<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1996
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
COMCAST CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
PENNSYLVANIA 4841 23-1709202
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
1500 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19102-2148
(215) 665-1700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JOHN R. ALCHIN
SENIOR VICE PRESIDENT AND TREASURER
COMCAST CORPORATION
1500 MARKET STREET
PHILADELPHIA, PENNSYLVANIA 19102-2148
(215) 665-1700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
WILLIAM L. TAYLOR, ESQ. WILLIAM APPLETON, ESQ.
DAVIS POLK & WARDWELL BAKER & HOSTETLER
450 LEXINGTON AVENUE 3200 NATIONAL CITY CENTER
NEW YORK, NEW YORK 10017 CLEVELAND, OHIO 44114
(212) 450-4000 (216) 621-0200
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as possible after this Registration Statement becomes effective
and all other conditions to the Merger of The E.W. Scripps Company with and into
Comcast Corporation pursuant to the Agreement and Plan of Merger described in
the enclosed Joint Proxy Statement-Prospectus have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
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- ----------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
AMOUNT OF
SHARES PROPOSED MAXIMUM PROPOSED AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE MAXIMUM AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(2)
<S> <C> <C> <C> <C>
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Class A Special Common Stock, par
value $1.00 per share............. 93,303,055 N/A N/A $416,177
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- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) Based upon the assumed number of shares that may be issued in the Merger
described herein. Such number is based upon an assumed aggregate
consideration of $1.5921 billion and an assumed Average Closing Price (as
defined in the Merger Agreement) of $17.06375.
(2) The registration fee for the acquisition of the cable business of The E.W.
Scripps Company ("Scripps") has been computed pursuant to Rule 457(f)(1) and
(2) under the Securities Act of 1933, as amended (the "Securities Act") on
the basis of 1/29 of 1% of the product of (A) the sum of (a) the product of
(i) $46.0625 (the average of the high and low prices of Class A Common Stock
of Scripps on the New York Stock Exchange on September 24, 1996) and (ii)
61,000,396 (the number of issued and outstanding shares of such class) and
(b) the product of (i) .00333 (one-third of the par value of Scripps Common
Voting Stock) and (ii) 19,470,382 (the number of issued and outstanding
shares of such class) times (B) 49.95212% (the percentage of the market
capitalization of Scripps which is attributable to the cable business of
Scripps). Pursuant to Rule 457 under the Securities Act, $322,500 previously
paid on January 5, 1996 upon filing with the Commission of preliminary proxy
materials has been credited against the registration fee payable in
connection with this filing.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
COMCAST CORPORATION
SEPTEMBER 30, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of Shareholders of
Comcast Corporation ("Comcast") to be held on November 7, 1996 at 10:00 a.m.,
local time, at the offices of Comcast, 1500 Market Street, 33rd Floor,
Philadelphia, Pennsylvania.
Comcast is a party to an Agreement and Plan of Merger dated October 28,
1995, by and among Comcast, The E.W. Scripps Company ("Scripps"), and Scripps
Howard, Inc., a wholly owned subsidiary of Scripps. This Agreement and Plan of
Merger is to be amended pursuant to the Form of Amendment to the Agreement and
Plan of Merger attached as Annex II to the accompanying Joint Proxy
Statement-Prospectus. The Agreement and Plan of Merger as so amended is referred
to herein as the "Merger Agreement." The Merger Agreement provides for the
acquisition by Comcast of the cable television business of Scripps (the "Scripps
Cable Business") pursuant to the merger (the "Merger") of Scripps, which at the
time of the Merger will hold only the Scripps Cable Business, with and into
Comcast in exchange for shares of Comcast Class A Special Common Stock with a
value (as determined in accordance with the Merger Agreement) of $1.575 billion,
subject to certain closing adjustments. The Merger and related matters are
described in greater detail in the accompanying Joint Proxy
Statement-Prospectus. At the Special Meeting, holders of Comcast Class A Common
Stock and Comcast Class B Common Stock will be asked to approve the Merger. The
Comcast Class A Special Common Stock is quoted on The Nasdaq Stock Market under
the symbol "CMCSK."
The Merger is subject to certain shareholder and regulatory approvals, and
certain other conditions. Comcast shareholders are being asked to approve the
issuance of Comcast Class A Special Common Stock in the Merger. Approval of such
issuance requires approval by a majority of all votes cast by holders of Comcast
Class A Common Stock and Comcast Class B Common Stock, voting together as a
single class. Sural Corporation, which owns shares of Comcast common stock
entitled to cast approximately 81% of the votes that all shares of Comcast
common stock are entitled to cast with respect to the approval of such issuance,
has agreed to vote its shares in favor of such issuance. Consequently, the
approval of the issuance submitted to shareholders in accordance with the
accompanying notice of meeting and as set forth in the accompanying Joint Proxy
Statement-Prospectus is assured. If all conditions are satisfied, it is expected
that the Merger will be completed during the fourth quarter of 1996. Holders of
Comcast common stock will not be entitled to dissenters' rights of appraisal in
connection with the Merger. The fact that a Comcast shareholder voted in favor
of the issuance of Comcast Class A Special Common Stock in the Merger could be
raised as a defense in any action brought by such shareholder against Comcast,
Sural Corporation or any officer or director of Comcast with respect to the
Merger.
YOUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE TERMS OF THE PROPOSED
MERGER AND BELIEVES THAT THE MERGER AND RELATED TRANSACTIONS ARE IN THE BEST
INTERESTS OF COMCAST AND ITS SHAREHOLDERS. THE BOARD HAS APPROVED THE MERGER AND
THE RELATED TRANSACTIONS AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSAL
TO APPROVE THE ISSUANCE OF COMCAST CLASS A SPECIAL COMMON STOCK IN THE MERGER.
The accompanying Joint Proxy Statement-Prospectus sets forth the respective
voting rights of holders of shares of Comcast common stock with respect to these
matters. We hope you will be able to attend the meeting. However, even if you
anticipate attending in person, we urge you to complete, sign, date and return
the enclosed proxy card promptly to ensure that your shares will be represented
at this meeting. If you do attend, you will, of course, be entitled to vote in
person.
Thank you, and I look forward to seeing you at the meeting.
Sincerely,
STANLEY WANG
Secretary
<PAGE> 3
THE E.W. SCRIPPS COMPANY
SEPTEMBER 30, 1996
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
The E.W. Scripps Company ("Scripps") to be held on November 5, 1996 at 1:00
p.m., local time, at the Queen City Club, 331 East Fourth Street, Cincinnati,
Ohio.
On October 28, 1995, Scripps reached an agreement that will result in its
cable television systems (the "Scripps Cable Business") being acquired by
Comcast Corporation ("Comcast") through a tax-free merger. As part of the
process of merging with Comcast, the remaining Scripps businesses -- the
newspaper, broadcast television and entertainment divisions -- will continue as
the new E.W. Scripps Company, all of the capital stock of which will be
distributed in a "spin-off" to Scripps stockholders as further described in the
accompanying Joint Proxy Statement-Prospectus (the "Spin-Off").
Scripps is a party to an Agreement and Plan of Merger dated October 28,
1995, by and among Comcast, Scripps, and Scripps Howard, Inc., a wholly owned
subsidiary of Scripps. This Agreement and Plan of Merger is to be amended
pursuant to the Form of Amendment to the Agreement and Plan of Merger attached
as Annex II to the accompanying Joint Proxy Statement-Prospectus. The Agreement
and Plan of Merger as so amended is referred to herein as the "Merger
Agreement." At the Special Meeting, holders of Common Voting Stock will be asked
to approve and adopt the Merger Agreement which contemplates that the shares of
Scripps Howard, Inc. will be distributed in the Spin-Off and the name Scripps
Howard, Inc. will thereafter be changed to The E.W. Scripps Company ("New
Scripps"). The Merger Agreement provides for the acquisition by Comcast of the
Scripps Cable Business pursuant to the merger (the "Merger") of Scripps, which
at the time of the Merger will hold only the Scripps Cable Business, with and
into Comcast in exchange for shares of Comcast Class A Special Common Stock with
a value (as determined in accordance with the Merger Agreement) of $1.575
billion, subject to certain closing adjustments. Comcast Class A Special Common
Stock is traded on The Nasdaq Stock Market under the symbol "CMCSK." Comcast
Class A Special Common Stock has no voting rights except in certain limited
circumstances. The Merger and related matters are described in greater detail in
the Joint Proxy Statement-Prospectus.
The Merger is subject to stockholder and regulatory approvals and certain
other conditions. Approval of the Merger requires the affirmative vote of the
holders of a majority of the outstanding shares of Common Voting Stock of
Scripps. The Edward W. Scripps Trust (the "Scripps Trust"), which owns
approximately 82% of the outstanding shares of Common Voting Stock, has agreed
to vote its shares in favor of the Merger (subject to certain exceptions
discussed in the Joint Proxy Statement-Prospectus). If all conditions are
satisfied, it is expected that the Merger will be completed during the fourth
quarter of 1996.
At the meeting, holders of Common Voting Stock and Class A Common Stock
will be asked to approve and adopt an amendment to the Certificate of
Incorporation of Scripps to facilitate, pursuant to the Spin-Off, the
distribution to holders of Scripps Common Voting Stock of one New Scripps Common
Voting Share for each share of Scripps Common Voting Stock and the distribution
to holders of Scripps Class A Common Stock of one New Scripps Class A Common
Share for each share of Scripps Class A Common Stock (the "Charter Amendment").
Approval of the Charter Amendment requires the affirmative vote of the holders
of a majority of the outstanding shares of Scripps Common Voting Stock and the
affirmative vote of the holders of a majority of the outstanding shares of
Scripps Class A Common Stock, voting as separate classes. The Scripps Trust,
which owns more than a majority of the outstanding shares of each of the Common
Voting Stock and the Class A Common Stock, has agreed to vote its shares in
favor of the Charter Amendment (subject to certain exceptions discussed in the
Joint Proxy Statement-Prospectus). If all conditions to the Merger are
satisfied, it is expected that the Spin-Off will be completed during the fourth
quarter of 1996.
Holders of Scripps Common Voting Stock are entitled to appraisal rights in
connection with the Merger, but holders of Scripps Class A Common Stock are not
entitled to such rights. See "Rights of Dissenting Scripps Stockholders." The
fact that a Scripps stockholder voted in favor of the Merger or the Charter
<PAGE> 4
Amendment could be raised as a defense in any action brought by such stockholder
against Scripps, its officers and directors, the Scripps Trust or the trustees
of the Scripps Trust with respect to the Merger or the Spin-Off.
YOUR BOARD OF DIRECTORS HAS CAREFULLY CONSIDERED THE TERMS OF THE MERGER
AND BELIEVES THAT THE MERGER AND RELATED TRANSACTIONS ARE FAIR TO AND IN THE
BEST INTERESTS OF SCRIPPS AND ITS STOCKHOLDERS. THE BOARD HAS UNANIMOUSLY
APPROVED THE MERGER AND THE RELATED TRANSACTIONS AND THE CHARTER AMENDMENT AND
RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE MERGER AND THE CHARTER AMENDMENT.
I hope you will be able to attend the meeting. Even if you anticipate
attending in person, I urge you to complete, sign, date and return the enclosed
proxy card promptly to ensure that your shares will be represented at this
meeting. If you do attend, you will, of course, be entitled to vote in person.
YOU SHOULD NOT SEND IN YOUR STOCK CERTIFICATES WHEN RETURNING YOUR PROXY.
IF THE MERGER IS CONSUMMATED, YOU WILL BE NOTIFIED AND PROVIDED WITH
INSTRUCTIONS FOR SENDING IN YOUR CERTIFICATES.
Sincerely yours,
WILLIAM R. BURLEIGH
President and Chief Executive Officer
<PAGE> 5
COMCAST CORPORATION
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 7, 1996
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Comcast Corporation ("Comcast") will be held on November 7, 1996 at
10:00 a.m., local time, at the Comcast offices at 1500 Market Street, 33rd
Floor, Philadelphia, Pennsylvania, for the purpose of considering and voting
upon the following matters:
(1) A proposal to approve the issuance of Comcast Class A Special
Common Stock in the Merger (as defined below) pursuant to the Agreement and
Plan of Merger, dated as of October 28, 1995, which is to be amended
pursuant to the Form of Amendment to the Agreement and Plan of Merger
attached as Annex II to the accompanying Joint Proxy Statement-Prospectus
(as so amended, the "Merger Agreement") by and among Comcast, The E.W.
Scripps Company ("Scripps"), and Scripps Howard, Inc., a wholly owned
subsidiary of Scripps. The Merger Agreement provides for the merger (the
"Merger") of Scripps, which at the time of the Merger will hold only
Scripps' cable television business, with and into Comcast and the issuance
in the Merger of shares of Comcast Class A Special Common Stock to holders
of Scripps common stock, all as more fully described in the accompanying
Joint Proxy Statement-Prospectus. A copy of the Agreement and Plan of
Merger is attached as Annex I to the accompanying Joint Proxy
Statement-Prospectus and certain related documents are attached as exhibits
thereto. The Comcast Class A Special Common Stock is quoted on The Nasdaq
Stock Market under the symbol "CMCSK."
(2) Such other business as may properly come before the Special
Meeting or any adjournments or postponements thereof.
The close of business on September 13, 1996, has been fixed as the record
date for the Special Meeting. All holders of record at that time of Comcast
common stock are entitled to notice of, and all such holders of Comcast Class A
Common Stock and Comcast Class B Common Stock are entitled to vote at, the
meeting and any adjournments or postponements thereof. In the event that the
meeting is adjourned for one or more periods aggregating at least fifteen days
due to the absence of a quorum, those shareholders entitled to vote who attend
the adjourned meeting, although otherwise less than a quorum, shall constitute a
quorum for the purpose of acting upon any matter set forth in this notice.
Approval of the issuance of Comcast Class A Special Common Stock in the
Merger requires approval by a majority of all votes cast by holders of Comcast
Class A Common Stock and Comcast Class B Common Stock, voting together as a
single class. The holders of Comcast Class A Special Common Stock are not
entitled to vote, except where class voting is required by applicable law or the
Comcast Articles of Incorporation. Since class voting is not required to approve
the issuance of Comcast Class A Special Common Stock in the Merger, holders of
Comcast Class A Special Common Stock will not be voting on approval of such
issuance. Sural Corporation ("Sural"), which owns shares of Comcast common stock
entitled to cast approximately 81% of the votes that all shares of Comcast
common stock are entitled to cast with respect to the approval of such issuance,
has entered into a voting agreement with Comcast, Scripps and The Edward W.
Scripps Trust, which owns a majority of the outstanding shares of each class of
Scripps common stock, pursuant to which Sural is obligated to vote in favor of
such issuance. Consequently, the approval of the issuance submitted to
shareholders in accordance with the foregoing notice of meeting and as set forth
in the accompanying Joint Proxy Statement-Prospectus is assured. The fact that a
Comcast shareholder voted in favor of the issuance of Comcast Class A Special
Common Stock in the Merger could be raised as a defense in any action brought by
such shareholder against Comcast, Sural or any officer or director of Comcast
with respect to the Merger.
Each shareholder, even though he or she now plans to attend the Special
Meeting, is requested to sign, date and return the enclosed Proxy without delay
in the enclosed postage-paid return envelope. You may
<PAGE> 6
revoke your Proxy at any time prior to its exercise. Any shareholder present at
the Special Meeting or at any adjournments or postponements thereof may revoke
his or her proxy and vote personally on each matter brought before the Special
Meeting. All shares represented at the Special Meeting by properly executed
proxies received prior to or at the Special Meeting and not properly revoked
will be voted at the Special Meeting in accordance with the instructions
indicated in such proxies. If no instructions are indicated, such proxies will
be voted FOR approval of the issuance of Comcast Class A Special Common Stock in
the Merger.
Holders of Comcast common stock will not be entitled to dissenters' rights
of appraisal in connection with the Merger.
By Order of the Board of Directors
STANLEY WANG
Secretary
September 30, 1996
PLEASE DATE AND SIGN THE ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE
ENCLOSED POSTAGE-PAID RETURN ENVELOPE.
<PAGE> 7
THE E.W. SCRIPPS COMPANY
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON NOVEMBER 5, 1996
------------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Scripps
Special Meeting") of The E.W. Scripps Company, a Delaware corporation
("Scripps"), will be held on November 5, 1996, commencing at 1:00 p.m., local
time, at the Queen City Club, 331 East Fourth Street, Cincinnati, Ohio for the
following purposes:
1. To consider and vote upon the following matters:
(a) An amendment to the Certificate of Incorporation of Scripps
required in connection with the distribution of capital stock of Scripps
Howard, Inc., an Ohio corporation and wholly owned subsidiary of Scripps
("New Scripps") as described below; and
(b) The Agreement and Plan of Merger dated as of October 28, 1995,
which is to be amended pursuant to the Form of Amendment to the Agreement
and Plan of Merger attached as Annex II to the accompanying Joint Proxy
Statement-Prospectus (as so amended, the "Merger Agreement"), by and among
Scripps, New Scripps and Comcast Corporation, a Pennsylvania corporation
("Comcast"), pursuant to which, among other things, Scripps will merge with
and into Comcast, which will be the surviving corporation, and each share
of Scripps Common Voting Stock, $.01 par value per share ("Scripps Common
Voting Stock"), and each share of Scripps Class A Common Stock, $.01 par
value per share ("Scripps Class A Common Stock"), will be converted into a
number of shares of Comcast Class A Special Common Stock as determined
pursuant to the formula set forth in the Merger Agreement (the "Merger").
Comcast Class A Special Common Stock is quoted on The Nasdaq Stock Market
under the symbol "CMCSK." Comcast Class A Special Common Stock has no
voting rights except in certain limited circumstances. A copy of the
Agreement and Plan of Merger is attached as Annex I to the accompanying
Joint Proxy Statement-Prospectus.
2. To transact such other business as may properly come before the Scripps
Special Meeting or any adjournments or postponements thereof.
Stockholders of record at the close of business on September 18, 1996, the
record date for the Special Meeting, are entitled to notice of and as set forth
herein to vote at the Scripps Special Meeting and any adjournments and
postponements thereof. Approval of the proposal in clause 1(a) requires the
affirmative vote of the holders of a majority of the outstanding shares of
Scripps Common Voting Stock and of Scripps Class A Common Stock, voting as
separate classes. Approval of the proposal in clause 1(b) requires the
affirmative vote of the holders of a majority of the outstanding shares of
Scripps Common Voting Stock. The failure of either of these proposals (the
"Scripps Proposals") to be approved by the stockholders will result in the
abandonment by Scripps of all of the transactions described herein.
Pursuant to the Merger, Comcast will acquire the cable television business
of Scripps (the "Scripps Cable Business"). Prior to the Scripps Special Meeting,
Scripps will contribute (the "Contribution") all of its assets unrelated to the
Scripps Cable Business to New Scripps. In connection with the Contribution, New
Scripps will (i) assume all liabilities of Scripps other than, with certain
limited exceptions, those related to the Scripps Cable Business, and (ii) agree
to issue to Scripps such number of New Scripps Class A Common Shares, $.01 par
value per share ("New Scripps Class A Common Shares"), and such number of New
Scripps Common Voting Shares, $.01 par value per share ("New Scripps Common
Voting Shares") as will be required for the Distribution as described below.
Also in connection with the Contribution, New Scripps will cause Scripps and the
subsidiaries and partnerships operating the Scripps Cable Business to be
released by all applicable third parties from any liability of New Scripps or
any of its subsidiaries (other than such cable subsidiaries and partnerships) or
any liability assumed by New Scripps pursuant to the Contribution that is (i)
debt for borrowed money and similar monetary obligations evidenced by bonds,
notes, debentures or other
<PAGE> 8
instruments, or (ii) with certain limited exceptions, guarantees, endorsements
and other contingent obligations, whether direct or indirect, in respect of
liabilities of others of any of the types described in clause (i) above. Prior
to consummation of the Merger, Scripps will distribute (the "Distribution") to
the holders of Scripps Class A Common Stock one New Scripps Class A Common Share
for each outstanding share of Scripps Class A Common Stock and to the holders of
Scripps Common Voting Stock one New Scripps Common Voting Share for each
outstanding share of Scripps Common Voting Stock.
As of the record date for the Scripps Special Meeting, The Edward W.
Scripps Trust (the "Scripps Trust") owned a majority of the outstanding shares
of each of the Scripps Common Voting Stock and the Scripps Class A Common Stock.
Therefore, the Scripps Trust has sufficient voting power to approve the
proposals regardless of the vote of any other stockholders. The fact that a
Scripps stockholder voted in favor of either of the Scripps Proposals could be
raised as a defense in any action brought by such stockholder against Scripps,
its officers and directors, the Scripps Trust or the trustees of the Scripps
Trust with respect to the Merger or the Distribution.
The Scripps Trust has entered into a voting agreement with Scripps, Comcast
and Comcast's controlling stockholder pursuant to which the Scripps Trust has
agreed to vote in favor of the aforesaid proposals (except under certain
circumstances discussed in the accompanying Joint Proxy Statement-Prospectus).
See "The Merger Agreement -- Ancillary Agreements -- Voting Agreement" in the
Joint Proxy Statement-Prospectus.
Holders of Scripps Common Voting Stock are entitled to appraisal rights in
connection with the Merger, but holders of Scripps Class A Common Stock are not
entitled to such rights. See "Rights of Dissenting Scripps Stockholders" in the
Joint Proxy Statement-Prospectus.
By Order of the Board of Directors
M. DENISE KUPRIONIS
Secretary
Cincinnati, Ohio
September 30, 1996
All stockholders are cordially invited to attend the Scripps Special
Meeting in person.
Whether or not you plan to attend the Scripps Special Meeting in person,
you are urged to complete, date and sign the enclosed proxy card and return it
in the enclosed envelope. The envelope requires no postage if mailed in the
United States. It is important that your shares be represented at the Scripps
Special Meeting. Any stockholder who signs and sends in a proxy card may revoke
it at any time before it is voted, as described in the Joint Proxy
Statement-Prospectus.
All shares represented at the Scripps Special Meeting by properly executed
proxies received prior to or at the Scripps Special Meeting and not properly
revoked will be voted at the Scripps Special Meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated, such
proxies will be voted FOR approval of the Scripps Proposals.
Do not send in any stock certificates at this time.
<PAGE> 9
COMCAST CORPORATION
AND
THE E.W. SCRIPPS COMPANY
JOINT PROXY STATEMENT
------------------------
COMCAST CORPORATION
PROSPECTUS
------------------------
This Joint Proxy Statement-Prospectus is being furnished to holders of Class
A Common Stock, $1.00 par value per share ("Comcast Class A Common Stock"),
Class B Common Stock, $1.00 par value per share ("Comcast Class B Common
Stock"), and Class A Special Common Stock, $1.00 par value per share ("Comcast
Special Common Stock", and together with the Comcast Class A Common Stock and
the Comcast Class B Common Stock, the "Comcast Common Stock"), of Comcast
Corporation, a Pennsylvania corporation ("Comcast"), in connection with the
solicitation of proxies by the Board of Directors (the "Comcast Board" or the
"Board of Directors of Comcast") of Comcast from holders of Comcast Class A
Common Stock for use at a special meeting of shareholders (the "Comcast Special
Meeting") to be held on November 7, 1996, at the time and place specified in the
accompanying notice and for the purpose of approving the issuance of Comcast
Special Common Stock in the Merger (as defined herein) and at any adjournments
or postponements of the Comcast Special Meeting.
This Joint Proxy Statement-Prospectus is also being furnished in connection
with the solicitation of proxies by the Board of Directors (the "Scripps Board"
or the "Board of Directors of Scripps") of The E.W. Scripps Company, a Delaware
corporation ("Scripps"), from holders of Scripps' outstanding shares of Class A
Common Stock, $.01 par value per share ("Scripps Class A Common Stock"), and
Common Voting Stock, $.01 par value per share ("Scripps Common Voting Stock"
and, together with the Scripps Class A Common Stock, the "Scripps Common
Stock"), for use at a special meeting of stockholders (the "Scripps Special
Meeting") to be held on November 5, 1996, at the time and place specified in the
accompanying notice and for the purposes of approving the Merger and the Charter
Amendment (as defined herein) and at any adjournments or postponements of the
Scripps Special Meeting. Holders of Scripps Common Voting Stock will vote on the
proposals to approve the Merger and the Charter Amendment. Holders of Scripps
Class A Common Stock will vote only on the proposal to approve the Charter
Amendment.
Pursuant to the Merger, Scripps will be merged with and into Comcast in a
transaction that will result in Comcast acquiring the Scripps Cable Business (as
herein defined) but not the other businesses or assets of Scripps. As
consideration for the Merger, Comcast expects to issue to holders of Scripps
Common Stock shares of Comcast Special Common Stock with a value (determined as
described herein) of approximately $1.5921 billion (base consideration of $1.575
billion plus estimated adjustments of $17.1 million), on the terms and subject
to the conditions set forth in the Merger Agreement (as defined herein). Comcast
and Scripps will resolicit their respective stockholders that have voting rights
with respect to approval of the proposals referred to herein if the adjusted
purchase price is materially different from $1.5921 billion. The Comcast Special
Common Stock to be issued in the Merger will be valued on the basis of an equity
adjustment or "collar" mechanism that provides for the Comcast Special Common
Stock to be valued at a minimum of $17.06375 per share, subject to certain
termination and "top-up" rights, as described below. See "Summary -- The Merger"
and "The Merger Agreement" for information regarding the manner in which the
purchase price adjustments and the exchange ratio are calculated.
The aggregate number of shares of Comcast Special Common Stock to be
delivered to Scripps stockholders in the Merger will equal the Aggregate
Consideration (as defined herein; $1.5921 billion as estimated above) divided by
the Collar Price. As used herein, the term "Collar Price" means the average
closing price of the Comcast Special Common Stock on Nasdaq (as defined herein)
for 15 days chosen at random out of the 40 trading days ending on the second
trading day prior to the closing date of the Merger (the "Average Closing
Price"), provided that the Collar Price will not be greater than $23.08625 and
will not be below $17.06375. The aggregate market value of the shares of Comcast
Special Common Stock that would be delivered in the Merger to Scripps
stockholders if the Average Closing Price were below the minimum Collar Price of
$17.06375 would be less than $1.5921 billion assuming that no additional shares
of Comcast Special Common Stock were delivered in the Merger and that Comcast
Special Common Stock has a per share value equal to the Average Closing Price.
The closing price of the Comcast Special Common Stock on Nasdaq on September
27, 1996 was $15.875 per share, which is below the minimum Collar Price of
$17.06375. Since July 10, 1996, when the closing price of Comcast Special Common
Stock was $16.75, the Comcast Special Common Stock has traded at closing prices
below the minimum Collar Price of $17.06375. If the Average Closing Price is
less than $17.06375, Scripps has the right, but not the obligation, to terminate
the Merger Agreement subject to the right of Comcast to elect to increase the
number of shares of Comcast Special Common Stock to be delivered (i) to the
number that would have been delivered if the Collar Price were equal to the
Average Closing Price or (ii) by such lower number as Scripps and Comcast may
agree. Scripps may elect not to terminate the Merger Agreement even if the
Average Closing Price falls below the minimum Collar Price of $17.06375 per
share. Comcast has informed Scripps that if the Average Closing Price is less
than $17.06375 and if Scripps exercises its rights to terminate the Merger
Agreement, Comcast does not intend to elect to deliver any additional shares of
Comcast Special Common Stock.
On October 28, 1995, Scripps received from its financial advisor an opinion
stating that the consideration to be paid by Comcast in the Merger was fair to
the stockholders of Scripps from a financial point of view. This opinion was
based, among other things, on market conditions at the time and does not
specifically address the fairness of consideration to be paid in the
<PAGE> 10
Merger in a transaction wherein the Average Closing Price is less than the
minimum Collar Price of $17.06375. The Scripps Board has not requested its
financial advisor to update its opinion. The Scripps Board will not proceed with
the Merger if the Average Closing Price is below $17.06375 per share and the
number of shares of Comcast Special Common Stock to be delivered by Comcast in
the Merger is less than the number that would have been delivered if the Collar
Price were equal to the Average Closing Price unless, among other things, the
Scripps Board receives an opinion from its financial advisor as to the fairness
from a financial point of view to Scripps stockholders of the Merger
consideration to be paid under such circumstances. If (i) the Average Closing
Price were below the minimum Collar Price of $17.06375, (ii) Scripps decided to
terminate the Merger Agreement and (iii) Comcast elected to deliver the Maximum
Top-Up Share Number (as defined herein) of shares of Comcast Special Common
Stock, then Scripps would be required under the Merger Agreement to consummate
the Merger whether or not it received an update of its financial advisor's
opinion unless Scripps were entitled by the terms of the Merger Agreement to
terminate it for other reasons. See "Summary -- The Merger", "The Merger
Agreement" and "Risk Factors -- Risk Factors Related to the Comcast Merger Stock
- -- Effect of Equity Adjustment Mechanism on Consideration Received in the
Merger" for information regarding the equity adjustment mechanism, the
termination and "top-up" rights, and certain related information.
Assuming that the Merger was consummated as of the date hereof, that the
closing adjustments resulted in an adjusted purchase price of $1.5921 billion,
that the minimum Collar Price of $17.06375 was used to calculate the number of
shares of Comcast Special Common Stock to be delivered in the Merger, that no
additional shares of Comcast Special Common Stock were delivered in the Merger,
and that the Comcast Special Common Stock had a market value of 15.875 per share
(the closing price of Comcast Special Common Stock on Nasdaq on September 27,
1996), the aggregate market value of the shares of Comcast Special Common Stock
delivered to Scripps stockholders in the Merger (93.3 million shares) would be
$1.4812 billion and the market value of the shares of Comcast Special Common
Stock delivered per share of Scripps Common Stock (1.159 shares of Comcast
Special Common Stock per share of Scripps Common Stock) would be $18.40 per
share.
The above matters are discussed in detail in this Joint Proxy
Statement-Prospectus. The proposed Merger and related transactions described
herein are complex transactions. Stockholders of Comcast and Scripps are urged
to carefully read and consider this Joint Proxy Statement-Prospectus in its
entirety.
Comcast Special Common Stock and Comcast Class A Common Stock trade on The
Nasdaq Stock Market ("Nasdaq") under the symbols "CMCSK" and "CMCSA",
respectively. On October 27, 1995, the last trading day prior to the execution
of the Agreement and Plan of Merger (as defined herein), the last sale prices of
the Comcast Special Common Stock and the Comcast Class A Common Stock, as
reported on Nasdaq, were $18.875 and $18.375 per share, respectively. On
September 27, 1996, the last sale prices of the Comcast Special Common Stock and
the Comcast Class A Common Stock, as reported on Nasdaq, were $15.875 and
$15.625 per share, respectively.
Comcast Special Common Stock has no voting rights, except in certain limited
circumstances. See "Comparison of Rights of Holders of Comcast Special Common
Stock and Holders of Scripps Common Stock -- Voting Rights."
Scripps Class A Common Stock trades on the New York Stock Exchange, Inc.
(the "NYSE") under the symbol "SSP." On October 27, 1995, the last trading day
prior to the execution of the Merger Agreement, the last sale price of the
Scripps Class A Common Stock, as reported on the NYSE, was $34.00 per share. On
September 27, 1996, the last sale price of the Scripps Class A Common Stock, as
reported on the NYSE, was $46.875 per share. New Scripps Class A Common Shares,
which will be distributed to the stockholders of Scripps pursuant to the
Distribution (as hereinafter defined), have been approved for listing on the
NYSE and will be traded under the symbol "SSP."
Holders of Comcast Common Stock will not be entitled to dissenters' rights
of appraisal in connection with the Merger. Holders of Scripps Common Voting
Stock are entitled to appraisal rights in connection with the Merger, but
holders of Scripps Class A Common Stock are not entitled to such rights. See
"Rights of Dissenting Scripps Stockholders." The fact that a Comcast shareholder
voted in favor of the issuance of Comcast Special Common Stock in the Merger
could be raised as a defense in any action brought by such shareholder against
Comcast, Sural Corporation or any officer or director of Comcast with respect to
the Merger. The fact that a Scripps stockholder voted in favor of the Merger or
the Charter Amendment could be raised as a defense in any action brought by such
stockholder against Scripps, its officers and directors, the Scripps Trust (as
defined herein) or the trustees of the Scripps Trust with respect to the Merger
or the Distribution.
SEE "RISK FACTORS" COMMENCING ON PAGE 31 FOR A DESCRIPTION OF CERTAIN
MATTERS THAT SHOULD BE CONSIDERED BY STOCKHOLDERS BEFORE VOTING.
------------------------
THE SECURITIES TO BE ISSUED PURSUANT TO THIS JOINT PROXY STATEMENT-PROSPECTUS
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT-PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
------------------------
The date of this Joint Proxy Statement-Prospectus is September 30, 1996.
(ii)
<PAGE> 11
This Joint Proxy Statement-Prospectus relates to the Agreement and Plan of
Merger dated as of October 28, 1995 (the "Agreement and Plan of Merger"), by and
among Comcast, Scripps and Scripps Howard, Inc., an Ohio corporation and wholly
owned subsidiary of Scripps ("New Scripps"). A copy of the Agreement and Plan of
Merger is attached hereto as Annex I. The Agreement and Plan of Merger is to be
amended pursuant to the Form of Amendment to the Agreement and Plan of Merger
attached as Annex II hereto. The Agreement and Plan of Merger as so amended is
referred to herein as the "Merger Agreement." Pursuant to the Merger Agreement,
Scripps, which, following an internal corporate restructuring described below,
will hold only Scripps' cable television businesses and assets (the "Scripps
Cable Business"), will merge with and into Comcast, and Comcast will be the
surviving corporation (the "Merger"). In the Merger, shares of Scripps Common
Stock will be converted into shares of Comcast Special Common Stock, as
described herein.
At the Comcast Special Meeting, holders of Comcast Class A Common Stock and
Comcast Class B Common Stock will be asked to consider and vote upon a proposal
to approve the issuance of Comcast Special Common Stock in the Merger (the
"Comcast Proposal").
Each holder of Comcast Class A Common Stock has one vote per share and each
holder of Comcast Class B Common Stock has 15 votes per share on matters
submitted to shareholders for approval. Except where class voting is required by
applicable law or the Comcast Amended and Restated Articles of Incorporation
(the "Comcast Articles"), the Comcast Class A Common Stock and the Comcast Class
B Common Stock vote as one class. The holders of Comcast Special Common Stock
are not entitled to vote, except where class voting is required by applicable
law or the Comcast Articles. Class voting is not required to approve the Comcast
Proposal.
The rules of the National Association of Securities Dealers, Inc. (the
"NASD Rules") require shareholder approval prior to the issuance of shares of
common stock in connection with the acquisition of the stock of another company
if the number of shares to be issued equals or exceeds 20% of the common stock
outstanding prior to such issuance. The NASD Rules are applicable to Comcast
since the Comcast Special Common Stock and the Comcast Class A Common Stock are
quoted on Nasdaq. The Merger Stock constitutes over 20% of the Comcast Common
Stock currently outstanding. Accordingly, the issuance of Comcast Special Common
Stock in the Merger is being submitted to Comcast's shareholders for approval.
The Comcast Proposal must be approved by a majority of the votes cast by holders
of the Comcast Class A Common Stock and Comcast Class B Common Stock, voting as
a single class. As of September 13, 1996 (the "Comcast Record Date"), Sural
Corporation, a Delaware corporation controlled by Comcast's Chairman and members
of his family ("Sural"), owned shares of Comcast Common Stock representing
approximately 81% of the outstanding voting power of Comcast. Therefore, Sural
has sufficient voting power to approve the Comcast Proposal regardless of the
vote of any other stockholders. Comcast, Scripps, Sural and The Edward W.
Scripps Trust, an affiliate of Scripps and the owner of Scripps Common Stock
representing a majority of the outstanding voting power of Scripps (the "Scripps
Trust"), have entered into a voting agreement (the "Voting Agreement") pursuant
to which Sural is obligated to vote in favor of the Comcast Proposal. See "The
Merger Agreement -- Ancillary Agreements -- Voting Agreement." The fact that a
Comcast shareholder voted in favor of the Comcast Proposal could be raised as a
defense in any action brought by such shareholder against Comcast, Sural or any
officer or director of Comcast with respect to the Merger.
Prior to the Scripps Special Meeting, Scripps will contribute (the
"Contribution") all of its assets unrelated to the Scripps Cable Business to New
Scripps. In connection with the Contribution, New Scripps will, among other
things, (i) assume all liabilities of Scripps other than, with certain limited
exceptions described herein, those related to the Scripps Cable Business, and
(ii) agree to issue and deliver to Scripps, upon its request, such number of New
Scripps Class A Common Shares, $.01 par value per share ("New Scripps Class A
Common Shares"), and such number of New Scripps Common Voting Shares, $.01 par
value per share ("New Scripps Common Voting Shares" and, together with New
Scripps Class A Common Shares, the "New Scripps Common Shares"), as will be
required for the Distribution (as defined herein). Also in connection with the
Contribution, New Scripps will cause Scripps and the subsidiaries and
partnerships operating the Scripps Cable Business to be released by all
applicable third parties from any liability of New Scripps or any of its
subsidiaries (other than such cable subsidiaries and partnerships) or any
liability assumed
(iii)
<PAGE> 12
by New Scripps pursuant to the Contribution that is (i) debt for borrowed money
and similar monetary obligations evidenced by bonds, notes, debentures or other
instruments, or (ii) guarantees, endorsements and other contingent obligations,
whether direct or indirect, in respect of liabilities of others of any of the
types described in clause (i) above; provided that Scripps will not be released
from its liability under a guaranty of certain notes issued by New Scripps but
will instead be indemnified by New Scripps in respect of that liability. Prior
to consummation of the Merger, Scripps will distribute (the "Distribution") to
holders of Scripps Common Stock one New Scripps Class A Common Share for each
share of Scripps Class A Common Stock held, and one New Scripps Common Voting
Share for each share of Scripps Common Voting Stock held, immediately prior to
the Distribution. The Contribution and the Distribution, collectively,
constitute the "Spin-Off."
At the Scripps Special Meeting, Scripps stockholders will be asked to
consider and vote upon the following proposals (collectively, the "Scripps
Proposals"):
(1) A proposal to approve and adopt an amendment (the "Scripps Charter
Amendment") to the Certificate of Incorporation of Scripps (the "Scripps
Charter") required in connection with the Spin-Off to permit Scripps to
distribute one New Scripps Class A Common Share for each share of Scripps
Class A Common Stock held and one New Scripps Common Voting Share for each
share of Scripps Common Voting Stock held.
(2) A proposal to approve and adopt the Merger Agreement.
Each of the Scripps Proposals will be voted upon separately by the Scripps
stockholders entitled to vote thereon at the Scripps Special Meeting. However,
the failure of the Scripps stockholders to approve either of the Scripps
Proposals will result in the abandonment by Scripps of the Spin-Off, the Scripps
Charter Amendment, the Merger and the related transactions. The affirmative vote
of the holders of a majority of the outstanding shares of Scripps Common Voting
Stock and of Scripps Class A Common Stock, voting as separate classes, is
required to approve the Scripps Charter Amendment, and the affirmative vote of
the holders of a majority of the outstanding shares of Scripps Common Voting
Stock is required to approve the Merger.
As of September 18, 1996 (the "Scripps Record Date"), the Scripps Trust
owned a majority of the outstanding shares of each class of Scripps Common
Stock. Therefore, the Scripps Trust has sufficient voting power to approve of
the Scripps Proposals regardless of the vote of any other stockholders. Pursuant
to the Voting Agreement, the Scripps Trust is obligated to vote in favor of the
Scripps Proposals, subject to its right not to vote in favor of the Scripps
Proposals if the Board of Trustees of the Scripps Trust determines, with the
advice of outside counsel, that it may be required, in the exercise of its
fiduciary duties, to vote its shares otherwise. See "The Merger
Agreement -- Ancillary Agreements -- Voting Agreement." The Scripps Board is
soliciting proxies from the holders of Scripps Common Voting Stock with respect
to the proposals to approve and adopt the Merger Agreement and the Scripps
Charter Amendment, and from the holders of Scripps Class A Common Stock with
respect to the proposal to approve and adopt the Scripps Charter Amendment,
because as a matter of stockholder relations it is Scripps' policy to solicit
proxies from such holders even though the Scripps Trust has a majority of each
class.
As described under "Rights of Dissenting Scripps Stockholders," holders of
Scripps Common Voting Stock who exercise and perfect dissenters' rights under
the Delaware General Corporation Law (the "DGCL" or "Delaware Law") will be
entitled to payment of the fair value of their shares of Scripps Common Voting
Stock (after giving effect to the Spin-Off) and will not receive Comcast Special
Common Stock as a result of the Merger. See "Rights of Dissenting Scripps
Stockholders." Holders of Scripps Class A Common Stock will not be entitled to
dissenters' appraisal rights in connection with the Merger or the Scripps
Charter Amendment. Holders of Comcast Common Stock will not be entitled to
dissenters' appraisal rights in connection with the Merger.
The aggregate number of shares of Comcast Special Common Stock to be
delivered to Scripps stockholders in the Merger will equal $1.575 billion (the
"Base Consideration"), adjusted as described herein (as adjusted, the "Aggregate
Consideration") divided by the Collar Price. As used herein, the term "Collar
(iv)
<PAGE> 13
Price" means the average closing price of the Comcast Special Common Stock on
Nasdaq for 15 days chosen at random out of the 40 trading days ending on the
second trading day prior to the closing date of the Merger (the "Average Closing
Price"), provided that the Collar Price will not be greater than $23.08625 and
will not be below $17.06375. The maximum Collar Price is 115%, and the minimum
Collar Price is 85%, of $20.075 (the "Execution Price"), which is the average
closing price of the Comcast Special Common Stock on Nasdaq for the 20 trading
days ending on October 24, 1995, the date Comcast submitted its proposal to
acquire the Scripps Cable Business. If the Average Closing Price is less than
$17.06375, Scripps has the right, but not the obligation, to terminate the
Merger Agreement subject to the right of Comcast to elect to increase the number
of shares of Comcast Special Common Stock to be delivered (i) to the number that
would have been delivered if the Collar Price were equal to the Average Closing
Price or (ii) by such lower number as Scripps and Comcast may agree. See "The
Merger Agreement -- General Provisions" for a complete description of how the
actual number of shares to be delivered to Scripps stockholders will be
calculated. If Scripps were to terminate the Merger Agreement and Comcast were
not to elect or agree to increase the number of shares of Comcast Special Common
Stock as described in clauses (i) and (ii) immediately above, neither Scripps
nor Comcast would be obligated to make any payment to the other as a result of
or in connection with such termination or failure to so elect or agree to
deliver additional shares.
The Scripps Board is recommending that holders of Scripps Common Voting
Stock approve and adopt the Merger Agreement and that holders of Scripps Common
Voting Stock and Scripps Class A Common Stock approve and adopt the Scripps
Charter Amendment and thereby provide the Scripps Board with the ability to
exercise its discretion, consistent with its fiduciary duties, to (i) proceed
with the Merger Agreement if the Average Closing Price is less than $17.06375,
(ii) terminate the Merger Agreement if the Average Closing Price is less than
$17.06375 (subject to Comcast's "top-up" right described above), or (iii) agree
with Comcast on a lower number of additional shares to be delivered by Comcast
as described above if the Average Closing Price is less than $17.06375. The
granting of such discretion to the Scripps Board pursuant to the Merger
Agreement is permitted under Delaware law. The fact that a Scripps stockholder
voted in favor of either of the Scripps Proposals could be raised as a defense
in any action brought by such stockholder against Scripps, its officers and
directors, the Scripps Trust or the trustees of the Scripps Trust with respect
to the Merger or the Spin-Off.
If (i) the Comcast shareholders approve the Comcast Proposal, (ii) the
Average Closing Price is below the minimum Collar Price of $17.06375 and (iii)
Scripps exercises its right to terminate the Merger Agreement, Comcast will have
discretion to increase the number of shares of Comcast Special Common Stock to
be delivered up to the number of shares that would have been delivered if the
Collar Price were equal to the Average Closing Price. However, Comcast has
informed Scripps that if the Average Closing Price is less than $17.06375 and if
Scripps exercises its rights to terminate the Merger Agreement, Comcast does not
intend to elect to deliver any additional shares of Comcast Special Common
Stock.
The closing price of the Comcast Special Common Stock on Nasdaq on
September 27, 1996 was $15.875 per share, which is below the minimum Collar
Price of $17.06375. Since July 10, 1996, when the closing price of Comcast
Special Common Stock was $16.75, the Comcast Special Common Stock has traded at
closing prices below the minimum Collar Price of $17.06375. Scripps may elect
not to terminate the Merger Agreement even if the Average Closing Price falls
below the minimum Collar Price of $17.06375 per share. The Scripps Board has not
determined whether or under what circumstances it would elect to terminate the
Merger Agreement if the Average Closing Price is below $17.06375 per share. In
making any such determination, the Scripps Board would take into account,
consistent with its fiduciary duties, all relevant facts and circumstances
existing at the time, including, without limitation, whether it believes Comcast
is prepared to increase the per share merger consideration, the market for cable
television industry stocks in general, the relative market value of the Comcast
Special Common Stock, and the advice of Scripps' financial advisors and legal
counsel. Comcast has informed Scripps that if the Average Closing Price is less
than $17.06375 and if Scripps exercises its right to terminate the Merger
Agreement, Comcast does not intend to elect to deliver any additional shares of
Comcast Special Common Stock. By approving the Merger Agreement, the holders of
Scripps Common Voting Stock will be permitting the Scripps Board to determine,
in the exercise of its fiduciary duties, to proceed with the Merger even if the
Average Closing Price of the Comcast Special Common Stock falls below $17.06375
per share and no additional shares of Comcast Special Common Stock
(v)
<PAGE> 14
are delivered. The Scripps Board will not proceed with the Merger if the Average
Closing Price of the Comcast Special Common Stock is below $17.06375 per share
and the number of shares of Comcast Special Common Stock to be delivered by
Comcast in the Merger is less than the number that would have been delivered if
the Collar Price were equal to the Average Closing Price , unless, among other
things, the Scripps Board receives an opinion from its financial advisor as to
the fairness from a financial point of view to Scripps stockholders of the
Merger consideration to be paid under such circumstances. If (i) the Average
Closing Price were below the minimum Collar Price of $17.06375, (ii) Scripps
decided to terminate the Merger Agreement and (iii) Comcast elected to deliver
the Maximum Top-Up Share Number (as defined herein) of shares of Comcast Special
Common Stock, then Scripps would be required under the Merger Agreement to
consummate the Merger whether or not it received an update of its financial
advisor's opinion unless Scripps were entitled by the terms of the Merger
Agreement to terminate it for other reasons.
If the Merger were consummated on the date hereof, assuming that (i) the
closing adjustments to the Base Consideration resulted in a $17.1 million
increase in the purchase price so that the Aggregate Consideration was $1.5921
billion and (ii) the Average Closing Price was equal to the Execution Price of
$20.075, Comcast would issue an aggregate of approximately 79.3 million shares
of Comcast Special Common Stock to holders of Scripps Common Stock ("Comcast
Merger Stock") and the Merger would result in the stockholders of Scripps
receiving approximately 0.986 shares of Comcast Merger Stock per share of
Scripps Common Stock. Assuming that the minimum Collar Price of $17.06375 was
used to calculate the amount of Comcast Merger Stock and that no additional
shares of Comcast Special Common Stock were delivered in the Merger, the Comcast
Merger Stock would be approximately 93.3 million shares and the stockholders of
Scripps would receive 1.159 shares of Comcast Special Common Stock per share of
Scripps Common Stock. The closing price of Comcast Special Common Stock on
Nasdaq on September 27, 1996 was $15.875 per share.
Based on the foregoing sets of assumptions, (i) the holders of Scripps
Common Stock would own Comcast Special Common Stock representing approximately
29.4% (assuming an Average Closing Price of $20.075) or 32.9% (assuming the
minimum Collar Price of $17.06375 was used to calculate the amount of Comcast
Merger Stock), respectively, of the outstanding Comcast Special Common Stock on
the Comcast Record Date and 25.4% or 28.6%, respectively, of the outstanding
Comcast Common Stock on such date, each on a pro forma basis for the Merger, and
(ii) each holder of Scripps Common Stock would own the same number and class of
shares in New Scripps (which will then hold all of the Scripps businesses other
than the Scripps Cable Business) as such holder owned in Scripps immediately
prior to the Spin-Off. See "The Merger Agreement -- Ownership of Comcast Stock
after the Merger" and "-- Ownership of New Scripps Stock after the Spin-Off and
the Merger."
Assuming that the Merger was consummated on the date hereof, that the
Aggregate Consideration was $1.5921 billion, that the minimum Collar Price of
$17.06375 was used to calculate the number of shares of Comcast Special Common
Stock to be delivered in the Merger, that no additional shares of Comcast
Special Common Stock were delivered in the Merger, and that the Comcast Special
Common Stock had a market value of $15.875 per share (the closing price of
Comcast Special Common Stock on Nasdaq on September 27, 1996), the aggregate
market value of the shares of Comcast Special Common Stock delivered to Scripps
stockholders in the Merger (93.3 million shares) would be $1.4812 billion and
the market value of the shares of Comcast Special Common Stock delivered per
share of Scripps Common Stock (1.159 shares of Comcast Special Common Stock per
share of Scripps Common Stock) would be $18.40 per share.
Scripps and Comcast intend to resolicit their respective stockholders that
have voting rights with respect to approval of the Scripps Proposals and the
Comcast Proposal, respectively, if the closing adjustments to the Base
Consideration result in a material change to the estimated adjusted Aggregate
Consideration of $1.5921 billion. Neither Scripps nor Comcast expects, however,
that such adjustments will result in such a material change.
Upon completion of all of the transactions described in this Joint Proxy
Statement-Prospectus, the current holders of all outstanding shares of Scripps
Class A Common Stock will hold all New Scripps Class A Common Shares outstanding
following the Merger and the current holders of all outstanding shares of
Scripps Common Voting Stock will hold all New Scripps Common Voting Shares
outstanding following the Merger,
(vi)
<PAGE> 15
and the relative common equity and voting rights held in Scripps by such
stockholders prior to the transactions will be substantially identical to the
common equity and voting rights held by them in New Scripps following the
transactions. See "Comparison of Rights of Stockholders of Scripps and New
Scripps."
The Scripps Trust has agreed to maintain ownership of a certain portion of
the Comcast Special Common Stock to be received by the Scripps Trust in the
Merger for at least one year following the effective time of the Merger (the
"Effective Time"). See "The Merger Agreement -- General
Provisions -- Restrictions on Transfer of Comcast Merger Stock."
The Comcast Board recommends a vote FOR the Comcast Proposal, and the
Scripps Board recommends a vote FOR each of the Scripps Proposals.
This Joint Proxy Statement-Prospectus also constitutes a prospectus of
Comcast with respect to the Comcast Special Common Stock to be issued to the
Scripps stockholders in the Merger. Application will be made to list such shares
of Comcast Special Common Stock on Nasdaq.
The New Scripps Class A Common Shares have been approved for listing on the
NYSE. The New Scripps Common Voting Shares will not be listed on any securities
exchange.
All information in this Joint Proxy Statement-Prospectus relating to
Comcast has been supplied by Comcast and all information relating to Scripps and
New Scripps has been supplied by Scripps. The unaudited pro forma financial
information contained or incorporated by reference herein regarding Comcast has
been prepared by Comcast and includes historical financial information regarding
the Scripps Cable Business that was supplied to Comcast by Scripps. Scripps, New
Scripps and Comcast have made certain covenants to each other with respect to
the information contained in this Joint Proxy Statement-Prospectus. See "The
Merger Agreement -- Certain Covenants," and "-- Indemnification." Scripps and
New Scripps do not have independent knowledge of the matters set forth herein
regarding Comcast and take no responsibility for any such information contained
herein, and Comcast does not have independent knowledge of the matters set forth
herein regarding Scripps and New Scripps and takes no responsibility for any
such information contained herein.
This Joint Proxy Statement-Prospectus and the accompanying forms of proxy
are first being mailed to stockholders of Comcast and Scripps on or about
October 4, 1996.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION WITH RESPECT TO THE MATTERS DESCRIBED IN THIS JOINT PROXY
STATEMENT-PROSPECTUS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE
HEREIN, IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY COMCAST,
SCRIPPS OR NEW SCRIPPS (OR THEIR SUCCESSORS). THIS JOINT PROXY
STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF COMCAST, SCRIPPS OR NEW SCRIPPS SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO ITS DATE.
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TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION................................................................. 1
INFORMATION INCORPORATED BY REFERENCE................................................. 1
SUMMARY............................................................................... 3
The Companies....................................................................... 3
The Special Meetings................................................................ 3
Special Factors for Minority Shareholders........................................... 5
The Pre-Merger Transactions......................................................... 6
Ownership of New Scripps after the Spin-Off and the Merger.......................... 7
The Merger.......................................................................... 8
Control by Affiliates of Vote Required to Approve the Merger and the Scripps Charter
Amendment; Interests of Officers, Directors and Principal Shareholders in the
Transactions..................................................................... 11
Comcast Stock Repurchase Program.................................................... 12
Restrictions on Transfer of Comcast Merger Stock.................................... 12
Restrictions on Transfer of New Scripps Common Shares............................... 12
Payment for Shares.................................................................. 12
Cable Net Liabilities and Capital Expenditure Adjustments........................... 12
Ownership of Comcast Stock After the Merger......................................... 13
Recommendation of the Boards of Directors........................................... 13
Opinion of Financial Advisor to Scripps............................................. 14
Effective Time of Merger............................................................ 14
Conditions to the Merger; Regulatory and Other Approvals............................ 15
Stock Exchange Listings............................................................. 15
Acquisition Proposals............................................................... 15
Registration Rights................................................................. 16
Termination of Merger Agreement; Indemnification.................................... 16
Certain Board Representation Rights................................................. 17
Certain Federal Income Tax Considerations........................................... 17
Accounting Treatment................................................................ 18
Rights of Dissenting Stockholders................................................... 18
Voting Agreement.................................................................... 18
Noncompetition Agreement............................................................ 18
Comparison of Rights of Stockholders................................................ 19
Exchange Agent...................................................................... 19
Description of Scripps Cable Business............................................... 19
Comparative Market Values; Market Price and Dividend Data........................... 19
Selected Historical and Pro Forma Per Share Data.................................... 20
Summary Selected Historical and Unaudited Pro Forma Condensed Consolidated Financial
Information...................................................................... 22
RISK FACTORS.......................................................................... 31
Risk Factors Related to the Comcast Merger Stock.................................... 31
Risk Factors Associated with the Spin-Off and the Merger............................ 35
Risk Factors Related to the New Scripps Common Stock................................ 35
Interests of Certain Persons in the Transactions.................................... 36
Certain Litigation.................................................................. 37
Cable Net Liabilities and Capital Expenditure Adjustments........................... 38
Rule 145 Restrictions............................................................... 38
</TABLE>
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<TABLE>
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RECENT REGULATORY DEVELOPMENTS........................................................ 38
THE MERGER............................................................................ 42
Background of and Scripps' Reasons for the Spin-Off and the Merger.................. 42
Recommendation of the Scripps Board of Directors.................................... 51
Opinion of Financial Advisor to Scripps............................................. 52
Background of and Comcast's Reasons for the Merger.................................. 63
Recommendation of the Comcast Board of Directors.................................... 65
THE SPECIAL MEETINGS.................................................................. 66
Matters to Be Discussed at the Special Meetings..................................... 66
Record Dates; Stock Entitled to Vote; Quorum........................................ 66
Required Votes...................................................................... 67
Solicitation and Voting of Proxies.................................................. 67
PRE-MERGER TRANSACTIONS............................................................... 69
Internal Spin-Offs.................................................................. 69
Spin-Off............................................................................ 69
Amendments to Organizational Documents of Scripps and New Scripps................... 70
THE MERGER AGREEMENT.................................................................. 70
General Provisions.................................................................. 70
Closing; Conditions Precedent....................................................... 76
Acquisition Proposals............................................................... 78
Certain Covenants................................................................... 79
Representations and Warranties...................................................... 82
Indemnification..................................................................... 83
Tax Matters......................................................................... 83
Certain Employee Matters............................................................ 84
Scripps Stock Option Plans.......................................................... 85
Termination......................................................................... 85
Amendment; Waiver................................................................... 86
Regulatory Approvals................................................................ 86
Ancillary Agreements................................................................ 86
Ownership of Comcast Stock After the Merger......................................... 89
Ownership of New Scripps Stock After the Spin-Off and the Merger.................... 89
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS............................................. 89
Federal Income Tax Consequences of Certain Transactions............................. 89
Backup Withholding.................................................................. 91
PROPOSAL TO APPROVE AND ADOPT THE SCRIPPS CHARTER AMENDMENT........................... 92
DESCRIPTION OF NEW SCRIPPS CAPITAL STOCK.............................................. 92
New Scripps Class A Common Shares and New Scripps Common Voting Shares.............. 92
Preferred Shares.................................................................... 94
Evaluation of Tender Offers and Similar Transactions................................ 94
Compliance with FCC Regulations..................................................... 94
Certain Ohio Anti-Takeover Laws..................................................... 95
Registrar and Transfer Agent........................................................ 95
COMPARISON OF RIGHTS OF STOCKHOLDERS OF SCRIPPS AND NEW SCRIPPS....................... 95
Certain Anti-Takeover Statutes...................................................... 95
Mergers and Consolidations.......................................................... 96
Other Corporate Transactions........................................................ 97
Cumulative Voting................................................................... 97
</TABLE>
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Class Voting........................................................................ 97
Appraisal Rights.................................................................... 98
Dividends........................................................................... 98
Repurchases......................................................................... 98
Director and Officer Liability and Indemnification.................................. 98
COMPARISON OF RIGHTS OF HOLDERS OF COMCAST SPECIAL COMMON STOCK AND HOLDERS OF SCRIPPS
COMMON STOCK........................................................................ 100
Fiduciary Duties of Directors....................................................... 100
Limitation of Director Liability.................................................... 100
Indemnification..................................................................... 101
Shareholder Protective Provisions................................................... 101
Voting Rights....................................................................... 102
Amendments to Certificate (Articles) of Incorporation............................... 103
Mergers and Major Transactions...................................................... 103
Dividends........................................................................... 103
Share Repurchase.................................................................... 104
Appraisal or Dissenters' Rights..................................................... 104
Special Treatment................................................................... 104
Amendments to By-Laws............................................................... 104
Action by Written Consent........................................................... 105
Special Meeting of Shareholders..................................................... 105
Annual Meeting of Shareholders...................................................... 105
Business Conducted at Meeting of Comcast Shareholders............................... 105
Preemptive Rights................................................................... 105
Case Law and Court Systems.......................................................... 106
NO RIGHTS OF DISSENTING COMCAST STOCKHOLDERS.......................................... 106
RIGHTS OF DISSENTING SCRIPPS STOCKHOLDERS............................................. 106
Scripps Common Voting Stock......................................................... 106
Scripps Class A Common Stock........................................................ 108
PAYMENTS AND DISTRIBUTIONS TO STOCKHOLDERS............................................ 108
LEGAL MATTERS......................................................................... 109
EXPERTS............................................................................... 109
Annex I -- Agreement and Plan of Merger
Annex II -- Form of Amendment to Agreement and Plan of Merger
Annex III -- Opinion of Financial Advisor to Scripps
Annex IV -- Section 262 of the Delaware General Corporation Law
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AVAILABLE INFORMATION
Comcast has filed with the Securities and Exchange Commission (the "SEC") a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the Comcast Special Common Stock described in
this Joint Proxy Statement-Prospectus. As permitted by the rules and regulations
of the SEC, this Joint Proxy Statement-Prospectus omits certain information,
exhibits and undertakings contained in the registration statement. Reference is
made to the registration statement and to the exhibits thereto for further
information. Statements contained herein concerning such documents are not
necessarily complete and, in each instance, reference is made to the copy of
each such document filed as an exhibit to the registration statement. Each such
statement is qualified in its entirety by such reference.
Comcast and Scripps are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith each files reports, proxy statements and other information
with the SEC. Such registration statements, and exhibits thereto, and the proxy
statements, reports and other information of Comcast and Scripps can be
inspected and copied at the public reference facilities maintained by the SEC at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Regional Offices located at Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, 13th Floor,
New York, New York 10048. Copies of such materials can be obtained by mail from
the public reference branch of the SEC at 450 Fifth Street, N.W., Washington,
D.C. 20549, at prescribed rates. Such material may also be accessed
electronically by means of the SEC's home page on the Internet at
http://www.sec.gov. Securities of Comcast are listed on Nasdaq and reports and
other information concerning Comcast can be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street N.W.,
Washington, D.C. 20006. Securities of Scripps are listed on the NYSE and reports
and other information concerning Scripps can be inspected at the offices of such
exchange at 20 Broad Street, New York, New York 10005.
INFORMATION INCORPORATED BY REFERENCE
THIS JOINT PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WITH RESPECT TO EACH OF COMCAST AND SCRIPPS THAT ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. SUCH DOCUMENTS RELATING TO COMCAST (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE HEREIN) ARE
AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO WHOM
THIS JOINT PROXY STATEMENT-PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST
TO SECRETARY, COMCAST CORPORATION, 1500 MARKET STREET, PHILADELPHIA,
PENNSYLVANIA 19102-2148, TELEPHONE (215) 665-1700. SUCH DOCUMENTS RELATING TO
SCRIPPS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT-PROSPECTUS IS
DELIVERED, UPON WRITTEN OR ORAL REQUEST TO INVESTOR RELATIONS, THE E.W. SCRIPPS
COMPANY, 312 WALNUT STREET, CINCINNATI, OHIO 45202, TELEPHONE (513) 977-3825. TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY OCTOBER
15, 1996.
The following documents filed by Comcast with the SEC (File No. 0-6983) are
incorporated by reference into this Joint Proxy Statement-Prospectus:
1. Comcast's annual report on Form 10-K for the year ended December
31, 1995;
2. Comcast's quarterly reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996;
3. Comcast's current reports on Form 8-K filed on February 12, 1996,
April 10, 1996, May 9, 1996, May 28, 1996 and August 21, 1996;
4. Amendment Number 1 filed on July 22, 1996 to Comcast's current
report on Form 8-K filed on May 28, 1996;
5. The description of Comcast Special Common Stock contained in
Comcast's registration statement on Form 8-A/A filed on July 16, 1996; and
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<PAGE> 20
6. All other reports filed by Comcast pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement-Prospectus and prior to the later of the date of the Comcast
Special Meeting and the date of the Scripps Special Meeting.
The following documents filed by Scripps with the SEC (File No. 1-16914)
are incorporated by reference into this Joint Proxy Statement-Prospectus:
1. Scripps' annual report on Form 10-K for the year ended December 31,
1995 and Amendment No. 1 thereto filed on May 9, 1996.
2. Amendment Number 1 filed on January 3, 1996, Amendment Number 2
filed on March 28, 1996, Amendment No. 3 filed on May 10, 1996, Amendment
No. 4 filed on May 15, 1996, Amendment No. 5 filed on July 18, 1996, and
Amendment No. 6 filed on August 14, 1996 to Scripps' current report on Form
8-K filed on December 29, 1995;
3. Scripps' quarterly reports on Form 10-Q for the quarters ended
March 31, 1996 and June 30, 1996;
4. The description of the Scripps Class A Common Stock contained in
Scripps' registration statement on Form 8-A filed on June 29, 1988; and
5. All other reports filed by Scripps pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Joint Proxy
Statement-Prospectus and prior to the later of the date of the Scripps
Special Meeting and the date of the Comcast Special Meeting.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Joint Proxy Statement-Prospectus to the extent that a
statement contained herein, or in any other subsequently filed document that
also is incorporated or deemed to be incorporated by reference herein, modifies
or supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Joint Proxy Statement-Prospectus. Subject to the foregoing, all information
appearing in this Joint Proxy Statement-Prospectus is qualified in its entirety
by the information appearing in the documents incorporated herein by reference.
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included herein is
forward-looking, such as information relating to the effects of future
regulation and competition. Such forward-looking information involves important
risks and uncertainties that could cause actual future results to differ
significantly from those expressed in any forward-looking statements made by, or
on behalf of, Scripps or Comcast. These risks and uncertainties include, but are
not limited to, uncertainties relating to economic conditions, acquisitions and
divestitures, government and regulatory policies, franchise-related matters, the
pricing and availability of equipment, materials, inventories and programming,
technological developments and changes in the competitive environment in which
Scripps and Comcast operate.
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<PAGE> 21
SUMMARY
The following is a summary of certain information contained elsewhere in
this Joint Proxy StatementProspectus or in documents incorporated herein by
reference. This summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information set forth or incorporated
by reference elsewhere in this Joint Proxy Statement-Prospectus and its Annexes,
all of which should be reviewed carefully.
THE COMPANIES
Comcast. Comcast is principally engaged in the development, management and
operation of wired and wireless telecommunications and the provision of content.
Wired telecommunications includes cable and telecommunications services in the
United States and the United Kingdom. Wireless telecommunications includes
cellular services, personal communications services, provided through Comcast's
investment in Sprint Spectrum, and direct to home satellite television. Content
is provided through QVC, Inc. and its subsidiaries ("QVC"), an electronic
retailer, Comcast Spectacor, Comcast Content & Communications Corporation ("C3")
and other programming investments. Comcast's consolidated domestic cable
operations served more than 3.4 million subscribers and passed more than 5.6
million homes as of June 30, 1996. Comcast owns a 50% interest in Garden State
Cablevision L.P., a cable communications company serving approximately 202,000
subscribers and passing approximately 294,000 homes as of June 30, 1996. In the
United Kingdom, a subsidiary of Comcast, Comcast UK Cable Partners Limited,
holds ownership interests in four cable and telephony businesses that
collectively have the potential to serve over 1.6 million homes. Comcast
provides cellular telephone communications services pursuant to licenses granted
by the Federal Communications Commission ("FCC") in markets with a population of
over 8.3 million, including the area in and around the City of Philadelphia,
Pennsylvania, the State of Delaware and a significant portion of the State of
New Jersey. Through QVC, Comcast markets a wide variety of products and reaches
over 55 million homes across the United States and an additional 5 million in
the United Kingdom. Additional information regarding Comcast is contained in
reports filed by Comcast with the SEC and is incorporated by reference herein.
See "Information Incorporated by Reference."
Comcast was organized in 1969 under the laws of the Commonwealth of
Pennsylvania and has its principal executive offices at 1500 Market Street,
Philadelphia, Pennsylvania, 19102-2148, (215) 665-1700.
Scripps. Scripps is a diversified media company operating through
subsidiaries in four business segments: newspapers, broadcast television,
entertainment and cable television. Scripps publishes daily newspapers in 16
markets, operates local television stations in nine markets, produces television
programming and licenses comic characters, and operates cable television systems
that served approximately 805,000 basic subscribers as of June 30, 1996.
Additional information regarding Scripps is contained in reports filed by
Scripps with the SEC and is incorporated by reference herein. See "Information
Incorporated by Reference."
Scripps was organized in 1987 under the laws of the State of Delaware and
has its principal executive offices at 1105 N. Market Street, Wilmington,
Delaware 19801, (302) 478-4141.
New Scripps. New Scripps currently owns all of the operating subsidiaries
of Scripps and publishes a daily newspaper in Cincinnati, Ohio. After
consummation of the Spin-Off and the Merger, New Scripps will change its name to
The E.W. Scripps Company and will continue to operate, through its subsidiaries,
the newspaper, broadcasting television and entertainment businesses of Scripps.
Financial and other information about each of these businesses is contained in
reports filed by Scripps with the SEC and is incorporated by reference herein.
See "Information Incorporated By Reference."
New Scripps was organized in 1987 under the laws of the State of Ohio and
has its principal executive offices at 312 Walnut Street, Cincinnati, Ohio
45202, (513) 977-3000.
THE SPECIAL MEETINGS
Comcast. The Comcast Special Meeting will be held at the offices of
Comcast, on November 7, 1996, beginning at 10:00 a.m. local time. The purpose of
the Comcast Special Meeting is to consider and vote upon
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<PAGE> 22
the Comcast Proposal. See "The Special Meetings -- Matters to Be Discussed at
the Special Meetings -- Comcast."
The record date for the Comcast Special Meeting is September 13, 1996 (the
"Comcast Record Date"). Accordingly, holders of record of Comcast Common Stock
as of the Comcast Record Date will be entitled to notice of, and holders of
record of Comcast Class A Common Stock and Comcast Class B Common Stock as of
the Comcast Record Date will be entitled to vote at, the Comcast Special
Meeting. Each share of Comcast Class A Common Stock is entitled to one vote, and
each share of Comcast Class B Common Stock is entitled to 15 votes, with respect
to the Comcast Proposal.
The presence in person or by proxy of shares representing a majority of
votes entitled to be cast by holders of Comcast Class A Common Stock and Comcast
Class B Common Stock as of the Comcast Record Date is required to constitute a
quorum for the transaction of business at the Comcast Special Meeting.
The Comcast Proposal must be approved by a majority of the votes cast by
the holders of the Comcast Class A Common Stock and Comcast Class B Common
Stock, voting as a single class. As of the Comcast Record Date, Sural owned
shares of Comcast Common Stock representing approximately 81% of the outstanding
voting power in Comcast. Therefore, Sural has sufficient voting power to approve
the Comcast Proposal regardless of the vote of any other stockholders. Sural has
entered into an agreement pursuant to which it is obligated to vote in favor of
the Comcast Proposal. See "The Merger Agreement -- Ancillary
Agreements -- Voting Agreement." The fact that a Comcast shareholder voted in
favor of the Comcast Proposal could be raised as a defense in any action brought
by such shareholder against Comcast, Sural or any officer or director of Comcast
with respect to the Merger.
Scripps. The Scripps Special Meeting will be held at the offices of
Scripps, on November 5, 1996, beginning at 1:00 p.m. local time. The purpose of
the Scripps Special Meeting is to consider and vote upon the Scripps Proposals.
See "The Special Meetings -- Matters to Be Discussed at the Special Meetings --
Scripps."
The record date for the Scripps Special Meeting is September 18, 1996 (the
"Scripps Record Date"). Accordingly, holders of record of each class of Scripps
Common Stock as of the Scripps Record Date will be entitled to notice of, and as
set forth herein to vote at, the Scripps Special Meeting.
The presence in person or by proxy of shares representing a majority of the
outstanding shares of Scripps Common Voting Stock as of the Scripps Record Date
is required to constitute a quorum for the transaction of business at the
Scripps Special Meeting with respect to the proposal to approve the Merger
Agreement. The presence in person or by proxy of shares representing a majority
of the outstanding shares of each of the Scripps Common Voting Stock and the
Scripps Class A Common Stock as of the Scripps Record Date is required to
constitute a quorum for the transaction of business at the Scripps Special
Meeting with respect to the proposal to approve the Scripps Charter Amendment.
The affirmative vote of the holders of a majority of the outstanding shares
of the Scripps Common Voting Stock is required for approval of the Merger
Agreement. The affirmative vote of the holders of a majority of the outstanding
shares of the Scripps Common Voting Stock and of the Scripps Class A Common
Stock, voting as separate classes, is required for approval of the Scripps
Charter Amendment. As of the Scripps Record Date, the Scripps Trust owned a
majority of the outstanding shares of each of the Scripps Common Voting Stock
and the Scripps Class A Common Stock. Therefore, the Scripps Trust has
sufficient voting power to approve the Scripps Proposals regardless of the vote
of any other stockholders. The Scripps Trust has entered into an agreement
pursuant to which it is obligated to vote in favor of the Scripps Proposals,
with certain limited exceptions. See "The Merger Agreement -- Ancillary
Agreements -- Voting Agreement." The Scripps Board is soliciting proxies from
the holders of Scripps Common Voting Stock with respect to the proposals to
approve and adopt the Merger Agreement and the Scripps Charter Amendment, and
from the holders of Scripps Class A Common Stock with respect to the proposal to
approve and adopt the Scripps Charter Amendment, because as a matter of
stockholder relations it is Scripps' policy to solicit proxies from such holders
even though the Scripps Trust has a majority of each class.
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<PAGE> 23
SPECIAL FACTORS FOR MINORITY SHAREHOLDERS
COMCAST
Shareholder Approval Requirement
The NASD Rules require shareholder approval prior to the issuance of shares
of common stock in connection with the acquisition of the stock of another
company if the number of shares to be issued equals or exceeds 20% of the common
stock outstanding prior to such issuance. The NASD Rules are applicable to
Comcast since the Comcast Special Common Stock and the Comcast Class A Common
Stock are quoted on Nasdaq. The Merger Stock constitutes over 20% of the Comcast
Common Stock currently outstanding. Accordingly, the issuance of Comcast Special
Common Stock in the Merger is being submitted to Comcast's shareholders for
approval. As of the Comcast Record Date, Sural owned shares of Comcast Common
Stock representing approximately 81% of the outstanding voting power of Comcast.
Therefore, Sural has sufficient voting power to approve the Comcast Proposal
regardless of the vote of any other stockholders. Notwithstanding the foregoing,
Comcast is soliciting proxies because it is required to do so by the NASD Rules.
Effect of Shareholder Approval
If (i) the Comcast shareholders approve the Comcast Proposal, (ii) the
Average Closing Price is below the minimum Collar Price of $17.06375 and (iii)
Scripps exercises its right to terminate the Merger Agreement, Comcast will have
discretion to increase the number of shares of Comcast Special Common Stock to
be delivered up to the number of shares that would have been delivered if the
Collar Price were equal to the Average Closing Price. However, Comcast has
informed Scripps that if the Average Closing Price is less than $17.06375 and if
Scripps exercises its rights to terminate the Merger Agreement, Comcast does not
intend to elect to deliver any additional shares of Comcast Special Common
Stock.
The fact that a Comcast shareholder voted in favor of the Comcast Proposal
could be raised as a defense in any action brought by such shareholder against
Comcast, Sural or any officer or director of Comcast with respect to the Merger.
Absence of Fairness Opinion
Lehman Brothers acted as financial advisor to Comcast in connection with
the Merger. Lehman Brothers' primary function was to assist Comcast in the
analysis of the likely effect of certain financial terms of the potential
transaction, particularly the proposed "collar arrangements," on the trading
price of Comcast's stock. Lehman Brothers was not asked to, and did not, make a
presentation to the Comcast Board regarding the valuation of the Scripps Cable
Business or render a fairness opinion on any proposed transaction.
SCRIPPS
Stockholder Approval Requirement
As of the Scripps Record Date, the Scripps Trust owned a majority of the
outstanding shares of each of the Scripps Common Voting Stock and the Scripps
Class A Common Stock. Therefore, the Scripps Trust has sufficient voting power
to approve the Scripps Proposals regardless of the vote of any other
stockholders. The Scripps Board is soliciting proxies from the holders of
Scripps Common Voting Stock with respect to the Merger and the Scripps Charter
Amendment, and from the holders of Scripps Class A Common Stock with respect to
the Scripps Charter Amendment, because as a matter of stockholder relations it
is Scripps' policy to solicit proxies from such holders even though the Scripps
Trust has a majority of each class.
Effect of Stockholder Approval
The Merger and the Scripps Charter Amendment will be voted on separately at
the Scripps Special Meeting. The holders of Scripps Class A Common Stock and the
holders of Scripps Common Voting Stock must approve the Scripps Charter
Amendment and the holders of Scripps Common Voting Stock must approve the Merger
or neither the Spin-Off or the Merger will be consummated. Thus the holders of
Scripps Class A Common Stock, by voting on the Scripps Charter Amendment,
effectively are voting on the Merger.
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<PAGE> 24
If the Merger and the Scripps Charter Amendment are approved, the Scripps
stockholders will have provided the Scripps Board with the ability to exercise
its discretion, consistent with its fiduciary duties, to (i) proceed with the
Merger Agreement if the Average Closing Price is less than $17.06375, (ii)
terminate the Merger Agreement if the Average Closing Price is less than
$17.06375 (subject to Comcast's "top-up" right), or (iii) agree with Comcast on
a number of additional shares lower than the Maximum Top-Up Share Number (as
defined herein) to be delivered by Comcast if the Average Closing Price is less
than $17.06375. The granting of such discretion to the Scripps Board pursuant to
the Merger Agreement is permitted under Delaware law.
The fact that a Scripps stockholder voted in favor of either of the Scripps
Proposals could be raised as a defense in any action brought by such stockholder
against Scripps, its officers and directors, the Scripps Trust or the trustees
of the Scripps Trust with respect to the Merger or the Spin-Off.
Coverage of Fairness Opinion of Financial Advisor to Scripps
On October 28, 1995, Scripps received from its financial advisor an opinion
stating that the consideration to be paid by Comcast in the Merger was fair to
the stockholders of Scripps from a financial point of view. This opinion was
based, among other things, on market conditions at the time and does not
specifically address the fairness of consideration to be paid in the Merger in a
transaction wherein the Average Closing Price is less than the minimum Collar
Price of $17.06375. The Scripps Board has not requested its financial advisor to
update its opinion. The Scripps Board will not proceed with the Merger if the
Average Closing Price is below $17.06375 per share and the number of shares of
Comcast Special Common Stock to be delivered by Comcast in the Merger is less
than the number that would have been delivered if the Collar Price were equal to
the Average Closing Price unless, among other things, the Scripps Board receives
an opinion from its financial advisor as to the fairness from a financial point
of view to Scripps stockholders of the Merger consideration to be paid under
such circumstances. If (i) the Average Closing Price were below the minimum
Collar Price of $17.06375, (ii) Scripps decided to terminate the Merger
Agreement and (iii) Comcast elected to deliver the Maximum Top-Up Share Number
of shares of Comcast Special Common Stock, then Scripps would be required under
the Merger Agreement to consummate the Merger whether or not it received an
update of its financial advisor's opinion unless Scripps were entitled by the
terms of the Merger Agreement to terminate it for other reasons. See "Summary --
The Merger", "The Merger Agreement" and "Risk Factors -- Risk Factors Related to
the Comcast Merger Stock -- Effect of Equity Adjustment Mechanism on
Consideration Received in the Merger" for information regarding the equity
adjustment mechanism, the termination and "top-up" rights, and certain related
information.
Opinion of Financial Advisor to Scripps Trust
On October 28, 1995, the trustees of the Scripps Trust received from the
Scripps Trust's financial advisor an opinion stating that the consideration to
be received by the Scripps Trust in the Merger was fair to the Scripps Trust
from a financial point of view. A copy of this opinion has been filed as an
exhibit to the registration statement of which this Proxy Statement-Prospectus
is a part. Although the trustees of the Scripps Trust did not obtain this
opinion for the purpose of asserting a defense based on receipt of this opinion
in any action brought against them or the Scripps Trust by a stockholder of
Scripps, the Scripps Trust and its trustees would not be precluded from
asserting a defense based on receipt of this opinion in such an action.
THE PRE-MERGER TRANSACTIONS
Prior to and as a condition to the Merger, each of the following
transactions must be consummated. See "Pre-Merger Transactions" for a more
complete description of these transactions.
Internal Spin-Offs. The Scripps Cable Business currently is operated
primarily through (i) four corporate subsidiaries of Scripps (the "Scripps Cable
Subsidiaries"), two of which are wholly owned subsidiaries of New Scripps and
two of which are wholly owned subsidiaries of Scripps Howard Broadcasting, Inc.
("Broadcasting"), an Ohio corporation and a wholly owned subsidiary of New
Scripps, and (ii) two partnerships, one of which is wholly owned by two of the
Scripps Cable Subsidiaries and one of which is 95% owned by one of the Scripps
Cable Subsidiaries and 5% owned by a third party (such partnerships, the
"Scripps Cable Partnerships" and, together with the Scripps Cable Subsidiaries,
"Scripps Cable"). Prior to
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<PAGE> 25
the Scripps Special Meeting and the transactions described in this section, in
transactions intended to qualify for tax-free treatment under the Internal
Revenue Code (the "Code"), Broadcasting will contribute certain assets and all
of the outstanding stock of one of the Scripps Cable Subsidiaries to another
Scripps Cable Subsidiary (the "Cable Holding Subsidiary"), and immediately
thereafter Broadcasting will distribute to New Scripps all of the outstanding
stock of the Cable Holding Subsidiary. Immediately thereafter, New Scripps will
contribute all of the outstanding shares of two additional Scripps Cable
Subsidiaries to the Cable Holding Subsidiary, and immediately thereafter New
Scripps will distribute to Scripps all of the outstanding shares of the Cable
Holding Subsidiary. The transactions described in the preceding two sentences
are referred to herein collectively as the "Internal Spin-Offs". As a result of
the Internal Spin-Offs, the Cable Holding Subsidiary will become a direct wholly
owned subsidiary of Scripps and the other Scripps Cable Subsidiaries will become
direct wholly owned subsidiaries of the Cable Holding Subsidiary.
Spin-Off. Following the Internal Spin-Offs and prior to the Scripps
Special Meeting, pursuant to a Contribution and Assumption Agreement between
Scripps and New Scripps, a copy of which is attached as Exhibit C to the Merger
Agreement (the "Contribution Agreement"), Scripps will contribute and transfer
to New Scripps (the "Contribution") all of the assets of Scripps other than the
stock of the Scripps Cable Subsidiaries and certain other assets, and in
connection therewith New Scripps will, among other things, (i) assume all
liabilities of Scripps other than, with certain limited exceptions described
herein, those related to the Scripps Cable Business and (ii) agree to issue and
deliver to Scripps such number of New Scripps Common Voting Shares and such
number of New Scripps Class A Common Shares as will be required for the
Distribution (as defined herein).
Following the Internal Spin-Offs and the Contribution, and immediately
prior to the Merger, Scripps will distribute to each holder of Scripps Common
Voting Stock one fully paid and nonassessable New Scripps Common Voting Share
for each share of Scripps Common Voting Stock held and to each holder of Scripps
Class A Common Stock one fully paid and nonassessable New Scripps Class A Common
Share for each share of Scripps Class A Common Stock held (the "Distribution").
As a result, each holder of Scripps Common Stock immediately prior to the
Distribution will own the same number and class of shares in New Scripps as such
holder owned in Scripps. Each share of the capital stock of New Scripps issued
and outstanding immediately prior to the Distribution and owned directly or
indirectly by Scripps or any of its subsidiaries (other than those to be
distributed in accordance with the Distribution) shall be cancelled at the time
of the Distribution.
The Contribution and the Distribution collectively constitute the
"Spin-Off." The terms of the Contribution are contained in the Contribution
Agreement. As part of the Contribution, Scripps will agree to hold New Scripps
and its subsidiaries, officers and directors harmless from substantially all
debts, liabilities or obligations of Scripps, to the extent they arise out of,
or are based upon or otherwise relate to, the Scripps Cable Business, except for
certain liabilities relating to taxes, employee benefits, litigation, insurance
claims, certain environmental matters, certain limited third party interests in
the Scripps Cable Business and certain other matters. See "The Merger
Agreement -- Indemnification." Notwithstanding the foregoing, New Scripps will
be responsible for all tax liabilities of Scripps and its subsidiaries for
periods through the date (the "Closing Date") on which the closing of the Merger
and related transactions occurs (the "Closing"), and Comcast, as the surviving
corporation, will be responsible for all such liabilities pertaining to the
Scripps Cable Business for periods thereafter. New Scripps will also be
responsible for certain taxes arising from or relating to the Merger, the
Contribution, the Internal Spin-Offs, the Spin-Off and related transactions. See
"The Merger Agreement -- Tax Matters."
Amendments to Organizational Documents of Scripps and New
Scripps. Immediately prior to the Distribution and the Merger, the Scripps
Charter will be amended in order to facilitate the Distribution. See "Proposal
to Approve and Adopt the Scripps Charter Amendment" and a copy of the Scripps
Charter Amendment attached as Exhibit A to Annex I hereto. The articles of
incorporation of New Scripps have been amended to conform in all material
respects and as nearly as practicable to the current Scripps Charter. See
"Comparison of Rights of Stockholders of Scripps and New Scripps" and a copy of
the New Scripps Amended Articles attached as Exhibit B to Annex I hereto.
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<PAGE> 26
OWNERSHIP OF NEW SCRIPPS AFTER THE SPIN-OFF AND THE MERGER
Following the Spin-Off and the Merger, holders of shares of Scripps Common
Voting Stock and Scripps Class A Common Stock immediately prior to the Spin-Off
will own New Scripps Common Voting Shares and New Scripps Class A Common Shares,
respectively, constituting 100% of the equity and voting power of New Scripps,
in the same number (and of the corresponding class) as shares of each class of
Scripps Common Stock that such holders owned immediately prior to the Spin-Off,
subject to certain differences between the rights of shareholders of an Ohio
corporation and stockholders of a Delaware corporation. See "Comparison of
Rights of Stockholders of Scripps and New Scripps" for a discussion of the
differences between the rights of stockholders of Scripps and New Scripps.
THE MERGER
The Merger Agreement provides that, subject to (i) the requisite adoption
and approval by Comcast stockholders of the Comcast Proposal, (ii) the requisite
adoption and approval by Scripps stockholders of the Scripps Proposals and (iii)
the satisfaction or waiver of certain other conditions, at the Effective Time,
Scripps (which, at the time of the Merger, will own only the Scripps Cable
Business) will be merged with and into Comcast, the separate existence of
Scripps will cease, and Comcast will continue as the surviving corporation. As a
result of the Merger, (i) Comcast will acquire the Scripps Cable Business and,
with certain exceptions, will be responsible for all of the liabilities of
Scripps relating to the Scripps Cable Business, and (ii) shares of Scripps
Common Stock outstanding immediately prior to the Merger will be converted into
shares of Comcast Special Common Stock ("Comcast Merger Stock"). Because the
Merger is structured as a merger of Scripps with and into Comcast, Comcast will
assume all liabilities of Scripps as a matter of law at the Effective Time. New
Scripps has agreed to indemnify Comcast in respect of all liabilities of Scripps
not related to the Scripps Cable Business and in respect of certain liabilities
relating to the Scripps Cable Business. See "The Merger
Agreement -- Indemnification."
Pursuant to the Merger Agreement and without any action on the part of the
holder of any shares of capital stock, each share of Scripps Common Stock
outstanding immediately prior to the Merger (except for shares of Scripps Common
Voting Stock with respect to which dissenters' rights are properly exercised)
will be converted into and become a number of fully paid and nonassessable
shares of Comcast Merger Stock (the "Common Stock Conversion Number") equivalent
to its pro rata share (based on the percentage of all Scripps Common Stock then
outstanding represented by such share of Scripps Common Stock) of $1.575 billion
(the "Base Consideration"), adjusted as described below (the Base Consideration,
as adjusted, the "Aggregate Consideration"), divided by a dollar amount (the
"Collar Price") which is determined by reference to (i) the average closing
price of the Comcast Special Common Stock on Nasdaq for 15 days chosen at random
(the "Selected Trading Days") from the 40 trading days (the "Random Trading
Days") ending on the second trading day prior to the Closing Date (the "Average
Closing Price") and (ii) $20.075 (the "Execution Price"), which is equal to the
average closing price of the Comcast Special Common Stock on Nasdaq for the 20
trading days ending on and including October 24, 1995, the date upon which
Comcast submitted its proposal to acquire the Scripps Cable Business. The Collar
Price will equal the Average Closing Price if the Average Closing Price is not
more than 115%, nor less than 85%, of the Execution Price. If the Average
Closing Price is more than 115% of the Execution Price ($23.08625), then the
Collar Price will be $23.08625. If the Average Closing Price is less than 85% of
the Execution Price ($17.06375), then the Collar Price will be $17.06375;
provided, that if the Average Closing Price is less than $17.06375, Scripps will
have the option to notify Comcast that it intends to terminate the Merger
Agreement if Comcast does not agree to deliver to the Scripps stockholders in
the Merger, in addition to the number of shares deliverable based on a Collar
Price of $17.06375, an additional number of shares (the "Top-up Share Number")
equal to (i) the difference between (a) the number of shares that would be
delivered if the Collar Price were the Average Closing Price and (b) the number
of shares that would be delivered at a Collar Price of $17.06375 (such
difference, the "Maximum Top-Up Share Number") or (ii) such lesser number as
Comcast and Scripps may
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<PAGE> 27
agree. Specifically, the Common Stock Conversion Number will be calculated
according to the following formula:
<TABLE>
<S> <C> <C> <C> <C>
Common Stock Aggregate Consideration
------------------------
= + Top-up Share Number
Conversion Number Collar Price
---------------------------------------------------------
Outstanding Scripps Common Stock
</TABLE>
The Scripps Board is recommending that holders of Scripps Common Voting
Stock approve and adopt the Merger Agreement and that holders of Scripps Common
Voting Stock and Scripps Class A Common Stock approve and adopt the Scripps
Charter Amendment and thereby provide the Scripps Board with the ability to
exercise its discretion, consistent with its fiduciary duties, to (i) proceed
with the Merger Agreement if the Average Closing Price is less than $17.06375,
(ii) terminate the Merger Agreement if the Average Closing Price is less than
$17.06375 (subject to Comcast's "top-up" right described above), or (iii) agree
with Comcast on a lower number of additional shares to be delivered by Comcast
as described above if the Average Closing Price is less than $17.06375. The
granting of such discretion to the Scripps Board pursuant to the Merger
Agreement is permitted under Delaware law. The fact that a Scripps stockholder
voted in favor of either of the Scripps Proposals could be raised as a defense
in any action brought by such stockholder against Scripps, its officers and
directors, the Scripps Trust or the trustees of the Scripps Trust with respect
to the Merger or the Spin-Off.
If (i) the Comcast shareholders approve the Comcast Proposal, (ii) the
Average Closing Price is below the minimum Collar Price of $17.06375 and (iii)
Scripps exercises its right to terminate the Merger Agreement, Comcast will have
discretion to increase the number of shares of Comcast Special Common Stock to
be delivered up to the number of shares that would have been delivered if the
Collar Price were equal to the Average Closing Price. However, Comcast has
informed Scripps that if the Average Closing Price is less than $17.06375 and if
Scripps exercises its rights to terminate the Merger Agreement, Comcast does not
intend to elect to deliver any additional shares of Comcast Special Common
Stock.
The closing price of the Comcast Special Common Stock on Nasdaq on
September 27, 1996 was $15.875 per share, which is below the minimum Collar
Price of $17.06375. Since July 10, 1996, when the closing price of Comcast
Special Common Stock was $16.75, the Comcast Special Common Stock has traded at
closing prices below the minimum Collar Price of $17.06375. Scripps may elect
not to terminate the Merger Agreement even if the Average Closing Price falls
below the minimum Collar Price of $17.06375 per share. The Scripps Board has not
determined whether or under what circumstances it would elect to terminate the
Merger Agreement if the Average Closing Price is below $17.06375 per share. In
making any such determination, the Scripps Board would take into account,
consistent with its fiduciary duties, all relevant facts and circumstances
existing at the time, including, without limitation, whether it believes Comcast
is prepared to increase the per share merger consideration, the market for cable
television industry stocks in general, the relative market value of the Comcast
Special Common Stock, and the advice of Scripps' financial advisors and legal
counsel. Comcast has informed Scripps that if the Average Closing Price is less
than $17.06375 and if Scripps exercises its right to terminate the Merger
Agreement, Comcast does not intend to elect to deliver any additional shares of
Comcast Special Common Stock. By approving the Merger Agreement, the holders of
Scripps Common Voting Stock will be permitting the Scripps Board to determine,
in the exercise of its fiduciary duties, to proceed with the Merger even if the
Average Closing Price of the Comcast Special Common Stock falls below $17.06375
per share and no additional shares of Comcast Special Common Stock are
delivered. The Scripps Board will not proceed with the Merger if the Average
Closing Price of the Comcast Special Common Stock is below $17.06375 per share
and the number of shares of Comcast Special Common Stock to be delivered by
Comcast in the Merger is less than the number that would have been delivered if
the Collar Price were equal to the Average Closing Price unless, among other
things, the Scripps Board receives an opinion from its financial advisor as to
the fairness from a financial point of view to Scripps stockholders of the
Merger consideration to be paid under such circumstances. If (i) the Average
Closing Price were below the minimum Collar Price of $17.06375, (ii) Scripps
decided to terminate the Merger Agreement and (iii) Comcast elected to deliver
the Maximum Top-Up Share Number of shares of Comcast Special Common Stock, then
Scripps would be required under the Merger Agreement to consummate the
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<PAGE> 28
Merger whether or not it received an update of its financial advisor's opinion
unless Scripps were entitled by the terms of the Merger Agreement to terminate
it for other reasons.
The Aggregate Consideration will be derived by making the following
adjustments to the Base Consideration of $1.575 billion:
(i) increasing the Base Consideration by Scripps' best estimate, as of
two days prior to the Effective Time, of the amount of capital expenditures
(not to exceed $43.2 million) made by Scripps Cable after November 1, 1995
and before the Effective Time for upgrades and rebuilds (but excluding $4.6
million of upgrades and rebuilds and excluding capital expenditures in the
ordinary course of business) mutually agreed to by Comcast and Scripps (the
"Estimated Capital Expenditure Amount");
(ii) reducing the Base Consideration by Scripps' best estimate, as of
two days prior to the Effective Time, of the consolidated liabilities (as
defined) minus the consolidated current assets (as defined) (other than
inventory) of Scripps Cable immediately prior to the Effective Time and
after giving effect to the Distribution (the "Estimated Cable Net
Liabilities Amount");
(iii) increasing the Base Consideration by the sum of (x) the amount,
if any, paid to acquire all or any part of the River City Interest (as
defined below in "The Merger Agreement -- Certain Covenants -- Acquisition
of Minority Interest") and (y) if any such acquisition takes place, 5% of
the difference between the consolidated liabilities of the relevant Scripps
Cable Partnership (as described below in "The Merger Agreement -- Certain
Covenants -- Acquisition of Minority Interest") as of the date of such
acquisition and the consolidated current assets (other than inventory) of
such Scripps Cable Partnership at such time (adjusted proportionately if
less than all of the River City Interest is acquired); and
(iv) reducing the Base Consideration by the amount, if any, by which
$62.5 million (the aggregate purchase price for the entire Mid-Tennessee
Business (as defined in "The Merger Agreement -- Certain
Covenants -- Acquisition of Mid-Tennessee Business")) exceeds the sum of
(A) the amount, if any, actually paid by Scripps Howard Broadcasting, Inc.,
an Ohio corporation and wholly owned subsidiary of New Scripps
("Broadcasting"), for the Mid-Tennessee Business or portion thereof
acquired by Broadcasting prior to the Effective Time, (B) the principal
amount of any promissory notes delivered by Broadcasting in connection with
such acquisition and (C) the difference between the consolidated
liabilities with respect to any portion of the Mid-Tennessee Business so
acquired as of the date such portion is transferred to a Scripps Cable
Subsidiary and the consolidated current assets (other than inventory) of
such portion of the Mid-Tennessee Business as of such time.
Scripps and Comcast intend to resolicit their respective stockholders that
have voting rights with respect to approval of the Scripps Proposals and the
Comcast Proposal, respectively, if the closing adjustments to the Base
Consideration result in a material change to the estimated adjusted Aggregate
Consideration of $1.5921 billion. Neither Scripps nor Comcast expects, however,
that such adjustments will result in such a material change.
Scripps is negotiating to acquire the River City Interest. As of the date
of this Joint Proxy StatementProspectus, Scripps has not reached any agreement
for the purchase of such interest.
The acquisition of the Mid-Tennessee business was completed on January 3,
1996, for a purchase price of $62.5 million. The estimated adjusted Aggregate
Consideration of $1.5921 billion does not include any adjustment for the
acquisition of the Mid-Tennessee business. No material adjustment will be made
to the estimated Aggregate Consideration as a result of this acquisition.
"Outstanding Scripps Common Stock" means the aggregate number of shares of
Scripps Common Stock outstanding on the Closing Date.
If, between October 28, 1995 and the Effective Time, the outstanding shares
of Comcast Special Common Stock are changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchanges of shares,
or if any extraordinary dividend or distribution is made with respect to the
Comcast Special Common Stock, then the Common Stock Conversion Number will be
correspondingly adjusted to reflect such event.
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<PAGE> 29
The Merger Agreement provides that no fractional shares of Comcast Merger
Stock will be issued in connection with the Merger. In lieu of any such
fractional interests, each holder of Scripps Common Stock entitled to receive
Comcast Merger Stock pursuant to the Merger will be entitled to receive an
amount in cash (without interest), rounded to the nearest cent, determined by
multiplying the fractional interest in the share of Comcast Merger Stock to
which such holder would otherwise be entitled (after taking into account all
shares of Scripps Common Stock then held of record by such holder) by the
closing sale price of a share of Comcast Special Common Stock on Nasdaq on the
Closing Date.
For a more detailed description of the terms of the Merger Agreement, see
"The Merger Agreement." A conformed copy of the Agreement and Plan of Merger is
set forth as Annex I to this Joint Proxy Statement-Prospectus and the Form of
Amendment to the Agreement and Plan of Merger is set forth as Annex II hereto.
The Merger Agreement is incorporated herein by reference.
CONTROL BY AFFILIATES OF VOTE REQUIRED TO APPROVE THE MERGER AND THE SCRIPPS
CHARTER AMENDMENT;
INTERESTS OF OFFICERS, DIRECTORS AND PRINCIPAL SHAREHOLDERS IN THE TRANSACTIONS
Sural, which is owned by the Chairman of Comcast and members of his family,
beneficially owned all of the outstanding shares of Comcast Class B Common Stock
and 1,845,037 shares of Comcast Class A common Stock as of the Comcast Record
Date. Collectively, such shares are entitled to cast approximately 81% of all
votes entitled to be cast on the Comcast Proposal. As such, Sural has voting
power sufficient to approve the Comcast Proposal regardless of the vote of any
other stockholders of Comcast entitled to vote on the Comcast Proposal.
The Scripps Trust beneficially owned 16,040,000 (or approximately 82%) of
the outstanding shares of the Scripps Common Voting Stock, and 32,610,000 (or
approximately 54%) of the outstanding shares of Scripps Class A Common Stock, as
of the Scripps Record Date, and, as such, has voting power sufficient to approve
the Merger and the Scripps Charter Amendment regardless of the vote of any other
holders of Scripps Common Voting Stock or Scripps Class A Common Stock. The
trustees of the Scripps Trust are Charles E. Scripps, Robert P. Scripps and John
H. Burlingame. Each of the trustees is a director of Scripps and New Scripps.
Charles E. Scripps and Robert P. Scripps are also beneficiaries of the Scripps
Trust. John H. Burlingame is the Executive Partner of Baker & Hostetler, which
serves as counsel to Scripps and New Scripps.
On or prior to the consummation of the Merger, the Scripps Trust and
Comcast will enter into a registration rights agreement pursuant to which (i)
the Scripps Trust will be entitled to certain registration rights with respect
to public offerings of Comcast Special Common Stock, and (ii) the Scripps Trust
will agree to certain restrictions on its ability to transfer the Comcast Merger
Stock it receives. See "The Merger Agreement -- Ancillary
Agreements -- Registration Rights Agreement" and "-- General
Provisions -- Restriction on Transfer of Comcast Merger Stock." On or prior to
the consummation of the Merger, the Scripps Trust and Sural will enter into a
board representation agreement pursuant to which (i) the Scripps Trust will have
the right, to the extent permitted by applicable law, to cause Comcast to
nominate for election to its Board of Directors, and Sural to vote in favor of
the election of, one individual (or under certain circumstances two individuals)
designated by the Scripps Trust and (ii) the Scripps Trust will agree to vote in
favor of the Permitted Amendments (as defined below) if they are proposed for
approval by the shareholders of Comcast. See "The Merger Agreement -- Ancillary
Agreement -- Board Representation Agreement."
Sural and the Scripps Trust have entered into an agreement pursuant to
which each of them has agreed to vote its shares of voting capital stock of
Comcast and Scripps, respectively, to approve the Scripps Proposals and the
Comcast Proposal, respectively. The obligation of the Scripps Trust pursuant to
such agreement is subject to certain limited exceptions. See "The Merger
Agreement -- Ancillary Agreements -- Voting Agreement."
Paul K. Scripps, a director of Scripps who is not a trustee of the Scripps
Trust, beneficially owned 1,616,113 shares of Scripps Common Voting Stock, or
approximately 8% of the outstanding shares of Scripps Common Voting Stock, and
189,097 shares of Scripps Class A Common Stock, or approximately .3% of the
outstanding shares of Scripps Class A Common Stock, as of the Scripps Record
Date. Other than such
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<PAGE> 30
director, and the directors of Scripps who are also the trustees of the Scripps
Trust, no executive officers or directors of Scripps beneficially owned any
outstanding shares of Scripps Common Voting Stock as of such date. Other than
such director, the directors and executive officers of Scripps beneficially
owned 364,668 shares of Scripps Class A Common Stock as of such date, excluding
the shares of Scripps Class A Common Stock beneficially owned by the Scripps
Trust.
Directors and executive officers of Comcast beneficially owned 2,864,421
shares of Comcast Class A Common Stock (including the 1,845,037 shares of
Comcast Class A Common Stock owned by Sural), or approximately 8.42% of the
outstanding shares of Comcast Class A Common Stock, as of the Comcast Record
Date. As indicated above, the Chairman of the Board of Directors of Comcast
beneficially owned all of the outstanding shares of Comcast Class B Common Stock
as of the Comcast Record Date.
COMCAST STOCK REPURCHASE PROGRAM
Simultaneously with the public announcement of the Agreement and Plan of
Merger, Comcast announced that it had approved a market repurchase program (the
"Repurchase Program") pursuant to which it may purchase, at such times and on
such terms as it determines appropriate, up to $500 million of Comcast Special
Common Stock and Comcast Class A Common Stock. Comcast has no obligation to
Scripps or New Scripps to make any such purchases. Comcast has agreed not to
make market purchases during the Random Trading Days and to terminate the
Repurchase Program no later than six months after the Closing Date. As of the
date hereof, Comcast has, pursuant to the Repurchase Program, purchased shares
of Comcast Special Common Stock and Comcast Class A Common Stock for aggregate
consideration of $185.8 million and sold put options in respect of an additional
4.0 million shares of Comcast Special Common Stock. See "The Merger
Agreement -- Certain Covenants -- Market Repurchase Program."
RESTRICTIONS ON TRANSFER OF COMCAST MERGER STOCK
The Scripps Trust has agreed that until at least the first anniversary of
the Effective Time it will maintain ownership of such number of shares of
Comcast Merger Stock issued to it in the Merger as represents at least 50% of
the total consideration issued in the Merger (including all shares of Comcast
Merger Stock, any payments to dissenting stockholders and payments of cash in
lieu of fractional shares). Moreover, the Scripps Trust has agreed not to sell
in the open market any Comcast capital stock during any period (not to exceed 10
trading days in any calendar month) in which, following notice by Comcast to the
Scripps Trust, Comcast proposes to repurchase its shares pursuant to the
Repurchase Program. See "The Merger Agreement -- General
Provisions -- Restrictions on Transfer of Comcast Merger Stock."
RESTRICTIONS ON TRANSFER OF NEW SCRIPPS COMMON SHARES
The New Scripps Common Shares received by Scripps stockholders pursuant to
the Spin-Off will not be subject to any restrictions on transfer (other than
those that may be related to federal and state securities laws). However,
Scripps expects to obtain representations from the Scripps Trust and certain
other holders of record of 5% or more of a class of the Scripps Common Stock
that such holders have no present intention to dispose of any of the New Scripps
Common Shares that they will receive in the Spin-Off.
PAYMENT FOR SHARES
For a description of the method of delivery of shares of Comcast Special
Common Stock to be issued to Scripps stockholders in the Merger, see "Payments
and Distributions to Stockholders." SCRIPPS STOCKHOLDERS SHOULD NOT SEND IN
THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
CABLE NET LIABILITIES AND CAPITAL EXPENDITURE ADJUSTMENTS
Within 90 days after the Effective Time, Comcast will deliver to New
Scripps its determination of (i) the amount of capital expenditures (not to
exceed $43.2 million) made by Scripps Cable after November 1, 1995 and before
the Effective Time for upgrades and rebuilds (but excluding $4.6 million of
upgrades and rebuilds and excluding capital expenditures in the ordinary course
of business) mutually agreed to by Comcast and Scripps (the "Capital Expenditure
Amount") and (ii) the consolidated liabilities minus the consolidated
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current assets (other than inventory) of Scripps Cable immediately prior to the
Effective Time and after giving effect to the Distribution (the "Cable Net
Liabilities Amount"). Within 10 days thereafter (or within 10 days of the
resolution of any dispute regarding such determination, which dispute, if not
resolved by Comcast and New Scripps, will be resolved by an independent
certified public accounting firm mutually acceptable to Comcast and New Scripps,
the decision of which shall be final and binding on Comcast and New Scripps),
adjustment payments will be made as follows: If the Capital Expenditure Amount
exceeds the Estimated Capital Expenditure Amount, then Comcast will pay to New
Scripps the amount of such excess, and if the Estimated Capital Expenditure
Amount exceeds the Capital Expenditure Amount, New Scripps will pay to Comcast
the amount of excess. If the Cable Net Liabilities Amount exceeds the Estimated
Cable Net Liabilities Amount, then New Scripps will pay to Comcast the amount of
such excess, and if the Estimated Cable Net Liabilities Amount exceeds the Cable
Net Liabilities Amount, Comcast will pay to New Scripps the amount of such
excess. Any such payments will include interest from the Closing Date to the
date of payment at the prime rate charged by Citibank, N.A. in New York City,
will be made in immediately available funds and will be made on an after-tax
basis. Neither Comcast nor Scripps expects any such payments to be material.
OWNERSHIP OF COMCAST STOCK AFTER THE MERGER
If the Merger were consummated on the date hereof, assuming that the Base
Consideration were increased by $17.1 million to result in an Aggregate
Consideration equal to $1.5921 billion and that the Average Closing Price were
equal to the Execution Price, the Comcast Merger Stock would be approximately
79.3 million shares of Comcast Special Common Stock, representing approximately
29.4% of the outstanding Comcast Special Common Stock on the Comcast Record Date
and approximately 25.4% of the outstanding Comcast Common Stock on such date
(but none of the voting power in Comcast) each on a pro forma basis for the
Merger, and the stockholders of Scripps would receive 0.986 shares of Comcast
Special Common Stock per share of Scripps Common Stock. Assuming that the
minimum Collar Price of $17.06375 was used to calculate the amount of Comcast
Merger Stock and that no additional shares of Comcast Special Common Stock were
delivered in the Merger, the Comcast Merger Stock would be approximately 93.3
million shares (representing approximately 32.9% of the outstanding Comcast
Special Common Stock on the Comcast Record Date and approximately 28.6% of the
outstanding Comcast Common Stock on such date, each on a pro forma basis for the
Merger) and the stockholders of Scripps would receive 1.159 shares of Comcast
Special Common Stock per share of Scripps Common Stock. The closing price of
Comcast Special Common Stock on Nasdaq on September 27, 1996 was $15.875 per
share.
In each case, each holder of Scripps Common Stock would own the same number
and class of shares in New Scripps as such holder owned in Scripps immediately
prior to the Spin-Off. See "The Merger Agreement -- Ownership of Comcast Stock
After the Merger."
RECOMMENDATION OF THE BOARDS OF DIRECTORS
Comcast. The Comcast Board has carefully considered the terms of the
Merger Agreement and believes that the Merger and the related transactions are
in the best interests of Comcast and its stockholders. Accordingly, the Comcast
Board recommends that Comcast stockholders vote FOR the Comcast Proposal. See
"The Merger -- Background of and Comcast's Reasons for the Merger" and
"-- Recommendation of the Comcast Board of Directors." In reaching its
conclusion, the Comcast Board considered, among other things, the following: (i)
the judgment and advice of Comcast management; (ii) the judgment and advice of
Comcast's financial advisor, Lehman Brothers Inc. ("Lehman Brothers"); (iii)
regulatory, competitive, technological and other developments affecting the
cable television industry; (iv) the characteristics and locations of the Scripps
cable systems; (v) the financial condition, results of operations and cash flows
of the Scripps Cable Business and Comcast, on an historical basis and a
prospective basis; (vi) the financial terms of the proposed transaction; (vii)
the terms and conditions of the Merger Agreement and related documents; (viii)
the strategic benefits of the proposed Merger; (ix) historical market prices of,
trading information for and expected market impact on Comcast Common Stock; and
(x) the dilutive effect of the issuance of Comcast Special Common Stock in the
proposed Merger. Lehman Brothers' primary function was to assist Comcast in the
analysis of the likely effect of certain financial terms of the potential
transaction, particularly
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the proposed "collar arrangements," on the trading price of Comcast's stock.
Lehman Brothers was not asked to, and did not, make a presentation to the
Comcast Board regarding the valuation of the Scripps Cable Business or render a
fairness opinion on any proposed transaction.
Scripps. The Scripps Board, by unanimous vote, has approved and adopted,
and believes to be in the best interests of and fair to Scripps and its
stockholders, the following: (i) the Merger Agreement and each of the
transactions contemplated thereby relating to Scripps, including the Spin-Off;
and (ii) the Scripps Charter Amendment. Accordingly, the Scripps Board
recommends that Scripps stockholders vote FOR each of the Scripps Proposals. See
"The Merger -- Background of and Scripps' Reasons for the Spin-Off and the
Merger" and "-- Recommendation of the Scripps Board of Directors." In reaching
its determination, the Scripps Board considered, among other things, the
following factors: (a) Scripps' business, operations, financial condition and
prospects, particularly in relation to the substantial operating scale needed to
compete in the cable television industry, and the business, operations,
financial condition, earnings and prospects of the Scripps Cable Business; (b)
the business, operations, financial condition, earnings and prospects of
Comcast, including the excellent quality and reputation of Comcast's management
and the combined operating scale of Scripps' and Comcast's cable television
systems; (c) the value and liquidity of Comcast Merger Stock to be received by
the stockholders of Scripps; (d) the fairness opinion of Merrill Lynch & Co.
("Merrill Lynch"), the financial advisor to Scripps; (e) other possible
transactions available to Scripps, as presented in the proposals submitted by
two other potential merger partners; and (f) the terms of the Merger Agreement.
The Scripps Board is recommending that holders of Scripps Common Voting
Stock approve and adopt the Merger Agreement and that holders of Scripps Common
Voting Stock and Scripps Class A Common Stock approve and adopt the Scripps
Charter Amendment and thereby provide the Scripps Board with the ability to
exercise its discretion, consistent with its fiduciary duties, to (i) proceed
with the Merger Agreement if the Average Closing Price is less than $17.06375,
(ii) to terminate the Merger Agreement if the Average Closing Price is less than
$17.06375 (subject to Comcast's "top-up" right described above), or (iii) to
agree with Comcast on a lower number of additional shares to be delivered by
Comcast as described above if the Average Closing Price is less than $17.06375.
The granting of such discretion to the Scripps Board pursuant to the Merger
Agreement is permitted under Delaware law. The fact that a Scripps stockholder
voted in favor of either of the Scripps Proposals could be raised as a defense
in any action brought by such stockholder against Scripps, its officers and
directors, the Scripps Trust or the trustees of the Scripps Trust with respect
to the Merger or the Spin-Off.
OPINION OF FINANCIAL ADVISOR TO SCRIPPS
Merrill Lynch has delivered to the Scripps Board its written opinion, dated
October 28, 1995 (the "Merrill Lynch Opinion"), to the effect that, based upon
and subject to the various considerations set forth in the Merrill Lynch
Opinion, as of such date, the consideration to be received by the holders of the
Scripps Common Stock pursuant to the Merger is fair to the stockholders of
Scripps from a financial point of view. The full text of the Merrill Lynch
Opinion, which sets forth assumptions made, matters considered and attendant
limitations, is attached hereto as Annex III to this Joint Proxy
Statement-Prospectus and is incorporated herein by reference. Scripps
stockholders are urged to read the Merrill Lynch Opinion carefully in its
entirety. See "The Merger -- Background of and Scripps' Reasons for the Spin-Off
and the Merger" and "-- Recommendation of Scripps Board of Directors" and
"-- Opinion of Financial Advisor to Scripps." The Merrill Lynch Opinion was
delivered October 28, 1995 to the Scripps Board in connection with its decision
whether or not to enter into the Agreement and Plan of Merger. The Merrill Lynch
Opinion, in stating that the Merger Consideration was fair to the stockholders
of Scripps from a financial point of view, was based, among other things, on
market conditions at the time and does not specifically address the fairness of
consideration to be paid in the Merger in a transaction wherein the Average
Closing Price of Comcast Special Common Stock is less than the minimum Collar
Price of $17.06375. On September 27, 1996, the closing price of Comcast Special
Common Stock on Nasdaq was $15.875 per share, which was below the minimum Collar
Price of $17.06375. The Scripps Board has not requested Merrill Lynch to update
the Merrill Lynch Opinion. The Scripps Board will not proceed with the Merger if
the Average Closing Price is below $17.06375 per share and the number of shares
of Comcast Special Common Stock to be delivered by Comcast in the Merger is less
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<PAGE> 33
than the number that would have been delivered if the Collar Price were equal to
the Average Closing Price unless, among other things, the Scripps Board receives
an opinion from Merrill Lynch as to the fairness from a financial point of view
to Scripps stockholders of the Merger consideration to be paid under such
circumstances. If (i) the Average Closing Price were below the minimum Collar
Price of $17.06375, (ii) Scripps decided to terminate the Merger Agreement and
(iii) Comcast elected to deliver the Maximum Top-Up Share Number of shares of
Comcast Special Common Stock, then Scripps would be required under the Merger
Agreement to consummate the Merger whether or not it received an update of its
financial advisor's opinion unless Scripps were entitled by the terms of the
Merger Agreement to terminate it for other reasons.
EFFECTIVE TIME OF MERGER
The Merger will become effective upon the filing of a certificate of merger
with the Secretary of State of the State of Delaware and a certificate or
articles of merger with the Department of State of the Commonwealth of
Pennsylvania, each in accordance with applicable law. It is anticipated that, if
approved by the stockholders of both Comcast and Scripps, the Merger will become
effective in the fourth quarter of 1996; however, because the Merger and the
related transactions are conditioned upon, among other things, regulatory
approvals and third party consents, no assurances can be given as to when the
consummation of the Merger will actually occur, if at all.
CONDITIONS TO THE MERGER; REGULATORY AND OTHER APPROVALS
Consummation of the Merger and each of the transactions contemplated
thereby is conditioned on, among other things, (i) approval of the Comcast
Proposal by the holders of Comcast Class A Common Stock and Comcast Class B
Common Stock voting as a single class and of the Scripps Proposals by the
holders of Scripps Common Voting Stock and/or Scripps Class A Common Stock, as
applicable, (ii) the consummation of the Internal Spin-Offs and the Spin-Off,
(iii) the expiration or termination of the waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the rules and regulations thereunder (which period has already
expired), (iv) obtaining the consents and/or waivers from the FCC and other
relevant governmental entities, (v) the absence of an injunction, order,
statute, rule or regulation of any governmental authority remaining in effect
which prohibits or makes illegal any of the transactions contemplated by the
Merger Agreement or which could have a material adverse effect on the Scripps
Cable Business or on Comcast, (vi) Scripps' receipt from the United States
Internal Revenue Service (the "Service") of a private letter ruling to the
effect that the Spin-Off and the Internal Spin-Offs are tax-free and from its
legal counsel of an opinion as to certain tax matters, including the tax-free
nature of the Merger (which letter has been received), (vii) the performance by
each party to the Merger Agreement of its respective obligations thereunder and,
subject to certain exceptions described below, the accuracy of all
representations and warranties contained in the Merger Agreement, (viii)
approval of the Comcast Merger Stock for listing on Nasdaq, (ix) receipt by
Comcast and New Scripps of certain opinions of legal counsel and other customary
closing documents, (x) the declaration of effectiveness of this Joint Proxy
Statement-Prospectus under the Securities Act, and (xi) the receipt of
authorizations, consents and approvals of applicable governmental authorities to
the transfer of cable television franchises in which at least 95% of the basic
subscribers of the Scripps Cable Business are located. See "The Merger
Agreement -- Closing; Conditions Precedent." Scripps and Comcast have satisfied
the conditions regarding the requisite consents from the FCC and satisfied the
condition (described in clause (xi) above) regarding cable television franchise
consents. There can, however, be no assurance that any or all of these
conditions will be satisfied as expected. Notwithstanding the condition that the
representations of the parties be true and correct as of the Closing Date, any
failure of any representation or warranty of Scripps or New Scripps, on the one
hand, or Comcast, on the other, to be true and correct as of the Closing Date
will not excuse Comcast, or Scripps and New Scripps, as the case may be, from
its or their obligations under the Merger Agreement if (i) the aggregate amount
of all losses that could reasonably be expected to be incurred by Comcast or its
subsidiaries, or by the holders of Comcast Merger Stock, as the case may be, as
a result of such failure would not exceed $50 million and (ii) New Scripps
indemnifies Comcast, or Comcast indemnifies New Scripps, as the case may be,
against all such losses in excess of $5 million.
STOCK EXCHANGE LISTINGS
Comcast. Application will be made to list the Comcast Merger Stock on
Nasdaq.
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New Scripps. New Scripps Class A Common Shares, which will be distributed
to stockholders of Scripps in the Spin-Off, have been approved for listing on
the NYSE. The New Scripps Common Voting Shares to be distributed to stockholders
of Scripps in the Spin-Off will not be listed on any national securities
exchange.
ACQUISITION PROPOSALS
The Merger Agreement prohibits Scripps, its subsidiaries and their
respective officers, directors, representatives and agents from, directly or
indirectly, knowingly encouraging, soliciting, initiating or participating in
any way in discussions or negotiations with, or knowingly providing any
confidential information to, any person (other than Comcast or any affiliate or
associate of Comcast and their respective directors, officers, employees,
representatives and agents) concerning any merger of Scripps or Scripps Cable,
the sale of any substantial part of the assets of Scripps Cable, the sale of
shares of capital stock of Scripps, the capital stock of the Scripps Cable
Subsidiaries or the partnership interests of the Scripps Cable Partnerships or
similar transactions involving Scripps Cable. However, Scripps' Board of
Directors may (i) take and disclose to Scripps' stockholders a position with
respect to a tender offer for Scripps Common Stock by a third party pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act, (ii) make such
disclosure to Scripps stockholders as, in the judgment of Scripps' Board of
Directors with the written advice of outside counsel, may be required under
applicable law, and (iii) respond to any unsolicited proposal or inquiry by
advising the person making such proposal or inquiry of the terms of the
provision summarized in this paragraph.
Scripps has agreed to notify Comcast promptly if any such proposal or
inquiry is received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, Scripps and to
furnish Comcast with a copy of any proposal that Scripps' Board of Directors has
determined is a "Superior Proposal" (as defined below in "The Merger
Agreement -- Acquisition Proposals"). Scripps' Board of Directors may respond to
any Superior Proposal and may provide information to, and negotiate with, any
person in connection therewith if Scripps' Board of Directors determines, with
the advice of outside counsel, that it is required to do so in the exercise of
its fiduciary duties.
The Merger Agreement requires Comcast to notify Scripps and provide it with
pertinent information in the event Comcast or any of its subsidiaries, or any of
their respective directors, officers, representatives or agents (i) solicits,
initiates or participates in any way in discussions or negotiations with, or
provides any confidential information to, any third party (other than Scripps or
any affiliate or associates of Scripps and their respective directors, officers,
employees, representatives and agents) concerning any merger, sale of
substantially all of the assets of Comcast, sale of shares of capital stock or
similar transactions involving Comcast or (ii) receives any proposal or inquiry
in respect of any such transaction or any request to provide any such
information or hold any such negotiations or discussions.
REGISTRATION RIGHTS
Comcast and Scripps have agreed that, on the Closing Date, Comcast and the
Scripps Trust will enter into a registration rights agreement relating to the
Comcast Merger Stock to be issued to the Scripps Trust pursuant to the Merger,
in the form attached as Exhibit F to the Merger Agreement. Such agreement will
provide that, subject to certain terms and conditions contained in the
agreement, the Scripps Trust will be entitled to three demand registrations and
unlimited "piggyback" registrations with respect to public offerings of Comcast
Special Common Stock. See "The Merger Agreement -- Ancillary
Agreements -- Registration Rights Agreement."
TERMINATION OF MERGER AGREEMENT; INDEMNIFICATION
The Merger Agreement may be terminated at any time prior to the Effective
Time by mutual written consent of Comcast, Scripps and New Scripps, or by either
Comcast or Scripps individually under certain circumstances specified in the
Merger Agreement.
If the Merger Agreement is terminated (i) by Scripps in the exercise of its
fiduciary duties, (ii) by Comcast (provided it is not in breach of any of its
obligations under the Merger Agreement) (x) if Scripps or New Scripps fails to
perform any of its covenants thereunder and such failure remains uncured for 20
business days after written notice by Comcast thereof or (y) as a result of the
material modification or withdrawal of
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<PAGE> 35
the approval and recommendation of the Merger and related transactions by the
Board of Directors of Scripps or (iii) by Scripps or Comcast if (A) the Merger
and related transactions are not approved by the stockholders of Comcast or
Scripps and (B) either (1) the Scripps Trust shall have failed to vote in favor
of the adoption and approval of the Merger and related transactions or (2) the
Board of Directors of Scripps shall have materially modified or withdrawn its
approval and recommendation of the Merger and related transactions, then Scripps
will pay to Comcast a fee of $47.25 million. In addition, if the Merger
Agreement is terminated by Comcast as a result of the failure of any condition
to the obligations of Comcast to be satisfied prior to December 31, 1996, other
than (i) a condition to all parties' obligations or (ii) the condition requiring
governmental consents with respect to franchises in which at least 95% of the
basic subscribers of the Scripps Cable Business are located, then Scripps will
be obligated to pay Comcast an amount (not to exceed $5.0 million) equal to the
actual reasonable fees and expenses paid or payable by or on behalf of Comcast
in connection with the negotiation, execution and delivery of the Merger
Agreement. See "The Merger Agreement -- Termination -- Termination Fees and
Expenses."
If the Merger Agreement is terminated (i) by Scripps (provided it is not in
breach of any of its obligations under the Merger Agreement) if (A) Comcast
fails to perform any of its covenants thereunder and such failure remains
uncured for 20 business days after written notice by Scripps thereof or (B) as a
result of the failure of any condition to the obligations of Scripps or New
Scripps (other than a condition to the obligations of all parties) to be
satisfied prior to December 31, 1996, or (ii) by Scripps if the Merger and
related transactions are not approved by the stockholders of Comcast and Sural
shall have failed to vote in favor of the adoption and approval of the Merger
and related transactions, then Comcast will pay Scripps an amount (not to exceed
$5.0 million) equal to the actual reasonable fees and expenses paid or payable
by or on behalf of Scripps and New Scripps in connection with the negotiation,
execution and delivery of the Merger Agreement. See "The Merger
Agreement -- Termination -- Termination Fees and Expenses."
The Merger Agreement provides for contractual indemnification by each of
the parties for various breaches of representations and warranties, misleading
statements or omissions, third party claims and stockholder suits. See "The
Merger Agreement -- Indemnification."
CERTAIN BOARD REPRESENTATION RIGHTS
Pursuant to a board representation agreement to be entered into on the
Closing Date between Comcast, the Scripps Trust and Sural (the "Board
Representation Agreement"), a form of which is attached to the Merger Agreement
as Exhibit G, the Scripps Trust will have the right, to the extent permitted by
applicable law, to cause Comcast to nominate for election to its Board of
Directors one individual (or under certain circumstances two individuals)
designated by the Scripps Trust. The Scripps Trust's rights to representation on
the Comcast Board of Directors will terminate on the earliest to occur of (i)
the date on which the Scripps Trust ceases to own at least 50% of the shares of
Comcast Merger Stock issued to it in the Merger, (ii) the date of the fourth
annual meeting of Comcast's Board of Directors following the consummation of the
Merger and (iii) the date on which the Scripps Trust elects to terminate such
right. Pursuant to the Board Representation Agreement, the Scripps Trust will
agree for a period of two years from the Closing Date to vote the shares of
Comcast Special Common Stock held by it in favor of certain amendments (the
"Permitted Amendments") to the Comcast Articles if such Permitted Amendments are
submitted to Comcast shareholders for approval. The Permitted Amendments are as
follows: (i) an amendment to eliminate certain class voting rights not required
to be provided under the PBCL; (ii) an amendment to permit Comcast (in the
discretion of its Board of Directors), by means of a dividend, rights
distribution, merger, statutory division, recapitalization, or other means to
distribute to the holders of the three existing classes of Comcast Common Stock
separate classes of equity interests in Comcast (e.g., different classes of
tracking stock) or other entities substantially replicating the relative rights
of the three existing classes of Comcast Common Stock; and (iii) an amendment to
permit shareholder action by consent in writing of the shareholders entitled to
cast a majority of the votes to be cast by all shareholders with respect to such
action, as permitted under the PBCL (as defined herein). On June 19, 1996, the
Comcast shareholders voted to approve Permitted Amendments (i) and (ii) above
(the "Adopted Permitted Amendments"). The purpose of the Permitted Amendments is
to
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provide Comcast with greater flexibility in conducting operations and in
pursuing possible transactions in the future. See "The Merger
Agreement -- Ancillary Agreements -- Board Representation Agreement."
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The consummation of the Internal Spin-Offs, the Spin-Off and the Merger is
conditioned on the receipt of a favorable private letter ruling from the Service
that the Internal Spin-Offs and the Spin-Off will qualify as tax-free
transactions under the Code and upon receipt of an opinion of Baker & Hostetler,
counsel to Scripps, that the Merger will qualify as a tax-free reorganization
under the Code. Baker & Hostetler's opinion relies on an opinion received from
Davis Polk & Wardwell that the Merger will continue to qualify as a
reorganization under Section 368(a)(1)(A) of the Code if Comcast contributes (as
it is permitted to do) all of the capital stock of the Cable Holding Subsidiary
to a first-tier wholly owned Comcast subsidiary. On July 24, 1996, Scripps
received such ruling from the Service. See "Certain Federal Income Tax
Considerations."
ACCOUNTING TREATMENT
The Merger will be accounted for by Comcast using the purchase method.
Comcast will be the acquiror of the Scripps Cable Business and, as a result, the
assets and liabilities of the Scripps Cable Business will be consolidated with
those of Comcast at their estimated fair values.
Scripps' historical basis in its assets and liabilities will be carried
over to New Scripps. The Merger, the Spin-Off and the related transactions will
be recorded as a reverse-spin transaction, and accordingly New Scripps' results
of operations for periods reported prior to the consummation of the Merger, the
Spin-Off and related transactions will represent the historical results of
operations previously reported by Scripps. Because Scripps Cable represents an
entire business segment that will be divested, its results are reported as
"discontinued operations" in Scripps' consolidated financial statements
contained in reports filed with the SEC and incorporated by reference herein.
Results of the remaining business segments, including results for divested
operating units within these segments through their dates of sale, are reported
as "continuing operations" in the aforesaid reports. See "Information
Incorporated By Reference."
RIGHTS OF DISSENTING STOCKHOLDERS
Comcast. Holders of Comcast Common Stock will not be entitled to
dissenters' appraisal rights in connection with the Merger.
Scripps. Pursuant to the DGCL, any holder of Scripps Common Voting Stock
who files a demand for appraisal in writing prior to the vote taken at the
Scripps Special Meeting, whose shares are not voted in favor of the Merger and
who satisfies certain other conditions shall be entitled to appraisal rights
under Section 262 of the DGCL ("Section 262"). See "Rights of Dissenting Scripps
Stockholders" for a description of such rights, including a summary of the steps
which must be taken to comply with Section 262. A copy of the text of Section
262 is set forth as Annex IV hereto. Holders of Scripps Class A Common Stock
will not be entitled to dissenters' appraisal rights in connection with the
Merger.
VOTING AGREEMENT
In connection with the execution of the Merger Agreement, Comcast, Scripps,
Sural and the Scripps Trust entered into the Voting Agreement (attached to the
Merger Agreement as Exhibit E), pursuant to which Sural has agreed to vote (i)
in favor of the Comcast Proposal, (ii) against any action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Comcast under the Merger Agreement or that
would result in any of the conditions to the obligations of Comcast under the
Merger Agreement not being fulfilled and (iii) in favor of any other matter
relating to the consummation of the transactions contemplated by the Merger
Agreement. Pursuant to the Voting Agreement, the Scripps Trust has agreed to
vote (i) in favor of the Scripps Proposals, (ii) against any proposal for any
recapitalization, merger, sale of assets or other business combination between
Scripps, New Scripps or any of the Scripps Cable Subsidiaries and any person
other than Comcast, or any other action or agreement which would result in the
breach of any covenant, representation or warranty or any other obligation or
agreement of
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Scripps in the Merger Agreement, or cause any conditions to the obligations of
Scripps under the Merger Agreement not to be fulfilled and (iii) in favor of any
other matter relating to the consummation of the transactions contemplated by
the Merger Agreement; provided, that the Scripps Trust is not obligated to vote
as described in this sentence if the board of trustees of the Scripps Trust
determines, with the advice of outside counsel, that it may be required, in the
exercise of its fiduciary duties, to vote other than as so described. See "The
Merger Agreement -- Ancillary Agreements -- Voting Agreement."
NONCOMPETITION AGREEMENT
As a condition to the Merger, New Scripps is required to enter into a
noncompetition agreement among Scripps, New Scripps and Comcast (the
"Noncompetition Agreement"), a form of which is attached to the Merger Agreement
as Exhibit D, pursuant to which New Scripps will agree that, for a period of
three years after the Closing Date, neither it nor any of its subsidiaries will,
directly or indirectly, on its own behalf or in the service of or on behalf of
others, (i) actively solicit for employment, interfere with or endeavor to
entice away (or attempt to do any of the foregoing) any of the directors,
officers, employees or agents of Comcast or any of its subsidiaries whether
holding such position prior to or after the Closing Date, or any person who at
any time on or after October 28, 1995 was an officer or employee of Scripps or
any of its subsidiaries engaged in the Restricted Business (as defined below)
and whom Comcast employs following the Effective Time, (ii) subject to certain
exceptions, engage in any manner in, or be connected as a stockholder, partner,
principal, agent, representative, consultant or otherwise with, any business or
enterprise engaged in the operation of cable television systems providing the
services currently provided by Scripps and Scripps Cable or the provision of
Multi-Channel Video Service (as defined) or alternate access services
(collectively, the "Restricted Business," which will not include the business of
developing or creating programming) in any area served by Scripps Cable on the
Closing Date (a "Restricted Area"), or (iii) use or permit Scripps' or New
Scripps' name to be used in connection with any business or enterprise engaged
in the Restricted Business in any Restricted Area. See "The Merger
Agreement -- Ancillary Agreements -- Noncompetition Agreement."
COMPARISON OF RIGHTS OF STOCKHOLDERS
The rights of holders of Scripps Common Stock currently are governed by
Delaware Law, the Scripps Charter and the Scripps By-Laws (the "Scripps
By-Laws"). Upon the consummation of the Spin-Off and the Merger, Scripps
stockholders will become New Scripps stockholders and, other than holders of
Scripps Common Voting Stock who exercise and perfect their statutory dissenters'
rights, Comcast stockholders, and their rights as New Scripps shareholders will
be governed by the Ohio General Corporation Law ("Ohio Law"), the New Scripps
Articles of Incorporation (the "New Scripps Articles") and the New Scripps Code
of Regulations (the "New Scripps Regulations"), and their rights as Comcast
stockholders will be governed by the Pennsylvania Business Corporation Law (the
"PBCL" or "Pennsylvania Law"), the Comcast Articles, and the Comcast By-Laws
(the "Comcast By-Laws"). See "Comparison of Rights of Stockholders of Scripps
and New Scripps" and "Comparison of Rights of Holders of Comcast Special Common
Stock and Holders of Scripps Common Stock."
EXCHANGE AGENT
The Bank of New York will act as the exchange agent in connection with the
Merger (the "Exchange Agent"). See "Payments and Distributions to Stockholders."
DESCRIPTION OF SCRIPPS CABLE BUSINESS
The Scripps Cable Business is conducted through subsidiaries that operate
cable television systems in ten states with approximately 805,000 basic
subscribers as of June 30, 1996. Additional information about the Scripps Cable
Business is contained in reports filed by Scripps with the SEC and incorporated
herein by reference. See "Information Incorporated by Reference."
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COMPARATIVE MARKET VALUES; MARKET PRICE AND DIVIDEND DATA
Nasdaq is the principal market on which Comcast Special Common Stock
(symbol: CMCSK) and Comcast Class A Common Stock (symbol: CMCSA) are traded. The
NYSE is the principal market on which Scripps Class A Common Stock is traded
(symbol: SSP). Neither Comcast Class B Common Stock nor Scripps Common Voting
Stock is listed or traded on any market. As of the Scripps Record Date and the
Comcast Record Date, respectively, there were approximately 4,700 owners of
Scripps Class A Common Stock, based on security position listings, 27 record
owners of Scripps Common Voting Stock, 2,288 record holders of Comcast Special
Common Stock, 1,858 record holders of Comcast Class A Common Stock and one
record owner of Comcast Class B Common Stock.
Set forth below are the closing sale prices for a share of Scripps Class A
Common Stock, a share of Comcast Special Common Stock, and a share of Comcast
Class A Common Stock, each as reported by The Wall Street Journal, on October
27, 1995, the last full business day preceding the day on which Scripps and
Comcast first announced the Merger, and as of a recent date prior to the mailing
of this Joint Proxy Statement-Prospectus. Information regarding the market value
of Scripps Class A Common Stock on an equivalent per share basis for the
proposed transactions is not provided since there is no public market for New
Scripps Class A Common Stock.
<TABLE>
<CAPTION>
SCRIPPS CLASS A COMCAST COMCAST
COMMON STOCK SPECIAL COMMON STOCK CLASS A COMMON STOCK
(HISTORICAL) (HISTORICAL) (HISTORICAL)
--------------- -------------------- --------------------
<S> <C> <C> <C>
October 27, 1995...................... $34.000 $ 18.875 $ 18.375
September 27, 1996.................... $46.875 $ 15.875 $ 15.625
</TABLE>
Information relating to historical market prices of and dividends on the
Comcast Special Common Stock and the Comcast Class A Common Stock, and the
Scripps Class A Common Stock, is contained in Annual Reports on Form 10-K filed
by Comcast and Scripps with the SEC. See "Information Incorporated By Reference"
and "Summary -- Selected Historical and Pro Forma Per Share Data."
As a result of the Merger, the number of shares of Comcast Common Stock
owned beneficially by directors and officers of Comcast and by holders of more
than 5% of Comcast Special Common Stock will not be changed but the percentage
of such persons' holdings of Comcast Common Stock will be reduced
proportionately as a result of the issuance of Comcast Special Common Stock
pursuant to the Merger. Such issuance will not have any effect on the number or
percentage of shares of Comcast Class A Common Stock and Comcast Class B Common
Stock held by any holder.
Following the Spin-off, the directors, officers and owners of more than 5%
of one or both classes of Scripps Common Stock will own a number of New Scripps
Common Voting Shares or New Scripps Class A Common Shares equal to the number of
shares of Scripps Common Voting Stock or Scripps Class A Common Stock, as the
case may be, owned by such persons prior to the Spin-Off.
Following the Spin-Off and the Merger, New Scripps expects to pay quarterly
dividends on its Class A Common Shares and Common Voting Shares at the same rate
as that currently paid with respect to the Scripps Class A Common Stock and the
Scripps Common Voting Stock. Future dividends will, however, be subject to the
earnings, financial condition and capital requirements of New Scripps.
It is the intention of the Comcast Board to continue to pay regular
quarterly cash dividends on all classes of its common stock; however, the
declaration and payment of future dividends and their amounts depend upon the
results of operations, financial condition and capital needs of Comcast,
contractual restrictions of Comcast and its subsidiaries and other factors.
Comcast is, and after the Merger will be, a holding company and its ability to
pay cash dividends will be dependent on its ability to receive cash dividends,
advances and other payments from its subsidiaries. Certain agreements to which
certain of Comcast's subsidiaries are a party contain restricted payment
provisions that limit the amount of cash dividends, advances and other payments
that those companies may pay to Comcast.
20
<PAGE> 39
SELECTED HISTORICAL AND PRO FORMA PER SHARE DATA
The following historical and pro forma financial information reflects
certain comparative per share information relating to income (loss) per share
from continuing operations, cash dividends per share and book value per share
(i) on an historical basis for Comcast and Scripps; (ii) on an unaudited pro
forma basis for Comcast per share of Comcast Common Stock assuming consummation
of the Merger; (iii) on an unaudited pro forma basis for New Scripps per share
of Scripps Common Stock assuming consummation of the Merger and related
transactions; and (iv) on an unaudited equivalent pro forma basis per share of
Scripps Common Stock for Comcast Common Stock and per share of Scripps Common
Stock for combined Comcast Common Stock and New Scripps Common Stock, each
assuming consummation of the Merger and, with respect to New Scripps Common
Stock, the transactions related to the Merger.
The information shown below should be read in conjunction with the
consolidated historical financial statements of Comcast and Scripps,
respectively, including the respective notes thereto, and the unaudited pro
forma financial statements of Comcast and Scripps, respectively, including the
notes thereto, incorporated by reference in this Joint Proxy
Statement-Prospectus. See "Information Incorporated by Reference." The unaudited
pro forma per share data is presented for comparative purposes only and is not
necessarily indicative of the financial position or results of operations which
would have been realized had the Merger and certain other transactions of
Comcast and Scripps, including Comcast's acquisition of QVC, which is more fully
described in the "Notes to Unaudited Pro Forma Condensed Consolidated Financial
Statements" included in Comcast's Current Report on Form 8-K filed on August 21,
1996, been consummated during the periods or as of the dates for which the
unaudited pro forma data is presented. The unaudited interim financial
information presented herein is not necessarily indicative of the financial
position as of the end of, or results of operations for, the full year. See also
"-- Summary Selected Historical and Unaudited Pro Forma Condensed Consolidated
Financial Information -- Comcast Unaudited Pro Forma."
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1996 DECEMBER 31, 1995
---------------- -----------------
<S> <C> <C>
HISTORICAL:
Comcast
Loss per share from continuing operations................. $(0.07) $ (0.16)
Dividends declared per share.............................. 0.0467 0.0933
Book value per share...................................... (4.09) (3.46)
Scripps(1)
Income per share from continuing operations............... $ 0.61 $ 1.17
Dividends declared per share.............................. 0.26 0.50
Book value per share...................................... 15.58 14.88
UNAUDITED PRO FORMA:
Comcast per Comcast common share(2)
Loss per share from continuing operations(3).............. $(0.12) $ (0.29)
Dividends declared per share(3)(5)........................ 0.0334 0.0671
Book value per share(4)................................... 1.95
Equivalent Comcast per Scripps common share(6)
Loss per share from continuing operations(3).............. $(0.14) $ (0.34)
Dividends declared per share(3)........................... 0.0387 0.0778
Book value per share(4)................................... 2.26
New Scripps per Scripps common share(7)
Income per share from continuing operations(3)............ $ 0.61 $ 1.17
Dividends declared per share(3)(8)........................ 0.26 0.50
Book value per share(4)................................... 11.07
Combined equivalent per Scripps common share(9)
Income per share from continuing operations(3)............ $ 0.47 $ 0.83
Dividends declared per share(3)........................... 0.2987 0.5778
Book value per share(4)................................... 13.33
</TABLE>
21
<PAGE> 40
- ---------------
(1) Considers the Scripps Cable Business to be discontinued operations and,
therefore, excluded from "Income per share from continuing operations." Per
share data for Scripps Cable is not meaningful, as Scripps Cable is
comprised of four corporate subsidiaries of Scripps and two partnerships
which do not have equivalent capital structures, and is therefore not
separately presented.
(2) The selected unaudited pro forma financial data presented herein have been
derived from, and should be read in conjunction with, Comcast's unaudited
pro forma condensed consolidated financial statements and other financial
information contained in Comcast's Current Report on Form 8-K filed with
the SEC on August 21, 1996, and incorporated herein by reference. The
assumptions related to such unaudited pro forma condensed consolidated
financial statements are summarized in this Joint Proxy Statement-
Prospectus in conjunction with the presentation of the summary selected
unaudited pro forma condensed consolidated financial information. See
"Information Incorporated by Reference" and "-- Summary Selected Historical
and Unaudited Pro Forma Condensed Consolidated Financial Information --
Comcast Unaudited Pro Forma."
(3) Gives effect to the Merger as if it had occurred on January 1, 1995.
(4) Gives effect to the Merger as if it had occurred on June 30, 1996.
(5) Pro forma dividends declared per share have been calculated based on the
historical cash dividends declared by Comcast divided by the weighted
average number of shares of Comcast Common Stock outstanding, as adjusted
for the pro forma effects of the Merger. This amount is not necessarily
indicative of the amount of dividends per share that the Comcast Board
would have declared had the Merger occurred on January 1, 1995. See "Risk
Factors -- Risk Factors Related to the Comcast Merger Stock -- Dividend
Policy."
(6) Pro forma equivalent Comcast per Scripps common share data represents the
equivalent per share interest of Scripps stockholders in Comcast and
Scripps Cable, assuming consummation of the Merger. These amounts were
calculated assuming that the outstanding shares of Scripps Common Stock
were exchanged for Comcast Special Common Stock at an assumed exchange
ratio of 1.159 shares of Comcast Special Common Stock for each share of
Scripps Common Stock outstanding immediately prior to the Merger. The
assumed exchange ratio is based upon the estimated Aggregate Consideration
of $1.5921 billion, the minimum Collar Price of $17.06375, and the number
of outstanding shares of Scripps Common Stock as of the Scripps Record
Date. These amounts are the product of the assumed exchange ratio of 1.159
multiplied by the Comcast per Comcast common share data.
(7) Pro forma New Scripps per Scripps common share data represents the
equivalent per share interest of Scripps stockholders in New Scripps,
assuming consummation of the Merger and related transactions. The unaudited
pro forma financial data of New Scripps for the year ended December 31,
1995 presented herein have been derived from, and should be read in
conjunction with, Scripps' unaudited pro forma financial statements and
other financial information included in the fifth amendment filed on July
18, 1996 to Scripps' Current Report on Form 8-K filed on December 29, 1995
and incorporated by reference herein. The unaudited pro forma financial
data of New Scripps for the six months ended June 30, 1996 presented herein
have been derived from, and should be read in conjunction with, Scripps'
unaudited pro forma financial statements and other information included in
the sixth amendment filed on August 14, 1996 to Scripps' Current Report on
Form 8-K filed on December 29, 1995 and incorporated by reference herein.
(8) Management of New Scripps intends to pay the same quarterly dividend per
share as currently paid by Scripps; however, future dividends will be
subject to New Scripps' earnings, financial condition, and capital
requirements.
(9) Pro forma combined equivalent per Scripps common share data represents the
equivalent per share interest of Scripps shareholders in both New Scripps
and Comcast, each on a pro forma basis for the Merger. These amounts are
the summation of Equivalent Comcast per Scripps common share data and New
Scripps per Scripps common share data.
22
<PAGE> 41
SUMMARY SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
Comcast Historical. The following table sets forth summary selected
historical consolidated financial data for Comcast for each of the five years in
the period ended December 31, 1995 and for the six month periods ended June 30,
1996 and 1995. Such data have been derived from, and should be read in
conjunction with, the audited consolidated financial statements and other
financial information contained in Comcast's Annual Report on Form 10-K for the
year ended December 31, 1995 and the unaudited condensed consolidated interim
financial statements contained in Comcast's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1996, including the notes thereto, incorporated
herein by reference. See "Information Incorporated by Reference." The unaudited
interim financial information presented herein is not necessarily indicative of
the financial position as of the end of, or results of operations for, the full
year.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
1996(1) 1995(1) 1995(1) 1994(1) 1993(1)(6) 1992(6) 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Revenues, net.......... $1,896,306 $1,487,178 $3,362,946 $1,375,304 $1,338,228 $ 900,345 $ 721,000
Operating income....... 241,925 93,387 329,791 239,794 264,896 165,106 144,951
Equity in net losses of
affiliates........... 60,321 37,906 86,618 40,884 28,872 104,306 83,366
Loss before
extraordinary items
and cumulative effect
of accounting
changes.............. (16,744) (29,922) (37,849) (75,325) (98,871) (217,935) (155,572)
Extraordinary items.... (1,013) (6,084) (11,703) (17,620) (52,297)
Cumulative effect of
accounting changes... (742,734)
Net loss............... (17,757) (29,922) (43,933) (87,028) (859,225) (270,232) (155,572)
Loss per share before
extraordinary items
and cumulative effect
of accounting
changes(2)(3)........ (.07) (.12) (.16) (.32) (.46) (1.08) (.87)
Extraordinary items per
share(3)............. (.02) (.05) (.08) (.26)
Cumulative effect of
accounting changes
per share(3)......... (3.47)
Net loss per
share(3)............. (.07) (.12) (.18) (.37) (4.01) (1.34) (.87)
Cash dividends declared
per share(3)......... .0467 .0467 .0933 .0933 .0933 .0933 .0933
Balance Sheet Data (at
period end):
Total assets........... 9,623,573 9,007,040 9,580,308 6,762,984 4,948,276 4,271,898 2,793,584
Working capital
(deficiency)......... 204,008 148,957 531,589 (52,132) 176,569 36,886 381,183
Long-term debt......... 7,120,289 6,399,579 6,943,766 4,810,541 4,154,830 3,973,514 2,452,912
Stockholders'
(deficiency)
equity............... (955,277) (754,105) (827,651) (726,789) (870,531) (181,641) 19,480
Book value per
share(3)............. (4.09) (3.15) (3.46) (3.04) (3.93) (0.89) 0.10
</TABLE>
23
<PAGE> 42
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
1996(1) 1995(1) 1995(1) 1994(1) 1993(1)(6) 1992(6) 1991
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Supplementary Financial
Data:
Operating income before
depreciation and
amortization(4)...... 566,197 480,430 1,018,843 576,256 606,396 397,153 309,250
Net cash provided by
operating
activities(5)........ 289,171 206,839 520,693 368,994 345,892 252,297 176,228
</TABLE>
- ---------------
(1) See "Management's Discussion and Analysis of Financial Condition and Results
of Operations" included in Comcast's Annual Report on Form 10-K for the
year ended December 31, 1995 and Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 for a discussion of events which affect the
comparability of the information reflected in the above summary selected
consolidated financial data.
(2) Equivalent to loss per share from continuing operations.
(3) As adjusted for Comcast's three-for-two stock split effective February 2,
1994.
(4) "Operating income before depreciation and amortization" (commonly referred
to in Comcast's businesses as "operating cash flow") is presented as a
measure of Comcast's ability to generate cash to service its obligations,
including debt service obligations, and to finance capital and other
expenditures. In part due to the capital intensive nature of the
telecommunications industry and the significant level of non-cash
depreciation and amortization expense, operating cash flow is frequently
used as one of the bases for evaluating companies in the industry.
Operating cash flow does not purport to represent net income or net cash
provided by operating activities, as those terms are defined under
generally accepted accounting principles, and should not be considered as
an alternative to such measurements as an indicator of Comcast's
performance.
(5) Represents net cash provided by operating activities as presented in
Comcast's Consolidated Statement of Cash Flows.
(6) Comparability of the information presented for the years ended December 31,
1993 and 1992 is affected by Comcast's acquisitions of AWACS, Inc., the
non-wireline cellular telephone system serving the Philadelphia
Metropolitan Statistical Area, from Metromedia Company in March 1992 and
Storer Communications, Inc. ("Storer") in December 1992. Prior to December
1992, Comcast had a 50% interest in Storer which was accounted for under
the equity method.
Comcast Unaudited Pro Forma. The following table sets forth summary
selected unaudited pro forma condensed consolidated financial data for Comcast
as of and for the six month period ended June 30, 1996 and for the year ended
December 31, 1995, which are presented to reflect the estimated impact of the
Merger on the historical consolidated financial statements of Comcast. The
Merger will be accounted for by Comcast using the purchase method. For a
description of the purchase method of accounting with respect to the Merger, see
"-- Accounting Treatment." The statement of operations data assume that the
Merger had been consummated on January 1, 1995 and the balance sheet data assume
that the Merger had been consummated on June 30, 1996. The summary selected
unaudited pro forma condensed consolidated financial data presented herein have
been derived from, and should be read in conjunction with, Comcast's unaudited
pro forma condensed consolidated financial statements and other financial
information contained in Comcast's Current Report on Form 8-K filed with the SEC
on August 21, 1996, and incorporated herein by reference. See "Information
Incorporated by Reference." Such financial statements were prepared assuming,
among other things, that: (i) certain closing adjustments totaling $17.1 million
are made to the Base Consideration, resulting in Aggregate Consideration of
$1.5921 billion, (ii) the Collar Price is the minimum of $17.06375 per share,
(iii) certain liabilities of Scripps Cable totaling $360.1 million are not
assumed by Comcast (pursuant to the Merger Agreement) and (iv) 75% of the
Aggregate Consideration in excess of Scripps Cable's
24
<PAGE> 43
historical asset book values is allocable to deferred charges, principally
franchise acquisition costs and subscriber lists, with a weighted average
estimated useful life of 12 years, with the remaining 25% allocable to property
and equipment, with a weighted average estimated useful life of 10 years. The
results presented in Comcast's unaudited pro forma condensed consolidated
financial statements are not necessarily indicative of the results for the full
year nor are they necessarily indicative of the results which actually would
have occurred had the Merger, as well as certain other transactions described in
related unaudited pro forma financial information, occurred on the dates
indicated or which may result in the future.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
1996(1) 1995(1)
---------------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Statement of Operations Data:
Revenues, net................................................ $ 2,049,275 $3,772,036
Operating income............................................. 211,094 269,277
Equity in net losses of affiliates........................... 60,321 94,383
Loss before extraordinary items.............................. (39,897) (95,013)
Extraordinary items.......................................... (1,013) (6,084)
Net loss..................................................... (40,910) (101,097)
Loss per share before extraordinary items(2)(3).............. (0.12) (0.29)
Extraordinary items per share(3)............................. (0.02)
Net loss per share(3)........................................ (0.12) (0.31)
Dividends declared per share(3)(4)........................... 0.0334 0.0671
Balance Sheet Data (at period end):
Total assets................................................. 11,861,094
Working capital.............................................. 208,943
Long-term debt............................................... 7,120,289
Stockholders' equity......................................... 636,791
Book value per share......................................... 1.95
Supplementary Financial Data:
Operating income before depreciation and amortization(5)..... 631,296 1,158,314
</TABLE>
- ---------------
(1) See "Unaudited Pro Forma Financial Information" and "Notes to Unaudited Pro
Forma Condensed Consolidated Financial Statements" included in Comcast's
Current Report on Form 8-K filed with the SEC on August 21, 1996,
incorporated by reference herein, for additional discussion of the pro forma
adjustments and related assumptions reflected in the above summary selected
unaudited pro forma condensed consolidated financial data.
(2) Equivalent to loss per share from continuing operations.
(3) Calculated based on the weighted average number of shares of Comcast Common
Stock outstanding, as adjusted for the pro forma effects of the Merger.
(4) Pro forma dividends declared per share has been calculated based on the
historical cash dividends declared by Comcast divided by the weighted
average number of shares of Comcast Common Stock outstanding, as adjusted
for the pro forma effects of the Merger. This amount is not necessarily
indicative of the amount of dividends per share that the Comcast Board would
have declared had the Merger occurred on January 1, 1995. See "Risk
Factors -- Risk Factors Related to the Comcast Merger Stock -- Dividend
Policy."
(5) "Operating income before depreciation and amortization" (commonly referred
to in Comcast's businesses as "operating cash flow") is presented as a
measure of Comcast's ability to generate cash to service obligations,
including debt service obligations, and to finance capital and other
expenditures. In part due to the capital intensive nature of the
telecommunications industry and the significant level of noncash
depreciation and amortization expense, operating cash flow is frequently
used as one of the bases for evaluating companies in the industry. Operating
cash flow does not purport to represent net income or net cash provided by
operating activities, as those terms are defined under generally accepted
accounting principles, and should not be considered as an alternative to
such measurements as an indicator of Comcast's performance.
25
<PAGE> 44
Scripps Historical. The following table sets forth selected consolidated
historical financial data for each of the five years in the period ended
December 31, 1995 and for the six month periods ended June 30, 1996 and 1995 for
Scripps. Such data has been derived from, and should be read in conjunction
with, the audited consolidated financial statements and notes thereto included
in Scripps' Annual Report on Form 10-K for the year ended December 31, 1995, as
amended, and the unaudited consolidated financial statements and notes thereto
included in Scripps' Quarterly Report on Form 10-Q for the quarter ended June
30, 1996. See "Information Incorporated by Reference." Unless otherwise noted,
the data excludes the cable television segment which is reported as a
discontinued business operation. Scripps will retain no proceeds from the
divestiture of the cable television business.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ----------------------------------------------------
1996 1995(1) 1995(1) 1994(1) 1993(1) 1992(1) 1991(1)
------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Operating Revenues:
Newspapers.......................... $ 325.8 $ 312.4 $ 640.1 $ 599.2 $ 548.2 $ 504.8 $ 485.3
Broadcast television................ 155.9 144.0 295.2 288.2 254.9 247.2 216.4
Entertainment....................... 49.8 47.8 94.8 73.5 84.7 87.2 91.6
Total............................... 531.6 504.3 1,030.1 960.9 887.9 839.3 793.3
Divested operating units(2)......... 0.3 0.3 3.7 57.4 178.1 281.0
Total operating revenues....... $ 531.6 $ 504.6 $1,030.4 $ 964.6 $ 945.2 $1,017.4 $1,074.3
Operating Income (Loss):
Newspapers.......................... $ 61.5 $ 64.3 $ 125.6 $ 119.8 $ 76.7 $ 88.7 $ 70.8
Broadcast television................ 47.5 41.2 86.9 94.5 69.1 61.6 49.6
Entertainment....................... (3.8) (3.4) (14.5) (7.1) 3.2 7.7 9.6
Corporate........................... (8.9) (8.9) (16.8) (15.5) (13.6) (15.0) (12.7)
Total............................... 96.3 93.2 181.3 191.7 135.4 143.1 117.3
Divested operating units(2)......... (0.4) (1.4) (0.1) (0.2) 7.5 (14.6) 33.2
Unusual items(3).................... (4.0) (7.9) (0.9)
Total operating income......... 91.9 91.8 181.2 183.6 142.0 128.5 150.4
Interest expense...................... (3.6) (6.2) (11.2) (16.3) (26.4) (33.8) (38.4)
Net gains on divested operating
units(1)............................ 91.9 78.0
Gain on sale of Garfield
copyrights(4)....................... 31.6
Other unusual credits (charges)(5).... (16.9) 2.5 (3.5)
Miscellaneous, net.................... 0.3 1.2 1.5 (0.9) (2.4) (3.6) (0.5)
Income taxes(6)....................... (38.3) (38.1) (74.5) (80.4) (86.4) (65.1) (48.4)
Minority interests.................... (1.5) (1.8) (3.3) (7.8) (16.2) (9.1) (7.2)
Income from continuing operations....... $ 48.8 $ 46.9 $ 93.6 $ 92.8 $ 104.9 $ 91.4 $ 55.9
Share Data
Income from continuing operations
excluding unusual items and net
gains............................... $ .61 $ .59 $ 1.17 $ 1.25 $ .72 $ .80 $ .75
Unusual items and net
gains(1,3,4,5,6).................... .03 (.04) .68 .42
Income from continuing operations..... $ .64 $ .59 $ 1.17 $ 1.22 $ 1.41 $ 1.22 $ .75
Dividends............................. $ .26 $ .24 $ .50 $ .44 $ .44 $ .40 $ .40
Other Financial Data
EBITDA(8) -- excluding divested
operating units(2) and unusual
items(3):
Newspapers.......................... $ 80.0 $ 82.3 $ 162.1 $ 154.9 $ 114.1 $ 122.8 $ 100.8
Broadcast television................ 61.1 53.8 113.0 115.8 89.5 81.6 65.9
Entertainment....................... (2.0) (2.0) (11.3) (5.3) 4.2 8.5 10.4
Corporate........................... (8.3) (8.4) (15.9) (14.8) (13.0) (13.4) (11.7)
Total............................... 130.8 125.7 247.9 250.6 194.7 199.6 165.5
</TABLE>
26
<PAGE> 45
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------ ----------------------------------------------------
1996 1995(1) 1995(1) 1994(1) 1993(1) 1992(1) 1991(1)
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS, EXCEPT SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Depreciation and amortization of
intangible assets................... 34.5 32.5 66.6 58.9 60.8 64.3 56.2
Net cash provided by continuing
operations.......................... 84.8 19.0 113.8 170.2 142.0 127.0 135.9
Investing activity:
Capital expenditures................ (36.8) (30.8) (57.3) (54.0) (36.8) (86.9) (114.2)
Other (investing)/divesting
activity, net..................... 21.0 (1.0) (30.9) 18.9 105.4 21.9 (127.9)
Balance Sheet Data: (at end of period)
Total assets.......................... 1,410.2 1,280.5 1,349.7 1,286.7 1,255.1 1,286.6 1,296.3
Long-term debt (including current
portion)(7)......................... 163.9 110.5 80.9 110.4 247.9 441.9 491.8
Stockholders' equity(7)............... 1,253.2 1,137.1 1,191.4 1,083.5 859.6 733.1 676.6
Long-term debt % of total
capitalization(7)................... 12% 9% 6% 9% 22% 38% 42%
</TABLE>
- ---------------
Note: Certain amounts may not foot as each is rounded independently.
(1) In the periods presented Scripps acquired and divested the following:
Acquisitions
1996 -- Daily newspaper in Vero Beach, Florida.
1994 -- The remaining 13.9% minority interest in Broadcasting in exchange
for 4,952,659 shares of Scripps Class A Common Stock. Cinetel
Productions (an independent producer of programs for cable
television).
1993 -- Remaining 2.7% minority interest in the Knoxville News-Sentinel.
5.7% of the outstanding shares of Broadcasting.
1992 -- Three daily newspapers in California (including The Monterey
County Herald in connection with the sale of The Pittsburgh
Press).
1991 -- Baltimore television station WMAR.
Divestitures
1996 -- Equity interest in The Television Food Network, a cable
programming network. No material gain or loss was realized as
proceeds approximated the net book value of assets sold.
1995 -- Watsonville, California, daily newspaper. No material gain or
loss was realized as proceeds approximated the net book value of
assets sold.
1993 -- Book publishing; newspapers in Tulare, California, and San Juan;
Memphis television station; radio stations. The divestures
resulted in net pre-tax gains of $91.9 million, increasing income
from continuing operations $46.8 million, $.63 per share.
1992 -- The Pittsburgh Press; TV Data; certain other investments. The
divestitures resulted in net pre-tax gains of $78.0 million,
increasing income from continuing operations $45.6 million, $.61
per share.
1991 -- George R. Hall Company (contracting firm specializing in the
installation, relocation and refurbishing of newspaper presses).
No gain or loss was realized as proceeds equalled the net book
value of assets sold.
(2) Noncable television operating units sold prior to June 30, 1996.
(3) Total operating income included the following unusual items:
1996 -- $4.0 million accrual for Scripps' share of costs associated with
restructuring portions of the distribution system of the
Cincinnati JOA. The accrual reduced income from continuing
operations $2.6 million, $.03 per share.
1994 -- $7.9 million loss on program rights expected to be sold as a
result of changes in television network affiliations. The loss
reduced income from continuing operations $4.9 million, $.07 per
share.
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<PAGE> 46
1993 -- Change in estimate of disputed music license fees increased
operating income $4.3 million; gain on the sale of certain
publishing equipment increased operating income $1.1 million; a
charge for workforce reductions at (1) Scripps' Denver newspaper
and (2) the newspaper feature distribution and the licensing
operations of United Media decreased operating income $6.3
million. The planned workforce reductions were fully implemented
in 1994. These items totaled $0.9 million and reduced income from
continuing operations $0.6 million, $.01 per share.
1992 -- Operating losses of $32.7 million during the Pittsburgh strike
(reported in divested operating units) reduced income from
continuing operations $20.2 million; $.27 per share.
(4) In 1994 Scripps sold its Garfield and U.S. Acres copyrights. The sale
resulted in a pre-tax gain of $31.6 million; $17.4 million after-tax, $.23
per share.
(5) Net gains and unusual credits (charges) included the following:
1994 -- An estimated $2.8 million loss on sale of real estate associated
with changes in television network affiliations; $8.0 million
special contribution to a charitable foundation; $6.1 million
accrual for lawsuits associated with a divested operating unit.
These items totaled $16.9 million and reduced income from
continuing operations $9.8 million, $.13 per share.
1993 -- A $2.5 million fee received in connection with transfer in
ownership of the Ogden, Utah, newspaper. Income from continuing
operations was increased $1.6 million, $.02 per share.
1992 -- Write-downs of real estate and investments totaling $3.5 million.
Income from continuing operations was reduced $2.3 million, $.03
per share.
(6) The provision for income taxes is affected by the following unusual items:
1994 -- Change in estimated tax liability for prior years increased the
tax provision, reducing income from continuing operations $5.3
million, $.07 per share.
1993 -- Change in estimated tax liability for prior years decreased the
tax provision, increasing income from continuing operations $5.4
million, $.07 per share; effect of the increase in the federal
income tax rate to 35% from 34% on the beginning of the year
deferred tax liabilities increased the tax provision, reducing
income from continuing operations $2.3 million, $.03 per share.
1992 -- Change in estimated tax liability for prior years decreased the
tax provision, increasing income from continuing operations $8.4
million, $.11 per share.
(7) Includes effects of discontinued cable television operations.
(8) Earnings before interest, income taxes, depreciation, and amortization
("EBITDA") is included in the Scripps Historical Summary Consolidated
Financial Data because:
(a) Changes in depreciation and amortization are often unrelated to
current performance. Management believes the year-over-year change in
EBITDA is a more useful measure of year-over-year performance than the
change in operating income because, combined with information on capital
spending plans, it is a more reliable indicator of results that may be
expected in future periods. However, management's belief that EBITDA is a
more useful measure of year-over-year performance is not shared by the
accounting profession.
(b) Banks and other lenders use EBITDA to determine Scripps' borrowing
capacity.
(c) Financial analysts use EBITDA to value communications media
companies.
(d) Acquisitions of communications media businesses are based on
multiples of EBITDA.
EBITDA should not, however, be construed as an alternative measure of the
amount of Scripps' income or cash flows from operating activities as EBITDA
excludes significant costs of doing business.
Scripps Cable Historical. The following year-end selected combined
historical financial data are derived from, and should be read in conjunction
with, the combined financial statements of Scripps Cable contained in the fifth
amendment to Scripps' Current Report on Form 8-K filed with the SEC on July 18,
1996, incorporated herein by reference. Selected financial data as of and for
the six month periods ended June 30,
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<PAGE> 47
1996 and 1995 are derived from, and should be read in conjunction with, the
combined unaudited financial statements of Scripps Cable contained in the sixth
amendment to Scripps' Current Report on Form 8-K filed with the SEC on August
14, 1996. See "Information Incorporated by Reference." The summary of operations
and other financial data for the years ended December 31, 1995, 1994, 1993 and
1992 and the balance sheet data as of December 31, 1995, 1994 and 1993 have been
derived from the audited combined financial statements of Scripps Cable. The
data for the remaining periods presented below are derived from the unaudited
combined financial statements of Scripps Cable, which, in the opinion of
Scripps' management, include all adjustments necessary for a fair presentation
of financial position and results of operations for such periods.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, DECEMBER 31,
--------------- ------------------------------------------
1996(1) 1995(1) 1995(1) 1994(1) 1993(1) 1992(1) 1991(1)
------ ------ ------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Summary of Operations
Operating revenues................... $153.4 $136.7 $279.5 $255.4 $251.8 $238.1 $218.2
Operating income
Operating income excluding unusual
items........................... $ 37.2 $ 28.3 $ 64.0 $ 42.8 $ 45.2 $ 43.7 $ 35.7
Accrual for certain lawsuits(2)... (1.4) (6.5)
Special rebates to
subscribers(3).................. (3.0)
Settlement of antitrust and unfair
trade practices litigation(4)... (12.0)
Total operating income....... 37.2 28.3 62.6 33.3 45.2 43.7 23.7
Interest expense..................... (17.4) (17.5) (35.3) (33.8) (29.8) (30.9) (34.0)
Gain on sale of cable system(1)...... 1.5
Miscellaneous, net................... (0.1) 0.8 0.8 (3.0) (2.4) (2.4) (1.8)
Income taxes(5)...................... (7.9) (4.3) (11.9) 10.6 (8.3) (14.9) (0.6)
Net income (loss).................... $ 11.8 $ 7.5 $ 17.7 $ 7.1 $ 4.7 $ (4.5) $(12.7)
Other Financial Data
EBITDA(6) -- excluding unusual
items(2,3,4)...................... $ 65.1 $ 56.2 $118.1 $100.1 $105.3 $101.3 $ 91.6
EBITDA as a percentage of operating
revenues.......................... 42.4% 41.1% 42.2% 39.2% 41.8% 42.5% 42.0%
Depreciation and amortization........ 27.9 27.9 54.1 57.3 60.0 57.6 55.9
Net cash flow from operating
activities........................ 34.3 40.0 72.0 56.7 65.4 51.4 50.1
Investing activity:
Capital expenditures.............. (31.4) (18.8) (47.5) (41.6) (67.0) (58.3) (36.8)
Other (investing)/divesting
activity, net................... (62.0) 0.1 2.6 (24.6) (3.8) (3.0) (4.6)
Balance Sheet Data (at end of
period)(6)
Total assets......................... 488.7 419.5 422.6 438.4 430.1 419.9 420.7
Advances from parent company......... 347.5 315.7 312.7 336.3 325.0 318.3 310.7
Stockholders' deficiency............. (3.2) (25.2) (15.0) (32.6) (39.7) (44.4) (40.0)
</TABLE>
- ---------------
(1) Scripps Cable acquired several cable television systems adjacent to existing
service areas in the periods presented. In 1995 Scripps Cable sold its
Barbourville, KY system. The acquisitions and the Barbourville sale had no
significant impact on operating revenues or operating income.
(2) In 1994 Scripps Cable accrued $6.5 million as an estimate of the ultimate
costs, including attorneys' fees and settlements, of certain lawsuits
against the Sacramento cable television system related primarily to
employment issues and to the timing and amount of late-payment fees
assessed to subscribers. The accrual reduced 1994 net income $4.0 million.
In 1995 Scripps Cable accrued an additional $1.4 million
29
<PAGE> 48
based upon a reassessment of the probable costs of these and additional
employment-related lawsuits. The additional accrual reduced 1995 net income
$0.9 million.
(3) In 1994 customers of the Sacramento cable television system were awarded
special rebates in connection with litigation concerning the system's
pricing in the late 1980s. The rebates and related legal fees totaled $3.0
million and reduced net income $1.7 million.
(4) In 1991 Scripps Cable settled a lawsuit alleging violations of antitrust and
unfair trade practice laws. The settlement and related legal fees totaled
$12.0 million and reduced net income $7.9 million.
(5) In 1992 management changed its estimate of a tax deduction related to the
redemption of a partnership interest in certain of Scripps Cable's cable
television systems. The resulting change in the liability for prior year
income taxes decreased 1992 net income by $8.4 million. In the fourth
quarter of 1994 the Internal Revenue Service proposed adjustments relating
to certain intangible assets and the redemption of the partnership
interest. Based upon the proposed adjustments management again changed its
estimate of the tax liability for prior years. The resulting change in the
liability for prior year income taxes and the deferred income tax liability
increased 1994 net income by $11.8 million.
(6) EBITDA is included in the Scripps Cable Historical Summary Combined
Financial Data because:
(a) Changes in depreciation and amortization are often unrelated to current
performance. Scripps management believes the year-over-year change in
EBITDA is a more useful measure of year-over-year performance than the
change in operating income because, combined with information on
capital spending plans, it is a more reliable indicator of results that
may be expected in future periods. However, management's belief that
EBITDA is a more useful measure of year-over-year performance is not
shared by the accounting profession.
(b) Financial analysts use EBITDA to value cable television businesses.
(c) Acquisitions of cable television businesses are based on multiples of
EBITDA.
EBITDA should not, however, be construed as an alternative measure of the
amount of Scripps Cable's income or cash flows from operating activities as
EBITDA excludes significant costs of doing business.
(7) Long-term debt is not material and therefore is not presented.
30
<PAGE> 49
RISK FACTORS
In considering whether to vote in favor of the Comcast Proposal and the
Scripps Proposals, holders of Comcast Class A Common Stock and Comcast Class B
Common Stock, and holders of Scripps Common Voting Stock and Scripps Class A
Common Stock, respectively, should consider the following matters.
RISK FACTORS RELATED TO THE COMCAST MERGER STOCK
Recent and Anticipated Losses; Stockholders' Deficiency. In recent years,
Comcast has experienced significant growth both through strategic acquisitions
and growth in its existing businesses. The effects of these acquisitions have
been to increase significantly Comcast's revenues and expenses, resulting in
substantial increases in operating income before depreciation and amortization,
depreciation and amortization expense and net interest expense. As a result of
the increases in depreciation and amortization expense and interest expense
associated with these acquisitions and their financing, it is expected that
Comcast will recognize significant losses for the foreseeable future. Losses
before extraordinary items and the cumulative effect of accounting changes in
1993, 1994 and 1995 and for the six months ended June 30, 1995 and 1996 were
$98.9 million, $75.3 million, $37.8 million, $29.9 million and $16.7 million,
respectively. Principally as a result of these losses and the effects of
extraordinary items and the cumulative effect of accounting changes, Comcast had
a stockholders' deficiency at June 30, 1996 of $955.3 million. It is anticipated
that this stockholders' deficiency will increase through the Effective Time. It
is not expected that the stockholders' deficiency will significantly affect the
way Comcast does business or its ability to obtain financing. Following the
Merger, it is anticipated that Comcast will have stockholders' equity. On a pro
forma basis for the Merger, at June 30, 1996, Comcast had stockholders' equity
of $636.8 million. See "Summary -- Summary Selected Historical and Unaudited Pro
Forma Condensed Consolidated Financial Information -- Comcast Unaudited Pro
Forma."
Comcast realized operating income before depreciation and amortization of
$606.4 million, $576.3 million, $1.019 billion, $480.4 million and $566.2
million for the years ended December 31, 1993, 1994 and 1995 and for the six
months ended June 30, 1995 and 1996, respectively. Operating income before
depreciation and amortization is commonly referred to in Comcast's businesses as
"operating cash flow." Operating cash flow is a measure of a company's ability
to generate cash to service its obligations, including debt service obligations,
and to finance capital and other expenditures. In part due to the capital
intensive nature of Comcast's businesses and the resulting significant level of
non-cash depreciation and amortization expense, operating cash flow is
frequently used as one of the bases for evaluating Comcast's businesses.
Operating cash flow does not purport to represent net income or net cash
provided by operating activities, as those terms are defined under generally
accepted accounting principles, and should not be considered as an alternative
to such measurements as an indicator of Comcast's performance. As a result of
Comcast's operating income before depreciation and amortization, its existing
cash balances, lines of credit and other financing resources, Comcast believes
that it will meet its current and long-term liquidity and capital requirements,
including fixed charges.
Factors Affecting Future Operations. The cable television and cellular
telephone communications industries, as well as Comcast's electronic retailing
operations, may be affected by, among other things: (i) changes in government
law and regulation; (ii) changes in the competitive environment; (iii) changes
in technology; (iv) franchise related matters; (v) market conditions that may
adversely affect the availability of debt and equity financing; and (vi) general
economic conditions.
The cable television and cellular telephone industries are subject to
extensive regulation on the federal, state and local levels. No assurance can be
given as to what future actions Congress, the FCC or other regulatory
authorities may take or the effects thereof on the cable television or cellular
telephone industries in general or on Comcast in particular. See "Recent
Regulatory Developments."
The cable television and cellular telephone industries are highly
competitive and subject to technological change. It is not possible to predict
the effects of such competition or such technological change on these industries
in general or on Comcast in particular.
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<PAGE> 50
Cable television companies operate under franchises granted by local
authorities that are subject to renewal and renegotiation from time to time. No
assurance can be given as to future franchise renewals.
Possible Volatility of Stock Price; Dilution. No prediction can be made as
to the effect, if any, that future market sales of Comcast Common Stock or the
availability of such stock for sale will have on the prevailing market price of
the Comcast Common Stock following the Merger. The Scripps Trust has agreed to
maintain ownership of such number of the shares of Comcast stock as equals
approximately 50% of the total consideration issued in the Merger (including all
shares of Comcast Merger Stock, any payments to dissenting stockholders and
payments of cash in lieu of fractional shares) until at least the first
anniversary of the Effective Time. Comcast has agreed to provide the Scripps
Trust with certain registration rights if the Scripps Trust should wish to
register shares of Comcast Merger Stock for sale under the Securities Act. Sales
of a significant amount of Comcast Special Common Stock by the Scripps Trust
could adversely affect the market price of such stock.
The Comcast Board of Directors has authorized the Repurchase Program,
pursuant to which Comcast may repurchase up to $500 million of Comcast Special
Common Stock and Comcast Class A Common Stock from time to time, in the open
market or in private transactions, subject to market conditions. The Repurchase
Program is intended to decrease the level of dilution to Comcast stockholders
that will arise as a result of the Merger. Comcast has agreed not to repurchase
its securities during the Random Trading Days and to terminate the Repurchase
Program no later than six months after the Closing Date. Such repurchases may
affect the market price of the Comcast Special Common Stock. For information
regarding transactions effected pursuant to the Repurchase Program to date, see
"The Merger Agreement -- Certain Covenants -- Market Repurchase Program."
As a result of the Merger the existing holders of Comcast Common Stock will
incur dilution in their ownership of Comcast.
Effect of Equity Adjustment Mechanism on Consideration Received in the
Merger. The manner in which the number of shares that comprise the Comcast
Merger Stock is calculated will directly affect the value of the Merger
Consideration provided to the Scripps stockholders. The manner in which such
number is calculated is described under "The Merger Agreement -- General
Provisions -- Share Exchange."
Because the Average Closing Price is calculated based on the average
closing price of the Comcast Special Common Stock for 15 trading days selected
by lot from a 40-trading-day period, the Average Closing Price may be materially
different than the price at which Comcast Special Common Stock is trading at the
time of the Merger. In addition, there can be no assurance that the Average
Closing Price will be between the minimum Collar Price of $17.06375 and the
maximum Collar Price of $23.08625. The closing price of Comcast Special Common
Stock on Nasdaq on September 27, 1996 was $15.875 per share.
If the Merger were consummated on the date hereof, assuming that the
closing adjustments to the Base Consideration resulted in a $17.1 million
increase in the purchase price, the number of shares of Comcast Special Common
Stock comprising the Comcast Merger Stock would be as follows: (i) assuming a
Collar Price at the minimum of $17.06375, approximately 93.3 million shares
representing 32.9% of the outstanding Comcast Special Common Stock on the
Comcast Record Date and 28.6% of the outstanding Comcast Common Stock on such
date, each on a pro forma basis for the Merger and (ii) assuming a Collar Price
at the maximum of $23.08625, approximately 69.0 million shares representing
26.6% of the outstanding Comcast Special Common Stock on the Comcast Record Date
and 22.8% of the outstanding Comcast Common Stock on such date, each on a pro
forma basis for the Merger.
If the Average Closing Price is less than $17.06375, Scripps has the right,
but not the obligation, to terminate the Merger Agreement subject to the right
of Comcast to elect to increase the number of shares of Comcast Special Common
Stock to be delivered (i) to the number that would have been delivered if the
Collar Price were equal to the Average Closing Price (in such case, the Top-up
Share Number would be the Maximum Top-up Share Number calculated in accordance
with the formula described herein at page 66) or (ii) by such lower number as
Scripps and Comcast may agree.
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<PAGE> 51
Assuming that the Merger was consummated on the date hereof, that the
Aggregate Consideration was $1.5921 billion, that the minimum Collar Price of
$17.06375 was used to calculate the number of shares of Comcast Special Common
Stock to be delivered in the Merger, that no additional shares of Comcast
Special Common Stock were delivered in the Merger, and that the Comcast Special
Common Stock had a market value of $15.875 per share (the closing price of
Comcast Special Common Stock on Nasdaq on September 27, 1996), the aggregate
market value of the shares of Comcast Special Common Stock delivered to Scripps
stockholders in the Merger (93.3 million shares) would be $1.4812 billion and
the market value of the shares of Comcast Special Common Stock delivered per
share of Scripps Common Stock (1.159 shares of Comcast Special Common Stock per
share of Scripps Common Stock) would be $18.40 per share.
The Scripps Board is recommending that holders of Scripps Common Voting
Stock approve and adopt the Merger Agreement and that holders of Scripps Common
Voting Stock and Scripps Class A Common Stock approve and adopt the Scripps
Charter Amendment and thereby provide the Scripps Board with the ability to
exercise its discretion, consistent with its fiduciary duties, to (i) proceed
with the Merger Agreement if the Average Closing Price is less than $17.06375,
(ii) terminate the Merger Agreement if the Average Closing Price is less than
$17.06375 (subject to Comcast's "top-up" right described above), or (iii) agree
with Comcast on a lower number of additional shares to be delivered by Comcast
as described above if the Average Closing Price is less than $17.06375. The
granting of such discretion to the Scripps Board pursuant to the Merger
Agreement is permitted under Delaware law. The fact that a Scripps stockholder
voted in favor of either of the Scripps Proposals could be raised as a defense
in any action brought by such stockholder against Scripps, its officers and
directors, the Scripps Trust or the trustees of the Scripps Trust with respect
to the Merger or the Spin-Off.
If (i) the Comcast shareholders approve the Comcast Proposal, (ii) the
Average Closing Price is below the minimum Collar Price of $17.06375 and (iii)
Scripps exercises its right to terminate the Merger Agreement, Comcast will have
discretion to increase the number of shares of Comcast Special Common Stock to
be delivered up to the number of shares that would have been delivered if the
Collar Price were equal to the Average Closing Price. However, Comcast has
informed Scripps that if the Average Closing Price is less than $17.06375 and if
Scripps exercises its rights to terminate the Merger Agreement, Comcast does not
intend to elect to deliver any additional shares of Comcast Special Common
Stock.
The closing price of the Comcast Special Common Stock on Nasdaq on
September 27, 1996 was $15.875 per share, which is below the minimum Collar
Price of $17.06375. Scripps may elect not to terminate the Merger Agreement even
if the Average Closing Price falls below the minimum Collar Price of $17.06375
per share. The Scripps Board has not determined whether or under what
circumstances it would elect to terminate the Merger Agreement if the Average
Closing Price is below $17.06375 per share. In making any such determination,
the Scripps Board would take into account, consistent with its fiduciary duties,
all relevant facts and circumstances existing at the time, including, without
limitation, whether it believes Comcast is prepared to increase the per share
merger consideration, the market for cable television industry stocks in
general, the relative market value of the Comcast Special Common Stock, and the
advice of Scripps' financial advisors and legal counsel. Comcast has informed
Scripps that if the Average Closing Price is less than $17.06375 and if Scripps
exercises its right to terminate the Merger Agreement, Comcast does not intend
to elect to deliver any additional shares of Comcast Special Common Stock. By
approving the Merger Agreement, the holders of Scripps Common Voting Stock will
be permitting the Scripps Board to determine, in the exercise of its fiduciary
duties, to proceed with the Merger even if the Average Closing Price of the
Comcast Special Common Stock falls below $17.06375 per share and no additional
shares of Comcast Special Common Stock are delivered. Under such circumstances,
the Scripps stockholders would receive total consideration valued (based on the
Average Closing Price) at less than the Aggregate Consideration. The Scripps
Board will not proceed with the Merger if the Average Closing Price of the
Comcast Special Common Stock is below $17.06375 per share and the number of
shares of Comcast Special Common Stock to be delivered by Comcast in the Merger
is less than the number that would have been delivered if the Collar Price were
equal to the Average Closing Price unless, among other things, the Scripps Board
receives an opinion from its financial advisor as to the fairness from a
financial point of view to Scripps stockholders of the Merger consideration to
be paid under such circumstances. If (i) the Average Closing Price were below
the minimum Collar Price of $17.06375, (ii) Scripps decided to terminate the
Merger Agreement and (iii) Comcast elected to deliver the
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<PAGE> 52
Maximum Top-Up Share Number of shares of Comcast Special Common Stock, then
Scripps would be required under the Merger Agreement to consummate the Merger
whether or not it received an update of its financial advisor's opinion unless
Scripps were entitled by the terms of the Merger Agreement to terminate it for
other reasons.
If the Average Closing Price is above $23.08625, Comcast is required to
issue that number of shares equal to the quotient obtained by dividing the
Aggregate Consideration by $23.08625. In such event, the Scripps stockholders
will receive total consideration valued at more than the Aggregate
Consideration.
Absence of Voting Rights; Principal and Significant Shareholders. Except
in certain limited circumstances, the holders of Comcast Special Common Stock
are not entitled to vote, while the Comcast Class A Common Stock entitles its
holders to one vote per share and the Comcast Class B Common Stock entitles its
holders to 15 votes per share. Sural is the sole owner of all of the outstanding
shares of Comcast Class B Common Stock (8,786,250 shares outstanding as of the
Comcast Record Date). As of such date, Sural also owned 1,845,037 shares of
Comcast Class A Common Stock and 5,315,772 shares of Comcast Special Common
Stock. Based upon the number of shares of Comcast Class A Common Stock and
Comcast Class B Common Stock outstanding as of the Comcast Record Date, Sural is
entitled to cast approximately 81% of the votes which all shareholders are
entitled to cast. Ralph J. Roberts, the Chairman of the Board of Directors of
Comcast, controls Sural and, in addition, as of the Comcast Record Date, was the
beneficial owner of 832,825 shares of the Comcast Special Common Stock and
319,070 shares of Comcast Class A Common Stock, excluding shares issuable upon
the exercise of options. In addition, as of such date, Mr. Roberts also held
options to purchase 658,125 shares of Comcast Class B Common Stock and 5,180,559
shares of Comcast Special Common Stock. Mr. Roberts' ownership, directly and
through Sural, allows Mr. Roberts to control substantially all actions to be
taken by the Comcast stockholders, including the election of directors to the
Comcast Board of Directors. This voting control may have the effect of
discouraging offers to acquire Comcast because the consummation of any such
acquisition would effectively require the consent of Mr. Roberts and may
preclude holders of Comcast Common Stock from receiving any premium above market
price for their shares that may be offered in connection with any attempt to
acquire control of Comcast.
Upon consummation of the Merger, the Scripps Trust will beneficially own
approximately 47.9 million shares of the Comcast Special Common Stock (assuming
an Average Closing Price of $20.075 and assuming that the Aggregate
Consideration is $1.5921 billion), or 56.4 million shares thereof (assuming the
minimum Collar Price of $17.06375 is used to calculate the amount of Comcast
Merger Stock), representing approximately 17.8% or 19.9%, respectively, of the
outstanding shares of such class on the Comcast Record Date, and approximately
15.3% or 17.3%, respectively, of the outstanding Comcast Common Stock on such
date, each on a pro forma basis for the Merger.
Anti-Takeover Effects of Certain Provisions of the Comcast Articles and
Comcast By-Laws. Certain provisions of the Comcast Articles and the Comcast
By-Laws could have the effect of making it more difficult for a third party to
acquire, or discouraging a third party from acquiring, a majority of the
outstanding capital stock of Comcast and could make it more difficult to
consummate certain types of transactions involving an actual or potential change
of control in Comcast, such as a merger, tender offer or proxy contest. The most
significant of these is the disparate voting rights of the Comcast Common Stock
described above. Additionally, shares of Comcast Preferred Stock may be issued
in the future without further shareholder approval and upon such terms and
conditions, and having such rights, privileges and preferences, as the Comcast
Board of Directors may determine. See "Comparison of Rights of Holders of
Comcast Special Common Stock and Holders of Scripps Common Stock."
Risks Associated With International Investments. Comcast has made, and
intends to continue to consider making, investments in companies located outside
the United States. Such investments are subject to risks and uncertainties
relating to the economic, social and political climate of those countries. Risks
specifically related to foreign investments may include risks of fluctuation in
currency valuation, expropriation, confiscatory taxation and nationalization,
increased regulation and approval requirements and governmental regulation
limiting returns to foreign investors.
Dividend Policy. Comcast began paying quarterly dividends on its Class A
Common Stock in 1977. Since 1978, Comcast has paid equal dividends on both the
Comcast Class A Common Stock and the Comcast
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<PAGE> 53
Class B Common Stock. Since December 1986, when the Comcast Special Common Stock
was issued, Comcast has paid equal per share dividends on shares of all classes
of its common stock.
It is the intention of the Comcast Board of Directors to continue to pay
regular quarterly cash dividends on all classes of its common stock. The
declaration and payment of future dividends on the Comcast Common Stock and on
any preferred stock subsequently issued and their amounts depend upon the
results of operations, financial condition and capital needs of Comcast,
contractual restrictions on Comcast and its subsidiaries and other factors.
Comcast is, and after the Merger will be, a holding company and its ability to
pay cash dividends will be dependent on its ability to receive cash dividends,
advances and other payments from its subsidiaries. Certain agreements to which
certain of Comcast's subsidiaries are a party contain restricted payment
provisions that limit the amount of cash dividends, advances and other payments
that those companies may pay to Comcast.
RISK FACTORS ASSOCIATED WITH THE SPIN-OFF AND THE MERGER
Consummation of the Spin-Off, the Merger and related transactions
(collectively, the "Transactions") is conditioned upon (i) the ruling from the
Service as to certain of the federal income tax consequences of the Transactions
not being withdrawn and (ii) the receipt of an opinion of counsel to Scripps as
to certain of the federal tax consequences of the Transactions. See "Certain
Federal Income Tax Considerations." Scripps may elect not to terminate the
Merger Agreement even if the Average Closing Price falls below $17.06375 per
share. In determining whether to elect to terminate the Merger Agreement in
these circumstances, the Scripps Board will take into account, consistent with
its fiduciary duties, all relevant facts and circumstances existing at the time,
including, without limitation, whether it believes Comcast is prepared to
increase the per share merger consideration, the market for cable television
industry stocks in general, the relative market value of the Comcast Special
Common Stock, and the advice of Scripps' financial advisors, Merrill Lynch, and
legal counsel. By approving the Merger Agreement, the holders of Scripps Common
Voting Stock will be permitting the Scripps Board to determine, in the exercise
of its fiduciary duties, to proceed with the Merger even if the Average Closing
Price of the Comcast Special Common Stock falls below $17.06375 per share and
the per share consideration is not increased or is increased by an amount less
than the amount which would have been paid if no collar arrangements were
applicable. The Merrill Lynch Opinion, in stating that the Merger Consideration
was fair to the stockholders of Scripps from a financial point of view, was
based, among other things, on market conditions at the time and does not
specifically address the fairness of consideration to be paid in the Merger in a
transaction wherein the Average Closing Price of Comcast Special Common Stock is
less than the minimum Collar Price of $17.06375. The Scripps Board will not
proceed with the Merger if the Average Closing Price is below $17.06375 per
share and the number of shares of Comcast Special Common Stock to be delivered
by Comcast in the Merger is less than the number that would have been delivered
if the Collar Price were equal to the Average Closing Price unless, among other
things, the Scripps Board receives an opinion from Merrill Lynch as to the
fairness from a financial point of view to Scripps stockholders of the Merger
consideration to be paid under such circumstances. If (i) the Average Closing
Price were below the minimum Collar Price of $17.06375, (ii) Scripps decided to
terminate the Merger Agreement and (iii) Comcast elected to deliver the Maximum
Top-Up Share Number of shares of Comcast Special Common Stock, then Scripps
would be required under the Merger Agreement to consummate the Merger whether or
not it received an update of its financial advisor's opinion unless Scripps were
entitled by the terms of the Merger Agreement to terminate it for other reasons.
RISK FACTORS RELATED TO THE NEW SCRIPPS COMMON STOCK
Control of New Scripps. Following consummation of the Spin-Off and the
Merger, the Scripps Trust will own approximately 82% of the outstanding New
Scripps Common Voting Shares and approximately 54% of the outstanding New
Scripps Class A Common Shares. Holders of New Scripps Class A Common Shares will
be entitled to elect the greater of three or one-third of the directors of New
Scripps, but will not be entitled to vote on any other matters except as
required by Ohio Law. Holders of New Scripps Common Voting Shares will be
entitled to elect all remaining directors and to vote on all other matters
requiring a vote of shareholders. As long as the Scripps Trust holds a majority
of the outstanding shares of both classes of New Scripps Common Shares, it will
be able to elect all of the directors of New Scripps. As long as the Scripps
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Trust owns a majority of the New Scripps Common Voting Shares, it will be able
to elect two-thirds of the directors of New Scripps and, under most
circumstances, amend the New Scripps Articles and effect a merger, sale of
assets or other fundamental corporate transaction without the approval of any
other shareholders of New Scripps, and will be able to defeat any unsolicited
attempt to acquire control of New Scripps. Such a concentration of voting power
and the limited voting rights of holders of New Scripps Class A Common Shares
may have the effect of precluding holders of shares in New Scripps from
receiving any premium above market price for their shares that may be offered in
connection with any attempt to acquire control of New Scripps. See "Description
of New Scripps Capital Stock." Under the agreement establishing the Scripps
Trust, the Scripps Trust must retain voting stock sufficient to ensure control
of New Scripps until the final distribution of the Scripps Trust estate unless
earlier dispositions are necessary for the purpose of preventing loss or damage
to the Scripps Trust estate.
Anti-Takeover Effect of Certain Provisions of the New Scripps
Articles. Certain provisions of the New Scripps Articles could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding capital stock of New Scripps. These provisions include the disparate
voting rights of New Scripps
Class A Common Shares and New Scripps Common Voting Shares. See "Description of
New Scripps Capital Stock."
No Prior Public Market for New Scripps Common Shares. Prior to the
consummation of the Spin-Off and the Merger, there will not have been any
trading market for the New Scripps Class A Common Shares or the New Scripps
Common Voting Shares. The New Scripps Class A Common Shares to be distributed to
the stockholders of Scripps pursuant to the Distribution have been approved for
listing on the NYSE. Scripps expects the New Scripps Class A Common Shares to
trade on the NYSE under the symbol "SSP." The New Scripps Common Voting Shares
to be distributed to stockholders of Scripps in the Spin-Off will not be listed
on any national securities exchange or quoted on any automated quotation system.
There can be no assurance as to the prices at which trading in the New Scripps
Class A Common Shares will occur after the completion of the Transactions.
Prices for such shares will be determined in the marketplace and may be
influenced by many factors, including the operating performance of New Scripps,
the depth and liquidity of the market for such shares and investor perception of
such shares.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTIONS
Treatment of Outstanding Stock Options and Restricted Stock. In connection
with the Spin-Off, New Scripps will assume the 1987 Long-Term Incentive Plan
(the "Incentive Plan") and the 1994 Non-Employee Directors Stock Option Plan
(the "Directors Plan," and together with the Incentive Plan, the "Scripps Stock
Plans"). In addition, as of the Effective Time, each stock option outstanding
under the Scripps Stock Plans that is not exercised prior to the Effective Time
will be assumed by New Scripps (the "Assumed Options"). The vesting schedule of
Assumed Options will not be affected by the Spin-Off and the Merger. All
references in the Assumed Options to Scripps and Scripps Class A Common Stock
will be deemed to refer to New Scripps and New Scripps Class A Common Shares,
respectively, as of the Effective Time.
Pursuant to the adjustment provisions of the Scripps Stock Plans, the
aggregate number and class of shares that may be issued under such plans and the
number, class and price of shares subject to the Assumed Options will be
adjusted, as deemed appropriate in the discretion of the compensation committee
of the New Scripps Board (the "Compensation Committee"), to prevent the dilution
or enlargement of rights of any participant under the Scripps Stock Plans as a
result of the assumption thereof by New Scripps.
In connection with the Spin-Off, New Scripps will assume each restricted
stock award that is subject to vesting conditions under the Incentive Plan (the
"Assumed Awards"). All references in the Assumed Awards to Scripps and Scripps
Class A Common Stock will be deemed to refer to New Scripps and New Scripps
Class A Common Shares, respectively, as of the Effective Time. The vesting
schedule of Assumed Awards will not be affected by the Spin-Off and the Merger.
Pursuant to certain provisions of the Incentive Plan, participants will be
entitled to adjustments in the number of shares of restricted stock subject to
such awards in order to make such awards comparable, given the structure and
size of New Scripps, to the currently outstanding awards.
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Approval of the Merger by the holders of Common Voting Stock of Scripps
will constitute approval of New Scripps' assumption of the Incentive Plan and
the Directors Plan and the options and restricted stock awards outstanding under
the Incentive Plan and the options outstanding under the Directors Plan for
purposes of the stockholder approval requirements of Rule 16b-3 under the
Exchange Act.
Treatment of Scripps Retirement Plans. Prior to the Merger, New Scripps
will assume all retirement and other benefit plans maintained by Scripps
(collectively, the "Scripps Retirement and Benefit Plans"). Participants in the
Scripps Retirement and Benefit Plans who remain employees of New Scripps will
continue as participants following the Spin-Off and the Merger, and their
service and salary, if applicable, with Scripps prior to the Effective Time will
be counted in determining eligibility, benefits and vesting under the Scripps
Retirement and Benefit Plans as assumed by New Scripps.
Interests of Certain Scripps Directors. Three members of the Scripps Board
of Directors are the trustees of the Scripps Trust (the "Trustees"). Two of the
Trustees are beneficiaries of the Scripps Trust.
CERTAIN LITIGATION
Scripps Stockholders' Litigation. On October 30, 1995, three purported
class actions on behalf of Scripps stockholders were filed in the Court of
Chancery, New Castle County, State of Delaware with respect to the proposed
transactions: Steven J. Gutter v. Daniel J. Meyer, et al., Case No. 14650; David
Shaev v. Lawrence A. Leser, et al., Case No. 14653 and Jack Shanfield v.
Lawrence A. Leser, et al., Case No. 14655. These actions are expected to be
consolidated and are collectively referred to herein as the "Scripps
Stockholders' Litigation."
The Scripps Stockholders' Litigation challenges the terms of the proposed
transactions by Scripps and names as defendants Scripps and its directors. The
Scripps Stockholders' Litigation alleges that the defendants breached their
fiduciary duties to the stockholders of Scripps with respect to the proposed
transactions because they failed to obtain the best price for the disposition of
the cable assets and have failed to maximize stockholder value. The Scripps
Stockholders' Litigation further claims, among other things, that the defendants
breached their fiduciary duties to the Scripps stockholders by entering into the
transactions to benefit the Scripps Trust and Scripps family members contrary to
the best interests of the other stockholders of Scripps.
The Scripps Stockholders' Litigation seeks to have the Merger enjoined or,
if the Merger is consummated, to have it rescinded and to recover unspecified
amounts of damages, fees and expenses. In addition, the actions seek an order to
have a Scripps stockholders' committee consisting of class members to
participate in the review of any transaction relating to the disposition of the
Scripps Cable Business.
Scripps and the other defendants named in the Scripps Stockholders'
Litigation deny the material allegations asserted against them. It is their
intention to defend vigorously the Scripps Stockholders' Litigation. Scripps
believes that the defendants have fulfilled their fiduciary duties under
Delaware law and that the Merger is in the best interests of all stockholders of
Scripps and has not been entered into solely for the benefit of the Scripps
Trust and Scripps family members as alleged. Thus, Scripps believes that the
Scripps Stockholders' Litigation is without merit and will not have a material
adverse effect on the financial condition or results of operations of Scripps.
River City Litigation. On January 3, 1996, River City Cablevision, Inc.
("River City") commenced an action in California Superior Court, Sacramento
County, against Scripps Howard Cable Company of Sacramento ("Scripps Howard
Sacramento") relating to the partnership that operates the Scripps Cable
television system in Sacramento. River City is the minority partner and Scripps
Howard Sacramento is the majority partner of the partnership. In the complaint,
River City alleges breach of fiduciary duty, breach of contract and other claims
based upon the contention that Scripps Howard Sacramento improperly
misappropriated more than $100 million from the partnership through unauthorized
or improper loans, interest payments and management fees. Scripps believes that
this action is without merit because Scripps Howard Sacramento fulfilled its
fiduciary duties, did not breach the partnership agreement, and did not
misappropriate
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any funds from the partnership. Thus, Scripps intends to contest this action
vigorously and does not believe that this action will have a material adverse
effect on Scripps' financial condition or results of operations.
CABLE NET LIABILITIES AND CAPITAL EXPENDITURE ADJUSTMENTS
Following the Effective Time, either Comcast or New Scripps may have to pay
to the other certain amounts as a result of the cable net liabilities and
capital expenditure adjustments described under "Summary--Cable Net Liabilities
and Capital Expenditure Adjustments." If the Capital Expenditure Amount exceeds
the Estimated Capital Expenditure Amount, then Comcast will pay to New Scripps
the amount of such excess, and if the Estimated Capital Expenditure Amount
exceeds the Capital Expenditure Amount, New Scripps will pay to Comcast the
amount of such excess. If the Cable Net Liabilities Amount exceeds the Estimated
Cable Net Liabilities Amount, then New Scripps will pay to Comcast the amount of
such excess, and if the Estimated Cable Net Liabilities Amount exceeds the Cable
Net Liabilities Amount, Comcast will pay to New Scripps the amount of such
excess. Any such payments will include interest from the Closing to the date of
payment at the prime rate charged by Citibank, N.A. in New York City, will be
made in immediately available funds and will be made on an after-tax basis.
Although neither Scripps nor Comcast expects any such payments to be material,
there can be no assurance in that regard.
RULE 145 RESTRICTIONS
The shares of Comcast Special Common Stock that will be issued pursuant to
the Merger are registered securities. Following the Merger, persons who are not
affiliates of Scripps will be able to sell Comcast Merger Stock in the public
market. Under Rule 145 of the SEC's rules and regulations, for two years after
the Effective Time (subject to restrictions on the Scripps Trust under the
Registration Rights Agreement), persons that were affiliates of Scripps prior to
the Merger (and are not affiliates of Comcast after the Merger) may sell Comcast
Merger Stock subject to certain volume limitations, manner of sale provisions,
notification requirements and requirements as to current public information
concerning Comcast set forth in Rule 144 of the SEC's rules and regulations.
During the period between the second and third years after the Effective Time,
such persons are subject only to the Rule 144 requirement as to current public
information regarding Comcast. After three years, such persons may sell their
shares of Comcast Merger Stock without compliance with Rules 145 and 144.
Assuming that the Average Closing Price is $20.075 and the Aggregate
Consideration is $1.5921 billion, affiliates of Scripps will receive
approximately 50.1 million shares of Comcast Special Common Stock pursuant to
the Merger. If instead, the minimum Collar Price of $17.06375 was used to
calculate the amount of Comcast Merger Stock, and assuming that no additional
shares of Comcast Special Common Stock were delivered in the Merger, affiliates
of Scripps would receive approximately 58.9 million shares of Comcast Special
Common Stock pursuant to the Merger. Persons who are currently affiliates of
Scripps and become affiliates of Comcast after the Merger may sell Comcast
Merger Stock only pursuant to an effective registration statement, Rule 144 or
another exemption from registration.
RECENT REGULATORY DEVELOPMENTS
The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
the Congress and various federal agencies may materially affect the cable
television industry. The following is a summary of recent regulatory
developments affecting the cable television industry.
In January 1995, the FCC relaxed its restrictions on ownership by cable
television operators of satellite master antenna television ("SMATV") systems in
such operators' existing franchise area. Under the new interpretation, a cable
operator may purchase SMATV systems in its existing franchise areas, provided
that the services are offered according to the terms of the cable operator's
local franchise agreement.
In June 1995, the United States Court of Appeals for the District of
Columbia Circuit substantially upheld cable television rate regulations adopted
by the FCC pursuant to the Cable Television Consumer Protection and Competition
Act of 1992 (the "1992 Cable Act"). The United States Supreme Court has refused
to review that decision. In August 1996, the United States Court of Appeals for
the District of
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Columbia Circuit upheld the constitutionality of the federal statutory
provisions authorizing (i) public, educational and governmental ("PEG") access
channels, (ii) commercial leased access channels, (iii) rate regulation, (iv)
liability for operators carrying obscene programming on access channels, and (v)
municipal immunity from damage claims; and it reversed the lower court's
determination that the federal statutory provisions authorizing (i) advance
subscriber notice for certain free premium channel previews and associated
blocking requirements and (ii) DBS channel set-aside requirements were
unconstitutional. In addition, in December 1995, a three-judge panel of the
United States District Court for the District of Columbia, in response to a
remand by the Supreme Court, upheld the mandatory signal carriage provisions of
the 1992 Cable Act. The United States Supreme Court has agreed to review this
decision. Scripps and Comcast cannot predict the ultimate outcome of this
litigation.
In September 1995, the FCC authorized a new, alternative method of
implementing rate adjustments which will allow cable operators to increase rates
for programming annually on the basis of projected increases in external costs
(inflation, costs for programming, franchise-related obligations and changes in
the number of regulated channels) rather than on the basis of cost increases
incurred in the preceding calendar quarter. Operators that elect not to recover
all of their accrued external costs and inflation pass-throughs each year may
recover them (with interest) in subsequent years.
In November 1995, the FCC initiated a general rulemaking proposal that
permits cable operators to price services uniformly across multiple franchise
areas, as well as regional areas. If the FCC adopts the proposals, cable
operators that provide service to clusters of systems would be permitted to
charge uniform rates across large geographic areas. Because the proposal is
designed to be revenue neutral, it would not affect the overall revenue that
operators receive, but administrative and marketing costs could be reduced.
In December 1995, the FCC adopted final cost-of-service rate regulations
requiring cable operators, among other things, to exclude 34% of system
acquisition costs related to intangible and tangible assets used to provide
regulated services. The FCC also reaffirmed the industry-wide 11.25% after-tax
rate of return on an operator's allowable rate base, but initiated a further
rulemaking in which it proposes to use an operator's actual debt cost and
capital structure to determine an operator's cost of capital or rate of return.
Comcast has settled the majority of outstanding proceedings challenging its
rates charged for regulated cable services. In December 1995, the FCC adopted an
order approving a negotiated settlement of rate complaints pending against
Comcast for cable programming service tiers ("CPSTs") which provided
approximately $6.6 million in refunds, plus interest, being given in the form of
bill credits, to approximately 1.3 million of Comcast's cable subscribers. This
FCC order resolved 160 of Comcast's benchmark rate cases covering the period
September 1993 through July 1994 and 104 of Comcast's cost-of-service cases for
CPSTs covering the period September 1993 through December 1995. As part of the
negotiated settlement, Comcast agreed to forego certain inflation and external
cost adjustments for systems covered by its cost-of-service filings for CPSTs.
Comcast currently is seeking to justify rates for basic cable services and
equipment in certain of its cable systems in the State of Connecticut on the
basis of cost-of-service showings. The State of Connecticut has ordered Comcast
to reduce such rates and to make refunds to subscribers. Comcast has appealed
the Connecticut decision to the FCC. Based upon its assessment (after
considering the advice of counsel) of Comcast's likelihood of success, and given
the amounts involved, Comcast's management believes that the ultimate resolution
of these pending regulatory matters will not have a material adverse impact on
Comcast's financial position or results of operations.
The Telecommunications Act of 1996 (the "1996 Telecom Act"), the most
comprehensive reform of the nation's telecommunications laws since the
Communications Act of 1934 (the "Communications Act"), became effective in
February 1996. The 1996 Telecom Act will result in changes in the marketplace
for cable communications, telephone and other telecommunications services.
Although the long-term goal of this Act is to promote competition and decrease
regulation of these industries, in the short-term the law delegates to the FCC
(and in some cases the states) broad new rulemaking authority. The new law
requires many of these rulemakings to be completed in a limited period of time.
The following is a brief summary of the important features of the 1996 Telecom
Act that will affect the cable communications, telephone and other
telecommunications industries.
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Cable Communications. The 1996 Telecom Act deregulates rates for CPSTs in
March 1999 for large Multiple System Operators ("MSOs"), such as Comcast, and
immediately for certain small operators. Deregulation will occur sooner for
systems in markets where comparable video services, other than DBS, are offered
by local exchange carriers ("LECs"), or their affiliates, or by third parties
utilizing the LECs' facilities or where "effective competition" is otherwise
established under the 1992 Cable Act. The 1996 Telecom Act also modifies the
uniform rate provisions of the 1992 Cable Act by prohibiting regulation of bulk
discount rates offered to subscribers in commercial and residential developments
and permits regulated equipment rates to be computed by aggregating costs of
broad categories of equipment at the franchise, system, regional or company
level. The 1996 Telecom Act eliminates the right of individual subscribers to
file rate complaints with the FCC concerning certain CPSTs and requires the FCC
to issue a final order within 90 days after receipt of CPST rate complaints
filed by any franchising authority after the date of enactment of the 1996
Telecom Act. The 1996 Telecom Act also modifies the existing statutory
provisions governing cable system technical standards, equipment compatibility,
subscriber notice requirements and program access, permits certain operators to
include losses incurred prior to September 1992 in setting regulated rates and
repeals the three-year anti-trafficking prohibition adopted in the 1992 Cable
Act.
The 1996 Telecom Act eliminates the requirement that LECs obtain FCC
approval under Section 214 of the Communications Act before providing video
services in their telephone service areas and removes the telephone
company/cable television cross-ownership prohibition that had been codified by
the Cable Communications Policy Act of 1984, thereby facilitating the ability of
the LECs to offer video services in their telephone service areas. LECs may
provide service as traditional cable operators with local franchises or they may
opt to provide their programming over unfranchised "open video systems" ("OVS"),
in which case they must set aside a portion of their channel capacity for use by
unaffiliated program distributors and satisfy certain other requirements. Under
certain circumstances, cable operators also may elect to offer services through
open video systems. The 1996 Telecom Act also prohibits a LEC from acquiring,
merging or joint venturing with, or being acquired by a cable operator in its
telephone service area except in limited circumstances. The FCC has adopted
regulations implementing the OVS requirements of the 1996 Telecom Act and cable
interests have announced that the FCC's new regulations will be appealed to the
federal appellate court.
Telephone. The 1996 Telecom Act removes barriers to entry in the local
telephone exchange market that is now monopolized by the seven Bell operating
companies ("BOCs") and other LECs by preempting state and local laws that
restrict competition and by requiring all LECs to provide nondiscriminatory
access and interconnection to potential competitors, such as cable operators and
long distance companies. At the same time, the new law also eliminates the
prospective effects of the AT&T, GTE and McCaw consent decrees and permits the
BOCs to enter the market for long distance services (through a separate
subsidiary) after they meet a series of requirements intended to open their
telephone service areas to competition. The 1996 Telecom Act also permits
interstate utility companies to enter the telecommunications market.
While the 1996 Telecom Act imposes new requirements with regard to
interconnection, it also directs the FCC to substantially relax much of its
regulation of LECs to promote competition. The FCC recently adopted a national
regulatory framework for implementing the local competition provisions of the
1996 Telecom Act, including adoption of rules delineating interconnection
obligations of telecommunications carriers, unbundling requirements for LEC
network elements, requirements for access to local rights-of-way, dialing parity
and telephone numbering, and requirements for resale of and non-discriminatory
access to LEC services. In many instances the FCC left to the individual states
the task of implementing the FCC's regulatory standards. Numerous BOCs and LECs
have appealed the FCC's decisions to various federal appellate courts. The new
law also eliminates or streamlines many of the requirements applicable to LECs,
such as the requirement to obtain prior approval of construction or acquisition
of a new plant. In addition, the 1996 Telecom Act requires the FCC and states to
review universal service programs and encourage access to advanced
telecommunications services by schools, libraries and other public institutions.
Other Telecommunications Services. In addition to these provisions
governing regulation of specific segments of the market, the 1996 Telecom Act
also contains provisions regulating the content of video
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programming and computer services. Specifically, the new law prohibits the use
of computer services to transmit "indecent" material to minors. Two federal
district courts have granted preliminary injunctions enjoining the enforcement
of this prohibition. The 1996 Telecom Act also requires the FCC to prescribe
guidelines for a rating system for violent and indecent video programming and
requires all new television sets to contain a so-called "V-chip" capable of
blocking all programs with a given rating. The new law substantially relaxes
current broadcast ownership rules by eliminating the 12 station limit for
television station ownership, and, instead, limiting ownership to stations with
a potential aggregate reach of 35 percent of television households in the US and
eliminating the network/cable cross-ownership prohibition.
The FCC and state regulatory agencies are required to conduct numerous
rulemakings to implement the 1996 Telecom Act. It is not possible to predict the
effect, if any, that the 1996 Telecom Act, the administrative rulemakings or the
litigation challenging the new statutory provisions and agency decisions may
have on the cable television industry in general or Comcast in particular, and
no assurance can be given that any such effect will not be material.
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THE MERGER
BACKGROUND OF AND SCRIPPS' REASONS FOR THE SPIN-OFF AND THE MERGER
The following is a summary of the background of and Scripps' reasons for
the Spin-Off and the Merger.
The Cable Television Industry. The cable television industry has undergone
significant changes in the last several years as a result of several factors,
including technological advances, increased consumer demand for services,
regulatory developments and increased competition. Services traditionally
provided by the cable television industry are expected to change and expand
substantially as a result of the deployment of fiber optic cable, advances in
the digitization of information, the expected deployment of new technology such
as "on demand" programming, video games, home shopping and interactive
programming, and the opening of the telecommunication services industry to
competition from the cable television industry. Regulations adopted by the FCC
pursuant to the Cable Act of 1992 affected the ability of cable companies to
increase rates for certain subscriber services or to restructure rates for
certain services. Those rate regulations were intended to reduce subscriber
rates and to limit future rate increases for basic and certain other cable
programming services. These regulations have negatively affected the financial
characteristics of the cable industry from the second half of 1993 to the
present. Due to changes in FCC regulations and recent legislation, the cable
television industry faces the likelihood of increased competition from telephone
companies and other video service providers having substantial financial and
technical resources.
In response to these factors, many cable television operators have been
taking steps to increase their operating scales. Increased scale offers several
benefits including lower programming costs, an improved ability to develop and
deploy new technologies and services that require a substantial capital
commitment, improved operating margins and decreased susceptibility to new
competitive forces. In order to capitalize on new technology, provide new
services and increase operating scales, cable television companies must commit
substantial capital to acquire additional cable systems and build new or upgrade
existing physical plants.
Scripps Cable. Prior to 1980, Scripps was principally engaged in the
newspaper and television broadcasting businesses. Scripps entered the cable
television business in the early 1980s, primarily through joint ventures with
established cable television operators such as Cablevision Systems Corporation
and Tele-Communications, Inc. Scripps purchased the interests of its primary
cable television partners in 1985 and 1986, thus acquiring sole or controlling
ownership of cable television systems in Sacramento, California and seven states
in the Southeast, including systems in Knoxville and Chattanooga, Tennessee.
During the remainder of the decade and into the 1990s, Scripps expanded its
cable television business through acquisitions and internal growth.
Beginning in 1992, several significant events occurred that affected
strategic planning regarding the Scripps Cable Business. The new federal
regulations requiring a rollback of basic cable subscription rates engendered
substantial changes in cable television pricing structures. Proposed strategic
alliances were announced among cable television operators and telecommunications
companies. Consolidation in the cable television industry became a growing trend
and new competitors emerged. These developments increased Scripps' awareness of
the growing importance of increased scale to meet the challenges posed for
traditional cable television companies and the concomitant need for substantial
capital to add or acquire such scale.
As a result of these events and other factors, Scripps' management
determined to recommend to the Scripps Board a full exploration of strategic
alternatives for the Scripps Cable Business.
Study of Strategic Alternatives for the Scripps Cable Business. At its
regular meeting held on February 16, 1995, the Board of Directors of Scripps
decided to have Scripps' management undertake a comprehensive evaluation of the
strategic alternatives for the Scripps Cable Business. Through this evaluation
Scripps intended to develop a long-term strategy for its cable television
business, including the possibilities of seeking joint ventures with other cable
television operators, selling all of the Scripps cable television systems for
stock or cash, or acquiring additional cable television systems of substantial
size. To this end, the Scripps Board authorized the Chairman and Chief Executive
Officer of Scripps to select an investment banking firm to assist Scripps in
reviewing the strategic alternatives for the Scripps Cable Business. Following
interviews
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with a number of investment banking firms in February and March 1995, Scripps
retained Merrill Lynch to conduct a study of the strategic alternatives
available with respect to the Scripps Cable Business. Assisted by Scripps'
management, Merrill Lynch conducted this study over several months, completing
its work in May 1995.
On June 6, 1995, at a regular meeting of the Board of Directors of Scripps,
the results of the Merrill Lynch study were presented in detail. At this meeting
representatives of Merrill Lynch discussed the strategic alternatives it had
identified and explained that the Merrill Lynch study took into account the
implications of each alternative as it related to the Scripps Cable Business, to
Scripps itself and to all of the stockholders of Scripps. One of these
alternatives consisted of a spin-off of the non-cable businesses to Scripps
stockholders followed by a stock-for-stock merger of Scripps, which would then
consist only of the Scripps Cable Business, into a transaction partner. At the
conclusion of its presentation, Merrill Lynch recommended that Scripps approach
selected interested parties to determine their level of interest in acquiring
the entire Scripps Cable Business through a tax-free spin-off/merger
transaction.
Following Merrill Lynch's presentation, the Scripps Board discussed at
length the strategic alternatives for the Scripps Cable Business. The directors
agreed that the Scripps Cable Business was not sufficiently large to develop
successfully in the changing environment of the cable television industry and
that a combination with or sale to a larger cable television operator was the
best strategic course of action. In this regard, the Scripps Board discussed the
possibilities of acquiring additional cable systems, a joint venture with a
major cable television or telecommunications company, a financial restructuring,
a sale of assets or stock of the Scripps Cable Business for cash, and the
spin-off/merger transaction recommended by Merrill Lynch.
One alternative, acquiring additional cable systems, would have placed
substantial demands on Scripps' available resources. The Scripps Board
determined that it would not be advisable to commit to such a course of action
in view of both the substantial leverage that would be required and the
strategic plans for Scripps' other businesses.
Another alternative considered by the Scripps Board involved the purchase
of certain cable television systems and the exchange of certain of Scripps
Cable's cable television systems for systems owned by a number of other cable
television operators in order to increase the cluster of systems in the
southeastern United States that Scripps owned. The Scripps Board concluded that
the plan, if completed, would still require Scripps to acquire additional cable
systems and, as a result, rejected the alternative for the reasons stated in the
preceding paragraph.
The Scripps Board considered a joint venture with a cable television or
telecommunications partner which would have involved a contribution of the
capital stock of Scripps Cable in exchange for shares of the joint venture
company's capital stock. Although this structure could have produced adequate
strategic scale, the Scripps Board concluded that it would not result in a
realization of the full value of Scripps Cable because the value of Scripps'
interest in the joint venture would not be fully reflected in Scripps' stock
price.
The Scripps Board also considered the alternative of a financial
restructuring in which, among other things, a private equity investment would be
sought for a substantial minority stake of Scripps Cable. The Scripps Board
concluded that this alternative would not achieve the highest valuation for
Scripps' stockholders relative to other alternatives and would not address the
operating issues of scale and clustering in the cable television business.
Another alternative would have involved the sale of the capital stock or
assets of Scripps Cable for cash. Although the gross purchase price might have
achieved the favorable valuations for cable television companies reflected in
recent transactions, such a sale would have resulted in substantial income tax
liability to Scripps, thereby reducing the after-tax proceeds to an unacceptable
level, without providing any consideration directly to Scripps stockholders.
Under the spin-off/merger transaction, the Scripps stockholders would
receive New Scripps common shares and securities of the transaction partner. The
Scripps Board believed that this structure would fulfill the need for strategic
scale by combining the Scripps Cable Business with the cable operations of a
transaction partner, would provide Scripps stockholders, through a bidding
process involving potential transaction
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partners, with maximum value for their interest in the Scripps Cable Business,
and would enable them to share in the benefits of the larger scale of the
combined operations. Depending on the transaction partner, Scripps stockholders
would also obtain a liquid, publicly traded equity security in exchange for
their interest in the Scripps Cable Business. In addition, the spin-off/merger
could be structured without adverse tax consequences to Scripps or Scripps
stockholders.
Accordingly, at the June 6, 1995 meeting, the Scripps Board unanimously
approved resolutions authorizing Scripps' management to explore the option of
divesting the Scripps Cable Business through a spin-off/merger transaction. In
connection with this decision, the Scripps Board established four strategic
objectives for negotiations with possible transaction partners: (i) maximizing
value for all of the Scripps stockholders; (ii) effecting a disposition of the
Scripps Cable Business that would not impose taxes on Scripps or Scripps
stockholders; (iii) obtaining a strong merger partner for the Scripps Cable
Business with resources to compete effectively in the rapidly evolving cable
television industry; and (iv) obtaining equity securities of a merger partner
with attractive investment attributes. Merrill Lynch was retained to assist
Scripps in initial discussions and negotiations with potential transaction
partners.
Distribution by Scripps of Confidential Information Memorandum. Following
the Scripps Board's decision at the June 6, 1995 meeting, a detailed
confidential information memorandum with respect to the Scripps Cable Business
was prepared by Merrill Lynch and Scripps management during June and July 1995.
This memorandum included a description of various aspects of the Scripps Cable
Business, including operating strategy, systems and technology, sales and
marketing, cable facilities, management, franchise information and clustering
data. The memorandum described each cable television operating region's local
economy, demographic characteristics, and potential opportunities to increase
basic subscribers and to provide additional services. The memorandum disclosed
total homes passed, basic and premium subscribers for each of the cable
television systems, and information concerning the capacity of each system. The
memorandum also provided historical and projected financial and operating data
on a system-by-system basis that included estimates for year-end 1995 and
projections for year-end 1996.
In August 1995, the confidential information memorandum was distributed by
Merrill Lynch to five potential transaction partners that had entered into
confidentiality agreements with Scripps, including Comcast. Merrill Lynch, on
behalf of Scripps, invited such parties to submit non-binding indications of
interest in September 1995 for the acquisition of the Scripps Cable Business. In
connection therewith, Merrill Lynch informed such parties that Scripps proposed
to structure the disposition of its cable business through a spin-off of
Scripps' publishing, broadcasting and entertainment businesses to Scripps
stockholders and a subsequent merger of Scripps (which would contain at that
time only the Scripps Cable Business) into the acquiring corporation. Merrill
Lynch informed such parties that Scripps was proposing this structure in order
to effect a transaction that would be tax-free to Scripps on the disposition of
its cable business and tax-free to the stockholders of Scripps in connection
with the proposed spin-off and merger. Merrill Lynch indicated that Scripps
would consider other structures that would accomplish the goals established by
Scripps.
In addition to the foregoing, Merrill Lynch informed potential transaction
partners that it had met with the trustees of the Scripps Trust, the controlling
stockholder of Scripps, and that a spin-off/merger transaction was acceptable to
the Scripps Trust as the holder of a majority of the voting power of Scripps.
Scripps and Merrill Lynch believed that information as to the Scripps Trust's
position on the proposed transaction structure was necessary in order to induce
the potential transaction partners to make the substantial investment of
resources necessary to explore the possibility of a transaction. Merrill Lynch
also informed such parties that Scripps and the Scripps Trust would consider the
liquidity of the consideration offered as one of several critical factors in
analyzing and comparing proposals for the acquisition of the Scripps Cable
Business.
Finally, Merrill Lynch informed such parties that if they submitted
acceptable preliminary proposals, Scripps and Merrill Lynch might determine to
invite such parties to conduct a due diligence review of the Scripps Cable
Business with a view to making a definitive acquisition proposal.
Certain Factors Relating to the Scripps Trust. Charles E. Scripps, Robert
P. Scripps, and John H. Burlingame, all of whom are directors of Scripps, are
the trustees of the Scripps Trust, the controlling stockholder of Scripps.
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In a meeting on September 29, 1995 with Scripps' management regarding the
proposed divestiture of the Scripps Cable Business, the Trustees indicated the
Scripps Trust's desire for the following: (i) maximization of stockholder value;
(ii) consummation of a transaction that would not impose taxes on Scripps or on
the Scripps Trust or the other stockholders of Scripps; (iii) the right to
nominate one or more persons to serve on the board of directors of the eventual
transaction partner for a period of time following consummation of the proposed
spin-off and merger; and (iv) registration rights that would enable the Scripps
Trust to register with federal and state agencies and sell in an orderly fashion
(through underwritten or other offerings) some or all of the shares of the
eventual transaction partner that the Scripps Trust would receive in the
proposed merger.
The Trustees informed Scripps' management that the board representation and
registration rights were important to the Scripps Trust in light of the
significant economic interest that the Scripps Trust would have in the eventual
transaction partner. In connection with the foregoing, the Trustees indicated
that the Scripps Trust would be willing to enter into an agreement with the
eventual transaction partner and its controlling stockholders (if any) pursuant
to which the Scripps Trust (subject to the fiduciary duties that the Trustees
owed to the beneficiaries of the Scripps Trust) would have an obligation to vote
in favor of the proposed transaction.
The primary objectives of the Scripps Trust with respect to the proposed
divestiture of the Scripps Cable Business were the same as those of Scripps
management and the Scripps Board of Directors: (i) maximization of shareholder
value and (ii) consummation of a tax-free transaction. In ultimately arriving at
their unanimous view that, based on such factors as liquidity, diversification
and prospects for appreciation in stock price, the Comcast final proposal was
preferable to the proposals of the two other bidders (all as described further
herein), the Trustees were cognizant of their duties as directors and Trustees
and, although no conflict actually arose, of the possible conflicts of interest
inherent in their serving as both directors and Trustees. The Trustees' views,
as directors and Trustees, as to the fairness of the Comcast proposal coincided
with the views of the other six directors of Scripps and of Scripps management.
Receipt by Scripps of Non-Binding Indications of Interest. Interested
parties were asked to submit their preliminary proposals by September 6, 1995,
and to include therein a non-binding estimate of the value of the consideration
to be offered for the Scripps Cable Business and a detailed description of such
consideration that provided all information deemed relevant to enable Scripps
and Merrill Lynch to ascertain the value of the consideration offered and
address the tax, liquidity and other concerns of Scripps, including information
regarding the liquidity of such consideration and any contingencies with respect
thereto.
In early September 1995, Merrill Lynch received, on behalf of Scripps,
preliminary, non-binding indications of interest in acquiring the Scripps Cable
Business from three companies that are leaders in the cable television industry,
including Comcast. Subsequent to receiving these indications of interest, senior
members of Scripps' management and one or more of the Trustees met, over the
course of several days, with senior members of management of each of the three
prospective transaction partners, including Comcast, to discuss their
preliminary proposals, particularly with respect to value, tax and liquidity
considerations, and to conduct preliminary due diligence with respect to such
partners. In these meetings, the senior management teams of each of the
prospective transaction partners, including Comcast, discussed their proposals
and made detailed presentations about their companies. During this process,
Merrill Lynch informed the prospective transaction partners that Scripps would
decide later in September 1995 whether to pursue a transaction with one
potential partner or conduct a process to allow each of the three potential
partners to submit a firm and final offer.
At a special meeting of the Scripps Board on September 29, 1995, Merrill
Lynch reviewed with the directors certain materials that it had prepared and
distributed with respect to the three parties interested in acquiring the
Scripps Cable Business. In these materials, Merrill Lynch presented to the Board
a summary, at management's request, and an analysis, at Merrill Lynch's
initiative, of the financial terms of each of the non-binding initial
indications of interest and discussed the relative advantages and disadvantages
of a transaction with each of the three bidders. The Merrill Lynch presentation
materials and analysis for the September 29, 1995 meeting of the Scripps Board
of Directors are described herein under the caption "Opinion of Financial
Advisor to Scripps -- Review of Proposals Received." At this meeting, the
Chairman and Chief Executive
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Officer of Scripps reported that he and another senior executive, together with
one or more of the Trustees, had met with such parties to discuss their levels
of interest and the attributes of their companies as potential transaction
partners. The directors then discussed the possible advantages and disadvantages
of a transaction with each interested party. The discussion focused on, among
other things, each potential partner's cable operations, leverage, management
structure, capital structure, dividend policy and diversification of asset mix,
whether the company was publicly or privately held, and various timing and tax
considerations. Initially, Scripps determined not to invite one of the three
interested parties to continue in the process in light of the value of that
party's indication of interest and the relative lack of liquidity of that
party's equity securities, for which there was no public market. That party
subsequently increased the value of its indication of interest to competitive
levels and provided certain assurances as to the liquidity of its equity
securities. After discussion, the Scripps Board unanimously decided to invite
each of the three prospective transaction partners to conduct extensive due
diligence of the Scripps Cable Business with a view to making a definitive
acquisition proposal.
Accordingly, following this meeting, Merrill Lynch prepared and distributed
in early October 1995 a term sheet outlining the material terms of the
spin-off/merger transaction that Scripps proposed to each prospective partner.
The term sheet provided for the following material terms and conditions: (i) a
tax-free spin-off/merger transaction; (ii) merger consideration in the form of
common stock of the transaction partner; (iii) certain purchase price
adjustments for the Scripps Cable Business working capital and capital
expenditures; (iv) certain customary closing conditions, including stockholder
approvals, franchise and other governmental approvals, and a favorable Service
ruling on the spin-off; (v) a value protection mechanism, often referred to as a
"collar," that was to be used to determine the number of shares to be delivered
as merger consideration and that provided for adjustments in such number of
shares to the extent that, between the execution of the merger agreement and the
closing of the transaction, the price of the eventual transaction partner's
common stock declined by up to 20%, or appreciated by up to 20%, and a right for
Scripps to terminate the proposed merger if such partner's stock declined by
more than 20% over a specified time during such period; (vi) "fiduciary outs"
for the Scripps Board and the Scripps Trust, which would allow Scripps to
terminate the proposed merger and accept a "superior proposal" from a third
party; (vii) a "breakup fee" of 2% of the aggregate consideration; and (viii)
board representation and registration rights for the Scripps Trust.
Scripps prepared a data room at its offices in Cincinnati, Ohio, and
provided the prospective transaction partners with the opportunity to review
business, financial and legal information with respect to the Scripps Cable
Business and to discuss operations with members of senior management of the
Scripps Cable Business.
During this process, the prospective transaction partners were also
provided with drafts of a proposed merger agreement and related agreements for
review and comment. Included among these agreements were drafts of board
representation, registration rights and voting agreements that the Trustees had
requested be prepared and distributed.
The proposed merger agreement contained a provision that allowed the
Scripps Board to support a Superior Proposal (as defined) from a third party in
the exercise of its fiduciary duties (the "Scripps Board fiduciary out"). A
fiduciary out (the "Scripps Trust fiduciary out") was provided to the Scripps
Trust in the draft of the voting agreement which allowed the Scripps Trust to
support such a Superior Proposal. A "Superior Proposal" was generally defined as
an unsolicited proposal from a third party that the Scripps Board of Directors
determined provided superior value to the Scripps stockholders.
At a special meeting of the Scripps Board held on October 13, 1995, Merrill
Lynch reviewed the current status of matters with respect to the possible
divestiture of the cable business, informing the Scripps Board that term sheets
had been sent to the three interested parties on October 6, 1995 and that draft
transaction documents had been sent to such parties on October 11, 1995. At this
meeting, Merrill Lynch reviewed with the Scripps Board materials relating to the
businesses of the three interested parties, including their capital structures,
trading markets and liquidity, diversity of business segments, public and
private market values, operating results and prospects. At the request of the
Chairman and Chief Executive Officer of Scripps, Merrill Lynch explained to the
Scripps Board how the proposed value protection mechanism or "collar," which
Scripps had requested be part of any final agreement for the sale of its cable
business, was expected to operate. There was discussion of the degree of
diversification of the three prospective bidders and of materials
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relating to analysts' recommendations with respect to the two bidders, including
Comcast, that had a public market for their stock. At the conclusion of this
meeting, the Scripps Board scheduled a special meeting to be held on October 26,
1995, by which time Scripps was to receive final proposals.
Request by Scripps for Final Proposals. Merrill Lynch invited the three
interested parties to submit final proposals and transaction documents by
October 24, 1995. Such final proposals were to include a detailed description of
the consideration offered and provide all information deemed relevant by the
bidder to enable Scripps and Merrill Lynch to ascertain the value of such
consideration and to address the tax, liquidity and other concerns of Scripps.
The transaction documents were to be marked with all revisions that the bidder
would request in the provisions thereof. Bidders were to have completed all due
diligence by the time final proposals were submitted. Merrill Lynch informed the
bidders that any proposal conditioned on further due diligence review would not
be considered by Scripps. Such proposals were to indicate the amount of time the
bidder expected to need after the transaction documents were executed to close
the transaction, taking into account all necessary regulatory approvals.
Proposals were to remain open through 5:00 p.m., New York time, on November 1,
1995. The bidders were informed that Scripps, with the advice and assistance of
Merrill Lynch, would evaluate the final proposals as expeditiously as reasonably
practicable, with the intention of entering into a definitive agreement with the
party that submitted the final proposal best satisfying Scripps' objectives.
Each bidder was specifically directed to submit its highest and final bid by the
aforesaid deadline. It was indicated that Scripps would consider all factors in
selecting a final proposal and that it reserved the right to negotiate with any
party individually or with one or more parties simultaneously.
Receipt by Scripps of Final Proposals; Negotiation of Terms of the
Merger. Final proposals, including transaction documents marked with proposed
revisions, were submitted to Scripps on October 24, 1995, by Comcast and the two
other potential transaction partners. Scripps' management and one of the
Trustees, John H. Burlingame, worked with Scripps' legal advisors and Merrill
Lynch between October 24 and October 26, 1995, analyzing the bids and comparing
their relative strengths and weaknesses.
Comcast's proposal offered to acquire the Scripps Cable Business for shares
of Comcast Special Common Stock (which is non-voting stock) with an aggregate
value of $1.525 billion, subject to certain adjustments. Comcast's proposal
included a collar mechanism that would, among other things, protect the value
that the stockholders of Scripps would receive, except to the extent the market
price of Comcast Special Common Stock declined by more than 5% from the
Execution Price of $20.075, the average price of such stock for the 20 trading
days immediately prior to submission of the final proposal. Conversely, the
value of the Comcast stock received by the Scripps stockholders would not
increase, except to the extent the market price increased by more than 5% over
the Execution Price. Such proposal also included a right for Scripps to
terminate the proposed merger if the price of such Comcast stock declined by
more than 20% during such period, but imposed on Scripps stockholders the value
loss if the decline in the price of the Comcast Special Common Stock was more
than 5% but less than 20% below the Execution Price (in which event the closing
would be required to occur and the Scripps stockholders would receive Comcast
Special Common Stock with a value at such time of between approximately 5% and
15% less than the $1.525 billion offered). Additionally, Comcast's proposal
sought to limit the fiduciary outs of the Scripps Board and the Scripps Trust to
terminate a proposed merger with Comcast in favor of a Superior Proposal and
sought an increase in the breakup fee from 2% to 5%.
The proposal submitted by a second bidder (the "Second Bidder") provided
for aggregate consideration of $1.5875 billion payable in a class of the Second
Bidder's common stock (the "low vote" common stock) that carried one vote per
share (as compared to another non-publicly traded class of the Second Bidder's
common stock that carried 15 votes per share and was held by a group of
controlling shareholders). This proposal provided for a collar mechanism in the
event that the Second Bidder was unable to consummate an underwritten registered
public offering of its low voting common stock prior to the closing of the
proposed merger as well as a collar in the event that, assuming such public
offering occurred prior to the closing of the proposed merger, the market price
of such stock increased or decreased by not more than 30% from an assumed price
of $25 per share (the "Assumed Trading Price") between the signing of a
definitive merger agreement and the closing of the proposed merger.
Additionally, this proposal afforded each of Scripps and the Second Bidder the
opportunity to terminate the proposed merger if the Second Bidder's stock
declined by
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more than 30% during such period, subject to the Second Bidder's right to
complete the proposed merger by issuing additional shares sufficient to protect
the value of the aggregate consideration offered. The Second Bidder's proposal
provided for a 3% breakup fee and sought to restrict the right of the Trustees
to vote for a Superior Proposal, thus effectively eliminating the fiduciary outs
of the Scripps Board and the Scripps Trust.
The proposal submitted by a third bidder (the "Third Bidder") to acquire
the Scripps Cable Business provided a stated value of $1.360 billion, subject to
certain adjustments as described below. The stated value would be adjusted
downward if the Scripps Cable Business did not meet certain specified projected
financial and operating targets prior to closing. Of the total consideration,
$1.300 billion of the stated value was payable in a series of common stock of
the Third Bidder (the "low vote" common stock) that carried one vote per share
(as compared to another series of common stock of the Third Bidder that carried
10 votes per share). The remaining $60 million of the stated value of the
proposal was attributed to the value of a carriage agreement that the Third
Bidder offered to Scripps to distribute The Home & Garden Network to not less
than five million subscribers within five years of the closing of the proposed
transaction. The Third Bidder's proposal included a collar mechanism that would,
among other things, have protected the $1.300 billion value that Scripps
stockholders would receive in low vote common stock of the Third Bidder, except
to the extent the market price of such common stock declined by more than 10%
from the $18.25 price per share that the Third Bidder assumed in its proposal
(the "Third Bidder's Assumed Stock Price"). Conversely, the value of the Third
Bidder's stock that would have been received by Scripps stockholders would not
increase, except to the extent that the market price increased by more than 20%
above the Third Bidder's Assumed Stock Price. Such proposal also included a
right for Scripps to terminate the proposed transaction if the price of the
Third Bidder's stock declined by more than 10% during the period between the
execution of a definitive agreement and the closing of the proposed transaction.
In its proposal, the Third Bidder offered to change the mix of stock
consideration, at Scripps' option, such that up to $200 million of the aggregate
consideration would be payable in a series of common stock of the Third Bidder
that tracked the performance of one of the Third Bidder's business segments. The
Third Bidder's proposal was subject to additional due diligence.
The proposals of Comcast and the other two bidders generally provided for
the registration rights and the board representation rights that the Scripps
Trust had requested Scripps management to seek in connection with the proposed
transaction.
On October 25, 1995, Merrill Lynch contacted representatives of Comcast and
the Second Bidder to seek clarification regarding certain elements of their
respective proposals, including, among other things, the proposed forms of
agreements that Scripps sent to prospective purchasers, the potential
adjustments to the stated values of the respective proposals, the form of
consideration of such proposals, and the mechanics and terms of the proposed
value protection mechanisms. The results were then compiled for presentation to
the Scripps Board on October 26, 1995.
In response to the request for clarification of final proposals, on October
26, 1995, prior to the scheduled Scripps Board meeting, Comcast increased its
original proposal by $25 million, from $1.525 billion to $1.550 billion, subject
to certain adjustments. Additionally, Comcast revised its proposed price
protection mechanism to provide for a collar of 10% above and 10% below the
Execution Price and to give Scripps the right to terminate the proposed merger
if the market price of Comcast Special Common Stock declined by more than 15%,
subject to Comcast's right to complete the merger by providing additional shares
to protect the value of the aggregate consideration offered. Comcast's revised
proposal continued to call for a 5% breakup fee and continued to limit the
Scripps Board fiduciary out and the Scripps Trust fiduciary out.
In response to the request for clarification of final proposals, the Second
Bidder modified its proposal by, among other things, lowering the Assumed
Trading Price to $20 per share and providing for a collar of 25% above and 25%
below the revised Assumed Trading Price. The Second Bidder's revised proposal
continued to call for a 3% breakup fee and to effectively eliminate the
fiduciary outs of the Scripps Board and the Scripps Trust.
A special meeting of the Board of Directors of Scripps was held on October
26, 1995, to review these proposals, select one of them and approve proceeding
toward a definitive merger agreement with the party whose proposal was selected.
At this meeting, the Scripps Board discussed the bids that had been received
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from the three bidders, including the revised bids that had been received from
Comcast and the Second Bidder on October 26, 1995. Merrill Lynch reviewed
presentation materials prepared at the request of the Scripps Board for the
October 26, 1995 meeting which it had distributed to the members of the Board of
Directors in advance. In these materials, Merrill Lynch presented an analysis of
the financial terms of each of the proposals and discussed, at the request of
the Scripps Board, the relative advantages and disadvantages of a transaction
with Comcast and the Second Bidder. Upon being asked by the Scripps Board for
its valuation of the two proposals, Merrill Lynch stated that the proposals of
Comcast and the Second Bidder were substantially equivalent from a financial
point of view. The Merrill Lynch presentation materials and analysis for the
October 26, 1995 meeting of the Scripps Board of Directors are described under
the caption "Opinion of Financial Advisor to Scripps -- Review of Proposals
Received." The proposal of the Third Bidder was judged by Scripps to be
inadequate as to price and certain other conditions and terms relative to the
proposals of the other two bidders as described above, and the directors
approved management's decision not to consider it further.
Following Merrill Lynch's presentation, the directors engaged in a detailed
discussion of the relative merits of the two proposals. Scripps' management,
Merrill Lynch and Scripps' legal advisors responded to questions from the
directors regarding various aspects of the proposals. Among the questions were
several regarding the relative values of the securities being offered by Comcast
and the Second Bidder. Merrill Lynch explained that Comcast, which operated in
three business segments (cable, programming and cellular communications), had a
more diversified asset base compared to the Second Bidder, which operated almost
entirely in the cable television business. Merrill Lynch also indicated that
Comcast stock was publicly traded and liquid, whereas the stock of the Second
Bidder was not publicly traded as yet, although the Second Bidder had filed with
the SEC a registration statement for an initial public offering of such stock.
Merrill Lynch informed the Scripps Board that the Comcast Special Common Stock
was trading at a multiple of operating cash flow (approximately 6.7 times) near
the low end of the range for publicly traded cable company stocks, whereas the
Second Bidder's low vote common stock, assuming a public market value at the
midpoint of the price range suggested by the Second Bidder's final proposal,
would be near the high end of such range (approximately 9.3 times). In response
to a question from the directors, Scripps' legal advisors summarized current
Delaware case law relating to breakup fees and fiduciary duties. Scripps' legal
advisors also reviewed the revisions proposed by Comcast and the Second Bidder
to the terms of the merger agreement and the related agreements and indicated
that there were no material differences between the revisions proposed by
Comcast and the Second Bidder other than the difference in the breakup fees so
proposed.
After a lengthy discussion regarding the proposals and the bidders, the
Scripps Board unanimously agreed that the Comcast proposal was preferable on the
basis of the aforesaid factors and directed management to have further
discussions with Comcast with a view to reaching a final agreement and preparing
definitive merger and related documents for approval and execution. Scripps'
management advised the Scripps Board that it would specifically seek an
improvement in the terms of the collar proposed by Comcast, among other things.
On October 27, 1995, as discussions with Comcast were to proceed, Merrill
Lynch informed the Chairman and Chief Executive Officer of Scripps that the
Second Bidder on its own initiative had increased its bid to $1.6275 billion,
subject to the same adjustments as originally proposed. In conjunction
therewith, the Second Bidder also withdrew its objection to the Scripps Trust
fiduciary out.
As a result of the Second Bidder's revised proposal, a special meeting of
the Scripps Board was called on October 27, 1995, at which the Second Bidder's
proposal was reviewed and discussed at length. After considering the revised
proposal and after further review of the Comcast proposal, the Scripps Board
decided that the Chairman and Chief Executive Officer, together with a
representative from Merrill Lynch, should contact each of the Second Bidder and
Comcast. In the course of these contacts the Second Bidder confirmed the terms
of its revised offer, and Comcast increased its proposal to $1.575 billion,
subject to certain adjustments that Merrill Lynch estimated would increase the
aggregate stock consideration to $1.6033 billion, and modified the terms of its
proposal to provide a collar of 15% above and 15% below the Execution Price.
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Later in the day, when the Scripps Board reconvened and the Chairman and
Chief Executive Officer had reported that he and Merrill Lynch's representative
had contacted Comcast and the Second Bidder, another discussion of the two bids
followed. The members of the Board of Directors discussed, among other things,
the prospects of Comcast and the Second Bidder, the range of valuations of the
two companies, the multiples of operating cash flow for the Second Bidder and
Comcast described above, the diversity of businesses operated by the two
companies, and the liquidity of the consideration offered in each proposed
transaction. After again considering operating data about each of the bidders,
along with other relevant analyses and information presented by Merrill Lynch,
the Scripps Board unanimously decided that the revised Comcast proposal
continued to be the preferred proposal and instructed management and counsel to
attempt to finalize an agreement for sale of the Scripps Cable Business to
Comcast and to report back to the Scripps Board on October 28, 1995.
In accordance with the Scripps Board's instructions, Merrill Lynch and
Scripps' legal advisors continued negotiations with Comcast on October 27 and
28, 1995. In the course of these negotiations it was indicated to Comcast that
the Second Bidder's revised proposal called for a breakup fee of only 3% and
that the Second Bidder was no longer objecting to the Scripps Trust fiduciary
out and had not sought to limit the Scripps Board fiduciary out. Comcast was
advised that, in light of those factors, in order to enter into a transaction
with Scripps, Comcast's proposal with respect to breakup fees and fiduciary outs
would have to be equivalent to that offered by the Second Bidder.
At the October 28, 1995 Scripps Board meeting, the Chairman and Chief
Executive Officer reported on the status of discussions with Comcast and the
Second Bidder and that Scripps' legal advisors were working with Comcast's legal
advisors to arrive at a mutually satisfactory definitive agreement should
Comcast's proposal be accepted. Merrill Lynch then reviewed with the Scripps
Board certain materials that it had prepared concerning Comcast and the Second
Bidder. Merrill Lynch also presented a detailed summary of the proposed merger
with Comcast and presented various valuation and financial analyses, as detailed
below under the caption "Opinion of Financial Advisor to Scripps." Following a
discussion of this material, the legal advisors for Scripps reviewed the
proposed definitive merger agreement for sale of the Scripps Cable Business to
Comcast as well as related documents, including the voting and other agreements
to be executed by the Scripps Trust. Merrill Lynch stated that the proposals of
Comcast and the Second Bidder were substantially equivalent from a financial
point of view. Based on Merrill Lynch's advice to the Scripps Board that such
proposals were substantially equivalent from a financial point of view, Merrill
Lynch did not recommend either proposal over the other. In addition, as
described below, Merrill Lynch delivered its opinion that the Merger
Consideration was fair to the stockholders of Scripps from a financial point of
view. In comparing other elements of the two proposals, Merrill Lynch and the
legal advisors for Scripps described the differences in breakup fees and
provisions with respect to fiduciary outs. The Scripps Board was of the
unanimous opinion that the Comcast proposal was preferable to the Second
Bidder's proposal. The Scripps Board based its view on such factors as the
higher degree of liquidity of Comcast's publicly traded common stock in
comparison to the common stock of the privately held Second Bidder, the greater
diversification of Comcast's businesses in comparison to the Second Bidder's
operations, the prospects for greater appreciation in Comcast stock compared to
the Second Bidder's stock based on, among other things, the multiple to
operating cash flow implied by the public valuation of Comcast. Nonetheless, the
Scripps Board expressed its desire that Comcast revise its proposal to reduce
the breakup fee from 5% to 3% and to withdraw the limitation Comcast had imposed
on the Scripps Board fiduciary out and the Scripps Trust fiduciary out. After
further discussion, the directors unanimously decided to recess the meeting and
directed the Chairman and Chief Executive Officer to contact Comcast about these
two remaining matters and to contact the Second Bidder to ascertain whether its
proposal, as revised, was its final offer.
When the meeting reconvened, the Chairman and Chief Executive Officer
reported that each of the bidders had been contacted as directed. The Chairman
and Chief Executive Officer reported that he had spoken with the Chief Executive
Officer of the Second Bidder, who confirmed that its revised proposal was final
and that no additional consideration would be forthcoming. Merrill Lynch
reported that Comcast had agreed to accept a 3% breakup fee and to allow
retention of the Scripps Board fiduciary out and the Scripps Trust fiduciary out
as originally proposed by Scripps and the Scripps Trust. In addition, the
Chairman and
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Chief Executive Officer noted that, in response to his inquiry, Comcast had
stated that it had submitted its best and final offer.
At the request of the Chairman and Chief Executive Officer of Scripps,
Merrill Lynch expressed its view that the process taken had offered each bidder
the opportunity to make its best and final offer. Merrill Lynch also delivered
its oral opinion (which was subsequently confirmed in writing) that the Merger
Consideration was fair to the stockholders of Scripps from a financial point of
view. The Chairman and Chief Executive Officer then confirmed that the Trustees
favored the Comcast proposal and had approved it and were prepared to enter into
the Voting Agreement obligating the Scripps Trust to vote in favor of the
Merger. Following the foregoing, the Scripps Board concluded its deliberations
and, acting unanimously, accepted the revised Comcast proposal, and approved the
Spin-Off, the Merger and the relevant transaction documents.
Following this meeting, on October 28, 1995, Scripps, New Scripps, and
Comcast entered into the Merger Agreement, and Scripps, Comcast, Sural and the
Scripps Trust entered into the Voting Agreement.
On October 29, 1995, Merrill Lynch was informed by the Second Bidder that
the Second Bidder was prepared to increase its bid by $25 million. At that time,
Merrill Lynch informed the Second Bidder that a merger agreement had been
executed on the previous day with Comcast. Since the Merger Agreement had been
executed and the Second Bidder did not pursue any revision to its proposal after
being so informed, the Scripps Board took no action in response to Merrill
Lynch's discussion with the Second Bidder.
All of the members of the Scripps Board attended the meetings held on
September 29, October 13, October 26, October 27 and October 28, 1995, except
Daniel J. Meyer, who was unable to attend the meeting on October 27, 1995, and
Robert P. Scripps, who was unable to attend part of such meeting.
RECOMMENDATION OF THE SCRIPPS BOARD OF DIRECTORS
At the meeting of the Board of Directors of Scripps held on October 28,
1995, by unanimous vote of the directors, the Scripps Board determined that the
Spin-Off and the Merger are fair to, and in the best interests of, Scripps and
all of its stockholders, approved the Spin-off and the Merger, and resolved to
recommend that stockholders of Scripps vote FOR approval and adoption of the
Merger Agreement and each of the Transactions contemplated thereby, including
the Spin-Off.
In reaching its decision, the Scripps Board considered, among other things,
the following factors:
- The Scripps Board's familiarity with and review of the business,
operations, financial condition, earnings and prospects of the Scripps
Cable Business. The Scripps Board considered the importance of scale to
the continued participation in the cable television business and the
growing capital requirements of the cable business in relation to the
financial condition and current and probable future earnings of,
strategic plans for and capital needs of its various other businesses. In
light of these factors, the Scripps Board determined that the cable
operations of Scripps could best be developed by a large cable television
company with greater scale.
- The Scripps Board's review of the business, operations, financial
condition, earnings and prospects of Comcast, and the enhanced
opportunities for growth that the Merger made possible. In choosing
Comcast as its merger partner, the Scripps Board considered and viewed
favorably the excellent quality and reputation of Comcast's management,
Comcast's growth over an extended period of time, the potential of
Comcast's cable and other diverse operations and Comcast's size and
related access to capital. The Scripps Board determined that the Scripps
stockholders would share in the benefits of the sizeable scale of the
combined Scripps Cable Business and Comcast's operations. In addition,
the Scripps Board noted the opportunities for increased profitability of
the Scripps Cable Business resulting from larger programming discounts
and other potential synergies and efficiencies that could be obtained
through the Merger.
- The value of Comcast Special Common Stock to be received by Scripps
stockholders in the Merger. An integral part of the determination by the
Scripps Board of Directors that the Merger is in the best interests of,
and fair to, the Scripps stockholders was a determination of the value of
the Comcast
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Special Common Stock. At the October 28, 1995 Scripps Board Meeting, the
Scripps Board considered the only negative factor inherent in the Comcast
proposal to be the relative value of the Merger Consideration. Also, as
detailed above under "Background of and Scripps' Reasons for the Spin-Off
and the Merger" and below under "Opinion of Financial Advisor to
Scripps," the Scripps Board received detailed presentations at several
meetings with respect to the value and liquidity of the Comcast Special
Common Stock to be received by the Scripps stockholders. During these
presentations, members of the Scripps Board posed various questions to
Merrill Lynch representatives, and the ensuing responses and discussions
enhanced the Scripps Board's understanding of the Merger and related
transactions. Finally, the Scripps Board noted that the value of the
consideration to be received in the Merger was the result of an extensive
and exhaustive process that resulted in proposals from three bidders and
the ultimate selection of Comcast's proposal and that Merrill Lynch had
rendered its opinion that the consideration to be paid by Comcast in the
Merger (the "Merger Consideration") was fair to the stockholders of
Scripps from a financial point of view.
- Other possible transactions available to Scripps. As discussed above
under "Background of and Scripps' Reasons for the Spin-Off and the
Merger," the Scripps Board carefully reviewed proposals submitted by
three potential merger partners. The Scripps Board was cognizant of the
differences in the consideration offered by Comcast, the Second Bidder
and the Third Bidder, and concluded that the proposal of Comcast was
substantially equivalent to that of the Second Bidder in financial terms
and superior to that of the Third Bidder in financial terms. Moreover,
the Scripps Board concluded that Comcast's proposal was superior to the
proposals of the Second Bidder and the Third Bidder on the basis of,
among other things, stock liquidity, diversification of business lines,
potential for stock price appreciation, and overall long-term prospects,
and thus would maximize value for the Scripps stockholders.
- The terms of the Merger. The Scripps Board reviewed with its legal
advisors and Merrill Lynch the provisions of the Merger Agreement and
determined that its terms permitted Scripps to achieve the tax-free
disposition of the Scripps Cable Business for liquid securities in a
manner that is fair to and in the best interests of Scripps and its
stockholders.
In view of the variety of factors considered, the Scripps Board did not
find it practicable to attempt to assign relative weights to the specific
factors considered in making its determinations. Consequently, the Scripps Board
did not quantify the assumptions or results of its analyses in reaching its
determination that the Merger is fair to, and in the best interests of, Scripps
and all of its stockholders. As a general matter, however, the Scripps Board
believes that all of the factors set forth above supported its determinations.
On August 27, 1996, the Scripps Board approved the Form of Amendment to the
Agreement and Plan of Merger in substantially the form set forth as Annex II.
THE BOARD OF DIRECTORS OF SCRIPPS UNANIMOUSLY RECOMMENDS THAT SCRIPPS
STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE SCRIPPS CHARTER
AMENDMENT AND FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT.
OPINION OF FINANCIAL ADVISOR TO SCRIPPS
In March 1995, Scripps retained Merrill Lynch to act as its financial
advisor in connection with a strategic review of its cable television business
which resulted in the execution of the Merger Agreement.
On October 28, 1995, Merrill Lynch delivered its oral opinion (which it
subsequently confirmed in writing) (the "Merrill Lynch Opinion") to the Board of
Directors of Scripps to the effect that, as of October 28, 1995, and based on
the assumptions made, procedures followed and matters considered, as set forth
in such opinion, the Merger Consideration is fair to the holders of the Scripps
Common Voting Stock and the Scripps Class A Common Stock from a financial point
of view. No limitations were imposed by the Board of Directors of Scripps upon
Merrill Lynch with respect to the investigations made or procedures followed by
it in rendering its opinion.
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A copy of the Merrill Lynch Opinion is attached to this Joint Proxy
Statement-Prospectus as Annex III. Scripps stockholders are urged to read the
Merrill Lynch Opinion in its entirety for the assumptions made, procedures
followed and matters considered by Merrill Lynch. The Merrill Lynch Opinion is
directed only to the fairness of the Merger Consideration from a financial point
of view and does not constitute a recommendation to any Scripps stockholder as
to how such stockholder should vote. The summary of the Merrill Lynch Opinion
set forth in this Joint Proxy Statement-Prospectus is qualified in its entirety
by reference to the full text of such opinion.
In arriving at the Merrill Lynch Opinion, Merrill Lynch, among other
things, (i) reviewed Scripps' Annual Reports to Stockholders, Annual Reports on
Form 10-K and related financial information for the three fiscal years ended
December 31, 1994 and Scripps' Quarterly Reports on Form 10-Q and the related
unaudited financial information for the quarterly periods ended March 31, 1995
and June 30, 1995; (ii) reviewed Comcast's Annual Reports to Stockholders,
Annual Reports on Form 10-K and related financial information for the three
fiscal years ended December 31, 1994 and Comcast's Quarterly Reports on Form
10-Q and the related unaudited financial information for the quarterly periods
ended March 31, 1995 and June 30, 1995; (iii) reviewed certain information,
including internal and unaudited financial statements, operating data and
forecasts relating to the business, earnings, cash flow, assets and prospects of
Scripps and the Scripps Cable Business, furnished to Merrill Lynch by Scripps;
(iv) conducted discussions with members of senior management of Scripps, Scripps
Cable and Comcast concerning their respective businesses, strategic objectives
and prospects; (v) reviewed the historical market prices and trading activity of
equity securities of publicly traded companies engaged in businesses Merrill
Lynch believes to be generally comparable to those of Scripps, the Scripps Cable
Business and Comcast, respectively; (vi) compared the results of certain
operations of Scripps, the Scripps Cable Business and Comcast with those of
certain companies which Merrill Lynch deemed to be reasonably similar to
Scripps, the Scripps Cable Business and Comcast, respectively; (vii) compared
the proposed financial terms of the Merger with the financial terms of certain
other cable television acquisitions which Merrill Lynch deemed to be relevant;
(viii) reviewed and analyzed the pro forma financial effects of the Transactions
on Scripps; (ix) reviewed the Merger Agreement and related schedules; and (x)
reviewed such other financial studies and analyses and performed such other
investigations and took into account such other matters as Merrill Lynch deemed
necessary, including Merrill Lynch's assessment of general economic, market and
monetary conditions.
The projected information regarding Scripps reviewed by Merrill Lynch is
based on estimates and assumptions that are inherently subject to significant
economic and competitive uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the control of Scripps.
Accordingly, there can be no assurance that the projected results would be
realized or that actual results would not be significantly higher or lower than
those reviewed by Merrill Lynch and, in part, set forth below. In addition, the
projections were not prepared with a view to public disclosure or compliance
with the published guidelines of the SEC or the guidelines established by the
American Institute of Certified Public Accountants regarding projections and
forecasts. Neither Merrill Lynch nor Comcast nor any of their respective
affiliates assumes responsibility for the Scripps projections provided to
Merrill Lynch by Scripps.
Merrill Lynch relied upon the accuracy and completeness of all information
supplied or otherwise made available to it by Scripps and Comcast and assumed
the financial forecasts of Scripps reflected the best currently available
estimates and judgments of the management of Scripps as to the expected future
performance of Scripps. Merrill Lynch did not independently verify such
information or assumptions or undertake any independent appraisal or evaluation
of the assets or liabilities of Scripps or Comcast. The Merrill Lynch Opinion is
based upon market, economic, financial and other conditions as they existed and
could be evaluated as of the date of the Merrill Lynch Opinion. In that regard,
it should be noted that neither the Merrill Lynch Opinion nor the Merrill Lynch
Report (as defined below) expressed any opinion as to the price or range of
prices at which Comcast Special Common Stock will trade subsequent to the
consummation of the Transactions.
As part of its assignment, Merrill Lynch assisted Scripps in the
structuring and execution of a comprehensive offering program (the "Offering
Program") regarding the Scripps Cable Business during which a range of
knowledgeable and qualified prospective buyers were contacted and given the
opportunity to
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make a thorough evaluation of the Scripps Cable Business in preparation for the
submission of a proposal to acquire the Scripps Cable Business. Merrill Lynch
received various indications of interest in possible business transactions
involving the Scripps Cable Business, which it assessed and reviewed with
Scripps' management and the Board of Directors of Scripps.
In arriving at the Merrill Lynch Opinion and making its presentation to the
Board of Directors of Scripps at the meeting held on October 28, 1995, Merrill
Lynch considered and discussed certain financial analyses and other factors. In
connection with its presentation, Merrill Lynch provided the Board of Directors
of Scripps with a summary of valuation results obtained by using several
different valuation methods as well as other materials concerning the Scripps
Cable Business, the Scripps Common Stock, the Comcast Common Stock, and the
proposals from prospective purchasers, among other things (the "Merrill Lynch
Report"). The material portions of the Merrill Lynch Report are summarized
below. Prior to delivering the Merrill Lynch Report and Merrill Lynch Opinion
and making its presentation to the Board of Directors of Scripps on October 28,
1995, Merrill Lynch made presentations to the Board of Directors of Scripps
during the course of the Offering Program, including presentations on September
29, 1995, October 13, 1995 and October 26, 1995 (the "Prior Presentations"). The
Merrill Lynch Report contained material substantially similar to that contained
in the Prior Presentations, except as indicated below.
The Merrill Lynch Opinion was delivered October 28, 1995 to the Scripps
Board in connection with its decision whether or not to enter into the Agreement
and Plan of Merger. Accordingly, the Scripps Board has not requested Merrill
Lynch to update the Merrill Lynch Opinion. The Merrill Lynch Opinion, in stating
that the Merger Consideration was fair to the stockholders of Scripps from a
financial point of view, was based, among other things, on market conditions at
the time and does not specifically address the fairness of consideration to be
paid in the Merger in a transaction wherein the Average Closing Price of Comcast
Special Common Stock is less than the minimum Collar Price of $17.06375.
Information concerning Scripps and Comcast and their respective securities,
subsequent to the date of the Merrill Lynch Opinion, is contained or
incorporated by reference in this Joint Proxy Statement-Prospectus.
Review of Proposals Received. At the September 29, 1995 Scripps Board
meeting, Merrill Lynch reviewed and analyzed, in detail, nonbinding indications
of interest received from three prospective purchasers of the Scripps Cable
Business (the "Preliminary Indications"). Merrill Lynch outlined and analyzed
the major indicated terms of each proposal, including, among others, the
valuation ranges, the alternatives for the form of consideration to be received
by the Scripps stockholders, and certain other important proposed contract
provisions. Merrill Lynch also reviewed the characteristics of the proposed
consideration in each proposal, including, among other things, the implied
public and private market values of the securities offered and liquidity of the
proposed consideration in each proposal. Merrill Lynch also reviewed the
historical results, market performance, business mix and prospects of each
prospective purchaser, on a stand-alone basis and pro forma for the acquisition
of the Scripps Cable Business. See "-- Review of the Prospective Purchasers." At
the October 13, 1995 Scripps Board meeting, Merrill Lynch provided an update
regarding the sales process, described the financial impact of a value
protection mechanism or collar and presented detailed materials concerning each
of the interested parties which are discussed below.
At the October 26, 1995 Scripps Board meeting, Merrill Lynch reviewed and
analyzed, in detail, each of the three proposals received on October 24, 1995 to
acquire the Scripps Cable Business. Merrill Lynch outlined and analyzed the
major terms of each proposal, including, among others, the stated and adjusted
bid values, form of consideration to be received by the Scripps stockholders,
proposed value protection mechanisms or collars, and certain key proposed
contract provisions. Merrill Lynch also provided an assessment of the liquidity
of the proposed consideration in each proposal. Merrill Lynch noted the changes
in the valuations from each of the prospective purchasers from the Preliminary
Indications and indicated that Comcast had increased its proposal on its own
initiative from its October 24, 1995 submission to a stated value of $1.550
billion. Merrill Lynch noted that among its other significant terms, the Comcast
proposal included an improved value protection mechanism to hold the value
constant within a band of stock prices of 10% (compared to 5% in its October
24th submission) above and 10% below the Execution Price. Merrill Lynch also
noted that the Second Bidder's proposal had a stated value of $1.5875 billion,
with a value protection mechanism to hold the value constant within a band of
stock prices from 30% above to 30% below a stated
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trading price of $25. As described below, Merrill Lynch's presentation to the
Scripps Board also included valuations of the Scripps Cable Business, for
comparative purposes, based on comparable public company analysis, comparable
acquisition transaction analysis, discounted cash flow analysis, and analysis of
the potential value of the Scripps Cable Business if operated by a third party.
After discussions with the two prospective purchasers that produced
clarification and modification of these proposals, at the October 28, 1995
Scripps Board meeting, Merrill Lynch reviewed and analyzed these revised
proposals in detail, one of which was the proposal from Comcast. As described in
more detail below, Merrill Lynch noted that Comcast had increased the stated
value of its proposal on its own initiative to $1.575 billion and that, after
certain adjustments as estimated by Merrill Lynch, this value increased to
$1.6033 billion. Merrill Lynch also noted that the Second Bidder had increased
its proposal on its own initiative to a stated value of $1.6275 billion with a
25% value protection mechanism above and below a stated trading price of $20.
See "-- Review of Comcast, the Second Bidder and Their Proposals." Similar to
Merrill Lynch's October 26, 1995 presentation, as described below, Merrill
Lynch's October 28, 1995 presentation to the Scripps Board also included a
valuation of the Scripps Cable Business, for comparative purposes, based on
comparable public company analysis comparable acquisition transaction analysis,
discounted cash flow analysis and analysis of the potential value of the Scripps
Cable Business if operated by a third party.
Review of Comcast, the Second Bidder and Their Proposals. At the October
28, 1995 Scripps Board meeting, Merrill Lynch analyzed the proposals submitted
by Comcast and the Second Bidder. Merrill Lynch ascribed an adjusted value to
the Comcast offer, as described below, of $1.6033 billion (the "Estimated
Comcast Merger Value") and an adjusted value to the Second Bidder's final
proposal of $1.6275 billion (the "Estimated Second Bidder Merger Value").
Merrill Lynch computed that the difference between the two proposals was
approximately 1.5% and 3.3% on an adjusted and unadjusted basis, respectively,
and advised the Scripps Board that in light of the limited size of such
differences and the other factors described below, the two proposals were
substantially equivalent from a financial point of view.
In valuing the Comcast proposal, Merrill Lynch calculated the adjustments
in Comcast's proposal by adding (i) the stated value of $1.575 billion, such
value being held constant over a specified range of potential stock prices for
Comcast Special Common Stock by the proposed value protection mechanism, (ii)
the value of the adjustment for the Cable Net Liabilities Amount, which, based
on the Scripps Cable Business' unaudited balance sheet as of June 30, 1995 that
was prepared by Scripps' management, Merrill Lynch calculated at a net liability
of $14.9 million, and (iii) the value of a reimbursement for capital
expenditures for the rebuild and upgrade of existing cable television plant,
which, based on the Scripps' projections and Merrill Lynch's estimates, was
expected to approximate $43.2 million at closing. Using this methodology,
Merrill Lynch calculated the total adjusted value of Comcast's proposal at
$1.6033 billion. The Second Bidder did not propose any such adjustments and
Merrill Lynch did not make any adjustments to the Second Bidder's proposal. In
making calculations regarding the pro forma effect of the Merger on Comcast,
Merrill Lynch assumed (i) that closing adjustments would result in a purchase
price of $1.6033 billion and (ii) that the closing price of the Comcast Special
Common Stock would be $20.075.
Merrill Lynch calculated that the Comcast proposal included a collar which
protected the Comcast Merger Value to be delivered to Scripps stockholders to
the extent the Comcast Special Common Stock traded in a range of $17.06 to
$23.09 over a certain period prior to the Closing Date, allowing for a decrease
of 9% and an increase of 24% from a trading price of the Comcast Special Common
Stock on October 27, 1995 (the last trading day prior to the October 28 Scripps
Board meeting) of $18.625 (the "Comcast Trading Price") before the Estimated
Comcast Merger Value would be affected. In addition, Merrill Lynch on October
27, 1995 calculated that this collar would allow for a decrease or increase of
15% from the Execution Price of $20.075 (the average trading price of the
Comcast Special Common Stock for the 20 trading day period ending on October 24,
1995, the date on which the prospective purchasers formally submitted their
proposals) before the Comcast Merger Value would be affected. Merrill Lynch
focused this part of its analysis on the Execution Price in light of certain
short-term market pressures on the Comcast Special Common Stock. Merrill Lynch
believed that the then recent decline in the market price of the Comcast Special
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Common Stock was likely the result of market rumors that Comcast was considering
the purchase of the Scripps Cable Business.
Merrill Lynch also analyzed the anticipated effects of the Repurchase
Program on Comcast and potential positive financial and market impact on Comcast
of the Repurchase Program. For a discussion of Merrill Lynch's analysis of the
effects of the Repurchase Program, see the discussion on the ownership and
credit statistics of Comcast and the Second Bidder pro forma for an acquisition
of the Scripps Cable Business that appears below under this caption and
additional discussion of Merrill Lynch's analysis of Comcast pro forma for the
acquisition of the Scripps Cable Business that appears under the caption
"Opinion of Financial Advisor to Scripps -- Pro Forma Analysis." Merrill Lynch
noted that the Repurchase Program, if effected, could provide support for the
Comcast stock price both before and after the Merger.
Merrill Lynch calculated that the Second Bidder's proposal included a
collar which protected the Second Bidder Merger Value to be delivered to Scripps
stockholders provided the Second Bidder's stock, when it did trade, traded in a
range of $15 to $25 over a certain period of time prior to or after the closing
date. Merrill Lynch calculated that based on its calculation of the midpoint of
the implied public market value (as described two paragraphs below) of the
Second Bidder's stock (prior to the acquisition of the Scripps Cable Business)
of $18.77, the collar would allow for a decrease of 20% and an increase of 33%
in such implied public market value before the Second Bidder Merger Value would
be affected.
Merrill Lynch also noted that while an active public market existed for the
shares of Comcast Special Common Stock, no public market then existed for the
common stock of the Second Bidder. The Merrill Lynch Report calculated that the
Estimated Comcast Merger Value represented approximately 31% of Comcast's
current public float, and that, if the Second Bidder did not complete a planned
initial public offering, the Second Bidder Merger Value would represent
substantially all of the Second Bidder's public float.
In comparing the proposals of Comcast and the Second Bidder, Merrill Lynch
calculated the implied public and private market value per share of Comcast and
the Second Bidder on a stand-alone basis. As described below, Merrill Lynch
calculated the midpoint of the implied value per share of Comcast of $24.40 on a
public market basis and $32.85 on a private market basis, which implied that the
current stock price was trading at a discount of 23.7% and 43.3% to such values,
respectively. See "-- Implied Public and Private Market Value Analysis" and the
table under "-- Review of the Prospective Purchasers." In light of this
analysis, Merrill Lynch noted that Comcast Special Common Stock could experience
significant price appreciation were these shares to trade near the midpoint or
the high end of the range of implied public market values. Merrill Lynch noted
that its analysis of the Second Bidder's proposal assumed no trading discount to
the midpoint of the implied public market value per share of the Second Bidder
of $18.77. Merrill Lynch noted that its analysis of the implied private market
value per share of the Second Bidder was $27.47 assuming the completion of an
initial public offering of the Second Bidder's Class A common stock or $28.60
assuming no initial public offering of such common stock was completed. The
Merrill Lynch Report also compared the multiple of Adjusted Cable Market
Capitalization (as defined below) to 1996 estimated EBITDA of each of Comcast
and the Second Bidder; that comparison yielded a multiple of 6.7x for Comcast
and 9.3x for the Second Bidder. See the table under "-- Review of the
Prospective Purchasers." The Merrill Lynch Report compared these multiples to
those of other publicly traded comparable cable companies which ranged from a
low of 6.7x to a high of 9.6x and noted that the implied multiple for the Second
Bidder was at a premium to all of the comparable companies with the exception of
one while the implied multiple for Comcast was the lowest of the comparable
companies, with one comparable company having substantially the same multiple.
The Merrill Lynch Report also analyzed the pro forma effects of the
proposals on Comcast and the Second Bidder. Merrill Lynch calculated that as a
result of the Transactions, Comcast would incur cash flow per share dilution of
6.5% to 7.7% in 1996 and 5.4% to 7.3% in 1997 compared to cash flow per share
dilution of 10.4% to 13.5% in 1996 and 8.5% to 10.3% in 1997 for the Second
Bidder. Merrill Lynch also estimated that pro forma for the acquisition of the
Scripps Cable Business, the implied range of public market values per share of
Comcast was $20.58 to $25.19, compared to the Comcast Trading Price of $18.625
on October 27, 1995, and a collar of $17.06 to $23.09. The implied range of
public market values per share of the Second
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Bidder pro forma for the acquisition of the Scripps Cable Business was $16.45 to
$19.10, compared to an implied pre-transaction public market value midpoint of
$18.77 and a collar of $15.00 to $25.00.
Merrill Lynch also analyzed the business mix of each prospective purchaser
and the contribution to public and private market value of each prospective
purchaser's business segments. See "-- Contribution Analysis" and the table
under "-- Review of the Prospective Purchasers." Merrill Lynch noted that the
percentages of Comcast's estimated public market and private market aggregate
asset value derived from domestic cable television were 56.3% and 59.9%,
respectively. For the Second Bidder, on a stand-alone basis, the percentages of
its estimated public market and private market asset value that were derived
from domestic cable television were 89.4% and 88.6%, respectively. Pro forma for
the acquisition of the Scripps Cable Business, Merrill Lynch presented the
contribution analysis for each prospective purchaser on a public market basis.
Merrill Lynch noted that for Comcast the percentage of estimated domestic cable
television asset value of estimated public market aggregate asset value pro
forma for the Scripps Cable acquisition was 60.3%. See "-- Contribution
Analysis," "-- Pro Forma Analysis" and the table under "-- Review of the
Prospective Purchasers." Merrill Lynch noted that such estimated percentage for
the Second Bidder pro forma for the acquisition of the Scripps Cable Business
was 93.5%.
Merrill Lynch also estimated the percentage that Scripps' stockholders
would own of each prospective purchaser pro forma for the acquisition of the
Scripps Cable Business. See "-- Pro Forma Analysis." Merrill Lynch calculated
that, based on its estimated implied public market value per share of the Second
Bidder, Scripps' stockholders would have a 32.2% economic interest and a 3.9%
voting interest in the Second Bidder, pro forma for the acquisition of the
Scripps Cable Business (assuming no initial public offering of the Second
Bidder's common stock) which compared with 25.3% economic ownership and 0%
voting interest under the Comcast proposal (assuming Comcast were to repurchase
approximately 27 million shares of Comcast Common Stock pursuant to the
Repurchase Program at an average price equal to the Comcast Trading Price (the
"Merrill Lynch Assumed Repurchase")).
Merrill Lynch also estimated that the credit statistics for Comcast would
change as follows: (i) the ratio of total debt less cash and cash equivalents to
EBITDA (the "Leverage Ratio") pro forma for the Merger and the Merrill Lynch
Assumed Repurchase would decline to 4.81x as compared to the stand-alone
(assuming no Merrill Lynch Assumed Repurchase or Merger) Leverage Ratio of
5.04x; and (ii) the ratio of EBITDA to interest expense (the "Coverage Ratio")
would increase to 2.49x pro forma for the Merger and the Merrill Lynch Assumed
Repurchase as compared to 2.40x on a stand-alone basis (assuming no Merrill
Lynch Assumed Repurchase or Merger). Merrill Lynch estimated that for the Second
Bidder the estimated 1996 credit statistics pro forma for the transactions would
change as follows: (i) assuming no initial public offering of the Second
Bidder's common stock, the Leverage Ratio would decline to 5.26x from 6.27x on a
stand-alone basis and the Coverage Ratio would increase to 2.22x from 1.87x on a
stand-alone basis and (ii) assuming the effect of the planned initial public
offering, the Leverage Ratio would decrease to 4.95x from 5.92x on a stand-alone
basis and the Coverage Ratio would increase to 2.35x from 1.98x on a stand-alone
basis.
Review of the Prospective Purchasers. At the September 29, 1995 Scripps
Board meeting, Merrill Lynch also reviewed in detail the historical results and
prospects of the three prospective purchasers. Merrill Lynch compiled
information concerning the characteristics and prospects of each of the
prospective purchasers and estimated a range of implied public and private
market values for the assets and equity of each of the prospective purchasers,
including Comcast. Merrill Lynch reviewed publicly available financial
statements, publicly available operating data, research reports from selected
equity and fixed income research analysts, rating agency reports, and other
publicly available information that Merrill Lynch deemed appropriate. Merrill
Lynch also reviewed certain forecasted operating cash flow estimates, analyses
and other material furnished to it by Scripps. In addition, the Merrill Lynch
Report was based on meetings between Merrill Lynch, certain members of Scripps'
management and Board of Directors, and the managements of each of the
prospective purchasers which involved discussions of the operations, financial
results, and outlook for their respective businesses. In conducting its review
of each of the prospective purchasers, for each company, among other things,
Merrill Lynch analyzed the market capitalization (defined as the market value of
the common stock plus the liquidation value of the preferred stock plus total
debt and minority interests less
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cash and cash equivalents) and market value of each company; the capital
structure of each company; the business mix of each prospective purchaser; the
liquidity of the consideration offered; the percentage discount represented by
the then current stock price in comparison to Merrill Lynch's estimate of
implied public and private market values for each company; the total annualized
returns that common stockholders in each company received over certain periods
in comparison to the returns for Scripps Common Stock and the Standard & Poor's
500 Index; the indexed trading history, if any, of the common stock of each
company; and the trading history, if any, of the common stock of each company in
comparison to the Standard & Poor's 400 Index and in comparison to an index of
cable television stocks that included Cablevision Systems Corporation
("Cablevision Systems"), Cox Communications, Inc. ("Cox"), Jones Intercable,
Inc. ("Jones"), Tele-Communications, Inc. ("TCI"), and Time Warner Inc. ("Time
Warner"), companies which Merrill Lynch deemed to be comparable to the
prospective purchasers. In addition, Merrill Lynch analyzed the ratio of the
estimated (x) market capitalization less the estimated value of noncable assets
less the estimated public market value of nonconsolidated cable television
assets (the "Adjusted Cable Market Capitalization") to (y) projected 1996
EBITDA. See the table below for a summary of the findings of these analyses as
updated and presented at the October 28, 1995 Scripps Board meeting and as
presented in the Merrill Lynch Report. The analyses of the total annualized
returns that common stockholders in each company received over certain periods
in comparison to the returns for Scripps Common Stock and the Standard & Poor's
500 Index were presented only at the September 29, 1995 and October 13, 1995
Scripps Board meetings and are not included in the Merrill Lynch Report. The
updated findings of such analyses are described in the paragraph below.
At the October 13, 1995 Scripps Board meeting, Merrill Lynch presented
substantially all of the analyses from the previous meeting updated to reflect
the then current stock prices and added certain information concerning the
prospective purchasers that included estimated implied public market and private
market valuations for each prospective purchaser on a stand-alone basis and pro
forma for the proposed acquisition of the Scripps Cable Business (which are
described in more detail under the captions "-- Implied Public and Private
Market Value Analysis" and "-- Pro Forma Analysis"), capitalization tables of
the prospective purchasers, summaries of contemporary research analyst
commentaries concerning the equity and debt securities of Comcast and the Third
Bidder and the debt securities of the Second Bidder and a profile of the
ownership of the equity securities of the Second Bidder. The profile of the
ownership of the Second Bidder that Merrill Lynch presented was based on
information from public documents of the Second Bidder and from a meeting with
the Second Bidder's management. See the table below for a summary of the
findings of these analyses as updated and presented at the October 28, 1995
Scripps Board meeting and as presented in the Merrill Lynch Report. The analyses
of the total annualized returns that common stockholders in each company
received over certain periods in comparison to the returns for Scripps Common
Stock and the Standard & Poor's 500 Index were presented only at the September
29, 1995 and October 13, 1995 Scripps Board meetings and are not included in the
Merrill Lynch Report. Merrill Lynch noted that the annualized annual investor
return from January 1992 through October 1995 for the Third Bidder was 11.1%,
for Comcast was 5.4%, for Scripps was 12.5% and for the S&P 500 was 11.9%. Such
returns were determined by calculating the compound annual rate of growth
implied by the total appreciation (the increase or decrease in the stock price
plus dividends common shareholders received, if any) that common shareholders
received over the period. Merrill Lynch noted that a similar analysis for the
Second Bidder could only be estimated since there is no public market for the
common stock of the Second Bidder. Such estimate of the Second Bidder's
annualized annual investor return was based on Merrill Lynch's estimates of the
equity value of the Second Bidder at the end of each year of the period and in
October 1995. As a result of these analyses, Merrill Lynch estimated that the
annualized annual investor return for the common stock of the Second Bidder was
32.8%.
At the October 26, 1995 Scripps Board meeting, Merrill Lynch also presented
updated analyses of the market capitalization and market value of each company;
the capital structure of each company with the addition of an analysis of the
capital structure of each company pro forma for the acquisition of the Scripps
Cable Business; the business mix of each prospective purchaser; the liquidity of
the consideration offered; updated estimated implied public market and private
market valuations of each prospective purchaser both on a stand-alone basis and
pro forma for the acquisition of the Scripps Cable Business, as described in
more detail below; the estimated percentage discount represented by the then
current stock price in comparison to Merrill Lynch's estimate of implied public
and private market values for each company; the trading history, if any,
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which was presented in graph form from October 7, 1994 through October 24, 1995,
of the common stock of each company in comparison to the Standard & Poor's 400
Index and in comparison to an index of cable television stocks that included
Cablevision Systems, Cox, Jones, TCI and Time Warner, companies which Merrill
Lynch deemed to be comparable to the prospective purchasers; and the ratios of
the estimated Adjusted Cable Market Capitalization to projected EBITDA for each
prospective purchaser. At the October 28, 1995 Scripps Board meeting, Merrill
Lynch presented these analyses in updated form, and such analyses were presented
in the Merrill Lynch Report. These analyses are summarized in the table below.
<TABLE>
<CAPTION>
SECOND THIRD
COMCAST BIDDER(1) BIDDER
-------- --------- -------
<S> <C> <C> <C>
Market Capitalization (in millions)......................... $ 11,294 $ 8,726 $27,772
Market Value (in millions).................................. $ 5,219 $ 3,432 $12,080
Adjusted Cable Market Capitalization/1996 Operating Cash
Flow...................................................... 6.7x 9.3x 8.2x
Current Stock Price Percentage
Discount from Public Market and Private Market Valuation:
Public Market............................................. -23.7% No Public -10.5%
Private Market............................................ -43.3% Market -43.3%
Pro Forma Asset Value Composition
Domestic Cable(2)......................................... 60.3% 93.5% 87.2%
International Cable/Programming........................... 1.2% 3.8% 8.1%
Domestic Programming...................................... 21.8% 2.6% 0.0%
Cellular.................................................. 15.3% 0.0% 0.0%
Other....................................................... 1.4% 0.1% 4.3%
Pro Forma Capitalization(3) (in millions)
Total Debt................................................ $7,231.5 $ 4,636.3
Redeemable Preferred Stock................................ -- $ 242.7
Minority Interest......................................... $ 710.7 $ 3.8
Total Stockholders' Equity................................ $ 295.5 $ 828.9
Total Capitalization...................................... $8,237.7 $ 5,711.7
</TABLE>
Notes: (1) Market capitalization and market value data based on mid-point of
public market valuation. Assumes no initial public offering.
(2) Includes non-consolidated cable investments and direct broadcast
satellite ventures.
(3) The Comcast data is pro forma for the acquisition of the Scripps
Cable Business and the $500 million Merrill Lynch Assumed
Repurchase. Data for the Second Bidder is pro forma for the
acquisition of the Scripps Cable Business and an assumed $300
million initial public offering. This analysis was not performed for
the Third Bidder for the October 28, 1995 Board Meeting.
See also "-- Review of Comcast, the Second Bidder and Their Proposals." As
described below under the seven next succeeding subcaptions (beginning with
"-- Implied Public and Private Market Analysis" and ending with "-- Valuation of
Scripps Cable; Analysis of Potential Value to Third Party"), Merrill Lynch's
presentation to the Scripps Board also included estimated valuations of the
Scripps Cable Business, for comparative purposes, based on comparable public
company analysis, comparable acquisition transaction analysis, discounted cash
flow analysis and analysis of the potential value of the Scripps Cable Business
if operated by a third party.
Implied Public and Private Market Value Analysis. To estimate the implied
public market and private market values of the assets and equity of each
prospective purchaser, Merrill Lynch estimated the value for each business
segment or investment of each company and, in the case of an equity valuation,
subtracted the debt and minority interests and added back the value of cash and
cash equivalents. Merrill Lynch used a variety of valuation methodologies to
estimate these public and private market values which included, among others,
using the then current stock price for publicly traded entities, discounted cash
flow analyses, and multiples of EBITDA, subscribers, and revenues as Merrill
Lynch deemed appropriate in each case. In selecting multiples for the
above-mentioned analyses, Merrill Lynch selected these multiples after
consideration of relevant multiples used to value businesses in acquisition
transactions or in the public market. For the
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purposes of these analyses, Merrill Lynch selected the acquisition transactions
or businesses, as the case may be, that it deemed to be comparable to each
prospective purchaser's assets or investments.
Merrill Lynch presented an analysis regarding Comcast's implied public
market value before the consummation of the Transactions with an estimated
public aggregate asset value range of $12.2 billion to $13.6 billion. Merrill
Lynch noted that the estimated implied midpoint public equity value per share
was $24.40. Merrill Lynch presented an analysis regarding Comcast's implied
estimated private market value before the consummation of the Transactions with
an estimated private market aggregate asset value range of $14.0 billion to
$16.6 billion. Merrill Lynch noted that the estimated implied midpoint private
market equity value per share was $32.85.
Contribution Analysis. Merrill Lynch presented analyses of the business
mix of each prospective purchaser and the contribution to public market and
private market value of each prospective purchaser's business segments. Merrill
Lynch's valuation methodologies of these segments are mentioned above. See
"-- Implied Public and Private Market Value Analysis." Merrill Lynch estimated
that Comcast's implied public aggregate asset value before the consummation of
the Transactions ranged from $12.2 billion to $13.6 billion with the component
businesses estimated to be valued at (based on the midpoints of the estimated
valuation ranges) $7.4 billion for domestic cable television, or 56.3%, $3.2
billion for electronic retailing, or 24.0%, $2.2 billion for cellular, or 16.8%,
and $0.4 billion, or 2.9%, for other operations and corporate expenses, among
other things. Merrill Lynch presented an analysis regarding Comcast's implied
private market value before the consummation of the Transactions with an
estimated private market aggregate asset value range of $14.0 billion to $16.6
billion with the component businesses estimated to be valued at (based on the
midpoints of the valuation ranges) $9.3 billion for domestic cable television,
or 59.9%, $3.4 billion for electronic retailing, or 22.2%, $2.4 billion for
cellular, or 15.7%, and $0.3 billion, or 2.4%, for the other operations, which
also reflects the value of corporate expenses, among other things.
Pro Forma Analysis. Merrill Lynch also estimated the pro forma impact of
the acquisition of the Scripps Cable Business on certain financial and operating
indicators for each prospective purchaser. Merrill Lynch also analyzed the
impact on Comcast if Comcast were to consummate the Merrill Lynch Assumed
Repurchase. Merrill Lynch estimated, based on the then current publicly
available information concerning Comcast, that pro forma for the Merger current
actual subscribers for Comcast would increase to 4.1 million, an increase from
3.3 million on a stand-alone basis. Merrill Lynch calculated, based on its
estimated midpoint implied public market and private market values, the
estimated accretion and dilution of the estimated public market and private
market values per share pro forma for the Merger, which for Comcast were as
follows: (i) assuming the effect of the Merrill Lynch Assumed Repurchase, the
dilution for the public market value per share was 5.9% and for the private
market value per share was 5.4% and (ii) assuming no Merrill Lynch Assumed
Repurchase, the dilution for the public market value per share was 7.2% and for
the private market value per share was 8.2%. Merrill Lynch presented analyses of
the business mix of each prospective purchaser and the contribution to estimated
public market value of each prospective purchaser's business segments pro forma
for the Transactions. See " -- Contribution Analysis" and the table under
" -- Review of the Prospective Purchasers." Merrill Lynch estimated that
Comcast's component businesses pro forma for the acquisition of the Scripps
Cable Business were valued at (based on the midpoints of the valuation ranges)
$8.7 billion for domestic cable television, or 60.3%, $3.2 billion for
electronic retailing, or 21.8%, $2.2 billion for cellular, or 15.3%, and $0.4
billion, or 2.6%, for other operations, which also reflects the value of
corporate expenses, among other things. Merrill Lynch noted in its presentation
that the similar analyses for the two other prospective purchasers pro forma for
the acquisition of the Scripps Cable Business indicated higher concentrations of
domestic cable television for each of the two other prospective purchasers
compared to Comcast pro forma for the Transactions. See " -- Review of Comcast,
the Second Bidder and Their Proposals" and the table under " -- Review of the
Prospective Purchasers."
Valuation of Scripps Cable; Comparable Public Company Analysis. Merrill
Lynch compared certain publicly available financial and operating data and
projected financial performance (reflecting a composite of research analysts'
estimates) of selected publicly traded cable television companies with similar
financial and operating data and projected financial performance of the Scripps
Cable Business (as estimated by the management of Scripps Cable). The selected
cable television companies reviewed in this analysis (collec-
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tively, the "Scripps Cable Comparable Group") were: Adelphia Communications
Corporation, Cablevision Systems, Century Communications Corporation
("Century"), Continental, Cox, Falcon Cable Systems Company, Jones, TCA Cable
TV, Inc., TCI and Time Warner. Merrill Lynch analyzed, among other things, the
ratios of Adjusted Cable Market Capitalization to projected cable EBITDA for
1995 and 1996, operating and financial performance data and the capital
structures of the Scripps Cable Comparable Group. Merrill Lynch then compared
the results of such analyses for the Scripps Cable Comparable Group to the
corresponding results for the Scripps Cable Business. Merrill Lynch calculated
the implied value of the Scripps Cable Business by selecting ranges of multiples
of 1995 cable EBITDA, derived from Merrill Lynch's analysis of multiples of
Adjusted Cable Market Capitalization to 1995 cable EBITDA of the Scripps Cable
Comparable Group, and applying such multiple ranges to the projected EBITDA of
each of Scripps Cable's cable television operating regions pro forma for
Scripps' pending acquisition of the Mid-Tennessee Business. As each of Scripps
Cable's cable television systems has differing operating and financial
characteristics, Merrill Lynch applied different multiple ranges to each region
based on its analysis of the Scripps Cable Comparable Group. For this analysis,
Merrill Lynch used a multiple range of 8.5x to 9.0x for the cable television
systems having their central operations in Sacramento, CA, Chattanooga, TN and
Knoxville, TN, 8.0x to 8.5x for the cable television systems in Atlanta, GA,
Lake County, FL, Rome, GA, and Longmont, CO, and 7.0x to 7.5x for the
Mid-Tennessee Business, Bluefield, WV, and Elizabethtown, KY. Based on an
estimate of $125.7 million of EBITDA for year-end 1995, Merrill Lynch
calculated, using this methodology, the implied value of the Scripps Cable
Business at between $1.024 billion and $1.087 billion.
Valuation of Scripps Cable; Comparable Acquisition Transaction
Analysis. Merrill Lynch reviewed certain publicly available information
regarding 17 selected business combinations involving cable television companies
since February 1994. Merrill Lynch reviewed the prices paid in such transactions
in terms of the Adjusted Cable Market Capitalization as a multiple of EBITDA and
compared such multiple to the multiples of such financial results for the
Scripps Cable Business implied by the Merger Consideration. The 17 pending and
completed business combinations reviewed in this analysis (collectively, the
"Acquisition Transaction Comparables") and the dates such acquisitions were
announced were: the acquisition of Viacom Inc.'s cable business by TCI
(announced July 1995); the sale of certain of Sammons Communications'
("Sammons") cable systems to both Lenfest Group and TKR Cable (announced March
1995); the sale of the remainder of Sammons' cable systems to Marcus Cable
Company (announced March 1995); the pending sale of Cablevision Industries
Corporation and certain related companies to Time Warner (announced February
1995); the sale of Cablevision of Chicago to Continental (announced January
1995); the sale of the cable business of Gaylord Entertainment Company to Kelso
& Company and Charter Communications, Inc. ("Charter") (announced December
1994); the merger of Providence Journal Company's cable systems with and into
Continental (announced November 1994); the sale of the ML Media Partners Cable
Systems to Century (announced November 1994); the acquisition of Summit
Communications Group, Inc. by Time Warner (announced September 1994); the merger
of TeleCable Corporation with and into TCI (announced August 1994); the purchase
of the Wometco Cable L.P. cable television systems by U.S. West Inc. (announced
July 1994); the acquisition of certain Crown Media cable television systems by
Charter (announced June 1994); the sale of Crown Media of Wisconsin to Marcus
Cable (announced June 1994); the acquisition of Maclean Hunter Limited's U.S.
cable systems by Comcast (announced June 1994); the merger of the Times Mirror
Company's cable systems with and into Cox (announced June 1994); and the
acquisition of McDonald Group by Charter (announced February 1994). Merrill
Lynch calculated the implied value of the Scripps Cable Business by selecting
ranges of multiples of 1995 cable EBITDA, derived from Merrill Lynch's analysis
of multiples of Adjusted Cable Market Capitalization to 1995 cable EBITDA of the
Acquisition Transaction Comparables, and applying such multiple ranges to the
projected EBITDA of each of Scripps Cable's cable television operating regions
pro forma for Scripps' pending acquisition of the Mid-Tennessee Business. See
"The Merger Agreement -- Certain Covenants -- Acquisition of Mid-Tennessee
Business." As each of Scripps Cable's cable television systems has differing
operating and financial characteristics, Merrill Lynch applied different
multiple ranges to each region based on its analysis of the Scripps Cable
Comparable Group. For this analysis, Merrill Lynch used a multiple range of
10.5x to 11.5x for the cable television systems having their central operations
in Sacramento, CA, Chattanooga, TN and Knoxville, TN, 10.0x to 11.0x for the
cable television systems in Atlanta, GA, Lake County, FL, Rome, GA
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and Longmont, CO, 9.5x to 10.5x for the Mid-Tennessee Business, and 9.0x to
10.0x for Bluefield, WV, and Elizabethtown, KY. Based on an estimate of $125.7
million of EBITDA for year-end 1995, Merrill Lynch calculated, using this
methodology, the implied value of the Scripps Cable Business at between $1.279
billion and $1.405 billion.
Valuation of Scripps Cable; Discounted Cash Flow Analysis. Merrill Lynch
performed a discounted cash flow analysis of the Scripps Cable Business based
upon estimates of projected financial performance prepared by Scripps Cable's
management for the years 1995 and 1996 and estimated by Merrill Lynch for the
years 1997 through 2005 on the basis of its review of Scripps Cable's historical
performance and discussions with Scripps' and Scripps Cable's management.
Utilizing these projections, Merrill Lynch calculated a range of values based
upon the discounted net present value of the sum of (i) the projected stream of
after-tax unlevered free cash flows for the Scripps Cable Business to the year
2005, (ii) the projected terminal value of the Scripps Cable Business at such
year based upon a range of multiples of projected EBITDA, and (iii) an assumed
cash balance net of debt. Merrill Lynch selected the range of discount rates of
12% to 14% by applying the typical cost of capital of a cable television company
to the Scripps Cable Business' cash flow, and selected 13% as the midpoint of
such range. In order to estimate such cost of capital for cable television
companies, Merrill Lynch performed weighted average cost of capital analyses for
comparable cable television companies. Merrill Lynch selected terminal multiples
of EBITDA (ranging from 10.0x to 12.0x). Utilizing this methodology, the value
of the Scripps Cable Business was calculated, using the midpoint discount rate
of 13% and a range of terminal multiples of EBITDA of 10.0x to 12.0x, to be
between $1.435 billion and $1.630 billion.
Valuation of Scripps Cable; Analysis of Potential Value to Third
Party. Merrill Lynch performed an analysis to estimate the range of potential
values the Scripps Cable Business could have in the hands of a larger cable
operator. For this analysis, Merrill Lynch assumed that the economies of scale
and increased programming discounts that a larger cable television company can
obtain as compared to Scripps Cable would provide certain of the prospective
purchasers with lower programming and other costs. The resulting higher 1995
estimated EBITDA from this analysis was $136.1 million, based on assumptions of
2% EBITDA margin improvement from a reduction in programming costs due to
programming discounts that were available to cable television operators based on
the number of subscribers they serve and a 5% reduction in employee and other
costs due to efficiencies derived from clustering, a term used in the cable
television industry to describe economies of scale in an operating region due to
the proximity of a significant base of subscribers. To determine the valuation
range for this analysis, Merrill Lynch calculated the value of the Scripps Cable
Business by using this estimated EBITDA figure and applied the same multiples
derived from Merrill Lynch's analysis of the Acquisition Transaction Comparables
as applied to each of Scripps' nine cable operating regions pro forma for the
acquisition of the Mid-Tennessee Business. Using this methodology, Merrill Lynch
calculated the implied potential value of the Scripps Cable Business, if
operated by a third party, at between $1.385 billion and $1.630 billion.
In arriving at the Merrill Lynch Opinion and in presenting the Merrill
Lynch Report, Merrill Lynch performed a variety of financial analyses, the
material portions of which are summarized above. The summary set forth above
does not purport to be a complete description of the analyses performed by
Merrill Lynch. In addition, Merrill Lynch believes that its analyses must be
considered as a whole and that selecting portions of its analyses or of the
factors considered by it, without considering all such factors and analyses,
could create a misleading view of the process underlying its analyses used in
arriving at the Merrill Lynch Opinion and the Merrill Lynch Report. The matters
considered by Merrill Lynch in arriving at the Merrill Lynch Opinion that, as of
the date of such opinion, the Merger Consideration is fair to the holders of
Scripps Common Stock from a financial point of view, involve elements of
subjective judgment and are based on numerous macroeconomic operating and
financial assumptions with respect to industry performance, general business and
economic conditions and other matters, many of which are beyond Scripps' or
Comcast's control. Any estimates incorporated in the analyses performed by
Merrill Lynch are not necessarily indicative of actual past or future results or
values, which may be significantly more or less favorable than such estimates.
Estimated values do not purport to be appraisals and do not necessarily reflect
the prices at which securities, businesses or companies may be sold in the
future, and such estimates are inherently subject to uncertainty. Arriving at a
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fairness opinion is a complex process not necessarily susceptible to partial or
summary description. No public company utilized as a comparison is identical to
Scripps, Scripps Cable, Comcast or the business segment for which a comparison
is being made, and none of the Acquisition Transaction Comparables or other
business combinations utilized as a comparison is identical to the proposed
Merger. Accordingly, an analysis of publicly traded comparable companies and
comparable business combinations resulting from the transactions is not
mathematical; rather, it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
values of the comparable companies or company to which they are being compared.
The Board of Directors of Scripps retained Merrill Lynch because Merrill
Lynch is an internationally recognized investment banking firm with substantial
experience in transactions similar to the Merger and because it is familiar with
Scripps and its businesses. Merrill Lynch acted as lead manager in connection
with a public offering of common stock by the Scripps Trust in December 1993 for
which it received customary compensation. In addition, Merrill Lynch has
rendered, from time to time, various investment banking and financial advisory
services to Comcast for which it has received customary compensation. As part of
its investment banking business, Merrill Lynch is continually engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions.
Fees Payable to Merrill Lynch. Pursuant to a letter agreement dated April
24, 1995 between Scripps and Merrill Lynch, Scripps retained Merrill Lynch as
financial advisor in connection with a review of Scripps' strategic alternatives
with regard to the Scripps Cable Business. Scripps has paid Merrill Lynch
$200,000 for services in connection with the strategic review of the Scripps
Cable Business and will become obligated to pay Merrill Lynch a fee of $7
million upon the consummation of the Merger; provided that the initial $200,000
fee shall be credited against the $7 million fee payable to Merrill Lynch upon
consummation of the Merger. Scripps has also agreed to reimburse Merrill Lynch
for its reasonable out-of-pocket expenses, including the reasonable fees and
disbursements of its legal counsel, and to indemnify Merrill Lynch and certain
related persons against certain liabilities in connection with its engagement,
including certain liabilities under the federal securities laws.
BACKGROUND OF AND COMCAST'S REASONS FOR THE MERGER.
Comcast considers a number of potential acquisitions of cable television
systems each year and has, from time to time, made such acquisitions on an
opportunistic basis.
In July 1995, Comcast entered into a confidentiality agreement with
Scripps, and in August 1995, Comcast received a copy of a confidential offering
memorandum describing various aspects of the Scripps Cable Business. Comcast
reviewed and analyzed the information contained in the confidential offering
memorandum. On the basis of that review and analysis, Comcast prepared and on
September 6, 1995 submitted to Merrill Lynch a preliminary, non-binding
indication of interest regarding the acquisition of the Scripps Cable Business.
Shortly thereafter, senior members of Comcast management met with senior members
of Scripps' management and one or more of the Trustees to discuss the indication
of interest submitted by Comcast. Shortly thereafter, Comcast was invited to
participate in the second phase of the sale process.
In early October 1995 Comcast and its outside legal counsel (i) received
from Merrill Lynch a term sheet outlining the material terms of the
spin-off/merger transaction, (ii) began a due diligence review of certain
business, financial and legal information with respect to Scripps and the
Scripps Cable Business, and (iii) reviewed drafts of proposed merger agreement
and related agreements, including drafts of board representation, registration
rights and voting agreements.
To assist it in its valuation of the Scripps Cable Business and in
structuring the financial terms of the potential transaction, Comcast retained
Lehman Brothers as its financial advisor. Lehman Brothers' primary function was
to assist Comcast in the analysis of the likely effect of certain financial
terms of the potential transaction, particularly the proposed "collar
arrangements," on the trading price of Comcast's stock. On October 20, 1995,
senior management of Comcast met, together with outside legal counsel and Lehman
Brothers, to consider and, if appropriate, to formulate a recommendation to the
Comcast Board regarding the
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possible acquisition by Comcast of the Scripps Cable Business. At such meeting,
Lehman Brothers indicated that the proposed collar arrangement might result in
short-term downward market pressure on the price of Comcast's stock during the
period (the "Pricing Period") in which the average trading price used to
calculate the number of shares to be delivered in the merger is determined.
Lehman Brothers also indicated breakup fees in transactions of this type are
typically in the 2% to 5% range.
Lehman Brothers was selected by Comcast management. Lehman Brothers is an
internationally recognized investment banking firm which has substantial
experience advising corporations in connection with transactions similar to the
Merger. Lehman Brothers has rendered, from time to time, various investment
banking and financial advisory services to Comcast for which it has received
customary compensation. In May 1995, Lehman Brothers acted as the underwriter in
connection with the public offering of Senior Subordinated Debentures of
Comcast. Lehman Brothers received customary compensation in connection with such
offering. Comcast will pay Lehman Brothers a fee of $750,000 in connection with
its role as financial advisor.
On October 22, 1995, members of the Comcast Board were provided with
detailed information prepared by Comcast management, which information included
an analysis of the Scripps Cable Business, a summary of the transaction
structure and the agreements proposed by Scripps, management's valuation of the
business, a financial impact analysis and a management summary of the proposed
bid. On October 23, 1995, a special meeting of the Comcast Board was convened to
consider the possible acquisition. All members of the Comcast Board other than
Irving A. Wechsler, who was out of the country, participated in the meeting.
At the Comcast Board Meeting, Brian L. Roberts, President of Comcast,
presented a review of the Scripps Cable Business, Comcast management's valuation
of that business and the transaction structure proposed by Scripps. He noted
that the Scripps Trust had requested representation on the Comcast Board.
Representatives of Lehman Brothers briefly discussed the valuation of the
Scripps Cable Business prepared by Comcast Management and indicated that they
believed that the assumptions used by Comcast Management in the preparation of
its valuation, and the conclusions of Comcast Management regarding the value of
Scripps Cable, were reasonable. Representatives of Lehman Brothers also reviewed
for the Comcast Board certain financial terms of the proposed transaction,
specifically, the "collar" arrangements and their expected effect on the market
price of Comcast stock, the breakup fee and the potential for dilution resulting
from the issuance of Comcast's stock. Lehman Brothers indicated that, because of
the potential for dilution, Comcast could expect the initial market reaction to
the announcement of the transaction to result in a decline in the price of
Comcast's stock. Lehman Brothers' views were based upon its assessment of
then-current market conditions and its experience in connection with
transactions similar to the Merger. Lehman Brothers was not asked to, and did
not, make a presentation to the Board regarding the valuation of the Scripps
Cable Business or render a fairness opinion on any proposed transaction. Outside
legal counsel to Comcast reviewed the terms of the merger agreement and related
agreements proposed by Scripps and various issues raised thereby. Mr. Roberts
informed the Comcast Board that Comcast management recommended the purchase of
the Scripps Cable Business and suggested pricing and certain other terms and
conditions. Following extensive discussions regarding the Scripps Cable
Business, the financial and legal aspects of the proposed transaction, the
accounting and likely market impact of the proposed transaction and various
other related matters, the Comcast Board approved the proposed acquisition
subject to the pricing limitations suggested by Mr. Roberts and authorized
management to negotiate the definitive terms and conditions, subject to such
limitations.
Comcast submitted a final proposal, including transaction documents marked
with proposed revisions, to Merrill Lynch and Scripps on October 24, 1995.
Comcast's proposal offered to acquire the Scripps Cable Business for shares of
Comcast Special Common Stock with an aggregate value of $1.525 billion, subject
to certain adjustments. Comcast's proposal included a price protection or
"collar" mechanism that would result in an adjustment to the number of shares of
Comcast Special Common Stock to be delivered to the extent the share price
increased by up to 5%, or decreased by up to 5%, between the execution of the
merger agreement and the closing. The proposal also included a right for Scripps
to terminate the proposed merger if the price of the Comcast Special Common
Stock declined by more than 20% during such period. In order to minimize the
downward pressure on the market price of Comcast's stock during the Pricing
Period, the Comcast proposal provided that the average trading price used to
calculate the number of shares to be issued in the merger be determined by
reference to the average closing price of the Comcast Special Common Stock on
Nasdaq for 15 days chosen at random from the 40 trading days ending immediately
before the closing date of the merger.
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Comcast's proposal also sought to limit the Scripps Board fiduciary out and the
Scripps Trust fiduciary out and requested a 5% breakup fee.
In response to a request by Merrill Lynch for clarification of final
proposals, on October 26, 1995, Comcast increased the amount of consideration
offered in its original proposal by $25 million, from $1.525 billion to $1.550
billion. Additionally, Comcast revised its proposed price protection mechanism
to provide for a collar of 10% above and 10% below the Execution Price and to
give Scripps the right to terminate the proposed merger if the market price of
Comcast Special Common Stock declined by more than 15%, subject to Comcast's
right to "top-up" the number of shares delivered. Comcast's revised proposal
continued to call for a 5% breakup fee and continued to limit the Scripps Board
fiduciary out and the Scripps Trust fiduciary out.
On October 27, 1995, a conference call was held among the Chairman and
Chief Executive Officer of Scripps, a representative from Merrill Lynch and
Comcast. Comcast offered to increase the consideration to $1.575 billion and to
modify the terms of its proposal to provide a collar of 15% above and 15% below
the Execution Price. The parties also discussed the possible timing of the
execution of a merger agreement.
Comcast and its legal advisors continued negotiation with Merrill Lynch and
Scripps' legal advisors on October 27 and 28, 1995. On October 28, 1995, Comcast
agreed to reduce the breakup fee to 3% and to allow retention of the Scripps
Board fiduciary out and Scripps Trust fiduciary out as originally proposed by
Scripps and the Scripps Trust.
On October 28, 1995, Scripps, New Scripps and Comcast entered into the
Agreement and Plan of Merger, and Scripps, Comcast, Sural and the Scripps Trust
entered into the Voting Agreement.
On June 19, 1996, the Comcast Board ratified the Agreement and Plan of
Merger as executed on October 28, 1995 and approved the Form of Amendment to the
Agreement and Plan of Merger in substantially the form set forth as Annex II.
RECOMMENDATION OF THE COMCAST BOARD OF DIRECTORS.
The Comcast Board of Directors has carefully considered the terms of the
proposed Merger and believes that the Merger and related transactions are in the
best interests of Comcast and its shareholders. The Comcast Board has approved
the Merger and the related transactions and recommends that the Comcast
shareholders vote FOR the proposal to approve the issuance of Comcast Special
Common Stock in the Merger.
The Comcast Board believes that the Merger would allow Comcast to increase
the scale of its cable television operations through the acquisition of
desirable systems. The Scripps cable systems are preponderantly in large
clusters. In addition, the structure of the transaction (specifically, the
absence of debt at Scripps Cable and Scripps' requirement that Comcast Special
Common Stock be used as the form of consideration) will reduce the leverage of
Comcast, which will provide Comcast with increased financial flexibility.
In reaching its conclusion, the Comcast Board considered, among other
things, the following: (i) the judgment, advice and analyses of Comcast's
management; (ii) the judgment, advice and analyses of Lehman Brothers; (iii)
regulatory, competitive, technological and other developments affecting the
cable television industry; (iv) the characteristics and locations of the Scripps
cable systems; (v) the financial condition, results of operations and cash flows
of the Scripps Cable Business and Comcast, both on an historical basis and a
prospective basis; (vi) the financial terms of the proposed transaction; (vii)
the terms and conditions of the Merger Agreement and related documents; (viii)
the strategic benefits of the proposed merger; (ix) historical market prices of,
trading information for and expected market impact on Comcast Common Stock; and
(x) the dilutive effect of the issuance of Comcast Special Common Stock in the
proposed Merger.
The foregoing discussion of the information and factors considered and
given weight by the Comcast Board is not intended to be exhaustive. In view of
the variety of factors considered in connection with its evaluation of the
Merger, the Comcast Board did not find it practicable to and did not quantify or
otherwise assign relative weights to the specific factors considered in reaching
its determination. In addition, individual members of the Comcast Board may have
given different weights to different factors.
THE COMCAST BOARD RECOMMENDS THAT THE HOLDERS OF COMCAST CLASS A COMMON
STOCK AND COMCAST CLASS B COMMON STOCK VOTE FOR THE PROPOSAL TO APPROVE THE
ISSUANCE OF COMCAST SPECIAL COMMON STOCK IN THE MERGER.
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THE SPECIAL MEETINGS
MATTERS TO BE DISCUSSED AT THE SPECIAL MEETINGS
General. This Joint Proxy Statement-Prospectus is being furnished by
Comcast to holders of shares of Comcast Common Stock and by Scripps to holders
of shares of Scripps Common Stock in connection with the solicitation of proxies
from certain of such stockholders for use at the Comcast Special Meeting and the
Scripps Special Meeting, respectively.
Comcast. At the Comcast Special Meeting or any adjournments or
postponements thereof, holders of shares of Comcast Class A Common Stock and
Comcast Class B Common Stock will be asked to approve the issuance of Comcast
Special Common Stock in the Merger, voting together as a single class. Such
stockholders will also consider and vote upon such other matters as may properly
be brought before the Comcast Special Meeting.
THE BOARD OF DIRECTORS OF COMCAST HAS APPROVED THE MERGER AND RECOMMENDS A
VOTE FOR THE PROPOSAL TO APPROVE THE ISSUANCE OF COMCAST SPECIAL COMMON STOCK IN
THE MERGER.
Scripps. At the Scripps Special Meeting or any adjournments or
postponements thereof, holders of Scripps Class A Common Stock and Scripps
Common Voting Stock, voting as separate classes, will be asked to approve and
adopt the Scripps Charter Amendment, and holders of Scripps Common Voting Stock
will be asked to approve and adopt the Merger Agreement. Holders of Scripps
Common Voting Stock will also consider and vote upon such other matters as may
properly be brought before the Scripps Special Meeting.
THE BOARD OF DIRECTORS OF SCRIPPS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE SCRIPPS CHARTER AMENDMENT AND RECOMMENDS THAT SCRIPPS
STOCKHOLDERS VOTE FOR THE PROPOSAL TO APPROVE AND ADOPT THE MERGER AGREEMENT AND
FOR THE PROPOSAL TO APPROVE AND ADOPT THE SCRIPPS CHARTER AMENDMENT.
RECORD DATES; STOCK ENTITLED TO VOTE; QUORUM
Comcast. The Comcast Record Date is September 13, 1996. Shareholders of
record at the close of business on the Comcast Record Date will be entitled to
notice of, and all such holders of Comcast Class A Common Stock and Comcast
Class B Common Stock will be entitled to vote at, the Comcast Special Meeting or
any adjournments or postponements thereof. As of the Comcast Record Date, there
were 34,002,024 shares of Comcast Class A Common Stock (one vote per share),
8,786,250 shares of Comcast Class B Common Stock (15 votes per share), and
190,504,702 shares of Comcast Special Common Stock (no votes per share)
outstanding and held by 1,858, one, and 2,288 holder(s) of record, respectively.
The presence in person or by proxy of shares representing a majority of
votes entitled to be cast by holders of Comcast Class A Common Stock and Comcast
Class B Common Stock issued, outstanding and entitled to vote as of the Comcast
Record Date is required to constitute a quorum for the transaction of business
at any meeting of stockholders. Abstentions and broker non-votes are included in
the determination of the number of shares of Comcast Class A Common Stock and
Comcast Class B Common Stock present for purposes of determining a quorum.
Scripps. The Scripps Record Date is September 18, 1996. Only holders of
record of shares of each class of Scripps Common Stock at the close of business
on the Scripps Record Date will be entitled to notice of, and as set forth
herein to vote at, the Scripps Special Meeting or any adjournments or
postponements thereof. As of the Scripps Record Date, there were 19,470,382
shares of Scripps Common Voting Stock and 61,000,396 shares of Scripps Class A
Common Stock outstanding held by approximately 27 and 4,700 holders of record,
respectively.
The presence in person or by proxy of shares representing a majority of the
outstanding shares of the Scripps Common Voting Stock as of the Scripps Record
Date is required to constitute a quorum for the transaction of business at the
Scripps Special Meeting with respect to the proposal to approve the Merger
Agreement. The presence in person or by proxy of shares representing a majority
of the outstanding shares of each class of Scripps Common Stock as of the
Scripps Record Date is required to constitute a quorum for the
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transaction of business at the Scripps Special Meeting with respect to the
proposal to approve the Scripps Charter Amendment. Abstentions and broker
non-votes are included in the determination of the number of shares of each
class of Scripps Common Stock present for purposes of determining a quorum.
REQUIRED VOTES
Comcast. The affirmative vote of a majority of the votes cast by holders
of the outstanding shares of Comcast Class A Common Stock and Comcast Class B
Common Stock, voting as a single class, is required for approval of the issuance
of Comcast Special Common Stock in the Merger. Abstentions and broker non-votes
will not be considered in determining whether the Comcast Proposal has been
approved. As of the Comcast Record Date, Sural owned shares of Comcast Common
Stock representing approximately 81% of the outstanding voting power in Comcast.
Therefore, Sural has sufficient voting power to approve the Comcast Proposal
regardless of the vote of any other stockholders. Sural has entered into an
agreement pursuant to which it is obligated to vote in favor of the Comcast
Proposal. See "The Merger Agreement -- Ancillary Agreements -- Voting
Agreement." The fact that a Comcast shareholder voted in favor of the Comcast
Proposal could be raised as a defense in any action brought by such shareholder
against Comcast, Sural or any officer or director of Comcast with respect to the
Merger.
Scripps. The affirmative vote of the holders of a majority of the
outstanding shares of Scripps Common Voting Stock is required for approval of
the Merger. The affirmative vote of the holders of a majority of the outstanding
shares of Scripps Common Voting Stock and of Scripps Class A Common Stock,
voting as separate classes, is required for approval of the Scripps Charter
Amendment. Abstentions and broker non-votes will have the same effect as a vote
against each of the Scripps Proposals. As of the Scripps Record Date, the
Scripps Trust owned a majority of the outstanding shares of each class of
Scripps Common Stock. Therefore, the Scripps Trust has sufficient voting power
to approve the Scripps Proposals regardless of the vote of any other
stockholders. The Scripps Trust has entered into an agreement pursuant to which
it is obligated to vote in favor of the Scripps Proposals (except under certain
circumstances). See "The Merger Agreement -- Ancillary Agreements -- Voting
Agreement." The Scripps Board is soliciting proxies from the holders of Scripps
Common Voting Stock with respect to the proposals to approve and adopt the
Merger Agreement and the Scripps Charter Amendment, and from the holders of
Scripps Class A Common Stock with respect to the proposal to approve and adopt
the Scripps Charter Amendment, because as a matter of stockholder relations it
is Scripps' policy to solicit proxies from such holders even though the Scripps
Trust has a majority of each class.
Each Scripps Proposal will be voted upon separately by the Scripps
stockholders entitled to vote at the Scripps Special Meeting; however, failure
of the Scripps stockholders, including the Scripps Trust, to approve both of the
Scripps Proposals will result in the abandonment by Scripps of the Scripps
Charter Amendment and the Merger and the related transactions, including the
Spin-Off.
SOLICITATION AND VOTING OF PROXIES
Comcast. Holders of record of Comcast Class A Common Stock and Comcast
Class B Common Stock on the Comcast Record Date are entitled to cast their
votes, in person or by properly executed proxy, at the Comcast Special Meeting.
All shares represented at the Comcast Special Meeting by properly executed
proxies received prior to or at the Comcast Special Meeting and not properly
revoked will be voted at the Comcast Special Meeting in accordance with the
instructions indicated in such proxies. If no instructions are indicated, such
proxies will be voted FOR approval of the Comcast Proposal. The Board of
Directors of Comcast does not know of any matters, other than the matters
described in the Comcast Notice of Special Meeting attached to this Joint Proxy
Statement-Prospectus, that will come before the Comcast Special Meeting.
If a quorum is not present at the time the Comcast Special Meeting is
convened, or if for any other reason Comcast believes that additional time
should be allowed for the solicitation of proxies or for the satisfaction of
conditions to the Merger or the transactions contemplated thereby, Comcast may
adjourn the Comcast Special Meeting with a vote of the holders of a majority of
the voting power represented by the Comcast Common Stock present at such
meeting. If Comcast proposes to adjourn the Comcast Special Meeting, the
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persons named in the enclosed proxy card will vote all shares for which they
have voting authority in favor of such adjournment (other than shares to be
voted against the Comcast Proposal).
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted by: (i) filing with the Secretary of
Comcast, at or before the Comcast Special Meeting, a written notice of
revocation bearing a date later than the date of the proxy; (ii) duly executing
a subsequent proxy relating to the same shares and delivering it to the
Secretary of Comcast at or before the Comcast Special Meeting; or (iii)
attending the Comcast Special Meeting and voting in person (although attendance
at the Comcast Special Meeting will not in and of itself constitute revocation
of a proxy). Any written notice revoking a proxy should be sent to Secretary,
Comcast Corporation, 1500 Market Street, Philadelphia, Pennsylvania 19102-2148.
Proxies are being solicited by and on behalf of the Comcast Board of
Directors. All expenses in connection with the solicitation of Comcast
shareholders, including the cost of preparing and mailing this Joint Proxy
Statement-Prospectus (except for printing and certain other costs, which will be
shared with Scripps), will be borne by Comcast. In addition to solicitation by
use of the mails, proxies may be solicited by directors, officers and employees
of Comcast in person or by telephone, telegram or other means of communication.
Such directors, officers and employees will not be additionally compensated, but
may be reimbursed for out-of-pocket expenses in connection with such
solicitation. Arrangements will be made with custodians, nominees and
fiduciaries for forwarding of proxy solicitation materials to beneficial owners
of Comcast Common Stock held of record by such persons, and Comcast may
reimburse such custodians, nominees and fiduciaries for reasonable expenses
incurred in connection therewith.
AS OF THE COMCAST RECORD DATE, SURAL OWNED SHARES OF COMCAST COMMON STOCK
REPRESENTING APPROXIMATELY 81% OF THE OUTSTANDING VOTING POWER OF COMCAST.
THEREFORE, SURAL HAS SUFFICIENT VOTING POWER TO APPROVE THE COMCAST PROPOSAL
REGARDLESS OF THE VOTE OF ANY OTHER STOCKHOLDERS.
Scripps. Stockholders of record on the Scripps Record Date are entitled to
cast their votes, in person or by properly executed proxy, at the Scripps
Special Meeting. All shares represented at the Scripps Special Meeting by
properly executed proxies received prior to or at the Scripps Special Meeting
and not properly revoked will be voted at the Scripps Special Meeting in
accordance with the instructions indicated in such proxies. If no instructions
are indicated, such proxies will be voted FOR approval of the Scripps Proposals.
The Board of Directors of Scripps does not know of any matters, other than the
matters described in the Scripps Notice of Special Meeting attached to this
Joint Proxy Statement-Prospectus, that will come before the Scripps Special
Meeting.
If a quorum is not present at the time the Scripps Special Meeting is
convened, or if for any other reason Scripps believes that additional time
should be allowed for the solicitation of proxies or for the satisfaction of
conditions to the Merger or the transactions contemplated thereby, Scripps may
adjourn the Scripps Special Meeting with a vote of the holders of a majority of
the outstanding shares of Scripps Common Voting Stock and Scripps Class A Common
Stock present at such meeting. If Scripps proposes to adjourn the Scripps
Special Meeting, the persons named in the enclosed proxy card will vote all
shares for which they have voting authority in favor of such adjournment (other
than shares to be voted against either of the Scripps Proposals).
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted by: (i) filing with the Secretary of
Scripps, at or before the Scripps Special Meeting, a written notice of
revocation bearing a date later than the date of the proxy; (ii) duly executing
a subsequent proxy relating to the same shares and delivering it to the
Secretary of Scripps at or before the Scripps Special Meeting; or (iii)
attending the Scripps Special Meeting and voting in person (although attendance
at the Scripps Special Meeting will not in and of itself constitute revocation
of a proxy). Any written notice revoking a proxy should be sent to Secretary,
The E. W. Scripps Company, 312 Walnut Street, Cincinnati, Ohio 45202.
Proxies are being solicited by and on behalf of the Scripps Board of
Directors. All expenses in connection with the solicitation of the Scripps
stockholders, including the cost of preparing and mailing this Joint Proxy
Statement-Prospectus (except for printing and certain other costs, which will be
shared with Comcast), will be borne by Scripps. In addition to solicitation by
use of the mails, proxies may be solicited by directors,
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officers and employees of Scripps in person or by telephone, telegram or other
means of communication. Such directors, officers and employees will not be
additionally compensated but may by reimbursed for out-of-pocket expenses in
connection with such solicitation. Arrangements will be made with custodians,
nominees and fiduciaries for forwarding of proxy solicitation materials to
beneficial owners of Scripps Common Stock held of record by such persons, and
Scripps may reimburse such custodians, nominees and fiduciaries for reasonable
expenses incurred in connection therewith.
AS OF THE SCRIPPS RECORD DATE, THE SCRIPPS TRUST OWNED A MAJORITY OF THE
OUTSTANDING SHARES OF EACH OF THE SCRIPPS COMMON VOTING STOCK AND SCRIPPS CLASS
A COMMON STOCK. THEREFORE, THE SCRIPPS TRUST HAS SUFFICIENT VOTING POWER TO
APPROVE THE SCRIPPS PROPOSALS REGARDLESS OF THE VOTE OF ANY OTHER STOCKHOLDERS.
PRE-MERGER TRANSACTIONS
Prior to and as a condition to the Merger, certain transactions must be
consummated. Among those are the following:
INTERNAL SPIN-OFFS
The Scripps Cable Business currently is operated primarily through (i) four
corporate subsidiaries of Scripps (the "Scripps Cable Subsidiaries"), two of
which are wholly owned subsidiaries of New Scripps and two of which are wholly
owned subsidiaries of Scripps Howard Broadcasting, Inc. ("Broadcasting"), an
Ohio corporation and a wholly owned subsidiary of New Scripps, and (ii) two
partnerships, one of which is wholly owned by two of the Scripps Cable
Subsidiaries and one of which is 95% owned by one of the Scripps Cable
Subsidiaries and 5% owned by a third party (such partnerships, the "Scripps
Cable Partnerships" and, together with the Scripps Cable Subsidiaries, "Scripps
Cable"). See "The Merger Agreement -- Certain Covenants -- Acquisition of
Minority Interest." Prior to the Scripps Special Meeting and the transactions
described in this section, in transactions intended to qualify for tax-free
treatment under the Code, Broadcasting will contribute certain assets and all of
the outstanding stock of one of the Scripps Cable Subsidiaries to another
Scripps Cable Subsidiary (the "Cable Holding Subsidiary"), and immediately
thereafter, Broadcasting will distribute to New Scripps all of the outstanding
stock of the Cable Holding Subsidiary. Immediately thereafter, New Scripps will
contribute all of the outstanding shares of two additional Scripps Cable
Subsidiaries to the Cable Holding Subsidiary, and immediately thereafter, New
Scripps will distribute to Scripps all of the outstanding shares of the Cable
Holding Subsidiary. As a result of such transactions, the Cable Holding
Subsidiary will become a direct wholly owned subsidiary of Scripps and the other
Scripps Cable Subsidiaries will become direct wholly owned subsidiaries of the
Cable Holding Subsidiary.
SPIN-OFF
Following the Internal Spin-Offs, and prior to the Scripps Special Meeting,
pursuant to a Contribution and Assumption Agreement between Scripps and New
Scripps, a copy of which is attached as Exhibit C to the Merger Agreement (the
"Contribution Agreement"), Scripps will contribute and transfer to New Scripps
(the "Contribution") all of the assets of Scripps other than the stock of the
Scripps Cable Subsidiaries, Scripps' rights created pursuant to the Merger
Agreement and the Contribution Agreement and Scripps' rights under the
confidentiality agreements identified by Comcast prior to the Effective Time
(collectively, the "Retained Assets"). In connection with the Contribution, New
Scripps will agree to issue and deliver to Scripps such number of New Scripps
Common Voting Shares and New Scripps Class A Common Shares that will be required
for the Distribution.
New Scripps will assume and hold Scripps and its subsidiaries (and their
respective successors in interest, including Comcast), officers and directors
harmless from all debts, liabilities and other obligations of Scripps, other
than (i) the liabilities relating to the Scripps Cable Business, except for
certain liabilities relating to taxes, employee benefits, litigation, insurance
claims, certain environmental matters, certain limited third party interests in
the Scripps Cable Business, and certain other matters, and (ii) Scripps'
obligations under the Merger Agreement and the Contribution Agreement
(collectively, the "Retained Liabilities"). Contemporaneously with such
transactions, New Scripps will cause Scripps and the Scripps Cable Subsidiaries
to be released from all liabilities of New Scripps or its subsidiaries (other
than Scripps Cable), or any other liability
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assumed by New Scripps, in respect of debt for borrowed money and similar
obligations and guaranties and other contingent obligations. In addition, prior
to the Effective Time, New Scripps will either purchase and retire all of its
outstanding 7 3/8% Notes due December 15, 1998 (the "7 3/8% Notes"), of which
Scripps is a guarantor, or if and to the extent such notes have not been
purchased by Scripps, New Scripps will indemnify Scripps and Comcast in respect
of any loss either may suffer in respect thereof. As of June 30, 1996, the
aggregate principal amount of the outstanding 7 3/8% Notes was $29.9 million.
As part of the Contribution, Scripps will agree to hold New Scripps and its
subsidiaries, officers and directors harmless from substantially all debts,
liabilities or obligations of Scripps, to the extent they arise out of, or are
based upon or otherwise relate to, the Scripps Cable Business, except for
certain liabilities relating to taxes, employee benefits, litigation, insurance
claims, certain environmental matters, certain limited third party interests in
the Scripps Cable Business and certain other matters. See "The Merger
Agreement -- Indemnification" and "-- Certain Employee Matters."
Notwithstanding the foregoing, New Scripps will be responsible for all tax
liabilities of Scripps and its subsidiaries for periods through the Closing
Date, and Comcast will be responsible for all such liabilities pertaining to the
Scripps Cable Business for periods thereafter. New Scripps will also be
responsible for certain taxes arising from or relating to the Merger, the
Contribution, the Internal Spin-Offs, the Spin-Off and related transactions. See
"The Merger Agreement -- Tax Matters."
Following the Internal Spin-Offs and the Contribution, and immediately
prior to the Merger, Scripps will distribute to each holder of Scripps Common
Voting Stock one fully paid and nonassessable New Scripps Common Voting Share
for each share of Scripps Common Voting Stock held and to each holder of Scripps
Class A Common Stock one fully paid and nonassessable New Scripps Class A Common
Share for each share of Scripps Class A Common Stock held (the "Distribution").
As a result, each holder of Scripps Common Stock immediately prior to the
Distribution will own the same number and class of shares in New Scripps as such
holder owned in Scripps. Each share of the capital stock of New Scripps issued
and outstanding immediately prior to the Distribution and owned directly or
indirectly by Scripps or any of its subsidiaries (other than those to be
distributed in accordance with the Distribution) shall be cancelled at the time
of the Distribution. The Contribution and the Distribution collectively
constitute the "Spin-Off."
AMENDMENTS TO ORGANIZATIONAL DOCUMENTS OF SCRIPPS AND NEW SCRIPPS
Immediately prior to the Distribution and the Merger, the Scripps Charter
Amendment will be effected in order to facilitate the Distribution. See
"Proposal to Approve and Adopt the Scripps Charter Amendment." The New Scripps
articles of incorporation have been amended (as amended, the "New Scripps
Articles") to conform as nearly as practicable to the current Scripps Charter.
See "Comparison of Rights of Stockholders of Scripps and New Scripps." The text
of the New Scripps Articles is attached to the Merger Agreement as Exhibit B.
THE MERGER AGREEMENT
The following description of certain provisions of the Merger Agreement and
the exhibits and schedules thereto is only a summary and does not purport to be
complete. This description is qualified in its entirety by reference to the
complete text of the Merger Agreement, a conformed copy of which is attached
hereto as Annex I and incorporated herein by reference.
GENERAL PROVISIONS
Share Exchange. The Merger Agreement provides that, subject to (i) the
requisite adoption and approval by Comcast stockholders of the Comcast Proposal,
(ii) the requisite adoption and approval by Scripps stockholders of the Scripps
Proposals, and (iii) the satisfaction or waiver of certain other conditions, at
the Effective Time, Scripps (which, at the time of the Merger, will own only the
Scripps Cable Business) will be merged with and into Comcast, the separate
existence of Scripps will cease, and Comcast will continue as the surviving
corporation. As a result of the Merger, (i) Comcast will acquire the Scripps
Cable Business and, with certain exceptions, will be responsible for all of the
liabilities of Scripps relating to the Scripps Cable Business, and (ii) shares
of Scripps Common Stock outstanding immediately prior to the Merger will be
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converted into shares of Comcast Special Common Stock ("Comcast Merger Stock")
as described below. Because the Merger is structured as a merger of Scripps with
and into Comcast, Comcast will assume all liabilities of Scripps as a matter of
law at the effective time of the Merger. New Scripps has agreed to indemnify
Comcast in respect of all liabilities of Scripps not related to the Scripps
Cable Business and in respect of certain liabilities relating to the Scripps
Cable Business. See "-- Indemnification."
Pursuant to the Merger Agreement and without any action on the part of the
holder of any shares of capital stock:
(i) Each share of the capital stock of Scripps issued and outstanding
immediately prior to the Merger and owned directly or indirectly by Scripps
as treasury stock, by New Scripps or by any of their respective
subsidiaries, will be cancelled and no consideration will be delivered in
exchange therefor;
(ii) Each share of the capital stock of Comcast issued and outstanding
immediately prior to the Merger will remain outstanding; and
(iii) Each share of Scripps Common Stock outstanding immediately prior
to the Merger (except for shares of Scripps Common Voting Stock with
respect to which dissenters' rights are properly exercised) will be
converted into and become a number of fully paid and nonassessable shares
of Comcast Merger Stock (the "Common Stock Conversion Number") equivalent
to its pro rata share (based on the percentage of all Scripps Common Stock
then outstanding represented by such share of Scripps Common Stock) of
$1.575 billion (the "Base Consideration"), adjusted as described below (the
Base Consideration, as adjusted, the "Aggregate Consideration"), divided by
a dollar amount (the "Collar Price") which is determined by reference to
(A) the average closing price of the Comcast Special Common Stock on Nasdaq
for 15 days chosen at random (the "Selected Trading Days") from the 40
trading days (the "Random Trading Days") ending on the second trading day
prior to the Closing Date (the "Average Closing Price") and (B) $20.075
(the "Execution Price"), which is equal to the average of the closing price
of the Comcast Special Common Stock on Nasdaq for the 20 trading days
ending on and including October 24, 1995, the date upon which Comcast
submitted its proposal to acquire the Scripps Cable Business. The Collar
Price will equal the Average Closing Price if the Average Closing Price is
not more than 115%, or less than 85%, of the Execution Price. If the
Average Closing Price is more than 115% of the Execution Price ($23.08625),
then the Collar Price will be $23.08625. If the Average Closing Price is
less than 85% of the Execution Price ($17.06375), then the Collar Price
will be $17.06375; provided, that if the Average Closing Price is less than
$17.06375, Scripps will have the option to notify Comcast that it intends
to terminate the Merger Agreement if Comcast does not agree to deliver to
the Scripps stockholders in the Merger, in addition to the number of shares
deliverable based on a Collar Price of $17.06375, an additional number of
shares (the "Top-up Share Number") equal to (A) the difference between (x)
the number of shares that would be delivered if the Collar Price were the
Average Closing Price and (y) the number of shares that would be delivered
at a Collar Price of $17.06375 or (B) such lesser number as Comcast and
Scripps may agree. Specifically, the Common Stock Conversion Number will be
calculated according to the following formula:
<TABLE>
<S> <C> <C> <C> <C>
Common Stock = Aggregate Consideration + Top-up Share Number
Conversion Number Collar Price
Outstanding Scripps Common Stock
</TABLE>
The Scripps Board is recommending that holders of Scripps Common Voting
Stock approve and adopt the Merger Agreement and that holders of Scripps Common
Voting Stock and Scripps Class A Common Stock approve and adopt the Scripps
Charter Amendment and thereby provide the Scripps Board with the ability to
exercise its discretion, consistent with its fiduciary duties, to (i) proceed
with the Merger Agreement if the Average Closing Price is less than $17.06375,
(ii) terminate the Merger Agreement if the Average Closing Price is less than
$17.06375 (subject to Comcast's "top-up" right described above), or (iii) agree
with Comcast on a lower number of additional shares to be delivered by Comcast
as described above if the Average Closing Price is less than $17.06375. The
granting of such discretion to the Scripps Board pursuant to the
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Merger Agreement is permitted under Delaware law. The fact that a Scripps
stockholder voted in favor of either of the Scripps Proposals could be raised as
a defense in any action brought by such stockholder against Scripps, its
officers and directors, the Scripps Trust or the trustees of the Scripps Trust
with respect to the Merger or the Spin-Off.
If (i) the Comcast shareholders approve the Comcast Proposal, (ii) the
Average Closing Price is below the minimum Collar Price of $17.06375 and (iii)
Scripps exercises its right to terminate the Merger Agreement, Comcast will have
discretion to increase the number of shares of Comcast Special Common Stock to
be delivered to the number of shares that would have been delivered if the
Collar Price were equal to the Average Closing Price. However, Comcast has
informed Scripps that if the Average Closing Price is less than $17.06375 and if
Scripps exercises its rights to terminate the Merger Agreement, Comcast does not
intend to elect to deliver any additional shares of Comcast Special Common
Stock.
The closing price of the Comcast Special Common Stock on Nasdaq on
September 27, 1996 was $15.875 per share, which is below the minimum Collar
Price of $17.06375. Since July 10, 1996, when the closing price of Comcast
Special Common Stock was $16.75, the Comcast Special Common Stock has traded at
closing prices below the minimum Collar Price of $17.06375. Scripps may elect
not to terminate the Merger Agreement even if the Average Closing Price falls
below the minimum Collar Price of $17.06375 per share. The Scripps Board has not
determined whether or under what circumstances it would elect to terminate the
Merger Agreement if the Average Closing Price is below $17.06375 per share. In
making any such determination, the Scripps Board would take into account,
consistent with its fiduciary duties, all relevant facts and circumstances
existing at the time, including, without limitation, whether it believes Comcast
is prepared to increase the per share merger consideration, the market for cable
television industry stocks in general, the relative market value of the Comcast
Special Common Stock, and the advice of Scripps' financial advisors and legal
counsel. Comcast has informed Scripps that if the Average Closing Price is less
than $17.06375 and if Scripps exercises its right to terminate the Merger
Agreement, Comcast does not intend to elect to deliver any additional shares of
Comcast Special Common Stock. By approving the Merger Agreement, the holders of
Scripps Common Voting Stock will be permitting the Scripps Board to determine,
in the exercise of its fiduciary duties, to proceed with the Merger even if the
Average Closing Price of the Comcast Special Common Stock falls below $17.06375
per share and no additional shares of Comcast Special Common Stock are
delivered. The Scripps Board will not proceed with the Merger if the Average
Closing Price of the Comcast Special Common Stock is below $17.06375 per share
and the number of shares of Comcast Special Common Stock to be delivered by
Comcast in the Merger is less than the number that would have been delivered if
the Collar Price were equal to the Average Closing Price unless, among other
things, the Scripps Board receives an opinion from its financial advisor as to
the fairness from a financial point of view to Scripps stockholders of the
Merger consideration to be paid under such circumstances. If (i) the Average
Closing Price were below the minimum Collar Price of $17.06375, (ii) Scripps
decided to terminate the Merger Agreement and (iii) Comcast elected to deliver
the Maximum Top-Up Share Number of shares of Comcast Special Common Stock, then
Scripps would be required under the Merger Agreement to consummate the Merger
whether or not it received an update of its financial advisor's opinion unless
Scripps were entitled by the terms of the Merger Agreement to terminate it for
other reasons.
The Aggregate Consideration will be derived by making the following
adjustments to the Base Consideration of $1.575 billion:
(i) increasing the Base Consideration by Scripps' best estimate, as of
two days prior to the Effective Time, of the amount of capital expenditures
(not to exceed $43.2 million) made by Scripps Cable after November 1, 1995
and before the Effective Time for upgrades and rebuilds (but excluding $4.6
million of upgrades and rebuilds and excluding capital expenditures in the
ordinary course of business) mutually agreed to by Comcast and Scripps (the
"Estimated Capital Expenditure Amount");
(ii) reducing the Base Consideration by Scripps' best estimate, as of
two days prior to the Effective Time, of the consolidated liabilities minus
the consolidated current assets (other than inventory) of Scripps Cable
immediately prior to the Effective Time and after giving effect to the
Distribution (the "Estimated Cable Net Liabilities Amount");
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(iii) increasing the Base Consideration by the sum of (A) the amount,
if any, paid to acquire all or any part of the River City Interest (as
described below in "-- Certain Covenants -- Acquisition of Minority
Interest") and (B) if any such acquisition takes place, 5% of the
difference between the consolidated liabilities of the relevant Scripps
Cable Partnership (as defined below in "-- Certain Covenants -- Acquisition
of Minority Interest") as of the date of such acquisition and the
consolidated current assets (other than inventory) of such Scripps Cable
Partnership at such time (adjusted proportionately if less than all of the
River City Interest is acquired); and
(iv) reducing the Base Consideration by the amount, if any, by which
$62.5 million (the aggregate purchase price for the entire Mid-Tennessee
Business (as defined in " -- Certain Covenants -- Acquisition of
Mid-Tennessee Business")) exceeds the sum of (A) the amount, if any,
actually paid by Broadcasting for the Mid-Tennessee Business or portion
thereof acquired by Broadcasting prior to the Effective Time, (B) the
principal amount of any promissory notes delivered by Broadcasting in
connection with such acquisition, and (C) the difference between the
consolidated liabilities with respect to any portion of the Mid-Tennessee
Business so acquired as of the date such portion is transferred to a
Scripps Cable Subsidiary and the consolidated current assets (other than
inventory) of such portion of the Mid-Tennessee Business as of such time.
Scripps and Comcast intend to resolicit their respective stockholders that
have voting rights with respect to approval of the Scripps Proposals and the
Comcast Proposal, respectively, if the closing adjustments to the Base
Consideration result in a material change to the estimated adjusted Aggregate
Consideration of $1.5921 billion. Neither Scripps nor Comcast expects, however,
that such adjustments will result in such a material change.
Scripps is negotiating to acquire the River City Interest. As of the date
of this Joint Proxy Statement-Prospectus, Scripps has not reached any agreement
for the purchase of such interest.
The acquisition of the Mid-Tennessee business was completed on January 3,
1996, for a purchase price of $62.5 million. The estimated adjusted Aggregate
Consideration of $1.5921 billion does not include any adjustment for the
acquisition of the Mid-Tennessee business. No material adjustment will be made
to the estimated Aggregate Consideration as a result of this acquisition.
"Outstanding Scripps Common Stock" means the aggregate number of shares of
Scripps Common Stock outstanding on the Closing Date.
If between October 28, 1995 and the Effective Time the outstanding shares
of Comcast Special Common Stock are changed into a different number of shares or
a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchanges of shares,
or if any extraordinary dividend or distribution is made with respect to the
Comcast Special Common Stock, then the Common Stock Conversion Number will be
correspondingly adjusted to reflect such event.
The holder of any shares of Scripps Common Voting Stock outstanding
immediately prior to the Merger that has validly exercised such holder's
dissenters' rights under applicable Delaware Law will not be entitled to
receive, in respect of the shares of Scripps Common Voting Stock as to which
such holder has validly exercised dissenters' rights, shares of Comcast Merger
Stock unless and until such holder shall have failed to perfect, or shall have
effectively withdrawn or lost, such holder's right to payment for such holder's
shares of Scripps Common Voting Stock under Delaware Law. In such event, such
holder shall be entitled to receive the Comcast Merger Stock to which such
holder would have been entitled had such holder not exercised dissenters'
rights. Scripps, Comcast and New Scripps have reached certain agreements
relating to any such exercise of dissenters' rights, including Comcast's
agreement, as the surviving corporation of the Merger, to pay any amount payable
to any such stockholder who becomes entitled under Delaware Law for such
holder's shares of Scripps Common Voting Stock, and New Scripps' agreement to
reimburse Comcast for a certain portion of such payments. See "Rights of
Dissenting Scripps Stockholders" for further information concerning the rights
of holders of Scripps Common Voting Stock to dissent, including a discussion of
the mechanics of perfecting such rights.
The Merger Agreement provides that no fractional shares of Comcast Merger
Stock will be issued in connection with the Merger. In lieu of any such
fractional interests, each holder of Scripps Common Stock entitled to receive
Comcast Merger Stock pursuant to the Merger will be entitled to receive an
amount in cash
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(without interest), rounded to the nearest cent, determined by multiplying the
fractional interest in the share of Comcast Merger Stock to which such holder
would otherwise be entitled (after taking into account all shares of Scripps
Common Stock then held of record by such holder) by the closing sale price of a
share of Comcast Special Common Stock on Nasdaq on the Closing Date.
As soon as practicable after the Effective Time, a letter of transmittal
will be mailed by the Exchange Agent to each holder of record of Scripps Common
Stock (other than Scripps, New Scripps or any of their respective subsidiaries)
immediately prior to the Effective Time to be used in forwarding such holder's
certificates evidencing such shares for surrender and exchange for certificates
evidencing the shares of Comcast Merger Stock to which such holder has become
entitled and, if applicable, cash in lieu of a fractional share of Comcast
Special Common Stock. The letter of transmittal will be accompanied by
instructions specifying the other details of the exchange. Scripps stockholders
should not send in their certificates until they receive the letter of
transmittal.
After the Effective Time, each certificate formerly representing Scripps
Common Stock, until surrendered and exchanged, will be deemed for all purposes
to evidence the right to receive the number of full shares of Comcast Special
Common Stock into which the shares of Scripps Common Stock shall have been so
converted pursuant to the Merger and cash in lieu of any fractional share of
Comcast Special Common Stock. The holder of such unexchanged certificate will
not be entitled to receive any dividend or other distribution payable by Comcast
to its stockholders until such certificate is surrendered. Any amounts remaining
unclaimed by holders of certificates formerly representing Scripps Common Stock
on the day immediately prior to such time as such amounts would otherwise
escheat to or become property of any governmental entity shall, to the extent
permitted by applicable law, become the property of Comcast free and clear of
any claims or interest of any holder previously entitled thereto. None of
Comcast, New Scripps, Scripps or the Exchange Agent will be liable to any holder
of certificates formerly representing Scripps Common Stock for any shares of
Comcast Merger Stock, dividends or distributions with respect thereto or cash
payable in lieu of fractional shares delivered to a state abandoned property
administrator or other public official pursuant to any applicable abandoned
property, escheat or similar law.
If the Merger were consummated on the date hereof, assuming that the Base
Consideration were increased by $17.1 million, to result in an Aggregate
Consideration equal to $1.5921 billion, and that the Average Closing Price were
equal to the Execution Price of $20.075 and that no holders of Scripps Common
Voting Stock exercise dissenters' rights, Comcast would issue approximately 79.3
million shares of Comcast Merger Stock to Scripps stockholders, and the Merger
would result in the stockholders of Scripps receiving approximately 0.986 shares
of Comcast Merger Stock per share of Scripps Common Stock. Assuming that the
minimum Collar Price of $17.06375 was used to calculate the amount of Comcast
Merger Stock and that no additional shares of Comcast Special Common Stock were
delivered in the Merger, the Comcast Merger Stock would be approximately 93.3
million shares and the stockholders of Scripps would receive 1.159 shares of
Comcast Merger Stock per share of Scripps Common Stock. The closing price of
Comcast Special Common Stock on Nasdaq on September 27, 1996 was $15.875 per
share.
Based on the foregoing sets of assumptions, (i) the holders of Scripps
Common Stock would own Comcast Special Common Stock representing approximately
29.4% (assuming an Average Closing Price of $20.075) or 32.9% (assuming the
minimum Collar Price of $17.06375 was used to calculate the amount of Comcast
Merger Stock and that no additional shares of Comcast Special Common Stock were
delivered in the Merger), respectively, of the outstanding Comcast Special
Common Stock on the Comcast Record Date and approximately 25.4% (assuming an
average Closing Price of $20.075) or 28.6% (assuming the minimum Collar Price of
$17.06375 was used to calculate the amount of Comcast Merger Stock and that no
additional shares of Comcast Special Common Stock were delivered in the Merger),
respectively, of the outstanding Comcast Common Stock on such date, each on a
pro forma basis for the Merger, and (ii) each holder of Scripps Common Stock
would own the same number and class of shares in New Scripps (which will then
hold all of the Scripps businesses other than the Scripps Cable Business) as
such holder owns in Scripps immediately prior to the Spin-Off. See
" -- Ownership of Comcast Stock After the Merger" and " -- Ownership of New
Scripps Stock After the Spin-Off and the Merger."
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Assuming that the Merger was consummated on the date hereof, that the
Aggregate Consideration was $1.5921 billion, that the minimum Collar Price of
$17.06375 was used to calculate the amount of Comcast Merger Stock, that no
additional shares of Comcast Special Common Stock were delivered in the Merger,
and that the Comcast Special Common Stock had a market value of $15.875 per
share (the closing price of Comcast Special Common Stock on Nasdaq on September
27, 1996), the aggregate market value of the shares of Comcast Special Common
Stock delivered to Scripps stockholders in the Merger (93.3 million shares)
would be $1.4812 billion and the market value of the shares of Comcast Special
Common Stock delivered per share of Scripps Common Stock (1.159 shares of
Comcast Special Common Stock per share of Scripps Common Stock) would be $18.40
per share.
Restrictions on Transfer of Comcast Merger Stock. The shares of Comcast
Special Common Stock that will be issued pursuant to the Merger are registered
securities. Following the Merger, persons who are not affiliates of Scripps will
be able to sell Comcast Merger Stock in the public market. Under Rule 145 of the
SEC's rules and regulations, for two years after the Effective Time (subject to
restrictions on the Scripps Trust under the Registration Rights Agreement),
persons that were affiliates of Scripps prior to the Merger (and are not
affiliates of Comcast after the Merger) may sell Comcast Merger Stock subject to
certain volume limitations, manner of sale provisions, notification requirements
and requirements as to current public information concerning Comcast set forth
in Rule 144 of the SEC's rules and regulations. During the period between the
second and third years after the Effective Time, such persons are subject only
to the Rule 144 requirement as to current public information regarding Comcast.
After three years, such persons may sell their shares of Comcast Merger Stock
without compliance with Rules 145 and 144. Assuming that the Average Closing
Price is $20.075 and the Aggregate Consideration is $1.5921 billion, affiliates
of Scripps will receive approximately 50.1 million shares of Comcast Special
Common Stock pursuant to the Merger. If instead, the minimum Collar Price of
$17.06375 was used to calculate the amount of Comcast Merger Stock, and assuming
that no additional shares of Comcast Special Common Stock were delivered in the
Merger, affiliates of Scripps would receive approximately 58.9 million shares of
Comcast Special Common Stock pursuant to the Merger. Persons who are currently
affiliates of Scripps and become affiliates of Comcast after the Merger may sell
Comcast Merger Stock only pursuant to an effective registration statement, Rule
144 or another exemption from registration.
Restrictions on Transfer of New Scripps Common Shares . The New Scripps
Common Shares received by Scripps stockholders pursuant to the Spin-Off will not
be subject to any restrictions on transfer (other than those that pertain to
affiliates of New Scripps under federal and state securities laws). Scripps
expects to obtain representations from the Scripps Trust and certain other
holders of record of 5% or more of either class of the Scripps Common Stock that
such holders have no present intention to dispose of any of the New Scripps
Common Shares they will receive in the Spin-Off. Such representations will be
sought in connection with Scripps' request for a ruling from the Service with
respect to the tax-free treatment of the Spin-Off.
Cable Net Liabilities and Capital Expenditure Adjustments. Within 90 days
after the Effective Time, Comcast will deliver to New Scripps its determination
of (i) the amount of capital expenditures (not to exceed $43.2 million) made by
Scripps Cable after November 1, 1995 and before the Effective Time for upgrades
and rebuilds (but excluding $4.6 million of upgrades and rebuilds and excluding
capital expenditures in the ordinary course of business) mutually agreed to by
Comcast and Scripps (the "Capital Expenditure Amount") and (ii) the consolidated
liabilities minus the consolidated current assets (other than inventory) of
Scripps Cable immediately prior to the Effective Time and after giving effect to
the Distribution (the "Cable Net Liabilities Amount"). Within 10 days thereafter
(or within 10 days of the resolution of any dispute regarding such
determination, which dispute, if not resolved by Comcast and New Scripps, will
be resolved by an independent certified public accounting firm mutually
acceptable to Comcast and New Scripps, the decision of which shall be final and
binding on Comcast and New Scripps), adjustment payments will be made as
follows: If the Capital Expenditure Amount exceeds the Estimated Capital
Expenditure Amount, then Comcast will pay to New Scripps the amount of such
excess, and if the Estimated Capital Expenditure Amount exceeds the Capital
Expenditure Amount, New Scripps will pay to Comcast the amount of excess. If the
Cable Net Liabilities Amount exceeds the Estimated Cable Net Liabilities Amount,
then New Scripps will pay to Comcast the amount of such excess, and if the
Estimated Cable Net Liabilities Amount exceeds
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the Cable Net Liabilities Amount, Comcast will pay to New Scripps the amount of
such excess. Any such payments will include interest from the Closing Date to
the date of payment at the prime rate charged by Citibank, N.A. in New York
City, will be made in immediately available funds and will be made on an after-
tax basis.
Certificate of Incorporation and By-Laws; Directors and Officers. The
Merger Agreement provides that the Comcast Articles and the Comcast By-Laws,
each as in effect immediately prior to the Effective Time, will be the Articles
of Incorporation and By-Laws of the surviving corporation. In addition, the
directors and officers of Comcast immediately prior to the Effective Time will
be the directors and officers of the surviving corporation. Contemporaneously
with the consummation of the Merger, Comcast, Sural and the Scripps Trust will
enter into a Board Representation Agreement pursuant to which, subject to the
conditions thereof, the Scripps Trust will have certain rights to representation
on the Board of Directors of Comcast. See "-- Ancillary Agreements -- Board
Representation Agreement."
Effective Time of Merger. The Merger will become effective upon the filing
of a certificate of merger with the Secretary of State of the State of Delaware
and a certificate or articles of merger with the Department of State of the
Commonwealth of Pennsylvania in accordance with applicable law.
CLOSING; CONDITIONS PRECEDENT
Closing and Closing Date. The closing of the Spin-Off and the Merger (the
"Closing") will take place as soon as practicable after the satisfaction or
waiver of the conditions set forth in the Merger Agreement and summarized below
(but no later than 10 business days thereafter) or on such other date as
Comcast, Scripps and New Scripps may agree.
Conditions to the Obligations of all Parties. The respective obligations
of Comcast, on the one hand, and Scripps and New Scripps, on the other hand, to
consummate the transactions contemplated by the Merger Agreement are subject to
the following requirements (none of which may be waived except as otherwise
indicated):
(i) the Comcast Proposal shall have been approved and adopted by the
stockholders of Comcast;
(ii) the Scripps Proposals shall have been approved and adopted by the
stockholders of Scripps;
(iii) the Internal Spin-Offs, the Spin-Off, the Scripps Charter
Amendment and (unless waived) certain amendments to the New Scripps Charter
shall have been consummated in accordance with the terms of the Merger
Agreement;
(iv) any waiting period applicable to the consummation of the
transactions contemplated by the Merger Agreement under the HSR Act shall
have expired or been terminated, and (unless waived) any other governmental
or regulatory notices or approvals required with respect to the
transactions contemplated thereby shall have been either filed or received;
provided, however, that this condition shall not apply with respect to any
authorization, consent, order or approval necessary for the transfer of
control of any cable television franchise if the Franchise Condition (as
hereinafter defined; see "-- Conditions to Obligations of Comcast") shall
have been satisfied or waived by Comcast;
(v) no federal, state or foreign governmental authority or other
agency or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered (and not revoked) any statute,
rule, regulation, injunction or other order (whether temporary, preliminary
or permanent) that has the effect of making the transactions contemplated
by the Merger Agreement illegal or otherwise prohibiting such transactions
or (unless waived) that questions the validity or the legality of the
transactions contemplated by the Merger Agreement and that in any case
could reasonably be expected to have a material adverse affect on the
Scripps Cable Business or on Comcast and its subsidiaries taken as a whole;
(vi) this Joint Proxy Statement-Prospectus shall have been declared
effective under the Securities Act, and no stop orders with respect thereto
shall have been issued;
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(vii) Scripps shall have received (A) from the Service a private
letter ruling to the effect that the Internal Spin-Offs and the Spin-Off
will qualify for tax-free treatment under Section 355 of the Code and (B)
an opinion of Baker & Hostetler, counsel to Scripps, that the Merger will
qualify as a tax-free reorganization under Section 368 of the Code, each in
form and substance reasonably satisfactory to Comcast and New Scripps.
Conditions to Obligations of Scripps and New Scripps. The obligations of
Scripps and New Scripps to effect the transactions contemplated by the Merger
Agreement are subject to the satisfaction, on or prior to the Closing Date, of
the following additional conditions (any or all of which may be waived):
(i) the representations and warranties of Comcast in the Merger
Agreement or in any other document delivered pursuant thereto shall be true
and correct in all material respects on and as of the Closing Date with the
same effect as if made on and as of the Closing Date, and at the Closing
Comcast shall have delivered to Scripps and New Scripps a certificate to
that effect;
(ii) each of the obligations of Comcast to be performed on or before
the Closing Date pursuant to the terms of the Merger Agreement shall have
been duly performed in all material respects on or before the Closing Date,
and at the Closing Comcast shall have delivered to Scripps a certificate to
that effect;
(iii) the Comcast Merger Stock shall have been approved for listing on
Nasdaq, subject to official notice of issuance;
(iv) Scripps and New Scripps shall have received an opinion from
counsel to Comcast dated as of the Closing Date, in form and substance
reasonably satisfactory to Scripps, New Scripps and their counsel; and
(v) Scripps and New Scripps shall have received all customary closing
documents they may reasonably request relating to the existence of Comcast
and the authority of Comcast for the Merger Agreement and the transactions
contemplated thereby, all in form and substance reasonably satisfactory to
Scripps and New Scripps.
Notwithstanding the foregoing, any failure of any representation or
warranty of Comcast to be true and correct as of the Closing Date will not
excuse Scripps or New Scripps from their obligations under the Merger Agreement
if (i) the aggregate amount of all losses, claims, damages, liabilities or
actions, including any legal or other expenses reasonably incurred in connection
with investigating or defending any such loss, claim, damage or liability or
action ("Losses") that could reasonably be expected to be incurred by holders of
Comcast Merger Stock as a result of the failure of such representations and
warranties to be true and correct as of the Closing Date would not exceed $50
million and (ii) Comcast indemnifies New Scripps against all such Losses in
excess of $5 million.
Conditions to Obligations of Comcast. The obligations of Comcast to effect
the transactions contemplated by the Merger Agreement are subject to the
satisfaction, on or prior to the Closing Date, of the following conditions (any
or all of which may be waived):
(i) the representations and warranties of Scripps and New Scripps
contained in the Merger Agreement or in any other document delivered
pursuant thereto shall be true and correct in all material respects on and
as of the Closing Date with the same effect as if made on and as of the
Closing Date, and at the Closing Scripps and New Scripps shall have
delivered to Comcast a certificate to that effect;
(ii) each of the obligations of Scripps and New Scripps to be
performed on or before the Closing Date pursuant to the terms of the Merger
Agreement shall have been duly performed in all material respects on or
before the Closing Date, and at the Closing, Scripps and New Scripps shall
have delivered to Comcast a certificate to that effect;
(iii) immediately prior to the Effective Time, Scripps shall have no
assets except the Retained Assets;
(iv) immediately prior to the Effective Time, Scripps shall have no
liabilities except the Retained Liabilities;
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(v) Comcast shall have received an opinion of Baker & Hostetler, dated
as of the Closing Date, in form and substance reasonably satisfactory to
Comcast and its counsel;
(vi) Scripps shall have delivered to Comcast a certificate signed by
the Chief Executive Officer and the Chief Financial Officer of Scripps
certifying that there are no outstanding options to acquire any capital
stock of Scripps and certifying as to the number of shares of capital stock
of Scripps outstanding as of the Closing Date, indicating the class and
series of such shares;
(vii) all authorizations, consents, orders and approvals of applicable
governmental authorities necessary to transfer cable television franchises
in which at least 95% of the basic subscribers of the Scripps Cable
Business are located shall have been obtained, be in effect and not be
subject to withdrawal or appeal (the "Franchise Conditions"); provided,
however, that such condition shall not be deemed to be satisfied until the
earlier to occur of (A) 30 days following the date such percentage is
obtained, (B) the date on which the condition would be satisfied if the
required percentage were 100% or (C) December 31, 1996; and
(viii) Comcast shall have received all customary closing documents it
may reasonably request relating to the existence of Scripps, New Scripps,
the Scripps Cable Subsidiaries and the Scripps Cable Partnerships and the
authority of Scripps and New Scripps for the Merger Agreement and the
transactions contemplated by the Merger Agreement, all in form and
substance reasonably satisfactory to Comcast.
Notwithstanding the foregoing, any failure of any representation or
warranty of Scripps or New Scripps to be true and correct as of the Closing Date
will not excuse Comcast from its obligations under the Merger Agreement if (i)
the aggregate amount of all Losses that could reasonably be expected to be
incurred by Comcast or its subsidiaries as a result of the failure of such
representations and warranties to be true and correct as of the Closing Date
would not exceed $50 million and (ii) New Scripps indemnifies Comcast against
all such Losses in excess of $5 million.
ACQUISITION PROPOSALS
The Merger Agreement prohibits Scripps, its subsidiaries and their
respective officers, directors, representatives and agents from, directly or
indirectly, knowingly encouraging, soliciting, initiating or participating in
any way in discussions or negotiations with, or knowingly providing any
confidential information to, any person (other than Comcast or any affiliate or
associate of Comcast and their respective directors, officers, employees,
representatives and agents) concerning any merger of Scripps or Scripps Cable,
the sale of any substantial part of the assets of Scripps Cable, the sale of
shares of capital stock of Scripps, the capital stock of the Scripps Cable
Subsidiaries or the partnership interests of the Scripps Cable Partnerships or
similar transactions involving Scripps Cable. However, Scripps' Board of
Directors may (i) take and disclose to Scripps' stockholders a position with
respect to a tender offer for Scripps Common Stock by a third party pursuant to
Rules 14d-9 and 14e-2 promulgated under the Exchange Act, (ii) make such
disclosure to Scripps stockholders as, in the judgment of Scripps' Board of
Directors with the written advice of outside counsel, may be required under
applicable law, and (iii) respond to any unsolicited proposal or inquiry by
advising the person making such proposal or inquiry of the terms of the
provision summarized in this paragraph.
Scripps has agreed to notify Comcast promptly if any such proposal or
inquiry is received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated with, Scripps and to
furnish Comcast with a copy of any proposal that Scripps' Board of Directors has
determined is a "Superior Proposal" (as defined below). Scripps' Board of
Directors may respond to any Superior Proposal and may provide information to,
and negotiate with, any person in connection therewith if Scripps' Board of
Directors determines, with the advice of outside counsel, that it is required to
do so in the exercise of its fiduciary duties. A "Superior Proposal" is defined
in the Merger Agreement to mean a bona fide, written, unsolicited proposal
relating to a possible transaction described in the preceding paragraph by any
person other than Comcast that, in the reasonable good faith judgment of
Scripps' Board of Directors, with the advice of outside financial advisors, is
reasonably likely to be consummated and is more favorable to the stockholders of
Scripps than the terms of the transactions contemplated by the Merger Agreement.
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The Merger Agreement requires Comcast to notify Scripps and provide it with
pertinent information in the event Comcast or any of its subsidiaries, or any of
their respective directors, officers, representatives or agents (i) solicits,
initiates or participates in any way in discussions or negotiations with, or
provides any confidential information to, any third party (other than Scripps or
any affiliate or associates of Scripps and their respective directors, officers,
employees, representatives and agents) concerning any merger, sale of
substantially all of the assets of Comcast, sale of shares of capital stock or
similar transactions involving Comcast or (ii) receives any proposal or inquiry
in respect of any such transaction or any request to provide any such
information or hold any such negotiations or discussions.
CERTAIN COVENANTS
Interim Operations of Scripps. Pursuant to the Merger Agreement, Scripps
has agreed, among other things, that from October 28, 1995 to the Closing Date,
Scripps shall conduct its operations in the ordinary course of business
consistent with past practices and shall not, without the prior written consent
of Comcast:
(i) amend the Scripps Charter or the Scripps By-Laws;
(ii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, other than dividends declared and paid consistent
with Scripps' past practice (except that (A) any subsidiary of Scripps
other than a Scripps Cable Subsidiary or a Scripps Cable Partnership may
declare and pay dividends that are payable to Scripps or to any other
subsidiary of Scripps and (B) any Scripps Cable Subsidiary or Scripps Cable
Partnership may declare and pay dividends in cash and cash equivalents that
are payable to Scripps or to any other subsidiary of Scripps), or redeem or
otherwise acquire any of its securities;
(iii) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of
or in substitution of any shares of its capital stock;
(iv) (A) create, incur or assume any debt not outstanding as of
October 28, 1995 (including obligations in respect of capital leases), (B)
assume, guarantee, endorse or otherwise become liable or responsible for
the obligations of any other person or entity, except to the extent Scripps
is released therefrom prior to or contemporaneously with the consummation
of the Merger or (C) make any loans, advances or capital contributions to,
or investments in, any person or entity other than a subsidiary;
(v) except pursuant to the Scripps Stock Plans, issue, sell, deliver
or agree or commit to issue, sell or deliver (whether through the issuance
or granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other equity
securities or amend any of the terms of any such securities outstanding on
October 28, 1995;
(vi) terminate, amend, modify or waive compliance with any of the
provisions, terms or conditions of the Contribution Agreement directly or
indirectly in respect of the assets or the liabilities retained by Scripps
or affecting the rights or obligations of Scripps from and after the
Effective Time; or
(vii) take or agree to take any of the foregoing actions or any
actions that would (A) subject to certain limited exceptions, make any
representation or warranty of Scripps or New Scripps contained in the
Merger Agreement materially untrue or incorrect as of the date made or as
of the Closing Date, (B) result in any of the conditions to Closing in the
Merger Agreement not being satisfied or (C) subject to certain limited
exceptions, be materially inconsistent with the terms of the Merger
Agreement or the transactions contemplated thereby.
Interim Operations of Scripps Cable. Pursuant to the Merger Agreement,
Scripps has agreed that, from October 28, 1995 to the Closing Date, it will
cause each of the Scripps Cable Subsidiaries and Scripps Cable Partnerships to
conduct its operations according to the ordinary and usual course of business
consistent with past practices. Scripps has also agreed that, except as
otherwise contemplated by the Merger Agreement
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(without the prior written consent of Comcast), it will not permit any of the
Scripps Cable Subsidiaries or Cable Partnerships to:
(i) amend its charter or bylaws or partnership agreement;
(ii) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other equity securities or partnership interests or amend
any of the terms of any securities outstanding on October 28, 1995;
(iii) acquire, sell, lease or dispose of any assets material to
Scripps Cable, other than (A) sales of inventory and equipment in the
ordinary and usual course of business consistent with past practice, (B)
the acquisition of assets related to the Mid-Tennessee Business as
described in "-- Acquisition of Mid-Tennessee Business," (C) in connection
with the proposed joint venture described in "-- Proposed Joint Venture,"
and (D) the acquisition of the minority interest in one of the Scripps
Cable Partnerships as described in "-- Acquisition of Minority Interest";
(iv) mortgage, pledge or subject to any lien, lease, security interest
or other charge or encumbrance any of its properties or assets, tangible or
intangible, material to Scripps Cable;
(v) fail to make capital expenditures in the ordinary course of
business (including line extensions but excluding upgrades and rebuilds) on
property, plant and equipment;
(vi) without the prior consent of Comcast, which is not to be withheld
or delayed unreasonably, (A) except as required by applicable law or as
disclosed to Comcast in writing prior to October 28, 1995, implement any
rate change, retiering or repackaging of cable television programming
offered by any Scripps Cable Subsidiary or Scripps Cable Partnership, (B)
except as disclosed to Comcast in writing prior to October 28, 1995, make
any cost-of-service or hardship election under the rules and regulations
adopted under the Cable Act of 1992 or (C) amend any franchise or agree to
make any payments or commitments, including commitments to make future
capital improvements or provide future services, in connection with
obtaining any authorization, consent, order or approval of any governmental
authority necessary for the transfer of control of any franchise;
(vii) increase the amount of any cash compensation payable to its
employees if such increase would be inconsistent with past practice or
would cause the aggregate cash compensation payable to all employees on an
annualized basis to exceed by more than 5% the cash compensation payable by
Scripps Cable to all of its employees on an annualized basis as of June 30,
1995; provided, that the foregoing restrictions do not apply to stay
bonuses paid to Cable Employees (as hereinafter defined) prior to the
Closing Date;
(viii) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, or redeem or otherwise acquire any of its securities,
except that the Scripps Cable Subsidiaries and the Scripps Cable
Partnerships may pay cash dividends, or otherwise make cash distributions,
to Scripps or any of its subsidiaries and as described in "-- Excess Cash";
(ix) fail to maintain inventory at customary levels; or
(x) take or agree to take any of the foregoing actions or any actions
that would (A) subject to certain limited exceptions, make any
representation or warranty of Scripps or New Scripps contained in the
Merger Agreement materially untrue or incorrect as of the date when made or
as of the Closing Date, (B) result in any of the conditions to Closing in
the Merger Agreement not being satisfied or (C) subject to certain limited
exceptions, be materially inconsistent with the terms of the Merger
Agreement or the transactions contemplated thereby.
Interim Operations of Comcast. Comcast has agreed that, except as
contemplated by the Merger Agreement, during the period from October 28, 1995 to
the Closing Date (i) Comcast will not amend the Comcast Articles in any manner
that requires a class vote of the Comcast Common Stock except that
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Comcast may amend the Comcast Articles to adopt the Permitted Amendments and
(ii) neither Comcast nor any of its subsidiaries will, without the prior written
consent of Scripps, take or agree to take any actions that would (A) subject to
certain limited exceptions, make any representation or warranty of Comcast
contained in the Merger Agreement materially untrue or incorrect as of the date
when made or as of the Closing Date, (B) result in any of the conditions to
Closing set forth in the Merger Agreement not being satisfied or (C) subject to
certain limited exceptions, be materially inconsistent with the terms of the
Merger Agreement or the transactions contemplated thereby.
On June 19, 1996, Comcast shareholders voted to approve the Adopted
Permitted Amendments.
Excess Cash. The Merger Agreement provides that, immediately prior to the
Distribution, the Scripps Cable Subsidiaries and the Scripps Cable Partnerships
shall pay dividends to Scripps and its subsidiaries so that none of the Scripps
Cable Subsidiaries or the Scripps Cable Partnerships owns any cash or cash
equivalents at the Effective Time.
Capital Expenditures. The Merger Agreement requires Scripps to cause
Scripps Cable to make capital expenditures in the ordinary course of business,
including line extensions. Scripps is permitted to make up to an additional
$43.2 million of capital expenditures for upgrades or rebuilds if agreed to in
advance by Comcast. See "-- General Provisions -- Cable Net Liabilities and
Capital Expenditure Adjustments" above for a description of adjustment payments
relating to capital expenditures for upgrades or rebuilds.
Acquisition of Mid-Tennessee Business. Prior to the execution of the
Merger Agreement, Broadcasting entered into an agreement to acquire certain
cable cluster systems owned by Mid-Tennessee Cable Limited Partnership
principally located in Athens, Tennessee, Harriman, Tennessee, and Greenbrier,
Tennessee (collectively, the "Mid-Tennessee Business") for an aggregate purchase
price of $62.5 million (the "Mid-Tennessee Acquisition"). The Merger Agreement
prohibits Broadcasting from waiving any closing condition or making any material
modification of the governing purchase agreement without the prior consent of
Comcast. On January 3, 1996, Broadcasting completed the acquisition of the
Mid-Tennessee Business for $62.5 million. Prior to the Scripps Special Meeting,
Broadcasting will contribute and assign to a Cable Subsidiary all assets and
liabilities of the Mid-Tennessee Business so acquired and all rights and
obligations it may have, if any, under any such purchase agreement (which
assets, rights and obligations will be acquired by Comcast as a result of the
Merger).
Acquisition of Minority Interest. Scripps is required to use its
reasonable best efforts to cause Scripps Howard Sacramento, a Scripps Cable
Subsidiary which owns a 95% interest in Sacramento Cable Television ("SCT"), the
Scripps Cable Partnership that owns and operates the Scripps cable franchise in
the Sacramento, California, area, to acquire the remaining 5% interest in SCT
from River City (the "River City Interest") on terms and conditions reasonably
satisfactory to Comcast. If SCT acquires all or any part of the River City
Interest, then the Aggregate Consideration will be increased as described above
in "-- General Provisions -- Share Exchange." If SCT does not acquire the River
City Interest, the Aggregate Consideration will not be affected. The acquisition
of the River City Interest is not a condition to the consummation of the Merger.
River City has commenced an action against Scripps Howard Sacramento relating to
the operation of SCT. See "Risk Factors -- Certain Litigation -- River City
Litigation."
Proposed Joint Venture. Prior to the execution of the Merger Agreement,
Scripps had commenced negotiations with Hyperion Telecommunications of
Tennessee, Inc. ("Hyperion") regarding a possible joint venture to provide
alternate access services. The Merger Agreement requires that the terms and
conditions of any such joint venture and any material related transactions must
be reasonably satisfactory to Comcast. These negotiations were terminated by
Scripps as a result of the failure of Scripps and Hyperion to reach an agreement
as to various terms.
Market Repurchase Program. Comcast has announced that it has approved the
Repurchase Program pursuant to which it may purchase at such times and on such
terms as it determines appropriate up to $500 million of Comcast Special Common
Stock and Comcast Class A Common Stock, although it has no obligation to Scripps
or New Scripps to make any such purchases. The Merger Agreement requires Comcast
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to terminate the Repurchase Program no later than six months following the
Closing Date and not to repurchase any of its shares during the Random Trading
Days.
As of the date hereof, Comcast has, pursuant to the Repurchase Program,
purchased shares of Comcast Special Common Stock and Comcast Class A Common
Stock for aggregate consideration of $185.8 million. In addition, as of the date
hereof, Comcast has sold to a financial institution put options on Comcast
Special Common Stock (the "Put Options"), that entitle that financial
institution, at its option, to sell to Comcast up to an aggregate of 4.0 million
shares of Comcast Special Common Stock on specified expiration dates, all of
which occur in January, February and March of 1997. Comcast and the financial
institution have established procedures that provide for the settlement, or the
postponement of the expiration of, the Put Options to prevent any Put Option
from expiring during the period proxies are being solicited pursuant hereto or
during the Random Trading Days. Pursuant to the Repurchase Program, Comcast may
repurchase additional shares of Comcast Special Common Stock or Comcast Class A
Common Stock, or sell additional put options on such stock, from time to time in
the open market or in private transactions, subject to market conditions. All
share ownership percentages set forth herein reflect the actual number of shares
outstanding as of the Comcast Record Date after taking into account repurchases
pursuant to the Repurchase Program but disregarding any repurchases that may be
made upon exercise of the Put Options.
SEC Filings. The Merger Agreement requires Scripps, New Scripps and
Comcast to prepare and file any filings required to be filed by each of them
under the Securities Act, the Exchange Act or any other federal or state laws
relating to the transactions contemplated by the Merger Agreement and to use
their best efforts to respond to any comments of the SEC or any other
appropriate government official with respect thereto. In addition, Scripps, New
Scripps and Comcast have agreed to cooperate with each other and provide to each
other all information necessary in order to prepare such filings.
Internal Revenue Service Ruling. Scripps has submitted to the Service a
request for a private letter ruling from the Service to the effect that the
Internal Spin-Offs (including the contribution of the assets related to the
Mid-Tennessee Business) and the Spin-Off will qualify for tax-free treatment
under Section 355 of the Code. The receipt of a favorable ruling is a condition
to the obligations of Comcast and Scripps to consummate the Merger. See
"-- Closing; Conditions Precedent." On July 24, 1996, Scripps received such
ruling from the Service.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Comcast, Scripps and New Scripps. The representations and warranties of the
parties will not survive beyond the Closing Date, except that the
representations and warranties made with respect to the capitalization of
Scripps and New Scripps will survive indefinitely.
The representations of Scripps and New Scripps are made with respect to
those companies and their respective subsidiaries, including the Scripps Cable
Subsidiaries and Scripps Cable Partnerships, and relate generally to: due
organization, qualification and authority; absence of violations of, among other
things, their respective charter documents, by-laws, certain contracts, and law;
required consents and approvals of governmental authorities; approval by the
Boards of Directors of Scripps and New Scripps of the Merger Agreement and the
Transactions and, in the case of Scripps, receipt of the opinion of Merrill
Lynch as to the fairness of the Merger; the capital structure of Scripps, New
Scripps and Scripps Cable; the accuracy of information, including financial
statements, contained in the Merger Agreement; the absence of certain material
changes or undisclosed liabilities; compliance with applicable laws; franchises
and material agreements; taxes; litigation; employee benefits; labor matters;
title to properties; the filing of appropriate SEC reports; environmental
matters; brokers and finders; and the Mid-Tennessee Acquisition.
The representations of Comcast are made with respect to itself and its
subsidiaries and relate generally to: due organization, qualification and
authority; absence of violations of, among other things, their respective
charter documents, by-laws, certain contracts and law; required consents and
approvals of governmental authorities; approval by the Board of Directors of
Comcast of the Merger Agreement and the Transactions; the capital structure of
Comcast; the accuracy of information, including financial statements, contained
in the
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Merger Agreement; the filing of appropriate SEC reports; certain tax matters;
the absence of certain material changes or undisclosed liabilities; and brokers
and finders.
INDEMNIFICATION
Pursuant to the Merger Agreement and the Contribution Agreement, Comcast,
Scripps, and New Scripps have agreed to indemnify one another with respect to
various matters summarized below.
Comcast will indemnify Scripps and New Scripps against losses that arise
out of material misstatements of fact or omissions for which Comcast is
responsible in documents filed with the SEC in connection with the Transactions.
New Scripps (and, if the Merger Agreement is terminated prior to the
consummation of the Merger, Scripps) will indemnify Comcast against losses that
arise out of such statements or omissions for which New Scripps or Scripps was
responsible.
New Scripps, from and after the Effective Time, will indemnify Comcast
against losses to the extent they: (i) arise out of or relate to any of the
assets received or liabilities assumed by New Scripps in connection with the
Spin-Off; (ii) are based upon any taxes payable with respect to the Scripps
Cable Business prior to the Effective Time; (iii) relate to liabilities and
obligations under employee benefit plans assumed by New Scripps; (iv) relate to
the Scripps Stock Plans assumed by New Scripps; (v) relate to any suit, action,
proceeding or investigation pending at or arising after the Closing Date that
relates to the Scripps Cable Business prior to the Effective Time; (vi) relate
to the 7 3/8% Notes; (vii) relate to the representations of Scripps and New
Scripps regarding the capitalization of Scripps and Scripps Cable; (viii) relate
to certain insured events occurring prior to the Effective Time; (ix) relate to
certain environmental liabilities; or (x) relate to contractual rights of
certain third parties with respect to certain of the cable systems being
acquired by Comcast.
Scripps (and after the Effective Time, Comcast) will indemnify New Scripps
against losses to the extent they: (i) with certain exceptions for losses
relating to taxes, employee benefits, litigation, insurance claims, certain
environmental matters, certain limited third party interests in the Scripps
Cable Business, and certain other matters, arise out of or relate to the
business operations of the Scripps Cable Subsidiaries and the assets and
liabilities retained by Scripps in connection with the Spin-Off; or (ii) relate
to any suit, action, proceeding or investigation arising after the Closing Date
that relates to the Scripps Cable Business after the Effective Time.
Scripps and New Scripps have agreed to indemnify Comcast against all losses
arising from or relating to any claim, action or proceeding brought by or on
behalf of the holders of Scripps Common Stock in connection with the
Transactions. Comcast has agreed to indemnify Scripps and New Scripps against
all losses arising from or relating to any claim, action or proceeding brought
by or on behalf of the holders of Comcast Common Stock in connection with the
Transactions.
TAX MATTERS
New Scripps will be liable for and shall indemnify Comcast, on an after-tax
basis, against all tax liabilities of Scripps and its subsidiaries attributable
to periods ending through the Closing Date, including tax liabilities resulting
from the failure of various components of the Internal Spin-Offs, the Spin-Off
and the Merger to qualify as tax-free transactions under the Code, unless such
failure to qualify is the result of certain actions by Comcast. See "Certain
Federal Income Tax Considerations."
New Scripps shall be entitled to (and shall indemnify Comcast against any
subsequent disallowance of) any tax credits or refunds of Scripps or any
subsidiary of Scripps payable with respect to any tax period prior to the
Closing Date, except that Comcast shall be entitled to any such credits or
refunds that are reflected as consolidated current assets of Scripps Cable for
purposes of the determination of the Cable Net Liabilities Amount.
New Scripps shall be responsible, subject to Comcast's review, for the
preparation, filing and signing of all Scripps consolidated income tax returns
for all taxable periods that end on or before the Closing Date, including tax
returns of the Scripps group for such periods that are due after the Closing
Date, and of all
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Scripps Cable tax returns required to be filed on or before the Closing Date,
and New Scripps shall be responsible for all taxes shown to be due thereon. All
such tax returns shall be prepared consistently with the past practice of
Scripps, New Scripps and Scripps Cable, and shall not amend (without Comcast's
consent) any election that relates to Scripps Cable (except to the extent a
change is required by law.)
Comcast shall be responsible for the preparation and filing of all Scripps
Cable tax returns (other than the Scripps consolidated tax return) required to
be filed after the Closing Date for tax periods that end after the Closing Date.
Comcast and New Scripps shall cooperate with each other in a timely manner
in the preparation and filing of any tax returns, payment of any taxes in
accordance with the Merger Agreement, and the conduct of any audit or other
proceeding.
Comcast and New Scripps shall each, to the extent potentially relevant to
the other party, retain records, documents, accounting data and other
information necessary for the preparation and filing of all tax returns or the
audit of such returns and give to the other reasonable access to such records,
documents, accounting data and other information and to its personnel and
premises.
For a period of two years after the Closing Date: (i) except for actions
taken in the ordinary course of business, Comcast may not sell, transfer,
distribute or otherwise dispose of a substantial portion of the operating assets
of Scripps Cable or any shares of capital stock of any corporation or
partnership interests of any partnership that was a subsidiary of Scripps
immediately prior to the Merger, whether by merger or otherwise; provided,
however, that Comcast shall be entitled to (A) enter into any like-kind exchange
for other cable television assets (within the meaning of Section 1031 of the
Code) with respect to any Scripps Cable assets and (B) contribute the Stock of
the Cable Holding Subsidiary to a wholly owned subsidiary of Comcast after the
Merger; (ii) Comcast shall not cause or permit any corporation that was a
subsidiary of Scripps immediately prior to the Merger to sell any shares of
capital stock or any partnership interests of such subsidiary to any person if
such sale or issuance will prevent Comcast from retaining "control" of such
subsidiary (within the meaning of Section 368 of the Code); (iii) Comcast shall
not adopt a plan of liquidation or initiate and enter into an agreement of
merger or other transaction pursuant to which the corporate legal existence of
Comcast would terminate or the outstanding stock of Comcast would, in a taxable
transaction, be converted into cash, other property or the stock or securities
of any other issuer; and (iv) Comcast and its affiliates shall not offer to
purchase, make a tender offer, or otherwise enter into any agreement to acquire
any shares of capital stock of New Scripps.
Notwithstanding the above, Comcast will be permitted to take any actions
described in clauses (i) through (iii) above if it first obtains either a ruling
from the Service or an opinion of recognized tax counsel satisfactory to New
Scripps to the effect that such actions will not result in the distribution of
New Scripps Common Shares to Scripps' stockholders or the Merger being taxable.
CERTAIN EMPLOYEE MATTERS
As a result of the transactions contemplated by the Merger Agreement, at
the Effective Time, Comcast will become the employer of all active employees of
Scripps Cable ("Cable Employees") as of the Effective Time, including employees
on any approved leave of absence or any short-term disability leave other than a
disability leave from which the employee never returns to active employment and,
instead, qualifies for benefits under Scripps' disability plan and excluding
Cable Employees who are receiving long-term disability income benefits as of the
Effective Time. From and after the Effective Time, except with respect to
benefits accrued prior to the Effective Time, all Cable Employees shall cease to
be covered by all employee benefit plans and arrangements previously extended to
them by Scripps or any of its affiliates ("Scripps Benefit Plans"), but all
Cable Employees shall be fully vested in their benefits accrued through the
Effective Time under Scripps' Media Pension Plan. As of the Effective Time, New
Scripps will assume all liabilities and responsibilities with respect to Cable
Employees or former employees of Scripps Cable under, or relating to, the
Scripps Benefit Plans.
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Effective from and after the Effective Time, Comcast will provide all Cable
Employees with compensation and employee benefits, including a group health care
plan, which are no less favorable in the aggregate than the benefits provided to
similarly situated Comcast employees. Any employee benefit plan of Comcast
(which covers Cable Employees) will grant Cable Employees credit for prior
service with Scripps and its affiliates prior to the Effective Time for purposes
of eligibility and vesting.
SCRIPPS STOCK OPTION PLANS
As of the Effective Time, New Scripps will assume both the Incentive Plan
and the Directors Plan. As of the Effective Time, each stock option outstanding
under the Incentive Plan or the Directors Plan or any other plan of Scripps, New
Scripps or any of their subsidiaries that is not exercised prior to the
Effective Time will be assumed by New Scripps, and each restricted stock award
subject to vesting conditions under the Incentive Plan or any other plan of
Scripps, New Scripps or any of their subsidiaries will be assumed by New
Scripps. Approval of the Merger by the holders of Common Voting Stock of Scripps
will constitute approval of New Scripps' assumption of the Incentive Plan and
the Directors Plan and the options and restricted stock awards outstanding under
the Incentive Plan and the options outstanding under the Directors Plan for
purposes of the stockholder approval requirements of Rule 16b-3 under the
Exchange Act.
TERMINATION
General. The Merger Agreement may be terminated and the transactions
contemplated thereby, including the Merger, abandoned at any time prior to the
Closing Date (i) by mutual written consent duly authorized by the Boards of
Directors of Scripps, New Scripps and Comcast, (ii) by either Comcast or Scripps
if the stockholders of Comcast fail to approve the Comcast Proposal or the
stockholders of Scripps fail to approve the Scripps Proposals, (iii) by either
Scripps or Comcast, provided the terminating party is not then in breach of its
obligations under the Merger Agreement, if the Merger is not consummated by
December 31, 1996 (the "Termination Date"), (iv) by Scripps, provided it is not
then in breach of any of its obligations under the Merger Agreement, if Comcast
fails to perform any covenant in the Merger Agreement and fails to cure such
failure within 20 business days after written notice by Scripps of such failure,
or if any condition to the obligations of Scripps and New Scripps has not been
satisfied and is not capable of being satisfied prior to the Termination Date,
(v) by Scripps, whether or not the conditions to its obligations under the
Merger Agreement have been satisfied, if its Board of Directors determines, with
the written advice of counsel provided to Comcast, that it may be required to do
so in the exercise of its fiduciary duties, (vi) by Comcast, provided it is not
then in breach of any of its obligations under the Merger Agreement, if (A)
Scripps or New Scripps fails to perform any covenant in the Merger Agreement and
fails to cure such failure within 20 business days after written notice by
Comcast of such failure, (B) any condition to the obligations of Comcast has not
been satisfied prior to the Termination Date, or (C) the Scripps Board of
Directors materially modifies or withdraws its approval of the Scripps Proposals
or its recommendation of the Scripps Proposals to the stockholders of Scripps,
(vii) by Scripps if the Average Closing Price is less than 85% of the Execution
Price and, following notice of intent by Scripps to terminate the Merger
Agreement, Comcast does not agree to deliver to Scripps stockholders in the
Merger, in addition to the number of shares which Comcast is obligated to
deliver, an additional number of shares equal to the Top-up Share Number (see
"-- General Provisions -- Share Exchange"), or (viii) by Comcast if it receives
a notice that the United States Department of Justice or the United States
Federal Trade Commission has authorized the institution of litigation
challenging the Merger and related transactions under the antitrust laws of the
United States and including a motion seeking to prohibit the consummation of the
Merger and related transactions.
If the Merger Agreement is terminated for any reason set forth above, the
Merger Agreement will become void and there will be no liability or obligation
on the part of Scripps, New Scripps or Comcast, or the directors, officers or
stockholders of any party, except that (i) the parties' indemnification
obligations with respect to misstatements or omissions in documents filed with
the SEC shall survive, (ii) certain confidentiality provisions shall survive,
and (iii) certain provisions with respect to the reimbursement of expenses and
the
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payment by Scripps of a termination fee under certain circumstances, as
described below, and certain other expense allocation provisions, shall survive.
Termination Fees and Expenses. If the Merger Agreement is terminated (i)
by Scripps in the exercise of its fiduciary duties, (ii) by Comcast (provided it
is not in breach of any of its obligations under the Merger Agreement) (x) if
Scripps or New Scripps fails to perform any of its covenants thereunder and such
failure remains uncured for 20 business days after written notice by Comcast
thereof or (y) as a result of the material modification or withdrawal of the
approval and recommendation of the Merger and related transactions by the Board
of Directors of Scripps or (iii) by Scripps or Comcast if (A) the Merger and
related transactions are not approved by the stockholders of Comcast or Scripps
and (B) either (1) the Scripps Trust shall have failed to vote in favor of the
adoption and approval of the Merger and related transactions or (2) the Board of
Directors of Scripps shall have materially modified or withdrawn its approval
and recommendation of the Merger and related transactions, then Scripps will pay
to Comcast a fee of $47.25 million. In addition, if the Merger Agreement is
terminated by Comcast as a result of the failure of any condition to the
obligations of Comcast to be satisfied prior to December 31, 1996, other than
(i) a condition to all parties' obligations or (ii) the Franchise Conditions,
then Scripps will be obligated to pay Comcast an amount (not to exceed $5.0
million) equal to the actual reasonable fees and expenses paid or payable by or
on behalf of Comcast in connection with the negotiation, execution and delivery
of the Merger Agreement.
If the Merger Agreement is terminated (i) by Scripps (provided it is not in
breach of any of its obligations under the Merger Agreement) if (A) Comcast
fails to perform any of its covenants thereunder and such failure remains
uncured for 20 business days after written notice by Scripps thereof or (B) as a
result of the failure of any condition to the obligations of Scripps or New
Scripps (other than a condition to the obligations of all parties) to be
satisfied prior to December 31, 1996, or (ii) by Scripps if the Merger and
related transactions are not approved by the stockholders of Comcast and Sural
shall have failed to vote in favor of the adoption and approval of the Merger
and related transactions, then Comcast will pay Scripps an amount (not to exceed
$5.0 million) equal to the actual reasonable fees and expenses paid or payable
by or on behalf of Scripps and New Scripps in connection with the negotiation,
execution and delivery of the Merger Agreement.
AMENDMENT; WAIVER
Subject to applicable law, (i) the Merger Agreement may be amended at any
time (including after the approval of the Scripps Proposals and after the
approval of the Comcast Proposal) by an instrument in writing signed on behalf
of all of the parties thereto and (ii) the parties may (A) extend any time for
performance of any of the obligations of the other parties to the Merger
Agreement; (B) waive inaccuracies in the representations and warranties of any
other party; or (C) waive compliance with any of the agreements or conditions
for their respective benefit therein.
REGULATORY APPROVALS
Consummation of the Merger requires (i) notification pursuant to, and
expiration or termination of the waiting period under, the HSR Act and the rules
and regulations thereunder, (ii) consents and/or waivers from the relevant
governmental entities under certain franchises issued to Scripps Cable, and
(iii) consents of the FCC to the transfer of control of certain licenses issued
by the FCC to Scripps. The waiting period under the HSR Act has expired. Scripps
and Comcast have satisfied the conditions regarding the franchise consents and
the FCC's consents.
ANCILLARY AGREEMENTS
In accordance with the terms of the Merger Agreement, the following
additional ancillary agreements have been or will be entered into:
Board Representation Agreement. The Merger Agreement provides that, on the
Closing Date, Comcast, Sural and the Scripps Trust will enter into the Board
Representation Agreement, pursuant to which the Scripps Trust will have the
right to require Comcast, to the extent permitted under applicable law, to take
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steps to cause a Scripps Trust designee (the "Initial Designee") reasonably
acceptable to Comcast to be proposed for election to the Board of Directors of
Comcast. The Initial Designee will be so proposed for election at the earlier of
(i) the first meeting of Comcast's Board following the consummation of the
Merger, if there then exists a vacancy on the Comcast Board or the Comcast Board
has the power to create new directorships, or (ii) if there then exists no such
vacancy or the Comcast Board does not have such power, at the first meeting of
stockholders of Comcast following the consummation of the Merger. The number of
Scripps Trust designees will be increased to two individuals if at any time
directors are nominated the product of (i) the number of directors then
constituting the Comcast Board (not including any director positions held by a
Scripps Trust designee) and (ii) the fraction representing the percentage of
outstanding Comcast Common Stock represented by the Comcast Common Stock held by
the Scripps Trust for not less than one year is equal to or greater than 1.75.
Comcast will be required to recommend to its stockholders the election of such
designee(s), solicit proxies from its stockholders for such election and take
all other action reasonably necessary to cause such election. Pursuant to the
Board Representation Agreement, Sural will agree to vote in favor of the
election of each of the Scripps Trust designees. In the event that any Scripps
Trust designee ceases to serve on the Comcast Board of Directors prior to the
expiration of such designee's scheduled term, Comcast will be required to take
all actions reasonably necessary to cause the vacancy to be filled by a
replacement Scripps Trust designee. Unless the Scripps Trust elects to terminate
its rights under the Board Representation Agreement voluntarily, its rights will
terminate on the earlier to occur of (i) the date on which the Scripps Trust
ceases to own at least 50% of the shares of Comcast Merger Stock acquired by the
Scripps Trust in the Merger and (ii) the date of the fourth annual meeting of
the Comcast Board of Directors following the consummation of the Merger. In
addition, the Board Representation Agreement will require the Scripps Trust, for
a period of two years following the consummation of the Merger, to vote in favor
of all Permitted Amendments.
Noncompetition Agreement. As a condition to the Merger, New Scripps is
required to enter into a Noncompetition Agreement among Scripps, New Scripps and
Comcast, pursuant to which New Scripps will agree that, for a period of three
years after the Closing Date, neither it nor any of its subsidiaries will,
directly or indirectly, on its own behalf or in the service of or on behalf of
others, (i) actively solicit for employment (including as an independent
contractor), interfere with or endeavor to entice away (or attempt to do any of
the foregoing) any of the directors, officers, employees or agents of Comcast or
any of its subsidiaries whether holding such position prior to or after the
Closing Date or any person who at any time on or after October 28, 1995 was an
officer or employee of Scripps or any of its subsidiaries engaged in the
Restricted Business (as defined below) and whom Comcast employs following the
Effective Time, (ii) subject to certain exceptions, engage in any manner in, or
be connected as a stockholder, partner, principal, agent, representative,
consultant or otherwise with, any business or enterprise engaged in the
operation of cable television systems providing the services currently provided
by Scripps and Scripps Cable or the provision of Multi-Channel Video Service (as
defined) or alternate access services (collectively, the "Restricted Business,"
which will not include the business of developing or creating programming) in
any area served by Scripps Cable on the Closing Date (a "Restricted Area"), or
(iii) use or permit Scripps' or New Scripps' name to be used in connection with
any business or enterprise engaged in the Restricted Business in any Restricted
Area.
Registration Rights Agreement. Comcast and Scripps have agreed that, on
the Closing Date, Comcast and the Scripps Trust will enter into a registration
rights agreement relating to the Comcast Merger Stock to be issued to the
Scripps Trust in the Merger (the "Registration Rights Agreement"). Pursuant to
the Registration Rights Agreement, Comcast will have certain obligations to
register under the Securities Act the shares of Comcast Merger Stock issued to
the Scripps Trust in the Merger (which would approximate 56.4 million shares if
the Merger were consummated on the date hereof, the Average Closing Price were
the minimum Collar Price of $17.06375, no additional shares of Comcast Special
Common Stock were delivered in the Merger and the Base Consideration were
adjusted to result in an Aggregate Consideration of $1.5921 billion as described
in "-- General Provisions -- Share Exchange") (the "Registrable Shares"). On not
more than three occasions after the consummation of the Merger, the Scripps
Trust may demand that Comcast file a registration statement under the Securities
Act (a "Demand Registration"), covering such number of Registrable Shares (which
shall have a fair market value of at least $100.0 million) as shall be specified
in such demand. Comcast will not, however, be obligated to effect a Demand
Registration within 12 months after
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the effective date of a previous Demand Registration, and Comcast will have the
right to postpone for up to 150 days any Demand Registration if Comcast believes
it would be detrimental or disadvantageous to Comcast or its stockholders to
file such registration statement. Comcast cannot exercise its right to postpone
a Demand Registration more than once during any twelve-month period. In
addition, subject to certain terms and conditions contained in the Registration
Rights Agreement, the Scripps Trust will, subject to certain limitations, have
the right to include Registrable Shares in any registration statement filed by
Comcast in respect of a primary or secondary offering of Comcast Special Common
Stock (other than on Form S-4 or Form S-8 or a registration statement filed
pursuant to Rule 415 under the Securities Act).
The Registration Rights Agreement will prohibit the Scripps Trust from
disposing of any of its shares of Comcast capital stock for 15 days prior to and
120 days following the effective date of any underwritten offering, unless the
managing underwriters of the offering agree otherwise. Comcast will be
prohibited from publicly selling (except pursuant to benefit plans and
registrations on Form S-4) any Comcast Special Common Stock (or securities
convertible into such stock) during the 15-day period prior to, and the 90-day
period following, the effective date of an underwritten public offering which is
a Demand Registration. In addition, Comcast will be obligated to use its
reasonable efforts to cause all holders of 5% or more of any class of capital
stock of Comcast and all other holders of securities of Comcast purchased from
Comcast other than in a public offering to enter into agreements with Comcast
with restrictions similar to those in the preceding sentence.
The Registration Rights Agreement will provide that, in connection with a
Demand Registration, all expenses incurred by Comcast in complying with its
obligation, under the Registration Rights Agreement including, without
limitation, all registration and filing fees, fees and expenses of complying
with securities and blue sky laws, listing fees, printing expenses and fees and
disbursements of accountants and counsel for Comcast will be paid by Comcast.
The expenses paid by Comcast will not include underwriting discounts and
commissions attributable to shares of the Scripps Trust.
Pursuant to the Registration Rights Agreement, the Scripps Trust has agreed
to maintain until at least the first anniversary of the Effective Time ownership
of such number of shares of Comcast Merger Stock issued to it in the Merger as
represents at least 50% of the total Merger Consideration. The Scripps Trust has
also agreed not to sell in the open market any Comcast capital stock in any
period (not to exceed 10 trading days in any calendar month) in which, following
notice by Comcast to the Scripps Trust, Comcast proposes to repurchase its
shares pursuant to the Repurchase Program. See "-- Certain Covenants -- Market
Repurchase Program."
Voting Agreement. In connection with the execution of the Merger
Agreement, Comcast, Scripps, Sural and the Scripps Trust entered into the Voting
Agreement, pursuant to which Sural has agreed to vote (i) in favor of the
Comcast Proposal, (ii) against any action or agreement that would result in a
breach of any covenant, representation or warranty or any other obligation or
agreement of Comcast under the Merger Agreement or that would result in any of
the conditions to the obligations of Comcast under the Merger Agreement not
being fulfilled and (iii) in favor of any other matter relating to the
consummation of the transactions contemplated by the Merger Agreement. Pursuant
to the Voting Agreement, the Scripps Trust has agreed to vote (i) in favor of
the Scripps Proposals, (ii) against any proposal for any recapitalization,
merger, sale of assets or other business combination between Scripps, New
Scripps or any of the Scripps Cable Subsidiaries and any person other than
Comcast, or any other action or agreement which would result in the breach of
any covenant, representation or warranty or any other obligations or agreements
of Scripps in the Merger Agreement, or cause any conditions to the obligations
of Scripps under the Merger Agreement not to be fulfilled, and (iii) in favor of
any other matter relating to the consummation of the transactions contemplated
by the Merger Agreement; provided, that the Scripps Trust is not obligated to
vote as described in the preceding sentence if the board of trustees of the
Scripps Trust determines, with the advice of outside counsel, that it may be
required, in the exercise of its fiduciary duties, to vote other than as so
described.
Sural and the Scripps Trust each agreed not to enter into any voting
agreement or grant a proxy or power of attorney that is inconsistent with the
Voting Agreement. In addition, Sural and the Scripps Trust each agreed not to
transfer ownership of their respective shares of Comcast and Scripps unless (i)
the transferee
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agrees in writing to be bound by the terms and conditions of the Voting
Agreement or (ii) such transfer would not affect the transferor's ability to
approve the Merger and related transactions without regard to the votes of the
other stockholders of Comcast and Scripps, respectively.
Execution of the Voting Agreement was a condition to Comcast and Scripps
entering into the Merger Agreement, and no compensation was paid to any person
in consideration for entering into such agreement.
OWNERSHIP OF COMCAST STOCK AFTER THE MERGER
If the Merger were consummated on the date hereof and assuming (i) that no
holders of Scripps Common Voting Stock exercised and perfected statutory
dissenters' rights under the DGCL, (ii) that the Base Consideration were
adjusted to result in an Aggregate Consideration equal to $1.5921 billion as
described in "-- General Provisions -- Share Exchange," and (iii) that the
Average Closing Price were equal to the Execution Price of $20.075, holders of
shares of Scripps Common Stock would own Comcast Special Common Stock
representing approximately 29.4% of the outstanding Comcast Special Common Stock
on the Comcast Record Date and 25.4% of the outstanding Comcast Common Stock on
such date, each on a pro forma basis for the Merger, and the stockholders of
Scripps would receive 0.986 Shares of Comcast Special Common Stock per share of
Scripps Common Stock. Assuming that the minimum Collar Price of $17.06375 was
used to calculate the amount of Comcast Merger Stock and that no additional
shares of Comcast Special Common Stock were delivered in the Merger, the Comcast
Merger Stock would be approximately 93.3 million shares (representing
approximately 32.9% of the outstanding Comcast Special Common Stock on the
Comcast Record Date and approximately 28.6% of the outstanding Comcast Common
Stock on such date, each on a pro forma basis for the Merger) and the
stockholders of Scripps would receive 1.159 shares of Comcast Special Common
Stock per share of Scripps Common Stock. The closing price of Comcast Special
Common Stock on Nasdaq on September 27, 1996 was $15.875 per share.
OWNERSHIP OF NEW SCRIPPS STOCK AFTER THE SPIN-OFF AND THE MERGER
Following the Spin-Off and the Merger, holders of Scripps Class A Common
Stock and holders of Scripps Common Voting Stock will own New Scripps Class A
Common Shares and New Scripps Common Voting Shares, respectively, constituting
100% of each such class of New Scripps Common Shares in the same proportion as
shares of Scripps Class A Common Stock and Scripps Common Voting Stock,
respectively, were held as of such date.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of the material federal income tax
consequences to the Scripps stockholders of the Internal Spin-offs, the
Spin-Off, the Merger and the transactions contemplated thereby. The tax
treatment of a stockholder may vary depending upon his particular situation, and
certain stockholders (including individuals who hold options in respect of
Scripps Class A Common Stock, insurance companies, tax-exempt organizations,
financial institutions or broker-dealers, and persons who are neither citizens
nor residents of the United States, or who are foreign corporations, foreign
partnerships or foreign estates or trusts as to the United States) may be
subject to special rules not discussed below.
EACH SCRIPPS STOCKHOLDER IS URGED TO CONSULT HIS, HER OR ITS TAX ADVISOR AS
TO THE PARTICULAR TAX CONSEQUENCES TO HIM, HER OR IT OF THE TRANSACTIONS
DESCRIBED HEREIN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR
FOREIGN TAX LAWS, AND OF CHANGES IN APPLICABLE TAX LAWS.
FEDERAL INCOME TAX CONSEQUENCES OF CERTAIN TRANSACTIONS
Consummation of the Internal Spin-Offs, the Spin-Off, the Merger and the
transactions contemplated thereby is conditioned upon the receipt of a favorable
ruling from the Service as to certain of the federal income tax consequences of
certain transactions in connection with the Internal Spin-Offs and the Spin-Off
and the receipt of an opinion of Baker & Hostetler, counsel to Scripps, as to
the qualification of the Merger as
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a tax-free reorganization under Section 368(a)(1)(A) of the Code. Specifically,
Scripps has requested rulings from the Service (the "Requested Rulings") that
the Internal Spin-Offs and the Spin-Off qualify under Section 355 of the Code
with the following effect (and related rulings as to the tax basis and holding
period):
(1) No gain or loss will be recognized and no amount will be
includible in income by any member of the Scripps consolidated group for
federal income tax purposes (the "Scripps Group") in the Internal Spin-Offs
and the Spin-Off.
(2) Stockholders of Scripps will recognize no gain or loss (and will
not have to include any amounts in income) in the Spin-Off and will
apportion the basis of their shares of Scripps Common Stock between the New
Scripps Common Shares received and the shares of Scripps Common Stock
retained (which will then be converted into Comcast Merger Stock) in
proportion to their relative fair market values. The holding period for New
Scripps Common Shares received in exchange for or with respect to shares of
Scripps Common Stock will include the holding period for the shares of
Scripps Common Stock, provided the shares of Scripps Common Stock were held
as capital assets.
On July 17, 1996 Scripps received the Requested Rulings from the Service.
It is a condition to the parties' obligations to consummate the transaction
contemplated by the Merger Agreement that the Requested Rulings not be
withdrawn. A ruling from the Service, while generally binding on the Service,
may under certain circumstances be revoked or modified by the Service
retroactively. Scripps is currently not aware of any facts or circumstances that
would cause the Service to revoke or modify the Requested Rulings received by
Scripps from the Service as to the federal income tax consequences described
above.
The Requested Rulings received from the Service are based on the assumption
that the Merger will qualify as a tax-free reorganization under Section
368(a)(1)(A) of the Code. The Service takes the position that the consequences
of a transaction such as the Merger are adequately established in the tax law,
and it therefore will not issue a "comfort" ruling as to whether such a
transaction qualifies as a reorganization under Section 368(a)(1)(A). Therefore,
Scripps has not requested a ruling that the Merger will qualify as a tax-free
reorganization under Section 368(a)(1)(A). Instead, consummation of the Internal
Spin-Offs, the Spin-Off and the Merger and the transactions contemplated thereby
is conditioned upon the receipt of the opinion of Baker & Hostetler, counsel to
Scripps, with respect to the material Federal income tax consequences of the
Merger. This opinion has been received by Scripps and provides as follows:
(i) The Merger will qualify as a reorganization under Section
368(a)(1)(A) of the Code.
(ii) Except for any cash received in lieu of fractional shares (or in
connection with the exercise of dissenters' rights), a stockholder will not
recognize any income, gain or loss as a result of the receipt of Comcast
Merger Stock.
(iii) A stockholder's tax basis for shares of Comcast Merger Stock,
including any fractional share interest for which cash is received, will
equal the allocable portion of such stockholder's basis in shares of
Scripps Common Stock held immediately before the Merger.
(iv) A stockholder's holding period for the Comcast Merger Stock,
including any fractional share interest for which cash is received, will
include the period during which the shares of Scripps Common Stock were
held, provided such shares were held as capital assets.
(v) Cash received by a stockholder in lieu of a fractional share
interest of Comcast Merger Stock will be treated as having been received as
a distribution in full payment in exchange for the fractional share
interest of Comcast Merger Stock which such stockholder would otherwise be
entitled to receive. This receipt of cash will result in gain or loss
measured by the difference between the basis of such fractional share
interest and the cash received. Such gain or loss will be capital gain or
loss to the stockholder, provided the Scripps Common Stock was a capital
asset in such stockholder's hands.
(vi) Where cash is received by a dissenting stockholder, and such
dissenting stockholder's actual and constructive ownership interest after
the transaction is such that the cash payment is not essentially equivalent
to a dividend, such cash payment will be treated as a redemption and such
shareholder will
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recognize gain measured by the difference between the amount of cash
received and the stockholder's basis in such stock).
A copy of the opinion issued by Baker & Hostetler has been filed as an
exhibit to the Registration Statement of which this Proxy Statement-Prospectus
is a part.
An opinion of counsel is not binding on the Service or the courts. Further,
the opinion of Baker & Hostetler is based on, among other things, current law
and certain representations as to factual matters made by, among others,
Scripps, New Scripps and Comcast which, if incorrect in certain material
respects, would jeopardize the conclusions reached by counsel in its opinion.
None of Scripps, New Scripps and Comcast is currently aware of any facts and
circumstances which would cause any such representations made by it to Baker &
Hostetler to be untrue or incorrect in any material respect. In addition,
Comcast has agreed to certain restrictions on its future actions for two years
to provide further assurances that the Internal Spin-Offs, the Spin-Off and the
Merger will be tax-free. See "The Merger Agreement -- Tax Matters." Baker &
Hostetler's opinion relies on an opinion received from Davis Polk & Wardwell
that the Merger will continue to qualify as a reorganization under Section
368(a)(1)(A) of the Code if Comcast contributes (as it is permitted to do) all
of the capital stock of the Cable Holding Subsidiary (i.e., Scripps Howard Cable
Company) to a first-tier wholly owned Comcast subsidiary.
A copy of the opinion issued by Davis Polk & Wardwell has been filed as an
Exhibit to the Registration Statement of which this Proxy Statement-Prospectus
is a part.
Receipt of the Requested Rulings and the opinion of Baker & Hostetler
described above are conditions to the consummation of the Internal Spin-Offs,
the Spin-Off and the Merger. In the event the Merger was consummated and
subsequently was determined not to qualify under Section 368(a)(1)(A) of the
Code, or if the Internal Spin-Offs and the Spin-Off were consummated and
subsequently were determined not to qualify under Section 355 of the Code,
substantial gain would be recognized by the members of the Scripps Group.
Although any resulting corporate income tax on such gain may be payable by
Comcast, as the successor to Scripps, New Scripps has agreed to indemnify
Comcast, on an after tax basis, for such tax liability unless the failure of the
Internal Spin-Offs, the Spin-Off and the Merger to qualify as tax-free
transactions under the Code is the result of Comcast's breach of the covenants
referred to in the second preceding paragraph. In addition, if the Spin-Off
fails to qualify under Section 355 of the Code, each Scripps stockholder will be
taxable in respect of the New Scripps Common Shares received in the Spin-Off.
Further, the failure of the Merger to qualify as a tax-free reorganization would
cause the Spin-Off to fail to qualify as a tax-free transaction and cause the
exchange of shares of Scripps Common Stock for shares of Comcast Merger Stock to
be taxable.
Upon consummation of the Merger, Comcast may contribute the stock of the
Cable Holding Subsidiary to a first-tier wholly owned Comcast subsidiary.
Comcast has received an opinion from its special tax counsel, Davis Polk &
Wardwell, to the effect that such contribution will not impact the tax-free
nature of the Merger.
BACKUP WITHHOLDING
Under the backup withholding rules, a holder of New Scripps Common Shares
and Comcast Merger Stock may be subject to backup withholding at the rate of 31%
with respect to dividends and proceeds of redemption, unless such stockholder
(i) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (ii) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. Any amount withheld under these rules will be credited
against the stockholders's federal income tax liability. New Scripps or Comcast
may require holders of New Scripps Common Shares or Comcast Merger Stock,
respectively, to establish an exemption from backup withholding or to make
arrangements satisfactory to New Scripps or Comcast, respectively, with respect
to the payment of backup withholding. A stockholder who does not provide New
Scripps or Comcast with his or her current taxpayer identification number may be
subject to penalties imposed by the Service.
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PROPOSAL TO APPROVE AND ADOPT THE SCRIPPS CHARTER AMENDMENT
The Board of Directors of Scripps has approved and declared advisable, and
is submitting to the Scripps stockholders for their approval, the Scripps
Charter Amendment. The Scripps Charter Amendment permits Scripps to distribute
to holders of Scripps Class A Common Stock one New Scripps Class A Common Share
for each share of Scripps Class A Common Stock and to holders of Scripps Common
Voting Stock one New Scripps Common Voting Share for each share of Scripps
Common Voting Stock. The Scripps Charter Amendment is required in connection
with the Spin-Off. This description is qualified in its entirety by reference to
the complete text of the Scripps Charter Amendment, a copy of which is attached
as Exhibit A to the Merger Agreement attached hereto as Annex I and incorporated
herein by reference.
DESCRIPTION OF NEW SCRIPPS CAPITAL STOCK
New Scripps is authorized to issue 120 million New Scripps Class A Common
Shares (of which 61,000,396 would be issued pursuant to the Spin-Off if the
Spin-Off were consummated as of the Scripps Record Date), 30 million New Scripps
Common Voting Shares (of which 19,470,382 would be issued pursuant to the
Spin-Off if the Spin-Off were consummated as of the Scripps Record Date) and 25
million New Scripps Preferred Shares. No New Scripps Preferred Shares will be
issued in the Spin-Off. The authorized and unissued New Scripps Class A Common
Shares and the New Scripps Preferred Shares will be available after the Spin-Off
for a variety of corporate purposes, including future public offerings and
corporate acquisitions. Except in connection with stock splits, stock dividends
or other similar transactions, the New Scripps Articles will prohibit the
issuance of additional Common Voting Shares. As of the Scripps Record Date, New
Scripps had 375 New Scripps Common Voting Shares and 375 New Scripps Class A
Shares outstanding, all of which were owned by Scripps.
The following is a description of the New Scripps Articles and Ohio Law,
which will govern the rights of holders of New Scripps Common Shares after the
Spin-Off.
NEW SCRIPPS CLASS A COMMON SHARES AND NEW SCRIPPS COMMON VOTING SHARES
General. The New Scripps Articles are identical in all material respects
to the Scripps Charter, except for provisions that make certain Ohio
anti-takeover laws inapplicable to New Scripps and provisions that allow for
spin-off and similar distributions, on a class-for-class basis to New Scripps
shareholders, of classes of common stock of a wholly owned subsidiary of New
Scripps replicating the relative rights of the two existing classes of common
shares of New Scripps. The rights, privileges and preferences of the New Scripps
Class A Common Shares and the New Scripps Common Voting Shares are identical in
all material respects to the rights, privileges and preferences of the Scripps
Class A Common Stock and the Scripps Common Voting Stock, respectively.
Voting Rights. Holders of New Scripps Class A Common Shares are entitled
to elect the greater of three or one-third of the directors of New Scripps (or
the nearest smaller whole number if one-third of the entire Board is not a whole
number), except directors, if any, to be elected by holders of New Scripps
Preferred Shares or any series thereof. Holders of New Scripps Class A Common
Shares are not entitled to vote on any other matters except as required by Ohio
Law. Under Ohio Law, an amendment to a corporation's articles of incorporation
that purports to do any of the following would require the approval of the
holders of each class of capital stock affected: (i) increase or decrease the
par value of the issued stock of such class (or of any other class of capital
stock of the corporation if the amendment would reduce or eliminate the stated
capital of the corporation), (ii) change issued stock of a class into a lesser
number of shares or into the same or a different number of shares of any other
class theretofore or then authorized (or so change any other class of capital
stock of the corporation if the amendment would reduce or eliminate the stated
capital of the corporation), (iii) change the express terms of, or add express
terms to, the stock of a class in any manner substantially prejudicial to the
holders of such class, (iv) change the express terms of issued shares of any
class senior to the particular class in any manner substantially prejudicial to
the holders of such junior class, (v) authorize shares of another class that are
convertible into, or authorize the conversion of shares of another class into,
such class, or authorize the directors to fix or alter conversion rights of
shares of another class that
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are convertible into such class, (vi) provide that the stated capital of the
corporation shall be reduced or eliminated as a result of an amendment described
in subclause (i) or (ii) above, or provide, in the case of an amendment
described in subclause (v) above, that the stated capital of the corporation
shall be reduced or eliminated upon the exercise of such conversion rights,
(vii) change substantially the purpose of the corporation, or provide that
thereafter an amendment to the corporation's articles of incorporation may be
adopted that changes substantially the purposes of the corporation, or (viii)
change the corporation into a nonprofit corporation. Holders of New Scripps
Common Voting Shares are entitled to elect all remaining directors and to vote
on all other matters. Nomination of persons for election by either class of
stock to the Board will be made by the vote of a majority of all directors then
in office, regardless of the class of stock entitled to elect them. Holders of a
majority of the outstanding New Scripps Common Voting Shares will have the right
to increase or decrease the number of authorized and unissued New Scripps Class
A Common Shares and Common Voting Shares, but not below the number of shares
thereof then outstanding. New Scripps Class A Common Shares and New Scripps
Common Voting Shares will not have cumulative voting rights.
The holders of New Scripps Common Voting Shares will have the power to
defeat any attempt to acquire control of New Scripps with a view to effecting a
merger, sale of assets or similar transaction even though such a change in
control may be favored by stockholders holding substantially more than a
majority of New Scripps' outstanding equity. This may have the effect of
precluding holders of shares in New Scripps from receiving any premium above
market price for their shares which may be offered in connection with any such
attempt to acquire control.
New Scripps' voting structure, which is similar to voting structures
adopted by a number of other media companies, is designed to promote the
continued independence and integrity of New Scripps' media operations under the
control of the holders of the New Scripps Common Voting Shares while at the same
time providing for equity ownership in New Scripps by a broader group of
stockholders through the means of a class of publicly traded common stock. This
structure may render more difficult certain unsolicited or hostile attempts to
take over New Scripps which could disrupt New Scripps, divert the attention of
its directors, officers and employees and adversely affect the independence and
quality of its media operations.
Dividend Rights. Each New Scripps Class A Common Share will be entitled to
dividends if, as and when dividends are declared by the Board of Directors of
New Scripps. Dividends must be paid on the New Scripps Class A Common Shares and
the New Scripps Common Voting Shares at any time that dividends are paid on
either. Any dividend declared and payable in cash, capital stock of New Scripps
(other than New Scripps Class A Common Shares or New Scripps Common Voting
Shares) or other property must be paid equally, share for share, on the New
Scripps Common Voting Shares and the New Scripps Class A Common Shares.
Dividends and distributions payable in New Scripps Common Voting Shares may be
paid only on New Scripps Common Voting Shares, and dividends and distributions
payable in New Scripps Class A Common Shares may be paid only on New Scripps
Class A Common Shares. If a dividend or distribution payable in New Scripps
Class A Common Shares is made on the New Scripps Class A Common Shares, a
simultaneous dividend or distribution on the New Scripps Common Voting Shares
must be made. If a dividend or distribution payable in New Scripps Common Voting
Shares is made on the New Scripps Common Voting Shares, a simultaneous dividend
or distribution in New Scripps Class A Common Shares must be made on the New
Scripps Class A Common Shares. Pursuant to any such dividend or distribution,
each New Scripps Common Voting Share will receive a number of New Scripps Common
Voting Shares equal to the number of New Scripps Class A Common Shares payable
on each New Scripps Class A Common Share. In the case of any dividend or other
distribution payable in stock of any corporation which just prior to the time of
the distribution is a wholly owned subsidiary of New Scripps and which possesses
authority to issue class A common shares and common voting shares with voting
characteristics identical to those of the New Scripps Class A Common Shares and
the New Scripps Common Voting Shares, respectively, including a distribution
pursuant to a stock dividend, a stock split or division of stock or a spin-off
or split-up reorganization of New Scripps, only class A common shares of such
subsidiary shall be distributed with respect to New Scripps Class A Common
Shares and only common voting shares of such subsidiary shall be distributed
with respect to New Scripps Common Voting Shares.
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Conversion. Each New Scripps Common Voting Share will be convertible at
any time, at the option of and without cost to the stockholder, into one New
Scripps Class A Common Share.
Liquidation Rights. In the event of the liquidation, dissolution or
winding up of New Scripps, holders of New Scripps Class A Common Shares and New
Scripps Common Voting Shares will be entitled to participate equally, share for
share, in the assets available for distribution.
Preemptive Rights. Holders of New Scripps Class A Common Shares will not
have preemptive rights to purchase shares of such stock or shares of stock of
any other class that New Scripps may issue. Holders of New Scripps Common Voting
Shares will have preemptive rights to purchase any additional New Scripps Common
Voting Shares or any other stock with or convertible into stock with general
voting rights issued by New Scripps.
PREFERRED SHARES
Following the Spin-Off, the Board of Directors of New Scripps will be
authorized to issue, by resolution and without any action by stockholders, up to
25 million New Scripps Preferred Shares. All New Scripps Preferred Shares will
be of equal rank. Dividends on New Scripps Preferred Shares will be cumulative
and will have a preference to the New Scripps Class A Common Shares and New
Scripps Common Voting Shares. So long as any New Scripps Preferred Shares are
outstanding, no dividends may be paid on, and New Scripps may not redeem or
retire, any common shares or other securities ranking junior to the New Scripps
Preferred Shares unless all accrued and unpaid dividends on the New Scripps
Preferred Shares shall have been paid. In the event of a liquidation,
dissolution or winding up of New Scripps, the New Scripps Preferred Shares are
entitled to receive, before any amounts are paid or distributed in respect of
any securities junior to the New Scripps Preferred Shares, the amount fixed by
the Board of Directors as a liquidation preference, plus the amount of all
accrued and unpaid dividends. The New Scripps Preferred Shares have no voting
rights except as may be required by Ohio Law. See "-- New Scripps Class A Common
Shares and New Scripps Common Voting Shares -- Voting Rights" for those
amendments to the New Scripps Articles that would require a vote of the holders
of the New Scripps Preferred Shares. Except as specifically described in this
section, the Board of Directors of New Scripps will have the power to establish
the designations, dividend rate, conversion rights, terms of redemption,
liquidation preference, sinking fund terms and all other preferences and rights
of any series of New Scripps Preferred Shares. The issuance of New Scripps
Preferred Shares may adversely affect certain rights of the holders of the New
Scripps Class A Common Shares and the New Scripps Common Voting Shares and may
render more difficult certain unsolicited or hostile attempts to take over New
Scripps.
EVALUATION OF TENDER OFFERS AND SIMILAR TRANSACTIONS
The New Scripps Articles provide that the Board of Directors, when
evaluating any offer of another party to make a tender or exchange offer for any
equity security of New Scripps, or any proposal to merge or consolidate New
Scripps with another company, or to purchase or otherwise acquire all or
substantially all the properties and assets of New Scripps, shall give due
consideration to the effect of such a transaction on the integrity, character
and quality of New Scripps' operations, as well as to all other relevant
factors, including the long-term and short-term interests of New Scripps and its
stockholders, and the social, legal and economic effects on employees,
customers, suppliers and creditors and on the communities and geographical areas
in which New Scripps and its subsidiaries operate or are located, and on any of
the businesses and properties of New Scripps or any of its subsidiaries. This
provision may have the effect of rendering more difficult or discouraging an
acquisition of New Scripps that is deemed undesirable by the Board of Directors.
COMPLIANCE WITH FCC REGULATIONS
The New Scripps Articles authorize New Scripps to obtain information from
stockholders and persons seeking to have shares of New Scripps' capital stock
transferred to them, in order to ascertain whether ownership of, or exercise of
rights with respect to, New Scripps' shares by such persons would violate
federal communications laws. If any person refuses to provide such information
or New Scripps concludes that such ownership or exercise of such rights would
result in the violation of applicable federal communications laws,
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New Scripps may refuse to transfer shares to such person or refuse to allow him
to exercise any rights with respect to New Scripps' shares if exercise thereof
would result in such a violation.
CERTAIN OHIO ANTI-TAKEOVER LAWS
Certain Ohio anti-takeover laws may have the effect of discouraging or
rendering more difficult an unsolicited acquisition of a corporation or its
capital stock to the extent the corporation is subject to such provisions. See
"Comparison of Rights of Stockholders of Scripps and New Scripps -- Certain
Anti-Takeover Statutes." The New Scripps Articles provide that none of these
provisions of Ohio Law apply to New Scripps except the tender offer statute. See
"Comparison of Rights of Stockholders of Scripps and New Scripps -- Certain
Anti-Takeover Statutes -- Tender Offer Statute."
REGISTRAR AND TRANSFER AGENT
The registrar and transfer agent for the New Scripps Common Shares will be
Fifth Third Bank, Cincinnati, Ohio.
COMPARISON OF RIGHTS OF STOCKHOLDERS OF
SCRIPPS AND NEW SCRIPPS
The rights of Scripps stockholders are governed by the DGCL. As
shareholders of New Scripps, an Ohio corporation, the rights of Scripps
stockholders will be governed by the Ohio Law rather than the DGCL. The Ohio Law
and the DGCL differ in a number of respects. The following is a summary of
certain significant differences between the provisions of these laws as they
might affect the rights and interests of the Scripps stockholders, based on the
provisions contained in the New Scripps Articles and the New Scripps
Regulations. A copy of the New Scripps Articles is attached to the Merger
Agreement as Exhibit B.
CERTAIN ANTI-TAKEOVER STATUTES
Business Combinations with Interested Stockholders. Section 203 of the
DGCL applies to a broad range of "business combinations" between a Delaware
corporation and an "interested stockholder." The DGCL definition of "business
combination" includes mergers, sales of assets, issuance of voting stock and
certain other transactions. The DGCL prohibits a corporation from engaging in a
business combination with an interested stockholder for a period of three years
following the date on which the stockholder became an "interested stockholder,"
unless (i) the board of directors approved the business combination before the
stockholder became an "interested stockholder," or the board of directors
approved the transaction that resulted in the stockholder becoming an
"interested stockholder," (ii) upon consummation of the transaction which
resulted in the stockholder becoming an "interested stockholder," such
stockholder owned at least 85% of the voting stock outstanding when the
transaction began other than shares held by directors who are also officers and
by certain employee stock plans, or (iii) the board of directors approved the
business combination after the stockholder became an "interested stockholder"
and the business combination was approved at a meeting by at least two-thirds of
the outstanding voting stock not owned by such stockholder. An "interested
stockholder" is defined as any person who owns, directly or indirectly, 15% or
more of the outstanding voting stock of a corporation.
Chapter 1704 of the Ohio Law applies to a broad range of business
combinations between an Ohio corporation and an "interested stockholder."
Chapter 1704 is triggered by the acquisition of 10% of the voting power of a
subject Ohio corporation rather than 15%. The prohibition imposed by Chapter
1704 continues indefinitely after the initial three-year period unless the
subject transaction is approved by the requisite vote of the stockholders or
satisfies statutory conditions relating to the fairness of consideration
received by stockholders who are not interested in the subject transaction.
During the initial three-year period the prohibition is absolute absent prior
approval by the board of directors of the acquisition of voting power by which a
person became an "interested stockholder" or of the subject transaction. Chapter
1704 does not provide any exemption for an "interested stockholder" who acquires
a significant percentage of stock in the transaction which resulted in the
stockholder becoming an "interested stockholder" as does Section 203 of the
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DGCL. The definition of "beneficial owner" in Chapter 1704 is essentially
similar to that of Section 203 of the DGCL except that Chapter 1704 does not
expressly exclude from the definition of beneficial owner a person who has the
right to vote stock pursuant to an agreement which arises solely from a
revocable proxy. Chapter 1704 may be made inapplicable to a company by its
articles of incorporation. The New Scripps Articles provide that Chapter 1704
does not apply to New Scripps.
Control Share Acquisition. Section 1701.831 of the Ohio Law (the "Ohio
Control Share Acquisition Statute") also provides protection to shareholders
against unfriendly and coercive takeover efforts. The Ohio Control Share
Acquisition Statute provides that certain notice and informational filings and
special shareholder meeting and voting procedures must be followed prior to
consummation of a proposed "control share acquisition," which is defined as any
acquisition of an issuer's shares which would entitle the acquiror, immediately
after such acquisition, directly or indirectly, to exercise or direct the
exercise of voting power of the issuer in the election of directors within any
of the following ranges of such voting power: (i) one-fifth or more but less
than one-third of such voting power, (ii) one-third or more but less than a
majority of such voting power, or (iii) a majority or more of such voting power.
Assuming compliance with the notice and information filings prescribed by
statute, the proposed control share acquisition may be made only if, at a duly
convened special meeting of shareholders, the acquisition is approved by both a
majority of the voting power of the issuer represented at the meeting and a
majority of the voting power remaining after excluding the combined voting power
of the intended acquiror and the directors and officers of the issuer. The Ohio
Control Share Acquisition Statute may be made inapplicable to a company by its
articles of incorporation. The New Scripps Articles provide that this statute
does not apply to New Scripps.
The DGCL contains no provision comparable to the Ohio Control Share
Acquisition Statute.
Ohio "Anti-Greenmail" Statute. Pursuant to Ohio Law Section 1707.043, a
public corporation formed in Ohio may recover profits that a shareholder makes
from the sale of the corporation's securities within 18 months after making a
proposal to acquire control or publicly disclosing the possibility of a proposal
to acquire control. The corporation may not, however, recover from a person who
proves either (i) that his sole purpose in making the proposal was to succeed in
acquiring control of the corporation and there were reasonable grounds to
believe that he would acquire control of the corporation or (ii) that his
purpose was not to increase any profit or decrease any loss in the stock. Also,
before the corporation may obtain any recovery, the aggregate amount of the
profit realized by such person must exceed $250,000. Any shareholder may bring
an action on behalf of the corporation if a corporation refuses to bring an
action to recover these profits. The party bringing such an action may recover
his attorneys' fees with the permission of the court having jurisdiction over
such action. The anti-greenmail statute may be made inapplicable to a company by
its articles of incorporation. The New Scripps Articles provide that this
statute does not apply to New Scripps.
The DGCL contains no provision comparable to the anti-greenmail statute.
Tender Offer Statute. The Ohio tender offer statute (Ohio Law Section
1707.041) requires any person making a tender offer for a corporation having its
principal place of business in Ohio to comply with certain filing, disclosure
and procedural requirements. The disclosure requirements include a statement of
any plans or proposals that the offeror, upon gaining control, may have to
liquidate the subject company, sell its assets, effect a merger or consolidation
of it, establish, terminate, convert, or amend employee benefit plans, close any
plant or facility of the subject company or of any of its subsidiaries or
affiliates, or make any other major change in its business, corporate structure,
management personnel, or policies of employment.
Delaware has no such tender offer statute.
MERGERS AND CONSOLIDATIONS
Under the DGCL, an agreement of merger or consolidation must be approved by
the directors of each constituent corporation and adopted by the affirmative
vote of the holders of a majority of the outstanding shares entitled to vote
thereon, or by a greater vote as provided in the certificate of incorporation.
Under the DGCL the separate vote of any class of shares is not required.
Additionally, the DGCL provides that, unless the certificate of incorporation
provides otherwise, no vote of the stockholders of the surviving corporation is
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required to approve the merger if (i) the agreement of merger does not amend in
any respect the corporation's certificate of incorporation, (ii) each share
outstanding immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation after the
effective date of the merger, and (iii) the number of shares of the surviving
corporation's common stock to be issued in the merger plus the number of shares
of common stock into which any other securities to be issued in the merger are
initially convertible does not exceed 20% of the surviving corporation's common
stock outstanding immediately prior to the effective date of the merger.
Under the Ohio Law, an agreement of merger or consolidation must be
approved by the directors of each constituent corporation and adopted by
shareholders of each constituent Ohio corporation (other than the surviving
corporation) holding at least two-thirds of the corporation's voting power, or a
different proportion but not less than a majority of the voting power, as
provided in the articles of incorporation. In the case of a merger, the
agreement must, in certain situations, also be adopted by the shareholders of
the surviving corporation by similar vote. The New Scripps Articles provide that
any such agreement must be adopted by shareholders holding at least a majority
of New Scripps' voting power.
OTHER CORPORATE TRANSACTIONS
Subject to certain exceptions, under the Ohio Law the approval of
two-thirds of the voting power of the corporation, or a different proportion
(not less than a majority of the corporation's voting power) as provided in the
articles of incorporation, is required for (i) the consummation of combinations
and majority share acquisitions involving the transfer or issuance of such
number of shares as would entitle the holders thereof to exercise at least
one-sixth of the voting power of such corporation in the election of directors
immediately after the consummation of such transaction, (ii) the disposition of
all or substantially all of the corporation's assets other than in the regular
course of business and (iii) voluntary dissolutions. The New Scripps Articles
provide that a majority of the voting power of New Scripps would be required for
approval of such actions.
The DGCL does not require shareholder approval in the case of combinations
and majority share acquisitions, but does require a majority vote on disposition
of all or substantially all of a corporation's assets and on dissolutions,
unless a greater vote is provided for in the certificate of incorporation.
CUMULATIVE VOTING
The cumulative voting concept permits a shareholder to cast as many votes
in the election of directors for each share of stock held by him as there are
directors to be elected. Each shareholder may cast all his votes for a single
candidate or distribute such votes among two or more candidates, as he chooses.
Under the DGCL, cumulative voting is permitted only if it is provided for in the
certificate of incorporation. Cumulative voting is not provided for in the
Scripps Charter.
Under the Ohio Law, cumulative voting in the election of directors is
mandatory upon proper notice being given to a corporation by any shareholder
unless specifically eliminated by an amendment to the corporation's articles of
incorporation. The New Scripps Articles provide that shareholders of New Scripps
do not have cumulative voting rights.
CLASS VOTING
The DGCL requires voting by separate classes only with respect to
amendments to the certificate of incorporation which change the powers,
preferences, or special rights of the shares of such class so as to affect them
adversely or which increase or decrease the aggregate number of authorized
shares or the par value of the shares of any such classes.
Under the Ohio Law, holders of a particular class of shares are entitled to
vote as a separate class if the rights of such class are affected, in a manner
substantially prejudicial, by mergers, consolidations or amendments to the
articles of incorporation.
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APPRAISAL RIGHTS
Under the DGCL, unless the certificate of incorporation provides otherwise,
appraisal rights are available only in connection with statutory mergers or
consolidations. Even in such cases, unless the certificate of incorporation
otherwise provides, the DGCL does not recognize appraisal rights for any class
or series of stock which is either listed on a national securities exchange or
designated as a national market system security by the National Association of
Securities Dealers, or held of record by more than 2,000 stockholders, except
that appraisal rights are available (i) for holders of such stock who, by the
terms of the merger or consolidation, are required to accept anything except (A)
stock of the corporation surviving or resulting from the merger or
consolidation, (B) shares which at the effective time of the merger or
consolidation are either listed on a national securities exchange or designated
as a national market system security by the National Association of Securities
Dealers, or held of record by more than 2,000 stockholders, (C) cash in lieu of
fractional shares of stock described in the foregoing clauses (A) and (B), or
(D) any combination of stock and cash in lieu of fractional shares described in
the foregoing clauses (A), (B) or (C) and (ii) in a short-form merger.
Under the Ohio Law, dissenting shareholders are entitled to appraisal
rights in connection with the lease, sale, exchange, transfer or other
disposition of all or substantially all of the assets of a corporation and in
connection with certain amendments to its articles of incorporation. In
addition, shareholders of an Ohio corporation being merged into a new
corporation are also entitled to appraisal rights. Shareholders of an acquiring
corporation are entitled to appraisal rights in a merger, combination or
majority share acquisition with respect to which such shareholders are entitled
to voting rights.
DIVIDENDS
A Delaware corporation may pay dividends out of any surplus and, if it has
no surplus, out of any net profits for the fiscal year in which the dividend was
declared or for the preceding fiscal year provided that such payment will not
reduce capital below the amount of capital represented by all classes of shares
having a preference upon the distribution of assets. An Ohio corporation may pay
dividends out of surplus, however created, but must notify its shareholders if a
dividend is paid out of surplus other than earned surplus.
REPURCHASES
Under the DGCL, a corporation may not, with certain limited exceptions,
repurchase or redeem its shares when the capital of such corporation is impaired
or when such purchase or redemption would cause the impairment of the capital of
such corporation.
Under the Ohio Law, a corporation may purchase or redeem its own shares if
authorized to do so by its articles of incorporation or under certain other
circumstances but may not do so if immediately thereafter its assets would be
less than its liabilities plus its stated capital, if any, or if the corporation
is insolvent or would be rendered insolvent by such a purchase or redemption.
Article Tenth of the New Scripps Articles authorizes New Scripps to purchase
outstanding shares of any class of its stock.
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION
Delaware. The DGCL permits a corporation to indemnify a director, officer
or agent for fines, judgments or settlements, as well as expenses in the context
of third-party actions, if such person acted in good faith and in a manner
reasonably believed to be in or not opposed to the best interest of the
corporation, and in the case of a criminal action, had no reason to believe his
conduct was unlawful. Indemnification in the context of actions by or in the
right of the corporation is restricted to expenses only. Further, if an officer,
director or agent is adjudged liable to the corporation, expenses are not
allowable, subject to limited exceptions where a court deems the award of
expenses appropriate. Determinations regarding permissive indemnification are to
be made by the majority vote of disinterested directors (even if less than a
quorum) or, if there are no such directors, or if such directors so direct, by
independent legal counsel or by the stockholders. Statutory indemnification is
not exclusive.
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The DGCL grants express authority to a Delaware corporation to purchase
insurance for director and officer liability. Such insurance may be purchased
for any officer, director, or agent, regardless of whether that individual is
otherwise eligible for indemnification by the corporation.
The DGCL contains no express statutory provision identifying the
appropriate standard of proof in actions against directors and officers.
Delaware case law indicates that the standard of proof in such actions is a
preponderance of the evidence. Although Delaware has not codified the business
judgment rule, the Delaware courts have developed a "modified" business judgment
rule that places the initial burden on directors and officers in the context of
contests for corporate control or the adoption of defensive measures.
Delaware Law permits a corporation's certificate of incorporation to limit
a director's exposure to monetary liability for breach of fiduciary duty.
Pursuant to Delaware Law, a director cannot be relieved of liability for (i)
breach of his/her duty of loyalty to the company, (ii) acts or omissions not in
good faith or constituting intentional misconduct or knowing violation of the
law, (iii) declaration of an improper dividend, stock purchase or redemption of
shares, or (iv) any transaction from which the director derived an improper
personal benefit.
Ohio. Under the Ohio Law, Ohio corporations are authorized to indemnify
directors, officers and agents within prescribed limits and must indemnify them
under certain circumstances. Ohio law does not provide statutory authorization
for a corporation to indemnify directors and officers for settlements, fines or
judgments in the context of derivative suits. However, it provides that
directors (but not officers) are entitled to mandatory advancement of expenses,
including attorneys' fees, incurred in defending any action, including
derivative actions, brought against the director, provided the director agrees
to cooperate with the corporation concerning the matter and to repay the amount
advanced if it is proved by clear and convincing evidence that his act or
failure to act was done with deliberate intent to cause injury to the
corporation or with reckless disregard for the corporation's best interests.
The Ohio Law does not authorize payment of expenses or judgments to an
officer or other agent after a finding of negligence or misconduct in a
derivative suit absent a court order. Indemnification is required, however, to
the extent such person succeeds on the merits. In all other cases, if a director
or officer acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, indemnification is
discretionary except as otherwise provided by a corporation's articles of
incorporation, code of regulations or by contract except with respect to the
advancement of expenses of directors.
The Ohio Law specifies that determinations regarding discretionary
indemnification are to be made by a majority vote of a quorum of disinterested
directors, or, if a quorum is not available, by independent counsel, the
stockholders, a court of common pleas, or the court in which the proceeding was
brought.
Under Ohio Law, a director is not liable for monetary damages unless it is
proved by clear and convincing evidence that his action or failure to act was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interest of the corporation. There is, however,
no comparable provision limiting the liability of officers or other agents of a
corporation.
The statutory right to indemnity is not exclusive in Ohio. The Ohio Law
provides express authority for Ohio corporations to procure not only insurance
policies, but also to furnish protection similar to insurance, including trust
funds, letters of credit and self-insurance, or to provide similar protection
such as indemnity against loss of insurance.
Unlike Delaware, Ohio has codified the traditional business judgment rule.
The Ohio Law provides that the business judgment presumption of good faith may
only be overcome by clear and convincing evidence, rather than the preponderance
of the evidence standard applicable in most states. Further, Ohio Law provides
specific statutory authority for directors to consider, in addition to the
interests of the corporation's stockholders, other factors such as the interests
of the corporation's employees, suppliers, creditors and customers; the economy
of the state and nation; community and societal considerations; the long-term
and short-term interests of the corporation and its stockholders; and the
possibility that these interests may be best
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served by the continued independence of the corporation. Finally, the Ohio Law
specifically provides that the selection of a time frame for the achievement of
corporate goals shall be the responsibility of directors.
The New Scripps Articles provide that New Scripps shall indemnify its
directors and officers to the fullest extent permitted by Ohio Law.
COMPARISON OF RIGHTS OF HOLDERS OF COMCAST
SPECIAL COMMON STOCK AND HOLDERS OF SCRIPPS COMMON STOCK
Scripps and Comcast are incorporated in Delaware and Pennsylvania,
respectively. Stockholders of Scripps, whose rights as stockholders are
currently governed by the DGCL, the Scripps Charter and the Scripps By-Laws,
upon consummation of the Merger will (in addition to being stockholders of New
Scripps), automatically become stockholders of Comcast, holding shares of
Comcast Special Common Stock, and, as stockholders of Comcast, their rights will
be governed by the PBCL, the Comcast Articles and the Comcast By-Laws. Although
it is impractical to note all of the differences, the following is a summary of
all material differences between the rights of holders of Scripps Class A Common
Stock and Scripps Common Voting Stock on the one hand and those of holders of
Comcast Special Common Stock on the other. The following does not purport to be
a complete description of the differences between the rights of Scripps and
Comcast stockholders. Such differences may be determined in full by reference to
the DGCL, the PBCL, the Scripps Charter, the Comcast Articles and the respective
Scripps and Comcast By-Laws.
FIDUCIARY DUTIES OF DIRECTORS
Both Delaware Law and Pennsylvania Law provide that the board of directors
has the ultimate responsibility for managing the business affairs of a
corporation. In discharging this function, directors owe fiduciary duties of
care and loyalty to the corporation and to its common stock holders.
Delaware courts have held that the duty of care requires the directors to
exercise an informed business judgment. An informed business judgment means that
the directors have informed themselves of all material information reasonably
available to them. Delaware courts have, under certain circumstances, also
imposed a heightened standard of conduct upon directors in matters involving a
contest for or sale of control of the corporation.
Similar to Delaware Law, Pennsylvania Law requires that directors perform
their duties in good faith. The PBCL, however, contains a provision specifically
permitting (though not requiring) directors, in discharging their duties, to
consider the effects of any action taken by them upon any or all affected groups
(including shareholders, members, employees, suppliers, customers, creditors and
the community in which the corporation operates) as well as all other pertinent
factors. Furthermore, unlike Delaware Law, the PBCL provides that a director has
no greater burden to justify any act relating to an actual or potential
acquisition of the corporation than he or she has regarding any other act as a
director.
LIMITATION OF DIRECTOR LIABILITY
Both Delaware Law and Pennsylvania Law permit a corporation's certificate
(articles) of incorporation or by-laws to limit a director's exposure to
monetary liability for breach of fiduciary duty.
Pursuant to Delaware Law, a director cannot be relieved of liability for
(i) breach of his/her duty of loyalty to the company, (ii) acts or omissions not
in good faith or constituting intentional misconduct or knowing violation of the
law, (iii) declaration of an improper dividend, stock purchase or redemption of
shares, or (iv) any transaction from which the director derived an improper
personal benefit.
Similarly, pursuant to Pennsylvania Law, a director cannot be relieved of
liability for (i) breach of his/her statutory duties of care and good faith to
the company if such breach or omission constitutes self-dealing, willful
misconduct or recklessness, (ii) violation of criminal statutes, or (iii)
nonpayment of federal, state or local taxes.
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The Scripps Charter and the Comcast By-Laws eliminate, to the fullest
extent permitted by law, liability of a director to the company or its
stockholders for monetary damages for a breach of such director's fiduciary duty
of care.
INDEMNIFICATION
Both Delaware Law and Pennsylvania Law permit a corporation to indemnify
any person involved in a third party action, by reason of being an officer or
director of the corporation, against expenses, judgments, fines and settlement
amounts paid in such third party action (and against expenses incurred in any
action by or in the right of the corporation), if such person acted in good
faith and reasonably believed that his/her actions were in, or not opposed to,
the best interests of the corporation. With respect to any criminal proceeding,
both Delaware Law and Pennsylvania Law permit indemnification only when the
director or officer had no reasonable cause to believe that his/her conduct was
unlawful. Furthermore, both states' laws provide that a corporation may advance
to officers and directors expenses incurred in defending any action upon receipt
of an undertaking by the person to repay the amount advanced if it is ultimately
determined that he/she is not entitled to indemnification.
In general, no indemnification for expenses in derivative actions is
permitted under either the DGCL or the PBCL where the person has been adjudged
liable to the corporation, unless a court finds him/her entitled to such
indemnification. If, however, the person has been successful in defending a
third-party or derivative action, indemnification for expenses incurred is
mandatory under both states' laws.
In both states, the statutory provisions for indemnification are
nonexclusive with respect to any other rights, such as contractual rights under
a bylaw, agreement or vote of stockholders or disinterested directors to which a
person seeking indemnification may be entitled.
Both Comcast and Scripps provide for the indemnification of directors and
officers to the fullest extent permissible under law. The Comcast By-Laws also
provide directors and officers with the right to have expenses incurred in
defending any proceeding paid by Comcast in advance of the final disposition of
such proceeding.
SHAREHOLDER PROTECTIVE PROVISIONS
Both Delaware Law and Pennsylvania Law contain provisions which provide
protection to shareholders, and the corporation in which they own shares,
against abusive acquisition and takeover techniques.
Section 203 of the DGCL applies to a broad range of "business combinations"
between a Delaware corporation and an "interested stockholder." The DGCL
definition of "business combination" includes mergers, sales of assets, issuance
of voting stock and certain other transactions. The DGCL prohibits a corporation
from engaging in a business combination with an interested stockholder for a
period of three years following the date on which the stockholder became an
"interested stockholder," unless (i) the board of directors approved the
business combination before the stockholder became an "interested stockholder,"
or the board of directors approved the transaction that resulted in the
stockholder becoming an "interested stockholder," (ii) upon consummation of the
transaction which resulted in the stockholder becoming an "interested
stockholder," such stockholder owned at least 85% of the voting stock
outstanding when the transaction began other than shares held by directors who
are also officers and by certain employee stock plans, or (iii) the board of
directors approved the business combination after the stockholder became an
"interested stockholder" and the business combination was approved at a meeting
by at least two-thirds of the outstanding voting stock not owned by such
stockholder. An "interested stockholder" is defined as any person who owns,
directly or indirectly, 15% or more of the outstanding voting stock of a
corporation.
Unlike Delaware Law, under the PBCL, a corporation is permanently
prohibited from engaging in any business combination with an interested
shareholder (defined in Pennsylvania as a beneficial owner of 20% or more of the
corporation's voting shares) unless (i) the shareholder became interested after
the date the board of directors approved the business combination, (ii) the
board of directors approved the transaction which resulted in the shareholder
becoming an interested shareholder prior to the occurrence of such transaction,
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(iii) no earlier than three months after the date the shareholder became
interested, and his/her beneficial ownership amounted to 80% of the
corporation's voting shares, the business combination is approved by a majority
of the non-interested shareholders and it meets certain other conditions
concerning amount of consideration, (iv) at any time after the date the
shareholder became interested, the business combination is approved by unanimous
vote of the shareholders, (v) within five years after the date the shareholder
became interested, the business combination is approved by a majority of the
non-interested shareholders, or (vi) within five years after the date the
shareholder became interested, the business combination is approved by a
majority of all shareholders and meets certain conditions set forth in the PBCL
which concern the amount of consideration. Sural does not constitute an
interested shareholder for purposes of the PBCL.
The PBCL contains a number of other "anti-takeover" provisions which are
generally triggered upon the acquisition by a person or group of certain
percentages (generally 20%) of a corporation's voting stock (the "Control
Stock"). These provisions provide for, among other things, shareholder appraisal
rights, limitations on voting rights of Control Stock, disgorgement of profits
from resales of Control Stock, severance pay for discharged employees and
survival of labor contracts. Pursuant to the Comcast By-Laws, and in accordance
with the PBCL, such provisions are inapplicable to Comcast and its shareholders.
VOTING RIGHTS
Holders of Scripps Class A Common Stock are entitled to elect the greater
of three or one-third of the directors of Scripps (or the nearest smaller whole
number if one-third of the entire board of directors is not a whole number),
except directors, if any, to be elected by holders of Scripps Preferred Shares
or any series thereof. However, holders of Scripps Class A Common Stock are not
entitled to vote on any other matters except as required by Delaware Law. Under
Delaware Law, if there is any proposal to increase or decrease the par value of
the shares of, or amend the Scripps Charter in a manner that would adversely
alter or change the powers, preferences, or special rights of the shares of,
Scripps Class A Common Stock, such amendment must be approved by a majority of
the outstanding shares of Scripps Class A Common Stock, voting separately as a
class. Holders of Scripps Common Voting Stock are entitled to elect all
remaining directors and to vote on all other matters. Nomination of persons for
election by either class of stock to the Scripps Board of Directors is made by
the vote of a majority of all directors then in office, regardless of the class
of stock entitled to elect them. Holders of a majority of the outstanding shares
of Scripps Common Voting Stock have the right to increase or decrease the number
of authorized and unissued shares of Scripps Class A Common Stock and Scripps
Common Voting Stock but not below the number of shares thereof then outstanding.
Shares of Scripps Class A Common Stock and Scripps Common Voting Stock do not
have cumulative voting rights.
The holders of Comcast Special Common Stock are not entitled to vote in the
election of directors or otherwise, except where class voting is required by
applicable law, in which case, each holder of Comcast Special Common Stock shall
be entitled to one vote per share. Each holder of Comcast Class A Common Stock
has one vote per share and each holder of Comcast Class B Common Stock has 15
votes per share. The Comcast Articles provide that the Comcast Special Common
Stock, the Comcast Class A Common Stock and the Comcast Class B Common Stock
vote as separate classes on certain amendments to the Comcast Articles and on
other matters, each as required by applicable law. Under applicable law, holders
of Comcast Special Common Stock have voting rights in the event the Comcast
Articles are amended (i) to create or expand the number of authorized shares of
any class of stock which has or may have a preference as to dividends or assets
senior to the Comcast Special Common Stock, (ii) to make any change in the
preferences, limitations, or special rights of the Comcast Special Common Stock
adverse to that class, or (iii) to amend or repeal the provisions relating to
class voting rights, or in the event of certain fundamental transactions (such
as mergers) having the same effect. In all other instances, including the
election of directors, the Comcast Class A Common Stock and the Comcast Class B
Common Stock vote as one class. Neither the holders of Comcast Class A Common
Stock nor the holders of Comcast Class B Common Stock have cumulative voting
rights.
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AMENDMENTS TO CERTIFICATE (ARTICLES) OF INCORPORATION
Under Delaware Law, amending the certificate of incorporation generally
requires the approval of the holders of a majority of the shares of stock
entitled to vote. Pennsylvania Law requires only the affirmative vote of a
majority of the votes cast by the holders of shares entitled to vote on a
proposed amendment, unless a specific provision of the PBCL or the articles of
incorporation requires a greater percentage. The Comcast Articles do not contain
a provision requiring greater than majority approval of amendments to such
Articles.
MERGERS AND MAJOR TRANSACTIONS
Under Delaware Law, fundamental corporate transactions (such as mergers,
sales of all or substantially all of the corporation's assets, dissolutions,
etc.) require the approval of the holders of a majority of the outstanding stock
entitled to vote. Pennsylvania Law reduces the approval threshold to a majority
of the votes cast.
DIVIDENDS
Delaware Law permits dividends to be paid out of (i) surplus (the excess of
net assets of the corporation over capital) or (ii) net profits for the current
and/or the then preceding fiscal year, unless the net assets are less than the
capital of any outstanding preferred stock. Pennsylvania Law permits the payment
of dividends, called distributions, unless after payment (i) the corporation
would be unable to pay its debts as they become due in the usual course of its
business, or (ii) the corporation's total assets would be less than its
liabilities plus the amount that would be necessary to satisfy any preferential
rights of shareholders if the corporation were to be dissolved.
Each share of Scripps Class A Common Stock is entitled to dividends if, as
and when dividends are declared by the Scripps Board of Directors. Certain of
the Scripps credit agreements restrict the amount of dividends that may be paid
to stockholders. Dividends must be paid on the Scripps Class A Common Stock and
the Scripps Common Voting Stock at any time that dividends are paid on either.
Any dividend declared and payable in cash, capital stock of Scripps (other than
Scripps Class A Common Stock or Scripps Common Voting Stock) or other property
must be paid equally, share for share, on the Scripps Common Voting Stock and
Scripps Class A Common Stock. Dividends and distributions payable in shares of
Scripps Common Voting Stock may be paid only on shares of Scripps Common Voting
Stock, and dividends and distributions payable in shares of Scripps Class A
Common Stock may be paid only on shares of Scripps Class A Common Stock. If a
dividend or distribution payable in Scripps Class A Common Stock is made on the
Scripps Class A Common Stock, a simultaneous dividend or distribution on the
Scripps Common Voting Stock must be made. If a dividend or distribution payable
in Scripps Common Voting Stock is made on the Scripps Common Voting Stock, a
simultaneous dividend or distribution in Scripps Class A Common Stock must be
made on the Scripps Class A Common Stock. Pursuant to any such dividend or
distribution, each share of Scripps Common Voting Stock will receive a number of
shares of Scripps Common Voting Stock equal to the number of shares of Scripps
Class A Common Stock payable on each share of Scripps Class A Common Stock.
Subject to the preferential rights of any Preferred Stock then outstanding,
the holders of Comcast Special Common Stock, Comcast Class A Common Stock and
Comcast Class B Common Stock are entitled to receive pro rata per share such
cash dividends as from time to time may be declared by the Comcast Board of
Directors out of funds legally available therefor. Each class of Comcast Common
Stock is to receive cash dividends and (except as described below) dividends of
stock or other property, as declared, on an equal basis per share. Stock
dividends on, and stock splits of, any class of Comcast Common Stock shall not
be paid or issued unless paid or issued on all classes of Comcast Common Stock,
in which case (except as described below) they are to be paid or issued only in
shares of that class or in shares of either Comcast Class A Common Stock or
Comcast Special Common Stock.
The Comcast Articles permit Comcast (in the discretion of its Board of
Directors), by means of a dividend, rights distribution, merger, statutory
division, recapitalization, or other means to distribute to the holders of the
three existing classes of Comcast Common Stock separate classes of equity
interests in Comcast (e.g. different classes of tracking stock) or in other
entities (e.g., different classes of stock in a subsidiary being
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spun off to Comcast's shareholders) substantially replicating the relative
rights of the three existing classes of Comcast Common Stock.
SHARE REPURCHASE
Under the DGCL and Pennsylvania Law, a corporation may not, with certain
limited exceptions, repurchase or redeem its shares when the capital of such
corporation is impaired or when such purchase or redemption would cause the
impairment of the capital of such corporation.
APPRAISAL OR DISSENTERS' RIGHTS
The rights of shareholders to demand payment in cash by a corporation of
the fair value of their shares under certain circumstances are called appraisal
rights under the DGCL and dissenters' rights under the PBCL. Under the DGCL,
unless the certificate of incorporation provides otherwise, appraisal rights are
available only in connection with statutory mergers or consolidations. Even in
such cases, unless the certificate of incorporation otherwise provides, Delaware
Law does not afford appraisal rights to holders of shares which are either
listed on a national securities exchange, quoted on Nasdaq or held of record by
more than 2,000 stockholders, unless (x) the plan of merger or consolidation
converts such shares into anything other than shares of the surviving
corporation or shares of stock of another corporation which, at the effective
date of the merger or consolidation, will either be listed on a national
securities exchange, quoted on Nasdaq or held of record by more than 2,000
stockholders or (y) the merger is a short-form merger.
Pennsylvania law generally affords dissenters' rights in the case of
mergers and certain other transactions. However, Pennsylvania does not afford
dissenters' rights to shareholders of a corporation which is a party to any plan
of merger with respect to shares of a class or series of such corporation which
is listed on a national securities exchange or is held on the record date by
more than 2,000 shareholders, unless the consideration received in exchange for
such shares is not constituted solely of shares of the surviving or new
corporation (plus cash in lieu of fractional shares).
SPECIAL TREATMENT
The PBCL provides that an amendment or plan may contain a provision
classifying the holders of shares of a class into one or more separate groups by
reference to any facts or circumstances that are not manifestly unreasonable and
providing mandatory treatment for shares of the class held by particular
shareholders or groups of shareholders that differs materially from the
treatment accorded other shareholders or groups of shareholders holding shares
of the same class if (i) the plan or amendment is approved by a majority of the
votes cast by the shareholders, including the class of shareholders subject to
such mandatory treatment, or (ii) a court of competent jurisdiction approves the
special treatment. Dissenters' rights would generally be available to
shareholders subject to special treatment.
AMENDMENTS TO BY-LAWS
Under Delaware Law, the certificate of incorporation may confer on the
board of directors the power to amend the by-laws. Additionally, the DGCL
provides that a corporation's by-laws may be amended by the stockholders
entitled to vote, which power shall not be divested or limited where the board
also has such power. Under Pennsylvania Law, the shareholders retain the rights
to amend the by-laws and the board of directors may be given the power to amend
the bylaws unless the subject of such amendment is solely the province of the
shareholders.
The Scripps By-Laws may be amended by a majority of the directors in office
acting at a meeting or by unanimous written consent, or by the vote or written
consent of the holders of a majority of the Scripps Common Voting Stock
outstanding. A majority of the shareholders entitled to vote have the power to
amend the Comcast By-Laws. The Comcast Board of Directors has the power to amend
the Comcast By-Laws except as limited by the PBCL and except that such power is
limited by the shareholders' right to change any such action.
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ACTION BY WRITTEN CONSENT
Delaware Law permits a majority or higher required percentage of
stockholders entitled to vote to consent in writing to any action that could be
taken by stockholders at a meeting, unless the certificate of incorporation
prohibits such written consent. Pennsylvania Law permits, if the articles of
incorporation provide, any corporate action to be taken by non-unanimous
shareholder consent without a meeting, where shareholders having the minimum
number of votes that would be necessary to take such action at a meeting sign
written consents.
In accordance with the DGCL, holders of a majority of outstanding shares of
Scripps Common Voting Stock may take any action permitted to be taken by
stockholders by consenting to such action in writing. Any action that must be or
could be taken at a meeting of Comcast shareholders (or a class of shareholders)
may be taken without a meeting if prior to or subsequent to the action, a
written consent setting forth the action to be taken is signed by all of the
shareholders who would be entitled to vote at a meeting for such purpose.
SPECIAL MEETING OF SHAREHOLDERS
Under Delaware Law, a special meeting of the stockholders may be called by
the board of directors or such other person as may be authorized by the
certificate of incorporation or by-laws. Pennsylvania Law permits a special
meeting of shareholders to be called by the board of directors or by such
officers or other persons as may be provided in the bylaws. The PBCL also
permits such meetings to be called by shareholders entitled to cast at least 20%
of the votes entitled to be cast at the meeting. However, as a company subject
to the rules and regulations under the Exchange Act, such provision is
inapplicable to Comcast.
Special meetings of stockholders of Scripps may be called by the Chairman
of the Board of Directors, or the President or a majority of the directors in
office acting at a meeting or by unanimous written consent, or by the holders of
a majority of the outstanding shares of Scripps Common Voting Stock acting at a
meeting or by written consent. Special meetings of the shareholders of Comcast
may be called by the Chairman of the Board of Directors or the President or by
the Board of Directors.
ANNUAL MEETING OF SHAREHOLDERS
Under Delaware Law, if the annual meeting for the election of directors is
not held on the designated date, the directors are required to cause such a
meeting to be held as soon thereafter as convenient. If they fail to do so for a
period of 30 days after the designated date, or if no date has been designated
for a period of 13 months after the organization of the corporation or after its
last annual meeting, the Court of Chancery may summarily order a meeting to be
held upon the application of any stockholder or director.
Under Pennsylvania Law, if the annual or other regular meeting for election
of directors is not held within six months after the designated date, any
shareholder may call the meeting at any time thereafter.
BUSINESS CONDUCTED AT MEETING OF COMCAST SHAREHOLDERS
The business that may be conducted at any meeting of the Comcast
shareholders must (i) be specified in the written notice of the meeting (or any
supplement thereto) given by Comcast, (ii) be brought before the meeting at the
direction of the Comcast Board of Directors, (iii) be brought before the meeting
by the presiding officer of the meeting unless a majority of the directors then
in office object to such business being conducted at the meeting, or (iv) in the
case of any matters intended to be brought by a Comcast shareholder before an
annual meeting of shareholders for specific action at such meeting, have been
specified in a written notice given to the Secretary of Comcast, by or on behalf
of any shareholder who shall have been a shareholder of record on the record
date for such meeting and who shall continue to be entitled to vote at such
meeting, in accordance with certain requirements set forth in the Comcast
By-Laws.
PREEMPTIVE RIGHTS
Holders of Scripps Class A Common Stock do not have preemptive rights to
purchase shares of such stock or shares of stock of any other class that Scripps
may issue. Holders of Scripps Common Voting Stock
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have preemptive rights to purchase any additional shares of Scripps Common
Voting Stock or any other stock issued by Scripps with, or convertible into
stock with, general voting rights.
The holders of Comcast Common Stock do not have any preemptive rights.
However, if the right to subscribe to stock, stock options or warrants to
purchase stock is offered or granted to all holders of Comcast Special Common
Stock or Comcast Class A Common Stock, parallel rights must be given to all
holders of Comcast Class B Common Stock. All shares of Comcast Common Stock
presently outstanding are, and all shares of the Comcast Special Common Stock to
be issued in the Merger will, when issued, be fully paid and non-assessable.
CASE LAW AND COURT SYSTEMS
There is a substantial body of case law in Delaware interpreting the
corporation laws of that state. A comparable body of judicial interpretation
does not yet exist in Pennsylvania. Delaware also has established a system of
Chancery Courts to adjudicate matters arising under the DGCL. Pennsylvania does
not have an equivalent court system. As a result of these factors, there may be
less certainty as to the outcome of matters governed by the PBCL, and therefore
it may be more difficult to obtain legal guidance as to such matters than would
be the case under Delaware Law.
NO RIGHTS OF DISSENTING COMCAST STOCKHOLDERS
Holders of Comcast Common Stock will not be entitled to dissenters' rights
of appraisal in connection with the Merger.
RIGHTS OF DISSENTING SCRIPPS STOCKHOLDERS
SCRIPPS COMMON VOTING STOCK
Holders of Scripps Common Voting Stock are entitled to appraisal rights
under Section 262 ("Section 262") of the DGCL, provided that they comply with
the conditions established by Section 262. Section 262 is reprinted in its
entirety as Annex IV to this Joint Proxy Statement-Prospectus. The following
discussion is not a complete statement of the law relating to appraisal rights
and is qualified in its entirety by reference to Annex IV. This discussion and
Annex IV should be reviewed carefully by any Scripps stockholder who owns
Scripps Common Voting Stock and wishes to exercise statutory appraisal rights or
who wishes to preserve the right to do so, since failure to comply with the
procedures set forth herein or therein will result in the loss of appraisal
rights.
A record holder of Scripps Common Voting Stock who makes the demand
described below with respect to such shares, who continuously is the record
holder of such shares through the Effective Time, who otherwise complies with
the statutory requirements of Section 262 and who neither votes in favor of the
Merger nor consents thereto in writing will be entitled to an appraisal by the
Delaware Court of the fair value of his Scripps Common Voting Stock. All
references in Section 262 and in this summary of appraisal rights to a "Scripps
stockholder" or "holders" of shares are to the record holder or holders of
Scripps Common Voting Stock.
Holders of Scripps Common Voting Stock who desire to exercise their
appraisal rights must deliver a separate written demand for appraisal to Scripps
prior to the vote by the Scripps stockholders on the Merger. A demand for
appraisal must be executed by or on behalf of the holder of record, fully and
correctly, as such holder's name appears on the certificate or certificates
representing Scripps Common Voting Stock. A person having a beneficial interest
in Scripps Common Voting Stock that is of record in the name of another person,
such as a broker, fiduciary or other nominee, must act promptly to cause the
record holder to follow the steps summarized herein properly and in a timely
manner to perfect whatever appraisal rights are available. If Scripps Common
Voting Stock is owned of record by a person other than the beneficial owner,
including a broker, fiduciary (such as a trustee, guardian or custodian) or
other nominee, such demand must be executed by or for the record owner. If
Scripps Common Voting Stock is owned of record by more than one person, as
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in a joint tenancy or tenancy in common, such demand must be executed by or for
all joint owners. An authorized agent, including an agent for two or more joint
owners, may execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner and expressly disclose the
fact that, in exercising the demand, such person is acting as agent for the
record owner.
A record owner, such as a broker, fiduciary or other nominee, who holds
Scripps Common Voting Stock as a nominee for others, may exercise appraisal
rights with respect to the shares held for all or less than all beneficial
owners of shares as to which such person is the record owner. In such case, the
written demand must set forth the number of shares covered by such demand. Where
the number of shares is not expressly stated, the demand will be presumed to
cover all Scripps Common Voting Stock outstanding in the name of such record
owner.
A Scripps stockholder who elects to exercise appraisal rights should mail
or deliver his or her written demand to: 312 Walnut Street, Cincinnati, Ohio
45202, Attention: Secretary. The written demand for appraisal should specify the
Scripps stockholder's name and mailing address, the number of shares of Scripps
Common Voting Stock owned, and that the holder is thereby demanding appraisal of
his or her shares. A proxy or vote against the Merger will not constitute such a
demand. Within 10 days after the Effective Time, Comcast as the surviving
corporation (the "Surviving Corporation") must provide notice to all holders who
have complied with Section 262 that the Merger has become effective.
Within 120 days after the Effective Time, the Surviving Corporation, or any
holder who has complied with the required conditions of Section 262, may file a
petition in the Delaware Court, with a copy served on the Surviving Corporation
in the case of a petition filed by a holder, demanding a determination of the
fair value of the shares of all dissenting holders. The Surviving Corporation
does not presently intend to file an appraisal petition and holders seeking to
exercise appraisal rights should not assume that the Surviving Corporation will
file such a petition or that the Surviving Corporation will initiate any
negotiations with respect to the fair value of such shares. Accordingly, Scripps
stockholders who desire to have their shares appraised should initiate any
petitions necessary for the perfection of their appraisal rights within the time
periods and in the manner prescribed in Section 262. Within 120 days after the
Effective Time, any Scripps stockholder who has theretofore complied with the
applicable provisions of Section 262 will be entitled, upon written request, to
receive from the Surviving Corporation a statement setting forth the aggregate
number of shares of Scripps Common Voting Stock not voted in favor of the Merger
and with respect to which demands for appraisal were received by Scripps and the
number of holders of such shares. Such statement must be mailed within 10 days
after the written request therefor has been received by the Surviving
Corporation or within 10 days after expiration of the time for delivery of
demands for appraisal under Section 262, whichever is later.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court will determine which holders are entitled to
appraisal rights and will appraise Scripps Common Voting Stock owned by such
holders, determining the fair value of such shares exclusive of any element of
value arising from the accomplishment or expectation of the Merger (and after
giving effect to the Spin-Off), together with a fair rate of interest, if any,
to be paid upon the amount determined to be the fair value. In determining fair
value, the Delaware Court is to take into account all relevant factors. In
Weinberger v. UOP Inc., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered, and that "fair price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court stated that in making this determination of fair value
the court must consider market value, asset value, dividends, earning prospects,
the nature of the enterprise and any other facts which could be ascertained as
of the date of the merger which throw light on future prospects of the merged
corporation. In Weinberger, the Delaware Supreme Court stated that "elements of
future value, including the nature of the enterprise, which are known or
susceptible of proof as of the date of the merger and not the product of
speculation, may be considered." Section 262, however, provides that fair value
is to be "exclusive of any element of value arising from the accomplishment or
expectation of the merger."
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Scripps stockholders considering seeking appraisal should recognize that
the fair value of their shares determined under Section 262 could be more than,
the same as or less than the consideration they are to receive pursuant to the
Merger Agreement if they do not seek appraisal of their shares. The cost of the
appraisal proceeding may be determined by the Delaware Court and taxed against
the parties as the Delaware Court deems equitable in the circumstances. Upon
application of a dissenting Scripps stockholder, the Delaware Court may order
that all or a portion of the expenses incurred by any dissenting holder in
connection with the appraisal proceeding, including without limitation
reasonable attorney's fees and the fees and expenses of experts, be charged pro
rata against the value of all shares entitled to appraisal.
Any holder of Scripps Common Voting Stock who has duly demanded appraisal
in compliance with Section 262 will not, after the Effective Time, be entitled
to vote for any purpose any shares subject to such demand or to receive payment
of dividends or other distributions on such shares, except for dividends or
distributions (including the distribution of the New Scripps Common Shares)
payable to stockholders of record at a date prior to the Effective Time.
At any time within 60 days after the Effective Time, any Scripps
stockholder will have the right to withdraw such demand for appraisal and to
accept the terms offered in the Merger. After this period, such shareholder may
withdraw such demand for appraisal only with the consent of the Surviving
Corporation. If no petition for appraisal is filed with the Delaware Court
within 120 days after the Effective Time, holders' rights to appraisal shall
cease, and all holders of Scripps Common Voting Stock will be entitled to
receive the consideration offered pursuant to the Merger Agreement. Inasmuch as
the Surviving Corporation has no obligation to file such a petition and has no
present intention to do so, any holder of Scripps Common Voting Stock who
desires such a petition to be filed is advised to file it on a timely basis.
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF DELAWARE LAW, ANY HOLDER
OF SCRIPPS COMMON VOTING STOCK WHO IS CONSIDERING DISSENTING FROM THE MERGER AND
EXERCISING DISSENTERS' RIGHTS MAY WISH TO CONSULT HIS OR HER LEGAL ADVISOR.
SCRIPPS CLASS A COMMON STOCK
Pursuant to Section 262 of the DGCL, holders of Scripps Class A Common
Stock will not have the right to dissent from the Merger and elect to have the
fair value of their shares of Scripps Class A Common Stock judicially determined
and paid to them in cash.
Under Section 262 of the DGCL, dissenters' rights are not available to the
stockholders of a corporation that is a party to a merger if the following
conditions are satisfied: (i) as of the record date of the meeting of
stockholders to approve the merger a corporation's stock is either (a) listed on
a national securities exchange or (b) held of record by more than 2,000
stockholders; and (ii) the consideration to be received by such stockholders in
the merger consists only of (a) shares of the capital stock of the surviving
corporation in the merger, (b) shares of the capital stock of any other
corporation provided that such stock, as of the date on which the merger becomes
effective, is either (1) listed on a national securities exchange or (2) held of
record by more than 2,000 stockholders, (c) cash in lieu of fractional shares or
(d) a combination of the foregoing. As of the Scripps Record Date, the Scripps
Class A Common Stock was listed on the NYSE and held of record by more than
2,000 stockholders. In the Merger, the holders of Scripps Class A Common Stock
will receive shares of capital stock of Comcast, which is the Surviving
Corporation.
PAYMENTS AND DISTRIBUTIONS TO STOCKHOLDERS
No payment will be made to holders of, and no exchange or distribution will
be made in respect of, Comcast Common Stock in connection with the Spin-Off, the
Merger or the other transactions contemplated herein.
Pursuant to the Spin-Off, New Scripps will mail to each holder of record of
Scripps Common Stock (other than Scripps, New Scripps or any of their respective
subsidiaries) immediately prior to the Effective
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Time certificates evidencing the shares of New Scripps Common Stock to which
such holder has become entitled by reason of the Spin-Off.
In order to receive shares of Comcast Merger Stock, together with any cash
in lieu of fractional interests, pursuant to the Merger, each stockholder of
Scripps will be required to surrender the certificates evidencing such
stockholder's shares of Scripps Common Stock to the Exchange Agent. Promptly
after the Effective Time, the Exchange Agent will mail or make available to each
stockholder a notice and letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the shares of Scripps
Common Stock shall pass, only upon proper delivery of the shares to the Exchange
Agent) advising such stockholder of the effectiveness of the Merger and the
procedures to be used in effecting the surrender of shares in connection
therewith. Promptly after surrender of such shares the stockholder will receive
Comcast Merger Stock, together with any cash in lieu of fractional shares.
Scripps stockholders should surrender shares only with a letter of transmittal.
Please do not send shares with the enclosed proxy.
If payment of the Comcast Merger Stock, together with any cash in lieu of
fractional shares, is to be made to a person other than a person in whose name
shares of Scripps Common Stock are registered, it shall be a condition of
payment that the shares so surrendered be properly endorsed or otherwise be in
proper form for transfer and that the person requesting such payment shall pay
any transfer or other taxes required by reason of the payment to a person other
than the registered holder of the shares, or shall establish to the satisfaction
of New Scripps and Comcast that such tax either has been paid or is not
applicable.
Until surrendered and exchanged in accordance with the Merger Agreement,
after the Effective Time each share of Scripps Common Stock shall represent only
the right to receive Comcast Merger Stock, together with any cash in lieu of
fractional shares, to which such shares are entitled. At the close of business
on the day prior to the date of the Effective Time, the stock transfer books of
Scripps shall be closed and no further transfers shall be made. If, thereafter,
any shares are presented for transfer, such shares shall be canceled and
exchanged for Comcast Merger Stock, together with any cash in lieu of fractional
shares. No party shall be liable to any holder of certificates formerly
representing Scripps Common Stock for any amount paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
LEGAL MATTERS
Certain legal matters relating to the validity of the New Scripps Class A
Common Shares and New Scripps Common Voting Shares and certain tax matters will
be passed upon by Baker & Hostetler, Cleveland, Ohio. John H. Burlingame, the
Executive Partner of Baker & Hostetler, is a director of Scripps and a Trustee.
Certain legal matters relating to the validity of the shares of Comcast Special
Common Stock will be passed upon by Arthur R. Block, Senior Deputy General
Counsel of Comcast. Certain other legal matters will be passed upon by Davis
Polk & Wardwell, counsel to Comcast.
EXPERTS
The consolidated financial statements and the related consolidated
financial statement schedule of Scripps as of December 31, 1995 and 1994 and for
each of the three years in the period ended December 31, 1995, included in
Amendment Number 1 dated May 9, 1996 to the Annual Report on Form 10-K of
Scripps and incorporated by reference in this Joint Proxy Statement-Prospectus,
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.
The combined financial statements of Scripps Cable as of December 31, 1995
and 1994 and for each of the three years in the period ended December 31, 1995,
included in Amendment Number 5 dated July 18, 1996 to the Report on Form 8-K of
Scripps dated December 28, 1995 and incorporated by reference in this Joint
Proxy Statement-Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein by
reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
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The consolidated financial statements and the related financial statement
schedule of Comcast as of December 31, 1995 and 1994 and for each of the three
years in the period ended December 31, 1995, included in the Annual Report on
Form 10-K of Comcast and incorporated by reference in this Joint Proxy
Statement-Prospectus, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of Comcast include amounts for QVC,
Comcast International Holdings, Inc. ("Comcast International") and Garden State
Cablevision L.P. ("Garden State"). Other auditors have audited the consolidated
financial statements of QVC as of December 31, 1995 and for the eleven-month
period then ended, the consolidated financial statements of Comcast
International as of December 31, 1994 and for the two years then ended, and the
financial statements of Garden State as of December 31, 1994 and for the two
years then ended. The reports of such auditors with respect to the financial
statements of QVC, Comcast International and Garden State were relied upon by
Deloitte & Touche LLP for the purpose of its report with respect to the
consolidated financial statements of Comcast described above, insofar as such
report relates to amounts included in Comcast's consolidated financial
statements for QVC, Comcast International and Garden State for the periods
specified in Comcast's consolidated financial statements.
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ANNEX I
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
THE E. W. SCRIPPS COMPANY,
SCRIPPS HOWARD, INC.,
AND
COMCAST CORPORATION
October 28, 1995
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TABLE OF CONTENTS
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ARTICLE I -- THE MERGER
Section 1.01 The Merger............................................................. 1
Section 1.02 Effect of the Merger on Capital Stock; Adjustments..................... 1
Section 1.03 Effective Time of the Merger........................................... 3
Section 1.04 Exchange of Certificates............................................... 3
Section 1.05 Distribution with Respect to Shares Represented by Unexchanged
Certificates........................................................ 4
Section 1.06 No Fractional Shares................................................... 4
Section 1.07 No Liability........................................................... 5
Section 1.08 Lost Certificates...................................................... 5
ARTICLE II -- CERTAIN PRE-MERGER TRANSACTIONS
Section 2.01 Internal Spinoffs; Amendments to Charters.............................. 5
Section 2.02 Contribution of Assets to and Assumption of Liabilities by SHI......... 6
ARTICLE III -- REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND SHI
Section 3.01 Organization and Authority............................................. 7
Section 3.02 No Breach.............................................................. 7
Section 3.03 Consents and Approvals................................................. 7
Section 3.04 Approvals of the Boards; Fairness Opinion; Vote Required............... 8
Section 3.05 Capitalization......................................................... 8
Section 3.06 SEC Reports............................................................ 9
Section 3.07 Financial Statements................................................... 9
Section 3.08 Absence of Certain Changes............................................. 9
Section 3.09 Absence of Undisclosed Liabilities..................................... 9
Section 3.10 Compliance with Law.................................................... 9
Section 3.11 Taxes.................................................................. 10
Section 3.12 Litigation............................................................. 10
Section 3.13 Brokers and Finders.................................................... 10
Section 3.14 Employee Benefit Plan Matters.......................................... 10
Section 3.15 Company Contracts...................................................... 10
Section 3.16 Environmental Matters.................................................. 10
Section 3.17 Full Disclosure........................................................ 11
ARTICLE IV -- REPRESENTATIONS AND WARRANTIES REGARDING CABLE
Section 4.01 Organization and Authority............................................. 11
Section 4.02 No Breach.............................................................. 11
Section 4.03 Capitalization......................................................... 11
Section 4.04 Financial Statements................................................... 12
Section 4.05 Absence of Certain Changes............................................. 12
Section 4.06 Absence of Undisclosed Liabilities..................................... 12
Section 4.07 Compliance with Law.................................................... 12
Section 4.08 Franchises and Material Agreements..................................... 13
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Section 4.09 Title to Properties; Encumbrances...................................... 15
Section 4.10 Litigation............................................................. 15
Section 4.11 Employee Benefit Plan Matters.......................................... 16
Section 4.12 Labor Matters.......................................................... 18
Section 4.13 Mid-Tennessee Acquisition.............................................. 18
Section 4.14 Environmental Matters.................................................. 18
ARTICLE V -- REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Section 5.01 Organization and Authority............................................. 19
Section 5.02 No Breach.............................................................. 19
Section 5.03 Consents and Approvals................................................. 19
Section 5.04 Approval of the Board; Vote Required................................... 20
Section 5.05 Capitalization......................................................... 20
Section 5.06 SEC Reports............................................................ 20
Section 5.07 Financial Statements................................................... 20
Section 5.08 Absence of Certain Changes............................................. 21
Section 5.09 Brokers and Finders.................................................... 21
Section 5.10 Full Disclosure........................................................ 21
Section 5.11 Certain Tax Matters.................................................... 21
ARTICLE VI -- OTHER AGREEMENTS
Section 6.01 No Solicitation........................................................ 21
Section 6.02 Conduct of Business of the Company..................................... 22
Section 6.03 Conduct of Business of Cable........................................... 23
Section 6.04 Conduct of Business of Acquiror........................................ 23
Section 6.05 Access to Information.................................................. 24
Section 6.06 SEC Filings............................................................ 24
Section 6.07 Reasonable Best Efforts................................................ 26
Section 6.08 Public Announcements................................................... 27
Section 6.09 Board Recommendations.................................................. 27
Section 6.10 Tax Matters............................................................ 27
Section 6.11 Notification........................................................... 31
Section 6.12 Employee Benefits...................................................... 31
Section 6.13 Employee Stock Options................................................. 32
Section 6.14 Meetings of Stockholders............................................... 32
Section 6.15 Regulatory and Other Authorizations.................................... 33
Section 6.16 Further Assurances..................................................... 33
Section 6.17 Internal Revenue Service Ruling........................................ 34
Section 6.18 Records Retention...................................................... 34
Section 6.19 Stock Exchange Listing................................................. 34
Section 6.20 Company Names.......................................................... 34
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Section 6.21 Other Agreements....................................................... 34
Section 6.22 Form 8-K; Provision of Financial Statements; Schedule of Contracts..... 34
Section 6.23 Determination of Estimated Amounts..................................... 35
Section 6.24 Capital Expenditures................................................... 36
Section 6.25 Excess Cash............................................................ 36
Section 6.26 Acquisition of Mid-Tennessee Business; Reduction of Aggregate
Consideration; Indemnity............................................. 36
Section 6.27 Indemnity Relating to Certain Litigation............................... 36
Section 6.28 River City Interest.................................................... 37
Section 6.29 Proposed Hyperion Joint Venture........................................ 37
Section 6.30 Cancellation of Intercompany Arrangements.............................. 37
ARTICLE VII -- CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
Section 7.01 Closing and Closing Date............................................... 37
Section 7.02 Conditions to the Obligations of the Company, SHI and Acquiror......... 37
Section 7.03 Conditions to the Obligations of the Company and SHI................... 38
Section 7.04 Conditions to Obligations of Acquiror.................................. 39
Section 7.05 Exception to Conditions to Obligations to the Company and SHI.......... 39
Section 7.06 Exception to Conditions to Obligations of Acquiror..................... 40
ARTICLE VIII -- TERMINATION
Section 8.01 Termination............................................................ 40
Section 8.02 Effect of Termination.................................................. 40
Section 8.03 Fees and Expenses...................................................... 41
ARTICLE IX -- MISCELLANEOUS
Section 9.01 Survival of Representations and Warranties............................. 41
Section 9.02 Entire Agreement....................................................... 41
Section 9.03 Notices................................................................ 41
Section 9.04 Governing Law.......................................................... 42
Section 9.05 Descriptive Headings................................................... 42
Section 9.06 Parties in Interest.................................................... 42
Section 9.07 Counterparts........................................................... 42
Section 9.08 Expenses............................................................... 42
Section 9.09 Personal Liability..................................................... 43
Section 9.10 Binding Effect; Assignment............................................. 43
Section 9.11 Amendment.............................................................. 43
Section 9.12 Extension; Waiver...................................................... 43
Section 9.13 Legal Fees; Costs...................................................... 43
ARTICLE X -- DEFINITIONS
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EXHIBITS AND SCHEDULES
Exhibit A -- Form of Amendment to Certificate of Incorporation of the
Company
Exhibit B -- Form of Restated Articles of Incorporation of SHI
Exhibit C -- Form of Contribution and Assumption Agreement
Exhibit D -- Form of Noncompetition Agreement
Exhibit E -- Form of Voting Agreement
Exhibit F -- Form of Registration Rights Agreement
Exhibit G -- Form of Board Representation Agreement
Schedule 3.09 -- Liabilities of the Company
Schedule 3.11(b) -- Material Claims and Investigations for Taxes of
Company
Schedule 3.15 -- Company Contracts
Schedule 4.07(a)(i) -- Material Licenses and Authorizations held by
Cable
Schedule 4.08(a)(i) -- Material Franchises of Cable
Schedule 4.08(b) -- Rights of Others to Acquire Assets of Cable
Schedule 4.08(f) -- Signals Carried by Cable Without Retransmission
Consent Agreements
Schedule 4.08(g) -- FCC Rate Complaints and Letters of Inquiry
Schedule 4.11(a) -- Cable Employee Plans and Cable Benefit Arrangements
Schedule 4.11(d) -- Welfare Benefit Plans Covering Cable Retirees
Schedule 4.12(a) -- Labor or Collective Bargaining Agreements of Cable
Schedule 4.12(b) -- Employees of Cable Represented by Labor
Organizations; Representation or Certification Proceedings
Schedule 5.05(a) -- Existing Options, Warrants, Etc. of Acquiror
Schedule 6.04 -- Permitted Amendments
Schedule 6.22(c) -- Cable Contracts
Schedule 6.27 -- Certain Litigation of Cable
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AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated as of October
28, 1995, is made by and among The E.W. Scripps Company, a Delaware corporation
(the "Company"), Scripps Howard, Inc., an Ohio corporation and wholly owned
subsidiary of the Company ("SHI"), and Comcast Corporation, a Pennsylvania
corporation ("Acquiror").
RECITALS
WHEREAS, the Boards of Directors of the Company, SHI and Acquiror each have
determined that it is in the best interests of their respective stockholders to
enter into this Agreement which, among other things, provides for (i) the
Company to contribute to SHI substantially all of the assets of the Company
(other than those assets described in the Contribution Agreement as being
retained by the Company) and to distribute to its stockholders the outstanding
shares of capital stock of SHI so that the stockholders of the Company will
become the stockholders of SHI; and (ii) the Company (immediately following such
contribution and distribution) to merge with and into Acquiror, as a result of
which the stockholders of the Company immediately prior to such merger will
become stockholders of Acquiror; and
WHEREAS, for federal income tax purposes, it is intended that such
transactions will qualify as a tax-free reorganization within the meaning of
Sections 368(a)(1)(D), 355, and 368(a)(1)(A) of the Internal Revenue Code.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements set forth below, the parties hereto agree as follows:
ARTICLE I
THE MERGER
1.01 The Merger. Subject to the terms and conditions hereof, at the
Effective Time: (i) the Company shall be merged with and into Acquiror (the
"Merger") and the separate existence of the Company shall cease and Acquiror
shall continue as the surviving corporation in the Merger (the "Surviving
Corporation"); (ii) the Articles of Incorporation of Acquiror, as in effect
immediately prior to the Effective Time, shall continue as the Articles of
Incorporation of the Surviving Corporation; (iii) the Bylaws of Acquiror, as in
effect immediately prior to the Effective Time, shall continue as the Bylaws of
the Surviving Corporation; (iv) the directors of Acquiror shall be the directors
of the Surviving Corporation; and (v) the officers of Acquiror immediately prior
to the Effective Time shall continue as the officers of the Surviving
Corporation. From and after the Effective Time, the Merger will have all the
effects provided by applicable law.
1.02 Effect of the Merger on Capital Stock; Adjustments. At the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any shares of capital stock:
(a) Subject to Sections 1.02(b) and 1.02(e) hereof, each share of
Company Common Stock issued and outstanding immediately prior to the Merger
shall be converted into and shall become that number of fully paid and
nonassessable shares of Acquiror Common Stock equal to the Common Stock
Conversion Number.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Merger and owned directly or indirectly by the
Company as treasury stock, by SHI or by any of the Company's or SHI's
respective Subsidiaries shall be cancelled, and no consideration shall be
delivered in exchange therefor.
(c) Each share of the capital stock of Acquiror issued and outstanding
immediately prior to the Merger shall remain outstanding.
(d) "Common Stock Conversion Number" shall mean the quotient obtained
by dividing (i) the aggregate number of shares of Acquiror Common Stock
into which Company Common Stock shall be
<PAGE> 135
converted (the "Aggregate Shares Delivered") by (ii) the number of shares
of Company Common Stock outstanding at the Closing Date (the "Outstanding
Company Common Stock").
For purposes hereof, the Aggregate Shares Delivered shall equal the
sum of (i) the Closing Price Share Number and (ii) the Top-up Share Number,
if any. For purposes hereof, the "Closing Price Share Number" shall equal
the quotient obtained by dividing the Aggregate Consideration by the Collar
Price. The "Collar Price" shall be whichever of the following applies:
(i) 115% of the Execution Price, if the Closing Price is greater
than 115% of the Execution Price; or
(ii) the Closing Price, if the Closing Pric is greater than or
equal to 85% but less than or equal to 115% of the Execution Price; or
(iii) 85% of the Execution Price, if the Closing Price is less than
85% of the Execution Price.
If the Closing Price is less than 85% of the Execution Price, the
Company shall have the right to give notice to Acquiror (the "Termination
Intent Notice") that the Company intends to terminate this Agreement. The
Termination Intent Notice shall be delivered to Acquiror in person at the
location where the Closing is to take place no later than 2:00 p.m. New
York time on the business day prior to the Closing Date (the "Pre-Closing
Date"). If the Company delivers a Termination Intent Notice, Acquiror shall
have the right to give notice to the Company (the "Top-up Notice") that
Acquiror elects to increase the number of shares of Acquiror Common Stock
to be delivered in the Merger to that number of shares (the "Maximum
Number") of Acquiror Common Stock equal to the Aggregate Consideration
divided by the Closing Price. The excess of the Maximum Number over the
number obtained by dividing the Aggregate Consideration by the Collar Price
is referred to herein as the "Collar Deficiency Number". The Top-up Notice
shall be delivered in person to the Company at the location where the
Closing is to take place no later than 8:00 p.m. New York time on the
Pre-Closing Date. If Acquiror has not delivered a Top-up Notice by the
above deadline, and the Company and Acquiror have not otherwise reached an
agreement regarding the number of shares of Acquiror Common Stock to be
delivered by such deadline, this Agreement shall terminate. If Acquiror
does deliver a Top-up Notice, or if the Company and Acquiror otherwise
agree, the number of shares of Acquiror Common Stock to be delivered in the
Merger shall be increased by the Collar Deficiency Number or such other
number as the Company and Acquiror may agree. The Collar Deficiency Number
or such other number is hereinafter referred to as "Top-up Share Number".
For purposes hereof, the "Aggregate Consideration" shall be
$1,575,000,000 (the "Base Consideration");
(i) increased by the Estimated Capital Expenditure Amount (as
defined in Section 6.23);
(ii) reduced by the Estimated Cable Net Liabilities Amount (as
defined in Section 6.23);
(iii) increased by the River City Purchase Amount (as defined in
Section 6.28), if any; and
(iv) reduced by the Mid-Tennessee Amount (as defined in Section
6.26), if any.
For purposes hereof, (i) the "Execution Price" shall be $20.075; (ii)
the average closing price of Acquiror Common Stock on the NASDAQ National
Market for the Random Trading Days shall be the "Closing Price"; and (iii)
the "Random Trading Days" shall be the 15 trading days selected by lot from
the 40 trading days ending on and including the second trading day prior to
the Closing Date. The Random Trading Days shall be selected by lot by the
Company and the Acquiror at 5:00 p.m. New York time on the second trading
day prior to the Closing Date.
If between the date hereof and the Effective Time the outstanding
shares of Acquiror Common Stock shall have been changed into a different
number of shares or a different class, by reason of any stock dividend,
subdivision, reclassification, recapitalization, split, combination or
exchanges of shares, or if any extraordinary dividend or distribution is
made with respect to the Acquiror Common Stock, then the Aggregate Shares
delivered shall be correspondingly adjusted to reflect such stockdividend,
subdivi-
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sion, reclassification, recapitalization, split, combination or exchange of
shares or extraordinary dividend or distribution.
(e) The holder of any shares ("Dissenting Shares") of Company Common
Stock outstanding immediately prior to the Merger that has validly
exercised such holder's dissenters' rights, if any, under the Delaware
General Corporation Law (the "DGCL") shall not be entitled to receive, in
respect of the shares of Company Common Stock as to which such holder has
validly exercised dissenters' rights, shares of Acquiror Common Stock and
shall not be entitled to receive shares of SHI Common Voting Shares or SHI
Class A Common Shares pursuant to the Distribution unless and until such
holder shall have failed to perfect, or shall have effectively withdrawn or
lost, such holder's right to payment for such holder's shares of Company
Common Stock under the DGCL. In such event, such holder shall be entitled
to receive the Acquiror Common Stock, SHI Common Voting Stock and SHI Class
A Common Stock such holder would have been entitled to receive had such
holder not exercised dissenters' rights. The Company shall give Acquiror
prompt notice upon receipt by the Company (i) prior to or at the meeting of
stockholders at which the Merger and other transactions contemplated hereby
are voted upon, of any written objection to such transactions (any
stockholder duly making such objection being hereinafter called a
"Dissenting Stockholder") and (ii) any other notices or communications made
after such time by a Dissenting Stockholder which pertains to dissenters'
rights. The Company agrees that, prior to the Effective Time, except with
the written consent of Acquiror, it will not voluntarily make any payment
with respect to, or settle or offer to settle, any such demand. Each
Dissenting Stockholder who becomes entitled under the DGCL to payment for
such holder's shares of Company Common Stock shall receive payment therefor
after the Effective Time from the Surviving Corporation, and SHI shall
reimburse the Surviving Corporation for the excess, if any, of (x) the
amount paid to such Dissenting Stockholders by the Acquiror over (y) the
product of (i) the quotient of the Aggregate Consideration divided by the
Aggregate Shares Delivered times (ii) the number of Dissenting Shares held
by such Dissenting Stockholders; provided that the amount paid to
Dissenting Shareholders shall have been agreed upon by the Surviving
Corporation, SHI and the Dissenting Stockholders or finally determined
pursuant to the DGCL.
1.03 Effective Time of the Merger. Subject to the terms and conditions
set forth in this Agreement, a certificate of merger shall be duly prepared,
executed and acknowledged by Acquiror and the Company and thereafter delivered
to the Secretary of State of Delaware and articles or a certificate of merger
shall be duly prepared, executed and acknowledged by Acquiror and the Company
and thereafter delivered to the Secretary of State of Pennsylvania (together,
the "Certificate of Merger") for filing pursuant to the Delaware General
Corporation Law and the Pennsylvania Business Corporations Law (the "PBCL"),
respectively, on the Closing Date. The Merger shall become effective upon the
filing of the Certificate of Merger with such Secretaries of State on the
Closing Date (the "Effective Time").
1.04 Exchange of Certificates.
(a) Prior to the Closing Date, the Company shall retain a bank or
trust company reasonably acceptable to Acquiror to act as exchange agent
(the "Exchange Agent") in connection with the surrender of certificates
evidencing shares of Company Common Stock converted into shares of Acquiror
Common Stock pursuant to the Merger. Prior to the Effective Time, Acquiror
shall deposit with the Exchange Agent the shares of Acquiror Common Stock
to be issued in the Merger, which shares (the "Merger Stock") shall be
deemed to be issued at the Effective Time. At and following the Effective
Time, the Surviving Corporation shall deliver to the Exchange Agent such
cash as may be required from time to time to make payment of cash in lieu
of fractional shares in accordance with Section 1.06 hereof.
(b) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each person who was, at the Effective Time, a holder of
record of a certificate or certificates that immediately prior to the
Effective Time evidenced Outstanding Company Common Stock (the
"Certificates"), other than the Company, SHI or any of their respective
Subsidiaries, (i) a letter of transmittal (which shall specify that
delivery of the Certificates shall be effective, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to
the Exchange Agent and which shall be in such form and shall have
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such other provisions as Acquiror and SHI shall reasonably specify) and
(ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing the Merger Stock. Upon surrender of
a Certificate for cancellation to the Exchange Agent, together with such
letter of transmittal duly executed and such other documents as may be
required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor certificates representing the
shares of Merger Stock that such holder has the right to receive pursuant
to the terms hereof (together with any dividend or distribution with
respect thereto made after the Effective Time and any cash paid in lieu of
fractional shares pursuant to Section 1.06), and the Certificate so
surrendered shall be canceled. In the event of a transfer of ownership of
Company Common Stock that is not registered in the stock transfer records
of the Company, a certificate representing the proper number of shares of
Merger Stock may be issued to a transferee if the Certificate representing
such Company Common Stock is presented to the Exchange Agent, accompanied
by all documents required to evidence and effect such transfer and by
evidence reasonably satisfactory to Acquiror and SHI that any applicable
stock transfer tax has been paid.
(c) After the Effective Time, each outstanding Certificate which
theretofore represented shares of Company Common Stock shall, until
surrendered for exchange in accordance with this Section 1.04, be deemed
for all purposes to evidence the right to receive the number of shares of
Merger Stock into which the shares of Company Common Stock (which, prior to
the Effective Time, were represented thereby) shall have been so converted.
(d) Except as otherwise expressly provided herein, the Surviving
Corporation shall pay all charges and expenses, including those of the
Exchange Agent, in connection with the exchange of shares of Merger Stock
for shares of Company Common Stock. Any Merger Stock deposited with the
Exchange Agent that remains unclaimed by the former stockholders of the
Company after six months following the Effective Time shall be delivered to
the Surviving Corporation, upon demand, and any former stockholders of the
Company who have not then complied with the instructions for exchanging
their Certificates shall thereafter look only to the Surviving Corporation
for exchange of Certificates.
(e) Effective upon the Closing Date, the stock transfer books of the
Company shall be closed, and there shall be no further registration of
transfers of shares of Company Common Stock thereafter on the records of
the Company.
(f) All Merger Stock issued upon conversion of shares of Company
Common Stock and all SHI Common Shares distributed pursuant to Article II
hereof, each in accordance with the terms hereof, shall be deemed to have
been issued in full satisfaction of all rights pertaining to such shares of
Company Common Stock.
1.05 Distribution With Respect to Shares Represented by Unexchanged
Certificates. No dividend or other distribution declared or made after the
Effective Time with respect to the Merger Stock with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate with
respect to the shares of Merger Stock issuable upon surrender of a Certificate
until the holder of such Certificate shall surrender such Certificate in
accordance with Section 1.04. Subject to the effect of applicable law, following
surrender of any such Certificate the Surviving Corporation shall pay, without
interest, to the record holder of certificates representing shares of Merger
Stock issued in exchange therefor (i) at the time of such surrender, the amount
of dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such shares of Merger Stock, and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender of such Certificate
and a payment date subsequent to such surrender payable with respect to such
shares of Merger Stock. No interest shall be paid on any of the Merger Stock or
any SHI Class A Common Shares or on SHI Common Voting Shares distributed
pursuant to Article II hereof.
1.06 No Fractional Shares.
(a) No certificates or scrip representing fractional shares of
Acquiror Common Stock shall be issued upon the surrender of Certificates
pursuant to Section 1.04. Such fractional share interests shall
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not entitle the owner thereof to any rights as a security holder of
Acquiror. In lieu of any such fractional shares of Acquiror Common Stock,
each holder of Company Common Stock entitled to receive shares of Acquiror
Common Stock in the Merger, upon surrender of a Certificate for exchange
pursuant to Section 1.04, shall be entitled to receive an amount in cash
(without interest), rounded to the nearest cent, determined by multiplying
the fractional interest in Acquiror Common Stock to which such holder would
otherwise be entitled (after taking into account all shares of Company
Common Stock then held of record by such holder) by the closing sale price
of a share of Acquiror Common Stock as reported on the NASDAQ National
Market on the Closing Date.
(b) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Company Common Stock in lieu of any
fractional share interests, Acquiror shall promptly deposit with the
Exchange Agent cash in the required amounts and the Exchange Agent will
mail such amounts without interest to such holders; provided, however, that
no such amount will be paid to any holder of Certificates which formerly
represented Company Common Stock prior to the surrender by such holder of
the Certificates formerly representing such holder's Company Common Stock.
Any such amounts that remain unclaimed by the former stockholders of the
Company after six months following the Effective Time shall be delivered to
the Surviving Corporation by the Exchange Agent upon demand and any former
stockholders of the Company who have not then surrendered their
Certificates shall thereafter look only to the Surviving Corporation for
payment in lieu of any fractional interests.
1.07 No Liability. Any amounts remaining unclaimed by holders of shares
on the day immediately prior to such time as such amounts would otherwise
escheat to or become property of any governmental entity shall, to the extent
permitted by applicable law, become the property of Acquiror free and clear of
any claims or interest of any holder previously entitled thereto. None of
Acquiror, SHI, the Company or the Exchange Agent will be liable to any holder of
shares of Company Common Stock for any shares of Merger Stock or any SHI Common
Shares, dividends or distributions with respect thereto or cash payable in lieu
of fractional shares delivered to a state abandoned property administrator or
other public official pursuant to any applicable abandoned property, escheat or
similar law.
1.08 Lost Certificates. If any Certificate shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the shares
of Merger Stock (and any dividend or distribution with respect thereto made
after the Effective Time and prior to such issuance and any cash payable in lieu
of fractional shares pursuant to Section 1.06) deliverable in respect thereof as
determined in accordance with the terms hereof. When authorizing such payment in
exchange for any lost, stolen or destroyed Certificate, the person to whom the
Merger Stock is to be issued, as a condition precedent to the issuance thereof,
shall give the Surviving Corporation a bond satisfactory to the Surviving
Corporation against any claim that may be made against the Surviving Corporation
with respect to the Certificate alleged to have been lost, stolen or destroyed.
ARTICLE II
CERTAIN PRE-MERGER TRANSACTIONS
The following transactions shall occur prior to the Effective Time:
2.01 Internal Spinoffs; Amendments to Charters.
(a) Prior to the Contribution, the Distribution and the Effective
Time, and in transactions intended to qualify under Section 355 of the
Internal Revenue Code as tax-free spinoffs, Scripps Howard Broadcasting
Company, an Ohio corporation and a wholly owned Subsidiary of SHI
("Broadcasting"), will distribute all of the outstanding capital stock of
Scripps Howard Cable Company of Sacramento, a Delaware corporation
("Sacramento Cable"), and Scripps Howard Cable Company, a Colorado
corporation ("SH Cable"), each of which is a wholly owned Subsidiary of
Broadcasting, to SHI, and SHI will then distribute to the Company all of
the outstanding capital stock of Sacramento Cable, SH Cable, L-R Cable,
Inc., a Colorado corporation and wholly owned Subsidiary of SHI ("L-R
Cable"),
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and EWS Cable, Inc., a Colorado corporation and wholly owned Subsidiary of
SHI ("EWS Cable"), whereupon Sacramento Cable, SH Cable, L-R Cable, and EWS
Cable (collectively, the "Cable Subsidiaries") will become direct wholly
owned Subsidiaries of the Company.
(b) Prior to the Contribution, the Distribution and the Effective
Time, the Company shall amend its Certificate of Incorporation as set forth
in Exhibit A hereto (the "Charter Amendment") and SHI shall amend and
restate its Articles of Incorporation as set forth in Exhibit B hereto (the
"Restated Articles").
2.02 Contribution of Assets to and Assumption of Liabilities by SHI.
(a) Prior to the Effective Time and pursuant to the terms of the
Contribution and Assumption Agreement to be entered into by the Company and
SHI in the form attached hereto as Exhibit C (the "Contribution
Agreement"), the Company shall contribute and transfer (together with the
transactions described in Section 2.02(b) below, the "Contribution") to SHI
all of the Company's right, title and interest in and to any and all assets
of the Company, whether tangible or intangible and whether fixed,
contingent or otherwise; provided, however, that the Company shall not
contribute to SHI (i) the issued and outstanding capital stock of, and its
right, title and interest in any advances to, any Cable Subsidiary; (ii)
the Company's rights created pursuant to this Agreement and the
Contribution Agreement; and (iii) cash sufficient to pay all expenses
relating to the transactions described in this Agreement that are the
responsibility of the Company hereunder including the fees and expenses of
Merrill Lynch in connection with such transactions.
(b) In consideration for the transactions described in Section 2.02(a)
above, concurrently therewith and pursuant to the Contribution Agreement,
SHI shall (i) assume any and all liabilities of the Company of every kind
whatsoever, whether absolute, known, unknown, fixed, contingent or
otherwise; provided, however, that SHI will not assume, and will have no
liability with respect to, (A) any liabilities associated with the cable
television business operations of the Cable Subsidiaries or Cable
Partnerships except as otherwise provided herein, including Sections
1.02(e), 6.06(g), 6.10, 6.12, 6.13, 6.27, 7.06 and 9.01 and (B) the
Company's obligations created pursuant to this Agreement and the
Contribution Agreement and (ii) issue and deliver to the Company shares of
common stock of SHI as set forth in the Contribution Agreement.
Concurrently with the transactions described in Section 2.02(a) above, SHI
will cause the Company and the Cable Subsidiaries to be released by all
applicable third parties from any liability of SHI or any of its
Subsidiaries other than Cable or any liability assumed by SHI pursuant to
this Section 2.02(b) that is (i) debt for borrowed money and similar
monetary obligations evidenced by bonds, notes, debentures or other
instruments, or (ii) guaranties, endorsements, and other contingent
obligations, whether direct or indirect, in respect of liabilities of
others of any of the types described in clause (i). Each of the Company
Contracts, other than the SHI Note Indenture will be terminated, or the
Company will otherwise be released from all obligations thereunder, prior
to the Effective Time. Prior to the Effective Time, either SHI shall
purchase and retire all of its outstanding 7 3/8% Notes due December 15,
1998 (the "SHI Notes"), or, if and to the extent the SHI Notes have not
been repurchased at the Effective Time, SHI shall defease the SHI Notes in
accordance with Section 401 of the SHI Note Indenture and shall indemnify
the Company in respect of any Loss it may suffer in respect thereof. Prior
to the Effective Time, SHI and the Company shall enter into the
Non-Competition Agreement as set forth in Exhibit D hereto. SHI
acknowledges that the liabilities to be assumed pursuant to the first
sentence of this Section 2.02(b) include any and all liabilities associated
with any claim, action or proceeding brought by or on behalf of the holders
of Company Common Stock in connection with the transactions contemplated
hereby.
(c) Following the Contribution and prior to the Effective Time, the
Company shall distribute (the "Distribution") one fully paid and
nonassessable SHI Class A Common Share to the holder of each share of
Company Class A Common Stock outstanding immediately prior to the
Distribution and one fully paid and nonassessable SHI Common Voting Share
to the holder of each share of Company Common Voting Stock outstanding
immediately prior to the Distribution. Each share of the capital stock of
SHI issued and outstanding immediately prior to the Distribution and owned
directly or indirectly by
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the Company or any of its Subsidiaries (other than those to be distributed
in accordance with the first sentence of this paragraph) shall be cancelled
at the time of the Distribution.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY AND SHI
The Company and SHI jointly and severally represent and warrant to Acquiror
as follows:
3.01 Organization and Authority. Each of the Company and SHI is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its incorporation. Each of the Company and SHI has all requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. Subject to the items referred
to in Section 3.03, all necessary action, corporate or otherwise, required to
have been taken by or on behalf of the Company and SHI by applicable law, their
respective charter documents or otherwise to authorize (i) the approval,
execution and delivery on behalf of the Company and SHI of this Agreement and
(ii) the performance by the Company and SHI of their respective obligations
under this Agreement and the consummation of the transactions contemplated
hereby has been taken, except that this Agreement, the Charter Amendment and the
transactions described in Section 6.13 must be approved by the stockholders of
the Company. This Agreement and each other agreement contemplated hereby (each a
"Transaction Agreement") to which the Company or SHI is or will be a party
constitutes or will constitute, as the case may be, a valid and binding
agreement of each of the Company and SHI, as the case may be, enforceable
against each of them in accordance with its terms, except (x) as the same may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws of
general application relating to or affecting creditors' rights, including
without limitation, the effect of statutory or other laws regarding fraudulent
conveyances and preferential transfers, and (y) for the limitations imposed by
general principles of equity. The foregoing exceptions are hereinafter referred
to as the "Enforceability Exceptions." The Company has heretofore delivered to
Acquiror true and complete copies of the Certificate or Articles of
Incorporation and Bylaws or Code of Regulations of the Company and SHI as in
effect on the date hereof.
3.02 No Breach. The execution and delivery of this Agreement by each of
the Company and SHI do not, and the consummation of the transactions
contemplated hereby by each of the Company and SHI will not, (i) violate or
conflict with the Certificate or Articles of Incorporation or Bylaws or Code of
Regulations of the Company or SHI, or (ii) constitute a breach or default (or an
event that with notice or lapse of time or both would become a breach or
default) of, or give rise to any third-party right of termination, cancellation,
modification or acceleration under, or otherwise require notice or approval
under, any agreement, understanding or undertaking to which the Company or SHI
or any of their respective Subsidiaries is a party or by which any of them is
bound, or give rise to any Lien on any of their properties, except where such
breach, default, Lien, third-party right, cancellation, modification or
acceleration would not have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole or materially interfere with or delay the
transactions contemplated hereby, or (iii) subject to obtaining the approvals
and making the filings described in Section 3.03 hereof, constitute a violation
of any statute, law, ordinance, rule, regulation, judgment, decree, order or
writ of any judicial, arbitral, public, or governmental authority having
jurisdiction over the Company or any of its Subsidiaries or SHI or any of its
Subsidiaries or any of their respective properties or assets except as would not
have a Material Adverse Effect on Cable or on the Company and its Subsidiaries
taken as a whole or materially interfere with or delay the transactions
contemplated hereby.
3.03 Consents and Approvals. Neither the execution and delivery of this
Agreement by the Company and SHI nor the consummation of the transactions
contemplated hereby will require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority,
except (i) for filings required under the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Securities Act"), (ii) for
filings required under the Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder (the "Exchange Act"), (iii) for filings under
state securities or "blue sky" laws, (iv) for notification pursuant to, and
expiration or termination of the waiting period under, the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
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thereunder (the "HSR Act"), (v) for the filing of the Certificate of Merger as
set forth in Article I hereof, (vi) for the filing of the Charter Amendment with
the Secretary of State of Delaware, the Restated Articles with the Secretary of
State of Ohio, and appropriate documents with the relevant authorities of other
states in which the Company and its Subsidiaries are qualified to do business,
(vii) for consents or waivers from the relevant governmental entities necessary
to transfer ownership of Cable's franchise agreements and Federal Communications
Commission ("FCC") licenses, and (viii) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent the Company or SHI from performing its
respective obligations under this Agreement or the Contribution Agreement
without having a Material Adverse Effect on the Company or Cable or materially
interfere with or delay the transactions contemplated hereby.
3.04 Approvals of the Boards; Fairness Opinion; Vote Required. The Boards
of Directors of the Company and SHI have each, by resolutions duly adopted at
meetings duly called and held, unanimously approved and adopted this Agreement,
the Merger, the Contribution and the Distribution, and the other transactions
contemplated hereby on the material terms and conditions set forth herein. The
Board of Directors of the Company has received the opinion as of the date of
this Agreement of Merrill Lynch & Co. ("Merrill Lynch"), as financial advisor to
the Company, that the consideration to be paid to the Company's stockholders in
the Merger is fair to such stockholders from a financial point of view. The
affirmative votes or actions by written consent of a majority of the votes that
holders of the outstanding shares of Company Common Voting Stock are entitled to
cast are the only votes of the holders of any class or series of the capital
stock of the Company necessary to approve the Merger and the Charter Amendment
under applicable law and the Company's Certificate of Incorporation and By-Laws.
3.05 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 120
million shares of Company Class A Common Stock, (ii) 30 million shares of
Company Common Voting Stock, and (iii) 25 million shares of serial
preferred stock, par value $.01 per share (the "Company Preferred Stock").
As of September 30, 1995, there were issued and outstanding 60,028,980
shares of Company Class A Common Stock and 19,990,833 shares of Company
Common Voting Stock. All such outstanding shares are duly authorized,
validly issued and fully paid and nonassessable. Since September 30, 1995
no shares of Company Common Stock have been issued except upon exercise of
options, restricted stock or other awards issued pursuant to the Incentive
Plan or the Directors Plan. There are no shares of Company Preferred Stock
issued and outstanding. There are no preemptive or other similar rights
available to the existing holders of the capital stock of the Company.
Other than options, restricted stock, and other awards outstanding or
issuable pursuant to the Incentive Plan or the Directors Plan, and other
than in connection with the transactions contemplated by this Agreement,
there are no outstanding options, warrants, rights, puts, calls,
commitments, or other contracts, arrangements, or understandings issued by
or binding upon the Company or any of its Subsidiaries requiring or
providing for, and there are no outstanding debt or equity securities of
the Company or its Subsidiaries which upon the conversion, exchange or
exercise thereof would require or provide for, the issuance, transfer or
sale by the Company or any of its Subsidiaries of any new or additional
equity interests in the Company (or any other securities of the Company
which, with notice, lapse of time or payment of monies, are or would be
convertible into or exercisable or exchangeable for equity interests in the
Company). Except for the Scripps Family Agreement dated October 15, 1992
(the voting provisions of which become effective only upon termination of
The Edward W. Scripps Trust (the "Trust")), there are no voting trusts or
other agreements or understandings to which the Company is a party with
respect to the voting of capital stock of the Company.
(b) As of the date hereof, the authorized capital stock of SHI
consists of 750 Common Shares, without par value (the "SHI Common Shares").
Upon the filing of its Amended and Restated Articles of Incorporation with
the Secretary of State of the State of Ohio, the authorized capital stock
of SHI will consist of (i) 120 million SHI Class A Common Shares, $.01 par
value; (ii) 30 million SHI Common Voting Shares, $.01 par value; and (iii)
25 million SHI Preferred Shares, $.01 par value. As of the date
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hereof, there are issued and outstanding 750 SHI Common Shares, all of
which are owned by the Company, and no other shares of capital stock of
SHI.
3.06 SEC Reports. The Company has filed all required forms, reports and
documents with the Securities and Exchange Commission (the "SEC") since January
1, 1993 (collectively, the "Company's SEC Reports"). The Company's SEC Reports
have complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act. As of their respective dates, none of the
Company's SEC Reports, including, without limitation, any financial statements
or schedules included or incorporated by reference therein, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company has heretofore made available or delivered to
Acquiror, in the form filed with the SEC, all of the Company's SEC Reports.
3.07 Financial Statements. The (i) audited consolidated financial
statements of the Company contained in the Company's Annual Report on Form 10-K
for the year ended December 31, 1994, and (ii) unaudited condensed consolidated
financial statements of the Company contained in the Company's Quarterly Report
on Form 10-Q for the six months ended June 30, 1995 (the "Company 10-Q"), were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") and present fairly in all material respects the
Company's consolidated financial position and the results of its consolidated
operations and its consolidated cash flows as of the relevant dates thereof and
for the periods covered thereby (subject to normal year-end adjustments in the
case of the unaudited interim financial statements).
3.08 Absence of Certain Changes. Except as otherwise disclosed in the
Company 10-Q, since June 30, 1995, there has not been any (i) material adverse
change in the financial position, liabilities, assets or business of the Company
and its Subsidiaries taken as a whole except for material adverse changes due to
general economic or industry-wide conditions, or (ii) other events or conditions
of any character that, individually or in the aggregate, have or would
reasonably be expected to have a Material Adverse Effect on the Company and its
Subsidiaries taken as a whole or on the ability of the Company and SHI to
perform their respective material obligations under this Agreement and the
Transaction Agreements to which they are or will be a party.
3.09 Absence of Undisclosed Liabilities. There are no liabilities of the
Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances which could reasonably be expected to result
in such a liability, other than (i) liabilities provided for in the balance
sheet included in the Company 10-Q or disclosed in the notes thereto and (ii)
other undisclosed liabilities which, individually or in the aggregate, are not
material to the Company and its Subsidiaries taken as a whole.
The Company has served only as a holding company for its Subsidiaries and
has not engaged in any active business operation. The aggregate amount of
liabilities of the Company which SHI will assume pursuant to Section 2.02(b)
would not reasonably be expected to exceed $50,000,000.
3.10 Compliance with Law. The Company holds all licenses, franchises,
certificates, consents, permits, qualifications and authorizations from all
governmental authorities necessary for the lawful conduct of its business,
except where the failure to hold any of the foregoing would not have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole. To the
Company's knowledge, the Company has not violated, and is not in violation of,
any such licenses, franchises, certificates, consents, permits, qualifications
or authorizations or any applicable statutes, laws, ordinances, rules and
regulations (including, without limitation, any of the foregoing related to
occupational safety, storage, disposal, discharge into the environment of
hazardous wastes, environmental protection, conservation, unfair competition,
labor practices or corrupt practices) of any governmental authorities, except
where such violations do not, and in so far as reasonably can be foreseen will
not, have a Material Adverse Effect on the Company and its Subsidiaries taken as
a whole, and the Company has not received any notice from a governmental or
regulatory authority within three years of the date hereof of any such
violation.
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3.11 Taxes.
(a) All Company Consolidated Income Tax Returns and Cable Tax Returns
(as defined in Section 6.10(h)), required to be filed on or before the date
hereof have been filed with the appropriate governmental agencies in all
jurisdictions in which such Tax Returns are required to be filed; all of
the foregoing Tax Returns are true, correct and complete in all material
respects; and all Taxes required to have been paid in connection with such
Tax Returns have been paid. All material Taxes payable by or with respect
to the Company and its Subsidiaries but not reflected on any Tax Return
required to be filed prior to the date of the most recent balance sheet
included in the Company 10-Q, have been fully paid or adequate provision
therefor has been made and reflected on such balance sheet.
(b) Except as set forth on Schedule 3.11(b) hereto, there is no claim
or investigation involving an amount greater than $250,000 pending or
threatened against the Company or Cable for past Taxes, and adequate
provision for the claims or investigations set forth on Schedule 3.11(b)
has been made as reflected on the Company's financial statements.
(c) The Company is not, and on the Closing Date will not be, an
investment Company within the meaning of Section 368(a)(2)(F)(iii) and (iv)
of the Internal Revenue Code.
(d) As of the Closing Date there will be no deferred intercompany
gains between the Company and the Cable Subsidiaries or between the Cable
Subsidiaries themselves in excess of $250,000 (in the aggregate).
3.12 Litigation. There is no suit, action, proceeding or investigation
pending against or, to the knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries or any of their respective
properties that, individually or in the aggregate, would reasonably be expected
to prevent, hinder, or materially delay the ability of the Company to consummate
the transactions contemplated by this Agreement or otherwise be material to the
Company and its Subsidiaries taken as a whole, nor is there any judgment,
decree, inquiry, rule or order outstanding against the Company or any of its
Subsidiaries which, insofar as can reasonably be foreseen, would prevent, hinder
or materially delay such ability or otherwise be material to the Company.
3.13 Brokers and Finders. Neither the Company, SHI nor any officer,
director or employee of the Company or SHI has employed any investment banker,
broker or finder or incurred any liability for any brokerage fees, commissions
or finder's fees in connection with the transactions contemplated herein, except
that the Company has employed Merrill Lynch as its financial advisor and for
whose fees and expenses the Company is responsible.
3.14 Employee Benefit Plan Matters.
(a) Company Employee Plans and Company Benefit Arrangements. Acquiror
shall have no liability whatsoever under any Company Employee Plans or
Company Benefit Arrangements or under any laws applicable to any Company
Employee Plans or Company Benefit Arrangements.
(b) COBRA. The Company, SHI and their ERISA Affiliates have complied
in all material respects with the continuation coverage requirements of
COBRA with respect to any loss of coverage occurring through the date of
this Agreement under a Group Health Plan sponsored by the Company, SHI or
any of their ERISA Affiliates.
3.15 Company Contracts. Except as set forth on Schedule 3.15, the Company
is not a party to or bound by any contract, agreement or commitment. The
contracts, agreements and commitments to which the Company is a party or by
which it is otherwise bound are referred to herein as the "Company Contracts".
The Company has heretofore delivered to Acquiror all Company Contracts.
3.16 Environmental Matters.
(a) Except as set forth in the Schedule 3.16, there are no
Environmental Liabilities of the Company and its Subsidiaries that have had
or may reasonably be expected to have a Material Adverse Effect on the
Company and its Subsidiaries taken as a whole.
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(b) There has been no environmental assessment, investigation, study,
audit, test, review or other analysis conducted of which the Company has
knowledge in relation to the current or prior business of the Company or
its Subsidiaries or any property or facility now or previously owned or
leased by the Company or its Subsidiaries which has not been delivered to
Acquiror prior to the date hereof.
3.17 Full Disclosure. All of the statements made by the Company and SHI
in this Agreement (including, without limitation, the representations and
warranties made by the Company and SHI herein and in the schedules and exhibits
hereto which are incorporated by reference herein and which constitute an
integral part of this Agreement) do not (and on the Closing Date will not)
include or contain any untrue statement of a material fact, and do not (and on
the Closing Date will not) omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING CABLE
The Company and SHI jointly and severally represent and warrant to Acquiror
as follows:
4.01 Organization and Authority. Each of the Cable Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation. Each Cable Partnership is a partnership duly
formed and validly existing under the laws of its jurisdiction of formation.
Each of the Cable Subsidiaries and the Cable Partnerships is qualified to do
business as a foreign corporation or partnership and is, where applicable, in
good standing, in each jurisdiction where such qualification is necessary except
where the failure to so qualify would not reasonably be expected to have a
Material Adverse Effect on Cable. Each of the Cable Subsidiaries and the Cable
Partnerships has all requisite corporate or partnership, as appropriate, power
and authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to have such power or
authority would not have a Material Adverse Effect on Cable. The Company has
heretofore delivered to Acquiror true and complete copies of the certificate of
incorporation, bylaws and partnership agreements of Cable as currently in
effect.
4.02 No Breach. The execution and delivery of this Agreement by each of
the Company and SHI do not, and the consummation of the transactions
contemplated hereby by each of the Company and SHI will not constitute a breach
or default (or an event that with notice or lapse of time or both would become a
breach or default) or give rise to any third-party right of termination,
cancellation, modification or acceleration under, or otherwise require notice or
approval under, any agreement, understanding or undertaking to which the Company
or any of the Cable Subsidiaries or Cable Partnerships is a party or by which
any of them is bound, or give rise to any Lien on any of their properties,
except where such breach, default, Lien, third-party right, cancellation,
modification, or acceleration would not have a Material Adverse Effect on Cable
or materially interfere with or delay the transactions contemplated hereby.
Neither the Company nor any of the Cable Subsidiaries or Cable Partnerships is a
party to or bound by any agreement that restricts or purports to restrict the
ability of any of them or any affiliate of any of them to engage in any location
in the business of cable television, except for such restrictions that would not
have a Material Adverse Effect on Cable.
4.03 Capitalization. All of the issued and outstanding shares of capital
stock of the Cable Subsidiaries are owned by SHI or Broadcasting (as set forth
below) and are duly authorized, validly issued and fully paid and nonassessable.
As of the date hereof, SH Cable and Sacramento Cable are wholly owned
Subsidiaries of Broadcasting. As of the date hereof, EWS Cable and L-R Cable are
wholly owned Subsidiaries of SHI. Immediately prior to the Effective Time, SH
Cable, Sacramento Cable, EWS Cable and L-R Cable will be wholly owned
subsidiaries of the Company. EWS Cable owns a 98% interest in, and L-R Cable
owns a 2% interest in, TeleScripps Cable Company, a Colorado partnership
("TCC"). Sacramento Cable owns a 95% interest in Sacramento Cable Television, a
California partnership ("SCT"). River City Cablevision, Inc., a California
corporation, owns a 5% interest in SCT (the "River City Interest") and is not
affiliated with the Company. TCC and SCT are collectively referred to herein as
the "Cable Partnerships." With respect to TCC's cable systems in the cities of
Chamblee and Doraville, Georgia, and in the County of Dekalb, Georgia,
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certain third parties have certain contractual rights (and obligations) which in
the case of each system are not material in the aggregate to such system. Other
than in connection with the transactions contemplated by this Agreement, there
are no outstanding options, warrants, rights, puts, calls, commitments, or other
contracts, arrangements, or understandings issued by or binding upon any Cable
Subsidiary or Cable Partnership requiring or providing for, and there are no
outstanding debt or equity securities of any Cable Subsidiary or Cable
Partnership which upon the conversion, exchange or exercise thereof would
require or provide for, the issuance, transfer or sale by any Cable Subsidiary
or Cable Partnership of any new or additional equity interests in the Cable
Subsidiaries or the Cable Partnerships (or any other securities of any Cable
Subsidiary or Cable Partnership which, with notice, lapse of time or payment of
monies, are or would be convertible into or exercisable or exchangeable for
equity interests in such Cable Subsidiary or Cable Partnership). There are no
voting trusts or other agreements or understandings to which the Company or any
of the Cable Subsidiaries or Cable Partnerships is a party with respect to the
voting of the capital stock of the Cable Subsidiaries or the partnership
interests of the Cable Partnerships. The Cable Subsidiaries and the Cable
Partnerships have not engaged in any businesses or other activities except for
the ownership and operation of cable television systems and other activities
incidental thereto.
4.04 Financial Statements. The (i) unaudited combined balance sheets of
Cable as of December 31, 1994 and 1993 (the "Cable Balance Sheets"), and the
related unaudited combined statements of income and cash flows for Cable for the
year ended December 31, 1993 and 1994, and (ii) unaudited combined balance sheet
of Cable as of September 30, 1995 and the related unaudited combined statements
of income and cash flows for Cable for the period ended September 30, 1995, were
prepared on a consistent basis and present fairly, in all material respects, the
combined financial position of Cable as of the dates thereof and their combined
results of operations and cash flows for the periods covered thereby (subject to
normal year-end adjustments in the case of the unaudited interim financial
statements).
4.05 Absence of Certain Changes. Since December 31, 1994, Cable has
conducted its business in the ordinary course consistent with past practice and
there has not been any (i) material adverse change in the financial position,
liabilities, assets or business of Cable except for material adverse changes due
to general economic or industry-wide conditions, (ii) other events or conditions
of any character that, individually or in the aggregate, have or would
reasonably be expected to have a Material Adverse Effect on Cable, or (iii)
change by Cable in any method of accounting or accounting practice.
4.06 Absence of Undisclosed Liabilities. There are no liabilities of
Cable of any kind whatsoever, whether accrued, contingent, absolute, determined,
determinable or otherwise, and there is no existing condition, situation or set
of circumstances which could reasonably be expected to result in such a
liability, other than: (i) liabilities provided for in the Cable Balance Sheets
or disclosed in the notes thereto and (ii) other liabilities which, individually
or in the aggregate, are not material to Cable.
4.07 Compliance with Law.
(a) The Cable Subsidiaries and Cable Partnerships hold all licenses,
franchises, certificates, consents, permits, qualifications and
authorizations from all governmental authorities necessary for the lawful
conduct of Cable's business, except where the failure to hold any of the
foregoing would not have a Material Adverse Effect on Cable. To the
Company's best knowledge, none of the Cable Subsidiaries or Cable
Partnerships has violated, or is in violation of, any such licenses,
franchises, certificates, consents, permits, qualifications or
authorizations or any applicable statutes, laws, ordinances, rules and
regulations (including, without limitation, any of the foregoing related to
occupational safety, storage, disposal, discharge into the environment of
hazardous waste, environmental protection, conservation, unfair
competition, labor practices or corrupt practices) of any governmental
authorities, except where such violations do not, and in so far as
reasonably can be foreseen will not, have a Material Adverse Effect on
Cable, and none of the Cable Subsidiaries or Cable Partnerships has
received any notice from a governmental or regulatory authority within
three years of the date hereof of any such violation.
(b) The Cable Subsidiaries and Cable Partnerships have made all
submissions (including, without limitation, registration statements)
required under the Communications Act of 1934, as amended, the Cable
Communications Policy Act of 1984, as amended, and the Cable Television
Consumer Protection
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and Competition Act of 1992 (collectively, the "Communications Act"), and
the applicable rules and regulations thereunder (the "Rules and
Regulations"), and, to the Company's best knowledge, have obtained all
necessary FCC and FAA authorizations, licenses, registrations, permits and
tower approvals. The Cable Subsidiaries and Cable Partnerships have
complied and are in compliance in all material respects with the
Communications Act and the Rules and Regulations.
4.08 Franchises and Material Agreements.
(a) As of June 30, 1995, the cable television systems owned by Cable
(i) had approximately 750,390 Basic Subscribers and 655,516 premium
subscriptions, (ii) passed approximately 1,181,767 residential dwelling
units, and (iii) included 4,313 underground plant miles and 15,737 aerial
plant miles. On average, for the three months ended September 30, 1995, the
Average Revenue Per Basic Subscriber was $31.44 per month. Each cable
system owned by Cable operates pursuant to a Franchise except where the
failure to have such a franchise would not have a Material Adverse Effect
on Cable. Each Franchise of Cable and each Material Cable Agreement is the
validly existing, legally enforceable obligation of each Cable Subsidiary
or Cable Partnership party thereto and, to the knowledge of the Company, of
the other parties thereto, subject to the Enforceability Exceptions. Each
Cable Subsidiary and Cable Partnership is validly and lawfully operating
under its Franchises and the Material Cable Agreements to which it is a
party, and each Cable Subsidiary and Cable Partnership has duly complied in
all material respects with all of the terms and conditions of each of its
Franchises and each Material Cable Agreement to which it is a party. The
Company is not aware of any third-party breach or default (or other act or
omission that with notice, passage of time or both would constitute a
default) under any Material Cable Agreement. Schedule 4.08(a)(i) sets forth
a complete list of all material Franchises of Cable.
Except for contracts and agreements entered into in accordance with the
terms of this Agreement, and except for the Material Cable Agreements, no Cable
Subsidiary or Cable Partnership and none of their respective properties is a
party to or bound by:
(i) any lease (whether of real or personal property) providing
for annual rentals of $250,000 or more, any lease with a term of more
than 5 years or any lease relating to headends or any intermediate
transmission points;
(ii) any affiliation or retransmission Contract with a
programming service or a distributor thereof that is material to the
relevant cable system;
(iii) any Contract providing for the purchase or sale by Cable
of goods, services, equipment or assets with an aggregate purchase price
of $250,000 or more or with a duration in excess of 5 years except any
such Contract that may be terminated by Cable within six months of the
date of this Agreement without penalty (upon written request by Aquiror
(which notice must be given, if at all, within one month following the
date on which the Contract is delivered to Acquiror), Cable shall
terminate any such Contract effective as of the Closing);
(iv) any partnership, joint venture or other similar Contract
or any guarantee of the obligations of any Person except any such
Contract or guarantee that could not reasonably be expected to involve
obligations exceeding $250,000 or otherwise be material to Cable;
(v) any Contract relating to indebtedness for borrowed money
or any installment purchase agreement, conditional sale contract or
other like financing arrangement, except any such Contract or
arrangement:
A. with an aggregate outstanding principal amount not exceeding
$150,000, and
B. which may be prepaid on not more than 30 days' notice without
the payment of any penalty;
(vi) any Contract with the Company or SHI or any of their
respective Subsidiaries other than another Cable Subsidiary or Cable
Partnership;
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(vii) any Contract which has or could reasonably be expected
to have the effect of prohibiting or restricting any business practice
of, or the conduct of business by, any Cable Subsidiary or Cable
Partnership; or
(viii) any other Contract that is material to Cable.
The Contracts listed on Schedule 4.08(a)(ii) are referred to herein as the
"Material Cable Agreements." No payments were made by Cable in connection with
the obtaining of any retransmission agreement with a programming service or
distributor thereof.
(b) Except as set forth on Schedule 4.08(b), no Person (including any
governmental authority) has any right to acquire any interest in any cable
television system or assets of Cable (including any right of first refusal
or similar right) upon an assignment or transfer of control of a Franchise,
other than rights of condemnation or eminent domain afforded by law and, to
the knowledge of the Company, no other Person (i) has been granted or has
applied for the consent or approval of any governmental authority for the
installation, construction, development, ownership, or operation of a cable
television system (as defined in the Cable Communications Policy Act of
1984, as amended) within all or part of the geographic area served by any
cable television system of Cable or (ii) operates, or has commenced the
construction, installation or development of, any cable television system
(as defined in the Cable Communications Policy Act of 1984, as amended)
within all or part of the geographic area served by any cable television
system of Cable, regardless of whether the consent or approval of any
governmental authority is required or has been obtained.
(c) Neither the Company nor any of the Cable Subsidiaries or Cable
Partnerships has made or is bound by any material commitments to any state,
municipal, local or other governmental commission, agency or body with
respect to the operation and construction of their respective systems which
are not fully reflected in the Franchises or any Material Cable Agreement.
Neither the Company nor any of the Cable Subsidiaries or Cable Partnerships
has entered into or is bound by any agreements with community groups or
similar third parties restricting or limiting the types of programming that
may be shown on such systems.
(d) No Franchising Authority has advised the Company or any Cable
Subsidiary or Cable Partnership, or otherwise notified the Company or any
Cable Subsidiary or Cable Partnership in accordance with the terms of the
applicable Franchise, of its intention to deny renewal of an existing
Franchise. The Company and the Cable Subsidiaries and Cable Partnerships
have timely filed notices of renewal in accordance with the Communications
Act with all Franchising Authorities with respect to each Franchise
expiring within 36 months after the date of this Agreement. Such notices of
renewal have been filed pursuant to the formal renewal procedures
established by Section 626(a) of the Communications Act. As of the Closing
Date, (i) the Company will have maintained a controlling ownership in each
system in its entirety for at least 36 consecutive months following the
initial construction or acquisition of each such system by the Company or a
Cable Subsidiary or Cable Partnership, or (ii) the consummation of the
transactions contemplated by this Agreement (including acquisition of the
assets related to the Mid-Tennessee Business as described in Section 4.13
hereof) will not violate the three-year holding period requirement set
forth in Section 617 of the Communications Act and the FCC rules and
regulations promulgated thereunder.
(e) The Company and the Cable Subsidiaries and Cable Partnerships are
operating the systems in compliance in all material respects with the
provisions of the Communications Act and the rules and regulations of the
FCC relating to carriage of signals, syndicated exclusivity, network
non-duplication, and retransmission consent except where the failure to
comply, individually or in the aggregate, would not result in a Material
Adverse Effect on Cable. No notices or demands have been received from any
television station or from any other Person claiming to have a right, or
objecting to or challenging the right of the systems, to carry any signal
or deliver the same, or challenging the channel position on which any
television station is carried.
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(f) Schedule 4.08(f) indicates which television signals carried by the
systems are carried without retransmission consent agreements (other than
stations which have elected must-carry status). The Company has delivered
to Acquiror full and complete copies of all retransmission consent
agreements. There are no obligations regarding unconstructed fiber
interconnect commitments. For each commercial television signal on each
system that has elected must-carry status, but that is not being carried
because of signal quality problems or potential copyright liability,
Schedule 4.08(f) lists the signal and the reason for non-carriage.
(g) The Company has delivered to Acquiror true, correct, and complete
specimen copies of (i) all FCC Forms 393, 1200, 1205, 1210, 1215 and 1220s
that have been prepared with respect to the systems, (ii) all material
correspondence with any governmental body, subscriber, or other interested
party relating to rate regulation generally or specific rates charged to
subscribers of the systems, including, without limitation, any complaints
filed with the FCC with respect to any rates charged to subscribers of the
systems, and (iii) any documentation supporting an exemption from the rate
regulation provisions of the Communications Act claimed by the Company or a
Cable Subsidiary or Cable Partnership with respect to the systems. Schedule
4.08(g) sets forth (i) a list of all rate complaints filed pursuant to the
Communications Act and received by the Company or any Cable Subsidiary or
Cable Partnership which have not been deemed invalid by the FCC, and
further sets forth those Franchises that have been certified or, to the
Company's knowledge, filed for certification under the Communications Act
with respect to rate regulation and (ii) a list of all letters of inquiry
from the FCC received by the Company or any Cable Subsidiary or Cable
Partnership since September 1, 1993 with regard to rate restructuring.
(h) Beginning with the first accounting period of 1992, the Cable
Subsidiaries and Cable Partnerships have filed all material copyright
notices and reports required to be filed by Section 111 of the Copyright
Act of 1976, as amended (the "Copyright Act"), and have paid all material
fees required to be paid pursuant to Section 111 of the Copyright Act and
the rules and regulations of the United States Copyright Office with
respect to the operation of each cable television system owned or operated
by them. None of the Company, SHI, any Cable Subsidiary or any Cable
Partnership has received any written notice from the United States
Copyright Office, or any other Person, either challenging any copyright
filing or payment made by such party or alleging a failure by such party to
make any copyright filing or payment, or threatening to bring suit for
copyright infringement.
4.09 Title to Properties; Encumbrances. The Cable Subsidiaries and the
Cable Partnerships are the exclusive holders of all rights in or to all real and
personal, tangible and intangible property and assets of the Company or its
Subsidiaries (other than any such assets held by the Company or its Subsidiaries
pursuant to leases or licenses with a Person other than the Company or another
of its Subsidiaries) used or useful in the ownership and operation of the cable
television systems owned or operated by Cable, and (b) each Cable Subsidiary or
Cable Partnership has good and valid title to its respective assets, free and
clear of all defects and Liens except: (i) materialmen's, mechanics', carriers',
workmen's, warehousemen's, repairmen's, or other like Liens arising in the
ordinary course of business, or deposits to obtain the release of such Liens;
(ii) Liens for current taxes not yet due and payable, and (iii) Liens or minor
imperfections of title that do not interfere with the use or detract from the
value of such property and, taken in the aggregate, do not have a Material
Adverse Effect on Cable. Except as would not result in any Material Adverse
Effect on Cable, each Cable Subsidiary and Cable Partnership owns or has the
lawful right to use all assets, properties, operating rights, easements,
contracts, leases, and other instruments necessary to operate its business
lawfully and to maintain the same as presently conducted.
4.10 Litigation. There is no suit, action, proceeding or investigation
pending against or, to the knowledge of the Company, threatened against or
affecting any Cable Subsidiary or Cable Partnership (except for proceedings or
investigations affecting the cable television industry generally) that,
individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Cable; nor is there any judgment, decree, inquiry,
rule or order outstanding against any Cable Subsidiary or Cable Partnership
which, individually or in the aggregate, has had any such effect or insofar as
can reasonably be foreseen, would have any such effect in the future.
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4.11 Employee Benefit Plan Matters.
(a) Cable Employee Plans and Cable Benefit Arrangements. Schedule
4.11(a) lists each Cable Employee Plan and Cable Benefit Arrangement. The
Company has delivered to Acquiror with respect to each Cable Employee Plan
and Cable Benefit Arrangement sponsored by the Company, SHI or any of their
ERISA Affiliates true and complete copies of (i) all written documents
comprising such plans and arrangements (including amendments and
individual, trust or insurance agreements relating thereto); (ii) the most
recent Federal Form 5500 series (including all schedules thereto) filed
with respect to each Cable Employee Plan; (iii) the most recent financial
statements and actuarial reports, if any, pertaining to each such plan or
arrangement; and (iv) the summary plan description currently in effect and
all material modifications thereto, if any, for each such Cable Employee
Plan. No Cable Employee Plan is a Multiemployer Plan.
(b) Multiemployer Plans.
(i) Neither the Company, SHI nor any of their ERISA Affiliates has
incurred any unsatisfied withdrawal liability, within the meaning of
Section 4201 of ERISA, with respect to any Multiemployer Plan to which
the Company, SHI or any of their ERISA Affiliates is required to make or
accrue a contribution (or has within the six-year period preceding the
Closing Date been required to make or accrue a contribution), nor is the
Company, SHI or any of their ERISA Affiliates reasonably expected to
incur any withdrawal liability with respect to any Multiemployer Plan.
(ii) Neither the Company, SHI nor any of their ERISA Affiliates has
been notified by the sponsor of any Multiemployer Plan to which the
Company, SHI or any of their ERISA Affiliates is required to make or
accrue a contribution (or has within the six-year period preceding the
Closing Date been required to make or accrue a contribution) that such
Multiemployer Plan is in reorganization or has been terminated, within
the meaning of Title IV of ERISA, and to the best knowledge of the
Company and SHI, no such Multiemployer Plan is reasonably expected to be
in reorganization or to be terminated, within the meaning of Title IV of
ERISA.
(iii) None of the Company, SHI or any ERISA Affiliate of any of
them has engaged in or is a successor or parent corporation to an entity
that has engaged in a transaction described in Section 4212(c) of ERISA.
If a "complete withdrawal" by the Company, SHI and all of their ERISA
Affiliates were to occur as of the Effective Time with respect to all of
the Multiemployer Plans to which the Company, SHI or any of their ERISA
Affiliates is required to make or accrue a contribution, none of the
Company, SHI or any ERISA Affiliate of any of them would incur any
material withdrawal liability under Title IV of ERISA.
(c) Union Welfare Funds. Neither the Company, SHI nor any of their
ERISA Affiliates has incurred any unsatisfied liability based on withdrawal
from any union-sponsored multiemployer welfare benefit fund maintained
pursuant to any Welfare Plan to which the Company, SHI or any of their
ERISA Affiliates contributes pursuant to the terms of a collective
bargaining agreement.
(d) Retiree Welfare Benefits Plans. Except as set forth in Schedule
4.11(d) and pursuant to the provisions of COBRA, neither the Company, SHI
nor any of their ERISA Affiliates maintains any Cable Employee Plan or
Company Employee Plan that provides benefits described in Section 3(l) of
ERISA to any former employees or retirees of Cable. Any disclosure in
Schedule 4.11(d) shall indicate the present value of accumulated plan
liabilities calculated in a manner consistent with FAS 106 and actual
annual expense for such benefits for each of the last two years.
(e) Pension Plans. All Company Employee Plans that are Pension Plans
intended to be qualified under Section 401 of the Code are so qualified and
have been so qualified during the period since their adoption; each trust
created under any such Plan is exempt from tax under Section 501(a) of the
Code and has been so exempt since its creation. A true and correct copy of
the most recent determination letter from the Internal Revenue Service (the
"IRS") regarding such qualified status for each such Plan has been, or
within five days following the date of this Agreement will be, delivered to
Acquiror.
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(f) Prohibited Transactions and Fiduciary Responsibility. Except with
respect to any Prohibited Transaction relating to any Multiemployer Plan
where such Prohibited Transaction has no relation to the Company, SHI or
any of their Subsidiaries, none of the Company Employee Plans has
participated in, engaged in or been a party to any Prohibited Transaction
which could result in the imposition of a material liability upon the
Company, SHI or any of their Subsidiaries. To the knowledge of the Company
and SHI, no officer, director or employee of the Company, SHI or any of
their Subsidiaries has committed a material breach of any responsibility or
obligation imposed upon fiduciaries by Title I of ERISA with respect to any
Company Employee Plan.
(g) Reporting and Disclosure. Except with respect to any violation
relating to any Multiemployer Plan where such violation has no relation to
the Company, SHI or any of their ERISA Affiliates, there are no material
violations of any reporting or disclosure requirements under ERISA with
respect to any Company Employee Plan.
(h) Funding Obligations. No Company Employee Plan that is a Pension
Plan subject to Title IV of ERISA (other than any Multiemployer Plan) has
(i) incurred an Accumulated Funding Deficiency, whether or not waived, (ii)
an accrued benefit obligation that exceeds the assets of the plan by more
than $50,000, determined as of the last applicable annual valuation date,
using the actuarial methods, factors and assumptions used for the most
recent actuarial report with respect to such plan, (iii) been a plan with
respect to which a Reportable Event has occurred other than a Reportable
Event that would not have a Material Adverse Effect, or (iv) been a plan
with respect to which any termination liability to the PBGC has been or is
reasonably expected to be incurred or with respect to which there exist
conditions or events which have occurred presenting a significant risk of
termination by the PBGC. Neither the Company, SHI or any ERISA Affiliate of
either of them has engaged in, or is a successor or parent corporation to
an entity that has engaged in a transaction described in Section 4069 of
ERISA.
(i) Liens and Penalties. Neither the Company, SHI nor any of their
ERISA Affiliates has any liability with respect to any Company Employee
Plan (i) for the termination of any Company Employee Plan that is a single
employer plan under ERISA Section 4062 or a multiple employer plan under
ERISA Section 4063, (ii) for any lien imposed under Section 302(f) of ERISA
or Section 412(n) of the Code, (iii) for any interest payments required
under Section 302(e) of ERISA or Section 412(m) of the Code, (iv) for any
excise tax imposed by Sections 4971, 4972, 4974, 4975, 4976, 4977, 4978,
4978B, 4979, 4979A, 4980 or 4980B of the Code, or (v) for any failure to
make any minimum funding contributions under Section 302 (c)(11) of ERISA
or Section 412(c)(11) of the Code. None of the Company, SHI or any ERISA
Affiliate of either of them has incurred, or reasonably expects to incur
prior to the Effective Time any liability under Title IV of ERISA arising
in connection with the termination of any plan covered or previously
covered by Title IV of ERISA.
(j) COBRA. The Company, SHI and their ERISA Affiliates have complied
in all material respects with the provisions of COBRA with respect to all
Cable Employee Plans that are Group Health Plans.
(k) Additional Benefits. No Cable Employee shall accrue or receive
additional benefits, service or accelerated rights to payments of benefits
under any Company Plan, including the right to receive any parachute
payment, as defined in Section 280G of the Code, or become entitled to
severance, termination allowance or similar payments as a result of the
transactions contemplated by this Agreement. No Cable Employee is covered
by any severance, termination, allowance or similar plan or program
(whether or not written).
(l) Claims. Other than claims for benefits in the ordinary course,
there is no claim pending, or to the knowledge of the Company or SHI
threatened, involving any Company Plan by any person against such plan or
the Company, SHI or any of their Subsidiaries. There is no pending, or to
the knowledge of the Company or SHI threatened, proceeding involving any
Company Employee Plan before the IRS, the United States Department of Labor
or any other governmental authority.
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(m) Compliance with Laws; Contributions. Each Company Plan and
Company Benefit Arrangement has at all times prior hereto been maintained
in all material respects, by its terms and in operation, in accordance with
all applicable laws. The Company, SHI and their ERISA Affiliates have made
full and timely payment of all amounts required to be contributed under the
terms of each Company Plan and applicable law or required to be paid as
expenses under such Company Plan, and the Company, SHI and their ERISA
Affiliates shall continue to do so through the Closing, except as the
Company, SHI and Acquiror may otherwise agree.
4.12 Labor Matters.
(a) Except as set forth on Schedule 4.12(a), no Cable Subsidiary or
Cable Partnership is party to any employment contract with any employee or
any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of any Cable
Subsidiary or Cable Partnership. All employees of Cable serve at will.
(b) Except as set forth on Schedule 4.12(b), (i) no employees of any
of the Cable Subsidiaries or Cable Partnerships are represented by any
labor organization and (ii) as of the date hereof, no labor organization or
group of employees of any of the Cable Subsidiaries or Cable Partnerships
has made a pending demand for recognition or certification, and there are
no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of the
Company, threatened to be brought or filed, with the NLRB or any other
labor relations tribunal or authority. To the knowledge of the
Company,there are no formal organizing activities involving a material
number of employees of the Cable Subsidiaries or Cable Partnerships pending
with, or threatened by, any labor organization.
(c) Except as would not result in a Material Adverse Effect on Cable,
(i) there are no strikes, work stoppages, slowdowns, lockouts, material
arbitrations or material grievances or other material labor disputes
pending or, to the knowledge of the Company, threatened against or
involving any of the Cable Subsidiaries or Cable Partnerships and (ii)
there are no unfair labor practice charges, grievances or complaints
pending or, to the knowledge of the Company, threatened by or on behalf of
any employee or group of employees of any of the Cable Subsidiaries or
Cable Partnerships.
4.13 Mid-Tennessee Acquisition. Broadcasting has entered into the
Mid-Tennessee Agreement with Mid-Tennessee Cable Limited Partnership, a
Tennessee limited partnership ("Mid-Tennessee"), pursuant to which Broadcasting
has agreed, on the terms and subject to the conditions set forth therein, to
acquire the assets of Mid-Tennessee used in Mid-Tennessee's Athens, Tennessee,
cable cluster, its Greenbrier, Tennessee, cable cluster and its Harriman,
Tennessee, cable cluster (collectively, the "Mid-Tennessee Business"). To the
knowledge of the Company and SHI based solely on information provided to the
Company and SHI to date by Mid-Tennessee, the Franchises comprising the
Mid-Tennessee Business have an aggregate of approximately 33,850 Basic
Subscribers. The Company has delivered to Acquiror a draft of the Mid-Tennessee
Agreement which is not different than the Mid-Tennessee Agreement in any
material respect.
4.14 Environmental Matters. (a) There are no Environmental Liabilities of
Cable that have had or may reasonably be expected to have a Material Adverse
Effect on Cable.
(b) There has been no environmental assessment investigation, study,
audit, test, review or other analysis conducted of which the Company has
knowledge in relation to the current or prior business of the Cable
Subsidiaries or Cable Partnerships or any property or facility now or
previously owned or leased by the Cable Subsidiaries or Cable Partnerships
which has not been delivered to Acquiror prior to the date hereof.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company and SHI as follows:
5.01 Organization and Authority. Acquiror is a corporation duly
organized, validly existing and in good standing under the laws of its state of
incorporation. Acquiror has all requisite corporate power and authority to own,
lease and operate its properties and to carry on its business as now being
conducted, except where the failure to have such power or authority would not
have a Material Adverse Effect on Acquiror and its Subsidiaries taken as a
whole. Acquiror has all requisite corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
Subject to the items referred to in Section 5.03, all necessary action,
corporate or otherwise, required to have been taken by or on behalf of Acquiror
by applicable law, its charter documents or otherwise to authorize (i) the
approval, execution and delivery on behalf of it of this Agreement and (ii) the
performance by it of its obligations under this Agreement and the consummation
of the transactions contemplated hereby has been taken, except that this
Agreement must be approved by the stockholders of Acquiror and the Board of
Directors of Acquiror must increase the size of such Board and elect the
designee(s) of the Trust to fill the vacancy or vacancies so created. This
Agreement and each other Transaction Agreement to which Acquiror is or will be a
party constitutes or will constitute, as the case may be, a valid and binding
agreement of Acquiror, enforceable against it in accordance with its terms,
subject to (i) the Enforceability Exceptions and (ii) in the case of the Board
Representation Agreement, to the Rules and Regulations regarding cross-ownership
of cable television systems and television stations, to the extent that such
Rules and Regulations may prohibit the Trust from designating a director or
observer on the Comcast Board of Directors. Acquiror has delivered to the
Company true and complete copies of its Articles of Incorporation and Bylaws as
in effect on the date hereof.
5.02 No Breach. The execution and delivery of this Agreement by Acquiror
do not and the consummation of the transactions contemplated hereby by Acquiror
will not (i) violate or conflict with its Articles of Incorporation or Bylaws or
(ii) constitute a breach or default (or an event which with notice or lapse of
time or both would become a breach or default) of, or give rise to any
third-party right of termination, cancellation, modification or acceleration
under, or otherwise require notice or approval under, any agreement,
understanding or undertaking to which Acquiror or any of its Subsidiaries is a
party or by which any of them is bound, or give rise to any Lien on any of their
properties, except where such breach, default, Lien, third-party right,
cancellation, modification or acceleration would not have a Material Adverse
Effect on Acquiror and its Subsidiaries taken as a whole or materially interfere
with or delay the transactions contemplated hereby, or (iii) subject to
obtaining the approvals and making the filings described in Section 5.03 hereof,
constitute a violation of any statute, law, ordinance, rule, regulation,
judgment, decree, order or writ of any judicial, arbitral, public, or
governmental authority having jurisdiction over Acquiror or any of its
Subsidiaries or any of their respective properties or assets, except as would
not have a Material Adverse Effect on Acquiror and its Subsidiaries taken as a
whole. Neither Acquiror nor any of its Subsidiaries is a party to or bound by
any agreement that restricts or purports to restrict the ability of any of them
or any affiliate of them to engage in any location in the business of cable
television, except for such restrictions that would not have a Material Adverse
Effect on Acquiror and its Subsidiaries taken as a whole or materially interfere
with or delay the transactions contemplated hereby.
5.03 Consents and Approvals. Neither the execution and delivery of this
Agreement by Acquiror nor the consummation of the transactions contemplated
hereby by Acquiror will require any consent, approval, authorization or permit
of, or filing with or notification to, any governmental or regulatory authority,
except (i) for filings required under the Securities Act, (ii) for filings
required under the Exchange Act, (iii) for filings required under state
securities or "blue sky" laws, (iv) for notification pursuant to the HSR Act and
expiration or termination of the waiting period thereunder, (v) for the filing
of the Certificate of Merger as set forth in Article I hereof, (vi) for any
waiver, consent or declaratory ruling by the FCC with respect to the Rules and
Regulations regarding cross-ownership of cable television systems and television
stations, to the extent that such Rules and Regulations may prohibit (A) the
Trust from designating a director or observer on the Comcast Board of Directors
or (B) Brian Roberts from serving on the Board of Directors of Turner
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Broadcasting Company, and (vii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications
would not have a Material Adverse Effect on Acquiror and its Subsidiaries, taken
as a whole, or prevent Acquiror from performing its obligations under this
Agreement without having a Material Adverse Effect on Acquiror and its
Subsidiaries, taken as a whole, or materially interfere with or delay the
transactions contemplated hereby.
5.04 Approval of the Board; Vote Required. The Board of Directors of
Acquiror has, by resolutions duly adopted at a meeting duly called and held,
unanimously approved and adopted this Agreement, the Merger and the other
transactions contemplated hereby on the material terms and conditions set forth
herein. The affirmative vote or action by written consent of a majority of the
votes that holders of the outstanding shares of Acquiror A Stock, Acquiror B
Stock and Acquiror Common Stock are entitled to cast voting as a single class is
the only vote of the holders of any class or series of the capital stock of
Acquiror necessary to approve this Agreement and the Merger under applicable law
and the Articles of Incorporation of Acquiror or the By-Laws of Acquiror.
5.05 Capitalization.
(a) As of the date hereof, the authorized capital stock of Acquiror
consists of: 200,000,000 shares of Class A Common Stock, par value $1.00
per share ("Acquiror A Stock"), 500,000,000 Shares of Class A Special
Common Stock, par value $1.00 per share ("Acquiror Common Stock"),
50,000,000 Shares of Class B Common Stock, par value $1.00 per share
("Acquiror B Stock"), and 20,000,000 Shares of Preferred Stock ("Acquiror
Preferred Stock"). As of September 30, 1995, there were issued and
outstanding the following shares of such stock: 39,103,350 shares of
Acquiror A Stock, 192,028,651 shares of Acquiror Common Stock and 8,786,250
shares of Acquiror B Stock. All such outstanding shares are duly
authorized, validly issued and fully paid and nonassessable. There are no
preemptive or other similar rights available to the existing holders of the
capital stock of Acquiror. As of the date hereof, and other than as set
forth on Schedule 5.05(a) and in connection with the transactions
contemplated by this Agreement, there are no outstanding options, warrants,
rights, puts, calls, commitments, or other contracts, arrangements, or
understandings issued by or binding upon Acquiror or any of its
Subsidiaries requiring, and there are no outstanding debt or equity
securities of Acquiror or any of its Subsidiaries which upon the
conversion, exchange or exercise thereof would require, the issuance, sale
or transfer by Acquiror of any new or additional equity interests in
Acquiror (or any other securities of Acquiror or any of its Subsidiaries
which, with notice, lapse of time or payment of monies, are or would be
convertible into or exercisable or exchangeable for equity interests in
Acquiror). Except as described on Schedule 5.05(a), there are no voting
trusts or other agreements or understandings to which Acquiror or any of
its Subsidiaries is a party with respect to the voting of capital stock of
Acquiror.
(b) The shares of Acquiror Common Stock to be issued in the Merger,
upon their issuance in accordance with the terms hereof, will be duly
authorized, validly issued, fully paid and nonassessable.
5.06 SEC Reports. Acquiror has filed all required forms, reports and
documents with the SEC since January 1, 1993 (collectively, "Acquiror's SEC
Reports") and delivered or made available to the Company copies thereof.
Acquiror's SEC Reports have complied in all material respects with all
applicable requirements of the Securities Act and the Exchange Act. As of their
respective dates, none of the Acquiror's SEC Reports, including, without
limitation, any financial statements or schedules included or incorporated by
reference therein, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
5.07 Financial Statements. The (i) audited consolidated financial
statements of Acquiror contained in Acquiror's Annual Report on Form 10-K for
the year ended December 31, 1994, and (ii) unaudited condensed consolidated
financial statements of Acquiror contained in Acquiror's Quarterly Report on
Form 10-Q for the six months ended June 30, 1995 ("Acquiror's Form 10-Q"), were
prepared in accordance with GAAP and present fairly in all material respects
Acquiror's consolidated financial position and the results of its consolidated
operations and its consolidated cash flows as of the relevant dates thereof and
for the
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periods covered thereby (subject to normal year-end adjustments in the case of
the unaudited interim financial statements).
5.08 Absence of Certain Changes. Since the date of the balance sheet of
Acquiror included in Acquiror's Form 10-Q, there has not been any (i) material
adverse change in the financial position, liabilities, assets or business of
Acquiror and its Subsidiaries taken as a whole except for material adverse
changes due to general economic or industry-wide conditions, or (ii) other
events or conditions of any character that, individually or in the aggregate,
have or would reasonably be expected to have a Material Adverse Effect on the
financial position, liabilities, assets or business of Acquiror and its
Subsidiaries taken as a whole or on the ability of Acquiror to perform its
material obligations under this Agreement and the Transaction Agreements to
which it is or will be a party.
5.09 Brokers and Finders. Neither Acquiror nor any of its officers,
directors, employees or affiliates has employed any investment banker, broker or
finder or incurred any liability for any brokerage fees, commissions or finder's
fees in connection with the transactions contemplated herein, except that
Acquiror has employed Lehman Brothers Inc. as its financial advisor in
connection with the transactions contemplated hereby and for whose fees and
expenses Acquiror is responsible.
5.10 Full Disclosure. All of the statements made by Acquiror in this
Agreement (including, without limitation, the representations and warranties
made by Acquiror herein and in the schedules and exhibits hereto which are
incorporated by reference herein and which constitute an integral part of this
Agreement) do not (and on the Closing Date will not) include or contain any
untrue statement of a material fact, and do not (and on the Closing Date will
not) omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
5.11 Certain Tax Matters. Acquiror is not, and on the Closing Date will
not be, an investment company within the meaning of Section 368(a)(2)(F)(iii)
and (iv) of the Internal Revenue Code.
ARTICLE VI
OTHER AGREEMENTS
6.01 No Solicitation.
(a) Neither the Company nor any of its Subsidiaries, nor any of its or
their officers, directors, representatives or agents shall, directly or
indirectly, knowingly encourage, solicit, initiate or, except as otherwise
provided in this Section 6.01(a), participate in any way in discussions or
negotiations with or knowingly provide any confidential information to any
corporation, partnership, person or other entity or group (other than Acquiror
or any affiliate or associate of Acquiror and their respective directors,
officers, employees, representatives and agents) concerning any merger of the
Company or Cable, the sale of any substantial part of the assets of Cable, the
sale of shares of the capital stock of the Company, the capital stock of the
Cable Subsidiaries or the interests in the Cable Partnership or similar
transactions involving Cable; provided, however, that nothing contained in this
Section 6.01(a) shall prohibit the Board of Directors of the Company from (i)
taking and disclosing to the Company's stockholders a position with respect to a
tender offer for Company Common Stock by a third party pursuant to Rules 14d-9
and 14e-2 promulgated under the Exchange Act, (ii) making such disclosure to the
Company's stockholders as, in the judgment of the Board of Directors of the
Company, with the advice of outside counsel, may be required under applicable
law, or (iii) responding to any unsolicited proposal or inquiry by advising the
person making such proposal or inquiry of the terms of this Section 6.01(a). The
Company will promptly communicate to Acquiror its receipt of any proposal or
inquiry in respect of any such transaction or its receipt of any request to
provide any such information or hold any such negotiations or discussions, and
will furnish Acquiror with a true and complete copy of any proposal that the
Board of Directors of the Company has determined is a Superior Proposal and will
keep Acquiror informed on a timely basis as to the status of and details
regarding negotiations, and the Company's intentions, with respect thereto.
Notwithstanding anything to the contrary set forth herein, the Board of
Directors of the Company may respond to any Superior Proposal and may provide
information to,
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and negotiate with, any person, group or entity in connection therewith if the
Board of Directors of the Company determines, with the advice of outside
counsel, that it may be required to do so in the exercise of its fiduciary
duties. For purposes hereof, "Superior Proposal" means a bona fide, written,
unsolicited proposal relating to a possible transaction described in this
Section 6.01(a) by any person other than Acquiror that, in the reasonable good
faith judgment of the Board of Directors of the Company, with the advice of
outside financial advisers, is reasonably likely to be consummated and is more
favorable to the stockholders of the Company than the terms of the transactions
contemplated by this Agreement.
(b) Acquiror will promptly notify the Company and provide it with pertinent
information in the event that Acquiror or any of its Subsidiaries, or any of its
or their officers, directors, representatives or agents (i) solicits, initiates
or participates in any way in discussions or negotiations with, or provides any
confidential information to, any corporation, partnership, person or other
entity or group (other than the Company or any affiliate or associate of the
Company and their respective directors, officers, employees, representatives and
agents) concerning any merger, sale of substantially all of the assets, or sale
of shares of the capital stock of Acquiror, or similar transaction involving
Acquiror, or (ii) receives any proposal or inquiry in respect of any such
transaction or any request to provide any such information or hold any such
negotiations or discussions.
6.02 Conduct of Business of the Company. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, the
Company shall conduct its operations in the ordinary course of business
consistent with past practices and shall not without the prior written consent
of Acquiror:
(a) amend its Certificate of Incorporation or Bylaws;
(b) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, except for dividends declared and paid consistent
with the Company's past practice (except that (i) any Subsidiary of the
Company other than a Cable Subsidiary or a Cable Partnership may declare
and pay dividends that are payable to the Company or to any other
Subsidiary of the Company and (ii) any Cable Subsidiary or Cable
Partnership may declare and pay dividends in cash and cash equivalents that
are payable to the Company or to any other Subsidiary of the Company), or
redeem or otherwise acquire any of its securities;
(c) split, combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or
in substitution of any shares of its capital stock;
(d) (i) create, incur or assume any indebtedness not currently
outstanding (including obligations in respect of capital leases), (ii)
assume, guarantee, endorse or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any
other person except to the extent the Company is released therefrom as
described in Section 2.02, or (iii) make any loans, advances or capital
contributions to, or investments in, any person other than a Subsidiary;
(e) except pursuant to the Incentive Plan and the Directors Plan, or
options or awards outstanding thereunder, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting
of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or amend any of
the terms of any securities outstanding on the date hereof; or
(f) terminate, amend, modify or waive compliance with any of the terms
or conditions of the Contribution Agreement directly or indirectly
respecting the Retained Assets or the Retained Liabilities or affecting the
rights or obligations of the Company thereunder from and after the
Effective Time.
(g) take, or agree in writing or otherwise to take, any of the
foregoing actions or any actions that would (i) subject to Section 7.06
hereof, make any representation or warranty of the Company or SHI contained
in this Agreement materially untrue or incorrect as of the date when made
or as of the Closing Date, (ii) result in any of the conditions to Closing
in Article VII of this Agreement not being satisfied, or (iii) subject to
Section 7.06 hereof, be materially inconsistent with the terms of this
Agreement or the transactions contemplated hereby.
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6.03 Conduct of Business of Cable. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, the
Company shall cause the Cable Subsidiaries and Cable Partnerships to conduct
their operations according to the ordinary and usual course of business
consistent with past practices. Without limiting the generality of the
foregoing, except as otherwise contemplated by this Agreement, without the prior
written consent of Acquiror, the Company shall not permit any of the Cable
Subsidiaries or Cable Partnerships to:
(a) amend its charter or bylaws or partnership agreement;
(b) issue, sell, deliver or agree or commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise) any stock of
any class or any other securities or partnership interests or amend any of
the terms of any securities outstanding on the date hereof;
(c) acquire, sell, lease or dispose of any assets material to Cable,
other than (i) sales of inventory and equipment in the ordinary and usual
course of business consistent with past practice, (ii) the acquisition of
assets related to the Mid-Tennessee Business in accordance with Section
6.26, (iii) in connection with the proposed joint venture with Hyperion
Telecommunications of Tennessee, Inc., a Delaware corporation, in
accordance with Section 6.29, and (iv) the acquisition of the River City
Interest in accordance with Section 6.28;
(d) mortgage, pledge or subject to any lien, lease, security interest
or other charge or encumbrance, any of its properties or assets, tangible
or intangible, material to Cable;
(e) fail to make Ordinary Course Expenditures on property, plant and
equipment;
(f) without the consent of Acquiror, which shall not be withheld or
delayed unreasonably, (i) except as required by applicable law or as
disclosed in writing to Acquiror prior to the date hereof, implement any
rate change, retiering or repackaging of cable television programming
offered by Cable, (ii) except as disclosed in writing to Acquiror prior to
the date hereof, make any cost-of-service or hardship election under the
Rules and Regulations adopted under the Cable Television Consumer
Protection and Competition Act of 1992, or (iii) amend any Franchise or
make or agree to make any payments or commitments, including commitments to
make future capital improvements or provide future services, in connection
with obtaining any authorization, consent, order or approval of any
governmental authority necessary for the transfer of control of any
Franchise;
(g) increase the amount of any cash compensation payable to any
employee if such increase would be inconsistent with past practices or
would cause the aggregate cash compensation payable to all employees on an
annualized basis to exceed by more than 5% percent the cash compensation
payable by Cable to all employees on an annualized basis as of June 30,
1995 (provided that this Section 6.03(g) shall not apply with respect to
stay bonuses paid to Cable employees prior to Closing);
(h) declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect
of its capital stock, or redeem or otherwise acquire any of its securities,
except as provided in Section 6.25;
(i) fail to maintain inventory at customary levels; or
(j) take, or agree in writing or otherwise to take, any of the
foregoing actions or any actions that would (i) subject to Section 7.06
hereof, make any representation or warranty of the Company or SHI contained
in this Agreement materially untrue or incorrect as of the date when made
or as of the Closing Date, (ii) result in any of the conditions to Closing
in Article VII of this Agreement not being satisfied, or (iii) subject to
Section 7.06 hereof, be materially inconsistent with the terms of this
Agreement or the transactions contemplated hereby.
6.04 Conduct of Business of Acquiror. Except as contemplated by this
Agreement, during the period from the date hereof to the Closing Date, (a)
Acquiror will not amend its Articles of Incorporation in any manner that
requires a class vote of the Acquiror Common Stock except that Acquiror may
amend its Articles
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of Incorporation as provided in Schedule 6.04 (the "Permitted Amendments") and
(b) neither Acquiror nor any of its Subsidiaries will, without the prior written
consent of the Company, take, or agree in writing or otherwise to take, any
actions that would (i) subject to Section 7.05, make any representation or
warranty of Acquiror contained in this Agreement materially untrue or incorrect
as of the date when made or as of the Closing Date, (ii) result in any of the
conditions to Closing in Article VII of this Agreement not being satisfied, or
(iii) subject to Section 7.05, be materially inconsistent with the terms of this
Agreement or the transactions contemplated hereby.
6.05 Access to Information. Between the date of this Agreement and the
Effective Time, (a) the Company will (i) give Acquiror and its authorized
representatives reasonable access, during regular business hours upon reasonable
notice, to all offices, warehouses and other facilities of the Company and its
Subsidiaries and to all books and records of the Company and its Subsidiaries,
(ii) permit Acquiror to make such reasonable inspections of the offices,
warehouses, facilities, books and records described in clause (i) as it may
require, (iii) cause its officers and those of its Subsidiaries to furnish
Acquiror with such financial and operating data and other information with
respect to the business and properties of the Company and Cable as Acquiror may
from time to time reasonably request, and (iv) permit Acquiror to conduct, at
Acquiror's expense environmental tests and assessments; and (b) Acquiror will
keep the Company informed as to material developments affecting Acquiror and its
Subsidiaries. All such access and information obtained by Acquiror and its
authorized representatives shall be subject to the terms and conditions of the
letter agreement between the Company and Acquiror dated July 19, 1995 (the
"Confidentiality Agreement"). All such information obtained by the Company and
its authorized representatives, and, after the Closing, all other information
regarding Cable which SHI or any of its Subsidiaries possesses or has access to
(including pursuant to Section 6.18), shall be treated in accordance with the
terms of the Confidentiality Agreement as if such agreement obligated such
Persons to hold such information confidential on the same basis as set forth
therein mutatis mutandis and Acquiror were a beneficiary of such obligations.
6.06 SEC Filings.
(a) The Company, SHI and Acquiror shall prepare jointly and, as soon as
practicable after the date of this Agreement, file with the SEC a joint proxy
statement/registration statement (the "Preliminary Joint Proxy
Statement/Prospectus") comprising preliminary proxy materials of the Company and
Acquiror under the Exchange Act with respect to the Merger and Registration
Statements on Form S-4 and preliminary prospectuses of SHI and Acquiror under
the Securities Act with respect to the Acquiror Common Stock to be issued in the
Merger and the SHI Common Voting Shares and the SHI Class A Common Shares to be
issued in connection with the Contribution and the Distribution and will
thereafter use their respective best efforts to respond to any comments of the
SEC with respect thereto and to cause a definitive joint proxy
statement/registration statement (including all supplements and amendments
thereto, the "Joint Proxy Statement/Prospectus") and proxy to be mailed to the
Company's and Acquiror's stockholders as promptly as practicable.
(b) As soon as practicable after the date hereof, the Company, SHI and
Acquiror shall prepare and file any other filings required to be filed by each
under the Exchange Act or any other federal or state laws relating to the
Merger, the Contribution and the Distribution, and the other transactions
contemplated hereby (collectively "Other Filings"), including, without
limitation, in the case of SHI, a registration statement on Form 8-A under the
Exchange Act with respect to the SHI Common Shares and will use their best
efforts to respond to any comments of the SEC or any other appropriate
government official with respect thereto.
(c) The Company and SHI, on the one hand, and Acquiror, on the other hand
shall cooperate with each other and provide to each other all information
necessary in order to prepare the Preliminary Joint Proxy Statement/Prospectus,
the Joint Proxy Statement/Prospectus and the Other Filings (collectively "SEC
Filings") and shall provide promptly to the other party any information that
such party may obtain that could necessitate amending any such document.
(d) The Company and Acquiror will notify the other party promptly of the
receipt of any comments from the SEC or its staff or any other government
official and of any requests by the SEC or its staff or any other government
official for amendments or supplements to any of the SEC Filings or for
additional
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information and will supply the other party with copies of all correspondence
between the Company or any of its representatives, SHI or any of its
representatives, or Acquiror and any of its representatives, as the case may be,
on the one hand, and the SEC or its staff or any other government official, on
the other hand, with respect thereto. If at any time prior to the Effective
Time, any event shall occur that should be set forth in an amendment of, or a
supplement to, any of the SEC Filings, the Company, SHI and Acquiror agree
promptly to prepare and file such amendment or supplement and to distribute such
amendment or supplement as required by applicable law, including, in the case of
an amendment or supplement to the Joint Proxy Statement/Prospectus, mailing such
supplement or amendment to the Company's and Acquiror's stockholders.
(e) The information provided and to be provided by the Company, SHI and
Acquiror for use in SEC Filings shall at all times prior to the Effective Time
be true and correct in all material respects and shall not omit to state any
material fact required to be stated therein or necessary in order to make such
information not false or misleading, and the Company, SHI and Acquiror each
agree to correct any such information provided by it for use in the SEC Filings
that shall have become false or misleading. Each SEC Filing, when filed with the
SEC or any government official, shall comply in all material respects with all
applicable requirements of law.
(f) Acquiror shall indemnify, defend and hold harmless the Company and SHI,
each of their officers and directors and each other person, if any, who controls
any of the foregoing within the meaning of the Exchange Act, against any losses,
claims, damages or liabilities, joint or several, to which any of the foregoing
may become subject under the Securities Act or the Exchange Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon (i) an untrue statement or alleged
untrue statement of a material fact contained in any SEC Filing or (ii) the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, provided that Acquiror
was responsible for such misstatement or omission, and upon request from time to
time Acquiror shall reimburse the Company, SHI and each such officer, director
and controlling person for any legal or any other expenses reasonably incurred
by any of them in connection with investigating or defending any such loss,
claim, damage, liability or action or enforcing this indemnity.
(g) SHI (and, if this Agreement is terminated prior to the consummation of
the Merger, the Company, jointly and severally with SHI) shall indemnify, defend
and hold harmless Acquiror, each of its officers and directors and each other
person, if any, who controls any of the foregoing within the meaning of the
Exchange Act, against any losses, claims, damages or liabilities, joint or
several, to which any of the foregoing may become subject under the Securities
Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon (i)
an untrue statement or alleged untrue statement of a material fact contained in
any SEC Filing or (ii) the omission or alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, provided
that the Company or SHI was responsible for such misstatement or omission, and
upon request from time to time SHI (and, if this Agreement is terminated prior
to the consummation of the Merger, the Company) shall reimburse Acquiror and
each such officer, director and controlling person for any legal or any other
expenses reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action or enforcing this
indemnity.
(h) For the purpose of this Section 6.06, the term "Indemnifying Party"
shall mean the party having an obligation hereunder to indemnify the other party
pursuant to this Section 6.06, and the term "Indemnified Party" shall mean the
party having the right to be indemnified pursuant to this Section 6.06. Whenever
any claim shall arise for indemnification under this Section 6.06, the
Indemnified Party shall promptly notify the Indemnifying Party in writing of
such claim and, when known, the facts constituting the basis for such claim (in
reasonable detail). Failure by the Indemnified Party to so notify the
Indemnifying Party shall not relieve the Indemnifying Party of any liability
hereunder except to the extent that such failure prejudices the Indemnifying
Party.
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(i) After such notice, if the Indemnifying Party undertakes to defend any
such claim, then the Indemnifying Party shall be entitled, if it so elects, to
take control of the defense and investigation with respect to such claim and to
employ and engage attorneys of its own choice and reasonably acceptable to the
Indemnified Party to handle and defend the same, at the Indemnifying Party's
cost, risk and expense, upon written notice to the Indemnified Party of such
election, which notice acknowledges the Indemnifying Party's obligation to
provide indemnification hereunder. The Indemnifying Party shall not settle any
third-party claim that is the subject of indemnification without the written
consent of the Indemnified Party, which consent shall not be unreasonably
withheld; provided, however, that the Indemnifying Party may settle a claim
without the Indemnified Party's consent if such settlement (i) makes no
admission or acknowledgment of liability or culpability with respect to the
Indemnified Party, (ii) includes a complete release of the Indemnified Party,
and (iii) does not require the Indemnified Party to make any payment or forgo or
take any action or otherwise materially adversely affect the Indemnified Party.
The Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and its attorneys in the investigation, trial and defense of
any lawsuit or action with respect to such claim and any appeal arising
therefrom (including the filing in the Indemnified Party's name of appropriate
cross-claims and counterclaims). The Indemnified Party may, at its own cost,
participate in any investigation, trial and defense of such lawsuit or action
controlled by the Indemnifying Party and any appeal arising therefrom. If, after
receipt of a notice of claim pursuant to Section 6.06(i), the Indemnifying Party
does not undertake to defend any such claim the Indemnified Party may, but shall
have no obligation to, contest any lawsuit or action with respect to such claim
and the Indemnifying Party shall be bound by the result obtained with respect
thereto by the Indemnified Party (including, without limitation, the settlement
thereof without the consent of the Indemnifying Party). If there are one or more
legal defenses available to the Indemnified Party that conflict with those
available to the Indemnifying Party or there is otherwise an actual or potential
conflict of interest, the Indemnified Party shall have the right, at the expense
of the Indemnifying Party, to assume the defense of the lawsuit or action;
provided, however, that the Indemnified Party may not settle such lawsuit or
action without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld.
(j) If the indemnification provided for in this Section 6.06 shall for any
reason be unavailable to the Indemnified Party in respect of any loss, claim,
damage or liability, or action referred to herein, then the Indemnifying Party
shall, in lieu of indemnifying the Indemnified Party, contribute to the amount
paid or payable by the Indemnified Party as a result of such loss, claim, damage
or liability, or action in respect thereof, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other hand with respect to the statements or omissions
that resulted in such loss, claim, damage or liability, or action in respect
thereof, as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to whether the untrue or alleged untrue
statement or omission of a material fact related to information supplied by the
Indemnifying Party on the one hand or the Indemnified Party on the other hand,
the intent of the parties and their relative knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by the Indemnified Party as a result of the loss, claim, damage
or liability, or action in respect thereof, referred to above in this paragraph
shall be deemed to include, for purposes of this paragraph, any legal or other
expenses reasonably incurred by the Indemnified Party in connection with
investigating or defending any such action or claim or enforcing this provision.
No person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
6.07 Reasonable Best Efforts. Subject to the fiduciary duties of the
Board of Directors of the Company, and subject to the other terms and conditions
hereof, each of the parties hereto agrees to use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement in the most expeditious manner practicable, including but not
limited to the satisfaction of all conditions to the Merger and seeking to
remove promptly any injunction or other legal barrier that may prevent or delay
such consummation. Each of the parties shall promptly notify the other whenever
a material consent is obtained and shall keep the other informed as to the
progress in obtaining such material consents.
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6.08 Public Announcements. No party hereto shall make any public
announcements or otherwise communicate with any news media with respect to this
Agreement or any of the transactions contemplated hereby without such prior
consultation with the other parties as to the timing and contents of any such
announcement as may be reasonable under the circumstances; provided,
however,that nothing contained herein shall prevent any party from promptly
making all filings with governmental authorities as may, in its judgment, be
required or advisable in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
6.09 Board Recommendations. The Joint Proxy Statement/Prospectus shall
include the recommendations of the Boards of Directors of the Company and
Acquiror that their respective stockholders approve the Merger and related
transactions; provided, however, that the Board of Directors of the Company may
modify or withdraw its recommendation if it determines, with the advice of
outside counsel, that it may be required to do so in the exercise of its
fiduciary duties as a result of a Superior Proposal.
6.10 Tax Matters.
(a) SHI Indemnification Obligations.
(i) Company Taxes. SHI shall be liable for, shall pay and shall
indemnify and hold Acquiror and its Subsidiaries harmless, on an After-Tax
Basis, against (A) any Tax of the Company or any Subsidiary of the Company
related to the Tax Indemnification Period and (B) any Restructuring Tax
(including, without limitation, court costs and reasonable professional
fees incurred in the investigation, defense or settlement of any claims
covered by this indemnity). For this purpose, the income attributable to
the Pre-Closing Tax Period shall be determined based on the permanent books
and records maintained for federal income tax purposes and in the case of
any Taxes based upon or related to income, the Taxes attributable to such
period shall be the amount that would be payable if the relevant period
ended on the Closing Date; in the case of any Taxes other than Taxes based
upon or related to income, the amount of Taxes attributable to the
Pre-Closing Tax Period shall be calculated by reference to the number of
days in such period ending on the Closing Date as compared to the total
number of days in the entire Taxable period. Except as specifically
provided in this Section 6.10, any Tax Sharing Agreement or policy of the
Company Group shall be terminated at the Effective Time, and the Surviving
Corporation and Cable shall have no obligation under such agreements after
the Effective Time.
(ii) Refunds and Credits of Company Taxes. SHI shall be entitled to
(and shall indemnify and hold harmless Acquiror and its Subsidiaries
against any subsequent disallowance of) any credits or refunds of Taxes of
the Company or any Subsidiary of the Company payable with respect to any
PreClosing Tax Period, except that Acquiror shall be entitled to any such
credits or refunds that are reflected as consolidated current assets of
Cable for purposes of the determination of the Cable Net Liabilities
Amount.
(iii) Control of Tax Proceedings.
(A) Except as provided in Section 6.10(a)(iii)(C), the parties
agree that SHI shall be designated as the agent for the Company Group
pursuant to Section 1.1502-77(d) of the Treasury Regulations. With
respect to any similar provisions of applicable state income or
franchise tax laws, to the extent permitted by law and as requested by
SHI, SHI shall be designated as the agent for the Company Group only if
the relevant Taxable year ends on or before the Closing Date and does
not include a period ending after the Closing Date; provided, however,
that (1) SHI shall provide Acquiror with instructions regarding the
manner in which such designation is to be effected and (2) such
designation shall not be made if it results in SHI being designated as
the agent of Cable or Acquiror in any Post-Closing Tax Period.
(B) Whenever any taxing authority asserts a claim, makes an
assessment, or otherwise disputes the amount of Company Taxes for which
SHI is or may be liable, in whole or in part, under this Agreement,
Acquiror shall promptly inform SHI. SHI shall promptly inform Acquiror
of any inquiries from the Internal Revenue Service or any other taxing
authority that relate to Cable. SHI covenants that it shall not, without
Acquiror's consent, take any action, or omit to take any action,
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that could result in an increase the Tax liability of Acquiror or Cable
in any Post-Closing Tax Period. SHI shall indemnify and hold Acquiror
and Cable harmless against any breach of the covenants contained in the
preceding sentence.
(C) If a taxing authority asserts a claim, makes an assessment or
otherwise disputes the amount of the Company Taxes attributable to Cable
(a "Cable Dispute"), Acquiror and SHI shall immediately inform each
other of the Cable Dispute. Acquiror, at its cost and expense, may, by
written notice to SHI, (1) participate in or (2) elect to control
(including the determination of whether and when to settle) any Cable
Dispute, which election shall be made in writing within 60 days after
the later of (a) the date of the notice transmitted by the taxing
authority describing the Cable Dispute, or (b) in the case of a notice
transmitted by the taxing authority to SHI, the date SHI informs
Acquiror of such Cable Dispute, and shall specify whether Acquiror is
participating in or electing to control the relevant Cable Dispute. If
Acquiror duly elects, as provided herein, to control a Cable Dispute, it
shall have the sole responsibility to conduct any resulting proceedings,
and shall be responsible for, and shall indemnify SHI, on an After-Tax
Basis, against any Taxes ultimately imposed with respect to such Cable
Dispute.
(b) Tax Returns.
(i) SHI shall be responsible, subject to the review of Acquiror, for
the preparation, filing and signing of all Company Consolidated Income Tax
Returns for all taxable periods that end on or before the Closing Date,
including Tax Returns of the Company Group for such periods that are due
after the Closing Date, and of all Cable Tax Returns required to be filed
on or before the Closing Date, and SHI shall be responsible for all Taxes
shown to be due thereon. All such Tax Returns shall be prepared
consistently with past practice of the Company, SHI and Cable and shall not
amend (without Acquiror's consent) any election that relates to Cable
(except to the extent a change is required by law). SHI shall provide
Acquiror with preliminary draft copies of the relevant portions of such
Returns that relate to Cable at least 20 days prior to the due date for
filing (taking into account any applicable extensions). Acquiror shall have
the opportunity to review all such returns (any such review shall not in
any way limit SHI's indemnification obligations hereunder); if Acquiror
objects to any matter relating to Cable reflected in such returns, Acquiror
shall inform SHI within 10 days of receipt of the preliminary draft return.
Acquiror and SHI shall resolve any disputes in good faith. Within 30 days
following the filing of Company Consolidated Income Tax Returns, SHI shall
furnish Acquiror with (A) copies of the relevant portions of such Tax
Returns that relate to Cable and (B) information concerning (1) the tax
basis of the assets of Cable as of the Closing Date; (2) the earnings and
profits of the Company and the Cable Subsidiaries as of the Closing Date;
(3) the Company's tax basis in the Cable Subsidiaries and the Subsidiaries'
tax basis in the Cable Partnerships as of the Closing Date; (4) the net
operating loss carryover, investment tax credit carryover, alternative
minimum tax carryover and the capital loss carryover available, if any, to
Acquiror and its Subsidiaries as of the Closing Date; and (5) all elections
with respect to Taxes in effect for Cable as of the Closing Date. The
Company shall provide Acquiror an estimate of the information listed in (1)
through (5) of the preceding sentence as soon as practicable hereafter but
prior to Closing.
(ii) Acquiror shall be responsible for the preparation and filing of
all Cable Tax Returns (other than the Company Consolidated Tax Return)
required to be filed after the Closing Date for Tax periods that end after
the Closing Date.
(iii) As soon as practicable after the date hereof and prior to
Closing, the Company shall provide Acquiror with a schedule of any waivers
or extensions of any applicable statute of limitations relating to the
assessment of federal, state or local Taxes relating to the Company or
Cable.
(c) Cooperation. Acquiror and SHI shall cooperate with each other in a
timely manner in the preparation and filing of any Tax Returns, payment of any
Taxes in accordance with this Agreement, and the conduct of any audit or other
proceeding. Each party shall execute and deliver such powers of attorney and
make available such other documents as are necessary to carry out the intent of
this Section 6.10. Each party
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agrees to notify the other party of any audit adjustments that do not result in
tax liability but can reasonably be expected to affect Tax Returns of the other
party.
(d) Retention of Records. Acquiror and SHI shall each, to the extent
potentially relevant to the other party, (i) retain records, documents,
accounting data and other information (including computer data) necessary for
the preparation and filing of all Tax Returns or the audit of such returns and
(ii) give to the other reasonable access to such records, documents, accounting
data and other information (including computer data) and to its personnel
(insuring their cooperation) and premises. If Acquiror elects to control any
Cable Dispute pursuant to the provisions of Section 6.10(a)(iii)(C) above, SHI
shall provide Acquiror with copies of all relevant books and records that are in
the possession of SHI or any Subsidiary of SHI. SHI and Acquiror shall each
notify the other party prior to discarding or destroying any such books and
records and shall, upon the other party's request, provide copies of all such
books and records to the other party. Upon Acquiror's request, SHI shall provide
Acquiror with copies of the relevant portions of any Tax Returns for Pre-Closing
Tax Periods to the extent related to Cable.
(e) Payments; Disputes. Except as otherwise provided in this Section 6.10,
any amounts owed by any party ("Indemnitor") to any other party ("Indemnitee")
under this Section 6.10 shall be paid within 10 days of notice from the
Indemnitee; provided that if the Indemnitee has not paid such amounts and such
amounts are being contested before the appropriate governmental authorities in
good faith, the Indemnitor shall not be required to make payment until it is
determined finally by an appropriate governmental authority that payment is due.
If Acquiror and SHI cannot agree on any calculation of any liabilities under
this Section 6.10, such calculation shall be made by any independent public
accounting firm acceptable to both such parties. The decision of such firm shall
be final and binding. The fees and expenses incurred in connection with such
calculation shall be borne equally by the disputing parties.
(f) Survival. Notwithstanding anything in this Agreement to the contrary,
the provisions of this Section 6.10 shall survive for the full period of all
applicable statutes of limitations (giving effect to any waiver or extension
thereof).
(g) Definitions.
(i) "After-Tax Basis" means, with respect to any payment, an amount
calculated by taking into account the Tax consequences of the receipt of
such payment, as well as any Tax benefit associated with the liability
giving rise to the payment.
(ii) "Cable Tax Returns" means any Tax Return of any of the Cable
Subsidiaries.
(iii) "Company Consolidated Income Tax Returns" means any Tax Return
of the Company with respect to Company Consolidated Income Taxes.
(iv) "Company Consolidated Income Taxes" means the federal income tax
and all applicable state income or franchise taxes of the Company Group,
together with any interest and any penalty, addition to tax or additional
amount imposed by any governmental authority responsible for the imposition
of any such tax.
(v) "Company Group" means the affiliated group of corporations, within
the meaning of Section 1504(a) of the Internal Revenue Code, of which the
Company is the common parent and any member of such group.
(vi) "Pre-Closing Tax Period" means any Tax period, or portion
thereof, ending on or before the close of business on the Closing Date.
(vii) "Post-Closing Tax Period" means any Tax Period or portion
thereof, beginning on or after the close of business on the Closing Date.
(viii) "Restructuring Tax" means any Tax imposed as a result of the
transfer of assets or any other transaction contemplated by this Agreement,
excluding any Tax that is solely the result of Acquiror's breach of Section
6.10(g).
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(ix) "Tax" (including with correlative meaning, the terms "Taxes" and
"Taxable") means (A) any income, gross receipts, ad valorem, premium,
excise, value-added, sales, use, transfer, franchise, license, severance,
stamp, occupation, service, lease, withholding, employment, payroll
premium, property or windfall profits tax, alternative or add-on-minimum
tax, or other tax, fee or assessment, and any payment required to be made
to any state abandoned property administrator or other public official
pursuant to an abandoned property, escheat or similar law, together with
any interest and any penalty, addition to tax or additional amount imposed
by any governmental authority responsible for the imposition of any such
tax or payment; (B) any liability of the Company or any Subsidiary of the
Company for the payment of any amounts of the type described in (A) as a
result of being a member of an affiliated, consolidated, combined or
unitary group, or being a party to any agreement or arrangement whereby the
liability of the Company or any Subsidiary of the Company for payments of
such amounts was determined or taken into account with reference to the
liability of any other person (excluding, however, any liability imposed on
the Cable Subsidiaries as a result of being a partner, beneficiary or
member of any flow-through entity, to the extent such liability relates to
income of the Cable Subsidiaries that is properly allocable to a Post-
Closing Tax Period); and (C) liability of the Company or any Subsidiary of
the Company for the payment of any amounts as a result of being party or
subject to any Tax Sharing Agreement.
(x) "Tax Indemnification Period" means (A) with respect to any Tax
described in clause (A) of the definition of "Tax," any Pre-Closing Tax
Period of the Company or any Subsidiary of the Company, (B) with respect to
any Tax described in clause (B) of the definition of "Tax", any Pre-Closing
Tax Period of the Company and any Subsidiary of the Company and the Tax
year of any member of a group described in such clause (B) which includes
(but does not end on) the Closing Date, and (C) with respect to any Tax
described in clause (C) of the definition of "Tax", the survival period of
the obligation under the applicable contract or arrangement which was
entered into or became effective during the Pre-Closing Tax Period.
(xi) "Tax Return" means any return, report, statement, information
statement and the like required to be filed with any authority with respect
to Taxes.
(xii) "Tax Sharing Agreement" means any Tax sharing agreement or
arrangement (whether or not written) binding on the Company of any
Subsidiary of the Company, and any agreement or arrangement (including any
arrangement required or permitted by law) which (A) requires the Company or
any Subsidiary of the Company to make a payment to or for the account of
any other person, (B) requires or permits the transfer or assignment of
income, revenues, receipts, or gains to the Company or any Subsidiary of
the Company from any other person, or (C) otherwise requires the Company or
any Subsidiary of the Company to indemnify any other person in respect of
Taxes.
(g) Additional Covenants. For a period of two years after the Closing
Date:
(i) Except for actions taken in the ordinary course of business,
Acquiror shall not sell, transfer, distribute or otherwise dispose of a
substantial portion of the operating assets of Cable or any shares of
capital stock of any corporation or partnership interests of any
partnership that was a Subsidiary of the Company immediately prior to the
Merger, whether by merger or otherwise; provided, however, that Acquiror
shall be entitled to enter into any like-kind exchange for other cable
television assets (within the meaning of Section 1031 of the Code) with
respect to any Cable assets;
(ii) Acquiror shall not cause or permit any corporation that was a
Subsidiary of the Company immediately prior to the Merger to sell any
shares of capital stock or any partnership interests of such Subsidiary to
any person if such sale or issuance will prevent Acquiror from retaining
"control" of such Subsidiary (within the meaning of Section 368 of the
Code);
(iii) Acquiror shall not adopt a plan of liquidation or initiate and
enter into an agreement of merger or other transaction pursuant to which
the corporate legal existence of Acquiror would terminate or the
outstanding stock of Acquiror would, in a taxable transaction, be converted
into cash, other property or the stock or securities of any other issuer;
and
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(iv) Acquiror and its affiliates shall not offer to purchase, make a
tender offer, or otherwise enter into any agreement to acquire any shares
of capital stock of SHI;
Notwithstanding the above, Acquiror shall be permitted to take any actions
described in clauses (i) through (iii) above if Acquiror first obtains either
(A) a ruling from the Internal Revenue Service; or (B) an opinion of recognized
tax counsel satisfactory to SHI, to the effect that such actions will not result
in the distribution of SHI shares to the Company's shareholders or the Merger
being taxable.
6.11 Notification. Each party hereto shall, in the event of, or promptly
after obtaining knowledge of the occurrence or threatened occurrence of, any
fact or circumstance that would cause or constitute a breach of any of its
representations and warranties set forth herein, give notice thereof to the
other parties and shall use its best efforts to prevent or promptly remedy such
breach.
6.12 Employee Benefits.
(a) As part of the assumption of liabilities of the Company by SHI pursuant
to Section 2.02 and the Contribution Agreement, effective as of the Effective
Time, SHI agrees to accept all liabilities and responsibilities including
without limitation those of a plan sponsor, within the meaning of Section
3(16)(B) of ERISA, of any Company Employee Plan and to accept all liabilities
and responsibilities including without limitation those of an employer under any
Company Benefit Arrangement except as may otherwise be provided in this Section
6.12. SHI agrees that Acquiror shall have no liability and shall be fully
indemnified and held harmless by SHI with respect to any such plans or
arrangements after the Effective Time. SHI and Acquiror agree that, effective
from and after the Effective Time, except with respect to benefits accrued prior
to the Effective Time, active Cable Employees shall cease to participate
actively in or be covered by any Company Employee Plan or any Company Benefit
Arrangement, including, without limitation, all Cable Plans. Transferred Cable
Employees, as defined in Section 6.12(b), shall vest at the Effective Time in
any benefit accrued through the date of Effective Time under any Pension Plan
that is a Cable Plan.
(b) Acquiror acknowledges that, as a result of the transactions
contemplated by this Agreement, Acquiror shall become at the Effective Time the
employer of all Cable Employees actively employed by Company as of the Effective
Time, including individuals on approved leaves of absence or short-term
disability leave, but excluding Cable Employees who are receiving long-term
disability income benefits as of the Effective Time and Cable Employees on
short-term disability leave at the Effective Time who subsequently receive
long-term disability income benefits without returning to active employment for
the Acquiror. Effective from and after the Effective Time, Acquiror agrees to
provide all Cable Employees who become so employed by Acquiror ("Transferred
Cable Employees") with similar compensation and employee benefits which are no
less favorable in the aggregate than the benefits provided to similarly situated
Acquiror employees. Any Employee Benefit Plan of Acquiror shall grant
Transferred Cable Employees credit for prior service with the Company, SHI and
any of their ERISA Affiliates prior to the Effective Time for purposes of
eligibility and vesting. Cable Employees shall not be deemed to be third-party
beneficiaries of any provision of this Section 6.12.
(c) The Company or SHI, as applicable, agrees to continue existing health
care coverage of Cable Employees and their covered dependents through the
Effective Time for eligible health care expenses and services incurred through
the Effective Time in accordance with the terms of relevant plan documents. For
purposes of the foregoing, an expense or service is deemed to be incurred when
the medical or dental services are performed.
(d) Immediately after the Effective Time, Acquiror agrees to provide
coverage under a group health care plan designed and implemented by Acquiror to
all Transferred Cable Employees, and the covered dependents of such Transferred
Cable Employees, who are still employed by the Company at the Effective Time,
taking into account for eligibility purposes under such plan the service accrued
by any such Transferred Cable Employee while an employee of the Company or any
of its ERISA Affiliates; provided that no such service for Transferred Cable
Employees need be credited by Acquiror for the purpose of determining
eligibility to receive any retiree medical benefit coverage. The group health
care plan provided in accordance with this Section 6.12(d) shall provide
benefits which are no less favorable than the benefits provided to
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similarly situated employees of the Acquiror. The health care plan provided by
Acquiror in accordance with this Section 6.12(d) shall contain no exclusions or
limitations for preexisting conditions applicable to covered Transferred Cable
Employees or the covered dependents of such Transferred Cable Employees.
(e) SHI shall assume and be solely responsible: (i) for the provision of
benefits required under the provisions of COBRA to any Cable Employees or other
qualified beneficiaries, within the meaning of Section 4980B(g) of the Code,
with respect to whom a qualifying event, within the meaning of Section
4980B(f)(3) of the Code, has occurred prior to the Effective Time; and (ii) for
the payment of all long-term disability income benefits to (x) all Cable
Employees who, as of the Effective Time, are receiving long-term disability
benefits or (y) are disabled or on short-term disability leave as of the
Effective Time and as a result of such disability have become or, without
returning to active employment become after the Effective Time, eligible for
long-term disability income benefits, as determined in accordance with long-term
disability coverage provisions that on or prior to the Effective Time are
applicable to the Cable Employees.
(f) Except as provided in the succeeding sentence, from and after the date
of this Agreement, neither the Company, SHI nor any of their ERISA Affiliates
will change the employment status of any Cable Employee so as to promise
employment with Cable for any specified term. Notwithstanding the foregoing
provision, from and after the date of this Agreement, the Company, SHI or any of
their ERISA Affiliates may enter into employment contracts on behalf of Cable
with any Cable Employee or prospective Cable Employees; provided, however, that
any such action taken must be in accordance with the ordinary and usual course
of business consistent with past practices, as provided in Section 6.03, and
provided, further, that consent of Acquiror must be obtained in all events.
(g) Acquiror agrees to cooperate, and agrees to use its best efforts to
cause its ERISA Affiliates to cooperate, in a complete, diligent and timely
manner to provide SHI or its ERISA Affiliates with such compensation, service
and other pertinent census data as may be reasonably required by SHI or any of
its ERISA Affiliates for purposes of calculating or effecting distribution of
benefits to which any Cable Employees may be entitled under any Employee Benefit
Plan established, maintained or contributed to by SHI or any of its ERISA
Affiliates.
6.13 Employee Stock Options. Effective as of the Effective Time, SHI
shall assume all incentive plans including without limitation the following
plans: (i) The E.W. Scripps Company 1987 Long-Term Incentive Plan (the
"Incentive Plan") and (ii) The E.W. Scripps Company 1994 Non-Employee Directors'
Stock Option Plan (the "Directors Plan"). As of the Effective Time, (A) each
stock option outstanding under the Incentive Plan or the Directors Plan or any
other plan of the Company, SHI or any of their Subsidiaries that is not
exercised prior to the Effective Time shall be assumed by SHI, and all
references in any such option to the Company and to its Class A Common Stock
shall be deemed to refer to SHI and its Class A Common Shares, and (B) each
restricted stock award subject to vesting conditions under the Incentive Plan or
any other plan of the Company, SHI or any of their Subsidiaries shall be assumed
by SHI and all references in any such restricted stock award to the Company and
its Class A Common Stock shall be deemed to refer to SHI and its Class A Common
Shares.
6.14 Meetings of Stockholders. Each of the Company and Acquiror shall
take all action necessary, in accordance with applicable law and its charter and
bylaws, to duly call, give notice of, convene and hold a meeting of its
stockholders as promptly as practicable to consider and vote upon the adoption
and approval of this Agreement and the transactions contemplated hereby
(collectively, the "Transactions"). The stockholder vote required for the
adoption and approval of the Transactions shall be the vote required: (i) in the
case of the Company, by the DGCL and the Company's Certificate of Incorporation;
and (ii) in the case of Acquiror, by the PBCL and Acquiror's Articles of
Incorporation. The Company (subject, in the case of a Superior Proposal, to the
fiduciary duty of its Board of Directors under the DGCL as advised by outside
counsel) and Acquiror each shall use their best efforts to solicit from their
stockholders proxies in favor of adoption and approval of the Transactions and
to take all other action necessary to secure the vote of such stockholders
required to effect the Transactions. By an agreement dated and executed as of
the date hereof, a copy of which is attached hereto as Exhibit E, the Trust has
agreed to vote, or cause to be voted, all of the shares of Company Common Voting
Stock owned by the Trust (or subject to proxies held by the Trust) in favor of
the
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Transactions, subject to the fiduciary duties of the trustees of the Trust, and
the holder of a majority of the voting power of Acquiror has agreed to vote, or
cause to be voted, all of the shares of capital stock of Acquiror that are owned
by such holder (or subject to proxies held by them) in favor of the Transactions
at the meeting of stockholders of the Company or Acquiror, as the case may be,
held to approve the Transactions.
6.15 Regulatory and Other Authorizations.
(a) The Company, SHI and Acquiror agree to use their respective best
efforts to obtain all authorizations, consents, orders and approvals of federal,
state, local and foreign regulatory bodies and officials and non-governmental
third parties that may be or become necessary for performance of its respective
obligations pursuant to this Agreement, and will cooperate fully with the other
parties in promptly seeking to obtain all such authorizations, consents, orders
and approvals. SHI and the Company shall have primary responsibility for
obtaining all authorizations, consents, orders and approvals with respect to
Licenses and Franchises of Cable. Without limitation, the Company and Acquiror
shall each make an appropriate filing of a Notification and Report Form pursuant
to the HSR Act no later than 30 days from the date hereof; and each such filing
shall request early termination of the waiting period imposed by the HSR Act.
Acquiror shall not be required to agree to any consent decree or order in
connection with any objections of the Department of Justice or the Federal Trade
Commission (each an "HSR Authority") to the transactions contemplated by this
Agreement. None of the Cable Subsidiaries or Cable Partnerships shall amend any
Franchise or make or agree to make any payments or commitments, including
commitments to make future capital improvements or provide future services, in
connection with obtaining any authorization, consent, order or approval of any
governmental authority necessary for the transfer of control of any Franchise.
(b) Any application to any governmental authority for any authorization,
consent, order or approval necessary for the transfer of control of any License
or Franchise shall be mutually acceptable to the Company and Acquiror. Without
limiting the obligations of the Company, SHI and Acquiror under Section 6.15(a),
each of the Company, SHI and Acquiror agrees, upon reasonable prior notice, to
make appropriate representatives available for attendance at meetings and
hearings before applicable governmental authorities in connection with the
transfer of control of any License or Franchise. The Company, SHI and Acquiror
each agree to use their reasonable best efforts to obtain any waiver, consent or
declaratory ruling by the FCC with respect to the Rules and Regulations
regarding cross-ownership of cable television systems and television stations,
to the extent that such Rules and Regulations may prohibit (i) the Trust from
designating a director on or observer of the Comcast Board of Directors or (ii)
Brian Roberts from serving on the Board of Directors of Turner Broadcasting
Company; provided that it shall not be a condition to the Closing that any such
waiver, consent or declaratory ruling shall have been obtained.
(c) Subject to Section 7.04(g), if any authorization, consent, order or
approval of any governmental authority necessary for the transfer of control of
any License or Franchise shall not have been obtained prior to the Effective
Time, SHI and Acquiror shall cooperate with each other and use their respective
best efforts (i) to restructure the ownership and control of such License or
Franchise from and after the Effective Time in such a manner that prevents any
violation of the terms of such License or Franchise that would have a Material
Adverse Effect on Acquiror and its Subsidiaries taken as a whole, on Cable or on
SHI and its Subsidiaries taken as a whole and preserves the intent of the
parties as set forth in this Agreement with respect to the terms and conditions
of the Merger, and (ii) notwithstanding the Closing, to continue to seek any
authorization, consent, order or approval necessary for the transfer of control
of such License or Franchise.
6.16 Further Assurances. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall execute such documents and other
instruments and take such further actions as may be reasonably required or
desirable to carry out the provisions hereof and consummate the transactions
contemplated hereby or, at and after the Closing Date, to evidence the
consummation of the transactions contemplated by this Agreement. Upon the terms
and subject to the conditions hereof, each of the parties hereto shall use its
respective reasonable best efforts to (i) take or cause to be taken all actions
and to do or cause to be done all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the transactions
contemplated by this Agreement and (ii) obtain in a timely manner all necessary
waivers, consents and approvals and to effect all necessary registrations and
filings.
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6.17 Internal Revenue Service Ruling. The Company shall, as promptly as
practicable after the date hereof, prepare and submit to the IRS a request for
an advance letter ruling from the IRS that the transactions contemplated by this
Agreement (other than the Merger), including the internal spinoffs described in
Section 2.01(a) hereto (and the contribution, if any, of the assets related to
the Mid-Tennessee Business) and the Contribution and the Distribution of SHI
Common Shares to the Company's stockholders will qualify as tax-free spinoffs
within the meaning of Sections 368(a)(1)(D) and 355 of the Internal Revenue
Code. Such request shall be true and correct in all material respects, and all
facts material to the ruling shall be disclosed in such request. The Company
shall afford Acquiror with reasonable opportunity to review and comment on such
request prior to its submission to the IRS, and such request as filed shall be
reasonably acceptable to Acquiror. The Company shall provide Acquiror with
copies of all materials submitted to the IRS, and Acquiror shall participate in
all meetings and conferences with IRS personnel, whether telephonically or in
person. Acquiror shall reasonably cooperate in good faith with the Company in
seeking to obtain such ruling.
6.18 Records Retention.
(a) For a period of five years after the Closing Date, SHI shall retain all
of its books and records relating to Cable for periods prior to the Closing Date
and Acquiror shall have the right to inspect and copy such books and records
during normal business hours, upon reasonable prior notice, in connection with
the preparation of financial statements, reports and filings and for any other
reasonable purpose.
(b) For a period of five years after the Closing Date, Acquiror shall
retain all of its books and records relating to Cable for periods subsequent to
the Closing Date and SHI shall have the right to inspect and copy such books and
records during normal business hours, upon reasonable prior notice, in
connection with the preparation of financial statements, reports and filings and
for any other reasonable purpose.
6.19 Stock Exchange Listing. SHI shall apply to the New York Stock
Exchange for the listing of the SHI Class A Common Shares and shall use its best
efforts to receive approval for the listing of such shares. Acquiror shall
submit a supplement listing application to the NASDAQ National Market for the
listing of the Merger Stock and shall use its best efforts to receive approval
for the listing of such stock.
6.20 Company Names.
(a) Acquiror acknowledges that the names "E.W. Scripps," "Scripps,"
"Scripps Howard," or any part thereof, and the initials "EWS" or "SH," whether
alone or in combination with one or more other words, are to the extent owned by
the Company or any of its Subsidiaries an asset of the Company being transferred
to SHI in the Contribution. Promptly after the Closing Date, Acquiror shall (i)
cause the Cable Subsidiaries and the Cable Partnerships to change their names to
delete any reference therein to the aforesaid names or initials and (ii)
reasonably cooperate in assisting SHI to change its name to "The E.W. Scripps
Company." As promptly as reasonably practicable after the Closing Date, Acquiror
shall cease using the aforesaid names or initials in connection with the
business operations of Cable.
(b) Between the consummation of the Contribution and the Closing (and for
as long thereafter as is required for Acquiror to comply with Section 6.20(a)),
the Company, the Cable Subsidiaries, and the Cable Partnerships shall have a
non-exclusive license to use the names "Scripps" and "Scripps Howard" and the
initials "EWS."
6.21 Other Agreements. At the Closing, Acquiror and the Trust shall enter
into a Registration Rights Agreement as set forth in Exhibit F and a Board
Representation Agreement as set forth in Exhibit G.
6.22 Form 8-K; Provision of Financial Statements; Schedule of Contracts.
(a) As soon as practicable after the date hereof, the Company will prepare
and file a Current Report on Form 8-K (the "Form 8-K") which will include a
description of the business of Cable and certain financial and other information
with respect to Cable. The Company covenants that the Form 8-K will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
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(b) At the request of Acquiror, the Company agrees to provide (or, if
requested by Acquiror, cooperate with Acquiror in the preparation of) as
promptly as practicable (but in any event within 45 days of the request) such
financial statements (audited or unaudited, as requested by Acquiror) relating
to Cable as the Acquiror may reasonably request in order to comply with the
requirements of the Securities Act or the Exchange Act or in order to secure
financing (including pursuant to a public offering registered under the
Securities Act).
(c) Within six weeks following the date hereof, the Company shall (i)
provide Schedule 6.22(c) to Acquiror, which shall include each of the following:
(A) any affiliation or retransmission Contract between any Cable Subsidiary or
Cable Partnership and a programming service or a distributor thereof; (B) any
Contract providing for the purchase or sale by Cable of goods, services,
equipment or assets with an aggregate purchase price of $250,000 or more or with
a duration in excess of five years; (C) any partnership, joint venture or other
similar Contract or any guarantee of the obligations of any Person; (D) all
Franchises of Cable; (E) all licenses, franchises, certificates, permits,
qualifications and authorizations from all governmental authorities necessary
for the lawful conduct of Cable's business; and (F) all consents and waivers
from all relevant governmental authorities necessary to transfer ownership of
Cable's franchise agreements and FCC licenses, and (ii) deliver complete copies
of all documents listed on Schedule 6.22(c) other than those previously
delivered or made available to Acquiror.
6.23 Determination of Estimated Amounts.
(a) Two days prior to the Effective Time, the Company shall inform Acquiror
of (i) the Company's best estimate of the Capital Expenditure Amount (the
"Estimated Capital Expenditure Amount"), (ii) the Company's best estimate of the
Cable Net Liabilities Amount (the "Estimated Cable Net Liabilities Amount"), and
(iii) the Company's basis for such estimates. The Estimated Capital Expenditures
Amount and the Estimated Cable Net Liabilities Amount shall be reasonably
satisfactory to Acquiror.
(b) As promptly as practicable after the Effective Time, but in any event
within 90 days thereafter, Acquiror shall prepare and deliver to SHI a schedule
(the "Acquiror Schedule") showing Acquiror's determination of the Cable Net
Liabilities Amount and the Capital Expenditure Amount. If SHI disagrees with
either of the determinations set forth in the Acquiror Schedule, SHI shall give
notice thereof to Acquiror within 30 days after delivery of the Acquiror
Schedule to SHI, such notice to include reasonable detail regarding the basis
for the disagreement.
(c) Acquiror and SHI shall attempt to settle any such disagreement; any
such settlement shall be final and binding upon Acquiror and SHI. If, however,
Acquiror and SHI are unable to settle such dispute within 30 days after receipt
of such notice of dispute by Acquiror, the dispute shall be submitted to an
independent certified public accounting firm mutually acceptable to Acquiror and
SHI for resolution, and the decision of such firm shall be final and binding
upon Acquiror and SHI. All costs incurred in connection with the resolution of
said dispute by such independent public accountants, including expenses and fees
for services rendered, shall be paid one half by Acquiror and one half by SHI.
Acquiror and SHI shall use reasonable efforts to have the dispute resolved
within 60 days after such dispute is submitted to said independent public
accountants. The final determination of the Cable Net Liabilities Amount and the
Capital Expenditure Amount (whether as a result of SHI's failing to give notice
of SHI's disagreement with Acquiror's determination within the time period
prescribed above, a resolution by Acquiror and SHI of any such disagreement, or
a determination by an accounting firm selected pursuant to clause (c) above to
resolve any disagreement among the parties) may occur on different dates.
(d) Within 10 Business Days following a final determination of the Cable
Net Liabilities Amount, (i) if the Cable Net Liabilities Amount exceeds the
Estimated Cable Net Liabilities Amount, then SHI will pay to Acquiror in
immediately available funds an amount equal to such excess plus interest at the
Agreed Rate from the Closing Date to the date of payment and (ii) if the
Estimated Cable Net Liabilities Amount exceeds the Cable Net Liabilities Amount,
Acquiror will pay to SHI in immediately available funds an amount equal to such
excess plus interest at the Agreed Rate from the Closing Date to the date of
payment. Any such payments shall be made on an after-tax basis.
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(e) Within 10 Business Days following a final determination of the Capital
Expenditure Amount, (i) if the Capital Expenditure Amount exceeds the Estimated
Capital Expenditure Amount, then Acquiror will pay to SHI in immediately
available funds an amount equal to such excess plus interest at the Agreed Rate
from the Closing Date to the date of payment and (ii) if the Estimated Capital
Expenditure Amount exceeds the Capital Expenditure Amount, SHI will pay to
Acquiror in immediately available funds an amount equal to such excess plus
interest at the Agreed Rate from the Closing Date to the date of payment. Any
such payments shall be made on an after tax basis.
6.24 Capital Expenditures. The Company agrees to cause Cable to make
capital expenditures in the ordinary course of business including line
extensions (the "Ordinary Course Expenditures"); provided, however, that such
Ordinary Course Expenditures shall not include upgrades or rebuilds. In
addition, Cable is permitted, but not required, to make up to $43,200,000 in
capital expenditures for upgrades and rebuilds to be mutually agreed by the
Company and Acquiror. The amount of capital expenditures made after November 1,
1995 and before the Effective Time by Cable for upgrades and rebuilds in
accordance with the mutual agreement of the Company and Acquiror, subject to
appropriate adjustments for minority interests, if any, is referred to herein as
the "Capital Expenditure Amount" and such amount shall not include any Ordinary
Course Expenditures.
6.25 Excess Cash. From time to time, after the date of execution of this
Agreement and until the Effective Time, and subject to applicable law, (i) the
Cable Subsidiaries and the Cable Partnerships may pay cash dividends, or
otherwise make cash distributions, to the Company or any of its Subsidiaries and
(ii) the Company may contribute to SHI cash held by the Company. Immediately
prior to the Contribution, the Cable Subsidiaries and the Cable Partnerships
shall, to the extent permitted by law and by the partnership agreement governing
SCT, pay dividends in cash or cash equivalents, or otherwise make contributions
in cash or cash equivalents, to the Company and its Subsidiaries so that none of
the Cable Subsidiaries and none of the Cable Partnerships own any cash or cash
equivalents at the Effective Time.
6.26 Acquisition of Mid-Tennessee Business; Reduction of Aggregate
Consideration; Indemnity. Any acquisition of all or part of the Mid-Tennessee
Business shall be on the terms and conditions of the Mid-Tennessee Agreement.
Broadcasting shall not waive any closing condition in, or agree to any material
modification of, the Mid-Tennessee Agreement without the consent of Acquiror,
which consent shall not be unreasonably withheld or delayed. The amount, if any,
paid by Broadcasting to acquire all or part of the Mid-Tennessee Business
(including amounts paid into escrow by Broadcasting ("Broadcasting Escrow
Amounts") and the principal amount of any promissory notes delivered by
Broadcasting ("Broadcasting Notes")) plus the MTB Net Liabilities Amount with
respect to all or such part of the Mid-Tennessee Business, as the case may be,
that is acquired is referred to herein as the "Mid-Tennessee Purchase Price."
For such purposes, "MTB Net Liabilities Amount" means, with respect to any part
of the Mid-Tennessee Business acquired, the Net Liabilities Amount of such part
of the Mid-Tennessee Business (including the Broadcasting Escrow Amounts and the
Broadcasting Notes to the extent the rights and obligations with respect thereto
are assigned to Cable) as of the date it is transferred to Cable. The amount, if
any, by which $62,500,000 exceeds the Mid-Tennessee Purchase Price is referred
to herein as the "Mid-Tennessee Amount" and shall reduce the Aggregate
Consideration as set forth in Section 1.02(d). Prior to the Effective Time,
Broadcasting shall contribute and assign to a Cable Subsidiary all assets and
liabilities of the Mid-Tennessee Business so acquired and all rights and
obligations it may have, if any, under any Mid-Tennessee Agreement and Acquiror
shall indemnify Broadcasting and its Subsidiaries against all Losses in
connection with the breach of such agreements by Cable or Acquiror after the
Effective Time. Such indemnification shall be subject to the procedures set
forth in Section 2.04 of the Contribution Agreement.
6.27 Indemnity Relating to Certain Litigation.
(a) SHI shall indemnify from and after the Closing Date (i) Acquiror and
its Subsidiaries, including Cable, against all Losses in connection with any
suit, action, proceeding or investigation pending at or arising after the
Closing Date that relates to Cable prior to the Effective Time and (ii) any
person who was an officer, director, partner or employee of any Cable Subsidiary
or Cable Partnership (or any partner thereof) against all Losses in connection
with any suit, action, proceeding or investigation. The Company and SHI shall
indemnify
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Acquiror against all Losses arising from or relating to any claim, action or
proceeding brought by or on behalf of the holders of Company Common Stock in
connection with the transactions contemplated hereby.
(b) Acquiror shall indemnify from and after the Closing Date (i) SHI and
its Subsidiaries against all Losses in connection with any suit, action,
proceeding or investigation pending at or arising after the Closing Date that
relates to Cable after the Effective Time and (ii) any person who was an
officer, director, partner or employee of any Cable Subsidiary or Cable
Partnership (or any partner thereof) prior to but not after the Closing Date
against all Losses in connection with any such suit, action, proceeding or
investigation. SHI represents that Schedule 6.27 hereto describes each suit,
action, proceeding or investigation pending at the date hereof that relates to
Cable. Acquiror shall indemnify the Company and SHI against all Losses arising
from or relating to any claim, action or proceeding brought by or on behalf of
the holders of Acquiror A Stock, Acquiror B Stock and Acquiror Common Stock in
connection with the transactions contemplated hereby.
(c) The indemnification arrangements set forth in this Section 6.27 shall
be subject to the procedures set forth in Section 2.04 of the Contribution
Agreement.
6.28 River City Interest. The Company shall use its reasonable best
efforts to cause Sacramento Cable to acquire prior to the Closing Date the River
City Interest or such lesser portion thereof as may be acquired. Any such
acquisition shall be on terms and conditions reasonably satisfactory to
Acquiror. If Sacramento Cable acquires all or any part of the River City
Interest, then the Aggregate Consideration shall be increased by the River City
Purchase Amount as set forth in Section 1.02(d). For purposes hereof, the term
"River City Purchase Amount" means the sum of (x) the amount paid by Sacramento
Cable to acquire all or any part of the River City Interest and (y) 5% of the
Net Liabilities Amount of SCT as of the date of such acquisition (adjusted
proportionately if less than all of the River City Interest is acquired).
6.29 Proposed Hyperion Joint Venture. The terms and conditions of any
joint venture with Hyperion Telecommunications of Tennessee, Inc. and any
material transactions in connection therewith shall be reasonably satisfactory
to Acquiror.
6.30 Cancellation of Intercompany Arrangements. Prior to the Effective
Time, and except as otherwise provided herein or as otherwise agreed by the
parties hereto, all accounts, payables, receivables, contracts, commitments and
agreements between the Company or Cable, on the one hand, and SHI or any of its
Subsidiaries, on the other hand, will be settled, cancelled or otherwise
terminated.
6.31 Market Purchase Program. The Company and SHI acknowledge that (i)
simultaneously with the announcement of the transactions contemplated hereby,
Acquiror intends to announce that it has approved a market repurchase program
(the "Repurchase Program") pursuant to which it may purchase at such times and
on such terms as it determines appropriate up to $500 million of common stock of
Acquiror and (ii) Acquiror has no obligation to make any such purchases.
Acquiror agrees not to make market purchases during the Random Trading Days and
to terminate the Repurchase Program no later than six months after the Closing
Date.
ARTICLE VII
CLOSING AND CLOSING DATE; CONDITIONS TO CLOSING
7.01 Closing and Closing Date. As soon as practicable after the
satisfaction or waiver of the conditions set forth herein (but no later than ten
business days thereafter) and immediately prior to the filing of the Certificate
of Merger, a closing of the transactions contemplated hereby (the "Closing")
shall take place at the offices of Davis Polk & Wardwell, 450 Lexington Avenue,
New York, New York, or on such other date and at such other location as the
parties may agree in writing. The date on which the Closing occurs is referred
to as the "Closing Date."
7.02 Conditions to the Obligations of the Company, SHI and Acquiror. The
respective obligations of the Company and SHI, on the one hand, and Acquiror, on
the other hand, to consummate the transactions contemplated hereby are subject
to the requirements that:
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(a) The Transactions shall have been approved and adopted by the
stockholders of the Company and of the Acquiror, as applicable and as
contemplated hereby;
(b) The transactions contemplated by Article II hereof shall have been
consummated in accordance with the terms hereof and in accordance with
applicable Law and each of the conveyancing and liability assumption
instruments and other instruments, documents and agreements executed in
connection with such transactions shall be in form and substance reasonably
satisfactory to Acquiror and its counsel;
(c) Any waiting period applicable to the consummation of the
transactions contemplated hereby under the HSR Act shall have expired or
been terminated, and any other governmental or regulatory notices,
authorizations, consents, orders or approvals necessary for the performance
of the parties' respective obligations pursuant to this Agreement shall
have been either filed (in the case of notices) or received and be in
effect and not subject to withdrawal or appeal; provided, however, that
this condition shall not apply with respect to any authorization, consent,
order or approval necessary for the transfer of control of any Franchise if
the condition in Section 7.04(g) has been satisfied or waived by Acquiror;
(d) No federal, state or foreign governmental authority or other
agency or commission or court of competent jurisdiction shall have enacted,
issued, promulgated, enforced or entered any statute, rule, or regulation,
or any permanent injunction or other order (whether temporary, preliminary
or permanent), which remains in effect and which has the effect of making
the transactions contemplated hereby illegal or otherwise prohibiting the
transactions contemplated hereby, or which questions the validity or the
legality of the transactions contemplated hereby and which could reasonably
be expected to have a Material Adverse Effect on Cable or on Acquiror and
its Subsidiaries taken as a whole;
(e) The Joint Proxy Statement/Prospectus shall have been declared
effective under the Securities Act and no stop orders with respect thereto
shall have been issued; and
(f) The Company shall have received (i) from the IRS an advance letter
ruling as contemplated by Section 6.17 hereof reasonably satisfactory to
Acquiror and SHI and (ii) an opinion of Baker & Hostetler to the effect
that the Merger constitutes a tax-free reorganization under Section 368 of
the Internal Revenue Code reasonably satisfactory to Acquiror and SHI.
7.03 Conditions to the Obligations of the Company and SHI. The
obligations of the Company and SHI to effect the transactions contemplated
hereby are subject to the satisfaction, on or prior to the Closing Date, of the
following conditions:
(a) Subject to Section 7.05, the representations and warranties of
Acquiror contained in this Agreement or in any other document delivered
pursuant hereto shall be true and correct in all material respects on and
as of the Closing Date with the same effect as if made on and as of the
Closing Date and at the Closing Acquiror shall have delivered to the
Company and SHI a certificate to that effect;
(b) Each of the obligations of Acquiror to be performed on or before
the Closing Date pursuant to the terms of this Agreement shall have been
duly performed in all material respects on or before the Closing Date and
at the Closing Acquiror shall have delivered to the Company a certificate
to that effect;
(c) The Acquiror Common Stock shall have been approved for listing on
the NASDAQ National Market subject to official notice of issuance;
(d) The Company and SHI shall have received an opinion of counsel for
Acquiror, dated as of the Closing Date, in form and substance reasonably
satisfactory to the Company, SHI and their counsel; and
(e) The Company and SHI shall have received all customary closing
documents they may reasonably request relating to the existence of Acquiror
and the authority of Acquiror for this Agreement and the transactions
contemplated hereby, all in form and substance reasonably satisfactory to
the Company and SHI.
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7.04 Conditions to Obligations of Acquiror. The obligations of Acquiror
to effect the transactions contemplated hereby are subject to the satisfaction,
on or prior to the Closing Date, of the following conditions:
(a) Subject to Section 7.06, the representations and warranties of the
Company and SHI contained in this Agreement or in any other document
delivered pursuant hereto shall be true and correct in all material
respects on and as of the Closing Date with the same effect as if made on
and as of the Closing Date and at the Closing the Company and SHI shall
have delivered to Acquiror a certificate to that effect;
(b) Each of the obligations of the Company and SHI to be performed on
or before the Closing Date pursuant to the terms of this Agreement shall
have been duly performed in all material respects on or before the Closing
Date and at the Closing the Company and SHI shall have delivered to
Acquiror a certificate to that effect;
(c) Immediately prior to the Effective Time, the Company shall have no
assets except (i) all of the issued and outstanding capital stock of, and
its right, title and interest in any advances to, the Cable Subsidiaries,
(ii) the contract rights referred to in Section 2.02(a)(ii); and (iii) the
cash referred to in Section 2.02(a)(iii) to the extent such cash has not
previously been used to pay expenses of the Company described therein;
(d) Immediately prior to the Effective Time, the Company shall have no
liabilities except (i) liabilities associated with the cable television
operations of Cable (including any liabilities assumed in connection with
the acquisition of assets related to the Mid-Tennessee Business in
accordance with Section 6.26) and (ii) the contract obligations referred to
in Section 2.02(b)(ii);
(e) Acquiror shall have received an opinion of Baker & Hostetler,
counsel for the Company and SHI, dated as of the Closing Date, in form and
substance reasonably satisfactory to Acquiror and its counsel;
(f) The Company shall have delivered to Acquiror a certificate signed
by the Chief Executive Officer and the Chief Financial Officer of the
Company certifying that there are no outstanding options to acquire any
capital stock of the Company and as to the number of shares of capital
stock of the Company outstanding as of the Closing Date, indicating the
class and series of such shares;
(g) All authorizations, consents, orders and approvals from applicable
Franchise Authorities necessary to transfer Franchises in which at least
95% of the Basic Subscribers of Cable are located (the "Required
Percentage") shall have been obtained, be in effect and not be subject to
withdrawal or appeal; provided, that the condition set forth in this
Section 7.04(g) shall not be deemed to be satisfied until the earlier to
occur of (x) 30 days following the date on which the Required Percentage is
obtained, (y) the date on which the condition set forth in this Section
7.04(g) would be satisfied if the Required Percentage were 100%, or (z) the
Termination Date; and
(h) Acquiror shall have received all customary closing documents it
may reasonably request relating to the existence of the Company, SHI, the
Cable Subsidiaries and the Cable Partnerships and the authority of the
Company and SHI for this Agreement and the transactions contemplated
hereby, all in form and substance reasonably satisfactory to Acquiror.
7.05 Exception to Conditions to Obligations to the Company and SHI. The
condition to the Company's and SHI's obligation to effect the Merger contained
in Section 7.03(a) shall be deemed satisfied notwithstanding any failure of any
representation or warranty of Acquiror to be true and correct as of the Closing
Date if (i) the aggregate amount of Losses that the holders of Merger Stock
could reasonably be expected to suffer as a result of the failures of such
representations and warranties to be true and correct as of the Closing Date
would not exceed $50,000,000 and (ii) Acquiror indemnifies SHI against any such
Losses; provided, however, that Acquiror will have liability under this Section
7.05 only with respect to those Losses that exceed, in the aggregate,
$5,000,000. The foregoing indemnification shall be subject to the procedures set
forth in Section 2.04 of the Contribution Agreement.
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7.06 Exception to Conditions to Obligations of Acquiror. The condition to
Acquiror's obligation to effect the Merger contained in Section 7.04(a) shall be
deemed satisfied notwithstanding any failure of any representation or warranty
of the Company or SHI to be true and correct as of the Closing Date if (i) the
aggregate amount of Losses that Acquiror or its Subsidiaries could reasonably be
expected to suffer as a result of the failures of such representations and
warranties to be true and correct as of the Closing Date would not exceed
$50,000,000 and (ii) SHI indemnifies Acquiror against any such Losses; provided,
however, that SHI will have liability under this Section 7.06 only with respect
to those Losses that exceed, in the aggregate, $5,000,000. The foregoing
indemnification shall be subject to the procedures set forth in Section 2.04 of
the Contribution Agreement.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the Closing Date:
(a) by mutual written consent duly authorized by the Boards of
Directors of the Company, SHI and Acquiror;
(b) by either the Company or Acquiror (i) if, at the stockholders'
meetings referred to in Section 6.14 (including any postponement or
adjournment thereof), the Merger and the other transactions contemplated
hereby that require such approval shall fail to be approved and adopted by
the affirmative vote specified herein, or (ii) so long as the terminating
party is not then in breach of any of its obligations hereunder, after
December 31, 1996 (the "Termination Date") if the Merger shall not have
been consummated on or before such date;
(c) by the Company, provided neither it nor SHI is then in breach of
any of its obligations hereunder, if either (i) Acquiror fails to perform
any covenant in this Agreement when performance thereof is due and does not
cure the failure within twenty business days after the Company delivers
written notice thereof, or (ii) any other condition in Section 7.02 or
Section 7.03 has not been satisfied and is not capable of being satisfied
prior to the Termination Date;
(d) by the Company, whether or not the conditions set forth in Section
7.02 have been satisfied, if the Board of Directors of the Company
determines, with the advice of outside counsel, that it may be required to
do so in the exercise of its fiduciary duties;
(e) by Acquiror, provided it is not then in breach of any of its
obligations hereunder, if either (i) the Company or SHI fails to perform
any covenant in this Agreement when performance thereof is due and does not
cure the failure within twenty business days after notice by Acquiror
thereof, (ii) any condition in Section 7.02 or Section 7.04 has not been
satisfied and is not capable of being satisfied prior to the Termination
Date, or (iii) the Board of Directors of the Company materially modifies or
withdraws the approval, determination or recommendation referred to in
Section 6.09;
(f) by the Company and Acquiror in accordance with and subject to
Section 1.02(d); or
(g) by Acquiror if it has received any communication from an HSR
Authority (such communication to be confirmed by such HSR Authority to the
Company) indicating that an HSR Authority has authorized the institution of
litigation challenging the transactions contemplated by this Agreement
under the U.S. antitrust laws, which litigation will include a motion
seeking an order or injunction prohibiting the consummation of any of the
transactions contemplated by this Agreement.
8.02 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 8.01 hereof, this Agreement, except for the
provisions of Section 6.06(f)-(j), Section 8.03, Section 9.08 and Section 9.13
and the confidentiality provisions of Section 6.05, shall forthwith become null
and void and have no effect, without any liability on the part of any party or
its directors, officers or stockholders. Nothing in this Section 8.02 shall
relieve any party to this Agreement of liability for breach of this Agreement.
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8.03 Fees and Expenses.
(a) In order to induce Acquiror to, among other things, enter into this
Agreement, the Company agrees as follows: If this Agreement is terminated (i) by
the Company pursuant to Section 8.01(d) hereof, (ii) by Acquiror pursuant to
Section 8.01(e)(i) or Section 8.01(e)(iii) hereof, or (iii) by the Company or
Acquiror pursuant to Section 8.01(b)(i) hereof and, in the case of this
subsection (iii), either (x) the Trust shall have failed to vote in favor of the
adoption and approval of the Transactions or (y) the Board of Directors of the
Company shall have materially modified or withdrawn the approval, determination
or recommendation referred to in Section 6.09, then the Company shall promptly
pay to Acquiror a fee equal to 3% of the Base Consideration. If this Agreement
is terminated by Acquiror pursuant to Section 8.01(e)(ii) hereof, other than as
a result of any condition in Section 7.02 or the condition in Section 7.04(g)
not being satisfied and not being capable of being satisfied prior to the
Termination Date, then the Company shall promptly pay to Acquiror an amount
equal to the actual reasonable fees and expenses paid or payable by or on behalf
of Acquiror to its attorneys, accountants, environmental consultants, management
consultants, and other consultants and advisors in connection with the
negotiation, execution and delivery of this Agreement and the transactions
contemplated hereby ("Expense Reimbursement"), provided, however, that the
Expense Reimbursement shall in no event exceed $5,000,000. The payment described
in the first sentence of this Section 8.03 (a) shall be made in same day funds
no later than five business days after the termination of this Agreement; the
Expense Reimbursement shall be made in same day funds no later than five
business days after receipt by the Company of detailed written statements
describing the fees and expenses.
(b) In order to induce the Company and SHI to, among other things, enter
into this Agreement, Acquiror agrees as follows: If this Agreement is terminated
(i) by the Company pursuant to Section 8.01(c), other than as a result of any
condition in Section 7.02 not being satisfied and not being capable of being
satisfied prior to the Termination Date or (ii) by the Company pursuant to
Section 8.01(b)(i) and the shareholder of Acquiror that is a party to the Voting
Agreement referred to in Section 6.14 shall have failed to vote in favor of the
adoption and approval of the Transactions, then Acquiror shall pay promptly to
the Company an amount equal to the actual reasonable fees and expenses paid or
payable by or on behalf of the Company and SHI to their attorneys, accountants,
environmental consultants, management consultants, and other consultants and
advisors in connection with the negotiation, execution and delivery of this
Agreement; provided, however, that such payment shall in no event exceed the sum
of $5,000,000. Such payment shall be made in same day funds no later than five
business days after receipt by Acquiror of detailed written statements
describing the fees and expenses.
ARTICLE IX
MISCELLANEOUS
9.01 Survival of Representations and Warranties. The representations and
warranties contained herein shall not survive beyond the Closing Date except
that the representations and warranties of SHI in Sections 3.05 and 4.03 and the
certification of SHI delivered pursuant to Section 7.04(f) shall survive
indefinitely and SHI shall indemnify the Acquiror and its Subsidiaries,
including Cable, in respect of any diminution in value or Losses incurred as a
result of any breach thereof. This Section 9.01 shall not limit any covenant or
agreement of the parties hereto which by its terms requires performance after
the Closing Date. The indemnity set forth in the first sentence of this Section
9.01 shall be subject to the procedures set forth in Section 2.04 of the
Contribution Agreement, and SHI shall not seek contribution from the Company or
any of its Subsidiaries or any of its or their respective officers or directors
in respect thereof.
9.02 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof and supersedes all
prior written and oral and all contemporaneous oral agreements and
understandings with respect to the subject matter hereof.
9.03 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy, or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties as follows:
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if to Acquiror:
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102
Telecopier: 215-981-7622
Attention: Stanley Wang, Esq.
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopier: 212-450-4800
Attention: William L. Taylor, Esq.
if to the Company or SHI:
The E.W. Scripps Company
Scripps Howard, Inc.
312 Walnut Street, 28th Floor
Cincinnati, Ohio
Attention: M. Denise Kuprionis, Secretary
with a copy to:
Baker & Hostetler
3200 National City Center
1900 East 9th Street
Cleveland, Ohio 44114
Attention: John H. Burlingame, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy shall be deemed effective
on the first business day at the place at which such notice or communication was
received following the day on which such notice or communication was sent. Any
notice or communication sent by registered or certified mail shall be deemed
effective on the fifth business day at the place from which such notice or
communication was mailed following the day on which such notice or communication
was mailed.
9.04 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware regardless of the laws that
might otherwise govern under principles of conflicts of laws applicable thereto,
except that the laws of the Commonwealth of Pennsylvania shall govern the effect
of the Merger on Acquiror.
9.05 Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
9.06 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
for Sections 6.06(f)-(j), 6.27 and 9.09 (which are intended to be for the
benefit of the persons provided for therein and may be enforced by such
persons).
9.07 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original but all of which shall constitute one
and the same agreement.
9.08 Expenses. Except as otherwise provided herein, all costs and
expenses incurred in connection with the transactions contemplated by this
Agreement shall be paid by the party incurring such expenses. Prior to the
Contribution, the Company shall pay, or make adequate provision for the payment
of, all costs and
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expenses required to be paid by the Company under this Agreement in connection
with the transactions contemplated by this Agreement.
9.09 Personal Liability. This Agreement shall not create or be deemed to
create or permit any personal liability or obligation on the part of any direct
or indirect stockholder of any party hereto or any officer, director, employee,
agent, representative or investor of any party hereto.
9.10 Binding Effect; Assignment. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors. This Agreement may not be assigned by any party
hereto.
9.11 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of all the parties. Any amendment to this Agreement
after the meetings of the stockholders of the Company and the Acquiror referred
to in Section 6.14 may, subject to applicable law, be made without seeking the
approval of such stockholders.
9.12 Extension; Waiver. All parties hereto affected thereby may (i)
extend the time for the performance of any of the obligations or other acts of
any other party hereto, (ii) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any document, certificate
or writing delivered pursuant hereto by any other party, or (iii) waive
compliance with any of the agreements or conditions contained herein or any
breach thereof. Any agreement on the part of any party to any such extension or
waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
9.13 Legal Fees; Costs. If any party hereto institutes any action or
proceeding, whether before a court or arbitrator, to enforce any provision of
this Agreement, the prevailing party therein shall be entitled to receive from
the losing party reasonable attorneys' fees and costs incurred in such action or
proceeding, whether or not such action or proceeding is prosecuted to judgment.
ARTICLE X
DEFINITIONS
When used in this Agreement, the following terms shall have the meanings
indicated.
"Accumulated Funding Deficiency" means an accumulated funding deficiency,
as defined in Section 302 of ERISA and Section 412 of the Code.
"Acquiror" has the meaning set forth in the first paragraph of this
Agreement.
"Acquiror A Stock" has the meaning set forth in Section 5.05(a).
"Acquiror B Stock" has the meaning set forth in Section 5.05(a).
"Acquiror Common Stock" means the Class A Special Common Stock, par value
$1.00 per share, of Acquiror.
"Acquiror Employee Plan" means any Employee Benefit Plan that is sponsored
or contributed to by Acquiror or any of its ERISA Affiliates covering any
employees or former employees of Acquiror or its ERISA Affiliates.
"Acquiror Preferred Stock" has the meaning set forth in Section 5.05(a).
"Acquiror Schedule" has the meaning set forth in Section 6.23(b).
"Acquiror's Form 10-Q" has the meaning set forth in Section 5.07.
"Acquiror's SEC Reports" has the meaning set forth in Section 5.06.
"Aggregate Consideration" has the meaning set forth in Section 1.02(d).
"Aggregate Shares Delivered" has the meaning set forth in Section 1.02(d).
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"Agreed Rate" means the annual rate of interest quoted from time to time by
Citibank, N.A. in New York City as its prime rate of interest for the purpose of
determining the interest rates charged by it for United States dollar commercial
loans made in the United States.
"Agreement" has the meaning set forth in the first paragraph of this
Agreement.
"Average Revenue Per Basic Subscriber" shall mean the amount of total
revenue received from Basic Subscribers during the calendar month in question
for recurring service (which shall include, without limitation, basic cable
service, pay cable service, additional outlets, equipment rental fees and
program guides, including installation charges and advertising revenues);
divided by one-half of the sum of (i) the number of Basic Subscribers on the
first day of the calendar month in question and (ii) the number of Basic
Subscribers on the last day of the calendar month in question.
"Basic Subscriber" means a Person (i) who subscribes to Basic Service, (ii)
who pays the full rate for such service charged by the Company, any Cable
Subsidiary or Cable Partnership, Acquiror or any Subsidiary of Acquiror (as the
case may be) for detached single family homes, and (iii) whose accounts
receivable owed for such service are not more than 60 days past due from the
date of invoice; provided, that a hotel, motel, or other multi-living unit
customer which pays less per living unit than the rates charged for detached
single family homes shall be considered to be that number of Basic Subscribers
which is equal to revenues from Basic Service provided to such hotel, motel, or
other customer for the month immediately preceding the month in which this
Agreement is executed and delivered (without regard to nonrecurring revenues
from ancillary services such as installation fees) divided by the full rate
charged for detached single family homes for such service.
"Base Consideration" has the meaning set forth in Section 1.02(d).
"Benefit Arrangement" means any material benefit arrangement (whether or
not written) that is not an Employee Benefit Plan, including (i) any employment
or consulting agreement, (ii) any arrangement providing for insurance coverage
or workers' compensation benefits, (iii) any incentive bonus or deferred bonus
arrangement, (iv) any arrangement providing termination allowance, severance or
similar benefits, (v) any equity compensation plan, (vi) any deferred
compensation plan, and (vii) any compensation policy and practice.
"Broadcasting" has the meaning set forth in Section 2.01(a).
"Cable" means, collectively, the Cable Subsidiaries and the Cable
Partnerships.
"Cable Balance Sheets" has the meaning set forth in Section 4.04.
"Cable Benefit Arrangement" means any Benefit Arrangement covering any
Cable Employees, directors and former directors of Cable and the beneficiaries
of any of them.
"Cable Dispute" has the meaning set forth in Section 6.10(a)(iii)(C).
"Cable Employee Plan" means any Employee Benefit Plan that is sponsored or
contributed to by the Company, SHI or any of their ERISA Affiliates covering any
Cable Employees.
"Cable Employee" means any employee or former employee of Cable.
"Cable Net Liabilities Amount" means the Net Liabilities Amount of Cable
immediately prior to the Effective Time and after giving effect to the
Distribution, appropriately adjusted for any minority interests. The Cable Net
Liabilities Amount does not include any assets or liabilities of the Company.
"Cable Plan" means any Cable Employee Plan or Cable Benefit Arrangement.
"Cable Partnerships" has the meaning set forth in Section 4.03.
"Cable Subsidiaries" has the meaning set forth in Section 2.01(a).
"Cable Tax Returns" has the meaning set forth in Section 6.10(f)(i).
"Capital Expenditure Amount" has the meaning set forth in Section 6.24.
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"Certificate of Merger" has the meaning set forth in Section 1.03.
"Certificates" has the meaning set forth in Section 1.04(b).
"Charter Amendment" has the meaning set forth in Section 2.01(b).
"Closing" and "Closing Date" have the meanings set forth in Section 7.01.
"Closing Price" has the meaning set forth in Section 1.02(d).
"Closing Price Share Number" has the meaning set forth in Section 1.02(d).
"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended, as set forth in Section 4980B of the Code and Part 6 of Title I of
ERISA.
"Code" means Internal Revenue Code of 1986, as amended.
"Collar Price" has the meaning set forth in Section 1.02(d).
"Common Stock Conversion Number" has the meaning set forth in Section
1.02(d).
"Communications Act" has the meaning set forth in Section 4.07(b).
"Company" has the meaning set forth in the first paragraph of this
Agreement.
"Company Benefit Arrangement" means any Benefit Arrangement maintained by
the Company, SHI or any of their ERISA Affiliates covering any employees, former
employees, directors or former directors of the Company, SHI or any of their
ERISA Affiliates, and the beneficiaries of any of them.
"Company Class A Common Stock" means the Company's Class A Common Stock,
$.01 par value per share.
"Company Common Stock" means, collectively, the Company Class A Common
Stock and the Company Common Voting Stock.
"Company Common Voting Stock" means the Company's Common Voting Stock, $.01
par value per share.
"Company Consolidated Income Taxes" has the meaning set forth in Section
6.10(f)(iii).
"Company Consolidated Income Tax Returns" has the meaning set forth in
Section 6.10(f)(ii).
"Company Contracts" has the meaning set forth in Section 3.15.
"Company Employee Plan" means any Employee Benefit Plan that is sponsored
or contributed to by the Company, SHI or any of their ERISA Affiliates covering
the employees or former employees of the Company, SHI or any of their ERISA
Affiliates.
"Company Group" has the meaning set forth in Section 6.10(f)(iv).
"Company Plan" means any Company Employee Benefit Plan or Company Benefit
Arrangement.
"Company Preferred Stock" has the meaning set forth in Section 3.05(a).
"Company's SEC Reports" has the meaning set forth in Section 3.06.
"Company 10-Q" has the meaning set forth in Section 3.07.
"Confidentiality Agreement" has the meaning set forth in Section 6.05.
"Contract" means any contract, agreement or understanding.
"Contribution" has the meaning set forth in Section 2.02(a).
"Contribution Agreement" has the meaning set forth in Section 2.02(a).
"Directors Plan" has the meaning set forth in Section 6.13.
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"DGCL" has the meaning set forth in Section 1.02(e).
"Dissenting Shares" has the meaning set forth in Section 1.02(e).
"Dissenting Stockholder" has the meaning set forth in Section 1.02(e).
"Distribution" has the meaning set forth in Section 2.02(c).
"Effective Time" has the meaning set forth in Section 1.03.
"Employee Benefit Plan" means any employee benefit plan, as defined in
Section 3(3) of ERISA.
"Enforceability Exceptions" has the meaning set forth in Section 3.01.
"Environmental Laws" means any federal, state, and local laws, judicial
decisions, regulations, rules, judgments, orders, decrees, permits, licenses,
agreements and governmental restrictions, relating to human health, the
environment or to emissions, discharges or releases of pollutants, contaminants
or other hazardous substances or wastes into the environment, including without
limitation ambient air, surface water, groundwater or land, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of pollutants, contaminants or other hazardous
substances or wastes or the clean-up or other remediation thereof.
"Environmental Liabilities" means any and all liabilities of or relating to
the named entity, whether contingent or fixed, actual or potential, known or
unknown, which (i) arise under or relate to matters covered by Environmental
Laws and (ii) relate to actions occurring or conditions existing on or prior to
the Effective Time.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means a Person and/or such Person's Subsidiary or any
trade or business (whether or not incorporated) which is under common control
with such entity or such entity's Subsidiaries or which is treated as a single
employer with such Person or any Subsidiary of such Person under Section 414(b),
(c), (m) or (o) of the Code or Section 4001(b)(1) of ERISA.
"Estimated Capital Expenditure Amount" has the meaning set forth in Section
6.23(a).
"Estimated Cable Net Liabilities Amount" has the meaning set forth in
Section 6.23(a).
"EWS Cable" has the meaning set forth in Section 2.01(a).
"Exchange Act" has the meaning set forth in Section 3.03.
"Exchange Agent" has the meaning set forth in Section 1.04(a).
"Execution Price" has the meaning set forth in Section 1.02(d).
"Expense Reimbursement" has the meaning set forth in Section 8.03(a).
"FAS 106" means Financial Accounting Standard 106.
"FCC" has the meaning set forth in Section 3.03.
"Form 8-K" has the meaning set forth in Section 6.22.
"Franchise" means written "franchise" within the meaning of Section 602(8)
of the Cable Communications Policy Act of 1984 (47 U.S.C. Section 522(9)).
"Franchising Authority" has the meaning that term is given by Section
602(9) of the Cable Communications Policy Act of 1984 (47 U.S.C. Section
522(10)).
"GAAP" has the meaning set forth in Section 3.07.
"Group Health Plan" means any group health plan, as defined in Section
5000(b)(1) of the Code.
"HSR Act" has the meaning set forth in Section 3.03.
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"HSR Authority" has the meaning set forth in Section 6.15(a).
"Incentive Plan" has the meaning set forth in Section 6.13.
"Indemnifying Party" has the meaning set forth in Section 6.06(h).
"Indemnified Party" has the meaning set forth in Section 6.06(h).
"Indemnitee" has the meaning set forth in Section 6.10(e).
"Indemnitor" has the meaning set forth in Section 6.10(e).
"IRS" means the Internal Revenue Service.
"Joint Proxy Statement/Prospectus" has the meaning set forth in 6.06(a).
"Licenses" means approvals, consents, rights, certificates, orders,
franchises, determinations, permissions, licenses, authorities or grants issued,
declared, designated or adopted by any nation or government, any federal, state,
municipal or other political subdivision thereof or any department, commission,
board, bureau, agency or instrumentality exercising executive, legislative,
judicial, regulatory or administrative functions pertaining to government,
excluding, however, the Franchises.
"Liens" means any lien, claim, charge, restriction, pledge, mortgage,
security interest or other encumbrance.
"Losses" means all losses, claims, damages, liabilities or actions,
including any legal or other expenses reasonably incurred in connection with
investigating or defending any such loss, claim, damage or liability or action
or enforcing any indemnity with respect thereto.
"L-R Cable" has the meaning set forth in Section 2.01(a).
"Material Adverse Effect" means a material adverse effect on the business,
condition (financial or otherwise) or assets of the named entity or the named
entities taken as a whole. When the term "Material Adverse Effect" or material
is used with respect to more than one act, occurrence, item or circumstance, all
such acts, occurrences, items and circumstances shall be considered individually
and in the aggregate.
"Material Cable Agreements" has the meaning set forth in Section 4.08(a).
"Merger" has the meaning set forth in Section 1.01.
"Merger Stock" has the meaning set forth in Section 1.04(a).
"Merrill Lynch" has the meaning set forth in Section 3.04.
"Mid-Tennessee" has the meaning set forth in Section 4.13.
"Mid-Tennessee Agreement" means the Asset Sale Agreement dated October 26,
1995 between Mid-Tennessee Cable Limited Partnership and Broadcasting.
"Mid-Tennessee Amount" has the meaning set forth in Section 6.26.
"Mid-Tennessee Business" has the meaning set forth in Section 4.13.
"Mid-Tennessee Purchase Price" has the meaning set forth in Section 6.26.
"MTB Net Liabilities Amount" has the meaning set forth in Section 6.26.
"Multiemployer Plan" means a multiemployer plan, as defined in Sections
3(37) and 4001(a)(3) of ERISA.
"NLRB" means the National Labor Relations Board.
"Net Liabilities Amount" means, with respect to any person at any time, (i)
the consolidated liabilities (whether long-term or current, and including,
without limitation, any and all accrued and unpaid taxes) of such Person and its
consolidated Subsidiaries at such time minus (ii) the consolidated current
assets (other
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than inventory) of such Person and its consolidated Subsidiaries at such time,
determined in each case in accordance with GAAP.
"Ordinary Course Expenditures" has the meaning set forth in Section 6.24.
"Other Filings" has the meaning set forth in Section 6.06(b).
"Outstanding Company Common Stock" has the meaning set forth in Section
1.02(d).
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" means any employer pension benefit plan, as defined in
Section 3(2) of ERISA.
"Person" means any individual, general partnership, limited partnership,
corporation, limited liability company, joint venture, trust, business trust,
cooperative or association, and the heirs, executors, administrators, legal
representatives, successors, and assigns of such Person where the context so
requires.
"Pre-Closing Date" has the meaning set forth in Section 1.02(d).
"Preliminary Joint Proxy Statement/Prospectus" has the meaning set forth in
section 6.06(a).
"Prohibited Transaction" means a transaction that is prohibited under 4975
of the Code or Section 406 of ERISA and not exempt under Section 4975 of the
Code or Section 408 of ERISA, respectively.
"Random Trading Days" has the meaning set forth in Section 1.02(d).
"Reportable Event" means a "reportable event," as defined in Section 4043
of ERISA, to the extent that the reporting of such event to the PBGC has not
been waived.
"Required Percentage" has the meaning set forth in Section 7.04(g).
"Restated Articles" has the meaning set forth in Section 2.01(b).
"Retained Assets" has the meaning set forth in the Contribution Agreement.
"Retained Liabilities" has the meaning set forth in the Contribution
Agreement.
"River City Interest" has the meaning set forth in Section 4.03.
"River City Purchase Amount" has the meaning set forth in Section 6.28.
"Rules and Regulations" has the meaning set forth in Section 4.07(b).
"Sacramento Cable" has the meaning set forth in Section 2.01(a).
"SCT" has the meaning set forth in Section 4.03.
"SEC" has the meaning set forth in Section 3.06.
"SEC Filings" has the meaning set forth in Section 6.06(c).
"Securities Act" has the meaning set forth in Section 3.03.
"Share Deficiency Number" has the meaning set forth in Section 1.02(d).
"SH Cable" has the meaning set forth in Section 2.01(a).
"SHI" has the meaning set forth in the first paragraph of this Agreement.
"SHI Class A Common Shares" means SHI's Class A Common Shares, $.01 par
value.
"SHI Common Shares" has the meaning set forth in Section 3.05(b).
"SHI Common Voting Shares" means SHI's Common Voting Shares, $.01 par
value.
"SHI Notes" has the meaning set forth in Section 2.02(b).
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"SHI Note Indenture" means the Indenture dated December 15, 1991 relating
to the 7 3/8% Notes of SHI due December 15, 1998.
"Subsidiary" as to any Person means (i) any corporation of which such
Person owns, either directly or through its Subsidiaries, 50% or more of the
total combined voting power of all classes of voting securities of such
corporation and (ii) any partnership, association, joint venture or other form
of business organization, whether or not it constitutes a legal entity, in which
such Person directly or indirectly through its Subsidiaries owns 50% or more of
the total equity interests.
"Superior Proposal" has the meaning set forth in Section 6.01(a).
"Surviving Corporation" has the meaning set forth in Section 1.01.
"Tax" has the meaning set forth in Section 6.10(f)(viii).
"Tax Return" has the meaning set forth in Section 6.10(f)(x).
"TCC" has the meaning set forth in Section 4.03.
"Termination Date" has the meaning set forth in Section 8.01(b).
"Termination Intent Notice" has the meaning set forth in Section 1.02(d).
"Top-up Notice" has the meaning set forth in Section 1.02(d).
"Top-up Share Number" has the meaning set forth in Section 1.02(d).
"Transaction Agreement" has the meaning set forth in Section 3.01.
"Transactions" has the meaning set forth in Section 6.14.
"Trust" has the meaning set forth in Section 6.14.
"Voting Agreement" means the Voting Agreement dated as of the date hereof
by and among Acquiror, the Company, the Trust and Sural Corporation.
"Welfare Plan" means any employee welfare benefit plan, as defined in
Section 3(1) of ERISA.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
THE E.W. SCRIPPS COMPANY
By /S/ LAWRENCE A. LESER
------------------------------------
Name: Lawrence A. Leser
Title: Chairman, and Chief Executive
Officer
SCRIPPS HOWARD, INC.
By /S/ LAWRENCE A. LESER
------------------------------------
Name: Lawrence A. Leser
Title: Chairman, and Chief Executive
Officer
COMCAST CORPORATION
By /S/ ROBERT S. PICK
------------------------------------
Name: Robert S. Pick
Title: Vice President
49
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ANNEX II
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
AMENDMENT dated as of , 1996 among The E.W. Scripps Company, a
Delaware corporation (the "Company"), Scripps Howard, Inc., an Ohio corporation
and wholly owned subsidiary of the Company ("SHI"), and Comcast Corporation, a
Pennsylvania corporation ("Acquiror").
W I T N E S S E T H :
WHEREAS, the parties hereto have heretofore entered into an Agreement and
Plan of Merger dated as of October 28, 1995, (the "Agreement"); and
WHEREAS, the parties hereto desire to amend the Agreement and certain
Exhibits thereto as hereinafter provided;
NOW, THEREFORE, the parties hereto agree as follows:
SECTION 1. DEFINITIONS; REFERENCES. Unless otherwise specifically defined
herein, each term used herein which is defined in the Agreement shall have the
meaning assigned to such term in the Agreement. Each reference to "hereof",
"herein" and "hereby" and each other similar reference and each reference to
"this Agreement" and each other similar reference contained in the Agreement
shall from and after the date hereof refer to the Agreement as amended hereby.
SECTION 2. AMENDMENT OF SECTION 1.02(E) OF THE AGREEMENT. Section 1.02(e)
of the Agreement is amended to read as follows:
(e) The holder of any shares ("Dissenting Shares") of Company Common
Stock outstanding immediately prior to the Merger that has validly
exercised such holder's dissenters' rights, if any, under the Delaware
General Corporation Law (the "DGCL") shall not be entitled to receive, in
respect of the shares of Company Common Stock as to which such holder has
validly exercised dissenters' rights, shares of Acquiror Common Stock
unless and until such holder shall have failed to perfect, or shall have
effectively withdrawn or lost, such holder's right to payment for such
holder's shares of Company Common Stock under the DGCL. In such event, such
holder shall be entitled to receive the Acquiror Common Stock such holder
would have been entitled to receive had such holder not exercised
dissenters' rights. The Company shall give Acquiror prompt notice upon
receipt by the Company (i) prior to or at the meeting of stockholders at
which the Merger and other transactions contemplated hereby are voted upon,
of any written objection to such transactions (any stockholder duly making
such objection being hereinafter called a "Dissenting Stockholder") and
(ii) any other notices or communications made after such time by a
Dissenting Stockholder which pertains to dissenters' rights. The Company
agrees that, prior to the Effective Time, except with the written consent
of Acquiror, it will not voluntarily make any payment with respect to, or
settle or offer to settle, any such demand. Each Dissenting Stockholder who
becomes entitled under the DGCL to payment for such holder's shares of
Company Common Stock shall receive payment therefor after the Effective
Time from the Surviving Corporation, and SHI shall reimburse the Surviving
Corporation for the excess, if any, of (x) the amount paid to such
Dissenting Stockholders by the Acquiror over (y) the product of (a) the
product of the Aggregate Shares Delivered times the Closing Price, divided
by the Outstanding Company Common Stock, times (b) the number of Dissenting
Shares held by such Dissenting Stockholders; provided that the amount paid
to Dissenting Stockholders shall have been agreed upon by the Surviving
Corporation, SHI and the Dissenting Stockholders or finally determined
pursuant to the DGCL.
<PAGE> 184
SECTION 3. AMENDMENT OF SECTION 2.01(A) OF THE AGREEMENT. Section 2.01(a)
of the Agreement is amended to read as follows:
2.01 Internal Spinoffs; Amendments to Charters.
(a) Prior to the Contribution, the Distribution and the Effective
Time, and in transactions intended to qualify for tax free treatment under
the Internal Revenue Code, Scripps Howard Broadcasting Company, an Ohio
corporation and a wholly owned Subsidiary of SHI ("Broadcasting"), will
contribute the assets and liabilities of the Mid-Tennessee Business, which
was acquired pursuant to the MidTennessee Agreement, and all of the
outstanding capital stock of Scripps Howard Cable Company of Sacramento, a
Delaware corporation and a wholly owned subsidiary of Broadcasting
("Sacramento Cable"), to Scripps Howard Cable Company, a Colorado
corporation and a wholly owned subsidiary of Broadcasting ("SH Cable"), and
immediately thereafter Broadcasting will distribute to SHI all of the
outstanding capital stock of SH Cable. Immediately thereafter, SHI will
contribute all of the outstanding capital stock of L-R Cable, Inc., a
Colorado corporation and a wholly owned Subsidiary of SHI ("L-R Cable"),
and EWS Cable, Inc., a Colorado corporation and a wholly owned Subsidiary
of SHI ("EWS Cable"), to SH Cable, and immediately thereafter SHI will
distribute to the Company all of the outstanding capital stock of SH Cable.
As a result of the transactions described in the previous two sentences, SH
Cable will become a direct wholly owned subsidiary of the Company, and
Sacramento Cable, L-R Cable, and EWS Cable (collectively with SH Cable, the
"Cable Subsidiaries") will become direct wholly owned Subsidiaries of SH
Cable.
SECTION 4. AMENDMENT OF SECTIONS 2.02(A) AND (B) OF THE
AGREEMENT. Sections 2.02(a) and (b) of the Agreement are amended to read as
follows:
(a) Prior to the Effective Time and pursuant to the terms of the
Contribution and Assumption Agreement to be entered into by the Company and
SHI in the form attached hereto as Exhibit C (the "Contribution
Agreement"), the Company shall contribute and transfer (together with the
transactions described in Section 2.02(b) below, the "Contribution") to SHI
all of the Company's right, title and interest in and to any and all assets
of the Company, whether tangible or intangible and whether fixed,
contingent or otherwise; provided, however, that the Company shall not
contribute to SHI (i) the issued and outstanding capital stock of any Cable
Subsidiary; (ii) the Company's rights created pursuant to this Agreement
and the Contribution Agreement; and (iii) the Company's rights under the
confidentiality agreements identified by Acquiror prior to the Effective
Time (collectively, the "Retained Assets").
(b) In consideration for the transactions described in Section 2.02(a)
above, SHI shall (A) concurrently therewith and pursuant to the
Contribution Agreement assume any and all liabilities of the Company of
every kind whatsoever, whether absolute, known, unknown, fixed, contingent
or otherwise; provided, however, that SHI will not assume, and will have no
liability with respect to, (i) any liabilities associated with the cable
television business operations of the Cable Subsidiaries or Cable
Partnerships except as otherwise provided herein, including Sections
1.02(e), 6.06(g), 6.10, 6.12, 6.13, 6.27, 6.32, 6.34, 6.35, 6.36, 7.06 and
9.01 and (ii) the Company's obligations created pursuant to this Agreement
and the Contribution Agreement (collectively, the "Retained Liabilities")
and (B) agree to issue and deliver to the Company shares of common stock of
SHI upon request of the Company as set forth in the Contribution Agreement.
Concurrently with the transactions described in Section 2.02(a) above, SHI
will cause the Company and the Cable Subsidiaries to be released by all
applicable third parties from any liability of SHI or any of its
Subsidiaries other than Cable or any liability assumed by SHI pursuant to
this Section 2.02(b) that is (A) debt for borrowed money and similar
monetary obligations evidenced by bonds, notes, debentures or other
instruments, or (B) except as otherwise specifically provided in this
Section 2.02(b), guaranties, endorsements, and other contingent
obligations, whether direct or indirect, in respect of liabilities of
others of any of the types described in clause (A). Each of the Company
Contracts, other than the SHI Note Indenture will be terminated, or the
Company will otherwise be released from all obligations thereunder, prior
to the Effective Time. Prior to the Effective Time, either SHI shall
purchase and retire all of its outstanding 7 3/8% Notes due December 15,
1998 (the "SHI Notes"), or, if and to the extent the SHI Notes have not
been
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<PAGE> 185
repurchased at the Effective Time, SHI shall indemnify the Company and
Acquiror in respect of any Loss either may suffer in respect thereof. SHI
agrees that it will fulfill its obligations, including the obligation to
make timely payments of interest and principal, under the SHI Notes and any
instrument or indenture relating thereto. Without the prior written consent
of Acquiror, SHI shall not vary the terms of the SHI Notes or any
instrument or indenture relating thereto. Prior to the Effective Time, SHI
and the Company shall enter into the Non-Competition Agreement as set forth
in Exhibit D hereto. SHI acknowledges that the liabilities to be assumed
pursuant to the first sentence of this Section 2.02(b) include (i) any and
all liabilities associated with any claim, action or proceeding brought by
or on behalf of the holders of the Company Common Stock in connection with
the transactions contemplated hereby, and (ii) all expenses relating to the
transactions described in this Agreement that are the responsibility of the
Company hereunder, including the fees and expenses of Merrill Lynch in
connection with such transactions. Immediately prior to the Distribution,
SHI and the Company will execute an instrument in form and substance
reasonably satisfactory to Acquiror pursuant to which SHI will assume all
liabilities of the Company, if any, other than the Retained Liabilities,
and the Company will transfer and deliver to SHI all assets of the Company,
if any, other than the Retained Assets.
SECTION 5. AMENDMENT OF EXHIBIT A TO THE AGREEMENT. Exhibit A of the
Agreement is amended by replacing it with the new Exhibit A attached hereto.
SECTION 6. AMENDMENT OF EXHIBIT B TO THE AGREEMENT. Exhibit B of the
Agreement is amended by replacing it with the new Exhibit B attached hereto.
SECTION 7. AMENDMENT OF EXHIBIT C TO THE AGREEMENT. Exhibit C of the
Agreement is amended by replacing it with the new Exhibit C attached hereto.
SECTION 8. AMENDMENT OF EXHIBIT F TO THE AGREEMENT. Exhibit F of the
Agreement is amended by replacing it with the new Exhibit F attached hereto.
SECTION 9. AMENDMENT OF SECTION 4.08 OF THE AGREEMENT. Section 4.08(a) of
the Agreement is amended by replacing clause (iii) of the second paragraph
thereof with the following:
(iii) any Contract providing for the purchase or sale by Cable of
goods, services, equipment or assets with an aggregate purchase price of
$250,000 or more or with a duration in excess of 5 years except any such
Contract that may be terminated by Cable within six months of the date of
this Agreement without penalty (upon written notice by Acquiror (which
notice must be given, if at all, by the later of August 30, 1996 or one
month following the date on which the Contract is delivered to Acquiror),
Cable shall terminate any such Contract effective as of the Closing);
SECTION 10. AMENDMENT OF SECTION 6.10(G) OF THE AGREEMENT. Section 6.10(g)
"Additional Covenants" of the Agreement is renamed Section 6.10(h) "Additional
Covenants", and the newly designated Section 6.10(h)(i) is amended to read as
follows:
(i) Except for actions taken in the ordinary course of business,
Acquiror shall not sell, transfer, distribute or otherwise dispose of a
substantial portion of the operating assets of Cable or any shares of
capital stock of any corporation or partnership interests of any
partnership that was a Subsidiary of the Company immediately prior to the
Merger, whether by merger or otherwise; provided, however, that Acquiror
shall be entitled to (A) enter into any like-kind exchange for other cable
television assets (within the meaning of Section 1031 of the Code) with
respect to any Cable assets and (B) contribute the stock of SH Cable to a
wholly owned first-tier subsidiary of the Acquiror after the Merger that
serves as the cable business holding company for the consolidated group of
the Acquiror (the "Dropdown"), but only if (i) the Acquiror receives an
opinion from Davis Polk & Wardwell or other tax counsel acceptable to the
Company and SHI that the Dropdown will qualify under Section 368(a)(2)(C)
of the Code and (ii) the IRS rules that the Dropdown will not affect the
tax-free treatment of the spin-off transactions (including without
limitation, the Distribution) that precede the Merger or the Acquiror
receives an
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opinion from Davis Polk & Wardwell or other tax counsel acceptable to the
Company and SHI to the same effect.
SECTION 11. AMENDMENT OF SECTION 6.14 OF THE AGREEMENT. Section 6.14 of
the Agreement is amended to read as follows:
6.14 Meetings of Stockholders. Each of the Company and Acquiror shall take
all action necessary, in accordance with applicable law and its charter and
bylaws, to duly call, give notice of, convene and hold a meeting of its
stockholders as promptly as practicable to consider and vote upon the adoption
and approval of this Agreement and the transactions contemplated hereby
(collectively, the "Transactions"). The stockholder vote required for the
adoption and approval of the Transactions shall be the vote required: (i) in the
case of the Company, by the DGCL and the Company's Certificate of Incorporation;
and (ii) in the case of Acquiror, by the rules of the National Association of
Securities Dealers, Inc. and Acquiror's Articles of Incorporation. The Company
(subject, in the case of a Superior Proposal, to the fiduciary duty of its Board
of Directors under the DGCL as advised by outside counsel) and Acquiror each
shall use its best efforts to solicit from its stockholders proxies in favor of
adoption and approval of the Transactions and to take all other action necessary
to secure the vote of such stockholders required to effect the Transactions. By
an agreement dated and executed as of the date hereof, a copy of which is
attached hereto as Exhibit E, the Trust has agreed to vote, or cause to be
voted, all of the shares of Company Common Voting Stock owned by the Trust (or
subject to proxies held by the Trust) in favor of the Transactions, subject to
the fiduciary duties of the trustees of the Trust, and the holder of a majority
of the voting power of Acquiror has agreed to vote, or cause to be voted, all of
the shares of capital stock of Acquiror that are owned by such holder (or
subject to proxies held by them) in favor of the Transactions at the meeting of
stockholders of the Company or Acquiror, as the case may be, held to approve the
Transactions.
SECTION 12. AMENDMENT OF SECTION 6.18 OF THE AGREEMENT. Section 6.18 of
the Agreement is amended to read as follows:
6.18 Records Retention. (a) In addition to its obligations under
Section 6.10(d) hereof, for a period of five years after the Closing Date,
SHI shall retain all of its books and records relating to SHI and its
Subsidiaries for periods prior to the Closing Date and Acquiror shall have
the right to inspect and copy such books and records during normal business
hours, upon reasonable prior notice, in connection with the preparation of
financial statements, reports and filings and for any other reasonable
purpose.
(b) In addition to its obligations under Section 6.10(d) hereof, for a
period of five years after the Closing Date, Acquiror shall retain all of
its books and records relating to the Company and Cable for periods prior
to the Closing Date and SHI shall have the right to inspect and copy such
books and records during normal business hours, upon reasonable prior
notice, in connection with the preparation of financial statements, reports
and filings and for any other reasonable purpose.
SECTION 13. AMENDMENT OF SECTION 6.24. Section 6.24 of the Agreement is
amended to read as follows:
6.24 Capital Expenditures. The Company agrees to cause Cable to make
capital expenditures in the ordinary course of business including line
extensions (the "Ordinary Course Expenditures"); provided, however, that
such Ordinary Course Expenditures shall not include upgrades or rebuilds.
In addition, Cable is permitted, but not required, to make up to
$43,200,000 in capital expenditures for upgrades and rebuilds to be
mutually agreed by the Company and Acquiror. The amount of capital
expenditures made after November 1, 1995 and before the Effective Time by
Cable for upgrades and rebuilds in accordance with the mutual agreement of
the Company and Acquiror, reduced by $4,600,000 and subject to appropriate
adjustments for minority interests, if any, is referred to herein as the
"Capital Expenditure Amount" and such amount shall not include any Ordinary
Course Expenditures.
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SECTION 14. AMENDMENT OF SECTION 6.25 OF THE AGREEMENT. Section 6.25 of
the Agreement is amended to read as follows:
6.25 Excess Cash. From time to time, after the date of execution of
this Agreement and until the Effective Time, and subject to applicable law,
(i) the Cable Subsidiaries and the Cable Partnerships may pay cash
dividends, or otherwise make cash distributions, to the Company or any of
its Subsidiaries and (ii) the Company may contribute to SHI cash held by
the Company. Immediately prior to the Distribution, the Cable Subsidiaries
and the Cable Partnerships shall, to the extent permitted by law and by the
partnership agreement governing SCT, pay dividends in cash or cash
equivalents, or otherwise make contributions in cash or cash equivalents,
to the Company or its Subsidiaries so that none of the Cable Subsidiaries
and none of the Cable Partnerships owns any cash or cash equivalents at the
Effective Time.
SECTION 15. ADDITION OF SECTIONS 6.32, 6.33, 6.34, 6.35 AND 6.36 TO THE
AGREEMENT. The following Sections 6.32, 6.33, 6.34, 6.35 and 6.36 are hereby
added to the Agreement:
6.32 SHI Liability for Insurance Claims. In connection with the
Contribution, SHI shall assume and shall indemnify and hold harmless
Acquiror and its Subsidiaries in respect of, any Loss arising from or
relating to any event occurring, or any set of circumstances existing, on
or prior to the Effective Time (without regard to whether a claim with
respect thereto was made prior to the Effective Time) if such event or set
of circumstances is or was an insured or covered event or set of
circumstances under any insurance policy or self insurance arrangement of
the Company or any of its Subsidiaries. For the purpose of determining
whether an event or set of circumstances was an insured or covered event,
any deductible, coinsurance, policy limit or other similar arrangement or
limitation shall be disregarded. The indemnification arrangements set forth
in this Section 6.32 shall be subject to the procedures set forth in
Section 2.04 of the Contribution Agreement.
6.33 Rule 145 Affiliates. Prior to the Effective Time, the Company
will deliver to the Acquiror (i) a list identifying all Persons who to the
knowledge of the Company are or may be deemed to be "affiliates" of the
Company under Rule 145 under the Securities Act and (ii) an agreement in
form and substance reasonably satisfactory to Acquiror pursuant to which
each such Person acknowledges his responsibilities as such an affiliate
under Rule 145.
6.34 Environmental Liabilities. Notwithstanding anything to the
contrary in the Agreement or this Amendment, SHI shall indemnify and hold
harmless Acquiror and its Subsidiaries in respect of any Loss incurred or
suffered by Acquiror or any of its Subsidiaries (including without
limitation all reasonable costs and expenses of investigation by engineers,
environmental consultants and similar technical personnel) arising from or
relating to (i) any event occurring, or any set of circumstances or
conditions existing, prior to the Effective Time and (ii) any violation of
or noncompliance with any Environmental Laws, with respect to the
environmental matters listed on Schedules 6.34(a), 6.34(b) and 6.34(c). The
indemnification arrangements set forth in this Section 6.34 with respect to
the matters set forth in Schedule 6.34(a) shall survive for five years
after the Effective Time, with respect to the matters set forth in Schedule
6.34(b) shall survive for one year after the Effective Time and with
respect to matters set forth in Schedule 6.34(c) shall survive for three
years after the Effective Time; and all such arrangements shall be subject
to the procedures set forth in Section 6.35. The indemnification for
matters set forth in Schedule 6.34(a) shall be limited to $500,000 in the
aggregate and the indemnification for matters set forth in Schedules
6.34(b) and (c) shall be limited to $100,000 in the aggregate. For purposes
of this Section 6.34, the definition of "Environmental Laws" shall mean
Environmental Laws in effect as of the Effective Time.
6.35 Environmental Procedures. With respect to environmental matters
for which SHI is potentially obligated to indemnify the Acquiror and its
Subsidiaries under Section 6.34 above, and subject to the limitations
provided with respect to the indemnification provided in Section 6.34
above, Acquiror and its Subsidiaries shall have the option to retain
exclusive control of the resolution of any such environmental matter,
including without limitation the exclusive option to (i) conduct and obtain
any tests, reports,
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surveys and investigations, (ii) contact governmental authorities, make any
reports to such authorities, submit any cleanup, remediation or compliance
plans to such authorities, negotiate with such authorities, and otherwise
deal with such authorities, provided that Acquiror shall use reasonable
efforts to keep the costs of any such remediation, cleanup, correction or
compliance reasonable (iii) prepare any work plan for any cleanup,
remediation or correction or noncompliance, and (iv) conduct or direct any
such cleanup, remediation or correction of noncompliance; provided that
Acquiror or its Subsidiaries shall, prior to initiating any activity
relating to any such environmental matter, provide SHI with a reasonably
detailed description of the proposed activity and a reasonable period of
time, given the specific circumstances, to permit SHI to comment on such
proposed activity. SHI shall reimburse the Acquiror or its Subsidiaries for
any reasonable out-of-pocket expenses incurred by Acquiror or its
Subsidiaries for any such environmental matter covered by Section 6.34.
6.36 SHI Liability for Certain Third-Party Rights.
(a) SHI shall indemnify and hold harmless Acquiror and its
Subsidiaries in respect of any Loss arising from or related to the
existence of the contractual rights referred to in Section 4.03 of certain
third parties ("Mini Systems") with respect to TCC's cable systems in the
cities of Chamblee and Doraville, Georgia, and in the County of Dekalb,
Georgia, except any Loss due to the negligence or willful misconduct of
Acquiror or any of its Subsidiaries after the Closing; provided that any
act or omission of Acquiror or any of its Subsidiaries that is consistent
with the past practices of SHI and its Subsidiaries with respect to the
Mini Systems prior to the Closing will not constitute negligence or willful
misconduct.
(b) Comcast shall, at the written request of Scripps, cooperate in any
effort made at any time after the Closing by Scripps to arrange for
Comcast's purchase of any Mini System and shall execute and deliver all
documents needed to effect such purchase upon receipt from Scripps of funds
to pay the purchase price of such system; provided that such documents must
be reasonably satisfactory to Comcast. Comcast's cooperation hereunder will
include, but not be limited to, furnishing to Scripps such financial and
other information concerning such Mini System as Scripps reasonably
requests in connection with any offer or negotiation for the purchase of
such Mini System.
From and after the Closing, Comcast may purchase for its own account
any Mini System, and Scripps will reimburse Comcast for the full amount of
the purchase price of such Mini System so long as Comcast has received
Scripps' written consent with respect thereto in advance of the purchase by
Comcast of such system. If the purchase of any Mini System or the documents
executed by Comcast in connection with such purchase shall result in any
liability on the part of Comcast or any of its Subsidiaries, such liability
will be treated as a Loss in respect of which Comcast and its Subsidiaries
will be indemnified pursuant to the terms of this Section 6.36.
(c) Promptly upon written request from Scripps given to Comcast at any
time or from time to time after the Closing, Comcast shall cooperate in any
reasonable effort made by Scripps or by Scripps' designee to terminate,
cancel, not renew, notify, foreclose upon, file suit on, or take any other
action on behalf of Comcast or any of its Subsidiaries with respect to any
and all notes, security interests or other interests, contractual
arrangements, rights, or obligations of any third party, with respect to
any Mini System. Such cooperation will include, without limitation, the
prompt execution and delivery in accordance with Scripps' written
instructions of any and all documents and instruments, in form and
substance reasonably satisfactory to Comcast, which Scripps may reasonably
deem necessary or expedient to effect such termination, cancellation,
non-renewal, notification, foreclosure, suit, or other action but shall not
include any action that could materially adversely affect Comcast or any of
its Subsidiaries.
If any such termination, cancellation, non-renewal, foreclosure,
notification, filing of suit or other action, or any such documents
executed and delivered by Comcast in connection therewith, shall result in
any liability on the part of Comcast or any of its Subsidiaries, such
liability will be treated as a Loss in respect of which Comcast and its
Subsidiaries shall be indemnified pursuant to the terms of this Section
6.36.
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SECTION 16. AMENDMENT OF SECTIONS 7.04(C) AND (D) OF THE
AGREEMENT. Sections 7.04(c) and 7.04(d) of the Agreement are amended to read as
follows:
(c) Immediately prior to the Effective Time, the Company shall have no
assets except the Retained Assets;
(d) Immediately prior to the Effective Time, the Company shall have no
liabilities except the Retained Liabilities;
SECTION 17. AMENDMENT OF SECTION 9.01 OF THE AGREEMENT. Section 9.01 of
the Agreement is amended to read as follows:
9.01 Survival of Representations and Warranties. The representations
and warranties contained herein shall not survive beyond the Closing Date
except that the representations and warranties of SHI in Sections 3.05 and
4.03, the second sentence of Section 6.27(b) and the certification of SHI
delivered pursuant to Section 7.04(f) shall survive indefinitely and SHI
shall indemnify the Acquiror and its Subsidiaries, including Cable, in
respect of any diminution in value or Losses incurred as a result of any
breach thereof. This Section 9.01 shall not limit any covenant or agreement
of the parties hereto which provides for indemnification or which by its
terms may require performance after the Closing Date, including, but not
limited to those covenants and agreements contained in Sections 1.02(e),
6.06(g), 6.10, 6.12, 6.13, 6.27, 6.32, 6.34, 6.35, 6.36 and 7.06 hereof.
Except as otherwise set forth herein, the indemnity set forth in this
Section 9.01 shall be subject to the procedures set forth in Section 2.04
of the Contribution Agreement, and SHI shall not seek contribution from the
Company or any of its Subsidiaries or any of its or their respective
officers or directors in respect thereof.
SECTION 18. AMENDMENT OF ARTICLE X OF THE AGREEMENT. Article X of the
Agreement is amended by adding the following definitions to such Article:
"Basic Service" means any service tier which includes the
retransmission of local television broadcast signals, as defined in 47
U.S.C. Section 522(3).
"Retained Assets" has the meaning set forth in Section 2.02(a).
"Retained Liabilities" has the meaning set forth in Section 2.02(b).
SECTION 19. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of Delaware.
SECTION 20. COUNTERPARTS. This Amendment may be signed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
THE E.W. SCRIPPS COMPANY
By___________________________
Name: William R. Burleigh
Title: President and Chief
Executive Officer
SCRIPPS HOWARD, INC.
By___________________________
Name: William R. Burleigh
Title: President and Chief
Executive Officer
COMCAST CORPORATION
By___________________________
Name: Robert S. Pick
Title: Vice President
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EXHIBIT A
THE E.W. SCRIPPS COMPANY
CHARTER AMENDMENT
Section 3 of Division B of Article III of the Company's Certificate of
Incorporation shall be amended to read as follows:
3. DIVIDENDS AND DISTRIBUTIONS. At any time shares of Common Voting Stock
are outstanding, as and when dividends or other distributions payable in either
cash, capital stock of the Corporation (other than Class A Common Stock or
Common Voting Stock) or other property (other than as provided in the last
sentence of this Section 3) of the Corporation may be declared by the board of
directors, the amount of any such dividend payable on each share of Class A
Common Stock shall be equal in all cases to the amount of such dividend payable
on each share of Common Voting Stock, and the amount of any such dividend
payable on each share of Common Voting Stock shall be equal in all cases to the
amount of the dividend payable on each share of Class A Common Stock. Dividends
and distributions payable in shares of Common Voting Stock may not be made on or
to shares of any class of the Corporation's capital stock other than the Common
Voting Stock and dividends payable in shares of Class A Common Stock may not be
made on or to shares of any class of the Corporation's capital stock other than
the Class A Common Stock. If a dividend or distribution payable in shares of
Class A Common Stock shall be made on the shares of Class A Common Stock, a
dividend or distribution payable in shares of Common Voting Stock shall be made
simultaneously on the shares of Common Voting Stock, and the number of shares of
Common Voting Stock payable on each share of Common Voting Stock pursuant to
such dividend or distribution shall be equal to the number of shares of Class A
Common Stock payable on each share of Class A Common Stock pursuant to such
dividend or distribution. In the case of any dividend or other distribution
payable in stock of Scripps Howard, Inc., an Ohio corporation and wholly-owned
subsidiary of the Corporation ("New Scripps"), including a distribution pursuant
to a spinoff reorganization of the Corporation, only Class A Common Shares of
New Scripps shall be distributed with respect to Class A Common Stock and only
Common Voting Shares of New Scripps shall be distributed with respect to Common
Voting Stock.
<PAGE> 192
EXHIBIT B
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
SCRIPPS HOWARD, INC.
FIRST: NAME. The name of the Corporation is Scripps Howard, Inc. (the
"Corporation").
SECOND: PRINCIPAL OFFICE. The place in the State of Ohio where the
principal office of the Corporation is to be located is Cincinnati, Hamilton
County.
THIRD: PURPOSE. The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be formed under Sections 1701.01 to
1701.98, inclusive, of the Ohio Revised Code.
FOURTH: CLASSES AND NUMBER OF SHARES. The total number of shares of all
classes of stock that the Corporation shall have authority to issue is
175,000,000 shares. The classes and the aggregate number of shares of stock of
each class that the Corporation shall have authority to issue are as follows:
(i) 30,000,000 Common Voting Shares, $0.01 par value ("Common Voting
Shares").
(ii) 120,000,000 Class A Common Shares, $0.01 par value ("Class A Common
Shares").
(iii) 25,000,000 Preferred Shares, $0.01 par value ("Preferred Shares").
The 750 Common Shares, without par value, of the Corporation heretofore
authorized, issued and outstanding are hereby changed into 375 Common Voting
Shares and 375 Class A Common Shares.
A. POWERS AND RIGHTS OF THE COMMON VOTING SHARES AND THE CLASS A COMMON
SHARES.
1. Election of Directors. Holders of Class A Common Shares, voting
separately and as a class, shall be entitled to elect the greater of three or
one-third (or the nearest smaller whole number if the aforesaid fraction is not
a whole number) of the directors of the Corporation to be elected from time to
time except directors, if any, to be elected by holders of Preferred Shares or
any series thereof; and holders of Common Voting Shares, voting separately and
as a class, shall be entitled to elect the balance of such directors.
2. Other Matters. Except as provided in this Article FOURTH with respect to
Class A Common Shares or in any resolution providing for the issue of Preferred
Shares or any series thereof, and as otherwise required by the Ohio Revised
Code, the entire voting power shall be vested solely and exclusively in the
holders of the Common Voting Shares, the holders of Common Voting Shares to be
entitled to one vote for each Common Voting Share held by them upon all matters
requiring a vote of shareholders of the Corporation, and the holders of
Preferred Shares or any series thereof or Class A Common Shares shall have no
voting power and shall not have the right to participate in any meeting of
shareholders or to have notice thereof. The number of authorized Class A Common
Shares may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of the
outstanding Common Voting Shares.
3. Dividends and Distributions. At any time Common Voting Shares are
outstanding, as and when dividends or other distributions payable in either
cash, capital stock of the Corporation (other than Class A Common Shares or
Common Voting Shares) or other property of the Corporation may be declared by
the Board of Directors, the amount of any such dividend payable on each of the
Class A Common Shares shall be equal in all cases to the amount of such dividend
payable on each of the Common Voting Shares, and the amount of any such dividend
payable on each of the Common Voting Shares shall be equal in all cases to the
amount of the dividend payable on each of the Class A Common Shares. Dividends
and distributions payable in Common Voting Shares may not be made on or to
shares of any class of the Corporation's capital stock
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other than the Common Voting Shares and dividends payable in Class A Common
Shares may not be made on or to shares of any class of the Corporation's capital
stock other than the Class A Common Shares. If a dividend or distribution
payable in Class A Common Shares shall be made on the Class A Common Shares, a
dividend or distribution payable in Common Voting Shares shall be made
simultaneously on the Common Voting Shares, and the number of Common Voting
Shares payable on each of the Common Voting Shares pursuant to such dividend or
distribution shall be equal to the number of Class A Common Shares payable on
each of the Class A Common Shares pursuant to such dividend or distribution.
In the case of any dividend or other distribution payable in stock of any
corporation which just prior to the time of the distribution is a wholly owned
subsidiary of the Corporation and which possesses authority to issue class A
common shares and common voting shares with voting characteristics identical to
those of the Class A Common Shares and the Common Voting Shares, respectively,
provided in these Amended and Restated Articles of Incorporation, including a
distribution pursuant to a stock dividend, a stock split or division of stock of
the Corporation, or a spin-off or split-up reorganization of the Corporation,
only class A common shares of such subsidiary shall be distributed with respect
to Class A Common Shares and only common voting shares of such subsidiary shall
be distributed with respect to Common Voting Shares.
4. Distribution of Assets Upon Liquidation. In the event the Corporation
shall be liquidated, dissolved or wound up, whether voluntarily or
involuntarily, after there shall have been paid or set aside for the holders of
all Preferred Shares then outstanding the full preferential amounts to which
they are entitled under the resolutions authorizing the issuance of such
Preferred Shares, the net assets of the Corporation remaining shall be divided
among the holders of the Class A Common Shares and Common Voting Shares in such
a manner that the amount of such net assets distributed to each of the Class A
Common Shares shall be equal to the amount of such assets distributed to each of
the Common Voting Shares.
5. Issuance of Common Voting Shares. Common Voting Shares may only be
issued (i) in accordance with and pursuant to the terms of the Contribution and
Assumption Agreement to be entered into by and between the Corporation and The
E.W. Scripps Company, a Delaware corporation ("EWSCO"), pursuant to the
Agreement and Plan of Merger among EWSCO, the Corporation and Comcast
Corporation, a Pennsylvania corporation, dated October 28, 1995, as it may be
amended, or (ii) in the form of a distribution or distributions pursuant to a
stock dividend or division or split-up of the Common Voting Shares and only then
in respect of the issued Common Voting Shares.
6. Preemptive Rights of Common Voting Shares. Holders of shares of Common
Voting Shares shall have the preemptive right to subscribe to any additional
issue of stock of any class of the Corporation or any series thereof that by its
express terms and provisions grants general, continuous and unconditional voting
rights to the holders thereof and to any class of securities of the Corporation
convertible into any such stock or series thereof. Except as set forth in the
first sentence of this Section 6, no holder of shares of the Corporation of any
class shall be entitled as such, as a matter of right, to subscribe for or
purchase shares of any class, now or hereafter authorized, or to subscribe for
or purchase securities convertible into or exchangeable for shares of the
Corporation or to which shall be attached or appertain any warrants or rights
entitling the holder thereof to subscribe for or purchase shares, except such
rights of subscription or purchase, if any, for such considerations and upon
such terms and conditions as its Board of Directors from time to time may
determine.
7. Conversion of Common Voting Shares. Each Common Voting Share may at any
time be converted at the election of the holder thereof into one Class A Common
Share. Any holder of Common Voting Shares may elect to convert any or all of
such shares at one time or at various times in such holder's discretion. Such
right shall be exercised by the surrender of the certificate representing each
Common Voting Share to be converted to the Corporation at its principal
executive offices, accompanied by a written notice of the election by the holder
thereof to convert and (if so required by the Corporation) by instruments of
transfer, in form satisfactory to the Corporation, duly executed by such holder
or his duly authorized attorney. The issuance of a certificate or certificates
for the Class A Common Shares upon conversion of Common Voting Shares shall be
made without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate or certificates are to be issued in a
name other than that of the holder of Common Voting Shares to
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be converted, the person or persons requesting the issuance thereof shall pay to
the Corporation the amount of any tax which may be payable in respect of any
such transfer, or shall establish to the satisfaction of the Corporation that
such tax has been paid. As promptly as practicable after the surrender for
conversion of a certificate or certificates representing Common Voting Shares
and the payment of any tax as hereinabove provided, the Corporation will deliver
to, or upon the written order of, the holder of such certificate or
certificates, a certificate or certificates representing the number of Class A
Common Shares issuable upon such conversion, issued in such name or names as
such holder may direct. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of the surrender of the
certificate or certificates representing Common Voting Shares (or, if on such
date the transfer books of the Corporation shall be closed, then immediately
prior to the close of business on the first date thereafter that such books
shall be open), and all rights of such holder arising from ownership of Common
Voting Shares shall cease at such time, and the person or persons in whose name
or names the certificate or certificates representing Class A Common Shares are
to be issued shall be treated for all purposes as having become the record
holder or holders of such Class A Common Shares at such time and shall have and
may exercise all the rights and powers appertaining thereto. No adjustments in
respect of past cash dividends shall be made upon the conversion of any Common
Voting Shares; provided that if any Common Voting Shares shall be converted into
Class A Common Shares subsequent to the record date for the payment of a
dividend or other distribution on Common Voting Shares but prior to such
payment, the registered holder of such Common Voting Shares at the close of
business on such record date shall be entitled to receive on the payment date,
with respect to the Class A Common Shares received upon such conversion, the
dividend or other distribution which would have been payable had such Class A
Common Shares been outstanding and held of record on such dividend record date
by the registered holder on such dividend record date of the Common Voting
Shares so converted in lieu of the dividend otherwise payable on the Common
Voting Shares so converted. The Corporation shall at all times reserve and keep
available, solely for the purpose of issuance upon conversion of outstanding
Common Voting Shares, such number of Class A Common Shares as may be issuable
upon the conversion of all such outstanding Common Voting Shares; provided that
the Corporation may deliver Class A Common Shares which are held in the treasury
of the Corporation for any Common Voting Shares to be converted. If registration
with or approval of any governmental authority under any federal or state law is
required before such Class A Common Shares may be issued upon such conversion,
the Corporation will endeavor to cause such shares to be duly registered or
approved, as the case may be. The Corporation will endeavor to list Class A
Common Shares required to be delivered upon conversion prior to such delivery
upon any national securities exchange or national market system on which the
outstanding Class A Common Shares may be listed at the time of such delivery.
All Class A Common Shares which may be issued upon conversion of Common Voting
Shares will, upon issuance, be fully paid and nonassessable. The aggregate
amount of stated capital represented by Class A Common Shares issued upon
conversion of Common Voting Shares shall be the same as the aggregate amount of
stated capital represented by the Common Voting Shares so converted. When Common
Voting Shares have been converted, they shall have the status of retired shares.
8. Other Rights. Except as otherwise required by the Ohio Revised Code or
as otherwise provided in these Amended and Restated Articles of Incorporation,
each Class A Common Share and each Common Voting Share shall have identical
powers, preferences and rights.
B. POWERS AND RIGHTS OF THE PREFERRED SHARES. The Preferred Shares shall
have the following express terms:
1. Series. The Preferred Shares may be issued from time to time in one or
more series. All Preferred Shares shall be of equal rank and shall be identical,
except in respect of the matters that may be fixed by the Board of Directors as
hereinafter provided, and each share of a series shall be identical with all
other shares of such series, except as to the dates from which dividends shall
accrue and be cumulative. Subject to the provisions of Sections 2 through 6,
inclusive, which provisions shall apply to all Preferred Shares, the Board of
Directors hereby is authorized to cause such shares to be issued in one or more
series and with respect to each such series to determine and fix prior to the
issuance thereof (and thereafter, to the extent provided in clause
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(b) of this Section) those rights, preferences and terms that maybe fixed by the
Board of Directors, including the following:
(a) The designation of the series, which may be by distinguishing number,
letter or title;
(b) The authorized number of shares of the series, which number the Board
of Directors may (except where otherwise provided in the creation of the series)
increase or decrease from time to time before or after the issuance thereof (but
not below the number of shares thereof then outstanding);
(c) The dividend rate or rates of the series, including the means by which
such rates may be established;
(d) The date or dates from which dividends shall accrue and be cumulative
and the dates on which and the period or periods for which dividends, if
declared, shall be payable, including the means by which such dates and periods
may be established;
(e) The redemption rights and price or prices, if any, for shares of the
series;
(f) The terms and amount of the sinking fund, if any, for the purchase or
redemption of shares of the series;
(g) The amounts payable on shares of the series in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the affairs
of the Corporation;
(h) Whether the shares of the series shall be convertible into Class A
Common Shares or Common Voting Shares (the Class A Common Shares and Common
Voting Shares being referred to hereinafter in this Division B collectively as
the "Common Shares") or shares of any other class and, if so, the conversion
rate or rates or price or prices, any adjustments thereof and all other terms
and conditions upon which such conversion may be made; and
(i) Restrictions, if any, on the issuance of shares of the same series or
of any other class or series.
The Board of Directors is authorized to adopt from time to time amendments
to the Amended and Restated Articles of Incorporation fixing, with respect to
each such series, the matters described in clauses (a) through (i), inclusive,
of this Section and is authorized to take such actions with respect thereto as
may be required or permitted by law in order to effect such amendments.
2. Dividends.
(a) The holders of Preferred Shares of each series, in preference to the
holders of Common Shares and of any other class of shares ranking junior to the
Preferred Shares, shall be entitled to receive out of any funds legally
available therefor, and when and as declared by the Board of Directors,
dividends in cash at the rate or rates for such series fixed in accordance with
the provisions of Section 1 of this Division B and no more, payable on the dates
fixed for such series. Such dividends shall accrue and be cumulative, in the
case of shares of a particular series, from and after the date or dates fixed
with respect to such series. No dividends shall be paid upon or declared or set
apart for any series of the Preferred Shares for any dividend period unless at
the same time a like proportionate dividend for the dividend periods terminating
on the same or any earlier date, ratably in proportion to the respective
dividend rates fixed therefor, shall have been paid upon or declared or set
apart for all Preferred Shares of all series then issued and outstanding and
entitled to receive such dividend.
(b) So long as any Preferred Shares shall be outstanding no dividend,
except a dividend payable in Common Shares or other shares ranking junior to the
Preferred Shares, shall be paid or declared or any distribution be made, except
as aforesaid, in respect of the Common Shares or any other shares ranking junior
to the Preferred Shares, nor shall any Common Shares or any other shares ranking
junior to the Preferred Shares be purchased, retired or otherwise acquired by
the Corporation, except out of the proceeds of the sale of Common Shares or
other shares of the Corporation ranking junior to the Preferred Shares received
by the Corporation subsequent to the date of first issuance of Preferred Shares
of any series, unless:
(1) All accrued and unpaid dividends on Preferred Shares, including the
full dividends for all current dividend periods, shall have been declared and
paid or a sum sufficient for payment thereof set apart; and
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(2) There shall be no arrearages with respect to the redemption of
Preferred Shares of any series from any sinking fund provided for shares of such
series in accordance with the provisions of Section 1 of this Division.
3. Redemption.
(a) Subject to the express terms of each series, the Corporation:
(1) May, from time to time, at the option of the Board of Directors, redeem
all or any part of any redeemable series of Preferred Shares at the time
outstanding at the applicable redemption price for such series fixed in
accordance with the provisions of Section 1 of this Division; and
(2) Shall, from time to time, make such redemptions of each series of
Preferred Shares as may be required to fulfill the requirements of any sinking
fund provided for shares of such series at the applicable sinking fund
redemption price fixed in accordance with the provisions of Section 1 of this
Division;
and shall in each case pay all accrued and unpaid dividends to the
redemption date.
(b) (1) Notice of every such redemption shall be mailed, postage prepaid,
to the holders of record of the Preferred Shares to be redeemed at their
respective addresses then appearing on the books of the Corporation, not less
than 30 days nor more than 60 days prior to the date fixed for such redemption,
or such other time prior thereto as the Board of Directors shall fix for any
series pursuant to Section 1 of this Division prior to the issuance thereof. At
any time after notice as provided above has been deposited in the mail, the
Corporation may deposit the aggregate redemption price of Preferred Shares to be
redeemed, together with accrued and unpaid dividends thereon to the redemption
date, with any bank or trust company having capital and surplus of not less than
$100,000,000, named in such notice and direct that there be paid to the
respective holders of the Preferred Shares so to be redeemed amounts equal to
the redemption price of the Preferred Shares so to be redeemed, together with
such accrued and unpaid dividends thereon, on surrender of the share certificate
or certificates held by such holders; and upon the deposit of such notice in the
mail and the making of such deposit of money with such bank or trust company,
such holders shall cease to be shareholders with respect to such shares; and
from and after the time such notice shall have been so deposited and such
deposit of money shall have been so made, such holders shall have no rights or
claim against the Corporation with respect to such shares, except only the right
to receive such money from such bank or trust company without interest or to
exercise before the redemption date any unexpired privileges of conversion. In
the event less than all of the outstanding Preferred Shares are to be redeemed,
the Corporation shall select by lot the shares so to be redeemed in such manner
as shall be prescribed by the Board of Directors.
(2) If the holders of Preferred Shares which have been called for
redemption shall not within six years after such deposit claim the amount
deposited for the redemption thereof, any such bank or trust company shall, upon
demand, pay over to the Corporation such unclaimed amounts and thereupon such
bank or trust company and the Corporation shall be relieved of all
responsibility in respect thereof and to such holders.
(c) Any Preferred Shares which are (1) redeemed by the Corporation pursuant
to the provisions of this Section, (2) purchased and delivered in satisfaction
of any sinking fund requirements provided for shares of such series, (3)
converted in accordance with the express terms thereof, or (4) otherwise
acquired by the Corporation, shall resume the status of authorized but unissued
Preferred Shares without serial designation.
4. Liquidation.
(a) (1) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the Corporation, the holders of
Preferred Shares of any series shall be entitled to receive in full out of the
assets of the Corporation, including its capital, before any amount shall be
paid or distributed among the holders of the Common Shares or any other shares
ranking junior to the Preferred Shares, the amounts fixed with respect to shares
of such series in accordance with Section 1 of this Division, plus an amount
equal to all dividends accrued and unpaid thereon to the date of payment of the
amount due pursuant to such liquidation, dissolution or winding up of the
affairs of the Corporation. In the event the net assets of the Corporation
legally available therefor are insufficient to permit the payment upon all
outstanding Preferred Shares of the
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full preferential amount to which they are respectively entitled, then such net
assets shall be distributed ratably upon all outstanding Preferred Shares, in
proportion to the full preferential amount to which each such share is entitled.
(2) After payment to the holders of Preferred Shares of the full
preferential amounts as aforesaid, the holders of Preferred Shares, as such,
shall have no right or claim to any of the remaining assets of the Corporation.
(b) The merger or consolidation of the Corporation into or with any other
corporation, the merger of any other corporation into it, or the sale, lease or
conveyance of all or substantially all the assets of the Corporation, shall not
be deemed to be a dissolution, liquidation or winding up for the purposes of
this Section.
Section 5. VOTING. Holders of Preferred Shares shall have no voting
rights, except as otherwise from time to time required by law.
Section 6. DEFINITIONS. For the purpose of this Division:
(a) Whenever reference is made to shares "ranking prior to the Preferred
Shares," such reference shall mean and include all shares of the Corporation in
respect of which the rights of the holders thereof as to the payment of
dividends or as to distributions in the event of a voluntary or involuntary
liquidation, dissolution or winding up of the affairs of the Corporation are
given preference over the rights of the holders of Preferred Shares;
(b) Whenever reference is made to shares "on a parity with the Preferred
Shares," such reference shall mean and include all other shares of the
Corporation in respect of which the rights of the holders thereof as to the
payment of dividends or as to distributions in the event of a voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation rank equally (except as to the amounts fixed therefor) with the
rights of the holders of Preferred Shares; and
(c) Whenever reference is made to shares "ranking junior to the Preferred
Shares," such reference shall mean and include all shares of the Corporation
other than those defined under Subsections (a) and (b) of this Section as shares
"ranking prior to" or "on a parity with" the Preferred Shares.
C. ISSUANCE OF THE COMMON SHARES AND THE PREFERRED SHARES.
The Board of Directors of the Corporation may from time to time authorize
by resolution the issuance of any or all of the Common Shares and the Preferred
Shares herein authorized in accordance with the terms and conditions set forth
in these Amended and Restated Articles of Incorporation for such purposes, in
such amounts, to such persons, corporations, or entities, for such
consideration, and in the case of the Preferred Shares, in one or more series,
all as the Board of Directors in its discretion may determine and without any
vote or other action by the shareholders, except as otherwise required by law.
FIFTH: SHARE OWNERSHIP.
A. REQUESTS FOR INFORMATION. So long as the Corporation or any of its
subsidiaries holds authority from the Federal Communications Commission ("FCC")
(or any successor thereto) to operate any television or radio broadcasting
station, if the Corporation has reason to believe that the ownership, or
proposed ownership, of shares of capital stock of the Corporation by any
shareholder or any person presenting any shares of capital stock of the
Corporation for transfer into his name (a "Proposed Transferee") may be
inconsistent with, or in violation of, any provision of the Federal
Communication Laws (as hereinafter defined) such shareholder or Proposed
Transferee, upon request of the Corporation, shall furnish promptly to the
Corporation such information (including, without limitation, information with
respect to citizenship, other ownership interests and affiliations) as the
Corporation shall reasonably request to determine whether the ownership of, or
the exercise of any rights with respect to, shares of capital stock of the
Corporation by such shareholder or Proposed Transferee is inconsistent with, or
in violation of, the Federal Communication Laws. For purposes of this Article
FIFTH, the term "Federal Communication Laws" shall mean any law of the United
States now or
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hereafter in effect (and any regulation thereunder) pertaining to the ownership
of, or the exercise of rights of ownership with respect to, capital stock of
corporations holding, directly or indirectly, television or radio station
authorizations, including, without limitation, the Communications Act of 1934,
as amended (the "Communications Act"), and regulations thereunder pertaining to
the ownership, or the exercise of the rights of ownership, of capital stock of
corporations holding, directly or indirectly, television or radio station
authorizations, by (i) aliens, as defined in or under the Communications Act, as
it may be amended from time to time, (ii) persons and entities having interests
in television or radio stations, newspapers, and cable television systems or
(iii) persons or entities, unilaterally or otherwise, seeking direct or indirect
control of the Corporation, as construed under the Communications Act, without
having obtained any requisite prior Federal regulatory approval of such control.
B. DENIAL OF RIGHTS; REFUSAL TO TRANSFER. If any shareholder or Proposed
Transferee from whom information is requested should fail to respond to such
request pursuant to Division A of this Article FIFTH or the Corporation shall
conclude that the ownership of, or the exercise of any rights of ownership with
respect to, shares of capital stock of the Corporation by such shareholder or
Proposed Transferee, could result in any inconsistency with or violation of the
Federal Communication Laws, the Corporation may refuse to permit the transfer of
shares of capital stock of the Corporation to such Proposed Transferee or may
suspend those rights of stock ownership the exercise of which would result in
any inconsistency with, or violation of, the Federal Communication Laws, such
refusal of transfer or suspension to remain in effect until the requested
information has been received or until the Corporation has determined that such
transfer, or the exercise of such suspended rights, as the case may be, is
permissible under the Federal Communication Laws; and the Corporation may
exercise any and all appropriate remedies, at law or in equity, in any court of
competent jurisdiction, against any such shareholder or Proposed Transferee,
with a view towards obtaining such information or preventing or curing any
situation which would cause any inconsistency with or violation of any provision
of the Federal Communication Laws.
C. LEGENDS. The Corporation may note on the certificates of its capital
stock that the shares represented by such certificates are subject to the
restrictions set forth in this Article FIFTH.
D. CERTAIN DEFINITIONS. For purposes of this Article, the word "person"
shall include not only natural persons but partnerships, associations,
corporations, limited liability companies, joint ventures and other entities,
and the word "regulation" shall include not only regulations but rules,
published policies and published controlling interpretations of an
administrative agency or body empowered to administer a statutory provision of
the Federal Communication Laws.
SIXTH: DELIBERATIONS OF DIRECTORS. The Board of Directors of the
Corporation, when evaluating any offer of another party to make a tender or
exchange offer for any equity security of the Corporation, to merge or
consolidate the Corporation with another corporation or to purchase or otherwise
acquire all or substantially all of the properties and assets of the
Corporation, shall, in connection with the exercise of its judgment in
determining what is in the best interests of the Corporation and its
shareholders, give due consideration to the effect of such a transaction on the
integrity, character and quality of the Corporation's operations, all other
relevant factors, including, without limitation, long-term as well as short-term
interests of the Corporation and shareholders (including, without limitation,
the possibility that these interests may be best served by the continued
independence of the Corporation), and the social, legal, and economic effects on
the employees, customers, suppliers and creditors of the Corporation and its
subsidiaries, on the communities and geographical areas in which the Corporation
and its subsidiaries operate or are located, and on any of the businesses and
properties of the Corporation or any of its subsidiaries, as well as such other
factors as the directors deem relevant.
SEVENTH: DIRECTORS' LIABILITY; INDEMNIFICATION.
A. RIGHT TO INDEMNIFICATION. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of the fact that he or she is or was a
director or officer of
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the Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation (including a
subsidiary of the Corporation) or of a partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans
(hereinafter an "indemnitee"), whether the basis of such proceeding is alleged
action in an official capacity as such a director, officer, employee, trustee or
agent, or in any other capacity while serving as such a director, officer,
employee, trustee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the Ohio Revised Code, as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and loss
(including, without limitation, attorneys' fees, judgments, fines, ERISA excise
taxes or penalties, and amounts paid in settlement) reasonably incurred or
suffered by such indemnitee in connection therewith, and such indemnification
shall continue as to an indemnitee who has ceased to be such a director,
officer, employee, trustee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators; provided, however, that,
except as provided in Division B of this Article SEVENTH with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such indemnitee in connection with a proceeding (or part thereof)
initiated by such indemnitee only if such proceeding (or part thereof) was
authorized by the board of directors of the Corporation. The right to
indemnification conferred in this Division B shall be a contract right and shall
include the right to be paid by the Corporation the expenses incurred in
defending any such proceeding in advance of its final disposition (hereinafter
an "advancement of expenses"); provided, however, that if the Ohio Revised Code
requires, an advancement of expenses incurred by an indemnitee in his or her
capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including, without limitation,
service to an employee benefit plan) shall be made only upon delivery to the
Corporation of an undertaking, by or on behalf of such indemnitee, to repay all
amounts so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such indemnitee is
not entitled to be indemnified for such expenses under this Section or otherwise
(hereinafter an "undertaking").
B. RIGHT OF INDEMNITEE TO BRING SUIT. If a claim for indemnification
pursuant to this Article SEVENTH is not paid in full by the Corporation within
sixty days after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the applicable
period shall be twenty days, the indemnitee may at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim. If
successful in whole or in part in any such suit or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms of an
undertaking, the indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In any suit brought by the indemnitee to
enforce a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and in any suit by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the indemnitee
has not met the applicable standard of conduct set forth in the Ohio Revised
Code. Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such a suit that indemnification of the indemnitee
is proper in the circumstances because the indemnitee has met the applicable
standard of conduct set forth in the Ohio Revised Code nor an actual
determination by the Corporation (including its Board of Directors, independent
legal counsel, or its stockholders) that the indemnitee has not met such
applicable standard of conduct shall create a presumption that the indemnitee
has not met the applicable standard of conduct or, in the case of such suit
brought by the indemnitee, be a defense to such suit. In any suit brought by the
indemnitee to enforce a right hereunder, or by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the burden of
proving that the indemnitee is not entitled to be indemnified or entitled to
such advancement of expenses under this Article SEVENTH or otherwise shall be on
the Corporation.
C. NON-EXCLUSIVITY OF RIGHTS. The rights to indemnification and advancement
of expenses conferred in this Article SEVENTH shall not be exclusive of any
other right that any person may have or hereafter acquire
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under any statute, certificate of incorporation, bylaw, agreement, vote of
stockholders or disinterested directors, or otherwise.
D. INSURANCE. The Corporation may purchase and maintain insurance, at its
expense, to protect itself and any director, officer, employee, trustee or agent
of the Corporation or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss, whether or not the
Corporation would have the power to indemnify such person against such expense,
liability or loss under the Ohio Revised Code.
E. INDEMNITY CONTRACTS. The Corporation may enter into contracts from time
to time with such of its directors, officers, agents or employees and providing
for such indemnification, insurance, and advancement of expenses as the Board of
Directors determines to be appropriate.
EIGHTH: Meetings of the shareholders of the Corporation may be called by
the chairman of the board or the president, or by a majority of the directors in
office acting at a meeting or by written consent, or by the holders of record of
fifty percent (50%) of the outstanding Common Voting Shares acting at a meeting
or by written consent.
NINTH: The provisions of Sections 1701.831 and 1707.43 and Chapter 1704 of
the Ohio Revised Code shall not apply to the Corporation.
TENTH: No shareholder of the Corporation may cumulate his voting power in
the election of directors.
ELEVENTH: Notwithstanding any provision of Sections 1701.01 to 1701.98,
inclusive, of the Ohio Revised Code, or any successor statutes now or hereafter
in force, requiring for the authorization or taking of any action the vote or
consent of the holders of shares entitling them to exercise two-thirds or any
other proportion of the voting power of the Corporation or of any class or
classes of shares thereof, such action, unless otherwise expressly required by
law or these Amended and Restated Articles of Incorporation, may be authorized
or taken by the vote or consent of the holders of shares entitling them to
exercise a majority of the voting power of the Corporation or of such class or
classes of shares thereof.
TWELFTH: To the extent permitted by law, the Corporation, by action of its
Board of Directors, may purchase or otherwise acquire shares of any class issued
by it at such times, for such consideration and upon such terms and conditions
as the board of directors may determine.
THIRTEENTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Amended and Restated Articles of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights and powers conferred herein upon shareholders, directors and officers are
subject to this reservation.
FOURTEENTH: These Amended and Restated Articles of Incorporation shall take
the place of and supersede the Corporation's existing Articles of Incorporation,
as amended.
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EXHIBIT C
FORM OF CONTRIBUTION AND ASSUMPTION AGREEMENT
This Contribution and Assumption Agreement (this "Agreement"), dated as of
, is made by and between The E.W. Scripps Company, a Delaware corporation
(the "Company"), and Scripps Howard, Inc., an Ohio corporation and wholly owned
subsidiary of the Company ("SHI").
RECITALS
WHEREAS, the Company, SHI and Comcast Corporation, a Pennsylvania
corporation ("Acquiror"), are parties to that certain Agreement and Plan of
Merger dated as of October 28, 1995 (the "Merger Agreement") pursuant to which,
among other things, the Company has agreed to contribute to SHI all of the
assets of the Company, except the capital stock of SH Cable and certain other
assets pursuant to the terms of this Agreement, as a step in a series of
transactions as a result of which (i) Acquiror will acquire Cable by merging the
Company with and into Acquiror and (ii) SHI will conduct the business previously
conducted by the Company (other than the operations of Cable).
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the parties hereto agree as follows:
ARTICLE I
CONTRIBUTION AND ASSUMPTION
1.01 Contribution of Assets.
(a) Subject to Section 1.01(b), the Company hereby contributes, grants,
conveys, assigns, transfers and delivers to SHI without recourse (the
"Contribution") all the Company's right, title and interest in and to any and
all assets of the Company, whether tangible or intangible and whether fixed,
contingent or otherwise, including, without limitation, the capital stock of all
corporations other than SH Cable, the names "E.W. Scripps," "Scripps," and
"Scripps Howard," and the initials "EWS" and "SH," all real property, furniture,
fixtures, equipment, tools, vehicles, supplies, buildings, improvements,
accounts receivable, notes, prepaid expenses, securities, trademarks, trade
names, leases and contract rights, wherever located (collectively, the
"Contributed Assets").
(b) Notwithstanding Section 1.01(a), the Company hereby retains and does
not contribute, grant, convey, assign, transfer or deliver to SHI (i) the issued
and outstanding capital stock of SH Cable, (ii) any rights of the Company
created by the Merger Agreement or this Agreement, and (iii) the Company's
rights under the confidentiality agreements (the "Confidentiality Agreements")
identified in Appendix A hereto (collectively, the "Retained Assets").
(c) Notwithstanding anything contained in this Agreement or in the Merger
Agreement to the contrary, SHI acknowledges and agrees that the Company makes
and has made no warranty, either express or implied, including without
limitation warranties of merchantability or fitness for a particular purpose,
with respect to any Contributed Assets.
1.02 Assumption of Liabilities.
(a) Subject to Sections 1.02(b) and 1.07 hereof, SHI, in partial
consideration for the Contribution, hereby unconditionally assumes and agrees to
pay, satisfy and discharge any and all liabilities of the Company of every kind
whatsoever, whether absolute, known, unknown, fixed, contingent or otherwise,
that exist as of the date hereof or exist as of, or otherwise relate to any
period ending on or prior to, the Effective Time (the "Assumed Liabilities").
(b) Notwithstanding Section 1.02(a), the Company hereby retains, and SHI
does not assume and will have no liability with respect to: (i) the liabilities
associated with the cable television business operations of
<PAGE> 202
the Cable Subsidiaries or Cable Partnerships, except as provided in the Merger
Agreement including Sections 1.02(e), 6.06(g), 6.10, 6.12, 6.13, 6.27, 6.32,
6.34, 6.35, 6.36, 7.06 and 9.01 thereof, and (ii) the obligations of the Company
created pursuant to this Agreement and those created under the Merger Agreement
(collectively, the "Retained Liabilities").
(c) It is expressly agreed by the parties hereto that all of the
obligations of SHI under the Merger Agreement shall be treated as Assumed
Liabilities and not as Retained Liabilities under this Agreement.
(d) It is expressly agreed by the parties hereto that all expenses relating
to the transactions described in the Merger Agreement that are the
responsibility of the Company thereunder, including the fees and expenses of
Merrill Lynch in connection with the Merger and related transactions, shall be
treated as Assumed Liabilities.
1.03 Issuance of SHI Stock. In partial consideration for the Contribution,
SHI hereby agrees to issue and deliver to the Company at the Company's request
prior to the Distribution the following:
(i) such number of newly issued Class A Common Shares, $.01 par value,
of SHI as will be required for the Distribution.
(ii) such number of newly issued Common Voting Shares, $.01 par value,
of SHI as will be required for the Distribution.
1.04 Employee Benefits. All Company Plans are subject to the terms of
Section 6.12 of the Merger Agreement, and all obligations of SHI under such
Section shall be treated as Assumed Liabilities and not as Retained Liabilities
under this Agreement.
1.05 Employee Stock Options. All plans and arrangements with respect to the
Company's employee stock options and restricted stock awards in place as of the
date hereof and all options and awards outstanding thereunder as of the date
hereof are subject to the terms of Section 6.13 of the Merger Agreement, and all
obligations of SHI under Section 6.13 of the Merger Agreement shall be treated
as Assumed Liabilities and not as Retained Liabilities under this Agreement.
1.06 Further Assurances. Each of the parties hereto promptly shall execute
such documents and other instruments and take such further actions as may be
reasonably required or desirable to carry out the provisions hereof and to
consummate the transactions contemplated hereby.
1.07 Tax Matters. Notwithstanding anything to the contrary in this
Agreement, liabilities of the parties for Taxes are subject to the terms of
Section 6.10 of the Merger Agreement, and all obligations of SHI under Section
6.10 of the Merger Agreement shall be treated as Assumed Liabilities and not as
Retained Liabilities under this Agreement. The transactions contemplated by the
Merger Agreement are intended to qualify as a tax-free reorganization within the
meaning of Sections 368(a)(1)(D), 355 and 368(a)(1)(A) of the Internal Revenue
Code.
1.08 Cooperation. The parties shall cooperate with each other in all
reasonable respects to ensure the smooth transfer of the Contributed Assets, the
Assumed Liabilities and the businesses related thereto, including, without
limitation, entering into any service or other sharing agreements that may be
necessary.
1.09 Other Matters. All liabilities of the Company with respect to the
Company Contracts and the SHI Notes (as such terms are defined in the Merger
Agreement), and any liabilities of the Company for any breach of the
Confidentiality Agreements prior to the Effective Time, shall be treated as
Assumed Liabilities and not as Retained Liabilities under this Agreement. After
the Effective Time and except as otherwise provided herein or in the Merger
Agreement, neither the Company nor any of its Subsidiaries shall have any
liability to SHI or any of its Subsidiaries in respect of any inter-company
contract, commitment or account existing on or prior to the Effective Time.
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ARTICLE II
INDEMNIFICATION
2.01 Indemnification by the Company. The Company shall indemnify, defend
and hold harmless SHI and each of its subsidiaries and their respective
successors-in-interest and each of their respective past and present officers
and directors against any losses, claims, damages or liabilities, joint or
several, arising out of or in connection with the Retained Liabilities, the
Retained Assets or the cable television operations of the Cable Subsidiaries,
except as otherwise provided in the Merger Agreement, including Sections
1.02(e), 6.06(g), 6.10, 6.12, 6.13, 6.27, 6.32, 6.34, 6.35, 6.36, 7.06 and 9.01
thereof, and the Company shall reimburse SHI, each such subsidiary, each such
successor-in-interest and each such officer and director for any legal or any
other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action.
2.02 Indemnification by SHI. SHI shall indemnify, defend and hold harmless
the Company and each of its subsidiaries and their respective
successors-in-interest, including Acquiror, and each of their respective past
and present officers and directors against any losses, claims, damages or
liabilities, joint or several, arising out of or in connection with the Assumed
Liabilities, the Contributed Assets or the operations of any of the businesses
contributed to SHI, and SHI shall reimburse the Company, each such subsidiary,
each such successor-in-interest and each such officer and director for any legal
or any other expenses reasonably incurred by any of them in connection with
investigating or defending any such loss, claim, damage, liability or action.
2.03 Notification of Claims. For the purpose of this Article II, the term
"Indemnifying Party" shall mean the party having an obligation hereunder to
indemnify the other party pursuant to this Article II, and the term "Indemnified
Party" shall mean the party having the right to be indemnified pursuant to this
Article II. Whenever any claim shall arise for indemnification under this
Article II, the Indemnified Party shall promptly notify the Indemnifying Party
in writing of such claim and, when known, the facts constituting the basis for
such claim (in reasonable detail). Failure by the Indemnified Party to so notify
the Indemnifying Party shall not relieve the Indemnifying Party of any liability
hereunder except to the extent that such failure materially prejudices the
Indemnifying Party.
2.04 Indemnification Procedures.
(a) After the notice required by Section 2.03, if the Indemnifying Party
undertakes to defend any such claim, then the Indemnifying Party shall be
entitled, if it so elects, to take control of the defense and investigation with
respect to such claim and to employ and engage attorneys of its own choice,
reasonably acceptable to the Indemnified Party, to handle and defend the same,
at the Indemnifying Party's cost, risk and expense, upon written notice to the
Indemnified Party of such election, which notice acknowledges the Indemnifying
Party's obligation to provide indemnification hereunder. The Indemnifying Party
shall not settle any third-party claim that is the subject of indemnification
without the written consent of the Indemnified Party, which consent shall not be
unreasonably withheld; provided, however, that the Indemnifying Party may settle
a claim without the Indemnified Party's consent if such settlement (i) makes no
admission or acknowledgment of liability or culpability with respect to the
Indemnified Party, (ii) includes a complete release of the Indemnified Party,
and (iii) does not require the Indemnified Party to make any payment or forego
or take any action or otherwise materially adversely affect the Indemnified
Party. The Indemnified Party shall cooperate in all reasonable respects with the
Indemnifying Party and its attorneys in the investigation, trial and defense of
any lawsuit or action with respect to such claim and any appeal arising
therefrom (including the filing in the Indemnified Party's name of appropriate
cross-claims and counterclaims). The Indemnified Party may, at its own cost,
participate in any investigation, trial and defense of such lawsuit or action
controlled by the Indemnifying Party and any appeal arising therefrom.
(b) If, after receipt of a notice of claim pursuant to Section 2.03, the
Indemnifying Party does not undertake to defend any such claim, the Indemnified
Party may, but shall have no obligation to, contest any lawsuit or action with
respect to such claim and the Indemnifying Party shall be bound by the result
obtained with respect thereto by the Indemnified Party (including, without
limitation, the settlement thereof without
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the consent of the Indemnifying Party). If there are one or more legal defenses
available to the Indemnified Party that conflict with those available to the
Indemnifying Party or there is otherwise an actual or potential conflict of
interest, the Indemnified Party shall have the right, at the expense of the
Indemnifying Party, to assume the defense of the lawsuit or action; provided,
however, that the Indemnified Party may not settle such lawsuit or action
without the consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed.
2.05 Jurisdiction. The parties accept, generally and unconditionally, the
exclusive jurisdiction of the State of Delaware in any action, suit or
proceeding of any kind which arises out of or by reason of this Agreement or any
agreements contemplated hereby.
2.06 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the fullest extent
possible.
2.07 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
ARTICLE III
MISCELLANEOUS
3.01 Entire Agreement. This Agreement, together with the Merger Agreement,
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all prior written and oral and all contemporaneous
oral agreements and understandings with respect to the subject matter hereof.
3.02 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware regardless of the laws that
might otherwise govern under principles of conflicts of laws applicable thereto.
3.03 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
3.04 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy with answerback, by express or overnight mail delivered by a nationally
recognized air courier (delivery charges prepaid), or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties as
follows:
if to the Company (prior to the Merger) or SHI:
The E.W. Scripps Company
Scripps Howard, Inc.
312 Walnut Street
28th Floor
Cincinnati, Ohio 45202
Attention: M. Denise Kuprionis, Secretary
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<PAGE> 205
with a copy to:
Baker & Hostetler
3200 National City Center
1900 East 9th Street
Cleveland, Ohio 44114
Telecopy: (216) 861-7913
Attention: John H. Burlingame
if to the Company (after the Merger):
The E.W. Scripps Company
c/o Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102
Attention: Stanley Wang, Esq.
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Taylor, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy or by air courier shall
be deemed effective on the first business day at the place at which such notice
or communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the fifth business day at the place
from which such notice or communication was mailed following the day on which
such notice or communication was mailed.
3.05 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement, except
as provided in Sections 3.07 and 3.08 and except for Article II (which are
intended to be for the benefit of the persons provided for therein and may be
enforced by such persons).
3.06 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
3.07 Personal Liability. This Agreement shall not create or be deemed to
create or permit any personal liability or obligation on the part of any direct
or indirect stockholder of any party hereto or any officer, director, employee,
agent, representative or investor of any party hereto.
3.08 Binding Effect; Assignment. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and successors, including Acquiror as the surviving corporation
in the Merger. This Agreement may not be assigned by any party hereto.
3.09 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of all the parties.
3.10 Legal Fees, Costs. If any party hereto institutes any action or
proceeding, whether before a court or arbitrator, to enforce any provision of
this Agreement, the prevailing party therein shall be entitled to receive from
the losing party reasonable attorneys' fees and costs incurred in such action or
proceeding, whether or not such action or proceeding is prosecuted to judgment.
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3.11 Defined Terms. Defined terms used herein which are not otherwise
defined shall have the meanings ascribed to them in the Merger Agreement.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
THE E.W. SCRIPPS COMPANY
By:____________________________
Name:
Title:
SCRIPPS HOWARD, INC.
By:____________________________
Name:
Title:
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<PAGE> 207
EXHIBIT D
NONCOMPETITION AGREEMENT
This Noncompetition Agreement (this "Agreement"), dated as of
, 1996, is made by and among The E.W. Scripps Company, a
Delaware corporation (the "Company"), Scripps Howard, Inc., an Ohio corporation
and wholly owned subsidiary of the Company ("SHI"), and Comcast Corporation, a
Pennsylvania corporation ("Acquiror").
RECITALS
WHEREAS, the Company, SHI, and Acquiror, are parties to that certain
Agreement and Plan of Merger dated as of October 28, 1995 (the "Merger
Agreement") pursuant to which, among other things, the Company has agreed to
contribute to SHI all of the assets of the Company (except as otherwise set
forth in the Merger Agreement) pursuant to the terms of the Contribution
Agreement (this and other capitalized terms used and not defined herein shall
have the meanings given to such terms in the Merger Agreement); and
WHEREAS, the Contribution is one step in a series of transactions as a
result of which (i) Acquiror will acquire the cable businesses of the Company
and its Cable Subsidiaries by merging the Company with and into Acquiror, and
(ii) SHI will acquire and conduct the business previously conducted by the
Company and its Subsidiaries (other than their cable television operations).
NOW, THEREFORE, in consideration of the foregoing and the agreements set
forth below, the receipt, adequacy and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
NONCOMPETITION COVENANTS
1.1 Noncompetition Covenants. SHI acknowledges that (i) it, on its own and
through its Subsidiaries and their respective officers, employees and other
representatives, has specialized knowledge and experience in the operation of
cable television systems (as defined in the Cable Communications Policy Act of
1984, as amended) providing the services provided by the Company and Cable on
the date hereof and the provision of Multi-Channel Video Service and alternative
access services (collectively, the "Restricted Business"; provided that the term
"Restricted Business" shall not be construed to include the business of
developing or creating programming (the "Programming Business") including
without limitation the Food Channel, Sports South and Home & Garden TV), (ii)
its reputation and contacts within the Restricted Business and those of its
Subsidiaries are considered of great value to the Company and Acquiror, and
(iii) if such knowledge, experience, reputation or contacts were used to compete
with Acquiror, serious harm to Acquiror could result. For purposes hereof,
"Multi-Channel Video Service" means the provision of two or more channels of
video programming, by any means of transmission or distribution, including but
not limited to cable television, direct broadcast satellite, master antenna
television system, satellite master antenna television system and multi-channel
microwave distribution system. Thus, SHI agrees that, for a period of three (3)
years after the Closing Date, neither it nor any of its Subsidiaries shall,
directly or indirectly, on its own behalf or in the service or on behalf of
others:
(1) actively solicit for employment (including as an independent
contractor), interfere with or endeavor to entice away (or attempt to do any of
the foregoing) (x) any of the directors, officers, employees or agents of
Acquiror or any of its Subsidiaries, whether holding such position prior to or
after the Closing Date, or (y) any person who at any time on or after October
28, 1995, was an officer or employee of the Company or any of its Subsidiaries
engaged on behalf of the Company in the Restricted Business and whom Acquiror
employs effective upon the Closing;
(2) own, manage, operate, finance, join, control, participate or assist in
the ownership, management, operation, financing or control of, or be connected
as a stockholder, partner, principal, agent, representative,
<PAGE> 208
consultant or otherwise with any business or enterprise engaged in the
Restricted Business in the Restricted Area (a "Restricted Party"); or
(3) use or permit the Company's or SHI's name to be used in connection with
any business or enterprise engaged in the Restricted Business in the Restricted
Area;
provided, however, that the provisions of this Section 1.1 shall not be
construed to prohibit (i) the ownership by SHI or any Subsidiary of SHI, as a
passive investor, of not more than 5% of any class of securities registered
pursuant to the Exchange Act of any corporation which is engaged in the
Restricted Business, or passive investments in partnerships or joint ventures
representing not more than 5% of any class of any equity interests therein or
(ii) SHI or its Subsidiaries from having a Restricted Party as an investor in
any business, other than a Restricted Business, in which SHI or its Subsidiaries
own an interest; and provided further, however, that beginning twenty months
after the Closing Date SHI or any Subsidiary of SHI may become the owner (as a
passive investor) of up to 50% of any class of securities registered pursuant to
the Exchange Act of any entity which is engaged in the Restricted Business. For
purposes hereof, the term "Restricted Area" means the geographic areas served by
Cable at the date hereof.
1.2 Reasonableness of Covenants, etc. In the event that the provisions of
Section 1.1 should ever be adjudicated to exceed the time, geographic or service
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic or service limitations permitted by applicable law. SHI agrees that
its covenants set forth in Section 1.1 (the "Noncompetition Covenants") are
appropriate and reasonable when considered in light of the nature and extent of
the Restricted Business and the transactions contemplated by the Merger
Agreement, including, without limitation, the assets being contributed to SHI by
the Company pursuant to the Contribution Agreement. Without limiting the
generality of the foregoing, SHI specifically agrees that prohibitions on the
active solicitation, interference or enticement of officers, directors,
employees or agents of Acquiror or any of its Subsidiaries, as set forth in
Section 1.1, are appropriate and reasonable in all respects. SHI agrees that the
Noncompetition Covenants are of the essence of this Agreement and the Merger
Agreement, that each such Noncompetition Covenant is reasonable and necessary to
protect and preserve the interests and properties of Acquiror and its
Subsidiaries and the Restricted Business of Acquiror and its Subsidiaries; that
irreparable loss and damage will be suffered by Acquiror should SHI or any of
its Subsidiaries breach any such Noncompetition Covenant; that each of such
covenants is separate, distinct and severable not only from the other of such
covenants but also from the other and remaining provisions of this Agreement and
the Merger Agreement, that the unenforceability of all or any of the
Noncompetition Covenants shall not affect the validity or enforceability of any
other such covenants; that, in addition to other remedies available to it,
Acquiror shall be entitled to both temporary and permanent injunctions to
prevent a breach or contemplated breach by SHI of any of the Noncompetition
Covenants, and that SHI hereby waives any requirements for the posting of a bond
or any other security by Acquiror in connection therewith.
1.3 Specific Performance; Other Remedies. SHI recognizes that the
Noncompetition Covenants are unique and, accordingly, Acquiror shall, in
addition to such other remedies as may be available to it at law or in equity,
have the right to enforce its rights under Section 1.1 by actions for injunctive
relief and specific performance to the extent permitted by law.
ARTICLE 2
MISCELLANEOUS
2.1 Entire Agreement. This Agreement constitutes the entire agreement among
the parties with respect to the specific subject matter thereof and supersedes
all prior written and oral and all contemporaneous oral agreements and
understandings with respect to the specific subject matter hereof.
2.2 Governing Law. This Agreement shall governed by and construed in
accordance with the laws of the State of Delaware regardless of conflict of law
principles.
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2.3 Descriptive Headings. The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of or to affect
the meaning or interpretation of this Agreement.
2.4 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy with answerback, by express or overnight mail delivery by a nationally
recognized air courier (delivery charges prepaid) or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties as
follows:
if to SHI:
The E.W. Scripps Company
Scripps Howard, Inc.
312 Walnut Street, 28th Floor
Cincinnati, Ohio
Attention: M. Denise Kuprionis, Secretary
with a copy to:
Baker & Hostetler
3200 National City Center
1900 East 9th Street
Cleveland, Ohio 44114
Telecopy: (216) 861-7913
Attention: John H. Burlingame, Esq.
if to Acquiror or the Company:
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102
Telecopy: (215) 981-7622
Attention: Stanley Wang, Esq.
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Telecopy: (212) 450-4800
Attention: William L. Taylor, Esq.
or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy or by air courier shall
be deemed effective on the first business day at the place at which such notice
or communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the fifth business day at the place
from which such notice or communication was mailed following the day in which
such notice or communication was mailed.
2.5 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement except
for Section 2.7 and 2.8 (which are intended to be for the benefit of the Persons
provided for therein, and may be enforced by such Persons).
2.6 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which shall constitute one
and the same agreement.
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2.7 Personal Liability. This Agreement shall not create or be deemed to
create or permit any personal liability or obligation on the part of any direct
or indirect stockholder of any party hereto or any officer, director, employee,
agent, representative or investor of any party hereto.
2.8 Binding Effect; Assignment. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective legal
representatives and successors, including Acquiror as the surviving corporation
in the Merger. This Agreement may not be assigned by any party hereto.
2.9 Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of all the parties.
2.10 Legal Fees; Costs. If any party hereto institutes any action or
proceeding to enforce any provision of this Agreement, the prevailing party
therein shall be entitled to receive from the losing party reasonable attorneys'
fees and costs incurred in such action or proceeding, whether or not such action
or proceeding is prosecuted to judgment.
2.11 Jurisdiction. The parties accept, generally and unconditionally, the
exclusive jurisdiction of the State of Delaware in any action, suit, or
proceeding of any kind which arises out of or by reason of this Agreement or any
agreements contemplated hereby.
2.12 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder
shall impair such right or be construed to be a waiver of, or acquiescence in,
any breach of any representation, warranty or agreement herein, nor shall any
single or partial exercise of any such right preclude other or further exercise
thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
THE E.W. SCRIPPS COMPANY
By:___________________________
Name:
Title:
SCRIPPS HOWARD, INC.
By:___________________________
Name:
Title:
COMCAST CORPORATION
By:___________________________
Name:
Title:
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EXHIBIT E
VOTING AGREEMENT
This Voting Agreement dated as of October 28, 1995 (this "Agreement"), is
by and among Comcast Corporation, a Pennsylvania corporation ("Acquiror"), The
E.W. Scripps Company, a Delaware corporation (the "Company"), Sural Corporation,
a Delaware corporation (the "Acquiror Stockholder"), and The Edward W. Scripps
Trust (the "Trust").
WHEREAS, the Acquiror Stockholder owns 1,845,037 shares of Acquiror's Class
A Common Stock, par value $1.00 per share, 5,315,772 shares of Acquiror's Class
A Special Common Stock, par value $1.00 per share, and 8,786,250 shares of
Acquiror's Class B Common Stock, par value $1.00 per share (all shares of such
stock now owned and which may hereafter be acquired by the Acquiror Stockholder
prior to the termination of this Agreement shall be referred to herein as the
"Acquiror Shares");
WHEREAS, the Trust owns 16,040,000 shares of the Company's Common Voting
Stock, $.01 par value per share ("Company Common Voting Stock"), and 32,610,000
shares of the Company's Class A Common Stock, $.01 par value per share ("Company
Class A Common Stock") (all shares of Company Common Voting Stock and Company
Class A Common Stock now owned and which may hereafter be acquired by the Trust
prior to the termination of this Agreement shall be referred to herein as the
"Company Shares");
WHEREAS, the Company, Scripps Howard, Inc., an Ohio corporation and an
affiliate of the Company ("SHI"), and Acquiror propose to enter into an
Agreement and Plan of Merger, dated as of the date hereof (the "Merger
Agreement"), which provides, among other things, that the Company will merge
with and into Acquiror pursuant to the Merger (this and other capitalized terms
used and not defined herein shall have the meanings given to such terms in the
Merger Agreement);
WHEREAS, it is a condition to the willingness of Acquiror to enter into the
Merger Agreement that the Trust agree, and in order to induce Acquiror to enter
into the Merger Agreement, the Trust has agreed, to enter into this Agreement;
and
WHEREAS, it is a condition to the willingness of the Company to enter into
the Merger Agreement that the Acquiror Stockholder agree, and in order to induce
the Company to enter into the Merger Agreement, the Acquiror Stockholder has
agreed, to enter into this Agreement;
Now, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE 1
VOTING OF COMPANY SHARES AND ACQUIROR SHARES
SECTION 1.1. VOTING AGREEMENT. (a) The Trust hereby agrees that during the
time this Agreement is in effect, at any meeting of the stockholders of the
Company, however called, and in any action by consent of the stockholders of the
Company, the Trust, subject to the last sentence of this Section 1.1, shall vote
its Company Shares: (i) in favor of the Merger, the Merger Agreement (as amended
from time to time) and the other Transactions with respect to which the Trust
may be entitled to vote, (ii) against any proposal for any recapitalization,
merger, sale of assets or other business combinations between the Company, SHI
or any of the Cable Subsidiaries and any person or entity other than Acquiror,
or any other action or agreement, that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or that would result in any of the conditions to the
obligations of the Company under the Merger Agreement not being fulfilled, and
(iii) in favor of any other matter relating to the consummation of the
Transactions with respect to which the Trust may be entitled to vote. The Trust
acknowledges receipt and review of a copy of the Merger Agreement.
Notwithstanding anything to the contrary set forth herein, the Trust shall not
be required to vote its Company Shares in accordance with this Section 1.1 if
the Board of Trustees of the Trust determines, with the advice of outside
counsel, that it may be required, in the exercise of its fiduciary duties, to
vote such shares other than in accordance with such Section.
<PAGE> 212
(b) The Acquiror Stockholder hereby agrees that during the time this
Agreement is in effect, at any meeting of the stockholders of Acquiror, however
called, and in any action by consent of the stockholders of Acquiror, the
Acquiror Stockholder shall vote its Acquiror Shares: (i) in favor of the Merger,
the Merger Agreement (as amended from time to time) and the other Transactions
with respect to which such Acquiror Stockholder may be entitled to vote, (ii)
against any action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Acquiror
under the Merger Agreement or that would result in any of the conditions to the
obligations of Acquiror under the Merger Agreement not being fulfilled and (iii)
in favor of any other matter relating to the consummation of the Transactions
with respect to which the Acquiror Stockholders may be entitled to vote. The
Acquiror Stockholder acknowledges receipt and review of a copy of the Merger
Agreement.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust hereby represents and warrants to Acquiror as follows:
SECTION 2.1. AUTHORITY RELATIVE TO THIS AGREEMENT. The Trust has all
necessary power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Trust and the
consummation by the Trust of the transactions contemplated hereby have been duly
and validly authorized by the Trust (including any approvals required to be
given by the trustees of the Trust), and no other proceedings on the part of the
Trust are necessary to authorize the execution and delivery of this Agreement or
to consummate such transactions. This Agreement has been duly and validly
executed and delivered by the Trust and, assuming the due authorization,
execution and delivery hereof by each other party hereto, constitutes a legal,
valid and binding obligation of the Trust (and the trustees of Trust in their
capacities as such), enforceable against the Trust in accordance with its terms,
except (x) as the same may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws of general application relating to or affecting
creditors' rights, including without limitation, the effect of statutory or
other laws regarding fraudulent conveyance and preferential transfers, and (y)
for the limitations imposed by general principles of equity. The Trust has
allowed Acquiror to review a complete copy of the trust agreement establishing
the Trust and evidence of its authority to enter into this Agreement. Acquiror
agrees to hold the contents of such trust agreement in complete confidence.
SECTION 2.2. NO CONFLICT.
(a) The execution and delivery of this Agreement by the Trust do not, and
the performance of this Agreement by the Trust will not, (i) conflict with or
violate the trust agreement establishing the Trust, (ii) conflict with or
violate any law, rule, regulation, order, judgment or decree applicable to the
Trust or by which the Trust's Company Shares are bound or affected, or (iii)
result in any breach of or constitute a default (or an event that with notice or
lapse of time or both would become a default) under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the Trust's Company Shares
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the Trust
is a party or by which the Trust or the Trust's Company Shares are bound or
affected, except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay the performance by the Trust of the Trust's obligations under this
Agreement.
(b) The execution and delivery of this Agreement by the Trust do not, and
the performance of this Agreement by the Trust will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
federal, state, local or foreign regulatory body, except (i) filings with the
SEC under the Exchange Act and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by the Trust of the Trust's
obligations under this Agreement.
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SECTION 2.3. TITLE TO THE COMPANY SHARES. The Trust is the owner of the
Company Shares, free and clear of all security interests, liens, claims,
pledges, options, rights of first refusal, agreements, limitations on voting
rights, charges and other encumbrances (collectively, "Liens") of any nature
whatsoever. The Trust has not appointed or granted any proxy, which appointment
or grant is still effective, with respect to the Company Shares. The Trust has
sole voting power with respect to the Company Shares, and the person executing
this Agreement on behalf of the Trust has the power to direct the voting of the
Company Shares.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR STOCKHOLDER
The Acquiror Stockholder hereby represents and warrants to the Company as
follows:
SECTION 3.1. AUTHORITY RELATIVE TO THIS AGREEMENT. The Acquiror Stockholder
has all necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by the
Acquiror Stockholder and the consummation by the Acquiror Stockholder of the
transactions contemplated hereby have been duly and validly authorized by the
Acquiror Stockholder, and no other proceedings on the part of the Acquiror
Stockholder are necessary to authorize the execution and delivery of this
Agreement or to consummate such transactions. This Agreement has been duly and
validly executed and delivered by the Acquiror Stockholder and, assuming the due
authorization, execution and delivery hereof by each other party hereto,
constitutes a legal, valid and binding obligation of such Acquiror Stockholder
enforceable against the Acquiror Stockholder in accordance with its terms,
except (x) as the same may be limited by applicable bankruptcy, insolvency,
moratorium or similar laws of general application relating to or affecting
creditors' rights, including without limitation, the effect of statutory or
other laws regarding fraudulent conveyance and preferential transfers, and (y)
for the limitations imposed by general principles of equity. The Acquiror
Stockholder has provided the Company with complete copies of its Certificate of
Incorporation and Bylaws and evidence of its authority to enter into this
Agreement.
SECTION 3.2. NO CONFLICT.
(a) The execution and delivery of this Agreement by the Acquiror
Stockholder do not, and the performance of this Agreement by the Acquiror
Stockholder shall not, (i) conflict with or violate the charter or by-laws of
the Acquiror Stockholder, (ii) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Acquiror Stockholder or
by which the Acquiror Shares are bound or affected or (iii) result in any breach
of or constitute a default (or an event that with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance on any of Acquiror Shares pursuant to, any note, bond, mortgage,
indenture contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Acquiror Stockholder is a party or by
which the Acquiror Stockholder or by which Acquiror Shares are bound or
affected, except, in the case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not prevent or
delay the performance by such Acquiror Stockholder of such Acquiror
Stockholder's obligations under this Agreement.
(b) The execution and delivery of this Agreement by the Acquiror
Stockholder do not, and the performance of this Agreement by the Acquiror
Stockholder will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any federal, state, local or foreign
regulatory body, except (i) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay the performance by the Acquiror Stockholder of its
obligations under this Agreement or (ii) filings with the SEC under the Exchange
Act.
SECTION 3.3. TITLE TO THE ACQUIROR SHARES. The Acquiror Stockholder is the
owner of the Acquiror Shares free and clear of all Liens whatsoever, except that
1,000,000 shares of Class A Common Stock (the "Pledged Stock") are pledged to
PNC Bank, N.A. pursuant to a loan agreement dated April 23, 1992 and a
collateral pledge agreement dated as of the same date (together, the "Loan
Agreements"). PNC Bank, N.A.
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has the right to vote the Pledged Stock upon the occurrence of an event of
default under the Loan Agreements. The Acquiror Stockholder has sole voting
power with respect to the Acquiror Shares or has the power to direct the voting
of the Acquiror Shares. The Acquiror Stockholder has not appointed or granted
any proxy, which appointment or grant is still effective, with respect to the
Acquiror Shares. The Acquiror Stockholder has sole voting power with respect to
the Acquiror Shares, and the person executing this Agreement on behalf of the
Acquiror Stockholder has the power to direct the voting of the Acquiror Shares.
ARTICLE 4
COVENANTS OF THE TRUST
SECTION 4.1. NO INCONSISTENT AGREEMENT. The Trust hereby covenants and
agrees that, except as otherwise contemplated by this Agreement, the Trust shall
not enter into any voting agreement or grant a proxy or power of attorney with
respect to the Trust's Company Shares which is inconsistent with this Agreement.
SECTION 4.2. TRANSFER OF TITLE. The Trust hereby covenants and agrees that
the Trust shall not transfer ownership of any of its Company Shares unless (i)
the transferee agrees in writing to be bound by the terms and conditions of this
Agreement or (ii) such transfer of ownership will not affect the Trust's ability
to approve of the Merger and the other Transactions with respect to which the
Trust may be entitled to vote without regard to the vote of the other
stockholders of the Company. Nothing else contained in this Agreement shall be
construed to prohibit any transfer permitted by this Section 4.2.
ARTICLE 5
COVENANTS OF THE ACQUIROR STOCKHOLDER
SECTION 5.1. NO INCONSISTENT AGREEMENT. The Acquiror Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement, such
Acquiror Stockholder shall not enter into any voting agreement or grant a proxy
or power of attorney with respect to the Acquiror Shares which is inconsistent
with this Agreement.
SECTION 5.2. TRANSFER OF TITLE. The Acquiror Stockholder hereby covenants
and agrees that (i) such Acquiror Stockholder shall not transfer ownership of
any of the Acquiror Shares unless the transferee agrees in writing to be bound
by the terms and conditions of this Agreement or (ii) such transfer of ownership
will not affect Acquiror Stockholder's ability to approve of the Merger and the
other Transactions with respect to which the Acquiror Stockholder may be
entitled to vote without regard to the vote of the other stockholders of
Acquiror. Nothing else contained in this Agreement shall be construed to
prohibit any transfer permitted by this Section 5.2.
ARTICLE 6
MISCELLANEOUS
SECTION 6.1. TERMINATION. This Agreement shall terminate on the earliest to
occur of (i) the date of consummation of the Merger, (ii) the date which is two
years from the date hereof, and (iii) the date of the termination of the Merger
Agreement.
SECTION 6.2. SPECIFIC PERFORMANCE. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 6.3. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties and supersedes all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof.
4
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SECTION 6.4. AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by all the parties hereto.
SECTION 6.5. SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
SECTION 6.6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of (i) in the case of the Trust's
Obligations, the State of Delaware, and (ii) in the case of the Acquiror
Stockholder's obligations, the State of Pennsylvania, regardless of the laws
that might otherwise govern under principles of conflicts of law applicable
hereto.
SECTION 6.7. DESCRIPTIVE HEADINGS. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement.
SECTION 6.8. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
SECTION 6.9. NOTICES. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given when delivered in
person, by telecopy with answerback, by express or overnight mail delivered by a
nationally recognized air courier (delivery charges prepaid) or by registered or
certified mail (postage prepaid, return receipt requested) to the respective
parties as follows: (i) if to the Trust, to it at 312 Walnut Street, 28th Floor,
Cincinnati, Ohio, attention: Donald E. Meihaus, Secretary-Treasurer, (ii) if to
the Acquiror Stockholder, to it at 11 North Market Street, Suite 1219,
Wilmington, Delaware, 19801, with a copy to Davis Polk & Wardwell, 450 Lexington
Avenue, New York, New York 10017, attention: William L. Taylor, Esq., (iii) if
to Acquiror, to it at 1500 Market Street, Philadelphia, Pennsylvania, 19102,
attention: Stanley Wang, Esq., with a copy to Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York 10017, attention: William L. Taylor, Esq.,
and (iv) if to the Company, to it at 312 Walnut Street, 28th Floor, Cincinnati,
Ohio, attention: M. Denise Kuprionis, Secretary, or to such other address as the
party to whom notice is given may have previously furnished to the others in
writing in the manner set forth above. Any notice or communication delivered in
person shall be deemed effective on delivery. Any notice or communication sent
by telecopy or by air courier shall be deemed effective on the first business
day at the place at which such notice or communication is received following the
day on which such notice or communication was sent. Any notice or communication
sent by registered or certified mail shall be deemed effective on the fifth
business day at the place from which such notice or communication was mailed
following the day on which such notice or communication was mailed.
SECTION 6.10. ASSIGNMENTS. This Agreement shall not be assigned by
operation of law or otherwise.
SECTION 6.11. PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this Agreement,
express or implied, is intended to or shall confer upon any person any right,
benefit or remedy of any nature whatsoever under or by reason of this Agreement.
5
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on as of the day first written above.
COMCAST CORPORATION
By: ROBERT S. PICK
---------------------------
Name: Robert S. Pick
Title: Vice President
THE E.W. SCRIPPS COMPANY
By: LAWRENCE A. LESER
---------------------------
Name: Lawrence A. Leser
Title: Chairman and Chief
Executive Officer
SURAL CORPORATION
By: BRIAN L. ROBERTS
---------------------------
Name: Brian L. Roberts
Title: Vice President
THE EDWARD W. SCRIPPS TRUST
By: ROBERT P. SCRIPPS
---------------------------
Name: Robert P. Scripps
Title: Trustee
<PAGE> 217
EXHIBIT F
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
, is made by and between Comcast Corporation, a Pennsylvania
corporation (the "Company"), and The Edward W. Scripps Trust (the "Trust").
WHEREAS, this Agreement is being entered into pursuant to the Agreement and
Plan of Merger, dated as of October 28, 1995, among The E.W. Scripps Company,
Scripps Howard, Inc., and the Company (the "Merger Agreement");
WHEREAS, it is intended by the Company and the Trust that this Agreement
shall become effective immediately upon the issuance of the Common Stock of the
Company to be issued pursuant to Article I of the Merger Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement:
a. "Commission" means the Securities and Exchange Commission.
b. "Common Stock" means the Class A Special Common Stock, par value
$1.00 per share, of the Company.
c. "Person" means a natural person, a partnership, a corporation, an
association, a joint stock company, a trust, an estate, a joint venture, an
unincorporated organization or other entity or a governmental entity or any
department, agency or political subdivision thereof.
d. "Registrable Shares" means, at any particular time at which notice
has been given pursuant to Section 2 or 3 hereunder, any of the following
which are held by the Trust: (i) shares of Common Stock issued pursuant to
the Merger; (ii) shares of Common Stock issued in lieu of cash dividends on
other Registrable Shares pursuant to a dividend reinvestment plan adopted
by the Company; (iii) shares of Common Stock then outstanding which were
issued as, or upon the conversion or exercise of other securities issued
as, a dividend or other distribution with respect to or in replacement of
other Registrable Shares; (iv) shares of Common Stock then issuable upon
conversion or exercise of other securities which were issued as a dividend
or other distribution with respect to or in replacement of other
Registrable Shares; and (v) any equity securities of the Company issued or
issuable with respect to the securities referred to in clauses (i) through
(iv) by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. For purposes of this Agreement, the Trust will be deemed to
be a holder of Registrable Shares whenever it has the unqualified right to
acquire such Registrable Shares (by conversion or otherwise, but
disregarding any legal restrictions upon the exercise of such right),
whether or not such acquisition has actually been effected.
e. "Registration Expenses" has the meaning ascribed to it in Section 6
of this Agreement.
f. "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
2. Demand Registrations.
a. REQUESTS FOR REGISTRATION. From and after the date hereof, the Trust may
make a written request from time to time for registration under the Securities
Act of all or part of its Registrable Shares. Each such request will specify the
number of Registrable Shares to be registered and the intended method of
distribution thereof. All registrations requested pursuant to this Section 2(a)
are referred to herein as "Demand Registrations." Demand Registrations shall be
on any form for which the Company then qualifies and which
<PAGE> 218
counsel for the Company shall deem appropriate and available for the sale of the
Registrable Shares to be registered thereunder in accordance with the intended
method of distribution thereof; provided that the Company will include in any
short-form registration such additional customary information as the Trust may
reasonably request after consultation with the managing underwriter, in the case
of any underwritten public offering, or with the investment banker, in the case
of any non-underwritten offering, in order to facilitate the sale of such
securities; and provided further that the Company shall not be required to file
any such registration as a shelf registration under Rule 415 of the Securities
Act.
b. REGISTRATIONS. A maximum of three Demand Registrations may be requested
by the Trust. A registration will not count as one of the Demand Registrations
requested by the Trust until it has become effective and unless either (i) the
Trust has registered and sold at least 90% of the Registrable Shares it requests
be included in such registration or (ii) the registration has remained effective
for at least 30 days. The Company will pay all Registration Expenses in
connection with any registration initiated as a Demand Registration requested
hereunder. Should a Demand Registration not become effective due to the failure
of the Trust to perform its obligations under this Agreement or the inability of
the Trust to reach agreement with the underwriters on price or other customary
terms for such transaction (provided that if the registration does not become
effective because of such inability then, on one occasion at the election of the
Trust, it shall not count as a Demand if the Trust pays the Company for all of
the Registration Expenses in respect thereof), or in the event the Trust
withdraws or does not pursue the request for the Demand Registration (in each of
the foregoing cases, provided that at such time the Company is in compliance in
all material respects with its obligations under this Agreement), then such
Demand Registration shall be deemed to have been effected. Each Demand
Registration must be in respect of Registrable Shares with a fair market value
in excess of $100,000,000.
c. PREEMPTION. The Company will have the right to preempt any Demand
Registration with a primary registration by delivering written notice of such
intention to the Trust indicating that the Company has identified a specific
business need and use for the proceeds of the sale of such securities within
five business days after the Company has received from the Trust a request for
such Demand Registration. In the ensuing primary registration, the Trust will
have such piggyback registration rights as are set forth in Section 3 hereof.
Upon the Company's preemption of a requested Demand Registration, such requested
registration will not count as one of the Demand Registrations.
d. PRIORITY ON DEMAND REGISTRATIONS. If a Demand Registration is an
underwritten public offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Shares and other
securities requested to be included in such offering would materially and
adversely affect the success of the offering, the Company will include in such
registration, prior to the inclusion of any securities which are not owned by
the Trust, the number of Registrable Shares requested to be included which in
the opinion of such underwriters can be sold without materially and adversely
affecting the success of the offering. Whenever a registration requested
pursuant to this Section is for an underwritten offering, only securities which
are to be distributed by the underwriters may be included in the registration.
e. RESTRICTIONS ON REGISTRATIONS. The Company will not be obligated to
effect any Demand Registration within twelve months after the effective date of
a previous Demand Registration. The Company may postpone for up to 150 days the
filing or effectiveness of a registration statement for a Demand Registration if
the Company reasonably believes that it would be detrimental or otherwise
disadvantageous to the Company or its shareholders for such a registration
statement to be filed as expeditiously as possible; provided, however, the
Company cannot exercise its right to postpone the filing or effectiveness of a
registration statement for a Demand Registration more than once during any
12-month period.
f. SELECTION OF UNDERWRITERS. The Trust shall have the right to select the
investment banker(s) and manager(s) to administer any public offering of equity
securities of the Company pursuant to a Demand Registration, subject to the
Company's approval, which approval shall not be unreasonably withheld.
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3. Piggyback Registrations.
a. RIGHT TO PIGGYBACK. Subject to the remaining provisions of this Section
3, whenever the Company proposes to register its Common Stock under the
Securities Act for its own account (other than a registration on Form S-4 or S-8
or pursuant to Rule 415 or any substitute or successor form or rule,
respectively that may be adopted by the Commission) or for the account of any
holders of its Common Stock, the Company will give written notice to the Trust
of its intention to effect such a registration and will include in such
registration, on the same terms and conditions as apply to the Company's or such
holder's Common Stock, all Registrable Shares that the Trust requests be
included within 15 days after the receipt of the Company's notice (a "Piggyback
Registration"). The Company agrees that it will act in good faith in electing to
offer securities pursuant to Rule 415. The Company is required to include
Registrable Shares requested by the Trust in an unlimited number of Piggyback
Registrations. If the Company shall determine in its sole discretion not to
register or to delay the registration of such Common Stock, the Company may, at
its election, provide written notice of such determination to the Trust and (i)
in the case of a determination not to effect a registration, shall thereupon be
relieved of the obligation to register such Registrable Shares, and (ii) in the
case of a determination to delay a registration, shall thereupon be permitted to
delay registering any Registrable Shares for the same period as the delay in
respect of Common Stock being registered for the Company's own account.
b. PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback Registration is an
underwritten primary offering on behalf of the Company, and the managing
underwriters for the Offering advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
would materially and adversely affect the success of the offering, the Company
will include in such registration (i) first, the securities the Company proposes
to sell, and (ii) second, Registrable Shares and other securities such that the
included amount of each shall be in proportion to the amount of Registrable
Shares and other securities requested to be included in such registration.
c. PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback Registration is an
underwritten secondary offering on behalf of holders of the Company's securities
other than holders of Registrable Shares, and the managing underwriters advise
the Company in writing that in their opinion the number of securities requested
to be included in such registration would materially and adversely affect the
success of the offering, the Company will include in such registration (i)
first, the securities included therein held by the holders other than the Trust,
and (ii) second, Registrable Shares and other securities such that the included
amount of each shall be in proportion to the amount of Registrable Shares and
other securities requested to be included in such registration.
d. SELECTION OF UNDERWRITERS. If a Piggyback Registration is an
underwritten primary registration on behalf of the Company, and the Trust elects
to register and sell Registrable Shares in such registration, the Company will
have the right to select the investment banker(s) and manager(s) to administer
the offering.
4. Holdback Agreements.
a. The Trust agrees not to offer, sell, contract to sell or otherwise
dispose of any equity securities of the Company, or any securities convertible
into or exchangeable or exercisable for such securities, during the 15-day
period prior to, and the 120-day period beginning on the effective date of, any
underwritten registration (except as part of such underwritten registration),
unless the underwriters managing the registered public offering otherwise agree.
In order to ensure compliance with the provisions of this Section 4(a), the
Company hereby agrees to notify the Trust as to the status and proposed
effective date of any registration statement of the Company which is filed with
the Commission.
b. The Company hereby agrees not to effect, except pursuant to employee
benefit plans and registrations on Form S-4, any public sale or distribution of
any securities of the same class as (or otherwise similar to) the Registrable
Shares, or any securities which, with notice, lapse of time and/or payment of
monies, are exchangeable or exercisable for or convertible into any such
securities during the 15-day period prior to, and during the 90-day period
commencing on, the effective date of a registration statement filed with the
Commission in connection with an underwritten offering effected pursuant to
Section 2 of this Agreement (except as part of such underwritten offering). The
Company agrees to use its reasonable efforts to cause each
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holder of five percent or more of the outstanding shares of any equity security
(or any security convertible into or exchangeable or exercisable for any equity
security) of the Company, and each holder of any equity security (or any
security convertible into or exchangeable or exercisable for any equity
security) of the Company purchased from the Company at any time other than in a
public offering, to enter into a similar agreement with the Company.
5. Registration Procedures. Whenever the Trust has requested that any
Registrable Shares be registered pursuant to this Agreement, the Company will
use its reasonable best efforts to effect the registration of such Registrable
Shares in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:
a. Prepare and file with the Commission a registration statement with
respect to such Registrable Shares and cause such registration statement to
become and remain effective for such period, not to exceed 60 days, as may
be reasonably necessary to effect the sale of such securities and to
include in any such registration statement all information which, in the
opinion of counsel to the Trust and counsel to the Company, is reasonably
required to be included therein under the Securities Act or which the
managing underwriter, in the case of an underwritten public offering, or
the investment banker, in the case of a non-underwritten offering,
reasonably requests be included therein to facilitate the sale of such
securities and which, in the opinion of counsel to the Company and counsel
to the Trust, is customary and may appropriately be included therein under
the Securities Act; provided, however, if (i) the effective date of any
registration statement filed pursuant to a Demand Registration would
otherwise be at least 45 calendar days, but fewer than 90 calendar days,
after the end of the Company's fiscal year, and (ii) the Securities Act
requires the Company to include audited financials as of the end of such
fiscal year or the Securities Act permits the use of, and the Trust has
requested that such registration statement include, audited financials as
of the end of such fiscal year, the Company may delay the filing of such
registration statement for such period as is reasonably necessary to
include therein its audited financial statements for such fiscal year;
b. Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 60 days and comply with
the provisions of the Securities Act applicable to the Company with respect
to the disposition of all securities covered by such registration statement
during such period in accordance with the intended methods of disposition
set forth in such registration statement;
c. Furnish to the Trust and the underwriters such number of copies of
such registration statement, each amendment and supplement thereto, the
prospectus included in such registration statement (including each
preliminary prospectus) as they may reasonably request in order to
facilitate the disposition of the Registrable Shares;
d. Use reasonable best efforts to register or qualify such Registrable
Shares under such other securities or blue sky laws of such jurisdictions
as the Trust reasonably requests and do any and all other acts and things
which may be reasonably necessary or advisable to enable the Trust to
consummate the disposition in such jurisdictions of the Registrable Shares
(provided, however, that the Company will not be required to (i) qualify
generally to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 4(d), (ii) subject itself to
taxation in any such jurisdiction, or (iii) consent to general service of
process in any such jurisdiction);
e. Otherwise use its best efforts in connection with each registered
offering of Registrable Shares hereunder to comply with all applicable
rules and regulations of the Commission, as the same may hereafter be
amended, including section 11(a) of the Securities Act and Rule 158
thereunder.
f. Use its best efforts to cause all such Registrable Shares to be
listed on each securities exchange or market trading system on which
similar securities issued by the Company are then listed;
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g. Enter into such customary agreements (including underwriting
agreements that contain such representations and warranties by the Company
and such other terms and provisions as are customarily contained in
agreements of this type, including, but not limited to, indemnities to the
effect and to the extent provided in Section 7, provisions for the delivery
of officers' certificates, opinions of counsel and accountants' "comfort"
letters and holdback arrangements) and take all such other actions as are
reasonably required in order to expedite or facilitate the disposition of
such Registrable Shares;
h. Subject to confidentiality restrictions reasonably required by the
Company, and subject to the reasonableness of the request therefor, make
available at reasonable times for inspection by the Trust, any underwriter
participating in any disposition pursuant to such registration statement,
and any attorney, accountant or other agent retained by the Trust or any
such underwriter, all pertinent financial and other records, pertinent
corporate documents and properties of the Company, and cause the Company's
officers, directors, employees and independent accountants to supply all
information reasonably requested by the Trust or any such underwriter,
attorney, accountant or agent in connection with such registration
statement;
i. Notify the Trust promptly after it shall receive notice thereof, of
the time when such registration statement or amendment thereto has become
effective or a prospectus or supplement to any prospectus forming a part of
such registration statement has been filed;
j. Notify the Trust of any request by the Commission for the amending
or supplementing of such registration statement or prospectus or for
supplemental information;
k. Prepare and file with the Commission, promptly upon the request of
the Trust, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel selected by the Trust and
counsel to the Company, is reasonably required under the Securities Act or
the rules and regulations thereunder in connection with the distribution of
Registrable Shares by the Trust;
l. Notify the Trust of the occurrence of any event during any time
when a prospectus relating to such securities is required to be delivered
under the Securities Act, as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were
made, not misleading, and in such event, prepare and promptly file with the
Commission and promptly notify the Trust of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary
to correct any such statements or omissions. The Trust agrees that, upon
receipt of any notice from the Company of the occurrence of any event of
the kind described in the preceding sentence, the Trust will forthwith
discontinue the offer and sale of Registrable Shares pursuant to the
registration statement covering such Registrable Shares until receipt by
the Trust and the Underwriters of the copies of such supplemented or
amended prospectus and, if so directed by the Company, the Trust will
deliver to the Company all copies, other than permanent file copies then in
the Trust's possession, of the most recent prospectus covering such
Registrable Shares at the time of receipt of such notice. In the event the
Company shall give such notice, the Company shall extend the 60 day-period
during which such registration statement shall be maintained effective, as
provided in Section 5(a) hereof, by the number of days during the period
from and including the date of the giving of such notice to the date when
the Company shall make available to the Trust such supplemented or amended
prospectus;
m. Advise the Trust, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission or
any state authority or agency suspending the effectiveness of such
registration statement or the initiation or threatening of any proceeding
for such purpose and promptly use all reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order
should be issued;
n. At the request of any underwriter in connection with an
underwritten offering, furnish on the date or dates provided for in the
underwriting agreement: (i) an opinion of counsel, addressed to the
underwriters, covering such customary matters as such underwriters may
reasonably request; and (ii) a
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comfort letter or letters from the independent certified public accountants
of the Company addressed to the underwriters, covering such customary
matters as such underwriters and sellers may reasonably request, in which
letters such accountants shall state, without limiting the generality of
the foregoing, that they are independent certified public accountants
within the meaning of the Securities Act and that in the opinion of such
accountants the financial statements and other financial data of the
Company included in the registration statement, the prospectus, or any
amendment or supplement thereto comply in all material respects with the
applicable accounting requirements of the Commission;
o. Subject to confidentiality restrictions reasonably required by the
Company, at reasonable times and upon reasonable notice, and as necessary
to permit a reasonable investigation with respect to the Company and its
business in connection with the preparation and filing of such registration
statement, make available for inspection by the Trust, by any managing
underwriter or other underwriters participating in any disposition of
Registrable Shares, and by any attorney, accountant or other agent,
representative or advisor retained by the Trust or any such underwriters,
all pertinent financial and other records and corporate documents of the
Company; and to the extent reasonably required, cause the Company's
officers, directors and employees to discuss pertinent aspects of the
Company's business with the Trust and any such underwriter, accountant,
agent, representative or advisor in connection with such registration
statement;
p. Permit the Trust, to the extent the Trust, in the judgment of its
counsel, might be deemed to be a "control person" of the Company (within
the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act), to participate in the preparation of such registration
statement and include therein material, furnished to the Company in writing
which, in the reasonable judgment of the Trust and its counsel, and counsel
to the Company, is required to be included therein; and
q. If any registration statement refers to the Trust by name or
otherwise as the holder of any securities of the Company, and if the Trust
reasonably believes it is or may be deemed to be a control person in
relation to, or an Affiliate of, the Company, then the Trust shall have the
right to require (i) insertion in such registration statement of language,
in form and substance reasonably satisfactory to the Trust, to the effect
that the ownership by the Trust of such securities is not to be construed
as and is not intended to be a recommendation by the Trust of the
investment quality of, or the relative merits and risks attendant to the
purchase of, the Company's securities covered thereby, and that such
ownership does not imply that the Trust will assist in meeting any future
financial or operating requirements of the Company, or (ii) in the case
where the reference to the Trust by name or otherwise is not required by
the Securities Act or any similar federal or state statute then in effect,
the deletion of the reference to the Trust.
r. Cooperate in the marketing efforts of the underwriters and the
Trust, including, without limitation, by making available, as reasonably
requested by the underwriters and the Trust, the senior executive officers
of the Company for attendance at, and active participation with the
underwriters in, informational or so-called "roadshow" meetings with
prospective purchasers of the Registrable Shares being offered, including
meeting with groups of such purchasers or with individual purchasers,
providing information and answering questions about the Company at such
meetings, and traveling to locations in the United States and abroad as
reasonably selected by the underwriters.
6. Registration Expenses.
All expenses of the Company incident to the Company's performance of or
compliance with this Agreement, including, without limitation, all registration
and filing fees, fees and expenses of compliance with securities or blue sky
laws, all fees and expenses associated with listing securities on exchanges or
Nasdaq, all fees and other expenses associated with filings with the NASD
(including, if required, the fees and expenses of any "qualified independent
underwriter" and its counsel) printing expenses, messenger and delivery
expenses, and fees and disbursements of counsel for the Company and its
independent certified public accountants (and the expenses of any special audits
or reviews performed by such accountants required by or incidental to such
performance and compliance), underwriters (excluding discounts and commissions
attributable to the
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securities included in such registration) and other Persons retained by the
Company (all such expenses being herein called "Registration Expenses"), will be
borne by the Company. In addition, the Company will pay its internal expenses
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, and the expense of any liability insurance obtained
by the Company.
7. Indemnification and Contribution.
a. The Company agrees to indemnify the Trust, its officers and trustees
against all losses, claims, damages, liabilities and expenses (including,
without limitation, reasonable attorneys' fees except as limited by Section
7(c)) caused by any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus
relating to the Registrable Shares or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as the same are caused by or contained in or based upon any
information furnished in writing to the Company by the Trust or any underwriter
expressly for use therein or by the Trust's or underwriter's failure to deliver
a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Trust or underwriter
with a sufficient number of copies of the same. In connection with an
underwritten offering, the Company will indemnify such underwriters, their
officers and directors and each Person who controls such underwriters (within
the meaning of the Securities Act) to the same extent as provided above with
respect to the indemnification of the Trust. In connection with an underwritten
offering, the underwriters shall be required to agree to indemnify the Trust,
its officers and trustees, and the Company, its officers and directors and each
Person who controls the Company (within the meaning of the Securities Act) to
the same extent as the Company agrees to indemnify such underwriters in this
Section 7(a), but only as to statements contained in or omitted from any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto in reliance upon written information furnished to
the Company by such underwriters for use in the preparation thereof. The
reimbursements required by this Section 7(a) will be made by periodic payments
during the course of the investigation or defense, as and when bills are
received or expenses incurred.
b. In connection with any registration statement in which the Trust is
participating, it will furnish to the Company in writing such information,
questionnaires and affidavits as the Company reasonably requests for use in
connection with any such registration statement or prospectus and will indemnify
the Company, its directors and officers and each Person who controls the Company
(within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act) against any losses, claims, damages, liabilities and expenses
(including, without limitation, attorneys' fees except as limited by Section
7(c)) caused by any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus
relating to the Registrable Shares or any amendment thereof or supplement
thereto or any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein not misleading, but
only to the extent that such untrue statement or omission is contained in any
information or affidavit so furnished in writing by or on behalf of the Trust.
The Trust also agrees to indemnify and hold harmless any underwriters of the
Registrable Shares, their officers and directors and each person who controls
such underwriters on substantially the same basis as that of the indemnification
of the Company provided in this Section 7(b).
c. Any Person entitled to indemnification hereunder will (i) give prompt
written notice to the indemnifying party of any claim with respect to which it
seeks indemnification and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim.
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d. The indemnification provided for under this Agreement will remain in
full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling Person of such
indemnified party and will survive the transfer of securities. The Company also
agrees to make such provisions as are reasonably requested by any indemnified
party for contribution to such party in the event the Company's indemnification
is unavailable for any reason.
e. If the indemnification from the indemnifying party as provided in this
Section 7 is unavailable or is otherwise insufficient to hold harmless any
Person entitled to indemnification in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party shall,
to the fullest extent permitted by law, contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the Person entitled to
indemnification in connection with the actions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made, or relates to
information supplied by such indemnifying party, and the party's relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant to this Section 7(e)
were determined by pro rata allocation or by any other method of allocation
which does not take account of the equitable considerations referred to in this
Section 7(e). No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation.
8. Compliance With Rule 144. At the request of the Trust, the Company will
(i) forthwith furnish a written statement of its compliance with the filing
requirements of the Commission as set forth in Rule 144 or any similar rules or
regulations hereafter adopted by the Commission as such may be amended from time
to time, (ii) make available to the public and the Trust such information, and
(iii) take such further actions as the Trust shall reasonably request as will
enable the Trust to be permitted to make sales pursuant to Rule 144 or such
similar rules and regulations. All sales of Registrable Shares by the Trust must
be effected in compliance with applicable law.
9. Participation in Underwritten Registrations. The Trust may not
participate in any registration hereunder which is underwritten unless it (a)
agrees to sell Registrable Shares on the basis provided in any underwriting
arrangements approved by the Person or Persons entitled hereunder to approve
such arrangements, (b) completes and executes all questionnaires, powers of
attorney, custody agreements, indemnities, underwriting agreements and other
documents required under the terms of such underwriting arrangements, and (c)
furnishes in writing to the Company such information regarding the Trust, the
plan of distribution of the Registrable Shares and other information as the
Company may from time to time reasonably request or as may be legally required
in connection with such registration. The Trust will have the right to select
the managing underwriters to administer any Demand Registration, subject to the
approval of the Company, which approval will not be unreasonably withheld.
10. Prohibition on Transfer.
(a) The Trust hereby agrees that it will not, during the period commencing
on the date hereof and ending one year after the date hereof, offer, pledge,
encumber, sell, contract to sell, sell any option or contract to purchase,
purchase any option to sell or otherwise dispose of, directly or indirectly, an
amount of Registrable Shares such that the total Registrable Shares owned by the
Trust at any time during such one-year period falls below the Continuity Amount.
For purposes hereof, "Continuity Amount" means the amount of shares of Common
Stock issued pursuant to the Merger representing 50% of the aggregate value of
the
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consideration issued in the Merger (including, for this purpose, any shares of
Common Stock issued in the Merger, any payments to holders of Dissenting Shares
and any payments in lieu of fractional shares).
(b) From time to time, if the Company intends to purchase shares of Common
Stock in the open market pursuant to the share repurchase program referred to in
Section 6.31 (the "Program") of the Merger Agreement, the Company may deliver a
notice (a "Black-Out Notice") to the Trust setting forth the period during which
the Company anticipates making such purchases (a "Black-Out Period"). The Trust
agrees that it will not sell any Registrable Shares in the open market during a
Black-Out Period. In order to be effective, the Company must deliver a Black-Out
Notice by facsimile to [ ] at [ ], to be confirmed by telephone at [ ] by no
later than 4:00 p.m. the day prior to the commencement of the Black-Out Period.
Each trading day within a Black-Out Period is referred to herein as a "Black-
Out Day." In no event shall the Company cause more than 10 trading days in any
one calendar month to be Black-Out Days. The Company will promptly inform the
Trust of any early termination of a Black-Out Period. The Trust agrees to hold
information regarding Black-Out Periods in confidence. The Company represents
that the Program will be terminated no later than six months from the date
hereof.
11. No Inconsistent Agreements. The Company will not hereafter enter into
any agreement with respect to its securities which is inconsistent with or
otherwise materially interferes with the rights granted to the Trust in this
Agreement.
12. Remedies. Any Person having rights under any provision of this
Agreement will be entitled to enforce such rights specifically, to recover
damages caused by reason of any breach of any provision of this Agreement, and
to exercise all other rights granted by law.
13. Amendments and Waivers. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or waived at any time only by
the written agreement of the Company and the Trust.
14. Successors and Assigns. Except as otherwise expressly provided herein,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto will bind and inure to the benefit of the respective
successors and assigns of the parties hereto, whether so expressed or not.
15. Final Agreement. This Agreement constitutes the final agreement of the
parties concerning the matters referred to herein, and supersedes all prior
agreements and understandings.
16. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be prohibited by or invalid
under applicable law, such provision will be ineffective only to the extent of
such prohibition or invalidity, without invalidating the remainder of this
Agreement.
17. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience of reference only and do not constitute a part of and
shall not be utilized in interpreting this Agreement.
18. Notices. Except as provided in Section 10(b), any notices required or
permitted to be sent hereunder shall be delivered personally or mailed,
certified mail, return receipt requested, or delivered by overnight courier
service to the following addresses, or such other addresses as shall be given by
notice delivered hereunder, and shall be deemed to have been given upon
delivery, if delivered personally, three business days after mailing, if mailed,
or one business day after delivery to the courier, if delivered by overnight
courier service:
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IF TO THE TRUST, at its address set forth on the stock record books of the
Company;
with a copy to:
John H. Burlingame, Esq.
Baker & Hostetler
3200 National City Center
1900 East Ninth Street
Cleveland, Ohio 44114-3485
If to the Company, to:
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19102
Attention: Stanley Wang, Esq.
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: William L. Taylor, Esq.
19. Governing Law. The validity, meaning and effect of this Agreement shall
be determined in accordance with the laws of the State of New York applicable to
contracts made and to be performed in that state without giving effect to the
principles of conflicts of laws thereof.
20. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an
original, and such counterparts together shall constitute one instrument. Each
party shall receive a duplicate original of the counterpart copy or copies
executed by it and the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on their respective behalf, by their respective officers thereunto
duly authorized, as of the day and year first set forth above.
THE EDWARD W. SCRIPPS TRUST
By:_________________________
COMCAST CORPORATION
By:_________________________
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EXHIBIT G
BOARD REPRESENTATION AGREEMENT
This Board Representation Agreement, dated as of , 1996 (this
"Agreement") is by and among Comcast Corporation, a Pennsylvania corporation
("Acquiror"), Sural Corporation, a Delaware corporation, (the "Acquiror
Stockholder") and The Edward W. Scripps Trust (the "Trust").
WHEREAS, the Acquiror Stockholder owns 1,845,037 shares of Acquiror's Class
A Common Stock, par value $1.00 per share, 5,315,772 shares of Acquiror's Class
A Special Common Stock, par value $1.00 per share, and 8,786,250 shares of
Acquiror's Class B Common Stock, par value $1.00 per share (all shares of such
stock now owned and which may hereafter be acquired by the Acquiror Stockholder
prior to the termination of this Agreement are referred to herein as the
"Acquiror Shares");
WHEREAS, The E.W. Scripps Company, a Delaware corporation (the "Company"),
Scripps Howard, Inc., an Ohio corporation ("SHI") and wholly owned subsidiary of
the Company, and Acquiror have entered into a Merger Agreement dated October 28,
1995 (the "Merger Agreement"), which provides, among other things, that the
Company will merge with and into Acquiror (the "Merger") (this and other
capitalized terms used and not defined herein shall have the meanings given to
such terms in the Merger Agreement);
WHEREAS, in connection with the Merger, the Trust will be entitled to
receive shares of Class A Special Common Stock, $1.00 par value per share, of
Acquiror (all such shares received by the Trust in the Merger, the "Trust
Shares"), and it is the desire of the Trust that it have the right to designate
certain persons for election as members of the board of directors of Acquiror
(the "Acquiror Board") following the consummation of the Merger;
WHEREAS, pursuant to the Merger Agreement, Acquiror has agreed to cause
(the "Initial Trust Designee") to be elected to the Acquiror
Board as set forth herein following consummation of the Merger; and
WHEREAS, it is a condition to the Company's and SHI's obligation to
consummate the Merger that the parties hereto enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
1. Representation on Acquiror Board. To the extent permitted under
applicable law the Trust shall be entitled to representation on the Acquiror
Board as follows: the Initial Trust Designee shall be proposed for election to
the Acquiror Board either: (i) if following the consummation of the Merger there
are one or more vacancies on such Board or the members of such Board have the
power to create new directorships, at the first meeting of the Acquiror Board
following consummation of the Merger, at which the Initial Trust Designee shall
be elected or (ii) if there are no such vacancies or power to create new
directorships, at the first meeting of stockholders of Acquiror held after
consummation of the Merger. Following such election of the Initial Trust
Designee, in each instance in which individuals are nominated for election to
the Acquiror Board, Acquiror shall cause to be nominated for election to the
Acquiror Board that number of individuals designated by the Trust (the "Trust
Designee(s)") equal to the Appointment Number (as defined below) as of the date
of nomination, in the manner and subject to the conditions set forth in this
Section 1. Acquiror shall cause such Trust Designee(s) to be validly and timely
nominated for election to the Acquiror Board in the same manner as other
proposed directors are nominated, shall recommend to its stockholders the
election to the Acquiror Board of the Trust Designee(s) and shall not revoke or
qualify such recommendation. Acquiror shall use its best efforts to solicit from
its stockholders proxies in favor of the election of all the Trust Designee(s),
and shall take such other action as may be reasonably necessary to cause such
Trust Designee(s) to be so elected. If any Initial Trust Designee or Trust
Designee who serves on the Acquiror Board ceases, for any reason, to serve on
the Acquiror Board (other than as a result of the expiration of the specified
term of such Initial Trust Designee or Trust Designee), Acquiror shall take all
actions reasonably necessary to cause the vacancy to be filled, as soon as
practicable, by an individual designated by the Trust (a "Replacement Trust
Designee"), but in any event no later than the first meeting of the Acquiror
Board following cessation of
<PAGE> 228
service by such Designee. Each Initial Trust Designee, Trust Designee or
Replacement Trust Designee shall be reasonably acceptable to Acquiror and shall
be eligible to serve on the Acquiror Board under applicable law.
For purposes hereof, "Appointment Number" means one, provided that the
Appointment Number shall be two if the product of (i) the total number of
directors constituting the Acquiror Board less the director position(s) held by
the designee(s) of the Trust and (ii) the quotient equal to (A) the number of
Long-term Shares held by the Trust at the time of nomination divided by (B) the
aggregate number of Acquiror Common Shares outstanding at such time on a fully
diluted basis shall be equal to or greater than 1.75. For purposes hereof, (i)
"Acquiror Common Shares" means shares of any class of common stock of Acquiror
and (ii) "Long-term Shares" means, as of any date, Acquiror Common Shares that
have been owned for not less than one year.
From time to time upon the reasonable written request by Acquiror, the
Trust will provide Acquiror with an opinion of counsel (the "Opinion")
reasonably acceptable to Acquiror, which opinion shall state that the nomination
and appointment of a proposed Initial Trust Designee, Trust Designee or
Replacement Trust Designee, as the case may be, to the Acquiror Board is
permitted under applicable law. Except as provided in the following paragraph,
all obligations on the part of Acquiror and the Acquiror Stockholder under this
Agreement shall be suspended until the Opinion shall have been received by it.
If the Trust shall not be permitted under applicable law to representation
on the Acquiror Board as described herein, or if the Trust should elect from
time to time observer status in lieu of a seat on the Board by written notice to
Acquiror, then to the extent permitted by law, the Trust shall for the period of
this Agreement be entitled to designate an observer who shall be entitled to
notice of and to attend all meetings of the Acquiror Board and to receive or
review, as the case may be, copies of all documents provided to members of the
Acquiror Board. Such observer shall enter into customary confidentiality
arrangements with the Company.
2. Termination of Rights. The rights of the Trust under Section 1 hereof
shall terminate upon the earliest of (i) the date on which the Trust ceases to
own at least 50% of the Trust Shares (as equitably adjusted for stock splits,
combinations, dividends, corporate reorganizations and similar events), (ii) the
date on which the fourth annual meeting of Acquiror's Board is convened after
the date hereof, and (iii) the date on which the Trust elects to terminate
Section 1 of this Agreement by notice to the other parties hereto.
3. Agreements of Acquiror Stockholder. To the extent permitted under
applicable law: the Acquiror Stockholder hereby agrees that, until such time as
the rights of the Trust terminate pursuant to Section 2 hereof, at any meeting
of the stockholders of Acquiror, however called, and in any action by consent of
the stockholders of Acquiror, for the election of directors, the Aquiror
Stockholder shall vote its Acquiror Shares in favor of the election to the
Acquiror Board of each Trust Designee and Replacement Trust Designee, as the
case may be.
4. Representations and Warranties of Acquiror. Acquiror represents and
warrants to the Trust that:
(a) Acquiror has all necessary corporate power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by Acquiror and the
performance of its obligations hereunder have been duly and validly
authorized by Acquiror, and no other proceedings on the part of Acquiror
are necessary to authorize the execution and delivery of this Agreement or
to perform such obligations except approval of Acquiror Board of a
resolution increasing the size of Acquiror Board as provided herein and
election of the designees of the Trust as provided herein. This Agreement
has been duly and validly executed and delivered by Acquiror and, assuming
the due authorization, execution and delivery hereof by each other party
hereto, constitutes a legal, valid and binding obligation of Acquiror
enforceable against Acquiror in accordance with its terms, except (i) as
the same may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws of general application relating to or affecting creditors'
rights, including without limitation, the effect of statutory or other laws
regarding fraudulent conveyances and preferential transfers, (ii) for the
limitations imposed by
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general principles of equity, and (iii) as the same may be limited under
the Rules and Regulations regarding cross-ownership of cable television
systems and television stations.
(b) The execution and delivery of this Agreement by Acquiror do not,
and the performance of this Agreement by Acquiror will not, (i) conflict
with or violate the Articles of Incorporation or By-laws of Acquiror, (ii)
except as described in Section 4(c), conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to Acquiror or by
which any of Acquiror's property may be bound, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the Acquiror's properties
pursuant to, any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation to
which Acquiror is a party or by which Acquiror or Acquiror's properties are
bound or affected, except, in the case of clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which
would not prevent or delay the performance by Acquiror of its obligations
under this Agreement.
(c) The execution and delivery of this Agreement by Acquiror do not,
and the performance of this Agreement by Acquiror will not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any federal, state, local or foreign regulatory body,
except (i) where the failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not prevent or delay the performance by Acquiror of Acquiror's obligations
under this Agreement, (ii) filings with the SEC under the Exchange Act and
(iii) any waiver, consent or declaratory ruling by the FCC with respect to
the Rules and Regulations regarding cross-ownership of cable television
systems and television stations, to the extent that such Rules and
Regulations may prohibit the performance of the Acquiror's obligations
hereunder.
5. Representations and Warranties of the Acquiror Stockholder. The Acquiror
Stockholder represents and warrants to the Trust as follows:
(a) The Acquiror Stockholder has all necessary power and authority to
execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery of this Agreement by the Acquiror
Stockholder and the performance of the Acquiror Stockholder's obligations
hereunder have been duly and validly authorized by the Acquiror
Stockholder, and no other corporate proceedings on the part of the Acquiror
Stockholder are necessary to authorize the execution and delivery of this
Agreement or to perform such obligations. This Agreement has been duly and
validly executed and delivered by the Acquiror Stockholder and, assuming
the due authorization, execution and delivery hereof by each other party
hereto, constitutes a legal, valid and binding obligation of the Acquiror
Stockholder enforceable against the Acquiror Stockholder in accordance with
its terms, except (i) as the same may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws of general application relating to
or affecting creditors' rights, including without limitation, the effect of
statutory or other laws regarding fraudulent conveyances and preferential
transfers, (ii) for the limitations imposed by general principles of
equity, and (iii) as the same may be limited under the Rules and
Regulations regarding cross-ownership of cable television systems and
television stations.
(b) The execution and delivery of this Agreement by the Acquiror
Stockholder do not, and the performance of this Agreement by the Acquiror
Stockholder will not, (i) conflict with or violate the charter or by-laws
of the Acquiror Stockholder, (ii) except as described in Section 5(c)
below, conflict with or violate any law, rule, regulation, order, judgment
or decree applicable to such Acquiror Stockholder or by which the Acquiror
Shares are bound or affected, or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or encumbrance on any Acquiror Shares pursuant to, any note, bond,
mortgage, indenture contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Acquiror Stockholder is a
party or by which the Acquiror Shares are bound or affected, except, in the
case of clauses (ii) and (iii), for any such conflicts, violations,
breaches, defaults or other occurrences
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which would not prevent or delay the performance by the Acquiror
Stockholder of its obligations under this Agreement.
(c) The execution and delivery of this Agreement by the Acquiror
Stockholder do not, and the performance of this Agreement by such Acquiror
Stockholder will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any federal, state, local or
foreign regulatory body, except (i) where the failure to obtain such
consents, approvals, authorizations or permits, or to make such filings or
notifications, would not prevent or delay the performance by the Acquiror
Stockholder of its obligations under this Agreement, (ii) filings with the
SEC under the Exchange Act, and (iii) any waiver, consent or declaratory
ruling by the FCC with respect to the Rules and Regulations regarding
cross-ownership of cable television systems and television stations, to the
extent that such Rules and Regulations may prohibit the performance of the
Acquiror Stockholder's obligations hereunder.
(d) The Acquiror Stockholder is the owner of the Acquiror Shares free
and clear of all security interests, liens, claims, pledges, options,
rights of first refusal, agreements, limitations on voting rights, charges
and other encumbrances of any nature whatsoever, except that 1,000,000
shares of Class A Common Stock (the "Pledged Stock") are pledged to PNC
Bank, N.A. pursuant to loan agreement dated April 23, 1992 and a collateral
pledge agreement dated as of the same date (together, the "Loan
Agreements"). PNC Bank, N.A. has the right to vote the Pledged Stock upon
the occurrence of an event of default under the Loan Agreements. The
Acquiror Stockholder has sole voting power with respect to the Acquiror
Shares or has the power to direct the voting of the Acquiror Shares. The
Acquiror Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to the Acquiror
Shares, other than pursuant to the Voting Agreement dated October 28, 1995
among the parties hereto and the Company. The Acquiror Stockholder has sole
voting power with respect to the Acquiror Shares, and the person executing
this Agreement on behalf of the Acquiror Stockholder has the power to
direct the voting of such Acquiror Shares.
6. No Prohibition on Transfers. Nothing in this Agreement shall prevent the
Acquiror Stockholder from offering, selling, transferring, pledging or in any
other way disposing of or placing encumbrances upon the Acquiror Shares.
7. Compensation, Expenses, Insurance. The Initial Trust Designee, Trust
Designees and Replacement Trust Designees serving on the Acquiror Board shall be
entitled to fees and other compensation, participation in option, stock or other
benefit plans for which directors are eligible, reimbursement of expenses, and
directors and officers liability insurance on an equal basis with other
non-employee members of the Acquiror Board.
8. Voting for Permitted Amendments.
(a) If from time to time any of the Permitted Amendments (as defined in the
Merger Agreement) is proposed for approval by the shareholders of Acquiror, the
Trust shall (i) be present, in person or represented by proxy, at the
stockholder meetings of Acquiror so that all shares of Acquiror Common Stock
beneficially owned by the Trust ("Trust Common Shares") shall be counted for the
purpose of determining the presence of a quorum at such meetings and (ii) vote
or cause to be voted, or consent with respect to, all Trust Common Shares in
favor of the approval of such Permitted Amendment. The Trust will not enter into
any agreement, commitment or understanding that limits, directs or restricts the
rights of the Trust to vote any Trust Common Shares so long as such Trust Shares
are owned by the Trust. The provisions of this subsection (a) shall terminate
two years from the date hereof.
(b) In connection with any shareholder vote regarding the approval of a
Permitted Amendment, the Trust will not, singly or as part of a partnership,
limited partnership or other group (as such terms are used in Section 13(d)(3)
of the Exchange Act), directly or indirectly make, or in any way participate in
any "solicitation" of "proxies" to vote (as such terms are defined in Rule 14a-1
under the Exchange Act), solicit any consent or communicate with or seek to
advise or influence any person or entity with respect to the voting
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of any Acquiror Common Securities or become a "participant" in any "election
contest" (as such terms are defined or used in Rule 14a-11 under the Exchange
Act) with respect to Acquiror.
(c) The Trust acknowledges that it has reviewed Acquiror's Articles of
Incorporation and Proxy Statement dated May 19, 1995.
9. Provisions Specifically Enforceable.
(a) The obligations of Acquiror and the Acquiror Stockholder under this
Agreement are unique. Acquiror and the Acquiror Stockholder acknowledge that it
would be extremely difficult or impracticable to measure the resulting damages
caused by any breach of this Agreement. Acquiror and the Acquiror Stockholder
agree that, in the event of a breach of this Agreement by Acquiror or the
Acquiror Stockholder, the Trust, in addition to any other available rights or
remedies, shall be entitled to specific performance of the obligations of
Acquiror and the Acquiror Stockholder under this Agreement, and Aquiror and the
Acquiror Stockholder expressly agree that a remedy in damages will not be
adequate.
(b) The remedies provided in this Section 8 are cumulative and are in
addition to any other remedies in law or equity which may be available to the
Trust. The election of one or more remedies shall not bar the use of other
remedies unless circumstances make the remedies incompatible.
10. Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Pennsylvania regardless of the laws
that might otherwise govern under principles of conflicts of law applicable
hereto.
11. Attorney's Fees. In any action to enforce the terms of this Agreement,
the prevailing party shall be entitled to recover its attorneys' fees and court
costs and other nonreimbursable litigation expenses, such as expert witness fees
and investigation expenses.
12. Merger and Modification. This Agreement sets forth the entire agreement
between the parties relating to the subject matter hereof, and supersedes all
other oral or written provisions. This Agreement may be modified or terminated
only in a writing signed by all parties.
13. Binding on Successors. This Agreement shall be binding upon Acquiror,
the Acquiror Stockholder and their respective successors and assigns.
14. Rules of Construction. All section captions are for reference only, and
shall not be considered in construing this Agreement.
15. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered in person, by
telecopy with answerback, by express or overnight mail delivered by a nationally
recognized air courier (delivery charges prepaid) or by registered or certified
mail (postage prepaid, return receipt requested) to the respective parties as
follows: (i) if to the Trust, to it at 312 Walnut Street, 28th Floor,
Cincinnati, Ohio, attention: Donald E. Meihaus, Secretary-Treasurer, (ii) if to
the Acquiror Stockholder, to it at 11 North Market Street, Suite 1219,
Wilmington, Delaware, 19801, with a copy to Davis Polk & Wardwell, 450 Lexington
Avenue, New York, New York, 10017, attention: William L. Taylor, Esq., (iii) if
to Acquiror, to it at 1500 Market Street, Philadelphia, Pennsylvania, 19102,
attention: Stanley Wang, Esq., with a copy to Davis Polk & Wardwell, 450
Lexington Avenue, New York, New York, 10017, attention: William L. Taylor, Esq.,
and (iv) if to the Company, to it in care of Acquiror at the address set forth
above, or to such other address as the party to whom notice is given may have
previously furnished to the others in writing in the manner set forth above. Any
notice or communication delivered in person shall be deemed effective on
delivery. Any notice or communication sent by telecopy or by air courier shall
be deemed effective on the first business day at the place at which such notice
or communication is received following the day on which such notice or
communication was sent. Any notice or communication sent by registered or
certified mail shall be deemed effective on the fifth business day at the place
from which such notice or communication was mailed following the day on which
such notice or communication was mailed.
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16. Counterparts. This Agreement may be executed contemporaneously in two
or more counterparts, each of which shall be deemed to constitute an original,
but all of which together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first written above.
COMCAST CORPORATION
By:________________________
Name:
Title:
SURAL CORPORATION
By:________________________
Name:
Title:
THE EDWARD W. SCRIPPS TRUST
By:________________________
Name:
Title:
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ANNEX III
INVESTMENT BANKING
CORPORATE AND INSTITUTIONAL
CLIENT GROUP
WORLD FINANCIAL CENTER
NORTH TOWER
NEW YORK, NEW YORK 10281-1329
MERRILL LYNCH LOGO 212 449 1000
October 28, 1995
Board of Directors
The E.W. Scripps Company
312 Walnut Street, 28th Floor
Cincinnati, Ohio 45202
Dear Sirs:
The E. W. Scripps Company, a Delaware corporation (the "Company") has
entered or will enter into (i) an Agreement and Plan of Merger (the "Merger
Agreement") by and among the Company, Scripps Howard, Inc., an Ohio corporation
("SHI") and Comcast Corporation (the "Acquiror"); (ii) a Contribution and
Assumption Agreement (the "Contribution Agreement") between the Company and SHI;
(iii) a Voting Agreement (the "Voting Agreement") by and among the Company, the
Acquiror, The Edward W. Scripps Trust (the "Trust") and the Acquiror stockholder
signatory thereto (the "Acquiror Stockholder") and (iv) a Non-Competition
Agreement (the "Non-Competition Agreement") by and among the Company, SHI and
Acquiror. The Trust, which owns approximately 79.5% of the Company's Common
Voting Stock, $.01 par value (the "Voting Common Stock"), and approximately
54.7% of the Company's Class A Common Stock, $.01 par value (the "Class A Common
Stock" and together with the Voting Common Stock, the "Company Common Stock"),
has entered into or will enter into (a) a Board Representation Agreement (the
"Board Representation Agreement") by and among the Trust, the Acquiror and the
Acquiror Stockholder and (b) a Registration Rights Agreement (the "Registration
Rights Agreement") between the Trust and the Acquiror. The Merger Agreement, the
Contribution Agreement, the Voting Agreement, the Non-Competition Agreement, the
Board Representation Agreement and the Registration Rights Agreement are
collectively referred to herein as the "Agreements."
Pursuant to the Agreements, (i) the Company will contribute to SHI
substantially all of the assets of the Company (other than those assets
described in the Contribution Agreement as being retained by the Company (the
"Company Cable Business")) and distribute to its stockholders the outstanding
shares of capital stock of SHI so that the holders of the Voting Common Stock
will receive the Common Voting Shares, $.01 par value, of SHI and the holders of
the Class A Common Stock will receive the Class A Common Shares, $.01 par value,
of SHI and (ii) the Company (immediately following such contribution and
distribution) will merge with and into the Acquiror (the "Merger") as a result
of which each share of Company Common Stock will be converted into the right to
receive the Common Stock Conversion Number (as defined in the Merger Agreement)
of shares of Class A Special Common Stock of the Acquiror (the "Acquiror
Stock"). The aforementioned transactions and related transactions described in
the Agreements are collectively referred to herein as the "Transactions." The
consideration to be received by the holders of the Company Common Stock pursuant
to the Merger is herein referred to as the "Merger Consideration".
You have asked us whether, in our opinion, the Merger Consideration is fair
to the stockholders of the Company from a financial point of view.
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MERRILL LYNCH LOGO
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed the Company's Annual Reports, Forms 10-K and related financial
information for the three fiscal years ended December 31, 1994 and the Company's
Forms 10-Q and the related unaudited financial information for the quarterly
periods ending March 31, 1995 and June 30, 1995;
(2) Reviewed the Acquiror's Annual Reports, Forms 10-K and related
financial information for the three fiscal years ended December 31, 1994 and the
Acquiror's Forms 10-Q and the related unaudited financial information for the
quarterly periods ending March 31, 1995 and June 30, 1995;
(3) Reviewed certain information, including internal and unaudited
financial statements, operating data and forecasts relating to the business,
earnings, cash flow, assets and prospects of the Company and the Company Cable
Business, furnished to us by the Company, and of the Acquiror, furnished to us
by the Acquiror;
(4) Conducted discussions with members of senior management of the Company,
the Company Cable Business and the Acquiror concerning their respective
businesses, strategic objectives and prospects;
(5) Reviewed the historical market prices and trading activity of equity
securities of publicly traded companies engaged in businesses we believe to be
generally comparable to those of the Company, the Company Cable Business and the
Acquiror, respectively;
(6) Compared the results of certain operations of the Company, the Company
Cable Business and the Acquiror with that of certain companies which we deemed
to be reasonably similar to the Company, the Company Cable Business and the
Acquiror, respectively;
(7) Compared the proposed financial terms of the Merger with the financial
terms of certain cable television acquisitions which we deemed to be relevant;
(8) Reviewed and analyzed the pro forma financial effects of the
Transactions on the Company;
(9) Reviewed the Agreements and related schedules; and
(10) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we deemed
necessary, including our assessment of general economic, market and monetary
conditions.
In preparing our opinion, we have relied on the accuracy and completeness
of all information supplied or otherwise made available to us by the Company and
the Acquiror, and we have not independently verified such information or any
underlying assumptions. With respect to the financial forecasts furnished by the
Company, the Company Cable Business and the Acquiror, we have assumed that they
have been reasonably prepared in accordance with accepted industry practice and
reflect the best currently available estimates and judgment of the Company's,
the Company Cable Business' or the Acquiror's management as to the future
competitive, operating and regulatory environments and expected future financial
performance of the Company, the Company Cable Business or the Acquiror, as the
case may be. We have not made any independent evaluation or appraisal of the
assets or liabilities of the Company, the Company Cable Business or the
Acquiror, nor have we been furnished with any such appraisals. We have, with
your approval, assumed the Transactions will qualify as a tax-free
reorganization and understand that the Trust has sufficient voting power to
approve the Transactions.
Furthermore, we express no opinion as to the price or range of prices at
which the shares of Acquiror Stock will trade subsequent to the consummation of
the Transactions.
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MERRILL LYNCH LOGO
As part of this assignment, we have assisted the Company in identifying a
broad spectrum of knowledgeable and qualified buyers who were contacted and
given the opportunity to make a thorough evaluation of the Company Cable
Business in preparation for the submission of a proposal to acquire the Company
Cable Business. As a result of these efforts, the Company received various
indications of interest regarding possible business transactions involving the
Company Cable Business, which we have assessed and reviewed with the management
and the Board of Directors of the Company.
We have acted as financial advisor to the Company in connection with the
Transactions and will receive a fee for our services, payment of a significant
portion of which is contingent upon consummation of the Transactions. We have,
in the past, provided financial advisory and/or financial services to the
Company and the Acquiror and its affiliates, and have received fees for the
rendering of such services. In addition, in the ordinary course of our
securities business, we may actively trade debt and/or equity securities of the
Acquiror and its affiliates for our own account and the accounts of our
customers, and we may from time to time hold a long or short position in such
securities.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be relied upon or used for any other
purpose without our prior written consent; provided, however, this letter may be
reproduced in full in the proxy statement/prospectus to be mailed to the
Company's stockholders in connection with the Transactions. We understand that
the Trust has engaged Donaldson, Lufkin & Jenrette Securities Corporation, which
will be rendering an opinion with respect to the Transactions and which will not
be relying on our opinion expressed herein.
On the basis of, and subject to, the foregoing and such other matters as we
consider relevant, we are of the opinion that the Merger Consideration is fair
to the stockholders of the Company from a financial point of view.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By /S/ Michael R. Costa
3
<PAGE> 236
ANNEX IV
[DELAWARE DISSENTERS' RIGHTS STATUTE]
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Sections 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the holders of the surviving corporation as
provided in subsections (f) or (g) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock anything
except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof,
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system
security on an interdealer quotation system by the National Association of
Securities Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares
of any class or series of its stock as a result of an amendment to its
certificate of incorporation, any merger or consolidation in which the
corporation is a constituent
<PAGE> 237
corporation or the sale of all or substantially all of the assets of the
corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of his
shares shall deliver to the corporation, before the taking of the vote on the
merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or consented to
the merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to Sections 228 or
253 of this title, the surviving or resulting corporation, either before the
effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of his shares.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Registrar in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown
<PAGE> 238
on the list at the addresses therein stated. Such notice shall also be given by
1 or more publications at least 1 week before the day of the hearing, in a
newspaper of general circulation published in the City of Wilmington, Delaware
or such publication as the Court deems advisable. The forms of the notices by
mail and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertified stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expense incurred by any stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorney's fees and the fees and
expenses of experts, to be charged pro rata against the value of all the shares
entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
<PAGE> 239
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Subchapter D (Sections 1741 through 1750) of Chapter 17 of the
Pennsylvania Business Corporation Law of 1988 (the "PBCL" or "Pennsylvania Law")
contains provisions for mandatory and discretionary indemnification of a
corporation's directors, officers, employees and agents (collectively,
"Representatives"), and related matters.
Under Section 1741, subject to certain limitations, a
corporation has the power to indemnify directors, officers and other
Representatives under certain prescribed circumstances against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with a threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative, to which any of them is a party or threatened to be made a party
by reason of his being a Representative of the corporation or serving at the
request of the corporation as a Representative of another corporation,
partnership, joint venture, trust or other enterprise, if he acted in good faith
and in a manner he reasonably believed to be in, or not opposed to, the best
interests of the corporation and, with respect to any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful.
Section 1742 provides for indemnification with respect to
derivative actions similar to that provided by Section 1741. However,
indemnification is not provided under Section 1742 in respect of any claim,
issue or matter as to which a Representative has been adjudged to be liable to
the corporation unless and only to the extent that the proper court determines
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, the Representative is fairly and reasonably
entitled to indemnity for the expenses that the court deems proper.
Section 1743 provides that indemnification against expenses is
mandatory to the extent that a Representative has been successful on the merits
or otherwise in defense of any such action or proceeding referred to in Section
1741 or 1742.
Section 1744 provides that unless ordered by a court, any
indemnification under Section 1741 or 1742 shall be made by the corporation as
authorized in the specific case upon a determination that indemnification of a
Representative is proper because the Representative met the applicable standard
of conduct, and such determination will be made by (i) the board of directors by
a majority vote of a quorum of directors not parties to the action or
proceeding; (ii) if a quorum is not obtainable or if obtainable and a majority
of disinterested directors so directs, by independent legal counsel in a written
opinion; or (iii) by the shareholders.
Section 1745 provides that expenses incurred by a
Representative in defending any action or proceeding referred to in Subchapter D
of Chapter 17 of the PBCL may be paid by the corporation in advance of the final
disposition of such action or proceeding upon
<PAGE> 240
receipt of an undertaking by or on behalf of the Representative to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation.
Section 1746 provides generally that except in any case where
the act or failure to act giving rise to the claim for indemnification is
determined by a court to have constituted willful misconduct or recklessness,
the indemnification and advancement of expenses provided by Subchapter D of
Chapter 17 of the PBCL shall not be deemed exclusive of any other rights to
which a Representative seeking indemnification or advancement of expenses may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding that office.
Section 1747 grants a corporation the power to purchase and
maintain insurance on behalf of any Representative against any liability
incurred by him in his capacity as a Representative, whether or not the
corporation would have the power to indemnify him against that liability under
Subchapter D of Chapter 17 of the PBCL.
Sections 1748 and 1749 apply the indemnification and
advancement of expenses provisions contained in Subchapter D of Chapter 17 of
the PBCL to successor corporations resulting from consolidation, merger or
division and to service as a Representative of a corporation or an employee
benefit plan.
Section 7-2 of the Registrant's By-Laws provides that the
Registrant will indemnify any director or officer of the Registrant to the
fullest extent permitted by the Pennsylvania Law against all expense, liability
and loss reasonably incurred or suffered by such person in connection with any
threatened, pending or completed action, suit or proceeding (a "Proceeding")
involving such person by reason of the fact that he or she is or was a director
or officer of the Registrant or is or was serving at the request or for the
benefit of the Registrant in any capacity for another corporation or other
enterprise. No indemnification pursuant to Section 7-2 may be made, however, in
any case where the act or failure to act giving rise to the claim for
indemnification is determined by a court to have constituted willful misconduct
or recklessness.
Section 7-2 further provides that the right to indemnification
includes the right to have the expenses incurred by the indemnified person in
defending any Proceeding paid by the Registrant in advance of the final
disposition of the Proceeding to the fullest extent permitted by Pennsylvania
Law. In addition, Section 7-2 provides that Registrant may purchase and maintain
insurance for the benefit of any person on behalf of whom insurance is permitted
to be purchased by The Pennsylvania Law against any expense, liability or loss
whether or not the Registrant would have the power to indemnify such person
under Pennsylvania or other law. The Registrant may also purchase and maintain
insurance to insure its indemnification obligations, whether arising under the
Registrant's By-Laws or otherwise. In addition, Section 7-2 states that the
Registrant may create a fund of any nature or otherwise may secure in any manner
its indemnification obligations, whether arising under the By-Laws or otherwise.
Section 7-3 of the Registrant's By-Laws states that the
provisions of the Registrant's By-Laws relating to indemnification constitute a
contract between the Registrant and each of its directors and officers which may
be modified as to any director or officer only
2
<PAGE> 241
with that person's consent or as provided in Section 7-3. Further, any repeal or
amendment of the indemnification provisions of the Registrant's By-Laws adverse
to any director or officer will apply only on a prospective basis. In addition,
no repeal or amendment of the By-Laws may affect the indemnification provisions
of the By-Laws so as to limit indemnification or the advancement of expenses in
any manner unless adopted by (a) the unanimous vote of the directors of the
Registrant then serving or (b) the affirmative vote of shareholders entitled to
cast at least 80% of the votes that all shareholders are entitled to cast in the
election of directors, provided that no such amendment will have a retroactive
effect inconsistent with the preceding sentence.
Section 2(d) of the Comcast 1987 Stock Option Plan and
Section 5(d) of the Comcast 1996 Stock Option Plan (collectively, the "Plans")
provide that each member of the Board of Directors of the committee
administering each of the Plans will be entitled to indemnity from the
Registrant to the fullest extent provided by applicable law and the
Registrant's By-Laws in connection with any action, suit or proceeding with
respect to the administration of the Plans or the granting of options under the
Plans in which such Person may be involved by reason of his or her being or
having been a member of the Board of Directors of the Registrant or such
committee.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
(A) EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
--------
<S> <C> <C>
2.1 Agreement and Plan of Merger (the "Merger Agreement") by and among
The E.W. Scripps Company, Scripps Howard, Inc., and Comcast Corporation
dated as of October 28, 1995 (attached as Annex I to the Joint Proxy
Statement-Prospectus) and Form of Amendment to the Merger Agreement
(attached as Annex II to the Joint Proxy Statement-Prospectus).
2.2 Voting Agreement by and among Comcast Corporation, The E.W.
Scripps Company, Sural Corporation and The Edward W. Scripps
Trust, dated as of October 28, 1995 (attached as Exhibit E to Annex I
to the Joint Proxy Statement-Prospectus).
4.1 Specimen Class A Common Stock Certificate
(incorporated by reference to Exhibit 2(a) to the
Company's Registration Statement on Form S-7 filed
with the Commission on September 17, 1980, File No.
2-69178).
4.2 Specimen Class A Special Common Stock Certificate (incorporated by
reference to Exhibit 4(2) to the Company's Annual Report on Form
10-K for the year ended December 31, 1986).
4.3(a) Indenture (including form of Note), dated as of May 15, 1983,
between Storer Communications, Inc. and The Chase Manhattan
Bank, N.A., as Trustee, relating to 10% Subordinated Debentures due
May 2003 of Storer Communications, Inc. (incorporated by reference
</TABLE>
3
<PAGE> 242
to Exhibit 4.6 to the Registration Statement on Form
S-1 (File No. 2-98938) of SCI Holdings, Inc.).
4.3(b) First Supplemental Indenture, dated December 3, 1986
(incorporated by reference to Exhibit 4.5 to the
Current Report on Form 8-K of Storer Communications,
Inc. dated December 3, 1986).
4.4 Amended and Restated Indenture dated as of June 5,
1992 among Comcast Cellular Corporation, the Company
and The Bank of New York, as Trustee, relating to
$500,493,000 Series A Senior Participating Redeemable
Zero Coupon Notes due 2000 and $500,493,000 Series B
Senior Participating Redeemable Zero Coupon Notes due
2000 (incorporated by reference to Exhibit 4.3 to the
Registration Statement on Form S-1 (File No.
33-46863) of Comcast Cellular Corporation).
4.5 Indenture, dated as of October 17, 1991, between the
Company and Morgan Guaranty Trust Company of New
York, as Trustee (incorporated by reference to
Exhibit 2 to the Company's Current Report on Form 8-K
filed with the Commission on October 31, 1991).
4.6 Form of Debenture relating to the Company's 10-1/4%
Senior Subordinated Debentures due 2001 (incorporated
by reference to Exhibit 4(19) to the Company's Annual
Report on Form 10-K for the year ended December 31,
1991).
4.7 Form of Debenture relating to the Company's
$300,000,000 10-5/8% Senior Subordinated Debentures
due 2012 (incorporated by reference to Exhibit 4(17)
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992).
4.8 Form of Debenture relating to the Company's
$200,000,000 9-1/2% Senior Subordinated Debentures
due 2008 (incorporated by reference to Exhibit 4(18)
to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992).
4.9 Indenture, dated as of February 20, 1991, between the
Company and Bankers Trust Company, as Trustee
(incorporated by reference to Exhibit 4.3 to the
Company's Registration Statement on Form S-3, File
No. 33-32820, filed with the Commission on January
11, 1990).
4.10 Form of Debenture relating to the Company's
3-3/8%/5-1/2% Step-up Convertible Subordinated
Debentures Due 2005 (incorporated by reference to
Exhibit 4(14) to the Company's Annual Report on Form
10-K for the year ended December 31, 1993).
4.11 Form of Debenture relating to the Company's 1-1/8%
Discount Convertible Subordinated Debentures Due 2007
(incorporated by
4
<PAGE> 243
reference to Exhibit 4 to the Company's Current
Report on Form 8-K filed with the Commission on
November 15, 1993).
4.12 Form of Debenture relating to the Company's $250.0
million 9-3/8% Senior Subordinated Debentures due
2005 (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995).
4.13 Form of Debenture relating to the Company's $250.0
million 9-1/8% Senior Subordinated Debentures due
2006 (incorporated by reference to Exhibit 4.13 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1995).
4.14 Indenture dated as of November 15, 1995, between
Comcast UK Cable Partners Limited and Bank of
Montreal Trust Company, as Trustee, in respect of
Comcast UK Cable Partners Limited's 11.20% Senior
Discount Debentures due 2007 (incorporated by
reference to Exhibit 4.1 to the Registration
Statement on Form S-1 (File No. 33- 96932) of Comcast
UK Cable Partners Limited).
4.14(a) Form of Debenture relating to Comcast UK Cable
Partners Limited's 11.20% Senior Discount Debentures
due 2007 (incorporated by reference to Exhibit 4.2 to
the Registration Statement on Form S-1 (File No.
33-96932) of Comcast UK Cable Partners Limited).
5 Opinion and consent of Arthur R. Block, Senior
Deputy General Counsel of Comcast Corporation,
regarding legality of the registered securities.
8.1 Opinion and consent of Baker & Hostetler regarding
certain tax matters.
8.2 Opinion and consent of Davis Polk & Wardwell
regarding certain tax matters.
10.1 Comcast Corporation 1996 Stock Option Plan, dated
March 13, 1996 (incorporated by reference to the
definitive additional materials to the Company's
amended definitive Proxy Statement for its Annual
Meeting of Shareholders held on June 19, 1996,
filed on May 15, 1996).
21 List of Subsidiaries (incorporated by reference to
Comcast's Annual Report on Form 10-K for the year
ended December 31, 1995).
23.1 Consent of Merrill Lynch & Co.
23.2 Consent of Arthur R. Block (included in Exhibit 5)
23.3 Consents of Deloitte & Touche LLP
5
<PAGE> 244
23.4 Consent of Baker & Hostetler (included in Exhibit
8.1)
23.5 Consent of Davis Polk & Wardwell (included in Exhibit
8.2)
23.6 Consent of KPMG Peat Marwick LLP
23.7 Consents of Arthur Andersen LLP
23.8 Consent of Lehman Brothers
23.9 Consent of Donaldson, Lufkin & Jenrette Securities
Corporation
24 Power of Attorney (included in Part II of the
Registration Statement).
99.1 Forms of Proxy.
99.2 Report of Independent Public Accountants to QVC,
Inc., as of December 31, 1995 and for the
eleven-month period then ended (incorporated by
reference to Exhibit 99.1 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1995).
99.3 Report of Independent Public Accountants to Garden
State Cablevision L.P., as of December 31, 1994 and
1993 and for the years then ended (incorporated by
reference to Exhibit 99.2 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1995).
99.4 Report of Independent Public Accountants to Comcast
International Holdings, Inc., as of December 31, 1994
and 1993 and for the years then ended (incorporated
by reference to Exhibit 99.3 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1994).
99.5 Report of Merrill Lynch & Co. to the Board of
Directors of The E.W. Scripps Company
99.6 Fairness opinion given by Donaldson, Lufkin &
Jenrette Securities Corporation to The Edward W.
Scripps Trust and the Trustees thereof.
(B) FINANCIAL STATEMENT SCHEDULES
None Required
(C) OPINION OF FINANCIAL ADVISOR
Fairness opinion given by Merrill Lynch & Co. is included as Annex II
to the Joint Proxy Statement-Prospectus.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to section 13(a) or section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant
6
<PAGE> 245
to section 15(d) of the Securities Exchange Act of 1934) that is incorporated by
reference in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against the public policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
registrant of expense incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel that matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the act and
will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered hereunder through
use of a prospectus which is a part of this registration statement, by any
person or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
The registrant undertakes that every prospectus (i) that is
filed pursuant to the immediately preceding paragraph, or (ii) that purports to
meet the requirements of section 10(a)(3) of the Act and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part of
an amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by
means of post-effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes:
7
<PAGE> 246
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration
statement;
(i) To include any prospectus required by Section 10(a)
(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the "Calculation
of Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Commission by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
8
<PAGE> 247
SIGNATURES AND POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized in Philadelphia,
Pennsylvania, on September 30, 1996.
COMCAST CORPORATION
By: /s/ Brian L. Roberts
---------------------------------
Brian L. Roberts, President
KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints Ralph J. Roberts, Brian
L. Roberts, Julian A. Brodsky, Lawrence S. Smith, John R. Alchin, Stanley Wang
and Arthur R. Block and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
to this Registration Statement, and to file the same, with all exhibits thereto,
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Ralph J. Roberts Chairman of the Board of September 30, 1996
- --------------------------- Directors; Director
Ralph J. Roberts
/s/ Julian A. Brodsky Vice Chairman of the Board September 30, 1996
- --------------------------- of Directors; Director
Julian A. Brodsky
/s/ Brian L. Roberts President; Director September 30, 1996
- --------------------------- (Principal Executive
Brian L. Roberts Officer)
</TABLE>
9
<PAGE> 248
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ Lawrence S. Smith Executive Vice President, September 30, 1996
- ---------------------------- (Principal Accounting
Lawrence S. Smith Officer)
/s/ John R. Alchin Senior Vice President September 30, 1996
- ---------------------------- and Treasurer (Principal
John R. Alchin Financial Officer)
/s/ Daniel Aaron Director September 30, 1996
- ----------------------------
Daniel Aaron
/s/ Gustave G. Amsterdam Director September 30, 1996
- ----------------------------
Gustave G. Amsterdam
/s/ Sheldon M. Bonovitz Director September 30, 1996
- ----------------------------
Sheldon M. Bonovitz
/s/ Joseph L. Castle II Director September 30, 1996
- ----------------------------
Joseph L. Castle II
/s/ Bernard C. Watson Director September 30, 1996
- ----------------------------
Bernard C. Watson
/s/ Irving A. Wechsler Director September 30, 1996
- ----------------------------
Irving A. Wechsler
/s/ Anne Wexler Director September 30, 1996
- ----------------------------
Anne Wexler
</TABLE>
10
<PAGE> 249
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
<S> <C> <C>
EXHIBIT PAGE
NUMBER DESCRIPTION NUMBER
- ------- ----------- ------
5 Opinion and consent of Arthur R.
Block, Senior Deputy General
Cousel of Comcast Corporation,
regarding legality of the
registered securities.
8.1 Opinion and consent of Baker &
Hostetler regarding certain tax
matters
8.2 Opinion and consent of Davis Polk &
Wardwell regarding certain tax
matters.
23.1 Consent of Merrill Lynch & Co.
23.2 Consent of Arthur R. Block
(included in Exhibit 5)
23.3 Consents of Deloitte & Touche LLP
23.4 Consent of Baker and Hostetler
(included in Exhibit 8.1)
23.5 Consent of Davis Polk & Wardwell
(included in Exhibit 8.2)
23.6 Consent of KPMG Peat Marwick LLP
23.7 Consents of Arthur Andersen LLP
23.8 Consent of Lehman Brothers
23.9 Consent of Donaldson, Lufkin & Jenrette Securities
Corporation
24 Power of Attorney (included in Part
II of the Registration Statement).
99.1 Forms of Proxy.
99.5 Report of Merrill Lynch & Co.
to the Board of Directors
of The E.W. Scripps Company
99.6 Fairness opinion given by Donaldson, Lufkin & Jenrette
Securities Corporation to The Edward W. Scripps Trust
and the Trustees thereof.
</TABLE>
<PAGE> 1
EXHIBIT 5
[Comcast Letterhead]
September 30, 1996
Comcast Corporation
1500 Market Street
Philadelphia, Pennsylvania 19103-2148
Re: Registration Statement on Form S-4
----------------------------------
Ladies & Gentlemen:
I am Senior Deputy General Counsel of Comcast Corporation (the
"Company") and have acted as such in connection with the preparation of a
Registration Statement (the "Registration Statement") on Form S-4 under the
Securities Act of 1933, as amended (the "Act"), covering shares of Class A
Special Common Stock, par value $1.00 per share (the "Common Stock") of the
Company. The Common Stock would be issued pursuant to an Agreement and Plan of
Merger dated as of October 28, 1995, as amended, by and among the Company, The
E.W. Scripps Company and Scripps Howard, Inc.
I have examined the Restated Certificate of Incorporation,
By-laws and other corporate records of the Company and such other documents as I
have deemed relevant to the opinion.
Based on the foregoing, it is my opinion that when the
shares of the Common Stock, or any portion thereof, are issued as described in
the Registration Statement, such shares will be duly authorized, validly issued,
fully paid and nonassessable.
I hereby consent to the use of my name under the caption
"Legal Matters" in the Registration Statement and any prospectus which
constitutes a part thereof and to the filing of this opinion as an exhibit to
the Registration Statement. In giving this consent, I do not hereby admit that I
come within the category of persons whose consent is required under Section 7 of
the Act or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
Very truly yours,
/s/ Arthur R. Block
-------------------
Arthur R. Block
Senior Deputy General Counsel
<PAGE> 1
EXHIBIT 8.1
--------------------------
BAKER
&
HOSTETLER
--------------------------
September 30, 1996
The E.W. Scripps Company
312 Walnut Street
Cincinnati, Ohio 45202
Ladies and Gentlemen:
You have requested our opinion concerning the material federal
income tax consequences to The E.W. Scripps Company (the "Company") and its
shareholders of the proposed statutory merger of the Company with and into
Comcast Corporation ("Comcast") (the "Merger") in accordance with the terms and
conditions of the Agreement and Plan of Merger by and among the Company, Scripps
Howard, Inc., and Comcast dated as of October 28, 1995, which is to be amended
pursuant to the Form of Amendment to the aforesaid Agreement and Plan of Merger
(such Agreement and such Form of Amendment hereafter referred to as the
"Agreement"). The opinions presented herein are based on the facts and
representations in the Agreement and in the Registration Statement on Form S-4
(the "Registration Statement") filed with the Securities and Exchange Commission
("SEC") on September 16, 1996, including without limitation the Joint Proxy
Statement-Prospectus with respect to Comcast and the Company contained in the
Registration Statement (collectively, the "Documents") and the representations
set forth in representation letters from the Company and Comcast, and from
certain shareholders of the Company with respect to continuity of shareholder
interest (collectively, the "Representation Letters") and the applicable tax law
as it exists today. We have also conducted such other investigations of fact
and law as we have deemed necessary for purposes of rendering the opinions
presented herein. Our opinion is conditioned on the assumption that there will
be no change in any of the facts or representations set forth in the Documents,
the Representation letters, or this letter between the date of this opinion and
the date of the Merger (the "Merger Date").
I. FACTS
-----
The Company is a Delaware corporation whose Class A Common
Stock is traded on the New York Stock Exchange. The Company owns all of the
outstanding shares of stock of Scripps Howard, Inc. ("SHI"), an Ohio
corporation, which is engaged in the business of publishing and distributing a
newspaper, The Cincinnati Post, and other business related activities. In
addition, SHI owns all of the outstanding shares of the stock of Scripps
<PAGE> 2
The E.W. Scripps Company
September 30, 1996
Page 2
Howard Broadcasting Company ("SHBC"), an Ohio corporation, which is engaged in
the business of television broadcasting through the operation of television
stations in Cincinnati, Ohio; Cleveland, Ohio; West Palm Beach, Florida; Tulsa,
Oklahoma; Kansas City, Missouri; Phoenix, Arizona; and Baltimore, Maryland.
SHI also owns all the outstanding shares of stock of several
other subsidiaries engaged in the newspaper publishing, entertainment and cable
television businesses, including EWS Cable, Inc. ("EWS Cable") and L-R Cable,
Inc. ("L-R Cable"), two Colorado corporations, which are general partners in
Telescripps Cable Company, a Colorado general partnership engaged in the cable
television business in the States of Tennessee, Kentucky, Florida, Georgia,
Indiana, South Carolina, Virginia, and West Virginia.
SHBC owns all the outstanding shares of stock of several
subsidiaries engaged in the television broadcasting and cable television
businesses, including Scripps Howard Cable Company ("SHCC"), a Colorado
corporation, which is engaged in the cable television business in Colorado and
Florida and Scripps Howard Cable Company of Sacramento ("SHCC Sacramento"), a
Delaware corporation which is a general partner in Sacramento Cable Television,
a California general partnership engaged in the cable television business in
California.
Comcast Corporation is a Pennsylvania corporation whose Class
A Special Common Stock is traded on the NASDAQ National Market.
Comcast desires to acquire the Company and all of the
Company's cable businesses, including the outstanding shares of EWS Cable, L-R
Cable, SHCC, and SHCC Sacramento (the Cable Subsidiaries) in exchange for its
Class A Special Common Stock traded on the NASDAQ National Market, which stock
is nonvoting stock, but does not desire to acquire the newspaper, entertainment
and television broadcasting businesses.
To permit Comcast to acquire the Company and the Cable
Subsidiaries without the newspaper, entertainment and television broadcasting
businesses, the Company and its subsidiaries propose the following steps:
1. SHBC will contribute the stock of SHCC Sacramento and the
assets of cable television businesses located in Athens,
Greenbrier and Harriman, Tennessee to SHCC;
2. SHBC will spin-off SHCC to SHI;
3. SHI will contribute the stock of L-R Cable and EWS Cable to
SHCC;
4. SHI will spin-off SHCC to the Company;
<PAGE> 3
The E.W. Scripps Company
September 30, 1996
Page 3
5. The Company will spin-off SHI to the shareholders of the
Company and SHI will change its name to The E.W. Scripps
Company; and
6. The Company will merge with and into Comcast in a statutory
merger intended to qualify as a reorganization under Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
(the "Code") with the shareholders of EWS receiving nonvoting
Class A Special Common Stock of Comcast ("Comcast Shares") in
exchange for their Class A Common Stock of the Company in the
Merger. No fractional shares will be issued. Cash will be
paid by Comcast in lieu of any fractional share interest;
however, such cash represents merely a mechanical rounding-off
of the fractions and is not separately bargained for
consideration.
Rulings are requested from the Internal Revenue Service
("IRS") regarding the federal income tax consequences of Items 1 through 5
("Requested Rulings") and no opinion is provided with respect to such items.
The Requested Rulings, however, are based on the assumption that the Merger
will qualify as a reorganization under Section 368(a)(1)(A) of the Code. No
ruling was requested regarding whether the Merger will qualify as a
reorganization under Section 368(a)(1)(A) of the Code because the IRS takes the
position that the consequences of a transaction such as the Merger are
adequately established in the tax law, and it therefore will not issue a
"comfort" ruling as to whether such a transaction qualifies as a reorganization
under Section 368(a)(1)(A) of the Code.
II. ASSUMPTIONS AND REPRESENTATIONS
-------------------------------
In order to determine the consequences of the Merger for
federal income tax purposes, we have assumed with your permission and Comcast's
permission that the Company and Comcast have adopted and will consummate all
steps set forth in the Agreement in accordance with and pursuant to
Pennsylvania and Delaware law. In addition, we have relied on the following
representations which we have received from the Company and/or Comcast:
(1) The formula set forth in the Agreement pursuant to which each
issued and outstanding share of EWS will be exchanged for
Comcast Shares is the result of arm's length bargaining and
the fair market value of the Comcast Shares to be received by
each shareholder of the Company will be approximately equal to
the fair market value of the shares of the Company surrendered
by such shareholder of the Company in the Merger.
(2) There is no plan or intention by the shareholders of the
Company who own 5 percent or more of the shares of the
Company, and to the best of the knowledge of the management of
the Company, there is no plan or intention on the part of the
remaining shareholders of the Company to sell, exchange or
otherwise dispose of a number of Comcast Shares received in
the Merger that would reduce the ownership by the shareholders
of the Company of Comcast
<PAGE> 4
The E.W. Scripps Company
September 30, 1996
Page 4
Shares to a number of Comcast Shares having a value, as of the
date of the Merger Date, of less than 50 percent of the value
of all of the formerly outstanding shares of the Company as of
the same date. For purposes of this representation, shares of
stock of the Company exchanged for cash or other property,
surrendered by dissenters or exchanged for cash in lieu of
fractional Comcast Shares will be treated as outstanding stock
of the Company on the date of the transaction. Also, for
purposes of this representation, shares of the Company and
Comcast held by shareholders of the Company and sold,
redeemed, or disposed of prior or subsequent to the Merger
Date are considered.
(3) Comcast Has No current plan or intention to reacquire any of
the Comcast Shares issued in the Merger; however, Comcast does
have a stock repurchase program announced in October 1995 under
which it is authorized to repurchase up to $500 million of
Comcast's common stock, which is less than 20 percent of its
common stock outstanding both (i) as of such date and (ii) as
of the date of this letter. Pursuant to the Agreement, Comcast
has agreed to (i) terminate the stock buy-back program no later
than six months after the Closing Date and (ii) notify The E.W.
Scripps Trust that Comcast anticipates making purchases during
a certain period of time so that The E.W. Scripps Trust can
avoid selling any of its Comcast Shares during such period.
Pursuant to the program, as of the date hereof, Comcast has
repurchased shares of Comcast common stock for an aggregate
purchase price of approximately $185.8 million.
(4) Comcast has no current plan or intention to transfer, sell or
otherwise dispose of any of the assets of EWS or any of the
stock or any material portion of the assets of the Cable
Subsidiaries acquired in the Merger, to liquidate any of the
Cable Subsidiaries or merge any of the Cable Subsidiaries into
any other corporation, provided, however, that Comcast does
intend to contribute the stock of SHCC acquired pursuant to the
Merger to Comcast Cable Communications, Inc., a Delaware
corporation and a wholly owned first-tier subsidiary of Comcast
that serves as the cable business holding company for the
Comcast consolidated group (the "Dropdown"), but only if (i)
Comcast receives an opinion from Davis Polk & Wardwell or other
tax counsel acceptable to EWS and SHI that the Dropdown will
qualify under Section 368(a)(2)(C) of the Code and (ii) the IRS
rules that the Dropdown will not affect the tax-free treatment
of the spin-off transactions that precede the Merger or Comcast
receives an opinion from Davis Polk & Wardwell or other tax
counsel acceptable to EWS and SHI to the same effect.
<PAGE> 5
The E.W. Scripps Company
September 30, 1996
Page 5
(5) The liabilities of the Company assumed by Comcast and the
liabilities to which the transferred assets of the Company are
subject were incurred by the Company in the ordinary course of
its business and are associated with the assets transferred.
(6) Following the Merger, Comcast will (i) continue the historic
businesses of EWS and the Cable Subsidiaries acquired pursuant
to the Merger, and (ii) use a significant portion of EWS's and
the Cable Subsidiaries' historic business assets acquired
pursuant to the Merger in its business.
(7) Comcast, the Company, the Cable Subsidiaries, and the
shareholders of the Company will pay their respective
expenses, if any, incurred in connection with the Merger.
(8) There is no intercorporate indebtedness existing between
Comcast and the Company, between the Company and the Cable
Subsidiaries, or between or among the Cable Subsidiaries that
was issued, acquired, or will be settled at a discount.
(9) Neither the Company nor Comcast is a corporation 50 percent or
more of the value of whose total assets are stock and
securities and 80 percent or more of the value of whose total
assets are assets held for investment. In making the
50-percent and 80-percent determinations under the preceding
sentence, stock and securities in any subsidiary corporation
shall be disregarded and the parent corporation shall be
deemed to own its ratable share of the subsidiary's assets,
and a corporation shall be considered a subsidiary if the
parent owns 50 percent or more of the combined voting power of
all classes of stock entitled to vote, or 50 percent or more
of the total value of shares of all classes of stock
outstanding. Further, neither the Company nor Comcast has
filed, will file for the tax year in which the Merger will
occur, or has any intention of filing an election to be a
regulated investment company or a real estate investment
trust.
(10) None of the Company, the Cable Subsidiaries, or Comcast is
under the jurisdiction of a court in a case under Title 11 of
the United States Code or a receivership, foreclosure, or
similar proceeding in Federal or State court.
(11) The fair market value of the assets of the Company transferred
to Comcast will equal or exceed the sum of the liabilities
assumed by Comcast, plus the amount of liabilities, if any, to
which the transferred assets are subject.
(12) The payment of cash in lieu of fractional Comcast Shares is
solely for the purpose of avoiding the expense and
inconvenience to Comcast of issuing fractional shares and does
not represent separately bargained-for consideration. The
total cash consideration that will be paid in the transaction
to the EWS
<PAGE> 6
The E.W. Scripps Company
September 30, 1996
Page 6
shareholders instead of issuing fractional Comcast Shares will
not exceed 1 percent of the total consideration that will be
issued in the transaction to the EWS shareholders in exchange
for their shares of EWS stock. The fractional share interests
of each EWS shareholder will be aggregated and no EWS
shareholder will receive cash in an amount equal to or greater
than the value of one full Comcast Share.
(13) The Company and Comcast will not take any position on any
Federal, state or local income or franchise tax return, or
take any other action or reporting position, that is
inconsistent with the treatment of the Merger as a statutory
merger and tax-free reorganization or with the representations
made herein.
(14) None of the compensation to be received by any
shareholder-employees of the Company will be separate
consideration for, or allocable to, any of their shares of the
Company; none of the Comcast Shares received by any
shareholder-employees will be separate consideration for, or
allocable to, any employment agreement; and the compensation
paid to any shareholder-employees will be for services
actually rendered and will be commensurate with amounts paid
to third parties bargaining at arm's-length for similar
services.
III. APPLICABLE LAW
--------------
A. Overview
--------
Section 368(a)(1)(A) of the Code provides that a "statutory
merger or consolidation", i.e., a merger or consolidation accomplished pursuant
to state law, constitutes a "reorganization." Pursuant to the Merger, the
Company will be merged with and into Comcast pursuant to Pennsylvania and
Delaware law, and except for any payments to dissenters and payments for
fractional shares, solely Comcast Shares, which are shares not entitled to
vote, will be exchanged for the assets of the Company.
In addition to the definitional requirements set forth in the
statute, in order for an exchange to be a tax-free reorganization, certain
requirements set forth under Section 1.368-1(b) of the Income Tax Regulations
must be satisfied. The Regulations provide that the purpose of the
reorganization provisions of the Code is to except from the general rule of
taxability certain specifically described exchanges incident to such
readjustments of corporate structures made in one of the particular ways
specified in the Code, as are required by business exigencies and which effect
only a readjustment of continuing interest in property under modified corporate
forms. Requisite to a reorganization under the Code are a continuity of the
business enterprise under the modified corporate form and a continuity of
interest therein on the part of those persons who, directly or indirectly, were
the owners of the enterprise prior to the reorganization.
<PAGE> 7
The E.W. Scripps Company
September 30, 1996
Page 7
B. Plan of Reorganization
----------------------
A transaction will not qualify as a tax-free reorganization
unless a plan of reorganization (i) "contemplate[s] the bona fide execution of
a transaction described in Section 368(a)," and (ii) provides for (a) the bona
fide consummation of each step of the transaction and (b) the continuation of
the enterprise. Reg. Section 1.368-1(c). As discussed below, both the Company
and Comcast have permitted us to assume that they have adopted and will
consummate the Agreement and Merger pursuant to Pennsylvania and Delaware law.
Assuming that assumption is valid, the "plan of reorganization" requirement
will be satisfied.
C. Merger Pursuant to State Law
----------------------------
To qualify as a Type A reorganization, a transaction must be a
merger or consolidation effected pursuant to the corporation laws of a state
(or certain laws of the United States in special circumstances not applicable
here). Because Comcast is a Pennsylvania corporation and the Company is a
Delaware corporation, the merger must be effected pursuant to the corporation
laws of the State of Pennsylvania (which requires, in the case of the Merger,
that the provisions of Delaware law also be complied with). If--as the Company
and Comcast have permitted us to assume--Pennsylvania and Delaware law
requirements for the Merger will be satisfied, the "merger pursuant to state
law" requirement will be satisfied.
D. Business Purpose
----------------
The IRS generally takes the position that a valid corporate
(i.e., not shareholder) business purpose of both merging corporations is
required in a reorganization under Section 368(a) of the Code. The regulations
require that "the readjustments involved in the exchanges or distributions
effected in the consummation of a plan of reorganization must be undertaken for
reasons germane to the continuance of the business of a corporation a party to
the reorganization." Reg. Section 1.368-2(g). Through the Merger, Comcast
seeks to increase its operating scale to lower its programming costs and
realize other economies of scale. The Company also expects that it will
achieve substantial economies of scale by combining its cable businesses with
the cable businesses of Comcast pursuant to the Merger. Accordingly, the
business purpose requirement under the regulations will be satisfied.
E. Continuity of Business Enterprise
---------------------------------
Section 1.368-1(d) of the Regulations provides that continuity
of business enterprise requires that the acquiring corporation either (i)
continue the acquired corporation's historic business or (ii) use a significant
portion of the acquired corporation's historic business assets in a business.
It is represented that after the Merger, Comcast will (i) continue the historic
businesses of EWS and the Cable Subsidiaries acquired pursuant to the Merger,
and (ii) use a significant portion of EWS's and the Cable Subsidiaries'
historic business assets
<PAGE> 8
The E.W. Scripps Company
September 30, 1996
Page 8
acquired pursuant to the Merger in its business. Accordingly, the Merger will
meet the continuity of business enterprise requirement.
F. Continuity of Shareholder Interest
----------------------------------
Under Section 1.368-1(b) of the Regulations, the continuity of
interest doctrine requires that in a reorganization there must be a continuing
interest through stock ownership on the part of those persons who, directly or
indirectly, were the owners of the stock of the acquired corporation prior to
the reorganization. Rev. Proc. 77-37 provides that the continuity of interest
requirement of Section 1.368-1(b) of the Regulations is satisfied if there is
continuing interest through the stock ownership in the acquiring or transferee
corporation on the part of the former shareholders of the acquired or
transferor corporation which is equal in value, as of the effective date of the
reorganization, to at least 50 percent of the value of all of the formerly
outstanding stock of the acquired or transferor corporation as of the same
date.
It is not necessary that each shareholder of the acquired or
transferor corporation receive in the exchange stock of the acquiring or
transferee corporation, or a corporation in "control" thereof, which is equal
in value to at least 50 percent of the value of his former stock interest in
the acquired or transferor corporation, so long as one or more shareholders of
the acquired or transferor corporation have a continuing interest through stock
ownership in the acquiring or transferee corporation (or a corporation in
"control" thereof) which is, in the aggregate, equal in value to at least 50
percent of the value of all of the formerly outstanding stock of the acquired
or transferor corporation. Sales, redemptions, and other dispositions of stock
occurring prior or, if planned or intended by the shareholder at the time of
the exchange, subsequent to the exchange which are part of the plan of
reorganization will be considered in determining whether there is a 50 percent
continuing interest through stock ownership as of the effective date of the
reorganization.
The Edward W. Scripps Trust has agreed to maintain ownership
for at least one year of shares of Comcast stock equal to at least 50 percent
of the total number of shares issued by Comcast in the Merger. Additionally,
it is represented that there is no plan or intention by the shareholders of the
Company who own 5 percent or more of the shares of the Company and, to the best
of the knowledge of the management of the Company, there is no plan or
intention on the part of remaining shareholders of the Company to sell,
exchange, or otherwise dispose of a number of Comcast Shares that will reduce
the Company shareholders' ownership of such stock to a number of shares having,
as of the date of the exchange, a value of less than 50 percent of the total
value of all the formerly outstanding shares of the Company as of the same
date. For purposes of these representations, shares of stock of the Company
exchanged for cash or other property, surrendered by dissenters or exchanged
for cash in lieu of fractional Comcast Shares will be treated as outstanding
stock of the Company on the date of the transaction. Also, for purposes of
these representations, shares of the Company and Comcast held by shareholders
of the Company and sold, redeemed, or disposed
<PAGE> 9
The E.W. Scripps Company
September 30, 1996
Page 9
of prior or subsequent to the Merger Date are considered. Accordingly, the
exchange will meet the continuity of interest requirement.
The 50 percent continuity of interest standard set forth in
Rev. Proc. 77-37 is a guideline utilized by the Internal Revenue Service in
determining whether to issue an advance ruling and does not represent how much
continuity of interest is needed in a reorganization as a matter of law. In
fact, in Nelson v. Helvering, 296 U.S. 374 (1936), the Supreme Court held that
there was a valid reorganization when the continuity of interest was equal to
38 percent.
Based upon the facts and analysis set forth above, the
exchange will qualify as a reorganization as described under Section
368(a)(1)(A) of the Code.
G. Other Provisions
----------------
Section 368(b)(2) of the Code provides that the term "a party
to a reorganization" includes both corporations, in the case of a
reorganization resulting from the acquisition by one corporation of stock or
properties of another corporation. Accordingly, Comcast and the Company will
each be "a party to a reorganization."
Section 361(a) of the Code provides that no gain or loss shall
be recognized to a corporation if such corporation is "a party to a
reorganization" and exchanges property, in pursuance of the plan of
reorganization, solely for stock or securities in another corporation, which is
"a party to the reorganization." Section 361(b) of the Code provides that if
Section 361(a) of the Code would apply to an exchange but for the fact that the
property received in the exchange consists not only of stock and securities but
also other property or money, then if the corporation receiving such other
property or money distributes it in pursuance of the plan of reorganization, no
gain to the corporation will be recognized.
Because the Company will distribute all of the Comcast Shares
it receives and any cash for fractional shares to its shareholders, no gain or
loss will be recognized by the Company upon the transfer of its assets in
exchange for the Comcast Shares and the assumption by Comcast of Company
liabilities.
Section 368(a)(2)(C) of the Code provides, in relevant part,
that a transaction otherwise qualifying as a reorganization described in
Section 368(a)(1)(A) of the Code shall not be disqualified by reason of the
fact that part or all of the stock or assets acquired in the transaction is
transferred to a corporation controlled by the corporation acquiring such
stock.
Section 357(a) of the Code provides that if a taxpayer
receives property which would be permitted to be received under Section 361 of
the Code without the recognition of gain if it were the sole consideration, and
as a part of the consideration, another party to the exchange assumes a
liability of the taxpayer, or acquires from the taxpayer property subject to a
liability, then such assumption or acquisition shall not be treated as money or
other
<PAGE> 10
The E.W. Scripps Company
September 30, 1996
Page 10
property, and shall not prevent the exchange from being within the provisions
of Section 361 of the Code.
Because the Company will distribute all of the Comcast Shares
it receives and any cash for fractional shares to its shareholders, no gain or
loss will be recognized by the Company upon the transfer of its assets in
exchange for the Comcast Shares and the assumption by Comcast of Company
liabilities. Because the exchange is a reorganization under Section 368(a) of
the Code and the Company is exchanging its property for Comcast Shares and cash
for fractional shares and assumption by Comcast of its liabilities, no gain or
loss will be recognized by the Company by reason of the exchange and Sections
361(a) and 357(a) of the Code.
Section 1032(a) of the Code provides that no gain or loss
shall be recognized to a corporation on the receipt of money or other property
in exchange for stock of such corporation. Accordingly, no gain or loss will
result to Comcast as a result of the exchange.
Section 362(b) of the Code provides that if property was
acquired by a corporation in connection with a reorganization, then the basis
of such property shall be the same as it would be in the hands of the
transferor, increased by the amount of gain recognized to the transferor on
such transfer. Because Comcast will receive property (i.e., the assets) from
the Company in connection with a reorganization within the meaning of Section
368(a) of the Code and no gain will be recognized by the Company, the basis of
the assets to be received by Comcast will be the same as the basis of those
assets in the hands of the Company immediately prior to the transfer.
Section 1223(2) of the Code provides that, in determining the
period for which the taxpayer has held property, however acquired, there shall
be included the period for which such property was held by any other person, if
such property has, for purposes of determining gain or loss from a sale or
exchange, the same basis (in whole or in part) in its hands as it would have in
the hands of such other person. Because the basis of the assets to be received
by Comcast will be the same as the basis of those assets in the hands of the
Company immediately prior to the transfer, the holding period for the assets of
the Company to be received by Comcast will include the period during which such
assets were held by the Company.
Section 354(a) of the Code provides that no gain or loss will
be recognized if stock in a corporation a party to a reorganization is, in
pursuance of the plan of reorganization, exchanged solely for stock in another
corporation a party to the reorganization. Therefore, since the shareholders
of the Company, a party to the reorganization, will receive solely Comcast
Shares, another party to the reorganization, no gain or loss will be
recognized, except with respect to fractional Comcast Share interests for which
Comcast will pay cash.
Section 358(a)(1) of the Code provides that, in the case of an
exchange to which Section 354 of the Code applies, the basis of the property
permitted to be received
<PAGE> 11
The E.W. Scripps Company
September 30, 1996
Page 11
under Section 354 of the Code without the recognition of gain or loss shall be
the same as that of the property exchanged, decreased by (i) the fair market
value of any other property (except money) received by the taxpayer, (ii) the
amount of any money received by the taxpayer, and (iii) the amount of loss to
the taxpayer which was recognized on such exchange, and increased by (i) the
amount which was treated as a dividend, and (ii) the amount of gain to the
taxpayer which was recognized on such exchange (not including any portion of
such gain which was treated as a dividend).
Since the exchange constitutes an exchange to which Section
354 of the Code applies, the basis of the Comcast Shares in the hands of the
shareholders of the Company (including the fractional share interests that they
would otherwise be entitled to receive) will be the same as the basis of the
shares of the Company surrendered in the exchange.
Section 1223(1) of the Code provides that, in determining the
period for which the taxpayer has held property received in an exchange, there
shall be included the period for which the taxpayer held the property exchanged
if the property has, for the purpose of determining gain or loss from a sale or
exchange, the same basis (in whole or in part) in his hands as the property
exchanged, provided the property exchanged at the time of such exchange is a
capital asset as defined in Section 1221 of the Code or property described in
Section 1231 of the Code. Since the basis of the Comcast Shares held by the
shareholders of the Company who receive Comcast Shares will have the same basis
(in whole or in part) as the stock exchanged, the holding period of the Comcast
Shares (including the fractional share interests that they would otherwise be
entitled to receive) will include the period for which the shares of the
Company were held, provided that such shares were held as a capital asset on
the date of the exchange.
Section 302(b)(3) of the Code provides that if a distribution
to a dissenting shareholder is in complete redemption of all of the stock of a
corporation owned by such shareholder actually or constructively, such
redemption shall be treated as a distribution in part or full payment in
exchange for such stock. Under Rev. Rul. 73-102, 1973-1 C.B. 186, because of
the operation of Section 302 of the Code, where cash is received by a
dissenting shareholder who will not receive actually or constructively any
Comcast Shares in the Merger, such cash will be treated as received by the
dissenting shareholder as a distribution in redemption of his, her or its
stock, subject to the provisions and limitations of Section 302 of the Code.
IV. OPINION
-------
Based upon and subject to the foregoing, including, without
limitation, our reliance upon the opinion dated as of the date hereof of Davis
Polk & Wardwell that the Dropdown will qualify under Section 368(a)(2)(C) of
the Code, our opinion as to the federal income tax consequences of the Merger
is as follows:
<PAGE> 12
The E.W. Scripps Company
September 30, 1996
Page 12
- - The Merger will qualify as a reorganization under Section 368(a)(1)(A)
of the Code. Comcast and the Company will each be "a party to a
reorganization" within the meaning of Section 368(b) of the Code.
- - No gain or loss will be recognized to the Company upon the transfer of
its assets to Comcast in exchange for the Comcast Shares and the
assumption by Comcast of the liabilities of the Company, and the cash
to be paid to dissenters and in lieu of fractional shares, or on the
distribution of the Comcast Shares by the Company to the shareholders
of the Company or the payment of cash to dissenters and in lieu of
fractional shares. Sections 361 and 357 of the Code.
- - No gain or loss will be recognized to Comcast on the receipt of the
assets of the Company and the assumption by Comcast of liabilities of
the Company in exchange for Comcast Shares. Section 1032 of the Code.
- - The basis of the assets of the Company in the hands of Comcast will be
the same as the basis of such assets in the hands of the Company
immediately prior to the exchange. Section 362(b) of the Code.
- - The holding period of the assets of the Company acquired by Comcast
will include the holding period of such assets in the hands of the
Company immediately prior to the exchange. Section 1223(2) of the
Code.
- - Except for any cash received in lieu of fractional shares, no gain or
loss will be recognized by a shareholder of the Company on the receipt
of Comcast Shares solely in exchange for his shares of the Company.
Section 354 of the Code.
- - The basis of Comcast Shares (including any fractional share interest
to which such holder may be entitled) received by a shareholder of the
Company who exchanges shares of the Company for Comcast Shares will be
the same as the basis of the shares of the Company surrendered in the
exchange therefor. Section 358(a)(1) of the Code.
- - The holding period of Comcast Shares (including any fractional share
interest to which such holder may be entitled) received by a
shareholder of the Company will include the holding period of the
shares of the Company surrendered in exchange therefor, provided that
the shares of the Company were capital assets at the date of the
exchange. Section 1223(1) of the Code.
- - Cash received by a shareholder of the Company in lieu of a fractional
share interest of Comcast stock will be treated as having been
received as a distribution in full payment in exchange for the
fractional share interest of Comcast stock which such shareholder
would otherwise be entitled to receive. This receipt of cash will
result in gain or loss measured by the difference between the basis of
such fractional share interest and the cash received. Such gain or
loss will be capital gain or loss to the
<PAGE> 13
The E.W. Scripps Company
September 30, 1996
Page 13
Company shareholder, provided the shares of the Company were capital
assets in such shareholder's hands.
- - Where cash is received by a dissenting shareholder, and such
dissenting shareholder's actual and constructive ownership interest
after the transaction is such that the cash payment is not essentially
equivalent to a dividend, such cash payment will be treated as a
redemption and such shareholder will recognize gain measured by the
difference between the amount of cash received and the shareholder's
basis in such stock.
Our opinion is not the equivalent of a ruling from the
Internal Revenue Service and may upon audit be challenged by the Internal
Revenue Service. Our opinion is based on the understanding that the relevant
facts are, and will be at the Merger Date, as set forth in the Documents, the
Representation Letters, and this letter. It is also based on the Code,
Regulations, case law and Internal Revenue Service rulings as they now exist.
These authorities are all subject to change and such change may be made with
retroactive effect. Were there to be such changes either before or after the
date of the exchange, or should the relevant facts change or prove to be other
than as we have reviewed, our opinion could be affected. In addition, pursuant
to Section 6.10(h) of the Agreement, Comcast has agreed to certain restrictions
on its actions for two years to provide further assurances that the Merger will
qualify as a reorganization under Section 368(a)(1)(A) of the Code.
We hereby consent to the reference to us under the headings
"CERTAIN FEDERAL INCOME TAX CONSIDERATIONS" and "LEGAL MATTERS" in the Joint
Proxy Statement-Prospectus and to the filing of this opinion as an exhibit to
the Joint Proxy Statement-Prospectus contained in the Registration Statement.
In giving this consent, we do not hereby admit that we are within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended, or the rules and regulations of the SEC promulgated
thereunder.
Very truly yours,
/s/ Baker & Hostetler
---------------------
Baker & Hostetler
<PAGE> 1
EXHIBIT 8.2
[Davis Polk & Wardwell]
(212) 450-4000
September 30, 1996
Comcast Corporation
1500 Market Street
Philadelphia, PA 19102
Attention: Steve Backstrom
Ladies and Gentlemen:
We have acted as special tax counsel for Comcast Corporation
("Comcast") in connection with the merger (the "Merger") of E.W. Scripps
Company ("EWS") with and into Comcast. We have been informed by you that the
Merger transaction is fully described in the Prospectus that forms a part of
the Registration Statement filed with the Securities and Exchange
Commission on September 16, 1996 (the "Prospectus"). You have asked our opinion
as to whether the Merger will continue to qualify as a tax-free reorganization
under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended
(the "Code"), if Comcast contributes all of the capital stock of Scripps Howard
Cable Company ("SHCC") to a first-tier wholly owned Comcast subsidiary (the
"Contribution"). Immediately prior to the Merger, all or substantially all of
EWS's assets will consist of the stock of SHCC. We have assumed, with your
permission, that the Merger otherwise qualifies as a tax-free reorganization
under Section 368(a)(1)(A).
On the basis of the foregoing, it is our opinion that pursuant
to Code Section 368(a)(2)(C) the Contribution will not impact the ability of the
Merger to qualify as a tax-free reorganization under Code Section 368(a)(1)(A)
of the Code.
<PAGE> 2
Comcast Corporation -2- September 30, 1996
We are members of the bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York and federal
laws of the United States of America. This opinion is based upon the Internal
Revenue Code of 1986, as amended, the regulations thereunder, administrative
guidance with respect thereto and judicial decisions, all as of the date hereof.
We hereby consent to the use of our name in connection with
the description of this opinion under the caption "Certain Federal Income Tax
Considerations" in the Prospectus. The issuance of this consent does not concede
that we are an "Expert" for purposes of the Securities Act of 1933.
Very truly yours,
/s/ Davis Polk & Wardwell
-------------------------
Davis Polk & Wardwell
<PAGE> 1
EXHIBIT 23.1
FORM OF CONSENT OF MERRILL LYNCH
--------------------------------
We hereby consent to the use of our opinion letter dated
October 28, 1995 to the Board of Directors of The E.W. Scripps Company included
as Annex III to the Proxy Statement/Prospectus which forms a part of the
Registration Statement on Form S-4 relating to the proposed merger of The E.W.
Scripps Company with and into Comcast Corporation and to the references to such
opinion in such Proxy Statement/Prospectus under the captions "The Merger -
Background of and Scripps' Reasons for the Spin-Off and the Merger - Receipt by
Scripps of Final Proposals; Negotiation of Terms of the Merger" and "The Merger
- - Opinion of Financial Advisor to Scripps". In giving such consent, we do not
thereby admit that we are included in the category of persons whose consent is
required under Section 7 of the Securities Act of 1933, as amended, or the rules
and regulations of the Securities and Exchange Commission thereunder, nor do we
thereby admit that we are experts with respect to any part of such Registration
Statement within the meaning of the term "experts" as used in the Securities Act
of 1933, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Michael R. Costa
-------------------------------
Michael R. Costa, Managing Director
Investment Banking Group
September 16, 1996
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Comcast Corporation on Form S-4 of our report dated February 29, 1996 appearing
in the Annual Report on Form 10-K of Comcast Corporation for the year ended
December 31, 1995, and to the reference under the heading "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
September 30, 1996
<PAGE> 2
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Comcast Corporation and its subsidiaries on Form S-4 of our report dated January
22, 1996, appearing in the Admendment Number 1 dated May 9, 1996 to the Annual
Report on Form 10-K of The E.W. Scripps Company and subsidiary companies for the
year ended December 31, 1995 and our report dated February 22, 1996 relating to
the financial statements of Scripps Cable appearing in Amendment Number 5 on
Form 8-K/A dated July 18, 1996 to The E.W. Scripps Company's Report on Form 8-K
dated December 28, 1995 and to the reference to us under the heading "Experts"
in the Joint Proxy Statement-Prospectus, which is part of this Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
Cincinnati, Ohio
September 30, 1996
<PAGE> 1
EXHIBIT 23.6
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
QVC, Inc.:
We consent to the incorporation by reference in this Registration Statement on
Form S-4 of Comcast Corporation of our report dated February 2, 1996, with
respect to the consolidated balance sheet of QVC, Inc. and subsidiaries as of
December 31, 1995, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the eleven-month period ended December
31, 1995, which report is included as an exhibit to the Annual Report on Form
10-K of Comcast Corporation for the year ended December 31, 1995 which Form
10-K is incorporated by reference herein.
/s/ KPMG PEAT MARWICK LLP
Philadelphia, Pennsylvania
September 30, 1996
<PAGE> 1
EXHIBIT 23.7
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated October 17, 1995 on
the financial statements of Garden State Cablevision L.P. included in Comcast
Corporation's Form 10-K for the year ended December 31, 1995 and to all
references to our Firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
September 30, 1996
<PAGE> 2
EXHIBIT 23.7
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated February 17, 1995
on the financial statements of Comcast International Holdings, Inc. included
in Comcast Corporation's Form 10-K for the year ended December 31, 1995 and to
all references to our firm included in this registration statement.
/s/ ARTHUR ANDERSEN LLP
Philadelphia, Pa.,
September 30, 1996
<PAGE> 1
EXHIBIT 23.8
CONSENT OF LEHMAN BROTHERS
We hereby consent to the inclusion in the Proxy Statement/Prospectus
forming part of this Registration Statement of our summary of involvement in the
Merger. In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, and the rules and regulations promulgated thereunder
(the "Securities Act"), and we do not thereby admit that we are experts with
respect to any part of this Registration Statement within the meaning of the
term "expert" as used in the Securities Act.
/s/ LEHMAN BROTHERS
September 30, 1996
<PAGE> 1
EXHIBIT 23.9
CONSENT OF DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION
We hereby consent to the inclusion of our opinion letter, dated October
28, 1995, to The Edward W. Scripps Trust as an exhibit to the Registration
Statement on S-4 of Comcast Corporation ("Comcast") relating to the Joint Proxy
Statement-Prospectus of The E.W. Scripps Company and Comcast. In giving such
consent, we do not admit that we come within the category of persons whose
consent is required under, and we do not admit that we are "experts" for
purposes of, the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By:/s/ Herald Ritch
____________________________
Herald Ritch
Managing Director
New York, New York
September 30, 1996
<PAGE> 1
COMCAST CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS OF COMCAST CORPORATION
P
R The undersigned, a holder of Class A Common Stock of COMCAST
O CORPORATION, hereby constitutes and appoints RALPH J. ROBERTS and
X STANLEY WANG, and each of them acting individually, as the attorney
Y and proxy of the undersigned, with full power of substitution, for
and in the name and stead of the undersigned, to attend the Special
Meeting of Shareholders of Comcast to be held on Thursday, November
7, 1996 at 10 A.M., at the offices of the Company, 1500 Market
Street, 33rd Floor, Philadelphia, Pennsylvania, and any adjournment
or postponement thereof, and thereat to vote all shares of CLASS A
COMMON STOCK which the undersigned would be entitled to vote if
personally present, as follows:
1. To approve the issuance of Comcast Class A Special Common Stock in
the merger (the "Merger") of The E.W. Scripps Company ("Scripps")
with and into Comcast pursuant to the Agreement and Plan of Merger,
dated as of October 28, 1995, which is to be amended pursuant to the
Form of Amendment to the Agreement and Plan of Merger attached as
Annex II to the accompanying Joint Proxy Statement-Prospectus, (as so
amended, the "Merger Agreement") by and among Comcast Corporation,
Scripps, and Scripps Howard, Inc.
/ / FOR / / AGAINST / / ABSTAIN
2. To vote on such other business which may properly come before the
meeting or any adjournment or postponement thereof.
Unless otherwise specified, the shares will be voted "FOR" the
approval of the issuance of Comcast Class A Special Common Stock in
the Merger. This Proxy also delegates discretionary authority to vote
with respect to any other business which may properly come before the
meeting and any adjournment or postponement thereof.
(Please sign and date on the reverse side.)
<PAGE> 2
(Continued from other side)
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS AND THE RELATED JOINT PROXY STATEMENT-PROSPECTUS.
Dated:_________________ , 1996
------------------------------
Signature of Shareholder
------------------------------
Signature of Shareholder
NOTE: Please sign this Proxy
exactly as name(s) appear(s)
in address. When signing as
attorney-in-fact, executor,
administrator, trustee or
guardian, please add your
title as such, and if signer
is a corporation, please sign
with full corporate name by
duly authorized officer or
officers and affix the
corporate seal. When stock is
issued in the name of two or
more persons, all such persons
should sign.
PLEASE SIGN, DATE AND RETURN IN THE ENCLOSED POSTAGE-PREPAID ENVELOPE.
<PAGE> 3
EXHIBIT 99.1
PROXY FOR
COMMON VOTING STOCK
THE E. W. SCRIPPS COMPANY
The undersigned hereby appoints WILLIAM R. BURLEIGH, DANIEL J.
CASTELLINI and M. DENISE KUPRIONIS, and each of them, as the
undersigned's proxies, with full power of substitution, to attend the
Special Meeting of Stockholders of The E.W. Scripps Company, to be
held at the Queen City Club, 331 East Fourth Street, Cincinnati, Ohio,
on November 5, 1996 at 1:00 PM, local time, and any adjournment or
postponement thereof, and to vote thereat the number of shares which
the undersigned would be entitled to vote, with all the power the
undersigned would possess if present in person, as follows:
1. To approve an amendment to the Certificate of Incorporation of
the Company (the "Charter Amendment") in connection with the
Spin-Off described in the Merger Agreement referenced below.
/ / FOR / / AGAINST / / ABSTAIN
2. To adopt the Agreement and Plan of Merger dated October 28,
1995, which is to be amended pursuant to the Form of Amendment
to the Agreement and Plan of Merger attached as Annex II to the
accompanying Joint Proxy Statement-Prospectus (as so amended,
the "Merger Agreement"), by and among the Company, Scripps
Howard, Inc. and Comcast Corporation.
/ / FOR / / AGAINST / / ABSTAIN
3. In their discretion with respect to such other matters as may
properly come before the Special Meeting or any adjournment or
postponement thereof.
The Board of Directors recommends a vote FOR approval of the
Charter Amendment and FOR adoption of the Merger Agreement. This
Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this
Proxy will be voted FOR approval of the Charter Amendment and FOR
adoption of the Merger Agreement. Under the Company's Bylaws, business
transacted at the Special Meeting of Stockholders is confined to the
purposes stated in the Notice of Special Meeting. THIS PROXY WILL,
HOWEVER, CONVEY DISCRETIONARY AUTHORITY TO THE PERSONS NAMED HEREIN AS
PROXIES TO VOTE ON MATTERS INCIDENT TO THE CONDUCT OF THE SPECIAL
MEETING.
(Continued, and to be signed, on other side)
(Continued from other side)
Receipt of the Notice of Special Meeting of Stockholders and the
related Joint Proxy Statement-Prospectus is hereby acknowledged.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
Dated , 1996
(Please date your Proxy)
Number of Shares
-----------------------------
Signature of Stockholder
Please sign exactly as your
name appears hereon,
indicating, where proper,
official position or
representative capacity.
When signing as Attorney,
Executor, Administrator,
Trustee, etc., give full
title as such.
<PAGE> 4
EXHIBIT 99.1
PROXY FOR
CLASS A COMMON STOCK
THE E. W. SCRIPPS COMPANY
The undersigned hereby appoints WILLIAM R. BURLEIGH, DANIEL J.
CASTELLINI and M. DENISE KUPRIONIS, and each of them, as the
undersigned's proxies, with full power of substitution, to attend the
Special Meeting of Stockholders of The E.W. Scripps Company, to be
held at the Queen City Club, 331 East Fourth Street, Cincinnati, Ohio,
on November 5, 1996 at 1:00 PM, local time, and any adjournment or
postponement thereof, and to vote thereat the number of shares which
the undersigned would be entitled to vote, with all the power the
undersigned would possess if present in person, as follows:
1. To approve an amendment to the Certificate of Incorporation of
the Company (the "Charter Amendment") in connection with the
Spin-Off described in the accompanying Joint Proxy
Statement-Prospectus.
/ / FOR / / AGAINST / / ABSTAIN
2. In their discretion with respect to such other matters as may
properly come before the Special Meeting or any adjournment or
postponement thereof.
The Board of Directors recommends a vote FOR approval of the
Charter Amendment. This Proxy, when properly executed, will be voted
in the manner directed herein by the undersigned stockholder. If no
direction is made, this Proxy will be voted FOR approval of the
Charter Amendment. Under the Company's Bylaws, business transacted at
the Special Meeting of Stockholders is confined to the purposes stated
in the Notice of Special Meeting. THIS PROXY WILL, HOWEVER, CONVEY
DISCRETIONARY AUTHORITY TO THE PERSONS NAMED HEREIN AS PROXIES TO VOTE
ON MATTERS INCIDENT TO THE CONDUCT OF THE SPECIAL MEETING.
(Continued, and to be signed, on other side)
(Continued from other side)
Receipt of the Notice of Special Meeting of Stockholders and the
related Joint Proxy Statement-Prospectus is hereby acknowledged.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF THE COMPANY.
Dated , 1996
(Please date your Proxy)
Number of Shares
-----------------------------
Signature of Stockholder
Please sign exactly as your
name appears hereon,
indicating, where proper,
official position or
representative capacity.
When signing as Attorney,
Executor, Administrator,
Trustee, etc., give full
title as such.
<PAGE> 1
Exhibit 99.5
- --------------------------------------------------------------------------------
PRESENTATION TO
BUCKEYE
REGARDING FINAL PROPOSALS
October 28, 1995
<PAGE> 2
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
1. Executive Summary
2. Review of Final Offers
3. Buckeye Cable Valuation
4. Overview of Patriot and Liberty
5. Pro Forma Analysis of New Buckeye
6. Comparison of Selected Cable Companies
[MERRILL LYNCH LOGO]
<PAGE> 3
- --------------------------------------------------------------------------------
EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
<PAGE> 4
EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Summary of Final Proposals
<TABLE>
<CAPTION>
STATED VALUE ADJUSTED VALUE VALUE PROTECTION
COMPANY ($MM) ($MM) SECURITY MECHANISM LIQUIDITY ASSESSMENT
- ---------------- ------------ -------------- ---------------------- -------------------------- -------------------------
<S> <C> <C> <C> <C> <C>
Liberty Company $1,575.0 $1,603.3 Class A Special Common - 15%/15% Nominal - Actively Traded
Stock ("K Stock") Collar, Based on $20.075
Stock Price
- 9%/24% Adjusted
Collar, Assuming
$18.625 Stock Price
- $500MM Share Buyback
Program
Patriot Company $1,627.5 $1,627.5 Class A Common Stock - 25%/25% Nominal - No Current Active
Collar, Based on $20 Public Market
Stock Price
- 20%/33% Adjusted - Filed IPO Prospectus
Collar, Assuming $18.77
Stock Price - Potential for Adequate
Float Over Time
Frontier Company $1,360.0 $1,360.0 Series A Frontier Group - 10%/20% Collar - Actively Traded, Highly
Common and Programming Liquid Security
Tracking Stock
</TABLE>
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1
<PAGE> 5
EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Adjusted Values of Final Proposals
(Dollars in Thousands Except Share Prices)
<TABLE>
<CAPTION>
ADJUSTMENTS
------------------------------ ASSUMED
STATED NEGATIVE CAPITAL PRE- COLLAR COLLAR MIDPOINT CURRENT
BIDDER VALUE WORKING CAPITAL EXPENDITURES ADJUSTED VALUE LOW HIGH VARIANCE VARIANCE (a)
- -------- --------- --------------- ------------ ---------------- --------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$20.00 $18.77
Patriot 1,627,500 0 0 (b) $1,627,500 15.00 25.00 75% 125% 80% 133%
$20.08 $18.63
Liberty 1,575,000 (14,904) 43,221 (b) 1,603,317 17.06 23.09 85% 115% 9% 24%
$18.05
Frontier 1,360,000 0 0 1,360,000 16.25 21.66 90% 120%
</TABLE>
(a) For Patriot, based on Merrill Lynch midpoint public valuation. For Liberty,
based on closing price as of October 27, 1995.
(b) For Patriot and Liberty, based on $70 million in total capex and $43 million
in upgrade capex.
2
<PAGE> 6
EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Overview of Final Proposals
CHART 1: VALUATION OF FINAL PROPOSALS
($ in millions)
Bar graph:
Frontier (1): $1,360.0
Liberty: $1,603.3
Patriot: $1,627.5
Note: (1) Includes est. valuation of HG-TV contract.
CHART 2: % OF COMBINED COMPANY OWNED
Bar graph:
Frontier:
Economic: 10.2%
Voting: 5.2%
Liberty(1):
Economic: 23.8%
Voting: 0.0%
Patriot(2):
Economic: 32.2%
Voting: 3.9%
Notes: (1) Fully diluted. Assumes repurchase; 22.2% and 0% if no repurchase.
Assuming closing stock price of $18.625 on October 27, 1995 and a repurchase,
result is 25.3% and 0.0%.
(2) Assumes no IPO; 30.3% and 3.9% if IPO.
CHART 3: CURRENT STOCK PRICE % DISCOUNT FROM BREAK-UP
Bar graph:
Frontier (1) - Public: (10.5)%
- Private: (43.3)%
Liberty - Public: (23.7)%
- Private: (43.3)%
Note: (1) Excludes Programming Co.
CHART 4: ADJ. MARKET CAP/96E OCF
Bar graph:
Frontier: 8.2x
Liberty (1): 6.7x
Patriot (2): 9.3x
Notes: (1) Cable only.
(2) Patriot based on midpoint of public market valuation.
CHART 5: MARKET CAPITALIZATION AND MARKET VALUE
($ in Millions)
Bar graph:
Frontier:
Market Cap: $27,772
Market Value: $12,080
Liberty:
Market Cap: $11,294
Market Value: $ 5,219
Patriot (1):
Market Cap: $ 8,726
Market Value: $ 3,432
Note: (1) Patriot based on midpoint of public market valuation. Assumes no IPO;
if IPO then market value equals $3,740.
CHART 6: OFFER AS A % OF CURRENT PUBLIC FLOAT
Bar graph:
Frontier: 14.0%
Liberty: 31.4%
Patriot: NA
[MERRILL LYNCH LOGO]
3
<PAGE> 7
EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Pro Forma Buckeye and Potential Buyers
CHART 1: CURRENT SUBSCRIBERS (a)
(in Thousands)
Bar graph:
Frontier: 13,292.6
Buckeye portion: 792.6
Liberty: 4,099.6
Buckeye portion: 792.6
Patriot: 4,909.6
Buckeye portion: 792.6
CHART 2: 1996E OPERATING CASH FLOW (a)
($ in millions)
Bar graph:
Frontier: $2,775.2
Buckeye portion: $ 142.4
Liberty: $1,344.6
Buckeye portion: $ 142.4
Patriot: $ 993.7
Buckeye portion: $ 142.4
Note: (a) Includes Rifkin properties.
CHART 3: MARKET VALUE (b)
($ in millions)
Bar graph
Frontier:
Total $13,445.7
Insider Holdings: $ 2,352.1
Public: $ 9,727.6
Buckeye portion: $ 1,366.0
Liberty:
Repurchase:
Total: $ 6,206.5
Insider Holdings: $ 476.8
Public: $ 4,242.2
Buckeye portion: $ 1,487.5
No Repurchase:
Total: $ 6,706.5
Insider Holdings: $ 476.8
Public: $ 4,742.2
Buckeye portion: $ 1,487.5
Patriot:
No IPO:
Total: $4,748.2
Insider Holdings: $2,515.0
Other Holders: $ 705.7
Buckeye Portion: $1,527.5
IPO:
Total: $5,033.2
Insider Holdings: $2,478.4
Other Holders: $1,028.7
Buckeye Portion: $1,526.1
CHART 4: MARKET CAP. (b)
($ in millions)
Bar graph
Frontier:
Total: $29,137.7
Buckeye Portion: $ 1,366.0
Liberty:
Repurchase:
Total: $13,281.4
Buckeye Portion: $ 1,487.5
No Repurchase:
Total: $13,281.4
Buckeye Portion: $ 1,487.5
Patriot:
No IPO:
Total: $10,353.6
Buckeye Portion: $ 1,527.5
IPO:
Total: $10,377.2
Buckeye Portion: $ 1,526.1
Note (a) Includes Rifkin properties.
(b) Insider holdings for each Company indicated by light colored box at top
of each bar.
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4
<PAGE> 8
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------
Overview of Final Proposals
CASH FLOW/SHARE AND CREDIT ANALYSIS
<TABLE>
<CAPTION>
Credit Statistics
Cash Flow Per Share ---------------------------------------------------
Final Accretion/(Dilution) Status Quo '96 Pro Forma '96
Proposal(a) --------------------- ---------------------- -----------------------
Acquiror ($ in Millions) 1996E 1997E Leverage Coverage Leverage Coverage
- -------- --------------- --------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Liberty
Repurchase $1,603 (6.5%) (5.4%) 5.04x 2.40x 4.81x 2.49x
No Repurchase $1,603 (7.7%) (7.3%) 5.04x 2.40x 4.42x 2.73x
Frontier $1,360 (2.7%) (2.8%) 5.71x 2.08x 5.37x 2.20x
Patriot
No IPO $1,627.5 (13.5%) (10.3%) 6.27x 1.87x 5.26x 2.22x
IPO $1,627.5 (10.4%) (8.5%) 5.92x 1.98x 4.95x 2.35x
</TABLE>
- ---------------------
(a) Includes value for Rifkin properties.
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5
<PAGE> 9
EXECUTIVE SUMMARY
- ----------------------------------------------------------------------
Overview of Final Proposals
PRO FORMA PUBLIC AND PRIVATE MARKET VALUE ACCRETION/(DILUTION) ANALYSIS (a)
<TABLE>
<CAPTION>
LIBERTY FRONTIER PATRIOT
------------------------------ -------- ---------------------
Repurchase No Repurchase IPO No IPO
---------- ------------- ------ ------
<S> <C> <C> <C> <C> <C>
Public Market Value/Share $24.40 $24.40 $18.94 $18.77 $19.03
Pro Forma Public Market Value/Share 22.96 22.64 18.81 17.60 17.86
% Accretion/(Dilution) (5.9%) (7.2%) (0.7%) (6.2%) (6.1%)
Private Market Value/Share $32.85 $32.85 $29.89 $27.47 $28.60
Pro Forma Private Market Value/Share $31.09 30.16 32.19 24.81 25.62
% Accretion/(Dilution) (5.4%) (8.2%) 7.7% (9.7%) (10.4%)
</TABLE>
- ------------------
(a) Represents dilution to market value of issuing shares to Buckeye. Based on
midpoint of estimate ranges.
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6
<PAGE> 10
EXECUTIVE SUMMARY
- -------------------------------------------------------------------------------
Pro Forma Public and Private Market Value Per Share Ranges
<TABLE>
<CAPTION>
Liberty Frontier Patriot(a)
------- -------- ----------
No No
Repurchase Repurchase IPO IPO
---------- ---------- ------- -------
<S> <C> <C> <C> <C> <C>
Pro Forma Public Market Value
Low $20.74 $20.58 $17.73 $16.45 $16.62
High 25.19 24.70 19.88 18.75 19.10
Midpoint 22.96 22.64 18.81 17.60 17.86
Pro Forma Private Market Value
Low $26.73 $26.13 $28.22 $20.99 $21.51
High 35.44 34.19 36.16 28.63 29.73
Midpoint 31.09 30.16 32.19 24.81 25.62
</TABLE>
- -----------------
(a) Assumes Buckeye cable properties do not command the same premium multiple
as Patriot.
7
<PAGE> 11
EXECUTIVE SUMMARY
- ----------------------------------------------------------------------------
Comparison of Pro Forma Asset Value Composition
<TABLE>
<S> <C> <C>
Pie Charts:
Frontier(1):
Domestic Cable (3): $26.8 billion; 87.2%
International Cable/Programming: $2.5 billion; 8.1%
Other: $1.3 billion; 4.3%
Liberty:
Domestic Cable(3) $8.7 billion; 60.3%
International Cable/Programming: $0.2 billion; 1.2%
Domestic Programming: $3.2 billion; 21.8%
Cellular: $2.2 billion; 15.3%
Other: $0.2 billion; 1.4%
Patriot:
Domestic Cable(3): $9.4 billion; 93.5%
International Cable/Programming: $0.4 billion; 3.8%
Domestic Programming: $0.3 billion; 2.6%
Other: $12.4 million; 0.1%
Table:
Frontier:
Current Stock Price: (2) $16.95
Public Midpoint Value per Share: $18.81
Liberty:
Current Stock Price: (2) $18.625
Public Midpoint Value per Share:
No Repurchase: $22.64
Repurchase: $22.96
Patriot:
Current Stock Price: (2) NA
Public Midpoint Value per Share:
No IPO: $17.86
IPO: $17.60
</TABLE>
- ------------------------
Notes: (1) Pro forma for Programming Company spin-off.
(2) Represents weighted average stock price to reflect multiple
classes of publicly traded stock.
(3) Includes non-consolidated cable investments and PrimeStar
investment.
[MERRILL LYNCH LOGO]
8
<PAGE> 12
EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Buckeye Standalone (a)/Pro Forma Analysis
($ in millions)
<TABLE>
<CAPTION>
Actual 1996E
Subscribers 1996E Operating After-tax
Own (000s) Revenues Cash Flow Cash Flow
--------------------------------- ----------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Standalone 100% of Buckeye Cable 792.6 $318.3 $142.4 $107.7
(Has)
Pro Forma 10.2% of Frontier 1,349.6 648.8 281.7 165.0
(Gets)
With Repurchase: 23.8% of Liberty 980.3 1,020.9 321.6 179.4
No Repurchase: 22.2% of Liberty 911.7 949.4 299.0 177.3
No IPO: 32.2% of Patriot 1,579.4 736.3 319.7 160.9
IPO: 30.3% of Patriot 1,488.6 694.0 301.3 159.3
</TABLE>
- ---------------
(a) Includes Rifkin properties.
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9
<PAGE> 13
EXECUTIVE SUMMARY
- --------------------------------------------------------------------------------
Final Bidders
LONGMONT, CO
--------------------------
BUCKEYE SUBS 37,988
Frontier Subs(1) 450,000
(1) Represents Denver ADI. Longmont is
40 miles north of Denver.
SACRAMENTO, CA ELIZABETH, KY
- ------------------------ ---------------------------
BUCKEYE SUBS 231,287 BUCKEYE SUBS 43,093
Patriot Subs 106,500 Patriot Subs(1) 61,335
Frontier Subs 53,000
(1) Represents Southern,
Illinois systems.
[MAP OF THE UNITED STATES]
BLUEFIELD, WV
---------------------------
BUCKEYE SUBS 54,951
Patriot Subs(1) 161,000
(1) Representing the Richmond
VA area
NORTHERN CALIFORNIA
- ------------------------------------
Frontier Subs(c) 1,120,000
Frontier/Lenfest Subs 115,000
Frontier/Intermedia Subs 95,000 KNOXVILLE, TN
Patriot Subs 36,549 -----------------------------
BUCKEYE SUBS(1) 140,539
Frontier Subs(a) 120,000
Liberty Subs(b) 9,005
(1) Pro forma for Rifkin
CHATTANOOGA, TN properties
- ---------------------------
BUCKEYE SUBS 111,895
Frontier Subs(a) 196,000
ROME, GA
---------------------------
BUCKEYE SUBS 49,496
ATLANTA, GA
---------------------------
BUCKEYE SUBS 74,067
Frontier Subs 72,000
LAKE COUNTY, FL
---------------------------
BUCKEYE SUBS 49,323
Patriot Subs(1) 578,475
Liberty Subs(2) 84,667
Frontier Subs(3) 78,000
(1) Patriot Holdings in Southern Florida
(2) Represents Tampa/St. Petersburg
(3) Represents Orlando ADI.
Sources: Public documents and releases, Paul Kagan Associates,
Merrill Lynch estimates.
(a) Includes Viacom subscribers in Nashville, TN.
(b) Includes Memphis, TN.
(c) Includes Viacom and Chronicle subscribers.
[MERRILL LYNCH LOGO]
10
<PAGE> 14
- --------------------------------------------------------------------------------
REVIEW OF FINAL OFFERS
- --------------------------------------------------------------------------------
<PAGE> 15
REVIEW OF FINAL OFFERS
- --------------------------------------------------------------------------------
Analysis of Value Protection Mechanisms
<TABLE>
<CAPTION>
Collar Current Current
---------------------- Stock Execution Value
Bidders Downside Upside Price Price of Bid
- ------- -------- ------ ------- --------- -------
<S> <C> <C> <C> <C> <C>
Liberty 15.0% 15.0% 18.63 20.08 1,603.3
Patriot 25.0% 25.0% 18.77(a) 20.00 1,627.5
</TABLE>
<TABLE>
<CAPTION>
Aggregate/Per Buckeye Share
Value Sensitivity to Stock Price Change Based on Current Trading Price of:
-------------------------------------------------------------------------------------------------------
Bidders 30% 25% 20% 15% 10% -5% -10% -15% -20% -25% -30%
- ------- --- --- --- --- --- --- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Liberty 78.2 13.5 0.0 0.0 0.0 0.0 (28.3) (115.8) (203.3) (290.8) (378.3)
0.97 0.17 0.00 0.00 0.00 0.00 (0.35) (1.44) (2.53) (3.62) (4.71)
Patriot 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (100.1) (201.9)
0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (1.25) (2.52)
</TABLE>
<TABLE>
<CAPTION>
Aggregate/Per Buckeye Share
Value Sensitivity to Cable Multiple Contraction of:
---------------------------------------------------------------------------------
Bidders 0.50x 1.00x 1.50x 2.00x 2.50x 3.00x
- ------- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Liberty (Assumes Repurchase) 0.0 (77.5) (189.6) (301.7) (413.8) (526.0)
Liberty Pro Forma Share Price Differential 0.00 (0.97) (2.36) (3.76) (5.16) (6.55)
Patriot 0.0 0.0 (107.3) (279.4) (451.5) (623.6)
Patriot Pro Forma Share Price Differential 0.00 0.00 (1.34) (3.48) (5.62) (7.77)
</TABLE>
- ---------------
(a) Based on estimated public market value
11
<PAGE> 16
REVIEW OF FINAL OFFERS
- -------------------------------------------------------------------------------
Liberty Value Protection Mechanism
. Protects value Buckeye shareholders receive for cable properties
. Protects against changes in Liberty's stock price from signing to
closing (up to one year)
. Downside protection achieved by giving up some upside potential in
Liberty's stock
EXAMPLE . Initial Buckeye Cable Value = $1,603.3 million ("Initial Value")
. Initial Liberty Stock Price = $20.075
. Initial Number of Liberty Shares Issued: 80.2 million
. Number of Liberty Shares Issued
> 69.7 million If Liberty Share Price >$23.09
> 69.7 million to 93.9 million If Liberty Share Price Is
Between $17.06 and $23.09
> 93.9 million If Liberty Share Price <$17.06
. Buckeye May Terminate Agreement If Liberty Share Price <$17.06
(>15% Decline) Unless Liberty Agrees to Deliver Sufficient Shares
to Protect Initial Value.
[GRAPH]
Graph depicts data in table from next page under the caption "Liberty Does Not
Exercise Option, Buckeye Can Terminate" and under the column headings" Trading
Price of Liberty", "Shares" and "Value".
[MERRILL LYNCH LOGO]
12
<PAGE> 17
REVIEW OF FINAL OFFERS
- -------------------------------------------------------------------------------
Liberty Offer ($ in millions)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Liberty Offer $1,603.3 Old Liberty Shares 280.9
Low Protection Range 15% Repurchase Amount 26.8
High 15% Shares 254.0
Based on $ 20.08
Low $ 17.06
High $ 23.09
</TABLE>
<TABLE>
<CAPTION>
Liberty Does Not Exercise Liberty Exercises Option
Option, Buckeye Can Terminate Buckeye Cannot Terminate
----------------------------- -------------------------
Trading Price Buckeye Buckeye
of Liberty Shares Value Ownership Shares Value Ownership
- -------------- ------ ----- --------- ------ ----- ---------
<S> <C> <C> <C> <C> <C> <C>
$12.00 93.959 $1,127.5 27.0% 133.608 $1,603.3 34.5%
$13.00 93.959 1,221.5 27.0% 123.330 1,603.3 32.7%
$14.00 93.959 1,315.4 27.0% 114.521 1,603.3 31.1%
$15.00 93.959 1,409.4 27.0% 106.886 1,603.3 29.6%
$16.00 93.959 1,503.3 27.0% 100.206 1,603.3 28.3%
$17.00 93.959 1,597.3 27.0% 94.312 1,603.3 27.0%
$17.06 93.959 1,603.3 27.0% 93.959 1,603.3 27.0%
$18.00 89.072 1,603.3 26.0% 89.072 1,603.3 26.0%
$19.00 84.384 1,603.3 24.9% 84.384 1,603.3 24.9%
$20.00 80.165 1,603.3 24.0% 80.165 1,603.3 24.0%
$20.08 79.865 1,603.3 23.9% 79.865 1,603.3 23.9%
$21.00 76.347 1,603.3 23.1% 76.347 1,603.3 23.1%
$22.00 72.877 1,603.3 22.3% 72.877 1,603.3 22.3%
$23.00 69.709 1,603.3 21.5% 69.709 1,603.3 21.5%
$23.09 69.448 1,603.3 21.5% 69.448 1,603.3 21.5%
$24.00 69.448 1,666.8 21.5% 69.448 1,666.8 21.5%
$25.00 69.448 1,736.2 21.5% 69.448 1,736.2 21.5%
$26.00 69.448 1,805.7 21.5% 69.448 1,805.7 21.5%
</TABLE>
13
<PAGE> 18
REVIEW OF FINAL OFFERS
- --------------------------------------------------------------------
Patriot Offer ($ in millions)
Patriot Offer $1,627.5
Value Protection Range 25%
Based on $20.00
Low $15.00
High $25.00
Old Patriot Shares 180.3
IPO Shares 18.9
Shares 199.3
<TABLE>
<CAPTION>
Patriot Does Not Exercise
Option, Buckeye Can Terminate
- ------------------------------------------------------------------------
Implied
Trading Price Buckeye Pro Forma
of Patriot Shares Value Ownership Multiple
- ------------- ------ -------- --------- ---------
<S> <C> <C> <C> <C>
$12.00 108.500 $1,302.0 35.3% 8.1x
$13.00 108.500 1,410.5 35.3% 8.4x
$14.00 108.500 1,519.0 35.3% 8.7x
$15.00 108.500 1,627.5 35.3% 9.0x
$16.00 101.719 1,627.5 33.8% 9.2x
$17.00 95.735 1,627.5 32.5% 9.4x
$18.00 90.417 1,627.5 31.2% 9.6x
$19.00 85.658 1,627.5 30.1% 9.8x
$20.00 81.375 1,627.5 29.0% 10.0x
$21.00 77.500 1,627.5 28.0% 10.2x
$22.00 73.977 1,627.5 27.1% 10.4x
$23.00 70.761 1,627.5 26.2% 10.6x
$24.00 67.813 1,627.5 25.4% 10.8x
$25.00 65.100 1,627.5 24.6% 11.0x
$26.00 65.100 1,692.6 24.6% 11.3x
$27.00 65.100 1,757.7 24.6% 11.6x
$28.00 65.100 1,822.8 24.6% 11.8x
$29.00 65.100 1,887.9 24.6% 12.1x
$30.00 65.100 1,953.0 24.6% 12.4x
<CAPTION>
Patriot Exercises Option
Buckeye Cannot Terminate
- ------------------------------------------------------------------------
Implied
Trading Price Buckeye Pro Forma
of Patriot Shares Value Ownership Multiple
- ------------- ------ -------- --------- ---------
<S> <C> <C> <C> <C>
$12.00 135.625 $1,627.5 40.5% 8.4x
$13.00 125.192 1,627.5 38.6% 8.6x
$14.00 116.250 1,627.5 36.8% 8.8x
$15.00 108.500 1,627.5 35.3% 9.0x
$16.00 101.719 1,627.5 33.8% 9.2x
$17.00 95.735 1,627.5 32.5% 9.4x
$18.00 90.417 1,627.5 31.2% 9.6x
$19.00 85.658 1,627.5 30.1% 9.8x
$20.00 81.375 1,627.5 29.0% 10.0x
$21.00 77.500 1,627.5 28.0% 10.2x
$22.00 73.977 1,627.5 27.1% 10.4x
$23.00 70.761 1,627.5 26.2% 10.6x
$24.00 67.813 1,627.5 25.4% 10.8x
$25.00 65.100 1,627.5 24.6% 11.0x
$26.00 65.100 1,692.6 24.6% 11.3x
$27.00 65.100 1,757.7 24.6% 11.6x
$28.00 65.100 1,822.8 24.6% 11.8x
$29.00 65.100 1,887.9 24.6% 12.1x
$30.00 65.100 1,953.0 24.6% 12.4x
</TABLE>
14
<PAGE> 19
- --------------------------------------------------------------------------------
BUCKEYE CABLE VALUATION
- --------------------------------------------------------------------------------
<PAGE> 20
BUCKEYE CABLE VALUATION
- --------------------------------------------------------------------------------
Analysis of Selected Cable Television Acquisitions and Final Proposals
Transaction Value to EBITDA Multiple
Bar Graph:
<TABLE>
<CAPTION>
Target: Acquiror: Multiple:
- ------- --------- ---------
<S> <C> <C>
Viacom TCI/InterMedia 15.1x
Sammons Lenfest/TKR 10.1x
Sammons Marcus Cable 9.8x
Cablevision Industries Time Warner 10.8x
Houston Industries Time Warner 9.8x
Cablevision of Chicago Continental 13.0x
Gaylord Kelso/Charter 10.0x
Providence Journal Continental 10.4x
ML Media Century 11.0x
Summit Time Warner 10.4x
TeleCable Tele-Communications, Inc. 11.9x
Wometco Cable U.S. West 11.1x
Crown Media Charter 10.0x
Crown Media of Wisconsin Marcus Cable 11.4x
Maclean Hunter Comcast 11.5x
Times Mirror Cox 11.2x
McDonald Group Charter 10.3x
Lines Across Bar Graph:
Liberty 12.8x
Patriot 12.9x
Frontier 10.8x
<FN>
Note: Multiple for Final Proposals reflect adjusted values of offers
</TABLE>
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15
<PAGE> 21
BUCKEYE CABLE VALUATION
- --------------------------------------------------------------------------------
Pricing Matrix ($ Millions)
<TABLE>
<CAPTION>
OPERATING CASH FLOW SUBSCRIBERS
----------------------------------------------------------- --------------------
ANNUALIZED ANNUALIZED JUNE 30, YEAR-END
VALUE LTM 1995(1) 2H1995 4Q1995(2) 1996(1) 1995 1995(1)
--------- ------ -------- ------ --------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
$109.9 $125.7 $126.6 $128.7 $142.4 750.4 798.0
$1,300 11.8x 10.3x 10.3x 10.1x 9.1x $1,732 $1,629
$1,350 12.3x 10.7x 10.7x 10.5x 9.5x $1,799 $1,692
$1,400 12.7x 11.1x 11.1x 10.9x 9.8x $1,866 $1,754
$1,450 13.2x 11.5x 11.5x 11.3x 10.2x $1,932 $1,817
$1,500 13.7x 11.9x 11.8x 11.7x 10.5x $1,999 $1,880
$1,550 14.1x 12.3x 12.2x 12.0x 10.9x $2,066 $1,942
$1,600 14.6x 12.7x 12.6x 12.4x 11.2x $2,132 $2,005
$1,650 15.0x 13.1x 13.0x 12.8x 11.6x $2,199 $2,068
</TABLE>
Notes: (1) Pro forma for Rifkin properties.
(2) Includes an estimate for Rifkin properties' 4Q1995 operating cash
flow.
16
<PAGE> 22
BUCKEYE CABLE VALUATION (a)
- --------------------------------------------------------------------------------
Valuation Analysis
<TABLE>
<S> <C> <C> <C>
Bar Graph: Multiples of:
-----------------------------------
1995 E Subscribers
Methodology: (Dollars in Millions) EBITDA: $125.7 (000): 784.5
Public Comparables Analysis: $1,024 - $1,087 8.2x - 8.7x $1,359 - $1,442
Acqusition Comparables Analysis: $1,279 - $1,405 10.2x - 11.2x $1,696 - $1,863
DCF Analysis: $1,435 - $1,630 10.0x - 11.4x $1,830 - $2,075
Potential Value to Third Party: $1,385 - $1,630 9.7x - 11.4x $1,765 - $2,075
Lines Across Bar Graph:
Final Proposal Range:
$1,628: Patriot
$1,603: Liberty
$1,360: Frontier
</TABLE>
(a) Includes Rifkin properties.
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17
<PAGE> 23
BUCKEYE CABLE VALUATION
- --------------------------------------------------------------------------------
Breakup Value By System - Stand Alone Value - Private
1995 STATISTICS ($ IN THOUSANDS, EXCEPT FOR PER SUB VALUES)
<TABLE>
<CAPTION>
Employee Programming Other Operating
Cluster Revenues - Costs - Costs - Costs = Cash Flow Multiples
- ----------------- -------- -------- ----------- ----- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sacramento, CA $ 94,938 $14,831 $26,978 $15,833 $ 37,295 10.5x - 11.5x
Chattanooga, TN 41,419 5,756 10,304 6,785 18,574 10.5x - 11.5x
Knoxville, TN 39,675 5,059 8,890 6,750 18,976 10.5x - 11.5x
Mid Tennessee 11,969 1,402 2,389 1,953 6,225 9.5x - 10.5x
Atlanta, GA 25,991 3,947 5,876 5,290 10,878 10.0x - 11.0x
Bluefield, WV 16,563 2,932 3,828 3,023 6,779 9.0x - 10.0x
Lake County, FL 17,035 2,628 3,458 2,924 8,025 10.0x - 11.0x
Rome, GA 17,023 2,801 3,722 2,911 7,588 10.0x - 11.0x
Elizabethtown, KY 12,661 1,855 2,846 2,480 5,481 9.0x - 10.0x
Longmont, CO 13,316 2,030 3,529 1,903 5,854 10.0x - 11.0x
-------- ------- ------- ------- --------
TOTAL $290,590 $43,241 $71,821 $49,851 $125,677 10.2X -11.2X
<CAPTION>
Stand Alone Stand Alone
Cluster Value Value Per Subscriber
- ----------------- --------------------------- ------------------------
<S> <C> <C> <C> <C>
Sacramento, CA $ 391,602 - $ 428,898 $1,715.5 - $1,878.9
Chattanooga, TN 195,029 - 213,603 1,744.0 - 1,910.1
Knoxville, TN 199,248 - 218,224 1,866.3 - 2,044.0
Mid Tennessee 59,389 - 65,614 1,845.0 2,038.3
Atlanta, GA 108,784 - 119,663 1,494.4 - 1,643.8
Bluefield, WV 61,015 - 67,795 1,116.4 - 1,240.5
Lake County, FL 80,251 - 88,276 1,554.3 - 1,709.7
Rome, GA 75,884 - 83,472 1,563.2 - 1,719.5
Elizabethtown, KY 49,326 - 54,806 1,160.2 - 1,289.1
Longmont, CO 58,544 - 64,398 1,583.6 - 1,741.9
---------- ---------- -------- --------
TOTAL $1,279,072 $1,404,749 $1,696.5 $1,863.2
</TABLE>
18
<PAGE> 24
BUCKEYE CABLE VALUATION
- --------------------------------------------------------------------------------
Breakup Value By System - Stand Alone Value - Public
1995 STATISTICS ($ IN THOUSANDS, EXCEPT FOR PER SUB VALUES)
<TABLE>
<CAPTION>
Employee Programming Other Operating
Cluster Revenues - Costs - Costs - Costs = Cash Flow Multiples
- ----------------- -------- -------- ----------- ----- --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Sacramento, CA $ 94,938 $14,831 $26,978 $15,833 $ 37,295 8.5x - 9.0x
Chattanooga, TN 41,419 5,756 10,304 6,785 18,574 8.5x - 9.0x
Knoxville, TN 39,675 5,059 8,890 6,750 18,976 8.5x - 9.0x
Mid Tennessee 11,969 1,402 2,389 1,953 6,225 7.0x - 7.5x
Atlanta, GA 25,991 3,947 5,876 5,290 10,878 8.0x - 8.5x
Bluefield, WV 16,563 2,932 3,828 3,023 6,779 7.0x - 7.5x
Lake County, FL 17,035 2,628 3,458 2,924 8,025 8.0x - 8.5x
Rome, GA 17,023 2,801 3,722 2,911 7,588 8.0x - 8.5x
Elizabethtown, KY 12,661 1,855 2,846 2,480 5,481 7.0x - 7.5x
Longmont, CO 13,316 2,030 3,529 1,903 5,854 8.0x - 8.5x
-------- ------- ------- ------- --------
TOTAL $290,590 $43,241 $71,821 $49,851 $125,677 8.2X -8.7X
<CAPTION>
Stand Alone Stand Alone
Cluster Value Value Per Subscriber
- ----------------- --------------------------- ------------------------
<S> <C> <C> <C> <C>
Sacramento, CA $ 317,011 - $ 335,659 $1,388.8 - $1,470.5
Chattanooga, TN 157,880 - 167,167 1,411.8 - 1,494.9
Knoxville, TN 161,296 - 170,784 1,510.8 - 1,599.7
Mid Tennessee 43,577 - 46,690 1,353.7 1,450.4
Atlanta, GA 87,028 - 92,467 1,195.5 - 1,270.2
Bluefield, WV 47,456 - 50,846 868.3 - 930.4
Lake County, FL 64,201 - 68,213 1,243.4 - 1,321.2
Rome, GA 60,707 - 64,501 1,250.6 - 1,328.7
Elizabethtown, KY 38,364 - 41,105 902.4 - 966.8
Longmont, CO 46,835 - 49,762 1,266.9 - 1,346.0
---------- ---------- -------- --------
TOTAL $1,024,356 $1,087,194 $1,358.6 $1,442.0
</TABLE>
19
<PAGE> 25
BUCKEYE CABLE VALUATION
- --------------------------------------------------------------------------------
Adjusted Market Capitalization/Cable EBITDA
Bar Chart
<TABLE>
<CAPTION>
1995E OCF Multiple 1996 E OCF Multiple
<S> <C> <C>
Cablevision Systems Corp. 10.5x 9.6x
TCA Cable TV, Inc. 9.7x 8.1x
Tele-Communications, Inc. 9.5x 8.2x
Cox Cable Communications 9.4x 8.3x
Century Communications Corp. 9.3x 8.4x
Adelphia Communications Corp. 8.6x 7.8x
Falcon Cable Systems Corp. 8.6x 7.9x
Jones Intercable, Inc. 8.4x 7.6x
Comcast Corp. 7.5x 6.7x
Time Warner Inc. 7.4x 6.7x
</TABLE>
Adjusted Market Capitalization = Market capitalization - Public Market Value of
Non Cable Assets - Public Market Value of Non-consolidated Cable Assets. TCI and
Comcast reflect adjustments to public comparables.
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20
<PAGE> 26
- --------------------------------------------------------------------------------
OVERVIEW OF PATRIOT AND LIBERTY
- --------------------------------------------------------------------------------
<PAGE> 27
COMPARISON OF FINAL BIDDERS
_______________________________________________________________________
Summary Investment Profile
<TABLE>
<CAPTION>
Frontier Liberty Patriot
-------- ------- -------
<S> <C> <C> <C>
Valuation 1/2 H H
Liquidity H 3/4 1/4
Diversified Business Mix 1/2 3/4 1/4
Credit Quality H 3/4 1/2
Insider Holdings H 1/4 H
Potential for Second
M&A Premium L 1/4 3/4
Quality of Operations 1/2 3/4 H
Size/Economies-of-Scale H 1/2 1/2
Cash Flow Growth Potential 3/4 H 1/2
Potential from Current and
New Investments 3/4 H 3/4
Telephony Strategy H H 1/2
</TABLE>
Shaded Bullets Describing Highs & Lows:
H = High; fully Shaded bullet
3/4 = 3/4 Shaded bullet
1/2 = 1/2 Shaded bullet
1/4 = 1/4 Shaded bullet
L = Low; no Shaded bullet
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21
<PAGE> 28
LIBERTY
- -------------------------------------------------------------------------------
Diverse Communications Business Mix: Overview of Business Segments
Liberty
Corporation
- - Consolidated 1995E OCF: $1.0 billion
Market Value of Equity: $5,219.0
Minority Interest:(a) 764.0
Total Debt:(a) 5,997.7
Cash & Equivalents:(a) (686.7)
----------
Market Capitalization: $11,294.0
Domestic Cable Electronic Retailing
Communications
- - 1995E Revenues: $1.430 - 1995E Revenues: $1.53
billion billion
- - 1995E OCF: $710 million - 1995E OCF: $230 million
- - 3.3 million basic subscribers - QVC: 57.45% interest;
- - Includes purchase of acquired in 1995
Maclean Hunter's 550,000
U.S. subscribers
- - Garden State Cable: 50%
interest
Cellular Other Ventures
Communications
- - 1995E Revenues: $385 - 1995E OCF: ($60) million
million - Teleport: 20% interest
- - 1995E OCF: $150 million - PrimeStar: 11% interest
- - System covers 7.5 million - Programming and other
POPs minority stakes
- Sprint Telecommunications
Venture: 15% interest in joint
venture with TCI, Cox, and
Sprint to offer domestic,
local, long distance, wired &
wireless telephone services
- UK Cable Partners Limited:
31% interest
- ----------------
(a) All balance sheet data as of June 30, 1995. 1995 year-end estimates are
from Jessica Reif, Merrill Lynch Equity Research. Total Debt reflects
conversion of certain issues.
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22
<PAGE> 29
LIBERTY
- --------------------------------------------------------------------------------
Liberty Price Performance Versus Selected Cable Comparables (10/7/94 - 10/24/95)
Line graph depicting the performance of Liberty, the S&P 400 and a U.S. Cable
Index(1) from October 7, 1994 through October 24, 1995.
(1) U.S. Cable Index includes: Cablevision Systems, Jones Intercable,
Tele-Communications, Cox Communications and Time Warner.
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23
<PAGE> 30
LIBERTY
- -------------------------------------------------------------------------------
Preliminary Status Quo Public and Private Valuation
Pie Charts
PUBLIC % CONTRIBUTION TO TOTAL ASSET VALUE
<TABLE>
<S> <C>
Domestic Cable Television: 56.3%; $7.4 billion
Cellular: 16.8%; $2.2 billion
QVC: 24.0%; $3.2 billion
Other(1): 2.9%; $0.4 billion
</TABLE>
Public
Aggregate Asset Value
$12.2 billion - $13.6 billion
Midpoint Equity Value: $24.40 per share
PRIVATE % CONTRIBUTION TO TOTAL ASSET VALUE
<TABLE>
<S> <C>
Domestic Cable Television: 59.9%; $9.3 billion
Cellular: 15.7%; $2.4 billion
QVC: 22.2%; $3.4 billion
Other (1): 2.4%; $0.3 billion
</TABLE>
Private
Aggregate Asset Value
$14.0 billion - $16.6 billion
Midpoint Equity Value: $32.85 per share
Note: (1) Among other interests, includes DBS investment net of corporate
overhead.
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24
<PAGE> 31
LIBERTY
- --------------------------------------------------------------------------------
Preliminary Summary Public Market Valuation
<TABLE>
<S> <C>
In Millions
Fully Diluted Shares Outstanding 280.2
Stock Price as of October 24, 1995 (1) $ 18.63
---------
Market Value of Equity $ 5,219.0
Plus: Long Term Debt and Other Claims $ 6,761.7
Less: Cash and Equivalents (686.7)
---------
Total Market Capitalization $11,294.0
Less: Cellular Operations (@ 12x EBITDA) $(2,220.0)
Less: QVC (@11x EBITDA) (3,080.0)
Less: Other Investments (933.5)
Less: Corporate Expenses (@ 7x) 280.0
---------
Adjusted Cable Market Capitalization $ 5,340.4
1995E Cable EBITDA $ 710.0
1996E Cable EBITDA 795.2
Adjusted Cable Market Capitalization/
1995E Cable EBITDA 7.5x
Adjusted Cable Market Capitalization/
1996E Cable EBITDA 6.7x
</TABLE>
Note: (1) Weighted stock price to reflect prices for different
classes of stock.
25
<PAGE> 32
LIBERTY
- --------------------------------------------------------------------------------
Pro Forma Capitalization Table - June 30, 1995 ($ in thousands)
<TABLE>
<S> <C>
Liberty Debt
Senior Debt 2,990,328
10.25% Senior Sub. 125,000
10.625% Senior Sub. 300,000
9.5% Senior Sub. 200,000
9.375% Senior Sub. 250,000
5.5% Convert. Sub. 250,000
0.0% Convert. Sub. 5,000
1.125% Disc. Convert. Sub. 329,900
Secured Part. Notes 402,000
10% Sub. Debentures 122,900
Other Debt 535,100
----------
5,510,228
Maclean Hunter Debt 715,000
QVC Debt 1,006,300
----------
Total Debt $7,231,528
Minority Interest (2) 710,679
<CAPTION>
Votes/
Share Dividend(1) Yield
------ ----------- -----
<S> <C> <C> <C> <C>
Shareholders Equity (3)
Common Stock- Special 244,937 0 0.0933 0.49%
Common Stock-Class A 39,075 1 0.0933 0.51%
Common Stock-Class B 8,786 15 0.0933
Additional Paid-in Capital 1,879,525
Retained Earnings (1,868,738)
Unrealizable Gains 6,283
On Marketable Securities
Cumulative Translation (14,368)
Total Stockholders' Equity $295,500
-----------
Total Capitalization $ 8,237,707
===========
</TABLE>
(1) As adjusted for Liberty's three-for-two stock split effective February 2,
1994.
(2) Includes the CalPERS investment in Maclean Hunter.
(3) Pro forma for Buckeye Cable Transaction and $500 million share repurchase.
26
<PAGE> 33
PATRIOT
- --------------------------------------------------------------------------------
Diverse Communications Business Mix: Overview of Business Segments
Patriot
- -------
Market Value of Equity(a): $3,432.4
Total Debt(b): 5,304.6
Cash & Equivalents(b): (10.0)
--------
Market Capitalization(b): $8,727.0
Domestic Cable
- --------------
* 4.1 million basic subscribers
* Includes purchase of Providence Journal's 773,486 subscribers
* Insight Communications: 34% interest
International Cable Operations
- ------------------------------
* Argentina - Fintelco: 50% interest
* Singapore - CableVision: 25% interest
* Japan - CT Telecom
* Australia - Optus Vision: 46.5% interest
Strategic Investments
- ---------------------
* Teleport: 20% interest
* PrimeStar: 10.4% interest
Programming
- -----------
* Other minority stakes
* Golf Channel 20%
* Turner
* HSN
* E! Entertainment: 10.4% interest
* New England Cable News: 50%
(a) Midpoint of public market value range from break-up analysis.
(b) All balance sheet data as of June 30, 1995.
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27
<PAGE> 34
PATRIOT
- --------------------------------------------------------------------------------
Preliminary Status Quo Public and Private Valuation
PUBLIC % CONTRIBUTION TO TOTAL ASSET VALUE
[PIE CHART]
Domestic Minority Cable Investments 0.5% $47 million
Programming Investments 3.0% $0.3 billion
Strategic Investments (Teleport, PrimeStar) 2.7% $0.2 billion
International Investments 4.5% $0.4 billion
Domestic Cable Television 89.4% $7.8 billion
Public
Aggregate Asset Value
$8.4 billion - $9.0 billion
Midpoint Equity Value:
Assuming No IPO: $19.03 per share
Assuming IPO: $18.77 per share
PRIVATE % CONTRIBUTION TO TOTAL ASSET VALUE
[PIE CHART]
Programming Investments 3.1% $0.3 billion
Strategic Investments 3.0% $0.3 billion
International Investments 4.6% $0.5 billion
Domestic Minority Cable Investments 0.7% $0.1 billion
Domestic Cable Television 88.6% $9.3 billion
Private
Aggregate Asset Value
$9.5 billion - $11.4 billion
Midpoint Equity Value:
Assuming No IPO: $28.60 per share
Assuming IPO: $27.47 per share
Note: $19.40 per share public market price agreed upon in Providence journal
merger.
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28
<PAGE> 35
PATRIOT
- --------------------------------------------------------------------------------
Preliminary Summary Public Market Valuation
<TABLE>
<S> <C>
In Millions
Fully Diluted Shares Outstanding 180.3
Stock Price as of October 24, 1995 (1) $ 19.03
--------
Market Value of Equity $3,432.4
Plus: Long Term Debt and Other Claims $5,304.6
Less: Cash and Equivalents (10.0)
--------
Total Market Capitalization $8,727.0
Less: Domestic Minority Cable Investments $ (37.1)
Less: International Investments (386.4)
Less: Strategic Investments (Teleport, PrimeStar) (235.6)
Less: Programming Investments (254.3)
Less: National Cable Communications (12.4)
--------
Adjusted Cable Market Capitalization $7,801.2
1995E Cable EBITDA 717.0
1996E Cable EBITDA 843.4
Adjusted Cable Market Capitalization/
1995E Cable EBITDA 10.9x
Adjusted Cable Market Capitalization/
1996E Cable EBITDA 9.3x
</TABLE>
Note: (1) Midpoint of Public Market Valuation
29
<PAGE> 36
PATRIOT
- --------------------------------------------------------------------------------
Pro Forma Capitalization Table - June 30, 1995 ($ in thousands) (1)
<TABLE>
<S> <C>
Patriot Debt
8.5% Senior Notes $ 200,000
8.625% Senior Notes 100,000
8.875% Senior Notes 275,000
9% Senior Debentures 300,000
9.5% Senior Debentures 525,000
1994 Credit Facility 1,824,890
1995 Credit Facility 1,032,000
Prudential Notes 138,250
-----------
Total Senior Debt $ 4,395,140
10.625% Senior Sub. Notes $ 100,000
11% Senior Sub. Debentures 300,000
Senior Sub Floating Rate Debs 100,000
Other Debt (Net of IPO Proceeds) (258,889)
-----------
Total Debt $ 4,636,251
Redeemable Common Stock 242,721
Minority Interest 3,798
<CAPTION>
Votes/
Shareholders' Equity Share
------
<S> <C> <C>
Series A Convertible Pfd. (2) $ 11 15
Class A Common Stock (3) 1,449 1
Class B Common Stock 926 15
Additional Paid-In Capital 3,169,848
Unearned Compensation (51,708)
Net Unrealized Holding
Gain on Marketable Secs 49,104
Retained Earnings (Deficit) (2,340,718)
Total Shareholders' Equity $ 828,913
-----------
Total Capitalization $ 5,711,683
===========
</TABLE>
(1) Pro Forma for the merger with Providence Journal.
(2) Liquidation Preference of $507,123.
(3) Also pro forma for the Buckeye Cable Transaction and a $300 million IPO.
30
<PAGE> 37
- --------------------------------------------------------------------------------
PRO FORMA ANALYSIS OF NEW BUCKEYE
- --------------------------------------------------------------------------------
<PAGE> 38
ANALYSIS OF SELECTED TRANSACTION
- --------------------------------------------------------------------------------
Transaction Structure
[Chart - Pre-Transaction]
The chart is a box diagram that shows Buckeye Shareholders owning 100% of
Buckeye which in turn owns a box labeled All Businesses.
[Chart - Post Transaction]
The chart is a box diagram that shows Buckeye Shareholders owning 100% of New
Buckeye which holds the Newspapers, Broadcasting and Entertainment Businesses.
Buckeye Shareholders are shown owning 20% (1) of a box labeled Buckeye Cable
and Cable Acquiror's Businesses and a box labeled Cable Acquiror Shareholders
is shown owning the remaining 80%(1).
Note: (1) for illustration purposes only.
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31
<PAGE> 39
ANALYSIS OF SELECTED TRANSACTION
- --------------------------------------------------------------------------------
Potential Value to Buckeye's Shareholders
- --------------------------------------------------------------------------------
SEGMENT VALUATION APPROACH
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE PER SHARE
LOW HIGH
--- ----
<S> <C> <C>
Public Market Value of New Buckeye (a) $22.75 $29.37
Value of Cable Transaction (b) 20.02 20.02
- --------------------------------------------------------------------------------
Total Value to Buckeye's Shareholders $42.77 $49.39
- --------------------------------------------------------------------------------
Current Market Price $34.00 $34.00
Premium to Current Market Price 25.8% 45.3%
- --------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
PRICE / EARNINGS MULTIPLE APPROACH
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LOW HIGH
--- ----
<S> <C> <C>
1996E EPS of New Buckeye (a) $1.39 $1.39
Price / Earnings Multiple 14.5x 17.0x
Public Market Value of New Buckeye (a) $20.16 $23.63
Value of Cable Transaction (b) 20.02 20.02
- --------------------------------------------------------------------------------
Total Value to Buckeye Shareholders $40.17 $43.65
- --------------------------------------------------------------------------------
Current Market Price $34.00 $34.00
Premium to Current Market Price 18.2% 28.4%
- --------------------------------------------------------------------------------
</TABLE>
- ------------------------------
Note: (a) New Buckeye is comprised of the Newspapers, Broadcast and
Entertainment segments.
(b) Value of Cable Transaction is based on the Adjusted Transaction Value.
32
<PAGE> 40
PRO FORMA ANALYSIS OF NEW BUCKEYE
- --------------------------------------------------------------------------------
Pro Forma Valuation Analysis
The E.W. Scripps Company
Contribution of Reporting Segments
Pie Charts
Public Market Value:
Newspapers: 48%
Broadcasting: 47%
Entertainment: 5%
Private Market Value:
Newspapers: 56%
Broadcasting: 40%
Entertainment 4%
1995E Revenues:
Newspapers: 62%
Broadcasting: 28%
Entertainment: 9%
1995E EBITDA:
Newspapers: 59%
Broadcasting: 41%
Value per Share
<TABLE>
<CAPTION>
Public Private
Low High Low High
------ ------ ------ ------
<S> <C> <C> <C> <C>
Newspapers $11.65 $14.83 $20.12 $24.36
Broadcasting 11.46 14.33 14.33 17.20
Entertainment 1.12 1.50 1.51 1.94
Debt, Cash and Other (1.48) (1.29) (1.48) (1.29)
------ ------ ------ ------
Value per Share $22.75 $29.37 $34.48 $42.21
Current Share Price: $34.00
</TABLE>
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33
<PAGE> 41
PRO FORMA ANALYSIS OF NEW BUCKEYE
- --------------------------------------------------------------------------------
EPS and EPS Growth Impact Analysis
<TABLE>
<CAPTION>
Compound
1996 2000 Annual Growth
---- ---- -------------
<S> <C> <C> <C>
Estimated E.P.S. before Cable Transaction 1.99 3.75 17.2%
Estimated E.P.S. after Cable Transaction 1.39 2.49 15.7%
% Dilution/Difference (30.2%) (33.6%) 1.5%
</TABLE>
34
<PAGE> 42
PRO FORMA ANALYSIS OF NEW BUCKEYE
- --------------------------------------------------------------------------------
Illustrative Pro Forma Analysis of Spin-Off/Merger
($ in Millions)
<TABLE>
<CAPTION>
As of September 30, 1995 Nine Months Ended September 30, 1995
--------------------------------------------------------- ------------------------------------
EQUITY AFTER-TAX EARNINGS
------------------------------- ------------------------------------
NEW MERGED NEW MERGED
ASSETS LIABILITIES COMBINED BUCKEYE ASSETS COMBINED BUCKEYE ASSETS
------ ----------- -------- ------- ------ -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Newspapers $ 605.5 $(122.9) $ 482.6 $482.6 $ -- $ 48.7 $ 48.7 $ --
Broadcasting 535.1 (126.9) 408.2 408.2 -- 33.3 33.3 --
Cable 411.6 (119.3) 292.3 -- 292.3 26.1 -- 26.1
Entertainment 75.0 (24.4) 50.6 50.6 -- (4.6) (4.6) --
Corporate 153.9 (226.5) (72.6) (72.6) -- (10.6) (10.6) --
------- ------- -------- ------ ------ ------ ------ -----
TOTAL $1,781.1 $(620.0) $1,161.1 $868.8 $292.3 $ 92.9 $ 66.8 $26.1
======== ======= ======== ====== ====== ====== ====== =====
Debt/Total Book Capitalization 12% 17% 0%
Debt/Equity 11% 14% 0%
Earnings per Share $ 1.22 $ 0.88
Earnings per Share % Pickup/(Dilution) -28%
</TABLE>
35
<PAGE> 43
PRO FORMA ANALYSIS OF NEW BUCKEYE
- --------------------------------------------------------------------------------
1996E Revenue Composition for Selected Newspaper Publishers
($ in millions)
Bar Graphs
<TABLE>
<CAPTION>
Newspapers Professional/ Information Broadcasting Cable Other
Consumer Services
Publishing
<S> <C> <C> <C> <C> <C> <C>
New York Times 89.8% 6.4% 3.8%
($2,552)
Knight Ridder 80.0% 20.0%
($2,894)
Gannett Co.(a) 73.9% 13.1% 3.7% 9.3%
($4,838)
New Buckeye 61.4% 28.4% 10.2%
($1,119)
Tribune Company 59.1% 36.0% 4.9%
($2,396)
Times Mirror 58.7% 41.3%
($3,508)
Dow Jones 58.1% 41.9%
($2,400)
A. H. Belo 55.4% 44.6%
($795)
Media General 49.6% 28.5% 21.9%
($732)
Washington Post 42.5% 20.6% 17.7% 11.5% 7.7%
($1,798)
<FN>
(a) Pro Forma for Multimedia acquisition
</TABLE>
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36
<PAGE> 44
PRO FORMA ANALYSIS OF NEW BUCKEYE
- ------------------------------------------------------------------------
1996E EBITDA Composition for Selected Newspaper Publishers
($ in millions)
Bar Graphs
<TABLE>
<CAPTION>
Newspapers Professional/ Information Broadcasting Cable Other
Consumer Services
Publishing
<S> <C> <C> <C> <C> <C> <C>
New York Times 84.6% 7.8% 7.6%
($435.0)
Knight Ridder 83.6% 16.4%
($485.0)
Gannett Co.(a) 66.2% 20.4% 7.2% 6.2%
($1,325.6)
Times Mirror 59.9% 40.1%
($531.6)
Tribune Company 58.1% 38.4% 3.5%
($570.8)
New Buckeye 57.1% 42.9%
($303.0)
Media General 45.3% 40.7% 14.0%
($150.0)
A. H. Belo 37.8% 62.2%
($229.6)
Dow Jones 37.0% 63.0%
($602.0)
Washington Post 32.1% 5.1% 38.8% 24.0%
($400.0)
<FN>
Note: (a) Pro Forma for Multimedia acquisition.
</TABLE>
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37
<PAGE> 45
PRO FORMA ANALYSIS OF NEW BUCKEYE
- --------------------------------------------------------------------------------
Analysis of Selected Comparable Newspaper/Broadcasting Companies
<TABLE>
<CAPTION>
1996E Revenue Contribution 1996E EBITDA Contribution Multiples
------------------------------ ------------------------------ --------------------------------------------
Company Newspaper Broadcasting Other Newspaper Broadcasting Other 1995 P/E 1996 P/E P/E Growth 5 Yr. Growth
- ------- --------- ------------ ----- --------- ------------ ----- -------- -------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
A.H. Belo 55.4% 44.6% 0.0% 40.9% 62.2% -3.1% 19.5x 16.6x 1.18 14.0%
Gannett 73.9% 13.1% 13.0% 66.2% 20.4% 13.4% 15.9x 14.7x 1.34 11.0%
Media General 49.6% 28.5% 21.9% 45.3% 40.7% 14.0% 16.8x 14.3x 0.95 15.0%
New York Times 89.8% 3.8% 6.4% 84.6% 7.8% 7.6% 22.2x 19.5x 1.30 15.0%
Washington Post 42.5% 17.7% 39.8% 32.1% 38.8% 29.2% 18.2x 16.8x 1.53 11.0%
Tribune 59.1% 36.0% 4.9% 58.1% 38.4% 3.5% 17.5x 16.1x 1.15 14.0%
High 89.8% 44.6% 39.8% 84.6% 62.2% 29.2% 22.2x 19.5x 1.53 15.0%
Mean 61.7% 24.0% 14.3% 54.5% 34.7% 10.8% 18.4x 16.3x 1.24 13.3%
Median 57.3% 23.1% 9.7% 51.7% 38.6% 10.5% 17.9x 16.3x 1.24 14.0%
Low 42.5% 3.8% 0.0% 32.1% 7.8% -3.1% 15.9x 14.3x 0.95 11.0%
New Buckeye
Statistics 61.4% 28.4% 10.2% 57.1% 42.9% 0.0%
Implied Values
High $27.11
Mean 22.70
Median 22.72
Low 19.88
</TABLE>
38
<PAGE> 46
PRO FORMA ANALYSIS OF NEW BUCKEYE
- ----------------------------------------------------------------
Analysis of Selected Comparable Newspaper/Broadcasting Companies:
Capital Structural/Dividend Policy
($ in Millions)
<TABLE>
<CAPTION>
Debt/ Interest Credit Payout Dividend
Company Debt Market Cap. Coverage(a) Rating Ratio Yield
---------- -------- ----------- ------------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
A.H. Belo $499 27.2% 5.9x NR 17.3% 0.9%
Gannett(a) $2,908 27.3% 5.9x AA3 39.9% 2.5%
Media General $173 17.5% 5.8x NR 25.9% 1.5%
New York Times $559 16.4% 7.8x A1 24.5% 1.9%
Washington Post $ 50 1.5% 54.1x AA3 25.0% 1.5%
Tribune $497 11.2% 22.8x A1 30.9% 1.8%
High $2,908 27.3% 54.1x 39.9% 2.5%
Mean 781 16.9% 17.1x 27.2% 1.7%
Median 498 16.9% 6.9x 25.4% 1.7%
Low 50 1.5% 5.8x 17.3% 0.9%
New Buckeye $0 0.0% NM 37.5% 1.7%
</TABLE>
(a) Pro forma for Multimedia acquisition
(b) EBIT/Interest expense
39
<PAGE> 47
- --------------------------------------------------------------------------------
COMPARISON OF SELECTED CABLE COMPANIES
- --------------------------------------------------------------------------------
<PAGE> 48
COMPARISON OF SELECTED CABLE COMPANIES
- --------------------------------------------------------------------------------
CHART 1: RUN RATE OCF MARGIN
ADLAC 53.8%
CMCSK 50.4%
CTY 46.0%
CVC 45.4%
TCI 42.2%
CCBLV 40.9%
COX 38.3%
CHART 2: PENETRATION
ADLAC 73.4%
COX 64.4%
CTY 61.5%
TCI 60.4%
CMCSK 60.2%
CVC 58.1%
CCBLV 58.0%
CHART 3: AVERAGE MONTHLY REV/SUBSCRIBER
CVC $41.58
CCBLV $35.79
COX $34.56
CMCSK $34.25
ADLAC $32.67
TCI $32.34
CTY $29.80
CHART 4: ANNUAL OCF/SUBSCRIBER
CVC $227
ADLAC $211
CMCSK $207
CCBLV $176
CTY $165
TCI $164
COX $159
[MERRILL LYNCH LOGO]
40
<PAGE> 49
COMPARISON OF SELECTED CABLE COMPANIES
- --------------------------------------------------------------------------------
Credit Statistics
CHART 1: TOTAL NET DEBT/RUN RATE OCF
ADLAC 10.02x
CTY 7.94x
CCBLV 7.02x
TCI 5.98x
CMCSK 5.85x
CVC 5.68x
COX 4.65x
TWX 3.89x
CHART 2: RUN RATE OCF/TOTAL INTEREST EXPENSE
COX 3.35x
TWX 3.11x
TCI 2.02x
CMCSK 1.98x
CVC 1.93x
CCBLV 1.71x
CTY 1.32x
ADLAC 1.00x
CHART 3: RUN RATE OCF/CASH INTEREST EXPENSE
COX 3.35x
TWX 3.33x
CMCSK 2.22x
TCI 2.02x
CVC 1.93x
CCBLV 1.71x
CTY 1.49x
ADLAC 1.07x
CHART 4: (RUN RATE OCF - CAP EX)/TOTAL INTEREST EXPENSE
TWX 1.86x
CMCSK 1.00x
CCBLV 0.85x
COX 0.68x
CTY 0.60x
TCI 0.59x
ADLAC 0.51x
CVC 0.36x
[MERRILL LYNCH LOGO]
41
<PAGE> 50
COMPARISON OF SELECTED CABLE COMPANIES
- --------------------------------------------------------------------------------
Credit Ratings (Moody's/S&P)
<TABLE>
<CAPTION>
Senior Subordinated S&P Outlook
<S> <C> <C> <C>
COX Baa2/A- -- Stable
TCI Baa3/BBB- Ba2/NR Stable
TWX Ba1/BBB- Ba3/BB+ Negative Watch
CCBLV Ba2/BB+ B1/BB- Stable
CMCSK NR/BB B1/B+ Stable
CTY Ba3/BB- B2/B+ Stable
CVC NR/BB- B3/B Stable
ADLAC B3/B -- Developing
</TABLE>
[MERRILL LYNCH LOGO]
42
<PAGE> 1
EXHIBIT 99.6
DONALDSON, LUFKIN & JENRETTE
140 Broadway
New York, NY 10005-1285
(212) 504-3000
October 28, 1995
Board of Trustees
The Edward W. Scripps Trust
312 Walnut Street
Cincinnati, OH 45202
Dear Sirs:
Pursuant to the terms of an Agreement and Plan of Merger (the
"Agreement") dated as of October 28, 1995 by and among The E.W. Scripps Company
("Scripps"), Scripps Howard, Inc. ("SHI" and together with Scripps, the
"Company"), an affiliate of Scripps, and Comcast Corporation ("Comcast"),
Comcast will acquire 100% of the outstanding stock of Scripps (the
"Transaction"), whose assets and liabilities will consist only of substantially
all of the assets and liabilities of the Company's Cable Subsidiaries (as
defined therein) at a price equal to $1,575.0 million plus certain adjustments
(the "Purchase Price"), payable in shares of Class A Special Common Stock of
Comcast ("Comcast Stock"), subject to certain adjustments based on the average
closing price of Comcast Stock as quoted on the Nasdaq National Market for 15
trading days selected by lot from the 40 trading days immediately prior to the
Closing Date (the "Closing Price"). You have requested our opinion as to the
fairness from a financial point of view to The Edward W. Scripps Trust (the
"Trust") of the Purchase Price to be received by the Trust pursuant to the terms
of the Agreement.
In arriving at our opinion, we have reviewed the Agreement. We also have
reviewed financial and other information that was publicly available or
furnished to us by the Company and Comcast including information provided during
discussions with their respective managements. Included in the information
provided during discussions with the respective managements were certain
financial projections, including those of the Cable Subsidiaries for the period
beginning 1995 and ending 1997 prepared by the management of the Company. In
addition, we have compared certain financial and securities data of the Company
and Comcast with various other companies whose securities are traded in public
markets, reviewed the historical stock prices and trading volumes of the common
stock of the Company and Comcast, reviewed prices and premiums paid in other
business combinations and conducted such other financial studies, analyses and
investigations as we deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy,
completeness and fairness of all of the financial and other information that was
available to us from public sources, that was provided to us by the Company,
Comcast, and their representatives, or that was otherwise reviewed by us. With
respect to the financial projections supplied to us, we have assumed that they
have been reasonably prepared on the basis reflecting the best currently
available estimates and judgments of the management of the Company as to the
future operating and financial performance of the Cable Subsidiaries. We have
not assumed any responsibility for making an independent evaluation of the
Company's assets or liabilities or for making any independent verification of
any of the information reviewed by us. We have relied as to all legal matters on
advice of counsel to the Company.
<PAGE> 2
Our opinion is necessarily based on economic, market, financial and
other conditions as they exist on, and on the information made available to us
as of, the date of this letter. It should be understood that, although
subsequent developments may affect this opinion, we do not have any obligation
to update, revise or reaffirm this opinion. We are expressing no opinion herein
as to the prices at which Comcast Stock will actually trade at any time. Our
opinion does not address the relative merits of the Transaction and the other
business strategies being considered by the Company's Board of Directors (the
"Board"), nor does it address the Board's decision to proceed with the
Transaction. Our opinion does not constitute a recommendation to any shareholder
as to how such shareholder should vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of
its investment banking services, is regularly engaged in the valuation of
businesses and securities in connection with mergers, acquisitions,
underwritings, sales and distributions of listed and unlisted securities,
private placements and valuations for estate, corporate and other purposes. DLJ
has performed investment banking and other services for the Company and for
Comcast (in the past) and as of the date of this letter, is acting as lead
manager for a public offering of debt securities for an affiliate of Comcast.
DLJ has been compensated for such services to each of the parties. In December
1993, DLJ acted as managing underwriter for a public offering of the Company's
Class A Common Stock and received usual and customary fees. DLJ has also been
engaged to provide merger and acquisition advisory services to the Company. In
the ordinary course of its business, DLJ may actively trade the equity and/or
debt securities of the Company and/or Comcast for DLJ's own account or for the
account of customers and, accordingly, may at any time hold a long or short
position in such securities.
Based upon the foregoing and such other factors as we deem relevant, we
are of the opinion that the consideration to be received by the Trust pursuant
to the Agreement is fair to the Trust from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael J. Connelly
-----------------------
Michael J. Connelly
Managing Director
