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PURCHASE AGREEMENT
DATED AS OF FEBRUARY 22, 1999
AMONG
FRONTIERVISION PARTNERS, L.P.,
AND
FVP GP, L.P., the GENERAL PARTNER, and
CERTAIN DIRECT AND INDIRECT LIMITED PARTNERS
OF FRONTIERVISION PARTNERS, L.P.,
as Sellers,
AND
ADELPHIA COMMUNICATIONS CORPORATION,
as Buyer
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PURCHASE AGREEMENT
DATED AS OF FEBRUARY 22, 1999
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TABLE OF CONTENTS
Page
ARTICLE 1
CERTAIN DEFINITIONS
<S> <C>
1.1 Terms Defined in this Section.............................................................1
1.2 Terms Defined Elsewhere in this Agreement................................................11
1.3 Rules of Construction....................................................................13
ARTICLE 2
SALE AND PURCHASE OF PURCHASED INTERESTS; ASSUMPTION OF
LIABILITIES; ADDITIONAL PURCHASE CONSIDERATION
2.1 Agreement to Sell and Buy................................................................13
2.2 Assumption of Obligations................................................................14
2.3 Additional Purchase Consideration for Purchased Interests................................14
2.4 Escrow Deposit; Registration Rights......................................................15
2.5 Cash Consideration Adjustments...........................................................16
2.6 Payment at Closing.......................................................................20
2.7 Post-Closing Payment of Cash Consideration Adjustments...................................20
2.8 Seller Specific Liabilities..............................................................23
2.9 Additional Cash Consideration Adjustments................................................25
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF FVP
3.1 Organization and Authority of FVP........................................................28
3.2 Authorization and Binding Obligation.....................................................28
3.3 Organization and Ownership of FrontierVision Companies...................................29
3.4 Absence of Conflicting Agreements; Consents..............................................30
3.5 Financial Statements.....................................................................30
3.6 Absence of Undisclosed Liabilities.......................................................31
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Page
3.7 Absence of Certain Changes...............................................................31
3.8 Franchises, Licenses, Material Contracts.................................................32
3.9 Title to and Condition of Real Property and Tangible Personal Property...................32
3.10 Intangibles..............................................................................33
3.11 Information Regarding the Systems........................................................33
3.12 Taxes....................................................................................36
3.13 Employee Plans...........................................................................36
3.14 Environmental Laws.......................................................................37
3.15 Claims and Litigation....................................................................38
3.16 Compliance With Laws.....................................................................38
3.17 Transactions with Affiliates.............................................................38
3.18 Broker...................................................................................39
3.19 Securities Law Matters...................................................................39
3.20 Cure.....................................................................................40
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
4.1 Authority of Sellers; Authorization and Binding Obligation...............................40
4.2 Absence of Conflicting Agreements; Consents..............................................41
4.3 Title to Purchased Interests.............................................................41
4.4 Broker...................................................................................42
4.5 Taxes....................................................................................43
4.6 Securities Law Matters...................................................................43
4.7 Cure.....................................................................................44
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization; Authorization and Binding Obligation.......................................44
5.2 Authorization and Binding Obligation.....................................................45
5.3 Absence of Conflicting Agreements; Consents..............................................45
5.4 Capital Structure; ACC Class A Common Stock..............................................46
5.5 Claims and Litigation....................................................................46
5.6 SEC Reports..............................................................................46
5.7 Broker...................................................................................47
5.8 Investment Purpose; Investment Company...................................................47
5.9 Cure.....................................................................................48
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Page
ARTICLE 6
SPECIAL COVENANTS AND AGREEMENTS
6.1 Operation of Business Prior to Closing...................................................48
6.2 Confidentiality; Press Release...........................................................52
6.3 Cooperation; Commercially Reasonable Efforts.............................................53
6.4 Consents.................................................................................53
6.5 HSR Act Filing...........................................................................58
6.6 Buyer's Qualifications and Financing.....................................................59
6.7 Discharge of Debt Documents..............................................................59
6.8 Retention and Access to the FrontierVision Companies' Records............................60
6.9 Employee Matters.........................................................................61
6.10 Tax Matters..............................................................................63
6.11 FrontierVision Name......................................................................64
6.12 Releases.................................................................................65
6.13 Directors and Officers Insurance.........................................................65
6.14 Rate Regulatory Matters..................................................................65
6.15 Distribution by SPCs of Interest in General Partner; Cancellation of SPC Notes...........66
6.16 Cooperation on Buyer SEC Matters.........................................................66
6.17 Stock Consideration Registration Rights Agreement........................................67
6.18 State Cable Systems......................................................................67
6.19 Lien Searches............................................................................68
6.20 Distant Signals; Copyright Matters.......................................................68
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF BUYER AND SELLERS
7.1 Conditions to Obligations of Buyer.......................................................69
7.2 Conditions to Obligations of Sellers.....................................................72
ARTICLE 8
CLOSING AND CLOSING DELIVERIES
8.1 Closing..................................................................................74
8.2 Deliveries by Sellers....................................................................76
8.3 Deliveries by Buyer......................................................................77
ARTICLE 9
TERMINATION
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Page
9.1 Termination by Agreement.................................................................78
9.2 Termination by FVP.......................................................................78
9.3 Termination by Buyer.....................................................................79
9.4 Effect of Termination....................................................................80
9.5 Attorneys' Fees..........................................................................81
ARTICLE 10
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION;
CERTAIN REMEDIES
10.1 Survival.................................................................................81
10.2 Indemnification by Sellers...............................................................81
10.3 Post-Closing Escrow Agreement............................................................82
10.4 Indemnification by Buyer.................................................................83
10.5 Certain Limitations on Indemnification Obligations.......................................84
10.6 Procedure for Indemnification............................................................87
10.7 Treatment of Indemnification Payments....................................................88
ARTICLE 11
MISCELLANEOUS
11.1 Fees and Expenses........................................................................88
11.2 Notices..................................................................................89
11.3 Benefit and Binding Effect...............................................................90
11.4 Further Assurances ......................................................................90
11.5 GOVERNING LAW............................................................................90
11.6 Entire Agreement.........................................................................91
11.7 Amendments; Waiver of Compliance; Consents...............................................91
11.8 Consent and Agreements of Sellers........................................................91
11.9 Counterparts.............................................................................92
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FRONTIERVISION'S DISCLOSURE SCHEDULE
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Section Description
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Section 1.1 Excluded Assets; Seasonal Subscribers; Prepayment Penalties
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Section 2.5 Capital Expenditures Budget; Carriage Adjustments
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Section 3.3 Ownership of FrontierVision Companies
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Section 3.4 FrontierVision Conflicts; Consents
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Section 3.5 Financial Statements
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Section 3.6 FrontierVision Liabilities
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Section 3.7 Certain Developments
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Section 3.8 Franchises, Licenses, Contracts
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Section 3.9 Real Property and Tangible Personal Property; Encumbrances
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Section 3.10 Intangibles
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Section 3.11 Systems Information
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Section 3.12 Tax Matters
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Section 3.13 Employee Plans
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Section 3.14 Environmental Matters
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Section 3.15 Claims and Litigation
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Section 3.16 Compliance with Laws
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Section 3.17 Transactions with Affiliates
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Section 3.18 Broker
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Section 4.2 Sellers Conflicts; Consents
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Section 4.3 Title to Purchased Interests
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Section 6.1 Post-Signing Covenants
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Section 6.4 Franchise Rebuild/Upgrade Requirements
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TABLE OF EXHIBITS
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Exhibit Description
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Exhibit A Form of Noncompetition Agreement
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Exhibit B Form of Post-Closing Escrow Agreement
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Exhibit C Form of Opinion of FVP's Counsel
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Exhibit D Form of Opinion of Buyer's Counsel
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Exhibit E Addresses of Sellers
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Exhibit F Closing Net Liabilities Example Calculation
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Exhibit G Form of Seller Release
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Exhibit H Form of Management Release
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Exhibit I Post-Closing Escrow Agreement Release Provisions
Example
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</TABLE>
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "Agreement") is entered into as of
February 22, 1999, by and among FrontierVision Partners, L.P., a Delaware
limited partnership ("FVP"), FVP GP, L.P., a Delaware limited partnership (the
"General Partner"), each party named as a "Limited Partner Seller" on the
signatures pages hereto, each party named as an "SPC Seller" on the signature
pages hereto, and Adelphia Communications Corporation, a Delaware corporation
("Buyer").
RECITALS
The General Partner owns all of the general partnership interests in
FVP and certain Subordinated Notes issued by FVP. The Limited Partner Sellers
are each limited partners of FVP and own limited partnership interests in FVP
and certain Subordinated Notes issued by FVP. Each SPC Seller owns all of the
capital stock of an SPC, which in turn is a limited partner of FVP and owns a
limited partnership interest in FVP and certain Subordinated Notes issued by
FVP. The SPC Sellers also hold certain Subordinated Notes issued by FVP.
Collectively, the Limited Partner Sellers and the SPCs own all of the limited
partnership interests in FVP, and collectively the General Partner, the Limited
Partner Sellers, the SPC Sellers and the SPCs own all of the Subordinated Notes
issued by FVP. Buyer desires to acquire from the General Partner and the Limited
Partner Sellers all of their partnership interests in FVP and Subordinated Notes
issued by FVP and desires to acquire from the SPC Sellers all of their stock in
the SPCs and Subordinated Notes issued by FVP. The General Partner, Limited
Partner Sellers and SPC Sellers (collectively, the "Sellers" and individually a
"Seller") desire to sell to Buyer all of their partnership interests in FVP or
stock in the SPCs, as described above and all of their Subordinated Notes issued
by FVP as described above, in each case for the consideration and on the terms
and conditions set forth in this Agreement.
AGREEMENTS
In consideration of the above recitals and of the mutual agreements and
covenants contained in this Agreement, the parties to this Agreement, intending
to be bound legally, agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Terms Defined in this Section.
The following terms, as used in this Agreement, have the meanings set
forth in this Section:
"ACC Class A Common Stock" means the Class A Common Stock, par value
$.01 per share, of Buyer that is authorized and designated as such in Buyer's
Certificate of Incorporation as in effect on the date of this Agreement.
<PAGE>
"Accounts Receivable" means all rights of the FrontierVision Companies
to payment for goods or services provided prior to the Adjustment Time,
including rights to payment for cable services to customers of the Systems, the
sale of advertising, the leasing of channels, and other goods and services and
rentals.
"Adjustment Time" means (A) with respect to Adjustment Assets and
Adjustment Liabilities and other items that primarily relate to the
FrontierVision Companies as a whole, 11:59 p.m., local Denver time, on the day
immediately preceding the Closing Date, and (B) with respect to Adjustment
Assets and Adjustment Liabilities and other items that primarily relate to a
particular System, 11:59 p.m. local time for that System, on the day immediately
preceding the Closing Date.
"Affiliate" means, with respect to any Person, any other Person that
directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with the specified Person.
"Assets" means all of the tangible and intangible assets that are
owned, leased or held by the FrontierVision Companies and that are used in
connection with the conduct of the business or operations of the Systems other
than the Excluded Assets and less any such Assets that are sold, transferred, or
otherwise conveyed by the FrontierVision Companies to third Persons prior to the
Closing in accordance with the provisions of this Agreement, provided that with
respect to any assets that are leased by the FrontierVision Companies or
otherwise not owned by the FrontierVision Companies, "Assets" includes only the
interest, title and rights in such assets held by the FrontierVision Companies.
"Basic Subscriber" means, with respect to any System as of any date,
each residential customer or resident of a multiple dwelling unit served by such
System who subscribes to at least broadcast basic service (either alone or in
combination with any other service and including subscribers who receive
regularly offered discounts), and who has rendered payment for one month's
service at such System's regular basic monthly subscription rate without
discount (excluding regularly offered discounts) and who does not have more than
$10.00 (excluding late charges and fees and amounts subject to a bona fide
dispute) that is two months or more past due from and including the last day of
the period to which any outstanding bill relates.
"Bulk Subscriber" means, with respect to any System, any commercial
establishment (e.g., any hotel or motel) or multiple dwelling unit establishment
(e.g., any apartment, condominium or cooperative building) served by such System
that subscribes to at least broadcast basic service (either alone or in
combination with any other service), and who has rendered payment for one
month's service at such customer's regular basic monthly subscription rate and
who does not have more than $10.00 (excluding late charges and fees and amounts
subject to a bona fide dispute) that is two months or more past due from and
including the last day of the period to which any outstanding bill relates.
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<PAGE>
"Cable Act" means Title VI of the Communications Act of 1934, as
amended, 47 U.S.C. Section 151 et seq., and all other provisions of the Cable
Communications Policy Act of 1984, the Cable Television Consumer Protection and
Competition Act of 1992, and the provisions of the Telecommunications Act of
1996 amending Title VI of the Communications Act of 1934, in each case as
amended and in effect from time to time.
"Capital Stock" means any and all shares, interests, or other
equivalent interests (however designated) in the equity of any Person, including
capital stock, partnership interests, and membership interests, and including
any rights, options or warrants with respect thereto.
"Charter Documents" means the articles or certificate of incorporation,
bylaws, certificate of limited partnership, partnership agreement, certificate
of formation, limited liability company operating agreement, and all other
organizational documents of any Person other than an individual.
"Closing" means the consummation of the purchase and sale of the
Purchased Interests pursuant to this Agreement in accordance with the provisions
of Article 8.
"Closing Date" means the date on which the Closing occurs.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Treasury Regulations promulgated thereunder, as amended and in effect from time
to time.
"Consents" means the consents, permits, approvals and authorizations of
Governmental Authorities and other Persons necessary to transfer the Purchased
Interests to Buyer or otherwise to consummate the transactions contemplated by
this Agreement.
"Contracts" means all leases, easements, rights-of-way, rights of
entry, programming agreements, pole attachment and conduit agreements, customer
agreements, and other agreements, written or oral (including any amendments and
other modifications thereto) to which any FrontierVision Company is a party or
which are binding upon any FrontierVision Company and that relate to any of the
Assets or the business or operations of any of the Systems or any of the
FrontierVision Companies and (A) which are in effect on the date hereof, or (B)
which are entered into by any FrontierVision Company between the date hereof and
the Closing Date.
"Copyright Act" means the Copyright Act of 1976, as amended and in
effect from time to time.
"Credit Agreement" means the Second Amended and Restated Credit
Agreement dated as of December 19, 1997 among FrontierVision Operating Partners,
L.P., as Borrower, The Chase Manhattan Bank, as Administrative Agent, J.P.
Morgan Securities Inc., as Syndication Agent, CIBC Inc., as Documentation Agent,
and each of the other Lenders party thereto, as amended and in effect from time
to time.
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<PAGE>
"Debt Documents" means each of the loan or credit agreements, notes,
bonds, indentures and other agreements and instruments pursuant to which any
indebtedness for borrowed money or any capital lease obligation of any
FrontierVision Company (and any guarantee by a FrontierVision Company of
indebtedness for borrowed money or any capitalized lease obligation of another
Person that is not a FrontierVision Company) in an aggregate principal amount in
excess of $250,000 is outstanding or committed to.
"Deposit Escrow Agreement" means the Escrow Agreement executed
concurrently herewith by FVP, Buyer and the Escrow Agent.
"Deposit Registration Rights Agreement" means the Registration Rights
Agreement between Buyer and FVP, relating to the registration of the Escrow
Registrable Securities constituting the Deposit Escrow Property, which agreement
shall be executed on the date of this Agreement.
"Employee Plan" means any pension, retirement, profit-sharing, deferred
compensation, vacation, severance, bonus, incentive, medical, vision, dental,
disability, life insurance or any other employee benefit plan as defined in
Section 3(3) of ERISA to which any FrontierVision Company or any ERISA Affiliate
of any FrontierVision Company contributes or which any FrontierVision Company or
any such ERISA Affiliate sponsors or maintains, or by which any FrontierVision
Company or any such ERISA Affiliate is otherwise bound.
"Encumbrances" means any pledge, claim, mortgage, lien, charge,
encumbrance, or security interest of any kind or nature whatsoever.
Notwithstanding the foregoing, "Encumbrances" does not include any restriction
on transfer or assignment.
"Environmental Claim" means any written claim or notice or any
proceeding before a Governmental Authority arising under or pertaining to any
Environmental Law or Hazardous Substance.
"Environmental Law" means any Legal Requirement pertaining to land use,
air, soil, surface water, groundwater (including the protection, cleanup,
removal, remediation or damage thereof), or to the protection of public health
and safety, or any other environmental matter, including the following laws as
amended and in effect from time to time: (A) Clean Air Act (42 U.S.C. ss. 7401,
et seq.); (B) Clean Water Act (33 U.S.C. ss. 1251, et seq.); (C) Resource
Conservation and Recovery Act (42 U.S.C. ss. 6901, et seq.); (D) Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss. 9601, et
seq.); (E) Safe Drinking Water Act (42 U.S.C. 300f, et seq.); and (F) Toxic
Substances Control Act (15 U.S.C. ss. 2601, et seq.).
"Equivalent Subscribers" means, with respect to any System as of any
date, the sum of: (A) the number of Basic Subscribers served by such System as
of such date; (B) the number of Basic Subscribers represented by the Bulk
Subscribers served by such System as of such date, which number shall be
calculated for each class of service provided by such System by dividing (1) the
monthly billings attributable to such System's Bulk Subscribers for each such
class of service provided by such
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<PAGE>
System for the calendar month immediately preceding the date on which such
calculation is made, by (2) the full, non-discounted monthly rate charged by
such System for such class of service, respectively (excluding pass-through
charges for sales taxes, line-itemized franchise fees, fees charged by the FCC
and other similar line-itemized charges); and (C) the number of equivalent Basic
Subscribers represented by the "Seasonal Subscribers" of the FrontierVision
Companies as of the date of determination, which number will be determined as
set forth in Section 1.1 of FrontierVision's Disclosure Schedule. For purposes
of the foregoing, monthly billings shall exclude billings for a la carte or
digital service tiers and for premium services, pass-through charges for sales
taxes, line- itemized franchise fees, fees charged by the FCC and other similar
line-itemized charges, and nonrecurring charges or credits which include those
relating to installation, connection, relocation and disconnection fees and
miscellaneous rental charges for equipment such as remote control devices and
converters.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder, as amended and in effect from
time to time.
"ERISA Affiliate" means a trade or business affiliated within the
meaning of Sections 414(b), (c) or (m) of the Code.
"Escrow Agent" means Bank of Montreal Trust Company.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC promulgated thereunder, as in effect
from time to time.
"Excluded Assets" means the assets listed as "Excluded Assets" in
Section 1.1 of FrontierVision's Disclosure Schedule.
"FCC" means the Federal Communications Commission.
"FCC Regulations" means the rules, regulations and published policies
of the FCC promulgated by the FCC with respect to the Cable Act, as in effect
from time to time.
"Franchise Area" means any geographic area in which a FrontierVision
Company is authorized to provide cable television service pursuant to a
Franchise or provides cable television service in which a Franchise is not
required pursuant to applicable Legal Requirements.
"Franchise" means any cable television franchise and related
agreements, ordinances, permits or other authorizations issued or granted to a
FrontierVision Company by any Franchising Authority.
"Franchising Authorities" means all Governmental Authorities that have
issued or granted any Franchises relating to the operation of a System.
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<PAGE>
"FrontierVision Companies" means FVP and each of the other entities
listed as "FrontierVision Companies" in Section 3.3 of FrontierVision's
Disclosure Schedule, each of which may be referred to herein individually as a
"FrontierVision Company." None of Main Security Surveillance, Inc., The Maine
InternetWorks, Inc., or Landmark NetAccess, Inc. is a "FrontierVision Company"
as used in this Agreement, except that for the limited purposes of determining
"Adjustment Assets" and "Adjustment Liabilities" of the FrontierVision Companies
in accordance with Section 2.5, Main Security Surveillance, Inc. shall be
treated as a FrontierVision Company.
"FrontierVision's Disclosure Schedule" means FrontierVision's
Disclosure Schedule referred to in this Agreement and delivered to Buyer by FVP
and Sellers concurrently with the execution of this Agreement.
"FrontierVision Inc." means FrontierVision Inc., a Delaware
corporation.
"FrontierVision Liabilities" means, with respect to the FrontierVision
Companies on a consolidated basis, without duplication, all liabilities of the
FrontierVision Companies (as defined and determined in accordance with GAAP),
including, without limitation the following: (A) all obligations of the
FrontierVision Companies for borrowed money; (B) all obligations of the
FrontierVision Companies evidenced by bonds, debentures, notes, indentures,
mortgages, or similar instruments; and (C) all capital lease obligations of the
FrontierVision Companies. Notwithstanding the foregoing, "FrontierVision
Liabilities" shall not include: (A) any amounts in respect of performance bonds
issued by any of the FrontierVision Companies in the ordinary course of
business; (B) any amounts in the nature of prepayment penalties or premiums
resulting from the consummation of the transactions contemplated by this
Agreement or satisfaction of the Indentures, which prepayment penalties and
premiums with respect to the Debt Documents are set forth in Section 1.1 of
FrontierVision's Disclosure Schedule; and (C) the Subordinated Notes. No
liability that would otherwise be included within the meaning of "FrontierVision
Liability" as defined above shall be excluded from the definition solely
because: (A) the liability relates to an item or matter that constitutes a
Permitted Encumbrance; or (B) the liability relates to an item or matter that is
disclosed to Buyer in this Agreement or FrontierVision's Disclosure Schedule.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"General Partnership Interest" means the general partnership interest
in FVP held by the General Partner.
"Governmental Authority" means any federal, state, or local
governmental authority, including any court or administrative or regulatory
agency.
"Hazardous Substance" means any pollutant, contaminant, hazardous or
toxic substance, material, constituent or waste or any pollutant or any release
thereof that is labeled or regulated as such
- 6 -
<PAGE>
by any Governmental Authority pursuant to an Environmental Law, including,
without limitation, petroleum or petroleum compounds, radioactive materials,
asbestos or any asbestos-containing material, or polychlorinated biphenyls.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, and the regulations promulgated by the Federal Trade Commission with
respect thereto, as amended and in effect from time to time.
"Indentures" means: (A) the Indenture dated as of October 7, 1996,
between FrontierVision Operating Partners, L.P. and FrontierVision Capital
Corporation, as Issuers, and U.S. Bank National Association, as Trustee,
relating to the 11% Senior Subordinated Notes due 2006 (the "1996 Indenture");
(B) the Indenture dated as of September 19, 1997 between FrontierVision
Holdings, L.P. and FrontierVision Holdings Capital Corporation, as Issuers, and
U.S. Bank National Association, as Trustee, relating to the 11 7/8% Senior
Discount Notes due 2007 (the "1997 Indenture"); and (C) the Indenture dated as
of December 9, 1998 between FrontierVision Holdings, L.P. and FrontierVision
Holdings Capital II Corporation, as Issuers, and U.S. Bank National Association,
as Trustee, relating to the 11 7/8% Senior Discount Notes due 2007, Series B
(the "1998 Indenture"), in each case as amended and in effect from time to time,
each of which may be referred to herein individually as an "Indenture."
"Intangibles" means all copyrights, trademarks, trade names, service
marks, service names, patents, permits, proprietary information, technical
information and data, machinery and equipment warranties, and other similar
intangible property rights and interests issued to or owned by any of the
FrontierVision Companies.
"Legal Requirements" means applicable common law and any applicable
statute, ordinance, code or other law, rule, regulation, order, technical or
other standard, requirement or procedure enacted, adopted, promulgated or
applied by any Governmental Authority, including any applicable decree or
judgment of a court of competent jurisdiction, all as in effect from time to
time.
"Licenses" means all domestic satellite, business radio and other FCC
licenses, and all other licenses, authorizations and permits issued by any
Governmental Authority that is held by a FrontierVision Company in the business
and operations of the Systems, excluding the Franchises.
"Limited Partnership Interests" means the limited partnership interests
in FVP held by the Limited Partner Sellers.
"Loss" means any claim, loss, liability, damages, penalties, costs and
expenses (excluding any and all consequential, incidental and special damages).
"Management Release" means the "Agreement of Release" substantially in
the form of Exhibit H to be delivered to Buyer by the Persons designated on
Exhibit H at the Closing.
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<PAGE>
"Material Contract" means the Debt Documents, the Material Leases, and
any other Contract that requires payments by one of the FrontierVision Companies
(or entitles one of the FrontierVision Companies to payments) in the aggregate
of more than $100,000 during the current term of such Contract, but "Material
Contract" specifically excludes all subscription agreements with customers and
specifically excludes all pole attachment and conduit agreements.
"Material Lease" means all headend, tower and microwave site leases,
fiber leases, and any other lease designated as a "Material Lease" in Section
3.9 of FrontierVision's Disclosure Schedule.
"Noncompetition Agreement" means either of the Noncompetition
Agreements between Buyer and each of the two Persons designated on Exhibit A,
substantially in the form of Exhibit A with respect to such Person, which
agreements shall be executed and delivered on the Closing Date.
"Permitted Encumbrances" means each of the following: (A) liens for
current taxes and other governmental charges that are not yet delinquent; (B)
liens for taxes, assessments, governmental charges or levies, or claims the
non-payment of which is being diligently contested in good faith or liens
arising out of judgments or awards against the FrontierVision Companies with
respect to which at the time there shall be a prosecution for appeal or there
shall be a proceeding to review or the time limit has not yet run for such an
appeal or review with respect to such judgment or award; provided that with
respect to the foregoing liens in this clause (B), adequate reserves shall have
been set aside on the FrontierVision Companies' books, and no foreclosure,
distraint, sale or similar proceedings shall have been commenced with respect
thereto that remain unstayed for a period of 60 days after their commencement;
(C) liens of carriers, warehousemen, mechanics, laborers, and materialmen and
other similar statutory liens incurred in the ordinary course of business for
sums not yet due or being diligently contested in good faith, and for which
adequate reserves have been set aside on the FrontierVision Companies' books;
(D) liens incurred in the ordinary course of business in connection with
worker's compensation and unemployment insurance or similar laws; (E) statutory
landlords' liens; (F) with respect to the Real Property, leases, easements,
rights to access, rights-of-way, mineral rights or other similar reservations
and restrictions and defects of title which are either of record or set forth in
FrontierVision's Disclosure Schedule or in the deeds or leases to such Real
Property or which (except in the case of owned Real Property, and which), either
individually or in the aggregate, do not materially and adversely affect or
interfere with the ownership or use or marketability of any such Real Property
in the business and operations of the Systems as presently conducted; and (G)
any other claims or encumbrances that are described in Section 3.9 of
FrontierVision's Disclosure Schedule and that relate to Assumed Liabilities that
are not discharged in full at the Closing or that will be removed prior to or at
Closing.
"Person" means an individual, corporation, association, partnership,
joint venture, trust, estate, limited liability company, limited liability
partnership, Governmental Authority, or other entity or organization.
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"Post-Closing Escrow Agreement" means the Post-Closing Escrow Agreement
among Buyer, Sellers, and the Escrow Agent, substantially in the form of Exhibit
B but subject to Section 10.3, which agreement shall be executed and delivered
on the Closing Date.
"Purchased Interests" means the General Partnership Interest, the
Limited Partnership Interests, the SPC Stock, the Subordinated Notes held by the
General Partner, the Subordinated Notes held by the Limited Partner Sellers, and
the Subordinated Notes held by the SPC Sellers.
"Rate Regulatory Matter" shall mean, with respect to any cable
television system, any matter or any effect on such system or the business or
operations thereof, arising out of or related to the Cable Act, any FCC
Regulations heretofore adopted thereunder, or any other present or future Legal
Requirement dealing with, limiting or affecting the rates which can be charged
by cable television systems to their customers (whether for programming,
equipment, installation, service or otherwise).
"Real Property" means all of the fee and leasehold estates and, to the
extent of the interest, title, and rights of the FrontierVision Companies in the
following, buildings and other improvements thereon, easements, licenses, rights
to access, rights-of-way, and other real property interests that are owned or
held by any of the FrontierVision Companies and used or held for use in the
business or operations of the Systems, plus such additions thereto and less such
deletions therefrom arising between the date hereof and the Closing Date in
accordance with this Agreement.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the SEC promulgated thereunder, as in effect from time
to time.
"Seller Release" means the "Agreement of Release" substantially in the
form of Exhibit G to be delivered to Buyer by each Seller at the Closing.
"SPC" means any corporation that is a limited partner of FVP, the
Capital Stock of which corporation is being sold to Buyer pursuant to this
Agreement.
"SPC Notes" means certain promissory notes issued by certain of the
SPCs to the SPC Seller which owns all of the Capital Stock of such SPC.
"SPC Stock" means the Capital Stock of the SPCs held by the SPC
Sellers.
"Stock Consideration Registration Rights Agreement" means the
Registration Rights Agreement among Buyer and Sellers, relating to the
registration of the Stock Consideration Registrable Securities constituting the
Stock Consideration, which agreement shall be executed on the date of this
Agreement.
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"Subordinated Notes" means certain Subordinated Notes issued by FVP to
the General Partner, the Limited Partner Sellers, the SPC Sellers, and the SPCs
in connection with their investments in FVP.
"Subsidiary" means, with respect to any Person, any other Person of
which the outstanding voting Capital Stock sufficient to elect at least a
majority of its board of directors or other governing body (or, if there are no
such voting interests, of which 50% or more of the Capital Stock) is owned
(beneficially or otherwise) directly or indirectly by such first Person or any
Subsidiary thereof.
"Systems" means the cable television systems owned and operated by any
FrontierVision Company or any combination of any of them, each of which may be
referred to herein individually as a "System."
"Tangible Personal Property" means all of the equipment, tools,
vehicles, furniture, leasehold improvements, office equipment, plant,
converters, spare parts, and other tangible personal property which are owned or
leased by any of the FrontierVision Companies and used or held for use in the
conduct of the business or operations of the Systems, plus such additions
thereto and less such deletions therefrom arising between the date hereof and
the Closing Date in accordance with this Agreement.
"Tax" means any federal, state, local, or foreign income, gross
receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, capital, transfer, employment, withholding, or other
tax or governmental assessment, together with any interest, additions, or
penalties with respect thereto and any interest in respect of such additions or
penalties.
"Tax Return" means any tax return, declaration of estimated tax, tax
report or other tax statement, or any other similar filing required to be
submitted to any Governmental Authority with respect to any Tax.
"Transaction Documents" means this Agreement, the Deposit Escrow
Agreement, the Post- Closing Escrow Agreement, the Noncompetition Agreements,
the Deposit Registration Rights Agreement, the Stock Consideration Registration
Rights Agreement, the Seller Releases, the Management Releases, and the other
documents, agreements, certificates and other instruments to be executed,
delivered and performed by the parties in connection with the transactions
contemplated by this Agreement.
"Upset Date" means the one year anniversary of the date of this
Agreement, as such date may be extended pursuant to the provisions of this
Agreement, including, without limitation, Sections 8.1, 9.2 and 9.3.
"Weighted Average Trading Price" means the price determined by a
fraction, the numerator of which is the sum of the results obtained by
multiplying, for each of the trading days in the period of measurement, (A) the
total number of shares of ACC Class A Common Stock or other security traded on
each of said trading days on the principal U.S. trading market (whether stock
exchange, the
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NASDAQ National Market System, or otherwise) on which such stock or other
security is traded, by (B) the closing sale price of such stock or other
security (as published in the Northeast Edition of The Wall Street Journal) for
each of said trading days, and the denominator of which is the total number of
shares of such stock or other security traded on the trading days in the period
of measurement.
1.2 Terms Defined Elsewhere in this Agreement.
For purposes of this Agreement, the following terms have the meanings
set forth in the sections indicated:
<TABLE>
<CAPTION>
Term Section
<S> <C>
120-Day Period Section 7.1(d)(1)(A)
Adjustment Assets Section 2.5(b)(1)
Adjustment Liabilities Section 2.5(b)(2)
Agent Section 11.8
Assumed Employees Section 6.9(a)
Assumed Liabilities Section 2.2
Audited Financial Statements Section 3.5(a)
Buyer First Paragraph
Buyer's 10-K Section 5.6(a)
Buyer's 10-Q Section 5.6(a)
Cash Consideration Section 2.3(a)(1)
Claimant Section
Closing Cash Payment Section 2.6
Closing Equivalent Subscribers Section 2.5(a)
Closing Net Liabilities Section 2.5(b)
Deposit Escrow Property Section 2.4(a)
Designated Material Consent Franchise Section 6.4(b)
Designated Non-Material Consent Section 6.4(b)
Franchise
Escrow Registrable Securities Section 2.4(b)
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Financial Statements Section
Final Closing Statement Section 2.7(b)
FVP First Paragraph
GECC Section 6.7(c)
GECC Facility Consent Section 6.7(c)
General Partner First Paragraph
Indemnifying Party Section
Limited Partner Seller First Paragraph
Material Consent Franchise Section 7.1(d)(1)
Material Renewal Franchise Section 6.4(c)
Net Closing Cash Payment Section 2.7(a)
Post-Closing Adjustments Escrow Section 2.7(a)
Post-Closing Adjustment Funds Section 2.7(a)
Post-Closing Indemnity Escrow Section 10.3
Post-Closing Indemnity Property Section 10.3
Preliminary Closing Statement Section 2.6
Purchase Consideration Section 2.3(a)
Renewal Franchises Section 6.1(a)(1)
Renewal Window Section 6.4(d)
Seller Recitals
SPC Seller First Paragraph
Stock Consideration Section 2.3(a)(2)
Stock Consideration Registrable Section 6.17
Securities
Unaudited Financial Statements Section 3.5(a)
Warn Act Section 9(a)
</TABLE>
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1.3 Rules of Construction.
Words used in this Agreement, regardless of the gender and number
specifically used, shall be deemed and construed to include any other gender and
any other number as the context requires. As used in this Agreement, the word
"including" is not limiting, and the word "or" is not exclusive. Except as
specifically otherwise provided in this Agreement in a particular instance, a
reference to a Section is a reference to a Section of this Agreement, a
reference to an Exhibit is a reference to an Exhibit to this Agreement, and the
terms "hereof," "herein," and other like terms refer to this Agreement as a
whole, including the Disclosure Schedules and the Exhibits to this Agreement,
and not solely to any particular part of this Agreement. The descriptive
headings in this Agreement are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
ARTICLE 2
SALE AND PURCHASE OF PURCHASED INTERESTS;
ASSUMPTION OF LIABILITIES; ADDITIONAL PURCHASE
CONSIDERATION
2.1 Agreement to Sell and Buy.
Subject to the terms and conditions set forth in this Agreement, each
Seller hereby agrees to sell, transfer, and deliver to Buyer at the Closing, and
Buyer hereby agrees to purchase at the Closing, the Purchased Interests held by
such Seller, free and clear of all Encumbrances.
2.2 Assumption of Obligations.
In consideration of the sale of the Purchased Interests, concurrently
with the Closing, Buyer shall assume all obligations and liabilities associated
with the Purchased Interests purchased by Buyer, whether such obligations and
liabilities arose prior to the Closing or arise after the Closing, including
(and notwithstanding any provision of applicable partnership law to the
contrary) all obligations and liabilities arising out of the ownership of the
General Partnership Interest (collectively, the "Assumed Liabilities"). After
the Closing Buyer shall cause the FrontierVision Companies to discharge all of
their obligations and liabilities, whether such obligations and liabilities
arose prior to the Closing or arise after the Closing, including all obligations
and liabilities relating to the business and operations of the Systems; provided
that Buyer shall not be deemed to have assumed directly any obligations and
liabilities of the FrontierVision Companies vis-a-vis any Person that is not a
party to this Agreement or entitled to indemnification under this Agreement. In
addition, nothing in this Section 2.2 shall impair Buyer's rights under Sections
2.5, 2.8 and 2.9 or Buyer's indemnification rights under Article 10 after the
Closing (subject in each case to the limitations provided therein).
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2.3 Additional Purchase Consideration for Purchased Interests.
(a) In addition to assuming the Assumed Liabilities,
Buyer shall pay and deliver to Sellers as consideration for the sale of the
Purchased Interests (the "Purchase Consideration"):
(1) A cash payment equal to Six Hundred Million
Dollars ($600,000,000),
subject to adjustment in accordance with this Article 2 (the "Cash
Consideration");
(2) 7,000,000 shares of ACC Class A Common
Stock, together with the kind
and amounts of securities, cash and other property that Sellers would have held
or been entitled to receive as of the Closing (whether resulting from a stock
split, subdivision, combination or reclassification of the outstanding capital
stock of Buyer, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which Buyer may be a
party or otherwise) had Sellers held such shares of ACC Class A Common Stock as
of the date of this Agreement and retained such shares, and all securities, cash
and other property distributed or issued with respect to or in substitution or
exchange therefor, during the period from the date of this Agreement through
(and including) the Closing Date (collectively, the "Stock Consideration"). To
the extent Adelphia pays cash to the Sellers pursuant to Section 8.1(a)(4) in
lieu of delivering the ACC Class A Common Stock (or other securities, cash and
property described in the preceding sentence), the term "Stock Consideration"
shall include all such cash as the context requires.
(b) The Cash Consideration (and any adjustments thereto)
and the Stock Consideration shall be allocated among the Purchased Interests and
the Sellers as determined by the Sellers and delivered to Buyer in writing at
least two days prior to the Closing. Not more than 44% of the aggregate Purchase
Consideration shall be allocated to the purchase and sale of the Purchased
Interests held by the SPC Sellers.
2.4 Escrow Deposit; Registration Rights.
(a) Deposit of ACC Class A Shares. Simultaneously with
the execution of this Agreement, and as a material inducement to FVP and Sellers
to enter into this Agreement, Buyer shall cause 1,000,000 shares of ACC Class A
Common Stock to be issued in the name of FVP and delivered to the Escrow Agent
to be held in escrow pursuant to the terms of the Deposit Escrow Agreement,
which is to be executed concurrently herewith by Buyer, FVP, and the Escrow
Agent. The "Deposit Escrow Property" means, collectively, the 1,000,000 shares
of ACC Class A Common Stock deposited pursuant to this Section 2.4(a), together
with the kind and amounts of securities, cash and other property that Sellers
would have held or been entitled to receive as of the date the Deposit Escrow
Property is released in accordance with this Agreement (whether resulting from a
stock split, subdivision, combination or reclassification of the outstanding
capital stock of Buyer, or in redemption thereof, or as a result of any merger,
consolidation, acquisition or other exchange of assets to which Buyer may be a
party or otherwise) had Sellers held such shares of ACC Class A Common Stock as
of the date of this Agreement and retained such shares, and all securities, cash
and other property distributed or issued
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<PAGE>
with respect to or in substitution or exchange therefor, during the period from
the date of this Agreement through (and including) the date the Deposit Escrow
Property is released in accordance with this Agreement, and also includes, to
the extent relevant, all cash deposited with the Escrow Agent pursuant to
Section 2.4(b) and all earnings thereon.
(b) Deposit Registration Rights Agreement. Simultaneously
with the execution of this Agreement, and as a material inducement to FVP and
Sellers to enter into this Agreement, Buyer shall execute and deliver the
Deposit Registration Rights Agreement, pursuant to which Buyer will grant FVP
certain rights as provided therein in respect of the shares of ACC Class A
Common Stock or other securities constituting the Deposit Escrow Property (the
"Escrow Registrable Securities"). As soon as practicable after the execution of
this Agreement, Buyer shall file an appropriate registration statement under the
Securities Act covering the registration of all of such Escrow Registrable
Securities. Buyer shall then use commercially reasonable efforts to cause such
registration statement to be declared effective under the Securities Act as soon
as practicable thereafter and kept effective in accordance with the provisions
of the Deposit Registration Rights Agreement, and Buyer shall otherwise comply
with the provisions of the Deposit Registration Rights Agreement. If a
registration statement covering the registration of all of such Escrow
Registrable Securities has not been declared effective under the Securities Act
(and such registration statement shall not be subject to any stop order or
proceeding seeking a stop order) on the earlier of (1) the date FVP terminates
this Agreement in accordance with Section 9.2 as a result of a willful breach of
this Agreement by Buyer (including a willful breach as described in the first
sentence of Section 9.4(c)), and (2) May 31, 1999, Buyer shall deposit with the
Escrow Agent, on the next business day, cash in an amount equal to the aggregate
fair market value of the shares of ACC Class A Common Stock or other securities
constituting the Deposit Escrow Property (computed on the basis of the Weighted
Average Trading Price of such shares of ACC Class A Common Stock or other
securities for the ten day trading period beginning on the thirteenth trading
day prior to the date on which Buyer deposits such cash amount pursuant to this
sentence). Upon such payment by Buyer to the Escrow Agent, all of such shares of
ACC Class A Common Stock or other securities constituting the Deposit Escrow
Property shall be released and paid over to Buyer but all cash funds, if any,
included in the Deposit Escrow Property and previously held by the Escrow Agent
shall be retained by the Escrow Agent as part of the Deposit Escrow Property.
(c) Release of Deposit Escrow Property. At the Closing,
all of the Deposit Escrow Property shall be released from escrow and returned to
Buyer. Upon termination of this Agreement prior to the Closing in accordance
with Article 9, all of the Deposit Escrow Property shall be released from escrow
and returned to Buyer except as provided in the following sentence. If FVP
terminates this Agreement in accordance with Section 9.2 as a result of a
willful breach of this Agreement by Buyer (including a willful breach as
described in the first sentence of Section 9.4(c)), all of the Deposit Escrow
Property shall be released from escrow and paid over to FVP on the next business
day, provided that FVP shall be entitled to receive all cash if the condition
specified in the last sentence of Section 2.4(b) is applicable, and FVP shall be
entitled to enforce this Section 2.4 against Buyer notwithstanding any provision
to the contrary in Section 9.4(c). On the day of the occurrence of any of the
foregoing events, FVP and Buyer will execute and deliver to the Escrow Agent
joint written instructions containing
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appropriate disbursement instructions consistent with this Section 2.4(c) and
the Deposit Escrow Agreement.
2.5 Cash Consideration Adjustments.
(a) Closing Equivalent Subscribers. The Cash
Consideration shall be decreased by the number, if any, by which the number of
Closing Equivalent Subscribers is less than 700,000, multiplied by $2,928. For
purposes of this Agreement, "Closing Equivalent Subscribers" means the total
number of Equivalent Subscribers for all of the Systems as of the Adjustment
Time; provided, however, that if the systems exchange transactions between the
FrontierVision Companies and InterMedia Partners of Kentucky, L.P. referred to
in Section 6.1 of FrontierVision's Disclosure Schedule are consummated prior to
the Closing hereunder, none of the subscribers served by the InterMedia systems
acquired in such transactions shall be included in Closing Equivalent
Subscribers but the number of Closing Equivalent Subscribers represented by the
subscribers served by the Systems sold to InterMedia (determined as if the
effective time of the consummation of the respective InterMedia transactions
were the Adjustment Time hereunder) shall be included in Closing Equivalent
Subscribers; and provided further, however, that the provisions of Section
6.4(e) shall apply to the extent relevant.
(b) Closing Net Liabilities. The Cash Consideration
shall be decreased by the amount, if any, by which the Closing Net Liabilities
exceed $1,150,000,000 and shall be increased by the amount, if any, by which the
Closing Net Liabilities are less than $1,150,000,000. For purposes of this
Agreement, "Closing Net Liabilities" means Adjustment Liabilities as of the
Adjustment Time, decreased by Adjustment Assets as of the Adjustment Time.
(1) Subject to the other provisions of this
Section 2.5(b), "Adjustment Assets" means, as of any date, the sum of: (A) cash
and cash equivalents, (B) prepaid expenses, deposits, and other current assets
(other than inventory); (C) Accounts Receivable and other receivables; (D) tax
refunds due to any of the FrontierVision Companies for any tax period ending
prior to the Adjustment Time; (E) the amount of Reimbursable Capital
Expenditures; (F) the amount of the cash consideration paid by the
FrontierVision Companies in connection with the systems exchange transactions,
if consummated prior to the Closing hereunder, with InterMedia Partners of
Kentucky L.P. referred to in Section 6.1 of FrontierVision's Disclosure
Schedule; (G) the aggregate amount of any cash investments made by the
FrontierVision Companies in The Maine Internet Works, Inc. and Landmark Net
Access, Inc. after the date of this Agreement and prior to the Adjustment Time
(provided that any such investments shall not be included unless Buyer consented
to such investments); (H) the amount of the net asset, if applicable, referred
to in Section 6.7(e); and (I) the amount of the insurance premiums paid by the
FrontierVision Companies prior to the Adjustment Time as contemplated by Section
6.13, in each case of clauses (A) through (D) computed for the FrontierVision
Companies on a consolidated basis and without duplication in accordance with
GAAP and in each case of clauses (E) through (I) as agreed above. Exhibit F
referred to below in Section 2.5(c) identifies and describes the "other
receivables" referenced in clause (C) above that would be included in Adjustment
Assets if the Closing
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Date were the date of this Agreement. The disclosure made pursuant to the
immediately preceding sentence is for informational purposes only.
(2) Subject to the other provisions of this
Section 2.5(b), "Adjustment Liabilities" means, as of any date, the sum of: (A)
accounts payable; (B) expenses of the FrontierVision Companies relating to the
consummation of the transactions contemplated by this Agreement, including fees
and expenses of attorneys, accountants, financial advisors and broker fees, if
such fees and expenses are paid by the FrontierVision Companies after the
Closing Date, but excluding any expenses that Buyer agrees to pay or is
obligated to pay pursuant to this Agreement; (C) accrued and unpaid expenses;
(D) subscriber's prepayments and deposits; (E) Tax payments due and payable by
any of the FrontierVision Companies to any Governmental Authority for all Tax
periods ending on or prior to the Adjustment Time; (F) all other FrontierVision
Liabilities as of the Adjustment Time; (G) subject to Section 6.18, $5,500,000
(which represents the amount by which the amount of rebuild/upgrade capital
expenditures of the FrontierVision Companies budgeted for the period beginning
October 23, 1998 and ending December 31, 1998 with respect to the Systems
acquired pursuant to the State Cable Acquisition Agreement exceeded the amount
of capital expenditures actually made by the FrontierVision Companies for such
period with respect to such Systems); (H) $2,000,000 (which represents the
amount by which the amount of rebuild/upgrade capital expenditures of the
FrontierVision Companies budgeted for the period beginning July 1, 1998 and
ending December 31, 1998 with respect to the Systems other than the Systems
acquired pursuant to the State Cable Acquisition Agreement exceeded the amount
of capital expenditures actually made by the FrontierVision Companies for such
period with respect to such other Systems); (I) the cash amount required to pay
off vehicle leases held by the FrontierVision Companies, if any; (J) the amount
as illustrated in Section 2.5 of FrontierVision's Disclosure Schedule as the
"Net Carriage Adjustment" and as updated for activity through the Closing Date;
(K) the amount of cash and other monetary purchase price consideration (net of
reasonable out-of-pocket transaction costs and expenses) received by the
FrontierVision Companies in connection with the sale of systems to Helicon
Partners I, L.P. consummated on January 7, 1999, plus the amount of cash and
other monetary purchase price consideration (net of reasonable out-of-pocket
transaction costs and expenses) received by the FrontierVision Companies in
connection with the sale of other systems and assets, including without
limitation, the sale of the Rockland, Maine office site real estate parcel
referenced in Section 3.8 of FrontierVision's Disclosure Schedule, if any,
consummated after the date of this Agreement and prior to the Closing Date; (L)
the amount of cash and other monetary purchase price consideration payable by
the FrontierVision Companies under the purchase contract for the Chillicothe,
Ohio real estate parcel referenced in Section 3.8 of FrontierVision's Disclosure
Schedule, but only to the extent to which such amount has not been paid by the
FrontierVision Companies prior to the Closing Date; (M) the FrontierVision
Companies' share of any out-of-pocket costs and expenses incurred in connection
with relocating the Luckey headend site referred to in Section 3.6 (Item A.2) of
FrontierVision's Disclosure Schedule, but only to the extent to which such costs
and expenses have not been paid by the FrontierVision Companies prior to the
Closing; (N) $3,937,500.00; (O) $200,000.00 (representing the amount payable in
connection with the matter disclosed in Section 3.6 (Item A.1) of
FrontierVision's Disclosure Schedule that is not covered by clause (F) above);
(P) the aggregate amount of any cash distributions received by the
FrontierVision Companies from The Maine Internet Works,
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Inc. and Landmark Net Access, Inc. after December 31, 1998 and prior to the
Adjustment Time; (Q) the amount paid by Buyer at the Closing with respect to
FVP's Executive Deferred Compensation Plan as contemplated by Section 6.9(f);
(R) the amount, if any, required to be included as an Adjustment Liability
pursuant to Section 6.4(e); (S) the amount of the net liability, if applicable,
referred to in Section 6.7(e); (T) $10,000,000, reduced by the aggregate amount
of capital expenditures actually made by the FrontierVision Companies during the
period beginning January 1, 1999 and ending on the Closing Date with respect to
the Waterville, Ohio and Bedford, Michigan Systems upgrade and rebuild projects
listed in Section 2.5 of FrontierVision's Disclosure Schedule; and (U) the
aggregate amount of the programming costs savings to the FrontierVision
Companies as a result of the Programming Supply Agreement with Buyer, in each
case of clauses (A) through (F) computed for the FrontierVision Companies on a
consolidated basis and without duplication in accordance with GAAP and in each
case of clauses (G) through (U) as agreed above. The parties agree that to the
extent any liability qualifies as an Adjustment Liability pursuant to more than
one clause of this paragraph, it shall be included only once and without
duplication.
(3) The amount of "Reimbursable Capital
Expenditures" equals the amount by which (A) the aggregate amount of capital
expenditures actually made by the FrontierVision Companies during the period
beginning January 1, 1999 and ending on the Closing Date with respect to any of
the Systems upgrade and rebuild projects listed in Section 2.5 of
FrontierVision's Disclosure Schedule (it being understood that in no event will
any capital expenditures made to complete the New Philadelphia retrofit, Bangor,
Amesbury, and Ironton/Ashland upgrade and rebuild projects to the point of
completion described in Section 2.5(D) of FrontierVision's Disclosure Schedule
or any capital expenditures made by the FrontierVision Companies with respect to
the Waterville, Ohio and Bedford, Michigan Systems upgrade and rebuild projects
listed in Section 2.5 of FrontierVision's Disclosure Schedule be included in the
amount for this clause (A)) exceeds (B) the amount, if any, by which (1) the
amount of Budgeted Other Capital Expenditures exceeds (2) the amount of Actual
Other Capital Expenditures; provided that if the amount in clause (B)(2) exceeds
the amount in clause (B)(1), the amount for clause (B) shall be zero. As used in
this subsection (3), the following terms have the following meanings:
(A) "Budgeted Other Capital
Expenditures" means the aggregate cumulative amount of capital expenditures
budgeted for all of the capital expenditures categories included in all
categories other than "Upgrade/Rebuild" on the Capital Expenditures Budget for
the period beginning January 1, 1999 and ending on the Closing Date (the amount
budgeted for the month in which the Closing occurs to be prorated in the event
the Closing Date occurs on a day other than the first or last day of a month).
(B) "Actual Other Capital Expenditures"
means the aggregate amount of capital expenditures actually made by the
FrontierVision Companies during the period beginning January 1, 1999 and ending
on the Closing Date with respect to all of the capital expenditure categories
included in all categories other than "Upgrade/Rebuild" on the Capital
Expenditures Budget, computed on a basis consistent with the accounting
methodologies used to compute the Budgeted Other Capital
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Expenditures, which in turn was prepared on a basis consistent with the
accounting procedures used to prepare the Financial Statements.
(C) "Capital Expenditures Budget" means
the monthly capital expenditures budget for the FrontierVision Companies for
calendar year 1999 that is included in Section 2.5 of FrontierVision's
Disclosure Schedule.
(4) To the extent consistent with GAAP, revenues
and expenses shall be treated as prepaid or accrued so as to reflect the
principle that revenues and expenses attributable to the period prior to the
Adjustment Time shall be for the account of Sellers and revenues and expenses
attributable to the period after the Adjustment Time shall be for the account of
Buyer.
(5) Deferred income Taxes of any FrontierVision
Company shall not be treated as Adjustment Assets or Adjustment Liabilities.
(6) To the extent any liability that would be an
Adjustment Liability but for the fact that all or any portion of such liability
is transferred by a FrontierVision Company (including Main Security
Surveillance, Inc. for this purpose) to and assumed by The Maine Internet Works,
Inc. or Landmark Net Access, Inc. prior to the Adjustment Time, such liability
shall be treated as an Adjustment Liability (but without duplication) in any
event.
(c) Example Calculation. Attached hereto as Exhibit F is
an example calculation of Closing Net Liabilities for illustrative purposes
only, prepared on the basis of good faith estimates of Adjustment Assets and
Adjustment Liabilities made by FVP as if the Closing Date were January 31, 1999.
FVP makes no representation and warranty to any other party with respect to the
accuracy of Exhibit F.
2.6 Payment at Closing.
No later than seven business days prior to the date scheduled for the
Closing, FVP shall prepare and deliver to Buyer a written report (the
"Preliminary Closing Statement") setting forth FVP's estimates of Closing Net
Liabilities and Closing Equivalent Subscribers, determined in accordance with
Section 2.5 and this Section 2.6. The Preliminary Closing Statement shall be
prepared by FVP in good faith and shall be certified by FVP to be its good faith
estimate of the Closing Net Liabilities and Closing Equivalent Subscribers as of
the date thereof. FVP shall make available to Buyer such information as Buyer
shall reasonably request relating to the matters set forth in the Preliminary
Closing Statement. If Buyer does not agree with any estimated amount set forth
in the Preliminary Closing Statement, then on or prior to the third business day
prior to the date scheduled for the Closing, Buyer may deliver to FVP a written
report setting forth in reasonable detail its good faith estimates (supported by
substantial evidence) of any amount set forth in the Preliminary Closing
Statement with which Buyer disagrees. In the case of any such estimated amount
as to which Buyer delivers its own estimate on or before such third business
day, FVP and Buyer will endeavor in good faith to agree prior to the Closing on
the
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appropriate amount of such estimate to be used for calculating the Closing Cash
Payment (as defined below). At the Closing Buyer shall pay to Sellers the amount
of the Cash Consideration, as adjusted at Closing on the basis of the
Preliminary Closing Statement, with any changes thereto mutually agreed to
between Buyer and FVP (the "Closing Cash Payment") in accordance with the
provisions of Section 8.3(a)(2). In the case of any such estimated amount as to
which Buyer delivers its own estimate on or before such third business day and
as to which FVP and Buyer do not so agree prior to the Closing, at the Closing
the difference (if any) between the amount of the Closing Cash Payment that
would be determined using the estimates set forth in FVP's Preliminary Closing
Statement (with any changes thereto mutually agreed to between Buyer and FVP)
and the amount of the Closing Cash Payment that would be determined using the
estimates of Buyer that remain in dispute will be transferred by Buyer to the
Escrow Agent, to be held in the Post-Closing Adjustments Escrow and disbursed in
accordance with the provisions of Section 2.7.
2.7 Post-Closing Payment of Cash Consideration Adjustments.
(a) Post-Closing Adjustments Escrow. At the Closing,
Buyer, Sellers and the Escrow Agent shall execute the Post-Closing Escrow
Agreement, in accordance with which, on the Closing Date, in addition to any
deposit to be made pursuant to Section 2.6, Buyer will deposit $5,000,000 with
the Escrow Agent to hold in escrow on behalf of Sellers solely in order to
provide a fund for any payment to which Buyer may be entitled in accordance with
Section 2.7(c) (such escrow, the "Post-Closing Adjustments Escrow," and such
$5,000,000, together with any amounts deposited in the Post-Closing Adjustments
Escrow pursuant to Section 2.6, and any earnings thereon, the "Post- Closing
Adjustment Funds"). None of the Post-Closing Adjustment Funds will be available
for any purpose other than as described above and as described in Section 2.9
and shall not be available to satisfy any obligation of Sellers under Article
10. The Post-Closing Adjustments Escrow will be administered, and the
Post-Closing Adjustment Funds will be held and disbursed, in accordance with the
provisions of this Section 2.7 and the Post-Closing Escrow Agreement. The
Closing Cash Payment less the amounts deposited in the Post-Closing Adjustments
Escrow pursuant to Sections 2.6 and this 2.7(a) shall be referred to as the "Net
Closing Cash Payment."
(b) Final Closing Statement. Within one hundred twenty
days after the Closing Date, Buyer shall prepare and deliver to the General
Partner a written report (the "Final Closing Statement") setting forth Buyer's
final estimates of Closing Net Liabilities and Closing Equivalent Subscribers,
determined in accordance with Section 2.5. The Final Closing Statement shall be
prepared by Buyer in good faith and shall be certified by Buyer to be, as of the
date prepared, its good faith estimate of the Closing Net Liabilities and
Closing Equivalent Subscribers. Buyer shall allow the General Partner and its
agents access at all reasonable times after the Closing Date to copies of the
books, records and accounts of the FrontierVision Companies and make available
to the General Partner such information as the General Partner reasonably
requests to allow the General Partner to examine the accuracy of the Final
Closing Statement. Within thirty days after the date that the Final Closing
Statement is delivered by Buyer to the General Partner, the General Partner
shall complete its examination thereof and may deliver to Buyer a written report
setting forth any proposed adjustments to any amounts set forth in the
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Final Closing Statement. If the General Partner notifies Buyer of its acceptance
of the amounts set forth in the Final Closing Statement, or if the General
Partner fails to deliver its report of any proposed adjustments within the
thirty day period specified in the preceding sentence, the amounts set forth in
the Final Closing Statement shall be conclusive, final, and binding on the
parties as of the last day of such thirty day period. Buyer and the General
Partner shall use good faith efforts to resolve any dispute involving the
amounts set forth in the Final Closing Statement. If the General Partner and
Buyer fail to agree on any amount set forth in the Final Closing Statement
within fifteen days after Buyer receives the General Partner's report pursuant
to this Section 2.7, then the General Partner shall retain a national
independent accounting firm which is approved by Buyer to make the final
determination, under the terms of this Agreement, of any amounts under dispute.
Buyer hereby approves the appointment of any of the "Big Five" accounting firms
selected by the General Partner so long as such firm does not then serve as the
independent auditor of any of the FrontierVision Companies or the General
Partner or Buyer. The selected accounting firm shall endeavor to resolve the
dispute as promptly as practicable and such firm's resolution of the dispute
shall be final and binding on the parties, and a judgment may be entered thereon
in any court of competent jurisdiction. All of the costs and expenses of the
selected accounting firm and its services rendered pursuant to this Section 2.7
shall be borne by Buyer, on the one hand, and Sellers, on the other hand, as
nearly as possible in the proportion to the amount by which the determination of
all matters related to such costs and expenses varies from the positions of
Buyer and the General Partner on all such matters. Any fees to be borne by
Sellers pursuant to the preceding sentence shall be paid out of the Post-Closing
Adjustment Funds in accordance with the provisions of Section 2.7(c).
(c) Payment of Cash Consideration Adjustments.
(1) Within three business days after the General
Partner delivers to Buyer its proposed adjustments to the Final Closing
Statement, the amounts not in dispute shall be determined and the Escrow Agent
shall release and pay over to Buyer and/or Sellers, as the case may be, the
appropriate amount of the Post-Closing Adjustment Funds not in dispute;
provided, however, that out of any amounts payable to Sellers an amount equal to
the greater of $25,000 or one percent (1%) of the amount in dispute shall
continue to be held in the Post-Closing Adjustments Escrow to cover (A) the
fees, if any, payable by Sellers pursuant to the last sentence of Section 2.7(b)
with respect to the final determination of the Cash Consideration and (B) the
fees payable by Sellers to the Escrow Agent pursuant to the Post-Closing Escrow
Agreement. For example, if (i) the Closing Cash Payment was determined to be
$600,000,000; (ii) the Net Closing Cash Payment was determined to be
$594,000,000; (iii) the Cash Consideration determined on the basis of Buyer's
Final Closing Statement was $595,000,000; and (iv) the Cash Consideration
determined on the basis of Buyer's Final Closing Statement (with any adjustments
proposed by the General Partner pursuant to Section 2.7(b)) was $597,000,000;
then $3,000,000 (i.e., $600,000,000 less $597,000,000) would be paid by the
Escrow Agent to Buyer, and $1,000,000 (i.e, $595,000,000 less $594,000,000) less
the amount of the reserve for Sellers' fees would be paid to Sellers. The
balance in the Post-Closing Adjustments Escrow would be held by the Escrow Agent
until the amount of the Cash Consideration is finally determined pursuant to
Section 2.7(b)) (whether by agreement of the parties or by final resolution of
any accounting firm).
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Upon and within three business days after such final determination, the Escrow
Agent shall release and pay over to Buyer and/or Sellers, as the case may be,
the appropriate amount of the Post-Closing Adjustment Funds based upon such
final determination; provided, however, that any payments to be made to Sellers
shall be reduced by the fees and expenses to be paid by Sellers if not already
reserved. To the extent there are not sufficient monies in the Post-Closing
Adjustments Escrow to distribute the amount determined to be payable to Sellers
pursuant to this Section 2.7, Buyer will pay to Sellers in cash the amount of
such deficiency within three business days of the date of such determination. To
the extent there are not sufficient monies in the Post-Closing Adjustments
Escrow to distribute the amounts determined to be payable to Buyer pursuant to
this Section 2.7, the amount of such deficiency will be paid to Buyer from the
Post-Closing Indemnity Escrow to the extent of any Post-Closing Indemnity
Property therein within three business days of the date of such determination.
(2) If Buyer has not delivered the Final Closing
Statement to the General Partner within twenty days after the end of the 120-day
period referred to in Section 2.7(b), the Escrow Agent shall release and pay
over to Sellers all of the Post-Closing Adjustment Funds.
(3) If the General Partner has not delivered its
report of any proposed adjustments to the Final Closing Statement within the
thirty day period following its receipt of the Final Closing Statement, the
Escrow Agent shall release and pay out the Post-Closing Adjustment Funds based
upon the Final Closing Statement delivered by Buyer.
(4) Notwithstanding the above provisions, if
Buyer has provided notice of a claim to the General Partner pursuant to Section
2.9(b), a portion of the Post-Closing Adjustment Funds sufficient to reimburse
Buyer for any such claim and to pay Sellers' share of any fees and expenses
under Section 2.9(b) shall be retained in the Post-Closing Adjustments Escrow
and shall not be distributed until such claims are finally resolved in
accordance with Section 2.9(b).
(5) All earnings attributable to each portion of
the Post-Closing Adjustment Funds shall be paid to the party entitled to such
portion of the Post-Closing Adjustment Funds in accordance with this Section 2.7
or Section 2.9 to the extent applicable (except all earnings attributable to the
portion of the Post-Closing Adjustment Funds, if any, used to pay the Sellers'
share of any fees and expenses payable out of the Post-Closing Adjustment Funds
pursuant to said Sections shall be paid to Sellers).
(6) Any amount which becomes payable pursuant to
this Section 2.7 will constitute an adjustment to the Cash Consideration for all
purposes.
(7) All payments to be made to Sellers under
this Section 2.7 shall be paid by wire or accounts transfer of immediately
available funds to one or more accounts designated by Sellers by written notice
to the Escrow Agent or Buyer, as applicable.
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(8) All payments to be made to Buyer under this
Section 2.7 shall be paid by wire or accounts transfer of immediately available
funds to one or more accounts designated by Buyer by written notice to the
Escrow Agent or Sellers, as applicable.
(9) No later than the close of business on the
first business day after it is determined in accordance with this Section 2.7
and Section 2.9 that Buyer and/or Sellers are entitled to all or any portion of
the Post-Closing Adjustment Funds, the General Partner and Buyer will execute
and deliver to the Escrow Agent joint written instructions containing
appropriate disbursement instructions consistent with this Section 2.7 and
Section 2.9 and the Post-Closing Escrow Agreement.
2.8 Seller Specific Liabilities.
(a) If it is determined at the Closing (based upon a good
faith showing by Buyer supported by substantial evidence and that is agreed to
by the SPC Seller that owns the Capital Stock of the SPC in question) that any
of the SPCs has any indebtedness or liability (other than any indebtedness or
liability disclosed in Section 4.3 or in Section 4.3 of FrontierVision's
Disclosure Schedule) that will not otherwise be discharged at the Closing, then
the amount of Cash Consideration payable to such SPC Seller shall be decreased
by the dollar amount of such indebtedness or liability as agreed to by such SPC
Seller and Buyer. If it is determined at the Closing (based upon a good faith
showing by Buyer supported by substantial evidence and that is agreed to by the
Seller in question) that any of the Purchased Interests held by a Seller is
subject to an Encumbrance and that will not otherwise be discharged and released
at the Closing, then the amount of Cash Consideration payable to such Seller
shall be decreased by the dollar amount necessary to discharge and release such
Encumbrance as agreed to by such Seller and Buyer. Buyer agrees to notify the
appropriate Seller promptly upon becoming aware of any matter that could give
rise to a claim under this Section 2.8 that was not disclosed in this Agreement
or in FrontierVision's Disclosure Schedule. If such Seller and Buyer cannot
agree on the appropriate amount of the decrease in Cash Consideration payable to
such Seller by the time scheduled for the Closing, then Buyer shall deposit a
portion of the Closing Cash Payment equal to the amount of Buyer's claim
(together with an amount equal to the greater of $25,000 or one percent (1%) of
the amount of Buyer's claim to cover the fees, if any, payable by such Seller
pursuant to Section 2.8(b) with respect to an accounting firm's final
determination) with the Escrow Agent to hold in a separate escrow on behalf of
such Seller solely in order to provide a fund for any payment to which Buyer may
be entitled in accordance with this Section 2.8 (each such escrow, a
"Post-Closing Section 2.8 Escrow," and such deposit, together with any earnings
thereon, the "Post-Closing Section 2.8 Funds"), and the amount of the Closing
Cash Payment payable to such Seller shall be decreased by the amount so
deposited. None of the Post-Closing Section 2.8 Funds will be available for any
purpose other than as described above and shall not be available to satisfy any
obligation of Sellers under Article 10. The Post-Closing Section 2.8 Escrow will
be administered, and the Post-Closing Section 2.8 Funds will be held and
disbursed, in accordance with the provisions of this Section 2.8 and the
Post-Closing Escrow Agreement.
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(b) After the Closing, Buyer and such Seller shall use
good faith efforts to resolve any dispute involving the validity and amount of
any claim made by Buyer pursuant to this Section 2.8. If such Seller and Buyer
fail to agree on the validity and amount of any such claim within fifteen days
after the Closing, then such Seller shall retain a national independent
accounting firm which is approved by Buyer to make the final determination,
under the terms of this Agreement, regarding the validity and amount of any such
claim. Buyer hereby approves the appointment of any of the "Big Five" accounting
firms selected by such Seller so long as such firm does not then serve as the
independent auditor of any of the FrontierVision Companies or the General
Partner or Buyer. The selected accounting firm shall endeavor to resolve the
dispute as promptly as practicable and such firm's resolution of the dispute
shall be final and binding on the parties, and a judgment may be entered thereon
in any court of competent jurisdiction. All of the costs and expenses of the
selected accounting firm and its services rendered pursuant to this Section 2.8
shall be borne by Buyer, on the one hand, and such Seller, on the other hand, as
nearly as possible in the proportion to the amount by which the determination of
all matters related to such costs and expenses varies from the positions of
Buyer and such Seller on all such matters.
(c) Within three business days after any matter governed
by this Section 2.8 is finally resolved (whether by agreement of the parties or
by final resolution of an accounting firm), the amount of Post-Closing Section
2.8 Funds payable to Buyer and/or such Seller shall be released and paid over to
Buyer and/or such Seller in accordance with such final resolution. To the extent
there are not sufficient monies in the Post-Closing Section 2.8 Escrow to
distribute the amounts determined to be payable to Buyer pursuant to this
Section 2.8, the amount of such deficiency will be paid to Buyer from the
Post-Closing Indemnity Escrow to the extent of any Post-Closing Indemnity
Property therein within three business days of the date of such determination.
All payments to be made to such Seller or Buyer, as the case may be, under this
Section 2.8 shall be paid by wire or accounts transfer of immediately available
funds to one or more accounts designated by such Seller or Buyer, as the case
may be, by written notice to the Escrow Agent. No later than the close of
business on the first business day after it is determined in accordance with
this Section 2.8 that Buyer and/or a Seller is entitled to all or any portion of
the Post-Closing Section 2.8 Funds being held in a Post-Closing Section 2.8
Escrow for the benefit of Buyer and such Seller, such Seller and Buyer will
execute and deliver to the Escrow Agent joint written instructions containing
appropriate disbursement instructions consistent with this Section 2.8 and the
Post-Closing Escrow Agreement.
(d) All earnings attributable to each portion of the
Post-Closing Section 2.8 Funds shall be paid to the party entitled to such
portion of the Post-Closing 2.8 Funds in accordance with this Section 2.8
(except all earnings attributable to the portion of the Post-Closing Section 2.8
Funds, if any, used to pay a Seller's share of any fees and expenses payable out
of the Post-Closing Section 2.8 Funds pursuant to this Section 2.8 shall be paid
to such Seller).
(e) Any amount which becomes payable pursuant to this
Section 2.8 will constitute an adjustment to the Cash Consideration for all
purposes.
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2.9 Additional Cash Consideration Adjustments.
(a) If, at any time prior to the Closing, Buyer becomes
aware of any fact, event,
circumstance, or action, the existence or occurrence of which, if not corrected
or remedied prior to the Closing, would, in Buyer's good faith and reasonable
belief, and supported by substantial evidence, require the Sellers to indemnify
Buyer pursuant to Section 10.2(a) as a result of an untrue representation or a
breach of warranty by FVP contained in Sections 3.9 (with respect to any
rearrangements or rehabilitations of cable trunk only as specified in the
penultimate sentence of Section 3.9), 3.11(g) (with respect to payment of
copyright fees only), 3.11(k), 3.11(l) (with respect to payment of pole
attachment fees only), or 3.14 or as a result of the existence of an Encumbrance
on the Assets of the FrontierVision Companies that is not a Permitted
Encumbrance, Buyer shall immediately give notice to FVP of such fact, event,
circumstance or action. If Buyer desires to seek an adjustment to the Cash
Consideration in respect of such matter, Buyer shall so state in its notice and
specify in reasonable detail the factual basis for the claim and the amount
thereof. Buyer shall certify in such notice that the basis and amount of the
claim were determined in good faith by Buyer and such claim must be supported by
substantial evidence. Buyer agrees to make available to FVP and its authorized
representatives the information relied upon by Buyer to substantiate the claim.
If the matter is cured prior to the Closing, Buyer shall not be entitled to any
adjustment to the Cash Consideration pursuant to this Section 2.9 in respect of
such matter. If Buyer and FVP agree at or prior to the Closing to the validity
and amount of such claim, the Cash Consideration shall be reduced by such
amount. If Buyer and FVP do not agree to the validity or the amount of the claim
at or prior to the Closing, then Buyer shall deposit a portion of the Closing
Cash Payment equal to the amount of Buyer's claim with the Escrow Agent to hold
in escrow on behalf of Sellers solely in order to provide a fund for any payment
to which Buyer may be entitled in respect of a claim made under this Section
2.9(a) (such escrow, the "Post-Closing Section 2.9 Escrow," and such deposit,
together with any earnings thereon, the "Post-Closing Section 2.9 Funds"). None
of the Post-Closing Section 2.9 Funds will be available for any purpose other
than as described above and shall not be available to satisfy any obligation of
Sellers under Article 10. The Post-Closing Section 2.9 Escrow will be
administered, and the Post-Closing Section 2.9 Funds will be held and disbursed,
in accordance with the provisions of this Section 2.9 and the Post-Closing
Escrow Agreement.
(b) If, at any time after the Closing and prior to end of
the 120-day period following the Closing, Buyer becomes aware of any fact,
event, circumstance, or action that existed or occurred prior to the Closing
and, because it was not corrected or remedied prior to the Closing, requires, in
Buyer's good faith and reasonable belief, and supported by substantial evidence,
the Sellers to indemnify Buyer pursuant to Section 10.2(a) as a result of an
untrue representation or a breach of warranty by FVP contained in Sections 3.9
(with respect to any rearrangements or rehabilitations of cable trunk only as
specified in the penultimate sentence of Section 3.9), 3.11(g) (with respect to
payment of copyright fees only), 3.11(k), 3.11(l) (with respect to payment of
pole attachment fees only), or 3.14 or as a result of the existence of an
Encumbrance on the Assets of the FrontierVision Companies that is not a
Permitted Encumbrance, and Buyer desires to seek an adjustment to the Cash
Consideration in respect of such matter, Buyer shall promptly give notice to the
General Partner of such fact, event, circumstance or action and specify in
reasonable detail the factual basis for the claim and the amount thereof. Buyer
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shall certify in such notice that the basis and amount of the claim were
determined in good faith by Buyer and such claim must be supported by
substantial evidence. An amount of Post-Closing Adjustment Funds sufficient to
reimburse Buyer for any claim made in accordance with this Section 2.9(b) and to
pay Sellers' share of any fees and expenses under Section 2.9 shall be retained
in the Post- Closing Adjustments Escrow and shall not be distributed until such
claim is finally resolved in accordance with this Section 2.9. Buyer agrees to
make available to FVP and its authorized representatives the information relied
upon by Buyer to substantiate the claim. If Buyer and FVP agree to the validity
and amount of such claim, the Cash Consideration shall be reduced by such amount
and a portion of the Post-Closing Adjustment Funds equal to such amount shall be
released and paid over to Buyer.
(c) Buyer and the General Partner shall use good faith
efforts to resolve any dispute
involving the validity and amount of any claim made by Buyer pursuant to this
Section 2.9. If the General Partner and Buyer fail to agree on the validity and
amount of any such claim within fifteen days after the Closing (with respect to
a claim made pursuant to Section 2.9(a)) or the date the claim is made by Buyer
(with respect to a claim made pursuant to Section 2.9(b)), then the General
Partner shall retain a national independent accounting firm which is approved by
Buyer to make the final determination, under the terms of this Agreement,
regarding the validity and amount of any such claim. The selection of an
accounting firm, the resolution of a dispute submitted to an accounting firm,
and responsibility for the resulting costs and expenses with respect to any
claims subject to this Section 2.9 shall be governed by the provisions of
Section 2.7(b) that govern such matters.
(d) If the General Partner or Buyer believes any such
claim is not an appropriate
matter to be determined by an accounting firm, the General Partner or Buyer may
submit the matter to binding arbitration under the Commercial Arbitration Rules
of the American Arbitration Association. Such arbitration shall take place in
Washington, D.C. unless the parties select a different site by mutual agreement.
All of the costs and expenses of arbitration pursuant to this Section 2.9 shall
be borne by Buyer, on the one hand, and Sellers, on the other hand, as nearly as
possible in the proportion to the amount by which the determination of all
matters related to such costs and expenses varies from the positions of Buyer
and the General Partner on all such matters, unless the arbitrator finds that
the position asserted by either party is without merit, in which case such party
shall bear the entire expenses of arbitration, including reasonable attorney's
fees of the other party. The arbitration determination shall be final and
binding on the parties, and a judgment may be entered thereon in any court of
competent jurisdiction.
(e) Within three business days after any matter governed
by this Section 2.9 is finally
resolved (whether by agreement of the parties, by final resolution of an
accounting firm, or by final resolution by an arbitrator), the amount of
Post-Closing Section 2.9 Funds or Post-Closing Adjustment Funds, as applicable,
payable to Buyer, on the one hand, and/or Sellers, on the other hand, shall be
released and paid over to Buyer and/or Sellers in accordance with such final
resolution. To the extent there are not sufficient monies in the Post-Closing
Section 2.9 Escrow or the Post-Closing Adjustments Escrow, as applicable, to
distribute the amounts determined to be payable to Buyer pursuant to this
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Section 2.9, the amount of such deficiency will be paid to Buyer from the
Post-Closing Indemnity Escrow to the extent of any Post-Closing Indemnity
Property therein within three business days of the date of such determination.
All payments to be made to Sellers or Buyer, as the case may be, under this
Section 2.9 shall be paid by wire or accounts transfer of immediately available
funds to one or more accounts designated by Sellers or Buyer, as the case may
be, by written notice to the Escrow Agent. No later than the close of business
on the first business day after it is determined in accordance with this Section
2.9 that Buyer and/or Sellers are entitled to all or any portion of the
Post-Closing Section 2.9 Funds and/or Post-Closing Adjustment Funds, the General
Partner and Buyer will execute and deliver to the Escrow Agent joint written
instructions containing appropriate disbursement instructions consistent with
this Section 2.9 and the Post-Closing Escrow Agreement.
(f) All earnings attributable to each portion of the
Post-Closing Section 2.9 Funds
shall be paid to the party entitled to such portion of the Post-Closing Section
2.9 Funds in accordance with this Section 2.9 (except all earnings attributable
to the portion of the Post-Closing Section 2.9 Funds, if any, used to pay the
Sellers' share of any fees and expenses payable out of the Post-Closing Section
2.9 Funds pursuant to this Section 2.9 shall be paid to the Sellers).
(g) Any amount which becomes payable pursuant to this
Section 2.9 will constitute
an adjustment to the Cash Consideration for all purposes.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF FVP
Subject to any provisions of this Agreement limiting, qualifying or
excluding any of the representations or warranties made herein, FVP represents
and warrants to Buyer as set forth in this Article 3.
3.1 Organization and Authority of FVP.
FVP is a limited partnership duly formed, validly existing, and in good
standing under the laws of the State of Delaware. FVP has the requisite
partnership power and authority to own, lease, and operate its properties, to
carry on its business in the places where such properties are now owned, leased,
or operated and such business is now conducted, and to execute, deliver and
perform this Agreement and the other Transaction Documents to which FVP is a
party according to their respective terms.
3.2 Authorization and Binding Obligation.
The execution, delivery, and performance by FVP of this Agreement and
the other Transaction Documents to which FVP is a party have been duly
authorized by all necessary partnership action on the part of FVP. This
Agreement and the other Transaction Documents to which FVP is a party have
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been duly executed and delivered by FVP (or, in the case of Transaction
Documents to be executed and delivered at Closing, when executed and delivered
will be duly executed and delivered) and constitute (or, in the case of
Transaction Documents to be executed and delivered at Closing, when executed and
delivered will constitute) the legal, valid, and binding obligation of FVP,
enforceable against FVP in accordance with their terms, except as the
enforceability of this Agreement and such other Transaction Documents may be
limited by bankruptcy, insolvency, or similar laws affecting creditors' rights
generally or by judicial discretion in the enforcement of equitable remedies,
and as rights to indemnification may be limited by federal or state securities
laws or the public policies embodied therein.
3.3 Organization and Ownership of FrontierVision Companies.
(a) Section 3.3 of FrontierVision's Disclosure Schedule
sets forth the name of each
FrontierVision Company, including the jurisdiction of incorporation or formation
of each, as the case may be. Each FrontierVision Company that is a corporation
is a corporation duly incorporated, validly existing, and in good standing under
the laws of the jurisdiction of its incorporation. Each FrontierVision Company
that is a limited partnership is a limited partnership duly formed, validly
existing, and in good standing under the laws of the jurisdiction of its
formation. Each FrontierVision Company that is a limited liability company is a
limited liability company duly formed, validly existing, and in good standing
under the laws of the jurisdiction of its formation. Each FrontierVision Company
is duly qualified and in good standing as a foreign corporation, limited
partnership, or limited liability company, as the case may be, in each
jurisdiction listed in Section 3.3 of FrontierVision's Disclosure Schedule,
which are all jurisdictions in which such qualification is required, except
where such failure to be so qualified would not have a material adverse effect
on the conduct of such FrontierVision Company's business. Except as disclosed in
Section 3.3 of FrontierVision's Disclosure Schedule, no FrontierVision Company,
directly or indirectly, owns, of record or beneficially, any outstanding
securities or other interest in any Person (each such Person, an "Investment
Person") or has the right or obligation to acquire, any outstanding securities
or other interest in any Person. The FrontierVision Company that owns the
Capital Stock of each such Investment Person owns such Capital Stock free and
clear of all Encumbrances.
(b) Section 3.3 of FrontierVision's Disclosure Schedule
sets forth the authorized,
issued and outstanding Capital Stock of FVP and each other FrontierVision
Company and the record and beneficial owner of the issued and outstanding
Capital Stock of each of them. All of such issued and outstanding Capital Stock
of the FrontierVision Companies has been duly authorized, validly issued, and
has not been issued in violation of any federal or state securities laws. Except
as set forth in Section 3.3 of FrontierVision's Disclosure Schedule, the owner
of the Capital Stock of each FrontierVision Company owns such Capital Stock free
and clear of all Encumbrances (except that no representation is made in this
Article 3 as to any partnership interests in FVP held by any Seller or any SPC
or as to any Capital Stock of any SPC held by any SPC Seller). Except as
disclosed in Section 3.3 of FrontierVision's Disclosure Schedule, there are no
outstanding securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which any
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FrontierVision Company is a party or by which any of them is bound obligating
such FrontierVision Company to issue, deliver or sell, or cause to be issued,
delivered or sold, any additional Capital Stock of such FrontierVision Company
or obligating such FrontierVision Company to issue, grant, extend or enter into
any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. FVP has delivered to Buyer complete and correct
copies of the Charter Documents of each FrontierVision Company as in effect on
the date hereof. Section 3.3 of FrontierVision's Disclosure Schedule describes
the Capital Stock or other investment interests held and beneficially owned by
the FrontierVision Companies with respect to the Investment Persons.
3.4 Absence of Conflicting Agreements; Consents.
Except for the expiration or termination of any applicable waiting
period under the HSR Act, the filing by FVP, any other FrontierVision Company,
and/or the Sellers with the SEC of any reports required to be filed in
connection with the consummation of the transactions contemplated hereby, or as
set forth in Section 3.4 of FrontierVision's Disclosure Schedule, the execution,
delivery and performance by FVP of this Agreement and the other Transaction
Documents to which FVP is a party (with or without the giving of notice, the
lapse of time, or both): (A) do not require the Consent of, notice to, or filing
with any Governmental Authority or any other Person under any Franchise, FCC
License or Material Contract; (B) will not conflict with any provision of the
Charter Documents of FVP or any other FrontierVision Company, each as currently
in effect; (C) assuming receipt of all Consents, will not conflict with, result
in a breach of, or constitute a default under any Legal Requirement to which FVP
or any of the other FrontierVision Companies is bound; (D) assuming receipt of
all Consents, will not conflict with, constitute grounds for termination of,
result in a breach of, constitute a default under, or accelerate or permit the
acceleration of any performance required by the terms of any Franchise, FCC
License, or Material Contract; and (E) will not result in the creation of any
Encumbrance upon the Assets. Notwithstanding the foregoing, FVP does not make
any representation or warranty regarding any of the foregoing that may result
from the specific legal or regulatory status of Buyer or as a result of any
other facts that specifically relate to the business or activities in which
Buyer is or proposes to be engaged other than the cable television business.
3.5 Financial Statements.
(a) FVP has furnished Buyer with true and complete copies
of the audited financial
statements listed in Section 3.5 of FrontierVision's Disclosure Schedule
(collectively, the "Audited Financial Statements") and of the unaudited
financial statements listed in Section 3.5 of FrontierVision's Disclosure
Schedule (collectively, the "Unaudited Financial Statements," and collectively
with the Audited Financial Statements, the "Financial Statements"), and such
Financial Statements are by this reference incorporated into and deemed a part
of FrontierVision's Disclosure Schedule.
(b) Except as disclosed in Section 3.5 of
FrontierVision's Disclosure Schedule and except, in the case of the Unaudited
Financial Statements, for the omission of footnotes and changes resulting from
customary and recurring year-end adjustments, the Financial Statements: (1) have
been
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prepared from the books and records of the FrontierVision Companies to which
they relate, with no material difference between such Financial Statements and
the financial records maintained, and the accounting methods applied, by the
FrontierVision Companies for tax purposes; (2) have been prepared in accordance
with GAAP consistently applied and maintained throughout the periods indicated
(except as indicated in the notes thereto); and (3) present fairly in all
material respects the financial condition of the FrontierVision Companies to
which they relate as at their respective dates and the results of operations for
the periods then ended.
3.6 Absence of Undisclosed Liabilities.
None of the FrontierVision Companies has any indebtedness, liability,
or obligation except for: (a) indebtedness, liabilities and obligations that are
reflected or reserved against in the latest balance sheet of such FrontierVision
Company included in the Financial Statements; (b) indebtedness, liabilities and
obligations under the Debt Documents, Contracts, Franchises, Licenses, or
Employee Plans; (c) indebtedness, liabilities and obligations that were incurred
after the date of the latest balance sheet of such FrontierVision Company
included in the Financial Statements either in the ordinary course of business
or in compliance with the covenants of FVP set forth in Section 6.1 or that (to
the extent not discharged prior to the Closing) will be included as Adjustment
Liabilities in the computation of Closing Net Liabilities (none of which
indebtedness, liabilities or obligations results from a claim or lawsuit
relating to a breach of contract, breach of warranty, tort or infringement that,
if adversely determined, would have a material adverse effect on the business,
financial condition, assets or liabilities of the FrontierVision Companies,
taken as a whole; and (d) contingent asserted and unasserted liabilities and
obligations set forth in Section 3.6 of FrontierVision's Disclosure Schedule.
3.7 Absence of Certain Changes.
(a) Since December 31, 1997, except as disclosed in the
Quarterly Reports on Form
10-Q of FrontierVision Operating Partners, L.P. for any of the quarters ended
March 31, 1998, June 30, 1998 and September 30, 1998, or as disclosed in the
Quarterly Reports on Form 10-Q of FrontierVision Holdings, L.P. for any of the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998, or as
disclosed in any public document filed by FrontierVision Operating Partners,
L.P. or FrontierVision Holdings, L.P. with the SEC after September 30, 1998, or
as disclosed in Section 3.7 of FrontierVision's Disclosure Schedule and except
for matters occurring after the date hereof that are permitted by the provisions
of this Agreement or consented to by Buyer, no FrontierVision Company has: (1)
made any sale, assignment, lease, or other transfer of assets other than in the
ordinary course of business with suitable replacements being obtained therefor
(unless such assets were obsolete); or (2) issued any note, bond, or other debt
security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money other than pursuant to the Debt Documents listed in Section 1.1
of FrontierVision's Disclosure Schedule.
(b) Since December 31, 1998, except as disclosed in
Section 3.7 of FrontierVision's Disclosure Schedule and except for matters
occurring after the date of this Agreement that are permitted
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by the provisions of this Agreement or consented to by Buyer, no FrontierVision
Company has made or promised any material increase in compensation payable or to
become payable to any of the employees (including executive officers) of any
FrontierVision Company other than in the ordinary course of business or as
contemplated under any employment arrangement currently in effect.
3.8 Franchises, Licenses, Material Contracts.
Section 3.8 of FrontierVision's Disclosure Schedule contains a list of
the Franchises (including the Franchising Authority which granted each Franchise
and the stated expiration date of each Franchise), FCC Licenses and Material
Contracts in effect on the date hereof, which list is true, correct and complete
in all material respects. Without material exception and subject to the last
sentence of this Section 3.8, the Franchises and the Licenses constitute all of
the authorizations of Governmental Authorities necessary or required for the
construction, maintenance and operations of the Systems as currently conducted.
FVP has delivered to Buyer true and complete copies of all Franchises, FCC
Licenses and Material Contracts as in effect on the date hereof. Subject to the
last sentence of this Section 3.8, the Franchises, FCC Licenses and Material
Contracts are in full force and effect (subject to expiration at the end of
their current term) and are valid, binding and enforceable upon the
FrontierVision Company that is a party thereto and, to FVP's knowledge, the
other parties thereto in accordance with their terms, except to the extent such
enforceability may be affected by bankruptcy, insolvency, or similar laws
affecting creditors' rights generally and by judicial discretion in the
enforcement of equitable remedies. Except as disclosed in Section 3.8 of
FrontierVision's Disclosure Schedule, the FrontierVision Companies are in
material compliance with the terms of the Franchises, Licenses and Material
Contracts, and as of the date of this Agreement none of the FrontierVision
Companies has received any written notice (or to FVP's knowledge after due
inquiry of the regional managers of the Systems, oral notice) from a Franchising
Authority to the effect that any of the FrontierVision Companies are not
currently in material compliance with the terms of the Franchise granted by such
Franchising Authority. Except as set forth in Section 3.4 or 3.8 of
FrontierVision's Disclosure Schedule, none of the Franchises grants to any
Franchising Authority or any other Person any right of first refusal or right