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Ord 2211 - Appr Trans Cable TV F COUNCIL BILL NO. 1876 ORDINANCE NO. 2211 AN ORDINANCE APPROVING AND CONSENTING TO THE TRANSFER AND ASSIGNMENT OF A CABLE TV FRANCmSE FROM NORTHLAND CABLE TELEVISION, INe. TO NORTH WILLAMETTE TELECOM, INC. AND DECLARING AN EMERGENCY. WHEREAS, the City of Woodburn, Oregon (the "City"), acting by and through its City Council (the "Council") and pursuant to the authority of and in accordance with the terms and conditions of Ordinance No. 1766, passed that certain Ordinance No. 2093 on October 12,1992, granting to NORTHLAND CABLE TELEVISION, INC. ("Seller") the authority to construct, operate and maintain a cable television system within the franchise area (the "Franchise"); and WHEREAS, Seller intends to sell substantially all of its assets, including all of its right, title and interest in the Franchise to North Willamette Telecom, Inc., an Oregon corporation, d.b.a. DirectLink of Oregon and its assigns ("North Willamette"); and WHEREAS, it is in the best interests of the City and it citizens to consent to the above- referenced assignment and transfer of the Franchise; NOW; THEREFORE, THE CITY OF WOODBURN ORDAINS AS FOLLOWS: Section 1. The City hereby approves and consents to the transfer and assignment of the Franchise from Seller to North WiIlamette. Section 2. The City hereby approves the encumbrance of the Franchise and the assets of the cable television system, and the assignment of same for security purposes, in connection with the acquisition and operation of the system and the financing and refinancing, from time to time, of the business operations of North Willamette. Section 3. The assignment and transfer of the Franchise shall not alter the terms and conditions of the Franchise granted in Ordinance 2093; and North Willamette shall file with the City Recorder a written unconditional assumption and acceptance of the Franchise. Section 4. In addition to the document required by Section 3, North Willamette shall file with the City Recorder a written assurance that: (A) It shall maintain a system headend in the incorporated City limits of Woodburn during the term of the Franchise. (B) It shall maintain an office and studio located in the incorporated City limits during the term of the Franchise. Page 1 - COUNCIL BILL NO. 1876 ORDINANCE NO. 2211 Section S. In connection with the assignment and transfer of the Franchise to North Willamette, the City certifies to Seller and North WilIamette that: (A) The Franchise was duly and validly issued by the City. (B) The Franchise is in full force and effect as of the date hereof, is valid and enforceable in accordance with its terms and wiIl not expire until October 19,2002. (C) No event of default under the Franchise, and no event which could become an event of default with the passage of time or the giving of notice, or both, has occurred and is continuing as of the date of this Ordinance. (0) All fees owing to the City pursuant to the Franchise have been paid through December 31, 1997. (E) The City acknowledges receipt of a completed FCC Form 394 from Seller and North WilIamette. Section 6. Ordinance Nos. 1766, 2093 and this Ordinance were and are adopted in accordance with the notice and procedure requirements of the laws of the State of Oregon governing cities, and with the notice and procedure requirements prescribed by the City. Ordinance Nos. 1766, 2093 and this ordinance were and are adopted in accordance with and do not conflict with the laws, ordinance, resolutions and other regulations of the City, as presently in effect or as the same were in effect at the time the particular action was taken. Section 6. This ordinance being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist and this ordinance shall take effect immediately upon passage by the Council an~ ~val by the Mayor. / Approved as to formY7~ ) 4- /:> / 1~ City Attorney Date I . APPROVED: '7/~~A (/r!,A~-' ,7 Nancy A. 'rksey, Mayor Passed by the Council April 13, 1998 Submitted to the Mayor April 15. 1998 Approved by the Mayor April 15, 1998 Filed in the Office of the Recorder April 15, 1998 ATTEST:J\<LV-G~",d Mary Tennant, City Recorder City of Woodburn, Oregon Page 2 - COUNCIL BILL NO. 1876 ORDINANCE NO. 2211 , ..;ommunlc8l1Ons Comn'isSion W&..",ngton, D.C. 20554 Approved by OMB 306()..()573 ExpIres 08131196 FCC 394 APPLICATION FOR FRANCHISE AUTHORITY CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL OF CABLE TELEVISION FRANCHISE FOR FRANCHISE AUTHORllY USE ONt. y SECTION I. GENERAL INFORMATION DATE April 7, 1998 1. Community Unit Identification Number(s): OR-0301 2. Application for: l.KJ D Assignment of Franchise Transfer of Control 3. Franchising authority: CITY OF WOODBURN 4. Identify oommunlty where the syslemlfranchlse that Is the lublect of the asolgnment or tranller of control Is located: CITY OF WOODBURN, OREGON 5. Date system was acquired or for systems constructed by the transferor/asslgnor the date on which FEBRUARY 17, 1988, service was provided to the first subscriber In the franchise area: from an affiliated company 6. Proposed effective date of closing of the transaction assigning or transfen1ng ownership of the system to transferee/assignee: May 22, 1998 7. Attach as an Exhibit a schedule of any and all additional Information or material filed with this appllcatioo that Is identified In the franchise as required to be provided to the franchising authority when requesting Its approval of the type of transaction that Is the subject of this application. I Exhibit No. PART I . TRANSFEROR/ASSIGNOR 1. Indicate the name, mailing address. and telephone number of the transferor/assignor. rans ror Ignor n I ua. s as name rs al ngs e ressor.. ox 1201 THIRD AVE. SUITE 3600 e u ng area e SEATTLE WA 98101 2.(a)Attach as an Exhibit a copy of the contrael or agreement that p<OVides for the assignment or tral1lfer of control Oncludlng any exhlblts or schedules thereto necessary in order to understand the tenns thereof). If there Is only an oral agreement. reduce the tenns to writing and attach. (Confidential trade. business. pricing or marketing infonnatlon. or other Information not otherwise publicly available, may be redacted.) I Exhibit No. I (b) Does llle contract submitted in response to (a) above embody llle full and complete agreement between the transferor/assignor and the transferee/assignee? Yes Q No o If No, explain in an Exhibit. I Exhibit No, ^DOCNUM^ FCC 394 October 1993 ,.... ........ PART II - TRANSFEREE/ASSIGNEE 1.(a) Indicate the name, mailing address. and telephone number of the transferee/assignee. ega name 0 rans tgnee I In I ua I IS as name rs North WiJlamette Telecom, Inc. Canb OR e 97013 aap one . n u ngarea e (503) 263-8080 (b) Indicate lhe name, mailing address, and telephone number of person to contact, If other lhan lhe transferee/assignee, ama con person s s name rs Rich Ares Irm or company name 1 any North WiJlamette Telecom, Inc. a ressor . . ox PO Bx 850 Canby OR e 97013 aap one . n u ngarea e (503) 266-8243 (c) Attach as an Exhlbitlhe name, mailing address, and telephone number of each additional person who should be contacted. K any. Exhibit No. (d) Indicate lhe address where lhe system's records will be maintained. I :;taddress I 191 SE 2nd Av Canby IStateOR I Z'1'9~i3 2. Indicate on an attached exhibit any plans to change the current tenns and conditions of service and operations of lhe system as a consequence of lhe transaction for which approval Is sought. Exhibit No. ~~~^ - SECTION II. TRANSFEREE'S/ASSIGNEE'S LEGAL QUALIFICATIONS 1, Transferee/Assignee is: c:::LJ Corporation a. Jurisdiction of Incorporation: d. Name and address of registered agent in Oregon jurisdiction: b. Date of incorporation: Roger Reif 1-24-89 Reif, Reif & Thalhofer c. For profit or not-for-profit: 273 N Grant For Profit Canby, OR 97013 c=::J Limited Partnership a. Jurisdiction In which formed: c. Name and address of registered agent in Jurisdiction: b. Date of formation: ~ Individual c::=;;;\er. Delaibe In an Exhibit. I Exhibit No. I I Jurisdiction whose laws govern formation: I b. ~ General Partnership I a. Date of formation: 2. List the transferee/assignee, and, if the transferee/assignee Is not a nalllral person. each of Its officers. directors, stockholders beneficially holding more than 5% of the outstanding voting shares, general partners, and limited partners holding an equity interest of more than 5%. Use only one column for each Individual or entity. Attach additional pages If necessary. (Read carefully - the lettered Items below refer to corresponding lines In the following table.) (a) Name. residence. occupation or principal oosln.... and principal place of business. (If other than an Individual, also show name. address and citizenship of nalllral person author1zed to vote the voting securities of the applicant that it holds.) List the applicant first, officers, next, then directors and, thereafter, remaining stockhoklers and/or partners. (b) Citizenship. (c) Relationship to the transferee/assignee (e.g., officer, director. etc.). (d) Number of shares or nalllre of partnership Interest. (e) Number of votes. (I) Percentage of votes. (a) North Willamette Telecom, Canby Telephone Association Inc. PO Bx 880 0("\ 1'.'( l\4Q, Q7" 1 > Canby OR 97013 (b) Oregon Corporation ~regoncoope~tlve Sole Shareholder (c) N/A Sole Shareholder (d) N/A 700,000 (J 00%) (e) N/A 700,000 (I) N/A 100% (a) (b) (c) ~~~^ . ,-, (e) (I) 3. If the applicant is a corporation or a limited partnership, is the transferee/assignee formed under the laws of, or duly qualified to transact business In, the State or other jurisdiction in which the system operates? If the answer is No, explain in an Exhibit. 4. Has the transferee/assignee had any interest In or In connection with an application which has been dismissed or denied by any tranchlse authority? If the answer Is Yes, describe circumstances In an Exhlbil 5. Has an adverse finding been made or an adverse final action been taken by any court or administrative body with respect to the transferee/aIIlgMe In a civil, aimlnal or administrative proceeding, brought under the provisions of any law or regulation related to the following: any felony: revocation, sUlpenslon or Involuntary transfer of any authorization (Including cable franchises) to provide video programming services: mass media related antibust or unfair competition; fraudulent statemenll to another governmental unit, or employment dllaimlnation? If the answer Is Yes, attach as an Exhibit a full'desaiption of the peISOl1S and matter(s) Involved, including an Idenllfication of any court or administrative body and any proceeding (by dates and file numbers, II applicable), and the disposition of IUch proceeding. 6. Are there any documents, instrumenll, contracts or understandings relating to ownership or future ownership rights with respect to any attributable Interest as desaibed In Question 2 (Including, but not limited to, non-voting stock Interests, beneficial stock ownership Interesll, options, warrants, debentures)? If Yes, provide particulars in an Exhibit. 7. Do documenll, Instruments, agreements or understandings for the pledge of stock of the transferee/assignee, as security for loanl or contractual perfonnance, provide that: (a) voting rights will remain with the applicant, even in the event of default on the obligation; (b) In the event of default, there will be either a private or public sale of the stock: and (c) prior to the exercise of any ownership rights by a purchaser at a sale desaibed In (b), any prior consent of the FCC and/or of the franchising authority, II required pursuant to federal, state or IocaJ law or pursuant to the terms of the franchise that is the subject of this application Is made will be obtained? If No, attach as an Exhibit a full explanation. N1A - Transferee does not have any luch documents, Instruments, agreements or unders"ndlngs. SECTION III - TRANSFEREE'SJASSIGNEE'S FINANCIAL QUALIFICATIONS 1. The transferee/assignee certifies that it has sufficient net liquid assets on hand or available from committed resources to consummate the transaction and operate the facilities for three months. 2. Attach as an Exhibit the most recent financial statements, prepared In accordance with generally accepted accounting principles, Including a balance sheet and Income statement for at least one full year, for the transferee/assignee or parent entity that has been prepared in the ordinary course of business, if any such financial statements are routlnety prepared. Such statements, If not otherwise publicly available, may be marked CONFIDENTIAL and will be maintained as confidential by the franchise authority and its agents to the extent pennisslble under local law. SECTION IV - TRANSFEREE'SJASSIGNEE'S TECHNICAL QUALIFICATIONS ~~^ Yes No ~ 0 I Exhibit No. Yes No 0 ILl I Exhibit No. Yes No 0 IX] I Exhibit No. Yes No 0 IX] I Exhibit No. Yes No 0 0 I Exhibit No. Yes IX] No o I Exhibit No.2 ,..--" rorth in an Exhibit a narrative account of the transferee's1asslgnee's technical qualifications, experience and expertise regarding cable television systems, Induding, but not limited to, summary Information about appropriate management personnel that will be Involved In the system's management and operations. The transferee/assignee may, but need not, list a representative sample of cable systems currently or fonnerly owned or operated. I Exhibit No.3 SECTION V . CERTIFICATIONS Part I . Transferor/Assignor All the statements made in the application and attached exhibits are considered material representations, and all the Exhibits are a material part hereof and are Incorporated herein as If set out In full In the application. WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, TITLE 18, SECTION 1001. ~f-j..ll \~1'l' Print full name JAMES A. PENNEY I CERTIFY that the statements in this application are true, complete and correct to the best of my knowledge and belief and are made in good faith. Check appropriate dasslflcatlon: Individual c=J General Partner CD Corporate Officer (Indicate Tille) VICE PRESIDENT c=J Other. Explain: ~!7~^ ~ Part II . Transferee/Assignee All the statements made In the application and attached exhibits are considered material representations, and all the exhibits are a material part hereof and are Incorporated herein as if set out In full In the application. The transferee/assignee certifies that he/she: (a) Has a aJrrent copy of the FCC's Rules governing cable television systems. (b) Has a current copy of the franchise that Is the SUbject of this application, and of any applicable state laws or local ordinances and related regulations. (c) Will use its best efforts to comply with the terms of the franchise and applicable state laws Of local ordinances and related regulations. and to effect changes, as prompUy as practicable, In the operation of the system, If any changes are necessary to cure any violations thereof Of defaults thereunder presently In effect or ongoing. Signature I CERTIFY that the statements in this application are true, ~~ ~4- complete and correct to the best of my knowledge and belief and ~ are made In good faith. Date WillFUL FALSE STATEMENTS MADE ON THIS FORM ARE PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. April 7, 1998 CODE, TITLE 18, SECTION 1001. Print full name Eugene L. Cole Ched< appropriate classification: Individual c=:J c::::::iJ c=:J I I General Partner Corporate Officer (Indicate Other. Explain: TItle) Attomey~n-Fact President ~!1~^ ..-..--.. ...-........-*.-"..-.--.-. ._--". ~ This Asset Purchase and Sale Agreement is made and entered into as of 2 - 2-:3 -'1 B 1998, and is by and between NORTHLAND CABLE TELEVISION, INC., a Washington corporatio~ ("Seller"), and NORm WILLAMETTE TELECOM, INC., an Oregon corporation ("Buyer"). ASSET PURCHASE AND SALE AGREEMENT RECITALS A. Seller owns and operates a cable television system serving the commumltes of Woodburn, Hubbard and Gervais and nearby unincorporated areas of Marion County, Oregon (the "System"); and B. Seller desires to sell and Buyer desires to buy the System. NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties agree as follows: AGREEMENTS ARTICLE I Purchase and Sale of Assets 1.1 Assets Subiect to Al!reement. Seller shall sell. assign, transfer, convey and deliver to Buyer, and Buyer shall purchase, assume and aequire from Seller. all of Seller's right, title and interest in and to the following described assets (collectively, the "Assets") as the same shall exist on the Closing Date (as defined below), provided that the Assets shall not include any of the assets described in Section 1.2: (a) . ACCQunts Receivable. All of Seller's accounts receivable related to the System as of the Closing Date; (b) Inventorv. All of Seller's operating inventory, supplies and other inventories of every kind and nature related to providing cable television services to Customers of the System. The term "Customer" as used in this Agreement means any person who is paying Seller for cable television services delivered by means of the System; '. (c) Real Estate. The real estate, including the land, buildings and other improvements thereon, described in Schedule 4.6 (the "Real Estate"). (d) Eauipment. All equipment and other personal property of Seller that is an integral part of the System (the "Equipment"), including: headend equipment, including towers and' origination, transmission and electronic equipment; distribution equipment, including trunk, distribution 'and drop lines, amplifiers, power supplies, conduit, vaults, pedestals, grounding and pole hardware; subscriber devices, including converters, behind television transformers and taps; installer and technician equipment, including vehicles, tools and test equipment; (e) Penn its and Licenses. Seller's cable television franchises (the "Franchises"); Federal Communications Commission ("FCC") permits, licenses and authorizations (the "FCC BP75c EX~l-~BlT 2/13198 Licenses") related to the System, all as set forth on Schedule 4.13; state and county highway crossing pennits; and railroad crossing permits; (I) Assumed Contracts. Seller's equipment leases (the "Equipment Leases") and Seller's pole attachment agreements (the "Pole Attachment Agreements") related to the System,. all as set forth on Schedule 4.10. Seller's agreements with Customer.; for cable television service as of tJie Closing Date (the "Customer Agreements") and Seller's unbilled selVice order.; for services to Customer.; or prospective Customers. TIle Franchises, FCC Licenses, Equipment Leases. Pole Attachment Agreements, Customer Agreements and unbilled service orders are referred to herein as the "Assumed Contracts"; (g) Intangible ProDertv. Seller's Customer lists and Customer records; construction and engineering maps and data, schematics and blueprints; books and financial records pertaining to the operation of the System; correspondence and documents pertaining to Customers, governmental authorities and other third parties relevant to the System's ongoing relationships with Customers, governmental authorities and other third parties; prepaid expenses to the extent such prepaid expenses result in an adjustment to the Purchase Price (as defined below) under Section 3.4; and (h) Other. All other items described in Schedule 1.1. 1.2 Excluded Assets. Notwithstanding anything contained in Section 1.1 to the contrary, the Assets will not include any of the following ("Excluded Assets"): (a) Cash, Cash, certificates of deposit, bank or savings and loan accounts, U.S. government securities, any other marketable securities of any kind or nature or notes receivable; (b) Claims. Claims of Seller against third parties. other than System accounts receivable as provided in Section I, \( a); (c) Prol!fllmming Contracts. Except as specifically set forth in Schedule 4.10. programming contracts used by Seller in the System, other than those agreements which permit or require the retransmission of broadcast signals to the extent necessary for Buyer to operate the System; (d) Bonds and Insurance. Bonds and insurance policies furnished by Seller pur.;uant to any Franchise, Pole Attachment Agreement or other authorization or agreement; (e) Nonexclusive Use. Any and all assets of Seller not solely used or reselVed solely for use in Seller's ownership and operation of the System; (I) Name. The names "Northland Cable Television," "Northland Cable News" and all derivatives thereof; (g) Billing Software. All billing software used in the operation of the System; provided, however, that Seller shall reasonably cooperate with Buyer to effect an orderly transition from Seller's proprietary billing system to one to be used by Buyer in accordance with the general terms set forth on Schedule 1.2( s(); and (h) Other. All other items described in Schedule 1.2(h). ARTICLE II BP75c -2- 2/13/98 ..,,-....-...--..---. ._~_....__.,_..-, Assumotion of Liabilities 2.1 Assumotion of Liabilities. Buyer shall assume, pay, perform and discharge, and forever . indemnifY and hold Seller harmless against and from the following liabilities and obligations of Seller (the "Assumed Liabilities"); provided that the Assumed Liabilities shall not include any of the liabilities described in Section 2.2: . (a) Assumed Contracts. All of Seller's liabilities and obligations under the Assumed Contracts to be satisfied or performed on or after the Closing Date. If and to the extent that Seller, in the ordinary course of business consistent with past practices, enters into written agreements with parties not affiliated with Seller after the date of this Agreement but before the Closing Date that have terms of less than 90 days and have payment or performance obligations of less than Two Thousand Five Hundred Dollars ($2,500), individually or in the aggregate, Buyer shall assume all of such agreements as part of the Assumed COntracts. Buyer shall assume any 'other agreements entered into by Seller to the extent Buyer has provided Seller with its express written approval of such agreements. (b) Current and Accrued Liabilities. All of Seller's accounts payable relating to the operation of the System remaining unpaid on the Closing Date and accrued current liabilities as of the Closing Date to the extent such accounts payable and accrued current liabilities result in an adjustment to the Purchase Price under Section 3.4. (c) Ooeratine Liabilities. All liabilities, obligations, costs and expenses with respect to claims arising with respect to the operation, of the' System on or after the Closing Date, including, without limitation, any and all franchise fees. pole attachment rentals. copyright fees, federal, state or local income, sales, use, excise. property or other taxes or tort claims arising out of or attributable to the conduct of the System on or after the Closing Date. 2.2 Excluded Liabilities. Notwithstanding anything contained in Section 2.1 to the contrary, Buyer shall not assume and shall not be obligated to pay, perform or discharge any of Seller's following liabilities: (a) Ooeratine Liabilities. Any and all liabilities, obligations, costs and expenses with respect to claims arising in any way with respect to the operation of the System prior to the Closing Date, including without limitation any and all franchise fees, pole attachment rentals, copyright fees, federal, state or local income, sales, use, excise, property. employment or other taxes or tort claims arising out of the conduct of the System before the Closing Date. " (b) Taxes. Any of Seller's liabilities and obligations for any federal, state or local income taxes resulting from the sale of the Assets hereunder. ARTICLE III Purchase Price shall b:'~ p~'iilLce: A_~o~;' A~:=;U:~~j= ~~i~: adjustments set forth in Section 3.4. The Purchase Price shall be allocated among the Assets in such amounts as set forth in Schedule 3.1 and to which allocation the parties agree to be bound, BP75c -3- 2/13/98 .. . 3.2 Purchase Price Escrow Deposit. Within one day after the execution of this Agreement, Buyer shall deposit $ J (the "Purchase Price Deposit") by federal wire transfer to an account designated by U.S. Bank of Washington, N.A. (the "Escrow Agent") in accordance with the terms of an escrow agreement among Buyer, Seller and the Escrow Agent substantially in the form attached hereto as Exhibit A and shall notify Seller that it has made the Purchase Price Deposit and provide Seller with confirmation by the Escrow Agent of the same. ' 3.3 Pavment of Purchase Price. Buyer shall pay the Purchase Price, less any payment to Seller of the Purchase Price Deposit, to Seller on the Closing Date by federal wire transfer to an account designated by Seller in writing at least two days prior to the Closing Date. 3.4 Adiustments to Purchase Price. The Purchase Price will be adjusted as follows: (a) Accounts Receivable. The Purchase Price shall be increased by an amount equal to the sum of the Customer Receivables (as hereinafter defined) and the Advertising Receivables (as hereinafter defined) on Seller's books as of the Closing Date in accordance with the following: (i) for receivables aged zero through 30 days, 95% of the aggregate amount of such receivables; (ii) for receivables aged 31 through 60 days. 85% of the aggregate amount of such receivables; (iii) for receivables aged 6\ through 90 days, 50% of the aggregate amount of such receivables. "Customer Receivables" means the aggregate accounts receivable as of the Closing Date due from Customers which will have been outstanding no more than 90 days from the due date of the billing as stated on the invoice. "Advertising Receivables" means the aggregate accounts receivables as of the Closing Date due from advertisers which have been outstanding no more than 90 days from the,due date of the billing as slated on the invoice. (b) Prorations and DeDOsits. The Purchase Price shall be increased for prepaid expenses (excluding, however, prepaid expenses'relating to any contracts or agreements that will not be assumed by Buyer or relating to Excluded Assets), and shall be reduced for accrued expenses and prepaid income, all as determined in.llccordance with generally accepted accounting principles. to reflect the principle that, except as qualified ill this Section. all income and expenses attributable to the System for the period before 12:00 midnight on the morning of the Closing Date are for the account of.Seller, and all income and expenses attributable to the System for the period after \2:00 midnight on the morning of the Closing Date are for the account of Buyer. Payroll expenses, including accrued wages and vacation and sick pay for Seller's employees shall be paid by Seller to the Closing Date and shall not be prorated. The Purchase Price shall be increased by the amount of any monies relating to the System that are on deposit with third parties as security for Seller's performance of the Assumed Contracts as of the Closing Date. The Purchase Price shall be decreased by the amount of any monies held by Seller as customer deposits, liability for which will be assumed by Buyer. " Seller shall prepare and deliver to Buyer. at least 7 business days prior to the Closing Date, a statement (the "Estimate Statement") showing the amount reasonably estimated by Seller, in good faith, '. to be the net amount, if any, of the adjustments provided for in this Section. Prior to the Closing, Seller shall provide Buyer with copies of or reasonable access to such books and records as Buyer may reasonably request for purposes of verifying the adjustments set forth in the Estimate Statement. Seller and Buyer agree to work together in good faith to resolve on or before the Closing Date any disagreement with respect to any matter set forth in the Estimate Statement. The Purchase Price paid by Buyer at Closing shall be increased or decreased by the estimated adjustment amount set forth in the Estimate Statement, adjusted for any changes agreed to by Buyer and Seller prior to Closing, and shall be further adjusted after the Closing, if necessary,. pursuant to Section 3.5. BP7Sc -4. 2/13/98 3.5 Final Adiustment Amount. (a) Within 45 days after the Closing Date. Seller shall prepare and deliver to Buyer a statement (the "Final Statement"). setting forth Sellds good faith determination of the actual adjustment to the Purchase Price (the "Final Adjustment Amount"). During the IS-day period following delivery of the Final Statement to Buyer, Seller shall provide Buyer with access during normal business hours to any books, records, working papers or other information reasonably necessary or useful in the review of the Final Statement and the calculation of the Final Adjustment Amount to enable Buyer to verify the accuracy of the Final Statement. The Final Statement shall become final and binding upon all parties hereto On the 16th day following delivery thereof (without counting such day of delivery) to Buyer unless the Buyer gives written notice of disagreement with the Final Statement (a "Notice of Disagreement") to Seller prior to such date, Any Notice of Disagreement shall specify in reasonable detail the nature of any disagreement so asserted and relate solely to the review of the Final Statement and the calculation of the Final Adjustment Amount. (b) Ifa Notice of Disagreement is given by Buyer in a timely manner, then the Final Statement shall become final and binding upon all parties hereto On the earlier of (x) the date Seller and Buyer resolve in writing any differences they may have with respect to all matters specified in the Notice' of Disagreement or (y) the date all disputed matters are finally resolved in writing by the Arbitrator (as hereinafter defined). During the I5-day period following the delivery of a Notice of Disagreement, Seller and Buyer shall seek in good faith to resolve any differences which they may have with respect to any matter specified in the Notice of Disagreement and each shall provide the other with reasonable access to any boOks, records. working papers or other information reasonably necessary' or useful in the preparation or calculation of (i) the Final Adjustment Amount, (ii) the Final Statement, or (iii) the Notice of Disagreement. At the end of such I5-day period if there has been no resolution of the matter manner specified in the Notice of Disagreement, Seller and Buyer shall submit to an arbitrator (the "Arbitrator") for review and resolution any and all matters arising under this Section which remain in dispute. The Arbitrator shall be a nationally recognized independent public accounting firm mutually agreed upon by Seller and Buyer, The Arbitrator shall render a decision resolving the matters submitted to the Arbitrator within 30 days following submission. thereto (or as soon thereafter as reasonably practicable). The fees and expenses of the Arbitrator pursuant to this Agreement shall be borne by the party identified by the Arbitrator as the unsuccessful party. (c) If as a result of any adjustments made pursuant to this Section 3,5. Buyer is finally determined to owe any amount to Seller, Buyer shall within five days pay such amount to Seller, and if Seller is finally determined to owe any amount to Buyer, Seller shall within five days pay such amount to Buyer. Any such payments shall be made by federal wire transfer of immediately available funds to an account designated in writing by the party receiving payment. In the event material adjustments arise after the date of the Final Statement but prior to the date that is one year after Closing, the parties shall endeavor to promptly and amicably settle any revenue or expense reimbursement, " 3.6 Transfer Taxes. Any sales, use, transfer and other similar taxes due as a result of the transactions provided for herein shall be paid by Buyer. ARTICLE IV . Reoresentations and Warranties of Seller Seller represents and warrants to Buyer as follows: BP75c -5- 2/13/98 ,_.~.,........."..., ....__,_.. ~__... ."__.__'"'__._.w__,_.___~__w~,. 4.1 Due Incorporation. Seller is a corporation duly organized and validly existing under the laws of the State of Washington and has the corporate power and authority to conduct its business as heretofore conducted and to own or hold under lease its properties and assets. Seller is duly qualified and in good standing in every jurisdiction where the character of the properties owned or leased by, or the nature of the business conducted by, Seller makes qualification to do business as a foreign entity necessary, except such jurisdictions where a failure to so qualify could not reasonably be expected to have a material adverse effect upon Seller, its properties or business. 4.2 Authorization. Seller has full corporate power to execute and deliver this Agreement and to perform its obligations hereunder. and the execution, delivery and performance hereof and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action. No other or further corporate action by Seller, its Board of Directors or shareholders is required in connection herewith. 4.3 No Breach of Statute or Contract. Subject to the receipt of the approvals described on Schedule 4.4. neither the execution and delivery of this Agreement, nor compliance with the terms and provisions hereof, on the part of Seller will (a) cause Seller to breach any statute, ordinance or regulation of any governmental authority. (b) conflict with or result in a breach of any of the terms, conditions or provisions of any agreement or instrument to which Seller is a party or by which it may be bound, or constitute a default thereunder. or (c) other than any liability for any income taxes which may be payable by Seller as a result of the consummation of the transactions contemplated hereby, result in the creation. of any material lien, charge or encumbrance of any nature whatsoever. or give to others any interest or rights, including rights of termination or cancellation, in or with respect to any of Seller's properties or assets. which breach, conflict, default or creation would have a material adverse effect on the financial condition or business operations of the System. 4.4 Third Partv Consents. Each person whose consent to the execution, delivery or performance of this Agreement by Seller is legally or contractually required is identified on Schedule 4.4. to the extent that the failure to obtain such consent would have a material adverse effect on the financial condition or business operations of the System or the ability of Seller to consummate the transactions contemplated hereunder. 4.5 Enforceabilitv, This Agreement has been duly executed and delivered by Seller, and constitutes a valid and binding obligation of Seller enforceable in accordance with its terms, except as may be limited by bankruptcy. insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors' rights generally or by the application of general principles of equity, 4.6 Assets. The Assets are in working condition and include all of the rights and properties reasonably necessary to operate the System as currently operated and to provide cable television service to the System's Customers. Seller has good and marketable title, free and clear of any mortgage, lien,.. restriction, encumbrance or-adverse claim to all of the Assets, except for (a) liens for general taxes and, assessments for the year of Closing and subsequent years; (b) minor encumbrances which do not materially affect the transferability, present use or value thereof; (c) mortgages, judgments and other liens to be satisfied at or before Closing; (d) the liens and exceptions listed on Schedule 4.6; and (e) in the case of the Real Estate, (i) municipal and zoning ordinances, (ii) such legal highways as do not interfere with the present use of the property..(iii) standard title insurance exceptions, and (iv) recorded easements for public utilities and governmental authorities, water rights. recorded building and .use restrictions and covenants, and other minor encumbrances, provided none of the foregoing materially BP75c -6- 2/13/98 interfere with the present use of the property subject thereto. Except as disclosed on Schedule 4.6. Seller is the sole and exclusive owner of the Assets (other than leased Assets) and does not use any of the Assets (other than leased Assets) by the consent of any other person. To Seller's knowledge, the Real Estate conforms in all material respects with applicable covenants in all building. zoning, environmental, land use and other laws, ordinances. codes, orders and regulations which affect the Real Estate. To Seller's knowledge, all necessary occupancy and other certificates and penn its for the present lawful use and occupancy of the Real Estate, and the Equipment thereon, have been issued. To Seller's knowledge, all notices or orders to correct violations of law, ordinances, codes, orders or regulations issued by any state, county, municipal or a local department having jurisdiction against or affecting any of the Real Estate during Seller's occupancy or use thereof have been complied with. All such Real Estate is accessible from public roads and has all utilities and other services necessary to the conduct of the System as presently conducted. There does not exist any standing order, decree. injunction, judgment or writ of any court which affects, concerns or attaches to the Assets. To Seller's knowledge, no legal or administrative action is threatened or pending which could ripen into a judgment or give rise to any such order, decree, injunction or writ affecting the Assets in any material respect. 4.7 Claims. Litil!lltion and Disoutes. To Seller's knowledge. except as disclosed in Schedule 4.7. and except for actions, proceedings or investigations affecting the cable television industry in general, there is no claim or litigation or investigative proceeding pending or threatened (a) against Seller to compel Seller to make any change in the character or location of any of the Assets or (b) which would materially affect (i) Seller's ability to perfonn hereunder, (ii) tile Assets, (iii) the rights granted under the Assumed Contracts, (iv) the financial condition or business operations of the System, or (v) the ownership, use, maintenance or operation of the Assets and the System by Buyer, Except as disclosed in Schedule 4,7. there is no strike or unresolved labor dispute affecting any of Seller's employees at the System. 4.8 Service Rates. Schedule 4.8 sets forth Seller's rates, as of September 30, 1997 for cable services, installation fees and other fees for each of the communities served by the System. 4.9 Cable Plant and Customers. Schedule 4.9 sets forth approximate infonnation as of the date of this Agreement with respect to (a) the number of Seller's Customers, (b) miles of plant, aerial and underground, and (c) the names of Seller's Customers receiving free or discounted services. All of the distribution plant described in Schedule 4.9 is fully served by the System's headend. 4.10 Assumed Contracts. The Assumed Contracts, together with Seller's state and county highway crossing pennits and Seller's railroad crossing permits, together with Seller's signal carriage agreements and together with any easement rights created under the Cable Communications Policy Act of 1984, include all agreements necessary for the operation of the System, Except as disclosed in Schedule4.IO. all of the A sumed Contracts necessary for the operation of the System are in good standing, valid and effectiv as to Seller, and there has been no material breach, violation or default or notice or claim of material bach, violation or default by any party thereto known to Seller. and Seller is , not aware of any event whi h has occurred that with notice or lapse of time or both could constitute a material breach, violation or efaultby any party thereto. " 4.11 Comoliance with Laws. Except as disclosed on Schedule 4.11. the System is in compliance with all federal, state and local laws, rules and regulations applicable to the System, the applicable rules and regulations of the FCC, and the licensing division of the United States Copyright Office and the Federal Aviation Administration with respect to air navigation hazards, except where the BP75c -7- 2/13/98 failure to be in compliance would not have a material adverse effect on the financial condition or business operations of the System. 4.12 Taxes. Fees and Utilities. Seller has filed with appropriate agencies all tax returns required by law to be filed by Seller with respect to the existence or operations of the System, except where the failure to file would not have a material adverse effect on the financial condition or business operations of the System. Such tax returns were properly prepared and reflected in all material respects the full amount due thereunder. No audit of any federal, state or municipal returns or other tax returns filed by or on behalf of Seller relating to the operation of the System is in progress or, to Seller's knowledge, pending or dueatened. There exists no unpaid federal, state or local income or other tax with respect to the operation of the System. except for accrued taxes not yet due and payable. The reserves for taxes made by Seller are adequate to ,cover the tax liabilities of Seller as of the date dlereof and nothing has occurred subsequently to make any such reserves inadequate. Seller has paid in full any and all license fees, copyright fees, franchise fees, business permit costs, pole attachment fees, unemployment and worker's compensation insurance contributions and utility bills currently due and required to be paid. 4.13 Franchises. Licenses and Permits. Schedule 4.13 contains a true and complete list of all Franchises and FCC Licenses needed to operate the System. Except as contained in the Franchises, the Franchises are subject to no conditions or restrictions other than such as may exist by virtue of acts of Congress, the rules and regulations of federal regulatory agencies or laws and rules adopted by dle various local governing audlOrities of dle State of Oregon. Other than orders, actions, proceedings or investigations generally applicable to the cable television industry in the United States or in the State of Oregon, to Seller's knowledge there are no proceedings pending which would materially and adversely affect the validity of the Franchises or the terms and provisions thereof, The System is currently in compliance in all material respects with all of the Franchises. Schedule 4.13 also contains a true and complete list of all currently outstanding licenses, authorizations, permits and orders issued by the FCC to Seller and which are required by the FCC for the current operation of the System in accordance with FCC rules and regulations. Except as contained in the FCC Licenses, the FCC Licenses are subject to no conditions or restrictions other than such as may exist by virtue of acts of Congress, the rules and regulations of federal regulatory agencies or laws and rules adopted by the various local governing authorities of the State of Oregon. Except as disclosed in Schedule 4.13. the System is in material compliance with the provisions of the FCC Licenses. 4.14 Governmental Filings. Seller has filed or caused to be filed all material reports and statements required to be filed with the FCC and franchising authorities with respect to the System, and such reports are accurate and complete in all material respects. All tests required by the regulations of the FCC to be conducted, have been conducted at the times and places' so required, and the records pertaining thereto, all of which have been retained as required by law, accurately and completely reflect, in all material respects, the results of such tests. Seller has filed all material notices and reports required to be filed with the United States Copyright Office with respect to the System, and such reports are accurate and complete in all material respects and all fees required to be paid with respect to the System. under the terms of the United States Copyright Revision Act of 1976 have been properly computed and paid by Seller, in all material respects. Schedule 4.14 contains copies of the System's most recently filed FCC Forms 325, 320 and 395A and the System's two most recently filed Copyright Statement of Account. All required certificates, permits and clearances from governmental agencies with respect to all of Seller's towers, earth stations, business radios and frequencies carried by the System have been obtained, except where the failure to obtain such certificates, permits and clearances would not have a material adverse effect on the financial condition or business operations of the System. " BP75c -8- 2/13/98 4.15 Revenue Statements. Schedule 4. 15 contains unaudited statements of revenue of the System for the calendar years 1995, 1996 and 1997, which were prepared from the books and records of account of Seller kept in the normal course of business and in accordance with generally accepted accounting principles, consistently applied in accordance with Seller's past practices and each of which presents fairly, in all material respects, the results of the System's operations for the period covered thereby. Since December 31, 1997 there has been no material adverse change in the business operations of the System. 4.16 Brokerage Fees. No person or other entity acting on behalf of Seller is entitled to any brokerage or finder's fee or commission in connection with this Agreement 4.17 No Material Change. Except for laws, rules, and regulations affecting the cable television industry generally, Seller knows of no fact that has resulted, or that in the reasonable judgment of Seller will result, in a material change in the System's business operations or the Assets, that has not been set forth in this Agreement or otherwise disclosed to Buyer. ARTICLE V Representations and Warranties of Buver Buyer represents and warrants to Seller as follows: 5.1 Due Incorporation. Buyer is a corporation duly organized and validly existing under the laws of the State of Oregon and has the corporate power and authority to conduct its business as heretofore conducted and to own or hold under lease its properties and assets. 5.2 Authorization. Buyer has full corporate power to execute and deliver this Agreement and to perform hereunder. and the execution, delivery and perfonnance hereof and the consummation of the transactions contemplated hereby have been duly authorized by all requisite corporate action. No other or further corporate action by Buyer, its Board of Directors or shareholders is required in connection herewith. 5.3 No Breach of Statute or Contract. Neither the execution and delivery of this Agreement, nor compliance with the terms and provisions hereof. on the part of Buyer will (a) cause Buyer to breach any statute, ordinance or regulation of any governmental authority, domestic or foreign, or (b) conflict with or result in a material breach of any of the terms, conditions or provisions of an agreement or instrument to which Buyer is a party or by which it may be bound, or constitute a default thereunder, which breach, conflict, default or creation would have a material adverse effect on the financial condition or business operations of Buyer or the ability of Buyer to perform its obligations hereunder. " 5.4 Third Party Consents. Buyer has obtained all material consents from all persons whose consent to the execution, delivery and performance of this Agreement by Buyer is legally or' contractually required: 5.5 Enforceabilitv. This Agreement has been duly executed and delivered by Buyer, and constitutes a valid and binding obligation of Buyer enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or other similar laws affecting creditors' rights generally or by the application of general principles of equity. BP75c -9- 2/13/98 5.6 Claims. Litigation and DisDutes. There is no claim or litigation or investigative proceeding pending or threatened against Buyer which would materially affect Buyer's ability to perform hereunder. 5.7 Brokerage Fees. Other than Richfield Associates and/or Gary Sugannan, no person or other entity acting on behalf of Buyer is entitled to any brokerage or finder's fee or comniission in connection with this Agreement. Buyer shall be solely liable for payment of any brokerage or finder's fee or commission due to Richfield Associates and/or Gary Sugannan, 5,8 Buver's Investigation, Buyer hereby acknowledges that it has conducted an investigation of the physical plant of the System which investigation included evaluation of the condition and perfonnance of the physical plant. Notwithstanding anything in this Agreement to the contrary, Buyer acknowledges that it is accepting the Assets in their present conditions and locations and with their present operating capabilities. Buyer acknowledges that Seller makes no warranty, express or implied, as to the condition of the Assets except that Seller does represent that the Assets and System are in working condition. Buyer has not relied upon. and Seller shall not be liable for or bound in any manner by, any express or implied verbal or written information. warranties, guarantees, promises, statements, inducements; representations of opinions pertaining to the System or the Assets, except as may be contained in this Agreement and certificates delivered hereunder. ARTICLE VI Covenants of Seller Except and to the extent Buyer may otherwise permit in writing, Seller covenants and agrees as follows: 6.1 Insuection. Between the date of this Agreement and the Closing, Seller shall give to Buyer, its officers, agents, employees, counsel, accountants, engineers and other representatives, reasonable access to all the premises and books and records relating to the System and, to the extent permitted by law, cause Seller's employees to furnish to Buyer such infonnation related to the System as Buyer shall from time to time reasonably request; provided. however, that any such investigation shall be conducted (a) through a corporate officer of Seller, (b) during normal business hours or as mutually agreed and (c) in such a manner as to not unreasonably to interfere with the operation of the System by Seller. 6.2 Conduct of Business Pending Closing. Until the Closing, Seller shall continue to operate the System diligently and substantially in the manner as heretofore conducted, and shall not make or initiate any unusual or novel methods of purchase. sale, management, accounting, construction or operation, or make any adjustments in the pricing of its services not consistent with Seller's past business practices in connection therewith. Seller shall use commercially reasonable efforts to preserve the System's existing business relationships with its Customers, suppliers. governmental authorities,' employees and others having business relations with Seller in connection with the System; provided, that such efforts by Seller shall not require Seller to undertake any extraordinary or unreasonable measures, including, without limitation, the payment of extraordinary or unreasonable fees or expenses, or the initiation or prosecution of legal proceedings. Without limiting the scope ofthe foregoing, Seller shall: " (a) Use, preserve and maintain the Assets on a basis consistent with past practice and keep the Assets in working condition; BP75c -10- 2/13/98 (b) Pay all debts and obligations incurred by it in the operation of its business in the ordinary course of business consistent with past practice; (c) Not commit any act or omit to do any act, nor penn it any act or omission to act, which may cause a material breach of any of the Assumed Contracts which would have a material adverse effect on the financial condition or business operations of the System; (d) Maintain its books, accounts and records in the usual manner and on a basis consistent with past practice; (e) Not enter into any agreement or agreements for the sale of a material amount of any of the Assets except for sales of Equipment consistent with past practice; provided any item of Equipment sold is replaced with an item of Equipment of like value and quality unless such item of Equipment is no longer necessary for the operation of the System; (f) Not increase or decrease any of its Customer rates except as provided on Schedule 6.2 or conduct any sales or marketing programs other than marketing programs consistent with past practices; provided, however. that this Agreement shall not preclude Seller from decreasing rates in accordance with applicable laws. rules and regulations. provided, further, that in the event Seller determines to decrease rates, Seller shall provide Buyer with three business days notice of such increase; and (g) Bill Customers on a basis consistent with past practices. 6.3 Third party Consents. Seller shall give all notices to governmental authorities and other third parties required to be given by it under the Assumed Contracts or otherwise in connection with the transactions contemplated hereby, To facilitate the orderly assignment and transfer of all rights and privileges (including, without limitation, Franchises) necessary to own and operate the System. and to facilitate the securing of all required approvals by the franchising authorities or any other governmental authority, Seller shall proceed after the execution of this Agreement, to prepare, file and prosecute each request and application therefor together with such information as may be reasonably necessary and appropriate to effect such approvals. In obtaining such approvals, Seller may agree to commercially reasonable non-material changes to any Assumed Contract, provided that Seller shall notify Buyer in advance of Seller's agreement to any such changes, Nothing herein shall require the expenditure or payment of any monies (other than in respect of normal and usual filing fees) or the giving of any other consideration by Seller in order to obtain any of such approvals. Seller and Buyer each shall bear one- half of all fees, charges and expenses incurred in obtaining such consents. " 6.4 Further Assurances. At the reasonable request of Buyer, Seller will execute such additional documents as Buyer may reasonably request in order to carry out the transactions Contemplated hereunder. 6.5 Confidentialitv. Seller covenants and agrees that it will not, at any time directly or indirectly, except in connection with the transactions contemplated hereby or to the extent required by law, make any public announcements or press releases without obtaining the prior written consent of Buyer, which consent shall not be withheld unreasonably. 6.6 Commerciallv Reasonable Efforts, Seller will use commercially reasonable efforts to cause the Closing contemplated hereby to occur, including, without limitation, commercially reasonable efforts to cause all required third party consents for transfer of the Assets to be obtained; provided, that BP75c -\1- 2/13/98 such efforts by Seller shall not require Seller to undertake any extraordinary or unreasonable measures to cause the Closing or to obtain such consents, including, without limitation, the payment of extraordinary or unreasonable fees or expenses, or the initiation or prosecution oflegal proceedings. 6.7 Emplovee Matters. Schedule 6.7 sets forth a list of all employees of Seller whose work relates solely to the System as of January 15, 1998 showing then-current positions and' rates of compensation. Seller will tenninate the employment of each employee whose work relates solely to the System as of the Closing Date (except those employees who are relocated by Seller). 6,8 Certain Uodated Infonnation. Promptly and in no event later than 30 days after the end of each month following ihe date of this Agreement until the Closing Date. Seller shall provide Buyer with updated information concerning the number of customers served by the System and the revenue generated by the System. ARTICLE VII Covenants of Buver Except and to the extent Seller may otherwise penn it in writing, Buyer covenants and agrees as follows: 7, I Third Party Consents. Buyer shall give all notices to governmental authorities and other third parties required to be given by it in connection with the transactions contemplated hereby. To facilitate the orderly assignment and transfer of all rights and privileges (including, without limitation, Franchises) necessary to own and operate the System, and to facilitate the securing of all required and necessary approvals by franchising authorities by any other governmental entity or authority, Buyer shall cooperate with Seller, and shall provide Seller with such infonnation and complete such application fonns as may reasonably be requested by Seller to prepare, file and prosecute each request and application therefor. Buyer shall attend such mcctings as Seller may reasonably request in connection with obtaining third party consents, and Buyer shall provide such financial infonnation as third parties may reasonably request in connection with the review of transfer requests. In addition to or in lieu of the consents listed on Schedule 4.4. Buyer acknowledges that it may need to enter into direct agreements with franchising authorities, other governmental entities or authorities or other third parties. Nothing herein shall require the expenditure or payment of any monies (other than in respect of nonnal and usual filing fccs) or the giving of any other consideration by Buyer in order to obtain such consents. 7.2 Discharge of Assumed Liabilities. Buyer shall pay, perfonn and discharge the Assumed Liabilities as they become due, including, without limitation, the discharge and perfonnance when due of each and every obligation of Seller under the Assumed Contracts. " 7 J Confidentiality. Buyer covenants and agrees that it will not, at any time, directly or indirectly, except in connection with the transactions contemplated hereby or to the extent required by law, make any public announcements or press releases without obtaining the prior written consent of Seller. which consent shall not be withheld unreasonably, 7.4 Commerciallv Reasonable Efforts. Buyer will use commercially reasonable efforts to cause the Closing contemplated hereby to occur, including, without limitation, commercially reasonable ' efforts to cause aU required third party consents for transfer of Assets to be obtained; provided, that such efforts by Buyer shall not require Buyer to undertake any extraordinary or unreasonable measures to BP75c -12- 2/13/98 cause the Closing or to obtain such consents, including, without limitation, the payment of extraordinary or unreasonable fees or expenses, or the initiation or prosecution of legal proceedings. 7.5 Access. Seller shall, for a period of five years from the Closing Date, have access to, and the right to copy, at its expense, for bona fide business purposes and during usual business hours upon reasonable period notice to Buyer, all of Seller's books and records relating to the System. Buyer shall retain and preserve all such books and records for such five-year period. 7,6 Efforts to Satisfy Early Resolution Conditions. Buyer shall promptly commence and shall thereafter use its commercially reasonable efforts to satisfY the early resolution conditions set forth at Section 9.8. 7.7 Further Assurances. At the reasonable request of Seller, Buyer will execute such additional documents as Seller may reasonably request in order to carry out the transactions contemplated hereunder. ARTICLE VIII Conditions to Seller's Oblieations Each and every obligation of Seller under this Agreement shall be subject to the fulfillment, prior to or at Closing, of each of the following conditions unless waived by Seller in wriiing: 8.1 Buyer's Representations and Warranties. Each representation and warranty made by Buyer in Article V shall be true and correct in all material respects on and as of the Closing Date with the same effect as though each such representation or warranty had been made or given on and as of the Closing Date. 8,2 Buyer's Covenants. Buyer shall have performed and complied with all of the covenants set forth in Article VII which are to be performed by it before or as of the Closing Date. 8.3 Consents. Seller shall, with the reasonable cooperation of Buyer, have obtained all consents listed in Schedule 4.4. 8.4 Material Adverse Chanl!:e. No material adverse change in the financial condition or results of operations of the System shall have occurred since the date of this Agreement. ., 8.5 CustomerOveral!:e. The number of Basic Subscribers served by the System shall not be more than 4,400. The term "Basic Subscribers" shall mean the sum of (a) the number of Customers subscribing to the System's Standard Basic Package, and (b) the number of Customers subscribing to the System's Economy Basic Service as a stand-alone service, and (c) the number determined by dividing (i) the total monthly billings for sales by the System to bulk and commercial accounts for basic cable' services during the most recent full month ended prior to the date of calculation by (ii) ~ 8.6 Buyer's Deliveries. Buyer shall have delivered the documents referred to in Article XII. 8.7 Settlement and Release. At Closing, Buyer shall cause all plaintiffs to execute and shall irrevocably instruct its counsel to file, within one business day after Closing, with the United States District Court for the District of Oregon a settlement, mutual release and dismissal with prejudice of matters described in North Willamette Telecom. Inc. and Canbv Telephone Association v. Northland BP75c -13- 2/13/98 Cable Television. Inc.. Civil No. CV-96-408-HA. Such settlement, mutual release and dismissal with prejudice shall be substantially in the form attached hereto as Exhibit B. 8.8 Fulfillment of Buver's Earlv Resolution Conditions. Buyer shall have delivered notice to Seller of Buyer's satisfaction with respect to the matters set forth at Section 9.8 within 45 days of the date of this Agreement. " 8.9 Proerammine Services. As of the Closing, Buyer shall have entered into programming agreements which provide for the carriage of the following programming services to those Customers of dte System as are currently receiving such programming services: Portland Trailblazers, Fox News; Discovery; The Learning Channel; ESPN; Family Channel; CNBC; Weather Channel; C-SPAN; NorthWest Cable News; ESPN-2; Cartoon Network; Science Fiction Channel; and History Channel. ARTICLE IX Conditions to Buver's Oblieations Each and every obligation of Buyer under this Agreement shall be subject to the fulfillment, prior to or at Closing, of each of the following conditions unless waived by Buyer in writing: 9. I Consents. Seller shall, with the reasonable cooperation of Buyer and consistent with the provisions of Section 6.3. have obtained all consents listed in Schedule 4.4. 9,2 Seller's Representations and Warranties, Each representation and warranty made by Seller in Article IV shall be true and correct in all material respects on and as of the Closing Date with the same effect as though each such representation and warranty had been made or given on and as of the Closing Date. 9.3 Seller's Covenants. Seller shall have performed and complied with all of the covenants set forth in Article VI which are to be performed by it before or as of the Closing Date. 9.4 Material Adverse Chanee. No material adverse change in the financial condition or results of operations of the System shall have occurred since the date of this Agreement. 9.5 Seller's Deliveries. Seller shall have delivered the documents referred to in Article XI. 9.6 Settlement and Release. At Closing, Seller shall cause all defendants to execute and shall irrevocably instruct its counsel to file. within one business day after Closing, with the United States District Court for the District of Oregon a settlement, mutual release and dismissal with prejudice of the matters described in North Willamette Telecom. Inc. and Canbv Telephone Association v. Northland Cable Television. Inc.. Civil No. CV-96-408-HA. Such settlement, mutual release and dismissal with prejudice shall be substantially in the form attached hereto as Exhibit B. " 9.7 Customer Shortfall. The number of Basic Subscribers (as such term is defined at Section 8.5) served by the System shall not be less than 3,900. 9.8 Specific Earlv Resolution Conditions. At its sole expense Buyer shall undertake the resolution of and shall have notified Seller of Buyer's satisfaction with respect to the following matters within 45 days of the date ofthis Agreement: BP15c -14- 2/13/98 ....,.,.,_."_._..."...,-~.- '--'-'---'~'-"'-'~~'-"-- (a) A financing commitment from a lender and on terms and conditions reasonably acceptable to Buyer; (b) Environmental site assessments in a form reasonably acceptable to Buyer covering any Real Estate to be conveyed pursuant to this Agreement; and (c) Commitments for title insurance covering any Real Estate to be conveyed pursuant to this Agreement containing only such permitted exceptions as are described in Section 4.6(e). ARTICLE X Closin!! and Termination 10.1 Closin!!. 111e closing (the "Closing") of the purchase and sale of the Assets under this Agreement shall take place on such date as Seller and Buyer may mutually designate which is no more than 10 days following Seller's notice to Buyer of Seller's receipt of the consents listed in Schedule 4.4. The Closing will take place at the offices of Seller, 1201 Third Avenue. Suite 3600, Seattle, Washington at 10:00 a.m. Seattle, Washington time on such date. The date on which the Closing occurs is referred to herein as the "Closing Date." Seller and Buyer shall meet on the date preceding the Closing Date at the offices of Seller to conduct a pre-Closing at which all deliveries to be made atClosing will be reviewed by the parties and placed in escrow. At I I :59 p.m. on the date preceding the Closing Date, Seller shall terminate its operation of the System. At 12:0 I a.m. on the Closing Date, Buyer shall commence operation of the System, Immediately after confirmation by Seller's bank of Seller's receipt of the Purchase Price, all instruments and payments held in escrow shall be distributed and disbursed to Seller and Buyer, and the Closing shall be consummated. 10.2 Termination. This Agreement (and the transactions contemplated hereby) may not be term inated except as follows: (a) Upon the mutual written consent of Seller and Buyer; (b) By Seller, if any of the conditions to Seller's obligations set forth in Article VIII have not been satisfied. as applicable; (c) By Buyer, if within 45 days of the date of this Agreement, Buyer has not resolved to its reasonable satisfaction the early resolution conditions set forth in Section 9.8; provided, however, if Buyer has not terminated this Agreement within such 45-day period, Buyer thereafter shall have no right to terminate this Agreement for any matters listed at Section 9.8; " (d) By Buyer, if any of the conditions to Buyer's obligations set forth in Article IX have not been satisfied, as applicable; or (e) By either party, if the Closing has not occurred on or before the 130th day after the date of this Agreement, unless the parties mutually agree to a later date. . ARTICLE XI Seller's Deliveries at Closin!! At Closing, Seller shall deliver the following to Buyer: BP75c -15- 2113/98 Il.l Instruments of Convevance. Such bill of sale. assignment and assumption agreements, deeds, and other instruments of transfer, all dated the Closing Date, substantially in the forms attached hereto as Exhibits C, D, E and F. 1l.2 Bring-Down Certificate. A bring-down certificate executed by a duly authorized officer of Seller to the effect that each representation and warranty made by Seller in Article IV is'true and correct in all material respects on and as of the Closing Date with the same effect as though each such representation or warranty had been made or given on and as of such date, that Seller has performed and complied with all of its covenants set forth in Article VI which are to be performed or complied with before or as of the Closing Date, and that all of the conditions to Buyer's obligations set forth in Article IX have been satisfied on or before the Closing Date, 1l.3 Secretary's Certificate, A certificate executed on behalf of Seller by the Secretary of Seller authenticating Seller's Articles of Incorporation, certifying as to the incumbency, and authenticating the signatures of, those persons executing this Agreement and certificates delivered hereunder on behalf of Seller, and certifying as to the adoption and continuing effect of resolutions authorizing Seller's execution. delivery and performance of this Agreement. 11 A Approvals and Consents, Evidence that Seller has obtained the consents required pursuant to Section 9. J . 11.5 Non-comoetition Agreement, The Non-competition Agreement, in the form attached hereto as Exhibit G, executed by a duly authorized officer of Seller. ARTICLE XII Buver's Deliveries at Closing At Closing, Buyer shall deliver the following to Seller: 12,1 Purchase Price. Payment of the Purchase Price in accordance with Section 3.3. 12.2 Assignment and Assumption Al!reements. Such assignment and assumption agreements and other instruments of transfer, all dated the Closing Date, substantially in the forms attached hereto as Exhibits E and F. 12.3 Bring-Down Certificate. A bring-down Certificate executed on' behalf of Buyer by Buyer's President to the effect that each representation and warranty made by Buyer in Article V is true and correct in all material respects on and as of the Closing Date with the same effect as though each such representation or warranty had been made or given on and as of such date, that Buyer has performed and complied with all of its covenants set forth in Article VII which are to be perfonned or complied with before or as of the Closing Date, and that all of the conditions to Seller's obligations set forth in Article Vlll have been satisfied on or before the Closing Date. 12A Secretary's Certificate. A certificate executed on behalf of Buyer by Buyer's Secretary authenticating Buyer's Articles of Incorporation and bylaws, certifying as to the incumbency, and authenticating the signatures of, officers executing this Agreement and certificates delivered hereunder on behalf of Buyer, and certifying as to the adoption and continuing effect of appropriate resolutions authorizing Buyer's execution, delivery and performance of this Agreement. BP75c -16- 2/13/98 " 12.5 Non-comoetition Agreement. The Non-competition Agreement, in the form attached hereto as Exhibit G, executed by a duly authorized officer of Buyer. ARTICLE XIII Indemnification 13.\ Survival of Reoresentations and Warranties, The representations and warranties of each party contained in this Agreement or in any document delivered pursuant hereto shall be deemed to be continuing and shall survive the Closing for a period of one year. 13.2 Indemnification bv Seller. For a period of one year after the Closing Date, Seller shall indemnify and hold Buyer harmless from and against any loss. cost, expense or other damages suffered by Buyer resulting from, arising out of. or incurred with respect to: (a) the operation of the System prior to the Closing Date, except to the extent such loss, cost, expense or other damage is specifically assumed by Buyer hereunder; (b) the falsity or breach of any representation or warranty made by Seller herein or any certificate delivered pursuant hereto; or (c) the failure by Seller to comply with any covenant of Seller set forth herein or in any instrument or certificate delivered hereunder, provided that any covenant of Seller to be performed or fulfilled on or before the Closing Date shall be deemed to have been performed or fulfilled unless Buyer shall make a written claim of nonperformance or nonfulfillment as of the Closing Date. Seller's indemnity obligation to Buyer under this Section 13.2 shall be Buyer's sole remedy against Seller with respect to such matters and shall be subject to the following limitation: (x) Seller shall not be obligated to indemnify Buyer with respect to indemnification claims made by Buyer under such clause until such time as the aggregate amount of all such claims exceeds the sum of $75,000; and (y) if the aggregate amount of all such claims exceeds the sum of $75,000, the maximum aggregate amount of Seller's indemnity obligation to Buyer under such clause with respect to such claims shall be limited to the aggregate amount of such claims in excess of $75,000, provided that in no event shall the maximum amount of Seller's indemnity obligation to Buyer under such clause with respect to such claims exceed the sum of$2,500,000. 13.3 Indemnification bv Buver. Buyer shall indemnify and hold Seller harmless from and against any loss, cost, expense or other damages suffered by Seller resulting from, arising out of, or incurred with respect to: (a) the operation of the System on or after the Closing Date; (b) the falsity or breach of any representation or warranty made by Buyer herein or in any certificate delivered pursuant hereto; or (c) the failure by Buyer to comply with any covenant of Buyer set forth herein or in any certificate delivered hereunder, provided that any covenant of Buyer to be performed or fulfilled on or before the Closing Date shall be deemed to have been performed or fulfilled unless Seller shall make a written claim of nonperformance or nonfulfillment as of the Closing Date. 13.4 Defense of Claims. If any third party shall assert any claim against Seller or Buyer which, if successful, would entitle either Seller or Buyer to indemnification under this Article XIII. the party entitled to indemnification (the "Indemnified Party") shall give notice of such claim to the party. from whom it intends to seek indemnification (the "Indemnifying Party") and the Indemnifying Party shall have the right to assume the defense of such claim at its expense. If the Indemnifying Party does assume such defense, it shall indemnify and hold the Indemnified Party harmless from and against any and all losses, damages and liabilities caused by or arising out of any settlement or judgment of such claim. In addition, the Indemnified Party shall have the right to participate in the defense of such claim at its expense, in which case (a) the Indemnifying Party shall cooperate in providing information to and consulting with the Indemnified Party about the claim; and (b) the Indemnifying Party shall not consent to the entry of judgment or enter into any settlement without the prior written consent of the Indemnified BP75c -17- 2113/98 Party. If the Indemnifying Party does not assume the defense of any such claim, the Indemnified Party may defend against or settle such claim in such manner and on such terms as it in good faith deems appropriate and shall be indemnified by the Indemnifying Party for the amount of any judgment or settlement and for all losses or expenses, including reasonable attorneys' fees, incurred by the Indemnified Party in connection with the defense or settlement of such claim. 13.5 Tax Effect. If any Indemnified Party shall be entitled to indemnification hereunder as a result of any loss, cost, expense or other damage for which indemnification may be claimed under this Article XIIl. the determination of the amount of indemnification to which such Indemnified Party is entitled as a result of such loss, cost, expense or other damage shall take into account any benefit, including any tax benefit, derived by the Indemnified Party and arising out of the facts or circumstances which resulted in such loss, cost, expense or other damage. ARTICLE XIV Miscellaneous 14,1 EXDenses. Except as otherwise expressly provided for in this Section 14.1 or elsewhere in this Agreement, each party hereto shall pay its own expenses and costs relating to the negotiation, execution and performance of this Agreement (including. without limitation, fees and expenses of attorneys, accountants. brokers. consultants, finders. lenders and investment bankers) whether or not Closing occurs; provide, however, in the event one of the parties breaches this Agreement and fails to consummate the transactions contemplated hereby, such breaching party shall be responsible for all costs and expenses incurred by the non-breaching party). Seller and Buyer shall each bear one-half of the costs and expenses incurred in securing the appropriate governmental approvals to the assignment of the Assumed Contracts. 14.2 Governin\! Law. This Agreement shall be constnJed and interpreted according the laws of the State of Oregon without reference to the rules of conflicts oflaw, 14.3 Notices. All notices. requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given when personally delivered or telefaxed, or five days after mailed, certified or registered mail, with postage prepaid addressed as follows (or to such other person or address as the party to receive such notice may have designated from time to time by notice in writing pursuant hereto): [fto Seller: , Northland Cable Television, Inc. 1201 Third Avenue, Suite 3600 Seattle, Washington 98 101 Attention: 10hn S. Whetzell and James A. Penney Telephone: (206) 621-1351 Telefax: (206) 623-90 I 5 With a copy (which shall not constitute effective notice) to: Ryan, Swanson & Cleveland 1201 Third Avenue, Suite 3400 Seattle, Washington 98101 BP75c -18- 2/13/98 " Attention: John E. Iverson Telephone: (206) 464-4224 Telefax: (206) 583-0359 If to Buyer: North Willamette Telecom, Inc. P.O, Box 850 191 S.E. 2nd Avenue Canby, Oregon 97013 Attention: Eugene L. Cole, President Telephone: (503) 263-8080 Telefax: (503) 266-8260 With a copy (which shall not constitute effective notice) to: Reif. Reif & Thalhofer 273 North Grant P.O. Box 729 Canby, Oregon 97013 Attention: Roger Reif Telephone: (503) 266-3456 Telefax: (503) 266-8555 14.4 Definition of Al!:reement. Unless the context clearly otherwise requires, as used herein, the tenn "Agreement" means this Agreement and the Schedules and Exhibits hereto. The words "herein," "hereof," and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section, Paragraph or other subdivision. Any of such Schedules and Exhibits may be later amended or revised by the mutual consent of the parties. Such Schedules and Exhibits, as so amended or revised. shall be true, complete and correct in all material respects and shall be incorporated into and shall for all purposes be deemed a part of this Agreement. 14.5 Headings, Gender and Person, The headings to Articles and Sections of this Agreement are for reference only and shall not be used in construing the provisions hereof or otherwise affect the meaning hereof. The use of the neuter pronoun "it" shall also refer to as appropriate to the masculine and/or feminine gender. The use of the singular herein shall, where appropriate, be deemed to include the plural and vice versa. As used herein, the word "person" refers to any individual, corporation, partnership, trust, governmental body or authority or other organization or entity. 14.6 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 14.7 Entire Agreement. This Agreement embodies the entire agreement and understanding between Seller and Buyer and supersedes all prior agreements and understandings related to the subject matter hereof. There are no representations, warranties, covenants, promises or agreements on the part of either party to the other hereto which are not explicitly set forth herein. 14.8 Modifications. Any modification, amendment or waiver of or with respect to any provision of this Agreement or any agreement, instrument or document delivered pursuant hereto shall BP75c -19- 2/13/98 , , not be effective unless it shall be in writing and signed by Seller and Buyer and shall designate specifically the terms and provisions so modified. 14.9 Assignment and Binding Effect. Neither party may assign this Agreement or any interest herein without the prior written consent of the other party hereto and any purported assignment without such consent shall be void. Subject to the foregoing, this Agreement shall be binding upon' and shall inure to the benefit of the parties hereto, their respective successors and assigns. 14.10 Time of the Essence. Time is of the essence in each and every provision of this Agreement. DATED as of the date first above written. SELLER: NORTHLAND CABLE TELEVISION, INC. By resident BUYER: NOR LLAMETTE TELECOM. INC, By &~ ef0G.- Eugene L. Cole. President BP75c -20- 2/13/98 .-,._.,~,-----,_............_~_._._.~._'-' EXHIBIT 3 North Willamette Telecom, Inc. currently manages and operates cable television systems in the communities of Aurora, Barlow, Canby, Donald, and Oregon City. A franchise is held in Clackamas County to provide service in the areas of Beaver Creek, Clear Creek, Stafford, rural Canby and rural Oregon City. North Willamette Telecom also provides service in Marion County. North Willamette Telecom currently provides service in the areas adjacent to the proposed Northland purchase that includes Woodburn, Hubbard, Gervais and a portion of Marion County. There were 7,850 customers receiving service from North Willamette Telecom as of the end of March. The commercial office and technical staff will continue to be located in Woodburn. Support staff for commercial, technical, construction and engineering will be available in Canby if assistance is necessary. Training is provided to all employees relating to safety, customer service and product knowledge. The technical staff participates in NCTA and SCTE courses with all fees paid by North Willamette. All employees are encouraged to enroll in courses provided through local community colleges and schools and are reimbursed for tuition. The executive and management personnel responsible for North Willamette Telecom's operations have been involved in the cable television industry since the late 1970's. North Willamette Telecom conducts regular preventative maintenance measures on its facilities and monitors signal quality on a regular basis to ensure a high quality picture is transmitted to its customers. North Willamette Telecom is in compliance with all FCC requirements and standards. North Willamette Telecom has dedicated itself in the past and will continue n the future to provide quality cable television to all of our customers using the latest in technology. ,_.. .. ___., "'_'""~__"_" ...^ _,..,~ ... ""'~_____"'" k_,