ASSET PURCHASE AGREEMENT
ALPHA CABLE PROPERTIES LIMITED PARTNERSHIP
BETA COMMUNICATIONS I, LLC
JANUARY 14, 2011
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is dated January 14, 2011 by and between and ALPHA CABLE PROPERTIES LIMITED PARTNERSHIP, a Washington limited partnership ("SELLER" or "ACP"), and BETA COMMUNICATIONS I, LLC, a Delaware limited liability company ("BUYER").
A. Seller owns and operates cable television system serving certain communities in
Texas (as set forth more particularly in Schedule 1.28) and,
B. Seller desires to sell, and Buyer wishes to buy, substantially all of Seller's assets used in the operation of the System, as such term is defined in Section 1.28, and the business related thereto (collectively the "BROADBAND BUSINESS") for the price and on the terms and conditions set forth in this Agreement.
[Section 1, the defined terms has been omitted]
SALE AND PURCHASE OF ASSETS
2.1. AGREEMENT TO SELL AND PURCHASE. Subject to the terms and conditions set forth in this Agreement, Seller hereby agrees to sell, transfer and deliver to Buyer on the Closing Date, and Buyer agrees to purchase from Seller on the Closing Date, all of the Assets, free and clear of any claims, liabilities, mortgages, liens, pledges, conditions, charges or encumbrances of any nature whatsoever except for Permitted Encumbrances, which Assets include the following:
2.1.1. the Personal Property;
2.1.2. the Real Property;
2.1.3. the Franchises;
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2.1.4. the Contracts;
2.1.5. the Accounts Receivable;
2.1.6. all of Seller's technical information and data, machinery and equipment warranties, maps, computer discs and tapes, plans, diagrams, blueprints and schematics, including filings with the Franchising Authorities and the FCC relating to the System (other than the materials described in Section 2.2 hereof);
2.1.7 all payments and sums deposited or advanced by Seller to a landlord, utility, governmental agency or any other party as a security deposit or in exchange for initiation of a service, other than performance bonds or payments received related to programming;
2.1.8 subject to Section 2.2, all books and records relating to the business or operations of the Systems, customer records and all records required by the Franchising Authorities to be kept, subject to the right of Seller to have such books and records made available to Seller for a period of three years from the Closing Date; and
2.1.9. the going concern value and, subject to Section 2.2.5, any of Seller's other intangible assets, if any, with respect to the System.
2.2. EXCLUDED ASSETS. The Assets shall exclude the following assets (the "EXCLUDED ASSETS"):
2.2.1. Seller's cash on hand, (other than petty cash for which an adjustment shall be made under Section 2.5), as of the Closing Date and all other cash in any of Seller's bank or savings accounts, including, without limitation, customer advance payments and deposits; any and all bonds, surety instruments, insurance policies and all rights and claims thereunder, letters of credit or other similar items and any cash surrender value in regard thereto, and any stocks, bonds, certificates of deposit and similar investments;
2.2.2. Any books and records that Seller is required by law to retain and any correspondence, memoranda, books of account, tax reports and returns and the like related to the System other than those described in Section 2.1.8, subject to the right of Buyer to have access to and to copy for a reasonable period, not to exceed three years from the Closing Date, and Seller's partnership books and records and other books and records related to internal partnership matters and financial relationships with Seller's lenders and affiliates;
2.2.3. Any claims, rights and interest in and to any refunds of federal, state or local franchise, income or other taxes or fees of any nature whatsoever for periods prior to the Closing Date including, without limitation, fees paid to the U.S. Copyright Office or any causes of action relating to such refunds;
2.2.4. All programming agreements and retransmission consent agreements of Seller, including those relating to or benefiting the System.
2.2.5. All trademarks, trade names, service marks, service names, logos and similar proprietary rights of Seller or its affiliates, whether or not used in the business of the System;
2.2.6. Except as specifically set forth herein, any Employee Plan, Compensation Arrangement or Multi-employer Plan;
2.2.7. All rights to receive fees or services from any affiliate of Seller other than fees for services, if any, rendered by Buyer after Closing;
2.2.8 Any and all assets and rights of Seller unrelated to the System;
2.2.9. All equipment, software, licenses and agreements related to Seller's customer billing system;
2.2.10. Any contracts, agreements or other arrangements between Seller and any affiliate of Seller;
2.2.11 Those choses in action of Seller whether or not related to the System of the type set forth on Schedule 2.2.11, which shall exclude such choses in action that relate solely to the System and which accrue after Closing; and
2.2.12. The assets listed on Schedule 2.2.12
2.3. EARNEST MONEY DEPOSIT. Upon execution and delivery of this Agreement by Seller and Buyer, Buyer shall deliver to U.S. Bank National Association (the "ESCROW AGENT") the amount of ONE HUNDRED THOUSAND DOLLARS AND 00/100 ($100,000.00) (the "DEPOSIT"), to secure the obligations of Buyer to close under this Agreement. The Deposit shall be held in an account and applied pursuant to the terms of that certain Escrow Agreement, substantially in the form attached hereto as Exhibit A ("ESCROW AGREEMENT"), to be executed concurrently herewith by Buyer, Seller and Escrow Agent. Upon the Closing, the amount of the Deposit, together
with interest thereon, shall be delivered to Seller and credited against the Purchase Price. In the event of a termination of this Agreement, the Deposit together with interest therein shall be paid in accordance with Section 8.2 hereof.
2.4. PURCHASE PRICE. The purchase price for the Assets shall be EIGHT MILLION FIVE HUNDRED THOUSAND DOLLARS AND 00/100 ($8,500,000.00) (the "PURCHASE PRICE"), and shall be paid by Buyer to Seller at the Closing as follows:
2.4.1. Release to Seller of the Deposit together with the interest therein in accordance with the provisions of the Escrow Agreement; and
2.4.2 Buyer shall deliver to the Escrow Agent for deposit into an escrow account an amount equal to EIGHT HUNDRED FIFTY THOUSAND DOLLARS AND 00/100 ($850,000.00) (the "HOLDBACK") to secure Seller's obligations under Section 9.2. The Holdback shall be held in an escrow account and applied pursuant to the terms of the Escrow Agreement. On the eighteen month anniversary of Closing, the Holdback, together with interest thereon, then remaining in the escrow account less any payments due to Buyer or pending claims made by Buyer pursuant to Section 9.4 together with interest attributable thereto, shall be delivered to Seller.
2.4.3. Subject to credits for the Deposit and the Holdback, together with interest thereon, and subject to adjustments and prorations set forth in Section 2.5 below, by wire transfer of the balance of the Purchase Price in immediately available funds to Seller.
2.5. ADJUSTMENTS AND PRORATIONS.
2.5.1. All revenues, expenses and other liabilities arising from the System up until midnight on the day prior to the Closing Date, including subscriber and advertising revenues, franchise fees, pole and other rental charges payable with respect to cable television service, utility charges, real and personal property taxes and assessments levied against the Assets, salesperson advances, property and equipment rentals, applicable copyright or other fees, sales and service charges, taxes (except for taxes arising from the transfer of the Assets hereunder), and similar prepaid and deferred items, shall be prorated between Buyer and Seller in accordance with the principle that Seller shall be responsible for all expenses, costs and liabilities and entitled to all revenues allocable to the conduct of the business or operations of the System for the period prior to the Closing Date, and Buyer shall be responsible for all expenses, costs and obligations and entitled to all revenues allocable to the conduct of the business or operations of the System on the Closing Date and for the period thereafter.
2.5.2. The Purchase Price shall be increased by an amount equal to (a) 98% of the face amount of all cable service customer Accounts Receivable that are outstanding 30 days or less from the first day of the period to which any outstanding bill relates, and (b) 90% of the face amount of all cable service customer Accounts Receivable that are outstanding more than 30 but fewer than 61 days from the first day of the period to which any outstanding bill relates.
2.5.4. The Purchase Price shall be increased by an amount equal to 100% of the face amount of all payments and sums deposited or advanced by Seller to a landlord, utility, governmental agency or any other party as a security deposit or in exchange for initiation of a service and which will inure to the benefit of Buyer.
2.5.5. The Purchase Price shall be reduced by an amount equal to (a) any customer advance payments (i.e., customer payments received by Seller prior to the Closing but relating to service to be provided by Buyer after the Closing) and deposits (including any interest owing thereon), (b) except as set forth in Section 2.5.4, above, any other advance payments (e.g., advertising payments received by Seller prior to the Closing but relating to service to be provided by Buyer after the Closing), and (c) the product of $2,291 and the number, if any, by which 3,710 exceeds the actual number of Subscribers in Systems. Notwithstanding, if the System loses fifty (50) or more subscribers in the thirty (30) days prior to Closing due to a Force Majeure Event, Seller may delay Closing up to thirty (30) days to engage in attempts to remediate the event(s) or circumstance(s) that resulted in the loss. For purposes of this Section 2.5.5, "FORCE MAJEURE EVENT" shall be defined to mean fire, earthquake, flood, labor disputes, utility curtailments, power failures, explosions, civil disturbances, hurricanes, tropical storms, tornadoes, and other similar events that are outside of the control of Seller.
2.5.6. At least ten (10) business days prior to the Closing, Seller will deliver to Buyer a report with respect to the System (the "PRELIMINARY REPORT"), showing in detail the preliminary determination of the adjustments referred to in this Section 2.5, calculated in accordance with such Section as of the Closing Date (or as of any other date(s) agreed to by the parties) together with any documents substantiating the determination of the adjustments to the Purchase Price proposed in the Preliminary Report. The Preliminary Report will include a schedule setting forth advance payments and deposits made to or by Seller, as well as Accounts Receivable information relating to the System (showing sums due and their respective aging as of the Closing Date). The parties shall negotiate in good faith to resolve any dispute and to reach an agreement prior to the Closing Date on such estimated adjustments as of the Closing Date or thereafter in accordance with Section 2.5.7 below. The adjustment shown in the Preliminary Report, as adjusted by agreement of the parties, will be reflected as an adjustment to the Purchase Price payable at the Closing.
2.5.7. Within ninety (90) days after the Closing Date, Buyer shall deliver to Seller a report with respect to the Systems (the "FINAL REPORT"), showing in detail the final determination of any adjustments which were not calculated as of the Closing Date and containing any corrections to the Preliminary Report, together with any documents substantiating the final calculation of the adjustments proposed in the Final Report. If Seller shall conclude that the Final Report does not accurately reflect the adjustments and prorations to be made to the Purchase Price in accordance with this Section 2.5, Seller shall, within thirty (30) days after its receipt of the Final Report, provide to Buyer its written statement of any discrepancies believed to exist. Buyer and Seller shall use good faith efforts to jointly resolve the discrepancies within fifteen (15) days of Buyer's receipt of Seller's written statement of discrepancies, which resolution, if achieved, shall be binding upon all parties to this Agreement and not subject to dispute or judicial review. If Buyer and Seller cannot resolve the discrepancies to their mutual satisfaction within such 15-day period, Buyer and Seller shall, within the following ten (10) days, jointly designate Deloitte & Touche LLP's
Seattle office ("Deloitte") to review the Final Report together with Seller's discrepancy statement and any other relevant documents. Deloitte shall report its conclusions as to adjustments pursuant to this Section 2.5 which shall be conclusive on all parties to this Agreement and not subject to dispute or judicial review. If, after adjustment as appropriate with respect to the amount of the aforesaid adjustments paid or credited at the Closing, Buyer or Seller is determined to owe an amount to the other, the appropriate party shall pay such amount thereof to the other, within three days after receipt of such determination. The cost of retaining such independent public accounting firm shall be split equally between Buyer and Seller.
2.6. ASSUMPTION OF LIABILITIES AND OBLIGATIONS. As of the Closing Date, Buyer shall assume and pay, discharge and perform the following (collectively, the "ASSUMED LIABILITIES"): (a) all obligations and liabilities of Seller under the Franchises and the Contracts related to the period after the Closing; (b) all obligations and liabilities of Seller to all customers and advertisers of the System for any advance payments or deposits for which Buyer shall have received a credit pursuant to the adjustments under Section 2.5; (c) all obligations and liabilities arising out of events occurring on or after the Closing Date related to the Assets or Buyer's conduct of the business or operations of the System; and (d) the obligations and liabilities listed on Schedule 2.6. All other obligations and liabilities of Seller shall remain and be the obligations and liabilities solely of Seller.