a) of the Buyer
Disclosure Schedule other than the LFA Approvals; provided, however, that Schedule 1.1(a) shall
be deemed to exclude the NYSE approval in the third bullet point on such
schedule.
“Buyer’s 401(k) Plan” has the meaning set
forth in Section 5.8(j).
“Buyer’s Statement” has the meaning set forth
in Section 2.6(b).
“Cable Act” means Title VI of the
Communications Act, 47 U.S.C. §§521 et seq.
“Cable System” means, with respect to each
Specified Business, each System that is Related to such Specified Business.
“Cap Amount” means the Group 1 Cap Amount or
the Group 2 Cap Amount, as the case may be.
“Capital Expenditure Adjustment Amount” means,
with respect to each Specified Business, an amount equal to the Target Capital
Expenditure Amount minus the
Closing Capital Expenditure Amount for such Specified Business. Except to the
extent (and only to the extent) the consent of Buyer is obtained as
contemplated in the proviso to the definition of “Closing Capital Expenditure
Amount,” in no event will the Capital Expenditure Adjustment Amount be a
negative number.
“Capital Lease” means any lease that is
required to be classified and accounted for as a capital lease under GAAP.
“Cash Consideration” has the meaning set forth
in Section 2.5(b).
“CERCLA” means the Comprehensive Environmental
Response, Compensation and Liability Act of 1980.
“Chapter 11 Expenses” means (a) any and
all costs incurred and expenses paid or payable by Seller or any of its
Affiliates in connection with the Sale Process, the Transaction or the
transactions contemplated by the Friendco Purchase Agreement, other than costs
that Buyer has expressly agreed to pay pursuant to this Agreement and (b) the
following costs and expenses related to the administration of the
Reorganization Case or the reorganization case of any Managed Cable Entity or
Non-Debtor Subsidiary: (i) obligations
to pay any professionals’ fees and expenses in connection with the
Reorganization Case incurred by Seller, its Affiliates, the Committees, and any
other compensation or expenses payable in connection with the Reorganization
Case (including
9
fees of attorneys, accountants, investment bankers,
financial advisors, auditors and consultants), other than fees and expenses
Buyer has expressly agreed to pay pursuant to this Agreement, (ii) fees
and expenses payable to the US Trustee under section 1930 of title 28, United
States Code, (iii) fees and expenses of the members of the Committees, (iv) fees
and expenses of the trustees of existing indentures of Seller and (v) fees
and expenses related to the DIP Facility.
“Chosen Courts” has the meaning set forth in Section 9.10.
“Claim” means a claim (as defined in section
101(5) of the Bankruptcy Code) against a Debtor.
“Claim Notice” has the meaning set forth in Section 7.4(a).
“Class 1 Representations and Warranties”
has the meaning set forth in Section 6.2(a).
“Class 2 Representations and Warranties”
has the meaning set forth in Section 6.2(a).
“Closing” means the closing of the
Transaction.
“Closing Adjustment Amount” means, with
respect to each Specified Business, the sum (expressed as a positive, if
positive, or as a negative, if negative) of (i) the Net Liabilities
Adjustment Amount for such Specified Business, minus
(ii) the Subscriber Adjustment Amount for such Specified Business, minus (iii) the Capital Expenditure
Adjustment Amount for such Specified Business.
“Closing Capital Expenditure Amount” means, as
to each Specified Business, the sum of all capital expenditures incurred by
Seller and its Affiliates in respect of such Specified Business consistent with
the Budget and in the Ordinary Course of Business (and excluding any amounts
incurred or paid in connection with any casualty or damage), subsequent to December 31,2004 and up to and including the end of the month immediately preceding the
Closing Date or, if the Closing occurs on a month-end, up to and
including such month; provided, however, that any capital
expenditures incurred or paid for in excess of the aggregate amount set forth
in the Budget for such Specified Business shall be included in the
determination of Closing Capital Expenditure Amount only to the extent that
Buyer shall have consented to such expenditures prior to the incurrence
thereof.
“Closing Date” has the meaning set forth in Section 2.8.
“Closing Net Liabilities Amount” means, with
respect to each Specified Business, the Current Assets of such Specified
Business minus the Total
Liabilities of such Specified Business.
10
“Closing Subscriber Number” means, with
respect to each Specified Business, as of the Closing, the number of Eligible
Basic Subscribers of such Specified Business.
“Code” means the Internal Revenue Code of
1986.
“Collective Bargaining Agreements” means, with
respect to each Specified Business, the collective bargaining agreements
covering Employees listed on Schedule 1.1(c) of the Seller
Disclosure Schedule and identified as Related to such Specified Business.
“Committees” means (i) the committee
appointed by the US Trustee to represent the interests of the unsecured
creditors of the Debtors, (ii) the committee appointed by the US Trustee
to represent the interests of equity holders of the Debtors, (iii) any
other committee appointed by the US Trustee in connection with the
Reorganization Case and (iv) any committee appointed by the US Trustee in
the reorganization case of any Managed Cable Entity or Non-Debtor
Subsidiary.
“Communications Act” means the Communications
Act of 1934.
“Condemnation Proceeds” means, with respect to
any Specified Business, all amounts payable or paid to Seller or any of its
Affiliates as proceeds of (i) a condemnation or other taking of any Asset
Related to such Specified Business by any Government Entity following December 31,2004 or (ii) the exercise of any Purchase Right Related to such Specified
Business following December 31, 2004.
“Confidential Information” has the meaning set
forth in Section 5.1(e).
“Confirmation Hearing” means the hearing held
by the Bankruptcy Court to consider confirmation of the Plan.
“Confirmation Order” means an order or
judgment of the Bankruptcy Court confirming the Plan pursuant to section 1129
of the Bankruptcy Code, satisfying the requirements of Section 5.13.
“Contract” means any agreement, contract,
lease or sublease, license or sublicense, purchase order, arrangement,
commitment, indenture, note, security, instrument, consensual obligation,
promise, covenant or undertaking, including all franchises, rights-of-way, bulk
service, commercial service or multiple dwelling unit agreements, access
agreements, programming agreements, signal supply agreements, agreements with
community groups, commercial leased access agreements, capacity license
agreements, partnership, joint venture or other similar agreements or
arrangements, and advertising interconnect agreements, or any other agreement,
in each case, whether written or oral, and all rights associated therewith.
“Contract Categories Expected to be Assumed”
means the following categories of Contracts, in each case to the extent Related
to a Specified Business:
(iii) bulk service, commercial service or multiple dwelling unit
Subscriber Contracts;
(iv) Contracts (including open purchase orders) relating to
Fixtures and Equipment and any other tangible personal property (excluding
motor vehicles), in each case only if Related exclusively to a specific Cable
System;
(v) local
Cable System leased access agreements required by Law;
(vi) Rights-of-Way;
(vii) Real Property Leases (excluding leases that would be
Excluded Assets pursuant to Section 2.2(h)(i)) and Transferred Real
Property Subleases;
(viii) Franchises and Authorizations (other than state certificates
of public convenience and necessity and similar state telecommunications
Authorizations);
(ix) advertising interconnect and local advertising sale
Contracts (other than advertising representation Contracts, except as set forth
on Schedule 1.1(e) of the Seller Disclosure Schedule); and
(x) software
licenses and related maintenance agreements, in each case only if Related
exclusively to a specific Cable System.
“Controlled Affiliate” means, with respect to
any Person, any Affiliate of such Person that is controlled directly or
indirectly by such Person.
“Cost Center” means a so called cost center as
used by Seller for internal management and bookkeeping purposes.
“CPA Firm” means KPMG LLP or such other firm
of independent certified public accountants as to which Seller and Buyer shall
mutually agree.
“Cure Costs” means, with respect to any
Contract, the costs and expenses payable under section 365 of the Bankruptcy
Code in connection with the assumption and/or assignment of such Contract.
“Current Assets” means, with respect to each
Specified Business, the current assets of such Specified Business included in
the Transferred Assets as of the Closing (after giving effect to the
Transaction), as would be reflected on the face of a balance sheet for such
Specified Business (excluding any footnotes thereto) prepared in accordance
with GAAP, consistently applied (to the extent GAAP was previously
12
applied) for such Specified Business; provided,
however, that in no event shall Current Assets include (A) inventory,
(B) any Assets with respect to Taxes (including duty and tax refunds and
prepayments) and net operating losses of Seller or any of its Affiliates, (C) investments
in Subsidiaries, (D) Assets held for sale (other than in connection with
the Exchange), (E) Condemnation Proceeds, (F) Insurance Claims
(except to the extent (and only to the extent) relating to an Assumed
Liability), (G) Accounts Receivable related to Programming Agreements, (H) pre-paid
insurance premiums and maintenance expenses (to the extent paid under Contracts
other than Assigned Contracts) or (I) prepaid expenses except to the
extent the Specified Business will receive the benefit thereof within one year
of the Closing; provided, further, that Current Assets to be
acquired under purchase orders outstanding as of the Closing will, for purposes
hereof, be treated as being owned by the relevant Specified Business as of the
Closing regardless of whether they would otherwise be treated as such under
GAAP but subject in any event to the remainder of this definition. For purposes
of determining Current Assets in respect of any Disputed MCE System, all
references above to the Closing shall be deemed to mean, with respect to any
Disputed MCE System, the MCE Closing.
“Debtors” has the meaning set forth in the
Recitals.
“Delayed Transfer Asset” has the meaning set
forth in Section 2.11.
“Derivative 2003 Financial Statements” has the
meaning set forth in Section 3.7(a).
“Derivative 2004 Financial Statements” has the
meaning set forth in Section 3.7(a).
“Derivative Audited Financial Statements” has
the meaning set forth in Section 5.11(b).
“Derivative Unallocated 2004 Financial Statements”
has the meaning set forth in Section 3.7(a).
“Designated Allocation” has the meaning set
forth in Section 2.1.
“Designated Litigation” means the litigation
set forth on Schedule 1.1(f) of the Seller Disclosure Schedule.
“Digital Subscriber” means a “Digital Customer”
as determined pursuant to the Seller Subscriber Accounting Policy.
“DIP Facility” means the Third Amended and
Restated Credit and Guaranty Agreement, dated as of February 25, 2005,
among Seller, the Subsidiaries of Seller identified therein and the financial
institutions identified therein, and any related documents, agreements and
instruments.
“Discharge” means, except as otherwise
provided in the Plan and the Confirmation Order, the discharge or equivalent
granted pursuant to the Confirmation
13
Order, and sections 363, 1123 and 1141 of the Bankruptcy
Code, (i) of Seller and its Affiliates that are Debtors, as debtors in
possession, from all Liabilities, (ii) of interests of, and rights,
interest and Claims of the holders of Claims against and interests in, Seller
and its Affiliates that are Debtors and (iii) of Encumbrances on, or
interests of Persons (other than Seller or its Affiliates) in, the Transferred
Assets.
“Disclosure Statement” has the meaning set
forth in Section 5.13(a).
“Disclosure Statement Motion” has the meaning
set forth in Section 5.13(a).
“Disputed MCE System” has the meaning set
forth in Section 2.7(a).
“Disputed MCE System Adjustment Amount” means,
with respect to the Disputed MCE Systems sold to Buyer pursuant to Section 2.7(c),
the sum of the Net Liabilities Adjustment Amount in respect of such Disputed
MCE Systems as determined pursuant to the last sentence of Section 2.7(c) plus the Initial Disputed MCE System
Adjustment Amount in respect of such Disputed MCE Systems.
“Eligible Basic Subscriber” means a Basic
Subscriber who, as of the Measurement Date, is a paying customer (A) who
subscribes to at least the lowest level of video programming offered by an
Acquired System, (B) who has been installed, and (C) either (1) whose
rate of service for all services (not including any installation costs)
provided to such Basic Subscriber is not subject to any discount or promotion
as of the Measurement Date or for any period thereafter other than (x) as
to any Cable System, the customary package rates applicable to such Cable
System as in effect as of March 31, 2005 as may be subsequently increased
by Seller or, with the consent of Buyer not to be unreasonably withheld,
reduced by Seller or (y) standard employee rate discounts or (2) who
is a Qualified Customer who is subject to no discount or promotion other than a
Permitted Promotion or an Historic Promotion. For the avoidance of doubt, the
customary reduction in the HSI rate applicable to any HSI-only subscriber who
subscribes to video services shall not be considered a discount or promotion
for purposes of the definition of “Eligible Basic Subscriber.”
“Employees” means all current and former
employees who are or were primarily employed in connection with the Acquired
Business and all employees of the Business identified on Schedule 5.8(a)(ii) of
the Seller Disclosure Schedule. Employees does not include (a) any
employees performing services in Puerto Rico or outside of the United States or
(b) any individual performing services in connection with the Acquired
Business who Seller or its Affiliates has classified as an independent
contractor as of immediately prior to the Closing Date.
“Encumbrance” means any lien, pledge, charge,
security interest, option, right of first refusal, mortgage, easement, right of
way, lease, sublease, license, sublicense, adverse claim, title defect,
encroachment, other survey defect, or other encumbrance of any kind, including,
with respect to real property, any covenant or restriction relating thereto. For
purposes of this Agreement, a Person shall be deemed to
14
own subject to an Encumbrance any Asset that it has acquired
or holds subject to the interest of a vendor or lessor under any conditional
sale agreement, Capital Lease or other title retention agreement relating to
such Asset.
“Environmental Law” means any Law (including
common law), Governmental Authorization or agreement with any Government Entity
or third party relating to (i) the protection of the environment or human
health and safety (including air, surface water, ground water, drinking water
supply, and surface or subsurface land or structures), (ii) the exposure
to, or the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, management, release or disposal of, any
Hazardous Substance or (iii) noise, odor or electromagnetic emissions.
“Environmental Permits” means all licenses,
permits, certificates and other authorizations and approvals issued by or
obtained from a Government Entity relating to or required by Environmental
Laws.
“Environmental Self-Audit” means,
subject to Section 5.16, the self-audit to be conducted by Seller
pursuant to an agreement between the United States Environmental Protection
Agency and Seller relating to compliance with Environmental Laws.
“Environmental Self-Audit Deficiencies” means
any deficiencies identified as a result of the performance of the Environmental
Self-Audit, including current or historical violations of, or actual or
potential Liabilities under, any Environmental Law.
“Environmental Transfer Act Liabilities” means
any Liabilities arising out of compliance with the Connecticut Transfer Act or
the New Jersey Industrial Site Recovery Act as a result of the completion of
the Transaction or the Exchange.
“Equipment Leases” means all leases for
vehicles included in the Fixtures and Equipment and all Capital Leases of other
Fixtures and Equipment.
“Equity Security” has the meaning ascribed to
such term in Rule 405 promulgated under the Securities Act as in effect on
the date hereof and, in any event, shall also include (i) any capital
stock of a corporation, any partnership interest, any limited liability company
interest and any other equity interest, (ii) any security or right
convertible into, exchangeable for, or evidencing the right to subscribe for
any such stock, equity interest or security referred to in clause (i), (iii) any
stock appreciation right, contingent value right or similar security or right
that is derivative of any such stock, equity interest or security referred to
in clause (i) or (ii), and (iv) any contract to grant, issue, award,
convey or sell any of the foregoing.
“ERISA” means the Employee Retirement Income
Security Act of 1974.
“ERISA Affiliate” has the meaning set forth in
Section 3.10(c).
“Escrow Account” has the meaning set forth in Section 2.5.
15
“Escrow Agent” has the meaning set forth in
the Recitals.
“Escrow Agreement” has the meaning set forth
in the Recitals.
“Escrow Amount” has the meaning set forth in Section 2.5.
“Escrow Payment” means, as to any amount
payable from the Escrow Account, an aggregate amount payable, first, in cash,
and, to the extent no cash remains in the Escrow Account, in Purchase Shares
or, if applicable, MCE Purchase Shares (where each share is valued at the Per
Share Value of the Purchase Shares); provided, however, that (i) the
cash portion of such amount shall be increased by (A) in respect of the
portion of any cash payment pursuant to Section 2.6(f), interest on such
portion from the date of the Closing to the date of payment at LIBOR calculated
on a 365-day basis, and (B) in respect of the portion of any cash
payment pursuant to Section 7.2, interest on such portion at LIBOR
calculated on a 365-day basis from the date notice of the Losses for
which indemnification is sought was delivered until the date of payment of
indemnification by the Indemnifying Party, and (ii) the stock portion of
such amount shall be increased by Interim Dividends made in respect of such
shares.
“Estimated Closing Adjustment Amount” has the
meaning set forth in Section 2.6(a).
“Exchange” has the meaning set forth in the
Recitals.
“Exchange Act” means the Securities Exchange
Act of 1934.
“Exchange Agreement” means the Exchange
Agreement, dated as of the date hereof, by and among Friendco, Comcast Cable
Communications Holdings, Inc., Comcast of Georgia, Inc., TCI Holdings, Inc.,
Parent, Buyer and Urban Cable Works of Philadelphia, L.P.
“Excluded Assets” has the meaning set forth in
Section 2.2.
“Excluded Claim” means any claim to the extent
(and only to the extent) relating to (i) the failure of the Purchase
Shares to have been issued in compliance with section 1145 of the Bankruptcy
Code or Section 5 of the Securities Act, as applicable, or (ii) the
failure of Parent to be deemed a successor to Seller in accordance with Rule 12(g)-3
of the Exchange Act.
“Excluded Liabilities” means, notwithstanding
anything to the contrary in this Agreement, all Liabilities of Seller or any of
its Affiliates other than the Assumed Liabilities. For the avoidance of doubt,
Excluded Liabilities shall include (i) Liabilities to the extent related
to the Excluded Assets, including Liabilities under any Contract that is not an
Assigned Contract (other than as set forth in clause (v) of the definition
of “Assumed Liabilities”), (ii) subject to clause (ii) of the
definition of “Assumed Liabilities” (except with respect to litigation that is
pending or threatened as of the Closing), Liabilities to the extent arising in
connection with the ownership, use, operation or maintenance of the Transferred
Assets or the conduct of any Specified Business on or
16
prior to the Closing, including those arising under or
related to (A) Environmental Laws (other than as expressly provided in
clause (viii) of the definition of “Assumed Liabilities”) or (B) any
Claim (other than under clauses (ii) (except with respect to litigation
that is pending or threatened as of the Closing), (iii), (iv), (v), (vii), (viii) or
(ix) of the definition of “Assumed Liabilities”) including any Claim in
respect of Losses to Persons or property, and any Claim relating to any filings
made by Seller or any of its Affiliates under the Exchange Act or the
Securities Act (other than any Excluded Claim), (iii) Liabilities under
any Indebtedness of Seller or any of its Affiliates, (iv) except for the
Assumed Cure Costs, Liabilities for Cure Costs, (v) Liabilities for
Chapter 11 Expenses, (vi) Excluded Taxes, (vii) Intercompany
Payables, (viii) Liabilities related to the SEC/DOJ Matters, including any
SEC/DOJ Settlement, (ix) Liabilities for any Claims filed against Seller
or any other Debtor after the bar date established in the Reorganization Case, (x) Liabilities
that are subject to the Discharge, any MCE Discharge or any Additional
Discharge, (xi) except as provided in clause (iii) of the definition of “Assumed
Liabilities,” Liabilities under any Benefit Plan, including under the Adelphia
Communications Corporation Key Employee Continuity Program, the Amended and
Restated Adelphia Communications Corporation Performance Retention Plan, the
Sale Bonus Program and any Stock Award, (xii) Liabilities identified as
Excluded Liabilities in Sections 5.2(j), 5.8(a) and 5.8(q), (xiii)
Liabilities to Seller, any member of the Rigas family, any Managed Cable Entity
or any of their respective Affiliates other than Liabilities under this
Agreement or any Ancillary Agreement, (xiv) except pursuant to Section 5.13(d),
Liabilities in respect of Rejection Claims and (xv) Liabilities allocated to
the Friendco Business pursuant to the proviso to Section 2.3.
“Excluded Taxes” means any Taxes imposed with
respect to any Specified Business or any Transferred Assets Related thereto or
any income or gain derived with respect thereto, in each case, other than
Assumed Taxes. For the avoidance of doubt, Excluded Taxes shall include any
income Tax liability payable by Seller or its Subsidiaries in respect of the
Transaction.
“Expanded Agreement” has the meaning set forth
in Section 5.15(a)(i).
“Extended Outside Date” has the meaning set
forth in Section 8.2.
“FCC” means the Federal Communications Commission.
“Final Adjustment Amount” means, with respect
to each Specified Business, the Closing Adjustment Amount as set forth in the
Buyer’s Statement for such Specified Business and, in the event of a Seller’s
Objection, as adjusted by either the agreement of Buyer and Seller, or by the
CPA Firm, acting pursuant to Section 2.6.
“Final MCE Purchase Price” means the Initial
MCE Purchase Price in respect of all Disputed MCE Systems the Assets of which
are to be transferred to Buyer at the MCE Closing plus the Disputed MCE System Adjustment Amount in respect of
all such Disputed MCE Systems.
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“Final Order” means an order or judgment of
the Bankruptcy Court, or other court of competent jurisdiction with respect to
the subject matter, (i) which has not been reversed, stayed, modified,
amended, enjoined, set aside, annulled or suspended, (ii) with respect to
which no request for a stay, motion or application for reconsideration or
rehearing, notice of appeal or petition for certiorari is filed within the
deadline provided by applicable statute or regulation or as to which any appeal
that has been taken or any petition for certiorari that has been or may be
filed has been resolved by the highest court to which the order or judgment was
appealed or from which certiorari was sought and (iii) as to which the
deadlines for filing such request, motion, petition, application, appeal or
notice referred to in clause (ii) above have expired; provided, however,
that a request for a stay, appeal, motion to reconsider or petition for
certiorari referred to in clause (ii) shall be disregarded for purposes of
such clause if such appeal, motion to reconsider or petition for certiorari
would not, individually or in the aggregate, reasonably be expected to be
materially adverse to the Transaction, any Specified Business, Parent or any of
its Affiliates (in the case of Parent or its Affiliates, only to the extent
related to the Transaction and not in their capacity as creditors or, with
respect to Plan distribution matters, equityholders) (taking into account
whether such request for a stay, appeal, motion to reconsider or petition for
certiorari would be rendered moot under the doctrine of “equitable mootness” as
a result of the occurrence of the Closing and any findings of the Bankruptcy
Court contained in any such order or judgment, including under section 363(m) of
the Bankruptcy Code).
“Financial Advisors” has the meaning set forth
in Section 4.26.
“Financial Information” has the meaning set
forth in Section 5.11(a).
“Fixtures and Equipment” means, with respect
to each Specified Business, all furniture, office equipment, furnishings,
fixtures, vehicles, equipment, testing equipment, computers, set-top boxes,
tools, electronic devices, towers, tower equipment, trunk and distribution
cable, other aboveground and underground cable, decoders and spare decoders for
scrambled satellite signals, amplifiers, microwave equipment, power supplies,
conduits, vaults and pedestals, grounding and pole hardware, installed
subscriber devices (including drop lines, converters, encoders, transformers
behind television sets and fittings), headends and hubs (origination,
transmission and distribution systems) hardware, spare parts, supplies and
closed circuit devices, inventory, other physical Assets (other than real
property) and other tangible personal property Related to such Specified Business,
wherever located.
“Franchise” means, with respect to each
Specified Business, each franchise, as such term is defined in the
Communications Act, granted by a Government Entity authorizing the
construction, upgrade, maintenance or operation of any part of the Cable
Systems that are part of such Specified Business.
“Friendco” has the meaning set forth in the
Recitals.
“Friendco Business” has the meaning set forth
in the Recitals.
18
“Friendco Purchase Agreement” has the meaning
set forth in the Recitals.
“Friendco Purchase Price” has the meaning
ascribed to the term “Purchase Price” in the Friendco Purchase Agreement.
“Friendco
Registration Rights Agreement” means that certain Registration Rights
Agreement, dated as of March 31, 2003, as amended (except to the extent
any amendment after June 21, 2006 would adversely affect Seller), by and
among TWE Holdings II Trust, a Delaware statutory trust, TWX and Parent.
“Friendco
Transaction” means the Redemptions and the Exchange.
“Friendco Transferred Assets” has the meaning
ascribed to the term “Transferred Assets” in the Friendco Purchase Agreement.
“Fully Diluted Basis” means all Equity
Securities of Parent, without regard to any restrictions or conditions with
respect to the exercisability of such Equity Securities, other than (i) any
Equity Securities issued following the date hereof on arm’s length terms for fair consideration,
as determined in good faith by Parent’s board of directors or any committee
thereof, and, in connection with any such issuance to TWX or any of its
Affiliates (other than Parent or its wholly owned Subsidiaries), also subject
to Section 5.3(c), and (ii) any Equity Securities issued following
the date hereof pursuant to employee stock option or restricted stock programs (A) as
approved by Parent’s board of directors or compensation committee from time to
time pursuant to which Permitted Parent Incentive Awards are issued or (B) in
connection with any acquisition transaction satisfying clause (i) of this
definition.
“GAAP” means United States generally accepted
accounting principles in effect from time to time.
“Government Antitrust Entity” means any
Government Entity with jurisdiction over the enforcement of any U.S. Antitrust
Law or other similar Law.
“Government Entity” means any federal, state
or local court, administrative body or other governmental or quasi-governmental
entity with competent jurisdiction.
“Governmental Authorizations” means, with
respect to each Specified Business, all licenses (including cable television
relay service, business radio and other licenses issued by the FCC or any other
Government Entity), permits (including construction permits), certificates,
waivers, amendments, consents, Franchises (including similar authorizations or
permits), exemptions, variances, expirations and terminations of any waiting
period requirements (including pursuant to the HSR Act), other actions by, and
notices, filings, registrations, qualifications, declarations and designations
with, and other authorizations and approvals Related to such Specified Business
and issued by or obtained from a Government Entity or Self-Regulatory
Organization.
“Group 1 Business” has the meaning set forth
in the Recitals.
19
“Group 1 Cap Amount” means $296,700,000, plus any amounts paid into the Escrow Account
by Buyer minus any amounts paid
out of the Escrow Account to Buyer, in each such case after Closing with
respect to adjustments in respect of the Group 1 Business under Sections 2.6(f) and
2.7(c).
“Group 1 Shared Assets and Liabilities” means
the Shared Assets and Liabilities that are allocated to the Group 1 Business as
set forth on Schedule 1.1(h) of the Seller Disclosure Schedule and
any other Assets or Liabilities (other than those solely Related to the Group 1
Business), as applicable, that are allocated to the Group 1 Business pursuant
to the Designated Allocation or the proviso to Section 2.3.
“Group 1 Systems” has the meaning set forth in
the Recitals.
“Group 1 Threshold Amount” means $74,000,000.
“Group 2 Business” has the meaning set forth
in the Recitals.
“Group 2 Cap Amount” means $267,900,000, plus any amounts paid into the Escrow
Account by Buyer minus any
amounts paid out of the Escrow Account to Buyer, in each such case after
Closing with respect to adjustments in respect of the Group 2 Business under
Sections 2.6(f) and 2.7(c).
“Group 2 Shared Assets and Liabilities” means
the Shared Assets and Liabilities that are allocated to the Group 2 Business as
set forth on Schedule 1.1(h) of the Seller Disclosure Schedule and
any other Assets or Liabilities (other than those solely Related to the Group 2
Business), as applicable, that are allocated to the Group 2 Business pursuant
to the Designated Allocation or the proviso to Section 2.3.
“Group 2 Systems” has the meaning set forth in
the Recitals.
“Group 2 Threshold Amount” means $67,000,000.
“Hazardous Substance” means any substance that
is listed, defined, designated or classified as hazardous, toxic or otherwise
harmful under applicable Laws or is otherwise regulated by a Government Entity,
including petroleum products and byproducts, asbestos-containing
material, polychlorinated biphenyls, lead-containing products and mold.
“Historic Promotion” means, as to any Basic
Subscriber (other than Subscribers that only receive the lowest tier of service
(i.e., lifeline or “B1 only” Subscribers)), any discount or promotion that (i) such
Basic Subscriber is subject to as of the date hereof (without any modification,
extension or renewal thereof after the date hereof) and (ii) does not
extend beyond twelve months following the date hereof.
“HSI Subscriber” means an “HSI Customer” as
determined pursuant to the Seller Subscriber Accounting Policy.
20
“HSR Act” means the Hart-Scott-Rodino
Antitrust Improvements Act of 1976.
“Indebtedness” of any Person shall mean,
without duplication, (i) all indebtedness of such Person for money
borrowed or with respect to deposits or advances of any kind, whether short-term
or long-term and whether secured or unsecured and whether or not required
to be disclosed on a balance sheet or in the related notes to financial
statements under GAAP, (ii) the undrawn face amount of, and unpaid
reimbursement obligations in respect of, all letters of credit and bankers’
acceptances issued for the account of such Person, (iii) obligations under
any Capital Lease, (iv) all obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (v) all obligations of
such Person upon which interest charges are customarily paid (excluding trade
accounts payable and accrued obligations in the ordinary course of business)
excluding Cure Costs or Rejection Claims, (vi) all obligations of such
Person under conditional sale or other title retention agreements relating to
Assets purchased by such Person, (vii) all obligations of such Person
issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations in the ordinary
course of business), (viii) all obligations of such Person in respect of
interest rate protection agreements, foreign currency exchange agreements or
other interest or exchange rate hedging arrangements, (ix) all obligations
of such Person to purchase, redeem, retire, defease or otherwise acquire for
value any Equity Securities of such Person or any trust or Subsidiary of such
Person (including any preferred stock of such Person or any obligations of such
Person in respect of trust preferred, but excluding any such obligations under
the Investment Documents listed on Schedule 1.1(i) of the Seller
Disclosure Schedule and provided that such Investment Documents have been made
available to Buyer prior to the date hereof), (x) any “keep well” or other
agreement to maintain the financial condition of another Person (other than a
wholly owned Subsidiary of such Person), (xi) any arrangement having the
economic effect of any of the foregoing, (xii) any indebtedness of the types
referred to in clauses (i) through (xi) above of another Person that is
guaranteed directly or indirectly by such Person or secured by (or for which
the holder of such indebtedness has an existing right, contingent or otherwise,
to be secured by) the Assets of such Person, whether or not the obligations
secured thereby have been assumed, (xiii) renewals, extensions, refundings,
deferrals, restructurings, amendments and modifications of any such
indebtedness, obligation or guarantee and (xiv) any interest, charges or
penalties in respect of any of the foregoing.
“Indemnified Parties” has the meaning set
forth in Section 7.2(a).
“Indemnifying Party” has the meaning set forth
in Section 7.4(a).
“Initial Disputed MCE System Adjustment Amount”
has the meaning set forth in Section 2.7(a).
“Initial MCE Purchase Price” has the meaning
set forth in Section 2.7(a).
21
“Insurance Claims” means, with respect to each
Specified Business, all title, property, casualty, fire or, to the extent it
relates to periods following the Closing, business interruption, insurance
proceeds received or receivable by such Specified Business in respect of any
Transferred Asset or Assumed Liability, all title, property, casualty, fire or,
to the extent it relates to periods following the Closing, business
interruption, insurance proceeds (to the extent not already expended (including
expenditures of other monies) by Seller or any Affiliate of Seller to restore
or replace the lost or damaged Asset, which replacement Asset shall be a
Transferred Asset) received or receivable by such Specified Business in respect
of any Asset damaged or lost after December 31, 2004 and which, if not so
damaged or lost, would have been a Transferred Asset and all insurance proceeds
received or receivable by such Specified Business in respect of business
interruption of such Specified Business to the extent relating to any period
after the Closing.
“Insurance Policies” has the meaning set forth
in Section 3.23.
“Intellectual Property” means, as they exist
anywhere in the world, (i) trademarks, service marks, brand names,
certification marks, collective marks, logos, symbols, trade dress, trade
names, and other indicia of origin, all applications and registrations for the
foregoing, and all goodwill associated therewith and symbolized thereby,
including all renewals of same, (ii) inventions and discoveries, whether
patentable or not, and all patents, invention disclosures and applications
therefor, and designs and improvements claimed therein, including divisions,
continuations, continuations-in-part and renewal applications, and
including renewals, reexaminations, interferences, extensions and reissues, (iii) trade
secrets, confidential information and know-how, including processes,
schematics, business methods, formulae, drawings, prototypes, models, designs,
customer lists and supplier lists, (iv) published and unpublished works of
authorship, whether copyrightable or not (including databases and other
compilations of information), including mask rights and computer software
(including all source code, object code, specifications, designs and
documentation related to such programs), copyrights therein and thereto,
registrations and applications therefor, and all renewals, extensions,
restorations and reversions thereof, (v) domain names, Internet addresses
and other computer identifiers, web sites, web pages and similar rights
and items, and (vi) any other intellectual property or proprietary rights
to the extent entitled to legal protection as such.
“Intellectual Property Assignment Agreement”
means, with respect to each Specified Business, an agreement in form and
substance reasonably acceptable to Seller and Buyer, providing for the
assignment of the Transferred Intellectual Property Related to such Specified
Business.
“Intercompany Payables” means, with respect to
each Specified Business, all account, note or loan payables (including credit
balance intercompany receivables), whether or not recorded on the books of
Seller or any of its Affiliates, for goods or services purchased by such
Specified Business or provided to such Specified Business, or advances (cash or
otherwise) or any other extensions of credit to such Specified Business, in
each case from Seller or any of its Affiliates, including amounts recorded on
the
22
Derivative 2004 Financial Statements, whether current or non-current,
as either intercompany, affiliate or related party payables, on a gross or net
basis.
“Intercompany Receivables” means, with respect
to each Specified Business, all account, note or loan receivables, whether or
not recorded on the books of Seller or any of its Affiliates, for goods or
services sold or provided by such Specified Business to Seller, any of its
Affiliates or advances (cash or otherwise) or any other extensions of credit
made by such Specified Business to Seller or any of its Affiliates, including
amounts recorded on the Derivative 2004 Financial Statements, whether current
or non-current, as either intercompany, affiliate or related party
receivables, on a gross or net basis.
“Interim Dividends” means, with respect to any
shares of Parent Class A Common Stock delivered after the Closing, any
dividends declared and paid between the Closing and the delivery of such
shares, plus (to the extent of any dividends paid in cash) interest from the
respective dates on which such dividends were paid to the date of payment, at
LIBOR calculated on a 365-day basis; it
being understoodthat the holder of such shares shall be entitled to
receive any dividends declared but not paid between the Closing and the
delivery of such shares upon the payment of such dividend to the holders of
Parent Class A Common Stock.
“Intermediate Subsidiary” has the meaning set
forth in Section 3.2(a).
“Investment Documents” means the documents
governing any Transferred Investment.
“Investment Entity” means any issuer of a
Transferred Investment.
“Investment Entity Securities” means, with
respect to each Investment Entity, the Equity Securities of such Investment
Entity.
“IRS” means the United States Internal Revenue
Service.
“Knowledge” means (i) with respect to
Seller and its Affiliates, the collective actual knowledge of any of Seller’s
executive officers, the vice president of law and governmental affairs, the
vice president for engineering, the vice president for finance, the vice
president of financial planning, the vice president — treasurer, the applicable
regional senior vice presidents, the applicable direct reports to the regional
senior vice presidents, including the senior executive officer of each Cable
System or group of Cable Systems, the most senior employee that is responsible
for tax matters (currently, the vice president of taxation), the senior officer
responsible for environmental matters including the Environmental Self-Audit
and each regional vice president of finance, each regional vice president of
engineering, and each regional vice president of law and governmental affairs,
and (ii) with respect to Buyer, the collective actual knowledge of Buyer’s
Chief Executive Officer, and any of Parent’s executive officers, applicable
executive vice presidents and applicable division presidents and each group
vice president of finance.
23
“Law” means any law, statute, ordinance, rule,
regulation, code, order, judgment, injunction or decree enacted, issued,
promulgated, enforced or entered by a Government Entity or Self-Regulatory
Organization.
“Lease Assignment Agreement” means, with
respect to each Specified Business, one or more agreements in form and
substance reasonably acceptable to Seller and Buyer and reasonably necessary to
cause such agreements to be recordable, assigning to Buyer the Transferred Real
Property Leases Related to such Specified Business.
“Leased Real Property” means real property
subject to the Real Property Leases.
“LFA Approvals” means all consents, approvals
or waivers required to be obtained from Government Entities with respect to the
transfer or change in control of Franchises in connection with the Transaction
and, except for purposes of Section 6.2(e), the Exchange.
“Liabilities” means any and all Indebtedness,
losses, claims, charges, demands, actions, damages, obligations, payments,
costs and expenses, sums of money, bonds, indemnities and similar obligations,
covenants, contracts, controversies, omissions, make whole agreements and
similar obligations, and other liabilities, including all contractual
obligations, whether due or to become due, fixed, contingent or absolute,
inchoate or otherwise, matured or unmatured, liquidated or unliquidated,
accrued or not accrued, asserted or not asserted, known or unknown, determined,
determinable or otherwise, whenever or however arising, including, those
arising under any Law, principles of common law (including out of any contract
or tort based on negligence or strict liability) action, threatened or
contemplated action (including the costs and expenses of demands, assessments,
judgments, settlements and compromises relating thereto and attorneys’ fees and
any and all costs and expenses (including allocated costs of in-house
counsel and other personnel), whatsoever reasonably incurred in investigating,
preparing or defending against any such actions or threatened or contemplated
actions), order or consent decree of any Government Entity or any award of any
arbitrator or mediator of any kind, and those arising under any contract,
commitment or undertaking, whether or not the same would be required by GAAP to
be recorded or reflected in financial statements or disclosed in the notes
thereto.
“LIBOR” means the six-month Interbank
Official Rate with respect to deposits in Dollars which appears on the Telerate
Page 3750 as of 11:00 a.m., London time, on the day that is two
business days in London preceding the Closing.
“Losses” has the meaning set forth in Section 7.2(a).
“Managed Cable Entity” means, with respect to
an MCE System, each Person (other than the Debtors, Buyer and its Affiliates)
that owns or purports to own any Equity Security or profits interest in such
MCE System.
“Material Adverse Effect” means (i) a
material adverse effect on the business, condition (financial or otherwise),
Assets or results of operations of any
24
Specified Business (or, solely for purposes of Section 6.2(f),
any Specified Business or the Acquired Business), taken as a whole, or (ii) a
material impairment or delay of Seller’s or its Affiliates’ ability to effect
the Closing or to perform its obligations under this Agreement or any Ancillary
Agreement to which it is a party; provided, however, that none of
the following (or the results thereof) shall be taken into account: (A) any change in Law or accounting
standards or interpretations thereof that is of general application; (B) any
change in general economic or business conditions or industry-wide or
financial market conditions generally; (C) except with respect to Sections
3.4, 3.5, 6.1(f) and 6.2(e), any adverse effect as a result of the
execution or announcement of this Agreement, the Ancillary Agreements, the
Transaction or the transactions contemplated by the Ancillary Agreements; and (D) any
loss of Subscribers reflected in the Base Subscriber Number for such Specified
Business (or, solely for purposes of Section 6.2(f), any or all Specified
Businesses ) and any loss of Subscribers to the extent reflected in the
Subscriber Change used in calculating the Final Adjustment Amount for such
Specified Business (or, solely for purposes of Section 6.2(f), any or all
Specified Businesses).
“MCE Base Subscriber Number” means, with
respect to each MCE System, the number of Basic Subscribers of such MCE System
corresponding to the month prior to the month in which the Closing occurs, as
set forth on Schedule 1.1(j) of the Seller Disclosure Schedule.
“MCE Closing” has the meaning set forth in Section 2.7(c).
“MCE Discharge” means, with respect to each
MCE System, except as otherwise provided in the Plan and the Confirmation Order
(or, to the extent approved by Buyer (such approval not to be unreasonably
withheld), such other plan that includes the applicable Managed Cable Entity as
a debtor and the confirmation order of the Bankruptcy Courtapproving such plan and effecting the MCE
Discharge), the discharge and/or equivalent effect granted pursuant to such confirmation
order and sections 363, 1123 and 1141 of the Bankruptcy Code or the equivalent
effect pursuant to any other governmental proceeding to the extent approved by
Buyer (such approval not to be unreasonably withheld; itbeingunderstoodthat it would be reasonable for Buyer to refuse to grant such approval
if such other governmental proceeding would not have the same effect as a
bankruptcy discharge in all respects relative to the Transaction), of (i) each
applicable Managed Cable Entity, as a debtor in possession, from Liabilities, (ii) interests
of, and rights, interest and Claims of the holders of Claims against and
interests in, such MCE System and Managed Cable Entity and (iii) Encumbrances
on, or interests of Persons (other than Seller and its Affiliates) in, the
Transferred Assets that are Related to such MCE System; itbeingunderstoodthat an MCE Discharge may occur pursuant to the Plan.
“MCE Financial Statements” has the meaning set
forth in Section 5.11(b).
“MCE Fraction” means, with respect to the
Disputed MCE Systems transferred to Buyer at the MCE Closing (or, as used in
the definitions of “MCE Subscriber Cap Component” and “MCE Subscriber Basket
Component,” with respect to all Disputed MCE Systems not transferred to Buyer
at the Closing), a fraction, the
25
numerator of which is the aggregate number of Basic
Subscribers served by such Disputed MCE Systems and the denominator of which is
the aggregate number of Basic Subscribers served by all Group 2 Systems and MCE
Systems, in each case as of December 31, 2004.
“MCE Management Agreement” has the meaning set
forth in Section 2.7(b).
“MCE Period” has the meaning set forth in Section 2.7(b).
“MCE Purchase Price” means $390,000,000.
“MCE Purchase Shares” has the meaning set
forth in Section 2.7(c).
“MCE Resolution” has the meaning set forth in Section 2.7(b).
“MCE Subscriber Basket Component” means the
Subscriber Basket set forth on Schedule 1.1(q)(i) of the Seller
Disclosure Schedule with respect to the Group 2 Systems multiplied by the MCE
Fraction.
“MCE Subscriber Cap Component” means the
Subscriber Cap set forth with respect to the Group 2 Systems on Schedule
1.1(q)(ii) of the Seller Disclosure Schedule multiplied by the MCE
Fraction.
“MCE Systems” has the meaning set forth in the
Recitals.
“Measurement Date” means the subscriber
cut-off date during the calendar month immediately preceding the month in which
the Closing occurs.
“Most Recent Balance Sheet” means, with
respect to each Specified Business, the unaudited balance sheet included in the
Derivative 2004 Financial Statements for such Specified Business.
“Multiemployer Plan” has the meaning set forth
in Section 3.10(a).
“Net Liabilities Adjustment Amount” means,
with respect to each Specified Business, the Closing Net Liabilities Amount minus the Base Net Liabilities Amount of
such Specified Business, expressed as a positive, if positive, or as a
negative, if negative.
“Non-Debtor Subsidiaries” has the meaning set
forth in Section 5.13(h).
“Non-Debtor Transfer” has the meaning set
forth in Section 5.13(h).
“Non-Governmental Authorizations” means,
with respect to each Specified Business, all licenses, permits (including
construction permits), certificates, waivers, amendments, consents, franchises,
exemptions, variances, expirations and terminations of any waiting period
requirements, other actions by, and notices, filings,
26
registrations, qualifications, declarations and designations
with, any Person and other authorizations and approvals that are Related to
such Specified Business other than Governmental Authorizations.
“Non-Referred Proposal” has the meaning set
forth in the definition of “Proposed Change in Tax Law.”
“Notice Period” has the meaning set forth in Section 7.4(a).
“NYSE” means the New York Stock Exchange.
“OCB Contract” means, with respect to each
Specified Business, a Contract Related to such Specified Business that (i) (A) is
in a Contract Category Expected to be Assumed, (B) is entered into in the
Ordinary Course and (C) contains no Special Terms (provided, that with respect to
Contracts described on Schedule 1.1(k)(i) of the Seller Disclosure
Schedule, clause (i) of the definition of “Special Terms” shall be
disregarded for purposes of this definition) or (ii) is set forth on Schedule
1.1(k)(ii) of the Seller Disclosure Schedule; provided, however,
that any Contract that would otherwise be an OCB Contract and which cannot be
assigned to Buyer at the Closing without consent or waivers of a third party
that are not obtained by the Closing (and the use and benefits of which cannot in
all material respects be provided to Buyer pursuant to Section 2.11) shall
be deemed not to be an OCB Contract; provided, further, that
Buyer shall be entitled to remove from Schedule 1.1(k)(i) of the
Seller Disclosure Schedule any Contract that was amended in any material
respect prior to the date hereof if such amendment is not identified with such
Contract on Schedule 1.1(k)(i).
“Offering
Financial Information” has the meaning set forth in Section 5.11(a).
“Ordinary Course” or “Ordinary Course of
Business” means (i) with respect to each Specified Business, the
conduct of such Specified Business as a going concern in accordance with Seller’s
normal day-to-day customs, practices and procedures, without regard
to the Sale Process (it being understood that
the use of regional or national resources utilized by a Cable System shall be
deemed to be so conducted if utilized in accordance with Seller’s normal,
day-to-day customs, practices and procedures in the Business as applied to such
Cable System), and (ii) with respect to the Parent Business, the conduct
of the Parent Business as a going concern in accordance with Parent’s normal
day-to-day customs, practices and procedures, except to the extent
such customs, practices and procedures relate to transactions entered into
following the date hereof that have the intended effect of benefiting any
Affiliate of Parent (other than any Subsidiary of Parent) at the expense of
Parent or any Subsidiary of Parent in a manner that would deprive Parent or any
Subsidiary of Parent of the benefit they would otherwise have obtained if the
transaction were to have been effected on terms that were negotiated on an arm’s
length basis.
“Outside Date” has the meaning set forth in Section 8.2.
27
“Owned Real Property” means, with respect to
each Specified Business, all fee interests in real property (including
improvements thereon) Related to such Specified Business, including those
listed on Schedule 1.1(l) of the Seller Disclosure Schedule and
identified as Related to such Specified Business.
“Parent” has the meaning set forth in the
Recitals.
“Parent Agreement” has the meaning set forth
in the Recitals.
“Parent Audited Financial Statements” has the
meaning set forth in Section 4.9(a).
“Parent Basic Subscriber” means a paying
customer who subscribes to at least the lowest level of video programming
offered by the Parent Cable Systems as determined pursuant to the Parent
Subscriber Accounting Policy.
“Parent Benefit Plans” has the meaning set
forth in Section 4.12(a).
“Parent Business” has the meaning set forth in
the Recitals.
“Parent Cable System” means each System that
is Related to the Parent Business.
“Parent Capital Stock” has the meaning set
forth in Section 4.4(b).
“Parent Class A Common Stock” has the
meaning set forth in Section 2.5(c).
“Parent Class B Common Stock” has the
meaning set forth in Section 4.4(b).
“Parent Digital Subscriber” means a paying
customer who subscribes to any level of service received via digital technology
(including the digital guide tier, digital basic tier, digital sports tier and
digital movie tier) from the Parent Cable Systems as determined pursuant to the
Parent Subscriber Accounting Policy.
“Parent Franchise” means each franchise, as
such term is defined in the Communications Act, granted by a Government Entity
authorizing the construction, upgrade, maintenance or operation of any part of
the Parent Cable Systems.
“Parent Governmental Authorizations” means all
licenses (including cable television relay service, business radio and other
licenses issued by the FCC or any other Government Entity), permits (including
construction permits), certificates, waivers, amendments, consents, franchises
(including similar authorizations or permits), exemptions, variances,
expirations and terminations of any waiting period requirements (including
pursuant to the HSR Act), other actions by, and notices, filings,
registrations, qualifications, declarations and designations with, and other
authorizations and approvals
28
Related to the Parent Business and issued by or obtained
from a Government Entity or Self-Regulatory Organization.
“Parent HSD Subscriber” means a paying
customer who subscribes to high speed data service offered by the Parent Cable
Systems as determined pursuant to the Parent Subscriber Accounting Policy.
“Parent Material Adverse Effect” means (i) a
material adverse effect on the business, condition (financial or otherwise),
Assets or results of operations of the Parent Business, taken as a whole or (ii) a
material impairment or delay of Parent’s or its Controlled Affiliates’ ability
to effect the Closing or to perform its obligations under this Agreement or any
Ancillary Agreement to which it is a party; provided, however,
that none of the following (or the results thereof) shall be taken into
account: (A) any change in Law or
accounting standards or interpretations thereof that is of general application;
(B) any change in general economic or business conditions or Broadband
Industry-wide or financial market conditions generally; and (C) except
with respect to Sections 4.6, 4.7 and 6.1(f), any adverse effect as a result of
the execution or announcement of this Agreement, the Ancillary Agreements, the
Transaction or the transactions contemplated by the Ancillary Agreements.
“Parent Material Contracts” means those
Contracts set forth on Schedule 4.17(a) of the Buyer Disclosure
Schedule.
“Parent Preferred Stock” has the meaning set
forth in Section 4.4(b).
“Parent Real Property” means all fee interests
in real property (including improvements thereon) Related to the Parent
Business.
“Parent Redemption” means the redemption of
the Parent Class A Common Stock pursuant to the Parent Redemption
Agreement.
“Parent Redemption Agreement” means the
Redemption Agreement, dated as of the date hereof, by and among Friendco,
Comcast Cable Communications Holdings, Inc., MOC Holdco II, Inc., TWE
Holdings I Trust, TWE Holdings II Trust, Cable Holdco II Inc., TWE Holding I
LLC, TWX and Parent.
“Parent Subscriber” means any Parent Basic
Subscriber, Parent Digital Subscriber or Parent HSD Subscriber.
“Parent Subscriber Accounting Policy” has the
meaning set forth in Section 4.18(e).
“Per Share Value of the Purchase Shares” means
the amount obtained by dividing the Aggregate Value of the Purchase Shares by
the aggregate number of Purchase Shares that would be delivered by Buyer at the
Closing before giving effect to any adjustment thereto pursuant to Section 2.6(f) or
2.7.
“Permitted
Assignee” has the meaning set forth in Section 9.3
29
“Permitted Encumbrances” means (i) Encumbrances
reflected or reserved against or otherwise disclosed in the Most Recent Balance
Sheet, (ii) mechanics’, materialmen’s, warehousemen’s, carriers’, workers’,
or repairmen’s liens or other similar common law or statutory Encumbrances
arising or incurred in the Ordinary Course and that are not material in amount
or effect on any Specified Business or are being contested in good faith by
appropriate proceedings, (iii) liens for Taxes, assessments and other
governmental charges that are not due or payable or are being contested in good
faith by appropriate proceedings, (iv) with respect to real property, (A) easements,
quasi-easements, licenses, covenants running with the land, rights-of-way,
rights of re-entry, restrictions or other similar encumbrances, conditions
or restrictions that would be disclosed on current title reports or surveys,
which do not, individually or in the aggregate with one or more other
Encumbrances, interfere in any material respect with the right or ability to
own, use, enjoy or operate such real property as currently used or operated or
to convey good and indefeasible fee simple title to the same (with respect to
Owned Real Property) or materially detract from the value of such real
property, (B) zoning, building, subdivision or other similar requirements
or restrictions, provided, that the same are not violated in any
material respect by the existing improvements or the current use and operation
of such real property, and (C) Transferred Real Property Subleases which
do not, individually or in the aggregate with one or more other Encumbrances,
interfere in any material respect with the right or ability to use, enjoy or
operate such real property as currently used or operated or materially detract
from the value of such real property, (v) Encumbrances, other than
Encumbrances on real property, incurred in the Ordinary Course that are not
material to any Specified Business, (vi) any transfer restrictions set
forth in any Assigned Contract (other than any such restriction that could
reasonably be expected, individually or in the aggregate, to adversely affect
the Transaction or the Exchange in any material respect) and (vii) Encumbrances
imposed by any Contract or any Law governing a Franchise, provided, that
in the case of clauses (i), (ii), (iii), (iv) (as to any Encumbrances that
can be satisfied solely through the payment of money) and (v), any such
Encumbrance shall be a Permitted Encumbrance only to the extent that such
Encumbrance (x) shall be discharged pursuant to the Discharge or, with
respect to MCE Systems or Transferred Assets owned by Non-Debtor Subsidiaries,
an MCE Discharge or Additional Discharge, respectively, or (y) is
reflected in the Closing Net Liabilities Amount used in calculating the Final
Adjustment Amount.
“Permitted Parent Incentive Awards” means an
amount of Equity Securities that, during the 12-month period commencing
on the date hereof, does not exceed 1.5% of the outstanding Equity Securities
of Parent calculated on a Fully Diluted Basis and, for each 90-day period
thereafter, does not exceed an additional 0.375% of the outstanding Equity
Securities of Parent calculated on a Fully Diluted Basis (provided, that
(i) no more than ten percent of Permitted Parent Incentive Awards shall be
shares of restricted stock and (ii) any such employee stock option shall
not be issued at less than fair market value as determined in good faith by
Parent’s board of directors or compensation committee).
“Permitted Promotion” means, as to any Basic
Subscriber (other than Subscribers that only receive the lowest tier of service
(i.e., lifeline or “B1 only”
30
Subscribers)), any discount or promotion (i) which does
not extend beyond two months following the Closing Date or provide for a
discount equal to (or in excess of) the entire Applicable Monthly Rate in any
consecutive months or in more than any one month if such discount or promotion
is for a period of less than four months and (ii) the dollar amounts or
values of which do not (A) exceed, over the life of such discount or
promotion, an amount equal to two times the full monthly rate card pricing
applicable to all services provided to such Subscriber (the “Applicable
Monthly Rate”) or (B) exceed 50% of an amount equal to the product of (x) the
Applicable Monthly Rate multiplied by (y) the number of months (including
any fraction thereof) in the life of such discount or promotion.
“Person” means an individual, a corporation, a
partnership, an association, a limited liability company, a Government Entity,
a trust, a labor union or other entity or organization.
“Petition Date” has the meaning set forth in
the Recitals.
“Plan” means the chapter 11 plan filed by
Seller and/or its Affiliates in connection with the Reorganization Case,
providing, among other things, for the effectuation of the Transaction, as
amended from time to time, and satisfying the requirements of Section 5.13.
“Primarily Related” means, with respect to any
business or System, owned or held primarily by, required primarily for, or
used, intended for use, leased, licensed, accrued, reserved or incurred
primarily in connection with, such business or System, including to the extent
allocated thereto pursuant to Schedule 1.1(m) of the Seller
Disclosure Schedule.
“Pro Rata Payment” means, as to any amount, an
aggregate amount of cash and Purchase Shares (where each Purchase Share is
valued at the Per Share Value of the Purchase Shares) equal to such amount and
allocated as between cash and Purchase Shares such that 35.14% of such amount
shall be in the form of Purchase Shares and 64.86% of such amount shall be in
cash; provided, however, that (i) the cash portion of such
amount shall be increased by (A) any Interim Dividend paid in cash on the
Purchase Shares included in such Pro Rata Payment and (B) in respect of
the portion of any cash payment by Buyer pursuant to (x) Section 2.6(f),
interest on such portion (without giving effect to the foregoing clause (A))
from the date of the Closing, as applicable, to the date of payment at LIBOR
calculated on a 365-day basis and (y) Section 7.2, interest on
such portion (without giving effect to the foregoing clause (A)) at LIBOR
calculated on a 365-day basis from the date notice of the Losses for
which indemnification is sought was delivered until the date of payment of
indemnification by the Buyer Indemnifying Party and (ii) the stock portion
of such amount shall be increased by Interim Dividends paid in stock on the
Purchase Shares included in such Pro Rata Payment.
“Programming Agreement” means any Contract
pursuant to which Seller or any of its Affiliates has the right to carry audio
and/or video content or programming (or pay for or otherwise provide
compensation with regard to cable television
31
programming) on any Cable System and all related
arrangements, including with respect to programming and launch initiatives and
support; provided, that “Programming Agreement” shall not include any
local Cable System leased access agreement required by Law.
“Proposed Change in Tax Law” means a proposal
published in writing by (i) the President of the United States, (ii) the
U.S. Treasury Department or any official on behalf of the U.S. Treasury
Department (including the Office of Tax Policy), (iii) the Commissioner of
the Internal Revenue Service or any official on behalf of the Internal Revenue
Service, (iv) the House Ways and Means Committee or any member thereof
(each such member, except for the chair and ranking minority member, a “Specified
HWMC Member”), (v) the Senate Finance Committee or any member thereof
(each such member, except for the chair and ranking minority member, a “Specified
SFC Member”) or (vi) any other Congressional Committee (any such
proposal that is not reported out of such Congressional Committee for
sequential referral to either the House Ways and Means Committee or the Senate
Finance Committee, a “Non-Referred Proposal”).
“Protections Order” means an order of the
Bankruptcy Court approving Section 5.10 and Article VIII pursuant to
sections 105, 363, 503(b) and 364 of the Bankruptcy Code.
“Proximate Cause Party” has the meaning set
forth in Section 8.2.
“Purchase Price” has the meaning set forth in Section 2.5(c).
“Purchase Price Allocation Schedule” has the
meaning set forth in Section 5.7(d).
“Purchase Price Per Subscriber” means $3,810.
“Purchase Rights” means any purchase options,
rights of first refusal or other rights that any Person may have (under the
terms of any franchise or otherwise) to purchase all or any portion of a System
owned or operated by any Person as a result of the Transaction or the transfer
of any System pursuant to the Exchange.
“Purchase Shares” has the meaning set forth in
Section 2.5(c).
“Qualified Customer” means a Basic Subscriber
who, prior to the Closing, has been billed and, prior to one month following
the Closing, has paid (disregarding payments subject to any rebates or similar
programs) for services delivered during the period commencing two months prior
to the Measurement Date and ending on the Measurement Date an amount no less
than (i) for each month in such period, 50% of the Applicable Monthly Rate
or (ii) 66.67% of the Applicable Monthly Rate in respect of any single
month during such period. For the avoidance of doubt, in calculating a
Qualified Customer for purposes of the Estimated Closing Adjustment Amount and
the condition set forth in the second sentence of Section 6.2(h), the
parties shall assume that no payments will be made by such Basic Subscriber
after the Closing.
32
“Rate Regulatory Matter” means any proceeding
or investigation with respect to a Cable System arising out of or related to
the Cable Act (other than those affecting the cable television industry
generally) dealing with, limiting or affecting the rates which can be charged
by such Cable System for programming, equipment, installation, service or
otherwise.
“Real Property Leases” means, with respect to
each Specified Business, those leases, subleases, license agreements, and
sublicense agreements, together with all extensions, supplements, amendments,
other modifications and nondisturbance agreements relating thereto, governing
real property Related to such Specified Business, including those with respect
to the real properties listed on Schedule 1.1(n) of the Seller
Disclosure Schedule and identified as Related to such Specified Business.
“Real Property Sublease” means, with respect
to any Specified Business, any lease, sublease, license or sublicense, together
with all extensions, supplements, amendments and other modifications relating
thereto, pursuant to which the Owned Real Property or the Leased Real Property
(or any portion thereof) Related to such Specified Business is leased,
subleased, licensed or sublicensed to others.
“Redemptions” means the transactions that are
the subject matter of the Parent Redemption Agreement and of the TWE Redemption
Agreement, including the Parent Redemption and the TWE Redemption.
“Registered” means issued by, registered with,
renewed by, or the subject of a pending application before, any Government
Entity or domain name registrar.
“Rejected Contracts” has the meaning set forth
in Section 5.13(b).
“Rejection Claim” means, with respect to a
Contract, any Claim arising out of (i) the termination of such Contract or
the rejection of such Contract under section 365 of the Bankruptcy Code or (ii) a
breach of or default under any such Contract entered into following the
Petition Date as a result of the termination, rejection or breach of such
Contract as a result of Buyer’s determination not to make such Contract an
Assigned Contract, in each case assuming such termination, rejection or breach
occurred as of the earlier of (A) the date on which such Contract is
terminated or rejected or (B) the Closing Date.
“Related” means, with respect to any business
or System, owned or held by, required for, or used, intended for use, leased,
licensed, accrued, reserved or incurred in connection with, such business or
System.
“Related to the Parent Business” means owned
or held by, required for, used or intended for use, leased or licensed in
connection with, the Parent Business as conducted by Parent and its Affiliates
prior to the Closing.
“Reorganization Case” has the meaning set
forth in the Recitals.
“Retained Books and Records” has the meaning
set forth in Section 5.1(d).
33
“Rigas Litigation” means the litigation
described on Schedule 1.1(o) of the Seller Disclosure Schedule.
“Rights-of-Way” means, with respect to each
Specified Business, the written rights-of-way easements, rights of
access, rights of use, pole line or joint line agreements, underground conduit
agreements, crossing agreements, railroad agreements, leases, subleases,
licenses, sublicenses and other similar interests in real property (other than
Owned Real Property and Leased Real Property), together with all extensions,
supplements, amendments, other modifications and nondisturbance agreements
relating thereto, Related to such Specified Business.
“Rights-of-Way Assignment Agreement” means,
with respect to each Specified Business, an agreement in form and substance
reasonably acceptable to Seller and Buyer and, to the extent relating to Transferred
Rights-of-Way that are currently recorded, reasonably necessary to cause such
assignments to be in recordable form, assigning to Buyer the Transferred
Rights-of-Way Related to such Specified Business.
“Sale Bonus Program” has the meaning set forth
in the definition of “Assumed Liabilities.”
“Sale Process” means the formal sale process
of Seller’s Business announced by Seller on April 22, 2004 and commenced
by Seller in September 2004.
“Schedule A Part” has the meaning set forth in
the definition of “System Group.”
“SEC” means the Securities and Exchange
Commission.
“SEC/DOJ Matters” means (i) the civil
enforcement action captioned Securities and
Exchange Commission v. Adelphia Communications Corporation, John J. Rigas,
Timothy J. Rigas, Michael J. Rigas, James P. Rigas, James R. Brown and Michael
C. Mulcahey, filed on July 24, 2002, alleging various
securities fraud claims arising out of the Rigas family’s alleged misconduct,
and the Department of Justice’s investigation related thereto, in each case as
amended, modified and/or supplemented from time to time, and any related action
or investigation commenced from time to time and (ii) any and all other
Claims that the SEC or Department of Justice may have against Seller or any of
its Affiliates (other than any Excluded Claim); provided, that, solely
for purposes of Section 6.1(c), clause (ii) shall be deemed to
exclude any such Claims that shall not have been asserted or threatened by the
SEC or Department of Justice as of the Closing Date.
“SEC/DOJ Settlement” means a settlement,
dismissal or other resolution of the SEC/DOJ Matters in full and pursuant to
which after the Closing no Specified Business or any owner thereof shall have
any Liability (including risk of criminal prosecution), including any obligation
with respect to behavioral relief or similar action or limitation other than
obligations not greater than those set forth in the form of letter agreement
delivered by representatives of Friendco to representatives of Seller and Buyer
on April 17, 2005.
34
“Securities Act” means the Securities Act of
1933.
“Self-Regulatory Organization” means the
National Association of Securities Dealers, Inc., the American Stock
Exchange, the NYSE, any national securities exchange (as defined in the
Exchange Act) or any other similar self-regulatory body or organization.
“Seller” has the meaning set forth in the
Preamble.
“Seller Audited Financial Statements” has the
meaning set forth in Section 5.11(b).
“Seller Confidentiality Agreement” means the
letter agreement, dated October 22, 2004, among Seller, Friendco and TWX,
as amended by the letter agreement, dated November 9, 2004, the letter
agreement, dated January 7, 2005 and the letter agreement dated as of the
date hereof.
“Seller Disclosure Schedule” means the disclosure
schedule attached hereto as Annex A.
“Seller Indemnified Parties” has the meaning
set forth in Section 7.3.
“Seller Required Approvals” means, with
respect to each Specified Business, all consents, approvals, waivers,
authorizations, notices and filings, (a) required to be obtained by Seller
or any of its Affiliates from, or to be given by Seller or any of its
Affiliates to, or made by Seller or any of its Affiliates with, any Person, in
connection with the execution, delivery and performance by Seller or any of its
Affiliates of this Agreement, the Ancillary Agreements and the agreements
contemplated thereby to which it is (or will be) a party, the failure of which
to obtain or make would, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect, other than the Confirmation
Order and the LFA Approvals, or (b) that are listed on Schedule 1.1(p) of
the Seller Disclosure Schedule and identified as Related to such Specified
Business.
“Seller Severance Plan” has the meaning set
forth in Section 5.8(c).
“Seller Subscriber Accounting Policy” has the
meaning set forth in Section 3.16(e).
“Seller’s 401(k) Plan” has the meaning
set forth in Section 5.8(j).
“Seller’s Objection” has the meaning set forth
in Section 2.6(c).
“Seller’s Statement” has the meaning set forth
in Section 2.6(a).
“Shared Assets and Liabilities” means the
Assets and Liabilities set forth on Schedule 1.1(h) of the Seller
Disclosure Schedule and any other Assets required to have been listed thereon
in order for the representation and warranty in Section 3.20(b) to be
true and correct.
35
“Significant Subsidiary” of any Person means a
Subsidiary of such Person that would constitute a “significant subsidiary”
(within the meaning of Rule 102 of Regulation S-X of the SEC).
“SOA” means the Sarbanes-Oxley Act of
2002.
“Special Term” has the meaning set forth in Section 3.15(b).
“Specified Business” means each of the Group 1
Business and the Group 2 Business.
“Specified HWMC Member” has the meaning set
forth in the definition of “Proposed Change in Tax Law.”
“Specified SFC Member” has the meaning set
forth in the definition of “Proposed Change in Tax Law.”
“Specified Systems” means each of the Group 1
Systems, the Group 2 Systems and the MCE Systems.
“Stock Awards” has the meaning set forth in Section 5.8(q).
“Sublease Assignment Agreement” means, with
respect to each Specified Business, one or more agreements in form and
substance reasonably acceptable to Seller and Buyer and reasonably necessary to
cause such agreements to be recordable, assigning to Buyer the Transferred Real
Property Subleases Related to such Specified Business.
“Subscriber” means any Basic Subscriber,
Digital Subscriber or HSI Subscriber.
“Subscriber Accounting System” has the meaning
set forth in Section 5.23.
“Subscriber Adjustment Amount” means, with
respect to each Specified Business, the product of (i) Purchase Price Per
Subscriber multiplied by (ii) if
(A) the absolute value of the Subscriber Change is less than or equal to
the Subscriber Basket, zero and (B) the absolute value of the Subscriber
Change is greater than the Subscriber Basket, (1) if the Subscriber Change
is a negative amount, the sum of the Subscriber Change plus the Subscriber Basket for such
Specified Business and (2) if the Subscriber Change is a positive amount,
the sum of the Subscriber Change minus the
Subscriber Basket for such Specified Business.
“Subscriber Basket” means, with respect to
each Specified Business, the number of Basic Subscribers set forth opposite
such Specified Business in Schedule 1.1(q)(i) of the Seller
Disclosure Schedule; provided, however, that the Subscriber
Basket allocated to the Group 2 Business shall be reduced by the MCE Subscriber
Basket Component (if there are any Disputed MCE Systems).
36
“Subscriber Cap” means, with respect to each
Specified Business, the number of Basic Subscribers set forth with respect to
such Specified Business in Schedule 1.1(q)(ii) of the Seller
Disclosure Schedule; provided, however, that the Subscriber Cap
allocated to the Group 2 Business shall be reduced by the MCE Subscriber Cap
Component (if there are any Disputed MCE Systems).
“Subscriber Change” means, with respect to
each Specified Business, the Base Subscriber Number for such Specified Business
minus the Closing Subscriber
Number for such Specified Business, expressed as a positive, if positive, or as
a negative, if negative; provided, that, except for purposes of
calculating the Subscriber Adjustment Amount for each Disputed MCE System
pursuant to Section 2.7(a), the
absolute value of the Subscriber Change shall not exceed the Subscriber Cap for
such Specified Business.
“Subsequent Adjustment Amount” has the meaning
set forth in Section 2.6(f).
“Subsidiary” means, with respect to any
Person, any entitywhether
incorporated or unincorporated, of which at least a majority of the securities
or ownership interests having by their terms voting power to elect a majority
of the board of directors or other persons performing similar functions is
directly or indirectly owned or controlled by such Person or by one or more of
its respective Subsidiaries; it being
understood that (i) Bright House Networks, LLC shall be deemed not to
be a Subsidiary of Parent or any of its Affiliates so long as its day-to-day
operations are managed by Advance Publications, Inc., a New York
corporation, Advance/Newhouse Partnership, a New York general partnership, or
any of their respective Affiliates pursuant to the Partnership Agreement for
Time Warner Entertainment-Advance/Newhouse Partnership, a New York general
partnership (“TWE-A/N”), (ii) TWE-A/N shall be deemed a wholly
owned, indirect Subsidiary of Parent, and (iii) the Tele-Media Entities
shall be deemed to be Subsidiaries of Seller.
“Superior Alternate Plan” has the meaning set
forth in Section 5.10(b).
“Superior Proposal” has the meaning set forth
in Section 5.10(a).
“System” means (i) a cable system, as
such term is defined in the Communications Act, and (ii) to the extent
relating to areas referred to on a Schedule A Part as a non-primary Cost
Center, a multichannel video programming distribution system operated through (A) bulk,
commercial or multiple dwelling units, (B) satellite master antenna
television units or (C) former Verizon cable systems in Thousand Oaks,
Oxnard, Port Hueneme and El Rio, California.
“System Group” means, with respect to each
Specified Business and each Specified Business (as defined in the Friendco
Purchase Agreement), the Systems that are a part of such Specified Business as
set forth in the applicable part of Schedule A of the Seller Disclosure
Schedule or Schedule A of the Seller Disclosure Schedule (as defined in the
Friendco Asset Purchase Agreement) (each, a “Schedule A Part”).
37
“Target Capital Expenditure Amount” means,
with respect to each Specified Business, the aggregate amount of capital
expenditures budgeted to be made in respect thereof, respectively, subsequent
to December 31, 2004 and up to and including the end of the month
immediately preceding the Closing Date or, if the Closing occurs on a
month-end, up to and including such month, as set forth in the Budget; provided,
however, that in the event any Disputed MCE Systems exist as of the
Closing, then the Target Capital Expenditure Amount in respect of the Group 2
Business shall be reduced by the amounts included in the Budget in respect of
each Disputed MCE System through the month ending (i) on the Closing Date
if the Closing occurs on a month-end or (ii) immediately prior to the
Closing Date if the Closing does not occur on a month-end (itbeingunderstoodthat the amounts included in the Budget in respect of
each Disputed MCE System shall be deemed for purposes hereof to equal the
amounts included in the Budget in respect of all MCE Systems multiplied by the
quotient obtained by dividing (x) the aggregate number of Basic
Subscribers served by such Disputed MCE System as of December 31, 2004 by (y) the
aggregate number of Basic Subscribers served by all MCE Systems as of December 31,2004); provided, further, that, if the Subscriber Change for a
Specified Business is a positive number, the Target Capital Expenditure Amount
for such Specified Business shall be reduced by an amount equal to the lesser
of (A) the product of the Subscriber Change multiplied by $210.00 and (B) (1) with
respect to the Group 1 Business, $21,100,000 and (2) with respect to the
Group 2 Business, $19,100,000.
“Tax Law” means the Code, final, temporary or
proposed Treasury regulations, published pronouncements of the U.S. Treasury
Department or IRS, court decisions or other relevant binding legal authority
(and similar provisions, pronouncements, decisions and other authorities of
state, local and foreign Law).
“Tax Return” shall mean any report, return or
other information (including any attached schedules or any amendments to such
report, return or other information) required to be supplied to or filed with a
Government Entity with respect to any Tax, including an information return,
claim for refund, amended return, declaration, or estimated Tax returns in
connection with the determination, assessment, collection or administration of
any income Tax.
“Taxes” means all federal, state or local and
all foreign taxes, including income, gross receipts, windfall profits, value
added, severance, property, production, sales, use, duty, license, excise,
franchise, employment, withholding or similar taxes (including any payment
required to be made to any state abandoned property administrator or other
public official pursuant to an abandoned property, escheat or similar Law)
together with any interest, additions or penalties with respect thereto and any
interest in respect of such additions or penalties.
“Tele-Media Entities” means each of TMC
Holding Corporation, a Delaware corporation, TMC Holdings, LLC, a Delaware
limited liability company, Adelphia Company of Western Connecticut, a
Connecticut corporation, Tele-Media Investment Partnership, L.P., a Delaware
limited partnership, Eastern Virginia Cablevision, L.P., a Delaware limited
partnership, Eastern Virginia Cablevision Holdings LLC, a Delaware limited
liability company, Tele-Media Company of Hopewell-Prince
38
George, a Virginia general partnership, Tele-Media Company
of Tri-States, L.P., a Delaware limited partnership, CMA Cablevision Associates
VII, L.P., a Pennsylvania limited partnership, and CMA Cablevision Associates
XI, L.P., a Pennsylvania limited partnership.
“Third Party Claim” has the meaning set forth
in Section 7.4(a).
“Third Party Confidentiality Agreement” has
the meaning set forth in Section 5.21.
“Total Liabilities” means, with respect to
each Specified Business, all Liabilities, expressed as a positive number, of
such Specified Business as of the Closing (after giving effect to the
Transaction), as would be reflected on the face of a balance sheet (excluding
any footnotes thereto) prepared in accordance with GAAP consistently applied
(to the extent GAAP was previously applied) for such Specified Business; provided,
however, that Total Liabilities shall include the following: accounts payable, accrued expenses (including
all accrued vacation time, sick days, paid time off, copyright fees, franchise
fees and other license fees or charges), Liabilities with respect to unearned
income and advance payments (including subscriber prepayments and deposits for
converters, encoders, cable television service and related sales) and interest,
if any, required to be paid on advance payments; provided, further,
that (a) in no event shall Total Liabilities include (i) Liabilities
that constitute Assumed Liabilities pursuant to clauses (iii) (other than
part (C) thereof), (iv) (other than accrued but unpaid Franchise fees
and any reserves for Franchise fee audits), (v), (vi), and (vii) of the
definition of “Assumed Liabilities” or (ii) Excluded Liabilities, and (b) Liabilities
(i) under the Sale Bonus Program included in clause (iii)(C) of the
definition of “Assumed Liabilities” and (ii) under purchase orders
outstanding as of the Closing will be treated, for purposes hereof, as part of
the Total Liabilities of the relevant Specified Business as of the Closing
regardless of whether they would otherwise be treated as such under GAAP but
subject in any event to the remainder of this definition. For purposes of
determining Total Liabilities in respect of any Disputed MCE System, all
references above to the Closing shall be deemed to mean, with respect to any
Disputed MCE System, the MCE Closing.
“Transaction” means the transactions that are
the subject of this Agreement, including the purchase and sale of the
Transferred Assets and the assumption of the Assumed Liabilities; provided,
however, that Transaction shall not include the Friendco Transaction.
“Transfer Tax Returns” has the meaning set
forth in Section 5.7(c)(ii).
“Transfer Taxes” has the meaning set forth in Section 5.7(c)(i).
“Transferred Assets” has the meaning set forth
in Section 2.1.
“Transferred Cash” has the meaning set forth
in Section 2.1(a).
“Transferred Employees” has the meaning set
forth in Section 5.8(e)(ii).
39
“Transferred Employees’ Records” means all
personnel files related to the Transferred Employees, but not including any
files the transfer of which would be prohibited by Law.
“Transferred Intellectual Property” means,
with respect to each Specified Business, the Intellectual Property owned by
Seller or its Affiliates and Related to such Specified Business, including that
set forth on Schedule 1.1(r) of the Seller Disclosure Schedule and
identified as Related to such Specified Business.
“Transferred Intellectual Property Contracts”
means, with respect to each Specified Business, (i) the licenses,
sublicenses, distributor agreements and permissions, and royalty agreements
concerning Intellectual Property to which Seller or any of its Affiliates is a
party and which are Related to such Specified Business and are Assigned
Contracts and (ii) the rights and entitlements, including the right to
receive royalty payments, pursuant to any licenses, sublicenses, distributor
agreements and permissions or royalty agreements to which Seller or any of its
Affiliates is a party and under which a third party licensee obtains benefits
pursuant to section 365(n) of the Bankruptcy Code and which are Related to
such Specified Business and are Assigned Contracts.
“Transferred Investment Assignment Agreement”
means, with respect to each Specified Business, an agreement in form and
substance reasonably acceptable to Seller and Buyer, providing for the
assignment and assumption of Transferred Investments Related to such Specified
Business.
“Transferred Investments” means, with respect
to each Specified Business, (i) the Equity Securities identified on Schedule
1.1(s)(i) of the Seller Disclosure Schedule and allocated to such
Specified Business pursuant to the Designated Allocation, itbeingunderstoodthat, by written notice to Seller delivered on one or
more occasions and no fewer than 10 Business Days prior to the Closing, Buyer
shall be entitled to remove any item from Schedule 1.1(s)(i) of the
Seller Disclosure Schedule with respect to which any material Investment
Document was not provided to Buyer prior to the date hereof, and (ii) those
Equity Securities identified on Schedule 1.1(s)(ii) of the Seller
Disclosure Schedule that Buyer selects to be allocated to a Specified Business,
itbeingunderstoodthat such selection shall be
made in the same manner, and subject to the same conditions, as are applicable
to the selection of Contracts as Assigned Contracts pursuant to Section 5.13
(with the determination of whether or not an item will be treated as an OCB
Contract made on the basis of the primary agreement containing the business
terms applicable to the applicable Investment Entity).
“Transferred Joint Venture Parents” has the
meaning ascribed to such term in the Friendco Purchase Agreement.
“Transferred Leased Real Property” means
Leased Real Property that is the subject of a Transferred Real Property Lease.
“Transferred Owned Real Property” means Owned
Real Property that is not an Excluded Asset pursuant to Section 2.2(h).
40
“Transferred Real Property Leases” means Real
Property Leases that are Assigned Contracts.
“Transferred Real Property Subleases” means
Real Property Subleases that are Assigned Contracts and that relate to (i) the
Transferred Owned Real Property or (ii) the Transferred Leased Real
Property.
“Transferred Rights-of-Way” means all
Rights-of-Way, provided that to the extent a Right-of-Way is a Contract,
Transferred Rights-of-Way shall mean Rights-of-Way that are Assigned Contracts.
“Transitional Services” has the meaning set
forth in Section 5.24.
“TWE” means Time Warner Entertainment Company,
L.P., a Delaware limited partnership.
“TWE-A/N” has the meaning set forth in the
definition of “Subsidiary.”
“TWE Redemption” means the redemption of
limited partnership interests in TWE pursuant to the TWE Redemption Agreement.
“TWE Redemption Agreement” means the
Redemption Agreement, dated as of the date hereof, by and among Friendco,
Comcast Cable Communications Holdings, Inc., MOC Holdco I, LLC, TWE
Holdings I Trust, Cable Holdco III LLC, TWE, TWX and Parent.
“TWX” means Time Warner Inc., a Delaware
corporation.
“TWX Agreement” means that certain Agreement,
dated March 31, 2003, between TWX, Parent and an Affiliate of Friendco.
“TWX Confidentiality Agreement” means the
letter agreement, dated November 9, 2004, between TWX and Seller.
“Unallocated Shared Assets and Liabilities”
means those Assets and Liabilities (and the related revenue and expenses)
identified as such on Schedule 1.1(h) of the Seller Disclosure Schedule.
“Union Employee” has the meaning set forth in Section 5.8(b).
“U.S. Antitrust Laws” means the Sherman Act,
the Clayton Act, the HSR Act, the Federal Trade Commission Act, and all other
federal and state statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines, and other Laws that are designed or intended to
prohibit, restrict or regulate actions having the purpose or effect of
monopolization or restraint of trade.
41
“US Trustee” means the United States Trustee
for Region 2 or such other region in which the reorganization case of any
Managed Cable Entity or Non-Debtor Subsidiary is pending.
“WARN” means the Worker Adjustment and
Retraining Notification Act.
Section
1.2 Other Interpretive
Provisions. Unless the express context otherwise requires:
(a) the
words “hereof,”“herein,” and “hereunder” and words of similar import, when
used in this Agreement, shall refer to this Agreement as a whole and not to any
particular provision of this Agreement;
(b) the
terms defined in the singular have a comparable meaning when used in the
plural, and vice versa;
(c) the
terms “Dollars” and “$” mean United States Dollars;
(d) any
payment hereunder to be made in the form of shares of Parent Class A
Common Stock shall be made only in whole shares and, in lieu of payment of any
fractional shares, a cash payment shall be made in an amount equal to the value
of such fractional shares valued at the Per Share Value of the Purchase Shares;
(e) references
herein to a specific Section, Subsection, Recital, Schedule or Exhibit shall
refer, respectively, to Sections, Subsections, Recitals, Schedules or Exhibits
of this Agreement;
(f) wherever
the word “include,”“includes,” or “including” is used in this Agreement, it
shall be deemed to be followed by the words “without limitation”;
(g) references
herein to any gender include each other gender;
(h) references
herein to any Person include such Person’s heirs, executors, personal
representatives, administrators, successors and assigns; provided, however,
that nothing contained in this clause (h) is intended to authorize any
assignment or transfer not otherwise permitted by this Agreement;
(i) references
herein to a Person in a particular capacity or capacities exclude such Person
in any other capacity;
(j) references
herein to any contract or agreement (including this Agreement) mean such
contract or agreement as amended, supplemented or modified from time to time in
accordance with the terms thereof;
(k) with
respect to the determination of any period of time, the word “from” means “from
and including” and the words “to” and “until” each means “to but excluding”;
42
(l) references
herein to any Law or any license mean such Law or license as amended, modified,
codified, reenacted, supplemented or superseded in whole or in part, and in
effect from time to time;
(m) references
herein to any Law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise;
(n) references
herein to sections of the Code shall be construed to also refer to any
successor sections;
(o) the
rules of construction contained in section 102 of the Bankruptcy Code
(except section 102(8) of the Bankruptcy Code) shall apply; and
(p) in
the event of any inconsistency between the terms of the Plan and this
Agreement, the terms of this Agreement shall control.
ARTICLE II
PURCHASE AND SALE OF THE SPECIFIED BUSINESSES
Section
2.1 Purchase and Sale of
Assets. Subject to Sections 2.7, 2.11 and 5.13(h), on the terms and subject
to the conditions set forth herein, at the Closing, Seller shall, and shall
cause each of its Affiliates to, sell, convey, transfer, assign and deliver to
Buyer, and Buyer shall purchase from Seller and each of its Affiliates (x) the
Transferred Investments and (y) all of Seller’s and each of its Affiliates’
Assets that are Related to the Acquired Business, including the Acquired
Systems, except for the Excluded Assets (clauses (x) and (y),
collectively, the “Transferred Assets”), free and clear of all
Encumbrances, other than Permitted Encumbrances (or, in the case of the
Transferred Investments, Encumbrances under the Investment Documents),
including the following:
(a) all
cash and cash equivalents consisting of (i) petty cash-on-hand, (ii) Condemnation
Proceeds and (iii) Insurance Claims (collectively, the “Transferred
Cash”);
(d) Transferred
Intellectual Property and Transferred Intellectual Property Contracts;
(e) Books
and Records;
(f) Fixtures
and Equipment;
(g) Transferred
Real Property Leases;
(h) Transferred
Real Property Subleases;
43
(i) Transferred
Owned Real Property;
(j) Transferred
Rights-of-Way;
(k) Insurance
Claims and Condemnation Proceeds to the extent not included under subsection (a) above;
(l) except
as set forth in Section 2.2(k), all claims (and the proceeds related
thereto) available to or being pursued by Seller or any of its Affiliates to
the extent related to the Transferred Assets, the Assumed Liabilities or the
ownership, use, function or value of any Transferred Asset;
(m) all
credits, prepaid expenses, advance payments, security deposits, prepaid items
and duties to the extent related to a Transferred Asset;
(n) to
the extent their transfer is not prohibited by Law, all Authorizations held by
Seller or any of its Affiliates and all applications therefor;
(o) all
guaranties, representations, warranties, indemnities and similar rights in
favor of Seller or any of its Affiliates to the extent related to any
Transferred Asset, except to the extent included in Excluded Assets;
(p) all
other current assets; and
(q) all
rights of Seller set forth in Section 5.12 of the Friendco Purchase
Agreement;
provided, that the sale, conveyance, transfer, assignment or
delivery of a Transferred Asset shall, except as otherwise directed by Buyer in
a manner consistent with the like allocations of Friendco pursuant to the
Friendco Purchase Agreement (provided, that the effect of any such
allocation so directed by Buyer that is different than the allocation that
would occur in the absence of such direction shall be disregarded for the
purposes of making any determination with respect to (x) the
representations, warranties or covenants of Seller herein, (y) the Closing
Adjustment Amount and (z) the satisfaction of the conditions set forth in Article VI,
in each case, to the extent such determination would be different (but in the
case of the Closing Adjustment Amount, only to the extent the aggregate Closing
Adjustment Amount and the Closing Adjustment Amount (as defined in the Friendco
Purchase Agreement) would be different) as a result of such direction), be
allocated among each of the Specified Businesses and the Friendco Business in
the following manner (provided, that (A) in no event will any of
the following allocations result in the transfer of subscribers from one System
Group to another and (B) any allocation of capital expenditures shall be
made in accordance with Schedule 5.2(s) of the Seller Disclosure
Schedule or, if not addressed in such Schedule as set forth below): if such Transferred Asset is (i) Related
only to a single Specified Business and not to the Friendco Business, to such
Specified Business, (ii) included in the Group 1 Shared Assets and
Liabilities pursuant to Schedule 1.1(h) of the Seller Disclosure
Schedule, to the Group 1 Business, (iii) included in the Group 2 Shared
Assets and Liabilities pursuant to Schedule 1.1(h) of the Seller
Disclosure Schedule, to the Group 2 Business, (iv) solely
44
Related to the Friendco Business or allocated to the
Friendco Business pursuant to Schedule 1.1(f) of the Seller
Disclosure Schedule (as defined in the Friendco Purchase Agreement), to the
Friendco Business, (v) is readily divisible, Related to more than one of
the Group 1 Business, the Group 2 Business and the Friendco Business and not
allocated pursuant to clause (i), (ii), (iii) or (iv), allocated to such
Group 1 Business, Group 2 Business and/or Friendco Business to which it is
Related pro rata based on the number of Basic Subscribers served by such Group
1 Business, Group 2 Business or Friendco Business (as applicable) as of the
Closing and (vi) not allocated pursuant to clause (i), (ii), (iii), (iv) or
(v) and is (A) Primarily Related to the Friendco Business, to the
Friendco Business, (B) Primarily Related to the Group 1 Business, to the
Group 1 Business or (C) not Primarily Related to the Friendco Business or
the Group 1 Business, to the Group 2 Business (the allocation of such assets
pursuant to this proviso to this Section 2.1, the “Designated
Allocation”). Notwithstanding anything to the contrary in this Section 2.1,
any Asset included in the Unallocated Shared Assets and Liabilities that is not
a Transferred Asset pursuant to the Designated Allocation shall not be deemed
to be a Transferred Asset.
Section
2.2 Excluded Assets. Notwithstanding
anything herein to the contrary, from and after the Closing, Seller and its
Affiliates shall retain, and there shall be excluded from the sale, conveyance,
assignment or transfer to Buyer hereunder, and the Transferred Assets shall not
include, any of the Friendco Transferred Assets (except as set forth in Section 5.15)or the following Assets (collectively, the
“Excluded Assets”):
(a) all
Assets with respect to Taxes (including duty and tax refunds and prepayments)
and net operating losses of Seller or any of its Affiliates;
(b) except
to the extent set forth in Section 5.1(d), all Tax Returns of Seller or
any of its Affiliates and all Books and Records (including working papers) and
tax software to the extent directly related thereto;
(c) all
insurance policies and rights thereunder other than the Insurance Claims;
(d) all
credits, prepaid expenses, deferred charges, advance payments, security
deposits and prepaid items, in each case, only to the extent related to any
Asset that is not a Transferred Asset;
(e) all
cash and cash equivalents, except for the Transferred Cash;
(f) all
Intercompany Receivables;
(g) all
Contracts (including all Third Party Confidentiality Agreements) other than
Assigned Contracts;
(h) (i) any
Owned Real Property that, and any lease (other than a lease designated by Buyer
as an Assigned Contract) for real property that, (A) is vacant, (B) contains
only inactive headends, inactive hubsites or inactive optical transition nodes
or (C) is solely residential in nature and (ii) the Owned Real
Property set forth on Schedule
45
2.2(h) of the Seller Disclosure Schedule; provided,
however, that, from time to time prior to the Closing but no later than
ten Business Days prior to the Closing, Buyer may designate any other Owned
Real Property to be included on such Schedule 2.2(h) of the Seller
Disclosure Schedule;
(i) all
Programming Agreements (other than any retransmission consent agreement that is
an Assigned Contract);
(j) all
Assets listed on Schedule 2.2(j) of the Seller Disclosure Schedule;
(k) (i) all
claims (and proceeds related thereto) set forth on Schedule 2.2(k) of
the Seller Disclosure Schedule relating to (A) the Rigas Litigation or (B) the
Designated Litigation, (ii) all other claims (and proceeds related
thereto) that Seller or any of its Affiliates may make after the date hereof to
the extent not affecting any Specified Business (including any Transferred
Asset or Assumed Liability) in any material respect and (iii) any claims
of Seller or its Affiliates against Seller or any of its Affiliates (other than
any claim against any Investment Entity) to the extent not affecting any
Specified Business (including any Transferred Asset or Assumed Liability);
(l) all
personnel records, other than the Transferred Employees’ Records;
(m) all
rights in connection with and Assets of the Benefit Plans;
(n) except
for the Transferred Investments, all Equity Securities or other rights of
Seller or any of its Affiliates in any other Person, including any Asset
Transferring Subsidiary;
(o) Assets
allocated to the Friendco Business pursuant to the Designated Allocation; and
(p) state
certificates of public convenience and necessity or similar state
telecommunication Authorizations except for those that Buyer designates in writing
as Transferred Assets at least ten Business Days prior to the Closing.
Section
2.3 Assumption of Liabilities. On the terms and subject
to the conditions set forth herein and in partial consideration of the sale of
the Transferred Assets, at the Closing, Buyer shall assume and discharge or
perform when due all the Assumed Liabilities; it
being understoodthat the assumption of an Assumed Liability shall,
except as otherwise allocated by Buyer in a manner consistent with the like
allocations of Friendco pursuant to the Friendco Purchase Agreement (provided,
that the effect of any such allocation so directed by Buyer that is different
than the allocation that would occur in the absence of such direction shall be
disregarded for the purposes of making any determination with respect to (x) the
representations, warranties or covenants of Seller herein, (y) the Closing
Adjustment Amount and (z) the satisfaction of the conditions set forth in Article VI,
in each case, to the extent such determination would be different (but in the
case of the Closing Adjustment Amount, only to the extent the aggregate Closing
Adjustment
46
Amount and the Closing Adjustment Amount (as defined in the
Friendco Purchase Agreement) would be different) as a result of such
direction), be allocated among each of the Specified Businesses and the
Friendco Business in the following manner:
if such Assumed Liability is (i) Related only to a single Specified
Business and not to the Friendco Business, to such Specified Business, (ii) included
in the Group 1 Shared Assets and Liabilities pursuant to Schedule 1.1(h) of
the Seller Disclosure Schedule, to the Group 1 Business, (iii) included in
the Group 2 Shared Assets and Liabilities pursuant to Schedule 1.1(h) of
the Seller Disclosure Schedule, to the Group 2 Business, (iv) solely
Related to the Friendco Business or allocated to the Friendco Business pursuant
to Schedule 1.1(f) of the Seller Disclosure Schedule (as defined in
the Friendco Purchase Agreement), to the Friendco Business and (v) not
allocated pursuant to clause (i), (ii), (iii) or (iv), then to the
Friendco Business, to the extent Related to the Friendco Business, to the Group
1 Business, to the extent Related to the Group 1 Business, and to the Group 2
Business, to the extent Related to the Group 2 Business (which allocations
shall be made in each case after giving effect to the allocations to each such
Friendco Business and Specified Business pursuant to the Designated
Allocation).
Section
2.4 Excluded Liabilities.
Seller and its Affiliates shall retain and be responsible for all Excluded
Liabilities. Notwithstanding anything to the contrary in this Agreement, Buyer
shall not assume, and neither Buyer nor any of its Affiliates shall have any
Liability for, any Liability of Seller or any Affiliate of Seller that is not
expressly assumed by Buyer pursuant to Section 2.3.
Section
2.5 Purchase Price. On the terms and subject
to the conditions set forth herein, in consideration of the sale of the
Transferred Assets, at the Closing, Buyer shall:
(a) assume
the Assumed Liabilities;
(b) pay
to Seller an aggregate amount in cash equal to $9,154,000,000, as adjusted
pursuant to Sections 2.6(a) and 2.6(f) (as so adjusted, the “Cash
Consideration”); and
(c) cause
Parent to issue and deliver, on behalf of Buyer, to Seller such number of
shares of Parent’s Class A Common Stock, par value $0.01 per share (the “Parent
Class A Common Stock”), as shall represent 16% of the outstanding
Equity Securities of Parent calculated on a Fully Diluted Basis (after giving
effect to such issuance and assuming for purposes of such calculation the
completion of the Redemption pursuant to the Parent Redemption Agreement but without giving effect to any adjustment
pursuant to Section 2.6 or 2.7), subject to adjustment of such number of
shares pursuant to Sections 2.6(f) and 2.7 (as so adjusted, the “Purchase
Shares” and, together with the Cash Consideration, the “Purchase Price”);
provided, however, that, in lieu of payment to Seller,
Buyer shall deliver or cause to be delivered, at the Closing, 4% of the
Purchase Price in the form of a Pro Rata Payment (after giving effect to any
adjustment thereof that is effected as of the Closing) (collectively, as such
amount may be increased in accordance with Section 2.6(f) or 2.7(c),
the “Escrow Amount”) to be held by the Escrow Agent in an account, the
cash
47
component
of which shall bear interest (the “Escrow Account”), pursuant to the
Escrow Agreement, which Escrow Amount shall be paid in whole or in part in
accordance with the terms of the Escrow Agreement to (i) the Buyer
Indemnified Parties to the extent necessary to satisfy any obligation of Seller
pursuant to Section 7.2(a), (ii) Buyer to the extent necessary to
satisfy a payment obligation of Seller, if any, pursuant to Section 2.6(f) or
2.7(d), (iii) Seller, on the date that is six months following the Closing
Date, to the extent of the excess, if any, of 33% of the Escrow Amount
deposited at the Closing over the sum of (A) all amounts paid pursuant to
the immediately preceding clauses (i) and (ii), plus (B) the maximum amount that could reasonably be
expected to be necessary to satisfy all claims by the Buyer Indemnified Parties
pursuant to Section 7.2(a) asserted on or prior to such date, and (iv) Seller
to the extent of any remaining funds and/or shares in the Escrow Account as of
the Buyer Indemnification Deadline (subject, with respect only to the MCE
Purchase Shares, to Section 2.7(d)), except to the extent of the maximum
amount that could reasonably be expected to be necessary to satisfy all claims
by the Buyer Indemnified Parties pursuant to Section 7.2(a) asserted
on or prior to the Buyer Indemnification Deadline (subject, with respect only
to the MCE Purchase Shares, to Section 2.7(d)). All amounts payable from
the Escrow Account shall be paid in the form of an Escrow Payment. Any Escrow
Payment or Pro Rata Payment to be made hereunder shall be made (x) in
respect of any distribution of shares of Parent Class A Common Stock by (I) delivery
of stock certificates representing such shares, registered in the name of Buyer
or Seller, as the case may be, or (II) confirmation of a book-entry
transfer of such shares in form and substance reasonably satisfactory to Buyer
or Seller, as the case may be, and the Escrow Agent, and (y) in respect of
any distribution of cash, by wire transfer of immediately available funds to an
account designated by Buyer or Seller, as the case may be, at least five
Business Days prior to such payment.
Section 2.5A Purchase
Shares. For the avoidance of doubt, 156.380952 shares of Parent Class A
Common Stock would be the number of shares required to be delivered pursuant to
Section 2.5(c) at the Closing (before giving effect to any adjustment
under Section 2.6 or 2.7) assuming that (a) the number of outstanding
Equity Securities as of the date hereof is as represented in Sections 4.4(b)(i) and
(b)(ii), (b) the Equity Securities subject to redemption under the Parent
Redemption Agreement is 179 shares of Parent Class A Common Stock, and (c) no
additional Equity Securities were issued by Parent on or after the date hereof
in violation of Section 5.3 hereof; provided that if any pro rata stock
dividend (or any stock split or similar recapitalization) is effected between
the date hereof and Closing as permitted hereunder then such number of shares
would be adjusted accordingly (by operation of the definition of Fully Diluted
Basis).
Section
2.6 Closing Adjustment Amount.
(a) No later than ten
Business Days prior to the Closing Date, Seller shall prepare, or cause to be
prepared, and deliver to Buyer, with respect to each Specified Business, a
statement (each, a “Seller’s Statement”), which shall set forth Seller’s
good faith estimate of the Closing Adjustment Amount which shall be determined
in accordance with this Agreement (the “Estimated Closing Adjustment Amount”).
Each Seller’s Statement shall be accompanied by a certification of Seller’s
Chief Financial Officer to the effect that such Seller’s Statement has been
prepared in
48
good
faith in accordance with this Agreement based on the books and records of such
Specified Business and be reasonably satisfactory to Buyer. If the sum of the
Estimated Closing Adjustment Amounts for the Specified Businesses is a negative
number, then the Cash Consideration payable at the Closing shall be decreased
by the absolute value of such sum. If the sum of the Estimated Closing
Adjustment Amounts for the Specified Businesses is a positive number, then the
Cash Consideration payable at the Closing shall be increased by such sum.
(b) As
soon as practicable but in no event more than 90 days following the Closing,
Buyer shall prepare, or cause to be prepared, and deliver to Seller, with
respect to each Specified Business, a statement (each, a “Buyer’s Statement”)
of the actual Closing Adjustment Amount, as of the Closing Date, which shall be
determined in accordance with this Agreement. Each Buyer’s Statement shall be
accompanied by a certification of Buyer’s Chief Financial Officer to the effect
that such Buyer’s Statement has been prepared in accordance with this Agreement
based on the books and records of such Specified Business.
(c) Seller
and Seller’s accountants shall complete their review of each of the Buyer’s
Statements and Buyer’s calculations of the Closing Adjustment Amount within 30
days after delivery thereof by Buyer. In the event that Seller determines in
good faith that any Buyer’s Statement has not been prepared in accordance with
this Agreement, Seller shall, on or before the last day of such 30-day
period, so inform Buyer in writing setting forth a specific description of the
basis of Seller’s determination and the adjustments to such Buyer’s Statement
and the corresponding adjustments to the applicable Closing Adjustment Amount
that Seller believes should be made in accordance with this Agreement (a “Seller’s
Objection”). If no Seller’s Objection is received by Buyer on or before the
last day of such 30-day period, then the Closing Adjustment Amount set
forth in a Buyer’s Statement shall be final and binding upon Seller. Buyer
shall have 30 days from its receipt of a Seller’s Objection to review and
respond to such Seller’s Objection.
(d) If
Seller and Buyer are unable to resolve all of their disagreements with respect
to the proposed adjustments set forth in any Seller’s Objection within 15 days
following the completion of Buyer’s review of such Seller’s Objection, they
shall refer any remaining disagreements to the CPA Firm which, acting as
experts and not as arbitrators, shall determine, in accordance with this Agreement
based on the books and records of the applicable Specified Business, and only
with respect to the remaining differences so submitted (and within the range of
dispute between Buyer’s Statement and Seller’s Objection with respect to each
such difference), whether and to what extent, if any, any Closing Adjustment
Amount requires adjustment. Buyer and Seller shall instruct the CPA Firm to
deliver its written determination to Buyer and Seller no later than 30 days
after the remaining differences underlying any such Seller’s Objection are
referred to the CPA Firm. The CPA Firm’s determination shall be conclusive and
binding upon Buyer and Seller and their respective Affiliates. With respect to
each Seller’s Objection, the fees and disbursements of the CPA Firm shall be
borne equally by Seller and Buyer. Buyer and Seller shall make readily
available to the CPA Firm all relevant books and records and any work papers
(including those of the parties’
49
respective accountants, to the extent
permitted by such accountants) relating to the determination of any Closing
Adjustment Amount and all other items reasonably requested by the CPA Firm in
connection therewith.
(e) Buyer
shall provide to Seller and its accountants full access to the books and
records of each Specified Business and to any other information, including work
papers of its accountants (to the extent permitted by such accountants), and to
any employees during regular business hours and on reasonable advance notice,
to the extent reasonably necessary for Seller to review each Buyer’s Statement,
to prepare a Seller’s Objection, if any, and to prepare materials for
presentation to the CPA Firm in connection with Section 2.6(d). Seller and
its accountants shall have full access to all information used by Buyer in
preparing such Buyer’s Statement, including the work papers of its accountants
(to the extent permitted by such accountants).
(f) Upon
satisfaction of the applicable procedures of this Section 2.6, the
Purchase Price shall be adjusted with respect to each Specified Business by an
amount equal to (i) the Final Adjustment Amount of such Specified Business
minus (ii) the Estimated
Closing Adjustment Amount of such Specified Business (the “Subsequent
Adjustment Amount”). If the Subsequent Adjustment Amount is a positive
number, then the Purchase Price allocated to such Specified Business shall be
increased by the Subsequent Adjustment Amount and Buyer shall promptly (and in
any event within five Business Days) after the final determination thereof pay
to the Escrow Agent, for deposit into the Escrow Account, a Pro Rata Payment
equal to the Subsequent Adjustment Amount. If the Subsequent Adjustment Amount
is a negative number, then the Purchase Price allocated to such Specified
Business shall be decreased by the absolute value of the Subsequent Adjustment
Amount and Buyer shall be entitled to an Escrow Payment equal to the Subsequent
Adjustment Amount from the Escrow Account promptly (and in any event within
five Business Days) after the final determination of the Subsequent Adjustment
Amount; provided, however, that, to the extent the payment
obligations pursuant to this sentence exceed the remaining funds in the Escrow
Account, Seller shall promptly (and in any event with five Business Days) after
the final determination of the Subsequent Adjustment Amount, pay such excess
amount to Buyer by wire transfer of immediately available funds to an account
designated by Buyer.
Section
2.7 MCE Systems.
(a) Notwithstanding
anything to the contrary contained herein, if any MCE System has not been
finally determined to be wholly owned by Seller or its wholly owned
Subsidiaries (itbeingunderstoodthat, for
purposes of this Section 2.7(a), if Seller has the right to cause the
transfer of good and marketable title to the Assets of any MCE System (free and
clear of all Encumbrances other than Permitted Encumbrances) to Buyer (or has
otherwise arranged for such transfer to occur at the Closing to the reasonable
satisfaction of Buyer), such Disputed MCE System shall be deemed to be wholly
owned by Seller) or has been finally determined to be so owned but as to which
there has not been an MCE Discharge as of the date on which the Seller’s
Statements are delivered under Section 2.6(a) (each such MCE System,
a “Disputed MCE System”), then (i) the geographical areas serviced
by such Disputed MCE System shall be deemed
50
not to be listed on Schedule A of the
Seller Disclosure Schedule and such Disputed MCE System shall be deemed not to
be included in the Group 2 Business or otherwise Related to the Group 2
Business or the Acquired Business, (ii) any Assets, Liabilities or
Employees that would, but for clause (i) above, have been Transferred
Assets, Assumed Liabilities or Transferred Employees shall be deemed not to be
Transferred Assets, Assumed Liabilities or Transferred Employees, respectively,
(iii) the Closing shall be effected without such Disputed MCE System, (iv) the
Purchase Price (before adjustment under Section 2.6) shall be reduced by
an aggregate amount equal to the product of (A) the MCE Purchase Price
multiplied by (B) the quotient obtained by dividing (1) the aggregate
number of Basic Subscribers served by all such Disputed MCE Systems as of December 31,2004 by (2) the aggregate number of Basic Subscribers served by all MCE
Systems as of December 31, 2004, such reduction to be applied solely to
the Purchase Shares (where each Purchase Share is valued at the Per Share Value
of the Purchase Shares) (the amount of such Purchase Share reduction with
respect to each such Disputed MCE System, the “Initial MCE Purchase Price”),
(v) the Seller’s Statement delivered in respect of the Group 2 Business
shall be prepared to reflect the foregoing and (vi) with respect to the
Disputed MCE Systems, the determination of the Closing Adjustment Amount
(calculated as to each such Disputed MCE System separately as if it were its
own Specified Business and assuming the Net Liabilities Adjustment Amount for
each such Disputed MCE System is zero) shall be made in accordance with Section 2.6
except that the Subscriber Cap shall not apply to the determination of the
Subscriber Adjustment Amount and there shall be no adjustment to the Purchase
Price at the Closing as a result of such determination (the amount by which the
Purchase Price would have been adjusted (expressed as a negative if decreased
and as a positive if increased) in respect of each such Disputed MCE System as
determined pursuant to this clause (vi), the “Initial Disputed MCE System
Adjustment Amount”).
(b) With
respect to any Disputed MCE System, Seller shall (i) use commercially reasonable efforts to cause each
such Disputed MCE System to be bound by a written management agreement with
Buyer (or its designee) as of the Closing, in form and substance reasonably
acceptable to Buyer and Seller (each such agreement, an “MCE Management
Agreement”), and (ii) continue during the succeeding 15 months (the “MCE
Period”) using commercially reasonable efforts to obtain full direct or
indirect ownership of, and an MCE Discharge with respect to, such Disputed MCE
System (itbeingunderstoodthat, for purposes of
this Section 2.7(b), if Seller has the right to cause the transfer of good
and marketable title to the Assets of any MCE System (free and clear of all
Encumbrances other than Permitted Encumbrances) to Buyer (or has otherwise
arranged for such transfer to occur at the MCE Closing to the reasonable
satisfaction of Buyer), such Disputed MCE System shall be deemed to be wholly
owned by Seller) (an “MCE Resolution”). Buyer shall not have any obligation
to enter into an MCE Management Agreement unless Buyer is provided with
reasonably satisfactory evidence of (A) the enforceability of such MCE
Management Agreement from and after the Closing, (B) the authority of the
counterpart(ies) to enter into and perform such MCE Management Agreement and to
bind such Disputed MCE System and (C) unless the MCE System is held by Seller
or the Liabilities of such Disputed MCE Systems under the applicable MCE
Management Agreement are guaranteed by Seller, the creditworthiness
of such MCE System (or such other Person who or such instrument that
51
guarantees the Liabilities of such MCE System
pursuant to the applicable MCE Management Agreement). Seller shall notify Buyer
of any MCE Resolution as promptly as practicable and in any event within three
Business Days of obtaining any such MCE Resolution and shall provide Buyer with
such information and documentation related thereto as Buyer reasonably
requests.
(c) As
to any Disputed MCE System that is the subject of an MCE Resolution that occurs
prior to the expiration of the MCE Period, and with respect to which (i) Buyer
(or its designee) enters into an MCE Management Agreement that has not been
terminated in accordance with its terms (other than by Seller as a direct result
of a breach by Buyer (or its designee)) or rejected and remains in full force
and effect until the completion of the MCE Closing (a “Buyer Managed MCE
System”) or (ii) Buyer (or its designee) does not enter into such an
MCE Management Agreement but, within 60 days of such MCE Resolution, Buyer
makes an election to purchase such Disputed MCE System, the parties agree that
Seller shall sell, or cause to be sold, to Buyer and Buyer shall purchase from
Seller (or the applicable transferor which Seller causes to sell) the Assets of
such Disputed MCE Systems in exchange for shares (the “MCE Purchase Shares”)
of Parent Class A Common Stock (where each such share is valued at the Per
Share Value of the Purchase Shares) in an amount equal to the estimated
Final MCE Purchase Price (to the extent related to the Net Liabilities Adjustment
Amount in respect of such Disputed MCE Systems, determined in accordance with Section 2.6(a) applied
mutatis mutandis)
to be delivered by Buyer to Seller at a single closing (the “MCE
Closing”), plus any Interim Dividends thereon, that, subject to
satisfaction of the conditions set forth in Sections 6.1, 6.2 (other than,
without limiting Section 2.7(d)(ii), Sections 6.2(a), 6.2(f) (but
only if Buyer is a Proximate Cause Party) and 6.2(h)) and 6.3 (other than,
without limiting Section 2.7(d)(ii), Sections 6.3(a) and 6.3(e))
(applied with respect to such Disputed MCE Systems (treating such Systems as a
Specified Business) and applied with respect to the MCE Purchase Shares
(treating such MCE Purchase Shares as Purchase Shares) mutatis mutandis), shall occur on the
fifth Business Day following the earlier of (A) the expiration of the MCE
Period and (B) the date all Disputed MCE Systems have been subject to an
MCE Resolution; provided, however, that 4% of the MCE Purchase
Shares so delivered plus any Interim Dividends thereon will be deposited in the
Escrow Account. At the MCE Closing, the parties will assign or assume, as
applicable, the Transferred Assets and Assumed Liabilities with respect to each
such Disputed MCE System (treating such System as a Specified Business) that
would have been assigned and assumed as if the Closing had been delayed until
the date of the MCE Closing and shall execute such conveyance, assumption and
other instruments as are required
pursuant to Sections 2.9 and 2.10 (applied with respect to such Disputed
MCE Systems (treating such Systems as a Specified Business) and applied with
respect to the MCE Purchase Shares (treating such MCE Purchase Shares as
Purchase Shares) mutatis mutandis.
For purposes of determining the Disputed MCE System Adjustment Amount, the Net
Liabilities Adjustment Amount in respect of each such Disputed MCE System shall
be determined as of the date of the MCE Closing and subsequently adjusted
in accordance with Section 2.6 applied mutatis
mutandis (treating each such System as a Specified Business) except
that any resulting adjustments shall be made[solely],
first,
in MCE Purchase Shares and, thereafter, in cash, where each MCE
Purchase Share is valued at the Per Share Value of the Purchase Shares.
52
(d) In
connection with the transfer to Buyer of any Disputed MCE Systems, (i) Assumed
Liabilities related to such Disputed MCE Systems shall be deemed to have been
assumed effective as of the date of the MCE Closing only, and (ii) at, and
as a condition to, the MCE Closing, (A) Seller shall be deemed to have
restated the representations and warranties in Article III in respect of
such Disputed MCE Systems (x) with respect to the Class 2
Representations and Warranties, as of the date made and as of the Closing, and (y) with
respect to the Class 1 Representations and Warranties, as of the date made
and as of the MCE Closing, (B) Seller shall deliver to Buyer a certificate
certifying to the satisfaction of Section 6.2(a) with respect to such
Disputed MCE Systems (treating such Disputed MCE Systems as if they were a
Specified Business and multiplying all applicable monetary and materiality
thresholds by the MCE Fraction) (x) with respect to the Class 2 Representations
and Warranties, as of the Closing, and (y) with respect to the Class 1
Representations and Warranties, as of the MCE Closing, (C) Article VII
shall apply to such Disputed MCE Systems mutatis
mutandis (including by multiplying the applicable basket and cap
amounts by the MCE Fraction), provided, that, notwithstanding Section 7.1,
all the representations and warranties in Article III shall, with respect
to such Disputed MCE Systems, survive the MCE Closing until the expiration of
the later of the survival period in Section 7.1 and twelve months after
the date of the MCE Closing (and the Buyer Indemnification Deadline shall be
extended with respect to such Disputed MCE Systems by a corresponding period), (D) Buyer
shall deliver to Seller a certificate certifying as to the truth and accuracy
of the first sentence of Section 4.5 as to the MCE Purchase Shares as of
the MCE Closing and (E) Sections 2.11 and 5.12 shall apply mutatis mutandis. For purposes of any
covenants in this Agreement governing the parties hereto following the Closing
and any Ancillary Agreement, any Assets related to any such Disputed MCE
Systems which are transferred to Buyer after Closing under this Section 2.7
shall become part of the Group 2 Business as of the time of the MCE Closing.
Section
2.8 Closing. The Closing
shall take place at the offices of Paul, Weiss, Rifkind, Wharton &
Garrison LLP, 1285 Avenue of the Americas, New York, New York10019-6064
at 10:00 a.m. New York City time, on the last Business Day of the calendar
month in which the conditions set forth in Article VI (other than those
conditions that by their nature are to be satisfied at the Closing but subject
to the fulfillment or waiver of those conditions) have been satisfied or
waived, unless such conditions have not been so satisfied or waived (other than
those conditions that by their nature are to be satisfied at the Closing but
subject to the fulfillment or waiver of those conditions) by the fifth Business
Day preceding the last Business Day of such calendar month, in which case the
Closing shall take place on the last Business Day of the next calendar month
(or at such other time and place as the parties hereto may mutually agree); provided,
however, that the Closing shall not occur prior to the earliest of (a) immediately
following the closing of the Redemption under the Parent Redemption Agreement, (b) 30
days following the date on which the conditions set forth in Article VI
(other than those conditions that by their nature are to be satisfied at the
Closing but subject to the fulfillment or waiver of those conditions) have been
satisfied or waived (provided, that the Outside Date or the Extended
Outside Date, as the case may be, shall be extended to the last Business Day of
the calendar month in which the end of such 30-day period occurs if the
Outside Date or Extended Outside Date, as the case may be, would otherwise
occur prior to such last
53
Business Day), and (c) the
termination of the Parent Redemption Agreement. The date on which the Closing
occurs is called the “Closing Date.”
Section
2.9 Deliveries by Buyer. At
the Closing, Buyer shall:
(a) deliver
to Seller, the Cash Consideration less the cash portion of the Escrow Amount to
be delivered at Closing in immediately available funds by wire transfer to an
account which has been designated by Seller at least two Business Days prior to
the Closing Date;
(b) deliver,
or cause to be delivered, to Seller, (i) stock certificates representing
the Purchase Shares (less the stock portion of the Escrow Amount to be
delivered at the Closing), duly endorsed for transfer or accompanied by
executed stock transfer powers or other appropriate instruments of assignment
and transfer or (ii) confirmation of a book-entry transfer of the Purchase
Shares (less the stock portion of the Escrow Amount to be delivered at the
Closing) in form and substance reasonably satisfactory to Buyer and Seller, in
each case, free and clear of all Encumbrances, other than those arising as a
result of the ownership of such Purchase Shares by the recipient thereunder or
under applicable securities Laws;
(c) deliver
to the Escrow Agent, (i) the cash portion of the Escrow Amount to be
delivered at Closing in immediately available funds by wire transfer to the
Escrow Agent and (ii) the stock portion of the Escrow Amount to be
delivered at Closing, by (A) delivery of stock certificates representing
such stock portion of the Escrow Amount or (B) confirmation of a
book-entry transfer of such stock portion of the Escrow Amount in form and
substance reasonably satisfactory to Buyer, Seller and the Escrow Agent, each
to be held by the Escrow Agent in the Escrow Account;
(d) deliver
to Seller (or to the applicable Affiliate of Seller), with respect to each
Specified Business, such bills of sale, instruments of assumption and other
instruments or documents, in form and substance reasonably acceptable to Seller
and Buyer, as may be reasonably necessary to effect, in each case in accordance
with the terms of this Agreement (x) the assumption by Buyer of the Assumed
Liabilities Related to such Specified Business and (y) the conveyance,
transfer and assignment to Buyer of the Transferred Assets Related to such
Specified Business, including the following:
(i) a
duly executed counterpart of one or more Bills of Sale;
(ii) a duly executed counterpart of one or more Assignment and
Assumption Agreements;
(iii) evidence of the obtaining of, or, with respect to Buyer
Required Approvals that only require notice or filing, the notice or filing
with respect to, the Buyer Required Approvals;
(iv) a duly executed counterpart of one or more Transferred
Investment Assignment Agreements;
54
(v) a
duly executed counterpart of one or more Intellectual Property Assignment
Agreements;
(vi) a duly executed counterpart of one or more Lease Assignment
Agreements;
(vii) a duly executed counterpart of one or more Sublease
Assignment Agreements;
(viii) a duly executed counterpart of one or more Rights-of-Way
Assignment Agreements;
(ix) the certificate to be delivered pursuant to Section 6.3(d);
(x) a
duly executed counterpart of the Escrow Agreement;
(xi) duly executed counterparts of such other customary
instruments of transfer, assumptions, filings or documents, in form and
substance reasonably satisfactory to Buyer and Seller, as may be reasonably
required to give effect to this Agreement; and
(e) deliver
to Seller the opinion of counsel referred to in Section 6.3(f).
Section
2.10 Deliveries by Seller.
At the Closing, Seller shall deliver, or cause to be delivered, to Buyer, with
respect to each Specified Business, such bills of sale, instruments of
assumption and other instruments or documents, in form and substance reasonably
acceptable to Seller and Buyer, as may be reasonably necessary to effect, in
each case in accordance with the terms of this Agreement (x) the
assumption by Buyer of the Assumed Liabilities Related to such Specified
Business and (y) the conveyance, transfer and assignment to Buyer of the
Transferred Assets Related to such Specified Business, including the following:
(a) a
duly executed counterpart of one or more Bills of Sale;
(b) a
duly executed counterpart of one or more Assignment and Assumption Agreements;
(c) a
duly executed counterpart of one or more Transferred Investment Assignment
Agreements;
(d) a
duly executed counterpart of one or more Intellectual Property Assignment
Agreements;
(e) a
duly executed counterpart of one or more Lease Assignment Agreements;
55
(f) a
duly executed counterpart of one or more Sublease Assignment Agreements;
(g) a
duly executed counterpart of one or more Rights-of-Way Assignment Agreements;
(h) special
warranty deeds (or local equivalent) in respect of the Transferred Owned Real
Property Related to such Specified Business;
(i) duly
executed certifications from Seller and each Subsidiary that in this
Transaction will be a transferor described in Treasury Regulations Section 1.1445-1(g)(3) that
Seller and such Subsidiaries are not foreign Persons within the meaning set
forth in Treasury Regulation Section 1.1445-2(b)(2)(iii)(A); itbeingunderstoodthat, notwithstanding anything to the
contrary contained herein, if Seller fails to provide Buyer with such
certifications, Buyer shall be entitled to withhold a portion of the Purchase
Price in accordance with Section 1445 of the Code and the applicable
Treasury Regulations;
(j) the
Books and Records Related to such Specified Business that are Transferred
Assets (it being understood that Books and
Records located on real property interests conveyed to Buyer at the Closing
shall be deemed delivered pursuant to this Section 2.10(j));
(k) evidence
of the obtaining of, or, with respect to Seller Required Approvals that only
require notice or filing, the notice or filing with respect to, the Seller
Required Approvals or any LFA Approvals, in each case, Related to such
Specified Business;
(l) the
certificate to be delivered pursuant to Section 6.2(d);
(m) a
certified copy of the Confirmation Order (including any amendments thereto);
(n) duly
executed counterparts of instruments providing Buyer the limited, irrevocable
right, in the name, place and stead of Seller and any of its Affiliates, as
attorney-in-fact of Seller and any of its Affiliates, to cash, deposit, endorse
or negotiate checks received on or after the Closing Date made out to Seller or
any of its Affiliates in payment for cable television, high speed Internet,
telephony and related services and charges provided by the Specified Systems
Related to such Specified Business, and evidence of written instructions to the
lock-box service provider or similar agents of Seller and any of its
Affiliates to promptly forward to Buyer upon receipt all such cash, deposits
and checks representing accounts receivable of such Specified Systems;
(o) to
the extent available using commercially reasonable efforts, (i) subject
only to Permitted Encumbrances, such certificates and affidavits of Seller or
its applicable Affiliate as may be reasonably requested by Buyer’s title
insurance company necessary and satisfactory to Buyer in connection with the
issuance of title insurance with respect to any Owned Real Property or Leased
Real Property Related to such Specified
56
Business and (ii) customary gap
indemnities covering Seller’s acts for the period between Closing and the
recording of the applicable deed or assignment of lease with respect to such
Owned Real Property or Leased Real Property; provided, that, except with
respect to the customary gap indemnities described in clause (ii) above,
such certificates or affidavits shall be deemed not to have been reasonably
requested if they would increase, in each case other than in a de minimis manner, the Liability of Seller
or any of its Affiliates beyond the liability that would be incurred by Seller
or its applicable Affiliates under a special warranty deed or would contain
representations that are more extensive than those set forth in this Agreement;
(p) the
Transferred Cash Related to such Specified Business in immediately available
funds by wire transfer to an account which has been designated by Buyer at
least two Business Days prior to the Closing Date (itbeingunderstoodthat Transferred Cash shall be deemed delivered if it is either (i) located
on real property interests being conveyed to Buyer at Closing or (ii) held
in accounts assigned to Buyer pursuant to duly executed instruments of
assignment that are reasonably satisfactory to Buyer);
(q) stock
certificates (or other comparable evidence of ownership, if issued)
representing the Transferred Investments Related to such Specified Business,
duly endorsed for transfer or accompanied by executed stock transfer powers or
other appropriate instruments of assignment and transfer;
(r) a
duly executed counterpart of the Escrow Agreement; and
(s) duly
executed counterparts of such other customary instruments of transfer, assumptions,
filings or documents, in form and substance reasonably satisfactory to Buyer
and Seller, as may be reasonably required to give effect to this Agreement.
Section
2.11 Non-Assignability of
Assets.
(a) Without
limiting Sections 6.1(f) and 6.2(e), if and to the extent that the
transfer or assignment from Seller or any of its Affiliates to Buyer of any
Transferred Asset would be a violation of applicable Law with respect to such
Transferred Asset or otherwise adversely affect the rights of the applicable transferee
thereunder as a result of the failure to obtain or make any consent, approval,
waiver, authorization, notice or filing required to be made in connection with
the Transaction, then the transfer or assignment to Buyer of such Transferred
Asset (each, a “Delayed Transfer Asset”) shall be automatically deemed
deferred and any such purported transfer or assignment shall be null and void
until such time as all legal impediments are removed and/or Authorizations have
been made or obtained; itbeingunderstoodthat no
adjustment to the Purchase Price will be made as a result of the failure to
transfer or assign any Delayed Transfer Asset.
(b) If
the transfer or assignment of any Transferred Asset (other than, at the
Closing, a Transferred Asset Related to a Disputed MCE System) intended to be
transferred or assigned hereunder is not consummated prior to or at the Closing
as a result of the failure to obtain any Authorization, then Seller or its
Affiliate shall thereafter,
57
directly or indirectly, hold such Transferred
Asset for the use and benefit of Buyer (at the expense of Buyer), insofar as
reasonably possible. In addition, to the extent not prohibited by Law, Seller
shall take or cause to be taken such other actions as may be reasonably
requested by Buyer in order to place Buyer, insofar as reasonably possible, in
the same position as if such Transferred Asset had been transferred as
contemplated hereby and so that all the benefits and burdens relating to such
Transferred Asset, including possession, use, risk of loss, potential for gain,
and dominion, control and command over such Transferred Asset, are to inure
from and after the Closing to Buyer. To the extent permitted by Law and to the
extent otherwise permissible in light of any required Authorization, Buyer
shall be entitled to, and shall be responsible for, the management of any
Transferred Assets not yet transferred to it as a result of this Section 2.11
and the parties hereto agree to use commercially reasonable efforts to
cooperate and coordinate with respect thereto.
(c) If
and when the Authorizations, the absence of which caused the deferral of
transfer of any Transferred Asset pursuant to this Section 2.11, are
obtained, the transfer of the applicable Transferred Asset to Buyer shall
automatically and without further action be effected in accordance with the
terms of this Agreement and the applicable Ancillary Agreements.
(d) Prior
to the Closing Date, Seller shall deliver to Buyer a list identifying, in
reasonable detail and to the Knowledge of Seller, the Delayed Transfer Assets
and the Authorizations required therefor.
(e) The
parties hereto further agree that, assuming as set forth in Section 2.11(b) that
all or substantially all of the benefits and burdens relating to the
Transferred Assets inure to Buyer, (i) any Delayed Transferred Assets
referred to in this Section 2.11(e) shall be treated for all income
Tax purposes as Assets of Buyer and (ii) neither Buyer nor Seller shall
take, and each of Buyer and Seller shall prevent any of their respective
Affiliates from taking, any position inconsistent with such treatment for any
income Tax purposes (unless required by a change in applicable income Tax Law
or a good faith resolution of a contest).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to
Buyer that, except as set forth on the Seller Disclosure Schedule, as of the
date hereof and as of the Closing:
Section
3.1 Organization and
Qualification. Seller is a corporation duly organized, validly existing and
in good standing under the laws of Delaware and has all requisite corporate
power and authority to own, lease and operate its Assets, and to carry on each
Specified Business as currently conducted. Seller is duly qualified to do
business and is in good standing as a foreign corporation in each jurisdiction
where the ownership or operation of the Transferred Assets or the conduct of
each Specified Business requires such qualification, except for failures to be
so qualified or in good standing, as the case
58
may be, that would not, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect. Prior
to the date hereof, Seller has made available to Buyer a true and complete copy
of Seller’s certificate of incorporation and bylaws, each as amended and in
effect as of the date hereof.
Section
3.2 Subsidiaries and
Transferred Investments.
(a) Schedule
3.2(a) of the Seller Disclosure Schedule sets forth a true and
complete list of each Asset Transferring Subsidiary, together with its jurisdiction
of organization. The Asset Transferring Subsidiaries are the only Subsidiaries
of Seller that have any right, title or other interest in or to the Assets of
Seller and its Affiliates that are Related to the Acquired Business. Except for
the Non-Debtor Subsidiaries, all of the Asset Transferring Subsidiaries and
Intermediate Subsidiaries are Debtors. Each Asset Transferring Subsidiary and
each Intermediate Subsidiary is duly organized, validly existing, and in good
standing under the laws of its jurisdiction of organization and, in the case of
the Asset Transferring Subsidiaries, has all requisite corporate or similar
power and authority to own, lease and operate its Assets and to carry on its
portion of each Specified Business as currently conducted, except for failures
to be in good standing that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect. Each Asset
Transferring Subsidiary and each Intermediate Subsidiary is duly qualified to
do business and is in good standing as a foreign corporation or other entity in
each jurisdiction where the ownership or operation of its Assets or the conduct
of its business requires such qualification, except for failures to be so duly
organized, validly existing, qualified or in good standing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except to the extent of any Claims that will be discharged (or
the functional equivalent thereof in terms of its effect on Buyer, each
Specified Business, the Transferred Assets and the Assumed Liabilities)
pursuant to the Discharge (or, as applicable, the MCE Discharge or an
Additional Discharge), (i) Seller owns, directly or indirectly, through
one or more other Subsidiaries (each such Subsidiary that is not also an Asset
Transferring Subsidiary is referred to herein as an “Intermediate Subsidiary”),
all right, title and interest in and to all of the outstanding Equity
Securities of the Asset Transferring Subsidiaries and (ii) all of the
outstanding Equity Securities of the Asset Transferring Subsidiaries and
Intermediate Subsidiaries have been duly authorized, and are validly issued,
fully paid and non-assessable. Except to the extent of any Claims that
will be discharged (or the functional equivalent thereof in terms of its effect
on Buyer, each Specified Business, the Transferred Assets and the Assumed
Liabilities) pursuant to the Discharge (or, as applicable, the MCE Discharge or
an Additional Discharge), Seller has, directly or indirectly, good and valid
title to the Equity Securities of each Asset Transferring Subsidiary and each
Intermediate Subsidiary, free and clear of all Encumbrances, other than
Permitted Encumbrances.
(b) Schedule
3.2(b) of the Seller Disclosure Schedule sets forth a true and
complete list of each Investment Entity, the Equity Securities of Seller and
its Affiliates in each Investment Entity and, to the Knowledge of Seller, with
respect to those Investment Entities identified on Schedule 3.2(b)(i) of
the Seller Disclosure Schedule, the jurisdiction of organization and authorized
and outstanding Equity Securities of such
59
Investment Entities. Seller has
provided or made available to Buyer true and complete copies of the Investment
Documents. Except to the extent of any Claims that will be discharged (or the
functional equivalent thereof in terms of its effect on Buyer, each Specified
Business, the Transferred Assets and the Assumed Liabilities) pursuant to the
Discharge (or, as applicable, the MCE Discharge or an Additional Discharge),
the outstanding Equity Securities held by Seller or any of its Affiliates in
respect of each Transferred Investment identified on Schedule 3.2(b)(i) of
the Seller Disclosure Schedule and, to the Knowledge of Seller, in respect of
any other Investment Entities, have been duly authorized, and are validly
issued, fully paid and non-assessable.
(c) Except
to the extent of any Claims that will be discharged (or the functional
equivalent thereof in terms of its effect on Buyer, each Specified Business,
the Transferred Assets and the Assumed Liabilities) pursuant to the Discharge
(or, as applicable, the MCE Discharge or an Additional Discharge), Seller has
good and valid title to the Transferred Investments, free and clear of all Encumbrances,
other than as set forth in any Investment Document, and upon delivery by Seller
and/or any of its Affiliates of the Transferred Investments at Closing, good
and valid title to the Transferred Investments, free and clear of all
Encumbrances, other than as set forth in any Investment Document and those
resulting from Buyer’s ownership, will pass to Buyer. Except for the
Transferred Investments, none of Seller or any of its Affiliates owns, directly
or indirectly, any Equity Securities of any Person (other than a Subsidiary of
Seller) or has any direct or indirect equity or ownership interest in any
business (other than any business operated by a Subsidiary of Seller), or is a
member of or participant in any partnership, joint venture or similar Person
(other than a Subsidiary of Seller) that is Related to the Acquired Business or
the Friendco Business.
Section
3.3 Corporate Authorization.
(a) Seller
has, with respect to Section 5.10 and Article VIII, full corporate
power and authority to execute and deliver this Agreement, and to perform its
obligations hereunder. The execution, delivery and performance by Seller of
this Agreement, with respect to Section 5.10 and Article VIII, have
been duly and validly authorized and no additional corporate, shareholder or
similar authorization or consent is required in connection with the execution,
delivery and performance by Seller of this Agreement.
(b) Without
limiting Section 3.3(a), subject to the entry of the Confirmation Order
and its effectiveness at the Closing, (i) Seller has full corporate power
and authority to execute and deliver this Agreement and each of the Ancillary
Agreements to which it is a party, and to perform its obligations hereunder and
thereunder and (ii) the execution, delivery and performance by Seller of
this Agreement and each of the Ancillary Agreements to which it is a party have
been duly and validly authorized and no additional corporate, shareholder or
similar authorization or consent is required in connection with the execution, delivery
and performance by Seller of this Agreement or any of the Ancillary Agreements
to which it is a party.
60
(c) Each
Affiliate of Seller has or prior to the Closing will have, subject to the entry
of the Confirmation Order and its effectiveness at the Closing, full corporate,
partnership or similar power and authority to execute and deliver each
Ancillary Agreement or Closing document to which it is (or will be) a party and
to perform its obligations thereunder. Subject to the entry of the Confirmation
Order, the execution, delivery and performance by each Affiliate of Seller of
each Ancillary Agreement or Closing document to which it is (or will be) a
party has been or prior to the Closing will have been duly and validly
authorized, and no additional corporate authorization or consent is or will be
required in connection with the execution, delivery and performance by any
Affiliate of Seller of the Ancillary Agreements or Closing documents to which
such Affiliate is (or will be) a party or signatory.
(d) At
a meeting duly called and held, the Board and the board of directors (or
similar governing body) of each Asset Transferring Subsidiary (other than the
Tele-Media Entities (without limiting Section 5.6(h))) has by the
requisite vote (i) determined that this Agreement and the Transaction are
in the best interests of Seller, such Asset Transferring Subsidiaries and their
respective stakeholders, (ii) approved and adopted this Agreement and (iii) resolved
to cause each Asset Transferring Subsidiary to perform its obligations under
the Ancillary Agreements to which it is (or will be) a party.
Section
3.4 Consents and Approvals.
No consent, approval, waiver, authorization, notice or filing is required to be
obtained by Seller or any of its Affiliates from, or to be given by Seller or
any of its Affiliates to, or made by Seller or any of its Affiliates with, any
Person (and assuming solely for this purpose that all Contracts Related to the
Acquired Business shall constitute Assigned Contracts but, for purposes of Section 6.2(a) only,
excluding any Contract that is not an Assigned Contract if the consent,
approval, waiver, authorization, notice or filing is required only to the
extent such Contract would have been an Assigned Contract), in connection with (a) the
execution, delivery and performance by Seller or any of its Affiliates of Section 5.10
and Article VIII and (b) other than the entry by the Bankruptcy Court
of the Confirmation Order (or the entry of an order pursuant to section 365(f) of
the Bankruptcy Code authorizing the assumption and, if applicable, assignment
of Assigned Contracts), the execution, delivery and performance by Seller or
any of its Affiliates of the remainder of this Agreement and the Ancillary
Agreements to which it is (or will be) a party, other than, in the case of this
clause (b) only, the consents, approvals, waivers, authorizations, notices
or filings the failure of which to obtain or make would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
Section
3.5 Non-Contravention.
The execution, delivery and performance by Seller and its Affiliates of this
Agreement and the Ancillary Agreements to which they are a party, and the
consummation of the transactions contemplated hereby and thereby (and assuming
solely for this purpose that all Contracts Related to the Acquired Business
shall constitute Assigned Contracts but, for purposes of Section 6.2(a) only,
excluding any Contract that is not an Assigned Contract), do not and will not (a) violate
any provision of the articles of incorporation, bylaws or other organizational
documents of Seller or any of its Affiliates, (b) assuming (i) the
entry of the Confirmation Order (or the entry of an order pursuant to section
365(f) of the Bankruptcy Code authorizing the
61
assumption and, if applicable,
assignment of Assigned Contracts), and (ii) the receipt of all consents,
approvals, waivers and authorizations and the making of the notices and filings
set forth on Schedule 3.4 of the Seller Disclosure Schedule with respect
to any Person which is not a Government Entity or Self-Regulatory
Organization (which assumption shall not apply to Section 5.10 and Article VIII),
conflict with, or result in the breach of, or constitute a default under, or
result in the termination, cancellation, modification or acceleration of any
right or obligation of Seller or any of its Affiliates under, or result in a
loss of any benefit to which Seller or any of its Affiliates is entitled under,
any Contract, or result in the creation of any Encumbrance upon any of the
Transferred Assets or give rise to any Purchase Right, in each case, whether
after the filing of notice or the lapse of time or both, or (c) assuming
the entry of the Confirmation Order and the receipt of all consents, approvals,
waivers and authorizations and the making of notices and filings set forth on Schedule
3.4 of the Seller Disclosure Schedule with respect to Government Entities
or Self-Regulatory Organizations or required to be made or obtained by
Buyer (which assumption shall not apply to Section 5.10 and Article VIII),
violate or result in a breach of or constitute a default under any Law to which
Seller or any of its Affiliates is subject, or under any Governmental
Authorization, except for (which exception shall not apply to Section 5.10
and Article VIII), in the cases of clauses (b) and (c), conflicts,
breaches, terminations, defaults, cancellations, accelerations, losses,
violations, Encumbrances or Purchase Rights that would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
Section
3.6 Binding Effect. Subject
to the Bankruptcy Court’s entry of the Confirmation Order and its effectiveness
at the Closing, this Agreement and each of the Ancillary Agreements dated the
date hereof is, and each other Ancillary Agreement will constitute, when
executed and delivered by Seller and each Affiliate of Seller party to such
agreements and by Buyer and the other parties thereto, a valid and legally
binding obligation of Seller and each Affiliate of Seller party to such
agreements, enforceable against Seller and each such Affiliate in accordance
with their respective terms. Notwithstanding the foregoing, Section 5.10
and Article VIII constitute valid and legally binding obligations of
Seller, enforceable against Seller in accordance with their respective terms. Upon
the Bankruptcy Court’s entry of the Confirmation Order and subject to its
effectiveness at the Closing, each of the unexecuted Ancillary Agreements to be
entered into on or prior to the Closing Date, when executed and delivered by
Seller and each Affiliate of Seller party to such agreements and by Buyer and
the other parties thereto, will constitute a valid and legally binding
obligation of Sellerand each
Affiliate of Seller party to such agreements, enforceable against Sellerand each such Affiliate in accordance with
its terms.
Section
3.7 Financial Statements.
(a) Set
forth on Schedule 3.7(a) of the Seller Disclosure Schedule is a
copy of (i) the consolidated audited balance sheets and audited statements
of income, stockholders’ equity and cash flows for Seller and its Affiliates
for the fiscal years ended December 31, 2001, December 31, 2002, and December 31,2003 (the “Audited Financial Statements”), (ii) the unaudited
balance sheet and unaudited statements of income,
62
stockholders’ equity and cash flows of each
Specified Business, but including the Excluded Assets and the Excluded
Liabilities to the extent Related to such Specified Business, at and for the
fiscal year ended December 31, 2003 (but not including, except with
respect to the unaudited statements of income, Unallocated Shared Assets and
Liabilities), in each case derived from the Audited Financial Statements for
the corresponding time period (the “Derivative 2003 Financial Statements”),
(iii) the unaudited balance sheet and unaudited statements of income,
stockholders’ equity and cash flows for each Specified Business, but including
the Excluded Assets and the Excluded Liabilities Related to such Specified
Business, at and for the fiscal year ended December 31, 2004 (but not
including, except with respect to the unaudited statements of income,
Unallocated Shared Assets and Liabilities) (the “Derivative 2004 Financial
Statements”) and (iv) the unaudited balance sheet and unaudited
statements of income, stockholders’ equity and cash flows for the Unallocated
Shared Assets and Liabilities at and for the fiscal year ended December 31,2004 (the “Derivative Unallocated 2004 Financial Statements”). The
Audited Financial Statements have been prepared from the books and records of
Seller and its Affiliates in accordance with GAAP consistently applied (except
as may be indicated in the notes thereto), and fairly present, in all material
respects, the financial condition and results of operations, stockholders’
equity and cash flows of Seller and its Affiliates (assuming the exclusion of
the MCE Systems and the MCE Systems (as defined in the Friendco Purchase
Agreement) from the Business) as of the dates thereof or for the periods then
ended. The Derivative 2003 Financial Statements and the Derivative 2004
Financial Statements have been specially prepared from the books and records of
Seller and its Affiliates in accordance with GAAP consistently applied (except
as may be indicated in the notes thereto) and fairly present, in all material
respects, the financial condition and results of operations, stockholders’
equity and cash flows of each such Specified Business (including the MCE
Systems) as of the dates thereof or for the periods then ended, subject to the
absence of footnotes and similar presentation items therein and excluding the
Unallocated Shared Assets and Liabilities (other than the related revenues and
expenses). The Derivative Unallocated 2004 Financial Statements have been
specially prepared from the books and records of Seller and its Affiliates in
accordance with GAAP consistently applied (except as may be indicated in the
notes thereto) and fairly present, in all material respects, the Unallocated
Shared Assets and Liabilities as of December 31, 2004 or for the period
ended thereon.
(b) The
Chief Executive Officer and the Chief Financial Officer of Seller and any
Significant Subsidiary of Seller have disclosed, based on their most recent
evaluation, to Seller’s auditors and the audit committee of the Board (i) all
significant deficiencies in the design or operation of internal controls that
could adversely affect Seller’s or any of Seller’s Affiliates’ ability to
record, process, summarize and report financial data and have identified for
Seller’s auditors any material weaknesses in internal controls and (ii) any
fraud, whether or not material, that involves management or other employees who
have a significant role in Seller’s or any of Seller’s Subsidiaries’ internal
controls. Copies of all disclosures described in the foregoing sentence have
been made available to Buyer. Seller and its consolidated Subsidiaries have
established and maintain disclosure controls and procedures (as such term is
defined in Rule 13a-15(e) under the Exchange Act); such
disclosure controls and procedures are designed to ensure
63
that material information relating to Seller,
including its consolidated Subsidiaries, is made known to Seller’s Chief
Executive Officer and its Chief Financial Officer by others within those
entities; and such disclosure controls and procedures are effective in alerting
Seller’s Chief Executive Officer and its Chief Financial Officer to material
information of the nature required to be disclosed in periodic reports pursuant
to the Exchange Act in a timely fashion.
(c) The
financial statements prepared by Seller and delivered to Buyer pursuant to Section 5.11(a) shall,
when so delivered, be prepared from the books and records of Seller and its
Affiliates in accordance with GAAP consistently applied (except as may be
indicated in the notes thereto), and fairly present, in all material respects,
the financial condition and results of operations, stockholders’ equity and
cash flows of each Specified Business as of the dates thereof or the period
then ended, subject to, in the case of interim financial statements, normal year-end
adjustments and the absence of footnotes and similar presentation items
therein.
(d) The
Additional Financial Statements prepared by Seller and delivered to Buyer
pursuant to Section 5.11(b) shall, when so delivered, be prepared
from the books and records of Seller and its Affiliates in accordance with GAAP
consistently applied (except as may be indicated in the notes thereto), and
will fairly present, in all material respects, the financial condition and
results of operations, stockholders’ equity and cash flows of (i) in the
case of the Seller Audited Financial Statements, Seller and its Affiliates
(assuming, with respect to any period prior to January 1, 2004, the
exclusion of the MCE Systems and the MCE Systems (as defined in the Friendco
Purchase Agreement) from the Business), (ii) in the case of the Derivative
Audited Financial Statements, each such Specified Business (assuming, with
respect to any period prior to January 1, 2004, the exclusion of the MCE
Systems and the MCE Systems (as defined in the Friendco Purchase Agreement)
from such Specified Business) and (iii) in the case of the MCE Financial
Statements, the MCE Systems, in each case as of the dates thereof or for the
periods then ended, subject, solely in the case of the MCE Financial Statements,
to the absence of footnotes and similar presentation items therein.
Section
3.8 Litigation and Claims.
(a) Except
(i) to the extent of any Claims that will be discharged (or the functional
equivalent thereof in terms of its effect on Buyer, each Specified Business,
the Transferred Assets and the Assumed Liabilities) pursuant to the Discharge
(or, as applicable, the MCE Discharge or an Additional Discharge) and, to the
Knowledge of Seller, not arising from actions, omissions or circumstances continuing
as of the Closing and affecting or otherwise relating to Seller or any of its
Affiliates, the Transferred Assets or any Specified Business and (ii) for
the SEC/DOJ Matters and the pendency of the Reorganization Case, there are no
civil, criminal or administrative actions, suits, demands, claims, hearings,
proceedings or investigations pending against, or, to the Knowledge of Seller,
threatened against or affecting, or otherwise relating to Seller or any of its
Affiliates, the Transferred Assets, any Specified Business or the Transaction,
other than those that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect.
64
(b) Except
(i) to the extent of any Claims that will be discharged (or the functional
equivalent thereof in terms of its effect on Buyer, each Specified Business,
the Transferred Assets and the Assumed Liabilities) pursuant to the Discharge
(or, as applicable, the MCE Discharge or an Additional Discharge) and, to the
Knowledge of Seller, not arising from actions, omissions or circumstances
continuing as of the Closing and affecting or otherwise relating to Seller or
any of its Affiliates, the Transferred Assets or any Specified Business and (ii) for
the SEC/DOJ Matters and the pendency of the Reorganization Case, none of
Seller, any of its Affiliates or any of the Transferred Assets is subject to
any order, writ, judgment, award, injunction or decree of any court or
governmental or regulatory authority of competent jurisdiction or any
arbitrator or arbitrators, other than those that would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
Section
3.9 Taxes.
(a) All
material Tax Returns with respect to each Specified Business or any Transferred
Assets that are required to be filed have been filed (or extensions have been
duly obtained) and all amounts shown to be due and owing or to be withheld
thereon have been duly and timely paid or withheld as the case may be (except
for the period prior to the commencement of the Reorganization Case, that may
not be paid except pursuant to a Plan); provided, that, solely for
purposes of Section 6.2(a), this Section 3.9(a) shall be
qualified by the Knowledge of Seller.
(b) There
is no materiallien for Taxes upon any of the Transferred Assets nor
is any taxing authority in the process of imposing, or has threatened to
impose, any materiallien for Taxes on any of the Transferred Assets,
other than liens for Taxes that are not yet due and payable or for Taxes the
validity or amount of which is being contested by Seller or one of its
Affiliates in good faith by appropriate action and for which appropriate
provision has been made in accordance with GAAP; provided, that, solely
for purposes of Section 6.2(a), this Section 3.9(b) shall be
qualified by the Knowledge of Seller.
(c) Seller
and its Affiliates have each withheld from their respective employees,
independent contractors, creditors, stockholders and third parties and timely
paid to the appropriate taxing authority proper and accurate amounts in all
material respects for all taxable periods, or portions thereof, ending on or
before the Closing Date in compliance with all Tax withholding and remitting
provisions of applicable laws and have each complied in all material respects
with all withholdingTax information reporting provisions of all
applicable Laws; provided, that, solely for purposes of Section 6.2(a),
this Section 3.9(c) shall be qualified by the Knowledge of Seller.
(d) None
of the Transferred Assets: (i) is property required to be treated as being
owned by another Person pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately prior
to the enactment of the Tax Reform Act of 1986, (ii) constitutes “tax-exempt
use property” within the meaning of Section 168(h)(1) of the Code or (iii) is
“tax-exempt bond financed property” within the meaning of Section 168(g)(5) of
the Code.
65
Section
3.10 Employee Benefits.
(a) All
benefit and compensation plans, programs, contracts, policies, agreements or
arrangements, including any trusts (including any trusts required in the future
as a result of the Transaction or otherwise), trust instruments, funding
arrangements or insurance contracts, any “employee benefit plans” within the
meaning of Section 3(3) of ERISA, including any multiemployer pension
plans within the meaning of Section 3(37) of ERISA (each, a “Multiemployer
Plan”), any pension, profit-sharing, savings, retirement, deferred
compensation, stock option, stock purchase, stock appreciation rights, stock
based, incentive, bonus, workers’ compensation, short term disability, sick
leave, group insurance, hospitalization, medical, dental, life, cafeteria or
flexible spending, vacation, continuity, sale bonus, retention, fringe benefit,
employee loan and severance plans and all employment, collective bargaining,
consulting, severance and change in control agreements, plans, policies,
programs or arrangements whether formal or informal, written or oral, and all amendments
thereto, under which (i) any Employee, director or consultant of Seller or
any of its Affiliates has any present or future right to benefits and which are
contributed to, sponsored by or maintained by Seller or any of its Affiliates,
or (ii) Seller or any of its ERISA Affiliates has any present or future
liability (whether contingent or otherwise) (the “Benefit Plans”), are
listed on Schedule 3.10(a) of the Seller Disclosure Schedule. Each
Benefit Plan which is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter from the Internal
Revenue Service National Office and has been separately identified. Seller has
provided or made available to Buyer true and complete copies of all Benefit
Plans (or with respect to any individual employment agreements shall provide
such agreements to Buyer no later than fourteen Business Days following the
date hereof) and, with respect to each Benefit Plan, to the extent applicable,
all related service agreements, summaries, summary plan descriptions, actuarial
reports, the most recently filed Forms 5500 and the most recent determination
letters.
(b) All
Benefit Plans, other than Multiemployer Plans, have been established,
maintained and administered in substantial compliance with all applicable Laws,
including ERISA and the Code. Neither Seller nor any of its Affiliates has
engaged in a transaction with respect to any Benefit Plan that is subject to
ERISA that could subject Seller to a tax or penalty imposed by either Section 4975
of the Code or Section 502(i) of ERISA. No actions, suits, claims,
litigation, audits, investigations, administrative proceedings or disputes are
pending, or, to Seller’s Knowledge threatened, with respect to (i) any
Benefit Plan that would be material to any Specified Business or (ii) any
Seller stock fund or trust in any Benefit Plan, and, to Seller’s Knowledge, no
facts or circumstances exist that could give rise to any such actions, suits,
claims, litigation, audits, investigations, administrative proceedings or
disputes.
(c) Neither
Seller nor any other entity which, together with Seller, would be treated as a
single employer under Section 4001 of ERISA or Section 414 of the
Code (an “ERISA Affiliate”) contributes to or has in the past six years
sponsored, maintained or contributed to any defined benefit pension plan (as
defined in Section 3(35) of ERISA) or is subject to Section 412 of
the Code or Section 302 of ERISA.
66
(d) Neither
Seller nor any of its ERISA Affiliates has, within the six years preceding the
date of this Agreement, or expects to incur any obligation to contribute to, or
any withdrawal liability under Subtitle E of Title IV of ERISA with respect to,
a Multiemployer Plan (whether based on contributions of Seller or an ERISA Affiliate)
nor do Seller or any of its ERISA Affiliates have any Liabilities under any
such plan that remain unsatisfied.
(e) There
has been no amendment to, or announcement by Seller or any of its Affiliates
(whether or not written) in respect of the Employees relating to any Benefit
Plan which would increase materially the expense of maintaining such Benefit
Plan above the level of the expense incurred therefor for the most recent
fiscal year, except as would not directly or indirectly adversely affect Buyer or
Parent.
(f) Neither
Seller nor any of its Affiliates has incurred any current or projected
liability in respect of post-employment or post-retirement health,
medical or life insurance benefits for current, former or retired employees of
Seller or any of its Affiliates, except as required to avoid an excise tax
under Section 4980B of the Code or otherwise, or as may be required
pursuant to any other applicable Law.
(g) No
Benefit Plan is a split-dollar life insurance program or otherwise
provides for loans to executive officers (within the meaning of the SOA).
(h) As
of the date hereof with respect to those Employees listed on Schedule 5.8(a)(ii) of
the Seller Disclosure Schedule and as of the date hereof and as of the Closing
Date with respect to all other Employees, no Benefit Plan exists that, as a
result of the execution of this Agreement or the Transaction (whether alone or
in connection with any subsequent event(s)), will (i) entitle any
Employee, director or consultant of Seller or any of its Affiliates to
severance pay or any increase in severance pay upon any termination of
employment after the date of this Agreement, (ii) accelerate the time of
payment or vesting or result in any payment or funding (through a grantor trust
or otherwise) of compensation or benefits under, increase the amount payable or
result in any other material obligation pursuant to, any of the Benefit Plans, (iii) limit
or restrict the right of Seller or any of its Affiliates to merge, amend or
terminate any of the Benefit Plans or (iv) result in payments under any of
the Benefit Plans which would subject any recipient of the payments to excise
taxes under Section 4999 of the Code.
(i) To
the extent that, after the Closing, Parent operates each Specified Business in
the same manner operated by Seller and its Affiliates during the six-month
period prior to the Closing, Parent will not incur any Liability under WARN or
any other applicable Law other than on account of any action or inaction taken
by Parent or Buyer following the Closing Date relating to plant closings or
employee separations or severance pay.
(j) Neither
Seller nor any of its Affiliates has any material Liability with respect to any
misclassification of any person as an independent contractor rather than as an
employee, or with respect to any employee leased from another employer, except
as would not directly or indirectly adversely affect Buyer or Parent.
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Section
3.11 Compliance with Laws. Each
Specified Business and all of the Transferred Assets have since July 1, 2003
and currently are being conducted, held and operated in compliance with all
applicable Laws and Governmental Authorizations, including the Communications
Act, the Cable Communications Policy Act of 1984, the Cable Television Consumer
Protection and Competition Act of 1992, the Telecommunications Act of 1996, the
Copyright Act of 1976 and all rules and regulations of the FCC and the
United States Copyright Office, except for failures to comply that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Since July 1, 2003 and, to the Knowledge of Seller, and
except to the extent of any Claims that will be discharged (or the functional
equivalent thereof in terms of its effect on Buyer, each Specified Business,
the Transferred Assets and the Assumed Liabilities) pursuant to the Discharge
(or, as applicable, the MCE Discharge or an Additional Discharge), prior to July 1,2003, neither Seller nor any of its Affiliates has received any notice alleging
any violation by Seller or any of its Affiliates under any applicable Law for a
violation, except for violations that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Except as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, each Specified Business has all Governmental
Authorizations necessary for the conduct of such Specified Business as
currently conducted and such Governmental Authorizations are in full force and
effect. Nothing in this representation is intended to address any compliance
matter that is specifically addressed by Sections 3.10 (Employee Benefits),
3.12 (Environmental Matters), 3.14 (Labor) and 3.17 (Franchises). Schedule
3.11 of the Seller Disclosure Schedule sets forth, with respect to each
Specified Business, each Governmental Authorization issued by the FCC, each
Governmental Authorization for the provision of telephony services and each
other material Governmental Authorization, in each case Related to such
Specified Business.
Section
3.12 Environmental Matters.
(a) Each
Specified Business, the Owned Real Property and the Transferred Assets are in
compliance in all material respects with all applicable Environmental Laws and
Environmental Permits and there are no material Liabilities under any
Environmental Law with respect to any Specified Business, the Owned Real
Property or the Transferred Assets.
(b) As
of the date hereof, none of Seller or any of its Affiliates (nor, to Seller’s
Knowledge, any predecessor in interest) has received from any Person any
notice, demand, claim, letter, citation, summons, order or request for
information, relating to any material violation or alleged violation of, or any
material Liability under, any Environmental Law in connection with or affecting
any Specified Business, the Owned Real Property or the Transferred Assets.
(c) There
are no material complaints filed, penalties assessed, writs, injunctions,
decrees, orders or judgments outstanding, or any material actions, suits,
proceedings or investigations pending or, to Seller’s Knowledge, threatened,
relating to compliance with or Liability under any Environmental Law affecting
any Specified Business, the Owned Real Property or the Transferred Assets.
68
(d) There
are no underground storage tanks, asbestos-containing materials, lead-based
products or polychlorinated biphenyls on, at or under any of the Owned Real
Property or Transferred Assets other than in compliance in all material
respects with all Environmental Laws; provided, that, solely for
purposes of Section 6.2(a), this Section 3.12(d) shall be deemed
to exclude any such items of which Seller does not have Knowledge.
(e) None
of the Owned Real Property or the Transferred Assets nor any property to which Hazardous
Substances located on or resulting from the use of any Owned Real Property or
Transferred Assets have been transported, nor any property to which Seller has,
directly or indirectly, transported or arranged for the transportation of any
Hazardous Substances is listed or, to Seller’s Knowledge, proposed for listing
on the National Priorities List promulgated pursuant to CERCLA, or CERCLIS (as
defined in CERCLA) or on any similar federal, state, local or foreign list of
sites requiring investigation or cleanup.
(f) All
material Environmental Permits Related to any Specified Business, the Owned
Real Property or the Transferred Assets are valid, are in full force and
effect, are transferable and, except as would not, individually or in the
aggregate, reasonably be expected to be material, will not be terminated or
impaired or become terminable as a result of the transactions contemplated
hereby.
(g) As
of the date hereof, there has been no material environmental investigation,
study, audit, test, review or other analysis conducted of which Seller has
Knowledge in relation to any Owned Real Property or the Transferred Assets
which has not been delivered to Buyer at least ten days prior to the date
hereof.
Section
3.13 Intellectual Property.
Seller and its Affiliates own the Transferred Intellectual Property free and
clear of any material Encumbrances other than Permitted Encumbrances. The
Transferred Intellectual Property that is Registered is subsisting and
enforceable in all material respects. None of the Transferred Intellectual
Property or, to the Knowledge of Seller, the Intellectual Property that is
provided to Seller and its Affiliates pursuant to the Transferred Intellectual
Property Contracts, is subject to any outstanding order, judgment or decree adversely
affecting Seller’s or its Affiliates’ use thereof or rights thereto as
currently used by Seller and its Affiliates in each Specified Business. Neither
Specified Business and none of the Transferred Assets infringes or has
infringed or otherwise violates or has violated any Person’s Intellectual
Property rights in any material respect. To the Knowledge of Seller, no Person
is infringing or otherwise violating any Intellectual Property rights of Seller
or its Affiliates in the Transferred Intellectual Property or the Intellectual
Property that is provided to Seller and its Affiliates pursuant to the
Transferred Intellectual Property Contracts, other than violations that would
not, individually or in the aggregate, reasonably be likely to have a Material
Adverse Effect. Immediately after the Closing, Buyer or its designated
Affiliate will own the Transferred Intellectual Property and hold the
Transferred Intellectual Property Contracts on terms and conditions that are
the same in all material respects as those in effect immediately prior to the
Closing, except to the extent that any of the Transferred Intellectual Property
is the subject of a license back to Friendco or any of its
69
Affiliates pursuant to Section 5.12
of the Friendco Purchase Agreement. None of Seller, any of its Affiliates or
any Specified Business has infringed or otherwise violated the Intellectual
Property rights of any Person except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section
3.14 Labor.
(a) Except
for the Collective Bargaining Agreements, none of Seller or any of its
Affiliates is a party to or bound by any labor agreement, union contract or
collective bargaining agreement respecting any of the Employees, nor are there
any Employees represented by a collectively bargained unit or labor
organization who are not covered by a Collective Bargaining Agreement.
(b) Seller
and its Affiliates are in compliance in all material respects with all labor
Laws applicable to any Specified Business and the Employees, and are not
engaged in any unfair labor practices, as defined in the National Labor
Relations Act or other Law applicable to Employees. There are no outstanding
unfair labor practice charges pending before the National Labor Relations Board
with respect to any Employee.
(c) There
is no pending or, to the Knowledge of Seller, threatened strike, shutdown,
dispute, walkout or other work stoppage or any union organizing effort by,
or with respect to, any of the Employees.
(a) Schedule
3.15(a) of the Seller Disclosure Schedule contains, with respect to
each Specified Business, Seller’s good faith estimate, as of the date hereof,
of the number of Contracts (other than Programming Agreements, Franchises and
Governmental Authorizations) to which Seller or any of its Affiliates or any of
their respective Assets are party, bound or subject which are executory and are
Related to such Specified Business. Such list represents Seller’s good faith
estimate of the number of such Contracts in each of the categories set forth on
Schedule 3.15(a) of the Seller Disclosure Schedule, and indicates
as to each category, the number of such Contracts that (i) were entered
into prior to the Petition Date, (ii) were entered into following the
Petition Date or (iii) Relate to any Specified Business and any other
business of Seller or its Affiliates, including any part of the Friendco
Business.
(b) Except
as set forth on Schedule 3.15(b) of the Seller Disclosure Schedule,
none of the Contracts of Seller or any of its Affiliates Related to a Specified
Business contains any of the following terms or provisions (each such term or
provision, a “Special Term”):
(i) consideration
payable or receivable by Seller or any of its Affiliates in excess of $100,000
in any twelve month period or in excess of $1,000,000 over the remaining term;
70
(ii) limitations on the freedom of Seller or any of its
Affiliates to compete in any line of business, with any Person or in any
geographic area, and which would limit the freedom of Buyer or any of its
Affiliates to do so after the Closing Date if it were an Assigned Contract;
(iii) so-called “most favored nation” provisions or any similar
provision requiring Seller or any of its Affiliates to offer a third party
terms or concessions at least as favorable as those offered to one or more
other parties, or which would require Buyer or any of its Affiliates to do so
after the Closing Date if it were an Assigned Contract;
(iv) any terms that do not reflect in all material respects
those that would be obtained in arm’s length negotiations;
(v) any
exclusivity provision or provision that requires the purchase of all or a given
portion of a party’s requirements or any other similar provision that would, in
each case, bind Buyer or its Affiliates after the Closing if it were an
Assigned Contract;
(vi) any terms for the benefit of any members of the Rigas
family (except terms for the general benefit of holders of Equity Securities in
Seller or any of its Affiliates), Seller, any Managed Cable Entity or any of
its or their current or former Affiliates or associates (as defined in Rule 405
under the Securities Act), in each case that would continue to benefit any such
Person after the Closing if it were an Assigned Contract;
(vii) any provision relating to the use by third parties of any of
the Transferred Assets to provide telephone, Internet or data services other
than in Contracts with Subscribers of any such services and other than under
the Contracts listed on Schedule 3.15(b)(vii) of the Seller
Disclosure Schedule; or
(viii) with respect to any Contract entered into following the entry
of the Confirmation Order, any provision that directly or indirectly restricts
(or imposes a penalty or loss of benefit upon) the assignment or transfer of
the rights or obligations thereunder to Buyer, Friendco or their Affiliates.
(c) Schedule
3.15(c) of the Seller Disclosure Schedule contains a true and complete
list, as of the date hereof, of all Contracts (other than Equipment Leases and
Programming Agreements) to which Seller or any of its Affiliates or any of
their respective Assets are party, bound or subjectthat
Relate to more than one Specified Business or to both a Specified Business and
any part of the Friendco Business.
(d) Subject
to the entry of the Confirmation Order, all Assigned Contracts will be, when
assumed by Seller and assigned to Buyer hereunder and under the Confirmation
Order, in full force and effect and will be enforceable against each party
thereto in accordance with the express terms thereof and any violation, breach
or event of default, or alleged violation, breach or event of default, or event
or condition that, after notice or lapse of time or both, would constitute a
violation, breach or event of default
71
thereunder on the part of Seller or any of
its Affiliates existing prior to such assumption and assignment will be fully
discharged and Buyer shall have no responsibility therefor except for any
Assumed Cure Costs. To the Knowledge of Seller, no other party to any Contract
of Seller or any of its Affiliates is in default, violation or breach of such
Contract, and there are no disputes pending or threatened under any such
Contract other than those defaults, violations, breaches and disputes that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. In the last five years, none of Seller or any of its
Affiliates has made any material claim under any Contract pursuant to which any
of the Cable Systems were acquired.
Section
3.16 Cable System and
Subscriber Information.
(a) Except
for the Friendco Transferred Assets, none of Seller or any of its Affiliates,
directly or indirectly, owns any Systems other than the Cable Systems listed on
Schedule 3.16(a) of the Seller Disclosure Schedule.
(b) Except
for the MCE Systems and the Friendco Transferred Assets, none of Seller or any
of its Affiliates, directly or indirectly, manages or operates any Systems
which it does not, directly or indirectly, wholly own.
(c) None
of Seller or any of its Affiliates, directly or indirectly, owns any Systems
that it does not, directly or indirectly, manage and operate.
(d) Schedule
3.16(d) of the Seller Disclosure Schedule sets forth the aggregate
number of Basic Subscribers, Digital Subscribers and HSI Subscribers of each
Specified Business (detailed by Cable System) as of December 31, 2004. Each
such aggregate number has been determined in accordance with the Seller
Subscriber Accounting Policy.
(e) Schedule
3.16(e) of the Seller Disclosure Schedule sets forth Seller’s policy
with respect to calculating subscribers (the “Seller Subscriber Accounting
Policy”).
(f) Schedule
3.16(f) of the Seller Disclosure Schedule sets forth the average total
revenue per Basic Subscriber of each Specified Business as of December 31,2004.
(g) Schedule
3.16(g) of the Seller Disclosure Schedule sets forth the Basic
Subscriber monthly churn rate for each Specified Business as of December 31,2004.
(h) Schedule
3.16(h) of the Seller Disclosure Schedule sets forth a true and
complete list of the Cost Centers comprising each Specified Business.
Section
3.17 Franchises.
(a) Schedule
3.17(a) of the Seller Disclosure Schedule sets forth (i) a true
and complete list of each Franchise operated by Seller or any of its Affiliates,
72
detailed by Specified Business, Cable System
and Cost Center and (ii) Seller’s good faith estimate of the number of
Basic Subscribers served by each such Franchise as of December 31, 2004. Except
as disclosed by Seller to Buyer prior to the date of this Agreement, the Cable
Systems are in compliance with the applicable Franchises in all material
respects. There are no material ongoing or, to the Knowledge of Seller,
threatened audits or similar proceedings undertaken by Government Entities with
respect to the Franchises.
(b) Except
as disclosed by Seller to Buyer prior to the date of this Agreement, (i) each
of the Franchises is in full force and effect in all material respects, and a
valid request for renewal has been duly and timely filed under Section 626
of the Communications Act with the proper Government Entity with respect to
each of the Franchises that has expired or will expire within 30 months after
the date of this Agreement, (ii) notices of renewal have been filed
pursuant to the formal renewal procedures established by Section 626(a) of
the Communications Act, (iii) there are no applications relating to any
Franchises pending before any Government Entity that are material to any
Specified Business, (iv) none of Seller or any of its Affiliates has
received notice from any Person that any Franchise will not be renewed or that
the applicable Government Entity has challenged or raised any material
objection to or, as of the date hereof, otherwise questioned in any material
respect, a Seller’s request for any such renewal under Section 626 of the
Communications Act, and Seller and its Affiliates have duly and timely complied
in all material respects with any and all inquiries and demands by any and all
Government Entities made with respect to Seller’s or such Affiliates’ requests
for any such renewal, (v) none of Seller, any of its Affiliates or any
Government Entity has commenced or requested the commencement of an
administrative proceeding concerning the renewal of a material Franchise as
provided in Section 626(c)(1) of the Communications Act, and (vi) to
the Knowledge of Seller, there exist no facts or circumstances that make it
likely that any material Franchise shall not be renewed or extended on
commercially reasonable terms.
(c) With
respect to the Franchises, none of Seller or any of its Affiliates has made any
material commitment to any Government Entity except (i) as set forth in
the Contracts listed on Schedule 3.17(c)(i) of the Seller
Disclosure Schedule, true and complete copies of which have been made available
to Buyer prior to March 31, 2005, and (ii) such other Franchise
commitments that (A) are commercially reasonable given the relevant
Franchise and locality and (B) do not contain unfulfilled commitments
except (1) those commitments reflected in the Budget or the Derivative
2004 Financial Statements (provided, that any commitment so reflected
only in part will be deemed to be covered by this exception only to the extent
so reflected) and (2) those commitments that are not material relative to
Seller’s operations or financial performance in the applicable Franchise area.
(d) Set
forth on Schedule 3.17(d) of the Seller Disclosure Schedule is a
list of each Franchise subject to a Purchase Right and except as set forth on
such Schedule no such Purchase Right provides for purchase thereunder at a
price less than fair market value or a third party offer price.
73
Section
3.18 Network Architecture. Schedule
3.18 of the Seller Disclosure Schedule sets forth a true and complete
statement (detailed by Cable System) as of December 31, 2004 (or, in the
case of clauses (c) and (f), as of the date hereof), of (a) the
approximate number of plant miles (aerial and underground) for each headend
located in each Specified Business, (b) the approximate bandwidth
capability expressed in MHz of each such headend, (c) the stations and
signals carried by each such headend and the channel position of each such
signal and station, (d) the approximate number of multiple dwelling units
served by such Specified Business, (e) the approximate number of homes
passed in such Specified Business as reflected in the system records of Seller
or any of its Affiliates, (f) a description of basic and optional or tier
services available and the rates charged for each such Specified Business, (g) the
bandwidth capacity of each Cable System in such Specified Business for each
headend, and (h) the municipalities served by each of the Cable Systems in
such Specified Business and the public service numbers of such municipalities.
Section
3.19 Absence of Changes. Since
the date of the Most Recent Balance Sheet, Seller and its Affiliates have
conducted each Specified Business only in the Ordinary Course, and each
Specified Business has not experienced any event, occurrence, condition or
circumstance, and, to Seller’s Knowledge, no event, occurrence, condition or
circumstance is threatened, other than those that would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect.
Section
3.20 Assets.
(a) Other
than the Excluded Assets, the right, title and interest of Seller and its
Affiliates in the Transferred Assets constitute all of the Assets of Seller and
its Affiliates owned or held by, used or intended for use, leased, licensed,
accrued, reserved, allocated or incurred in connection with the conduct of any
Specified Business in all material respects as currently conducted and,
immediately after the Closing, shall be sufficient for Buyer to continue to
operate and conduct such Specified Business in all material respects as
currently conducted. At the Closing (after giving effect to the Transaction),
Buyer or its designated Affiliate will have good and marketable title to (or in
the case of Transferred Assets that are leased, valid leasehold interests in)
the Transferred Assets free and clear of any Encumbrances, other than Permitted
Encumbrances (or in the case of the Transferred Investments, Encumbrances under
the Investment Documents), and those created by Buyer or its Affiliates.
(b) The
Shared Assets and Liabilities are the only Assets and Liabilities of Seller or
any of its Affiliates that Relate to both of the Specified Businesses or to any
Specified Business and any other business of Seller or its Affiliates,
including any part of the Friendco Business.
(c) The
Friendco Transferred Assets are the only Assets that are Primarily Related to
the Cable Systems being purchased by Friendco. None of the Friendco Transferred
Assets are Primarily Related to any Specified Business except to the extent Buyer
has otherwise so consented. Other than the Friendco Transferred
74
Assets, the Transferred Assets and the
Excluded Assets, there are no Assets of Seller or any of its Affiliates Related
to the Business.
(d) Schedule
3.20(d) of the Seller Disclosure Schedule sets forth a true and
complete list of all of the material Assets Related to each Specified Business
owned, held by, leased or licensed by any Subsidiary of Seller that is not a
Debtor.
(e) Other
than the Tele-Media Entities, the Transferred Investments and the wholly owned
Subsidiaries of Seller and as set forth on Schedule 3.20(e) of the
Seller Disclosure Schedule, Seller and its Affiliates have no Equity Security
in any Person which holds Assets Primarily Related to the operations and
business conducted by the Cable Systems.
Section
3.21 Real Property.
(a) Schedule
3.21(a) of the Seller Disclosure Schedule sets forth a complete and
accurate list of all the Real Property Leases and Real Property Subleases, in
each case providing for annual payments in excess of $50,000. Seller has
delivered to Buyer true and complete copies of each of such Real Property
Leases and Real Property Subleases.
(b) Schedule
3.21(b) of the Seller Disclosure Schedule sets forth the address
and/or location and the general use within each Specified Business of each
Owned Real Property and each Leased Real Property listed on Schedule 3.21(a) of
the Seller Disclosure Schedule.
(c) Subject
to the entry of the Confirmation Order, all Transferred Real Property Leases
and Transferred Rights-of-Way, when assumed by Seller or its Affiliates and
assigned to Buyer or its Affiliates pursuant to this Agreement and the
Confirmation Order, will be in full force and effect and will be enforceable
against each party thereto in accordance with the express terms thereof and
will not require any consent of any Person or any payment thereunder in respect
of such assignment (unless such payment is made by Seller or any of its
Affiliates on or prior to the Closing) and any violation, breach or event of
default, or event or condition that, after notice or lapse of time or both (to
the extent required), would constitute a violation, breach or event of default
thereunder on the part of Seller or any of its Affiliates existing prior to
such assumption and assignment will be fully discharged and none of Buyer nor
any of its Affiliates shall have any responsibility therefor. To the Knowledge
of Seller, no other party to any Transferred Real Property Lease or Transferred
Right-of-Way is in default, violation or breach of such Transferred Real
Property Lease or Transferred Right-of-Way and there are no disputes pending or
threatened thereunder other than those defaults, violations, breaches and
disputes that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Neither the Transferred Owned Real
Property nor the Transferred Leased Real Property is subject to any material
Real Property Sublease.
75
(d) Seller
has not received notice and has no Knowledge of any pending, threatened or
contemplated material condemnation proceeding affecting the Transferred Owned
Real Property or the Leased Real Property or any part thereof, or of any sale
or other disposition of the Transferred Owned Real Property or the Leased Real
Property or any part thereof in lieu of condemnation.
Section
3.22 Absence of Liabilities.
Except to the extent of any Claims that will be discharged (or the functional
equivalent thereof in terms of its effect on Buyer, each Specified Business,
the Transferred Assets and the Assumed Liabilities) pursuant to the Discharge
(or, as applicable, the MCE Discharge or an Additional Discharge), each
Specified Business has no Liabilities and there is no existing condition,
situation or set of circumstances that, individually or in the aggregate, would
reasonably be expected to result in a Liability of any Specified Business,
other than (a) Liabilities specifically reflected, reserved against or
otherwise disclosed in the Derivative 2004 Financial Statements or, only with respect
to Liabilities included in the Unallocated Shared Assets and Liabilities that
become Assumed Liabilities pursuant to Section 2.3, the Derivative
Unallocated 2004 Financial Statements, (b) Excluded Liabilities and (c) Liabilities
that were incurred in the Ordinary Course of Business since the date of the
Derivative 2004 Financial Statements and that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
Section
3.23 Insurance. Schedule
3.23 of the Seller Disclosure Schedule lists all material insurance
policies covering the properties, assets, employees and operations of the
Business (including policies providing property, casualty, liability and
workers’ compensation coverage) (the “Insurance Policies”). All of the
Insurance Policies or renewals thereof are in full force and effect in all
material respects. With such exceptions as would not be material, all premiums
due in respect of the Insurance Policies have been paid by Seller or its
Affiliate and Seller and its Affiliates are otherwise in compliance with the
terms of such policies. Seller carries sufficient third party insurance to
insure in all material respects all reasonable insurable risks of the Business.
Following the Closing, the Insurance Policies shall continue to provide
coverage with respect to acts, omissions and events occurring prior to the
Closing in accordance with their terms as if the Closing had not occurred. To
the Knowledge of Seller, there has not been any threatened termination of,
material premium increase (other than with respect to customary annual premium
increases) with respect to, or material alteration of coverage under, any
Insurance Policy.
Section
3.24 Friendco Purchase
Agreement. Seller has previously delivered to Buyer a true and complete
copy of the Friendco Purchase Agreement as of the date hereof. Except for the
Friendco Purchase Agreement and the JV Documents and any Ancillary Agreements
(each as defined in the Friendco Purchase Agreement) to which Friendco or any of
its Affiliates is party, Seller and/or any of its Affiliates, on the one hand,
and Friendco and/or any of its Affiliates, on the other hand, are not party to
any Contract related to the Transaction or the Friendco Transaction.
Section
3.25 Transactions with
Affiliates. Except for this Agreement, the Ancillary Agreements to which it
is a party and any Liability arising under this
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Agreement or any such Ancillary
Agreement, from and after the Closing, none of Buyer or its respective
Subsidiaries shall, as a result of the Transaction, be bound by any Contract or
any other arrangement of any kind whatsoever with, or have any Liability to,
Seller, any Managed Cable Entity or any of their respective Affiliates.
Section
3.26 Finders’ Fees. Except
for UBS Securities LLC and Allen & Company LLC, whose fees will be
paid by Seller, there is no investment banker, broker, finder or other
intermediary that has been retained by or is authorized to act on behalf of
Seller or any of its Affiliates who might be entitled to any fee or commission
in connection with the Transaction.
Section
3.27 No Other Representations
or Warranties. Except for the representations and warranties contained in
this Article III, neither Seller nor any other Person makes any other
express or implied representation or warranty on behalf of Seller.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller that, except
as set forth on the Buyer Disclosure Schedule, as of the date hereof and as of
the Closing:
Section
4.1 Organization and
Qualification.
(a) Buyer
is a limited liability company duly organized, validly existing and in good
standing under the laws of Delaware. Buyer has all requisite limited liability
company power and authority to own and operate its Assets and to carry on its
business as currently conducted. Buyer has made available to Seller a true and
complete copy of Buyer’s limited liability company agreement, as amended and in
effect as of the date hereof.
(b) Parent
is a corporation duly organized, validly existing and in good standing under
the laws of Delaware. Parent has all requisite corporate power and authority to
own and operate its Assets and to carry on its business as currently conducted.
Buyer has made available to Seller a true and complete copy of Parent’s
certificate of incorporation and bylaws, each as amended and in effect as of
the date hereof.
(a) Schedule
4.2(a) of the Buyer Disclosure Schedule sets forth a true and complete
list of each Significant Subsidiary of Parent and each other Subsidiary of
Parent that is not directly or indirectly wholly owned by Parent or its
Significant Subsidiaries, together with its jurisdiction of organization and
its authorized and outstanding Equity Securities as of the date hereof. Each
Subsidiary of Parent is duly organized, validly existing, and in good standing
under the laws of its jurisdiction of organization and has all requisite
corporate or similar power and authority to own, lease and operate its Assets
and to carry on its portion of the Parent Business as currently
77
conducted and is duly qualified to do
business and is in good standing as a foreign corporation or other entity in
each jurisdiction where the ownership or operation of its Assets or the conduct
of its business requires such qualification, except for failures to be so duly
organized, validly existing, qualified or in good standing that would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect. Buyer has provided or made available to Seller true
and complete copies of the certificate of incorporation and bylaws (or similar
organizational documents) of each of the Significant Subsidiaries of Parent as
in effect as of the date hereof. As of the date hereof, Parent owns, directly
or indirectly, through one or more of its other Subsidiaries, all right, title
and interest in and to all outstanding Equity Securities of the Subsidiaries
indicated as owned by it on Schedule 4.2(a) of the Buyer Disclosure
Schedule. All of the outstanding Equity Securities of the Subsidiaries of
Parent have been duly authorized, and are validly issued, fully paid and non-assessable.
(b) As
of the date hereof and except in respect of any of the following rights that
are for the benefit of any Person that is, directly or indirectly, a wholly
owned Subsidiary of Parent, (i) there are no preemptive or other
outstanding rights, options, warrants, conversion rights, stock appreciation
rights, redemption rights, repurchase rights, agreements, arrangements or
commitments of any character under which the Subsidiaries of Parent are or may
become obligated to issue or sell, or giving any Person a right to subscribe
for or acquire, or in any way dispose of, any shares of the Equity Securities
of the Subsidiaries of Parent, and no securities or obligations evidencing such
rights are authorized, issued or outstanding, (ii) the outstanding Equity
Securities of the Subsidiaries of Parent are not subject to any voting trust
agreement or other Contract restricting or otherwise relating to the voting,
dividend rights or disposition of such Equity Securities and (iii) there
are no phantom stock or similar rights providing economic benefits based,
directly or indirectly, on the value or price of the Equity Securities of the
Subsidiaries of Parent.
Section
4.3 Corporate Authorization.
(a) Buyer
has full limited liability company power and authority to execute and deliver
this Agreement and to perform its obligations hereunder. The execution,
delivery and performance by Buyer of this Agreement have been duly and validly
authorized and no additional limited liability company member or similar
authorization or consent is required in connection with the execution, delivery
and performance by Buyer of this Agreement.
(b) Parent
has full corporate power and authority to execute and deliver the Parent
Agreement and to perform its obligations thereunder. The execution, delivery
and performance by Parent of the Parent Agreement have been duly and validly
authorized and no additional corporate, shareholder or similar authorization or
consent is required in connection with the execution, delivery and performance
by Parent of the Parent Agreement.
(c) Prior
to the Closing, each of Buyer, Parent and Parent’s Subsidiaries (other than
Buyer) will have full limited liability company, corporate,
78
partnership or similar power and authority to
execute and deliver each of the Ancillary Agreements to which it will be a
party and to perform its obligations thereunder. Prior to the Closing, the
execution, delivery and performance by each of Buyer, Parent and Parent’s
Subsidiaries (other than Buyer) of each of the Ancillary Agreements to which it
will be a party will have been duly and validly authorized and no additional
limited liability company member, shareholder or similar authorization or
consent will be required in connection with the execution, delivery and
performance by each of Buyer, Parent and Parent’s Subsidiaries (other than
Buyer) of any of the Ancillary Agreements to which it will be a party.
Section
4.4 Buyer Interests and
Parent Capital Stock.
(a) As
of the date hereof, Parent owns directly all right, title and interest in and
to all outstanding Equity Securities of Buyer. As of the Closing, Buyer will be
a Subsidiary of Parent.
(b) As
of the date hereof, (i) the authorized capital stock of Parent (the “Parent
Capital Stock”) consists of (A) 1,000 shares of common stock, of which
(1) 925 have been designated Parent Class A Common Stock, and (2) 75
have been designated Class B Common Stock, par value $0.01 per share (the “Parent
Class B Common Stock”), and (B) 1,000 shares of preferred stock,
par value $0.01 per share (the “Parent Preferred Stock”); (ii) there
are issued and outstanding (A) 925 shares of Parent Class A Common
Stock and 75 shares of Parent Class B Common Stock and (B) no shares
of Parent Preferred Stock; (iii) except for the Parent Capital Stock,
there are no Equity Securities of Parent issued, reserved for issuance or
outstanding; (iv) the Parent Capital Stock and any other Equity Securities
of Parent have been duly authorized, and are validly issued, fully paid and
nonassessable; (v) there are no preemptive or other outstanding rights,
options, warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments of any character
under which Parent is or may become obligated to issue or sell, or giving any
Person a right to subscribe for or acquire, or in any way dispose of, any
shares of Parent Capital Stock or other Equity Securities of Parent, and no
securities or obligations evidencing such rights are authorized, issued or
outstanding; (vi) the outstanding Parent Capital Stock and other Equity
Securities of Parent are not subject to any voting trust agreement or other
contract, agreement or arrangement restricting or otherwise relating to the
voting, dividend rights or disposition of such stock or other Equity
Securities; (vii) there are no phantom stock or similar rights providing
economic benefits based, directly or indirectly, on the value or price of the
Parent Capital Stock or other Equity Securities of Parent; (viii) there
are not any bonds, debentures, notes or other Indebtedness of Parent having the
right to vote (or convertible into, or exchangeable for, securities having the
right to vote) on any matters on which holders of the Parent Capital Stock may
vote; and (ix) there are not any outstanding contractual obligations of
Parent or any of its Subsidiaries to repurchase, redeem or otherwise acquire
any shares of capital stock of Parent.
(c) As
of the Closing, the Purchase Shares (before adjustments under Section 2.6
or 2.7) shall represent 16% of the total outstanding Equity Securities of
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Parent calculated on a Fully
Diluted Basis, after giving effect to the issuance of the Purchase Shares and
assuming for purposes of such calculation the consummation of the Redemption
under the Parent Redemption Agreement but without giving effect to any
adjustments under Section 2.6 or 2.7; provided, however,
that Equity Securities issued pursuant to clause (ii) of the definition of
“Fully Diluted Basis” shall not exceed the Permitted Parent Incentive Awards; provided,
further, that such limitation shall not apply to any Equity Securities
issued as contemplated by clause (ii)(B) of the definition of “Fully
Diluted Basis.”
Section
4.5 Purchase Shares. Upon
issuance, the Purchase Shares will be duly authorized, validly issued, fully
paid and nonassessable, and free and clear of all Encumbrances of any kind
whatsoever, including any preemptive rights, rights of first refusal, call
options, subscription rights or any similar rights under any provision of
applicable Law, the charter documents or bylaws of Parent or any of its
Subsidiaries or any Contract to which Parent is a party or otherwise bound and
subject to applicable securities Laws. At the Closing, Parent will have
sufficient authorized but unissued shares of Parent Capital Stock for Buyer to
meet its obligation to cause Parent to deliver the Purchase Shares under this
Agreement. Upon consummation of the Transaction, good and valid title to the
Purchase Shares will pass to the recipients thereof from Buyer, free and clear of
any Encumbrances, other than those arising as a result of the ownership of such
Purchase Shares by [the] any recipient thereof or under applicable securities
Laws.
Section
4.6 Consents and Approvals.
No consent, approval, waiver, authorization, notice or filing is required to be
obtained by Buyer, Parent or any of Parent’s Affiliates from, or to be given by
Buyer, Parent or any of Parent’s Affiliates to, or made by Buyer, Parent or any
of Parent’s Affiliates with, any Person in connection with the execution,
delivery and performance by Buyer of this Agreement and by Buyer, Parent or any
of Parent’s Affiliates of the Ancillary Agreements to which it is a party,
other than the consents, approvals, waivers, authorizations, notices or filings
the failure of which to obtain, give or make would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect.
Section
4.7 Non-Contravention.
The execution, delivery and performance by Buyer of this Agreement and the
execution, delivery and performance by each of Buyer and Parent of each of the
Ancillary Agreements to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, do not and will not (a) violate
any provision of the certificate of incorporation, bylaws or other
organizational documents of Buyer, Parent or any of Parent’s Affiliates, (b) assuming
the receipt of all consents, approvals, waivers and authorizations and the
making of notices and filings set forth on Schedule 4.6 of the Buyer
Disclosure Schedule with respect to any Person which is not a Government Entity
or Self-Regulatory Organization, conflict with, or result in the breach of, or
constitute a default under, or result in the termination, cancellation,
modification or acceleration (whether after the filing of notice or the lapse
of time or both) of any right or obligation of Buyer, Parent or any of Parent’s
Affiliates, under, or result in a loss of any benefit to which Buyer, Parent or
any of Parent’s Affiliates is entitled under, any Contract to which any of them
is a party or result in the
80
creation of any Encumbrance upon any
of their Assets or give rise to any Purchase Right or (c) assuming the
receipt of all consents, approvals, waivers and authorizations and the making
of notices and filings set forth on Schedule 4.6 of the Buyer Disclosure
Schedule with respect to Government Entities or Self-Regulatory Organizations
or required to be made or obtained by Seller, violate or result in a breach of
or constitute a default under any Law to which Buyer, Parent or any of Parent’s
Affiliates is subject, or under any Parent Governmental Authorization, other
than, in the case of clauses (b) and (c), conflicts, breaches,
terminations, defaults, cancellations, accelerations, losses, violations or
Encumbrances that would not, individually or in the aggregate, reasonably be
expected to have a Parent Material Adverse Effect.
Section
4.8 Binding Effect. This
Agreement and each of the Ancillary Agreements dated the date hereof is, and
each other Ancillary Agreement will constitute, when executed and delivered by
Buyer and each Affiliate of Buyer party to such agreements and by Seller and
the other parties thereto, a valid and legally binding obligation of Buyer and
each Affiliate of Buyer party to such agreements, enforceable against Buyer and
each such Affiliate in accordance with their respective terms.
Section
4.9 Financial Statements.
(a) Set
forth on Schedule 4.9(a) of the Buyer Disclosure Schedule is a copy
of the consolidated audited balance sheets and audited statements of income,
stockholders’ equity and cash flows for Parent (and its predecessors in
interest, as the case may be) and its Subsidiaries for the fiscal years ended December 31,2002, December 31, 2003 and December 31, 2004 (the “Parent Audited
Financial Statements”). The Parent Audited Financial Statements have been
prepared from the books and records of Parent in accordance with GAAP
consistently applied, and fairly present, in all material respects, the
financial condition and results of operations and cash flows of Parent as of
the dates thereof or the periods then ended.
(b) The
Chief Executive Officer and the Chief Financial Officer of Parent have
disclosed, based on their most recent evaluation, to Parent’s auditors and the
audit committee of Parent’s board of directors (i) all significant
deficiencies in the design or operation of internal controls that could
adversely affect Parent’s or any of Parent’s Affiliates’ ability to record,
process, summarize and report financial data and have identified for Parent’s
auditors any material weaknesses in the internal controls and (ii) any
fraud, whether or not material, that involves management or other employees who
have a significant role in Parent’s internal controls. Copies of all
disclosures described in the foregoing sentence have been made available to
Seller. Parent and its Significant Subsidiaries have established and maintain
disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under
the Exchange Act); such disclosure controls and procedures are designed to
ensure that material information relating to Parent, including its Significant
Subsidiaries, is made known to Parent’s Chief Executive Officer and its Chief
Financial Officer by others within those entities; and such disclosure controls
and procedures are effective in alerting Parent’s Chief Executive Officer and
its Chief Financial Officer to material information of the nature required to
be disclosed in periodic reports pursuant to the Exchange Act in a timely
fashion.
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Section
4.10 Litigation and Claims.
There are no civil, criminal or administrative actions, suits, demands, claims,
hearings, proceedings or investigations pending against, or, to the Knowledge
of Buyer, threatened against or affecting, or otherwise relating to Parent or
any of its Affiliates, or the Transaction, other than those that would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect. None of Parent or any of its Affiliates is subject to
any order, writ, judgment, award, injunction or decree of any court or
governmental or regulatory authority of competent jurisdiction or any
arbitrator or arbitrators, other than those that would not, individually or in
the aggregate, reasonably be expected to have a Parent Material Adverse Effect.
To the Knowledge of Buyer, as of the date hereof, the matters described in the
Current Report on Form 8-K, filed December 15, 2004, by TWX
with the SEC would not reasonably be expected to have a Parent Material Adverse
Effect.
Section
4.11 Taxes. Each of Parent
and its Subsidiaries has filed all Tax Returns required to have been filed (or
extensions have been duly obtained) and has paid all Taxes required to have
been paid by it, except where failure to file such Tax Returns or pay such
Taxes would not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect.
Section
4.12 Employee Benefits. Except as would not,
individually or in the aggregate, reasonably be expected to have a Parent Material
Adverse Effect:
(a) all
material benefit and compensation plans, programs, contracts, policies or
arrangements, including any trusts, trust instruments and insurance contracts
forming a part thereof, any “employee benefit plans” within the meaning of Section 3(3) of
ERISA, any deferred compensation, stock option, stock purchase, stock
appreciation rights, stock based, incentive, bonus, workers’ compensation,
short term disability, vacation, retention and severance plans and all
employment, collective bargaining, consulting, severance and change in control
agreements, and all amendments thereto, in each case under which any current or
former employee of Parent has any right to benefits and which are contributed
to, sponsored by or maintained by Parent (the “Parent Benefit Plans”),
have been maintained in substantial compliance with their terms and with the
requirements prescribed by any applicable statutes, orders, rules and
regulations, including ERISA and the Code;
(b) each
Parent Benefit Plan that is intended to be qualified under an applicable
provision of the Code or any regulation thereunder, including Section 401(a) of
the Code, is so qualified and has been so qualified during the period since its
adoption;
(c) each
trust created under any such Parent Benefit Plan is exempt from tax and has
been so exempt since its creation and, to the Knowledge of Buyer, nothing has
occurred with respect to the operation of any Parent Benefit Plan that would
cause the loss of such qualification or exemption; and
(d) the
Transaction will not result in any new or additional Liability of Parent or any
of its Subsidiaries under any Parent Benefit Plan that would not have been a
Liability of Parent or any of its Subsidiaries absent the consummation of the
Transaction.
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Section
4.13 Compliance with Laws. The
Parent Business has been since July 1, 2003 and is being conducted in
compliance with all applicable Laws and Parent Governmental Authorizations,
including the Communications Act, the Cable Communications Policy Act of 1984,
the Cable Television Consumer Protection and Competition Act of 1992, the
Telecommunications Act of 1996, the Copyright Act of 1976 and all rules and
regulations of the FCC and the United States Copyright Office, except for
failures to comply that would not, individually or in the aggregate, reasonably
be expected to have a Parent Material Adverse Effect. Neither Parent nor any of
its Affiliates has received any notice alleging any material violation by
Parent or any of its Subsidiaries under any applicable Law, except for
violations that have been cured or that would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect. Parent
has all Parent Governmental Authorizations necessary for the conduct of the
Parent Business as currently conducted other than those the absence of which
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect. Nothing in this representation is intended to
address any compliance matter that is specifically addressed by Sections 4.12
(Employee Benefits), 4.14 (Environmental Matters), 4.16 (Labor) and 4.19
(Parent Franchises).
Section
4.14 Environmental Matters.
(a) Since
July 1, 2003, the Parent Business and the Parent Real Property have been
in material compliance with all applicable Environmental Laws and there are no
material Liabilities under any Environmental Law with respect to the Parent
Business.
(b) Since
July 1, 2003, none of Parent or any of its Subsidiaries (nor, to Buyer’s
Knowledge, any predecessor in interest) has received from any Person any
notice, demand, claim, letter or request for information, relating to any
material violation or alleged material violation of, or any material Liability
under, any Environmental Law in connection with or affecting the Parent
Business or the Parent Real Property.
(c) There
are no writs, injunctions, decrees, orders or judgments outstanding, or any
actions, suits, proceedings or investigations pending or, to Buyer’s Knowledge,
threatened, relating to material compliance with or material Liability under
any Environmental Law affecting the Parent Business or the Parent Real
Property.
(d) To
Buyer’s Knowledge, there are no underground storage tanks, asbestos containing
materials, lead based products or polychlorinated biphenyls on any of the
Parent Real Property other than as in compliance in all material respects with
all Environmental Laws.
Section
4.15 Intellectual Property.
Except as would not, individually or in the aggregate, reasonably be expected
to have a Parent Material Adverse Effect, as of the Closing Date, Parent or its
Subsidiaries will own or have a valid license or other right to use the
Intellectual Property necessary to conduct the Parent Business substantially as
currently conducted. Parent has not received any notice that (a) use of
such Intellectual Property in the Parent Business substantially as currently
used by Parent and its
83
Subsidiaries infringes or otherwise
violates any Person’s Intellectual Property rights or (b) any Person is
infringing or otherwise violating any Intellectual Property rights of Parent or
its Subsidiaries in such Intellectual Property, that, in either such case,
would, individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect.
Section
4.16 Labor.
(a) None
of Parent or any of its Subsidiaries is a party to or bound by any material
labor agreement, union contract or collective bargaining agreement respecting
the employees of Parent and its Subsidiaries, nor are there any employees of
Parent or its Subsidiaries represented by a collectively bargained unit or
labor organization who are not covered by a Collective Bargaining Agreement.
(b) Parent
and its Subsidiaries are in compliance in all material respects with all labor
Laws applicable to the Parent Business and the employees of Parent, and are not
engaged in any unfair labor practices, as defined in the National Labor
Relations Act or other Law applicable to employees of Parent and its
Subsidiaries. There are no outstanding unfair labor practice charges pending
before the National Labor Relations Board with respect to any employees of
Parent.
(c) There
is no pending, or to the Knowledge of Buyer threatened, strike, walkout or
other work stoppage or any union organizing effort by any of the employees
of Parent and its Subsidiaries.
(a) Except
for such Contracts or arrangements as are entered into between the date hereof
and the Closing and that are not prohibited by this Agreement, neither Parent
nor any of its Subsidiaries is bound by or subject to (i) except for
programming agreements or Contracts with Affiliates, any Contract that is
material (as such term is defined in Item 601(b)(10) of Regulation S-K
promulgated under the Securities Act) to the Parent Business, (ii) any
programming agreement involving consideration in excess of $25,000,000 in any
twelve month period, (iii) any Contract involving consideration in excess
of $1,000,000 in any twelve month period with any Affiliate of Parent (other
than any Subsidiary of Parent) or having the intended effect of benefiting any
Affiliate of Parent (other than any Subsidiary of Parent) at the expense of
Parent or any Subsidiary of Parent in a manner that would deprive Parent or
such Parent Subsidiary of the benefit it would otherwise have obtained if the
transaction were to have been effected on terms that were on an arm’s length
basis or (iv) any material Contract with Friendco or any of its Affiliates
(A) related to or entered into in connection with the Transaction or (B) in
connection with the sale or exchange of any Transferred Assets or any
Transferred Assets (as defined in the Friendco Purchase Agreement).
(b) All
Parent Material Contracts are in full force and effect and are enforceable
against each party thereto in accordance with the express terms thereof. There
does not exist under any Contract to which Parent or any of its Affiliates is a
party
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or by which its Assets are bound any
violation, breach or event of default, or alleged violation, breach or event of
default, or event or condition that, after notice or lapse of time or both,
would constitute a violation, breach or event of default thereunder on the part
of Parent or any of its Affiliates or, to the Knowledge of Buyer, any other
party thereto, except for such violations, breaches, events or conditions that
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect. There are no disputes pending or threatened
under any Contract to which Parent or any of its Subsidiaries is a party or by
which its Assets are bound other than those disputes that would not,
individually or in the aggregate, reasonably be expected to have a Parent
Material Adverse Effect. All of the Parent Material Contracts set forth on Schedule
4.17(a)(iii)of the Buyer Disclosure
Schedule were entered into on an arm’s length basis and in the Ordinary Course
of Business.
Section
4.18 Parent Cable Systems and
Subscriber Information.
(a) None
of Parent or any of its Subsidiaries, directly or indirectly, owns any Systems
other than the Parent Cable Systems listed on Schedule 4.18(a) of
the Buyer Disclosure Schedule.
(b) None
of Parent or any of its Subsidiaries, directly or indirectly, manages or
operates any Systems which it does not, directly or indirectly, wholly own.
(c) None
of Parent or any of its Subsidiaries, directly or indirectly, owns any Systems
that it does not, directly or indirectly, manage and operate.
(d) Schedule
4.18(d) of the Buyer Disclosure Schedule sets forth the aggregate
number of Parent Basic Subscribers, Parent Digital Subscribers and Parent HSD
Subscribers as of December 31, 2004. Each such aggregate number has been
determined in accordance with the Parent Subscriber Accounting Policy.
(e) Schedule
4.18(e) of the Buyer Disclosure Schedule sets forth Parent’s policy
with respect to calculating Parent Subscribers (the “Parent Subscriber
Accounting Policy”).
(f) Schedule
4.18(f) of the Buyer Disclosure Schedule sets forth the average total revenue
per Parent Basic Subscriber as of December 31, 2004.
(g) Schedule
4.18(g) of the Buyer Disclosure Schedule sets forth the Parent Basic
Subscriber monthly churn rate for the Parent Business as of December 31,2004. Each such aggregate number has been determined in accordance with the
Parent Subscriber Accounting Policy.
Section
4.19 Parent Franchises.
(a) Schedule
4.19(a) of the Buyer Disclosure Schedule sets forth a true and
complete list of each Parent Franchise operated by Parent or any of its Subsidiaries
as of the date hereof, detailed by Parent Cable System. The Parent Cable
Systems are in compliance with the applicable Parent Franchises except for such
failures to comply that
85
would not, individually or in the
aggregate, reasonably be expected to have a Parent Material Adverse Effect. As
of the date hereof, there are no material ongoing or, to the Knowledge of
Buyer, threatened audits or similar proceedings undertaken by Government
Entities with respect to the Parent Franchises.
(b) Each
of the Parent Franchises is in full force and effect in all material respects,
and as of the date hereof a valid request for renewal has been duly and timely
filed under Section 626 of the Communications Act with the proper
Government Entity with respect to each of the Franchises that has expired or
will expire within 30 months after the date of this Agreement. None of Parent
or any of its Subsidiaries has received notice as of the date hereof from any
Person that any Parent Franchise will not be renewed or that the applicable
Government Entity has challenged or raised any objection to or otherwise
questioned a Parent’s request for any such renewal under Section 626 of
the Communications Act, and Parent and its Subsidiaries have duly and timely
complied in all material respects with any and all inquiries and demands by any
and all Government Entities made with respect to Parent’s or such Subsidiaries’
requests for any such renewal.
(c) With
respect to the Parent Franchises, none of Parent or any of its Subsidiaries has
made any commitments to any Government Entity, except any commitments that
would not, individually or in the aggregate, reasonably be expected to have a
Parent Material Adverse Effect.
Section
4.20 Network Architecture. Schedule
4.20 of the Buyer Disclosure Schedule sets forth in all material respects a
true and complete statement as of December 31, 2004, of (a) the
approximate number of plant miles (aerial and underground) for each division of
the Parent Business, (b) the approximate bandwidth capability expressed in
MHz of each such division of the Parent Business, (c) the stations and
signals carried by each such division and the channel position of each such
signal and station of the Parent Business, (d) the approximate number of
bulk accounts served by the Parent Cable Systems, (e) the approximate
number of homes passed in the Parent Business as reflected in the system
records of Parent or any of its Affiliates, (f) a description of basic and
optional or tier services available from each such division of the Parent
Business and the rates charged for each, (g) the channel capacity of each
such division of the Parent Business, and (h) the municipalities served by
each such division of the Parent Business and the community unit numbers of
such municipalities.
Section
4.21 Absence of Changes. Since
December 31, 2004, the Parent Business has not experienced any event,
occurrence, condition or circumstance, and, to Buyer’s Knowledge, no event,
occurrence, condition or circumstance is threatened that, individually or in
the aggregate, has had or is reasonably expected to have, a Parent Material
Adverse Effect.
Section
4.22 Assets. The Assets
held by Parent and its Subsidiaries constitute all the Assets and rights of
Parent and its Subsidiaries owned, used or held for use primarily in connection
with the conduct of the Parent Business in all material respects as currently
conducted.
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Section
4.23 Absence of Liabilities.
The Parent Business has no Liabilities and there is no existing condition,
situation or set of circumstances that, individually or in the aggregate, would
reasonably be expected to result in a Liability of the Parent Business, other
than (a) Liabilities specifically reflected, reserved against or otherwise
disclosed in the Parent Audited Financial Statements and (b) Liabilities
that were incurred since the date of the Parent Audited Financial Statements
and that would not, individually or in the aggregate, reasonably be expected to
have a Parent Material Adverse Effect.
Section
4.24 Friendco Agreements.
(a) Buyer
has delivered to Seller true and complete copies of the Parent Redemption
Agreement, TWE Redemption Agreement and Exchange Agreement, each as in effect
as of the date hereof.
(b) Each
of the Parent Redemption Agreement, the TWE Redemption Agreement and the
Exchange Agreement constitutes a valid and legally binding obligation of each
of Buyer, Parent and any of their Affiliates that are parties thereto,
enforceable against each of them in accordance with its terms.
(c) As
of the date hereof, except for the Exchange Agreement, the TWE Redemption
Agreement and the Parent Redemption Agreement, none of Buyer or its Affiliates
have entered into any material agreements or understandings with Friendco or
any of its Affiliates Relating to any of the Transferred Assets or otherwise in
connection with the Transaction or the Friendco Transaction.
Section
4.25 No On-Sale Agreements.
Except with respect to the Transaction, the Exchange or the Redemptions, as of
the date hereof, Buyer and its Affiliates have not entered into any binding
agreement with any third party (other than Seller) with respect to a purchase
and sale transaction, whether by merger, stock sale, asset sale or otherwise,
for any of the Transferred Assets.
Section
4.26 Finders’ Fees. Except
for Bear, Stearns & Co. Inc. and Lehman Brothers Inc. (the “Financial
Advisors”), whose fees will be paid by Buyer, there is no investment
banker, broker, finder or other intermediary that has been retained by or is
authorized to act on behalf of Buyer or any Affiliate of Buyer who might be
entitled to any fee or commission in connection with the Transaction.
Section 4.27 Opinion of Financial Advisors.
The board of directors of Parent and the Managing Member of Buyer have received
the opinions of the Financial Advisors, each dated April 19, 2005, to the
effect that, as of such date and subject to the assumptions, qualifications and
other limitations set forth therein, (i) to the Parent, the consideration
to be paid in the Parent Redemption, (ii) to TWE, the consideration to be
paid in the TWE Redemption, and (iii) to Parent and Buyer, the
consideration to be received in the Exchange are fair from a financial point of
view. The opinions were delivered solely for the use and benefit of the board
of directors of Parent, the managing member of Buyer and the board of
representatives of TWE and may not be relied upon by Seller or any third party
or used for any other purpose without the prior approval of the
87
Financial Advisors, which approval
shall not be implied by inclusion of this representation in the Agreement.
Section
4.28 No Other Representations
or Warranties. Except for the representations and warranties contained in
this Article IV, neither Buyer nor any other Person makes any other
express or implied representation or warranty on behalf of Buyer.
ARTICLE V
COVENANTS
Section
5.1 Access and Information.
(a) From
the date hereof until the Closing (and, with respect to any Disputed MCE
System, until the expiration of the MCE Period), subject to applicable Laws,
Seller shall (i) afford Buyer and its authorized representatives
reasonable access, during regular business hours, upon reasonable advance
notice, to the Employees, each Specified Business, the Friendco Business,
Assets that will be Transferred Assets as of the Closing and the Friendco
Transferred Assets, (ii) furnish, or cause to be furnished, to Buyer any
financial and operating data and other information with respect to each
Specified Business or in furtherance of the Transaction or the Exchange as Buyer
from time to time reasonably requests, including, subject to Section 5.11,
by providing to Buyer or its accountants sufficient information (A) for
the preparation of the pro-forma balance sheet and statements of income,
stockholders’ equity and cash flows for the Parent Business (in each case, if
requested, assuming the Friendco Transaction and/or the Exchange have occurred)
and (B) regarding compliance by Seller and its Affiliates with the
requirements of the SOA with respect to the Business, and (iii) instruct
the Employees, and its counsel and financial advisors to cooperate with Buyer
in its investigation of each Specified Business and the Friendco Business,
including instructing its accountants to give Buyer access to their work
papers; provided, however, that in no event shall Buyer have
access to any information that, based on advice of Seller’s counsel, would (A) reasonably
be expected to create Liability under applicable Laws, including U.S. Antitrust
Laws, or waive any material legal privilege (provided, that in such
latter event Buyer and Seller shall use commercially reasonable efforts to
cooperate to permit disclosure of such information in a manner consistent with
the preservation of such legal privilege), (B) result in the disclosure of
any trade secrets of third parties or (C) violate any obligation of Seller
with respect to confidentiality so long as, with respect to confidentiality, to
the extent specifically requested by Buyer, Seller has made commercially
reasonable efforts to obtain a waiver regarding the possible disclosure from
the third party to whom it owes an obligation of confidentiality; it being understood that Buyer shall not
conduct any environmental sampling without the prior written consent of Seller,
which consent may be withheld in Seller’s reasonable discretion. All requests
made pursuant to this Section 5.1(a) shall be directed to an
executive officer of Seller or such Person or Persons as may be designated by
Seller. All information received pursuant to this Section 5.1(a) shall,
prior to the Closing, be governed by the terms of the Seller Confidentiality
Agreement. No information or knowledge obtained in any
88
investigation by Buyer pursuant to
this Section 5.1(a) shall affect or be deemed to modify any
representation or warranty made by Seller hereunder.
(b) From
the date hereof until the Closing, subject to applicable Laws, Buyer shall, and
shall cause Parent and its Controlled Affiliates to, (i) afford Seller and
its authorized representatives reasonable access, during regular business hours
and upon reasonable advance notice, to the Parent Business, (ii) furnish,
or cause to be furnished, to Seller any financial and operating data and other
information with respect to the Parent Business, the Exchange, the Redemptions
or in furtherance of the Transaction as Seller from time to time reasonably
requests and (iii) instruct its employees, and its counsel and financial
advisors to cooperate with Seller in its investigation of the Parent Business
including instructing its accountants to give Seller access to their work
papers; provided, however, that in no event shall Seller have
access to any information that, based on advice of Buyer’s counsel, would (A) reasonably
be expected to create Liability under applicable Laws, including U.S. Antitrust
Laws, or waive any material legal privilege (provided, that in such
latter event Buyer and Seller shall use commercially reasonable efforts to
cooperate to permit disclosure of such information in a manner consistent with
the preservation of such legal privilege), (B) result in the disclosure of
any trade secrets of third parties or (C) violate any obligation of Parent
with respect to confidentiality so long as, with respect to confidentiality, to
the extent specifically requested by Seller, Buyer or Parent has made
commercially reasonable efforts to obtain a waiver regarding the possible
disclosure from the third party to whom it owes an obligation of
confidentiality; itbeingunderstoodthat Seller shall not conduct any environmental sampling
without the prior written consent of Buyer, which consent may be withheld in
Buyer’s absolute discretion. All requests made pursuant to this Section 5.1(b) shall
be directed to an executive officer of Buyer or such Person or Persons as may
be designated by Buyer. All information received pursuant to this Section 5.1(b) shall
be governed by the terms of the TWX Confidentiality Agreement. No information
or knowledge obtained in any investigation by Seller pursuant to this Section 5.1(b) shall
affect or be deemed to modify any representation or warranty made by Buyer
hereunder.
(c) Following
the Closing and until all applicable statutes of limitations (including periods
of waiver) have expired, Buyer agrees to retain all Books and Records in
existence on the Closing Date, and to the extent permitted by Law and
confidentiality obligations existing as of the Closing Date, grant to Seller
and its representatives during regular business hours and subject to reasonable
rules and regulations, the right, at the expense of Seller, (i) to
inspect and copy the Books and Records and (ii) to have personnel of Buyer
made reasonably available to them or have Buyer otherwise cooperate to the
extent reasonably necessary, including in connection with (A) preparing
and filing Tax Returns and/or any Tax inquiry, audit, investigation or dispute,
(B) any litigation or investigation or (C) the claims resolution,
plan administration and case closing processes in the Reorganization Case; provided,
however, that in no event shall Seller have access to any information
that, based on advice of Buyer’s counsel, would (1) reasonably be expected
to create Liability under applicable Laws, including U.S. Antitrust Laws, or
waive any material legal privilege (provided, that in such latter event
Buyer and Seller shall use commercially reasonable efforts to cooperate to
permit disclosure of such information in a manner consistent with the
89
preservation of such legal
privilege), (2) result in the disclosure of any trade secrets of third
parties or (3) violate any obligation of Buyer with respect to
confidentiality (provided, that with respect to clause (3), to the
extent specifically requested by Seller, Buyer or Parent has in good faith
sought to obtain a waiver regarding the possible disclosure from the third
party to whom it owes an obligation of confidentiality). In no event shall
Seller or its representatives have access to the Tax Returns of Buyer. No Books
and Records shall be destroyed by Buyer without first advising Seller in
writing and giving Seller a reasonable opportunity to obtain possession thereof
at the transferee’s expense. All information received pursuant to this Section 5.1(c) shall
be governed by the terms of Section 5.1(e).
(d) Following
the Closing and until all applicable statutes of limitations (including periods
of waiver) have expired (and with respect to Tax Returns, until the later of (I) the
five year anniversary of the Closing and (II) the expiration of the
statute of limitations with respect to such Tax Return), Seller agrees to
retain all Books and Records in existence on the Closing Date and not
transferred to Buyer (the “Retained Books and Records”), and to the
extent permitted by Law and confidentiality obligations existing as of the
Closing Date, (i) convey to Buyer copies of any Tax Returns of Seller or
its Subsidiaries relating to periods (or portions thereof) ending on or after December 31,1999 and on or before the Closing (including any amended Tax Returns relating
to such periods that are filed by Seller after the Closing) (ii) grant to
Buyer and its representatives the right, at the expense of Buyer and subject to
reasonable rules and regulations, to inspect and make copies of any other
Tax Returns of Seller or any of its Subsidiaries relating to periods (or
portions thereof) ending on or before the Closing and any workpapers and tax
software related to the Tax Returns described in clauses (i) or (ii) hereof,
(iii) grant to Buyer and its representatives during regular business hours
and subject to reasonable rules and regulations the right to inspect and
make copies of Retained Books and Records not described in clauses (i) or (ii) hereof,
and (iv) grant to Buyer and its representatives during regular business
hours and subject to reasonable rules and regulations, the right, at the
expense of Buyer, to have personnel of Seller made reasonably available to them
or have Seller otherwise cooperate to the extent reasonably necessary, in each
case, including in connection with (A) preparing and filing Tax Returns
and/or any Tax inquiry, audit, investigation or dispute or (B) any
litigation or investigation; provided, however, that in no event
may Buyer or its representatives inspect, examine, review, distribute or
disclose in any form the specific contents of any of Seller’s or its
Subsidiaries’ income or franchise Tax Returns (or copies thereof) provided by
Seller either at Closing or at a later date or of workpapers or tax software
related to any such income or franchise Tax Returns (or copies thereof) until
the specific contents of such income or franchise Tax Returns become relevant
to Buyer in connection with (x) preparing and filing Tax Returns, or (y) any
Tax inquiry, audit, investigation or dispute with a Government Entity, in each
case, at which time Buyer may use such Tax Returns and related workpapers and
tax software (or copies thereof) for purposes reasonably related to the
activities described in (x) or (y) above; provided, further,
that in no event shall Buyer or its representatives have access to any information
that, based on advice of Seller’s counsel, would (1) reasonably be
expected to create Liability under applicable Laws, including U.S. Antitrust
Laws, or waive any material legal privilege (provided, that in such
latter event Buyer and Seller shall use commercially reasonable efforts to
90
cooperate to permit disclosure of
such information in a manner consistent with the preservation of such legal
privilege), (2) result in the disclosure of any trade secrets of third
parties or (3) violate any obligation of Seller with respect to
confidentiality (provided, that with respect to clause (3), to the
extent specifically requested by Buyer or Parent, Seller has in good faith
sought to obtain a waiver regarding the possible disclosure from the third
party to whom it owes an obligation of confidentiality). No Retained Books and
Records shall be destroyed by Seller without first advising Buyer in writing
and giving Buyer a reasonable opportunity to obtain possession thereof at the
transferee’s expense.
(e) From
and after the Closing, Seller and its Affiliates shall keep confidential any
non-public information in their possession Related to the Business or related
to the Transferred Assets (any such information that is required to keep
confidential pursuant to this sentence shall be referred to as “Confidential
Information”). Neither Seller nor its Affiliates shall disclose, or permit
any of their respective directors, officers, employees or representatives to
disclose, any Confidential Information to any other Person or use such
information to the detriment of Buyer or its Affiliates; provided, that
such party may use and disclose any such information (i) once it has been
publicly disclosed (other than by such party in breach of its obligations under
this Section 5.1(e)) or (ii) to the extent that such party may, in
the reasonable judgment of its counsel, be compelled by Law to disclose any of
such information, such party may disclose such information if it has used
commercially reasonable efforts, and has afforded Buyer the opportunity, to
obtain an appropriate protective order, or other satisfactory assurance of
confidential treatment, for the information compelled to be disclosed. Except
in respect of Excluded Assets and Excluded Liabilities, the Seller Confidentiality
Agreement shall terminate upon the Closing with no further Liability thereunder
on the part of any party thereto.
Section
5.2 Conduct of Business. During
the period from the date hereof to the Closing (and, following the Closing,
with respect to any Disputed MCE System that is not a Buyer Managed MCE System,
until the expiration of the MCE Period), except as otherwise expressly
contemplated by this Agreement, as set forth on Schedule 5.2 of the
Seller Disclosure Schedule or as Buyer otherwise agrees in writing in advance,
Seller shall (x) conduct, and shall cause its Affiliates to conduct, each
Specified Business in the Ordinary Course and in accordance with applicable
material Laws (including, subject to Section 5.2(s), completing line
extensions, placing conduit or cable in new developments, fulfilling
installation requests and work on existing and planned construction projects), (y) use
its commercially reasonable efforts to preserve intact each Specified Business
and its relationship with its customers, suppliers, creditors and employees (itbeingunderstoodthat no increases in any compensation or
any incentive compensation or similar compensation shall be required in respect
thereof except to the extent such increase is required in the Ordinary Course
of Business) and (z) use its commercially reasonable efforts to perform
and honor all of its post-petition obligations under any Contract as they
become due and otherwise discharge and satisfy all Liabilities thereunder as
and when they become due. During the period from the date hereof to the Closing
(and, following the Closing, with respect to any Disputed MCE System that is
not a Buyer Managed MCE System, until the expiration of the MCE Period), except
as
91
otherwise contemplated by this
Agreement or any Ancillary Agreement or as Buyer shall otherwise consent (provided,
that Buyer shall respond as soon as reasonably practicable but in no event
later than five Business Days following receipt of Seller’s written request for
such response) or as set forth in the applicable sections of Schedule 5.2
of the Seller Disclosure Schedule, Seller shall, and shall cause each of its
Affiliates to, with respect to each Specified Business:
(a) not
incur, create or assume any Encumbrance on any of its Assets other than a
Permitted Encumbrance;
(b) not
sell, lease, license, transfer or dispose of any Assets other than in the
Ordinary Course of Business; provided, however, that in any
event, such Assets shall not (i) constitute a Cable System or material
portion thereof or (ii) include any Equity Securities of any Asset
Transferring Subsidiary (other than in connection with a transfer to Seller or
any of its wholly owned Subsidiaries that is an Asset Transferring Subsidiary
and a Debtor);
(c) not
(i) assume pursuant to an order of the Bankruptcy Court any OCB Contract, (ii) enter
into any Contract in the Contract Categories Expected to be Assumed that
contains any Special Terms (except with respect to clause (i) of the
definition thereof), (iii) modify, renew (except in respect of
Governmental Authorizations pursuant to Section 5.2(r)), suspend, abrogate
or amend in any material respect (including the addition of any Special Term)
any (A) Governmental Authorization that is material, (B) Contract
Related to any Specified Business that is material or that contains Special
Terms (except with respect to clause (i) of the definition thereof), (C) retransmission
consent agreement (in a manner which would result in any compensation being
payable thereunder, other than compensation that is customary, consistent with
Seller’s past practice and, in any event, non-monetary), (D) Third Party
Confidentiality Agreement or (E) Contract listed on Schedule 1.1(k)(ii) of
the Seller Disclosure Schedule (other than, with respect to this clause (E),
with the consent of Buyer, such consent not to be unreasonably withheld (other
than in the case of extending the term or amending with like effect any lease
on Schedule 1.1(k)(ii), with respect to which such consent shall be at
Buyer’s discretion)), (iv) reject or terminate any Contract Related to any
Specified Business or (v) with respect to any Contract Related to any
Specified Business, take any action outside the Ordinary Course of Business or
fail to take any action in the Ordinary Course of Business;
(d) not
declare, set aside or pay any dividend or distribution on any Investment Entity
Securities;
(e) not
amend any of the Investment Documents;
(f) not
issue, sell, pledge, transfer (other than to Seller or any wholly owned
Subsidiary of Seller; provided, that any such wholly owned Subsidiary
shall be an Asset Transferring Subsidiary and a Debtor), dispose of or encumber
any Investment Entity Securities;
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(g) not
split, combine, subdivide, reclassify or redeem, or purchase or otherwise
acquire, any Investment Entity Securities;
(h) provide
prompt written notice to Buyer of Seller or any of its Affiliates entering into
any OCB Contract that is material to any Specified Business;
(i) not
dispose of, license or permit to abandon, invalidate or lapse any rights in, to
or for the use of any material Transferred Intellectual Property;
(j) not
(i) increase the compensation of any Employee or current director of
Seller or any of its Subsidiaries, except for increases in salary or wage rates
in the Ordinary Course of Business or as required by the terms of agreements or
plans currently in effect and listed on Schedule 3.10(a) of the
Seller Disclosure Schedule or with respect to any Employee listed on Schedule
5.8(a)(ii) of the Seller Disclosure Schedule, (ii) establish,
amend, pay, agree to grant or increase any special bonus, sale bonus, stay
bonus, retention bonus, deal bonus, emergence award or change in control bonus
or any other benefit under Seller’s Performance Retention Plan or other plan,
agreement, award or arrangement, other than any such award, entitlement or
arrangement that will be fully paid and satisfied on or prior to the Closing
Date (other than any sale bonus under the Sale Bonus Program as provided below
or as otherwise provided in the parenthetical at the end of this clause (ii) with
respect to awards other than awards under the Sale Bonus Program or Seller’s
Performance Retention Plan) and the Liabilities of which will be Excluded
Liabilities or, with respect to any sale bonus under the Sale Bonus Program, to
the extent (but only to the extent) any such sale bonus amount is reflected in
the Closing Net Liabilities Amount used in calculating the Final Adjustment
Amount (provided, however, that an award, entitlement or
arrangement under this clause (ii) granted to an Employee listed on Schedule
5.8(a)(ii) of the Seller Disclosure Schedule may be paid by Seller in
accordance with its terms; provided, further, that (x) all
payments that pursuant to the term of such award, entitlement or arrangement
are to be paid on or prior to the Closing shall be paid by Seller on or prior
to the Closing and (y) if Buyer offers employment to any such Employee
pursuant to Section 5.8(a) and such Employee becomes a Transferred
Employee, Seller shall fully pay and satisfy any such award, entitlement or
arrangement as to such individual on or prior to the Closing Date), (iii) except
as provided in clause (ii) or as required by Law, establish, adopt, enter
into, amend or terminate any Benefit Plan (other than any broad based health or
welfare plan) or any plan, agreement, program, policy, trust, fund or other
arrangement that would be a Benefit Plan if it were in existence as of the date
of this Agreement, (iv) hire any employee for any Specified Business with
annual compensation in excess of the amount of compensation for a Person in a
similar position consistent with past practice, other than to fill vacancies
arising in the Ordinary Course of Business, (v) enter into any new
employment or severance agreements or amend any such existing agreement with
any Employee (provided, that the foregoing shall not restrict Seller
from taking any such action with respect to an Employee listed on Schedule
5.8(a)(ii) of the Seller Disclosure Schedule so long as Parent or
Buyer, as applicable, will not be bound by any such action (including as it may
relate to the terms of employment of any such Employee pursuant to Section 5.8
hereof) if the Employee becomes employed by Parent or Buyer in connection with
the Transaction), (vi) establish, adopt, enter into, amend or terminate
any plan,
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policy or arrangement providing for
severance or termination pay or benefits (provided, that the foregoing
shall not restrict Seller from taking any such action so long as Parent or
Buyer, as applicable, will not be bound by any such action (including as it may
relate to the terms of any offer to any Employee pursuant to Section 5.8(a) hereof)
if any Employee covered thereby becomes employed by Parent or Buyer in
connection with the Transaction), or (vii) engage in any hiring practices
that are not in the Ordinary Course of Business;
(k) not
make any material loans, advances or capital contributions to, or investments
in, any other Person (other than, to the extent not in violation of applicable
Law, customary loans or advances to employees in amounts not material to the
maker of such loan or advance and other than to any Subsidiary of Seller in the
Ordinary Course);
(l) not
settle any claims, actions, arbitrations, disputes or other proceedings that would
result in Seller or any of its Affiliates being enjoined in any respect
material to the Transaction or any Specified Business or that would affect any
Specified Business after the Closing (other than in a de minimis manner);
(m) not
make any material change in any method of accounting, keeping of books of
account or accounting practices or in any material method of Tax accounting of
Seller or any of its Subsidiaries unless required (i) by a concurrent
change in GAAP or applicable Law or (ii) upon prior written notice to
Buyer, in order to comply with any GAAP requirements or FASB interpretations or
in order to comply with the view of Seller’s independent auditors;
(n) except
for capital expenditures, which shall be governed by Section 5.2(s), not
Acquire any Assets or any business (including Equity Securities) in one or a
series of related transactions, other than (i) pursuant to agreements in
effect as of the date hereof that were disclosed to Buyer prior to the date
hereof, (ii) Assets used by Seller in the Ordinary Course of Business
(which Assets do not constitute a System, a business unit, division or all or
substantially all of the Assets of the transferor), (iii) any interest in
or Assets of any entity which nominally owns any interest in any MCE System and
(iv) any Equity Securities in any Tele-Media Entity;
(o) use
commercially reasonable efforts to continue normal marketing, advertising and
promotional expenditures with respect to each Specified Business;
(p) use
commercially reasonable efforts to (i) maintain or cause to be maintained (A) the
Transferred Assets in adequate condition and repair for their current use in
the Ordinary Course, ordinary wear and tear excepted, and (B) in full
force and effect the Insurance Policies (with the same amounts and scopes of
coverage) with respect to the Transferred Assets and the operation of each
Specified Business and (ii) enforce in good faith the rights under the
Insurance Policies;
(q) use
commercially reasonable efforts to perform all post-petition obligations under
all of the Franchises, other material Governmental Authorizations and
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Assigned Contracts without material
breach or default and pay all post-Petition Date Liabilities arising thereunder
in the Ordinary Course of Business;
(r) use
commercially reasonable efforts to renew any material Governmental
Authorizations which expire prior to the Closing Date;
(s) use
commercially reasonable efforts to make capital expenditures and operate in
accordance with the capital and operating budget set forth on Schedule 5.2(s) of
the Seller Disclosure Schedule (the “Budget”) and, in the case of capital expenditures, on a line item basis;
(t) maintain
inventory sufficient for the operation of each Specified Business in the
Ordinary Course of Business;
(u) not
engage in any marketing, Subscriber installation or collection practices other
than in the Ordinary Course of Business;
(v) not
convert any billing systems used by any Specified Business;
(w) use
commercially reasonable efforts to implement all rate changes provided for in
the Budget and except for rate increases provided for in the Budget not change
the rate charged for any level of cable television, telephony or high speed
data services;
(x) except
as required by applicable Law (including applicable must-carry laws), not add
or voluntarily delete any channels from any Cable System, or change the channel
lineup in any Cable System or commit to do any of the foregoing in the future;
except for (i) pending channel additions and deletions or changes in
channel lineups to the extent customer notifications have, as of the date
hereof, been mailed or otherwise made in a manner permitted by each applicable
Franchise; (ii) channel additions or changes in lineups as required in
order to fulfill distribution commitments or broadcast station retransmission
consent obligations (in either case, existing as of the date hereof) pursuant
to existing Contracts, and solely to the extent the commitment and/or
obligation must, pursuant to such Contract, be satisfied prior to the Closing
Date; (iii) channel additions, migrations or changes in channel lineups in
connection with headend consolidations (provided, however, that
no new channels may be added to a system unless immediately prior to the
headend consolidation, the channel was so carried on one headend or the other, provided,
further, that if such channel is carried on both headends and the
channel is not carried on the same tier or level of service on the two
headends, then after such consolidation, the channel shall be carried on the
tier or level of service of the dominant headend); (iv) the addition of
one or more of the channels listed on Schedule 5.2(x)(iv) of the
Seller Disclosure Schedule in connection with a system upgrade; (v) the
roll-out of any video on demand service listed on Schedule 5.2(x)(v) of
the Seller Disclosure Schedule or any free video on demand services for which
Seller is not required to pay any fee or consideration; (vi) the addition
of one or more of the high definition services listed on Schedule 5.2(x)(vi) of
the Seller Disclosure Schedule, which additions shall not, except as otherwise
noted on Schedule 5.2(x)(vi) of the Seller
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Disclosure Schedule, require Seller
to pay any fee or consideration for such services; or (vii) the addition
of the high definition signal of a NBC, ABC, CBS, or Fox station that is
licensed to the same designated market area as the system on which such signal
is being launched, so long as such signal is a simulcast of such station’s
analog signal, to the extent Seller is not required to pay any fee or
consideration for such high definition signal;
(y) not
file a cost-of-service rate justification;
(z) use
commercially reasonable efforts to launch telephony and video on demand
services in the Cable Systems identified on Schedule 5.2(z) of the
Seller Disclosure Schedule substantially in accordance with the timetable set
forth on such Schedule 5.2(z), and provide Buyer with written notice
promptly following any such launch;
(aa) continue to conduct the Business in accordance with, and not
make any change to, the Seller Subscriber Accounting Policy, including as to
disconnects;
(bb) not transfer the employment duties of any Applicable
Employee from any Cable System to a different Cable System or business unit
other than in the Ordinary Course of Business;
(cc) use commercially reasonable efforts to maintain or cause to
be maintained its Books and Records and accounts with respect to each Specified
Business in the usual, regular and ordinary manner on a basis consistent with
past practice;
(dd) give or cause to be given to Buyer, and its counsel,
accountants and other representatives, (i) as
soon as reasonably possible, but in any event prior to the date of submission
to the appropriate Government Entity, copies of all FCC rate Forms 1205, 1210,
1235, and 1240, and simultaneous with, or as soon as reasonably possible after
submission to the appropriate Government Entity, any other FCC Forms required
under the regulations of the FCC promulgated under the Cable Act that are
prepared with respect to any of the Cable Systems and (ii) as soon as
reasonably possible after filing copies of all copyright returns filed in
connection with any Cable System; provided, that, in the case of clause
(i), before any such FCC Forms 1205, 1210, 1235, or 1240 are filed, Seller and
Buyer shall consult in good faith concerning the contents of such forms; and
(ee) not announce an intention, authorize or enter into any
agreement or commitment with respect to any of the foregoing.
Section
5.3 Conduct of Parent
Business. During the period from the date hereof to the Closing, except as
otherwise expressly contemplated by this Agreement, the Parent Redemption
Agreement, the TWE Redemption Agreement, the Exchange Agreement, as set forth
on Schedule 5.3 of the Buyer Disclosure Schedule or as Seller otherwise
agrees in writing in advance, Buyer shall, and shall cause Parent and its
Subsidiaries to, use commercially reasonable efforts to preserve intact the
Parent Business and its relationship with its material customers, suppliers,
creditors and key employees (itbeingunderstoodthat
no increases in any compensation or any incentive
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compensation or similar compensation
shall be required in respect thereof except to the extent such increase is
required in the Ordinary Course of Business). Without limiting the generality
of the foregoing, during the period from the date hereof to the Closing, except
as otherwise contemplated by this Agreement or any Ancillary Agreement or as
Seller shall otherwise consent (which consent shall not be unreasonably
withheld and, provided, that Seller shall respond as soon as reasonably
practicable but in no event later than five Business Days following receipt of
Buyer’s written request for such response) or as set forth in the applicable
sections of Schedule 5.3 of the Buyer Disclosure Schedule, Buyer shall
not, and shall cause Parent and each its Subsidiaries not to:
(a) sell,
lease, license, transfer or dispose of any Assets (itbeingunderstoodthat for purposes of this Section 5.3(a), Assets do not include
Equity Securities of Parent or cash or cash equivalents) for consideration not
consisting primarily of Systems other than (i) in the Ordinary Course of
Business, (ii) pursuant to the Friendco Transaction or (iii) Assets
which, in the aggregate, the fair market value of the total consideration
therefor would not exceed the amount specified on Schedule 5.3(a)(iii) of
the Buyer Disclosure Schedule;
(b) declare,
set aside or pay any dividend or distribution on any shares of Parent Capital
Stock or other Equity Security in Parent or any of its Subsidiaries other than
dividends or distributions by any Subsidiary of Parent to Parent or another
Subsidiary of Parent;
(c) enter
into any transaction (other than pursuant to any Contract in effect as of the
date hereof) having the intended effect of benefiting any Affiliate of Parent
(other than any Subsidiary of Parent) at the expense of Parent or any
Subsidiary of Parent in a manner that would deprive Parent or any such
Subsidiary of the benefit they would otherwise have obtained if the transaction
were to have been effected on terms that were on an arm’s length basis or any
transaction that does not satisfy the requirements of Article VI of Parent’s
bylaws, as in effect as of the date hereof;
(d) except
pursuant to Section 5.4, amend the certificate of incorporation, bylaws or
other organizational documents of Parent in a manner adverse to Seller or its
stakeholders;
(e) issue
any shares of Parent Capital Stock or other Equity Securities of Parent other
than (i) Equity Securities issued following the date hereof on arm’s-length
terms for consideration determined in good faith by Parent’s board of directors
or any committee thereof to be fair, including, subject to Section 5.3(c),
Equity Securities issued to TWX or any of its Affiliates (other than Parent or
its wholly owned Subsidiaries), and (ii) Equity Securities issued
following the date hereof pursuant to employee option or restricted stock
programs approved by Parent’s board of directors or the compensation committee
thereof; provided, however, that Equity Securities issued
pursuant to clause (ii) of this sentence shall not exceed the Permitted
Parent Incentive Awards; provided, however, that such limitation
shall not apply to any Equity Securities issued as contemplated by clause (ii)(B) of
the definition of “Fully Diluted Basis”;
97
(f) settle
any claims, actions, arbitrations, disputes or other proceedings not involving
a Government Entity that would result in Parent or any of its Affiliates being
enjoined in any respect material to the Transaction; or
(g) authorize
or enter into any agreement or commitment with respect to any of the foregoing;
provided, however,
that, except in respect of Sections 5.3(c) and 5.3(d), the foregoing
limitations shall not restrict transactions solely among or between Parent and
any of its direct or indirect Subsidiaries.
Section
5.4 Amended and Restated
Charter and Amended and Restated By-laws. On or prior to the Closing, Buyer
will cause Parent to (a) file the Amended and Restated Charter with the
Secretary of State of the State of Delaware and (b) adopt the Amended and
Restated By-laws. Buyer will cause Parent (i) for a period of two years
following the Closing, not to enter into any merger pursuant to Section 253
of the Delaware General Corporation Law and (ii) for a period of eighteen
months following the Closing, not to issue any Equity Securities to any Person
(other than, subject to Section 5.3(c) and, following the Closing,
the Amended and Restated By-laws, TWX and its Affiliates (other than Parent or
its wholly owned Subsidiaries)) that have a higher vote per share than the
Parent Class A Common Stock.
Section
5.5 Listing of Purchase Shares.
(a) [. ] Subject to
there being a SEC/DOJ Settlement and Seller having satisfied the covenant in Section 5.19(a),
Buyer shall, and shall cause Parent and its Subsidiaries to, use commercially
reasonable efforts to cause[,] ([a]i)(A) effective as of the Closing, the Purchase
Shares to be either registered under the Securities Act or exempt from any such
registration under section 1145 of the Bankruptcy Code and (B) effective as of the Closing (or as of
such later date that is required by the SEC but in any event no later than two
weeks following the Closing), the Purchase Shares to be
listed for trading on the NYSE [and (b] or, if such listing on the NYSE has not been effected within a
reasonable period following the Closing, the Nasdaq Stock Market and (ii)(A) effective
as of the MCE Closing, the MCE Purchase Shares to be either registered under
the Securities Act or exempt from any such registration and (B) effective
as promptly as practicable following the MCE Closing, the MCE Purchase Shares,
to be listed for trading on the NYSE or, if such listing on the NYSE has not been effected within a
reasonable period following the Closing, the Nasdaq Stock Market.
(b) Seller covenants and agrees that
Seller shall not transfer or distribute, directly or indirectly, Purchase
Shares prior to the earlier of the date on which the Purchase Shares have been
registered under the Exchange Act and two weeks following the Closing.
Section
5.6 Commercially Reasonable
Efforts.
(a) Subject
to the Bankruptcy Code and any orders of the Bankruptcy Court, Seller and Buyer
shall, and Buyer shall cause Parent to, cooperate and use their
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respective commercially reasonable
efforts to fulfill as promptly as practicable the conditions precedent to the
other party’s obligations hereunder and shall use their respective commercially
reasonable efforts to fulfill as promptly as practicable the conditions
precedent to their obligations hereunder to the extent they have the ability to
control the satisfaction of such obligations. Without limiting the generality
of the foregoing, Seller and Buyer shall, and Buyer shall cause Parent to, (i) make
all filings and submissions required by the U.S. Antitrust Laws and any other
Laws, and promptly file any additional information requested as soon as
practicable after receipt of such request therefor and promptly file any other
information that is necessary, proper or advisable to permit consummation of
the Transaction and the Exchange and (ii) use commercially reasonable
efforts to obtain and maintain all Seller Required Approvals and Buyer Required
Approvals in form and substance reasonably satisfactory to Buyer and Seller. In
connection with the foregoing, Seller and Buyer will, and Buyer will cause
Parent to, endeavor to consummate the Transaction without (or with minimal)
costs, conditions, limitations or restrictions associated with the grant of
such Seller Required Approvals and Buyer Required Approvals.
(b) Notwithstanding
anything to the contrary herein, nothing in this Agreement shall require Buyer
or Parent to agree to or to effect any divesture, hold separate or similar
agreement with respect to any business or Assets or agree to enter into, or
amend, or agree to amend, any Contracts or governmental authorizations or take
or refrain from taking any other action or conduct any business in any manner
if doing so would reasonably be expected, individually or in the aggregate, to
have (i) an adverse impact (other than a de
minimis adverse impact)on
TWX or any of its Affiliates (excluding Parent and its Subsidiaries) or any of
their respective businesses or Assets (excluding businesses and Assets of
Parent and its Subsidiaries) or (ii) an adverse impact that is material to
the Parent Business or the Transferred Assets or would materially constrain the
operations of Parent and its Subsidiaries or of the Transferred Assets; it being
understood that the incurrence of legal, accounting, investment banking and
other customary forms of transaction expenses and the commitment of reasonable
management time and effort shall not be considered an adverse impact for the
purpose of this clause (ii).
(c) No
later than 45 days following the date hereof, Buyer and Seller shall, and Buyer
shall cause Parent to, provide each other (or shall cause their respective
Subsidiaries to provide) with all necessary documentation to allow filing of
FCC Forms 394 with respect to the Franchises with respect to which a LFA
Approval is or may be required. Buyer and Seller shall, and Buyer shall cause
Parent to, use commercially reasonable efforts to cooperate with one another
and, no later than 60 days following the date hereof, file with the applicable
Government Entity FCC Forms 394 for each of the Franchises with respect to
which a LFA Approval is or may be required. Buyer and Seller shall, and Buyer
shall cause Parent to, cooperate and use their commercially reasonable efforts
to have Buyer enter into a substitute performance bond arrangement with respect
to those Assets of each Specified Business the transfer of which to Buyer would
require Buyer to enter into such a substitute bond arrangement, on substantially
the same terms as the substitute bond arrangement with respect to such Assets
in effect as of the date hereof. Notwithstanding anything to the contrary
herein, Seller shall not accept,
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agree to or accede to any
modifications or amendments to, or in connection with, or any conditions to the
transfer of, any Franchises that are not approved by Buyer in writing, such
approval not to be unreasonably withheld; provided, however, that
if Seller affords Buyer reasonable notice of, and opportunity to attend and
participate in, meetings or other discussions relating to LFA Approvals where
modifications, amendments or conditions are expected to be discussed or
negotiated, Buyer shall approve any such modifications, amendments or
conditions that are approved by Seller so long as such modifications,
amendments or conditions are commercially reasonable and are similar in nature,
extent and impact (giving due consideration to such factors as the relative
size of the Franchise involved, the proximity of other Franchises, the
financial and operational impact of the change and the precedential impact
thereof) to modifications, amendments or conditions agreed to by Parent or
Buyer or Friendco in connection with material acquisitions of cable assets
effected since 2001. In addition, if Buyer seeks any LFA Approval pursuant to
this Transaction, Buyer shall agree to any modifications, amendments or
conditions that are commercially reasonable and are similar in nature, extent
and impact (giving due consideration to such factors as the relative size of
the Franchise involved, the proximity of other Franchises, the financial and
operational impact of the change and the precedential impact thereof) to
modifications, amendments or conditions agreed to by Parent or Buyer or Friendco
in connection with material acquisitions of cable assets effected since 2001.
(d) Each
of the parties hereto agrees to execute and deliver such other documents,
certificates, agreements and other writings and to take such other commercially
reasonable actions as may be necessary or desirable in order to evidence,
consummate or implement expeditiously the transactions contemplated by this
Agreement and to vest in Buyer good and marketable title to the Transferred
Assets to the same extent as held by Seller and its Affiliates, free and clear
of all Encumbrances other than, in the case of Transferred Assets, Permitted
Encumbrances, and in the case of the Transferred Investments, Encumbrances
under the Investment Documents.
(e) Seller
and Buyer shall, and Buyer shall cause Parent to, cooperate with each other and
shall furnish to the other party all information reasonably necessary or
desirable in connection with making any filing under the HSR Act, and in
connection with resolving any investigation or other inquiry by any Government
Antitrust Entity with respect to the Transaction and the Exchange; provided,
however, that Buyer shall reimburse Seller for the reasonable
out-of-pocket costs, if any, incurred by Seller as a result of such cooperation
solely to the extent it relates to the consummation of the Exchange. Each of
the parties shall promptly inform the other party of any communication with,
and any proposed understanding, undertaking or agreement with, any Government
Entity regarding any such filings or any such transaction. Seller and Buyer
shall not, and Buyer shall cause Parent not to, participate in any meeting with
any Government Antitrust Entity in respect of any such filings, investigation
or other inquiry without giving the other party prior notice of, and the
opportunity to participate in, such meeting. The parties hereto will consult
and cooperate with one another in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with all meetings,
actions and proceedings under or relating to the HSR Act (including, with
100
respect to making a particular
filing, by providing copies of all such documents (other than those that will not
be publicly available) to the non-filing party and their advisors prior
to filing and, if requested, giving due consideration to all reasonable
additions, deletions or changes suggested in connection therewith); provided,
however, that in no event shall Buyer or Seller be required to furnish,
or Buyer be required to cause Parent to furnish, any information that, based on
advice of such party’s counsel, would reasonably be expected to create any
potential Liability under applicable Laws, including U.S. Antitrust Laws, or
would constitute a waiver of any material legal privilege (provided,
that in such latter event Buyer and Seller shall use commercially reasonable
efforts to cooperate to permit disclosure of such information in a manner
consistent with the preservation of such legal privilege).
(f) In
furtherance and not in limitation of the foregoing, each of Buyer and Seller
agrees to make, and Buyer agrees to cause Parent to make, as promptly as
practicable, (i) an appropriate filing of a Notification and Report Form pursuant
to the HSR Act with respect to the Transaction and the Exchange (which filing
shall be made in any event within 20 Business Days of the date hereof), (ii) appropriate
filings with the FCC, and any state public service commissions having
jurisdiction over any Transferred Assets or any services provided by any
Specified Business or the Assets of or services provided by the Parent Business
with respect to the Transaction and the Exchange, and (iii) all other
necessary filings with other Government Entities relating to the Transaction
and the Exchange, and to use commercially reasonable efforts to cause the
expiration or termination of the applicable waiting periods under the HSR Act
and the receipt of the Seller Required Approvals and the Buyer Required
Approvals under such other Laws or from such authorities or third parties as
soon as practicable; provided, however, that Buyer shall
reimburse Seller for the reasonable out-of-pocket costs, if any, incurred by
Seller as a result of such cooperation solely to the extent it relates to the
consummation of the Exchange.
(g) Each
of Seller and Buyer shall, and Buyer shall cause Parent to, give (or shall
cause their respective Subsidiaries to give) any notices to third parties, and
use, and cause their respective Subsidiaries to use, commercially reasonable
efforts to obtain any third party (excluding Government Entities) consents
related to or required in connection with the Transaction and the Exchange that
are Seller Required Approvals or Buyer Required Approvals; provided, however,
that Buyer shall reimburse Seller for the reasonable out-of-pocket costs, if
any, incurred by Seller as a result of such cooperation solely to the extent it
relates to the consummation of the Exchange.
(h) Seller
shall, and shall cause its Affiliates to, take all actions as may be necessary
or desirable in order that, as of the Closing, all of the Assets (other than
any Equity Securities or other Excluded Assets) of the Tele-Media Entities and
each of their respective Subsidiaries shall constitute Transferred Assets.
(i) Notwithstanding
anything in this Agreement to the contrary, Buyer shall have the sole
responsibility for any filing, submission or other action (including, for the
avoidance of doubt, obtaining any required LFA Approval) that is necessary,
proper or advisable to permit the consummation of the Exchange (it being understood that Seller
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shall use its commercially
reasonable efforts to cooperate with Buyer with respect to any action required
to be taken by Buyer pursuant to this sentence; provided, however,
that Buyer shall reimburse Seller for the reasonable out-of-pocket costs, if
any, incurred by Seller as a result of such cooperation solely to the extent it
relates to the consummation of the Exchange.
(j) After
the Closing, Buyer shall, in the Ordinary Course of Business of Parent, use its
commercially reasonable efforts to bill and collect from each Basic Subscriber
that is potentially a Qualified Customer any amounts due and payable in respect
of services delivered to such Basic Subscriber prior to the Closing.
Section
5.7 Tax Matters.
(a) Proration
of Taxes. To the extent necessary to determine the liability for Taxes for
a portion of a taxable year or period that begins before and ends after the Closing,
the determination of the Taxes for the portion of the year or period ending on,
and the portion of the year or period beginning after, the Closing shall be
determined by assuming that the taxable year or period ended as of the close of
business on the Closing, except that those annual property taxes and
exemptions, allowances or deductions that are calculated on an annual basis
shall be prorated on a time basis. For the avoidance of doubt, (i) any
Taxes that are apportioned to the portion of a taxable period that ends on the
Closing pursuant to this Section 5.7(a) shall be Excluded Taxes and (ii) any
Taxes that are apportioned to the portion of a taxable period beginning after
the Closing pursuant to this Section 5.7(a) shall be Assumed Taxes.
(b) Tax
Returns. Buyer shall not file any amended Tax Returns with respect to the
Transferred Assets that include periods ending on or prior to the Closing
without Seller’s written consent, which shall not be unreasonably withheld or
delayed.
(c) Transfer
Taxes.
(i) To
the extent not otherwise exempt to the fullest extent permitted by section 1146(c) of
the Bankruptcy Code and except as otherwise provided in this Section 5.7(c)(i),
all federal, state, local or foreign or other excise, sales, use, value added,
transfer (including real property transfer or gains), stamp, documentary,
filing, recordation and other similar taxes and fees that may be imposed or
assessed as a result of the Transaction, together with any interest, additions
or penalties with respect thereto and any interest in respect of such additions
or penalties (“Transfer Taxes”), shall, subject to the provisos to
Sections 5.7(c)(iii) and 5.7(c)(v), be borne by Buyer.
(ii) Any Tax Returns that must be filed in connection with
Transfer Taxes (“Transfer Tax Returns”) shall be prepared by Buyer and
Buyer shall prepare such Transfer Tax Returns in a manner consistent with the
allocation of the Aggregate Consideration pursuant to Section 5.7(d); provided,
however, that if Buyer and Seller do not jointly agree to a Purchase
Price Allocation Schedule as provided in Section 5.7(d) and except as
provided in Section 5.7(c)(iii), any such Transfer Tax Return shall
be prepared by Buyer in good faith in a manner consistent with the purchase
price
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allocation of Buyer or Seller that
Buyer and Seller, as the case may be, use for Tax purposes, that results in the
higher aggregate Transfer Tax liability with respect to each applicable
jurisdiction. The party filing any Transfer Tax Return (or similar form
claiming an applicable exemption from Transfer Taxes) pursuant to this Section 5.7
shall furnish a copy of such Transfer Tax Return (or similar form) to the other
party.
(iii) Except as provided in the following proviso, all Transfer
Tax Returns shall be filed by Buyer, and Buyer shall be responsible for
remitting all amounts shown as due on such Transfer Tax Returns to the
appropriate Government Entity; provided, however, that, in the
case of any Transfer Tax Return in which Seller’s purchase price allocation
would result in a higher aggregate Transfer Tax liability than Buyer’s purchase
price allocation (w) Buyer shall prepare such Transfer Tax Return unless
Seller reasonably determines that the positions taken on such Transfer Tax
Return as prepared by Buyer would reasonably be expected to give rise to a
material risk of civil and/or criminal penalties (other than interest) if
challenged by the applicable Government Entity, in which case, Seller may
prepare such Transfer Tax Return, (x) Seller shall be responsible for filing
such Transfer Tax Return and for remitting all amounts shown as due thereon to
the appropriate Government Entity, (y) notwithstanding any other provision
of this Section 5.7(c) to the contrary, Buyer shall pay to Seller an
amount equal to the Transfer Tax liability that would have resulted if such
return had been prepared by Buyer (itbeingunderstoodthat,
for purposes of this clause (y), the Transfer Tax Return that would have been
prepared by Buyer shall be determined by using (1) the Buyer’s purchase
price allocation, and (2) Buyer’s interpretation of applicable Tax Law as
reflected in the Transfer Tax Return prepared by Buyer pursuant to clause (x) hereof),
and (z) Seller shall have sole responsibility for the balance of the
Transfer Tax liability with respect to such Transfer Tax Return. Buyer and
Seller shall (and shall cause each of their respective Affiliates to) cooperate
in the timely completion and filing of all such Tax Returns, and Buyer and
Seller shall (and shall cause each of their respective Affiliates to) execute
such documents in connection with such filings as shall have been required by
Law or reasonably requested by the other party.
(iv) Buyer shall control the conduct of any audit, claim,
contest or administrative or judicial proceeding relating to such Transfer
Taxes, subject to Seller’s right to make any statement or report to any tax
authority reflecting the purchase price allocation prepared by Seller; provided,
however, that Seller shall be entitled to make any such statement and/or
report only (A) to the extent Seller reasonably determines is reasonably
necessary to rebut any presumption under applicable Tax Law that would
otherwise deem Seller to have agreed to and adopted the purchase price
allocation prepared by Buyer in the absence of such statement or report and (B) if
such presumption could reasonably be expected to result in an adverse effect on
Seller other than a deminimis adverse effect. If Buyer or Seller
receives any written notice of assessment or other claim from any Government
Entity with respect to Transfer Taxes for which the other party may be liable
pursuant to this Section 5.7(c), the notified party shall notify the other
party in writing of the receipt of such notice of assessment or other claim
promptly after the receipt thereof.
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(v) Any
additional Transfer Taxes resulting from an adverse determination by a
Government Entity shall be borne by Buyer; provided, however,
that, so long as the adverse determination by the applicable Government Entity
does not relate directly to purchase price allocation, Seller shall be
responsible for any such additional Transfer Taxes to the extent that such
additional Transfer Taxes are attributable to the use of Seller’s purchase
price allocation rather than Buyer’s purchase price allocation.
(vi) Any Transfer Taxes resulting from any subsequent increase
in the Purchase Price pursuant to this Agreement shall be borne in accordance
with the provisions of this Section 5.7(c).
(vii) Buyer and Seller shall cooperate in good faith to minimize
the amount of Transfer Taxes that may be imposed or assessed as a result of the
Transaction, including pursuant to one or more restructuring transactions
consummated pursuant to the Plan prior to the Closing; provided, that
Buyer and Seller conclude in good faith that such restructuring would have a
more likely than not probability of prevailing if challenged by the applicable
Government Entity.
(d) Determination
and Allocation of Purchase Price. Seller and Buyer undertake to act in good
faith to jointly agree to a schedule setting forth the allocation of the
Aggregate Consideration among the Transferred Assets (the “Purchase Price
Allocation Schedule”) for Tax purposes. If Seller and Buyer so agree within
180 days of the Closing Date, Seller and Buyer shall, and Seller and Buyer
shall cause each of their respective Affiliates, (i) to report the
federal, state, and local income and other Tax consequences of the Transaction
contemplated herein in a manner consistent with such Purchase Price Allocation
Schedule and (ii) not to take any position inconsistent therewith for any
Tax purposes (unless required by a change in applicable Tax Law or as a result
of a good faith resolution of a contest). If Seller and Buyer do not so agree
within 180 days of the Closing Date, each of Seller and Buyer may prepare their
own purchase price allocation and, for the avoidance of doubt and except as
provided in Sections 5.7(c)(iii) and 5.7(c)(v), each of Buyer and Seller
will have no liability to the other for any additional Taxes that may be imposed
by any Government Entity as a result of inconsistencies between the respective
allocations of Buyer and Seller.
(e) Employee
Withholding and Reporting Matters. With respect to those Transferred
Employees who are employed by Buyer within the same calendar year as the
Closing, Buyer shall, in accordance with and to the extent permitted pursuant
to Revenue Procedure 2004-53, 2004-34 I.R.B. 320, assume all
responsibility for preparing and filing Form W-2, Wage and Tax
Statement, Form 941, Employer’s Quarterly Federal Tax Return, Form W-4,
Employee’s Withholding Allowance Certificate and Form W-5, Earned
Income Credit Advance Payment Certificate. Seller and Buyer agree to comply
with the procedures described in Section 5 of the Revenue Procedure 2004-53.
Notwithstanding any provision of this Agreement, all Taxes required to have
been withheld by Seller and its Subsidiaries from their respective employees
and independent contractors with respect to any taxable periods, or portions
thereof, ending on or before the Closing shall be Excluded Liabilities and
shall not be treated as Assumed Liabilities.
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(f) Consistent
Treatment. The parties intend that the Transaction shall constitute a
taxable transaction and, for the avoidance of doubt, the Transaction shall not
be governed by Sections 351 or 368(a) of the Code (or similar provisions
of state, local or foreign Tax law, as applicable). The parties agree to, and
to cause their respective Affiliates to, treat the Transaction in the foregoing
manner for all income Tax purposes (unless otherwise required by a change in
applicable income Tax law or as a result of a good faith resolution of a
contest).
(g) Notice
of Buyer Adverse Tax Event. If any change in Tax Law or Proposed Change in
Tax Law occurs and Buyer or Paul, Weiss, Rifkind, Wharton & Garrison
LLP (or such other counsel that Buyer selects to represent Buyer with respect
to the Transaction) believes that such change in Tax Law or such Proposed
Change in Tax Law has a reasonable possibility of constituting a Buyer Adverse
Tax Event as of the Closing Date, Buyer shall within ten Business Days of such
determination provide written notice to Seller describing the change in Tax Law
or the Proposed Change in Tax Law and a statement that such change in Tax Law
or Proposed Change in Tax Law may constitute a Buyer Adverse Tax Event as of
the Closing Date (a “Buyer Adverse Tax Event Notice”). Upon reasonable
request by Seller, Buyer will make its counsel reasonably available to Seller
to discuss why Buyer believes the described change in Tax Law or Proposed
Change in Tax Law has a possibility of constituting a Buyer Adverse Tax Event.
Section
5.8 Post-Closing
Obligations of each Specified Business to Certain Employees.
(a) Seller
shall provide to Buyer no later than 14 Business Days following the date
hereof, a copy of each employment agreement or other individual agreement
governing the terms and conditions of any Applicable Employee’s employment
entered into with any Applicable Employee and a schedule of each Applicable Employee
with his or her title, job location, employer, primary place of residence,
salary or wage rate, commission status, bonus opportunity, date of hire, level
or other job classification, full or part time status, “exempt” or “non-exempt”
status, whether such Applicable Employee is part of a collective bargaining
unit and regularly scheduled work shift, as applicable, and shall supplement
such schedule no later than 60 Business Days following the date hereof,
indicating for each Applicable Employee, such Applicable Employee’s direct
supervisor and most recent performance rating or evaluation. In addition, no
later than 55 Business Days prior to the Closing Date, Seller shall update such
schedule, including with respect to each Applicable Employee’s direct
supervisor and most recent performance rating or evaluation. No later than 40
Business Days prior to the Closing Date, Buyer shall make offers of employment
commencing on the Closing Date to all Applicable Employees, and such offers
shall be contingent upon (i) the Closing, (ii) such Employee being an
Applicable Employee on the Closing Date and (iii) such Applicable Employee’s
satisfaction of customary employment conditions applicable to all Parent
employees which customary employment conditions are set forth on Schedule
5.8(a)(i) of the Buyer Disclosure Schedule (itbeingunderstoodthat such conditions will not include the evaluation of prior
performance) (the “Background Check”); provided, however,
that Buyer shall have no obligation to extend an offer of
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employment to any Employee who as of
the date hereof or as of the Closing Date is identified by job function,
description or title or otherwise noted on Schedule 5.8(a)(ii)of the Seller Disclosure Schedule. Buyer shall, and
shall cause Parent to, cooperate with Seller from and after the date hereof to
communicate with Applicable Employees other than those set forth on Schedule
5.8(a)(ii)of the Seller Disclosure
Schedule regarding the anticipated offers of employment to be made by Buyer to
such Applicable Employees hereunder. Offers of employment required by this Section 5.8(a) shall
be for a position of similar or greater status, authority, duties and aggregate
compensation (excluding any equity-based compensation, severance, retention,
sale, stay, special bonus, emergence or other change in control payments or
awards or any similar compensation or award) as such Employee enjoys with
Seller and/or its Affiliates immediately prior to the Closing Date, that is
within a 50-mile radius from such Employee’s primary place of residence
as of the Closing Date, and with any such additional rights and benefits as are
prescribed by this Section 5.8. Consistent with and subject to the
foregoing and the other terms of this Agreement, Buyer shall have the right to
establish the terms and conditions under which such offers will be made. No
later than two Business Days following the date offers are required to be made
hereunder, Buyer shall provide to Seller a list of the Applicable Employees who
do not satisfy the Background Check, by job position or name and region, and as
to whom Buyer as a result of such Background Check failure has not made offers
of employment pursuant to this Section 5.8(a). The parties hereto shall
cooperate with each other to give effect to this Section 5.8(a) and
neither Seller nor its Affiliates shall take any actions that would interfere
with the Applicable Employees so offered employment from becoming employed by
Buyer as of the Closing Date. If any Employee, other than a Transferred
Employee, becomes entitled to any payments or benefits under any severance
policy, plan, agreement, arrangement or program which exists or arises or may
be deemed to exist or arise, under any applicable Law or otherwise, as a result
of the consummation of the Transaction or otherwise, Seller shall be liable for
such amounts, which Liability shall constitute an Excluded Liability except to
the extent Buyer does not comply with the requirement to offer employment on
the terms set forth in this Section 5.8(a).
(b) Beginning
on the Closing Date and ending no earlier than the first anniversary of the
Closing Date, Buyer shall, or shall cause Parent to, provide each Transferred
Employee, other than any Transferred Employee included in a collective
bargaining unit covered by the Collective Bargaining Agreements as in effect on
the Closing Date (each, a “Union Employee”) with, at Buyer’s sole
discretion, either compensation and employee benefits that are (i) no less
favorable in the aggregate (excluding any equity-based compensation, severance,
retention, sale, stay, special bonus, emergence or other change in control
payments or awards or any similar compensation or award) than the compensation
and employee benefits provided to each such Transferred Employee immediately prior
to the Closing Date or (ii) substantially comparable in the aggregate
(excluding any severance) to the compensation and employee benefits provided to
similarly situated employees of Parent; provided, that for purposes of
any equity-based compensation, such employees shall be deemed newly hired
employees of Parent. In addition, to the extent Parent maintains a
tax-qualified defined benefit pension plan, from and after the date each
Transferred Employee satisfies the applicable eligibility and service requirements
of any such plan as in effect on any date of determination, such
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Transferred Employee shall
participate in such plan to the same extent as similarly situated employees of
Parent. With respect to Union Employees, Buyer will retain any and all of the
rights and obligations it may have pursuant to applicable labor Law.
(c) Notwithstanding
Section 5.8(b), beginning on the Closing Date, Buyer shall, or shall cause
Parent to, for a period ending no earlier than the first anniversary of the
Closing Date, maintain a severance plan for the benefit of each Transferred
Employee, other than any Union Employee, that is no less favorable to
Transferred Employees than the Amended and Restated Adelphia Communications
Corporation Severance Plan effective September 21, 2004 (the “Seller
Severance Plan”) and which includes the same general terms and conditions
regarding eligibility and exclusion from eligibility for severance pay and
benefits as the Seller Severance Plan. It is intended that this Section 5.8(c) shall
not result in any duplication of benefits to any Transferred Employee.
(d) To
the extent (and only to the extent) set forth on Schedule 5.8(d) of
the Seller Disclosure Schedule, Buyer shall assume all Liabilities and
obligations to provide any severance pay and benefits to any Transferred
Employee whose employment is terminated following the Closing. Buyer shall
reimburse Seller for any severance costs incurred with respect to any Employee
who is not offered employment by Buyer pursuant to this Transaction in the
event Parent or any of its Subsidiaries hires such Employee within three months
after the Closing.
(e) For
purposes of this Agreement, (i) “Applicable Employees” means all
of the following:
(A) All
persons who are active Employees on the Closing Date, including Employees on
vacation and Employees on a regularly scheduled day off from work. Employees on
temporary leave for purposes of jury or annual two-week national
service/military duty shall be deemed to be active Employees;
(B) Employees
who on the Closing Date are on nonmedical leave of absence; provided, however,
that no such Employee shall be guaranteed reinstatement to active service if
his return to employment is contrary to the terms of his leave, unless
otherwise required by applicable Law (for purposes of the foregoing, nonmedical
leave of absence shall include maternity or paternity leave, leave under the
Family and Medical Leave Act of 1993, educational leave, military leave with
veteran’s reemployment rights under federal Law, or personal leave, unless any
of such is determined to be a medical leave); and
(C) Employees
who on the Closing Date are on disability or medical leave and for whom it has
been 180 calendar days or less since their last day of active employment; provided,
however, that no such Employee shall be guaranteed reinstatement to
active service if he is incapable of working in accordance with the policies,
practices and procedures of Buyer; and
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(ii) “Transferred Employees” means those Applicable
Employees who accept offers of employment with Buyer.
(f) Seller
shall retain responsibility for and continue to pay all medical, life
insurance, disability and other welfare plan expenses and benefits for each
Transferred Employee with respect to claims incurred by such Transferred
Employee or his or her covered dependents prior to the Closing Date except to
the extent (and only to the extent) such liabilities are reflected in the
determination of the Closing Net Liabilities used in the determination of the
Final Adjustment Amount for the Specified Business in which such Transferred
Employee is employed. Buyer shall be responsible for all expenses and benefits
with respect to claims incurred by Transferred Employees or their covered
dependents on or after the Closing Date. For purposes of this paragraph, a
claim is deemed incurred: (i) in
the case of medical or dental benefits, when the services that are the subject
of the claim are performed, (ii) in the case of life insurance, when the
death occurs, (iii) in the case of long-term disability benefits,
when the Employee becomes disabled, and (iv) in the case of workers
compensation benefits, when the event giving rise to the benefits occurs.
(g) With
respect to any plan that is a “welfare benefit plan” (as defined in Section 3(1) of
ERISA), or any plan that would be a “welfare benefit plan” (as defined in Section 3(1) of
ERISA) if it were subject to ERISA, maintained by Parent, Buyer shall (i) provide
coverage for Transferred Employees under its medical, dental and health plans
as of the Closing Date in accordance with the terms of such plans, (ii) cause
there to be waived any pre-existing conditions, actively at work
requirements and waiting periods or other eligibility requirements to the
extent such conditions, requirements or waiting periods were satisfied by a
Transferred Employee under a corresponding Benefit Plan, and (iii) cause
such plans to honor any expenses incurred by the Transferred Employees and
their dependents or beneficiaries under similar plans of Seller and its Affiliates
during the portion of the calendar year in which the Closing Date occurs for
purposes of satisfying applicable deductible, co-insurance and maximum
out-of-pocket expenses.
(h) Transferred
Employees shall be given credit for purposes of eligibility and vesting and
other entitlement to benefits or rights, under each employee benefit plan of
Parent (each, a “Buyer Plan”) in which such Transferred Employees are or
become eligible to participate, for all service (including service with Seller
or any of its Affiliates) for which such Transferred Employees were credited
for such purposes under a corresponding Benefit Plan of Seller prior to the
Closing Date; provided, however, that nothing in this Section 5.8(h) shall
result in any duplication of benefits.
(i) Except
as required by applicable Law, as of the Closing Date, the Transferred
Employees shall cease to accrue further benefits under the employee benefit
plans and arrangements maintained by Seller and its Affiliates. From and after
the Closing, Seller shall remain solely responsible for any and all Liabilities
in respect of the Employees, including the Transferred Employees, related to
the Benefit Plans, except as otherwise provided in this Section 5.8. None
of Buyer or any of its Affiliates shall assume or have transferred to them the
sponsorship of any of the Benefit Plans or any other benefit plans or
arrangements maintained by Seller or any of its Affiliates,
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including any non-qualified deferred
compensation or rabbi trust plans or arrangements, pursuant to or in connection
with the Transaction.
(j) Seller
shall take all actions necessary to fully vest the Transferred Employees in
their account balances under Seller’s tax-qualified 401(k) plan (“Seller’s
401(k) Plan”) effective as of the Closing Date. In accordance with the
terms of the applicable plan, each Transferred Employee shall be eligible to
participate in a Parent-sponsored defined contribution plan intended to qualify
under Sections 401(a) and 401(k) of the Code (“Buyer’s 401(k) Plan”).
Buyer shall take all actions reasonably necessary to permit beginning as soon
as reasonably practical following the Closing Date each Transferred Employee
who has received an eligible rollover distribution (as defined in Section 402(c)(4) of
the Code) from Seller’s 401(k) Plan to roll over the distribution, to an
account in Buyer’s 401(k) Plan.
(k) With
respect to any accrued but unused vacation time (including flexible time-off
and sick pay) to which any Transferred Employee is entitled pursuant to the
vacation policy applicable to such Transferred Employee immediately prior to
the Closing Date, Buyer shall, to the extent permitted by applicable Law,
assume the liability for such accrued vacation and allow such Transferred
Employee to use such accrued vacation to the extent such Transferred Employee
would have been entitled to such accrued vacation based on his level and years
of service under the vacation policy of Parent in effect as of the Closing Date
as if such Transferred Employee had been employed by Buyer during such
Transferred Employee’s employment with Seller; provided, however,
that if the Transferred Employee’s accrued vacation is greater than the amount
of vacation to which such Transferred Employee would have been entitled under
Parent’s vacation policy, Buyer shall pay to such Transferred Employee within
90 days of the Closing Date an amount in cash equal to the difference but only
to the extent of the amount reflected in the Closing Net Liabilities Amount
used in calculating the Final Adjustment Amount for the Specified Business in
which such Transferred Employee is employed. With respect to any sale bonuses
under the Sale Bonus Program, Seller shall be responsible for the payment to
all Employees of that portion of the bonus that is to be paid on the “First
Sale Bonus Payment Date” (as defined in the Sale Bonus Program), which bonuses
shall be paid prior to or on the Closing. Buyer shall be responsible for the
payment to Transferred Employees on a timely basis of any sale bonuses under
the Sale Bonus Program to be paid after the “First Sale Bonus Payment Date” but
only to the extent of the amount reflected in the Closing Net Liabilities
Amount used in calculating the Final Adjustment Amount for the Specified
Business in which such Transferred Employee is employed.
(l) Buyer
shall be responsible for providing or discharging any and all notifications,
benefits and liabilities to Transferred Employees and governmental authorities
required by WARN or by any other applicable Law relating to plant closings or
employee separations that are required (i) to be provided after the
Closing or (ii) with respect to any plant closing or mass layoff that
occurs within the 60-day period immediately following the Closing. Seller
agrees to cooperate in preparing and distributing any notices that Buyer may
desire to provide prior to the Closing. No later than five Business Days prior
to the Closing Date, Seller shall provide Buyer with a
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schedule setting forth each Employee
whose employment was terminated or is anticipated to be terminated during the
six month period prior to the Closing Date and the work location of such
Employee.
(m) Buyer
shall assume any liability under COBRA arising from the actions (or inactions)
of Buyer or its Affiliates with respect to the Transferred Employees after the
Closing Date. Seller shall retain all obligations with respect to continued
coverage under COBRA (and any similar state Law), Section 4980B of the
Code and Part 6 of Subtitle B of Title I of ERISA and the regulations
thereunder for all Employees, including Applicable Employees, who do not become
Transferred Employees. Notwithstanding the immediately preceding sentence, to
the extent required by Treasury Regulation Section 54.4980B-9,
Q&A-8(c), Buyer shall perform all obligations under COBRA and the
foregoing provisions of the Code and ERISA with respect to each employee of
Seller who is an “M&A qualified beneficiary” with respect to the
Transaction, as such term is defined by Treasury Regulation section 54.4980B-9,
Q&A-4.
(n) For
Employees who participate in Seller’s short term incentive bonus program,
including the Short-Term Incentive Plan, Sales Incentive Plan and Marketing
Incentive Plan, Seller shall be responsible for paying their respective annual
bonuses for the period from the January 1 immediately preceding the
Closing Date through the Closing (pro-rated for the partial year) and shall pay
such bonuses to such Employees no later than the Closing; and, solely with
respect to Transferred Employees who participated immediately prior to the
Closing Date in such Seller’s short term incentive bonus programs, Buyer shall
be responsible for paying respective annual bonuses for the period from the
Closing Date through the December 31 immediately following the Closing
Date pro-rated for the partial year.
(o) With
respect to any Transferred Employee who becomes employed by Friendco or any of
its Affiliates pursuant to the Exchange Agreement, references to any benefit
plans maintained by Buyer or Parent shall be deemed to be references to benefit
plans maintained by Friendco or its Affiliates and references to similarly
situated employees of Buyer shall be deemed to be references to similarly
situated employees of Friendco or its Affiliates.
(p) The
parties hereto hereby acknowledge and agree that no provision of this Agreement
shall be construed to create any right to any compensation or benefits
whatsoever on the part of any Employee or other future, present or former
employee of Seller or any of its Affiliates. Nothing in this Section 5.8
or elsewhere in this Agreement shall be deemed to make any employee of the
parties or their respective Affiliates a third party beneficiary of this Section 5.8
or any rights relating hereto.
(q) The
parties hereto hereby acknowledge and agree that Buyer shall have no Liability
in respect of any award to any Employee, director, consultant, independent
contractor or other service provider of Seller or its Affiliates with respect
to any shares of Seller’s Equity Securities, whether existing on the date hereof
or arising in the future (“Stock Awards”), and that all Liabilities
related to such Stock Awards shall be Excluded Liabilities.
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(r) Seller
agrees that, notwithstanding anything in this Agreement to the contrary, the
payments of awards under the Amended and Restated Adelphia Communications
Corporation Performance Retention Plan shall in no event be made in Equity
Securities of Buyer, Parent or any Affiliate of Parent and shall be satisfied
in full by Seller prior to or on the Closing.
Section
5.9 Ancillary Agreements.
At the Closing, Seller shall and shall cause each of its Affiliates party to an
unexecuted Ancillary Agreement to, execute and deliver each unexecuted
Ancillary Agreement to which it is a party, and Buyer shall execute and deliver
each of the unexecuted Ancillary Agreements to be executed by it.
Section
5.10 Acquisition Proposals.
Except as otherwise provided in this Section 5.10, Seller agrees that
neither it nor any of its Subsidiaries nor any of their respective directors,
officers or employees shall, and that it shall direct its Subsidiaries and its
and its Subsidiaries’ agents and representatives and use its best efforts to
cause its and its Subsidiaries’ agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, initiate, solicit or encourage
any inquiries or the making of any proposal or offer with respect to a merger,
reorganization (including an Alternate Plan), share exchange, consolidation or
similar transaction involving (directly or indirectly), or any purchase
(directly or though a proposed investment in Equity Securities, debt securities
or claims of creditors) of 10% or more of the Transferred Assets Related to the
Business or of the outstanding Equity Securities of Seller or any of its
Affiliates directly or indirectly owning Assets Related to the Business (any
such proposal or offer being hereinafter referred to as an “Acquisition
Proposal” and any such transaction, an “Acquisition”); provided,
however, that the foregoing shall not restrict Seller from renewing the “exit
financing” of the Debtors on substantially the same terms as in effect as of March 31,2005. Seller further agrees that neither it nor any of its Subsidiaries nor any
of their respective directors, officers or employees shall, and that it shall
direct its Subsidiaries and its and its Subsidiaries’ agents and
representatives and use its best efforts to cause its and its Subsidiaries’
agents and representatives (including any investment banker, attorney or
accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, engage in any negotiations concerning, or provide any confidential
information or data to or have any discussions with any Person relating to, an
Acquisition Proposal, or otherwise facilitate any effort or attempt to make or
implement an Acquisition Proposal. Seller agrees that it will take the
necessary steps to promptly inform the Persons referred to in the first
sentence of this Section 5.10 of the obligations undertaken in this Section 5.10
and to cause them to cease immediately any current activities that are
inconsistent with this Section 5.10. Notwithstanding the foregoing,
nothing contained in this Agreement shall prevent Seller or its board of
directors (the “Board”) from:
(a) (i) complying
with its disclosure obligations under Law or the Bankruptcy Code with regard to
an Acquisition Proposal, or (ii) prior to the commencement of the
Confirmation Hearing, in response to an unsolicited bona fide Acquisition
Proposal, (A) (1) providing information to (including discussing any
due diligence issues, requests or clarifications with) a Person with whom
Seller executes a
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confidentiality agreement on terms
no less favorable to Seller than those contained in the Seller Confidentiality
Agreement (as in effect prior to amendment on the date hereof), other than any
restrictions on such Person’s ability to make or amend an Acquisition Proposal
and (2) following receipt of a bona fide unsolicited Acquisition Proposal
from such a Person, engaging in discussions with such Person to the extent such
discussions are confined to clarifying any term of such Acquisition Proposal or
(B) engaging in any negotiations or discussions with any Person who has
made such an Acquisition Proposal if and only to the extent that in each such
case referred to in clauses (A) and (B) above, (1) the Board
determines in good faith after consultation with outside legal counsel that the
directors of Seller should take such action in order to comply with their
fiduciary duties under applicable Law, (2) such Acquisition Proposal
involves the direct or indirect acquisition by one or more third parties of at
least 66-2/3% of (x) all Assets Related to the Business or (y) the
outstanding Equity Securities of Seller and (3) in each such case referred
to in clause (B) above, the Board determines in good faith (after
consultation with its financial and legal advisors) that such Acquisition
Proposal, if accepted, is reasonably likely to be consummated, taking into
account all legal, financial and regulatory aspects of the proposal and the
Person making the proposal, and if consummated, would result in a transaction
more favorable (taking into account, without limitation, financial terms of any
termination fee that may be payable pursuant to Section 8.5(b)) to Seller’s
stakeholders from a financial point of view than the Transaction (any such more
favorable Acquisition Proposal being referred to in this Agreement as a “Superior
Proposal”). Seller or any of its Subsidiaries shall notify Buyer promptly
(but in no event later than 24 hours) after receipt by Seller or any of its
Subsidiaries (or any of their respective directors, officers, employees or
advisors) of any Acquisition Proposal, any indication that a third party is
considering making an Acquisition Proposal or any request for information
relating to the Transferred Assets, any Specified Business, Seller or any of
its Subsidiaries or for access to any Specified Business or any of the
Transferred Assets by any third party that may be considering making, or has
made, an Acquisition Proposal. Seller shall provide such notice orally and in
writing and shall identify the third party making, and the terms and conditions
of, any such Acquisition Proposal, indication or request. Seller shall keep
Buyer fully informed, on a current basis, of the status and details of any such
Acquisition Proposal, indication or request. Seller shall promptly provide
Buyer with any non-public information concerning Seller’s business,
present or future performance, financial condition or results of operations,
provided to any third party that was not previously provided to Buyer; and
(b) (i)
prior to the commencement of the Confirmation Hearing, engaging in any
negotiations or discussions concerning an Alternate Plan with the Committees,
the stakeholders of Seller or its Affiliates or their respective advisors (in
each case (other than in the case of Committees) with whom Seller enters into,
or has entered into, a confidentiality agreement on customary terms under the
circumstances that restricts such stakeholder (other than with respect to any
other stakeholder who is subject to a substantially similar confidentiality
agreement or to the Committees) from (x) disclosing any confidential
information regarding Seller and its Affiliates, Buyer and its Affiliates, or
information regarding an Alternate Plan, including the status thereof, and (y) making
public statements regarding any of the foregoing), but only to the extent that (A) the
Board determines in good faith after consultation with outside legal counsel
that
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the directors of Seller should take
such action in order to comply with their fiduciary duties under applicable Law
and (B) the Board determines in good faith (after consultation with its
financial and legal advisors) that such Alternate Plan, if pursued and assuming
(for purposes of determining the right to engage in negotiations or discussions
pursuant to this Section 5.10(b), but not for purposes of the definition
of “Superior Alternate Plan”) the support of Seller’s stakeholders therefor, is
reasonably likely to be consummated, taking into account all legal, financial
and regulatory aspects of the proposed Alternate Plan and, if consummated,
would result in a transaction more favorable (taking into account, without
limitation, the financial terms of any termination fee that may be paid
pursuant to Section 8.5(b)) to the stakeholders of Seller and its
Affiliates from a financial point of view than the Transaction (any such more
favorable Alternate Plan being referred to in this Agreement as a “Superior
Alternate Plan”) or (ii) after entry of a Confirmation Order
satisfying the condition set forth in Section 6.2(g) (but only for so
long as such Confirmation Order is in effect), planning for an Alternate Plan
that involves the emergence of Debtors as standalone entities with no greater
than a 10% additional equity contribution (other than existing Claims),
including engaging in any negotiations or discussions concerning an Alternate
Plan with stakeholders of Seller or its Affiliates or their advisors, preparing
(but not filing) a disclosure statement with respect to such Alternate Plan and
preparing and negotiating any intercreditor agreements; provided, however,
that such Alternate Plan provides that it can only be confirmed and effective
if this Agreement is terminated in accordance with its terms and such planning
does not involve any action or omission that could reasonably be expected to
materially impair or materially delay the Transaction; provided, further,
that nothing in this Section 5.10(b) shall permit any public
statements or filings with the Bankruptcy Court or any other court by or on
behalf of Seller or its Affiliates. Seller shall notify Buyer of its engagement
in discussions concerning an Alternate Plan and shall keep Buyer reasonably
informed, on a current basis, of material developments that could reasonably be
expected to result in an Alternate Plan. For purposes of this Agreement, an “Alternate
Plan” is any plan under chapter 11 of the Bankruptcy Code (other than the
Plan) or any liquidation under chapter 7 of the Bankruptcy Code. Without
limiting any other obligation set forth in this Agreement, Seller shall, in
connection with the activities permitted under this Section 5.10(b), use
commercially reasonable efforts to enforce any confidentiality obligations of
the Committees and any obligations under the confidentiality agreements
described in this Section 5.10(b).
Section
5.11 Additional Financial
Information.
(a) Seller
shall use commercially reasonable efforts, and shall cause its Affiliates to
use commercially reasonable efforts, to provide Buyer with financial statements
and related information (collectively, “Financial Information”)
sufficient to permit Parent or its Affiliates to fulfill [its] their
obligations to [include] provide financial disclosure relating to
each Specified Business and, if required, the Friendco Business and the MCE
Systems, on a timely basis in any report under the Exchange Act and,
if Buyer, Parent or any of Parent’s Affiliates undertakes an offering of
securities prior to the Closing, the Securities Act in any relevant offering document
(itbeingunderstoodthat the foregoing shall not
require Seller to file or furnish any periodic or current reports that are
required to be filed prior to the date hereof under the Exchange
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Act with the SEC (which reports are
addressed by Section 5.19)). Following the Closing, Seller shall provide, as promptly as reasonably
practicable, to Buyer the following financial information (the “Offering
Financial Information”), if required by the SEC, in connection with any
securities offering in connection with this Transaction or the Friendco
Registration Rights Agreement: (i) the Seller’s Quarterly Report on Form 10-Q
for the most recently completed fiscal quarter as of the date of the Closing
and Annual Report on Form 10-K for the most recently completed
fiscal year as of the date of the Closing and (ii)(A) if such report,
registration statement or any amendment or supplement to any of the foregoing
is filed or a registration statement for such offering becomes effective, prior
to November 12, 2006, unaudited interim financial statements as of June 30,2006 and for the period commencing January 1, 2006 and ending on June 30,2006 for each Specified Business (including the MCE Systems) and a
corresponding period in the 2005 fiscal year, (B) if such report,
registration statement or any amendment or supplement to any of the foregoing
is filed or a registration statement for such offering becomes effective, on or
after November 12, 2006 but prior to February 14, 2007, unaudited
interim financial statements as of September 30, 2006 and for the period
commencing January 1, 2006 and ending on September 30, 2006 for each
Specified Business (including the MCE Systems) and a corresponding period in
the 2005 fiscal year, (C) if such report, registration statement or any
amendment or supplement to any of the foregoing is filed or a registration
statement for such offering becomes effective, on or after February 14,2007 but prior to May 15, 2007, audited financial statements as of and for
the fiscal year ending December 31, 2006 for each Specified Business
(including the MCE Systems), (D) unaudited financial information for each
Specified Business (including the MCE Systems) with respect to the period
beginning on the day after the most recently completed fiscal quarter as of the
date of the Closing and ending on the date of the Closing, (E) the financial
statements and related information required by clauses (ii)(A), (B), (C) and
(D) of this Section 5.11(a) for each Specified Business (as
defined in the Friendco Purchase Agreement) and (F) to the extent able to
be produced through the use of commercially reasonable efforts, any other
financial statements and related information that is required by the SEC or the
rules of the stock exchange or automated quotation system on which the
Parent Class A Common Stock is to be listed with respect to any period
ending on or prior to the Closing Date; provided, that in no event shall Seller
be required to provide Offering Financial Information with respect to any
Specified Business or the MCE Systems to the extent (i) such Offering
Financial Information is in respect of any time following the Closing or (ii) the
SEC permits the provision of Offering Financial Information with respect to
Seller as a whole instead. If some or all of the Financial
Information is included in or incorporated by reference into a prospectus for
an offering of securities by Parent or any of Parent’s Subsidiaries prior to
the Closing, Seller shall, and shall cause its Affiliates to, use commercially
reasonable efforts to cause the independent auditors of Seller to provide
customary assistance to Buyer, Parent or such Subsidiary and its underwriters
in connection with such financing, including the provision of consent and
comfort letters addressed to the [SEC] Parent,
comfort letters addressed to the underwriters, participation in due diligence
matters with respect to such offering and assistance in
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responding to comments or questions
from the SEC with respect to the Financial Information. Buyer shall reimburse
Seller for the reasonable costs and expenses incurred by Seller pursuant to this
Section 5.11(a), including reasonable out-of-pocket costs and any
incremental costs and expenses necessary to comply with this Section 5.11(a) (including
all necessary incentive compensation) (unless and to the extent compliance with
this Section 5.11(a) is waived by Buyer prior to the incurrence of
such costs and expenses). Seller shall give Buyer reasonable advance notice of
the type and the amount of such costs and expenses prior to the incurrence
thereof.
(b) As
soon as reasonably practicable (and, in any event, prior to the Closing),
Seller shall, and shall cause its Affiliates to, use commercially reasonable
efforts, to provide Buyer with a copy of (i) the consolidated audited
balance sheets and audited statements of income, stockholders equity and cash
flows for each Specified Business reflecting the allocation of Shared Assets
and Liabilities pursuant to the Designated Allocation and Section 2.3
(assuming, with respect to any period prior to January 1, 2004, the
exclusion of the MCE Systems and the MCE Systems (as defined in the Friendco
Purchase Agreement) from each such Specified Business), at and for the fiscal
years ended December 31, 2002 (unless statements at and for the fiscal
year ended December 31, 2005 are provided as set forth below), December 31,2003, December 31, 2004, and, if the Closing shall not have occurred on or
prior to March 31, 2006 (or if such statements are otherwise available) December 31,2005 (the “Derivative Audited Financial Statements”), (ii) the
consolidated audited balance sheets and audited statements of income,
stockholders’ equity and cash flows for Seller and its Affiliates for the
fiscal years ended December 31, 2004, and, if the Closing shall not have
occurred on or prior to March 31, 2006 (or if such statements are
otherwise available), December 31, 2005 (the “Seller Audited Financial
Statements”), and (iii) the unaudited balance sheets and unaudited
statements of income, stockholders’ equity and cash flows for each MCE System
for the fiscal years ended December 31, 2002 (unless the Derivative
Audited Financial Statements include
consolidated audited balance sheets and audited statements of income,
stockholders equity and cash flows for each Specified Business for the fiscal
year ended December 31, 2005 are provided as set forth above), and December 31,2003 (the “MCE Financial Statements” and, together with the Derivative
Audited Financial Statements and the Seller Audited Financial Statements, the “Additional
Financial Statements”); provided, that Buyer shall reimburse Seller
for the reasonable costs and expenses incurred by Seller in connection with the
preparation of the Derivative Audited Financial Statements and the MCE
Financial Statements, including reasonable out-of-pocket costs and any
incremental costs and expenses necessary to comply with this Section 5.11(b) (including
all necessary incentive compensation). Seller shall give Buyer reasonable
advance notice of the type and the amount of such costs and expenses prior to
the incurrence thereof.
(c) Buyer
shall use its commercially reasonable efforts to obtain relief from the staff
of the SEC from Parent’s obligations to include financial statements with
respect to periods ending on or prior to December 31, 2002 required by Section 5.11(a) or
Section 5.11(b) in Parent’s filings under the Securities Act or
Exchange Act. Seller shall cooperate with Buyer in respect of the obtaining of
any such relief.
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Section
5.12 Post-Closing Consents.
(a) Subsequent
to the Closing, and subject to Section 2.11, Seller shall and shall cause
its Affiliates to continue to use commercially reasonable efforts to obtain in
writing as promptly as possible any consent, authorization or approval
necessary or commercially advisable in connection with the Transaction which
was not obtained on or before the Closing in form and substance reasonably
satisfactory to Buyer.
(b) Without
limiting Section 5.12(a), in the event that a Closing under this Agreement
occurs without the receipt of all LFA Approvals, Buyer and Seller shall, and
Buyer shall cause Parent to, act in good faith to obtain any remaining LFA
Approvals following the Closing. Until such time as all LFA Approvals have been
obtained, Buyer covenants and agrees to use commercially reasonable efforts to
satisfy all obligations of Seller or any of its Affiliates arising after the
Closing under each Franchise agreement corresponding to a LFA Approval that has
not been obtained. Buyer and Seller agree to enter into such arrangements as
are reasonably necessary to cause Seller not to be in breach under each such
Franchise agreement and to permit Buyer to receive the economic benefits of
each such Franchise agreement.
(c) Buyer
and Seller agree, assuming as set forth in Section 5.12(b) that all
or substantially all of the economic benefits relating to a remaining Franchise
inure to Buyer, (i) that any remaining Franchises described in Section 5.12(b) shall
be treated for all income Tax purposes as Assets of Buyer as of the Closing and
(ii) not to take, and to prevent any of their respective Affiliates from
taking, any position inconsistent with such treatment for any income Tax
purposes (unless required by a change in applicable income Tax Law or a good
faith resolution of a contest).
Section
5.13 Bankruptcy Proceedings.
(a) Seller
shall, as soon as reasonably practicable after the date hereof, but no later
than 45 days hereafter, file with the Bankruptcy Court (i) a Disclosure
Statement with respect to the Plan intended to meet the requirements of section
1125(b) of the Bankruptcy Code and this Section 5.13 (as amended from
time to time in accordance with this Agreement, the “Disclosure Statement”),
(ii) a motion to approve, among other things, the Disclosure Statement
(the “Disclosure Statement Motion”) and (iii) the Plan. Seller
shall, and shall cause each of its Affiliates to, commence appropriate
proceedings before the Bankruptcy Court and otherwise use commercially
reasonable efforts to obtain approval of the Disclosure Statement and the Plan
as expeditiously as possible. Seller shall, and shall cause its Affiliates to,
provide in the Disclosure Statement a range of values determined by Seller
after consultation with Buyer; provided, that the midpoint of such range
shall equal the Aggregate Value of the Purchase Shares; provided, however,
that, based on changes, events or circumstances first arising or occurring
following the date hereof, Seller may, after consultation with Buyer and its
counsel, change the midpoint and the range in order that the statements
contained in the Disclosure Statement in respect of the value of the Purchase
Shares would not be misleading or result in a violation of any applicable Law
by Seller; provided, further, that any such change shall be
disregarded for purposes of this Agreement, including the
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amount of the Aggregate Value of the
Purchase Shares or Per Share Value of the Purchase Shares. The Plan, any and
all exhibits and attachments to the Plan, the Disclosure Statement, and the
Disclosure Statement Motion and the orders approving the same (including the Confirmation
Order), and any amendment or supplement to any of the foregoing, (A) to
the extent affecting the terms of the Transaction, the Transferred Assets, the
Assumed Liabilities, Parent or its Affiliates (in the case of Parent or its
Affiliates, only to the extent related to the Transaction or an interest in the
Transferred Joint Venture Parents (other than with respect to Plan distribution
matters) and not in their capacity as creditors or, with respect to Plan
distribution matters, equityholders), shall be in all material respects
reasonably acceptable in form and substance to, and shall not be filed until
consented to by, Buyer, which consent shall not be unreasonably withheld, (B) shall
not otherwise contain any provision (including any provision relating to the
allocation of distributable proceeds among Seller’s stakeholders), or otherwise
have an effect, that would, individually or in the aggregate, reasonably be
expected to materially impair or materially delay the Transaction; it being
understood that any allocation of distributable proceeds that does not
violate the absolute priority rule or any proposed waiver of the absolute
priority rule as may be contemplated by the Plan that is reasonably
expected to be consented to by the affected classes shall not be deemed to
materially impair or materially delay the Transaction, (C) shall not
contain any provision providing for an Alternate Plan, including the so-called “toggle
plan”, (D) shall not treat Buyer or its Affiliates, in their capacities as
creditors or equityholders, in a discriminatory manner as compared to similarly
classified stakeholdersand (E) without
limiting the generality of the foregoing, in the case of the Confirmation
Order, shall contain the finding that Buyer is a good faith purchaser of the
Transferred Assets pursuant to section 363(m) of the Bankruptcy Code
unless Buyer’s actions which have been determined by the Bankruptcy Court to
have not been in good faith preclude such a finding. Buyer shall refrain from
taking any actions in connection herewith that are not in good faith (as
determined by the Bankruptcy Court) and that would preclude a finding that
Buyer is a good faith purchaser of the Transferred Assets pursuant to section
363(m) of the Bankruptcy Code. Seller shall provide Buyer and its counsel
with copies of all material motions, applications, supporting papers and
notices prepared by Seller (including forms of orders and notices to interested
parties) relating in any way to the Disclosure Statement, the Plan or the Transaction
prior to the filing of such documents and shall provide Buyer, to the extent
practicable, with a reasonable opportunity to review and comment on same. Seller
shall consult with Buyer prior to taking any action in or with respect to the
Reorganization Case that could reasonably be expected, individually or in the
aggregate, to (x) be inconsistent with this Agreement or the Transaction, (y) materially
impair or materially delay the Transaction or (z) relate to any material
information provided by Buyer for inclusion in the Disclosure Statement or have
an adverse effect on the Transaction, the Transferred Assets, the Assumed
Liabilities, Parent or its Affiliates (in the case of Parent or its Affiliates,
only to the extent related to the Transaction or an interest in the Transferred
Joint Venture Parents (other than with respect to Plan distribution matters)
and not in their capacity as creditors or, with respect to Plan distribution
matters, equityholders). Buyer shall provide Seller with all information
concerning Buyer, Parent and its Controlled Affiliates as is required or
reasonably advisable to be included in the Disclosure Statement, including (to
the extent
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so reasonably advisable) all
information that would be required to be set forth in a registration statement
on Form S-1 under the Securities Act. Any information delivered by
Buyer or Seller for inclusion in the Disclosure Statement will be intended to
satisfy the requirements of section 1125(a) of the Bankruptcy Code.
(b) No
later than 70 days prior to the Confirmation Hearing, Seller shall deliver to
Buyer a true and complete list of all Contracts Related to each Specified
Business (other than Programming Agreements but including retransmission
consent agreements) entered into prior to such seventieth day (provided,
that between such seventieth day and the Confirmation Hearing, Seller shall
promptly update such list to reflect Contracts Related to each Specified
Business (other than Programming Agreements but including retransmission
consent agreements) entered into during such period) which shall include the
following, each of which must be satisfactory in form and substance to Buyer in
its reasonable discretion: (i) a
list of Contracts (other than Programming Agreements but including retransmission
consent agreements) which Seller or any Affiliate has rejected pursuant to an
order of the Bankruptcy Court (the “Rejected Contracts”); (ii) a
list of Contracts (other than Programming Agreements but including
retransmission consent agreements) which Seller or any Affiliate has assumed
pursuant to an order of the Bankruptcy Court; (iii) with respect to each
such Contract that is not a Rejected Contract, (A) Seller’s good faith
estimate of the Cure Costs in respect of such Contract, (B) Seller’s good faith
estimate of the Rejection Claims in respect of such Contract and (C) whether
such Contract was entered into on or following the Petition Date. No later than
40 days prior to the Confirmation Hearing, Buyer shall provide Seller with a
list of Contracts to be assumed, if applicable, by Seller or any of its
Affiliates and assigned by Seller or any of its Affiliates to Buyer with
respect to each Specified Business (as further identified by Buyer pursuant to
the provisions of this Section 5.13(b), the “Assigned Contracts”). As
promptly as practicable following the determination of the Assigned Contracts
by Buyer and in any event no later than 20 days prior to the Confirmation
Hearing, Seller or its Affiliates, as the case may be, shall commence
appropriate proceedings before the Bankruptcy Court and otherwise take all
necessary actions in order to determine Cure Costs with respect to any Assigned
Contract entered into prior to the Petition Date. Notwithstanding the
foregoing, prior to the Closing, Buyer may identify (x) any Assigned
Contract as one that Buyer no longer desires to have assigned to it and such
Contract shall for all purposes of this Agreement, including Section 5.13(c),
and any Ancillary Agreement be deemed not to be an Assigned Contract and (y) any
Contract entered into by Seller of any of its Affiliates following entry of the
Confirmation Order that is Related to any Specified Business as an Assigned
Contract and such Contract shall for all purposes of this Agreement be deemed
to be an Assigned Contract. At the direction of Buyer, Seller shall, or shall
cause its Affiliates to, as the case may be, take all necessary actions and, if
necessary, promptly commence appropriate proceedings before the Bankruptcy
Court in order to effect the assumption of any Assigned Contract by Seller or
any of its Affiliates and the assignment of such Contract to Buyer at the
Closing pursuant to the Plan. Following the Closing, Seller shall not, and
shall cause each of its Affiliates not to, amend, modify, terminate or abrogate
any Assigned Contract. Seller shall, and shall cause each of its Affiliates to,
take all actions such that each OCB Contract that is not an Assigned Contract
shall be terminated or rejected as of the Closing.
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(c) Seller
shall use its commercially reasonable efforts to make available to Buyer as
promptly as practicable after the date hereof (or, in the case of Contracts
entered into after the date hereof, as promptly thereafter as practicable) true
and complete copies of each of the Contracts Related to each Specified Business
(other than Programming Agreements but including retransmission consent
agreements) and of each of the Contracts listed, or required to be listed, in Schedule
3.15(b) of the Seller Disclosure Schedule, and true and complete
summaries of the terms of any such oral Contracts; itbeingunderstoodthat, in any event, such copies and summaries shall be made available in
respect of the Contracts listed on the list delivered pursuant to the first
sentence of Section 5.13(b) no later than 70 days prior to the
Confirmation Hearing.
(d) Other
than the Assumed Cure Costs, Seller shall be liable for all Cure Costs, and
Buyer shall have no Liability to any Seller Indemnified Party, the estate of
Seller or any of its Affiliates or to any non-debtor party to any
Contract in connection therewith; provided, however, that if the
amount of the Cure Costs in respect of any Assigned Contract that is not an OCB
Contract is greater than the amount that would be paid to the non-debtor
party to such Contract on account of a Rejection Claim in respect of such
Contract, taking into consideration the likely recovery on account of such
Rejection Claim under the Plan (as Seller and Buyer mutually agree, or, in the
absence of such agreement, as may be determined by the Bankruptcy Court), then
such excess, but only such excess, shall be deemed to constitute an Assumed
Cure Cost. Seller shall also be liable for all Claims, including Rejection
Claims, in respect of any Contract that is not an Assigned Contract, and Buyer
shall have no Liability to any Seller Indemnified Party, the estate of Seller
or any of its Affiliates or to any non-debtor party to any such Contract
in connection therewith; provided, however, that if the amount
that would be paid to the non-debtor party to an OCB Contract that is not an
Assigned Contract on account of a Rejection Claim in respect of such OCB
Contract, taking into consideration the likely recovery on account of such
Rejection Claim under the Plan, is greater than the Cure Costs with respect to
such OCB Contract (in either case as Seller and Buyer mutually agree, or, in
the absence of such agreement, as may be determined by the Bankruptcy Court),
then, subject to such OCB Contract having been made available to Buyer for at
least 70 days prior to the Confirmation Hearing (or, in the case of Contracts
entered into after such seventieth day, as promptly thereafter as practicable),
such excess, but only such excess, shall constitute an Assumed Liability. Subject
to approval of the Bankruptcy Court (which approval Seller shall use
commercially reasonable efforts to obtain), Buyer (or its designee) shall be
entitled to assume and maintain control, on behalf of Seller and any of its
Affiliates, of the litigation and settlement of any dispute over any Assumed
Cure Costs with respect to any Franchise or, in respect of any OCB Contract,
any Rejection Claim that is an Assumed Liability. Seller shall not, and shall
cause each of its Affiliates not to, without the prior written consent of Buyer
(not to be unreasonably withheld), settle, compromise or offer to settle or
compromise any Liability in respect of (i) Cure Costs under such Assigned
Contract that is not an OCB Contract or under any Franchise unless Seller shall
have assumed all Liabilities in respect thereof and shall have agreed to
release Buyer from all Liabilities in respect of any and all Cure Costs under
such Assigned Contract or such Franchise or (ii) any Rejection Claim in
respect of any OCB Contract unless Seller shall have assumed all Liabilities in
respect thereof and shall have agreed to release Buyer from all Liabilities in
respect of any and all Rejection
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Claims caused by or arising out of
any such settlement or compromise and Seller shall consult with and, in each
case, provide Buyer a meaningful opportunity to participate in any such
litigation or settlement.
(e) Any
motion, application or other court document filed with, and the proposed orders
submitted to, the Bankruptcy Court seeking authorization to assume and assign or
reject or terminate any Contracts Relating to any Specified Business or the
Business shall be provided to Buyer in advance of filing (with a reasonable
opportunity to review and comment on same) and shall be in form and substance
reasonably satisfactory to Buyer in all material respects. On or prior to the
Closing, Seller shall, and shall cause its Affiliates to, cure any and all
defaults and breaches under and satisfy (or with respect to any Assumed
Liability or obligation that cannot be rendered non-contingent and liquidated
prior to the Closing Date, make effective provision satisfactory to Buyer and
the Bankruptcy Court for satisfaction from funds of Seller) any Liability
(other than as to Assumed Cure Costs) arising from or relating to pre-Closing periods
under the Assigned Contracts so that such Contracts may be assumed by Seller or
its Affiliates and assigned to Buyer in accordance with the provisions of
section 365 of the Bankruptcy Code and this Agreement. On or prior to the
Closing, Seller shall, and shall cause its Affiliates to, pay or make adequate
reserve for all Cure Costs other than the Assumed Cure Costs.
(f) Seller
shall, and shall cause its Affiliates to, and Buyer shall, and shall cause
Parent to, each use commercially reasonable efforts, and cooperate, assist and
consult with each other, as promptly as practicable, to secure approval of the
Disclosure Statement, confirmation of the Plan and consummation of the
transactions contemplated by the Plan and this Agreement. Neither the Plan nor the
Disclosure Statement nor any other material document relating to the
transactions contemplated hereby shall be amended, modified, supplemented,
withdrawn or revoked (i) if such amendment, modification, supplement,
withdrawal or revocation affects the terms of the Transaction, the Transferred
Assets, the Assumed Liabilities, Parent or its Affiliates (in the case of
Parent or its Affiliates, only to the extent related to the Transaction or an
interest in the Transferred Joint Venture Parents (other than with respect to
Plan distribution matters) and not in their capacity as creditors or, with
respect to Plan distribution matters, equityholders) without the consent of
Buyer (provided, that such consent shall not be unreasonably withheld)
or (ii) if such amendment, modification, supplement, withdrawal or
revocation would contain or alter any provision (including as to the allocation
of distributable proceeds among Seller’s stakeholders), that would,
individually or in the aggregate, reasonably be expected to materially impair
or materially delay the Transaction. For the avoidance of doubt, the parties
hereto acknowledge and agree that it would not be unreasonable for Buyer to
decline to consent to any Plan modification which would require the payment of
additional consideration by Buyer under the Plan or which would reduce or
impair the Transferred Assets or increase the Assumed Liabilities.
(g) If
an order, judgment or ruling of a court of competent jurisdiction in the
Reorganization Case is entered denying entry of (or vacating), or that is
inconsistent with the entry of, a Confirmation Order satisfying the condition
set forth in Section 6.2(g), Seller and Buyer will cooperate and otherwise
use commercially reasonable efforts to prosecute diligently the entry of a
Confirmation Order satisfying the
120
condition set forth in Section 6.2(g).
If the Confirmation Order or any other orders of the Bankruptcy Court relating
to this Agreement, the Disclosure Statement, the solicitation of acceptances of
the Plan or confirmation of the Plan shall be appealed by any party (or a
petition for certiorari or motion for reconsideration, amendment,
clarification, modification, vacation, stay, rehearing or reargument shall be
filed with respect to any such order), Seller and Buyer will cooperate in
taking such steps to prosecute diligently such appeal, petition or motion, each
of Seller and Buyer shall use commercially reasonable efforts to obtain an
expedited resolution of any such appeal, petition or motion and any expenses
incurred by Seller in connection therewith shall be borne by Seller.
(h) Seller
shall either (i) (A) cause the Subsidiaries of Seller listed on Schedule
5.13(h) of the Seller Disclosure Schedule or any other non-debtor
Subsidiary of Seller that acquires Assets Related to the Acquired Business (the
“Non-Debtor Subsidiaries”) to file a petition for relief under chapter
11 of the Bankruptcy Code (the “Additional Reorganization Case”), (B) take
all steps reasonably necessary to obtain approval by the Bankruptcy Court of
the Transaction as it relates to the Non-Debtor Subsidiaries and (C) obtain
an Additional Discharge for the Non-Debtor Subsidiaries, in each case as
expeditiously as possible under the Bankruptcy Code and the Bankruptcy Rules,
and in any event prior to the Closing, or (ii) subject to the prior
approval of the Bankruptcy Court, cause each Non-Debtor Subsidiary to transfer
any Assets of such Non-Debtor Subsidiary to a Debtor in exchange for payment of
adequate consideration (provided, that such transfer shall be reasonably
satisfactory to Buyer in all material respects and shall render such Assets
subject to the Discharge) (such transfer, a “Non-Debtor Transfer”). Seller
shall, and shall cause each Non-Debtor Subsidiary to, (x) provide Buyer
and its counsel with copies of all material motions, applications, supporting
papers and notices prepared by Seller or such Non-Debtor Subsidiary (including
forms of orders and notices to interested parties) relating in any way to an
Additional Reorganization Case or Non-Debtor Transfer prior to the filing of
such documents and (y) provide Buyer, to the extent practicable, with a
reasonable opportunity to review and comment on same. Seller shall, and shall
cause each Non-Debtor Subsidiary to, consult with Buyer prior to taking any
action in or with respect to any Additional Reorganization Case or Non-Debtor
Transfer. For purposes of Sections 2.1 and 2.3 (including any related
definitions), unless otherwise directed in writing by Buyer (and only to the
extent set forth in such writing), each Non-Debtor Subsidiary shall only be
considered an Affiliate of Seller if and only to the extent such Non-Debtor
Subsidiary shall have performed the actions and satisfied the requirements set
forth in clause (i) or (ii) of this Section 5.13(h).
(i) Seller
shall, and shall cause each of its Affiliates to, use commercially reasonable
efforts to maintain the exclusive periods pursuant to section 1121(d) of
the Bankruptcy Code during which the Debtors may file a plan or plans of
reorganization and solicit acceptances thereof.
Section
5.14 Equipment Leases. Seller
shall, and shall cause its Affiliates to, pay the remaining balances on any
Equipment Leases and shall deliver title to all vehicles and Fixtures and
Equipment covered by such Equipment Leases free and clear of all Encumbrances
to Buyer at the Closing.
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Section
5.15 Expanded Transaction. In the event that the
Friendco Purchase Agreement is terminated prior to the Closing as a result of
actions by, or failure to obtain Governmental Authorizations from, any
Government Antitrust Entity or the FCC, then:
(a) the
following provisions shall become effective upon notice to Buyer by Seller of
such termination:
(i) at
the Closing, an aggregate amount of consideration equal to the Purchase Price
(as defined in the Friendco Purchase Agreement) minus the Aggregate Buyer
Discharge Amount (as defined in the agreement attached hereto as Exhibit 5.15(a)(i),
the “Expanded Agreement”), subject to adjustments pursuant to Section 2.6(a),
2.6(f) and 2.7, shall be added to the Purchase Price in Section 2.5
hereunder; provided, that any such consideration to be delivered by
Buyer pursuant to this Section 5.15 shall be satisfied, at Buyer’s
election, with any combination of cash, which shall be deemed to constitute
part of the Cash Consideration, or shares of Parent Class A Common Stock
(valued at the Per Share Value of the Purchase Shares), which shall be deemed
to constitute additional Purchase Shares for purposes of this Agreement;
(ii) each of the Group 1 Business and the Group 2 Business as
defined in the Friendco Purchase Agreement shall be deemed to be a Specified
Business hereunder, each referred to herein as the “Group 1 Friendco Business”
and “Group 2 Friendco Business,” respectively, applying references herein to
such Specified Businesses as would have been applied under the Friendco
Purchase Agreement; provided, that, the preamble in Sections 6.1
and 6.2 of the Friendco Purchase Agreement shall be incorporated into Sections
6.1 and 6.2, respectively, with respect to the Group 2 Friendco Business;
(iii) the JV Interests and Transferred Investments to have been
acquired by Friendco or its Affiliates under the Friendco Purchase Agreement
shall be added to Section 2.1(x) and the Transferred Assets and Specified
Systems to have been acquired directly by Friendco or its Affiliates under the
Friendco Purchase Agreement shall be deemed to be included in Transferred
Assets and Specified Systems hereunder (provided, that Books and Records
(as defined in the Friendco Purchase Agreement) shall be deemed to include
Excluded Books and Records (as defined in the Friendco Purchase Agreement), and
at the Closing, Seller shall deliver the Excluded Books and Records (as defined
in the Friendco Purchase Agreement) to Buyer);
(iv) the Assumed Liabilities to have been assumed by Friendco or
its Affiliates under the Friendco Purchase Agreement shall be deemed to be
included in Assumed Liabilities hereunder;
(v) all
representations, warranties, covenants and agreements made by Seller or any of
its Affiliates pursuant to the Friendco Purchase Agreement (or any Ancillary Agreements, as defined
therein) shall be deemed to have been made to Buyer hereunder (and under the
corresponding provisions hereof to the extent applicable), including under all
escrow arrangements, all conditions to Friendco’s obligations thereunder
(including Section 6.2(j) thereof, but without regard to the
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application of clause (x) thereof)
shall be deemed to be included in Section 6.2 hereof, and the Seller
Disclosure Schedules delivered thereunder (a true and complete copy of which
Seller has provided to Buyer as of the date hereof) shall be deemed to have
been delivered with the Seller Disclosure Schedules hereunder;
(vi) Section 6.1(i) shall be deleted;
(vii) the following shall be added at the end of Section 6.2:
“(m) Buyer shall have received satisfactory
evidence of the consummation of the Joint Venture Transactions (as defined in
the Expanded Agreement).”; and
(viii) each of the Outside Date and the Extended Outside
Date shall be extended for six months.
(b) Seller
shall, and shall cause each of its Affiliates to, assign all of its rights
under the Friendco Purchase Agreement to Buyer.
Section
5.16 Environmental Matters.
(a) Environmental
Self-Audit. Seller shall provide copies of all correspondence, audits,
assessments, agreements, proposals and other documentation relating to the
Environmental Self-Audit to Buyer. Prior to the Closing Date, Seller shall
cooperate and consult with Buyer in the (i) negotiation of any agreement
with the United States Environmental Protection Agency or any other relevant
Government Entity relating to the Environmental Self-Audit, (ii) development
and negotiation of the scope of the Environmental Self-Audit and (iii) development
and negotiation of corrective action and remedies with respect to the
Environmental Self-Audit Deficiencies. In any agreement with the United States
Environmental Protection Agency or any other relevant Government Entity entered
into prior to the Closing Date with respect to the Environmental Self-Audit,
Seller shall not agree to any remedies that impose obligations to act or
refrain from acting after the Closing Date except to the extent that such
remedies (A) can be satisfied solely through the payment of monetary
damages or (B) are reasonably acceptable to Buyer; provided, that
Buyer shall not be required to agree to non-monetary obligations that could
reasonably be expected to involve more than de
minimis expenditures by Buyer or its Affiliates after the Closing.
(b) Property
Transfer Laws. Seller shall take all actions required by the Connecticut
Transfer Act and the New Jersey Industrial Site Recovery Act, to the extent
such actions are required as a result of this Transaction, provided that
Seller shall not take any actions or enter into any agreement relating to the
Connecticut Transfer Act or the New Jersey Industrial Site Recovery Act that
will impose binding obligations to act or refrain from acting after the Closing
Date except to the extent that such remedies (i) can be satisfied solely
through the payment of monetary damages or (ii) are reasonably acceptable
to Buyer; provided, that Buyer shall not be required to agree to
non-monetary obligations that could reasonably be expected to involve more than
de minimis expenditures by Buyer or its Affiliates after
the Closing.
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(c) Notice
and Information. If at any time prior to the Closing, any material
environmental investigation, study, audit, test, review or other analysis in
relation to any Owned Real Property or Transferred Asset is conducted, Seller
shall (i) promptly notify Buyer thereof and (ii) subject to
applicable Law, keep Buyer informed as to the progress of any such proceeding.
Section
5.17 SOA Compliance. Prior
to the Closing, Seller shall use reasonable efforts, and shall cause its
Affiliates and its and their respective representatives to use reasonable
efforts, to take all actions that Buyer may reasonably request, and to
cooperate and to cause the representatives of Seller and its Affiliates to
cooperate in the taking of such actions, to enable each Specified Business,
immediately following the Closing, to satisfy the applicable obligations under
Sections 302, 404 and 906 of the SOA and the other requirements of the SOA with
respect to the Cable Systems, including establishing and maintaining adequate
disclosure controls and procedures and internal controls over financial
reporting as such terms are defined in the SOA; itbeingunderstoodthat, Seller has material weakness in its internal controls.
Section
5.18 Franchise Expirations. From and after the date
hereof until the Closing, Seller shall, and shall cause its Affiliates to, use
commercially reasonable efforts to obtain renewals or valid extensions of any
Franchises which expire on or before December 31, 2007, in the Ordinary
Course of Business. Seller shall not, and shall cause its Affiliates not to,
agree or accede to any material modifications or amendments to or in connection
with, or the imposition of any material condition to the renewal or extension
of, any of the Franchises that are not reasonably acceptable to Buyer
determined in a manner consistent with the proviso to Section 5.6(c); provided,
however, that if the LFA Approval in respect of such Franchise is not
obtained in connection with any such renewal or extension (after Buyer has
complied with its obligations under Section 5.6(c)) Seller shall only
agree or accede to any such modifications or amendments that are reasonably
acceptable to Buyer (without regard to the proviso to Section 5.6(c)). Upon
reasonable prior notice, Seller shall, and shall cause its Affiliates to, allow
representatives of Buyer to attend meetings and hearings before applicable
Government Entities in connection with the renewal or extension of any
Franchise or Governmental Authorization. Nothing in this Section 5.18
shall limit the obligations of Buyer or Seller pursuant to Section 5.6(c).
Section
5.19 Exchange Act Filings. Prior
to the Closing, Seller shall use commercially reasonable efforts to file (a) all
reports and other materials required to be filed by Seller with the SEC
pursuant to and in compliance with the Exchange Act (other than with respect to
timing), including Section 12 thereof, with respect to any period ending
on or prior to the Closing Date, and (b) the Disclosure Statement as an
exhibit to a Current Report on Form 8-K. Notwithstanding the
foregoing, Seller shall not be required to file quarterly reports for fiscal
quarters ended in 2001, 2002 or 2003 or annual reports for the fiscal years
ending on or before December 31, 2002 if (and only to the extent), (a) the
staff of the SEC shall have provided Buyer with adequate assurance that such
reports are not required to be filed in order for Parent to be deemed current
in its filings under the Exchange Act following the Closing or (b) Seller
shall have previously used such commercially reasonable effort to the
reasonable satisfaction of Buyer. Buyer shall
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reimburse Seller for all reasonable
costs and expenses incurred by Seller pursuant to this Section 5.19 with
respect to the preparation of quarterly reports required to be filed for fiscal
quarters ended in 2001, 2002 or 2003 or annual reports for the fiscal years
ending on December 31, 2001 and December 31, 2002, including reasonable
out-of-pocket costs and any incremental costs and expenses incurred in respect
of the individuals preparing such reports necessary to comply with this Section 5.19,
including all necessary incentive compensation, unless and to the extent
compliance with the requirement to file such reports is waived by Buyer prior
to the incurrence of such costs and expenses. Seller shall give Buyer
reasonable advance notice of the type and the amount of such costs and expenses
prior to the incurrence thereof. Buyer shall use its commercially reasonable
efforts to obtain relief from the staff of the SEC with respect to Parent being
deemed current in its filings under the Exchange Act following the Closing
without the reports required by this Section 5.19. Seller shall cooperate
with Buyer in respect of the obtaining of any such relief. Following the Closing, Seller shall (i) file
all Quarterly Reports on Form 10-Q for any fiscal quarters
commencing after March 31, 2006 that are completed prior to the Closing
Date (to the extent not previously filed) (and/or, as applicable, file the
Annual Report on Form 10-K for the fiscal year completed prior to
the Closing Date) and shall either file the Quarterly Reports on Form 10-Q
for the fiscal quarter that began prior to the Closing Date and that is
completed following the Closing Date or, subject to clause (ii) of this
sentence, provide such financial statements in respect of operations required
to be contained therein directly to Buyer for purposes of any pro forma
presentations in respect each Specified Business (including the MCE Systems)
and each Specified Business (as defined in the Friendco Purchase Agreement),
and (ii) to the extent required by the SEC or the stock exchange or
automated quotation system on which the Parent Class A Common Stock is to
be listed, until such time as the Purchase Shares are registered under Section 12
of the Exchange Act, file all reports and other materials required to be filed
by Seller with the SEC pursuant to and in compliance with the Exchange Act
(other than with respect to timing).
Section
5.20 Cooperation upon Inquiries
as to Rates. If at any time prior to Closing, any Government Entity
commences a Rate Regulatory Matter with respect to a Cable System, Seller shall
(a) promptly notify Buyer and (b) subject to applicable Law, keep
Buyer informed as to the progress of any such proceeding. Without the prior
consent of Buyer, which consent shall not be unreasonably withheld or delayed,
Seller shall not, and shall cause its Affiliates not to, settle any such Rate
Regulatory Matter, either before or after Closing, if (i) Buyer or any of
its Affiliates would have any Liability under such settlement other than an
obligation to pay money in an amount not greater than $50,000, which obligation
is fully reflected in the Closing Net Liabilities Amount used in calculating
the Final Adjustment Amount, or (ii) such settlement would reduce the
rates permitted to be charged by Buyer after the Closing below the rates set
forth on Schedule 3.18 of the Seller Disclosure Schedule or otherwise
then in effect.
Section
5.21 Third Party
Confidentiality Agreements. After the Closing and for so long as reasonably
necessary, Seller shall use reasonable efforts to, and shall cause its
applicable Affiliates to use reasonable efforts to, enforce each
confidentiality agreement entered into by Seller or any such Affiliate with any
third party in connection with
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the Sale Process or otherwise in
connection with the Reorganization Case (each, a “Third Party
Confidentiality Agreement”), on behalf of Buyer and its Affiliates to the
extent such confidentiality agreement relates to the Acquired Business.
Section
5.22 Enforcement. Buyer
will take all necessary action to enforce and perform on a timely basis its
rights and obligations, respectively, set forth in the Parent Agreement. Buyer
will take all necessary action to cause Parent to enforce and perform on a
timely basis Parent’s rights and obligations, respectively, set forth in the
TWX Agreement. Seller shall, and shall cause each of its Affiliates to, timely
enforce all of its rights and perform all of its obligations, under the
Friendco Purchase Agreement.
Section
5.23 Subscriber Reports. Within
30 days following the end of each calendar month commencing August 2005
through the Closing, Seller shall provide Buyer with a written report setting
forth the following information with respect to each Specified Business as of
the end of such calendar month: (a) the
number of Basic Subscribers served by such Specified Business, (b) the
number of Basic Subscribers in such Specified Business whose rate of service is
subject to any discount or promotion (or rebates or similar programs) as of the
subscriber cut-off date for such calendar month and (c) the discounts or
promotions (or rebates or similar programs) offered by such Specified Business
during such calendar month, and the geographic areas in which each such
discount or promotion (or rebate or similar program) is offered. Seller shall,
in consultation with Buyer commencing as promptly as practicable following the
date hereof, develop and, no later than 90 days prior to the Closing,
implement, an accounting system reasonably acceptable to Buyer, (i) which
would reasonably be expected to accurately track the number of Eligible Basic
Subscribers (in accordance with the definition thereof) and (ii) the
results of which are traceable to Seller’s billing system and capable of being
verified, using commercially reasonable efforts, as part of the computation of
and resolution of disputes regarding the Subscriber Adjustment Amount pursuant
to Section 2.6 (such accounting system, the “Subscriber Accounting
System”).
Section
5.24 Transitional Services.
Seller shall provide to Buyer, with respect to each Specified Business, upon
written request from Buyer received by Seller no later than 30 days prior to
the Closing Date, such services as may be reasonably requested by Buyer in
connection with the operation of such Specified Business for a commercially
reasonable transition period following the Closing to allow for conversion of
existing or replacement services, in each case to the extent and only to the
extent Seller or its Affiliates retains the Assets and employees necessary to
allow the provision of such services (“Transitional Services”). In addition,
between the date hereof and the Closing, Seller shall use commercially
reasonable efforts to cooperate with Buyer to assist Buyer in developing and
implementing a plan of transition. Buyer shall promptly reimburse Seller for
the reasonable out-of-pocket costs and any incremental costs and expenses
necessary to provide Transitional Services. All other terms and conditions for
the provision of Transitional Services shall be reasonably satisfactory to both
Buyer and Seller and subject to applicable Law.
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ARTICLE VI
CONDITIONS TO CLOSING
Section
6.1 Conditions to the
Obligations of Buyer and Seller. The obligations of the parties hereto to
effect the Closing are subject to the satisfaction (or waiver by both parties)
prior to the Closing of the following conditions:
(a) Bankruptcy
Court Approval. The Confirmation Order shall have been entered by the
Bankruptcy Court, shall be a Final Order and shall be in full force and effect,
and the Plan shall be effective in accordance with its terms.
(b) Consummation
of the Plan. All conditions precedent to consummation of the Plan shall
have been satisfied or waived in accordance with the terms of the Plan and the
Plan shall be consummated substantially contemporaneously with the Closing.
(c) SEC/DOJ
Matters. There shall have been a SEC/DOJ Settlement.
(d) HSR.
The waiting periods applicable to the consummation of the Transaction under the
HSR Act shall have expired or been terminated.
(e) No
Prohibition. No Law shall be in effect prohibiting the Transaction.
(f) Consents
and Approvals. All Seller Required Approvals and all Buyer Required
Approvals shall have been obtained, in each case in form and substance
reasonably satisfactory to both parties.
(g) Registration
of Purchase Shares. Unless the issuance of the Purchase Shares pursuant to
the Plan and the terms of this Agreement is exempted from any registration
under the Securities Act pursuant to the Confirmation Order or a no-action
letter from the staff of the SEC, a registration statement in respect of the
Purchase Shares shall have been declared effective by the SEC and no stop order
suspending the effectiveness of such registration shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
[The]Subject to Section 5.5(b), at such
time as the Purchase Shares are distributed to the Debtors’ claimants and
stakeholders pursuant to thePlan, the Purchase
Shares shall be freely tradable and not subject to any resale restrictions
except to the extent that the holder thereof is an Affiliate of Parent or an
underwriter (as defined in section 1145(b) of the Bankruptcy Code).
(h) [Listing of Purchase Shares. The Purchase
Shares shall have been approved for listing on the NYSE, subject only to
official notice of issuance.]Intentionally Omitted.
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(i) Cross-Conditionality.
Subject to Section 5.15, the closing under the Friendco Purchase Agreement
shall have occurred contemporaneously with the Closing.
Section
6.2 Conditions to the
Obligation of Buyer. The obligation of Buyer to effect the Closing is
subject to the satisfaction (or waiver by Buyer) prior to the Closing of the
following conditions:
(a) Representations
and Warranties. The representations and warranties in Section 3.1, Section 3.2(a) (other
than the first sentence thereof), Sections 3.3 through 3.6 and Sections 3.24
through 3.26 (the “Class 1 Representations and Warranties”; all
other representations and warranties contained in Article III, the “Class 2
Representations and Warranties”) that are qualified as to materiality or
Material Adverse Effect shall be true and correct, and the Class 1
Representations and Warranties that are not so qualified shall be true and
correct in all material respects, in each case, at the time made and as of the
Closing Date as if made at and as of such time (except, in each case, to the
extent expressly made as of an earlier date, in which case as of such earlier
date). The Class 2 Representations and Warranties (other than Section 3.19
(but only to the extent related to any event, occurrence, condition or
circumstance first occurring after the date hereof), Section 3.20(b) or
the first two sentences of Section 3.20(c), assuming, as to Sections 3.20(b) and
3.20(c), the information delivered pursuant to such Sections was prepared by
Seller in good faith) shall be true and correct (without giving effect to any
materiality or Material Adverse Effect qualifiers set forth therein) at the
time made and as of the Closing Date as if made at and as of such time (except
to the extent expressly made as of an earlier date, in which case as of such
earlier date), except where the failure of such Class 2 Representations
and Warranties to be true and correct has not and would not, individually or in
the aggregate, reasonably be expected to result in a Material Adverse Effect.
(b) Covenants.
Each of the covenants and agreements of Seller to be performed on or prior to
the Closing shall have been duly performed in all material respects.
(c) Ancillary
Agreements. Seller and its Affiliates shall have executed and delivered the
Ancillary Agreements to which they are a party except (i) those Ancillary
Agreements the failure of which to have been executed and delivered would not
reasonably be expected, individually or in the aggregate, to impair the benefit
of the Transaction to Buyer (other than in a de
minimis manner), taking into account Section 2.11, (ii)
in respect of LFA Approvals not obtained as of the Closing and (iii) those
Ancillary Agreements required to be delivered pursuant to Section 2.10(s) the
failure of which to have been delivered would not reasonably be expected,
individually or in the aggregate, to materially impair the benefit of the
Transaction to Buyer.
(d) Certificate.
Buyer shall have received a certificate, signed on behalf of Seller by the
Chief Executive Officer or Chief Financial Officer of Seller, dated the Closing
Date, to the effect that the conditions set forth in Sections 6.2(a), 6.2(b) and
6.2(f) have been satisfied.
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(e) Franchises.
Except as would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect, all LFA Approvals shall have been obtained,
and all Purchase Rights (other than in connection with the Exchange) shall have
been waived, in respect of each Specified Business on or prior to the Closing; provided,
that this condition shall be deemed not to have been satisfied until the
earliest of (i) the date upon which this condition would be satisfied if
the foregoing Material Adverse Effect exception were omitted, (ii) 30 days
following the date the condition would have been satisfied but for this proviso
and (iii) six Business Days prior to the Outside Date.
(f) No
Material Adverse Change. Since the date of this Agreement, no event or
condition has occurred that, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect.
(g) Bankruptcy
Plan and Confirmation Order. The Confirmation Order and the Plan confirmed
by the Bankruptcy Court shall, to the extent relating to or affecting the
Transaction, the Transferred Assets, the Assumed Liabilities, Parent or its
Affiliates (in the case of Parent or its Affiliates, only to the extent related
to the Transaction or an interest in the Transferred Joint Venture Parents
(other than with respect to Plan distribution matters) and not in their
capacity as creditors or, with respect to Plan distribution matters,
equityholders), be in all material respects satisfactory to Buyer in its
reasonable discretion and, without limiting the generality of the foregoing,
the Confirmation Order shall contain the finding that Buyer is a good faith
purchaser of the Transferred Assets pursuant to section 363(m) of the
Bankruptcy Code unless Buyer’s actions have been determined by the Bankruptcy
Court to have not been in good faith preclude such a finding.
(h) Subscribers.
At least 60 days prior to the Closing, Seller shall have implemented the
Subscriber Accounting System. The number of Eligible Basic Subscribers served
by each Specified Business shall be at least equal to (i) the Base
Subscriber Number for such Specified Business minus
(ii) the Subscriber Basket for such Specified Business minus (iii) the Subscriber Cap for
such Specified Business.
(i) Intentionally
Omitted.
(j) No
Buyer Adverse Tax Event. There shall not have been a Buyer Adverse Tax
Event that is in existence as of the Closing.
(k) Financial
Information. Seller shall have provided Buyer with all Financial
Information and the Additional Financial Statements contemplated by Section 5.11
(disregarding for this purpose all references therein to “commercially
reasonable efforts”) except to the extent Buyer has obtained relief from the
SEC with respect thereto or has failed to comply with its obligations under Section 5.11([d]c).
Section
6.3 Conditions to the
Obligation of Seller. The obligation of Seller to effect the Closing is
subject to the satisfaction (or waiver by Seller) prior to the Closing of the
following conditions:
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(a) Representations
and Warranties. The representations and warranties in Sections 4.1 through
4.8 and 4.24 (the “Buyer Class 1 Representations and Warranties”;
all other representations and warranties contained in Article IV, the “Buyer
Class 2 Representations and Warranties”) that are qualified as to
materiality or Parent Material Adverse Effect shall be true and correct, and
the Buyer Class 1 Representations and Warranties that are not so qualified
shall be true and correct in all material respects, in each case, at the time
made and as of the Closing Date as if made at and as of such time (except, in
each case, to the extent expressly made as of an earlier date, in which case as
of such earlier date). The Buyer Class 2 Representations and Warranties
shall be true and correct (without giving effect to any materiality or Parent
Material Adverse Effect qualifiers set forth therein) at the time made and as
of the Closing Date as if made at and as of such time (except to the extent
expressly made as of an earlier date, in which case as of such earlier date),
except where the failure of such Buyer Class 2 Representations and
Warranties to be true and correct has not and would not, individually or in the
aggregate, reasonably be expected to result in a Parent Material Adverse
Effect.
(b) Covenants.
Each of the covenants and agreements of Buyer to be performed on or prior to
the Closing shall have been duly performed in all material respects.
(c) Ancillary
Agreements. Buyer shall have, and shall have caused Parent to have,
executed and delivered the Ancillary Agreements to which it is a party except (i) those
Ancillary Agreements the failure of which to have been executed and delivered
would not reasonably be expected, individually or in the aggregate, to impair
the benefit of the Transaction to Seller (other than in a de minimis manner), (ii) in respect
of LFA Approvals not obtained as of the Closing and (iii) the Ancillary
Agreements required to be delivered pursuant to Section 2.9(d)(xi) the
failure of which to have been delivered would not reasonably be expected,
individually or in the aggregate, to materially impair the benefit of the
Transaction to Seller.
(d) Certificate.
Seller shall have received a certificate, signed on behalf of Buyer by the
Chief Executive Officer or Chief Financial Officer of Buyer, dated the Closing
Date, to the effect that the conditions set forth in Sections 6.3(a), 6.3(b) and
6.3(e) have been satisfied.
(e) No
Material Adverse Change. Since the date of this Agreement, no event or
condition has occurred that, individually or in the aggregate, has had or would
reasonably be expected to have a Parent Material Adverse Effect.
(f) Legal
Opinion. Seller shall have received an opinion of counsel that the Purchase
Shares have been validly issued in accordance with the laws of the State of
Delaware.
(g) Bankruptcy
Plan and Confirmation Order. The Confirmation Order and the final Plan
shall not differ in a manner that would be materially adverse to Seller and its
Affiliates from the confirmation order and the Plan, respectively, proposed by
Seller to the Bankruptcy Court in accordance with Section 5.13.
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(h) Amended
and Restated Charter and Amended and Restated By-laws. The Amended
and Restated Charter shall have been filed with the Secretary of State of the
State of Delaware and shall be effective as of immediately following the
Closing. The Amended and Restated By-laws shall have been duly adopted by
Parent and shall be effective as of immediately following the Closing.
ARTICLE VII
SURVIVAL; INDEMNIFICATION; CERTAIN REMEDIES
Section 7.1 Survival. The representations and warranties of
Buyer contained in this Agreement shall expire upon the Closing. The
representations and warranties of Seller contained in this Agreement shall
survive the Closing for the period set forth in this Section 7.1. Subject
to Section 2.7(d), all representations and warranties made by Seller
contained in this Agreement and all claims with respect thereto shall terminate
upon the expiration of twelve months after the Closing Date (the “Buyer
Indemnification Deadline”); itbeingunderstoodthat
in the event notice of any claim for indemnification under this Article VII
has been given (within the meaning of Section 9.1) prior to the Buyer
Indemnification Deadline, the representations and warranties that are the
subject of such indemnification claim shall survive with respect to such claim
until such time as such claim is finally resolved.
Section 7.2 Indemnification by Seller.
(a) Seller
hereby agrees that from and after the Closing it shall indemnify, defend and
hold harmless Buyer, its Affiliates, and their respective directors, officers,
shareholders, partners, members, attorneys, accountants, agents,
representatives and employees (other than the Transferred Employees) and their
heirs, successors and permitted assigns, each in their capacity as such (the “Buyer
Indemnified Parties” and, together with the Seller Indemnified Parties, the
“Indemnified Parties”) from, against and in respect of any damages,
losses, charges, Liabilities, claims, demands, actions, suits, proceedings,
payments, judgments, settlements, assessments, deficiencies, taxes, interest,
penalties, and costs and expenses (including removal costs, remediation costs,
closure costs, fines, penalties and expenses of investigation and ongoing
monitoring, reasonable attorneys’ fees, and reasonable out of pocket disbursements)
(collectively, “Losses”) imposed on, sustained, incurred or suffered by,
or asserted against, any of the Buyer Indemnified Parties, whether in respect
of third party claims, claims between the parties hereto, or otherwise,
directly or indirectly relating to, arising out of or resulting from (i) subject
to Section 7.2(b), any breach of any representation or warranty made by
Seller contained in this Agreement for the period such representation or
warranty survives, (ii) any breach of any covenant or agreement of Seller
contained in this Agreement and (iii) any Excluded Asset or Excluded
Liability.
(b) Seller
shall not be liable to the Buyer Indemnified Parties for any Losses with
respect to the matters contained in Section 7.2(a)(i):
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(i) until
any such Losses in respect of the Group 1 Business exceed an aggregate amount
equal to the Group 1 Threshold Amount, and then for all such Losses in excess
of $42,000,000, up to an aggregate amount not to exceed the Group 1 Cap Amount;
provided, however, that the limitations herein regarding the
Group 1 Threshold Amount shall not apply to the Class 1 Representations
and Warranties; and
(ii) until any such Losses in respect of the Group 2 Business
exceed an aggregate amount equal to the Group 2 Threshold Amount, and then for
all such Losses in excess of $38,000,000, up to an aggregate amount not to
exceed the Group 2 Cap Amount; provided, however, that the
limitations herein regarding the Group 2 Threshold Amount shall not apply to
the Class 1 Representations and Warranties.
(c) Subject
to Section 7.8, the Buyer Indemnified Parties shall be entitled to receive
payment only from the Escrow Account with respect to any Liability of Seller
for any Losses under Section 7.2(a) and, with respect to each
Specified Business, only up to an aggregate amount not to exceed the Cap Amount
applicable to such Specified Business. Notwithstanding anything to the contrary
in this Agreement, Seller shall not be liable for any Losses that (i) are
reflected in the Closing Net Liabilities Amount used in calculating the Final
Adjustment Amount to the extent and only to the extent so reflected or (ii) have
been actually discharged (or the functional equivalent thereof in terms of its
effect on Buyer, each Specified Business, the Transferred Assets and the
Assumed Liabilities) pursuant to the Discharge (or, as applicable, the MCE
Discharge or an Additional Discharge) to the extent and only to the extent so
discharged (or such functional equivalent).
Section 7.3 Indemnification by Buyer. Buyer hereby agrees
that from and after the Closing it shall indemnify, defend and hold harmless
Seller and its Affiliates and their respective directors, officers,
stakeholders, partners, members, attorneys, accountants, agents,
representatives and employees and their heirs, successors and permitted
assigns, each in their capacity as such (the “Seller Indemnified Parties”)
from, against and in respect of any Losses imposed on, sustained, incurred or
suffered by, or asserted against, any of the Seller Indemnified Parties,
whether in respect of third party claims, claims between the parties hereto, or
otherwise, directly or indirectly relating to, arising out of or resulting from
(a) the Assumed Liabilities Related to each Specified Business, (b) any
breach of a covenant or agreement of Buyer contained in this Agreement or (c) the
Transferred Assets Related to each Specified Business, each Specified Business
or the Transferred Employees to the extent attributable to the operation or
ownership of the Transferred Assets Related to such Specified Business or such
Specified Business, or the employment of the Transferred Employees following
the Closing. Notwithstanding anything to the contrary set forth in this
Agreement, to the extent that any Seller Indemnified Party is or becomes a
shareholder or other equity holder of Parent or any of its Affiliates,
indemnification hereunder shall not include Losses suffered by such Seller
Indemnified Party (or its Affiliates) in such shareholder or other equity
holder capacity by reason of (i) the indemnities being provided by Buyer
hereunder or (ii) Losses suffered in such capacity in respect of any
Transferred Assets or Assumed Liabilities.
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Section 7.4 Third Party Claim Indemnification Procedures.
(a) In
the event that any written claim or demand for which an indemnifying party (an “Indemnifying
Party”) may have liability to any Indemnified Party hereunder is asserted
against or sought to be collected from any Indemnified Party by a third party
(a “Third Party Claim”), such Indemnified Party shall promptly, but in
no event more than thirty days following such Indemnified Party’s receipt of a
Third Party Claim, notify the Indemnifying Party in writing of such Third Party
Claim, the amount or the estimated amount of damages sought thereunder to the
extent then ascertainable (which estimate shall not be conclusive of the final
amount of such Third Party Claim), any other remedy sought thereunder, any
relevant time constraints relating thereto and, to the extent practicable, any
other material details pertaining thereto (a “Claim Notice”); provided,
however, that the failure timely to give a Claim Notice shall not affect
the rights of an Indemnified Party hereunder except to the extent that such
failure has a material prejudicial effect on the defenses or other rights
available to the Indemnifying Party with respect to such Third Party Claim. The
Indemnifying Party shall have 15 days (or such lesser number of days set forth
in the Claim Notice as may be required by court proceeding in the event of a
litigated matter) after receipt of the Claim Notice (the “Notice Period”)
to notify the Indemnified Party that it desires to defend the Indemnified Party
against such Third Party Claim; provided, however, that the
Indemnifying Party shall not be entitled to assume or maintain control of the
defense of any Third Party Claim and shall pay the fees and expenses of counsel
retained by the Indemnified Party if (i) the Third Party Claim relates to
or arises in connection with any criminal proceeding, action, indictment,
allegation or investigation, (ii) the Third Party Claim seeks injunctive
or equitable relief against the Indemnified Party, (iii) the Indemnifying
Party has failed to defend or is failing to defend in good faith the Third
Party Claim, (iv) the Indemnifying Party and the Indemnified Party are
both named parties to the proceedings and the Indemnified Party shall have
reasonably concluded that representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests between
them or (v) in the case of a Buyer Indemnified Party, it is reasonably
likely that the Losses arising from such Third Party Claim will exceed the
amount such Buyer Indemnified Party will be entitled to recover as a result of
the limitations set forth in Section 7.2(b); provided, further,
that prior to assuming control of such defense, the Indemnifying Party must
acknowledge that it would have an indemnity obligation for any Losses resulting
from such Third Party Claim.
(b) In
the event that the Indemnifying Party notifies the Indemnified Party within the
Notice Period that it desires to defend the Indemnified Party against a Third
Party Claim and subject to Section 7.4(a), the Indemnifying Party shall
have the right to defend the Indemnified Party by appropriate proceedings and
shall have the sole power to direct and control such defense at its expense. Once
the Indemnifying Party has duly assumed the defense of a Third Party Claim, the
Indemnified Party shall have the right, but not the obligation, to participate
in any such defense and to employ separate counsel of its choosing. Subject to Section 7.4(a),
the Indemnified Party shall participate in any such defense at its expense. The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party, settle, compromise or offer to settle or compromise any
Third Party Claim unless (i) the Indemnifying Party shall have agreed to
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indemnify and hold the Indemnified Party
harmless from and against any and all Losses caused by or arising out of any
such settlement or compromise, (ii) such settlement or compromise shall
include as an unconditional term thereof the giving by the claimant of a
release of the Indemnified Party, reasonably satisfactory to the Indemnified
Party, from all Liability with respect to such Third Party Claim and (iii) such
settlement or compromise would not result in (A) the imposition of a
consent order, injunction or decree that would restrict the future activity or
conduct of the Indemnified Party or any of its Affiliates, (B) a finding
or admission of a violation of Law or violation of the rights of any Person by
the Indemnified Party or any of its Affiliates, (C) a finding or admission
that would have an adverse effect on other claims made or threatened against
the Indemnified Party or any of its Affiliates, or (D) any monetary
liability of the Indemnified Party that will not be promptly paid or reimbursed
by the Indemnifying Party.
(c) If
the Indemnifying Party (i) is not entitled to defend a Third Party Claim, (ii) elects
not to defend the Indemnified Party against a Third Party Claim, whether by not
giving the Indemnified Party timely notice of its desire to so defend or
otherwise or (iii) after assuming the defense of a Third Party Claim,
fails to take reasonable steps necessary to defend diligently such Third Party
Claim within ten days after receiving written notice from the Indemnified Party
to the effect that the Indemnifying Party has so failed, the Indemnified Party
shall have the right but not the obligation to assume its own defense; itbeingunderstoodthat the Indemnified Party’s right to
indemnification for a Third Party Claim shall not be adversely affected by
assuming the defense of such Third Party Claim. The Indemnified Party shall not
settle a Third Party Claim for which the Indemnifying Party shall have monetary
liability hereunder without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
Section 7.5 Consequential Damages; Materiality; Interest. Notwithstanding
anything to the contrary contained in this Agreement, no Person shall be liable
under this Article VII for any consequential, punitive, special,
incidental or indirect damages, including lost profits, except to the extent
awarded by a court of competent jurisdiction in connection with a Third Party
Claim, except to the extent the Loss arises out of an intentional or willful
breach by the non-claiming party and the Loss was reasonably foreseeable. Any
computation of Losses hereunder in respect of a breach of representation or
warranty shall measure such Losses without giving effect to any qualifier for
materiality or Material Adverse Effect set forth therein. Amounts payable in
respect of any Losses under Section 7.3 shall bear interest at LIBOR
calculated on a 365-day basis from the date notice of the Losses for
which indemnification is sought was delivered until the date of payment of
indemnification by the Indemnifying Party. Amounts payable in respect of any
Losses under Section 7.2 shall bear interest as set forth in the
definition of “Escrow Payment.”
Section 7.6 Payments. The Indemnifying Party shall pay all
amounts payable pursuant to this Article VII, promptly following receipt
from an Indemnified Party of a bill, together with all accompanying reasonably
detailed back up documentation, by (a) in the case of a payment by Seller,
making an Escrow Payment from the Escrow Account,
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subject to the proviso to the last
sentence in Section 2.6(f) with respect to the matters set forth in Section 2.6(f) (including
as applied to any MCE System in accordance with Section 2.7(c)), and (b) in
the case of a payment by Buyer, wire transfer of immediately available funds,
in an amount equal to the Loss that is the subject of indemnification hereunder,
unless the Indemnifying Party in good faith disputes the Loss, in which event
it shall so notify the Indemnified Party. In any event, the Indemnifying Party
shall pay to the Indemnified Party (i) in the case of a payment by Seller,
an Escrow Payment from the Escrow Account, subject to the proviso to the last
sentence in Section 2.6(f) with respect to the matters set forth in Section 2.6(f) (including
as applied to any MCE System in accordance with Section 2.7(c)), and (ii) in
the case of a payment by Buyer, by wire transfer of immediately available
funds, in each case in an amount equal to the amount of any Loss (and any
interest thereon) for which it is liable hereunder no later than three days
following any final determination of such Loss and the Indemnifying Party’s
liability therefor. A “final determination” shall exist when (A) the
parties to the dispute have reached an agreement in writing, (B) a court
of competent jurisdiction shall have entered a final and non appealable order
or judgment, or (C) an arbitration or like panel shall have rendered a
final non appealable determination with respect to disputes the parties have
agreed to submit thereto.
Section 7.7 Characterization of Indemnification Payments. All
payments made by an Indemnifying Party to an Indemnified Party in respect of
any claim pursuant to this Article VII shall be treated as adjustments to
the Purchase Price for all income Tax purposes but shall not affect the Escrow
Amount (other than to the extent of any payment hereunder); provided, however,
that any payments pursuant to this Article VII that represent interest
payable under Section 7.5 shall be treated as (a) deductible to the
Indemnifying Party and (b) taxable to the Indemnified Party. The parties
agree to treat, and to cause their respective Affiliates to treat, any such
payments in the foregoing manner, for all income Tax purposes (unless otherwise
required by a change in applicable income Tax Law or as a result of a good
faith resolution of a contest).
Section 7.8 Remedies. From and after the Closing, the rights
and remedies of Seller and Buyer under this Article VII shall be exclusive
and in lieu of any and all other rights and remedies which Seller and Buyer may
have under this Agreement or otherwise against each other with respect to the
Transaction for monetary relief with respect to (a) any breach of any
representation or warranty or any failure to perform any covenant or agreement
set forth in this Agreement, other than those which are intentional or willful
and other than those in (i) the proviso to the last sentence
in Section 2.6(f) (including as applied to any MCE System in
accordance with Section 2.7(c)), (ii) the Escrow Agreement and (iii) each
MCE Management Agreement and (b) the Assumed Liabilities
or the Excluded Liabilities, and Buyer and Seller each expressly waives any and
all other rights or causes of action it or its Affiliates may have against the
other party or its Affiliates for monetary relief now or in the future under
any Law with respect to the Transaction.
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ARTICLE VIII
TERMINATION
Section 8.1 Termination
by Mutual Consent. This Agreement may be terminated
at any time prior to the Closing by mutual written agreement of Seller and
Buyer.
Section 8.2 Termination
by Either Buyer or Seller. This Agreement may be terminated
at any time prior to the Closing by Buyer or Seller, by giving written notice
of termination to the other party, if (a) subject to Section 2.8(b), the
Closing shall not have occurred on or before July 31, 2006 (the “Outside
Date”) so long as the party proposing to terminate has not breached in any
material respect any of its representations, warranties, covenants or other
agreements under this Agreement in any manner that shall have proximately
contributed to the failure of the Closing to so occur (such breaching party, a
“Proximate Cause Party”); provided, however, that if any
Government Antitrust Entity has not completed its review of the Transaction or
the transactions contemplated by the Friendco Purchase Agreement by such time,
or either party determines in good faith at such time that additional time is
necessary in order to forestall any action to restrain, enjoin or prohibit the
Transaction or the transactions contemplated by the Friendco Purchase Agreement
by any Government Antitrust Entity, and, in either such case, all conditions
set forth in Article VI (other than Section 6.1(d)) have been satisfied or
waived in writing by the party entitled to the benefit thereof or are
immediately capable of being satisfied, then in either such case, such date may
be extended by either party to a date not beyond October 31, 2006(the “Extended
Outside Date”); provided, further, that if the Closing has
not occurred by such date as a result of the failure to satisfy Section 6.1(i)
by reason of actions by, or failure to obtain Governmental Authorizations from,
any Governmental Antitrust Entity or the FCC, then such date shall be extended
for an additional six months following the date that the Extended Outside Date
would otherwise occur or (b) any Law (other than an order, judgment or ruling
contemplated by Section 8.3(d)(ii) or 8.4(c)(ii)) permanently restraining,
enjoining or otherwise prohibiting consummation of the Transaction shall become
final and non-appealable.
Section 8.3 Termination
by Seller. This Agreement may be terminated
at any time prior to the Closing by Seller, by written notice to Buyer:
(a) prior to the commencement of the
Confirmation Hearing, if (i) as of the date of such termination, Seller is not
in breach of Section 5.10, (ii) the Board authorizes Seller, subject to
complying with the terms of this Agreement, to enter into a binding written
agreement concerning a transaction that constitutes a Superior Proposal and
Seller notifies Buyer in writing that it intends to enter into such an
agreement, attaching the most current version of such agreement (and all
related agreements) to such notice (provided, that if such intention
changes Seller shall promptly notify Buyer of that fact) and (iii) Buyer does
not make, within five Business Days of receipt of Seller’s written notification
of its intention to enter into a binding agreement for a Superior Proposal, an
offer which, thereafter, the Board determines, in good faith after
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consultation with its financial advisors, is at least as favorable to
the stakeholders of Seller as is the Superior Proposal (taking into account,
without limitation, financial terms of any termination fee that may be payable
pursuant to Section 8.5(b) and the likelihood of consummation);
(b) if there has been a
breach of any representation, warranty, covenant or agreement made by Buyer in
this Agreement such that an executive officer of Buyer would be unable to
deliver the closing certificate to Seller regarding Buyer’s representations and
warranties and Buyer’s performance of its obligations as required pursuant to
Section 6.3(a) and Section 6.3(b), respectively, and such breach or condition
is not curable or, if curable, is not cured within 60 days after written notice
thereof is given by Seller to Buyer; provided, however, that if,
with respect to any such breach or condition that cannot reasonably be expected
to be cured within 60 days, Buyer is diligently proceeding to cure such breach,
this Agreement may not be terminated pursuant to this Section 8.3(b) for so long
as (i) such breach is reasonably likely to be cured prior to the date on which
this Agreement would otherwise be terminated under Section 8.2 and (ii) Buyer
continues such efforts to cure; provided, further, that the right
to terminate this Agreement pursuant to this Section 8.3(b) shall not be
available to Seller if as of such time it is a Proximate Cause Party;
(c) prior to the
commencement of the Confirmation Hearing, if (i) as of the date of such
termination, Seller is not in breach of Section 5.10, (ii) the Board authorizes
Seller to file a Superior Alternate Plan with the Bankruptcy Court and Seller
notifies Buyer in writing that it intends to file such Superior Alternate Plan,
attaching the most current version of such Superior Alternate Plan (and all
related agreements and supporting documentation) to such notice (provided,
that if such intention changes Seller shall promptly notify Buyer of that fact)
and (iii) Buyer does not make, within ten Business Days of receipt of Seller’s
written notification of its intention to file a Superior Alternate Plan, an
offer which, thereafter, the Board determines, in good faith after consultation
with its financial advisors, is at least as favorable to the stakeholders of
Seller as is the Superior Alternate Plan (taking into account, without
limitation, financial terms of any termination fee that may be payable pursuant
to Section 8.5(b) and the likelihood of consummation); or
(d) if (i) at any time
after the conclusion of voting on the Plan as established by the Bankruptcy
Court, Seller’s stakeholders who are entitled to vote on the Plan vote in
sufficient number and amount against the Plan such that the Plan is not
otherwise capable of being confirmed by the Bankruptcy Court or (ii) subject to
compliance by Seller with the first sentence of Section 5.13(g), at any time
after the expiration of 150 days following the entry of an order, judgment or
ruling by a court of competent jurisdiction in the Reorganization Case denying
entry of (or vacating), or that is inconsistent with the entry of, a
Confirmation Order satisfying the condition set forth in Section 6.2(g), the
Bankruptcy Court shall not have thereafter entered a Confirmation Order
satisfying the condition set forth in Section 6.2(g); provided, however,
that Seller may only terminate this Agreement pursuant to this Section
8.3(d)(ii) if at such time it would not reasonably be expected that a
Confirmation Order satisfying the condition set forth in Section 6.2(g) shall
be entered prior to the Outside Date.
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Section 8.4 Termination
by Buyer. This Agreement may be terminated
at any time prior to the Closing by Buyer, by written notice to Seller:
(a) if there has been a breach of any
representation, warranty, covenant or agreement made by Seller in this Agreement
(assuming entry of the Confirmation Order) such that an executive officer of
Seller would be unable to deliver the closing certificate to Buyer regarding
Seller’s representations and warranties and Seller’s performance of its
obligations as required pursuant to Section 6.2(a) and Section 6.2(b),
respectively, and such breach is not curable or, if curable, is not cured
within 60 days after written notice thereof is given by Buyer to Seller; provided,
however, that if, with respect to any such breach or condition that
cannot reasonably be expected to be cured within 60 days, Seller is diligently
proceeding to cure such breach, this Agreement may not be terminated pursuant
to this Section 8.4(a) for so long as (i) such breach is reasonably likely to
be cured prior to the date on which this Agreement would otherwise be
terminated under Section 8.2 and (ii) Seller continues such efforts to cure;
(b) if (i) Seller has not, by October 15,2005, filed all motions reasonably necessary to obtain the Confirmation Order
or (ii) if the Protections Order is vacated or modified in any material respect
following the date hereof (except as modified pursuant to the order of the
Bankruptcy Court entered on June 16, 2006);
(c) if (i) at any time
after the conclusion of voting on the Plan as established by the Bankruptcy
Court, Seller’s stakeholders who are entitled to vote on the Plan vote in
sufficient number and amount against the Plan such that the Plan is not
otherwise capable of being confirmed by the Bankruptcy Court or (ii) subject to
compliance by Buyer with the first sentence of Section 5.13(g), at any time
after the expiration of 150 days following the entry of an order, judgment or
ruling by a court of competent jurisdiction in the Reorganization Case denying
entry of (or vacating), or that is inconsistent with the entry of, a
Confirmation Order satisfying the condition set forth in Section 6.2(g), the
Bankruptcy Court shall not have thereafter entered a Confirmation Order
satisfying the condition set forth in Section 6.2(g); provided, however,
that Buyer may only terminate this Agreement pursuant to this Section
8.3(c)(ii) if at such time it would not reasonably be expected that a
Confirmation Order satisfying the condition set forth in Section 6.2(g) shall
be entered prior to the Outside Date; or
(d) following (i) the conversion of the
Reorganization Case into one or more cases under chapter 7 of the Bankruptcy
Code or (ii) the appointment of a chapter 11 trustee in the Reorganization
Case;
provided, however, that the right to terminate this Agreement
pursuant to Section 8.4(a), (b) or (c) shall not be available to Buyer if as of
such time it is a Proximate Cause Party.
Section 8.5 Effect of Termination.
(a) In the event of the
termination of this Agreement in accordance with Article VIII, this Agreement
shall thereafter become void and have no effect, and no party hereto shall have
any Liability to the other party hereto or their respective
138
Affiliates, or their respective
directors, officers or employees, except for the obligations of the parties
hereto contained in this Section 8.5 and in Sections 9.1, 9.4, 9.6, 9.7, 9.10,
9.11 and 9.13 (and any related definitional provisions set forth in Article I),
and except that nothing in this Section 8.5 shall relieve any party from
liability for any willful breach of this Agreement that arose prior to such
termination.
(b) In the event that (i) this Agreement is terminated by Seller pursuant to Section 8.2(a)
prior to the entry of a Confirmation Order satisfying the condition set forth
in Section 6.2(g) which has not been vacated by a court of competent
jurisdiction and Buyer is not a Proximate Cause Party as of the date of such
termination, or (ii) this Agreement is terminated (A) by Seller pursuant to
Section 8.3(a), 8.3(c) or 8.3(d) or (B) by Buyer pursuant to Section 8.4(a)
(but, with respect to the representations and warranties of Seller, only in the
case of a willful breach by Seller), 8.4(b) or 8.4(c) except, in the case of
this clause (ii)(B), in the event that Buyer is a Proximate Cause Party as of
the date of such termination, then Seller shall pay Buyer, by wire transfer of
immediately available funds, a termination fee of $352,850,000 payable upon the
earlier of consummation of an Acquisition or the effective date of a chapter 11
plan of Seller and/or one or more of its Affiliates approved by the Bankruptcy
Court, which plan involves a substantial portion of the Assets of Seller and
its Affiliates.
(c) The obligation of
Seller to pay the amount payable under Section 8.5(b) (and the payment thereof)
shall be absolute and unconditional; such payment shall be an administrative
expense under section 507(a)(1) of the Bankruptcy Code and shall be payable as
specified herein and not subject to any defense, claim, counterclaim, offset,
recoupment, or reduction of any kind whatsoever.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Notices. All notices, requests, demands,
approvals, consents and other communications hereunder shall be in writing and
shall be deemed to have been duly given and made if served by personal delivery
upon the party for whom it is intended or delivered by registered or certified
mail, return receipt requested, or if sent by telecopier or email, provided
that the telecopy or email is promptly confirmed by telephone confirmation
thereof, to the Person at the address set forth below, or such other address as
may be designated in writing hereafter, in the same manner, by such Person:
Section 9.2 Amendment; Waiver. Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by Buyer and Seller, or in the
case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies
herein provided shall be cumulative and not exclusive of any rights or remedies
provided by Law except as otherwise specifically provided in Article VII.
Section 9.3 No Assignment or Benefit to Third
Parties. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors,
legal representatives and permitted assigns.
No party to this Agreement may assign any of its rights or transfer or
delegate any of its obligations under this Agreement, by operation of Law or
otherwise, without the prior written consent of the other party hereto, except,
in whole or in part, (a) as provided in Section 9.5, (b) with respect to
Seller’s rights and obligations, [following the Closing to
any entity]to a limited number of entities acting on behalf of Seller’s estate [(provided,
that no]that are designated by Seller and reasonably
acceptable (including in terms of the number of entities and the form and
identity of each such entity) to the Buyer (each, a “PermittedAssignee”);
providedthat (i) each such Permitted Assignee shall agree in
writing to be bound by the obligations and Liabilities of the Seller set forth
in this Agreement and (ii)such assignment by Seller under this [clause (b) will relieve Seller of its Liabilities hereunder]Section 9.3 shall not relieve Seller of any of its obligations or Liabilities
under this Agreement unless Seller provides the Buyer with a guarantee of the
obligations and Liabilities of such Permitted Assignee under this Agreement
that is in form and substance reasonably acceptable to the Buyer), (c) to Friendco under the Exchange Agreement and (d) by
Buyer to one or more direct or indirect wholly owned Subsidiaries of Buyer
(provided, that Buyer identifies such Subsidiary and the rights and obligations
to be assigned on or before Closing; provided, further,
that no such assignment by Buyer to a wholly owned Subsidiary under this clause
(d) will relieve Buyer of its Liabilities hereunder). Any assignment or transfer permitted
hereunder shall be evidenced in writing signed by the assignor and assignee, a
copy of which shall be delivered to the other party hereto. In connection
with any assignment by Seller of its rights and obligations under the Friendco
Purchase Agreement to any Permitted Assignees (as defined in the Friendco
Purchase Agreement), such Permitted Assignees (as defined in the Friendco
Purchase Agreement) will agree, in
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form and substance reasonably acceptable to
Buyer, to be bound by and liable for Seller’s obligations and Liabilities
hereunder; provided, that no such agreement will relieve Seller of any of
its obligations or Liabilities hereunder. In connection
with any assignment, transfer or delegation by Buyer to Friendco as permitted
above, Buyer shall be relieved of any Liability so assigned, transferred or
delegated to the extent Seller has the right to enforce in full against
Friendco any such Liability. Nothing in
this Agreement, express or implied, is intended to confer upon any Person other
than Buyer, Seller, the Indemnified Parties and their respective successors,
legal representatives and permitted assigns, any rights or remedies under or by
reason of this Agreement.
Section 9.4 Entire
Agreement. This Agreement (including all
Schedules and Exhibits) and the Ancillary Agreements executed as of the date
hereof contain the entire agreement between the parties hereto with respect to
the subject matter hereof and thereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, except for the
TWX Confidentiality Agreement and the Seller Confidentiality Agreement, which
shall remain in full force and effect except as otherwise provided herein.
Section 9.5 Debtor
Obligations Joint and Several; Fulfillment of Obligations. Seller shall, and shall cause each
of its Affiliates to, cause each and every Debtor, including each that is an
Asset Transferring Subsidiary hereunder, to agree for the benefit of Buyer,
except to the extent any Liability is limited to the Escrow Account as a result
of the limitations set forth in Article VII, to be jointly and severally liable
for any breach or violation of Seller’s representations, warranties or
covenants hereunder and to execute and deliver such Contracts and take such
further action as may be reasonably requested by Buyer to evidence the intent
and effect of the foregoing (including, for the avoidance of doubt, the
inclusion, except to the extent any Liability is limited to the Escrow Account
as a result of the limitations set forth in Article VII, of an express
undertaking of such joint and several liability in the Plan). Any obligation of any party to any other
party under this Agreement, or any of the Ancillary Agreements, which
obligation is performed, satisfied or fulfilled completely and without any
adverse legal implications to the obligee, by an Affiliate of such party, shall
be deemed to have been performed, satisfied or fulfilled by such party.
Section 9.6 Public
Disclosure. Notwithstanding anything to the
contrary contained herein, no press release or similar public announcement or
communication shall be made or caused to be made relating to this Agreement and
the Transaction unless specifically approved in advance by both parties hereto,
except that a party hereto may issue any press release or make any public
announcement or communication relating to this Agreement and the Transaction
that may be required by any applicable Law (including any listing requirement)
without such approval if, to the extent practicable, such party has used
commercially reasonable efforts to obtain the approval of the other party before
issuing such press release or making such public announcement or communication.
Section 9.7 Expenses. Except as otherwise expressly
provided in this Agreement, whether or not the Closing occurs, all costs and
expenses incurred in
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connection with this Agreement and the transactions contemplated hereby
shall be borne by the party incurring such costs and expenses.
Section 9.8 Schedules.
(a) The disclosure of
any matter in any Section relating to representations of the Seller Disclosure
Schedule or the Buyer Disclosure Schedule shall not be deemed to constitute an
admission by Seller or Buyer or to otherwise imply that any such matter is
material for the purposes of this Agreement, unless the inclusion of such
matter in such Schedule is required to make the representation true. A matter set forth in one Schedule of the
Seller Disclosure Schedule or Buyer Disclosure Schedule pertaining to Article
III or IV, as applicable, need not be set forth in any other Schedule of such
disclosure schedule pertaining to Article III or IV, as applicable, or on a
Schedule corresponding to any other Section of Article III or IV, as
applicable, so long as its relevance to such other Schedule or Section is
readily apparent on the face of the information so disclosed. A matter set forth in one Schedule of the
Seller Disclosure Schedule or Buyer Disclosure Schedule pertaining to Article V
(which shall in no event address matters occurring prior to the date hereof)
need not be set forth on a Schedule corresponding to any Section of Article III
or IV, as applicable, so long as (a) its relevance to such other Schedule or
Section is readily apparent on the face of the information so disclosed and (b)
such matter does not qualify the representations and warranties set forth in Articles
III or IV, as applicable, to the extent such representations and warranties are
made as of the date hereof or as of another specific date prior to the date
hereof.
(b) No later than ten
Business Days prior to the Closing, Seller may deliver to Buyer an update to Schedule
3.8(a) and Schedule 3.8(b) of the Seller Disclosure Schedule but
only in respect of matters that will be discharged (or the functional
equivalent thereof in terms of its effect on Buyer, each Specified Business,
the Transferred Assets and the Assumed Liabilities) pursuant to the Discharge
(or, as applicable, the MCE Discharge or an Additional Discharge) but arise
from actions, omissions or circumstances continuing as of the Closing. No matter added to Schedule 3.8(a) or Schedule
3.8(b) of the Seller Disclosure Schedule pursuant to the preceding sentence
will be treated as set forth on any other Schedule as a result of the second
sentence of Section 9.8(a).
(c) When an area is set
forth on one Schedule A Part as a primary Cost Center and another Schedule A
Part as a non-primary Cost Center, the following shall apply in determining the
Systems and System Group to which it relates:
(i) for the Schedule A Part with respect to which such area is the primary
Cost Center, such Schedule will be deemed to exclude the Subscribers, and
Assets primarily related to those Subscribers, included in the applicable
non-primary Cost Center(s) and (ii) for any given Schedule A Part with respect
to which such area is a non-primary Cost Center, such Schedule A Part will be
deemed to include only the Subscribers, and Assets primarily related to those
Subscribers, included in the applicable non-primary Cost Center.
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Section 9.9 Bulk
Sales. Seller and Buyer agree to waive
compliance with Article 6 of the Uniform Commercial Code as adopted in each of
the jurisdictions in which any of the Transferred Assets are located to the
extent that such Article is applicable to the transactions contemplated hereby.
Section 9.10 Governing
Law; Submission to Jurisdiction; Selection of Forum; Waiver of Trial by Jury. THE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
Each party hereto agrees that it shall bring any action or proceeding in
respect of any claim arising out of or related to this Agreement or the
transactions contained in or contemplated by this Agreement and the Ancillary
Agreements, exclusively in (a) the Bankruptcy Court so long as the
Reorganization Case remains open and (b) after the completion of the
Reorganization Case or in the event that the Bankruptcy Court determines that
it does not have jurisdiction, the United States District Court for the
Southern District of New York or any New York State court sitting in New York
City (together with the Bankruptcy Court, the “Chosen Courts”), and
solely in connection with claims arising under this Agreement or the
transactions that are the subject of this Agreement or any of the Ancillary
Agreements (i) irrevocably submits to the exclusive jurisdiction of the Chosen
Courts, (ii) waives any objection to laying venue in any such action or
proceeding in the Chosen Courts, (iii) waives any objection that the Chosen
Courts are an inconvenient forum or do not have jurisdiction over any party
hereto and (iv) agrees that service of process upon such party in any such
action or proceeding shall be effective if notice is given in accordance with
Section 9.1. Seller irrevocably
designates The Corporation Trust Company as its agent and attorney-in-fact for
the acceptance of service of process and making an appearance on its behalf in
any such claim or proceeding and for the taking of all such acts as may be
necessary or appropriate in order to confer jurisdiction over it before the
Chosen Courts and Seller stipulates that such consent and appointment is
irrevocable and coupled with an interest.Each party hereto irrevocably waives any and all right to trial by jury in
any legal proceeding arising out of or relating to this Agreement or the
transactions contemplated hereby.
Section 9.11 Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same Agreement.
Section 9.12 Headings. The heading references herein and
the table of contents hereof are for convenience purposes only, and shall not
be deemed to limit or affect any of the provisions hereof.
Section 9.13 Severability. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability of the other
provisions hereof. If any provision of
this Agreement, or the application thereof to any Person or any circumstance,
is invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the
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application of such provision to other Persons or circumstances shall not
be affected by such invalidity or unenforceability, nor shall such invalidity
or unenforceability affect the validity or enforceability of such provision, or
the application thereof, in any other jurisdiction.
Section 9.14 Specific
Enforcement. The parties agree that irreparable
damage would occur and that the parties would not have any adequate remedy at
Law in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of Section 5.10 or Article VIII and to enforce specifically the terms
and provisions of such Sections and, following entry of the Confirmation Order,
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
of this Agreement, such rights being in addition to any other remedy to which
the parties are entitled at Law or in equity.
The parties waive any requirement for security or the posting of any
bond or other surety in connection with any temporary or permanent award or injunctive,
mandatory or other equitable relief.
[Remainder of page intentionally left
blank.]
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IN WITNESS WHEREOF, the parties have executed or
caused this Agreement to be executed as of the date first written above.
ADELPHIA COMMUNICATIONS
CORPORATION
By:
Name:
Title:
TIME WARNER NY CABLE LLC
By:
Name:
Title:
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Dates Referenced Herein and Documents Incorporated by Reference
