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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1995
OR
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934 (NO FEE REQUIRED)
For the transition period from to
COMMISSION FILE NUMBER 33-57471
CONTINENTAL CABLEVISION, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 04-2370836
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
THE PILOT HOUSE 02110
LEWIS WHARF (ZIP CODE)
BOSTON, MA
(ADDRESS OF PRINCIPAL
EXECUTIVE OFFICES)
617-742-9500
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. X
The aggregate market value of the voting stock of the registrant held by
non-affiliates is not applicable as no public market for the voting stock of
the registrant exists.
Number of shares of the registrant's Class A Common Stock at March 15,
1996: 38,885,385
Number of shares of the registrant's Class B Common Stock at March 15,
1996: 109,664,521
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CONTINENTAL CABLEVISION, INC.
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PART I
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PAGE
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Item 1. Business...................................................... 1
Item 2. Properties.................................................... 32
Item 3. Legal Proceedings............................................. 32
Item 4. Submission of Matters to a Vote of Security Holders........... 32
PART II
Market for the Registrant's Common Stock and Related
Item 5. Stockholder Matters........................................... 33
Item 6. Selected Consolidated Financial Information................... 34
Management's Discussion and Analysis of Financial Condition
Item 7. and Results of Operations..................................... 36
Item 8. Financial Statements and Supplementary Data................... 45
Changes in and Disagreements with Accountants on Accounting
Item 9. and Financial Disclosure...................................... 67
PART III
Item 10. Directors and Executive Officers of the Registrant............ 67
Item 11. Executive Compensation........................................ 70
Security Ownership of Certain Beneficial Owners and
Item 12. Management.................................................... 74
Item 13. Certain Relationships and Related Transactions................ 77
PART IV
Exhibits, Financial Statement Schedules and Reports on Form 8-
Item 14. K............................................................. 78
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PART I
ITEM 1. BUSINESS.
(A) DEVELOPMENT OF BUSINESS.
Continental Cablevision, Inc. ("Continental" or the "Company," which terms
include its consolidated subsidiaries unless the context indicates otherwise)
is a leading provider of broadband communications services. As of December 31,
1995, the Company's systems and those of its U.S. affiliates passed
approximately 7.2 million homes and provided service to approximately 4.2
million basic cable subscribers, making the Company the third-largest cable
television system operator in the United States. In addition, Continental has
pursued investments in sectors that are complementary to its core business,
including (i) international broadband communications; (ii) interests in
telecommunications and technology, including competitive-access telephony and
direct broadcast satellite ("DBS") service; and (iii) interests in programming
services.
Effective October 5, 1995, Continental acquired the cable television
businesses and assets of Providence Journal Company ("Providence Journal"),
serving approximately 779,000 basic subscribers, through the merger of
Providence Journal into Continental and related transactions (the "Providence
Journal Merger"). The Company also completed during the year ended December
31, 1995: (i) acquisitions of systems serving approximately 88,000 basic
subscribers in Chicago, Illinois ("Cablevision of Chicago"), 74,000 basic
subscribers in Michigan ("Columbia Cable of Michigan") and 12,000 basic
subscribers in Northern California ("Consolidated Cablevision of California")
and (ii) the acquisition of the remaining 66.2% interest in N-COM Limited
Partnership II ("N-COM"), which owned systems serving approximately 56,000
basic subscribers in Michigan (the "N-COM Buyout" and, collectively, the
"Recent Acquisitions"). See "Description of Business--U.S. Acquisitions and
Investments."
On February 27, 1996, the Company entered into a definitive Agreement and
Plan of Merger (the "Merger Agreement") with U S WEST, Inc. ("U S WEST")
providing for the merger of the Company with and into U S WEST (the "Merger").
As a result of the Merger, Continental's operations will become part of U S
WEST Media Group ("UMG"), a leading global media and telecommunications
company. UMG is one of two major groups that comprise U S WEST. U S WEST's
other major group, U S WEST Communications, provides telecommunications
services to more than 25 million customers in 14 western and mid-western
states.
If the Merger is consummated, UMG will acquire all of Continental's
outstanding capital stock for aggregate consideration of approximately $5.3
billion, consisting of the following: shares of a new class of U S WEST Series
D Convertible Preferred Stock (the "Series D Preferred Stock") valued at $1
billion, shares of U S WEST Media Group Common Stock ("UMG Common Stock")
valued at $3.3 billion and $1 billion in cash. The Common Stock, $.01 par
value per share, of the Company (the "Common Stock") has been valued at $30
per share for purposes of the Merger. At U S WEST's election, the cash
consideration may be increased, and the consideration to be paid in UMG Common
Stock may be reduced, by up to $500 million. As part of the Merger, US WEST
will also assume Continental's outstanding indebtedness and other liabilities,
which are currently approximately $5.5 billion.
The Merger has been structured to be a tax-free reorganization; the gain, if
any, recognized by a Continental stockholder will be taxable only to the
extent of any cash received. In the Merger, each holder of Class A Common
Stock of the Company (the "Class A Common Stock") is entitled to receive
shares of UMG Common Stock and shares of Series D Preferred Stock, and each
holder of Class B Common Stock of the Company (the "Class B Common Stock")
(including those issued upon conversion of the Series A Participating
Convertible Preferred Stock of Continental (the "Series A Preferred Stock"))
is entitled to receive, at the holder's election, either cash or shares of UMG
Common Stock and shares of Series D Preferred Stock, or a combination thereof.
In order to maintain the tax-free status of the Providence Journal Merger,
holders of Class A Common Stock, comprised mainly of former Providence Journal
stockholders, will be asked to approve an amendment to the Company's Amended
and Restated Certificate of Incorporation that will allow cash consideration
to be received only by holders of Class B Common Stock.
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For purposes of determining the number of shares of UMG Common Stock to be
delivered in the Merger, such stock will be valued on the basis of the average
last reported intra-day sale price of UMG Common Stock during the 20 trading
days selected by lot from the 30 trading days ending on the fourth trading day
before the effective date of the Merger (the "UMG Share Price"). Continental
and U S WEST will be required to consummate the Merger if the UMG Share Price
as so determined is no less than $20.825 and no greater than $28.175. If the
UMG Share Price is below $20.825, Continental will have the right to terminate
the Merger Agreement unless U S WEST elects to issue shares of UMG Common
Stock based on the actual UMG Share Price. If U S WEST does not so elect and
Continental terminates the Merger Agreement, Continental will have the right
to require U S WEST to purchase 5,650,000 shares of a new Series B Convertible
Preferred Stock of Continental for a purchase price of $282.5 million.
Conversely, if the UMG Share Price is above $28.175, U S WEST will have the
right to terminate the Merger Agreement unless Continental elects to accept
shares of UMG Common Stock in the Merger based on the actual UMG Share Price.
The Merger is expected to close in the fourth quarter of 1996. The
consummation of the Merger is subject to various conditions to closing,
including, but not limited to, regulatory approvals and Continental
stockholder votes. Certain major stockholders have agreed to vote in favor of
the Merger and other related matters. However, no assurances can be given that
the Merger will occur, or occur in the foregoing manner.
Unless otherwise indicated, all industry data set forth herein are based
upon information compiled by the National Cable Television Association
("NCTA"), Paul Kagan Associates and/or Warren Publishing Co., and median
household income data are derived from demographic information provided by
Equifax Marketing Decision Systems, Inc. The demographic information was
provided by zip code area and was averaged by Continental (weighted by the
number of basic subscribers in each zip code area) (i) for all of the zip code
areas Continental serves and (ii) for the zip code areas in each of
Continental's five U.S. cable television management regions. Equifax Marketing
Decision Systems, Inc. developed the 1995 demographic information by adjusting
1990 census data to take into account estimated growth rates which were
developed by the WEFA Group (formerly Wharton Econometric Forecasting
Associates and Chase Econometrics).
The share information contained herein, except as otherwise provided, gives
effect to a stock dividend of 24 shares, which was effective September 29,
1995, on each share of Class A Common Stock and Class B Common Stock of the
Company outstanding on the record date for such stock dividend.
The Company logo is a trademark of the Company. All other brand names and
trademarks appearing herein are the property of their respective holders.
The Company was incorporated in the State of Delaware in 1963 and has been
providing basic and pay cable television services since its inception.
(B) DESCRIPTION OF BUSINESS.
U.S. CABLE TELEVISION BUSINESS
The Company's five management regions operate systems that are organized
into 22 operating clusters in 20 states. As of December 31, 1995,
approximately 55.0% of Continental's total basic subscribers were located in
the Company's seven largest operating clusters. The Providence Journal Merger
and the Recent Acquisitions increased the total number of subscribers in these
clusters by approximately 33.0%, to more than 2.3 million. Continental
believes that its operating scale in key markets generates significant
benefits, including operating efficiencies, and enhances its ability to
develop and deploy new technologies and services.
Continental's systems have channel capacity and addressability that are
among the highest in the cable industry. The Company's systems are located
principally in suburban communities adjacent to major
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metropolitan markets, as well as in mid-sized cities, that generally have
attractive demographics and are geographically diverse. These systems serve
communities with a median household income of approximately $42,300 versus the
national median of approximately $37,900. Continental believes that its
technologically advanced broadband networks and the demographic profile of its
subscriber base, coupled with its effective marketing, are essential to its
ability to sustain pay-to-basic penetration rates and total monthly revenue
per average basic subscriber that are among the highest in the cable
television industry. Continental believes that the geographic diversity of its
system clusters reduces its exposure to economic, competitive or regulatory
factors in any particular region.
Cable television is a service that delivers a wide variety of channels of
television programming, consisting primarily of video entertainment, sports
and news, as well as informational services, locally originated programming
and digital audio programming, to the homes of subscribers who pay a monthly
fee for the service. Television and radio signals are received by off-air
antennas, microwave relay systems, satellite earth stations and fiber-optic
cables and then distributed to subscribers' homes over networks of coaxial and
fiber-optic cables.
The Company's systems offer subscribers various levels (or "tiers") of cable
services consisting of broadcast television signals available off-air in any
locality, television signals from so-called "superstations" originating in
distant cities (such as WTBS, WGN and WWOR), various satellite-delivered, non-
broadcast channels (such as Entertainment and Sports Programming Network
("ESPN"), Cable News Network ("CNN"), the USA Network ("USA") and Music
Television ("MTV")), displays of information featuring news, weather and stock
market reports and programming originated locally by the systems (such as
public, educational and governmental access channels). The Company's systems
also provide premium services to basic subscribers for an extra monthly
charge. These premium services include Home Box Office ("HBO"), Cinemax,
Showtime, The Movie Channel, Encore, The Disney Channel and certain regional
sports networks, which are satellite-delivered channels that consist
principally of feature films, live sporting events and other special
entertainment features, usually presented without commercial interruption.
Certain of the Company's systems also carry "multiplexed" premium services,
which are available from certain premium-service providers such as HBO.
Multiplexing allows a premium-service supplier to offer its programming on two
or more channels simultaneously, but scheduled differently, so as to provide
the subscriber with an expanded choice of programs at any given time.
Although services vary from system to system because of differences in
channel capacity and viewer interest, most of Continental's systems offer a
Basic Broadcast Tier ("BBT") as the lowest-priced tier (consisting generally
of broadcast television signals available locally off-air, local origination
and public, educational and governmental access channels), one or more Cable
Programming Service ("CPS") tiers (which include satellite-delivered cable
programming services) and several premium and pay-per-view channels.
Subscribers may choose various combinations of such services. Certain
Continental systems offer satellite-delivered, non-broadcast services as a New
Product Tier ("NPT"), which the FCC has indicated it will forebear from
regulating. See "Legislation and Regulation" for a description of recent
legislation and regulation, which limits Continental's ability to price and
tier certain programming services. Continental may offer such NPTs to
subscribers in additional systems as it expands channel capacity in such
systems. As a result of a social contract (the "Social Contract") adopted by
the Federal Communications Commission (the "FCC"), Continental is permitted on
each existing system (currently excluding the systems acquired in the
Providence Journal Merger and the Recent Acquisitions) to move up to four
existing services on CPS tier(s) to a single tier called a Migrated Product
Tier, provided such tier is offered without requiring customers to purchase
any tier other than the BBT. The rates of the Migrated Product Tier will be
regulated under the Social Contract until January 1997 and then may be
converted into NPTs. Under a proposed amendment to the Social Contract that
has been released for public comment by the FCC (the "Social Contract
Amendment"), former Providence Journal systems and systems acquired in the
Recent Acquisitions will also be permitted to implement Migrated Product
Tiers. See "U.S. Operating Strategy--U.S. Regulatory Strategy; Social
Contract."
A customer generally pays an initial installation charge and fixed monthly
fees for the BBT, CPS tier, NPT, Migrated Product Tier and premium programming
services. Such monthly service fees constitute Continental's primary source of
revenues. In addition to these monthly revenues, Continental's systems
currently generate
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revenues from additional fees paid by customers for pay-per-view programming
of movies and special events and from the sale of available advertising spots
on advertiser-supported programming. Continental's systems also offer home
shopping services, from which Continental receives a share of revenues from
sales of merchandise in its service areas.
U.S. OPERATING STRATEGY
Continental's strategy in the United States is to acquire and retain
customers that will subscribe to a broad range of enhanced video, high-speed
data, telephony and other telecommunications services. Execution of this
strategy involves the following key operating principles:
OPERATING SCALE. Continental is committed to preserving and further
expanding its operating scale in key markets (as measured by the number of
homes passed) through internal growth and strategic acquisitions and exchanges
of systems. Continental believes that operating scale is critical to its
ability to meet the growing capital and technical requirements that are vital
to its long-term competitiveness and will enable it to realize operating
efficiencies, enhance its ability to develop and deploy new technologies and
provide new services.
LARGE REGIONAL SYSTEM CLUSTERS. Since its inception, Continental has
concentrated its operations in large regional system clusters located
primarily in suburban communities adjacent to major metropolitan markets, as
well as in mid-sized cities, that generally have attractive demographics and
are geographically diverse. Continental believes that clustering creates
operating efficiencies through reduced marketing and personnel costs and lower
capital expenditures, particularly in systems where cable service can be
delivered to several communities within a single region through a central
headend reception facility. Regional system clusters are attractive to
advertisers in that they maximize the scope and effectiveness of advertising
expenditures. Large system clusters also enable Continental to attract and
retain high-quality management at the system level and to more effectively
deploy new products and services. In addition to selectively acquiring
systems, Continental is exploring opportunities to enlarge and enhance key
system clusters by exchanging certain of its systems for those of other cable
television operators. See "U.S. Acquisitions and Investments."
As of December 31, 1995, approximately 55.0% of Continental's total basic
subscribers were located in the Company's seven largest operating clusters,
which include the greater metropolitan areas of Boston, Chicago, Los Angeles
and Detroit. The Providence Journal Merger and the Recent Acquisitions
increased the total number of basic subscribers in these operating clusters by
approximately 33.0%, to more than 2.3 million.
Communities that are served by Continental's systems have a median household
income of approximately $42,300, versus the national median of approximately
$37,900. Continental's five management regions operate systems that are
organized into 22 operating clusters in 20 states. No single region accounts
for more than 24.9% of total basic subscribers. Continental believes that this
geographic diversity reduces its exposure to economic, competitive or
regulatory factors in any particular region.
TECHNOLOGICALLY ADVANCED SYSTEMS. Continental strives to maintain the
highest technological standards in the industry and is continually upgrading
its systems. By deploying high-capacity fiber-optic cable and addressable
technology in its broadband network, Continental continues to develop the
foundation from which to provide a broad range of enhanced video, high-speed
data, telephony and other telecommunications services. Fiber-optic cable
provides the capacity necessary to offer such services. Addressable
technology, which enables Continental to control electronically the cable
television services to be delivered to each customer, is essential to realize
the full growth potential of pay-per-view, tiered programming offerings such
as NPTs and Migrated Product Tiers and other interactive video services.
Continental's continuing investment in its systems enhances picture quality
and signal reliability, reduces operating costs and improves overall customer
satisfaction.
Continental continues to upgrade its systems with addressable technology and
fiber-optic cable. As of December 31, 1995, Continental provided at least 54-
channel capacity in systems serving over 80.0% of its basic
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subscribers. In addition, Continental had addressable technology in systems
serving approximately 88.0% of its basic subscribers. Continental will also
begin to deploy digital converter boxes, as they become commercially
available, to certain basic subscribers. Digital compression significantly
increases the number of video channels that can be carried on a system and
greatly increases Continental's ability to provide enhanced video, high-speed
data, telephony and other telecommunications services. In addition to
upgrading its systems, Continental is deploying an information technology
system in order to increase operating efficiencies (including billing and
customer service).
Continental has recently installed digital advertising insertion equipment
in several markets including Boston, Richmond, Jacksonville, Pompano, Dayton,
Fresno and Detroit. This equipment allows Continental to download
advertisements electronically to certain headends, thereby significantly
enhancing the flexibility and reliability of Continental's advertising sales.
Continental's Northeast region employs high-speed Asynchronous Transfer Mode
switches, which, in addition to facilitating advertising insertion, have other
potential uses, including improving Continental's ability to provide enhanced
video, voice and high-speed data offerings. Asynchronous Transfer Mode is a
new high-speed data transport and packaging protocol that allows data, video
and voice to be sent simultaneously over the same communication line.
DECENTRALIZED AND LOCALLY RESPONSIBLE MANAGEMENT. Continental has developed
a decentralized and locally responsive management structure that brings
significant management expertise and stability to every region and allows
Continental to respond effectively to the specific needs of the communities it
serves. Broad operating authority has been delegated to the Senior Vice
President managing each region, who has, on average, 13 years of experience
with Continental and 20 years within the cable industry. Certain employees,
including the regional Senior Vice Presidents, are awarded equity compensation
in the form of restricted stock grants, which vest over time, as an additional
incentive to maximize stockholder value. Continental believes that the
expertise, stability and commitment of its regional management is integral to
its ability to provide superior customer service, maintain strong community
and local regulatory relations and maximize growth potential.
EFFECTIVE MARKETING. Continental seeks to maximize revenues by increasing
subscriptions to its BBT, CPS, NPT, Migrated Product Tier, premium and pay-
per-view programming services through effective marketing, combined with a
local focus on customer service and community relations. Continental markets
cable television services through telemarketing, direct mail and door-to-door
solicitation, reinforced by radio, cable television, off-air television and
newspaper advertising. Continental seeks to attract and retain long-term
subscribers and increase the percentage of homes in its service areas that
subscribe to expanded service offerings. Continental believes that its
technologically advanced systems and the demographic profile of its subscriber
base, coupled with its effective marketing, are essential to its ability to
sustain pay-to-basic penetration rates and total monthly revenue per average
basic subscriber that are among the highest in the cable industry. As of
December 31, 1995, Continental's ratio of premium service subscriptions to
basic subscribers was 90.0%, and its total monthly cable revenue per average
basic subscriber was $35.99.
CUSTOMER SERVICE AND COMMUNITY RELATIONS. Continental believes that it is an
industry leader in addressing the needs of its local customers. Through the
use of surveys, focus groups, and other research tools, and by continually
investing in information technology and employee training, Continental
believes it has created one of the most extensive customer service programs in
the cable television industry, supported by training centers in each of its
regions. To improve its customer service efforts, Continental is in the
process of incorporating information technology into its customer service
functions, which will enable customer service representatives to more
effectively interact with the customer. Continental's emphasis on customer
service has helped to foster and sustain good relationships with the
communities it serves.
Continental believes that its focus on customer service and community
relations and reputation for quality will provide a competitive advantage as
it plans to market a broad range of enhanced video, high-speed data, telephony
and other telecommunications services to homes in its operating regions,
frequently in competition with other providers of these services. See
"Competition."
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LEADERSHIP IN REGULATORY AND OTHER INDUSTRY MATTERS. Continental has
fostered strong regulatory relations at the federal and local levels. In order
to resolve a variety of significant regulatory issues and obtain more
certainty in the regulatory environment, Continental negotiated the Social
Contract, the first comprehensive rate agreement involving cable television
ever approved by the FCC. The Social Contract was adopted by the FCC on August
3, 1995, and extends through the year 2000. It settled all rate cases pending
before the FCC at the time and all cost-of-service cases pending before local
franchise authorities. The Social Contract Amendment, which would incorporate
into the Social Contract the systems acquired in the Providence Journal Merger
and the Recent Acquisitions and would settle all outstanding rate cases and
appeals involving these systems pending before the FCC, was released for
public comment on March 6, 1996. See "U.S. Regulatory Strategy; Social
Contract." Continental was also the first major cable television company to
reach a retransmission consent agreement with a broadcaster not requiring cash
compensation for the right to carry the broadcaster's local television
signals.
EXPANDED SERVICE OFFERINGS. Continental believes that its operating strategy
has generated and will continue to generate additional revenues from numerous
sources, as customer demand expands and regulations permit. Increased channel
capacity and addressability enable Continental to offer enhanced video
services such as "tiered" and "multiplexed" services. Continental believes
that the "tiering" of programming services, which includes providing Migrated
Product Tiers and NPTs, leads to increased customer satisfaction by offering
subscribers a wider variety of programming and pricing packages from which to
choose. In addition, Continental currently uses "multiplexing" in many systems
to enhance the perceived value of certain of its premium service offerings
such as HBO.
Continental derives revenues from the sale of advertising time on
advertising-supported, satellite-delivered networks such as ESPN, MTV and CNN,
as well as on locally originated programming. Continental's advertising
revenues increased from $27.0 million for the year ended December 31, 1990 to
$73.4 million for the year ended December 31, 1995 (representing a 22.1%
compound annual growth rate in advertising revenues) and accounted for 5.1% of
Continental's total revenues for the year ended December 31, 1995. Continental
has increased its advertising sales through its participation in several
regional cable advertising interconnects (associations of cable companies
organized to effectively deliver a large market to advertisers), as well as
through the deployment of advanced technologies, including digital advertising
insertion equipment and Asynchronous Transfer Mode switches. Continental also
participates in the national development of cable advertising through its
ownership interest in National Cable Communications L.P. ("NCC"), the largest
cable advertising representation firm in the country.
Pay-per-view programming is offered to subscribers on an individual event
basis and consists of recently released movies and special events (including
boxing matches, other sporting events and concerts). Continental realized
14.9% compound annual growth in pay-per-view revenues from December 31, 1990
to December 31, 1995; for the year ended December 31, 1995, pay-per-view
revenues accounted for approximately 2.3% of Continental's total revenues.
Continental believes that increased channel capacity and the further
deployment of addressable technology in its systems will enable it to expand
the number of channels dedicated to pay-per-view services and increase the
number of subscribers with access to pay-per-view programming. Continental
will be conducting marketing and engineering trials in its Natick,
Massachusetts system to evaluate the viability of enhanced pay-per-view or
near video-on-demand ("NVOD") services. The Natick trials are scheduled to
begin in late 1996 and will cover approximately 1,500 homes. Based on the
results of these tests, Continental may offer enhanced pay-per-view or NVOD
services in certain of its other systems in 1997.
Continental also receives a percentage of the proceeds from subscribers'
purchases of merchandise offered on home shopping programming services such as
QVC, Inc. ("QVC"), Home Shopping Network, Inc. ("HSN") and Valuevision.
Combined, advertising, pay-per-view and home shopping revenues have increased
at a compound annual rate of 20.2% from December 31, 1990 to December 31,
1995. Continental believes that these and other services could become more
substantial sources of revenue over time; however, there can be no assurance
in this regard.
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In addition, Continental has created an advanced broadband
telecommunications network for Boston College in Newton, Massachusetts, which
is a fully interactive, 750 MHz network providing service to 150 classrooms,
250 administrative locations and over 8,000 outlets in dormitory locations on
campus. The network provides video and high-speed data services, including
full access to library resources and the Internet from each outlet, and will
provide "cable-commuting" services to faculty, administrators and students.
The project represents an opportunity for Continental to capitalize on its
existing network infrastructure to provide comprehensive broadband network
services. Based on its experience providing these services to Boston College,
Continental may make these services available on its systems in other markets.
Continental currently provides competitive-access telephony service to
business customers in Jacksonville, Florida and Richmond, Virginia.
Continental is currently certificated to provide residential telephony service
in Florida and California and has already installed telephony switching
equipment in Jacksonville, Florida. The Company plans to provide residential
telephone service initially to multiple-dwelling units in selected Florida
communities in 1996 and introduce residential telephone service to single-
family homes by the end of 1997. Continental has applied for certification to
provide telephony services in New Hampshire and will likely apply for
certification in Massachusetts, Illinois, Ohio, Virginia and Michigan during
1996.
Finally, the Company currently acts as a local distributor of the PrimeStar
Partners, L.P. ("PrimeStar") DBS service. In this role, it sells to, services,
and collects monthly fees from consumers. PrimeStar, of which Continental owns
a 10.4% interest, currently offers a wide range of programming, including 73
channels of cable and network television, sports and movies as well as several
audio channels. As of December 31, 1995, Continental served approximately
80,000 of PrimeStar's approximately 961,000 customers. In addition,
Continental's DBS-service business generated revenue of $37.0 million and
operating income before depreciation and amortization of $4.3 million for the
year ended December 31, 1995. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Telecommunications and
Technology."
U.S. REGULATORY STRATEGY; SOCIAL CONTRACT. In October 1992, Congress enacted
the Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act"), which, among other things, authorized the FCC to set
standards for governmental authorities to regulate the rates for certain cable
television services and equipment and gave local broadcast stations the option
to elect mandatory carriage or require retransmission consent.
After extensive evaluation of cost-of-service principles and economic and
legal analyses by experts in the rate regulation area, Continental decided to
defend certain of its service rates using the FCC's benchmark methodology and
certain of its service rates using the cost-of-service methodology.
On August 3, 1995, the FCC adopted a Social Contract with Continental, which
covered all of Continental's franchises, regulated or unregulated (excluding
the franchises acquired in the Providence Journal Merger and the Recent
Acquisitions). It was the first comprehensive rate agreement involving cable
television ever approved by the FCC. Continental's Social Contract resolved
377 cable rate cases; provided $9.5 million of in-kind refunds to affected
subscribers; created low-priced life-line BBTs in all Continental systems in a
manner that was revenue-neutral to the Company; committed Continental to
invest $1.35 billion in system rebuilds and upgrades from 1995 through 2000 to
expand channel capacity and improve technical reliability and picture quality;
and established a plan to stabilize rates for the BBT and for CPS tiers in all
Continental franchises, including franchises that are not subject to rate
regulation.
In establishing low-priced life-line BBTs, Continental was permitted to
adjust its CPS-tier rates to offset the 15% to 20% reductions in its BBT rates
and to allow for external cost increases, inflation and channel additions
permitted by the FCC's "going forward" rules (the "Going Forward Rules").
Under the Going Forward Rules, Continental, along with other cable operators,
during the two-year period beginning January 1, 1995, is permitted to add new
services to the CPS tier and to reflect the cost of those new services by an
amount not to exceed $.20 per added channel up to an aggregate of $1.20, plus
the actual license fees for the added channels not to exceed a total of $.30.
In 1997, a seventh channel may be added at a rate of $.20 plus the license
fee.
7
<PAGE>
Pursuant to the Social Contract, Continental is permitted to conduct a
second round of channel additions during the three-year period commencing
January 1, 1998 on the same terms as the first round under the Going Forward
Rules.
Continental is also permitted to average broad categories of equipment and
various installation costs for all its systems on a state or region-wide
basis, rather than on a franchise-by-franchise basis. This averaging is now
also permitted by the Telecommunications Act of 1996 (the "1996
Telecommunications Act"), discussed herein. Such rates will be reviewed and
approved by the FCC, subject to enforcement by local franchise authorities.
Finally, Continental is permitted on each system to move up to four existing
services on CPS tier(s) to a single Migrated Product Tier, provided the
Migrated Product Tier is offered without requiring customers to purchase any
tier other than the BBT. The rates of the Migrated Product Tier will be
regulated in accordance with price limits contained in the Social Contract
until January 1, 1997, at which point Continental systems may elect to convert
their Migrated Product Tiers into NPTs, as defined by the Going Forward Rules,
provided the tiers continue to be offered without requiring customers to
purchase any tier other than the BBT. The rates for the NPTs are regulated by
market forces. See "Legislation and Regulation--Federal Regulation--Rate
Regulation." In addition, Continental has the right to add an unlimited number
of new channels to its Migrated Product Tier at $.20 per channel, plus the
actual license fees for the added channels.
Continental has the right to petition the FCC to incorporate acquisitions of
cable television systems under the Social Contract. The Social Contract
Amendment was released by the FCC for public comment on March 6, 1996.
The Social Contract Amendment, if adopted, would incorporate into the Social
Contract all franchises acquired in the Providence Journal Merger and the
Recent Acquisitions; resolve all CPS-tier rate cases involving the systems
acquired in the Providence Journal Merger and the Recent Acquisitions; provide
for cash refunds in the form of bill credits to affected customers totaling
approximately $1.6 million; and find that current rates being charged for CPS-
tier services in all such franchises, except for Naples, Florida, are not
unreasonable. Subscribers in the Naples, Florida system, which was acquired in
the Providence Journal Merger, would receive their proportionate share of CPS-
tier rate reductions not to exceed $250,000 in the aggregate. For the systems
acquired in the Providence Journal Merger and the Recent Acquisitions,
Continental would establish a life-line BBT priced 15% to 20% below current
rates and would recoup the reduced amount by a revenue-neutral increase on
CPS-tier services, as in the original Social Contract.
The Company would be able to continue to offer all packages of a la carte
channels that are currently offered in former Providence Journal systems; such
packages would be treated as Migrated Product Tiers. The only exception would
be Naples, Florida, where four of eight channels in the a la carte package
would have to be moved to the CPS tier. New channels would be added to the
Migrated Product Tier at a price of $.20 per channel plus actual license fees.
Where only one a la carte package was created, it may later be converted into
an NPT. If two a la carte packages were created, they would remain Migrated
Product Tiers through the term of the Social Contract. For systems acquired in
the Providence Journal Merger and the Recent Acquisitions that did not create
a la carte packages, the Company would be able to create Migrated Product
Tiers consisting of up to four services migrated from regulated CPS tiers.
Local franchising authorities may elect to opt out of the $1.6 million of
cash refunds under the Social Contract Amendment, but would be bound by the
other terms of the Social Contract Amendment. Further, if a local franchising
authority in the Naples, Florida system elects to opt out of the cash refunds,
subscribers in that franchise area would not receive their share of the
$250,000 prospective rate reduction.
8
<PAGE>
The resolution of pending rate cases is without any finding by the FCC of
any wrongdoing by the Company, Providence Journal or any of the entities from
which the Company purchased systems in the Recent Acquisitions.
In addition, the proposed Social Contract Amendment would effect certain
changes to the original Social Contract, such as an increase in the capital
investment commitment from $1.35 billion to $1.7 billion for the upgrade of
Continental's systems, including the systems acquired in the Providence
Journal Merger and the Recent Acquisitions. In addition, instead of using the
Going Forward Rules and the second round of Going Forward Rules permitted by
the Social Contract, Continental would agree to add, on average, 10 additional
regulated services to the CPS tier during the life of the Social Contract and
would be able to increase monthly rates for the CPS tier by $1.00 each year in
the systems acquired in the Providence Journal Merger and the Recent
Acquisitions from 1996 through 1999 (net of any Going Forward increases taken
in 1996) and by $1.00 each year in all other Continental systems from 1997
through 1999. During the life of the Social Contract, the only other permitted
CPS-tier increases would be for inflation and increases in external costs. The
Company would provide a free cable connection to public schools (K-12) and a
cable connection at cost to secondary private schools whose students receive
funding under Title I of the Elementary and Secondary Education Act and would
provide free cable service to all connected schools. Within one year of the
commercial availability of a Continental on-line service for personal
computers, the Company would, upon request, provide the cable-connected
schools with one free modem and free on-line service during the school year.
Additional modems would be made available at cost. The Company would also
provide teacher training and support.
The rate restructuring, Migrated Product Tier and "Going Forward"
adjustments that Continental has implemented under the Social Contract and the
Social Contract Amendment, if adopted, will continue to apply to systems
divested by Continental through a system sale or exchange. Other rights and
obligations will apply only if the new owner notifies the FCC that it agrees
to be bound by the same or similar terms and conditions as those contained in
the Social Contract and the Social Contract Amendment, if adopted. Continental
will not be relieved of its total capital investment requirement under the
Social Contract and the Social Contract Amendment, if adopted, by reason of
these divestitures. The Social Contract also provides for its termination in
the future if the laws and regulations applicable to services offered in any
Continental franchise change in a manner that would have a material favorable
financial impact on Continental. In that instance, the Company may petition
the FCC to terminate the Social Contract.
In February 1996, the 1996 Telecommunications Act was enacted into law. The
1996 Telecommunications Act modifies various provisions of the Communications
Act of 1934, the Cable Communications Policy Act of 1984 (the "1984 Cable
Act") and the 1992 Cable Act, with the intent of establishing a pro-
competitive, deregulatory policy framework for telecommunications. Among other
provisions, discussed below, the 1996 Telecommunications Act sets a date for
removal of CPS-tier rate regulations, allows telephone companies to build and
operate cable systems in their local markets, and sets forth the conditions
for voice and data competition in the local telephone market. The Company at
this time cannot predict the full effect that the 1996 Telecommunications Act
or the FCC's implementing regulations may have on Continental's operations.
See "Legislation and Regulation."
9
<PAGE>
U.S. SYSTEMS
The following table summarizes the growth of the Company and its affiliates
within the United States since December 31, 1993.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Homes passed by cable (1).................... 5,192,000 5,372,000 7,191,000
Number of basic subscribers (2).............. 2,895,000 3,081,000 4,190,000
Basic penetration (3)........................ 55.8% 57.4% 58.3%
Number of premium subscriptions (4).......... 2,454,000 2,635,000 3,770,000
Premium penetration (5)...................... 84.8% 85.5% 90.0%
Monthly cable revenue per average basic sub-
scriber (6)................................. $35.69 $35.06 $35.99
</TABLE>
- --------
(1) Represents estimated dwelling units located sufficiently close to the
Company's cable plant to be practicably connected without any further
extension of principal transmission lines.
(2) A "basic subscriber" means a person who, at a minimum, subscribes to the
Company's BBT which consists of broadcast television signals available
off-air locally, local origination and public, educational and
governmental access channels. Bulk subscribers are accounted for on an
"equivalent billing unit" basis, dividing aggregate BBT revenues by the
stated BBT rate.
(3) Basic subscribers as a percentage of homes passed by cable.
(4) Equals the number of premium services subscribed to by basic subscribers.
Premium services include only single channel services offered for a
monthly fee per channel and do not include packages of channels offered
for a single monthly fee.
(5) Premium subscriptions as a percentage of basic subscribers. A basic
subscriber may purchase more than one premium service, each of which is
counted as a separate premium subscription. This ratio may be greater than
100% if the average customer subscribes to more than one premium service.
(6) Cable revenues (excluding DBS-service revenues) divided by the weighted
average number of basic subscribers for the Company's consolidated
subsidiaries during the twelve-month period ended December 31 for each
year presented.
10
<PAGE>
The following table sets forth operating information pertaining to
Continental's U.S. systems and the systems of certain U.S. affiliates as of
December 31, 1995.
<TABLE>
<CAPTION>
HOMES NUMBER OF NUMBER OF
PASSED BY BASIC BASIC PREMIUM PREMIUM
MANAGEMENT REGION CABLE SUBSCRIBERS PENETRATION SUBSCRIPTIONS PENETRATION
- ----------------- --------- ----------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C>
NORTHEAST REGION
Eastern New England (MA)...... 473,638 327,757 69.2% 306,567 93.5%
Southern New England (RI,
MA).......................... 386,406 266,399 68.9% 250,831 94.2%
Northern New England (NH,
ME).......................... 232,762 177,265 76.2% 114,963 64.9%
Western New England (MA, CT).. 221,888 152,976 68.9% 132,412 86.6%
New York
(Haverstraw/Ossining)........ 149,645 119,604 79.9% 98,329 82.2%
--------- --------- ---- --------- -----
Total....................... 1,464,339 1,044,001 71.3% 903,102 86.5%
WESTERN REGION
Southern California........... 1,419,184 559,761 39.4% 645,954 115.4%
Greater Metropolitan Fresno... 334,197 158,084 47.3% 167,242 105.8%
Greater Metropolitan Stock-
ton.......................... 194,625 112,415 57.8% 62,215 55.3%
Yuba City, California......... 44,215 32,664 73.9% 44,108 135.0%
Reno, Nevada.................. 13,748 9,915 72.1% 6,453 65.1%
Northern
California/Washington/Idaho.. 52,897 35,185 66.5% 15,822 45.0%
--------- --------- ---- --------- -----
Total....................... 2,058,866 908,024 44.1% 941,794 103.7%
SOUTHEAST REGION
Jacksonville, Florida......... 416,997 242,636 58.2% 254,134 104.7%
Pompano/Hialeah, Florida...... 386,633 231,611 59.9% 171,741 74.2%
Naples, Florida............... 178,446 121,246 68.0% 61,085 50.4%
Richmond, Virginia............ 246,425 166,932 67.7% 140,421 84.1%
--------- --------- ---- --------- -----
Total....................... 1,228,501 762,425 62.1% 627,381 82.3%
MIDWEST REGION
Greater Dayton................ 250,331 172,115 68.8% 123,885 72.0%
Greater Metropolitan Detroit.. 394,231 259,784 65.9% 223,868 86.2%
Lansing and Greater Metropoli-
tan Lansing ................. 125,412 85,986 68.6% 54,437 63.3%
Greater Metropolitan Cleve-
land......................... 122,706 86,697 70.7% 62,335 71.9%
North Central Ohio............ 121,156 83,874 69.2% 56,673 67.6%
--------- --------- ---- --------- -----
Total....................... 1,013,836 688,456 67.9% 521,198 75.7%
CENTRAL REGION
Greater Metropolitan Chicago
(West)....................... 630,425 348,085 55.2% 408,202 117.3%
Southern Illinois............. 85,477 61,657 72.1% 35,731 58.0%
St. Louis, Missouri (1)....... 174,297 100,393 57.6% 119,879 119.4%
Minneapolis/St. Paul, Minneso-
ta........................... 311,785 153,721 49.3% 135,883 88.4%
--------- --------- ---- --------- -----
Total....................... 1,201,984 663,856 55.2% 699,695 105.4%
Affiliated Companies (2)...... 223,411 123,397 55.2% 77,322 62.7%
--------- --------- ---- --------- -----
Total....................... 7,190,937 4,190,159 58.3% 3,770,492 90.0%
========= ========= ==== ========= =====
SYSTEMS DESIGNATION:
Consolidated Systems.......... 6,967,526 4,066,762 58.4% 3,693,170 90.8%
Affiliated Companies (2)...... 223,411 123,397 55.2% 77,322 62.7%
--------- --------- ---- --------- -----
Total....................... 7,190,937 4,190,159 58.3% 3,770,492 90.0%
========= ========= ==== ========= =====
</TABLE>
- --------
(1) The Company has entered into an agreement to exchange these systems for
other systems in New England. See "U.S. Acquisitions and Investments--
Other Acquisitions."
(2) Affiliated Companies are those companies not majority-owned or controlled
by the Company. The systems held by Affiliated Companies consist of
systems held by four limited partnerships. See "U.S. Acquisitions and
Investments--U.S. Minority Cable Investments." The Company owns less than
50% of the outstanding limited partnership interests of each such
partnership. None of the systems owned by Affiliated Companies are managed
by the Company. In reporting subscriber and other data for systems not
controlled or managed by the Company, only that portion of data
corresponding to the Company's percentage ownership is included.
11
<PAGE>
MANAGEMENT REGIONS. A description of Continental's five U.S. cable
television management regions and their significant operating clusters is set
forth below.
Northeast. The Northeast region is Continental's largest management region
based on the number of basic cable subscribers, representing approximately
20.4% of Continental's total homes passed and 24.9% of its total basic
subscribers as of December 31, 1995. This region includes systems in the New
England states of Maine, New Hampshire, Massachusetts, Connecticut and Rhode
Island, as well as in and around Westchester County, New York. Significant
operating clusters in Massachusetts, which include greater metropolitan Boston
and the city of Springfield and the surrounding communities in the western
part of the state, represent approximately 68.4% of the region's total basic
subscribers. The Northeast region commenced a five-year rebuild program in
1994, which upon completion will result in a combination of 550 MHz and 750
MHz capacity for most of the region. The median household income for the
communities served by Continental in the Northeast region is approximately
$47,700, versus the national median household income of $37,900.
Western. The Western region represented approximately 28.6% of Continental's
total homes passed and 21.7% of its total basic subscribers as of December 31,
1995. This region includes systems in the city and county of Los Angeles,
where Continental is the largest cable operator, with approximately 560,000 of
its basic subscribers clustered in geographically contiguous franchises served
by two headends. This region also includes Continental's Northern California
systems, which include the cities of Fresno, Visalia, Stockton, and Yuba City,
as well as Reno, Nevada. An upgrade of the Los Angeles systems, that will
bring capacity to 750 MHz, is currently under way. The median household income
for the communities served by Continental in the Western region is
approximately $41,300.
Southeast. The Southeast region represented approximately 17.1% of
Continental's total homes passed and 18.2% of its total basic subscribers as
of December 31, 1995. This region includes significant operating clusters
serving the communities surrounding Jacksonville, Naples and Pompano, Florida
and Richmond, Virginia. The Jacksonville cluster is one of Continental's
largest, serving over 240,000 basic subscribers. In 1994, the Jacksonville and
Pompano systems commenced rebuild projects which will provide 750 MHz capacity
to fiber nodes serving approximately 1,000 or fewer homes by 1997. The median
household income for the communities served by Continental in the Southeast
region is approximately $35,600.
Midwest. The Midwest region represented approximately 14.1% of Continental's
total homes passed and 16.4% of its total basic subscribers as of December 31,
1995. This region includes systems in greater metropolitan Detroit and
Lansing, which includes the communities of Southfield, Dearborn Heights,
Westland, and Jackson. In Ohio, Continental's systems serve the greater Dayton
and Cleveland communities, as well as several communities throughout North
Central Ohio. The Dayton systems have recently been rebuilt to provide 550 MHz
capacity to fiber nodes serving approximately 2,000 or fewer homes. The median
household income for the communities served by Continental in the Midwest
region is approximately $40,000.
Central. The Central region represented approximately 16.7% of Continental's
total homes passed and 15.8% of its total basic subscribers as of December 31,
1995. This region includes systems in metropolitan Chicago and Southern
Illinois, Minneapolis/St. Paul, Minnesota, and St. Louis, Missouri.
Continental's metropolitan Chicago cluster, which includes the suburban
Chicago communities of Elmhurst, Forest Park, Oak Brook, Rosemont, Northfield,
Westchester, and Wilmette, is one of Continental's largest, with approximately
348,000 basic subscribers served by four headends. All of the Central region's
systems are scheduled to be rebuilt or upgraded by 1997, at which time all
major markets will have between 600 MHz and 750 MHz capacity. The Company has
entered into an agreement to exchange its systems in St. Louis for other
systems in New England. See "U.S. Acquisitions and Investments--Other
Acquisitions." The median household income for the communities served by
Continental in the Central region is approximately $44,800.
12
<PAGE>
FRANCHISES. Continental believes it has maintained good relations with its
local franchise authorities. Continental has never had a franchise revoked,
and to date all of its franchises have been renewed or extended at their
expirations, frequently on modified but satisfactory terms. Continental's
franchises establish the terms and conditions under which the systems are
operated. Typically, they establish certain performance and safety standards
related to the Company's construction and maintenance of facilities in, under
and over public streets and rights-of-way in the franchise areas. Some, but
not all, of these franchises specify the services to be offered. Nearly all of
the Company's franchises provide for the payment of fees to the local
franchising authorities, which currently average approximately 3.2% of gross
revenues. The 1984 Cable Act prohibits local franchising authorities from
imposing annual franchise fees in excess of 5.0% of gross revenues and also
permits the cable system operator to seek renegotiation and modification of
franchise requirements if warranted by changed circumstances. The Company's
franchises are usually issued for fixed terms ranging from 10 to 15 years and
must periodically be renewed. Most of such franchises can be terminated prior
to their stated expirations for breach of material provisions.
Franchises representing approximately 1.7 million basic subscribers are
scheduled to expire through 2000. The 1984 Cable Act provides, among other
things, for an orderly franchise renewal process in which a franchise renewal
will not be unreasonably withheld or, if renewal is withheld and the system is
acquired by the franchise authority or a third party, the franchise authority
must pay the operator the "fair market value" of the system covered by such
franchise. In addition, the 1984 Cable Act establishes comprehensive renewal
procedures which require that an incumbent franchisee's renewal application be
assessed on its own merit and not as part of a comparative process with
competing applications. See "Legislation and Regulation--Cable Communications
Policy Act of 1984."
PROGRAMMING. The Company provides programming to its subscribers pursuant to
contracts with programming suppliers. The Company generally pays a flat
monthly fee per subscriber for programming on its basic and premium services.
Some programming suppliers provide volume discount pricing structures and/or
offer marketing support to the Company. The Company's programming contracts
are generally for fixed periods of time ranging from 3 to 10 years and are
subject to negotiated renewal. The costs to the Company to provide cable
programming have increased in recent years and are expected to continue to
increase due to additional programming being provided to basic subscribers,
increased costs to produce or purchase cable programming, inflationary
increases and other factors. Increases in the cost of programming services
have been offset in part by additional volume discounts as a result of the
growth of Continental and its success in selling such services to its
customers. Effective in May 1994, the FCC's rate regulations under the 1992
Cable Act permit operators to pass through to customers increases in
programming costs in excess of the inflation rate. Management believes that
Continental will continue to have access to programming services at reasonable
price levels. See "Legislation and Regulation."
The "program-access" provisions of the 1992 Cable Act require that much of
the cable network programming in which Continental has an ownership interest
be sold, under certain circumstances, to multichannel video programming
providers that compete with Continental's local cable systems. The 1996
Telecommunications Act extends the program-access requirements of the 1992
Cable Act to a telephone company that provides video programming by any means
directly to subscribers, and to programming in which such a company holds an
attributable ownership interest, thus allowing Continental's cable systems
similar access to programming developed by their telephone company
competitors.
MUST CARRY/RETRANSMISSION CONSENT. The 1992 Cable Act contains broadcast
signal carriage requirements, and the FCC has adopted regulations which are
currently in force implementing such statutory carriage requirements. These
new rules allow local commercial television broadcast stations, commencing on
June 17, 1993 and every three years thereafter, either to elect required
carriage ("must-carry" status), or to require a cable television system to
negotiate for "retransmission consent" rights. A cable television system
generally is required to devote up to one-third of its activated channel
capacity for the mandatory carriage of
13
<PAGE>
local commercial television stations. Local non-commercial television stations
are also given mandatory carriage rights on cable television systems under the
1992 Cable Act and the FCC's rules; however, such stations are not given the
option to negotiate for retransmission consent rights. Additionally, as of
October 6, 1993, cable television systems were required to obtain
retransmission consent for all "distant" commercial television stations
(except for commercial satellite-delivered independent "superstations" such as
WTBS), commercial radio stations and certain low-power television stations
carried by cable television systems. Continental has been successful at
reaching retransmission consent agreements for terms generally ranging from
three to seven years with virtually all of the local broadcast stations that
elected retransmission consent (all without payment of cash compensation), and
only in a very few instances has Continental been forced to drop a local
broadcast signal from its programming. Some of Continental's systems have been
required to carry television broadcast stations that they otherwise would not
have elected to carry due to must-carry elections. At this time, Continental
cannot predict the outcome of any future must-carry elections by and
retransmission consent negotiations with local broadcasters. A second election
period for must-carry or retransmission consent will occur for many stations
this year, ending on October 6, 1996. See "Legislation and Regulation."
U.S. ACQUISITIONS AND INVESTMENTS
Continental has recently acquired or agreed to acquire cable television
systems that are contiguous, or in close proximity, to its existing systems.
The Company also continues to review opportunities to exchange additional
systems for those of other cable television system operators in order to
enlarge and enhance its system clusters. See "Other U.S. Acquisitions."
Continental generates incremental operating income from such acquisitions and
exchanges through the expansion of service offerings and efficiencies
resulting from system consolidation.
THE PROVIDENCE JOURNAL MERGER. The Company recently completed a series of
acquisitions in the United States, the most significant of which was the
acquisition of the cable television businesses and assets of Providence
Journal. On October 5, 1995, pursuant to the terms of an Agreement and Plan of
Merger, dated as of November 18, 1994, as amended and restated as of August 1,
1995, by and among Continental, Providence Journal, The Providence Journal
Company, King Holding Corp. and King Broadcasting Company, Continental
acquired all of the cable television businesses and assets of Providence
Journal ("Providence Journal Cable") in a series of related transactions, the
result of which was that Providence Journal, following an internal corporate
restructuring in which the non-cable businesses and assets of Providence
Journal were transferred to The Providence Journal Company (a newly formed
company), merged with and into Continental. Continental issued approximately
30.1 million shares of Class A Common Stock to Providence Journal stockholders
in the Providence Journal Merger. The shares of Class A Common Stock received
in the Providence Journal Merger are not transferable by the former Providence
Journal stockholders except for transfers not for value to certain specified
permitted transferees until October 5, 1996.
As part of the Providence Journal Merger, Continental also purchased certain
cable television systems owned by a subsidiary of Providence Journal for a
purchase price of $405.0 million and discharged approximately $410.0 million
of Providence Journal liabilities. The systems acquired in the Providence
Journal Merger passed approximately 1.3 million homes and served approximately
779,000 basic subscribers in nine states. Such systems are, for the most part,
located in communities contiguous, or in close proximity to other Continental
systems.
OTHER U.S. ACQUISITIONS. The following is a summary of other recent
acquisitions of U.S. cable systems consummated during the year ended December
31, 1995 and other pending transactions:
In August 1995, Continental acquired Cablevision of Chicago's systems
serving approximately 88,000 basic subscribers in the Chicago, Illinois area
for a purchase price of approximately $168.5 million. These systems are in
close proximity to Continental's existing systems in its Central region.
In September 1995, Continental acquired Consolidated Cablevision of
California's systems serving approximately 12,000 basic subscribers in
northern California for approximately $17.0 million. These systems are in
close proximity to Continental's existing systems in its Western region.
14
<PAGE>
In October 1995, Continental purchased Columbia Cable of Michigan's systems
serving approximately 74,000 basic subscribers in Michigan for approximately
$155.0 million. In December 1995, Continental acquired the remaining
partnership interests and discharged certain liabilities of N-COM, a limited
partnership that operates cable television systems serving approximately
56,000 basic subscribers in greater metropolitan Detroit for approximately
$88.0 million. The Columbia Cable of Michigan and N-COM systems are in close
proximity to other Continental systems in its Midwest region.
In March 1996, Continental entered into a purchase agreement to acquire the
remaining partnership interests (the "Pending M/NH Buyout") in Meredith/New
Heritage Strategic Partners L.P. ("M/NH"). The purchase agreement remains
subject to the completion of certain schedules and exhibits thereto.
Continental currently owns a 37.9% interest in M/NH. Under the current terms
of the transaction, Continental would acquire the remaining interests in M/NH
for a cash purchase price of approximately $129.2 million, plus the assumption
or repayment of approximately $90.0 million of indebtedness. As of December
31, 1995, M/NH owned and operated cable television systems serving
approximately 126,000 basic subscribers in the Minneapolis/St. Paul, Minnesota
area. These systems are in close proximity to Continental's other systems in
the Minneapolis/St. Paul area. The closing of the Pending M/NH Buyout is
expected to occur in the third quarter of 1996.
In December 1995, Continental and TCI Cable Partners of St. Louis L.P. ("TCI
Cable Partners") agreed to a tax-free exchange of the Company's systems in and
around St. Louis County, Missouri for TCI Cable Partners' systems in and
around Andover, Barnstable, Nantucket and Waltham, Massachusetts. The systems
of each party cover approximately 100,000 basic subscribers. The Company
expects to consummate this transaction in the second quarter of 1996.
U.S. MINORITY CABLE INVESTMENTS. The acquisitions of minority ownership
interests in various U.S. cable television companies has contributed to
Continental's nationwide operating scale. As of December 31, 1995, Continental
held minority ownership positions in the following U.S. cable companies:
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1995
---------------------------------------
HOMES TOTAL BASIC TOTAL PERCENTAGE
INVESTMENT PASSED SUBSCRIBERS DEBT OWNERSHIP
---------- ------- ----------- -------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Insight Communications Company, L.P... 304,261 163,923 $172,975 34.4%
Meredith/New Heritage Strategic
Partners, L.P(1)..................... 240,786 126,047 88,732 37.9%
Prime Cable of Hickory, L.P........... 53,047 36,535 38,342 33.3%
Inland Bay Cable TV Associates........ 19,922 14,361 4,639 49.0%
</TABLE>
- --------
(1) Continental has entered into a purchase agreement to acquire the remaining
ownership interests in M/NH from the other partners and discharge or
assume certain liabilities for total consideration of approximately $219.2
million. No assurances can be made at this time that such transaction will
be consummated. See "U.S. Acquisitions and Investments--Other U.S.
Acquisitions."
INTERNATIONAL OPERATIONS
Continental has made investments in international broadband communications
networks, principally in Latin America and the Pacific Rim. These investments
represent opportunities for Continental to capitalize on its managerial,
technical and marketing expertise in international markets.
ARGENTINA. Continental owns an approximate 50% interest in Fintelco, S.A.
("Fintelco") an Argentine cable television operator. Fintelco is the largest
cable television operator in Argentina, with approximately 616,000 subscribers
in regional system clusters in the Argentine provinces of Buenos Aires,
Cordoba and Santa Fe. These systems are currently managed by Continental's
Argentine partner, with technical assistance provided by Continental.
15
<PAGE>
Fintelco's operating strategy focuses on creating large regional system
clusters in key markets. As of December 31, 1995, Fintelco had approximately
315,000 subscribers in the province of Buenos Aires, 179,000 subscribers in
the province of Cordoba and 122,000 subscribers in the province of Santa Fe.
Average monthly subscriber rates for Fintelco's cable television services are
the equivalent of approximately US$30. Most systems in Argentina provide a
single package of services, which typically includes premium movie channels
such as HBO Ole. For the fiscal year ended November 30, 1995, Fintelco
recorded revenues of approximately US$244.0 million and operating income
before depreciation and amortization of approximately US$47.0 million.
There is currently no regulation of cable subscription rates in Argentina.
Cable operators in Argentina are issued non-exclusive broadcast licenses for
the carriage of their programming services, and may compete with other cable
operators for the same subscribers. The multi-channel television industry in
Argentina is extremely competitive. Fintelco competes in certain areas of
Buenos Aires, Cordoba and Santa Fe. Fintelco believes that competition is
primarily based on price, program offerings, customer satisfaction and quality
of the system network. Other cable operators in Buenos Aires include:
Cablevision, S.A. (which is currently 51% owned by an affiliate of U.S. cable
operator Tele-Communications, Inc. ("TCI")), Grupo Clarin (d/b/a Multicanal)
and Fin Cable S.A. (d/b/a Telefe).
In November 1990, the Argentine telephone system was privatized and two
companies, Telefonica de Argentine S.A. ("Telefonica") and Telecom Argentina
STET- France Telecom S.A. ("Telecom"), were granted exclusive licenses to
provide local and long-distance telephony service. The exclusivity of these
licenses is scheduled to expire in 1997, but may be extended for an additional
three-year period if the licensees have met certain mandatory standards for
the expansion of their telephone networks and improvements in quality of
service. No assurance can be given, however, that cable operators in Argentina
will be permitted to offer telephony services in 1997, in 2000 or at any other
time in the future. During the period their telephony licenses are exclusive,
Telefonica and Telecom are not permitted to provide cable television on a
commercial basis over their networks.
AUSTRALIA. Continental has entered into an agreement with Optus
Communications Pty Limited ("Optus"), the second licensed carrier in
Australia, providing long-distance and cellular telephone services, Publishing
and Broadcasting Limited ("Nine"), the parent company of Kerry Packer's Nine
Network, and Seven Network Limited ("Seven") to create a broadband
communications network in Australia. The venture ("Optus Vision") is owned
46.5% by Continental, 46.5% by Optus, 5% by Nine and 2% by Seven. Nine and
Seven represent two of Australia's three major commercial television networks.
Each of Nine and Seven has an option to increase at fair market value its
shareholding to 20% and 15%, respectively, at any time prior to July 1, 1997.
Optus Vision is providing cable television, and will provide local telephone
and a variety of advanced broadband interactive services to business and
residential customers in Australia's major markets. Optus Vision anticipates
that it will begin to offer local telephone service in the second half of
1996.
Australia has a population of approximately 17.8 million, with over 5.6
million television households and VCR penetration of approximately 71%.
Construction of the Optus Vision network began in March 1995. Optus Vision's
plan anticipates passing approximately 2.9 million households throughout
Australia by mid-1998, beginning with the major metropolitan centers of
Sydney, Melbourne and Brisbane.
Although the network will have capacity for 64 channels, Optus Vision began
providing a programming package in September 1995, which now has 17 channels
including three movie channels, three sports channels and a variety of local
and international programming.
The subscription television industry in Australia has been and is expected
to continue to be competitive. Optus Vision expects to compete in Australia
with, among others, (i) FOXTEL, the joint venture between Telstra Corporation
Limited, the government-owned Australian national telecommunications carrier,
and The News Corporation Limited, a major international media and
entertainment company, which provides subscription
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television services under the name FOXTEL over a cable television network, and
(ii) Australis Media Ltd. ("Australis"), which currently provides subscription
television services by way of Multi-channel, Multi-point Distribution Services
("MMDS"), commonly called wireless cable systems, under the name Galaxy and
will provide services by way of both MMDS and DBS technology in the future.
FOXTEL has entered into a long-term programming agreement for the exclusive
distribution of Australis' programming. FOXTEL and Australis announced a
proposed merger of their operations in October 1995. In February 1996, the
Australian Competition and Consumer Commission announced that the proposed
merger would breach certain provisions of the Trade Practices Act. As a
result, the merger of FOXTEL and Australis has not proceeded as proposed.
Optus Vision currently employs approximately 1,600 people, including several
former Continental employees. H. Franklin Anthony III, the former Senior Vice
President and General Manager of Continental's Northeast region, serves as the
Chief Operating Officer of Optus Vision.
SINGAPORE. Continental has a 25% equity interest in Singapore Cablevision
Pte Ltd ("SCV"), a joint venture that is constructing a high-capacity network
to provide cable television and a variety of interactive services to
substantially all of Singapore's approximate 820,000 households. SCV has the
exclusive right, through June 2002, to provide traditional cable television
service in Singapore. Cable television service has not previously been
available in Singapore. Continental's partners in this venture are Singapore
Technologies Venture Pte. Ltd., Singapore International Media Pte. Ltd. and
Singapore Press Holdings Limited, each of which is affiliated with the
government of Singapore. The system activated its first subscribers in June
1995, and by 1999, when construction is expected to be completed, it is
anticipated that there will be nearly one million households in Singapore.
SCV's service offerings include both Mandarin and English language
programming. Continental is managing the system's construction and ongoing
operations under a five-year agreement, for which it receives management fees
based upon the gross revenues generated by the system.
TELECOMMUNICATIONS AND TECHNOLOGY
Continental is currently rebuilding and upgrading its U.S. systems to create
advanced hybrid fiber-optic and coaxial cable networks that will serve as the
infrastructure for the provision of enhanced video, high-speed data, telephony
and other telecommunications services. Although Continental believes that
demand exists to support the entry of cable television companies into the
telephony business, the offering of these services will require the removal of
existing regulatory and legislative barriers to local telephone competition.
See "Competition" and "Legislation and Regulation."
TCG. Continental currently has a 20% equity interest in Teleport
Communications Group, Inc. ("TCG"), a leading "competitive-access provider" in
the United States. TCG is a local telecommunications services provider and a
leading fiber-optic-based competitor to local telephone companies nationwide.
TCG provides local telecommunications services primarily over high-capacity
fiber-optic networks (which it owns or leases from cable operators such as
Continental) to meet the voice, data and video transmission needs of high-
volume business customers in major metropolitan areas throughout the United
States. TCG's customers include long-distance carriers and resellers,
international telephone carriers, financial services firms, banking and
brokerage institutions, media companies and other telecommunications-intensive
businesses. In competition with the Regional Bell Operating Companies
("RBOCs") and other Local Exchange Carriers ("LECs"), TCG offers its customers
vendor diversity for local service, superior quality, competitive pricing and
state-of-the-art technology.
Since 1985, TCG has owned and operated the nation's largest non-LEC local
telecommunications network in the New York City metropolitan area, the
country's leading telecommunications market. Beginning in 1988 with the
construction of a Boston network, TCG has expanded its network operations to
26 telecommunications markets in the United States, including Los Angeles,
Chicago, San Francisco, Dallas, Detroit, Miami, Houston, Seattle, San Diego
and Milwaukee. In several of these markets, Continental is a partner and a
primary network provider for TCG.
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In addition to Continental, the other partners in TCG include Cox Cable
Communications, Inc. ("Cox"), TCI and Comcast Corporation ("Comcast"), which
currently have interests of approximately 30%, 30% and 20%, respectively.
OTHER TELECOMMUNICATIONS ACTIVITIES. Continental also owns an 80.0% interest
in Continental Fiber Technologies, Inc. and a 63.0% interest in Alternet of
Virginia, Inc., which both have fiber-optic networks that they own or lease
from Continental. Such networks provide local telephony service to business
customers in Jacksonville, Florida and Richmond, Virginia, respectively.
Continental is currently certificated to provide residential telephony
service in Florida and California and has already installed telephony
switching equipment in Jacksonville, Florida. The Company plans to provide
residential telephone service initially to multiple-dwelling units in selected
Florida communities in 1996 and introduce residential telephone service to
single-family homes by 1997. Continental has applied for certification to
provide telephony services in New Hampshire and will likely apply for
certification in Massachusetts, Illinois, Ohio, Virginia and Michigan during
1996.
PRIMESTAR. Continental currently owns a 10.4% interest in PrimeStar, a
nationwide provider of DBS service. The remaining interests in PrimeStar are
held by GE Americom Services, Inc. (an affiliate of General Electric) with
16.6% and five other cable television operators (TCI and Time Warner Cable own
20.9% each; Comcast, Cox and Newhouse Broadcasting Corp. own 10.4% each).
PrimeStar provided medium-powered DBS service to approximately 961,000
customers nationwide as of December 31, 1995. PrimeStar acts as a wholesaler
of DBS services, securing programming services for eventual resale to
consumers and arranging for the transmission of the programming via satellite.
PrimeStar does not sell directly to end users, but rather sells the rights to
resell programming to local distributors, including Continental and its other
cable partners, who in turn sell to, service, and collect monthly fees from
consumers. Continental served approximately 80,000 of PrimeStar's customers as
of December 31, 1995. During the year ended December 31, 1995, Continental
recorded DBS-service revenue of $37.0 million and operating income before
depreciation and amortization of $4.3 million. PrimeStar currently offers a
wide range of programming, including 73 channels of cable and network
television, sports and movies, as well as several music channels. In order to
expand its service, PrimeStar's partners have agreed in principal on a long-
term path for medium-powered DBS service with the option for a fifteen-year
transponder lease from GE Americom Communications, Inc. This would give
PrimeStar the potential to deliver approximately 150 channels of programming.
PrimeStar is still considering its options for the delivery of high-powered
DBS service following the conclusion of an FCC auction, which left PrimeStar
without the assured use of certain desirable spectrum frequencies for high-
powered service.
The following is a summary of financial and operating statistics for
PrimeStar, which commenced operations in 1991.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1993 1994 1995
------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues............................................ $10,900 $27,800 $180,595
Growth rate......................................... 110% 155% 550%
Customers........................................... 66,800 230,800 961,200
Growth rate......................................... 51% 246% 316%
</TABLE>
PROGRAMMING AND OTHER INVESTMENTS
Continental has made minority investments in programming services based upon
Continental's belief that programming is a means of generating additional
interest in cable television. The following summarizes certain of
Continental's programming investments:
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TURNER BROADCASTING SYSTEM, INC. AND HOME SHOPPING NETWORK, INC. Continental
holds marketable equity securities of Turner Broadcasting System, Inc.
("Turner") and HSN. As of December 31, 1995, the approximate market values of
Continental's investments in Turner and HSN were $147.0 million and $4.4
million, respectively. On September 22, 1995, Turner and Time Warner, Inc.
("Time Warner") entered into a merger agreement providing for the merger of
Turner into a wholly owned subsidiary of Time Warner. The merger agreement
provides that all outstanding shares of Turner capital stock will be converted
into shares of Time Warner common stock. If the merger is consummated under
its current terms, the Company will receive approximately 4.4 million shares
of Time Warner common stock in exchange for its shares of Turner capital
stock. The merger is subject to a number of conditions, including regulatory
approvals. There can be no assurances that all of the conditions to the
consummation of the merger will be satisfied or that, as a condition to the
grant of regulatory approvals, changes will not be required to the terms of
the merger. The approximate market value of the Time Warner shares that
Continental would have received had the merger taken place as of March 11,
1996 would have been approximately $189.8 million. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources." Timothy P. Neher, Director and Vice Chairman
of the Board of Continental, serves on the Board of Directors of Turner.
E! ENTERTAINMENT TELEVISION, INC. Continental owns a 10.4% interest in E!
Entertainment Television, Inc. ("E!"), whose programming includes
entertainment related news, information and features. E! has agreements with
every major U.S. cable television operator and, as of December 31, 1995, was
distributed to approximately 37.3 million customers, representing more than
50% of U.S. multi-channel television households. Other shareholders in E!
include Comcast, Cox and TCI, each with an approximate 10.4% interest, and
Time Warner Cable, with a 48% interest. Robert A. Stengel, a Senior Vice
President of Continental, serves on the Board of Directors of E!.
The following is a summary of financial and operating statistics for E!:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS, EXCEPT PERCENTAGES)
<S> <C> <C> <C>
Revenues................................. $ 31,700 $ 49,100 $ 74,300
Growth rate.............................. 43.4% 54.9% 51.3%
Subscribers.............................. 25,800 27,800 37,300
Growth rate.............................. 30.1% 7.8% 34.2%
</TABLE>
NATIONAL CABLE COMMUNICATIONS, L.P. Continental has a 12.5% limited
partnership interest in NCC, the largest representation firm in spot cable
advertising sales. The other limited partners in NCC are Cox, Time Warner
Cable and Comcast, each with a 12.5% interest. NCC's managing partner is Katz
Cable Corporation, with a 50.0% interest. Robert A. Stengel, a Senior Vice
President of Continental, serves on the management committee of NCC. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
NEW ENGLAND CABLE NEWS. Continental and The Hearst Corporation each own 50%
of New England Cable News, a regional cable news network featuring news,
sports and weather programming on an exclusive basis to cable television
systems in the New England area. New England Cable News had revenues of $5.5
million for the year ended December 31, 1995. Russell Stephens, a Senior Vice
President of Continental's Northeast region, serves on the Board of Directors
of New England Cable News.
VIEWER'S CHOICE. PPVN Holding Co. ("PPVN"), which operates under the brand-
name Viewer's Choice, is a cable operator-controlled buying cooperative and
distributor for pay-per-view programming. Continental holds a 10.0% interest
in PPVN. William T. Schleyer, the President and Chief Operating Officer of
Continental, serves on the Board of Directors of PPVN.
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<PAGE>
THE GOLF CHANNEL. Continental owns an approximate 20.2% interest in The Golf
Channel, a cable programming service which provides golf-related programming
24 hours a day. Timothy P. Neher, Director and Vice Chairman of the Board of
Continental, serves on the Board of Directors of The Golf Channel.
TV FOOD NETWORK. Continental owns an approximate 15.0% interest in the TV
Food Network, a cable operator-owned programming service which offers programs
on cooking, food preparation and other related topics. Robert A. Stengel, a
Senior Vice President of Continental, serves on the Management Committee of
the TV Food Network.
THE SUNSHINE NETWORK. Continental owns an approximate 7.5% interest in The
Sunshine Network, a joint venture that provides programming consisting of
Florida sporting events, sports news and related programs, as well as local
public affairs programs. Jeffrey T. DeLorme, an Executive Vice President of
Continental, serves on the Board of Directors of The Sunshine Network.
MUSIC CHOICE. Digital Cable Radio Associates ("Music Choice") distributes
audio programming in digital format over coaxial cable. The service allows
cable television customers to receive compact disc-quality sound in several
music formats. Continental owns an approximate 10.1% interest in Music Choice.
Robert A. Stengel, a Senior Vice President of Continental, serves on the Board
of Directors of Music Choice.
OUTDOOR LIFE NETWORK AND SPEEDVISION. Continental owns an approximate 23.0%
and 22.1% interest in the Outdoor Life Network and Speedvision, respectively,
both newly created programming services. The Outdoor Life Network is the first
24-hour network dedicated entirely to outdoor activities. Speedvision is the
first network for automotive, marine and aviation enthusiasts. Both of these
programming ventures are scheduled to debut in 1996. Robert A. Stengel, a
Senior Vice President of Continental serves on the Board of Directors of both
Outdoor Life and Speedvision.
COMPETITION
CABLE TELEVISION COMPETITION. Continental's systems compete with other
communications and entertainment media, including conventional off-air
television broadcasting services, newspapers, movie theaters, live sporting
events and home video products. Cable television service was first offered as
a means of improving television reception in markets where terrain factors or
remoteness from major cities limited the availability of off-air television.
In some of the areas served by Continental's systems, a substantial variety of
television programming can be received off-air, including low-power (UHF)
television stations, which have increased the number of television signals in
the country and provided off-air television programs to limited local areas.
The extent to which cable television service is competitive depends upon a
cable television system's ability to provide, on a cost-effective basis, an
even greater variety of programming than that available off-air or through
other alternative delivery sources.
Since Continental's U.S. cable television systems operate under non-
exclusive franchises, other companies may obtain permission to build cable
television systems in areas where Continental presently operates. Telephone
company affiliates have recently applied for and been granted franchises in
certain markets in which Continental operates. While Continental believes that
the current level of overbuilding is not material, it is currently unable to
predict the extent to which overbuilds may occur in its franchise areas and
the impact, if any, such overbuilds may have on Continental in the future.
Additional competition may come from satellite master antenna television
("SMATV") systems serving condominiums, apartment complexes and other private
residential developments. The operators of these private systems often enter
into exclusive agreements with apartment building owners or homeowners'
associations that preclude operators of franchised cable television systems
from serving residents of such private complexes. The widespread availability
of reasonably priced earth stations enables private cable television systems
to offer both improved reception of local television stations and many of the
same satellite-delivered program services that are offered by franchised cable
television systems. FCC regulations permit SMATV operators to use point-to-
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<PAGE>
point microwave service to distribute video entertainment programming to their
SMATV systems. A private cable television system normally is free of the
regulatory burdens imposed on franchised cable television systems. Although a
number of states have enacted laws to afford operators of franchised cable
television systems access to private complexes, the U.S. Supreme Court has
held that cable companies cannot have such access without compensating the
property owner. The access statutes of several states have been challenged
successfully in the courts, including those of states in which Continental
operates.
In recent years, the FCC has initiated new policies and authorized new
technologies to provide a more favorable operating environment for certain
existing technologies and to create substantial additional competition to
cable television systems. These technologies include, among others, DBS
services, which transmit signals by satellite to receiving facilities located
on customers' premises. Although satellite-delivered programming has been
available to backyard earth stations for some time, new, high-powered direct-
to-home satellites make possible the wide-scale delivery of programming to
individuals throughout the United States using roof-top or wall-mounted
antennas. Companies offering DBS services use video compression technology to
increase channel capacity and to provide a package of movies, broadcast and
other program services highly competitive with those of cable television
systems. Two companies began offering high-powered DBS service in 1994 and a
third company began service in 1996 in competition with cable television
operators and PrimeStar. Continental has invested in PrimeStar, a medium-
powered DBS-service provider, which currently offers 73 channels of video and
audio service. In order to expand its service, PrimeStar's partners have
agreed in principle on a long-term path for medium-powered DBS service with
the option for a fifteen-year transponder lease from GE Americom
Communications Inc., which would give PrimeStar the potential to deliver
approximately 150 channels of programming. Other companies intend to offer
expanded service over high-powered satellites using video compression
technology. DBS service providers may be able to offer new and highly
specialized services using a national base of subscribers. The ability of DBS-
service providers to compete with the cable television industry depends on,
among other factors, the availability of reception equipment at reasonable
prices. Initial sales of DBS services indicate that it may offer substantial
competition to cable television operators. PrimeStar is still considering its
options for the delivery of high-powered DBS service following the conclusion
of an FCC auction, which left PrimeStar without the assured use of certain
desirable spectrum frequencies for high-powered service. See
"Telecommunications and Technology."
Cable television systems also may compete with wireless program distribution
services such as MMDS, which are licensed to serve specific areas. MMDS uses
low-power microwave frequencies to transmit television programming over-the-
air to subscribers. MMDS systems' ability to compete with cable television
systems has previously been limited by a lack of channel capacity, the
inability to obtain programming and regulatory delays. However, NYNEX Corp.
and Bell Atlantic Corporation have agreed to invest up to $100.0 million in
CAI Wireless Systems Inc., an MMDS operator. In addition, Pacific Telesis
Group has acquired Cross Country Wireless Inc., another MMDS operator. A
series of actions taken by the FCC, including reallocating certain frequencies
to the wireless services, are intended to facilitate the development of
wireless cable television systems as an alternative means of distributing
video programming. The FCC also initiated a rule-making proceeding to allocate
frequencies in the 28 GHz band for a new multi-channel wireless video service.
Continental is unable to predict the extent to which additional competition
from these services will materialize in the future or the impact such
competition would have on Continental's operations.
The Company believes that as a result of its investment in technologically
advanced systems, it is well-positioned to offer new services such as on-line
services, data communications and telephony. Continental believes that the
ability to offer interactive services over a high-capacity, two-way network
provides a distinct competitive advantage over DBS and MMDS, which are
currently one-way services.
Other new technologies may become competitive with non-entertainment
services that cable television systems can offer. The FCC has authorized
television broadcast stations to transmit textual and graphic
21
<PAGE>
information useful both to consumers and to businesses. The FCC also permits
commercial and non-commercial FM stations to use their subcarrier frequencies
to provide non-broadcast services, including data transmissions. The FCC
established an over-the-air Interactive Video and Data Service that will
permit two-way interaction with commercial and educational programming along
with informational and data services. Telephone companies and other common
carriers also provide facilities for the transmission and distribution of data
and other non-video services.
In the past, federal cross-ownership restrictions have limited entry into
the cable television business by potentially strong competitors such as
telephone companies. Removal of these entry barriers makes it possible for
companies with considerable resources, and, consequently, a potentially
greater willingness or ability to overbuild, to enter the cable television and
telecommunications business. The 1996 Telecommunications Act repeals the 1984
Cable Act's prohibition against telco-cable cross-ownership and provides that
a local exchange telephone company, also known as a LEC, may provide video
programming directly to subscribers through a variety of means, including: (1)
as a radio-based (MMDS or DBS) multichannel video programming distributor; (2)
as a cable operator, fully subject to the franchising, rate regulation and
other provisions of the 1984 Cable Act and the 1992 Cable Act; and (3) through
an "open video system" that is certified by the FCC to offer non-
discriminatory access to a portion of its channel capacity for unaffiliated
program distributors, subject only to selected portions of the regulations
applicable to cable operators. A local telephone company also may provide the
"transmission of video programming" on a common carrier basis. Telephone
companies in several of the Company's franchise areas have applied for
franchises to offer cable service. Ameritech Corporation, for example, has
obtained a franchise to build a cable system in several of the communities
formerly served by N-COM, which Continental acquired in December 1995. The
total number of subscribers is not material in relation to Continental's total
subscriber base, but there can be no assurances with respect to the number of
communities for which Ameritech Corporation may obtain franchises in the
future. See "Legislation and Regulation--Federal Regulation."
The 1996 Telecommunications Act also prohibits a telephone company or a
cable system operator in the same market from acquiring each other, except in
limited circumstances, such as areas of smaller population.
TELEPHONY COMPETITION. LECs currently dominate the two-way switched voice
and data market. The LECs provide a full range of local telecommunications
services and equipment to customers as well as origination and termination
access to their local networks to inter-exchange carriers ("IXCs") and mobile
radio service providers. Prior to the 1996 Telecommunications Act, in many
states the LECs have had an exclusive franchise by law to provide telephone
service. As a consequence of this monopoly position, the LECs have established
relationships with their customers and provide those customers with various
transmission and switching services that other potential telecommunications
service providers were not permitted by law to offer.
In addition to the LECs and existing competitive-access providers,
competitors which are potentially capable of offering private line, special
access and switched services include other cable television companies,
electric utilities, long-distance carriers, microwave carriers, wireless
service providers and private networks built by large end-users.
While several states have engaged in legislative or regulatory efforts to
remove local telecommunications market entry restrictions, new market entrants
have maintained a high degree of dependance upon the incumbent LEC for
interconnection to LEC customers and for allocation of telephone numbers.
TELECOMMUNICATIONS REGULATION. The 1996 Telecommunications Act removes
barriers to entry in the local telephone market that is now monopolized by the
RBOCs and other LECs by preempting state and local laws that restrict
competition and by requiring incumbent 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 eliminates the
Modified Final Judgment and permits the RBOCs to enter the market for long-
distance service (through a separate subsidiary) after they satisfy a
"competitive checklist." The 1996 Telecommunications Act also permits
interstate utility companies to enter the telecommunications market for the
first time.
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<PAGE>
The 1996 Telecommunications Act also eliminates or streamlines many of the
requirements applicable to LECs, and requires the FCC and states to review
universal service programs and encourage access to advanced telecommunications
services provided by all entities, including cable companies, by schools,
libraries and other public institutions. The FCC and, in some cases, states
are required to conduct numerous rulemaking proceedings to implement these
provisions.
LEGISLATION AND REGULATION
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
Congress and various federal agencies may materially affect the cable
television industry. The following is a summary of federal laws and
regulations affecting the growth and operation of the cable television
industry and a description of certain state and local laws.
CABLE COMMUNICATIONS POLICY ACT OF 1984. The 1984 Cable Act became effective
in December 1984. This federal statute, which amended the Communications Act
of 1934, created uniform national standards and guidelines for the regulation
of cable television systems. Violations by a cable television system operator
of provisions of the 1984 Cable Act, as well as of FCC regulations, can
subject the operator to substantial monetary penalties and other sanctions.
Among other things, the 1984 Cable Act affirmed the right of franchising
authorities (state or local, depending on the practice in individual states)
to award one or more franchises within their jurisdictions. It also prohibited
non-grandfathered cable television systems from operating without a franchise
in such jurisdictions. In connection with new franchises, the 1984 Cable Act
provides that in granting or renewing franchises, franchising authorities may
establish requirements for cable-related facilities and equipment, but may not
establish or enforce requirements for video programming or information
services other than in broad categories. The 1996 Telecommunications Act
preempted the ability of franchising authorities to impose any oversight of
cable operators' technical standards.
CABLE TELEVISION CONSUMER PROTECTION AND COMPETITION ACT OF 1992. In October
1992, Congress enacted the 1992 Cable Act. This legislation made significant
changes to the legislative and regulatory environment in which the cable
industry operates. It amended the 1984 Cable Act in many respects. The 1992
Cable Act became effective in December 1992, although certain provisions, most
notably those dealing with rate regulation and retransmission consent, became
effective at later dates. The legislation required the FCC to initiate a
number of rule-making proceedings to implement various provisions of the
statute, the majority of which, including certain of those related to rate
regulation, have been completed. The 1992 Cable Act allows for a greater
degree of regulation of the cable industry with respect to, among other
things: (i) cable system rates for both the BBT and certain CPS tiers; (ii)
programming access and exclusivity arrangements; (iii) access to cable
channels by unaffiliated programming services; (iv) leased-access terms and
conditions; (v) horizontal and vertical ownership of cable systems; (vi)
customer service requirements; (vii) franchise renewals; (viii) television
broadcast signal carriage and retransmission consent; (ix) technical
standards; (x) customer privacy; (xi) consumer protection issues; (xii) cable
equipment compatibility; (xiii) obscene or indecent programming; and (xiv)
subscription to tiers of service other than the BBT as a condition of
purchasing premium services. Additionally, the 1992 Cable Act encourages
competition with existing cable television systems by: allowing municipalities
to own and operate their own cable television systems without a franchise;
preventing franchising authorities from granting exclusive franchises or
unreasonably refusing to award additional franchises covering an existing
cable system's service area; and prohibiting the common ownership of cable
systems and co-located MMDS or SMATV systems. The 1992 Cable Act also
precludes video programmers affiliated with cable television companies from
favoring cable operators over competitors and requires such programmers to
sell their programming to other multi-channel video distributors.
Various cable operators have filed actions in the United States District
Court in the District of Columbia challenging the constitutionality of several
sections of the 1992 Cable Act. Pursuant to special jurisdictional provisions
in the 1992 Cable Act, a challenge to the must-carry provisions of the 1992
Cable Act was heard by a three-judge panel of the district court. In April
1993, the three-judge court granted summary judgment for the
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government, upholding the constitutional validity of the must-carry provisions
of the 1992 Cable Act. That decision was appealed directly to the United
States Supreme Court, which in June 1994, remanded the case to the district
court. The lower court again upheld the must-carry rules, but this decision is
again on appeal to the United States Supreme Court, which has agreed to hear
this appeal in 1996. Pending the outcome of further proceedings, the must-
carry statutes and the FCC regulations remain in place.
The cable operators' constitutional challenge to the balance of the 1992
Cable Act provisions was heard by a single judge of the district court. In
September 1993, the court rendered its decision upholding the
constitutionality of all but three provisions of the statute (multiple
ownership limits for cable operators, advance notice of free previews for
certain programming services, and channel set-asides for DBS operators). This
decision was appealed to the United States Court of Appeals for the District
of Columbia Circuit and was heard by that court in November 1995. Appeals were
also filed in that court from the FCC's rate regulation rule-making decisions.
The FCC's rate regulations were substantially upheld in June 1995, and the
United States Supreme Court has refused to hear an appeal of that decision.
TELECOMMUNICATIONS ACT OF 1996. As noted above, the 1996 Telecommunications
Act was enacted into law in February 1996. The 1996 Telecommunications Act
modifies various provisions of the Communications Act of 1934, the 1984 Cable
Act and the 1992 Cable Act, with the intent of establishing a pro-competitive,
deregulatory policy framework for both video and telecommunications services.
Continental at this time cannot predict the full effect that the 1996
Telecommunications Act or the FCC's implementing regulations may have on
Continental's operations.
FEDERAL REGULATION. The FCC, the principal federal agency with jurisdiction
over cable television, has promulgated regulations covering such areas as the
registration of cable television systems, cross-ownership between cable
television systems and other communications businesses, carriage of television
broadcast programming, consumer education and lockbox enforcement,
origination, cablecasting and sponsorship identification, children's
programming, the regulation of basic cable service rates in areas where cable
television systems are not subject to effective competition, signal leakage
and frequency use, technical performance, maintenance of various records,
equal employment opportunity, and antenna structure notification, marking and
lighting. The FCC has the authority to enforce these regulations through the
imposition of substantial fines, the issuance of cease and desist orders
and/or the imposition of other administrative sanctions, such as the
revocation of FCC licenses needed to operate certain transmission facilities
often used in connection with cable operations. The 1992 Cable Act required
the FCC to adopt additional regulations covering, among other things, cable
rates, signal carriage, consumer protection and customer service, leased
access, indecent programming, programmer access to cable television systems,
programming agreements, technical standards, consumer electronics equipment
compatibility, ownership of home wiring, program exclusivity, equal employment
opportunity, and various aspects of DBS system ownership and operation. The
1996 Telecommunications Act mandates changes in certain of these regulations.
A brief summary of certain of these federal regulations as adopted to date
follows.
Rate Regulation. The 1984 Cable Act codified existing FCC preemption of rate
regulation for premium channels and optional CPS tiers. The 1984 Cable Act
also deregulated basic cable rates for cable television systems determined by
the FCC to be subject to effective competition. The 1992 Cable Act
substantially changed the 1984 Cable Act and FCC rate regulation standards
then in existence. The 1992 Cable Act replaced the FCC's old standard for
determining effective competition, under which most cable systems were not
subject to local rate regulation, with a statutory provision that results in
nearly all cable television systems becoming subject to local rate regulation
of the BBT. Additionally, the legislation eliminates the 5% annual rate
increase for basic service previously allowed by the 1984 Cable Act without
local approval; requires the FCC to adopt a formula for franchising
authorities to enforce, to assure that BBT rates are reasonable; allows the
FCC to review rates for CPS tiers (other than per-channel or per-event
services) in response to complaints filed by franchising authorities and/or
cable customers; prohibits cable television systems from requiring subscribers
to purchase service tiers above the BBT in order to purchase premium services
if the system is technically capable of doing so; requires the FCC to adopt
regulations to establish, on the basis of actual costs, the price for
installation of cable service,
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remote controls, converter boxes and additional outlets; and allows the FCC to
impose restrictions on the re-tiering and rearrangement of cable services
under certain limited circumstances.
The 1992 Cable Act authorizes the FCC to, among other things, set standards
for governmental authorities to regulate the rates for certain cable
television services and equipment and gives local broadcast stations the
option to elect mandatory carriage or require retransmission consent.
Pursuant to authority granted under the 1992 Cable Act, the FCC in April
1993 promulgated rate regulations that established maximum allowable rates for
cable television services, except for services offered on a per-channel or
per-program basis. In February 1994, the FCC adopted a revised regulatory
scheme which included, among other things, interim cost-of-service standards
and a new benchmark formula to determine certain service rates. In creating
the new benchmark formula, the FCC mandated a further reduction in rates for
certain regulated services. Final cost-of-service rules were adopted in
January 1996.
The FCC has issued a series of new rules covering such issues as increases
for inflation and external costs, and the addition of new channels to
regulated CPS tiers (the "Going Forward Rules" and Form 1210); rules
permitting a single annual rate increase, and allowing operators to anticipate
12 months of inflation and known increases in external costs, while providing
for a true-up of costs after 12 months (Form 1240); abbreviated cost-of-
service rules for network upgrades (Form 1235); and rules that limit the FCC's
review of CPS tier rates to the amount of the increase only, thereby
grandfathering all rates that were unregulated prior to November 1995.
The FCC also publicly announced that it would consider "social contracts" as
an alternative form of rate regulation for cable operators. Continental's
Social Contract with the FCC was adopted by the FCC on August 3, 1995. The
Social Contract settles all of Continental's pending cost-of-service rate
cases and all of its benchmark CPS-tier rate cases. Benchmark BBT cases will
be resolved by Continental and local franchise authorities. Under the Social
Contract Amendment, which was released for public comment on March 6, 1996 and
incorporates into the Social Contract the systems acquired in the Providence
Journal Merger and the Recent Acquisitions, CPS-tier rates may be increased by
$1.00 per year per subscriber plus inflation and allowable external costs. BBT
rates may increase by inflation and external costs. The Social Contract and,
if adopted by the FCC, the Social Contract Amendment, will govern
Continental's future rates. The Social Contract also provides for its
termination in the future if the laws and regulations applicable to services
offered in any Continental franchise change in a manner that would have a
material favorable financial impact on Continental. In that instance, the
Company may petition the FCC to terminate the Social Contract. For a
description of the Social Contract and the Social Contract Amendment see
"Business--Description of Business--U.S. Operating Strategy--U.S. Regulatory
Strategy; Social Contract."
Furthermore, the 1996 Telecommunications Act, which provides for the
deregulation of CPS-tier rates after March 31, 1996, 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
Telecommunications Act also eliminates the right of individual subscribers to
file rate complaints with the FCC concerning CPS tiers, and instead requires
that such complaints be filed by a franchising authority.
The 1992 Cable Act provided that all rate regulation, for both the CPS tiers
and for the BBT, is eliminated when a cable system is subject to "effective
competition" from another multichannel video programming provider such as
MMDS, DBS, a telephone company, or a combination of any or all of these. The
1996 Telecommunications Act expanded the definition of "effective competition"
to include instances in which a local telephone company or its affiliate (or a
multichannel video programming distributor using the facilities of a telephone
company or its affiliate) offers comparable video programming directly to
subscribers by any means (other than DBS) in the cable operator's franchise
area. Since telephone companies are providing or planning to provide video
services in several of Continental's franchise areas, this provision will
allow the Company greater flexibility in packaging and pricing its product in
those markets.
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The 1996 Telecommunications Act also eliminates the uniform rate structure
requirements of the 1992 Cable Act for cable operators in areas subject to
effective competition or as applied to video programming offered on a per-
channel or per-program basis and allows non-uniform bulk discount rates to be
offered to multiple dwelling units.
Other Regulations under the 1992 Cable Act. In addition to the foregoing
rate regulations, the FCC has adopted regulations pursuant to the 1992 Cable
Act which require cable systems to permit customers to purchase video
programming on a per-channel or a per-event basis without the necessity of
subscribing to any tier of service, other than the basic service tier, unless
the cable system is technically incapable of doing so. Generally, this
exemption from compliance with the statute for cable systems that do not have
such technical capability is available until a cable system obtains the
capability, but not later than December 2002. The FCC also has adopted a
number of measures for improving compatibility between existing cable systems
and consumer equipment. In conjunction therewith, the FCC rules prohibit cable
operators from scrambling program signals carried on the basic tier, absent a
waiver.
The FCC also has adopted regulations in connection with its cost-of-service
proceedings which govern programming charges for affiliated entities. These
rules apply to systems subject to regulation under both the benchmark and
cost-of-service regulations. The cost of programming to affiliated entities
must be the prevailing company price, based on the sale of programming to
third parties, or a price equal to the lower of the programming service's net
book cost and its estimated fair market value.
Carriage of Broadcast Television Signals. The 1992 Cable Act contains signal
carriage requirements allowing commercial television broadcast stations which
are "local" to a cable system (i.e., the system is located in the station's
Area of Dominant Influence) to elect every three years whether to require the
cable system to carry the station ("must-carry" status) or to negotiate for
"retransmission consent" to carry it. The first such election was made in June
1993. A recent amendment to the Copyright Act in some cases increased the
number of stations that may elect must-carry status on cable systems located
within such stations' Areas of Dominant Influence. Local non-commercial
television stations are given mandatory carriage rights, subject to certain
exceptions, within the larger of: (i) a 50 mile radius from the station's city
of license or (ii) the station's grade B contour (a measure of signal
strength). Unlike commercial stations, non-commercial stations are not given
the option to negotiate retransmission consent for the carriage of their
signal. In addition, cable systems have to obtain retransmission consent for
the carriage of all "distant" commercial broadcast stations, except for
certain "superstations" (i.e., commercial satellite-delivered independent
stations such as WTBS).
Nonduplication of Network Programming. Cable television systems that have
1,000 or more customers must, upon the appropriate request of a local
television station, delete the simultaneous or non-simultaneous network
programming of a distant station when such programming has also been
contracted for by the local station on an exclusive basis.
Deletion of Syndicated Programming. FCC regulations enable television
broadcast stations that have obtained exclusive distribution rights for
syndicated programming in their market to require a cable system to delete or
"black out" such programming from other television stations which are carried
by the cable system. The extent of such deletions will vary from market to
market and cannot be predicted with certainty. However, it is possible that
such deletions could be substantial and could lead the cable operator to drop
a distant signal in its entirety. The FCC also has commenced a proceeding to
determine whether to relax or abolish the geographic limitations on program
exclusivity contained in its rules, which would allow parties to set the
geographic scope of exclusive distribution rights entirely by contract, and to
determine whether such exclusivity rights should be extended to non-commercial
educational stations. It is possible that the outcome of these proceedings
will increase the amount of programming that cable operators are required to
black out. Finally, the FCC has declined to impose equivalent syndicated
exclusivity rules on satellite carriers who provide services to the owners of
home satellite dishes similar to those provided by cable systems.
Franchise Fees. Although franchising authorities may impose franchise fees
under the 1984 Cable Act, such payments cannot exceed 5% of a cable system's
annual gross revenues. Franchising authorities are also
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empowered in awarding new franchises or renewing existing franchises to
require cable operators to provide cable-related facilities and equipment and
to enforce compliance with voluntary commitments. In the case of franchises in
effect prior to the effective date of the 1984 Cable Act, franchising
authorities may enforce requirements contained in the franchise relating to
facilities, equipment and services, whether or not cable-related. The 1984
Cable Act, under certain limited circumstances, permits a cable operator to
obtain modifications of franchise obligations.
Renewal of Franchises. The 1984 Cable Act established renewal procedures and
criteria designed to protect incumbent franchises against arbitrary denials of
renewal. While these formal procedures are not mandatory unless timely invoked
by either the cable operator or the franchising authority, they can provide
substantial protection to incumbent franchisees. Even after the formal renewal
procedures are invoked, franchising authorities and cable operators remain
free to negotiate a renewal outside the formal process.
Nevertheless, renewal is by no means assured, as the franchisee must meet
certain statutory standards. Even if a franchise is renewed, a franchising
authority may impose new and more onerous requirements such as upgrading
facilities and equipment, although the municipality must take into account the
cost of meeting such requirements.
The 1992 Cable Act made several changes to the process under which a cable
operator seeks to enforce its renewal rights that could make it easier in some
cases for a franchising authority to deny renewal. While a cable operator must
still submit its request to commence renewal proceedings within 30 to 36
months prior to franchise expiration to invoke the formal renewal process, the
request must be in writing and the franchising authority must commence renewal
proceedings not later than six months after receipt of such notice. The four-
month period for the franchising authority to grant or deny the renewal now
runs from the submission of the renewal proposal, not the completion of the
public proceeding. Franchising authorities may consider the "level" of
programming service provided by a cable operator in deciding whether to renew.
Franchising authorities are no longer precluded from denying renewal based on
failure to substantially comply with the material terms of the franchise where
the franchising authority has "effectively acquiesced" to such past
violations. However, the franchising authority is estopped from denying
renewal if, after giving the cable operator notice and opportunity to cure, it
fails to respond to a written notice from the cable operator of its failure or
inability to cure. Courts may not reverse a denial of a renewal based on
procedural violations found to be "harmless error."
Channel Set-Asides. The 1984 Cable Act permits local franchising authorities
to require cable operators to set aside certain channels for public,
educational and governmental access programming. The 1984 Cable Act further
requires cable television systems with 36 or more activated channels to
designate a portion of their channel capacity for commercial leased access by
unaffiliated third parties. While the 1984 Cable Act allowed cable operators
substantial latitude in setting leased-access rates, the 1992 Cable Act
required leased-access rates to be set according to an FCC-prescribed formula.
The FCC adopted such a formula and implemented regulations in April 1993. The
FCC is expected to act shortly on petitions requesting the FCC to reconsider
its decision and adopt lower leased-access rates.
Competing Franchises. Questions concerning the right of a municipality to
award de facto exclusive cable television franchises and to impose certain
franchise restrictions upon cable television companies are under consideration
in Preferred Communications, Inc. v. City of Los Angeles, involving a proposed
applicant for a franchise in one of the Company's service areas, in which the
United States Supreme Court declared that cable television operators have
First Amendment rights which cannot be abridged in the absence of overriding
governmental interests. However, the 1992 Cable Act, among other things,
prohibits franchising authorities from unreasonably refusing to grant
franchises to competing cable television systems and permits franchising
authorities to operate their own cable television systems without franchises.
Ownership and Cross-Ownership Limitations. The 1984 Cable Act codified then-
existing FCC cross-ownership regulations, which, in part, prohibited LECs from
providing video programming directly to customers within their local exchange
telephone service areas, except in rural areas or by specific waiver of FCC
rules. As noted above, this restriction was removed by the 1996
Telecommunications Act.
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The 1984 Cable Act and the FCC's rules also prohibited the common ownership,
operation, control or interest in a cable system and a local television
broadcast station whose predicted grade B contour (a measure of a television
station's significant signal strength as defined by the FCC's rules) covers
any portion of the community served by the cable system. Common ownership or
control has historically also been prohibited by the FCC (but not by the 1984
Cable Act) between a cable system and a national television network, although
the FCC adopted an order that substantially relaxed the network/cable cross-
ownership prohibitions subject to certain national and local ownership limits.
Finally, in order to encourage competition in the provision of video
programming, the FCC adopted a rule prohibiting the common ownership,
affiliation, control or interest in cable television systems and MMDS
facilities having overlapping service areas, except in very limited
circumstances. The 1992 Cable Act codified this restriction and extended it to
co-located SMATV systems. Permitted arrangements in effect as of October 5,
1992 were grandfathered. In January 1995, the FCC loosened its previously
stringent interpretation of the lack of ability of a cable operator to
purchase a SMATV system in the same franchise area. The 1992 Cable Act permits
states or local franchising authorities to adopt certain additional
restrictions on the ownership of cable television systems.
The 1996 Telecommunications Act repeals the statutory ban on cable-broadcast
station cross-ownership to permit common ownership or control of a television
station and a cable system with overlapping service areas. The 1996
Telecommunications Act leaves in place, however, the cable system-television
station cross-ownership restriction contained in the FCC's rules and does not
mandate an outcome for the FCC's review of the regulation, which will occur
this year. The 1996 Telecommunications Act also directs the FCC to revise its
existing regulations concerning broadcast network-cable cross-ownership to
permit common control of both a television network and a cable system. The
1996 Telecommunications Act removes the statutory ban on cable-MMDS cross-
ownership by any cable operator in a franchise area where one cable operator
is subject to effective competition.
Pursuant to the 1992 Cable Act, the FCC has imposed limits on the number of
cable systems which a single cable operator can own. In general, no cable
operator can have an attributable interest in cable systems which pass more
than 30% of all homes nationwide. Attributable interests for these purposes
include voting interests of 5% or more (unless there is another single holder
of more than 50% of the voting stock), officerships, directorships and general
partnership interests. The FCC has stayed the effectiveness of these rules
pending the outcome of the appeal from the United States District Court
decision holding the multiple-ownership limit provision of the 1992 Cable Act
unconstitutional.
The FCC has also adopted rules which limit the number of channels on a cable
system which may be occupied by programming in which the entity which owns the
cable system has an attributable interest to 40% of all activated channels.
Equal Employment Opportunity. The 1984 Cable Act includes provisions to
ensure that minorities and women are provided equal employment opportunities
within the cable television industry. The statute requires the FCC to adopt
reporting and certification rules that apply to all cable system operators
with more than five full-time employees. Pursuant to the requirements of the
1992 Cable Act, the FCC has imposed more detailed annual Equal Employment
Opportunity ("EEO") reporting requirements on cable operators and has expanded
those requirements to all multi-channel video-service distributors. Failure to
comply with the EEO requirements can result in the imposition of fines and/or
other administrative sanctions, or may, in certain circumstances, be cited by
a franchising authority as a reason for denying a franchisee's renewal
request.
Privacy. The 1984 Cable Act imposes a number of restrictions on the manner
in which cable system operators can collect and disclose data about individual
system customers. The statute also requires that the system operator must
periodically provide all customers with written information about its policies
regarding the collection and handling of data about customers, their privacy
rights under federal law and their enforcement rights. In the event that a
cable operator is found to have violated the customer privacy provisions of
the 1984 Cable Act, it could be required to pay damages, attorneys' fees and
other costs. Under the 1992 Cable Act, the privacy requirements are
strengthened to require that cable operators take such actions as are
necessary to prevent unauthorized access to personally identifiable
information.
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Anti-Trafficking/Franchise Transfer Approval. The 1992 Cable Act precluded
cable operators from selling or otherwise transferring ownership of a cable
television system within 36 months after acquisition or initial construction,
with various exceptions. This provision was eliminated by the 1996
Telecommunications Act. The 1992 Cable Act also requires franchising
authorities to act on any franchise transfer request submitted after December
4, 1992 within 120 days after receipt of all information required by FCC
regulations and by the franchising authority. Approval is deemed to be granted
if the franchising authority fails to act within such period.
Registration Procedure and Reporting Requirements. Prior to commencing
operation in a particular community, all cable television systems must file a
registration statement with the FCC listing the broadcast signals they will
carry and certain other information. Additionally, cable operators
periodically are required to file various informational reports with the FCC.
Cable operators who operate in certain frequency bands are required on an
annual basis to file the results of their periodic cumulative leakage testing
measurements. Operators who fail to make this filing or who exceed the FCC's
allowable cumulative leakage index risk being prohibited from operating in
those frequency bands in addition to other sanctions.
Technical Requirements. Historically, the FCC has imposed technical
standards applicable to the cable channels on which broadcast stations are
carried, and has prohibited franchising authorities from adopting standards
which were in conflict with or more restrictive than those established by the
FCC. The FCC has recently revised such standards and made them applicable to
all classes of channels which carry downstream National Television System
Committee video programming. Local franchising authorities are permitted to
enforce the FCC's new technical standards. The FCC also has adopted additional
standards applicable to cable television systems using frequencies in the 108-
137 MHz and 225-400 MHz bands in order to prevent harmful interference with
aeronautical navigation and safety radio services and has also established
limits on cable system signal leakage. The 1992 Cable Act requires the FCC to
periodically update its technical standards to take into account changes in
technology and to entertain waiver requests from franchising authorities who
would seek to impose more stringent technical standards upon their franchised
cable television systems. Although the 1992 Cable Act requires the FCC to
establish "minimum technical standards relating to cable televisions systems
technical operation and signal quality," the FCC announced that its recently
completed cable television technical standards rule-making satisfied the new
statutory mandate. The 1996 Telecommunications Act preempted the ability of
franchising authorities to impose any oversight of cable operators' technical
standards.
Pole Attachments. The FCC currently regulates the rates and conditions
imposed by certain public utilities for use of their poles, unless under the
Federal Pole Attachments Act, state public utility commissions are able to
demonstrate that they regulate rates, terms and conditions of the cable
television pole attachments. A number of states and the District of Columbia
have certified to the FCC that they regulate the rates, terms and conditions
for pole attachments. In the absence of state regulation, the FCC administers
such pole attachment rates through use of a formula which it has devised and
from time to time revises.
The 1996 Telecommunications Act modifies the current pole attachment
provisions of the Communications Act of 1934 by requiring that utilities
provide cable systems and telecommunications carriers with non-discriminatory
access to any pole, conduit or right-of-way controlled by the utility. The FCC
is required to adopt new regulations to govern the charges for pole
attachments used by companies providing telecommunications services, including
cable operators. These regulations are likely to increase the rates charged to
cable companies providing voice and data, in addition to video services. These
new pole attachment regulations will not become effective, however, until five
years after enactment of the 1996 Telecommunications Act, and any increase in
attachment rates resulting from the FCC's new regulations will be phased in in
equal annual increments over a period of five years.
Other Matters. FCC regulation also includes matters regarding a cable
system's carriage of local sports programming; restrictions on origination and
cablecasting by cable system operators; application of the rules governing
political broadcasts; customer service; home wiring and limitations on
advertising contained in non-broadcast children's programming.
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Implementing provisions of the 1993 Budget Act, the FCC adopted requirements
for payment of 1994 annual "regulatory fees." Cable television systems were
required to pay regulatory fees of $0.37 per subscriber, which, may be passed
on to subscribers as "external cost" adjustments to rates for basic cable
service. This amount was increased to $.49 per subscriber in 1995 and may be
further increased in 1996. Fees are also assessed for other licenses,
including licenses for business radio and cable television-relay systems and
earth stations, which, however, may not be collected directly from
subscribers. Beginning in 1995, no fee is assessed for receive-only, cable-
earth stations.
COPYRIGHT REGULATION. Cable television systems are subject to federal
copyright licensing covering carriage of broadcast signals. In exchange for
making semi-annual payments to a federal copyright royalty pool and meeting
certain other obligations, cable operators obtain a statutory license to
retransmit broadcast signals. The amount of this royalty payment varies,
depending on the amount of system revenues from certain sources, the number of
distant signals carried and the location of the cable system with respect to
over-the-air television stations. Cable operators are liable for interest on
underpaid and unpaid royalty fees, but are not entitled to collect interest on
refunds received for the overpayment of copyright fees. Originally, the
Federal Copyright Royalty Tribunal was empowered to make and, in fact, did
make several adjustments in copyright royalty rates. This tribunal was
eliminated by Congress in 1993. Any future adjustment to the copyright royalty
rates will be done through an arbitration process to be supervised by the U.S.
Copyright Office.
Various bills have been introduced into Congress over the past several years
that would eliminate or modify the cable television compulsory copyright
license. The FCC has recommended to Congress that it repeal the cable
industry's compulsory copyright license. The FCC determined that the statutory
compulsory copyright license for local and distant broadcast signals no longer
serves the public interest and that private negotiations between the
applicable parties would better serve the public. Without the compulsory
license, cable operators might need to negotiate rights from the copyright
owners for each program carried on each broadcast station in the channel
lineup. Such negotiated agreements could increase the cost to cable operators
of carrying broadcast signals. The 1992 Cable Act's retransmission consent
provisions expressly provide that retransmission consent agreements between
television broadcast stations and cable operators do not obviate the need for
cable operators to obtain a copyright license for the programming carried on
each broadcaster's signal.
Copyright music performed in programming supplied to cable television
systems by pay cable networks (such as HBO) and cable programming networks
(such as USA) has generally been licensed by the networks through private
agreements with the American Society of Composers and Publishers ("ASCAP") and
BMI, Inc. ("BMI"), the two major performing rights organizations in the United
States. ASCAP and BMI offer "through to the viewer" licenses to the cable
networks, which cover the retransmission of the cable networks' programming by
cable television systems to their customers. The cable industry has not yet
concluded negotiations on licensing fees with music performing rights
societies for the use of music performed in programs locally originated by
cable television systems. See "Legal Proceedings."
STATE AND LOCAL REGULATIONS. Because cable television systems use local
streets and rights-of-way, cable television systems are subject to state and
local regulation, typically imposed through the franchising process. State
and/or local officials are usually involved in franchise selection, system
design and construction, safety, service rates, consumer relations, billing
practices and community-related programming and services.
Cable television systems generally are operated pursuant to non-exclusive
franchises, permits or licenses granted by a municipality or other state or
local government entity. Franchises generally are granted for fixed terms and
in many cases are terminable if the franchise operator fails to comply with
material provisions. Although the 1984 Cable Act provides for certain
procedural protection, there can be no assurance that renewals will be granted
or that renewals will be made on similar terms and conditions. Franchises
usually call for the payment of fees, often based on a percentage of the
system's gross customer revenues, to the granting authority. Upon receipt of a
franchise, the cable system owner usually is subject to a broad range of
obligations to the issuing authority directly affecting the business of the
system. The terms and conditions of franchises vary
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materially from jurisdiction to jurisdiction, and even from city to city
within the same state, historically ranging from reasonable to highly
restrictive or burdensome. The 1984 Cable Act places certain limitations on a
franchising authority's ability to control the operation of a cable system,
and the courts have from time to time reviewed the constitutionality of
several general franchise requirements, including franchise fees and leased-
access channel requirements, often with inconsistent results. On the other
hand, the 1992 Cable Act prohibits exclusive franchises, and allows
franchising authorities to exercise greater control over the operation of
franchised cable television systems, especially in the areas of customer
service and rate regulation. The 1992 Cable Act also allows franchising
authorities to operate their own multi-channel video distribution system
without having to obtain a franchise and permits states or local franchising
authorities to adopt certain restrictions on the ownership of cable television
systems. Moreover, franchising authorities are immunized from monetary damage
awards arising from regulation of cable television systems or decisions made
on franchise grants, renewals, transfers and amendments.
The specific terms and conditions of a franchise and the laws and
regulations under which it was granted directly affect the profitability of
the cable television system. Cable franchises generally contain provisions
governing charges for basic cable television services, fees to be paid to the
franchising authority, length of the franchise term, renewal, sale or transfer
of the franchise, territory of the franchise, design and technical performance
of the system, use and occupancy of public streets and number and types of
cable services provided.
Various proposals have been introduced at the state and local levels with
regard to the regulation of cable television systems, and a number of states
have adopted legislation subjecting cable television systems to the
jurisdiction of centralized state governmental agencies, some of which impose
regulations of a character similar to that of a public utility.
REGULATION OF TELECOMMUNICATIONS ACTIVITIES. As noted above under
"Telecommunications and Technology," Continental provides in certain of its
systems alternate-access local telecommunications services over a portion of
its fiber-optic cable facilities, and Continental currently owns a 20%
interest in TCG. Local telecommunications activities are regulated by either
the FCC or state public utility commissions, or both. In some instances,
Continental or TCG may be required to obtain regulatory permission to offer
such services, and may be required to file tariffs for its service offerings,
depending on whether particular alternate-access activities of Continental or
TCG are classified as common carriage or private carriage. See "Federal
Regulation--Ownership and Cross-Ownership Limitations." As noted above, the
1996 Telecommunications Act preempts state and locally-imposed barriers to the
provision of intrastate and interstate telecommunications services by cable
system operators in competition with local telephone companies.
The foregoing does not purport to be a summary of all present and proposed
federal, state and local regulations and legislation relating to the cable
television industry. Other existing federal regulations, copyright licensing,
and, in many jurisdictions, state and local franchise requirements, currently
are the subject of a variety of judicial proceedings, legislative hearings,
and administrative and legislative proposals which could change, in varying
degrees, the manner in which cable television systems operate. Neither the
outcome of these proceedings nor their impact upon the cable industry or the
Company can be predicted at this time.
EMPLOYEES
Continental currently has approximately 9,200 full-time employees, including
approximately 100 employees located at Continental's Boston headquarters, who
provide staff support in the areas of corporate planning, finance, marketing,
program acquisition, employee training and benefits administration, government
relations, internal auditing, financial and tax reporting and regulatory
compliance. Continental believes that its relations with its employees are
good.
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ITEM 2. PROPERTIES.
The Company's principal physical assets consist of cable television systems,
including signal receiving, encoding and decoding apparatus, headends,
distribution systems, and subscriber house-drop equipment for each of its
systems. The signal receiving apparatus typically includes a tower, antenna,
ancillary electronic equipment, and earth stations for reception of satellite
signals. Headends, consisting of associated electronic equipment necessary for
the reception, amplification and modulation of signals, are located near the
receiving devices. The Company's distribution systems consist of coaxial and
fiber-optic cables and related electronic equipment. Subscriber equipment
consists of taps, house drops, converters and analog addressable converters.
The Company owns its distribution system, various office and studio fixtures,
test equipment and service vehicles. The physical components of Continental's
systems require maintenance and periodic upgrading to keep pace with
technological advances.
The Company's coaxial and fiber-optic cables are generally attached to
utility poles under pole-rental agreements with local public utilities,
although in some areas the distribution cable is buried in underground ducts
or trenches. The FCC regulates pole-attachment rates under the Federal Pole
Attachments Act. See "Business--Description of Business--Legislation and
Regulation--Federal Regulation--Pole Attachments."
The Company owns or leases parcels of real property for signal reception
sites (antenna towers and headends), microwave facilities and business
offices. The Company owns the building which houses its headquarters in
Boston, Massachusetts.
The Company believes its properties, both owned and leased, are in good
operating condition and are suitable and adequate for its business operations.
ITEM 3. LEGAL PROCEEDINGS.
On October 24, 1995, a class of ASCAP members filed a class action copyright
infringement action in federal district court against a class comprised of
cable television operators that had transmitted satellite-generated pay-per-
view programming to their subscribers during the three-year period from
October 25, 1992 through the date of the suit. Continental was named as one of
the defendant class representatives. Plaintiffs alleged that the defendant
class members had infringed their copyrights by exhibiting pay-per-view
programs, which contain music owned by plaintiffs, without a license to
"perform" plaintiffs' copyrighted musical compositions. Plaintiffs sought a
permanent injunction restraining such public performances without
authorization, actual or statutory damages, and an award of costs and
attorneys' fees. The parties entered into a settlement agreement dated as of
February 12, 1996, which settled all copyright infringement claims relating to
the Company, and the case was dismissed on February 27, 1996 pursuant to the
terms of the settlement agreement. License fees will be negotiated or, failing
agreement, established by the ASCAP Rate Court.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders of the Company
during the fourth quarter of the fiscal year ended December 31, 1995.
32
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
No established public trading market exists for the Company's Class A Common
Stock or Class B Common Stock, and accordingly no high and low bid information
or quotations are available with respect to the Company's Common Stock. The
shares of Class A Common Stock held by the former Providence Journal
stockholders are subject to contractual restrictions on transfer until October
5, 1996.
As of March 15, 1996, there were 560 holders of record of Class A Common
Stock and 348 holders of record of Class B Common Stock. The Company has not
paid dividends on its Common Stock and has no present intention of so doing.
Certain agreements, pursuant to which the Company has borrowed funds, contain
provisions that limit the amount of dividends and stock repurchases that the
Company may make. See Note 7 to the Company's Consolidated Financial
Statements.
33
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION.
The following tables present selected consolidated financial information
relating to the financial condition and results of operations of the Company
over the past five years, and should be read in conjunction with the
Consolidated Financial Statements of the Company for the year ended December
31, 1995 set forth in Part IV hereof.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenues................ $ 1,039,163 $ 1,113,475 $ 1,177,163 $ 1,197,977 $ 1,442,392
Costs and expenses:
Operating............. 347,469 365,513 382,195 405,535 498,239
Selling, general and
administrative....... 246,986 259,632 267,376 267,349 339,002
Depreciation and
amortization......... 267,510 272,851 279,009 283,183 341,171
Restricted stock
purchase program(1).. 10,067 9,683 11,004 11,316 12,005
----------- ----------- ----------- ----------- -----------
Total............... 872,032 907,679 939,584 967,383 1,190,417
----------- ----------- ----------- ----------- -----------
Operating income........ 167,131 205,796 237,579 230,594 251,975
----------- ----------- ----------- ----------- -----------
Interest expense (net).. 324,976 296,031 282,252 315,541 363,826
Other (income)
expense(2)............. 1,936 11,071 (10,978) 24,048 48,085
----------- ----------- ----------- ----------- -----------
Total............... 326,912 307,102 271,274 339,589 411,911
----------- ----------- ----------- ----------- -----------
Loss before income
taxes, extraordinary
item and cumulative
effect of accounting
change................. (159,781) (101,306) (33,695) (108,995) (159,936)
Benefit (provision) for
income taxes........... (1,861) (1,654) 7,921 40,419 47,909
----------- ----------- ----------- ----------- -----------
Loss before
extraordinary item and
cumulative effect of
accounting change...... (161,642) (102,960) (25,774) (68,576) (112,027)
Extraordinary item...... -- -- -- (18,265) --
----------- ----------- ----------- ----------- -----------
Loss before cumulative
effect of accounting
change................. (161,642) (102,960) (25,774) (86,841) (112,027)
Cumulative effect of
accounting change...... -- -- (184,996) -- --
----------- ----------- ----------- ----------- -----------
Net loss................ (161,642) (102,960) (210,770) (86,841) (112,027)
Preferred stock
preferences............ (5,771) (16,861) (34,115) (36,800) (39,802)
----------- ----------- ----------- ----------- -----------
Loss applicable to
common stockholders.... $ (167,413) $ (119,821) $ (244,885) $ (123,641) $ (151,829)
=========== =========== =========== =========== ===========
Per common share:
Loss before
extraordinary item
and cumulative effect
of accounting
change............... $ (1.42) $ (1.00) $ (.53) $ (.92) $ (1.22)
Extraordinary item.... -- -- -- (.16) --
Cumulative effect of
accounting change.... -- -- (1.62) -- --
----------- ----------- ----------- ----------- -----------
Net loss.............. $ (1.42) $ (1.00) $ (2.15) $ (1.08) $ (1.22)
=========== =========== =========== =========== ===========
Weighted average common
shares outstanding (in
thousands)............. 117,534 119,544 114,055 114,334 124,882
OTHER DATA:
EBITDA(3)............... $ 444,708 $ 488,330 $ 527,592 $ 525,093 $ 605,151
EBITDA as % of
revenues............... 42.8% 43.9% 44.8% 43.8% 42.0%
Net cash provided from
operating activities... $ 123,543 $ 215,045 $ 250,504 $ 236,304 $ 221,264
Capital expenditures.... $ 145,846 $ 145,189 $ 185,691 $ 300,511 $ 518,161
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
---------------------------------------------------------------
1991 1992 1993 1994 1995
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.................... $ 14,265 $ 27,352 $ 122,640 $ 11,564 $ 18,551
Total assets............ 2,082,182 2,003,196 2,091,853 2,483,639 5,080,593
Total debt.............. 3,338,281 3,011,669 3,177,178 3,449,907 5,285,159
Redeemable common
stock.................. 445,463 223,716 213,548 232,399 256,135
Stockholder's equity
(deficiency)........... (1,919,525) (1,486,231) (1,667,088) (1,688,334) (1,215,951)
</TABLE>
- --------
(1) Represents the difference between the consideration paid by employees for
purchases of shares of Common Stock of the Company under the Company's
Restricted Stock Purchase Program and the fair market value of such shares
(as determined by the Company's Board of Directors) at the date of
issuance, amortized over the vesting schedule of such shares. See Note 11
to the Company's Consolidated Financial Statements.
(2) Includes equity in net income (loss) of affiliates, minority interest in
net loss of subsidiaries, other non-operating income and expenses, gains
on sale of marketable equity securities of $10.3 million, $17.1 million
and $24.1 million from the Company's sales of its investment in affiliates
in 1992 and 1993 and sale of marketable equity securities and a portion of
an investment in 1995, respectively. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(3) Operating income before depreciation and amortization and non-cash stock
compensation (Restricted Stock Purchase Program expense). Based on its
experience in the cable television industry, the Company believes that
EBITDA and related measures of cash flow serve as important financial
analysis tools for measuring and comparing cable television companies in
several areas, such as liquidity, operating performance and leverage.
EBITDA should not be considered by the reader as an alternative to
operating or net income (as determined in accordance with GAAP) as an
indicator of the Company's performance or as an alternative to cash flows
from operating activities (as determined in accordance with GAAP) as a
measure of liquidity. Substantially all of the Company's financing
agreements contain certain covenants in which EBITDA is used as a measure
of financial performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
35
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Continental is a leading provider of broadband communications services.
Continental's operations consist primarily of U.S. cable television systems
with complementary operations and investments in three other areas: (i)
international broadband communications ventures; (ii) interests in the
telecommunications and technology industries, including companies offering
competitive-access telephony and DBS service; and (iii) interests in
programming services.
Substantially all of Continental's revenues are earned from customer fees
for basic cable programming and premium television services, the rental of
converters and remote control devices, and cable installation fees. During the
period from December 31, 1992 through December 31, 1995, Continental's
revenues increased at a compound annual growth rate of 9.0% primarily through
basic subscriber growth and increases in monthly revenue per average basic
subscriber. Revenues for the year ended December 31, 1995 increased 20.4%
compared to 1994 (10.3% excluding acquisitions). Revenues for the year ended
December 31, 1994 increased only 1.8% compared to 1993 due to basic rate
reductions and non-cash revenue reserves recorded in connection with the FCC
rate regulations.
Additional revenues are generated by the sale of advertising, pay-per-view
programming fees, DBS service and payments received as a result of revenue-
sharing agreements for products sold through home shopping networks.
Continental expects that advertising and home shopping revenues (which
currently represent approximately 6.3% of Continental's total revenues) may
become a larger percentage of total revenues. These sources of revenues tend
to be cyclical and seasonal in nature and could increase the cyclicality and
seasonality in Continental's total revenues.
Continental's business is subject to significant regulatory developments,
including recent federal laws and regulations, which regulate rates charged by
Continental for certain cable services. Such laws and regulations will limit
Continental's ability to increase or restructure its rates for certain
services. On August 3, 1995, the Social Contract between Continental and the
FCC was adopted, which covers all of Continental's existing franchises
(excluding the systems acquired in the Providence Journal Merger and the
Recent Acquisitions), including those that are currently unregulated, and is
the first comprehensive rate agreement involving cable television ever
approved by the FCC. The Social Contract settled Continental's pending cost-
of-service rate cases and its benchmark CPS-tier rate cases. The Social
Contract Amendment was released by the FCC for public comment on March 6,
1996. This amendment incorporates into the Social Contract the cable
television systems acquired in the Providence Journal Merger and the Recent
Acquisitions and makes certain other changes to the Social Contract. See
"Business--Description of Business--U.S. Operating Strategy--U.S. Regulatory
Strategy; Social Contract." In addition, the 1996 Telecommunications Act has
been enacted into law. The 1996 Telecommunications Act modifies various
provisions of the Communications Act of 1934, the 1984 Cable Act and the 1992
Cable Act with the intent of establishing a pro-competitive, deregulatory
policy framework for the telecommunications industry.
The high level of depreciation and amortization associated with
Continental's capital expenditures and acquisitions and the interest costs
related to financing activities, have caused Continental to report net losses.
Continental believes that such net losses are common for cable television
companies.
The Company has recently completed a series of acquisitions in the United
States, the most significant of which was the acquisition of the cable
television businesses and assets of Providence Journal. See "Business
Description of Business--U.S. Acquisitions and Investments--The Providence
Journal Merger." Results of operations of the companies and businesses
acquired have been included in the accompanying results of operations from
their respective dates of acquisition.
PROPOSED MERGER WITH U S WEST
On February 27, 1996, the Company entered into the Merger Agreement with U S
WEST, providing for the Merger of the Company with and into U S WEST. As a
result of the Merger, Continental's operations will become part of UMG, a
leading global media and telecommunications company.
36
<PAGE>
The Merger is expected to close in the fourth quarter of 1996. The
consummation of the Merger is subject to various conditions to closing,
including, but not limited to, regulatory approvals and Continental
stockholder votes. Certain major stockholders have agreed to vote in favor of
the Merger and other related matters. However, no assurances can be given that
the Merger will occur, or occur in the foregoing manner. See "Business--
Development of Business."
RESULTS OF OPERATIONS
The following table sets forth, for the years indicated, certain items in
the Company's Selected Consolidated Financial Information. See the footnotes
to "Selected Consolidated Financial Information."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Basic cable service..................... $ 845,213 $ 849,889 $1,013,405
Premium cable service................... 242,956 245,605 269,069
Advertising............................. 52,618 57,896 73,389
Pay-per-view............................ 25,746 24,523 32,467
Other................................... 8,875 14,035 17,014
DBS..................................... 1,755 6,029 37,048
---------- ---------- ----------
Total................................. 1,177,163 1,197,977 1,442,392
Operating, selling, general and
administrative expenses.................. 649,571 672,884 837,241
Depreciation and amortization............. 279,009 283,183 341,171
Restricted stock purchase program......... 11,004 11,316 12,005
---------- ---------- ----------
Operating income.......................... 237,579 230,594 251,975
Interest expense, net..................... 282,252 315,541 363,826
Other (income) expenses................... (10,978) 24,048 48,085
---------- ---------- ----------
Loss before income taxes, extraordinary
item and cumulative effect of accounting
change................................... (33,695) (108,995) (159,936)
Benefit for income taxes.................. (7,921) (40,419) (47,909)
---------- ---------- ----------
Loss before extraordinary item and
cumulative effect of accounting change... (25,774) (68,576) (112,027)
Extraordinary item........................ -- (18,265) --
---------- ---------- ----------
Loss before cumulative effect of
accounting change........................ (25,774) (86,841) (112,027)
Cumulative effect of accounting change.... (184,996) -- --
---------- ---------- ----------
Net loss.................................. $ (210,770) $ (86,841) $ (112,027)
========== ========== ==========
OTHER DATA:
EBITDA.................................... $ 527,592 $ 525,093 $ 605,151
EBITDA as a % of revenues................. 44.8% 43.8% 42.0%
SUBSCRIBER DATA FOR U.S. CABLE SYSTEMS
<CAPTION>
AS OF DECEMBER 31,
----------------------------------
1993 1994 1995
---------- ---------- ----------
<S> <C> <C> <C>
Homes passed by cable..................... 5,192,000 5,372,000 7,191,000
Number of basic subscribers............... 2,895,000 3,081,000 4,190,000
Basic penetration......................... 55.8% 57.4% 58.3%
Number of premium subscriptions........... 2,454,000 2,635,000 3,770,000
Premium penetration....................... 84.8% 85.5% 90.0%
</TABLE>
37
<PAGE>
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31,
1994. Revenues increased 20.4% (or $244.4 million) to approximately $1.4
billion. The acquisition of cable television systems in New Hampshire and
Florida during 1994, the Providence Journal Merger and the Recent
Acquisitions, serving a total of approximately 1,087,000 basic subscribers as
of their respective acquisition dates, accounted for $122.1 million of such
revenue increase. Excluding the effects of the foregoing acquisitions,
revenues increased 10.3% (or $122.3 million) as a result of a 3.1% increase in
ending basic cable subscribers, an increase in cable revenue per average basic
subscriber and an increase in DBS-service revenues. Excluding the foregoing
acquisitions and DBS-service revenues, monthly cable revenue per average basic
subscriber increased from $35.23 to $36.56. The $1.33 increase in monthly
cable revenue per average basic subscriber reflects: (i) increases in basic
rates and a reversal during 1995 of certain non-cash revenue reserves (see
below) as a result of the Social Contract and (ii) an increase in premium and
other revenue categories. Revenues from premium cable services increased by
$3.8 million to $248.1 million (excluding the foregoing acquisitions and DBS
service) due to an increase in premium subscriptions. The increase in revenues
(excluding the foregoing acquisitions and DBS service) was also due to a $9.2
million increase in advertising revenues to $66.9 million, a $2.4 million
increase in home shopping revenues to $16.4 million and a $5.6 million
increase in pay-per-view revenues to $30.1 million. Revenues from DBS service
increased by $31.0 million to $37.0 million principally as a result of an
increase of 58,000 in the number of DBS-service customers to approximately
80,000 as of December 31, 1995.
Operating, selling, general and administrative expenses increased 24.4% to
$837.2 million due primarily to the foregoing acquisitions, the provision of
DBS service, and increases in programming costs and wages. Many of the
increases in expenses were not passed through to subscribers in the form of
rate increases in accordance with the FCC's rate regulations due to the
negotiation and implementation of the Social Contract. See "Business--
Development of Business--U.S. Operating Strategy--U.S. Regulatory Strategy;
Social Contract." Depreciation and amortization expenses increased 20.5% to
$341.2 million due to the foregoing acquisitions and increased levels of
capital expenditures. Non-cash stock compensation (Restricted Stock Purchase
Program expense) increased 6.1% to $12.0 million due to a vesting of a greater
percentage of shares issued under Continental's Restricted Stock Purchase
Program as compared to 1994. Operating income increased 9.3% to $252.0
million. Interest expense increased 15.3% to $363.8 million as a result of a
25.0% increase in average debt outstanding. The effective interest rate
decreased from 9.7% to 9.0%. Other (income) expenses included a gain of $23.0
million from the sale of the Company's shares of QVC common stock and a gain
of $1.0 million on the sale of a portion of its investment in NCC. Other
(income) expense also includes equity in net loss of affiliates, which
increased from $25.0 million to $70.4 million primarily due to the Company
recording its proportionate share of losses from its international investments
in Australia, Argentina and Singapore and its investments in TCG and The Golf
Channel. The effective tax rate was lower in 1995 since a tax benefit was not
recorded for the equity in net loss of foreign affiliates. As a result of the
above factors, the net loss before extraordinary item for 1995 compared to
1994 increased by $43.5 million to $112.0 million.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31,
1993. Revenues increased by 1.8% (or $20.8 million) to approximately $1.2
billion. The cable television systems acquired in New Hampshire and Florida
during 1994 served a total of approximately 78,000 basic subscribers as of
their respective acquisition dates and accounted for $8.0 million of such
revenue increase. Excluding the effects of the foregoing acquisitions,
revenues increased 1.1% (or $12.8 million) as a result of a 3.7% increase in
ending basic subscribers and an increase in premium and certain other revenue.
Monthly cable revenue per average basic subscriber decreased from $35.71 to
$35.23. The $.48 decrease was primarily due to rate reductions and non-cash
revenue reserves recorded during 1994 in connection with the FCC's rate
regulations, net of an $.11 increase in premium, advertising and other
revenue. See "Liquidity and Capital Resources--Recent Legislation." Revenues
from premium cable increased by $1.3 million (excluding the foregoing
acquisitions and DBS-service revenues) due to an increase in premium
subscriptions. The increase in revenues (excluding the foregoing acquisitions
and DBS-service revenues) was also due to a $5.0 million increase in
advertising revenue and a $5.1 million increase in other revenue due to
continued growth in home shopping revenue, less a $1.3 million decrease in
pay-per-view revenue. Pay-per-view revenue decreased due to the lack of
availability of special events offered as compared to 1993, reflecting
industry-wide trends. Revenues from DBS service increased $4.3 million or
244.0% as a result of an increase in DBS-service customers from 4,300 to
22,000.
38
<PAGE>
Operating, selling, general and administrative expenses increased 3.6% to
$672.9 million, primarily due to the foregoing acquisitions and increases in
programming costs and wages. Depreciation and amortization expenses increased
1.5% to $283.2 million due to an increase in capital expenditures. Non-cash
stock compensation (Restricted Stock Purchase Program expense) increased 2.8%
to $11.3 million due to the vesting of a greater percentage of shares issued
under Continental's Restricted Stock Purchase Program as compared to 1993.
Operating income decreased 2.9% to $230.6 million. Interest expense increased
approximately 11.8% to $315.5 million due to a 5.0% increase in average debt
outstanding and an increase in the effective interest rate from 9.1% to 9.7%.
Other (income) expenses decreased as a result of equity in net loss of
affiliates which increased from $12.8 million to $25.0 million, primarily due
to Continental recording its proportionate share of losses from PrimeStar and
TCG and its affiliates. Continental also recorded an extraordinary loss of
$18.3 million due to the extinguishment of debt.
As a result of such factors, loss before the cumulative effect of the
accounting change for the year ended December 31, 1994, compared to December
31, 1993, increased by $61.1 million to $86.8 million, and net loss for the
year ended December 31, 1994, compared to December 31, 1993, decreased from
$210.8 million to $86.8 million.
Continental implemented Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109") as of January 1, 1993. SFAS 109
required a change from the deferred to the liability method for computing
deferred income taxes. The cumulative effect of this change was a non-
recurring increase in net loss of $185.0 million. The cumulative change
resulted from net deferred tax liabilities recognized for the difference
between the financial reporting and tax bases of assets and liabilities. The
income tax benefit recognized in 1993 was $7.9 million due to deferred tax
benefits recognized under SFAS 109. The income tax benefit for 1993 was
decreased by $4.2 million as a result of applying the newly enacted federal
tax rates to deferred tax balances as of January 1, 1993.
EBITDA. Based on its experience in the cable television industry,
Continental believes that EBITDA and related measures of cash flow serve as
important financial analysis tools for measuring and comparing cable
television companies in several areas, such as liquidity, operating
performance and leverage. EBITDA should not be considered as an alternative to
operating or net income (measured in accordance with GAAP) as an indicator of
Continental's performance or as an alternative to cash flows from operating
activities (measured in accordance with GAAP) as a measure of Continental's
liquidity. For the year ended December 31, 1995, EBITDA increased 15.2% to
$605.2 million, as compared to the same period in 1994. Excluding the effect
of the acquisition of cable television systems in New Hampshire and Florida in
1994, the Providence Journal Merger and the Recent Acquisitions, EBITDA
increased 6.3%. DBS service accounted for $4.3 million of EBITDA for the year
ended December 31, 1995 compared to $(1.9) million as of December 31, 1994.
The remaining increase in EBITDA for the year ended December 31, 1995
(excluding the effects of acquisitions) was the result of increases in
revenue. EBITDA decreased 0.5% to $525.1 million for the year ended December
31, 1994, primarily due to rate reductions and non-cash revenue reserves
recorded in connection with the FCC's rate regulations.
INFLATION. Certain of the Company's expenses, such as those for wages and
benefits, for equipment repair and replacement, and for billing and marketing,
increase with general inflation. However, the Company does not believe that
its financial results have been, or will be, adversely affected by inflation,
provided that it is able to increase its service rates periodically. For a
description of recent legislation and regulations that may limit the Company's
ability to raise its rates for certain services, see "Business--Description of
Business--U.S. Operating Strategy--U.S. Regulatory Strategy; Social Contract"
and "Legislation and Regulation."
RECENT ACCOUNTING PRONOUNCEMENTS. In March 1995, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of" ("SFAS 121"), which is effective for fiscal
years beginning after December 15, 1995. SFAS 121 addresses the accounting for
potential impairment of long-lived assets. The effect of implementing SFAS 121
is expected to be immaterial to Continental's financial position and results
of operations.
39
<PAGE>
In October 1995, the FASB issued Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123, which is
effective for fiscal years beginning after December 15, 1995, establishes
financial accounting and reporting requirements for stock-based employee
compensation plans. The effect of implementing SFAS 123 is expected to be
immaterial to Continental's financial position and results of operations.
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth for the period indicated certain items from
the Company's Statement of Consolidated Cash Flows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1995
------------
<S> <C>
Net cash provided from operating activities................... $ 221,264
============
Net cash provided from (used for) financing activities:
Net borrowings.............................................. $ 1,828,979
Other....................................................... (4,445)
------------
Total..................................................... $ 1,824,534
============
Net cash provided from (used for) investing activities:
Acquisitions (net).......................................... $ (1,243,879)
Property, plant and equipment............................... (518,161)
Investments................................................. (280,142)
Other assets................................................ (25,167)
Proceeds from sale of marketable equity securities.......... 27,357
Proceeds from sale of investment-net........................ 1,181
------------
Total..................................................... $ (2,038,811)
============
</TABLE>
1995 FINANCING ACTIVITIES. On December 13, 1995, Continental issued $600.0
million in aggregate principal amount of 8.30% Senior Notes Due 2006 (the
"8.30% Senior Notes") in an offering pursuant to Rule 144A of the Securities
Act of 1933. The net proceeds from the sale of the 8.30% Senior Notes were
used initially to repay $587.1 million of the indebtedness outstanding under
an unsecured, reducing revolving credit facility of the Company and certain of
its subsidiaries (the "1994 Credit Facility"). The maximum credit availability
under the 1994 Credit Facility is $2.2 billion, which will decrease annually
commencing in December 1997, with a final maturity in October 2003.
On July 18, 1995, certain of Continental's subsidiaries entered into an
unsecured, reducing revolving credit facility (the "1995 Credit Facility").
The maximum credit availability under the 1995 Credit Facility is
$1.2 billion, which will decrease annually commencing in December 1998, with a
final maturity in September 2004. Such facility has other terms and conditions
that are similar in certain respects to those contained in the 1994 Credit
Facility.
In October 1995, Continental borrowed under the 1995 Credit Facility to fund
approximately $815.0 million in connection with the Providence Journal Merger
and approximately $155.0 million for the acquisition of Columbia Cable of
Michigan. In December 1995, Continental borrowed under the 1995 Credit
Facility to fund approximately $88.0 million in connection with the N-COM
Buyout. Subsequent borrowings under the 1995 Credit Facility will be used for
general corporate purposes, including capital expenditures for the Providence
Journal Cable, Columbia Cable of Michigan and N-COM systems.
CREDIT ARRANGEMENTS OF CONTINENTAL. On December 31, 1995, Continental had
cash on hand of $18.6 million and the following credit arrangements: (i)
approximately $1.6 billion outstanding under the 1994 Credit Facility; (ii)
approximately $1.0 billion outstanding under the 1995 Credit Facility; (iii)
$125.8 million of 10.12% Senior Notes Due 1999 to the Prudential Life
Insurance Company; (iv) $200.0 million of 8 1/2% Senior Notes
40
<PAGE>
Due 2001; (v) $100.0 million of 8 5/8% Senior Notes Due 2003; (vi) $275.0
million of 8 7/8% Senior Debentures Due 2005; (vii) $600.0 million of the
8.30% Senior Notes; (viii) $300.0 million of 9% Senior Debentures Due 2008;
(ix) $525.0 million of 9 1/2% Senior Debentures Due 2013; (x) $100.0 million
of 10 5/8% Senior Subordinated Notes Due 2002; (xi) $100.0 million of Senior
Subordinated Floating Rate Debentures Due 2004 (the "Floating Rate
Debentures"); and (xii) $300.0 million of 11% Senior Subordinated Debentures
Due 2007. Other miscellaneous debt was approximately $34.2 million as of
December 31, 1995. As of December 31, 1995, there was credit availability of
$613.8 million and $161.0 million under the 1994 Credit Facility and 1995
Credit Facility, respectively. In February 1996, the Company borrowed funds
under the 1994 Credit Facility in order to redeem $100.0 million in aggregate
principal amount of the Floating Rate Debentures, plus accrued interest
thereon.
As of December 31, 1995, a subsidiary of Continental had issued a standby
letter of credit of approximately $56.3 million on behalf of PrimeStar, which
guaranteed a portion of the financing incurred by PrimeStar to construct a
successor-satellite system. On March 11, 1996, the obligations under such
letter of credit increased to approximately $70.6 million. The letter of
credit is secured by certain marketable equity securities with a fair market
value of approximately $163.7 million as of March 11, 1996.
The annual maturities of Continental's indebtedness for the years ending
December 31, 1996, 1997, 1998, 1999 and 2000 will be approximately $29.6
million, $32.1 million, $33.6 million, $112.3 million and $559.0 million,
respectively.
CAPITAL EXPENDITURES AND U.S. ACQUISITIONS. Continental's expenditures for
property, plant and equipment totaled approximately $518.2 million for the
year ended December 31, 1995. The increase in Continental's capital
expenditures for 1995 as compared to 1994 was due to: (i) the rebuild and
upgrade of its systems; (ii) the provision of DBS service; and (iii) the
acquisition of cable systems in New Hampshire and Florida in 1994, the
Providence Journal Merger and the Recent Acquisitions. Continental anticipates
that it will spend during 1996: (i) approximately $529.0 million on capital
expenditures for its systems (excluding the systems to be acquired in the
Pending M/NH Buyout), (ii) approximately $85.0 million on capital expenditures
for the provision of DBS service and (iii) approximately $120.0 million on
capital expenditures for new businesses such as telephony and high-speed data
services. However, Continental is continually reevaluating its capital budget
based on economic, technological and other factors. In accordance with the
recently adopted Social Contract with the FCC, Continental has agreed to
invest a minimum of $1.35 billion in system rebuilds and upgrades in the
United States from 1995 to 2000 to expand channel capacity and improve system
reliability and picture quality, $419.2 million of which has already been
invested. Under the Social Contract Amendment, which was recently released by
the FCC for public comment, Continental would agree to increase the minimum
investment from $1.35 billion to $1.7 billion, in order to incorporate into
the Social Contract the systems acquired in the Providence Journal Merger and
the Recent Acquisitions. See "Business--Description of Business--U.S.
Operating Strategy--U.S. Regulatory Strategy; Social Contract."
In 1995, Continental acquired (i) the cable television systems of Providence
Journal for total consideration of approximately $1.4 billion pursuant to the
Providence Journal Merger, and (ii) other cable television systems, or
interests therein, in the Recent Acquisitions for an aggregate of
approximately $428.5 million. See "Business--Description of Business--U.S.
Acquisitions and Investments." Continental has entered into a purchase
agreement to acquire the remaining ownership interests and discharge or assume
certain liabilities of M/NH for total consideration of approximately $219.2
million. The Cablevision of Chicago and the Consolidated Cablevision of
California acquisitions closed in August 1995 and September 1995,
respectively, and both the Providence Journal Merger and Columbia Cable of
Michigan acquisition closed in October 1995. The N-COM Buyout closed in
December 1995. The Pending M/NH Buyout is expected to close in the third
quarter of 1996. All of these cable television systems primarily serve
communities that are contiguous, or in close proximity, to Continental's other
systems. Continental funded the acquisition of Columbia Cable of Michigan and
the N-COM Buyout with borrowings under the 1995 Credit Facility. Continental
funded the Cablevision of Chicago and the
41
<PAGE>
Consolidated Cablevision of California acquisitions with borrowings under the
1994 Credit Facility. Continental funded the Providence Journal Merger with
borrowings under the 1995 Credit Facility as well as through the issuance of
approximately 30.1 million shares of Class A Common Stock. See "Business--
Description of Business--U.S. Acquisitions and Investments--The Providence
Journal Merger" and "Other U.S. Acquisitions."
INVESTMENTS. For purposes of the Statement of Consolidated Cash Flows, the
Company's investments include, among other things, telecommunications and
technology and international.
International Investments. As of December 31, 1995, Continental had advanced
US$150.5 million to Fintelco. In addition, Continental has recorded
commitments to contribute an additional US$24.2 million to Fintelco in order
to finance a portion of certain acquisitions of Argentine cable television
systems. Fintelco recently entered into a US$140.0 million credit facility,
and is in the process of arranging an aggregate of approximately US$65.0
million in additional credit facilities. Proceeds from such facilities will be
used to refinance existing short-term indebtedness and for general corporate
purposes, including capital expenditures. Such facilities may reduce the
amount of future advances from Fintelco's shareholders, including Continental.
No assurance can be given at this time that such additional facilities will be
successfully arranged. See "Business-- Description of Business--International
Operations."
As of December 31, 1995, Continental had invested approximately US$169.1
million in Optus Vision. Optus Vision anticipates at this time that the
remaining funding needs of the project will be approximately US$1.2 billion
(based upon exchange rates at December 31, 1995) through 1999, which will be
provided by a combination of equity from the joint venture partners and third-
party debt. Optus Vision recently arranged A$230.0 million of short-term
credit facilities. Proceeds from such facilities will be used for general
corporate purposes, including capital expenditures. Such facilities may reduce
the amount of future advances from Optus Vision shareholders, including
Continental. Continental's funding requirements would be reduced if either or
both of Nine and Seven exercise their options to increase their equity
interests in Optus Vision to 20% and 15%, respectively, but there can be no
assurances that Nine and/or Seven will exercise their options. See "Business--
Description of Business--International Operations."
As of December 31, 1995, Continental had made capital contributions to SCV
of US$17.6 million and committed to contribute up to approximately US$27.0
million (based on exchange rates as of December 31, 1995) in additional
capital. In addition, Continental has committed to lend up to approximately
US$45.0 million (based on exchange rates as of December 31, 1995) to SCV if
third-party debt financing is unavailable. SCV has arranged an aggregate of
S$106.0 million in senior credit facilities and is in the process of arranging
additional senior credit facilities. Such facilities may reduce the amount of
future advances from SCV's shareholders, including Continental. No assurance
can be given at this time that all such additional facilities will be
successfully arranged. See "Business--Description of Business--International
Operations."
Investments in Telecommunications and Technology. Continental has made
numerous investments which are related to its ownership interests in TCG and
PrimeStar.
In 1993, Continental purchased 20% of TCG for a purchase price of $66.0
million. In addition, Continental has committed to lend up to $69.9 million to
TCG through 2003, of which $53.8 million was advanced as of December 31, 1995.
Continental has also invested $56.7 million in joint ventures involving TCG
and other cable television operators. On May 22, 1995, TCG entered into a
$250.0 million revolving credit facility with a group of financial
institutions. Borrowings under the facility may be used for general corporate
purposes of TCG, including capital expenditures. Such facility may reduce the
amount of future advances from TCG's shareholders, including Continental.
Continental also owns an approximate 10.4% partnership interest in
PrimeStar. Continental has made cash investments totaling $25.8 million as of
December 31, 1995 to fund PrimeStar's ongoing operations and may in the future
make additional investments in PrimeStar. See "Business--Description of
Business--Telecommunications and Technology."
42
<PAGE>
OTHER FINANCING AND INVESTMENT ACTIVITIES. In January 1995, Continental sold
its shares of QVC common stock in a tender offer for approximately $27.4
million and sold a portion of its investment in NCC for approximately $1.2
million. The proceeds from these sales were used to repay amounts outstanding
under the 1994 Credit Facility.
Intangible and other assets increased by a total of $1.5 billion during the
year ended December 31, 1995 due primarily to assets recorded in connection
with the Providence Journal Merger and the Recent Acquisitions and an increase
of approximately $14.2 million in loans to certain employees to cover tax
obligations in connection with Continental's Restricted Stock Purchase
Program. See Note 11 to Continental's Consolidated Financial Statements.
1998-1999 SHARE REPURCHASE PROGRAM. Continental is a party to a liquidity
agreement (the "Stock Liquidation Agreement") with certain shareholders,
including H. Irving Grousbeck (a co-founder of the Company), and the partners
of certain general investment limited partnerships managed by Burr, Egan,
Deleage & Co. (collectively, the "Subject Stockholders"), pursuant to which
Continental has obligations to purchase, and the Subject Stockholders and
other stockholders who have elected to have their shares of Common Stock
covered thereby ("Redeemable Common Stock") have obligations to sell, such
Redeemable Common Stock in 1998 or 1999, as described below (the "1998-1999
Share Repurchase Program").
Continental's obligation under the Stock Liquidation Agreement is to
repurchase approximately 16.7 million shares of Redeemable Common Stock
(representing approximately 9.42% of its outstanding shares of Common Stock on
a fully diluted basis, assuming conversion of the outstanding shares of Series
A Preferred Stock) on December 15, 1998 (or January 15, 1999), at each such
stockholder's election. The purchase price for such redemption is equal to the
greater of (i) the dollar amount that a holder of Common Stock would receive
per share of Common Stock upon a sale of the Company as a whole pursuant to a
merger or a sale of stock or, if greater, the dollar amount a holder of Common
Stock would then receive per share of Common Stock derived from the sale of
the Company's assets and subsequent distribution of the proceeds therefrom
(net of corporate taxes, including sales and capital gains taxes in connection
with such sale of assets), in either case less a discount of 22.5%, or (ii)
the dollar amount equal to the net proceeds which would be expected to be
received by a stockholder of the Company from the sale of a share of Common
Stock in an underwritten public offering at the time the shares are to be
repurchased after, under certain circumstances, being reduced by pro forma
expenses and underwriting discounts. In the event the Company is unable to
perform its obligation to complete the 1998-1999 Share Repurchase Program
within six months of the payment date therefor, the Company is obligated, at
the request made within such six-month period of any one or more Subject
Stockholders or transferees holding an aggregate of at least 2.5 million
shares of such transferred shares of Redeemable Common Stock, to use its best
efforts (subject to compliance with applicable laws and regulations) to cause
the sale of all or substantially all of the assets of the Company and,
following the consummation of such sale, to liquidate the Company.
CAPITAL RESOURCES. Historically, cash generated from the Company's operating
activities in conjunction with borrowings and, to a lesser extent, proceeds
from private equity issuances have been sufficient to fund the Company's
capital expenditures, investments and acquisitions, debt service requirements
and stock repurchase obligations. Prior to the consummation of the Merger with
U S WEST, Continental anticipates funding its capital expenditures,
acquisitions, investments and debt service requirements with cash provided
from operating activities and borrowings under existing and new credit
facilities. If the Merger is not consummated, Continental anticipates funding
its capital needs with cash provided from operating activities, borrowings
under existing and new credit facilities and future equity issuances. However,
there can be no assurance in this regard. Furthermore, there can be no
assurance that the terms available for any future debt or equity financing
would be favorable to the Company.
RECENT LEGISLATION. In October 1992, Congress passed the 1992 Cable Act,
which, among other things, authorizes the FCC to set standards for
governmental authorities to regulate the rates for certain cable television
43
<PAGE>
services and equipment and gives local broadcast stations the option to elect
mandatory carriage or require retransmission consent. Pursuant to authority
granted under the 1992 Cable Act, the FCC adopted a series of rate
regulations.
The FCC also publicly announced that it would consider "social contracts" as
an alternative form of rate regulation for cable operators. Continental's
Social Contract with the FCC was adopted by the FCC on August 3, 1995. In
addition, the Social Contract Amendment was released for public comment on
March 6, 1996 and incorporates into the Social Contract the systems acquired
in the Providence Journal Merger and the Recent Acquisitions. The Social
Contract and the Social Contract Amendment, if adopted by the FCC, will govern
Continental's future rates. The Social Contract also provides for its
termination in the future if the laws and regulations applicable to services
offered in any Continental franchise change in a manner that would have a
material favorable financial impact on Continental. In that instance, the
Company may petition the FCC to terminate the Social Contract. For a
description of the Social Contract and the Social Contract Amendment, see
"Business--Description of Business--U.S. Operating Strategy--U.S. Regulatory
Strategy; Social Contract."
Furthermore, the 1996 Telecommunications Act has been enacted into law. The
1996 Telecommunications Act modifies various provisions of the Communications
Act of 1934, the 1984 Cable Act and the 1992 Cable Act, with the intent of
establishing a pro-competitive, deregulatory policy framework for the
telecommunications industry. See "Business--Description of Business--U.S.
Operating Strategy--Legislation and Regulation."
44
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Independent Auditors' Report............................................. 46
Consolidated Balance Sheets, December 31, 1994 and 1995.................. 47
Statements of Consolidated Operations, Years Ended December 31, 1993,
1994 and 1995........................................................... 48
Statements of Consolidated Stockholders' Equity (Deficiency), Years Ended
December 31, 1993, 1994 and 1995........................................ 49
Statements of Consolidated Cash Flows, Years Ended December 31, 1993,
1994 and 1995........................................................... 50
Notes to Consolidated Financial Statements............................... 51
</TABLE>
45
<PAGE>
INDEPENDENT AUDITORS' REPORT
Continental Cablevision, Inc.:
We have audited the accompanying consolidated balance sheets of Continental
Cablevision, Inc. and its subsidiaries as of December 31, 1994 and 1995 and
the related statements of consolidated operations, consolidated stockholders'
equity (deficiency) and consolidated cash flows for each of the three years in
the period ended December 31, 1995. Our audits also included the financial
statement schedules listed in the index as Item 14. These financial statements
and financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements of Continental
Cablevision, Inc. and its subsidiaries present fairly, in all material
respects, the financial position of the companies at December 31, 1994 and
1995 and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995 in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
As discussed in Notes 12 and 4 to the consolidated financial statements, the
Company changed its method of accounting for income taxes and investments in
1993 and 1994, respectively.
Deloitte & Touche LLP
Boston, Massachusetts
February 14, 1996
46
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
------
Cash................................................. $ 11,564 $ 18,551
Accounts Receivable--net............................. 58,212 110,132
Prepaid Expenses and Other........................... 14,321 9,967
Supplies............................................. 62,517 88,687
Marketable Equity Securities......................... 122,510 151,378
Investments.......................................... 335,479 538,352
Property, Plant and Equipment--net................... 1,353,789 2,107,473
Intangible Assets--net............................... 421,420 1,902,796
Other Assets--net.................................... 103,827 153,257
----------- -----------
TOTAL.......................................... $ 2,483,639 $ 5,080,593
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
-------------------------------------------------
Accounts Payable..................................... $ 82,083 $ 96,833
Accrued Interest..................................... 82,040 86,977
Accrued and Other Liabilities........................ 206,271 238,343
Debt................................................. 3,449,907 5,285,159
Deferred Income Taxes................................ 116,482 307,041
Minority Interest in Subsidiaries.................... 2,791 26,056
Commitments and Contingencies
Redeemable Common Stock, $.01 par value; 16,684,150
shares outstanding.................................. 232,399 256,135
Stockholders' Equity (Deficiency):
Preferred Stock, $.01 par value; 198,857,142 shares
authorized; none outstanding...................... -- --
Series A Convertible Preferred Stock, $.01 par
value; 1,142,858 shares authorized and
outstanding; liquidation preference--$487,776,000
and $527,578,000.................................. 11 11
Class A Common Stock, $.01 par value; 425,000,000
shares authorized; 8,585,500 and 38,780,694 shares
outstanding....................................... 86 388
Class B Common Stock, $.01 par value; 200,000,000
shares authorized; 90,291,375 and 92,572,000
shares outstanding................................ 903 926
Additional Paid-In Capital......................... 583,181 1,181,193
Unearned Compensation.............................. (12,097) (45,851)
Net Unrealized Holding Gain on Marketable Equity
Securities........................................ 47,996 67,823
Deficit............................................ (2,308,414) (2,420,441)
----------- -----------
Stockholders' Equity (Deficiency)................ (1,688,334) (1,215,951)
----------- -----------
TOTAL.......................................... $ 2,483,639 $ 5,080,593
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
47
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1993 1994 1995
------------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
Revenues.......................... $ 1,177,163 $1,197,977 $ 1,442,392
Costs and Expenses:
Operating....................... 382,195 405,535 498,239
Selling, General and
Administrative................. 267,376 267,349 339,002
Depreciation and Amortization... 279,009 283,183 341,171
Restricted Stock Purchase
Program........................ 11,004 11,316 12,005
------------- ------------- -------------
Total......................... 939,584 967,383 1,190,417
------------- ------------- -------------
Operating Income.................. 237,579 230,594 251,975
------------- ------------- -------------
Other (Income) Expense:
Interest........................ 282,252 315,541 363,826
Equity in Net Loss of
Affiliates..................... 12,827 25,002 70,364
Gain on Sale of Marketable
Equity Securities.............. (4,322) (1,204) (23,032)
Gain on Sale of Investments..... (17,067) -- (1,035)
Minority Interest in Net Income
(Loss) of Subsidiaries......... 184 (205) (39)
Dividend Income................. (650) (824) (715)
Other........................... (1,950) 1,279 2,542
------------- ------------- -------------
Total......................... 271,274 339,589 411,911
------------- ------------- -------------
Loss From Operations Before Income
Taxes, Extraordinary Item and
Cumulative Effect of Change in
Accounting for Income Taxes...... (33,695) (108,995) (159,936)
Income Tax Benefit................ (7,921) (40,419) (47,909)
------------- ------------- -------------
Loss Before Extraordinary Item and
Cumulative Effect of Change in
Accounting for Income Taxes...... (25,774) (68,576) (112,027)
Extraordinary Item, Net of Income
Taxes............................ -- (18,265) --
------------- ------------- -------------
Loss Before Cumulative Effect of
Change in Accounting for Income
Taxes............................ (25,774) (86,841) (112,027)
Cumulative Effect of Change in Ac-
counting for Income Taxes........ (184,996) -- --
------------- ------------- -------------
Net Loss.......................... (210,770) (86,841) (112,027)
Preferred Stock Preferences....... (34,115) (36,800) (39,802)
------------- ------------- -------------
Loss Applicable to Common Stock-
holders.......................... $ (244,885) $ (123,641) $ (151,829)
============= ============= =============
Loss Per Common Share:
Loss Before Extraordinary Item
and Cumulative Effect of Change
in Accounting for Income
Taxes.......................... $ (.53) $ (.92) $ (1.22)
Extraordinary Item.............. -- (.16) --
------------- ------------- -------------
Loss Before Cumulative Effect of
Change in Accounting for Income
Taxes.......................... (.53) (1.08) (1.22)
Cumulative Effect of Change in
Accounting for Income Taxes.... (1.62) -- --
------------- ------------- -------------
Net Loss........................ $ (2.15) $ (1.08) $ (1.22)
============= ============= =============
</TABLE>
See Notes to Consolidated Financial Statements.
48
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
COMMON
STOCK
-----------
SERIES A NET UNREALIZED
CONVERTIBLE ADDITIONAL HOLDING GAIN ON
PREFERRED CLASS CLASS PAID-IN UNEARNED MARKETABLE EQUITY
STOCK A B CAPITAL COMPENSATION SECURITIES DEFICIT
----------- ----- ----- ---------- ------------ ----------------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1,
1993................... $ 11 $ 38 $913 $ 558,529 $(34,919) $ -- $ (2,010,803)
Net Loss............... -- -- -- -- -- -- (210,770)
Accretion of Redeemable
Common Stock.......... -- -- -- (14,766) -- -- --
Issuance of Class A
Common Stock.......... -- 24 -- 46,476 -- -- --
Reclassification of
Redeemable Common
Stock to Class A
Common Stock.......... -- -- -- 5,085 -- -- --
Restricted Stock
Purchase Program:
Stock Issued (Class
B).................... -- -- -- 544 (544) -- --
Stock Vested........... -- -- -- -- 11,004 -- --
Stock Forfeited........ -- -- -- (882) 882 -- --
Stock Exchanged for
Loans................. -- -- -- (6,526) -- -- --
Stock Repurchased...... -- -- -- (11,384) -- -- --
---- ---- ---- ---------- -------- -------- ------------
Balance, December 31,
1993................... 11 62 913 577,076 (23,577) -- (2,221,573)
Adjustment due to
change in accounting
principle for
marketable equity
securities, net of
income taxes of
$56,434............... -- -- -- -- -- 84,650 --
Net Loss............... -- -- -- -- -- -- (86,841)
Accretion of Redeemable
Common Stock.......... -- -- -- (19,932) -- -- --
Restricted Stock
Purchase Program:
Stock Vested........... -- -- -- -- 11,316 -- --
Stock Forfeited........ -- -- -- (164) 164 -- --
Stock Exchanged for
Loans................. -- -- -- (611) -- -- --
Conversion of Class B
to Class A Common
Stock................. -- 8 (8) -- -- -- --
Stock Repurchased...... -- -- (2) (3,672) -- -- --
Issuance of Class A
Common Stock.......... -- 16 -- 30,484 -- -- --
Change in Unrealized
Gain, net of income
taxes of $24,081...... -- -- -- -- -- (36,654) --
---- ---- ---- ---------- -------- -------- ------------
Balance, December 31,
1994................... 11 86 903 583,181 (12,097) 47,996 (2,308,414)
Net Loss............... -- -- -- -- -- -- (112,027)
Accretion of Redeemable
Common Stock.......... -- -- -- (23,736) -- -- --
Restricted Stock
Purchase Program:
Stock Issued........... -- -- 23 46,205 (46,228) -- --
Stock Vested........... -- -- -- -- 12,005 -- --
Stock Forfeited........ -- -- -- (469) 469 -- --
Stock Exchanged for
Loans................. -- -- -- (337) -- -- --
Issuance of Class A
Common Stock in
connection with
acquisition, net of
issuance costs of
$8,111................ -- 302 -- 576,349 -- -- --
Change in Unrealized
Gain, net of income
taxes of $13,364...... -- -- -- -- -- 19,827 --
---- ---- ---- ---------- -------- -------- ------------
Balance, December 31,
1995................... $ 11 $388 $926 $1,181,193 $(45,851) $ 67,823 $(2,420,441)
==== ==== ==== ========== ======== ======== ============
</TABLE>
See Notes to Consolidated Financial Statements.
49
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1993 1994 1995
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net Loss............................... $ (210,770) $ (86,841) $ (112,027)
Adjustments to Reconcile Net Loss to
Net Cash Provided from Operating
Activities, Net of Acquisitions:
Extraordinary Item.................... -- 18,265 --
Cumulative Effect of Change in
Accounting for Income Taxes.......... 184,996 -- --
Depreciation and Amortization......... 279,009 283,183 341,171
Restricted Stock Purchase Program..... 11,004 11,316 12,005
Amortization of Deferred Financing
Costs................................ 5,554 5,759 9,184
Equity in Net Loss of Affiliates...... 12,827 25,002 70,364
Gain on Sale of Marketable Equity
Securities........................... (4,322) (1,204) (23,032)
Gain on Sale of Investments........... (17,067) -- (1,035)
Minority Interest in Net Income (Loss)
of Subsidiaries...................... 184 (205) (39)
Deferred Income Taxes................. (9,788) (42,272) (48,783)
Accrued Interest...................... 15,787 9,632 4,937
Accounts Payable, Accrued and Other
Liabilities.......................... (3,633) 66,142 5,515
Other Working Capital Changes......... (13,277) (52,473) (36,996)
----------- ----------- -----------
NET CASH PROVIDED FROM OPERATING
ACTIVITIES............................. 250,504 236,304 221,264
----------- ----------- -----------
FINANCING ACTIVITIES:
Proceeds from Borrowings............... 1,502,304 1,709,980 2,635,240
Repayment of Borrowings................ (1,369,341) (1,456,061) (806,261)
Premium Paid on Extinguishment of
Debt.................................. -- (20,924) --
Increase (Decrease) in Minority
Interests............................. (2,580) 779 3,666
Issuance of Common Stock............... 46,500 30,500 (8,111)
Repurchase of Common Stock and
Redeemable Common Stock............... (31,232) (4,755) --
----------- ----------- -----------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES............................. 145,651 259,519 1,824,534
----------- ----------- -----------
INVESTING ACTIVITIES:
Acquisitions, Net of Liabilities
Assumed and Cash Acquired............. -- (114,990) (1,243,879)
Property, Plant and Equipment.......... (185,691) (300,511) (518,161)
Investments............................ (106,819) (192,119) (280,142)
Other Assets........................... (7,182) (16,832) (25,167)
Purchase of Marketable Equity
Securities............................ (8,042) -- --
Proceeds from Sale of Marketable Equity
Securities............................ 5,719 17,553 27,357
Proceeds from Sale of Investment--net.. 1,148 -- 1,181
----------- ----------- -----------
NET CASH USED FOR INVESTING ACTIVITIES.. (300,867) (606,899) (2,038,811)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS............................ 95,288 (111,076) 6,987
BALANCE AT BEGINNING OF YEAR............ 27,352 122,640 11,564
----------- ----------- -----------
BALANCE AT END OF YEAR.................. $ 122,640 $ 11,564 $ 18,551
=========== =========== ===========
</TABLE>
See Notes to Consolidated Financial Statements.
50
<PAGE>
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
The Company is a provider of broadband communications services with
operations and investments encompassing cable television systems,
international broadband communication ventures, telecommunications and
technology ventures and programming services.
The accompanying consolidated financial statements include the accounts of
Continental Cablevision, Inc. (the Company) and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.
The preparation of the Company's consolidated financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at each
balance sheet date and during each reporting period. Significant estimates
included in the consolidated financial statements include the assigned useful
lives of property, plant and equipment and intangible assets, the carrying
value of cost method investments, certain accruals, and valuation allowances
for deferred tax assets. Actual results could differ from these estimates.
Stock Dividend
On September 28, 1995, the stockholders approved an increase in the number
of authorized shares of common stock to 625,000,000 (425,000,000 Class A and
200,000,000 Class B, respectively) and preferred stock to 200,000,000. In
addition, the Company's Board of Directors approved a stock dividend of 24
shares of Class A or B common stock for each share of Class A or B common
stock held as of the record date. Due to the significance of this stock
dividend to the Company's capital structure, all share and per share
information have been restated to present this stock dividend as though it had
occurred at the beginning of the earliest period presented.
Supplies and Property, Plant and Equipment
Supplies are stated at the lower of cost (first-in, first-out method) or
market. Property, plant and equipment are stated at cost and include
capitalized interest of $908,000, $2,377,000 and $7,233,000 in 1993, 1994 and
1995, respectively. Depreciation is provided using the straight-line group
method over estimated useful lives as follows: buildings, 25 to 40 years;
reception and distribution facilities, 3 to 15 years; and equipment and
fixtures, 4 to 12 1/2 years. (See Note 6)
Intangible and Other Assets
Intangible assets consist primarily of franchise costs and goodwill recorded
in various acquisitions. Such amounts are generally amortized over 10 to 40
years. Franchise costs, net of accumulated amortization, at December 31, 1994
and 1995 are $355,488,000 and $1,491,269,000, respectively. Other assets
represent deferred financing costs and loans to employees (see Note 11).
Accumulated amortization for intangible and other assets aggregated
$714,492,000 and $807,644,000 at December 31, 1994 and 1995, respectively.
On an ongoing basis management evaluates the amortization periods and the
recoverability of the net carrying value of intangible assets by reviewing the
performance of the underlying operations, in particular, of the future
undiscounted operating cash flows of the acquired entities.
Allowance for Doubtful Accounts
The allowance for doubtful accounts at December 31, 1994 and 1995 is
$9,771,000 and $12,476,000, respectively.
51
<PAGE>
Investments
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities (SFAS 115) requires that certain
debt and equity securities be categorized as either securities available for
sale, securities held to maturity or trading account securities. The Company
has classified all investments subject to SFAS 115 as available for sale and
as such reports these securities at fair value, with the unrealized gains or
losses, net of tax, reported as a separate component of stockholders' equity
(deficiency). Realized gains and losses are included in results of operations.
Prior to January 1, 1994, marketable equity securities were carried at either
the lower of cost or market. In accordance with SFAS 115, prior period
financial statements have not been restated to reflect the change in
accounting principle. (See Note 4)
Investments in 20-50% owned affiliates and other investments where the
Company owns less than 20% but has the ability to exert significant influence
are generally accounted for using the equity method. The excess of the cost of
equity investments over the underlying value of the net assets is amortized
over a period of approximately 10 years. Investments in less than 20% owned
companies whose equity securities do not have a readily determinable market
value are generally accounted for using the cost method. Investments in debt
securities not subject to SFAS 115 are reported at amortized cost. (See Note
5)
Derivative Financial Instruments
The Company uses derivative financial instruments (primarily Interest Rate
Exchange Agreements (Swaps) and Interest Rate Cap Agreements (Caps)) as a
means of managing interest-rate risk associated with current debt or
anticipated debt transactions that have a high probability of being executed.
These instruments are matched with either fixed or variable rate debt and
periodic cash payments are accrued on a settlement basis as an adjustment to
interest expense. Derivative financial instruments are not held for trading
purposes. Any premiums associated with the instruments are amortized over
their term and realized gains or losses as a result of the termination of the
instruments are deferred and amortized over the shorter of the remaining term
of the instrument or the underlying debt. (See Note 7)
Income Taxes
The Company implemented Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109) as of January 1, 1993. Deferred tax
liabilities and assets are recognized for the future tax consequences of
temporary differences between the financial reporting and tax bases of
existing assets and liabilities. In addition, future tax benefits, such as net
operating loss and investment tax credit carryforwards, are recognized to the
extent realization of such benefits is more likely than not. (See Note 12)
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting data
to develop the estimates of fair value. Accordingly, the estimates presented
herein are not necessarily indicative of the amounts that the Company could
realize in a current market exchange. The use of different market assumptions
and/or estimation methodologies may have a material effect on the estimated
fair value amounts. The fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1994 and
1995. Although management is not aware of any factors that would significantly
affect the estimated fair value amounts, such amounts have not been
comprehensively revalued for purposes of these financial statements since that
date, and current estimates of fair value may differ significantly from the
amounts presented herein.
52
<PAGE>
The following is a summary of the estimated fair value and carrying value of
the Company's financial instruments:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------
1994 1995
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
---------- ---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Marketable Equity Securities
(See Note 4)................. $ 122,510 $ 122,510 $ 151,378 $ 151,378
Cost Method Investments (See
Note 5)...................... 33,175 47,322 35,663 54,221
LIABILITIES
Total Debt, Swaps and Caps
(See Note 7)................. 3,449,907 3,516,588 5,285,159 5,418,137
Redeemable Common Stock (See
Note 9)...................... 232,399 329,011 256,135 353,704
</TABLE>
The Company believes carrying value approximates fair value for all other
financial instruments.
Loss per Common Share
Loss per common share is calculated by dividing the loss available to common
stockholders by the weighted average number of common shares outstanding of
114,055,000, 114,334,000 and 124,882,000 for the years ended December 31,
1993, 1994 and 1995, respectively. Shares of the Series A Convertible
Preferred Stock were not assumed to be converted into shares of common stock
since the result would be anti-dilutive.
Reclassifications
Certain amounts have been reclassified from previous presentation in the
accompanying consolidated financial statements.
Recent Accounting Standards and Pronouncements
The Accounting Standards Executive Committee of the AICPA adopted Statement
of Position 94-6 (SOP) on December 30, 1994. This SOP, Disclosure of Certain
Significant Risks and Uncertainties, is effective for fiscal years ending
after December 15, 1995. The disclosures required by the SOP focus primarily
on the nature of an entity's operations, the use of estimates in preparation
of financial statements and on risks and uncertainties that could
significantly affect the amounts reported in the financial statements. The
company's consolidated financial statements are in compliance with this
statement.
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 (SFAS 121), Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,
which is effective for fiscal years beginning after December 15, 1995. SFAS
121 addresses the accounting for potential impairment of long-lived assets.
The effect of implementing SFAS 121 is expected to be immaterial to the
Company's financial position and results of operations.
In October 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS
123). SFAS 123, which is effective for fiscal years beginning after December
15, 1995, establishes financial accounting and reporting requirements for
stock-based employee compensation plans. The effect of implementing SFAS 123
is expected to be immaterial to the Company's financial position and results
of operations.
53
<PAGE>
2. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
The following represents non-cash investing and financing activities and
cash paid for interest and income taxes during the years ended December 31,
1993, 1994 and 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1994 1995
-------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Acquisitions:
Fair Value of Assets Acquired............. $ -- $114,990 $2,135,941
Deferred Taxes and Minority Interest
Assumed.................................. -- -- (257,946)
Net Working Capital Liabilities Assumed... -- -- (49,354)
Fair Value of Class A Common Stock
Issued................................... -- -- (584,762)
-------- -------- ----------
Cash Paid for Acquisitions.............. $ -- $114,990 $1,243,879
======== ======== ==========
Dispositions:
Gain on Sale of Investment (See Note 5)... $ 15,919 $ -- $ --
Deferred Gain on Sale of Investment....... 165 -- --
Bases of Assets Sold...................... 429 -- --
Gain on Sale of Marketable Equity
Securities............................... 3,471 -- --
Bases of Property Received................ (19,984) -- --
-------- -------- ----------
Proceeds Received from Disposition...... $ -- $ -- $ --
======== ======== ==========
Accretion of Redeemable Common Stock........ $ 14,766 $ 19,932 $ 23,736
======== ======== ==========
Accretion of Series A Convertible Preferred
Stock...................................... $ 34,115 $ 36,800 $ 39,802
======== ======== ==========
Cash Paid During the Year for Interest...... $261,846 $299,115 $ 369,436
======== ======== ==========
Cash Paid During the Year for Income Taxes.. $ 2,370 $ 2,411 $ 1,070
======== ======== ==========
</TABLE>
3. ACQUISITIONS
All acquisitions have been accounted for as purchases. Results of operations
of the companies and businesses acquired have been included in the
accompanying consolidated financial statements from their respective dates of
acquisition.
In June 1994, the Company purchased cable television systems in Manchester,
New Hampshire for approximately $47,990,000, and in November 1994 purchased
cable television systems in Florida for approximately $67,000,000.
The Company purchased cable television systems in the Chicago, Illinois area
for approximately $168,500,000 in August 1995 and cable television systems in
California for approximately $17,000,000 in September 1995. In October 1995,
the Company purchased cable television systems in Michigan for approximately
$155,000,000. Also, in October 1995, the Company, Providence Journal, King
Holding Corporation, King Broadcasting Company and The Providence Journal
Company consummated a merger (the Merger) in which the Providence Journal
(which at the time of the Merger included only the Providence Journal cable
businesses and assets) was merged with and into the Company. In connection
with the Merger, the Company purchased the cable television businesses and
assets of King Broadcasting Company (the King Cable Assets, and collectively
with Providence Journal, Providence Journal Cable). The total consideration
involved in the Merger consisted of $405,000,000 in cash, the repayment of
approximately $410,000,000 of existing indebtedness (see Note 7) and the
issuance of 30,142,394 shares of the Company's Class A common stock at an
ascribed value of $584,762,000. In December 1995, the Company purchased for
$88,000,000 in cash the non-owned interests in and discharged certain
liabilities of N-Com Limited Partnership II (N-Com), which owns and operates
cable television systems in Michigan.
54
<PAGE>
The summarized unaudited pro forma results of operations for the years ended
December 31, 1994 and 1995, assuming the acquisitions above occurred as of the
beginning of each respective period, are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1994 1995
------------ ------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Revenues......................................... $ 1,586,829 $ 1,732,311
Depreciation and Amortization.................... 388,940 440,109
Operating Income................................. 275,652 263,768
Net Loss......................................... (124,592) (184,671)
Net Loss per Common Share........................ (0.86) (1.27)
</TABLE>
4. MARKETABLE EQUITY SECURITIES
Effective January 1, 1994, the Company adopted SFAS 115 and classified
marketable equity securities as available for sale. These investments had a
fair value of $183,245,000 and a cost of $42,161,000 at the date of adoption.
The unrealized gain of $141,084,000, less income taxes of $56,434,000 was
reported as an adjustment to stockholders' equity (deficiency). These
securities have an aggregate cost basis of $42,161,000 and $37,837,000 as of
December 31, 1994 and 1995, respectively. During the year ended December 31,
1994, the Company recognized a gross unrealized holding loss of $60,735,000
and a gross realized gain of $1,204,000. During the year ended December 31,
1995, the Company recognized a gross unrealized holding gain of $33,191,000
and a gross realized gain of $23,032,000.
5. INVESTMENTS
The Company's investments consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
APPROXIMATE -----------------
OWNERSHIP 1994 1995
----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Equity Method Investments:
Teleport Communications Group, Inc. (TCG)
and TCG Partners.......................... 20% $ 93,954 $100,058
Regional TCG Partnerships.................. 10%-30% 34,609 45,603
PrimeStar Partners L.P. (PrimeStar)........ 10% 12,500 16,311
Fintelco, S.A. ............................ 50% 146,040 164,144
Optus Vision Pty Ltd (Optus Vision)........ 47% -- 150,232
Singapore Cablevision Private Limited
(SCV)..................................... 25% 8,484 15,023
Other...................................... 20%-50% 6,717 11,318
-------- --------
302,304 502,689
Cost Method Investments...................... 33,175 35,663
-------- --------
Total.................................... $335,479 $538,352
======== ========
</TABLE>
Estimated fair value of cost method investments is $47,322,000 and
$54,221,000 as of December 31, 1994 and 1995, respectively, based on various
valuation methods.
In October 1993, the Company exchanged its equity interest in Insight
Communications Company U.K., L.P. for stock representing less than a 5%
interest in International CableTel, Incorporated (CableTel), a
55
<PAGE>
telecommunications company operating in the United Kingdom. The Company
accounted for the investment in CableTel as a marketable equity security and
recorded a gain of $15,919,000. During the year ended December 31, 1994, the
CableTel marketable equity securities were sold at an additional realized gain
of $1,204,000.
As of December 31, 1995, the Company had invested $66,000,000 in equity and
had made commitments to TCG to loan up to $69,920,000 through 2003, of which
$53,800,000 was outstanding as of December 31, 1995. These loans bear interest
at approximately 7% and are due on the earlier of the seventh anniversary of
the borrowing or May 2003. TCG and its affiliates are telecommunications
companies which operate fiber-optic networks in the United States.
As of December 31, 1995, a wholly owned subsidiary of the Company issued a
standby letter of credit of $56,250,000 on behalf of PrimeStar, a limited
partnership that provides direct broadcast satellite services. The standby
letter of credit guarantees a portion of the financing PrimeStar incurred to
construct a satellite system and is collateralized by certain marketable
equity securities with a carrying value of $151,378,000 as of December 31,
1995. As a result of these commitments and other qualitative factors, the
Company accounts for its investment in PrimeStar using the equity method.
As of December 31, 1994 and 1995, the Company had advanced $114,000,000 and
$150,500,000, respectively, in cash to Fintelco, S.A. which owns and operates
cable television systems in Argentina. In addition, the Company has recorded
commitments to contribute an additional $24,164,000 to Fintelco, S.A.
As of December 31, 1995, the Company had invested approximately $169,087,000
in Optus Vision, a joint venture which is constructing a broadband
communications network in Australia. The Company currently holds a 46.5%
interest in Optus Vision.
As of December 31, 1995, the Company had invested $17,614,000 in Singapore
Cablevision Pte Ltd (SCV), which owns and operates a cable television system
in Singapore. The Company is committed to make additional capital
contributions to SCV of approximately $27,000,000 to be paid over time. In
addition, the Company has made commitments to SCV to loan up to approximately
$45,000,000 if third party debt financing cannot be obtained by SCV.
The Company also has various investments in cable television companies which
are not individually material to the Company. The Company has approximately a
one-third ownership interest in these companies and therefore accounts for
these investments using the equity method.
The major components of all equity method investees' combined financial
position and results of operations are as follows (reflects the Company's
proportionate share for the period which the investments are owned):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Property, Plant and Equipment................................ $226,000 $290,000
Total Assets................................................. 495,000 574,000
Total Liabilities............................................ 387,000 420,000
Equity....................................................... 108,000 154,000
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1994 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Revenues.......................................... $ 63,000 $146,000 $244,000
Depreciation and Amortization..................... 22,000 27,000 41,000
Operating Loss.................................... (5,000) (4,000) (40,000)
Net Loss.......................................... (19,000) (28,000) (67,000)
</TABLE>
56
<PAGE>
6. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Land and Buildings.................................. $ 56,630 $ 84,254
Reception and Distribution Facilities............... 2,122,304 2,897,745
Equipment and Fixtures.............................. 288,950 377,657
----------- -----------
Total............................................. 2,467,884 3,359,656
Less--Accumulated Depreciation...................... 1,114,095 1,252,183
----------- -----------
Property, Plant and Equipment--net................ $ 1,353,789 $ 2,107,473
=========== ===========
</TABLE>
7. DEBT
Total debt outstanding is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
1994 Credit Facility................................ $ 1,373,790 $ 1,586,200
1995 Credit Facility................................ -- 1,039,000
Insurance Company Notes............................. 150,000 125,750
Senior Notes and Debentures......................... 1,400,000 2,000,000
Subordinated Debt................................... 500,000 500,000
Other............................................... 26,117 34,209
----------- -----------
Total............................................. $ 3,449,907 $ 5,285,159
=========== ===========
</TABLE>
In October 1994, the Company amended and restated its bank indebtedness by
entering into a $2,200,000,000 unsecured reducing revolver credit agreement
(the 1994 Credit Facility). Credit availability under the 1994 Credit Facility
will decrease annually commencing in December, 1997 with a final maturity in
October 2003. Borrowings under the 1994 Credit Facility bear interest at a
rate between the agent bank's prime rate (8 1/2% as of December 31, 1994 and
1995) and prime plus 1/2%, depending on certain financial tests. At the
Company's option, most borrowings bear interest at spreads over LIBOR. The
Company's obligations under the 1994 Credit Facility are guaranteed by the
Company's Restricted Subsidiaries, (collectively with the Company, the
Restricted Group) which represent the majority of the Company's owned and
operated cable systems, excluding those acquired in the Providence Journal
Cable and Michigan acquisitions (collectively, the New Borrowing Group).
Prepayments are required from the proceeds of certain sales of Restricted
Subsidiaries' assets.
During 1995, certain of the Company's subsidiaries entered into a
$1,200,000,000 unsecured reducing revolver credit facility (the 1995 Credit
Facility). Initial borrowings under the 1995 Credit Facility were utilized to
finance the acquisitions of Providence Journal Cable and the Michigan cable
systems. Credit availability under the 1995 Credit Facility will decrease
annually commencing in December 1998 with a final maturity in September 2004.
Borrowings under the 1995 Credit Facility bear interest at the agent bank's
prime rate (8 1/2% at December 31, 1995) plus 1/2% or spreads over LIBOR. The
New Borrowing Group's obligations under the 1995 Credit Facility are
guaranteed by substantially all of the New Borrowing Group subsidiaries.
Prepayments are required from the proceeds of certain sales of New Borrowing
Group assets.
The Insurance Company Notes are unsecured, bear interest at 10.12%, require
increasing semi-annual repayments through July 1, 1999 and rank pari passu in
right of payment with the 1994 Credit Facility.
57
<PAGE>
The Company's unsecured Senior Notes and Debentures rank pari passu in right
of payment with the Insurance Company Notes and 1994 Credit Facility
(collectively, Senior Debt) and are non-redeemable prior to maturity, except
for the 9 1/2% Senior Debentures. The 9 1/2% Senior Debentures are redeemable
at the Company's option at par plus declining premiums beginning in 2005. In
addition, at any time prior to August 1996, the Company may redeem a portion
of the 9 1/2% Senior Debentures at a premium with the proceeds from any
offering by the Company of its capital stock. In December 1995, the Company
issued $600,000,000 of 8.30% Senior Notes. No sinking fund is required for any
of the Senior Notes and Debentures.
The Senior Notes and Debentures consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1994 1995
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
8 1/2% Senior Notes, Due September 15, 2001........... $ 200,000 $ 200,000
8 5/8% Senior Notes, Due August 15, 2003.............. 100,000 100,000
8 7/8% Senior Debentures, Due September 15, 2005...... 275,000 275,000
8.30% Senior Notes, Due May 15, 2006.................. -- 600,000
9% Senior Debentures, Due September 1, 2008........... 300,000 300,000
9 1/2% Senior Debentures, Due August 1, 2013.......... 525,000 525,000
---------- ----------
Total............................................... $1,400,000 $2,000,000
========== ==========
</TABLE>
The Company's Senior Debt limits the Restricted Group with respect to, among
other things, payment of dividends, the repurchase of capital stock in excess
of $724,000,000, the creation of liens and additional indebtedness, property
dispositions, investments and leases, and requires certain minimum ratios of
cash flow to debt and cash flow to related fixed charges. In addition, the
1995 Credit Facility has similar limitations with respect to the New Borrowing
Group.
The Company's Subordinated Debt is redeemable at the Company's option at par
plus declining premiums at various dates, and is subordinated to the Company's
Senior Debt. Subordinated Debt consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
10 5/8% Senior Subordinated Notes, Due June 15, 2002..... $100,000 $100,000
Senior Subordinated Floating Rate Debentures,
Due November 1, 2004.................................... 100,000 100,000
11% Senior Subordinated Debentures, Due June 1, 2007..... 300,000 300,000
-------- --------
Total.................................................. $500,000 $500,000
======== ========
</TABLE>
In November 1994, the Company redeemed $325,000,000 of 12 7/8% Senior
Subordinated Debentures for a price equal to 106.438% of their principal
amounts plus accrued interest thereon. As a result of the redemption and the
write-off of $7,176,000 of unamortized deferred financing costs, the Company
recorded an extraordinary loss of $28,100,000, less an income tax benefit of
$9,835,000.
The Senior Subordinated Floating Rate Debentures bear interest at LIBOR plus
3%. In February 1996, the Company redeemed the Senior Floating Rate Debentures
for a price equal to the principal amount plus accrued interest thereon.
58
<PAGE>
Derivative financial instruments used to manage interest rate risk include
Swaps and Caps. The following table summarizes the terms of the Company's
existing Swaps and Caps as of December 31, 1995:
<TABLE>
<CAPTION>
AVERAGE
NOTIONAL AMOUNT MATURITIES INTEREST RATE
--------------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Fixed to Variable Swaps........... $1,425,000 1998-2003 5.9%
Variable to Fixed Swaps........... 900,000 1996-2000 8.9%
Caps (carrying value $1,380,000 in
Other Assets).................... 800,000 1996-1997 8.0%
</TABLE>
The Company's credit risk if the counterparties failed to perform under
these agreements, would be limited to the periodic settlement of amounts
receivable under these agreements. As of December 31, 1994 and 1995, the net
amounts payable by the Company in connection with the Swaps were $5,000,000
and $6,460,000, respectively.
The Company's variable-rate Swaps, which are indexed to six month LIBOR,
include a $75,000,000 Swap that may be extended by the counterparty at a
certain time in the future under the same terms and conditions at the existing
contracted rate. The Company entered into this Swap to further manage its
interest rate risk. The Swap is related to specific portions of the Company's
fixed-rate debt and is with a counterparty that is a lender in both the 1994
Credit Facility and 1995 Credit Facility.
The fair value of total debt, Swaps and Caps is estimated to be
$3,516,588,000 and $5,418,137,000 as of December 31, 1994 and 1995,
respectively, and is based on recent trades and dealer quotes. The components
of the fair value are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Carrying Value of Debt............................ $ 3,449,907 $ 5,285,159
Unrealized (Gain) Loss on Debt.................... (130,442) 85,195
Unrealized Loss on Floating to Fixed Rate Swaps... 14,247 41,495
Unrealized Loss on Fixed to Floating Rate Swaps... 184,903 6,177
Unrealized (Gain) Loss on Interest Rate Cap
Agreements....................................... (2,027) 111
----------- -----------
Total........................................... $ 3,516,588 $ 5,418,137
=========== ===========
</TABLE>
Annual maturities of debt for the five years subsequent to December 31,
1995, are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
1996.......................................................... $ 29,641
1997.......................................................... 32,108
1998.......................................................... 33,551
1999.......................................................... 112,267
2000.......................................................... 558,903
Thereafter.................................................... 4,518,689
-----------
Total....................................................... $ 5,285,159
===========
</TABLE>
8. COMMITMENTS
The Company and its subsidiaries have entered into various operating lease
agreements, with total commitments of $48,685,000 as of December 31, 1995.
Commitments under such agreements for the years 1996-2000 approximate
$11,374,000, $8,629,000, $7,024,000, $5,832,000 and $3,895,000, respectively.
The Company and its subsidiaries also rent pole space from various companies
under agreements which are generally terminable on short notice. Lease and
rental costs charged to operations for the years ended December 31, 1993,
1994, and 1995 were $18,378,000, $20,113,000 and $21,696,000, respectively.
59
<PAGE>
9. REDEEMABLE COMMON STOCK
Pursuant to a Stock Liquidation Agreement with certain stockholders (the
Selling Stockholders), the Company committed to repurchase certain shares of
its common stock (Redeemable Common Stock) in December 1998 or January 1999 at
a defined purchase price (Purchase Price). The Purchase Price is the greater
of the net proceeds per share from the liquidation of the Company less a 22.5%
discount or the estimated amount of net proceeds per share from an
underwritten public offering of the Company's common stock.
The fair value of the Redeemable Common Stock is estimated at $329,011,000
and $353,704,000 as of December 31, 1994 and 1995, respectively, based on the
estimate of the Purchase Price at these dates of $19.72 and $21.20 per share,
respectively, as determined by an investment banker for the Company.
In the event the Company is unable to meet its commitments under the Stock
Liquidation Agreement, the Selling Stockholders may cause the sale of all or
substantially all of the assets of the Company.
During 1993, the Company repurchased 1,604,400 shares of Redeemable Common
Stock for approximately $31,125,000 and reclassified 411,175 shares of
Redeemable Common Stock as Class A Common Stock based on an agreement with a
certain stockholder to remove such shares from the 1998-1999 Share Repurchase
Program. During 1994, the Company repurchased 27,475 shares of Class A Common
Stock and 217,625 shares of Class B Common Stock, of which 82,900 were shares
of Redeemable Common Stock.
The initial estimated repurchase cost for the Redeemable Common Stock has
been adjusted by periodic accretions through the repurchase dates based on the
interest method of the difference between the initial estimate and the
subsequent estimates of the Purchase Price.
10. STOCKHOLDERS' EQUITY (DEFICIENCY)
The Company has two classes of stock: Class A Common Stock, which has one
vote per share, and Class B Common Stock, which has ten votes per share. At
December 31, 1995, there were 38,885,294 and 109,151,550 Class A and Class B
shares of common stock outstanding, respectively. Stockholders' Equity
(Deficiency) reflects only 38,780,694 and 92,572,000 Class A and Class B
shares of common stock outstanding, respectively, due to the classification of
16,684,150 shares as Redeemable Common Stock.
In 1993 and 1994, the Company sold 2,396,900 shares of Class A Common Stock
for approximately $46,500,000 and 1,572,150 shares of Class A Common Stock for
approximately $30,500,000, respectively.
Each share of Series A Convertible Preferred Stock (Convertible Preferred)
is entitled to 250 votes per share, shares equally with each common share in
all dividends and distributions, and is convertible into 25 shares of common
stock, at any time, at the option of the holder. The Convertible Preferred
stockholders have the right to sell their shares in a public offering by
causing the Company to register such shares under the Securities Act of 1933.
Certain other stockholders of the Company have similar registration rights.
The Convertible Preferred has a liquidation preference equal to the greater
of its Accreted Value or the amount which would be distributed to common
stockholders, assuming conversion of the Convertible Preferred. The Accreted
Value assumes a yield of 8% per annum, compounded semi-annually in arrears on
the $350 purchase price per share. During the year, the carrying value of the
Convertible Preferred has been increased by $39,802,000 to reflect the
Accreted Value of $527,578,000 as of December 31, 1995.
After June 1997, if the value of the common stock is greater than 137.5% of
the then Accreted Value, the Company will have the right to convert each
outstanding share of Convertible Preferred into one share of common stock.
In June 2002, each outstanding share of Convertible Preferred may be
converted at the option of the holder or the Company into a number of common
shares which will have a value equal to the Accreted Value. The
60
<PAGE>
Company may, at its sole option, purchase for cash at the Accreted Value all
or part of the Convertible Preferred instead of accepting or requiring
conversion.
The Company paid aggregate fees and underwriting discounts to Lazard Freres
& Company (Lazard) of approximately $7,700,000 during 1993 and $9,000,000
during 1995 in connection with certain investment banking services. Two
directors of the Company are general partners of Lazard and managing directors
of Corporate Partners, L.P., which purchased 728,953 shares of Convertible
Preferred on the same terms as all other purchasers of Convertible Preferred.
11. RESTRICTED STOCK PURCHASE PROGRAM
The Company maintains a Restricted Stock Purchase Program under which
certain employees of the Company, selected by the Board of Directors, are
permitted to buy shares of the Company's common stock at the par value of one
cent per share. The shares remain wholly or partly subject to forfeiture for
seven years, during which time a pro rata portion of the shares becomes
"vested" at six-month intervals. Upon termination of employment with the
Company, an employee must resell to the Company, for the price paid by the
employee, the employee's shares which are not then vested. For financial
statement presentation, the difference between the purchase price and the fair
market value at the date of issuance (as determined by the Board of Directors)
is recorded as additional paid-in capital and unearned compensation, and
charged to operations through 2001 as the shares vest. Shares of common stock
issued under the program for the years ended December 31, 1993, 1994 and 1995
were 40,000, none and 2,382,925, respectively. At December 31, 1994 and 1995,
1,003,925 and 2,496,025 shares, respectively, were not yet vested. In
connection with the Restricted Stock Purchase Program, a wholly-owned
subsidiary of the Company has loaned approximately $13,541,000 and $27,746,000
at December 31, 1994 and 1995, respectively, to the participating employees to
fund their individual tax liabilities. These loans are due through 2001, bear
interest at a range from 5% to 8% and are included in Other Assets in the
accompanying financial statements.
12. INCOME TAXES
Effective January 1, 1993, the Company implemented the provisions of SFAS
109 and recognized an additional charge of $184,996,000 for deferred income
taxes. Such amount has been reflected in the consolidated financial statements
as the cumulative effect of change in accounting for income taxes.
During 1993, the Company revised its estimated annual effective tax rate to
reflect a change in the federal statutory rate from 34% to 35%. The income tax
benefit for the year decreased approximately $4,182,000 as a result of
applying the newly enacted federal tax rates to deferred tax balances as of
January 1, 1993.
The provision (benefit) for income taxes is comprised of:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal...................................... $ 647 $ (196) $ (238)
State........................................ 1,220 2,049 1,112
Deferred:
Federal...................................... (7,968) (35,549) (42,416)
State........................................ (1,820) (6,723) (6,367)
------- -------- --------
Total...................................... $(7,921) $(40,419) $(47,909)
======= ======== ========
Extraordinary Item--Deferred................... $ -- $ (9,835) $ --
======= ======== ========
</TABLE>
61
<PAGE>
Differences between the effective income tax rate and the federal statutory
rate are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Federal Statutory Rate....................... (35.0)% (35.0)% (35.0)%
Enacted Tax Rate Change...................... 12.4% -- --
Non-Deductible Equity in Net Losses of For-
eign Affiliates............................. -- -- 6.5%
State Income Tax, Net of Federal Income Tax
Benefit..................................... (1.2)% (2.2)% (2.4)%
Other........................................ .3% .5% .9%
------- ------- -------
Total...................................... (23.5)% (36.7)% (30.0)%
======= ======= =======
</TABLE>
The tax effects of temporary differences and carryforwards that give rise to
significant portions of deferred tax assets and liabilities consist of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred Tax Liabilities:
Depreciation and Amortization...................... $(506,560) $(801,068)
Unrealized Holding Gain on Marketable Equity
Securities........................................ (32,353) (45,717)
Other.............................................. (5,245) (15,790)
Deferred Tax Assets:
Net Operating Loss Carryforwards................... 460,469 570,739
Tax Credit Carryforwards........................... 59,397 57,492
Other.............................................. 60,836 68,729
Valuation Allowance................................ (153,026) (141,426)
--------- ---------
Net Deferred Tax Liability........................... $(116,482) $(307,041)
========= =========
</TABLE>
The Company and its subsidiaries have net operating loss carryforwards of
approximately $1,131,000,000 for federal income tax purposes, expiring through
2010, and investment tax credit carryforwards of approximately $57,500,000
expiring through 2005.
Valuation allowances have been established for uncertainties in realizing
transitional investment tax credit carryforwards, the tax benefit of certain
limited use federal net operating losses and certain state net operating
losses. If in future periods the realization of tax credit and net operating
loss carryforwards acquired as a result of business combinations becomes more
likely than not, $36,000,000 of the valuation allowance will be allocated to
reduce goodwill and other intangible assets. The net change of the valuation
allowance during 1994 and 1995 was a decrease of $4,445,000 and $11,600,000,
respectively. The decreases were due primarily to the expiration of state net
operating loss carryforwards and investment tax credit carryforwards.
13. RETIREMENT AND MATCHED SAVINGS PLANS
The Company has a non-contributory defined benefit plan covering
substantially all employees. Benefits under the plan are determined based on
formulas which reflect employees' years of service and the average of the five
consecutive years of highest compensation. The Company's policy is to make
contributions sufficient to meet the minimum funding requirements of ERISA.
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<PAGE>
The components of net periodic pension expense are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1993 1994 1995
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Service Cost-Benefits
Earned During the Year... $ 2,584 $ 2,934 $ 2,919
Interest Cost on Projected
Benefit Obligation....... 1,336 1,576 1,896
Actual Loss (Return) on
Plan Assets.............. (136) 417 (3,039)
Other Items............... (615) (1,514) 1,672
------- -------- --------
Total................... $ 3,169 $ 3,413 $ 3,448
======= ======== ========
</TABLE>
The following table sets forth the funded status and amounts recognized in
the Company's balance sheet:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1994 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Actuarial Present Value of:
Vested Benefit Obligation............................. $ (9,159) $(15,341)
Non-Vested Benefit Obligation......................... (1,201) (1,465)
-------- --------
Accumulated Benefit Obligation.......................... (10,360) (16,806)
Effect of Projected Salary Increases.................... (12,691) (12,041)
-------- --------
Projected Benefit Obligation............................ (23,051) (28,847)
Plan Assets at Market Value............................. 12,397 18,498
-------- --------
Funded Status........................................... (10,654) (10,349)
Deferred Transition Loss................................ 1,194 1,124
Unrecognized Prior Service Cost......................... (511) (483)
Unrecognized Net Loss................................... 2,233 1,963
-------- --------
Accrued Pension Cost................................ $ (7,738) $ (7,745)
======== ========
</TABLE>
The actuarial assumptions as of the year-end measurement date are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1994 1995
------ ------
<S> <C> <C>
Discount Rate................................................ 8.75% 7.25%
Expected Long-Term Rate of Return............................ 9.00% 9.00%
Rate of Increase in Future Salary Levels..................... 5.75% 4.25%
</TABLE>
At December 31, 1995, plan assets consist of equity and debt securities,
U.S. Government obligations and cash equivalents.
The Company sponsors a defined contribution Matched Savings Plan covering
substantially all of its employees. The Company's contribution for this plan
is based on a percentage of each participant's salary. Total costs for the
years ended December 31, 1993, 1994 and 1995 were approximately $2,550,000,
$2,652,000 and $2,907,000, respectively.
Effective in 1995, the Company approved a Supplemental Executive Retirement
Plan ("SERP"). The SERP provides additional retirement benefits for any
employee of Continental whose accrued benefits under the Continental
Retirement Plan are limited by the Internal Revenue Code's (the "Code") limit
on compensation which may be taken into account under that plan or by the
Code's Section 415 limit on the size of retirement benefits which may be
funded under that plan. The SERP is an unfunded, non tax-qualified plan.
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<PAGE>
The components of net periodic pension cost for the supplemental retirement
plan for 1995 are as follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1995
-----------------
(IN THOUSANDS)
<S> <C>
Service Cost--Benefits Earned During the Year.............. $ 77
Interest Cost on Projected Benefit Obligation.............. 124
Other Items................................................ 79
----
Total.................................................... $280
====
</TABLE>
The actuarial assumptions as of the year-end measurement date are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
<S> <C>
Discount Rate.............................................. 7.25%
Rate of Increase in Future Salary Levels................... 4.25%
</TABLE>
The funded status of the supplemental retirement plan as of December 31,
1995 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------
(IN THOUSANDS)
<S> <C>
Actuarial Present Value:
Vested Benefit Obligation................................ $ (651)
Non-Vested Benefit Obligation............................ (2)
-------
Accumulated Benefit Obligation............................. (653)
Effect of Projected Salary Increases....................... (1,146)
-------
Projected Benefit Obligation............................... (1,799)
Plan Assets at Market...................................... --
-------
Funded Status.............................................. (1,799)
Unrecognized Prior Service................................. 1,341
Unrecognized Net Loss...................................... 178
-------
Accrued Pension Cost..................................... $ (280)
=======
</TABLE>
14. CONTINGENCIES
The Company is subject to legal proceedings and claims which arise in the
ordinary course of business. In the opinion of management, the ultimate
resolution of such legal proceedings and claims will not have a material
effect on the consolidated financial position and results of operations of the
Company.
15. LEGISLATION AND REGULATION
Pursuant to the Cable Television Consumer Protection and Competition Act of
1992, the FCC in April 1993 promulgated rate regulations that establish
maximum allowable rates for cable television services, except for services
offered on a per-channel or per-program basis. The FCC's regulations require
rates for equipment and installations to be cost-based, and require reasonable
rates for regulated cable television services to be established based on, at
the election of the cable television operator, either application of the FCC's
benchmark formula or a cost-of-service showing pursuant to standards adopted
by the FCC. In addition, the FCC regulations limit future rate increases for
regulated services.
Under current FCC regulations, a rate complaint or certification of a local
franchising authority is required to regulate a system. In accordance with the
regulations, the Company either reduced rates under the FCC's benchmark
methodology or supported current rates by cost-of-service showings for
regulated franchises. Certain positions taken by the Company in its cost-of-
service filings were based on provisions of the FCC's interim cost-of-service
rules that allowed certain "presumptions" in the rules to be overcome on a
case-by-case basis. While
64
<PAGE>
the Company believes that its showings in this regard were sufficient, the
results of these cases were unknown. As a result, the Company recorded a
revenue reserve during 1994.
On August 3, 1995, a social contract between the Company and the FCC (the
Social Contract) was adopted. The Social Contract is a six-year agreement
covering all of the Company's existing franchises, including those that are
currently unregulated, and settles the Company's pending cost-of-service rate
cases and benchmark cable programming service tier (CPS) rate cases. Benchmark
broadcast service tier (BBT) cases will be resolved by the Company and local
franchising authorities. As part of the resolution of these cases, the Company
agrees to, among other things, (i) invest at least $1.35 billion in domestic
system rebuilds and upgrades in the next six years to expand channel capacity
and improve system reliability and picture quality, (ii) reduce its BBT
service rates and (iii) make in-kind refunds to affected subscribers totaling
a retail value of approximately $9.5 million. In 1995, the Company adjusted
the revenue reserve recorded in 1994 to reflect the impact of the Social
Contract. The resolution of pending rate cases was without any finding by the
FCC of any wrongdoing by the Company.
The Social Contract also provides for its termination in the future if the
laws and regulations applicable to services offered in any Continental
franchise change in a manner that would have a material favorable financial
impact on Continental. In that instance, the Company may petition the FCC to
terminate the Social Contract.
In February 1996, the Telecommunications Act of 1996 was enacted, which
deregulates CPS rates after March 31, 1999.
16. EVENTS SUBSEQUENT TO INDEPENDENT AUDITORS' REPORT (UNAUDITED)
In February 1996, the Company signed a definitive Agreement and Plan of
Merger (the Merger Agreement) providing for the merger of the Company with and
into U S WEST, Inc., with U S WEST, Inc. being the surviving corporation. The
Merger Agreement provides for the stockholders of the Company to receive a
combination of cash and securities of U S WEST, Inc. valued at approximately
$5.3 billion in exchange for all of the outstanding stock of the Company.
Additionally, U S WEST, Inc. will assume the Company's outstanding
indebtedness and other liabilities. The merger is contingent, among other
things, upon receiving approval from the Company's stockholders and necessary
regulatory approvals.
On March 6, 1996, a proposed amendment (the Social Contract Amendment) to
the Social Contract was released by the FCC for public comment. If adopted,
the Social Contract Amendment would incorporate all franchises acquired during
1995 into the Social Contract, and settle most CPS-rate cases of the acquired
franchises. The Social Contract Amendment provides for cash refunds of $1.6
million (for which reserves were recorded as of December 31, 1995) and
increases the Company's investment commitment in domestic system rebuilds and
upgrades from $1.35 billion to $1.7 billion.
In March 1996, the Company entered into a purchase agreement to acquire the
non-owned interests in and discharge or assume certain liabilities of
Meredith/New Heritage Strategic Partners, L.P. for approximately $219,200,000.
65
<PAGE>
17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Quarterly results of operations for 1994 and 1995 are summarized below:
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
1994
Revenues................... $ 290,764 $ 298,626 $ 296,246 $ 312,341
Depreciation and
Amortization.............. 67,458 68,065 71,277 76,383
Restricted Stock Purchase
Program................... 2,838 2,837 2,827 2,814
Operating Income........... 59,284 61,507 53,565 56,238
Loss Before Extraordinary
Item...................... (13,640) (9,981) (21,871) (23,084)
Extraordinary Item......... -- -- -- (18,265)
Net Loss................... (13,640) (9,981) (21,871) (41,349)
Loss Applicable to Common
Stockholders.............. (22,518) (18,990) (31,309) (50,824)
Loss Per Common Share:
Loss Before Extraordinary
Item.................... (0.19) (0.16) (0.27) (0.28)
Extraordinary Item....... -- -- -- (0.16)
Net Loss................. (0.19) (0.16) (0.27) (0.44)
1995
Revenues................... $ 318,576 $ 331,472 $ 342,445 $ 449,899
Depreciation and
Amortization.............. 74,422 73,990 82,156 110,603
Restricted Stock Purchase
Program................... 2,850 3,055 3,042 3,058
Operating Income........... 59,192 61,361 61,400 70,022
Net Loss................... (6,902) (26,165) (25,065) (53,895)
Loss Applicable to Common
Stockholders.............. (16,505) (35,909) (35,273) (64,142)
Loss Per Common Share:
Net Loss................. (0.14) (0.30) (0.30) (0.44)
</TABLE>
66
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The positions held by each Director and Executive Officer of Continental are
shown below. There are no family relationships among the following persons.
<TABLE>
<CAPTION>
NAME OF DIRECTOR OR EXECUTIVE OFFICER POSITION WITH CONTINENTAL
------------------------------------- -------------------------
<S> <C>
Amos B. Hostetter, Jr.(1)....................... Chairman of the Board, Chief
Executive Officer and Director
Timothy P. Neher................................ Vice Chairman of the Board and
Director
William T. Schleyer............................. President and Chief Operating
Officer
Roy F. Coppedge III(2).......................... Director
Stephen Hamblett................................ Director
Jonathan H. Kagan(1), (2)....................... Director
Robert B. Luick................................. Director and Secretary
Henry F. McCance................................ Director
Trygve E. Myhren(2)............................. Director
Lester Pollack.................................. Director
Michael J. Ritter............................... Director
Vincent J. Ryan(1).............................. Director
Ronald H. Cooper................................ Executive Vice President
Jeffrey T. DeLorme.............................. Executive Vice President
Nancy Hawthorne................................. Senior Vice President and Chief
Financial Officer
</TABLE>
- --------
(1) Members of the Executive Committee
(2) Members of the Audit Committee
Continental has a classified Board composed of three classes. Each class
serves for three years, with one class being elected each year. The term of
the Class A Directors, Messrs. McCance, Coppedge, Ritter and Luick, will
expire at the 1996 Annual Meeting of Continental. The term of the Class B
Directors, Messrs. Neher, Ryan and Kagan, will expire at the 1997 Annual
Meeting of Continental. The term of the Class C Directors, Messrs. Hostetter,
Pollack, Hamblett and Myhren, will expire at the 1998 Annual Meeting of
Continental. Under the terms of certain stock purchase agreements with
Continental, Corporate Advisors, L.P. ("Corporate Advisors"), on behalf of the
investors (the "Continental Preferred Stock Investors") who purchased Series A
Preferred Stock, currently has the right to designate two persons, and Boston
Ventures Limited Partnership III, on behalf of itself and Boston Ventures
Limited Partnership IIIA, Boston Ventures Limited Partnership IV and Boston
Ventures Limited Partnership IVA (collectively, the "Boston Ventures
Investors"), currently has the right to designate one person, to be nominated
as members of the Board of Directors. Lester Pollack and Jonathan H. Kagan are
the designees of the Continental Preferred Stock Investors, and Roy F.
Coppedge III is the designee of the Boston Ventures Investors. The Providence
Journal Company has the right to designate two individuals to be nominated as
members of Continental's Board for a three-year term after the term of its two
designees, Stephen Hamblett and Trygve E. Myhren, expires.
The Executive Officers were elected by the Continental Board of Directors on
May 18, 1995. All Executive Officers hold office until the first meeting of
the Continental Board following the next annual meeting of stockholders and
until their successors are chosen and qualified.
The following is a description of the business experience during the past
five years of each Director and Executive Officer and includes, as to
Directors, other directorships held in companies required to file periodic
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<PAGE>
reports with the Securities and Exchange Commission (the "Commission") and
registered investment companies.
DIRECTORS AND EXECUTIVE OFFICERS
Amos B. Hostetter, Jr. (59), a cofounder of Continental, is the Chairman of
the Board and Chief Executive Officer of Continental. He has been a Director
since 1963. Mr. Hostetter is a past Chairman of the National Cable Television
Association ("NCTA") and currently serves on NCTA's Board and Executive
Committee. He is past Chairman and serves on the Executive Committee of the
Board of Directors of both Cable in the Classroom and C-SPAN and serves as a
Director and Chairman of the Audit Committee of Commodities Corporation (USA).
Timothy B. Neher (48) is the Vice Chairman of the Board of Continental. He
has been a Director since 1982 and has been employed by Continental since
1974. Prior to 1991 he was President and Chief Operating Officer of
Continental, prior to 1986 he was an Executive Vice President of Continental,
and prior to 1982 he was Vice President and Treasurer of Continental. He
currently is on the Board of Directors of Turner and The Golf Channel, Inc.
William T. Schleyer (44) is the President and Chief Operating Officer of
Continental. Prior to March 15, 1995 he was an Executive Vice President and
prior to 1989 he was the Senior Vice President and General Manager of
Continental's Northeast region. He is a member of the Boards of Directors of
CableLabs, the research and development arm of the cable industry, PPVN and
Optus Vision. He has been employed by Continental since 1978.
Roy F. Coppedge III (47) has been a Director of Boston Ventures Management,
Inc. since 1983. He currently is on the Board of Directors of American Media,
Inc. He was elected to serve as a Director of Continental in 1992.
Stephen Hamblett (61) has been the Chairman of the Board and Chief Executive
Officer and a Director of The Providence Journal Company (as successor to
Providence Journal) and Publisher of the Journal-Bulletin newspapers since
1987. He has been a Director of Continental since October 1995. Mr. Hamblett
also serves on the Boards of Directors of the Associated Press and the Inter-
American Press Association.
Jonathan H. Kagan (39) is Managing Director of Corporate Advisors and of
Centre Partners, L.P., investment partnerships affiliated with Lazard Freres &
Co. LLC ("Lazard") and a Managing Director of Lazard. He has been associated
with Lazard since 1980. He was elected to serve as a Director of Continental
in 1992. Mr. Kagan currently is on the Board of Directors of Tyco Toys, Inc.
Robert B. Luick (84) is of counsel to the law firm of Sullivan & Worcester
LLP ("Sullivan & Worcester"), which firm has acted as counsel to Continental
since its inception. Prior to 1992, Mr. Luick was a partner at Sullivan &
Worcester. Mr. Luick has been with Sullivan & Worcester since 1943. He is a
member of the Board of Directors of Ionics, Incorporated, a diversified water
treatment company. He has been Secretary and a Director of Continental since
1963.
Henry F. McCance (53) has been general partner of the following venture
capital partnerships (either directly or indirectly as the general partner of
such partnerships) since their formation: Greylock Ventures Limited
Partnership (1983), Greylock Investments Limited Partnership (1985), Greylock
Capital Limited Partnership (1987), Greylock Limited Partnership (1990) and
Greylock Equity Limited Partnership (1994). He is also President and Treasurer
of Greylock Management Corporation, an investment services organization, and a
Director of Brookstone, Inc., Manugistics, Inc., Shiva Corporation and CATS
Software. Prior to 1990, Mr. McCance was a Vice President and Treasurer of
Greylock Management Corporation. Mr. McCance has been a Director of
Continental since 1972.
Trygve E. Myhren (59) has been President and Chief Operating Officer and a
Director of The Providence Journal Company (as successor to Providence
Journal) since 1990. He has been a Director of Continental
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<PAGE>
since October 1995. Mr. Myhren is a past Chairman of the NCTA and is currently
a Director of Advanced Marketing Services, Inc., CableLabs and Peapod Limited,
a company that provides consumer on-line grocery shopping services. From 1981
through 1988 he was the Chairman and Chief Executive Officer of American
Television & Communications Corporation, which is now part of Time Warner.
Lester Pollack (62) is Senior Managing Director of Corporate Advisors and
Chief Executive Officer of Centre Partners, L.P., investment partnerships
affiliated with Lazard, as well as a Managing Director of Lazard. He currently
is on the Board of Directors of SunAmerica Inc., Kaufman & Broad Home
Corporation, Tidewater, Inc., LaSalle Re Holdings Limited, Parlex Corporation,
Polaroid Corporation and Sphere Drake Holdings Limited. He was elected to
serve as a Director of Continental in 1992.
Michael J. Ritter (54) has been a Director since 1991 and was employed by
Continental from 1980 until March 15, 1995, at which time he retired as the
President and Chief Operating Officer of Continental. Prior to 1991 he was an
Executive Vice President, and prior to 1988 he was the Senior Vice President
and General Manager of Continental's Michigan management region.
Vincent J. Ryan (59) has been Chairman of the Board and a Director of
Schooner Capital Corporation, a venture capital organization, since 1971. Mr.
Ryan is also a Director of Iron Mountain Incorporated, an information-
management company. He has been a Director of Continental since 1980.
Ronald H. Cooper (38) is an Executive Vice President of Continental. Prior
to 1995, he was the Senior Vice President of Continental's Southern California
management region. Prior to 1990 he was the Senior Vice President of
Continental's Northern California management region. He is a member of the
Boards of Directors of Cable Advertising Partners, TCG and TCG-Los Angeles and
serves on the compensation committee of TCG. He has been employed by
Continental since 1982.
Jeffrey T. DeLorme (43) is an Executive Vice President of Continental. Prior
to February 1993, he was the Senior Vice President and General Manager of
Continental's Florida/Georgia management region. He serves on the Partners'
Committee of PrimeStar and on the Board of Directors of The Sunshine Network.
He has been employed by Continental since 1980.
Nancy Hawthorne (44) is the Chief Financial Officer and a Senior Vice
President of Continental. Prior to December 1993, she was also the Treasurer
of Continental, in addition to being Chief Financial Officer and a Senior Vice
President. Prior to December 1992, she was a Senior Vice President and the
Treasurer of Continental. Prior to 1988, she was a Vice President and the
Treasurer of Continental. She is a member of the Boards of Directors of Perini
Corporation, a construction company, New England Zenith Fund, a mutual fund,
TCG and Optus Vision. She has been employed by Continental since 1982.
Biographical information concerning the Directors and Executive Officers is
as of March 1, 1996.
69
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The following table (the "Summary Compensation Table") discloses
compensation received by Continental's Chief Executive Officer and the four
most highly compensated other Executive Officers of Continental (the Chief
Executive Officer and the other Executive Officers are hereinafter referred to
as the "Named Executive Officers") for the three fiscal years ended December
31, 1993, 1994 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------------ ------------------
NAME AND PRINCIPAL OTHER ANNUAL RESTRICTED STOCK ALL OTHER
POSITION YEAR # SALARY($) BONUS($)(1) COMPENSATION($) AWARD($)(2)(3) COMPENSATION($)(4)
------------------ ------ --------- ----------- --------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Amos B. Hostetter, Jr.,. 1995 $650,000 $208,848 $ -- $4,849,900 $4,273
Chairman and Chief 1994 649,876 97,991 -- -- 4,273
Executive Officer 1993 624,961 238,653 -- -- 4,273
William T. Schleyer, ... 1995 424,077 14,052 -- 4,364,910 3,403
President and Chief 1994 315,815 30,639 -- -- 3,403
Operating Officer 1993 291,923 61,418 -- -- 3,403
Jeffrey T. DeLorme, .... 1995 324,764 105,370 -- 2,424,950 3,403
Executive Vice
President 1994 294,846 49,166 -- -- 3,403
1993 268,484 56,871 111,608(5) -- 3,403
Ronald H. Cooper, ...... 1995 267,123 34,543 -- 2,424,950 3,315
Executive Vice
President
Nancy Hawthorne, ....... 1995 274,746 67,488 -- 2,085,457 3,403
Chief Financial Officer 1994 241,938 18,331 -- -- 3,403
and Senior Vice
President 1993 224,896 46,590 -- -- 3,403
</TABLE>
- --------
(1) See Note 11 to Consolidated Financial Statements. Continental has made
loans to these and other persons in amounts equal to the income taxes
incurred by them as a result of their restricted stock purchases. Such
loans were financed through cash provided from operating activities and
long-term borrowings. Continental charges interest on these loans
generally at rates ranging from 5% to 8% per annum and declares bonuses to
each of these persons in the amount of the interest due each year.
Continental declared no other bonus to any Named Executive Officer during
the years presented. As of March 1, 1996, the amounts of the loans
outstanding to certain of the Named Executive Officers were as follows:
William T. Schleyer ($1,751,974), Jeffrey T. DeLorme ($1,311,077), Ronald
H. Cooper ($261,500) and Nancy Hawthorne ($1,100,277). The outstanding
principal balance of each such loan is generally payable upon the earlier
to occur of (i) the due date of such loan or (ii) the termination of such
person's employment with Continental. Each of Mr. DeLorme and Mr. Cooper
has an additional loan from a subsidiary of Continental, of which the
current amounts outstanding are: Mr. DeLorme ($400,000) and Mr. Cooper
($278,680). Since the beginning of the fiscal year ended December 31,
1993, the largest aggregate amounts of indebtedness of the following Named
Executive Officers were as follows: William T. Schleyer ($1,751,974),
Jeffrey T. DeLorme ($1,711,077), Ronald H. Cooper ($1,270,997) and Nancy
Hawthorne ($1,100,277). See "Compensation Committee Interlocks and Insider
Participation" for loan amounts to certain other Named Executive Officers.
(2) Shares of restricted stock are entitled to dividends at the same rate as
all other shares of Common Stock.
(3) Shown below are (i) the total number of unvested shares and market value
of such shares as of December 31, 1995 and (ii) the vesting schedule of
such shares for each of the Named Executive Officers:
70
<PAGE>
<TABLE>
<CAPTION>
RESTRICTED SHARES HELD
AS OF 12/31/95 VESTING OVER THREE YEARS FROM 12/31/95
---------------------- --------------------------------------------
SHARES VESTING SHARES VESTING SHARES VESTING
NAME SHARES VALUE IN 1996 IN 1997 IN 1998
---- ---------------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Amos B. Hostetter, Jr... 266,250 $5,165,250 91,250 50,000 50,000
William T. Schleyer..... 216,250 $4,195,250 58,750 45,000 45,000
Jeffrey T. DeLorme...... 124,875 $2,422,575 37,375 25,000 25,000
Ronald H. Cooper........ 118,550 $2,299,870 31,050 25,000 25,000
Nancy Hawthorne......... 105,550 $2,047,670 30,300 21,500 21,500
</TABLE>
(4) Includes payment by Continental in the fiscal years ended December 31,
1993, 1994 and 1995, respectively, of premiums for term life insurance on
behalf of the Named Executive Officers: Amos B. Hostetter, Jr. ($1,125
each year), William T. Schleyer ($255 each year), Jeffrey T. DeLorme ($255
each year), Ronald H. Cooper ($165 each year) and Nancy Hawthorne ($255
each year). The remaining amounts for the Named Executive Officers
represents the employer matching contribution under Continental's matched
savings plan.
(5) Represents a one-time reimbursement of moving and related expenses
incurred by Mr. DeLorme in connection with his relocation to Continental's
Boston, Massachusetts office (grossed up for income taxes incurred by Mr.
DeLorme).
CERTAIN PROVISIONS OF THE RESTRICTED STOCK PURCHASE AGREEMENTS. On February
28, 1996, the Company offered to sell restricted stock to certain key
employees under the Company's 1995 Restricted Stock Purchase Program (the
"Restricted Stock Purchase Program"). At the same time, outstanding agreements
pursuant to which employees had purchased restricted stock in the past were
amended. In purchasing restricted shares, an employee enters into a Restricted
Stock Purchase Agreement (an "RSPA") with the Company containing restrictions
on transfer, vesting provisions and a non-competition covenant, among other
provisions. All of the RSPAs provide that the Company will repurchase for the
amount that the employee has paid, the unvested stock of any employee whose
employment terminates for any reason. Vesting occurs over time according to a
schedule designated in each RSPA. The RSPA dated February 28, 1996 (the "New
RSPA") entered into between certain key employees and the Company and the
amendments to outstanding RSPAs provide that if the Merger with U S WEST is
consummated, then vesting is accelerated upon the first to occur of the
following events after the effective date of the Merger: (i) death or
disability; (ii) in the case of an employee based in the existing corporate
headquarters of the Company, termination by reason of an involuntary
relocation to a place of employment that is more than 25 miles from the
existing headquarters, or relocation of the corporate headquarters; (iii)
termination of employment within twenty-four months of the effective date of
the Merger, other than in connection with the sale, swap or other disposition
of a system or other business unit in which the employee is employed, if such
termination is by reason of: (a) a diminution in the employee's compensation,
including a material adverse change in employee benefits; (b) the assignment
to the employee of duties and responsibilities which are materially less than
the employee's duties and responsibilities as of the effective date of the
Merger; or (c) an involuntary termination of employment other than a
"Termination for Cause." "Termination for Cause" means termination because of
the employee's (A) refusal or failure (other than for reasons of illness,
incapacity due to physical or mental illness or physical injury) to perform,
or persistent and material deficiencies in performing, his or her duties,
provided such duties are substantially similar to such person's duties prior
to the Merger; (B) misappropriation of any funds or property of the Company;
(C) conduct which could reasonably result in the employee's conviction of a
felony; or (D) conduct which could reasonably result in termination of the
employee's employment due to violation of published internal policies. U S
WEST will assume the obligations under the RSPAs in connection with the
Merger, and any reference to the Company as employer will thereafter be deemed
to refer to U S WEST.
In addition, each employee, in connection with the execution of an RSPA, has
the option of entering into a tax liability financing agreement, pursuant to
which the Company agrees to lend the employee an amount up to the employee's
total additional federal, state and local income taxes incurred as a result of
the employee's filing an election under Section 83(b) of the Internal Revenue
Code. The tax liability financing agreements executed in connection with the
New RSPA provide, and the outstanding tax liability financing agreements under
existing
71
<PAGE>
RSPAs were amended to provide, that, conditioned upon the consummation of the
Merger and continued employment through such date, one-third of the
outstanding principal amount of the loans will be forgiven on each January 2,
1997, 1998 and 1999, provided, however, that the loan shall be payable by the
employee in full in the case of any violation of the non-competition agreement
in the RSPA (even if partially or entirely forgiven at the time of such
violation). In addition, if the Merger is consummated, the loan will be
forgiven in full upon the occurrence of the same events that would result in
acceleration of vesting under the RSPAs described above. The maturity dates of
the loans granted to pay taxes were all extended to January 2, 2002.
All of the Named Executive Officers in the Summary Compensation Table
entered into such amendments to their outstanding RSPA and the related tax
liability financing agreements. In addition, Mr. Cooper and Ms. Hawthorne
purchased additional shares of restricted stock under the New RSPA and will
receive loans under the related tax liability financing agreements.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Base annual
compensation for executive officers was determined during the last fiscal year
by the Chairman, the Vice Chairman and the President of Continental. Pursuant
to authority delegated by the Continental Board of Directors, the Chairman
also awarded grants of restricted stock in 1995 and 1996 to key employees
designated by the Continental Board in accordance with Continental's
Restricted Stock Purchase Program. Amos B. Hostetter, Jr. and Timothy P.
Neher, the Chairman and Vice Chairman of Continental, respectively, are
Directors and participate in deliberations concerning executive officer
compensation.
Continental has made loans to these two executive officers and other persons
in amounts equal to the income taxes incurred by them as a result of their
restricted stock purchases. Such loans were financed through cash provided
from operating activities and long-term borrowings. Continental charges
interest on these loans generally at rates ranging from 5% to 8% per annum and
declares bonuses to each of these persons in the amount of the interest due
each year. As of March 1, 1996, the amounts of the loans outstanding to the
two executive officers named above were as follows: Amos B. Hostetter, Jr.
($3,379,546) and Timothy P. Neher ($2,669,856). Since the beginning of the
fiscal year ended December 31, 1993, the largest aggregate amounts of
indebtedness of such executive officers were as follows: Amos B. Hostetter,
Jr. ($3,379,546) and Timothy P. Neher ($4,057,356). The outstanding principal
balance of each such loan is generally payable upon the earlier to occur of
(i) the due date of such loan or (ii) the termination of such person's
employment with Continental. For information regarding loans to other
executive officers, see footnote (1) to the Summary Compensation Table.
On December 31, 1993, Continental accepted payment for loans incurred in
connection with restricted stock purchases pursuant to Continental's 1989
Restricted Stock Purchase Agreement ("RSPA III") which became due on such date
by (i) transfer to Continental and cancellation of vested shares of Common
Stock with a value equal to the loan outstanding, valued at $19.40 per share
(the "Stock-for-Loan Exchange"), (ii) payment in cash or (iii) a combination
of the two. Continental also made an offer (the "RSPA Offer") in January 1994
to purchase shares of Common Stock up to a maximum of 1,334,975 shares at a
purchase price of $19.40 per share. The persons who were eligible to
participate in the Stock-for-Loan Exchange and to accept the RSPA Offer were
persons who held shares of Common Stock issued pursuant to RSPA III (current
or former employees and family members of employees and former employees). The
valuation of the shares at $19.40 was equal to the price last paid in a
private placement of shares of Class A Common Stock, which was consummated in
November 1993. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources." The two
executive officers named above repaid the following loan amounts in shares of
Common Stock in the Stock-for-Loan Exchange: Amos B. Hostetter, Jr.
($1,471,936) and Timothy P. Neher ($1,387,500), and sold the following number
of shares of Common Stock to Continental pursuant to the RSPA Offer: Amos B.
Hostetter, Jr. (0) and Timothy P. Neher (29,800). For information regarding
other executive officers, see "Certain Transactions." In addition, the
Hostetter Foundation, an entity controlled by Mr. Hostetter, sold 29,600
shares of Class B Common Stock to Continental in January 1994 for a purchase
price of $19.40 per share.
72
<PAGE>
RETIREMENT PLANS. The following table sets forth, as computed in accordance
with the basic benefit formula employed for purposes of Continental's
Retirement Plan (the "Continental Retirement Plan") and its Supplemental
Executive Retirement Plan ("SERP"), the estimated annual benefits payable upon
retirement to employees to Continental in the following compensation and
years-of-service classifications. Such benefits are before offset in
recognition of the employer contribution toward social security benefits.
<TABLE>
<CAPTION>
YEARS OF SERVICE
------------------------------------------
COMPENSATION 10 15 20 25 30 OR MORE
------------ ------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
$150,000........................... $14,250 $21,375 28,500 35,625 42,750
$200,000........................... 19,000 28,500 38,000 47,500 57,000
$300,000........................... 28,500 42,750 57,000 71,250 85,500
$400,000........................... 38,000 57,000 76,000 95,000 114,000
$500,000........................... 47,500 71,250 95,000 118,750 142,500
$600,000........................... 57,000 85,500 114,000 142,500 171,000
$700,000........................... 66,500 99,750 133,000 166,250 199,500
</TABLE>
Actual benefits are computed on the basis of (1) .95% of the employee's
average annual compensation less .37% of average annual compensation (limited
to social security covered compensation) multiplied by (2) the number of years
of service (not to exceed thirty years). Average annual compensation is the
average of a participant's compensation for the five consecutive years in
which compensation was the highest.
The SERP, effective in 1995, provides additional retirement benefits for any
employee of Continental whose accrued benefits under the Continental
Retirement Plan are limited by the Internal Revenue Code's (the "Code") limit
(currently $150,000) on compensation which may be taken into account under
that plan or by the Code's Section 415 limit on the size of retirement
benefits which may be funded under the plan. The SERP is an unfunded, non tax-
qualified plan which is intended to create for each participant a benefit upon
termination of employment generally equal in value to the excess of what his
accrued vested benefit in the Continental Retirement Plan would have been
without the $150,000 compensation limit and the Section 415 limit on benefits
which may be funded, over the actual benefit under that plan. The benefit
under the SERP is payable upon termination of employment, at the participant's
election, in a lump sum or in equal annual installments (with interest) over
2, 5 or 10 years. A participant may designate a beneficiary under the SERP to
receive his benefit should he die before its complete pay-out.
The covered compensation for each Named Executive Officer is based upon the
amounts shown in the "Salary" column of the Summary Compensation Table. For
each Named Executive Officer, the current compensation covered by the
Continental Retirement Plan does not differ substantially (by more than 10%
from the aggregate compensation set forth in the Summary Compensation Table.
The Named Executive Officers have been credited with the following years of
service: Mr. Hostetter, 33 years; Mr. Schleyer, 18 years; Mr. DeLorme, 16
years; Mr. Cooper, 14 years and Ms. Hawthorne, 14 years.
COMPENSATION OF DIRECTORS
The members of the Continental Board of Directors who are not officers of
Continental currently receive an annual retainer of $16,000 and a fee of
$3,500 for each meeting attended. Members of the Audit Committee receive
$1,000 for meetings held separately from Board meetings. In addition,
Directors who reside outside the Greater Boston area are reimbursed for their
travel expenses incurred in connection with attendance at meetings of the
Continental Board of Directors or its Committees.
73
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table provides information as of March 15, 1996, with respect
to the shares of Common Stock and Series A Preferred Stock beneficially owned
by each person known by Continental to own more than 5% of the outstanding
Common Stock or Series A Preferred Stock, each Director of Continental, each
Named Executive Officer and by all Directors and executive officers of
Continental as a group. The number of shares beneficially owned by each
Director or executive officer is determined according to rules of the
Securities and Exchange Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such rules,
beneficial ownership includes any shares as to which the individual or entity
has sole or shared voting power or investment power and also any shares which
the individual or entity has the right to acquire within 60 days of March 15,
1996 through the exercise of an option, conversion feature or similar right.
Except as noted below, each holder has sole voting and investment power with
respect to all shares of Common Stock or Series A Preferred Stock listed as
owned by such person or entity.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES PERCENTAGE OF OF SERIES A
OF COMMON STOCK(1) OUTSTANDING PREFERRED STOCK(2) PERCENTAGE OF
BENEFICIALLY SHARES OF BENEFICIALLY OUTSTANDING SERIES A
NAME OWNED COMMON STOCK OWNED PREFERRED STOCK
---- ------------------ ------------- ------------------ --------------------
<S> <C> <C> <C> <C>
Amos B. Hostetter,
Jr.(3)................. 45,205,425 30.43% -- --
Timothy P. Neher(4)..... 1,671,725 1.13 -- --
William T. Schleyer..... 766,200 * -- --
Roy F. Coppedge III(5).. 7,514,075 5.06 -- --
Stephen Hamblett........ 185,129 * -- --
Jonathan H. Kagan(6).... 28,571,450 16.13 1,142,858 100.00
Robert B. Luick(7)...... 229,575 * -- --
Henry F. McCance(8)..... 258,125 * -- --
Trygve E. Myhren........ 36,390 * -- --
Lester Pollack(6)....... 28,571,450 16.13 1,142,858 100.00
Michael J. Ritter....... 589,150 * -- --
Vincent J. Ryan(9)...... 5,719,825 3.85 -- --
Jeffrey T. DeLorme...... 391,525 * -- --
Ronald H. Cooper........ 209,275 * -- --
Nancy Hawthorne......... 239,325 * -- --
Directors and Executive
Officers as a Group
(15 persons)(6)........ 91,587,194 51.70 1,142,858 100.00
H. Irving
Grousbeck(10).......... 10,033,000 6.75 -- --
Boston Ventures Company
Limited Partnership III
Boston Ventures Limited
Partnership III(11).... 3,034,525 2.04 -- --
Boston Ventures Limited
Partnership IIIA(11).. 799,825 * -- --
Boston Ventures Company
Limited Partnership IV
Boston Ventures Limited
Partnership IV(11)..... 2,381,725 1.60 -- --
Boston Ventures Limited
Partnership IVA(11)... 1,298,000 * -- --
---------- ----- --------- ------
Total as a group.... 7,514,075 5.06 -- 100.00
</TABLE>
74
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF SHARES PERCENTAGE OF OF SERIES A
OF COMMON STOCK (1) OUTSTANDING PREFERRED STOCK(2) PERCENTAGE OF
BENEFICIALLY SHARES OF BENEFICIALLY OUTSTANDING SERIES A
NAME OWNED COMMON STOCK OWNED PREFERRED STOCK
---- ------------------- ------------- ------------------ --------------------
<S> <C> <C> <C> <C>
LFCP Corp. and Corporate
Advisors, L.P.(12)
Corporate Partners,
L.P.(12)............. 18,223,825 10.93% 728,953 63.78%
Mellon Bank, N.A. as
Trustee for First Plaza
Group Trust(12)(13).... 4,285,725 2.80 171,429 15.00
The State Board of
Administration of
Florida(12)............ 1,902,100 1.26 76,084 6.66
Vencap Holdings (1992)
Pte Ltd(12)............ 1,785,700 1.19 71,428 6.25
Corporate Offshore
Partners, L.P.(12)..... 1,302,675 * 52,107 4.56
ContCable Co-Investors,
L.P.(12)............... 1,071,425 * 42,857 3.75
---------- ----- --------- -----
Total as a group.... 28,571,450 16.13%(14) 1,142,858 100%
</TABLE>
- --------
* Less than 1% of class.
(1) The Common Stock includes Class A Common Stock, which has one vote per
share, and Class B Common Stock, which has ten votes per share. As the
number of shares of Class A Common Stock currently represents 26.18% of
the Common Stock and approximately 2.74% of the voting power of the Common
Stock, the Class A Common Stock has not been shown as a separate class of
stock, but rather Common Stock has been treated as one class. Every
greater than 5% beneficial owner of Class B Common Stock would be a
greater than 5% beneficial owner of Class A Common Stock.
(2) Under the rules of determining beneficial ownership promulgated by the
Commission, each holder of Series A Preferred Stock is deemed to own
currently that number of shares of Common Stock into which the Series A
Preferred Stock is convertible. Each share of the Series A Preferred
Stock is presently convertible into Common Stock on a 25-for-one basis.
The table therefore shows the number of shares of Series A Preferred
Stock owned by each holder in the column for the Series A Preferred Stock
and includes that number of shares in the column for Common Stock into
which the Series A Preferred Stock would be convertible.
(3) Mr. Hostetter has shared voting and investment power as to 42,843,550
shares of Common Stock held by the Amos B. Hostetter, Jr. 1989 Trust of
which Messrs. Hostetter and Neher are the sole trustees. Mr. Hostetter
has shared voting and investment power as to a further 446,400 shares of
Common Stock; as to 223,200 of such shares, he disclaims beneficial
ownership. Additionally, Mr. Hostetter disclaims beneficial ownership of
550,000 shares of Common Stock with respect to which his wife acts as a
trustee with Mr. Neher and 49,075 shares of Common Stock held by him as
custodian for five minor children. The shares listed in the table as
being beneficially owned by Mr. Hostetter include those as to which
Mr. Hostetter has shared voting and/or investment power and those as to
which Mr. Hostetter disclaims beneficial ownership. Mr. Hostetter's
address is The Pilot House, Lewis Wharf, Boston, Massachusetts 02110.
(4) Mr. Neher has shared voting and investment power as to 550,000 shares of
Common Stock with respect to which he acts as a trustee with Mrs.
Hostetter, and as to 42,843,550 shares of Common Stock with respect to
which he acts as a trustee with Mr. Hostetter. Mr. Neher disclaims
beneficial ownership as to such shares, and the table does not indicate
such shares as being beneficially owned by Mr. Neher. See footnote (3)
above. Additionally, Mr. Neher disclaims beneficial ownership as to
165,000 shares with respect to which he acts as trustee and 55,000 shares
held by his wife as custodian for their children, which are included in
the table as being beneficially owned by Mr. Neher.
75
<PAGE>
(5) All the shares listed in the table as beneficially owned by Mr. Coppedge
are held by the four limited partnerships described in footnote (11)
below. Mr. Coppedge, a partner of each of the general partners of the
limited partnerships and a Director of Boston Ventures Management, Inc.,
which manages the investments of the four limited partnerships, has
shared voting and investment power as to these shares. Mr. Coppedge is
entitled to beneficial ownership of an indeterminate number of these
shares and disclaims beneficial ownership as to the balance. Mr.
Coppedge's address is c/o Boston Ventures Management, Inc., 231 Custom
House Street, Boston, Massachusetts 02110.
(6) All shares listed in the table as being beneficially owned by Mr. Pollack
and Mr. Kagan are beneficially owned by Corporate Advisors. See footnote
(12) below. Mr. Pollack may be deemed to have shared voting and
investment power over such shares as the Chairman and Treasurer and as a
Director of LFCP Corp., and Mr. Kagan may be deemed to have shared voting
and investment power over such shares as the President of LFCP Corp. LFCP
Corp. is the sole general partner of Corporate Advisors and a wholly
owned subsidiary of Lazard. Mr. Pollack and Mr. Kagan are both Managing
Directors of Lazard. Mr. Pollack's and Mr. Kagan's address is c/o
Corporate Advisors, L.P., 30 Rockefeller Plaza, New York, New York 10020.
Mr. Pollack and Mr. Kagan disclaim beneficial ownership of all such
shares.
(7) The shares listed in the table as being beneficially owned by Mr. Luick
include 73,800 shares owned by Mr. Luick's daughter and 37,500 shares
with respect to which she acts as trustee of Mr. Luick's grandchildren.
Mr. Luick disclaims beneficial ownership of these shares.
(8) The shares listed in the table as being beneficially owned by Mr. McCance
include 225,000 shares held by Greylock Limited partnership, of which Mr.
McCance is a general partner. Mr. McCance has shared voting and
investment power as to these shares, is entitled to beneficial ownership
of an indeterminate number of these shares and disclaims beneficial
ownership as to the balance. Of the remaining shares, Mr. McCance
disclaims beneficial ownership as to 12,500 shares with respect to which
his wife acts as trustee for his daughter and 12,500 shares held by his
daughter.
(9) Mr. Ryan holds 131,125 shares of Common Stock. The remaining shares of
Common Stock listed in the table as being beneficially owned by Mr. Ryan
are held by Schooner Capital Corporation (and its subsidiaries), over
which Mr. Ryan has shared voting and investment power as the Chairman and
principal stockholder.
(10) All of these shares are subject to the Stock Liquidation Agreement
pursuant to which Mr. Grousbeck must sell such shares to Continental in
either 1998 or 1999. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources--1998-1999 Share Repurchase Program." Mr. Grousbeck's address
is Room 382, Graduate School of Business, Stanford University, Stanford,
California 94305.
(11) These four limited partnerships may be deemed to be a "group" of persons
acting together for the purpose of acquiring, holding, voting or
disposing of shares of Common Stock. Boston Ventures Company Limited
Partnership III ("BV Co. III"), as the sole general partner of each of
Boston Ventures Limited Partnership III and Boston Ventures Limited
Partnership IIIA, is deemed to be the beneficial owner of the shares held
by such limited partnerships and to have shared voting and investment
power with respect to such shares. Boston Ventures Company Limited
Partnership IV ("BV Co. IV"), as the sole general partner of each of
Boston Ventures Limited Partnership IV and Boston Ventures Limited
Partnership IVA, is deemed to be the beneficial owner of the shares held
by such limited partnerships and to have shared voting and investment
power with respect to such shares. BV Co. III disclaims beneficial
ownership of the shares beneficially owned by BV Co. IV; and BV Co. IV
disclaims beneficial ownership of the shares beneficially owned by BV Co.
III. Mr. Coppedge may be deemed to beneficially own all such shares. See
footnote (5).
(12) These stockholders may be deemed to be a "group" of persons acting
together for the purpose of acquiring, holding, voting or disposing of
shares of Series A Preferred Stock. Corporate Advisors, as the general
partner of Corporate Partners, L.P. ("Corporate Partners") and Corporate
Offshore Partners, L.P. ("Corporate Offshore Partners"), has sole voting
and investment power as to the shares held by them. Corporate Advisors
serves as investment manager over a certain investment management account
for The State Board of Administration of Florida ("SBA") and has sole
voting and dispositive power with respect to the shares of Series A
Preferred Stock held by SBA. Pursuant to the Co-Investment Agreement
dated as of April 27, 1992 (the "Co-Investment Agreement") by and among
Corporate Advisors, Corporate
76
<PAGE>
Partners, Corporate Offshore Partners, First Plaza Group Trust ("FPGT"),
Vencap Holdings (1992) Pte. Ltd. ("Vencap") and ContCable Co-Investors,
L.P. ("ContCable"), Corporate Advisors has sole voting and dispositive
power with respect to the shares held by Vencap and ContCable. The address
of Corporate Advisors, Corporate Partners, Corporate Offshore Partners,
FPGT, SBA, ContCable and Vencap is: c/o Corporate Advisors, L.P., 30
Rockefeller Plaza, New York, New York 10020. See footnote (6) above.
(13) Mellon Bank, N.A. acts as the trustee for FPGT, a trust under and for the
benefit of certain employee benefit plans of General Motors Corporation
and its subsidiaries. The shares listed in the table may be deemed to be
beneficially owned by General Motors Investment Management Corporation
("GMIMC"), a wholly owned subsidiary of General Motors Corporation.
GMIMC's principal business is providing investment advice and investment
management services with respect to the assets of certain employee
benefit plans of General Motors Corporation and its subsidiaries and with
respect to the assets of certain direct and indirect subsidiaries of
General Motors Corporation and associated entities. GMIMC is serving as
FPGT's investment manager with respect to these shares and, in that
capacity, it has the sole power to direct Mellon Bank, N.A. as to the
voting and disposition of these shares. Because of its limited role as
trustee, Mellon Bank, N.A. disclaims beneficial ownership of these
shares. Pursuant to the Co-Investment Agreement, FPGT is obligated,
subject to its fiduciary duties under the Employee Retirement Income
Security Act of 1974, as amended, (i) to transfer shares held by it only
in a transaction in which the other parties to the Co-Investment
Agreement participate on a pro rata basis and (ii) to exercise all voting
and other rights with respect to such shares in the same manner as is
done by Corporate Advisors on behalf of the Corporate Partners and
Corporate Offshore Partners.
(14) The percentage ownership for the group assumes the conversion of shares
of Series A Preferred Stock into Common Stock by all members of the
group. The percentage ownership for each individual member of the group
assumes conversion by only that stockholder.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Lester Pollack, a Director of Continental, is Senior Managing Director of
Corporate Advisors and a Managing Director of Lazard. Jonathan H. Kagan, a
Director of Continental, is Managing Director of Corporate Advisors and a
Managing Director of Lazard. Corporate Advisors is the sole general partner of
Corporate Partners and Corporate Offshore Partners. A wholly owned subsidiary
of Lazard is the sole general partner of Corporate Advisors.
Lazard received fees and underwriting discounts from Continental in an
aggregate amount of $7.4 million for its services as an underwriter to
Continental of $1.4 billion of senior notes and debentures during the year
ended December 31, 1993.
Lazard acted as a financial advisor to Continental in connection with the
negotiations and the consummation of the Providence Journal Merger, and, for
such services, received a fee of $5.5 million. Continental also reimbursed
Lazard for its reasonable out-of-pocket expenses, including fees and expenses
of legal counsel.
Lazard acted as a Placement Agent in the sale of the 8.30% Senior Notes,
and, for such services received underwriting discounts and commissions
totalling approximately $3.5 million.
Lazard also acted as financial adviser to the Company in connection with the
proposed Merger with U S WEST and received a fee of $4,000,000 upon its
announcement. Lazard will receive an additional fee upon the consummation of
the Merger.
For a discussion of loans made to Executive Officers of Continental in
connection with Continental's Restricted Stock Purchase Program, see footnote
(1) to the Summary Compensation Table and "Compensation Committee Interlocks
and Insider Participation." For a description of Continental's Stock-for-Loan
Exchange and the RSPA Offer to repurchase shares of Common Stock, and
information regarding certain Executive Officers who are Directors
participating therein, see "Compensation Committee Interlocks and Insider
Participation." The following Executive Officers who are not Directors of
Continental participated in the Stock-for-Loan Exchange in the following
amounts: William T. Schleyer ($291,000), Jeffrey T. DeLorme ($155,000),
77
<PAGE>
Ronald H. Cooper ($159,497) and Nancy Hawthorne ($274,464). In addition,
William T. Schleyer made a cash payment for the remaining $141,063 of his
outstanding loan incurred in connection with restricted stock purchases
pursuant to RSPA III.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements:
The following consolidated financial statements of the Company and the
Independent Auditors' Report relating thereto are filed under Item 8 in Part
II of this report:
Independent Auditors' Report
Consolidated Balance Sheets, December 31, 1994 and 1995
Statements of Consolidated Operations, Years Ended December 31, 1993,
1994 and 1995
Statements of Consolidated Stockholders' Equity (Deficiency), Years
Ended December 31, 1993, 1994 and 1995
Statements of Consolidated Cash Flows, Years Ended December 31, 1993,
1994 and 1995
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules:
The following financial statement schedules of the Company and the Independent
Auditors' Report relating thereto are filed as part of this report:
Schedule II--Valuation and Qualifying Accounts and Reserves
Schedule IV--Condensed Financial Information of Registrant
Financial Statement Schedules not included are omitted due to the lack
of conditions under which they are required.
(a)(3) Exhibits filed as part of this report:
As listed in the Exhibit Index beginning on page 81 hereof.
(b) Reports on Form 8-K.
The Company filed a current report on Form 8-K under item 2 on October
18, 1995 pertaining to the consummation of the transactions
contemplated by the Amended and Restated Agreement and Plan of Merger
dated as of August 1, 1995 by and among Providence Journal Company, The
Providence Journal Company, King Broadcasting Company, King Holding
Corp. and the Registrant (item 2). No financial statements were filed
as they were previously reported in the Joint Proxy Statement--
Prospectus dated August 31, 1995 included as part of the Registrant's
Registration Statement (Registration No. 33-57471).
78
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
Continental Cablevision, Inc.
/s/ Amos B. Hostetter, Jr.
By: _________________________________
AMOS B. HOSTETTER, JR. CHAIRMAN OF
THE BOARD
Dated: March 27, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Amos B. Hostetter, Jr. Director and March 27, 1996
- ------------------------------------- Chairman of the
AMOS B. HOSTETTER, JR. Board (principal
executive officer)
/s/ Timothy P. Neher Director and Vice March 27, 1996
- ------------------------------------- Chairman of the
TIMOTHY P. NEHER Board
/s/ William T. Schleyer President and Chief March 27, 1996
- ------------------------------------- Operating Officer
WILLIAM T. SCHLEYER
/s/ Nancy Hawthorne Chief Financial March 27, 1996
- ------------------------------------- Officer and Senior
NANCY HAWTHORNE Vice President
(principal
financial officer)
/s/ Richard A. Hoffstein Senior Vice March 27, 1996
- ------------------------------------- President and
RICHARD A. HOFFSTEIN Controller
(principal
accounting officer)
Director March 27, 1996
- -------------------------------------
MICHAEL J. RITTER
Director March 27, 1996
- -------------------------------------
ROY F. COPPEDGE III
79
<PAGE>
SIGNATURE TITLE DATE
Director March 27, 1996
- -------------------------------------
JONATHAN H. KAGAN
Director March 27, 1996
- -------------------------------------
ROBERT B. LUICK
/s/ Henry F. McCance Director March 27, 1996
- -------------------------------------
HENRY F. MCCANCE
/s/ Lester Pollack Director March 27, 1996
- -------------------------------------
LESTER POLLACK
/s/ Vincent J. Ryan Director March 27, 1996
- -------------------------------------
VINCENT J. RYAN
/s/ Stephen Hamblett Director March 27, 1996
- -------------------------------------
STEPHEN HAMBLETT
/s/ Trygve E. Myhren Director March 27, 1996
- -------------------------------------
TRYGVE E. MYHREN
80
<PAGE>
INDEX TO EXHIBITS
Listed below are the exhibits which are filed as part of this report
(according to the number assigned to them in Item 601 of Regulation S-K). Each
exhibit marked/1/ is incorporated by reference to the Company's Registration
Statement No. 33-46510 (as amended), declared effective by the Securities and
Exchange Commission on June 15, 1992, each exhibit marked by/2/ is
incorporated by reference to the Company's Registration Statement No. 33-
59806, declared effective by the Securities and Exchange Commission on May 27,
1993, each exhibit marked by/3/ is incorporated by reference to the Company's
Registration Statement No. 33-65798, declared effective by the Securities and
Exchange Commission on August 6, 1993, each exhibit marked by/4/ is
incorporated by reference to the Company's Registration Statement No. 33-
57471, declared effective by the Commission on August 31, 1995 and each
exhibit marked by/5/ is incorporated by reference to the Company's
Registration Statement No. 33-63529 filed with the Commission on October 19,
1995. Exhibit numbers in parentheses refer to the exhibit numbers in
Registration Statements. Each exhibit marked by a pound sign (#) is a
management contract or compensatory plan.
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
----------- --------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated as of November 18,
1994, by and among the Company, Providence Journal
Company, The Providence Journal Company, King Holding
Corp. and King Broadcasting Company, as amended and
restated as of August 1, 1995./4/ (2.1)
2.2 Agreement and Plan of Merger between US WEST, Inc. and
Continental Cablevision, Inc. dated as of February 27,
1996 . . . Filed herewith as Exhibit 2.2.
3.1 Restated Certificate of Incorporation of the Company .
. . Filed herewith as Exhibit 3.1.
3.1A Certificate of Designation of the Company relating to
the Series A Preferred Stock./4/ (3.1A)
3.1B Form of Amendment to Company's Restated Certificate of
Incorporation pertaining to merger consideration
included as Exhibit A to the Merger Agreement filed as
Exhibit 2.2.
3.2 By-Laws of the Company . . . Filed herewith as Exhibit
3.2.
4.1 Indenture dated as of June 22, 1992 between the Company
and Morgan Guaranty Trust Company of New York as
Trustee, pertaining to the Company's 10 5/8% Senior
Subordinated Notes due 2002./1/ (4.1)
4.2 Indenture, dated as of June 22, 1992 between the
Company and Morgan Guaranty Trust Company of New York
as Trustee, pertaining to the Company's 11% Senior
Subordinated Debentures due 2007./1/ (4.2)
4.3 Amended and Restated Note Agreement dated as of October
17, 1994 by and among the Company and certain of its
direct and indirect Subsidiaries as Guarantors and The
Prudential Insurance Company of America./4/ (4.5)
4.4 Indenture dated as of June 1, 1993 between the Company
and The First National Bank of Chicago, as Trustee,
pertaining to the Company's 8 5/8% Senior Notes due
2003./2/ (4.10)
4.5 Indenture dated as of June 1, 1993 between the Company
and The First National Bank of Chicago, as Trustee,
pertaining to the Company's 9% Senior Debentures due
2008./2/ (4.11)
4.6 Indenture dated as of August 1, 1993 between the
Company and the Bank of New York, as Trustee,
pertaining to the Company's 8 7/8% Senior Debentures
due 2005./3/ (4.11)
4.7 Indenture dated as of August 1, 1993 between the
Company and the Bank of New York, as Trustee,
pertaining to the Company's 9 1/2% Senior Debentures
due 2013./3/ (4.12)
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
----------- --------
<C> <S> <C>
4.8 Indenture dated as of August 1, 1993 between the
Company and the Bank of New York, as Trustee,
pertaining to the Company's 8 1/2% Senior Notes due
2001./3/ (4.13)
4.9 Indenture dated December 13, 1995 between the Company
and the Bank of Montreal, as Trustee, pertaining to the
Company's 8.30% Senior Notes due 2006. . . . Filed
herewith as Exhibit 4.9.
10.1 Stock Liquidation Agreement dated as of March 6, 1989,
as amended as of September 28, 1990, replacing and
restating the Stock Acquisition Agreement made as of
December 19, 1988 by and among the Company, H. Irving
Grousbeck, MD Co., Burr, Egan, Deleage & Co., Roderick
A. MacLeod and Amos B. Hostetter, Jr./1/ (10.2)
10.2 Second Amendment to Stock Liquidation Agreement dated
as of July 7, 1992 by and among the Company, Amos B.
Hostetter, Jr., H. Irving Grousbeck, MD Co., Burr,
Egan, Deleage & Co. and Roderick A. MacLeod./2/ (10.2)
10.3 Form of Restricted Stock Purchase Agreement./1/ (10.3)
10.4 Stock Purchase Agreement dated April 27, 1992 among the
Company, Corporate Partners, L.P., Corporate Offshore
Partners, L.P., The State Board of Administration of
Florida, Chemical Equity Associates, Mellon Bank, N.A.
as Trustee for First Plaza Group Trust, Vencap Holdings
(1992) Pte Ltd and Corporate Advisors, L.P./1/ (10.4)
10.5 Registration Rights Agreement dated June 22, 1992 among
the Company, Corporate Partners, L.P., Corporate
Offshore Partners, L.P., The State Board of
Administration of Florida, Chemical Equity Associates,
Mellon Bank, N.A. as Trustee for First Plaza Group
Trust, Vencap Holdings (1992) Pte Ltd and Corporate
Advisors, L.P./1/ (10.5)
10.6 Amendment to Registration Rights Agreement dated July
15, 1992 among the Company and Corporate Advisors, L.P.
on behalf of Corporate Partners, L.P., Corporate
Offshore Partners, L.P., The State Board of
Administration of Florida, ContCable Co-Investors,
L.P., Mellon Bank, N.A., as Trustee for First Plaza
Group Trust, and Vencap Holdings (1992) PTE Ltd./2/
(10.6)
10.7 Stock Purchase Agreement dated July 15, 1992, as
amended on November 17, 1992, among the Company, Boston
Ventures Limited Partnership III, Boston Ventures
Limited Partnership IIIA, Boston Ventures Limited
Partnership IV and Boston Ventures Limited Partnership
IVA./2/ (10.7)
10.8 Stock Purchase Agreement dated July 15, 1992 among the
Company, Thomas H. Lee Equity Partners, L.P., THL-CCI
Investors Limited Partnership, Providence Media
Partners L.P., Alta V Limited Partnership, Customs
House Partners and Ontario Teachers' Pension Plan
Board./2/ (10.8)
10.9 Registration Rights Agreement dated July 15, 1992 among
the Company, Boston Ventures Limited Partnership III,
Boston Ventures Limited Partnership IIIA, Boston
Ventures Limited Partnership IV, Boston Ventures
Limited Partnership IVA, Thomas H. Lee Equity Partners,
L.P., THL-CCI Investors Limited Partnership, Providence
Media Partners L.P., Alta V Limited Partnership,
Customs House Partners and Ontario Teachers' Pension
Plan Board./2/ (10.9)
10.10 Liquidation Rights Agreement dated as of July 7, 1992
by and between the Company and MD Co./2/ (10.10)
10.11 Stock Purchase Agreement dated as of December 17, 1992
by and among Teleport Communications Group Inc.,
Comcast Corporation, Comcast Teleport, Inc., the
Company and Continental Teleport, Inc./2/ (10.11)
</TABLE>
82
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
----------- --------
<C> <S> <C>
10.12 Optus Vision Joint Venture-Optus Vision Shareholders
Agreement dated May 19, 1995 by and among Continental
Cablevision of Australia, Inc., Optus Communications
Pty Limited, Pay TV Holdings Pty Limited, Tallglen Pty
Limited, Optus Vision Pty Limited, Optus Networks Pty
Limited and Optus Administration Pty Limited./4/
(10.12)
10.13 Management Incentive Plan.#/4/ (10.13)
10.14 Purchase Agreement dated as of November 1, 1994 by and
among Columbia Associates, L.P., Columbia Cable of
Michigan, Inc., and Continental Cablevision of
Manchester, Inc./4/ (10.14)
10.15 Supplemental Executive Retirement Plan.#/4/ (10.15)
10.16 Registration Rights Agreement with The Providence
Journal Company./5/ (10.16)
10.17 Form of Restricted Stock Purchase Agreements for
1995.#/4/ (10.17)
10.18 First Amendment to the Purchase Agreement dated March
24, 1995 by and among Columbia Associates, L.P.,
Columbia Cable of Michigan, Inc., and Continental
Cablevision of Manchester, Inc./4/ (10.19)
10.18A Second Amendment to the Purchase Agreement dated
September 30, 1995, by and among Columbia Associates,
L.P., Columbia Cable of Michigan, Inc. and Continental
Cablevision of Manchester./5/ (10.19A)
10.19 Purchase Agreement dated January 6, 1995 by and between
Continental Cablevision, Inc. and Cablevision of
Chicago./4/ (10.20)
10.20 Purchase Agreement dated March 29, 1995 between N-COM
Limited Partnership II and Continental Cablevision
Investments, Inc./4/ (10.21)
10.21 Amended and Restated Credit Agreement dated as of
October 1, 1994 among the Company and certain of its
direct and indirect Subsidiaries as Guarantors and The
First National Bank of Boston, for itself and as
Administrative and Managing Agent, and certain
financial institutions named therein./4/ (4.4)
10.21A Amendment Number 1 dated as of September 29, 1995 to
the Amended and Restated Credit Agreement dated as of
October 1, 1994 among the Company and certain of its
direct and indirect Subsidiaries as Guarantors and The
First National Bank of Boston, for itself and as
Administrative and Managing Agent, and certain
financial institutions named therein. . . . Filed
herewith as Exhibit 10.21A.
10.22 Credit Agreement dated as of July 18, 1995 among PJC
Financing Corporation, Colony Communications, Inc.,
Columbia Cable of Michigan, N-COM Acquisition
Corporation and their respective Subsidiaries and The
Toronto Dominion Bank as Documentation Agent and
managing Agent, The First National Bank of Boston for
itself and as Administrative and Managing Agent and The
Bank of New York for itself and as Syndication and
Managing Agent and certain financial institutions named
therein./4/ (4.11)
10.23 Amendment to Credit Agreement dated September 22, 1995
among PJC Financing Corporation and certain of its
direct and indirect Subsidiaries and The First National
Bank of Boston, and certain financial institutions
named therein./5/ (10.24)
10.24 Registration Rights Agreement dated December 13, 1995
among the Company, Lazard Freres & Co. LLC and Morgan
Stanley & Co. Incorporated. . . . Filed herewith as
Exhibit 10.24.
10.25 Asset Exchange Agreement dated December 20, 1995 by and
between Continental Cablevision of St. Louis County,
Inc. and TCI Cable Partners of St. Louis,
L.P. . . . Filed herewith as Exhibit 10.25.
</TABLE>
83
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. PAGE NO.
----------- --------
<C> <S> <C>
10.26 Forms of Restricted Stock Purchase Agreements for 1996
and amendments to Restricted Stock Purchase Agreements
and related agreements.#. . . Filed herewith as Exhibit
10.26.
10.27 Purchase Agreement dated as of March 15, 1996 among
Meredith/New Heritage Partnership and New Heritage
Associates and the Company. . . . Filed herewith as
Exhibit 10.27.
10.28 Stockholders Agreement dated as of February 27, 1995
among Amos B. Hostetter, Jr., the Amos B. Hostetter,
Jr. 1989 Trust, Timothy P. Neher, Corporate Advisors,
L.P. and certain stockholders of the Company named
therein and U S WEST. . . .Filed herewith as Exhibit
10.28.
11.1 Schedule of computation of earnings per
share. . . . Filed herewith as Exhibit 11.1.
21 Subsidiaries of the Company. . . . Filed herewith as
Exhibit 21.
27 Financial Data Schedules. . . . Filed herewith as
Exhibit 27.
</TABLE>
84
<PAGE>
SCHEDULE II
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COST AND AT END
DESCRIPTIONS OF PERIOD EXPENSES DEDUCTIONS (A) OTHER (B) OF PERIOD
- ------------ ---------- ---------- -------------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL
ACCOUNTS
Year Ended December 31,
1993................... $9,072 $12,793 $(12,430) $ -- $ 9,435
====== ======= ======== ====== =======
Year Ended December 31,
1994................... $9,435 $12,791 $(12,798) $ 343 $ 9,771
====== ======= ======== ====== =======
Year Ended December 31,
1995................... $9,771 $14,244 $(13,017) $1,478 $12,476
====== ======= ======== ====== =======
</TABLE>
- --------
(A) Amounts written off, net of recoveries.
(B) Other represents acquisitions in 1994 and 1995.
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE IV
CONTINENTAL CABLEVISION, INC.
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1994 1995
----------- -----------
<S> <C> <C>
ASSETS
Cash............................................. $ 729 $ 18
Accounts Receivable.............................. 296 222
Prepaid Expenses................................. 2,988 --
Investments in and Advances to Affiliates and
Subsidiaries.................................... 1,995,762 3,258,518
Property and Equipment--net...................... 764 2,675
Intangible and Other Assets--net................. 65,743 72,447
Deferred income taxes............................ 18,454 23,454
----------- -----------
Total.......................................... $ 2,084,736 $ 3,357,334
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
Accounts Payable................................. $ 474 $ 267
Accrued Interest................................. 80,577 70,167
Accrued and Other Liabilities.................... 35,830 33,928
Debt............................................. 3,423,790 4,212,788
Commitments and Contingencies....................
Redeemable Common Stock, $.01 par value,
16,684,150 shares outstanding................... 232,399 256,135
Stockholders' Equity (Deficiency) (Note Below):
Preferred Stock $.01 par value, none
outstanding....................................
Series A Convertible Preferred Stock, $.01 par
value, 1,142,858 shares authorized and
outstanding.................................... 11 11
Class A Common Stock, $.01 par value,
425,000,000 shares authorized, 8,585,500 and
38,780,694 shares outstanding.................. 86 388
Class B Common Stock, $.01 par value,
200,000,000 shares authorized, 90,291,375 and
92,572,000 shares outstanding.................. 903 926
Additional Paid-In Capital...................... 583,181 1,181,193
Unearned Compensation........................... (12,097) (45,851)
Affiliate's Net Unrealized Holding Gain on
Marketable Equity Securities................... 47,996 67,823
Deficit......................................... (2,308,414) (2,420,441)
----------- -----------
Stockholders' Equity (Deficiency).............. (1,688,334) (1,215,951)
----------- -----------
Total........................................ $ 2,084,736 $ 3,357,334
=========== ===========
</TABLE>
Note: Please See Part II, Item 8 for Detail for Activity Occurring in the
Registrant's Equity Section.
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE IV
CONTINENTAL CABLEVISION, INC.
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Revenues...................................... $ -- $ -- $ --
Costs and Expenses:
Selling, General and Administrative.......... 600 520 412
Depreciation and Amortization................ 88 162 320
Restricted Stock Purchase Program............ 11,004 11,316 12,005
--------- --------- ---------
Total....................................... 11,692 11,998 12,737
--------- --------- ---------
Operating Income (Loss)....................... (11,692) (11,998) (12,737)
--------- --------- ---------
Other (Income) Expense:
Interest Expense............................. 264,993 305,529 346,537
Interest Income from Affiliates.............. (264,993) (305,529) (346,537)
Equity in Net Income of Affiliates........... 202,718 60,814 103,780
Minority Interest in Net Income (Loss) of
Affiliates.................................. 184 (205) (39)
Other........................................ (5) 769 549
--------- --------- ---------
Total....................................... 202,897 61,378 104,290
--------- --------- ---------
Loss Before Income Taxes, Extraordinary Item
and Cumulative Effect of Change in Accounting
for Income Taxes............................. (214,589) (73,376) (117,027)
Income Tax Benefit............................ (4,443) (4,800) (5,000)
--------- --------- ---------
Loss Before Extraordinary Item and Cumulative
Effect of Change in Accounting for Income
Taxes........................................ (210,146) (68,576) (112,027)
Extraordinary Item, Net of Income Taxes....... -- (18,265) --
--------- --------- ---------
Loss before Cumulative Effect of Change in
Accounting for Income Taxes.................. (210,146) (86,841) (112,027)
Cumulative Effect of Change in Accounting for
Income Taxes................................. (624) -- --
--------- --------- ---------
Net Loss...................................... (210,770) (86,841) (112,027)
Preferred Stock Preferences................... (34,115) (36,800) (39,802)
--------- --------- ---------
Loss Applicable to Common Stockholders........ $(244,885) $(123,641) $(151,829)
========= ========= =========
Loss Per Common Share:
Loss Before Extraordinary Item............... $ (2.14) $ (0.92) $ (1.22)
Extraordinary Item, Net of Income Taxes...... -- (0.16) --
Cumulative Effect of Change in Accounting for
Income Taxes................................ (0.01) -- --
--------- --------- ---------
Net Loss..................................... $ (2.15) $ (1.08) $ (1.22)
========= ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
SCHEDULE IV
CONTINENTAL CABLEVISION, INC.
(PARENT COMPANY ONLY)
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1994 1995
----------- --------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net loss................................... $ (210,770) $ (86,841) $(112,027)
Adjustments to Reconcile Net Loss to Net
Cash Used for Operating Activities:
Extraordinary Item....................... -- 18,265 --
Cumulative Effect of Change in Accounting
for Income Taxes........................ 624 -- --
Depreciation and Amortization............ 88 162 320
Restricted Stock Purchase Program........ 11,004 11,316 12,005
Equity in Net Income of Affiliates and
Subsidiaries............................ 202,718 60,814 103,780
Minority Interest In Net Income (Loss) of
Affiliates.............................. 184 (205) (39)
Deferred Income Taxes.................... (4,443) (4,800) (5,000)
Change in Working Capital Items.......... 17,679 696 (9,456)
----------- --------- ---------
NET CASH USED FOR OPERATING ACTIVITIES...... 17,084 (593) (10,417)
----------- --------- ---------
FINANCING ACTIVITIES:
Proceeds from Borrowings................... 1,393,474 618,629 812,888
Repayment of Borrowings.................... (1,038,606) (346,500) (24,250)
Premium Paid on Extinguishment of Debt..... -- (20,924) --
Issuance of Common Stock................... 46,500 30,500 --
Repurchase of Common Stock and Redeemable
Common Stock.............................. (31,232) (4,755) --
----------- --------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES... 370,136 276,950 788,638
----------- --------- ---------
INVESTING ACTIVITIES:
Fixed and Intangible Assets................ (31,030) (9,736) (8,913)
Advances to Affiliates and Subsidiaries--
net....................................... (246,926) (379,639) (770,019)
----------- --------- ---------
NET CASH USED FOR INVESTING ACTIVITIES...... (277,956) (389,375) (778,932)
----------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS................................ 109,264 (113,018) (711)
BALANCE AT BEGINNING OF YEAR................ 4,483 113,747 729
----------- --------- ---------
BALANCE AT END OF YEAR...................... $ 113,747 $ 729 $ 18
=========== ========= =========
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
================================================================================
AGREEMENT AND PLAN OF MERGER
between
U S WEST, INC.
and
CONTINENTAL CABLEVISION, INC.
Dated as of February 27, 1996
================================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS.......................................................... 2
1.1 Definitions.................................................. 2
1.2 Terms Defined Elsewhere in the Agreement..................... 13
1.3 Other Definitional Provisions................................ 14
<PAGE>
Page
----
ARTICLE II
THE MERGER........................................................... 15
2.1 The Merger................................................... 15
2.2 Closing...................................................... 15
2.3 Effective Time............................................... 15
2.4 Effects of the Merger........................................ 16
2.5 Directors; Certificate of Incorporation; Bylaws.............. 16
ARTICLE III
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES................... 17
3.1 Effect on Capital Stock...................................... 17
3.2 Company Common Stock Elections; Exchange Fund................ 21
3.3 Proration.................................................... 24
3.4 Dividends, Fractional Shares, Etc............................ 24
3.5 Restricted Stock............................................. 28
3.6 Dissenting Shares............................................ 28
3.7 Share Price Adjustment....................................... 29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................ 29
4.1 Organization and Authority of the Company.................... 29
4.2 Capitalization............................................... 31
4.3 No Conflicts................................................. 32
4.4 Vote Required................................................ 33
4.5 Board Recommendation; Opinion of Financial Advisor........... 33
4.6 Consents..................................................... 34
4.7 Compliance; No Defaults...................................... 35
4.8 SEC Documents; Undisclosed Liabilities....................... 36
4.9 Litigation................................................... 37
4.10 Taxes........................................................ 37
4.11 Employee Benefits............................................ 40
4.12 Cable Television Franchises.................................. 43
4.13 Environmental Matters........................................ 47
4.14 Labor........................................................ 48
4.15 Absence of Changes or Events................................. 50
4.16 Unlawful Payments and Contributions.......................... 51
<PAGE>
Page
----
4.17 Brokers and Intermediaries................................... 51
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF ACQUIROR........................... 52
5.1 Organization and Authority of Acquiror....................... 52
5.2 Capitalization............................................... 53
5.3 No Conflicts................................................. 54
5.4 Stockholder Vote............................................. 55
5.5 Consents..................................................... 55
5.6 Compliance; No Defaults...................................... 56
5.7 Acquiror SEC Documents; Undisclosed Liabilities.............. 56
5.8 Litigation................................................... 57
5.9 Absence of Changes or Events................................. 57
5.10 Brokers and Intermediaries................................... 58
5.11 Ownership of Company Capital Stock........................... 58
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS............................ 58
6.1 Conduct of Business of the Company........................... 58
6.2 Conduct of Business of Acquiror.............................. 63
6.3 Access to Information........................................ 65
ARTICLE VII
ADDITIONAL AGREEMENTS................................................ 66
7.1 Preparation of Form S-4 Statement; Stockholders' Meeting;
and the Proxy Charter Amendment.............................. 66
7.2 Letter of the Company's Accountants.......................... 69
7.3 Letter of Acquiror's Accountants............................. 69
7.4 Reasonable Best Efforts...................................... 70
7.5 Franchise and License Consents............................... 70
7.6 Antitrust Notification....................................... 72
7.7 Certain Actions.............................................. 74
7.8 Supplemental Disclosure...................................... 75
7.9 Announcements................................................ 75
7.10 No Solicitation.............................................. 75
7.11 Indemnification; Directors' and Officers Insurance........... 77
7.12 NYSE Listing................................................. 78
7.13 Affiliates................................................... 78
<PAGE>
Page
----
7.14 Employee Benefits............................................ 79
7.15 Registration Rights Agreement................................ 80
7.16 Tax Treatment................................................ 80
7.17 Series D Preferred Stock..................................... 80
7.18 Company Indebtedness......................................... 81
7.19 Authorization of Issuance of Merger Consideration............ 81
7.20 Attribution.................................................. 81
7.21 Further Assurances........................................... 81
ARTICLE VIII
CONDITIONS PRECEDENT................................................. 82
8.1 Conditions to Each Party's Obligation to Effect the Merger... 82
8.2 Conditions of Obligations of Acquiror........................ 83
8.3 Conditions of Obligations of the Company..................... 86
ARTICLE IX
TERMINATION AND AMENDMENT............................................ 87
9.1 Termination.................................................. 87
9.2 Effect of Termination........................................ 90
9.3 Fees and Expenses............................................ 90
9.4 Certain Purchase Obligations................................. 91
9.5 Amendment.................................................... 92
9.6 Extension; Waiver............................................ 93
ARTICLE X
GENERAL PROVISIONS 93
10.1 Frustration of the Closing Conditions 93
10.2 Effectiveness of Representations, Warranties and Agreements 93
10.3 Expenses 94
10.4 Applicable Law 94
10.5 Notices 94
10.6 Entire Agreement 95
10.7 Headings; References 96
10.8 Counterparts 96
10.9 Parties in Interest; Assignment 96
10.10 Severability; Enforcement 96
10.11 Specific Performance 96
10.12 Jurisdiction 97
<PAGE>
EXHIBITS
Exhibit A Form of Charter Amendment
Exhibit B Form of Registration Rights Agreement for Media Stock and Series D
Preferred Stock
Exhibit C Form of Certificate of Designation for Series D Convertible
Preferred Stock
Exhibit D
Form of Affiliate Letter
Exhibit E Form of Certificate of Designation for Put Shares
Exhibit F Form of Registration Rights Agreement for Put Shares
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 27, 1996, between U S WEST,
INC., a Delaware corporation ("Acquiror"), and CONTINENTAL CABLEVISION, INC., a
Delaware corporation (the "Company").
W I T N E S S E T H:
-------------------
WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement, the Company and Acquiror will enter into a business combination
transaction pursuant to which the Company will merge with and into Acquiror (the
"Merger"), with Acquiror continuing as the surviving corporation (the "Surviving
Corporation");
WHEREAS, the board of directors of the Company has determined that the Merger
would be fair to and in the best interests of its stockholders, and such board
of directors has approved this Agreement and the transactions contemplated
hereby and has recommended the adoption by the stockholders of the Company of
this Agreement and the amendment, substantially in the form of Exhibit A hereto
(the "Charter Amendment"), to the Company's Restated Certificate of
Incorporation to be effected immediately prior to the consummation of the
Merger;
WHEREAS, the board of directors of Acquiror has determined that the Merger
would be fair to and in the best interests of its stockholders, and such board
of directors has approved this Agreement and the transactions contemplated
hereby;
WHEREAS, concurrently with the execution of this Agreement and in order to
induce Acquiror to enter into this Agreement, certain stockholders of the
Company have executed and delivered an agreement (the "Stockholders' Agreement")
pursuant to which, among other things, such Stockholders have granted to
Acquiror their proxy to vote all of the votes entitled to be cast by such
stockholders in
<PAGE>
favor of the adoption of this Agreement and the Charter Amendment;
WHEREAS, for Federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and the rules and regulations promulgated
thereunder (the "Code"); and
WHEREAS, Acquiror and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements herein contained, the parties hereto agree
as follows:
ARTICLE Section 1
DEFINITIONS
a. Definitions. For purposes of this Agreement, the following terms shall
-----------
have the meanings set forth below:
"Acquiror Region" shall mean Arizona, Colorado, Idaho, Iowa, Minnesota,
---------------
Montana, Nebraska, New Mexico, North Dakota, Oregon, South Dakota, Utah,
Washington and Wyoming.
"Affiliate" shall mean, with respect to any Person, any other Person
---------
directly or indirectly controlling, controlled by or under common control with
such other Person.
"Appraiser" shall mean a nationally recognized investment banking firm
---------
that is independent of the Company, Acquiror and their respective Subsidiaries
and has significant experience and expertise in the valuation of entities with
businesses comparable to those being appraised.
"Basic Cable Service" shall mean as to each System the tier of video
-------------------
programming service defined in 47 C.F.R. (S) 76.901(a).
<PAGE>
"Board of Directors" shall mean the board of directors of the Company.
------------------
"Business Day" shall mean a day other than a Saturday, Sunday or other day on
------------
which commercial banks in New York City are authorized or required by law to
close.
"Cable Act" shall mean the Cable Communications Policy Act of 1984, as amended
---------
by the Cable Television Consumer Protection and Competition Act of 1992 and the
Telecommunications Act of 1996.
"Cable Programming Service" shall mean as to each System those video
-------------------------
programming services defined in 47 C.F.R. (S) 76.901(b).
"Calculation Price" shall mean the Determination Price, Cap Price or Floor
-----------------
Price, as applicable, based upon which the Class A Common Conversion Number or
Class B Common Conversion Number is determined in accordance with Section
3.1(d).
"Cap Price" shall mean $28.175.
---------
"Cash Consideration Amount" shall equal $1 billion; provided, however, that
------------------------- -------- -------
the board of directors of Acquiror shall have the right, in its sole discretion,
to increase the Cash Consideration Amount to a maximum of $1.5 billion so long
as notice of such change is given to the Company no later than one Business Day
prior to the Effective Time; provided, further, that the board of directors of
-------- -------
Acquiror shall have the right to increase the Cash Consideration Amount above
$1.5 billion in an amount equal to (x) the number of shares of Company Common
Stock issued or to be issued in connection with any acquisition by the Company
approved by Acquiror pursuant to Section 6.1 hereof multiplied by (y) the Share
Price; and provided, further, that the Cash Consideration Amount may be reduced
-------- -------
pursuant to Section 7.7(c).
"CATV" shall mean any method, presently existing, for the transmission and/or
----
exhibition (whether by microwave, fiber optics or coaxial cable) of broadband
video signals other than by means of DBS, MMDS, broadcast television and in-home
video players (and which is based on the expectation of payment by the
recipient), and shall include without limitation cable television (basic and
premium) and pay-per-view television.
<PAGE>
"Charter Amendment" shall have the meaning set forth in the second recital to
-----------------
this Agreement.
"Class A Common Percentage" shall mean the quotient (rounded to the nearest
-------------------------
hundredth, or if there shall not be a nearest hundredth, to the next lowest
hundredth) of (x) the Common Consideration Amount divided by (y) the Transaction
Value.
"Class A Preferred Consideration Amount" shall mean the product of (x) the
--------------------------------------
Class A Preferred Percentage multiplied by (y) the Share Price multiplied by (z)
the number of shares of Class A Common Stock outstanding immediately prior to
the Effective Time on a fully diluted basis.
"Class A Preferred Conversion Number" shall mean the quotient of (x) the
-----------------------------------
product of (A) the Class A Preferred Percentage multiplied by (B) the Share
Price divided by (y) the Liquidation Value (rounded to the nearest hundredth, or
if there shall not be a nearest hundredth, to the next lowest hundredth).
"Class A Preferred Percentage" shall mean the difference between (x) one and
----------------------------
(y) the Class A Common Percentage.
"Class B Common Consideration Amount" shall mean the product of (x) the Class
-----------------------------------
B Percentage multiplied by (y) the Common Consideration Amount.
"Class B Common Percentage" shall mean the quotient (rounded to the nearest
-------------------------
hundredth, or if there shall not be a nearest hundredth, to the next lowest
hundredth) of (x) the Class B Common Consideration Amount divided by (y) the sum
of the Class B Common Consideration Amount and the Class B Preferred
Consideration Amount.
"Class B Preferred Percentage" shall mean the quotient (rounded to the nearest
----------------------------
hundredth, or if there shall not be a nearest hundredth, to the next highest
hundredth) of (x) the Class B Preferred Consideration Amount divided by (y) the
sum of the Class B Common Consideration Amount and the Class B Preferred
Consideration Amount.
"Class B Percentage" shall mean the quotient (rounded to the nearest
------------------
hundredth, or if there shall not be a nearest hundredth, to the next lowest
hundredth) of (i) the number of shares of Class B Common
<PAGE>
Stock outstanding immediately prior to the Effective Time on a fully diluted
basis, including giving effect to the conversion of all outstanding shares of
Company Preferred Stock divided by (ii) the number of shares of Company Common
Stock outstanding immediately prior to the Effective Time on a fully diluted
basis, including giving effect to the conversion of all outstanding shares of
Company Preferred Stock.
"Class B Preferred Consideration Amount" shall mean the difference between (x)
--------------------------------------
the Preferred Consideration Amount and (y) the Class A Preferred Consideration
Amount.
"Class B Preferred Conversion Number" shall mean the quotient of (x) the
-----------------------------------
product of (A) the Class B Preferred Percentage multiplied by (B) the Share
Price divided by (y) the Liquidation Value (rounded to the nearest hundredth, or
if there shall not be a nearest hundredth, to the next lowest hundredth).
"Code" shall have the meaning set forth in the fifth recital of this
----
Agreement.
"Common Consideration Amount" shall equal the excess of (x) the Transaction
---------------------------
Value over (y) the sum of the Preferred Consideration Amount and the Cash
Consideration Amount.
"Communications Act" shall mean the Communications Act of 1934, as amended, 47
------------------
U.S.C. (S)(S) 151, et seq., as amended by the Telecommunications Act of 1996.
"Copyright Office" shall mean the United States Copyright Office of the
----------------
Library of Congress or any successor agency that shall hold principal
responsibility for administering the cable television compulsory license for
retransmission of broadcast signals established pursuant to Section 111 of the
Copyright Act, 17 U.S.C. (S) 111.
"DBS" shall mean a system providing direct-to-home in the broadcast satellite
---
services authorized by the FCC.
"Determination Price" shall mean the average of the Intra-Day Closing Prices
-------------------
for the Random Trading Days.
<PAGE>
"DGCL" shall mean the Delaware General Corporation Law.
----
"DOJ" shall mean the Department of Justice.
---
"Encumbrances" shall mean any and all mortgages, security interests, liens,
------------
claims, pledges, restrictions, leases, title exceptions, charges or other
encumbrances.
"Environmental Claim" means any notice of violation, action, claim,
-------------------
Environmental Lien, demand, abatement or other Order or direction (conditional
or otherwise) by any Governmental Authority or any other Person for personal
injury (including sickness, disease or death), tangible or intangible property
damage, damage to the environment, pollution, contamination or other adverse
effects on the environment, or for fines, penalties or restrictions resulting
from or based upon (i) the existence of an Environmental Release (including,
without limitation, sudden or non-sudden accidental or non-accidental
Environmental Releases) of, or exposure to, any Hazardous Material, noxious odor
or illegal audible noise in, into or onto the environment (including, without
limitation, the air, soil, surface water or groundwater) at, in, by, from or
related to any property owned, operated or leased by the Company or its
Subsidiaries or any activities or operations thereof; (ii) the transportation,
storage, treatment or disposal of Hazardous Materials in connection with any
property owned, operated or leased by the Company or its Subsidiaries or their
operations or facilities; or (iii) the violation, or alleged violation, of any
Environmental Law or Environmental Permit of or from any Governmental Authority
relating to environmental matters connected with any property owned, leased or
operated by the Company or any of its Subsidiaries.
"Environmental Costs and Liabilities" means any and all losses, liabilities,
-----------------------------------
obligations, damages, fines, penalties, judgments, actions, claims, costs and
expenses (including, without limitation, fees, disbursements and expenses of
legal counsel, experts, engineers and consultants and the costs of investigation
and feasibility studies and Remedial Action) arising from or under any
Environmental Law or contract, agreement or similar arrangement with any
Governmental Authority or other Person required under any Environmental Law.
<PAGE>
"Environmental Law" means any Federal, state, local, or foreign law (including
-----------------
common law), statute, code, ordinance, rule, regulation or other legally
enforceable requirement relating to the environment, natural resources, or
public or employee health and safety as it relates to exposure to Hazardous
Materials and includes, but is not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. (S) 9601 et seq., the
-- ----
Hazardous Materials Transportation Act, 49 U.S.C. (S) 1801 et seq., the Resource
-- ----
Conservation and Recovery Act, 42 U.S.C. (S) 6901 et seq., the Clean Water Act,
-- ----
33 U.S.C. (S) 1251 et seq., the Clean Air Act, 33 U.S.C. (S) 2601 et seq., the
-- ---- -- ----
Toxic Substances Control Act, 15 U.S.C. (S) 2601 et seq., the Federal
-- ----
Insecticide, Fungicide, and Rodenticide Act, 7 U.S.C. (S) 136 et seq., the Oil
-- ----
Pollution Act of 1990, 33 U.S.C (S) 2701 et seq. and the relevant portions of
-- ---
the Occupational Safety and Health Act, 29 U.S.C. (S) 651 et seq., as such laws
-- ----
have been amended or supplemented as of the date hereof, and the regulations
promulgated pursuant thereto, and all analogous state or local statutes as of
the date hereof.
"Environmental Lien" means any lien arising under Environmental Laws.
------------------
"Environmental Permit" means any permit, approval, authorization, license,
--------------------
variance, registration or permission required under any applicable Environmental
Law.
"Environmental Release" means any release, spill, emission, leaking, pumping,
---------------------
pouring, dumping, emptying, injection, deposit, disposal, discharge, dispersal,
leaching, or migration on or into the indoor or outdoor environment or into or
out of any property not authorized under any Environmental Permit and requiring
notification under any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
-----
amended, and the applicable regulations promulgated thereunder.
"ERISA Affiliate" shall mean any corporation or trade or business (whether or
---------------
not incorporated) which are or have ever been treated as a single employer with
or which are or have been under common control with the Company within the
meaning of Section 414(b), (c), (m) or (o) of the Code.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and
------------
the rules and regulations promulgated thereunder.
"FCC" shall mean the Federal Communications Commission.
---
"Final Order" shall mean an action or actions by any Governmental Authority or
-----------
the FCC which has not been reversed, stayed, enjoined, set aside, annulled or
suspended, and as to the FCC with respect to which the time for filing any
request, petition or appeal of such action has expired and the time for the FCC
to set aside its action on its own motion has passed, and as to any Franchise
Consent, when the Franchise Consent has been or is deemed to be approved as
provided in Section 617 of the Cable Act.
"Floor Price" shall mean $20.825.
-----------
"FTC" shall mean the Federal Trade Commission.
---
"GAAP" shall mean generally accepted accounting principles in effect in the
----
United States of America as of the date of the applicable determination.
"Governmental Authority" shall mean any foreign, Federal, state, municipal or
----------------------
other governmental department, commission, board, bureau, agency or
instrumentality.
"Hazardous Material" means any substance, material or waste which is regulated
------------------
by any Governmental Authority in jurisdictions in which the Company operates,
including, without limitation, any material, substance or waste which is defined
as a "hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste," "restricted hazardous waste," "contaminant," "toxic waste" or
"toxic substance" under any provision of Environmental Law, which includes, but
is not limited to, petroleum, petroleum products, asbestos, and polychlorinated
biphenyls.
"Homes Passed" shall mean the number of homes to which CATV service is
------------
currently available from the Company or the Subsidiaries, whether or not a given
household subscribes to such service.
<PAGE>
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
-------
as amended.
"Indebtedness" shall mean, with respect to any Person, any indebtedness,
------------
secured or unsecured, (i) in respect of borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), and evidenced by bonds, notes, debentures or similar
instruments or letters of credit, to the extent of the face value thereof (or,
in the case of evidence of indebtedness issued at a discount, the current
accredit value thereof) or (ii) representing the balance deferred and unpaid of
the purchase price of property or services (other than accounts payable in the
ordinary course of business) and shall also include, to the extent not otherwise
included, (A) any capitalized lease obligations and (B) the face value of
guaranties of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor). No item constituting Indebtedness under
any of the definitions set forth above shall be counted twice by virtue of the
fact that it constitutes "Indebtedness" under more than one of such definitions.
"Intra-Day Closing Prices" shall mean the volume weighted average sale price
------------------------
of the Media Stock (regular way) as shown on the Composite Tape of the NYSE.
"IRS" means the United States Internal Revenue Service.
---
"Knowledge of the Company" and "to the Company's Knowledge" shall mean the
------------------------ --------------------------
actual knowledge of the executive officers (as identified in the Company SEC
Documents), the Senior Vice President-Corporate & Legal Affairs and the regional
Senior Vice Presidents, in each case of the Company after reasonable
investigation and due inquiry.
"Legal Proceedings" means any judicial, administrative or arbitral actions,
-----------------
suits, proceedings (public or private) or governmental proceedings.
"Material Adverse Effect" shall mean, (i) with respect to the Company, any
-----------------------
change or effect that is or is reasonably likely to be materially adverse to the
business, results of operations, properties, assets, liabilities or condition
(financial or otherwise) of the
<PAGE>
Company and its Subsidiaries taken as whole and (ii) with respect to Acquiror,
any change or effect that is or is reasonably likely to be materially adverse to
the business, results of operations, properties, assets, liabilities or
condition (financial or otherwise) of either (x) the Media Group or (y) Acquiror
and its Subsidiaries taken as a whole; provided, however, that Material Adverse
-------- -------
Effect shall in each instance exclude any change or effect due to general
economic or industry wide conditions.
"Media Group" shall have the meaning set forth in Section 2.6.15 of Article V
-----------
of the Restated Certificate of Incorporation of Acquiror as in effect as of the
date hereof.
"Merger" shall have the meaning set forth in the first recital to this
------
Agreement.
"MMDS" shall mean a system operating in the Multichannel Multipoint
----
Distribution Services authorized by the FCC.
"NYSE" shall mean the New York Stock Exchange, Inc.
----
"Person" shall mean an individual, corporation, partnership, trust or
------
unincorporated organization or a government or any agency or political
subdivision thereof.
"Preferred Consideration Amount" shall equal $1 billion.
------------------------------
"Random Trading Days" shall mean the 20 Trading Days selected by Acquiror by
-------------------
lot (through a method reasonably satisfactory to the Company) from the 30
Trading Days ending on the fourth Trading Day prior to the Closing Date.
"Recently Acquired Systems" shall mean the Systems acquired by the Company or
-------------------------
its Subsidiaries from Providence Journal Company, Cablevision of Chicago,
Columbia of Michigan, Consolidated Cablevision of California and N-COM Limited
Partnership II since August 1, 1995.
"Registration Rights Agreement" shall mean the registration rights agreement,
-----------------------------
substantially in the form of Exhibit B hereto, to be entered into by Acquiror,
Amos B. Hostetter, Jr. and the Amos B. Hostetter, Jr. 1989 Trust.
<PAGE>
"Remedial Action" means all actions required under any applicable
---------------
Environmental Law or otherwise undertaken by any Governmental Authority,
including, without limitation, any capital expenditures, required or undertaken
to (i) clean up, remove, treat, or in any other way address any Hazardous
Material; (ii) prevent the Release or threat of Release, or minimize the further
Release of any Hazardous Material so it does not migrate or endanger or threaten
to endanger public health or welfare or the indoor or outdoor environment; (iii)
perform pre-remedial studies and investigations or post-remedial monitoring and
care; or (iv) bring facilities on any property owned, operated or leased by the
Company or its Subsidiaries and the facilities located and operations conducted
thereon into compliance with all applicable Environmental Laws and Environmental
Permits.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
--------------
rules and regulations promulgated thereunder.
"Share Price" shall mean $30, decreased by the Per Share Adjustment Amount, if
-----------
any, plus the Additional Amount, if any, in accordance with the terms of Section
3.7.
"Stockholders' Agreement" shall have the meaning set forth in the first
-----------------------
recital of this Agreement.
"Subpart N of the FCC Rules" shall refer to the Subpart N of Part 76 of the
--------------------------
FCC's rules (47 C.F.R. (S)(S) 76.900 through 76.985), entitled "Cable Rate
Regulation," added by order in Docket 92-266, adopted by the FCC on April 1,
1993, as such Subpart may be amended from time to time thereafter, as such rules
were in effect on any particular date, and shall include successor provisions if
recodified or otherwise modified.
"Subscriber" shall mean a member of the general public who receives video
----------
programming services distributed by a System and does not further distribute it;
provided, however, that the number of Subscribers in a multi-unit dwelling or
- -------- -------
commercial structure that obtains service on a "bulk rate" basis shall be
determined by dividing the bulk rate charge by the rate for individual
households subscribing to the same level of service as the multi-unit structure
(e.g., if the basic subscription rate
<PAGE>
for individual households is $10 and the multi-unit dwelling or commercial
structure paid a bulk fee of $100 for the same level of service, then that
multi-unit dwelling or structure shall be counted as having 10 Subscribers).
"Subsidiary" shall mean, with respect to any Person, (i) each corporation,
----------
partnership, joint venture or other legal entity of which such Person owns,
either directly or indirectly, more than 50% of the stock or other equity
interests the holders of which are generally entitled to vote for the election
of the board of directors or similar governing body of such corporation,
partnership, joint venture or other legal entity, (ii) each partnership in which
such Person or another Subsidiary of such Person is the sole general partner or
sole managing partner and (iii) each limited liability company in which such
Person or another Subsidiary of such Persons is the managing member or otherwise
controls.
"Surviving Corporation" shall have the meaning set forth in the first recital
---------------------
of this Agreement.
"Systems" shall mean the cable television systems listed in Section 4.12(a) of
-------
the Company Disclosure Letter.
"Tax" or "Taxes" shall mean all taxes, charges, fees, imposts, levies or other
--- -----
assessments, including, without limitation, all net income, gross receipts,
capital, sales, use, ad valorem, value added, transfer, franchise, profits,
inventory, capital stock, license, withholding, payroll, employment, social
security, unemployment, excise, severance, stamp, occupation, property and
estimated taxes, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts imposed by any taxing authority (domestic or foreign)
and shall include any transferee liability in respect of Taxes.
"Third Party" shall mean a party or parties unaffiliated with either the
-----------
Company or Acquiror.
"Trading Day" shall mean a day on which (i) the NYSE is open for the
-----------
transaction of business and (ii) there is no suspension of trading of the Media
Stock.
<PAGE>
"Transaction Documents" shall mean the Stockholders' Agreement and the
---------------------
Registration Rights Agreement.
"Transaction Value" shall equal the product of (x) the Share Price multiplied
-----------------
by (y) the number of shares of Company Common Stock outstanding immediately
prior to the Effective Time on a fully diluted basis, including giving effect to
the conversion of all outstanding shares of Company Preferred Stock.
"WARN" shall mean the Worker Adjustment and Retraining Notification Act and
----
any similar state or local "plant closing" law.
b. Terms Defined Elsewhere in the Agreement. For purposes of this
----------------------------------------
Agreement, the following terms have the meanings set forth in the sections
indicated:
Term Section
---- -------
Acceleration Event
7.14(c)
Acquiror Certificates
3.2(b)
Acquiror Consents
5.5
Acquiror Disclosure Letter
5.2(b)
Acquiror SEC Documents
5.7(a)
Acquiror Termination Notice
3.1(d)(ii)
Acquisition Proposal
7.10(d)
Additional Amount
<PAGE>
3.7
Additional Payment
7.14(c)
Additional Stockholders' Meeting
7.1(d)
Allocation Determination
3.2(d)
Applicable Laws
4.7(a)
Articles
10.7
Benefit Plans
4.11(a)
Cap Top-Up Intent Notice
3.1(d)(ii)
Cash Cap
3.3(a)
Cash Election
3.1(c)(ii)
Certificate of Merger
2.3
Certificates
3.2(b)
Class A Common Conversion Number
3.1(d)
Class A Common Stock
3.1(c)(i)
Class A Merger Consideration
3.1(c)(i)
<PAGE>
Class B Common Conversion Number
3.1(d)
Class B Common Stock
3.1(c)(ii)
Class B Cash Consideration
3.1(c)(ii)
Class B Merger Consideration
3.1(c)(ii)
Class B Stock Consideration
3.1(c)(ii)
Class B Stock Election
3.2(a)
Closing
2.2
Closing Date
2.2
Communications Stock
5.2(a)
Company Capital Stock
4.2(a)
Company Certificate
3.1(c)(iii)
Company Common Stock
3.1
Company Consents
4.6
Company Letter of Transmittal
3.2(c)
Company Disclosure Letter
4.1(c)
<PAGE>
Company Preferred Stock
4.2(a)
Company Representatives
7.10(a)
Company SEC Documents
4.8(a)
Company Termination Notice
3.1(d)(ii)
Confidentiality Agreements
6.3(c)
Copyright Act
4.12(e)
Designated Assets
7.7(b)
Designated Asset Fair Market Value
7.7(c)
Dissenting Shares
3.6
Effective Time
2.3
Election Deadline
3.2(d)
Election Form
3.2(c)
Equity Appreciation Rights Plans
4.11(i)
Excess Cash Amount
3.3(c)
Excise Tax
<PAGE>
7.14(c)
Exchange Agent
3.2(b)
Exchange Fund
3.2(b)
Exhibits
10.7
Floor Top-Up Intent Notice
3.1(d)(ii)
Foreign Benefit Plans
4.11(b)
Form S-4
5.5
Fractional Shares
3.4(c)(i)
Franchise Consents
4.6
Franchises
4.12(a)
Gains Taxes
4.6
Incremental Excise Tax
7.14(c)
Indemnified Liabilities
7.11(b)
Indemnified Parties
<PAGE>
7.11(b)
Initial Stockholders' Meeting
7.1(d)
Liquidation Value
3.1(c)(i)
License Consents
4.6
Material Franchises
4.12(c)
Media Stock
3.1(c)(i)
Merger Consideration
3.2(b)
Non-Required Franchises
7.5(b)
Non-Required Systems
7.5(b)
Permits
4.7(a)
Per Share Adjustment Amount
7.7(c)
Prorated Cash Amount
3.3(b)
Proxy Statement
4.6
Put Closing Date
9.4(c)
<PAGE>
Put Exercise Notice
9.4(b)
Put Right
9.4(a)
Put Shares
9.4(a)
Requested Cash Amount
3.3(a)
Required Franchise Consents
8.2(j)
Restricted Company Common Stock
3.5
Rights Agreement
5.2(a)
RSPA
3.5
Sections
10.7
Series D Preferred Stock
3.1(c)(i)
Social Contract Amendment
4.6
Social Contract Consents
4.6
Social Contract Order
4.6
Stock Election
3.2(a)
<PAGE>
Stockholder Approvals
4.1(b)
Stockholders' Meeting
7.1(d)
Tax Returns
4.10(a)
Termination Date
9.1(d)
c. Other Definitional Provisions. The words "hereof", "herein", and
-----------------------------
"hereunder" and words of similar import, when used in this Agreement,
shall refer to this Agreement as a whole and not to any particular
provision of this Agreement.
i. The terms defined in the singular shall have a comparable meaning
when used in the plural, and vice versa.
ii. The terms "dollars" and "$" shall mean United States dollars.
ARTICLE Section 2
THE MERGER
a. The Merger. Upon the terms and subject to the conditions set
----------
forth in this Agreement, and in accordance with the DGCL, the Company
shall be merged with and into Acquiror at the Effective Time (as defined
in Section 2.3). At the Effective Time, the separate corporate existence
of the Company shall cease, and Acquiror shall continue as the Surviving
Corporation and shall succeed to and assume all of the rights,
properties, liabilities and obligations of the Company in accordance
with the DGCL.
<PAGE>
b. Closing. Unless this Agreement shall have been terminated and the
-------
transactions herein contemplated shall have been abandoned pursuant to
Section 9.1, the closing of the Merger (the "Closing") shall take place
at 10:00 a.m., New York City time, the later of (i) the fifth Business
Day after the date on which the last of the conditions set forth in
Article VIII is fulfilled or waived, other than conditions requiring
deliveries at the Closing and (ii) November 15, 1996 (the "Closing
Date"), at the offices of Weil, Gotshal & Manges LLP, 767 Fifth Avenue,
New York, New York 10153, unless another date, time or place is agreed
to in writing by the parties hereto.
c. Effective Time. Subject to the provisions of this Agreement, the
--------------
parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary
of State of the State of Delaware, as provided in the DGCL, as soon as
practicable on or after the Closing Date. The Merger shall become
effective upon such filing or at such time thereafter as is provided in
the Certificate of Merger (the "Effective Time").
d. Effects of the Merger. From and after the Effective Time, the
---------------------
Surviving Corporation shall possess all the rights, privileges, powers
and franchises of a public as well as of a private nature, and be
subject to all the restrictions, disabilities and duties of each of
Acquiror and the Company; and all and singular rights, privileges,
powers and franchises of each of Acquiror and the Company, and all
property, real, personal and mixed, and all debts due to either of
Acquiror or the Company on whatever account, as well as for stock
subscriptions and all other things in action or belonging to each of
Acquiror and the Company, shall be vested in the Surviving Corporation;
and all property, rights, privileges, powers and franchises,
<PAGE>
and all and every other interest shall be thereafter as effectually the
property of the Surviving Corporation as they were of Acquiror and the
Company; and the title to any real estate vested by deed or otherwise,
in either of Acquiror or the Company, shall not revert or be in any way
impaired; but all rights of creditors and all liens upon any property of
either of Acquiror or the Company shall be preserved unimpaired; and all
debts, liabilities and duties of Acquiror and the Company shall
thenceforth attach to the Surviving Corporation, and may be enforced
against it to the same extent as if said debts and liabilities had been
incurred by it.
e. Directors; Certificate of Incorporation; Bylaws. The directors of
-----------------------------------------------
Acquiror and the officers of Acquiror immediately prior to the Effective
Time shall be the directors and officers of the Surviving Corporation
until their successors have been duly elected or appointed and
qualified, or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's certificate of incorporation
and bylaws.
i. The Restated Certificate of Incorporation of Acquiror as in effect
immediately prior to the Effective Time shall be the Restated
Certificate of Incorporation of the Surviving Corporation, until duly
amended in accordance with the terms thereof and the DGCL.
ii. The Bylaws of Acquiror as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until
thereafter amended as provided by Applicable Law, the Restated
Certificate of Incorporation of the Surviving Corporation or such
Bylaws.
<PAGE>
ARTICLE Section 3
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF
THE CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
a. Effect on Capital Stock. At the Effective Time, by virtue of the
-----------------------
Merger and without any action on the part of the holder of any shares of
Company Capital Stock (as defined in Section 4.2) or the holder of any
shares of capital stock of Acquiror:
i. Capital Stock of Acquiror. Each share of each class of capital
-------------------------
stock of Acquiror issued and outstanding immediately prior to the
Effective Time shall remain an issued and outstanding share of the same
class of capital stock of the Surviving Corporation.
ii. Cancellation of Treasury Stock and Acquiror-Owned Stock. Each share
-------------------------------------------------------
of Company Capital Stock that is owned by the Company or any wholly
owned Subsidiary of the Company and each share of Company Capital Stock
that is owned by Acquiror or any wholly owned subsidiary of Acquiror
shall be canceled and retired and shall cease to exist and no
consideration shall be delivered or deliverable in exchange therefor.
b. Conversion of Company Common Stock.
----------------------------------
(1) Subject to Sections 3.5 and 3.6, at the Effective Time, each issued
and outstanding share (excluding shares cancelled pursuant to Section
3.1(b)) of Class A Common Stock, par value $.01 per share, of the
Company ("Class A Common Stock") shall be converted into the right to
receive (x) a number of shares of U S WEST Media Group Common Stock, par
value $.01 per share, of Acquiror (the "Media Stock") equal to the Class
A Common Conversion Number (as determined in accordance with Section
3.1(d)) and (y) a number of shares of Series D Convertible Preferred
Stock, par value $1.00 per share,
<PAGE>
of Acquiror (the "Series D Preferred Stock"), having the rights,
preferences and terms set forth in the Certificate of Designation
attached as Exhibit C hereto, with a liquidation value of $50 per share
(the "Liquidation Value"), equal to the Class A Preferred Conversion
Number (collectively, the "Class A Merger Consideration").
(2) Except as otherwise provided in Section 3.3 and subject to Sections
3.5 and 3.6, at the Effective Time each issued and outstanding share
(excluding shares cancelled pursuant to Section 3.1(b)) of Class B
Common Stock, par value $.01 per share, of the Company ("Class B Common
Stock"), shall be converted into, at the election of the holder thereof,
one of the following (as adjusted pursuant to Section 3.3, the "Class B
Merger Consideration"):
(x) for each such share of Class B Common Stock with respect to which an
election to receive cash has been effectively made and not revoked, pursuant to
Sections 3.2(c), (d) and (e) (a "Cash Election"), the right to receive an amount
in cash from Acquiror, without interest, equal to the Share Price (the "Class B
Cash Consideration"); or
(y) for each such share of Class B Common Stock (other than shares as to which
a Cash Election was effectively made and not revoked), the right to receive (1)
a number of shares of Media Stock equal to the Class B Common Conversion Number
(as determined in accordance with Section 3.1(d)) and (2) a number of shares of
Series D Preferred Stock equal to the Class B Preferred Conversion Number
(collectively, the "Class B Stock Consideration").
(3) As a result of the Merger and without any action on the part of the
holder thereof, at the Effective Time all shares of Company Common Stock
shall cease to be outstanding and shall be cancelled and retired and
shall cease to exist, and each holder of shares of Company Common Stock
shall thereafter cease to have any rights with respect to such shares of
Company
<PAGE>
Common Stock, except the right to receive, without interest, the Class A
Merger Consideration or Class B Merger Consideration, as applicable, and
cash for fractional shares of Media Stock or Series D Preferred Stock in
accordance with Section 3.6(c) upon the surrender of a certificate
representing such shares of Company Common Stock (a "Company
Certificate"). The Media Stock and Series D Preferred Stock comprising
part of the Merger Consideration, when issued to the holders of Company
Common Stock, will be duly authorized, validly issued, fully paid, non-
assessable and not subject to preemptive rights created by statute,
Acquiror's Restated Certificate of Incorporation or Bylaws or any
agreement to which Acquiror is a party or by which Acquiror is bound.
i.Certain Adjustments and Determinations. If, between the date of this
--------------------------------------
Agreement and the Effective Time, the outstanding shares of Media Stock,
Series D Preferred Stock or Company 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 exchange of shares, the Common Conversion Number and the
Preferred Conversion Number correspondingly shall be adjusted to reflect
such stock dividend, subdivision, reclassification, recapitalization,
split, combination or exchange of shares.
(1) The Class A Common Conversion Number and Class B Common Conversion
Number shall be determined in the following manner:
(a)If the Determination Price is greater than or equal to the Floor
Price and less than or equal to the Cap Price, (x) the Class A Common
Conversion Number shall be equal to the quotient of (1) the product of
(I) the Class A Common Percentage multiplied by (II) the Share Price
divided
<PAGE>
by (2) the Determination Price (rounded to the nearest hundredth, or if
there shall not be a nearest hundredth, to the next lowest hundredth)
and (y) the Class B Common Conversion Number shall be equal to the
quotient of (1) the product of (I) the Class B Common Percentage
multiplied by (II) the Share Price divided by (2) the Determination
Price (rounded to the nearest hundredth, or if there shall not be a
nearest hundredth, to the next lowest hundredth).
(b)If the Determination Price is less than the Floor Price, (x) the
Class A Common Conversion Number shall be equal to the quotient of (1)
the product of (I) the Class A Common Percentage multiplied by (II) the
Share Price divided by (2) the Floor Price (rounded to the nearest
hundredth, or if there shall not be a nearest hundredth, to the next
lowest hundredth) and (y) the Class B Common Conversion Number shall be
equal to the quotient of (1) the product of (I) the Class B Common
Percentage multiplied by (II) the Share Price divided by (2) the Floor
Price (rounded to the nearest hundredth, or if there shall not be a
nearest hundredth, to the next lowest hundredth); provided, however,
-------- -------
that in such event Acquiror shall have the right to give written notice
to the Company (the "Floor Top-Up Intent Notice") that the board of
directors of Acquiror elects to increase both (x) the Class A Common
Conversion Number to the quotient of (1) the product of (I) the Class A
Common Percentage multiplied by (II) the Share Price divided by (2) the
Determination Price (rounded to the nearest hundredth, or if there shall
not be a nearest hundredth, to the next lowest hundredth) and (y) the
Class B Common Conversion Number to the quotient of (1) the product of
(I) the Class B Common Percentage multiplied by (II) the Share Price
divided by (2) the Determination Price (rounded to the nearest
hundredth, or if there shall not be a nearest hundredth,
<PAGE>
to the next lowest hundredth). The Floor Top-Up Intent Notice shall be
delivered to the Company no later than 2:00 p.m. on the second Business
Day prior to the Closing Date. If, in such case, Acquiror does not
deliver a Floor Top-Up Intent Notice, the Company shall have the right
to give written notice to Acquiror (the "Company Termination Notice")
that the Company elects to terminate this Agreement. The Company
Termination Notice shall be delivered to Acquiror no later than 2:00
p.m. on the Business Day prior to the Closing Date.
(c) If the Determination Price is greater than the Cap Price, (x) the
Class A Common Conversion Number shall be equal to the quotient of (1)
the product of (I) the Class A Common Percentage multiplied by (II) the
Share Price divided by (2) the Cap Price (rounded to the nearest
hundredth, or if there shall not be a nearest hundredth, to the next
lowest hundredth) and (y) the Class B Common Conversion Number shall be
equal to the quotient of (1) the product of (I) the Class B Common
Percentage multiplied by (II) the Share Price divided by (2) the Cap
Price (rounded to the nearest hundredth, or if there shall not be a
nearest hundredth, to the next lowest hundredth); provided, however,
-------- -------
that in such event, the Company shall have the right to give written
notice to Acquiror (the "Cap Top-Up Intent Notice") that the Board of
Directors elects to decrease both (x) the Class A Common Conversion
Number to the quotient of (1) the product of (I) the Class A Common
Percentage multiplied by (II) the Share Price divided by (2) the
Determination Price (rounded to the nearest hundredth, or if there shall
not be a nearest hundredth, to the next lowest hundredth) and (y) the
Class B Common Conversion Number to the quotient of (1) the product of
(I) the Class B Common Percentage multiplied by (II) the Share Price
divided by (2) the Determination Price (rounded to the nearest
hundredth, or
<PAGE>
if there shall not be a nearest hundredth, to the next lowest
hundredth). The Cap Top-Up Intent Notice shall be delivered to Acquiror
no later than 2:00 p.m. on the second Business Day prior to the Closing
Date. If, in such case, the Company does not deliver a Cap Top-Up Intent
Notice, Acquiror shall have the right to give written notice to the
Company (the "Acquiror Termination Notice") that Acquiror elects to
terminate this Agreement. The Acquiror Termination Notice shall be
delivered to the Company no later than 2:00 p.m. on the Business Day
prior to the Closing Date.
c. Company Common Stock Elections; Exchange Fund. Each Person who,
---------------------------------------------
at the Effective Time, is a record holder of shares of Class B Common
Stock (other than holders of shares of Class B Common Stock to be
cancelled as set forth in Section 3.1(b) or subject to Section 3.5 or
3.6) shall have the right to submit an Election Form (as defined in
Section 3.2(c)) specifying the number of shares of Class B Common Stock
that such Person desires to have converted into the right to receive the
Class B Stock Consideration (the "Stock Election") and the number of
shares of Class B Common Stock that such Person desires to have
converted into the right to receive the Class B Cash Consideration
pursuant to the Class B Cash Election.
i. Promptly after the Allocation Determination (as defined in Section
3.2(d)), (i) Acquiror shall deposit (or cause to be deposited) with a
bank or trust company to be designated by Acquiror and reasonably
acceptable to the Company (the "Exchange Agent"), for the benefit of the
holders of shares of Class B Common Stock, for exchange in accordance
with this Article III, cash in the amount sufficient to pay the
aggregate Class B Cash Consideration and (ii) Acquiror shall deposit (or
cause to be deposited) with the Exchange Agent, for the benefit of
holders
<PAGE>
of shares of Company Common Stock, certificates representing the shares
of Media Stock and Series D Preferred Stock ("Acquiror Certificates")
for exchange in accordance with this Article III (the cash and shares
deposited pursuant to clauses (i) and (ii) being hereinafter referred to
as the "Exchange Fund"). The Media Stock and Series D Preferred Stock
into which Company Common Stock shall be converted pursuant to the
Merger shall be deemed to have been issued at the Effective Time.
ii. As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of Company Common
Stock immediately prior to the Effective Time (excluding any shares of
Company Common Stock which will be cancelled pursuant to Section 3.1(b)
or which are subject to Section 3.5 or 3.6) (A) a letter of transmittal
(the "Company Letter of Transmittal") (which shall specify that delivery
shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon delivery of such Company Certificates
to the Exchange Agent and shall be in such form and have such other
provisions as Acquiror shall specify) and (B) instructions for use in
effecting the surrender of the Company Certificates in exchange for the
Class A Merger Consideration or Class B Merger Consideration, as
applicable, with respect to the shares of Company Common Stock formerly
represented thereby. The Exchange Agent shall also mail to holders of
Class B Common Stock, together with the items specified in the preceding
sentence, an election form (the "Election Form") providing for such
holders to make the Cash Election or the Stock Election. The Election
Form shall include information as to the Share Price, the Class B Common
Conversion Number, the Class B Preferred Conversion Number and the Cash
Consideration Amount and state the pricing terms of the Series D
Preferred Stock. As of the Election Deadline (as hereinafter
<PAGE>
defined) all holders of Class B Common Stock immediately prior to the
Effective Time that shall not have submitted to the Exchange Agent or
shall have properly revoked an effective, properly completed Election
Form shall be deemed to have made a Stock Election.
iii. Any Cash Election or Stock Election (other than a deemed Stock
Election) shall have been validly made only if the Exchange Agent shall
have received by 5:00 p.m. New York, New York time on a date (the
"Election Deadline") to be mutually agreed upon by Acquiror and the
Company (which date shall not be later than the twentieth Business Day
after the Effective Time), an Election Form properly completed and
executed (with the signature or signatures thereof guaranteed to the
extent required by the Election Form) by such holder accompanied by such
holder's Company Certificates, or by an appropriate guarantee of
delivery of such Company Certificates from a member of any registered
national securities exchange or of the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the
United States as set forth in such Election Form. Any holder of Class B
Common Stock (other than a holder who has submitted an irrevocable
election) who has made an election by submitting an Election Form to the
Exchange Agent may at any time prior to the Election Deadline change
such holder's election by submitting a revised Election Form, properly
completed and signed that is received by the Exchange Agent prior to the
Election Deadline. Any holder of Class B Common Stock may at any time
prior to the Election Deadline revoke such holder's election by written
notice to the Exchange Agent received by the Close of business on the
day prior to the Election Deadline. As soon as practicable after the
Election Deadline, the Exchange Agent shall determine the allocation of
the cash portion of the Class B Merger Consideration and the stock
portion of the Class B Merger
<PAGE>
Consideration and shall notify Acquiror of its determination (the
"Allocation Determination").
iv. Upon surrender of a Company Certificate for cancellation to the
Exchange Agent, together with the Company Letter of Transmittal, duly
executed, and such other documents as Acquiror or the Exchange Agent
shall reasonably request, the holder of such Company Certificate shall
be entitled to receive promptly after the Election Deadline in exchange
therefor (A) a certified or bank cashier's check in the amount equal to
the cash, if any, which such holder has the right to receive pursuant to
the provisions of this Article III (including any cash in lieu of
fractional shares of Media Stock and Series D Preferred Stock pursuant
to Section 3.4(c)), and (B) Acquiror Certificates representing that
number of shares of Media Stock and Series D Preferred Stock, if any,
which such holder has the right to receive pursuant to this Article III
(in each case less the amount of any required withholding taxes, if any,
determined in accordance with Section 3.4(g)), and the Company
Certificate so surrendered shall forthwith be cancelled. Until
surrendered as contemplated by this Section 3.3, each Company
Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive the Class A Merger Consideration or
Class B Merger Consideration, as applicable, with respect to the shares
of Company Common Stock formerly represented thereby.
v. Acquiror shall have the right to make reasonable rules, not
inconsistent with the terms of this Agreement, governing the validity of
the Election Forms, the manner and extent to which Cash Elections or
Stock Elections are to be taken into account in making the
determinations prescribed by Section 3.3, the issuance and delivery of
certificates for Media Stock and Series D Preferred Stock into which
shares of
<PAGE>
Class B Common Stock are converted in the Merger, and the payment of
cash for shares of Class B Common Stock converted into the right to
receive cash in the Merger.
d. Proration. The aggregate amount of cash to be paid to holders of
---------
Class B Common Stock (the "Cash Cap") shall not exceed the Cash
Consideration Amount.
i. In the event that the aggregate amount of cash represented by the
Cash Elections received by the Exchange Agent (the "Requested Cash
Amount") exceeds the Cash Cap, each holder making a Cash Election shall
receive, for each share of Class B Common Stock for which a Cash
Election has been made, (x) cash in an amount equal to the product of
the Class B Cash Consideration and a fraction, the numerator of which is
the Cash Cap and the denominator of which is the Requested Cash Amount
(such product, the "Prorated Cash Amount"), (y) a number of shares of
Media Stock equal to the product of the Class B Common Percentage and a
fraction, the numerator of which is equal to the Share Price minus the
Prorated Cash Amount and the denominator of which is the Calculation
Price and (z) a number of shares of Series D Preferred Stock equal to
the product of the Class B Preferred Percentage and a fraction, the
numerator of which is equal to the Share Price minus the Prorated Cash
Amount and the denominator of which is equal to the Liquidation Value.
ii. In the event the Requested Cash Amount is less than the Cash Cap,
each holder making a Stock Election (other than as set forth in Section
3.5) shall receive for each share of Class B Common Stock for which a
Stock Election has been made, (x) cash in an amount equal to the
quotient of (1) the excess of the Cash Cap over the Requested Cash
Amount divided by (2) the number of shares of Class B Common Stock for
which such Stock Elections have been made or have been deemed to have
been made
<PAGE>
(such quotient, the "Excess Cash Amount"), (y) a number of shares of
Media Stock equal to the product of the Class B Common Percentage and a
fraction, the numerator of which is equal to the difference between the
Share Price and the Excess Cash Amount and the denominator of which is
equal to the Calculation Price and (z) a number of shares of Series D
Preferred Stock equal to the product of the Class B Preferred Percentage
and a fraction, the numerator of which is equal to the difference
between the Share Price and the Excess Cash Amount and the denominator
of which is equal to the Liquidation Value.
e. Dividends, Fractional Shares, Etc. Notwithstanding any other
---------------------------------
provisions of this Agreement, no dividends or other distributions
declared after the Effective Time on Media Stock or Series D Preferred
Stock shall be paid with respect to any whole shares of Media Stock or
Series D Preferred Stock represented by a Company Certificate until such
Company Certificate is surrendered for exchange as provided herein.
Subject to the effect of Applicable Laws, following surrender of any
such Company Certificate, there shall be paid to the holder of the
Acquiror Certificates issued in exchange therefor, without interest,
(i) at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore
payable with respect to such whole shares of Media Stock and Series D
Preferred Stock and not paid, less the amount of any withholding taxes
which may be required thereon, 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 and a payment date subsequent
to surrender payable with respect to such whole shares of Media Stock
and Series D Preferred Stock, less the amount of any withholding taxes
which may be required thereon.
<PAGE>
i. At or after the Effective Time, there shall be no transfers on the
stock transfer books of the Company of the shares of Company Common
Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, certificates representing any such shares
are presented to the Surviving Corporation, they shall be cancelled and
exchanged for certificates for the consideration, if any, deliverable in
respect thereof pursuant to this Agreement in accordance with the
procedures set forth in this Article III. Company Certificates
surrendered for exchange by any Person constituting an "affiliate" of
the Company for purposes of Rule 145(c) under the Securities Act shall
not be exchanged until Acquiror has received a written agreement from
such Person as provided in Section 7.13.
ii. No certificates or scrip evidencing fractional shares of Media Stock
or Series D Preferred Stock shall be issued upon the surrender for
exchange of Company Certificates, and such fractional share interests
will not entitle the owner thereof to vote or to any rights of a
stockholder of Acquiror. In lieu of any such fractional shares, the
Exchange Agent shall, on behalf of all holders of fractional shares of
Media Stock and Series D Preferred Stock, as soon as practicable after
the Effective Time, aggregate all such fractional interests
(collectively, the "Fractional Shares") and, at Acquiror's option, such
Fractional Shares shall be purchased by Acquiror or otherwise sold by
the Exchange Agent as agent for the holders of such Fractional Shares,
in either case at the then prevailing price on the NYSE, all in the
manner provided hereinafter. Until the net proceeds of such sale or
sales have been distributed to the holders of Fractional Shares, the
Exchange Agent shall retain such proceeds in trust for the benefit of
such holders. Acquiror shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs,
<PAGE>
including expenses and compensation of the Exchange Agent, incurred in
connection with such sale of the Fractional Shares.
(1) To the extent not purchased by Acquiror, the sale of the Fractional
Shares by the Exchange Agent shall be executed on the NYSE or through
one or more member firms of the NYSE and will be executed in round lots
to the extent practicable. In either case, the Exchange Agent will
determine the portion, if any, of the net proceeds of such sale to which
each holder of Fractional Shares is entitled, by multiplying the amount
of the aggregate net proceeds of the sale of the Fractional Shares, by a
fraction, the numerator of which is the amount of Fractional Shares to
which such holder is entitled and the denominator of which is the
aggregate amount of Fractional Shares to which all holders of Fractional
Shares are entitled.
(2) As soon as practicable after the determination of the amount of
cash, if any, to be paid to holders of Fractional Shares in lieu of such
Fractional Shares, the Exchange Agent shall mail such amounts, without
interest, to such holders; provided, however, that no such amount will
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be paid to any holder of such Fractional Shares prior to the surrender
by such holder of the Company Certificates formerly representing such
holder's shares of Company Common Stock.
iii.Any portion of the Exchange Fund that remains undistributed to the
holders of Company Common Stock for six months after the Effective Time
shall be delivered to Acquiror, upon demand, and any holders of Company
Common Stock who have not theretofore complied with this Article III
shall thereafter look only to Acquiror for the Class A Merger
Consideration or Class B Merger Consideration, as applicable, net cash
proceeds from the sale of Fractional Shares and unpaid dividends and
distributions on the Media Stock and Series
<PAGE>
D Preferred Stock to which they are entitled. All interest accrued in
respect of the Exchange Fund shall inure to the benefit of and be paid
to Acquiror.
iv.None of Acquiror, the Company or the Exchange Agent shall be liable
to any holder of shares of Company Common Stock for any cash, shares of
Media Stock or Series D Preferred Stock, net cash proceeds from the sale
of Fractional Shares or unpaid dividends or distributions with respect
to Media Stock or Series D Preferred Stock from the Exchange Fund
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law. If any Company Certificates shall not
have been surrendered prior to seven years after the Effective Time (or
immediately prior to such earlier date on which any cash, shares of
Media Stock or Series D Preferred Stock, net cash proceeds from the sale
of Fractional Shares or unpaid dividends or distributions with respect
to Media Stock or Series D Preferred Stock in respect of such Company
Certificates would otherwise escheat to or become the property of any
Governmental Authority), any such cash, shares or unpaid dividends or
distributions in respect of such Company Certificates shall, to the
extent permitted by Applicable Laws, become the property of the
Surviving Corporation; provided, however, that any holder of Company
-------- -------
Common Stock shall thereafter have the right to demand from Acquiror any
such cash, shares or unpaid dividends or distributions.
v. In the event that any Company Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Company Certificate to be lost, stolen or destroyed
and, if required by Acquiror, the posting by such Person of a bond in
such reasonable amount as Acquiror may direct as indemnity against any
claim that may be made against it with respect to such
<PAGE>
Company Certificate, the Exchange Agent (or Acquiror, as the case may
be) will issue in exchange for such lost, stolen or destroyed Company
Certificate the Class A Merger Consideration or Class B Merger
Consideration, as applicable, cash in lieu of fractional shares, and
unpaid dividends and distributions on shares of Media Stock and Series D
Preferred Stock deliverable in respect thereof pursuant to this
Agreement.
vi. Acquiror shall be entitled to, or shall be entitled to cause the
Exchange Agent to, deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as are required to be deducted and withheld
with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax law. To the extent that amounts
are so withheld by Acquiror or the Exchange Agent, as the case may be,
such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the holder of the shares of Company
Common Stock in respect of which such deduction and withholding was made
by Acquiror.
f. Restricted Stock. To the extent any Company Common Stock that is
----------------
unvested and outstanding immediately prior to the Effective Time is
subject to the terms and conditions of a Restricted Stock Purchase
Agreement ("RSPA") between the Company and any current or former
employee of the Company ("Restricted Company Common Stock"), (i) the
holder of such Restricted Company Common Stock shall not be entitled to
make a Cash Election in respect of such Restricted Company Common Stock
nor shall it receive cash pursuant to Section 3.3 and (ii) any Media
Stock or Series D Preferred Stock received with respect to such
Restricted Company Common Stock shall be subject to the terms of such
RSPA, as amended by an Amendment to Restricted Stock Purchase Agreement
substantially in the
<PAGE>
form set forth in Section 3.5 of the Company Disclosure Letter.
g. Dissenting Shares. Notwithstanding any other provisions of this
-----------------
Agreement to the contrary, shares of Company Common Stock that are
outstanding immediately prior to the Effective Time and that are held by
stockholders who shall have not voted in favor of the Merger or
consented thereto in writing and who shall have demanded properly in
writing appraisal for such shares in accordance with Section 262 of the
DGCL (collectively, the "Dissenting Shares") shall not be converted into
or represent the right to receive the Class A Merger Consideration or
Class B Merger Consideration, as applicable. Such stockholders shall be
entitled to receive payment of the appraised value of such shares of
Company Common Stock held by them in accordance with the provisions of
such Section 262, except that all Dissenting Shares held by stockholders
who shall have failed to perfect or who effectively shall have withdrawn
or lost their rights to appraisal of such shares of Company Common Stock
under such Section 262 shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective Time, for the
right to receive, without any interest thereon, the Class A Merger
Consideration or Class B Merger Consideration, as applicable, upon
surrender in the manner provided in this Article III, of the Company
Certificate or Company Certificates that formerly evidenced such shares
of Class B Common Stock.
h. Share Price Adjustment. If the Closing shall not have occurred on or
----------------------
prior to January 3, 1997, the Share Price shall be increased at a rate
equal to 8% per annum from and including January 1, 1997 to and
excluding the Closing Date calculated on the basis of the actual number
of days in the period (such amount being the "Additional Amount");
provided, however,
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<PAGE>
that no such amount shall be added to the Share Price if (i) the Closing
has not occurred on or prior to January 3, 1997 and the last of the
conditions set forth in Article VIII to be fulfilled is the condition
set forth in Section 8.2(h) or the condition set forth in Section
8.1(a), other than, in each case as a result of any action taken or not
taken by Acquiror or (ii) the Company has taken any action that would
result in any of the conditions to the consummation of the Merger set
forth herein not being satisfied at such time; provided, further,
-------- -------
that upon satisfaction of the conditions described in clause (i) above
if either such condition is the last condition to be fulfilled, the
Additional Amount shall be added to the Share Price and shall be
calculated commencing five Business Days after the date of such
satisfaction.
ARTICLE Section 4
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquiror as follows:
a.Organization and Authority of the Company.
-----------------------------------------
i. Each of the Company and its Subsidiaries is a corporation or
partnership duly organized, validly existing and in good standing under
the laws of its jurisdiction of incorporation or organization with all
requisite power to enable it to own, lease and operate its assets and
properties and to conduct its business as currently being conducted and
is qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by it or the character or
location of the properties owned or leased by it requires such
qualification, except to the extent the failure so to qualify would not
have a
<PAGE>
Material Adverse Effect with respect to the Company. Complete and
correct copies of the Restated Certificate of Incorporation and Bylaws,
each as amended to date, of the Company have been delivered to Acquiror.
Such Restated Certificate of Incorporation and Bylaws are in full force
and effect.
ii.The Company has all requisite corporate power and authority to
execute and deliver this Agreement and the Transaction Documents to
which it is a party and to perform its obligations hereunder and
thereunder and, subject to (i) the adoption of this Agreement by the
holders of a majority of the voting power of the outstanding shares of
Company Capital Stock, voting as a single class and (ii) the adoption of
the Charter Amendment by 66-2/3% of the voting power of the outstanding
shares of Company Capital Stock voting as a single class and a majority
of the voting power of each of the outstanding shares of the Class A
Common Stock and the Class B Common Stock voting as separate classes
(collectively, the "Stockholder Approvals"), to consummate the
transactions contemplated hereby and thereby. The execution and delivery
of this Agreement and such Transaction Documents and the consummation of
the transactions contemplated hereby and thereby have been duly
authorized by all requisite corporate action on the part of the Company,
subject, in the case of this Agreement, the Merger and the Charter
Amendment, to the Stockholder Approvals. This Agreement and each
Transaction Document to which the Company is a party has been duly
executed and delivered by the Company and constitutes the legal, valid
and binding obligation of the Company, enforceable against it in
accordance with its terms, except (i) as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting creditors' rights generally and (ii) as the remedy of
specific performance and injunctive and other forms of equitable
<PAGE>
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
iii.Section 4.1 of the letter from the Company, dated the date hereof,
addressed to Acquiror (the "Company Disclosure Letter") sets forth, as
of the date hereof, a true and complete list of all of the Company's
Subsidiaries, including the jurisdiction of incorporation or
organization of each Subsidiary and the percentage of each Subsidiary's
outstanding capital stock or other ownership interest owned by the
Company or another Subsidiary of the Company or by any other Person. All
of the outstanding shares of capital stock of each Subsidiary have been
validly issued and are fully paid and nonassessable and, except as set
forth in Section 4.1 of the Company Disclosure Letter, are owned by the
Company or a Subsidiary, free and clear of all Encumbrances. Except as
set forth in Section 4.1 of the Company Disclosure Letter, the Company
does not, directly or indirectly, own any capital stock of or other
equity interests in any corporation, partnership or other Person and
neither the Company nor any of its Subsidiaries is a member of or
participant in a partnership, joint venture or similar Person.
b. Capitalization. As of the date hereof, the authorized capital stock
--------------
of the Company consists of: (i) 425,000,000 shares of Class A Common
Stock, of which (A) 38,885,385 shares are issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by statute, the Company's
Restated Certificate of Incorporation or Bylaws or any agreement to
which the Company is a party or by which the Company is bound and (B) no
shares are held in the treasury of the Company; (ii) 200,000,000 shares
of Class B Common Stock, of which (A) 109,349,496 shares are issued and
<PAGE>
outstanding, all of which are duly authorized, validly issued, fully
paid and nonassessable and not subject to preemptive rights created by
statute, the Company's Restated Certificate of Incorporation or Bylaws
or any agreement to which the Company is a party or by which the Company
is bound, (B) no shares are held in the treasury of the Company and (C)
28,571,450 shares are issuable upon conversion of Company Preferred
Stock; and (iii) 200,000,000 shares of Preferred Stock, par value $.01
per share, of the Company, of which 1,142,858 shares have been
designated Series A Participating Convertible Preferred Stock (the
"Company Preferred Stock" and, together with the Company Common Stock,
the "Company Capital Stock") and are issued and outstanding, all of
which are duly authorized, validly issued, fully paid and nonassessable
and not subject to preemptive rights created by statute, the Company's
Certificate of Incorporation or Bylaws or any agreement to which the
Company is a party or by which the Company is bound.
i.Other than as described in this Section 4.2, or as listed in Section
4.2(b) of the Company Disclosure Letter, no shares of the capital stock
of the Company are authorized, issued or outstanding, or reserved for
any other purpose, and there are no options, warrants or other rights
(including tag-along, right of first refusal, buy-sell, registration or
similar rights), agreements, arrangements or commitments of any
character to which the Company, any of its Subsidiaries or any Person in
which the Company or its Subsidiaries own any interest is a party
relating to the issued or unissued capital stock of the Company, any of
its Subsidiaries or any such Person or obligating or which could
obligate the Company or any of its Subsidiaries to grant, issue or sell
any shares of capital stock of the Company, any of its Subsidiaries or
any Person in which the
<PAGE>
Company or its Subsidiaries own any interest, by sale, lease, license or
otherwise. Except as described in Section 4.2(b) of the Company
Disclosure Letter, the Company has no outstanding bonds, debentures,
notes or other obligations the holders of which have the right to vote
or that are convertible into or exercisable for securities having the
right to vote with the stockholders of the Company on any matter. Except
as set forth in Section 4.2(b) of the Company Disclosure Letter, there
are, to the Knowledge of the Company, no voting trusts or other
agreements or understandings with respect to the voting of Company
Capital Stock. Except as set forth on Section 4.2 of the Company
Disclosure Letter, none of the Company, its Subsidiaries or any Person
in which the Company or its Subsidiaries own any interest is a party to
any non-competition agreement or other agreement or arrangement which
restrains, limits or impedes the current or contemplated business or
operations of the Company or any of its Subsidiaries or would apply to
Acquiror or any of its Affiliates following the Effective Time.
c. No Conflicts. Except as set forth in Section 4.3 of the Company
------------
Disclosure Letter, subject to obtaining the Company Consents (as defined
in Section 4.6), the execution and delivery of this Agreement and each
of the Transaction Documents to which the Company is a party by the
Company do not, and the consummation of the transactions contemplated
hereby and thereby and compliance with the terms hereof and thereof will
not, conflict with, or result in any violation of or default (with or
without notice or lapse of time, or both) under, or give rise to a right
of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or to increased, additional,
accelerated or guaranteed rights or entitlements of any Person under, or
result in the creation of any Encumbrances upon
<PAGE>
any of the properties or assets of the Company or its Subsidiaries under
any provision of (i) the Certificate of Incorporation, Bylaws or other
organizational document of the Company or any Subsidiary, (ii) any note,
bond, mortgage, indenture or deed of trust, deed to secure debt or any
license, lease, contract, commitment, permit, concession, franchise,
agreement or other binding arrangement to which the Company or any of
its Subsidiaries is a party or by which any of them or their respective
properties or assets are bound, including any Franchise, (iii) any
judgment, order, writ, injunction or decree of any court, governmental
body, administrative agency or arbitrator applicable to the Company or
any Subsidiary or their respective properties or assets as of the date
hereof or (iv) any law, statute, rule, regulation or judicial or
administrative decision applicable to the Company or any Subsidiary,
except in the case of clauses (ii) and (iv), such conflicts, violations
and defaults, termination, cancellation and acceleration rights and
entitlements and Encumbrances that in the aggregate would not hinder or
impair the consummation of the transactions contemplated hereby or have
a Material Adverse Effect with respect to the Company.
d. Vote Required. The Stockholder Approvals are the only votes of the
-------------
holders of any class or series of Company Capital Stock necessary or
required (under Applicable Law or otherwise) to approve this Agreement
and the transactions contemplated hereby.
e. Board Recommendation; Opinion of Financial Advisor. The Board of
--------------------------------------------------
Directors at a meeting duly called and held, has by unanimous vote of
those directors present (who constituted 100% of the directors then in
office) (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, are fair to and in the best
interests of the stockholders of the Company and has
<PAGE>
approved the same, and (ii) resolved to recommend that the holders of
the shares of Company Capital Stock adopt this Agreement and the
transactions contemplated hereby, including the Merger.
i.The Company has received the opinions of (i) Lazard Freres & Co. LLC,
dated February 27, 1996, to the effect that, as of the date hereof, the
consideration to be received by the holders of shares of Company Capital
Stock in the Merger is fair from a financial point of view to such
holders and (ii) Allen & Company Incorporated, dated February 27, 1996,
to the effect that, as of the date hereof, the consideration to be
received by the holders of the Class A Common Stock in the Merger is
fair from a financial point of view to such holders. A signed, true and
complete copy of such opinions has been delivered to Acquiror.
f. Consents. Not later than 30 days after the date of this Agreement, the
--------
Company shall furnish to Acquiror a list of each Franchise as to which
notice to, or the consent of, a Governmental Authority is required as a
condition to the transfer of control or the right to control the
Franchise in connection with the transactions contemplated hereby (all
such notices and consents being "Franchise Consents"). Section 4.6 of
the Company Disclosure Letter lists each FCC license held by the Company
or any Subsidiary, other than private mobile radio service licenses, as
to which FCC consent is required prior to the assignment or transfer of
control of such license in connection with the transactions contemplated
hereby (all such notices and consents being "License Consents"). Except
for (i) the Franchise Consents and License Consents, (ii) as set forth
in Section 4.6 of the Company Disclosure Letter, (iii) compliance with
and filings under the HSR Act, (iv) the filing with the SEC of (A) a
proxy statement under the Exchange
45
<PAGE>
Act relating to the meeting (or meetings) of the Company's stockholders
to be held in connection with the Merger, the Charter Amendment and the
other transactions contemplated by this Agreement (the "Proxy
Statement"), (B) any registration statement required to be filed in
connection with any action taken by the Company pursuant to Section 7.7
and (C) such reports under the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby,
(v) the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do
business, (vi) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws, (vii) such
filings in connection with any state or local tax which is attributable
to the beneficial ownership of the Company's or its Subsidiaries' real
property, if any (collectively, "Gains Taxes"), and (viii) such filings
as may be required with the FCC or any Governmental Authority to obtain
their consent to the assumption by the Acquiror of the Social Contract
(including all Systems and communities encompassed thereby) between the
Company and the FCC, as approved by Memorandum Opinion and Order
released August 3, 1995 (FCC 95-335) (the "Social Contract Order") and
as may be modified thereafter by a proposed Social Contract Amendment
that is substantially similar to that which the Company has provided to
Acquiror (the "Social Contract Amendment") (such notice and consent
being the "Social Contract Consents") (the items in clauses (i) through
(vi) being collectively referred to herein as "Company Consents"), no
consents, approvals, licenses, permits, orders or authorizations of, or
registrations, declarations, notices or filings with, any Governmental
Authority or any Third Party are required to be obtained or made by or
with respect to the Company or any of its
46
<PAGE>
Subsidiaries on or prior to the Closing Date in connection with (A) the
execution, delivery and performance of this Agreement or any of the
Transaction Documents to which the Company is a party, the consummation
of the transactions contemplated hereby and thereby or the taking by the
Company of any other action contemplated hereby or thereby, (B) the
continuing validity and effectiveness of (and prevention of any material
default under or violation of the terms of) any Franchise or any other
material, license, permit or authorization or any material contract,
agreement or lease to which the Company or any Subsidiary is a party or
(C) the conduct by the Company or any of its Subsidiaries of their
respective businesses following the Closing as conducted on the date
hereof, which, if not obtained or made in connection with clauses (A),
(B) and (C), would have a Material Adverse Effect with respect to the
Company.
g. Compliance; No Defaults. Except as set forth in Section 4.7 of the
-----------------------
Company Disclosure Letter, neither the Company nor any of its
Subsidiaries is in violation of, is, to the Knowledge of the Company,
under investigation with respect to any violation of, has been given
notice or been charged with violation of, or failed to comply with any
statute, law, ordinance, rule, order or regulation of any Governmental
Authority (including but not limited to the Social Contract Order, as
amended) applicable to its business or operations ("Applicable Laws"),
except for violations and failures to comply that would not have a
Material Adverse Effect with respect to the Company. Except as set forth
in Section 4.7 of the Company Disclosure Letter, the Company and its
Subsidiaries have all permits, licenses, variances, exemptions, orders
and approvals of all Governmental Authorities ("Permits") which are
material to the operation of the businesses of the Company and its
Subsidiaries, taken as a whole.
47
<PAGE>
i. Neither the Company nor any of its Subsidiaries is in default or
violation (and no event has occurred which, with notice or the lapse of
time or both, would constitute a default or violation) of any term,
condition or provision of (i) its Certificate of Incorporation, as
amended, or Bylaws or other comparable organizational document or (ii)
any note, bond, mortgage, indenture, license, agreement or other
instrument or obligation to which the Company or any of its Subsidiaries
is now a party or by which the Company or any of its Subsidiaries or any
of their respective properties or assets may be bound, except in the
case of clause (ii), for defaults or violations which in the aggregate
would not have a Material Adverse Effect with respect to the Company.
h. SEC Documents; Undisclosed Liabilities. The Company has made
--------------------------------------
available to Acquiror a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by the
Company with the SEC since January 1, 1993 (as such documents have since
the time of their filing been amended, the "Company SEC Documents"),
which are all the documents (other than preliminary proxy materials)
that the Company was required to file with the SEC since such date. As
of their respective dates, the Company SEC Documents (including any
financial statements filed, to be filed or required to have been filed
as a part thereof) complied in all material respects with the
requirements of the Securities Act or the Exchange Act, as applicable,
and the rules and regulations of the SEC thereunder applicable to such
Company SEC Documents, and none of the Company SEC Documents contained
any untrue statement of a material fact or omitted 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. The financial statements of the Company included in the
Company SEC Documents
48
<PAGE>
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present (subject, in the case
of the unaudited financial statements, to normal, recurring audit
adjustments, which were not individually or in the aggregate material)
the consolidated financial position of the Company and its consolidated
Subsidiaries as at the dates thereof and the consolidated results of
their operations and cash flows for the periods then ended.
i.Except as disclosed in the Company SEC Documents or in Section 4.8 or
4.9 of the Company Disclosure Letter, as of the date hereof the Company
and its Subsidiaries do not have any material indebtedness, obligations
or liabilities of any kind (whether accrued, absolute, contingent or
otherwise, and whether due or to become due or asserted or unasserted)
required by GAAP to be reflected on a consolidated balance sheet of the
Company and its consolidated Subsidiaries or in the notes, exhibits or
schedules thereto.
i. Litigation. Except as set forth in the Company SEC Documents or in
----------
Section 4.9 of the Company Disclosure Letter, there are no Legal
Proceedings against or affecting the Company or any of its Subsidiaries
or their respective properties or assets pending or, to the Knowledge of
the Company, threatened against the Company or any of its Subsidiaries,
that individually or in the aggregate could (i) have a Material Adverse
Effect with respect to the Company or (ii) as of the date hereof,
prevent, materially hinder or delay the consummation of the transactions
contemplated by this Agreement or the Transaction Documents or seek to
limit the ownership or operation of the Company by Acquiror. Except as
set
<PAGE>
forth in Section 4.9 of the Company Disclosure Letter, neither the
Company nor any of its Subsidiaries is a party or subject to or in
default under any judgment, order, injunction or decree of any
Governmental Authority applicable to it or to its respective properties
or assets, which judgment, order, injunction, decree or default
thereunder constitutes a Material Adverse Effect with respect to the
Company.
j. Taxes. Except as set forth in Section 4.10(a) of the Company
-----
Disclosure Letter, (i) all Federal, state, local and foreign Tax
returns, declarations and reports ("Tax Returns") required to be filed
by or on behalf of the Company or any of its Subsidiaries have been
filed on a timely basis with the appropriate Governmental Authorities in
all jurisdictions in which such Tax Returns are required to be filed
(after giving effect to any valid extensions of time in which to make
such filings), except for Tax Returns as to which the failure to file
would not individually or in the aggregate have a Material Adverse
Effect with respect to the Company, and all such Tax Returns were true,
correct and complete in all material respects; (ii) all amounts due and
payable in respect of such Tax Returns (including interest and
penalties) have been fully and timely paid or are or will be adequately
provided for in the appropriate financial statements of the Company and
its Subsidiaries, except for amounts the failure to pay would not have a
Material Adverse Effect with respect to the Company; (iii) no waivers of
statutes of limitations have been given or requested with respect to the
Company or any of its Subsidiaries in connection with any Tax Returns
covering the Company or any of its Subsidiaries with respect to any
income or franchise Taxes or other material Taxes payable by any of
them; and (iv) each of the Company and its Subsidiaries has duly and
timely withheld from salaries, wages and other compensation
<PAGE>
of its employees and paid over to the appropriate taxing authorities all
amounts required to be so withheld and paid over for all periods not
barred by applicable statutes of limitations under all Applicable Laws,
except for amounts as to which the failure to withhold or pay would not
have a Material Adverse Effect with respect to the Company.
i.Except as set forth in Section 4.10(b) of the Company Disclosure
Letter, all deficiencies asserted or assessments made in an amount in
excess of $300,000 by the IRS or any other taxing authority of the Tax
Returns of or covering the Company or any of its Subsidiaries have been
fully paid or are or will be adequately provided for in the appropriate
financial statements of the Company and its Subsidiaries.
ii.Except as set forth in Section 4.10(c) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries nor any other
Person on behalf of the Company or any of its Subsidiaries: (i) has
filed a consent pursuant to Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection
(f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company or any of its Subsidiaries; (ii) has executed or
entered into a closing agreement pursuant to Section 7121 of the Code or
any predecessor provision thereof or any similar provision of state,
local or foreign law; or (iii) has agreed to or is required to make any
adjustments pursuant to Section 481(a) of the Code or any similar
provision of state, local or foreign law by reason of a change in
accounting method initiated by the Company or any of its Subsidiaries
nor to the Knowledge of the Company (which for purposes of this Section
4.10 shall include the tax director) has the IRS proposed any such
adjustment or change in accounting method, or has any application
pending with any taxing authority requesting permission
<PAGE>
for any changes in accounting methods that relate to the business or
operations of the Company or any of its Subsidiaries.
iii.Except as set forth in Section 4.10(d) of the Company Disclosure
Letter, none of the assets of the Company and its Subsidiaries is
property required to be treated as being owned by another Person
pursuant to the provisions of Section 168(f)(8) of the Internal Revenue
Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986 or is "tax-exempt use property"
within the meaning of Section 168(h)(l) of the Code.
iv.The Federal income Tax Returns of the Company and its Subsidiaries,
any of their predecessors or any affiliated group of which the Company
or any of its Subsidiaries is or was a member have been examined by the
IRS, or the periods covered by such Tax Returns have been closed by
applicable statute of limitations, for all periods through December 31,
1991, except to the extent such Tax Returns may be examined for the
purpose of determining loss or credit carryforwards to a year not so
closed. The state income or franchise Tax Returns of the Company and its
Subsidiaries, any of their predecessors or any affiliated, combined or
unitary group of which the Company or any of its Subsidiaries is or was
a member have been examined by the relevant taxing authorities, or the
periods covered by such Tax Returns have been closed by applicable
statute of limitations, in each case through at least December 31, 1991,
except to the extent such Tax Returns may be examined for the purpose of
determining loss or credit carryforwards to a year not so closed.
v.Except as set forth in Section 4.10(f) of the Company Disclosure
Letter, (i) no Tax audits or other administrative proceedings are
pending with regard to any Taxes for
<PAGE>
which the Company or any of its Subsidiaries may be liable and (ii) no
written notice of any such audit has been received by the Company or any
of its Subsidiaries.
vi.As of December 31, 1995, the Company had net operating loss
carryforwards for Federal income tax purposes of no less than $900
million.
vii.Except as set forth in Section 4.10(h) of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or
bound by any agreement providing for the allocation or sharing of Taxes.
viii.Except as set forth in Section 4.10(i) of the Company Disclosure
Letter, since January 1, 1989 neither the Company nor any of its
Subsidiaries has been a member of, or was acquired from, any "affiliated
group" (as defined in Section 1504 of the Code) other than (i) in a
transaction in which the common parent of such affiliated group was
acquired or (ii) the affiliated group in which the Company is the common
parent.
ix.Except as set forth in Section 4.10(j) of the Company Disclosure
Letter, the performance of the transactions contemplated by this
Agreement will not (either alone or upon the occurrence of any
additional or subsequent event) result in any payment that would
constitute an "excess parachute payment" within the meaning of Section
280G of the Code.
x.The Company and each of its Subsidiaries is not currently, has not
been within the last five years and does not anticipate becoming a
"United States real property holding corporation" within the meaning of
Section 897(c) of the Code.
k. Employee Benefits. Section 4.11(a) of the Company Disclosure Letter
-----------------
lists all
<PAGE>
"employee benefit plans," as defined in Section 3(3) of ERISA, and all
other deferred compensation, bonus or other incentive compensation,
stock purchase or other Equity Appreciation Rights Plans, severance pay,
salary continuation for disability or other leave of absence,
supplemental unemployment benefits, lay-off or reduction in force,
change in control or educational assistance arrangements or policies for
which the Company or any of its Subsidiaries has any material obligation
or liability (each a "Benefit Plan" and collectively, the "Benefit
Plans"), including, but not limited to, any individual benefit
arrangement, policy or practice with respect to any current or former
officer, employee or director of the Company or any of its Subsidiaries.
i.Section 4.11(b) of the Company Disclosure Letter lists, separately for
each foreign country, all Benefit Plans covering employees of the
Company and its Subsidiaries who are employed outside of the United
States ("Foreign Benefit Plans").
ii.The Company and its Subsidiaries have delivered to Acquiror correct
and complete copies of all Benefit Plans, and, where applicable, each of
the following documents with respect to such plans: (i) any amendments,
(ii) any related trust documents, (iii) the two most recently filed IRS
Forms 5500 with all attachments thereto, (iv) the last IRS determination
letter, (v) the most recent summary plan descriptions and summaries of
material modifications, (vi) the last actuarial valuation report and
(vii) written communications to employees to the extent the substance of
the Benefit Plans described therein differs materially from the other
documentation furnished under this Section.
iii.Except as disclosed in Section 4.11(d) of the Company Disclosure
Letter, none of
<PAGE>
the Benefit Plans is subject to Title IV of ERISA or Section 412 of the
Code, and the Company and its ERISA Affiliates from time to time have
not within the preceding six years had any obligation to make any
contribution to a retirement plan subject to Title IV of ERISA or
incurred any liability (contingent or otherwise) under Title IV of ERISA
and neither the Company, its Subsidiaries nor any of its ERISA
Affiliates has any actual or potential obligation or liability to any
multiemployer plan (as defined in Section 4001(a)(3) of ERISA).
iv.Each Benefit Plan, including any associated trust, intended to
qualify under Section 401 of the Code does so qualify.
v.Except as disclosed on Section 4.11(f) of the Company Disclosure
Letter and except as would not have a Material Adverse Effect with
respect to the Company, the Benefit Plans have been maintained and
administered in accordance with their terms and with the provisions of
ERISA, the Code and other Applicable Laws.
vi.There are no pending or, to the Company's Knowledge, overtly
threatened actions, claims or lawsuits that have been asserted or
instituted against any of the Benefit Plans, the assets of any of the
trusts under such plans or the plan sponsor, plan administrator or
fiduciary of any of the Benefit Plans with respect to the operation of
such plans (other than routine benefit claims) that individually or in
the aggregate could have a Material Adverse Effect with respect to the
Company.
vii.The Company and its Subsidiaries do not provide, and are not
obligated to provide, retiree life insurance or retiree health benefits
to any current or former employee after his or her termination of
employment with the Company or any Subsidiary, except as may be required
under Section 4980B of the Code and Part 6 of Subtitle B of Title
<PAGE>
I of ERISA or as disclosed in Section 4.11(h) of the Company Disclosure
Letter.
viii.Except as disclosed in Section 4.11(i) of the Company Disclosure
Letter and except with respect to payments under the Equity Appreciation
Rights Plans that will be paid or satisfied by the Company on or prior
to Closing of all estimated payments, neither the execution and delivery
of this Agreement nor the consummation of the transactions contemplated
hereby will (i) result in any payment becoming due to any employee
(current or former) of the Company or any Subsidiary, (ii) increase any
benefits otherwise payable under any Benefit Plan or (iii) result in the
acceleration of the time of payment or the vesting of any benefits under
any Benefit Plan. The Company has also delivered to Acquiror a schedule
of all estimated payments to be made under each Equity Appreciation
Rights Plan on or prior to the Closing. "Equity Appreciation Rights
Plans" are all plans or arrangements maintained by the Company or any of
its Subsidiaries that provide for a benefit based upon the issuance of
stock, restricted stock, stock options, phantom stock or other equity
appreciation rights or incentive awards, determined by the book, fair
market or formula value of a share of stock of the Company.
ix.Except as disclosed in Section 4.11(j) of the Company Disclosure
Letter, (i) no employee of the Company or any Subsidiary will be
entitled to any severance payments upon the sale of the Company or any
Subsidiary, or any divisions or business units thereof, absent an
employee's actual loss of employment and (ii) none of the executives of
the Company or any Subsidiary are eligible to receive any payment under
any severance pay, stay bonus or other retention plan, program or
arrangement of the Company or any of its Subsidiaries.
<PAGE>
x.Except as disclosed in Schedule 4.11(k) of the Company Disclosure
Letter, the projected benefit obligation of the Company or any
Subsidiary (as calculated using actuarial assumptions used to calculate
liabilities under FAS 87 with respect to post-employment benefits
accrued) under each Benefit Plan that is a defined benefit pension plan
is fully funded by assets of such plan or by an adequate reserve on the
applicable balance sheet of the Company or any Subsidiary.
l. Cable Television Franchises. Section 4.12 of the Company Disclosure
---------------------------
Letter sets forth a list of the Systems, and as to each such System, (i)
the geographic area and FCC community unit(s) served, (ii) the name of
the legal entity that owns such System and holds the applicable
franchise, as well as the identity, ownership interest and relationship
to the Company, if any, of each owner of any interest in such legal
entity, (iii) as of December 31, 1995, the number of Homes Passed and
Subscribers served by such System, and (iv) the names and addresses of
the Governmental Authorities issuing the franchises and/or implementing
such ordinances. By no later than 30 days after the date of this
Agreement, the Company shall furnish to Acquiror a complete and accurate
list and copy of all of the franchise agreements and similar governing
agreements, instruments, resolutions, statutes and/or CATV-franchise-
related ordinances that are used, necessary or required in order to
operate, or to which the Company or its Subsidiaries are subject by
reason of their operation of, the Systems (individually as to each
System, its "Franchise" and collectively, the "Franchises"), and, as of
December 31, 1995, the number of Homes Passed and Subscribers served by
the Systems by Franchise. The Systems listed in Section 4.12 of the
Company Disclosure Letter represent all of the "cable television
systems", as defined in Section 602(7) of the Cable Act, owned and
operated by the
<PAGE>
Company and its Subsidiaries in the United States. The Franchises and
any related regulatory ordinances contain all material commitments,
obligations and rights of the Company and its Subsidiaries with respect
to each of the Governmental Authorities granting such Franchises, in
connection with the construction, ownership and operation of the
Systems. The Franchises enable the Company and its Subsidiaries to
operate, and, subject to obtaining the Franchise Consents and License
Consents, immediately following the Closing will enable the Surviving
Corporation and its Subsidiaries to continue to operate all of the
Systems as and where they are presently operated. To the Knowledge of
the Company, each Franchise is valid under all Federal, state and local
laws and is validly held by the Company or its Subsidiaries, as the case
may be. The Company and its Subsidiaries have complied with the material
terms and conditions of the Franchises and the same will not be subject
to revocation or nonrenewal as a result of the execution and delivery of
this Agreement or the Transaction Documents, or the consummation of the
transactions contemplated hereby and thereby, subject to obtaining the
Franchise Consents and License Consents. Except as set forth in Section
4.12 of the Company Disclosure Letter, there are no lawsuits, revocation
proceedings or disputes pending with respect to any of the Franchises or
Systems that would material affect the right of the Company or any
Subsidiary to operate a System, and no Governmental Authority or other
Person has notified the Company or any of its Subsidiaries in writing of
its intention to conduct or initiate the same. Neither the Company nor
any of its Subsidiaries has received any written notice that any such
Franchise is under consideration to be revoked nor, except for
Franchises that are subject to renewal negotiations, to be modified in
any material respect.
<PAGE>
i. Except as set forth in Section 4.12 of the Company Disclosure Letter,
no Person other than certain municipalities (a list of which will be
provided no later than 30 days after the date of this Agreement) has any
right to acquire any interest in any of the Systems, or to designate any
other person or entity to acquire any interest in any of the Systems
(including, without limitation, any right of first refusal or similar
right to purchase any interest in the Systems), which right has not been
validly, properly and irrevocably (except for the right to revoke such
waiver only if this Agreement is terminated pursuant to Article IX
hereof) waived by the party entitled to assert such right.
ii. Section 4.12 of the Company Disclosure Letter lists the date on
which each Franchise will expire or has expired. Except as set forth in
Section 4.12 of the Company Disclosure Letter, there are not now pending
any proceedings of any Governmental Authority with respect to any
proposal for renewal of any Franchise. There exists no fact or
circumstance that makes it likely that any Franchise will not be renewed
or extended on commercially reasonable terms. Except where the Company
or its Subsidiaries are proceeding under informal renewal procedures as
provided for by the Cable Act, the Company and its Subsidiaries have
timely filed with the appropriate Governmental Authority all appropriate
requests for renewal within 30 to 36 months under the Cable Act. Section
4.12 of the Company Disclosure Letter sets forth those Franchises
serving 25,000 or more Subscribers ("Material Franchises") where the
Company or a Subsidiary has not filed a written renewal notice pursuant
to (S) 626(a)(1) of the Cable Act. Except as set forth in Section 4.12
of the Company Disclosure Letter, as to any Franchise that has expired
prior to the date hereof, the Company is currently operating such
Franchise under duly authorized extensions, and the Company has no
reason to believe
<PAGE>
that such extensions will not be renewed until such time as the
Franchise itself has been renewed for an additional term.
iii. To the Company's Knowledge, the Systems and all related businesses
of the Company and its Subsidiaries are, and have been, operated in
compliance with the Communications Act and all regulations of the FCC
established pursuant thereto, and the Company and its Subsidiaries have
submitted to the FCC all filings that are required under the rules,
orders and regulations of the FCC or other Governmental Authorities with
jurisdiction. Except as set forth in Section 4.12 of the Company
Disclosure Letter, the operation of the Systems has been, and is, in
compliance with the rules and regulations of the FCC or other
Governmental Authorities with jurisdiction and the Company and its
Subsidiaries have not received any written notice from the FCC or other
Governmental Authorities with jurisdiction with respect to any material
violation of its rules and regulations or from any other Governmental
Authorities with jurisdiction with respect to any material violation of
any Franchise.
iv. To the Company's Knowledge, for each relevant semi-annual reporting
period, the Company has timely filed with the United States Copyright
Office all required Statements of Account in true and correct form in
all material respects, and has paid when due all required copyright
royalty fee payments in the correct amount, relating to the Systems'
carriage of television broadcast signals and appropriately classifying
the applicable tiers on which the Systems carry television broadcast
signals. To the Company's Knowledge, carriage of all broadcast signals
is in compliance with the Copyright Act of 1976, as amended (the
"Copyright Act") and the rules and regulations of the Copyright Office
and is eligible for the compulsory license under Section 111 of the
Copyright Act. Except as set forth in Section 4.12
<PAGE>
of the Company Disclosure Letter, neither the Company nor any of its
Subsidiaries has received any inquiry from the Copyright Office or any
Third Party challenging or questioning the information submitted in any
Statement of Account or the amount of any royalty payment, for which the
Company has not provided adequate reserves in its reasonable business
judgment, nor are the Company or its Subsidiaries aware of any basis for
such inquiry. Except as set forth in Section 4.12 of the Company
Disclosure Letter, to the Company's Knowledge, no claim or copyright
infringement has been made against the Company or any of its
Subsidiaries that has not been settled, nor is any such claim pending or
threatened.
v. Other than as set forth in Section 4.12 of the Company Disclosure
Letter, neither the Company nor any of its Subsidiaries is subject to
any FCC proceeding challenging the rights of the Company or its
Subsidiaries to carry or not carry any signal, nor has the Company or
any of its Subsidiaries received any written notice or demand to carry
or not carry any signal, the carriage or non-carriage of which could
have a material adverse effect on any System.
vi. The Systems (other than the Recently Acquired Systems) are, and have
been, operated in material compliance with the Social Contract Order and
the Company and its Subsidiaries have submitted to the FCC and any
relevant Governmental Authority all forms, notices and other written
material required thereunder for implementation of the Social Contract.
Each such filing has been prepared and filed in compliance with the
Social Contract Order and is complete and accurate in all material
respects. Neither the Company nor any Subsidiary has received written
notice from the FCC as to any non-compliance with the Social Contract
Order. The Company shall use its reasonable best efforts to seek
amendment
<PAGE>
of the Social Contract Order to bring the Recently Acquired Systems
under terms substantially the same as those contained in the proposed
Social Contract Amendment.
vii. Section 4.12 of the Company Disclosure Letter lists each of the
Governmental Authorities that (i) has been certified by the FCC pursuant
to 47 C.F.R. (S) 76.910 to regulate Basic Cable Service and associated
equipment of a System or (ii) has petitioned the FCC to regulate the
rates for Basic Cable Service and associated equipment pursuant to 47
C.F.R. (S) 76.913; Section 4.12 of the Company Disclosure Letter also
lists each complaint filed against Cable Programming Service rates on
FCC Form 329 that has not been settled by the Social Contract Order. Of
those listed, the Form 329 complaints pertaining to the Recently
Acquired Systems would be settled by the proposed Social Contract
Amendment.
viii. To the extent that the Company's and/or its Subsidiaries' rates
have not been settled pursuant to the Social Contract or would not be
settled by the proposed Social Contract Amendment, the Company and/or
its Subsidiaries are in compliance in all material respects with FCC
rate requirements.
ix.Except as set forth in Section 4.12 of the Company Disclosure Letter,
neither the Company nor any of its Subsidiaries (x) is under any
investigation by the FCC or any Governmental Authority with respect to
any of its rates for Basic Cable Service or any Cable Programming
Service (including but not limited to rates for associated equipment) or
(y) is a party to any proceeding before the FCC or any other
Governmental Authority the collective outcome of which could result in
the Company or any of its Subsidiaries being ordered to make refunds to
Subscribers in excess of $2,000,000 (exclusive of potential Social
Contract Amendment
<PAGE>
refunds) or reduce the rates currently charged to Subscribers when
netted against any increases to which the Company is entitled.
x.Section 4.12 of the Company Disclosure Letter lists each System, and
the Franchise(s) by which it is authorized, that is subject to effective
competition (as that term is defined in Section 623(l)(1) of the Cable
Act) and the basis for the Company's determination that the System
operating under that Franchise is subject to effective competition.
m. Environmental Matters. Except as set forth in Section 4.13 of the
---------------------
Company Disclosure Letter:
(1) the operations of the Company and its Subsidiaries are in material
compliance with all applicable Environmental Laws;
(2) to the Company's Knowledge, all real property owned, operated or
leased by the Company and its Subsidiaries are free from contamination
by any Hazardous Material that is reasonably likely to result in
Environmental Costs and Liabilities to the Company in excess of
$2,000,000;
(3) to the Knowledge of the Company, the Company and its Subsidiaries
have obtained and currently maintain all material Environmental Permits
necessary for their operations and are in material compliance with such
Environmental Permits;
(4) except to the extent such matters are the subject matter of other
representations and warranties of the Company contained herein, there
are no Legal Proceedings or Environmental Claims pending, or to the
Knowledge of the Company, threatened against the Company or its
Subsidiaries alleging the violation of any Environmental Law or
asserting claims regarding Environmental Costs and Liabilities under any
Environmental Law;
<PAGE>
(5) neither the Company nor its Subsidiaries nor to the Knowledge of the
Company, any predecessor of the Company or its Subsidiaries or any owner
of premises leased or operated by the Company or its Subsidiaries with
respect to such property, has filed any formal notice under Federal,
state, local or foreign law indicating past or present generation
treatment, storage, or disposal of or reporting a Release of Hazardous
Material into the environment; and
(6) to the Knowledge of the Company, there is not now, nor has there
been in the past, on, in or under any real property owned, leased or
operated by the Company or its Subsidiaries (A) any underground storage
tanks, above-ground storage tanks, dikes or impoundments, (B) any
friable asbestos-containing materials or (C) any polychlorinated
biphenyls which, in each case, is material to the operation of its
business at such real property.
n. Labor. Except as set forth in Section 4.14(a)(1) of the Company
-----
Disclosure Letter, neither the Company nor any of its Subsidiaries is a
party to any labor or collective bargaining agreement and there are no
labor or collective bargaining agreements that govern the terms and
conditions of employment with the Company or its Subsidiaries with
respect to employees of the Company or its Subsidiaries. Section
4.14(a)(2) of the Company Disclosure Letter lists all employment,
management, consulting, management retention or other personal service,
or compensation agreements or arrangements covering one or more non-
employees (including severance, termination or change-of-control
arrangements) and all material employment, management, consulting,
management retention or other personal service, or compensation
agreements or arrangements covering one or more employees (including
severance,
<PAGE>
termination or change-of-control arrangements) in each case, entered
into by the Company or any of its Subsidiaries and a copy of each such
agreement has been delivered to Acquiror.
i.Except as set forth in Section 4.14(b) of the Company Disclosure
Letter, no employees of the Company or any of its Subsidiaries are
represented by any labor organization; no labor organization or group of
employees of the Company or any of its Subsidiaries has made a pending
demand against the Company or any Subsidiary for recognition, and there
are no representation proceedings or petitions seeking a representation
proceeding presently pending against or, to the knowledge of the
Company, threatened to be brought or filed against the Company or any
Subsidiary, with the National Labor Relations Board or other labor
relations tribunal; there is no organizing activity involving the
Company or any of the Subsidiaries pending or, to the Knowledge of the
Company, threatened by any labor organization or group of employees of
the Company or any its Subsidiaries.
ii.There are no (i) strikes, work stoppages, slowdowns, lockouts or
arbitrations (in the case of arbitrations which if adversely decided
would reasonably be expected to involve the payment of damages of more
than $500,000) or (ii) material grievances or other material labor
disputes pending or, to the Knowledge of the Company, threatened against
or involving the Company or any of its Subsidiaries. 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 the Company or any of its Subsidiaries that
individually or in the aggregate involve more than $500,000.
iii.Except as set forth in Section 4.14(d) of the Company Disclosure
Letter, there are
<PAGE>
no material complaints, charges or claims against the Company and its
Subsidiaries pending or, to the Knowledge of the Company, threatened to
be brought or filed with any Governmental Authority or in which an
employee or former employee of the Company or any of its Subsidiaries is
a party or a complainant based on, arising out of, in connection with,
or otherwise relating to the employment or termination of employment by
the Company or a Subsidiary of any individual, including any claim for
workers' compensation or under the Occupational Safety and Health Act of
1970, as amended. In the aggregate, the complaints and charges set forth
in Section 4.14(d) of the Company Disclosure Letter would not have,
singly or in the aggregate, a Material Adverse Effect with respect to
the Company even if each were resolved adversely to the Company and its
Subsidiaries.
iv.Hours worked by and payments made to employees of the Company and its
Subsidiaries have not been in material violation of the Federal Fair
Labor Standards Act or any other Applicable Law dealing with such
matters.
v.The Company and its Subsidiaries are in material compliance with all
Applicable Laws relating to the FCC-Equal Employment Opportunity
Commission standards and employment or termination of employment of
labor (including, but not limited to, leased workers and independent
contractors), including all such Applicable Laws and WARN relating to
wages, hours, collective bargaining, employment discrimination, civil
rights, safety and health, workers' compensation, pay equity and the
collection and payment of withholding and/or social security taxes and
similar Taxes.
o. Absence of Changes or Events. Except as set forth in Section 4.15 of the
----------------------------
Company Disclosure Letter or disclosed in the
<PAGE>
Company SEC Documents, since the date of the most recent audited
financial statements included in the Company SEC Documents, the Company
and its Subsidiaries have operated their respective businesses only in
the ordinary and usual course and in substantially the same manner as
previously conducted and there has not been:
(1)any damage, destruction or loss with respect to the properties or
assets of the Company or its Subsidiaries whether covered by insurance
or not, which has had or would have, individually or in the aggregate, a
Material Adverse Effect with respect to the Company;
(2)any change, occurrence or circumstance that had a Material Adverse
Effect with respect to the Company;
(3) any change in the accounting principles, methods, practices or
procedures followed by the Company in connection with the business of
the Company or any change in the depreciation or amortization policies
or rates theretofore adopted by the Company in connection with the
business of the Company and its Subsidiaries;
(4)any declaration or payment of any dividends, or other distributions
in respect of the outstanding shares of Capital Stock of the Company or
any of its Subsidiaries (other than dividends declared or paid by
wholly-owned Subsidiaries);
(5)any split, combination or reclassification of the Company's capital
stock or any issuance of shares of capital stock of the Company or any
Subsidiary or any other change in the authorized capitalization of the
Company or any Subsidiary, except as contemplated by this Agreement;
<PAGE>
(6)any repurchase or redemption by the Company of shares of its capital
stock or any issuance by the Company of any other securities in exchange
or in substitution for shares of its capital stock except pursuant to
employee benefit plans, programs or arrangements in existence on the
date hereof, in the ordinary course of business consistent with past
practice; or
(7) any grant or award of any options, warrants, conversion rights or
other rights to acquire any shares of capital stock of the Company or
any Subsidiary, except as contemplated by this Agreement or except
pursuant to employee benefit plans, programs or arrangements in
existence on the date hereof, in the ordinary course of business
consistent with past practice.
p. Unlawful Payments and Contributions. Neither the Company nor, to the
-----------------------------------
Knowledge of the Company, any of its directors, officers or any of its
other employees or agents has (a) used any Company funds for any
unlawful contribution, endorsement, gift, entertainment or other
unlawful expense relating to political activity; (b) made any direct or
indirect unlawful payment to any government official or employee from
Company funds; (c) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended, in connection with
the Company's and its Subsidiaries' business; or (d) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to
any Person or entity with respect to matters pertaining to the Company.
q. Brokers and Intermediaries. Neither the Company nor any of its officers,
--------------------------
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement and the
Transaction Documents, except that the Company has retained Lazard
Freres & Co.
<PAGE>
LLC and Allen & Company Incorporated as its financial advisors, whose
respective fees and expenses shall be paid by the Company. The Company
has delivered to Acquiror a copy of the retention agreement related
thereto.
ARTICLE
Section 5
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
Acquiror represents and warrants to the Company that:
a.Organization and Authority of Acquiror.
--------------------------------------
i. Each of Acquiror and its Subsidiaries is a corporation or partnership
duly organized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization with all requisite
power to enable it to own, lease and operate its assets and properties
and to conduct its business as currently being conducted and is
qualified and in good standing to do business in each jurisdiction in
which the nature of the business conducted by it or the character or
location of the properties owned or leased by it requires such
qualification, except to the extent the failure so to qualify would not
have a Material Adverse Effect with respect to Acquiror. Complete and
correct copies of the Certificate of Incorporation and Bylaws, each as
amended to date, of Acquiror have been delivered to the Company. Such
Restated Certificate of Incorporation and Bylaws are in full force and
effect.
ii.Acquiror has all requisite corporate power and authority to execute
and deliver this Agreement and the Transaction Documents to which it is
a party and to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and
<PAGE>
thereby. The execution and delivery of this Agreement and such
Transaction Documents and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all
requisite corporate action on the part of Acquiror. This Agreement and
each Transaction Document to which Acquiror is a party has been duly
executed and delivered by Acquiror and constitutes the legal, valid and
binding obligation of Acquiror, enforceable against it in accordance
with its terms, except (i) as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally and (ii) as the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
b. Capitalization. As of the date hereof, the authorized capital stock of
--------------
Acquiror consists of (i) 2,000,000,000 shares of U S WEST Communications
Group Common Stock, par value $.01 per share ("Communications Stock"),
of which 475,604,443 shares were issued and outstanding as of February
23, 1996, all of which are duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights created by
statute, Acquiror's Restated Certificate of Incorporation or any
agreement to which Acquiror is a party or by which Acquiror is bound,
(ii) 2,000,000,000 shares of Media Stock, of which 473,225,728 shares
were issued and outstanding as of February 23, 1996, all of which are
duly authorized, validly issued, fully paid and nonassessable and not
subject to preemptive rights created by statute, Acquiror's Restated
Certificate of Incorporation or any agreement to which Acquiror is a
party or by which Acquiror is bound, and (iii) 200,000,000 shares of
Preferred Stock, par value $1.00 per share,
<PAGE>
of which (A) 10,000,000 shares have been designated as Series A Junior
Participating Cumulative Preferred Stock, none of which are issued and
outstanding and all of which are reserved for issuance in connection
with rights to purchase Communications Stock pursuant to the Amended and
Restated Rights Agreement, dated as of October 31, 1995 (the "Rights
Agreement"), by and between Acquiror and State Street Bank and Trust
Company, as rights agent, (B) 10,000,000 shares have been designated as
Series B Junior Participating Cumulative Preferred Stock, none of which
are issued and outstanding and all of which are reserved for issuance in
connection with rights to purchase Media Stock pursuant to the Rights
Agreement, and (C) 50,000 shares have been designated as Series C
Cumulative Redeemable Preferred Stock and are issued and outstanding,
all of which are duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights created by statute,
Acquiror's Restated Certificate of Incorporation or Bylaws or any
agreement to which Acquiror is a party or by which Acquiror is bound. As
of the date hereof, the Number of Shares Issuable with Respect to the
InterGroup Interest (as defined in Section 2.6.19 of Article V of
Acquiror's Restated Certificate of Incorporation) is zero.
i.Other than as described in the Acquiror SEC Documents or in Section
5.2 of the Letter from Acquiror, dated the date hereof, addressed to the
Company (the "Acquiror Disclosure Letter"), no shares of the capital
stock of Acquiror are authorized, issued or outstanding, or reserved for
any other purpose, and there are no options, warrants or other rights
(including registration rights), agreements, arrangements or commitments
of any character to which Acquiror is a party relating to the issued or
unissued capital stock of Acquiror or any obligation of Acquiror to
grant, issue or sell any shares of capital stock of Acquiror by sale,
<PAGE>
lease, license or otherwise. Except as disclosed in the Acquiror SEC
Documents or in Section 5.2 of the Acquiror Disclosure Letter, Acquiror
has no outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote or which are convertible into or
exercisable for securities having the right to vote with the
stockholders of Acquiror on any matter. Except as set forth in Section
5.2 of the Acquiror Disclosure Letter there are no voting trusts or
other agreements or understandings with respect to the voting of the
capital stock of Acquiror.
c. No Conflicts. Subject to obtaining the Acquiror Consents (as defined in
------------
Section 5.5), the execution and delivery of this Agreement and each of
the Transaction Documents to which Acquiror is a party do not, and the
consummation of the transactions contemplated hereby and thereby and
compliance with the terms hereof and thereof will not, conflict with, or
result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material
benefit under, or to the increased, additional, accelerated or
guaranteed rights or entitlements of any Person under, or result in the
creation of any Encumbrances upon any of the properties or assets of
Acquiror under, any provision of (i) the Restated Certificate of
Incorporation and Bylaws of Acquiror, (ii) any note, bond, mortgage,
indenture or deed of trust, deed to secure debt or any license, lease,
contract, commitment, permit, concession, franchise, agreement or other
binding arrangement to which Acquiror is a party or by which any of its
properties or assets may be bound or subject, (iii) any judgment, order,
writ, injunction or decree of any court, governmental body,
administrative agency or arbitrator applicable to Acquiror or its
properties or assets, or (iv) any law,
<PAGE>
statute, rule, regulation or judicial or administrative decision
applicable to Acquiror; except in the case of clauses (ii) and (iv),
such conflicts, violations and defaults, termination, cancellation and
acceleration rights and entitlements and Encumbrances that in the
aggregate would not hinder or impair the consummation of the
transactions contemplated hereby or have a Material Adverse Effect with
respect to Acquiror.
d. Stockholder Vote. At such time as all conditions to the Merger have
----------------
otherwise been satisfied, no vote of the holders of any class or series
of Acquiror's capital stock not theretofore obtained will be necessary
or required (under Applicable Law or otherwise) to approve this
Agreement and the transactions contemplated hereby.
e. Consents. Except for (i) as set forth in Section 5.5 of the Acquiror
--------
Disclosure Letter, (ii) compliance with and filings under the HSR Act,
(iii) the filing with the SEC by Acquiror of a registration statement on
Form S-4 registering under the Securities Act the shares of Media Stock
and Series D Preferred Stock to be issued in the Merger (the "Form S-4")
and such reports under the Exchange Act as may be required in connection
with this Agreement and the transactions contemplated hereby, (iv) the
filing of the Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do
business, (v) such filings and approvals as may be required by any
applicable state securities, "blue sky" or takeover laws, and (vi) such
filings in connection with Gains Taxes (the items in clauses (i) through
(vi) being collectively referred to herein as "Acquiror Consents"), no
consents, approvals, licenses, permits, orders or authorizations of, or
registrations, declarations, notices or filings with, any Governmental
Authority or
<PAGE>
any Third Party are required to be obtained or made by or with respect
to Acquiror in connection with the execution, delivery and performance
of this Agreement or any of the other agreements contemplated hereby to
which it is a party or the consummation of the transactions contemplated
hereby and thereby or the taking by Acquiror of any other action
contemplated hereby or thereby, which, if not obtained or made, would
have a Material Adverse Effect with respect to Acquiror.
f. Compliance; No Defaults. Except as set forth in Section 5.6 of the
-----------------------
Acquiror Disclosure Letter, neither Acquiror nor any of its Subsidiaries
is in violation of, is, to the knowledge of Acquiror, under
investigation with respect to any violation of, has been given notice or
been charged with violation of, or failed to comply with any Applicable
Laws, except for violations and failures to comply that would not have a
Material Adverse Effect with respect to Acquiror. Except as set forth in
Section 5.6 of the Acquiror Disclosure Letter, Acquiror and its
Subsidiaries have all Permits which are material to the operation of the
businesses of Acquiror and its Subsidiaries.
i. Neither Acquiror nor any of its Subsidiaries is in default or
violation (and no event has occurred which, with notice or the lapse of
time or both, would constitute a default or violation) of any term,
condition or provision of (i) its Restated Certificate of Incorporation
or Bylaws or other comparable organizational document or (ii) any note,
bond, mortgage, indenture, license, agreement or other instrument or
obligation to which Acquiror or any of its Subsidiaries is now a party
or by which Acquiror or any of its Subsidiaries or any of their
respective properties or assets may be bound, except in the case of
clause (ii), for defaults or violations which in the aggregate would not
<PAGE>
have a Material Adverse Effect with respect to Acquiror.
g. Acquiror SEC Documents; Undisclosed Liabilities. Acquiror has filed all
-----------------------------------------------
required reports, schedules, registration statements and definitive
proxy statements with the SEC since January 1, 1993 (as such documents
have since the time of their filing been amended, the "Acquiror SEC
Documents"). As of their respective dates, the Acquiror SEC Documents
(including any financial statements filed, to be filed or required to
have been filed as a part thereof) complied in all material respects
with the requirements of the Securities Act or the Exchange Act, as
applicable, and the rules and regulations of the SEC thereunder
applicable to such Acquiror SEC Documents, and none of the Acquiror SEC
Documents contained any untrue statement of a material fact or omitted
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. The financial statements of Acquiror
included in the Acquiror SEC Documents comply as to form in all material
respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP applied on a consistent basis during
the periods involved (except as may be indicated in the notes thereto)
and fairly present (subject, in the case of the unaudited financial
statements, to normal, recurring audit adjustments, which were not
individually or in the aggregate material) the consolidated financial
position of Acquiror and its consolidated Subsidiaries as at the dates
thereof and the consolidated results of their operations and cash flows
for the periods then ended.
i.Except as disclosed in the Acquiror SEC Documents or in Section 5.7 of
the Acquiror Disclosure Letter, as of the date hereof,
<PAGE>
Acquiror and its Subsidiaries do not have any material indebtedness,
obligations or liabilities of any kind (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted) required by GAAP to be reflected on a consolidated balance
sheet of the Acquiror and its consolidated Subsidiaries or in the notes,
exhibits or schedules thereto.
h. Litigation. Except as set forth in the Acquiror SEC Documents or in
----------
Section 5.8 of the Acquiror Disclosure Letter, there are no Legal
Proceedings against or affecting Acquiror or any of its Subsidiaries or
their respective properties or assets pending or, to the knowledge of
Acquiror, threatened, that individually or in the aggregate could (i)
have a Material Adverse Effect with respect to Acquiror or (ii) prevent,
hinder or materially delay the consummation of the transactions
contemplated by this Agreement or the Transaction Documents. Except as
set forth in Section 5.8 of the Acquiror Disclosure Letter, neither
Acquiror nor any of its Subsidiaries is a party or subject to or in
default under any judgment, order, injunction or decree of any
Governmental Authority applicable to it or to its respective properties
or assets, which judgment, order, injunction, decree or default
thereunder constitutes a Material Adverse Effect with respect to
Acquiror.
i. Absence of Changes or Events. Except as disclosed in the Acquiror SEC
----------------------------
Documents, since the date of the most recent audited financial
statements included in the Acquiror SEC Documents, Acquiror and its
Subsidiaries have conducted their business operations only in the
ordinary course and there has not occurred (i) any change, occurrence or
circumstance that had any Material Adverse Effect with respect to
Acquiror or (ii) other events or conditions of any character that,
individually or in the aggregate, have or would reasonably be
<PAGE>
expected to have, a Material Adverse Effect with respect to Acquiror or
on the ability of Acquiror to perform its material obligations under
this Agreement and the Transaction Documents to which it is a party.
j. Brokers and Intermediaries. Neither Acquiror nor any of its officers,
--------------------------
directors or employees has employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in
connection with the transactions contemplated by this Agreement and the
Transaction Documents, except that Acquiror has retained Lehman Brothers
Inc., as its financial advisor, whose fees and expenses shall be paid by
Acquiror.
k. Ownership of Company Capital Stock. Neither Acquiror nor any of its
----------------------------------
Subsidiaries owns, directly or indirectly, any shares of Company
Capital Stock.
ARTICLE Section 6
COVENANTS RELATING TO CONDUCT OF BUSINESS
a.Conduct of Business of the Company. Except as otherwise expressly
----------------------------------
permitted by the terms of this Agreement, from the date hereof to the
Effective Time, the Company shall, and shall cause its Subsidiaries to,
carry on their respective businesses in the ordinary course in
substantially the same manner as presently conducted (including with
respect to advertising, promotions and capital expenditures) and in
compliance in all material respects with Applicable Laws, use their
reasonable best efforts consistent with past practices to keep available
the services of the present employees of the Company and its
Subsidiaries and to preserve their relationships with customers,
suppliers and others with whom the Company and its Subsidiaries deal to
the end that their goodwill and ongoing businesses shall not
<PAGE>
be materially impaired in any material respect at the Closing Date. The
Company shall not, and shall cause its Subsidiaries not to, take any
action that would, or that is reasonably likely to, result in any of the
representations and warranties of the Company set forth in Article IV
being untrue in any material respect as of the date made or in any of
the conditions to the consummation of the Merger set forth herein not
being satisfied. In addition, and without limiting the generality of the
foregoing, except as otherwise expressly permitted by the terms of this
Agreement or as set forth in Section 6.1 of the Company Disclosure
Letter, during the period from the date hereof to the Effective Time,
the Company shall not (and shall cause its Subsidiaries not to), without
the written consent of Acquiror, which decision regarding consents shall
be made promptly (in light of its circumstances) after receipt of notice
seeking such consent:
(1)except for the Charter Amendment, amend its Restated Certificate of
Incorporation, Bylaws or other comparable organizational documents;
(2)subject to Sections 7.7 and 7.14(b), redeem or otherwise acquire any
shares of its capital stock, or issue any capital stock or any option,
warrant or right relating thereto or any securities convertible into or
exchangeable for any shares of its capital stock, or split, combine or
reclassify any of its capital stock or issue any securities in exchange
or in substitution for shares of its capital stock;
(3) subject to Section 7.14(b), (A) grant or agree to grant to any
employee any increase in wages or bonus, severance, profit sharing,
retirement, deferred compensation, insurance or other compensation or
benefits, or establish any new compensation or benefit plans or
arrangements, or amend or agree to amend
<PAGE>
any existing Benefit Plans or Equity Appreciation Rights Plans, except
as may be required under existing agreements or in the ordinary course
of business consistent with past practices or (B) enter into any new
RSPA or amend the terms of any existing RSPA or accelerate the vesting
of any shares of Class B Common Stock issued thereunder;
(4) merge, amalgamate or consolidate with any other entity in any
transaction in which the Company is not the surviving corporation (other
than mergers between Subsidiaries of the Company), sell all or
substantially all of its business or assets, or acquire all or
substantially all of the business or assets of any other Person;
(5) enter into or amend any employment, consulting, severance or similar
agreement with any individual, except with respect to severance gifts or
payments of a nominal nature to persons holding non-officer/executive
level positions in the ordinary course of business consistent with past
practice;
(6) subject to Section 7.7, declare, set aside or make any dividends,
payments or distributions in cash, securities or property to the
stockholders of the Company, whether or not upon or in respect of any
share of Company Capital Stock;
(7) incur or assume any Indebtedness other than as specifically set
forth in Section 6.1(vii) of the Company Disclosure Letter;
(8) voluntarily grant any material Encumbrance on any of its material
assets, other than Encumbrances that are incurred in the ordinary course
of business;
(9) make any change in any method of accounting or accounting practice
or policy, except as required by Applicable Laws or by GAAP;
<PAGE>
(10) make or incur any capital expenditures that are not set forth in
Section 6.1(x) of the Company Disclosure Letter or that, individually,
are in excess of $25 million or, in the aggregate, in excess of $50
million;
(11) subject to Section 7.7, sell, lease, swap or otherwise dispose of
any assets, other than (A) sales, leases, swaps or other dispositions of
such assets not having a fair market value in excess of $15 million
individually or $30 million in the aggregate (so long as the Company
provides notice to Acquiror of any sale, lease, swap or other
disposition of any asset having a fair market value of greater than $5
million) or (B) swaps of Systems or assets of Systems in order to
facilitate the clustering of Systems or dispose of Systems located in
the Acquiror Region; provided, however, that (1) such swaps shall not in
-------- -------
the aggregate involve more than 500,000 Subscribers of the Company or
its Subsidiaries, (2) any cable television systems acquired by the
Company or any of its Subsidiaries in any such swap shall not be located
in the Acquiror Region, (3) any cable television systems acquired by the
Company in any such swap shall not be in a franchise area where there is
a substantial overbuild with any other CATV system owned by the Company,
Acquiror or any of their respective Affiliates, (4) the aggregate amount
of cash paid by the Company or any of its Subsidiaries in any such swap
shall not exceed $50 million in the aggregate, (5) any such swap shall
require the approval of Acquiror, which approval shall not be
unreasonably withheld and Acquiror shall be reasonably satisfied that
the Company has received substantially equivalent value including cash
or other assets and (6) to the extent that the Company or any Subsidiary
must apply for the consent of the Governmental Authority as a condition
to the transfer of control or assignment of any Franchise associated
<PAGE>
with any such swap, such application shall include an application to the
Governmental Authority, and relevant information relating to the
proposed transaction, requesting contemporaneous approval for the
anticipated acquisition of the Company or its Subsidiary by Acquiror as
contemplated herein and the transfer of control of said Franchise to the
Surviving Corporation in accordance with the terms hereof; and provided,
--------
further, that any consent required from a Governmental Authority as a
-------
condition to consummating such swap shall be deemed a Required Franchise
Consent;
(12) acquire or agree to acquire by merging or consolidating with, or by
purchasing all or a substantial portion of the assets of or equity in,
or by any other manner, any business of any Person or acquire or agree
to acquire any assets (other than supplies, raw materials and inventory
in the ordinary course, capital expenditures permitted by clause (x)
above and asset swaps permitted by clause (xi) above);
(13) abandon, avoid, dispose, surrender, fail to file for timely
renewal, terminate or amend in any materially adverse manner the terms
of any material Franchises, any FCC license that would have a material
adverse effect on the operation of a System or the Social Contract
Order, except as amended by virtue of the proposed Social Contract
Amendment, or, with respect to any Material Franchise, fail to file for
renewal pursuant to Section 626(a) of the Cable Act;
(14) delete any programming service on the Systems or make material
change in the programming services offered on the Systems other than in
the ordinary course of business or as required by the Cable Act, the
Social Contract Order or any amendments thereto;
<PAGE>
(15) except as otherwise permitted by clauses (xi) and (xii), modify,
amend, terminate, renew or fail to use reasonable efforts to renew any
material contract or agreement necessary to continue the Company's
business in the ordinary course or waive, release or assign any material
rights or claims, other than in the ordinary course of business;
(16) offer free or reduced-price service as an inducement to any Person,
except in the ordinary course of business consistent with past practice;
(17) except as permitted by Applicable Law, including the Social
Contract Order and any amendments thereto, and (A) as disclosed to
Acquiror in writing at least 30 days prior to any rate change, implement
any rate change, retiering or repackaging of CATV programming offered by
any of its Subsidiaries, (B) and as disclosed in writing to Acquiror at
least 30 days prior to any cost-of-service rate change make any cost-of-
service election under the rules and regulations adopted under the Cable
Act, (C) determine a method of refund pursuant to 47 C.F.R. Section
76.942(d) or 76.961(c) or (D) 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 any renewal
of any Franchise other than that which the Company would make in the
ordinary course of business;
(18) enter into any agreement, understanding or commitment that
restrains, limits or impedes the Company's or Acquiror's ability to
compete with or conduct any business or line of business;
(19) invest or enter into any agreement, understanding or commitment,
whether written or oral, by or on behalf of the Company or its
Subsidiaries, to invest or provide additional capital in respect of
<PAGE>
assets, businesses or entities; provided, however, that the restrictions
-------- -------
contained in this clause shall not apply to existing commitments as set
forth in Section 6.1(xix) of the Company Disclosure Letter or to any
investments in excess of $10 million individually or $20 million in the
aggregate;
(20) except as otherwise provided in clause (xix) above or Section 7.14,
enter into any material contract or agreement with, or make any loan or
advance to, any Affiliate (other than a wholly owned Subsidiary) of the
Company or any stockholder or Affiliate thereof;
(21) enter into, or amend the terms of, any agreement relating to
interest rate swaps, caps or other hedging or derivative instruments
relating to Indebtedness of the Company and its Subsidiaries, except as
required under agreements relating to existing Indebtedness and
Indebtedness permitted by clause (vii) above;
(22) conduct its business in a manner or take, or cause to be taken, any
other action (including, without limitation, effecting or agreeing to
effect or announcing an intention or proposal to effect, any
acquisition, business combination, merger, consolidation, restructuring
or similar transaction) that would or might reasonably be expected to
prevent Acquiror or the Company from consummating the transactions
contemplated hereby in accordance with the terms of this Agreement
(regardless of whether such action would otherwise be permitted or not
prohibited hereunder), including, without limitation, any action which
may limit the ability of Acquiror or the Company to consummate the
transactions contemplated hereby as a result of antitrust or other
regulatory concerns;
(23) purchase, sell or trade (or announce any intention or proposal
to purchase, sell
<PAGE>
or trade) any shares of Media Stock, or take any other action a
principal purpose of which is to affect the calculation of the
Determination Price; or
(24) agree, whether in writing or otherwise, to do any of the foregoing.
Prior to the date hereof, Acquiror has delivered to the Company a list (which
the Acquiror may update from time to time) designating certain individuals of
the Acquiror to whom the Company may direct requests for consents under this
Section 6.1.
b.Conduct of Business of Acquiror. Except as set forth in Section 6.2 of
---------------------------------
the Acquiror Disclosure Letter, from the date hereof to the Effective
Time, Acquiror shall not (and shall cause its Subsidiaries not to):
(1) issue shares of Media Stock or any option, warrant or right relating
thereto or any securities convertible into or exchangeable for any
shares of Media Stock at less than fair market value as determined by
the Board of Directors of Acquiror (other than pursuant to the terms of
existing options or benefit plans), or split, combine, redeem, convert
or reclassify the Media Stock or issue any securities in exchange or in
substitution for shares of Media Stock;
(2) amend its Certificate of Incorporation or Bylaws (other than the
filing of a Certificate of Designations for the issuance of any series
of Preferred Stock of Acquiror) in any manner adverse to the holders of
Media Stock;
(3) declare, set aside or make any dividends or distributions in cash,
securities or property to holders of Media Stock;
(4) conduct its business in a manner or take, or cause to be taken, any
other action (including, without limitation, effecting or agreeing to
effect or
<PAGE>
announcing an intention or proposal to effect, any acquisition, business
combination, merger, consolidation, restructuring or similar
transaction) that would or might reasonably be expected to prevent
Acquiror or the Company from consummating the transactions contemplated
hereby in accordance with the terms of this Agreement (regardless of
whether such action would otherwise be permitted or not prohibited
hereunder), including, without limitation, any action which may limit
the ability of Acquiror or the Company to consummate the transactions
contemplated hereby as a result of antitrust or other regulatory
concerns;
(5) take any action that would, or that is reasonably likely to, result
in any of the representations and warranties of Acquiror set forth in
Article V being untrue in any material respect as of the date made or
any of the conditions to the Merger set forth herein not being
satisfied;
(6) purchase, sell (other than through primary issuances) or trade (or
announce any intention or proposal to purchase, sell or trade) any
shares of Media Stock, or take any other action a principal purpose of
which is to affect the calculation of the Determination Price, other
then pursuant to benefit plans in the ordinary course of business;
(7) sell all or substantially all of the properties and assets of the
Media Group (within the meaning of Section 2.4.1(B) of Article V of the
Restated Certificate of Incorporation of Acquiror); or
(8) acquire, or agree to acquire, any shares of Company Capital Stock so
long as, after giving effect to the purchase of the Put Shares pursuant
to Section 9.4, Acquiror would beneficially own less than 10% of the
Company Capital Stock.
<PAGE>
c. Access to Information. From the date hereof until the Closing Date, the
---------------------
Company shall permit Acquiror and its representatives to have full
access to the management, facilities, suppliers, accounts, books,
records (including, without limitation, budgets, forecasts and personnel
files and records), contracts and other materials of the Company and its
Subsidiaries reasonably requested by Acquiror or such representatives
and to make available to Acquiror and its representatives the directors,
officers, employees and independent accountants of the Company for
interviews for the purpose, among other things, of verifying the
information furnished to Acquiror, developing transition plans and
integrating the operations of the Company and its Subsidiaries with the
operations of Acquiror and its Subsidiaries and Affiliates. Such access
shall be subject to existing confidentiality agreements and shall be
conducted by Acquiror and its representatives during normal business
hours, upon reasonable advance notice and in such a manner as not to
interfere unreasonably with the business or operations of the Company
and its Subsidiaries.
i.From the date hereof until the Closing Date, Acquiror shall permit the
Company and its representatives to have full access to the management,
facilities, suppliers, accounts, books, records (including, without
limitation, budgets and forecasts), contracts and other materials of the
Media Group reasonably requested by the Company or such representatives
and to make available to the Company and its representatives the
directors, officers, employees and independent accountants of the Media
Group for interviews for the purpose, among other things, of verifying
the information furnished to the Company. Such access shall be subject
to existing confidentiality agreements and shall be conducted by the
Company and its
<PAGE>
representatives during normal business hours, upon reasonable advance
notice and in such a manner as not to interfere unreasonably with the
business or operations of the Media Group.
ii.Each of the Company and Acquiror agrees that it will not, and will
cause each of their respective Affiliates and representatives not to,
use any information obtained pursuant to this Section 6.3 for any
purpose unrelated to the consummation of the transactions contemplated
by this Agreement. The Confidentiality Agreement, dated as of September
26, 1994, as amended on January 11, 1996, between Acquiror and the
Company and the Confidentiality Agreement, dated as of April 19, 1995,
between Acquiror and the Company (the "Confidentiality Agreements")
shall apply with respect to information furnished thereunder or
hereunder and any other activities contemplated thereby.
ARTICLE Section 7
ADDITIONAL AGREEMENTS
a.Preparation of Form S-4 and the Proxy Statement; Stockholders'
-------------------------------------------------------------
Meeting; Charter Amendment. Promptly following the date of this
--------------------------
Agreement, the Company shall prepare and file with the SEC the Proxy
Statement and Acquiror shall prepare and file with the SEC the Form S-4,
in which the Proxy Statement will be included as a prospectus. Each of
the Company and Acquiror shall use its reasonable best efforts to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. The Company shall use its reasonable best
efforts to cause the Proxy Statement to be mailed to the Company's
stockholders, as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Acquiror shall also take any action
(other than qualifying to do business in
<PAGE>
any jurisdiction in which it is not now so qualified or consenting to
service of process in any jurisdiction in which it has not previously so
consented in any action other than one arising out of the offering of
the Media Stock and the Series D Preferred Stock in such jurisdiction)
required to be taken to qualify the Media Stock and Series D Preferred
Stock to be issued in the Merger under any applicable state securities
or "blue sky" laws prior to the Effective Time, and the Company shall
furnish all information concerning the Company and the holders of the
Company Capital Stock as may be reasonably requested in connection with
any such action.
i.None of the information supplied or to be supplied by the Company, on
the one hand, or Acquiror, on the other hand, for inclusion or
incorporation by reference in (i) the Form S-4 will, at the time the
Form S-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, or (ii) the Proxy Statement will, at
the date it is first mailed to the stockholders of the Company or at the
time of each Stockholders' Meeting (as defined in Section 7.1(d)),
contain any untrue statement of a material fact or 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 are made, not misleading. The Proxy Statement and the Form S-4 will
comply as to form in all material respects with the requirements of the
Exchange Act or the Securities Act, as the case may be. Notwithstanding
the foregoing, (i) no representation is made by the Company with respect
to statements made or incorporated by reference therein based on
information supplied in writing by
<PAGE>
Acquiror specifically for inclusion or incorporation by reference in the
Proxy Statement and (ii) no representation is made by Acquiror with
respect to statements made or incorporated by reference therein based on
information supplied in writing by the Company specifically for
inclusion or incorporation by reference in the Form S-4.
ii.The Company and Acquiror shall cooperate with each other and provide
to each other all information necessary in order to prepare the Proxy
Statement and the Form S-4. The Company and Acquiror shall notify each
other promptly of the receipt of any comments from the SEC or its staff
and of any requests by the SEC or its staff for amendments or
supplements to the Form S-4 or the Proxy Statement or for additional
information and shall supply the other parties with copies of all
correspondence between the Company or any of its representatives, or
Acquiror or any of its representatives, as the case may be, on the one
hand, and the SEC or its staff, on the other hand, with respect thereto.
The Company and Acquiror shall use their respective reasonable best
efforts to respond to any comments of the SEC with respect to the Form
S-4 and the Proxy Statement as promptly as practicable. If at any time
prior to the Effective Time there shall occur (i) any event with respect
to the Company or any of its Subsidiaries, or with respect to other
information supplied by the Company for inclusion in the Proxy Statement
or (ii) any event with respect to Acquiror, or with respect to
information supplied by Acquiror for inclusion in the Form S-4, in
either case which event is required to be described in an amendment of,
or a supplement to, the Proxy Statement or Form S-4, such event shall be
so described, and such amendment or supplement shall be promptly filed
with the SEC and, as required by law, disseminated to the stockholders
of the Company. Acquiror shall notify the Company promptly upon
<PAGE>
(i) the declaration by the SEC of the effectiveness of the Form S-4,
(ii) the issuance or threatened issuance of any stop order or other
order preventing or suspending the use of any prospectus relating to the
Form S-4, (iii) any suspension or threatened suspension of the use of
any prospectus relating to the Form S-4 in any state, (iv) any
proceedings commenced or threatened to be commenced by the SEC or any
state securities commission that might result in the issuance of a stop
order or other order or suspension of use or (v) any request by the SEC
to supplement or amend any prospectus relating to the Form S-4 after the
effectiveness thereof. Acquiror and, to the extent applicable, the
Company, shall use its reasonable best efforts to prevent or promptly
remove any stop order or other order preventing or suspending the use of
any prospectus relating to the Form S-4 and to comply with any such
request by the SEC or any state securities commission to amend or
supplement the Form S-4 or the prospectus relating thereto.
iii.The Company shall, as promptly as practicable, duly call, give
notice of, convene and hold a meeting of its stockholders (the "Initial
Stockholders' Meeting") for the purpose of obtaining the Stockholder
Approvals. The Company shall use its reasonable best efforts to hold
such meeting as soon as practicable. In the event the Charter Amendment
is not approved at the Initial Stockholders' Meeting, the Company shall,
as promptly as practicable following the date of the Initial
Stockholders' Meeting, duly call, give notice of, convene and hold
another meeting of its stockholders (the "Additional Stockholders'
Meeting" and, together with the Initial Stockholders' Meeting,
collectively, the "Stockholders' Meetings" and individually, a
"Stockholders' Meeting") for the purpose of obtaining the Stockholder
Approvals. The Company shall, as promptly as practicable
<PAGE>
after the date of the Initial Stockholders' Meeting, hold the Additional
Stockholders' Meeting. Subject to the fiduciary duties of the Board of
Directors of the Company under Applicable Laws and to Section 9.1(g),
the Company shall, through the Board of Directors, recommend to its
stockholders adoption of this Agreement, the Charter Amendment and the
other transactions contemplated hereby and shall use its best efforts to
solicit from stockholders proxies in favor of adoption of this Agreement
and the Charter Amendment and to take all other action necessary to
secure the Stockholder Approvals at the Initial Stockholders' Meeting or
the Additional Stockholders' Meeting, as the case may be. Without
limiting the generality of the foregoing, the Company agrees that its
obligations pursuant to the first and third sentences of this Section
7.1(d) shall not be altered by the commencement, public proposal or
communication to the Company of any Acquisition Proposal (as defined in
Section 7.10).
iv.Subject to receipt of the Stockholder Approvals, the Company shall
take all actions necessary to cause the Charter Amendment to be
executed, acknowledged and filed and to become effective no later than
immediately prior to the Effective Time in accordance with the DGCL as
soon as practicable after the approval thereof at a Stockholders'
Meeting.
v.The Company shall make stock transfer records relating to the Company
available to Acquiror to the extent reasonably necessary to effectuate
the intent of this Agreement.
b. Letter of the Company's Accountants. The Company shall use its
-----------------------------------
reasonable best efforts to cause to be delivered to Acquiror letters of
(i) Deloitte & Touche LLP, the Company's independent public accountants
and (ii) any other independent
<PAGE>
public accountants whose reports are included or incorporated by
reference in the Form S-4, each dated a date within two business days
before the date on which the Form S-4 shall become effective and
addressed to Acquiror, in form and substance reasonably satisfactory to
Acquiror and customary in scope and substance for letters delivered by
independent public accountants in connection with registration
statements similar to the Form S-4.
c. Letter of Acquiror's Accountants. Acquiror shall use its reasonable best
--------------------------------
efforts to cause to be delivered to the Company a letter of Coopers &
Lybrand L.L.P., Acquiror's independent public accountants, dated a date
within two business days before the date on which the Form S-4 shall
become effective and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
d. Reasonable Best Efforts. Subject to the terms and conditions of this
-----------------------
Agreement, including, without limitation, Section 7.6, each of the
parties hereto agrees to use its reasonable best efforts to take, or
cause to be taken, all 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 (including the execution of the Transaction Documents to which
they or any of their Affiliates are a party), subject to the Stockholder
Approval, including (a) the obtaining of all necessary actions or
nonactions, waivers, consents and approvals from Governmental
Authorities and the making of it all necessary registrations and filings
(including filings with Governmental Authorities, if any), and the
taking of all
<PAGE>
reasonable steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any Governmental
Authorities, (b) the obtaining of all necessary consents, approvals or
waivers from Third Parties and (c) the execution and delivery of any
additional instruments necessary to consummate the transactions
contemplated by this Agreement and the Transaction Documents. In
furtherance of the foregoing, Acquiror and the Company each shall
furnish to the other such necessary information and reasonable
assistance as the other may request in connection with obtaining any
consents required to be obtained by it hereunder.
e. Franchise and License Consents. Without limiting the generality of
------------------------------
Section 7.4, the Company and Acquiror shall each use their respective
reasonable best efforts to obtain all Franchise Consents and License
Consents, including taking the actions specified herein. In order to
secure the Franchise Consents and License Consents from Governmental
Authorities and the FCC, the Company shall proceed immediately in good
faith and using its reasonable best efforts, to prepare, file and
prosecute each Franchise Consent and License Consent from the relevant
Governmental Authority and the FCC, with the full right of participation
by Acquiror including, without limitation, the right of prior review and
approval of correspondence or forms of transfer resolutions,
applications, ordinances or agreements to be submitted to Governmental
Authorities and the FCC (which approval shall not be unreasonably
withheld or delayed) and to be represented at all meetings or hearings
as may be scheduled to consider such submissions. The Company shall send
notice of the transactions contemplated in this Agreement to all
Governmental Authorities. The Company shall submit to each Governmental
Authority whose consent is required a form of ordinance or resolution,
as appropriate, relating to the transfer of
<PAGE>
the Franchise, which ordinance or resolution shall be in a form
reasonably acceptable to Acquiror and the Company. The Company shall
consult with Acquiror and promptly and regularly notify Acquiror with
regard to all material developments of the Franchise Consent and License
Consent process, and shall give Acquiror reasonable prior notice of all
meetings scheduled with the Governmental Authorities and the FCC.
Acquiror shall use its reasonable best efforts to promptly assist the
Company and shall take such prompt and affirmative actions as may
reasonably be necessary in obtaining such approvals and shall cooperate
with the Company in the preparation, filing and prosecution of such
applications as may reasonably be necessary, including the preparation,
filing and prosecution of any joint applications required to be filed
with the Governmental Authorities or the FCC, and agrees to use its
reasonable best efforts to furnish all information as is reasonably or
as is customarily required by the approving entity, and, if required by
a Governmental Authority or the FCC upon reasonable notice, Acquiror
shall have the obligation to be represented at such meetings or hearings
as may be scheduled to consider such applications. Any administrative
filing fees imposed or expenses for which reimbursement is required by
the Governmental Authority in connection with obtaining the Franchise
Consents or the License Consents shall be borne by the Company and each
of the parties shall bear its own legal fees or other costs of
professional advisors incurred in the filing and prosection of such
applications. If, in connection with obtaining Franchise Consents or the
License Consents from a Governmental Authority or the FCC, a
Governmental Authority or the FCC impose new, material Franchise or
license conditions as a condition to granting its consent, Acquiror and
the Company shall negotiate jointly with such Governmental Authority or
the FCC with
<PAGE>
respect to such conditions, with such conditions to be accepted only if
consented to by Acquiror and the Company, which consent shall not be
unreasonably withheld. Acquiror agrees that prior to the Closing Date,
it will not, without the prior written consent of the Company, seek
amendments, modifications or other changes to Franchises and shall not
institute any discussions with Governmental Authorities or the FCC
without the prior written consent of the Company and without offering a
representative of the Company an opportunity to participate or observe
such discussions. To the extent such request would not, in the
reasonable judgment of the Company, delay or impair the ability to
obtain any Franchise Consents, any application to any Governmental
Authority for any Franchise Consent necessary for the transfer of
control of any Franchise shall request that the relevant Governmental
Authority also agree that no further Franchise Consent shall be required
for the subsequent transfer of control of, or assignment of, such
Franchise to a specified Person identified in such application who is an
Affiliate of Acquiror to which Acquiror intends to transfer or assign
the Franchise immediately prior to Closing. In addition, the Company
will use reasonable best efforts to obtain necessary transfers of all
private mobile radio service licenses.
i.To the extent that any Franchise Consents listed in Section 4.6 of the
Company Disclosure Letter have not been obtained by Final Order prior to
Closing (such Franchises hereinafter referred to as the "Non-Required
Franchises"), Acquiror and Company shall enter into negotiations to
determine the disposition of the Non-Required Franchises after Closing.
In the event that the parties agree to transfer any part of a System
which includes, in part, areas covered by a Non-Required Franchise
(hereinafter the "Non-Required Systems"), the parties shall continue to
be
<PAGE>
subject to Section 7.5(a) until such time as all Franchise Consents are
obtained and the Non-Required Franchises are transferred to Acquiror.
f. Antitrust Notification. The Company and Acquiror shall as promptly as
----------------------
practicable, but in no event later than 30 Business Days following the
execution and delivery of this Agreement, file with the FTC and the DOJ
the notification and report form required for the transactions
contemplated hereby and any supplemental information requested in
connection therewith pursuant to the HSR Act. Each of Acquiror and the
Company shall furnish to each other's counsel such necessary information
and reasonable assistance as the other may request in connection with
its preparation of any filing or submission that is necessary under the
HSR Act. The Company and Acquiror acknowledge that more than one filing
may be required under the HSR Act in order to consummate the
transactions contemplated by this Agreement, and agree to cooperate and
furnish to each other's counsel such necessary information and
reasonable assistance as the other may request in connection with its
preparation of any subsequent filing.
i.The Company and Acquiror shall keep each other apprised of the status
of any communications with, and any inquiries or requests for additional
information from, the FTC and the DOJ and shall comply promptly with any
such inquiry or request.
ii.Each of the Company and Acquiror shall use its reasonable best
efforts to obtain any clearance required under the HSR Act for the
consummation of the Merger, which efforts, for purposes of this
Agreement shall not, except as provided in Section 7.6(d), require
Acquiror in order to obtain any consent or clearance from the DOJ or any
other Governmental Authority to (i) hold separate, sell or otherwise
dispose of any assets, including assets of
<PAGE>
the Company, the effect of any of which, in the reasonable judgment of
Acquiror, would be to materially impair the value of the Merger to
Acquiror or (ii) contest any suit brought or threatened by the FTC or
DOJ or attempt to lift or rescind any injunction or restraining order
obtained by the FTC or DOJ adversely affecting the ability of the
parties hereto to consummate the transactions contemplated hereby.
iii.For purposes of Section 7.6(c), "reasonable best efforts" shall
include entry into a consent decree in any action brought by the DOJ or
into a consent order with the FTC where such decree or order requires
the divestiture of the Designated Assets and of the assets set forth in
Section 7.6(d) of the Company Disclosure Letter, if and only if, such
decree or order does not require, either absolutely or conditionally,
the divestiture of any other assets or of the stock of any other
corporation, or (except for reasonable and customary compliance and
other requirements ancillary to the required divestiture) impose any
additional requirement or limitation on Acquiror, on its ability to
operate its current and contemplated businesses, or on its ability to
acquire assets or stock in any corporation; and only if such decree or
order provides that Acquiror shall have a period of at least 12 months
to effect such divestiture itself and an additional 12 months to divest
pursuant to a reasonable and customary trusteeship provision.
g. Certain Actions. Except as otherwise specifically limited by this
---------------
Agreement, each of the Company and Acquiror agrees to use its reasonable
best efforts and to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary, proper or advisable to ensure
that there shall be no regulatory impediments, pursuant to the
Communications Act, the rules and regulations of the FCC, or otherwise,
to the closing of the
<PAGE>
transactions contemplated hereby and the Company agrees not to acquire
any assets or engage in any activities prior to the Closing of a type
which Acquiror would be precluded from acquiring or engaging in pursuant
to the Communications Act, the rules and regulations of the FCC or
otherwise.
i.On or prior to the Closing Date, the Company shall sell, distribute to
stockholders or otherwise dispose of the properties of the Company and
its Subsidiaries listed in Section 7.7 of the Company Disclosure Letter
(the "Designated Assets") in a manner acceptable to Acquiror, in its
sole discretion.
ii.Not later than one hundred and twenty (120) days following the date
hereof, the Company and Acquiror shall agree to the fair market value of
the Designated Assets (the "Designated Asset Fair Market Value"). In the
event of a sale or other disposition of the Designated Assets for an
amount less than the Designated Asset Fair Market Value, the Share Price
shall be reduced by the quotient of (i) the excess of (x) the Designated
Asset Fair Market Value over (y) the amount of consideration received by
the Company in respect of such sale or disposition divided by (ii) the
number of shares of Company Common Stock outstanding immediately prior
to the Effective Time on a fully diluted basis, including giving effect
to the conversion of all outstanding shares of Company Preferred Stock.
In the event of a distribution of the Designated Assets to the
stockholders of the Company, the Share Price shall be reduced by an
amount equal to the quotient of (i) the Designated Asset Fair Market
Value divided by (ii) the number of shares of Company Common Stock
outstanding immediately prior to the Effective Time on a fully diluted
basis, including giving effect to the conversion of all outstanding
shares of Company Preferred Stock. The amount of any adjustment to the
Share Price pursuant to
<PAGE>
this Section 7.7(c) shall be referred to as the "Per Share Adjustment
Amount" and the Cash Consideration Amount shall be reduced by the Per
Share Adjustment Amount multiplied by the number of shares of Company
Common Stock outstanding immediately prior to the Effective Time on a
fully diluted basis, including giving effect to the conversion of all
outstanding shares of Company Preferred Stock.
h. Supplemental Disclosure. The Company shall confer on a regular and
-----------------------
frequent basis with Acquiror, report on operational matters and promptly
notify Acquiror of, and furnish Acquiror with, any information it may
reasonably request with respect to, any event or condition or the
existence of any fact that would cause any of the conditions to
Acquiror's obligation to consummate the Merger not to be completed, and
Acquiror shall promptly notify the Company of, and furnish the Company
any information it may reasonably request with respect to, any event or
condition or the existence of any fact that would cause any of the
conditions to the Company's obligation to consummate the Merger not to
be completed.
i. Announcements. Prior to the Closing, neither the Company nor Acquiror
-------------
will issue any press release or otherwise make any public statement with
respect to this Agreement and the transactions contemplated hereby
without the prior consent of the other (which consent shall not be
unreasonably withheld), except as may be required by Applicable Law or
stock exchange regulations (including, without limitation, pursuant to
the United States Federal securities laws in connection with any
registration statement or report filed thereunder), in which event the
party required to make the release or announcement shall, if possible,
allow the other party reasonable time to comment on such release or
announcement in advance of such issuance.
<PAGE>
j. No Solicitation. From the date hereof until the Effective Time, the
---------------
Company shall not, nor shall it permit any of its Subsidiaries to, nor
shall it authorize or permit any of its officers, directors, employees,
agents, investment bankers, attorneys, financial advisors or other
representatives or those of any of its Subsidiaries (collectively,
"Company Representatives") to, directly or indirectly, solicit, initiate
or encourage (including by way of furnishing information or assistance)
or take other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to, an
Acquisition Proposal from any Third Party, or engage in any discussions
or negotiations relating thereto or in furtherance thereof or accept or
enter any agreement with respect to any Acquisition Proposal; provided,
--------
however, that, notwithstanding anything to the contrary in this
-------
Agreement, (i) prior to the approval of this Agreement by the
Stockholders of the Company, the Company may engage in discussions or
negotiations with, and may furnish information concerning the Company
and its business, properties and assets to, a Third Party who, without
any solicitation, initiation, encouragement, discussion or negotiation,
directly or indirectly, by or with the Company or any Company
Representatives, or in furtherance thereof makes a written, bona fide
Acquisition Proposal that is not subject to any material contingencies
relating to financing and that is reasonably capable of being financed
and is financially superior to the consideration to be received by the
Company's stockholders pursuant to the Merger (as determined in good
faith by the Board of Directors after consultation with the Company's
financial advisors) if (1) the Board of Directors determines in its good
faith, after receipt of written advice of the Company's outside legal
counsel, that such action is advisable for the Board of Directors to act
in a manner
<PAGE>
consistent with its fiduciary duties under Applicable Law and (2) prior
to furnishing information with respect to the Company and its
Subsidiaries to, such Third Party, the Company shall receive from such
Third Party an executed confidentiality agreement in reasonably
customary form on terms not more favorable to such Person or entity than
the terms contained in the Confidentiality Agreements, or (ii) the Board
of Directors may take and disclose to the Company's stockholders a
position with regard to a tender offer or exchange offer to the extent
required by Rule 14e-2(a) under the Exchange Act. Without limiting the
foregoing, it is understood that any violation of the restrictions set
forth in the preceding sentence by any investment banker or financial
advisor retained by the Company, whether or not such Person is
purporting to act of behalf of the Company of any of its Subsidiaries or
otherwise, shall constitute a breach of this Section 7.10 by the
Company.
i.The Company shall promptly notify Acquiror orally and in writing of
any Acquisition Proposal or any inquiry with respect to or which could
lead to any Acquisition Proposal, within 24 hours of the receipt
thereof, including the identity of the Third Party making any such
Acquisition Proposal or inquiry and the material terms and conditions of
any Acquisition Proposal, and if such Acquisition Proposal or inquiry is
in writing, shall deliver to Acquiror a copy of such Acquisition
Proposal or inquiry. The Company shall keep Acquiror informed of the
status and details of any such Acquisition Proposal or inquiry.
ii.The Company shall immediately cease and cause to be terminated any
existing solicitation, initiation, encouragement, activity, discussion
or negotiation with any parties conducted heretofore by the Company or
any Company Representatives with respect to any of the foregoing.
<PAGE>
iii.As used in this Agreement, "Acquisition Proposal" shall mean any
proposal or offer, other than a proposal or offer by Acquiror or any of
its Affiliates, for a tender or exchange offer, merger, consolidation or
other business combination involving the Company or any of its material
Subsidiaries or any proposal to acquire in any manner a substantial
equity interest in or a substantial portion of the assets of the Company
or any of its material Subsidiaries; provided, however, that, the term
--------- -------
"Acquisition Proposal" shall not include any acquisition by the Company
or any of its Subsidiaries of any assets, businesses or entities in any
transaction or series of related transactions in exchange for other
assets, businesses or entities of any Third Party.
k. Indemnification; Directors' and Officers Insurance. The Restated
--------------------------------------------------
Certificate of Incorporation and Bylaws of the Surviving Corporation at
the Effective Time shall not be amended, repealed or otherwise modified
for a period of six years after the Effective Time in any manner that
would adversely affect the rights thereunder of individuals who at any
time prior to the Effective Time were directors or officers of the
Company or its Subsidiaries in respect of actions or omissions occurring
at or prior to the Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such modification
is required by law.
i.From and after the Effective Time, the Surviving Corporation shall,
indemnify, defend and hold harmless each Person who is now, or has been
at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer or director of the Company or any of its
Subsidiaries (the "Indemnified Parties") against all losses, claims,
damages, costs, expenses (including attorneys' fees and expenses),
liabilities
<PAGE>
or judgments or amounts that are paid in settlement with the approval of
the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any threatened or actual claim,
action, suit, proceeding or investigation based in whole or in part on
or arising in whole or in part out of the fact that such Person is or
was a director or officer of the Company or any of its Subsidiaries or
served as a director of any Third Party on behalf of the Company or any
of its Subsidiaries whether pertaining to any matter existing or
occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified
Liabilities"), including, without limitation, all Indemnified
Liabilities based in whole or in part on, or arising in whole or in part
out of, or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the fullest extent a corporation is permitted
under the DGCL to indemnify its own directors or officers as the case
may be (and the Company or the Surviving Corporation, as the case may
be, will pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the full extent
permitted by law).
ii.The provisions of this Section 7.11 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or
her heirs and his or her personal representatives and shall be binding
on all successors and assigns of Acquiror and the Company.
l. NYSE Listing. Acquiror shall use its best efforts to cause the shares of
------------
Media Stock and Series D Preferred Stock to be issued in the Merger to
be approved for listing on the NYSE, subject only to notice of official
issuance, prior to the Effective Time. If, for any reason, Acquiror
shall not be able to list the shares of the
<PAGE>
Series D Preferred Stock to be issued in the Merger on the NYSE,
Acquiror shall use its best efforts to, prior to the Effective Date,
list such shares on such other stock exchange, or cause such shares to
be eligible for trading on such other trading facility, as the Company
may request.
m. Affiliates. Prior to the Closing Date, the Company shall deliver to
----------
Acquiror a letter identifying all Persons who are, at the time this
Agreement is submitted to the stockholders of the Company, "affiliates"
of the Company for purposes of Rule 145 under the Securities Act. The
Company shall use its best efforts to cause each such Person to deliver
to Acquiror on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit D.
n. Employee Benefits. For a period of one year following the Effective
-----------------
Time, Acquiror shall maintain in effect for employees of the Company and
its Subsidiaries benefits (other than RSPAs or similar benefits) no less
favorable in the aggregate than the benefits offered by the Company
immediately prior to the Effective Time. Acquiror agrees to honor and
perform all severance, employment and similar agreements of the Company
disclosed in Section 4.11 of the Company Disclosure Letter and each RSPA
and related Tax Liability Financing Agreement.
i. Following the date hereof, the Company shall, after consultation with
Acquiror, be permitted to (i) forgive up to $35.7 million principal
amount of outstanding loans made by the Company to employees to enable
such employees to pay income Taxes incurred by such employees as a
result of the purchase of shares of Company Common Stock by such
employees pursuant to the RSPAs in accordance with the terms of an
amendment to the Tax Liability Financing Agreement substantially in the
form set forth in Section 7.14 of the Company Disclosure Letter;
provided, however, that
-------- -------
<PAGE>
any loan to an employee of the Company who is, or reasonably can be
expected to become, a "covered employee" (within the meaning of Section
162(m) of the Code) shall in no event be forgiven, in whole or in part,
prior to the day following the Closing Date, (ii) issue up to 350,000
shares of Company Common Stock pursuant to RSPAs substantially in the
form heretofore provided to Acquiror to employees of the Company or any
of its Subsidiaries; and provided, further, that, in each case, such
-------- -------
forgiveness or issuance acts as incentive for the purpose of retaining
and motivating such employee to continue in the employment of the
Company following the Effective Time and is implemented in a manner
consistent with such purpose.
ii.If, following the Effective Time, the termination of the employee's
employment with the Company or any of its Subsidiaries results in the
acceleration of the vesting of an award under any RSPA or the
forgiveness of a loan related to an RSPA pursuant to a Tax Liability
Financing Agreement (other than as a result of termination of employment
by reason of the employee's death or disability) (an "Acceleration
Event") and as a result of such Acceleration Event, the employee either
(i) becomes subject to an excise tax (the "Excise Tax") under Section
4999 of the Code that such employee would not have been subject to
without the occurrence of such Acceleration Event or (ii) the amount of
the Excise Tax imposed on such employee is greater than the amount of
the Excise Tax that would have been imposed without the occurrence of
such Acceleration Event (the "Incremental Excise Tax"), Acquiror shall
pay or shall cause to be paid to the employee, at the time specified
below, an additional amount (the "Additional Payment") sufficient to (a)
in the case of clause (i) above, reimburse the employee for the Excise
Tax and in the case of clause (ii) above, reimburse the employee for the
Incremental Excise Tax and (b) in
<PAGE>
either case, reimburse the employee for any federal, state or local
income tax or any additional excise tax under Section 4999 of the Code
payable with respect to any Additional Payment made pursuant to this
Section 7.14(c). The Additional Payment provided for in this Section
7.14(c) shall be made no later than the due date for the Excise Tax or
Incremental Excise Tax (as the case may be) imposed. In the event of any
dispute in the calculations made pursuant to this Section 7.14(c), an
independent big six accounting firm shall be selected to resolve any
such dispute and the decision of such accounting firm shall be final and
binding on the Company and the employee. The fees and costs of such
accounting firm shall be shared equally among the Company and the
employee.
o. Registration Rights Agreement. Acquiror shall execute and deliver to the
-----------------------------
other parties thereto the Registration Rights Agreement at or prior to
the Closing.
p. Tax Treatment. Each of Acquiror and the Company shall use its reasonable
-------------
best efforts to cause the Merger to qualify as a reorganization under
the provisions of Sections 368(a) of the Code and to obtain the opinions
of counsel referred to in Sections 8.2(c) and 8.3(c).
i.The Company and Acquiror agree that if a ruling satisfactory to the
Company, Acquiror and The Providence Journal Company is obtained from
the IRS, this Agreement shall be amended to permit the creation of a
newly-formed holding company to acquire the capital stock of the Company
and Acquiror.
q. Series D Preferred Stock. Prior to the Effective Time, Acquiror shall
------------------------
file with the Secretary of State of the State of Delaware a Certificate
of Designation, in the form of Exhibit C hereto, with respect to the
shares of Series D Preferred Stock issuable pursuant to Section 3.1.
<PAGE>
r. Company Indebtedness. The Company shall assist Acquiror, and shall take
--------------------
such actions as Acquiror may reasonably request at Acquiror's sole
expense in order to facilitate with respect to the amendment, repayment,
redemption, refinancing or other restructuring of outstanding
Indebtedness of the Company on or after the Effective Time in connection
with the Merger.
s. Authorization of Issuance of Merger Consideration. Acquiror shall obtain
-------------------------------------------------
any authorizations and consents necessary, and shall take such further
actions as may be required, for the issuance of the Media Stock and the
Series D Preferred Stock to holders of Company Common Stock pursuant to
the terms of this Agreement.
t. Attribution. Following the Effective Time, the board of directors of
-----------
Acquiror shall attribute all of the assets and liabilities of the
Company and its Subsidiaries to the Media Group pursuant to Sections
2.5.1 and 2.6.15 of Article V of the Restated Certificate of
Incorporation of Acquiror as in effect as of the date hereof.
u. Further Assurances. 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 and evidence 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 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 to obtain in a timely manner all necessary waivers, consents and
approvals and to
<PAGE>
effect all necessary registrations and filings.
ARTICLE Section 8
CONDITIONS PRECEDENT
a.Conditions to Each Party's Obligation to Effect the Merger. The
----------------------------------------------------------
respective obligation of each party to effect the Merger shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
i.Stockholder Approvals; Charter Amendment. The Company shall have
----------------------------------------
obtained the Stockholder Approvals and the Charter Amendment shall have
been executed, acknowledged and filed and shall have become effective in
accordance with the DGCL.
ii.HSR Act. The waiting periods (and any extension thereof) applicable
-------
to the Merger under the HSR Act shall have expired or been terminated;
neither the FTC nor DOJ shall have authorized the institution of
enforcement proceedings (that have not been dismissed or otherwise
disposed of) to delay, prohibit, or otherwise restrain the transactions
contemplated by the Agreement; no such proceeding will be pending as of
the Closing Date and other than as contemplated by Section 7.6(d), no
injunction or order shall have been issued by a court of competent
jurisdiction and remain in effect as of the Closing Date.
iii.No Injunctions or Restraints. No statute, rule, regulation,
----------------------------
injunction, restraining order or decree of any court or Governmental
Authority of competent jurisdiction shall be in effect that restrains or
prevents the transactions contemplated hereby.
iv.Form S-4. The Form S-4 shall have been declared effective under the
--------
Securities Act
<PAGE>
and shall not be the subject of any stop order or proceedings seeking a
stop order, and any material "blue sky" and other state securities laws
applicable to the issuance of the Media Stock and Series D Preferred
Stock shall have been complied with.
v.NYSE Listing. The shares of Media Stock issuable to the Company's
------------
stockholders pursuant to this Agreement shall have been approved for
listing on the NYSE, subject only to official notice of issuance.
vi.Conversion of Company Preferred Stock; Certain Elections. The holders
--------------------------------------------------------
of shares of Company Preferred Stock shall have converted such shares
into shares of Company Common Stock, effective no later than immediately
prior to the Effective Time.
b. Conditions of Obligations of Acquiror. The obligations of Acquiror to
-------------------------------------
effect the Merger are subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by
Acquiror:
i.Representations and Warranties. There shall be no breach of any
------------------------------
representation or warranty of the Company made hereunder that,
individually or together with all other such breaches, results in a
Material Adverse Effect with respect to the Company. Acquiror shall have
received a certificate from the Company dated the Closing Date signed by
an authorized officer of the Company certifying to the fulfillment of
this condition.
ii.Agreements. The Company shall have performed and complied in all
----------
material respects with all of its respective undertakings, covenants,
conditions and agreements required by this Agreement to be performed or
complied with by it prior to or at the Closing. Acquiror shall have
received a certificate from the Company dated the Closing Date signed by
an
<PAGE>
authorized officer of the Company and certifying to the fulfillment of
this condition.
iii.Tax Opinion. Acquiror shall have received an opinion of Weil,
-----------
Gotshal & Manges LLP, dated the Closing Date, to the effect that (i) the
Merger should be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code; (ii)
each of Acquiror and the Company should be a party to the reorganization
within the meaning of Section 368(b) of the Code; and (iii) no gain or
loss should be recognized by the Company or Acquiror as a result of the
Merger. In rendering such opinion, Weil, Gotshal & Manges LLP may
receive and rely upon representations contained in certificates of the
Company, Acquiror, and certain stockholders of the Company.
iv.Letters from Affiliates. Acquiror shall have received from each
-----------------------
Person in the letter referred to in Section 7.13 an executed copy of an
agreement substantially in the form of Exhibit D.
v.Consents. All Company Consents (other than Franchise Consents) and
--------
Acquiror Consents shall have been obtained, except where the failure to
obtain any such consent would not have a Material Adverse Effect with
respect to the Company or Acquiror, as the case may be.
vi.Transaction Documents. Each of the Transaction Documents which were
---------------------
not executed on the date hereof shall have been duly authorized and
executed by the parties thereto other than Acquiror.
vii.Dissenting Shares. Acquiror shall have received evidence, in form
-----------------
and substance reasonably satisfactory to it, that the number of
Dissenting Shares shall constitute no greater than 10% of the total
number of shares of Company Common Stock (assuming conversion of the
Company
<PAGE>
Preferred Stock) outstanding immediately prior to the Effective Time.
viii.Other Actions. The Company shall have disposed of the Designated
-------------
Assets as provided in Section 7.7.
ix.Litigation. Except as described in Section 7.6(c), there shall not be
----------
pending or threatened by any Governmental Authority any suit, action or
proceeding, (i) seeking to restrain or prohibit the Merger or seeking to
obtain from Acquiror or the Company or any of their respective
Subsidiaries in connection with the Merger any material damages, (ii)
seeking to prohibit or limit the ownership or operation by Acquiror, the
Company or any of their respective Subsidiaries of any material portion
of the business or assets of Acquiror and its Subsidiaries taken as a
whole or the Company and its Subsidiaries taken as a whole, or to compel
Acquiror, the Company or any of their respective Subsidiaries to dispose
of or hold separate any material portion of the business or assets of
Acquiror and its Subsidiaries taken as a whole or the Company and its
Subsidiaries taken as a whole, in each case as a result of the Merger or
any of the other transactions contemplated by this Agreement or the
Transaction Documents, (iii) seeking to impose limitations on the
ability of Acquiror to acquire or hold, or exercise full rights of
ownership of, the shares of Company Capital Stock, including the right
to vote such shares of Company Capital Stock on all matters properly
presented to the stockholders of the Company or (iv) seeking to prohibit
Acquiror from effectively controlling in any material respect any
portion of the business or operations of the Company or any of its
Subsidiaries taken as a whole, which, in each case, has a reasonable
likelihood of success and if determined in a manner adverse to the
Company or Acquiror, could reasonably be expected to
<PAGE>
result in a Material Adverse Effect with respect to Acquiror or the
Company.
x.Franchise and License Consents. The Company shall have obtained, in
------------------------------
accordance with the terms of Section 7.5, (i) all Franchise Consents
required pursuant to this Section 8.2(j) (the "Required Franchise
Consents"); (ii) all License Consents for each FCC license set forth in
Section 4.6 of the Company Disclosure Letter and (iii) to the extent
required by the FCC or any Governmental Authority with jurisdiction, the
Social Contract Consent; provided, however, that each Franchise Consent
-------- -------
and License Consent and the Social Contract Consent required to be
obtained hereunder shall be a Final Order. The aggregate number of
Subscribers covered by the Required Franchise Consents (i) as to which
Franchise Consents are obtained in accordance with the terms of Section
7.5 and (ii) that do not require Franchise Consents, shall equal at
least ninety percent (90%) of the total number of Subscribers covered by
all Franchises and shall equal at least ninety-five percent (95%) of the
total number of Subscribers covered by Franchises located within the
thirty largest Metropolitan Statistical Areas (as ranked on the basis of
the 1994 U.S. Census by Rand McNally) in which the Company or its
Subsidiaries operates a Franchise, in each case as of March 31, 1996
based on the Company's month-end billing report as of such date, as
adjusted to reflect any acquisitions or dispositions of Systems. The
aggregate number of Required Franchise Consents (i) as to which
Franchise Consents are obtained in accordance with the terms of Section
7.5 and (ii) that do not require Franchise Consents, shall equal at
least eighty-five percent (85%) of the total number of Franchises as of
the date hereof.
xi. Corporate Proceedings and Documents. All corporate proceedings taken
-----------------------------------
by the Company in connection with the transactions
<PAGE>
contemplated hereby and all documents incident thereto shall be
reasonably satisfactory in all material respects to Acquiror and
Acquiror's counsel, and Acquiror and Acquiror's Counsel shall have
received all such counterpart originals or certified or other copies of
such documents as they may reasonably request.
c. Conditions of Obligations of the Company. The obligation of the Company
----------------------------------------
to effect the Merger is subject to the satisfaction of the following
conditions, any or all of which may be waived in whole or in part by the
Company:
i.Representations and Warranties. There shall be no breach of any
------------------------------
representation or warranty of Acquiror made hereunder that, individually
or together with all other such breaches, results in a Material Adverse
Effect with respect to Acquiror. The Company shall have received a
certificate dated the Closing Date signed by an authorized officer of
Acquiror certifying to the fulfillment of this condition.
ii.Agreements. Acquiror shall have performed and complied in all
----------
material respects with all of their respective undertakings, covenants,
conditions and agreements required by this Agreement to be performed or
complied with by Acquiror prior to or at the Closing. The Company shall
have received a certificate dated the Closing Date signed by an
authorized officer of Acquiror certifying to the fulfillment of this
condition.
iii.Tax Opinion. The Company shall have received an opinion of Sullivan
-----------
& Worcester LLP, dated the Closing Date, to the effect that (i) the
Merger will be treated for Federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Code; (ii)
each of the Acquiror and the Company will be a party to the
reorganization within the
<PAGE>
meaning of Section 368(b) of the Code; and (iii) gain, if any, realized
will be recognized by a stockholder of the Company as a result of the
Merger, but not in excess of the amount of cash received by such
stockholder. In rendering such opinion, Sullivan & Worcester LLP, may
receive and rely upon representations contained in certificates of
Acquiror, the Company, and certain stockholders of the Company.
iv.Consents. All Company Consents and Acquiror Consents shall have been
--------
obtained, except where the failure to obtain any such consent would not
have a Material Adverse Effect with respect to the Company or Acquiror,
as the case may be.
v.Transaction Documents. Each of the Transaction Documents shall have
---------------------
been duly authorized and executed by the parties thereto other than the
Company.
vi.Preferred Stock Listing. The shares of Series D Preferred Stock
-----------------------
issuable to the Company's stockholders pursuant to this Agreement shall
have been approved for listing on the NYSE or otherwise approved for
listing or eligible for trading as provided in Section 7.12 hereof,
subject only to official notice of issuance.
vii.Corporate Proceedings and Documents. All corporate proceedings taken
-----------------------------------
by Acquiror in connection with the transactions contemplated hereby and
all documents incident thereto shall be reasonably satisfactory in all
material respects to the Company and the Company's counsel, and the
Company and the Company's counsel shall have received all such
counterpart originals or certified or other copies of such documents as
they may reasonably request.
<PAGE>
ARTICLE Section 9
TERMINATION AND AMENDMENT
a.Termination. This Agreement may be terminated and the Merger may be
-----------
abandoned at any time prior to the Effective Time, whether before or
after approval of the matters presented in connection with the Merger by
the stockholders of the Company:
i.by mutual written consent of the Company, on the one hand, and
Acquiror, on the other hand, or by mutual action of their respective
boards of directors;
ii.by Acquiror, if any of the conditions set forth in Section 8.1 or 8.2
shall have become incapable of fulfillment, and shall not have been
waived by Acquiror, or if the Company shall breach in any material
respect any of its representations, warranties or obligations hereunder
and such breach shall not have been cured in all material respects or
waived and the Company shall not have provided reasonable assurance that
such breach will be cured in all material respects on or before the
Closing Date, but only if such breach, singly or together with all other
such breaches, would have a Material Adverse Effect with respect to the
Company;
iii.by the Company, if any of the conditions set forth in Section 8.1 or
8.3 shall have become incapable of fulfillment, and shall not have been
waived by the Company, or if Acquiror shall breach in any material
respect any of its representations, warranties or obligations hereunder
and such breach shall not have been cured in all material respects or
waived and Acquiror shall not have provided reasonable assurance that
such breach will be cured in all material respects on or before the
Closing Date, but only if such breach, singly or together with all other
such breaches, would have a Material Adverse Effect with respect to
Acquiror;
<PAGE>
iv.by either the Company or Acquiror, if the Merger shall not have been
consummated on or before August 31, 1997 (the "Termination Date");
provided, however, that if all the conditions set forth in Article VIII
-------- -------
(other than the conditions set forth in Sections 8.1(a), 8.1(b), 8.1(c),
8.2(e), 8.2(h), 8.2(i) and 8.2(j)) have been satisfied at the
Termination Date, either Acquiror or the Company may, by notice to the
other prior to such date, extend the Termination Date to the latest date
so extended by either party but in no event later than December 31,
1997;
v.by either the Company or Acquiror if the Stockholder Approvals shall
not have been obtained by reason of the failure to obtain the required
vote upon a vote held at the Stockholders' Meetings (including any
postponements or adjournments thereof); provided, however, that if the
-------- -------
Stockholder Approvals are not obtained at the Initial Stockholders'
Meeting solely by reason of a failure to obtain approval of the Charter
Amendment, then this Agreement shall not be terminable unless the
Stockholder Approvals shall not have been obtained by reason of a
failure to obtain the required vote upon a vote held at the Additional
Stockholders' Meeting;
vi.by Acquiror, if the Company shall have (i) withdrawn or modified, in
a manner adverse to Acquiror, its approval or recommendation of this
Agreement or any of the transactions contemplated hereby, (ii) failed to
include such recommendation in the Proxy Statement, (iii) approved or
recommended any Acquisition Proposal from a Third Party or (iv) resolved
to do any of the foregoing;
vii.by the Company, prior to the approval of this Agreement by the
stockholders of the Company, if the Board of Directors shall approve,
and the Company shall enter into, a definitive agreement providing for
<PAGE>
the implementation of an Acquisition Proposal; provided, however, that
-------- -------
(i) the Company is not then in breach of Section 7.10, (ii) prior to
such termination, the Company has negotiated with Acquiror in good faith
to make such adjustments in the terms and conditions of this Agreement
as would enable the Company to proceed with the transactions
contemplated hereby and (iii) the Board of Directors, has determined in
good faith (on the basis of the terms of such Acquisition Proposal and
the terms of this Agreement, after giving effect to any concessions
offered by Acquiror pursuant to clause (ii) above), after receipt of
written advice from the Company's outside legal counsel, that such
termination is advisable for the Board of Directors to act in a manner
consistent with its fiduciary duties to stockholders under Applicable
Law and (iv) the Company shall provide to Acquiror prior written notice
of such termination, which notice shall advise Acquiror of the matters
described in clauses (ii) and (iii) above;
viii. by the Company pursuant to Section 3.1(d)(ii)(B); or
ix. by Acquiror pursuant to Section 3.1(d)(ii)(C).
Notwithstanding the foregoing, a party shall not be permitted to terminate this
Agreement pursuant to clause (b), (c) or (d) hereof if such party is in breach
of any of its material representations, warranties, covenants or agreements
contained in this Agreement.
b. Effect of Termination. In the event of termination by the Company or
---------------------
Acquiror pursuant to Section 9.1, written notice thereof shall promptly
be given to the other parties and, except as otherwise provided herein,
the transactions contemplated by this Agreement shall be terminated,
without further action by any party. Notwithstanding the foregoing,
nothing in this Section 9.2 shall be deemed to release any party from
any liability for
<PAGE>
any breach by such party of the terms and provisions of this Agreement
or to impair the right of the Company, on the one hand, and Acquiror, on
the other hand, to compel specific performance of the other party of its
or their obligations under this Agreement
c. Fees and Expenses. In order to induce Acquiror to, among other things,
-----------------
enter into this Agreement, the Company agrees that if this Agreement is
terminated (A) by Acquiror pursuant to Section 9.1(f) hereof, (B) by the
Company pursuant to Section 9.1(g) hereof, or (C) by the Company or
Acquiror pursuant to Section 9.1(e) hereof and the Board of Directors
shall have materially modified or withdrawn its approval, determination
or recommendation of this Agreement or any of the transactions
contemplated hereby prior to the Initial Stockholders' Meeting or there
shall have been an Acquisition Proposal and such proposal shall not have
been withdrawn prior to the Initial Stockholders' Meeting and within one
year thereafter the Company enters into a definitive agreement with
respect to such Acquisition Proposal (including any definitive agreement
relating to an Acquisition Proposal offered by the same proponent or its
Affiliate as such Acquisition Proposal), then the Company shall promptly
pay Acquiror a fee of $125 million, plus 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; provided, however, that
-------- -------
payment for fees and expenses shall in no event exceed $15 million. Any
payment required by this Section 9.3 shall be made in same day funds to
Acquiror by the Company no later than five Business Days following
termination of this Agreement by Acquiror or the Company, as the case
may be.
<PAGE>
d.Certain Purchase Obligations. In order to induce the Company to, among
----------------------------
other things, enter into this Agreement, Acquiror agrees that if this
Agreement is terminated by the Company pursuant to Section 9.1(h), then
the Company shall have the right, for a period of 30 days thereafter, to
require Acquiror to purchase from the Company (the "Put Right")
5,650,000 shares of Series B Convertible Preferred Stock, par value $.01
per share, of the Company, having the rights, preferences and terms set
forth in the Certificate of Designations attached as Exhibit E hereto
(the "Put Shares") for an aggregate purchase price of $282.5 million.
i.Following termination by the Company of this Agreement pursuant to
Section 9.1(h), the Company may exercise the Put Right by delivering to
Acquiror a written notice of such exercise (the "Put Exercise Notice"),
which shall specify a date not less than 90 days from the date of such
notice for the closing of the purchase of the Put Shares by Acquiror.
ii.The closing with respect to the purchase of the Put Shares shall take
place on the earlier of (i) the date specified in the Put Exercise
Notice and (ii) the second Business Day following the date on which the
last of the conditions set forth in Section 9.4(d) is fulfilled or
waived, unless another date, time or place is agreed to in writing by
the parties hereto (the "Put Closing Date"). At such closing, the
Company shall deliver to Acquiror certificates representing the Put
Shares and Acquiror shall deliver to the Company $282.5 million by wire
transfer of immediately available funds to an account designated by the
Company.
iii.The obligations of Acquiror to purchase the Put Shares shall be
subject to the satisfaction prior to the Put Closing Date of the
following conditions:
<PAGE>
(1) HSR Act. The waiting periods (and any extension thereof) applicable
-------
to the purchase of the Put Shares under the HSR Act shall have expired
or been terminated and there shall be no authorized or pending action by
a Governmental Authority seeking to restrain or prevent the purchase of
the Put Shares.
(2) No Injunctions or Restraints. No statute, rule, regulation,
----------------------------
injunction, restraining order or decree of any nature of any court or
Governmental Authority shall be in effect that restrains or prevents the
purchase of the Put Shares.
(3) Representations and Warranties. There shall be no breach of any
------------------------------
representation or warranty of the Company made hereunder that,
individually or together with all other such breaches, results in a
Material Adverse Effect with respect to the Company. Acquiror shall have
received a certificate from the Company dated the Put Closing Date
signed by an authorized officer of the Company certifying to the
fulfillment of this condition.
(4) Agreements. The Company shall have performed and complied in all
----------
material respects with all of its respective undertakings, covenants,
conditions and agreements required by this Agreement to be performed or
complied with by it prior to or at the Put Closing Date. Acquiror shall
have received a certificate from the Company dated the Put Closing Date
signed by an authorized officer of the Company and certifying to the
fulfillment of this condition.
(5) Franchise Consents. To the extent any Franchise(s) individually or
------------------
collectively representing more than 5% of total Subscribers of the
Company and its Subsidiaries require notice to, or the consent of, a
Governmental Authority in connection with the purchase by Acquiror of
the Put Shares, the consent of each such
<PAGE>
Governmental Authority shall have been obtained by the Company.
(6) Registration Rights Agreement. The Company and Acquiror shall have
-----------------------------
entered into a Registration Rights Agreement substantially in the form
of Exhibit F hereto.
iv.From and after the Put Closing Date, for so long as Acquiror owns any
of the Put Shares, Acquiror shall not acquire, or agree to acquire,
directly or indirectly, any shares of Company Capital Stock, or any
rights or options to acquire shares of Company Capital Stock, if as a
result of any such acquisition, Acquiror would beneficially own 10
percent or more of the Company Capital Stock.
e. Amendment. Subject to Applicable Law, this Agreement may be amended,
---------
modified or supplemented only by written agreement of Acquiror and the
Company at any time prior to the Effective Time with respect to any of
the terms contained herein; provided, however, that, after this
-------- -------
Agreement is approved by the Company's stockholders, no such amendment
or modification shall (i) alter or change the amount or kind of
consideration to be delivered to the stockholders of the Company or (ii)
alter or change any of the terms and conditions of this Agreement, if
such alteration or change would adversely affect the holders of any
class of capital stock of the Company.
f.Extension; Waiver. At any time prior to the Effective Time, the
-----------------
parties hereto, by action taken or authorized by their respective boards
of directors, may, to the extent legally allowed: (i) extend the time
for the performance of any of the obligations or other acts of the other
parties hereto; (ii) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant
hereto; and (iii) waive
<PAGE>
compliance with any of the agreements or conditions contained herein.
Any agreement on the part of a party hereto to any such extension or
waiver shall be valid only if set forth in a written instrument signed
on behalf of such party. The failure of any party hereto to assert any
of its rights hereunder shall not constitute a waiver of such rights nor
in any way effect the validity of this Agreement or any part hereof or
the right of such party thereafter to enforce each and every provision
of this Agreement. No waiver of any breach of or non-compliance with
this Agreement shall be held to be a waiver of any other or subsequent
breach or non-compliance.
ARTICLE Section 10
GENERAL PROVISIONS
a.Frustration of the Closing Conditions. Neither the Company nor
-------------------------------------
Acquiror may rely on the failure of any condition precedent set forth in
Article VIII to be satisfied if such failure was caused by such party's
(or parties') failure to act in good faith or to use its reasonable best
efforts to consummate the transactions contemplated by this Agreement in
accordance with Section 7.4.
b.Effectiveness of Representations, Warranties and Agreements. The
-----------------------------------------------------------
representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this
Agreement pursuant to Article IX, except that the agreements set forth
in Articles I, II and III and Sections 7.11, 7.14 and 7.20 shall survive
the Effective Time and those set forth in Sections 9.2, 9.3, 9.4 and
Article X hereof shall survive termination.
c.Expenses. Except as otherwise provided herein, including in Sections
--------
7.5 and 9.3,
<PAGE>
each of the parties hereto shall pay the fees and expenses of its
respective counsel, accountants and other experts and shall pay all
other costs and expenses incurred by it in connection with the
negotiation, preparation and execution of this Agreement and the
Transaction Documents and the consummation of the transactions
contemplated hereby and thereby; provided, however, that the
-------- -------
Company shall pay, with funds of the Company and not with funds provided
by Acquiror, any and all property or transfer Taxes imposed on the
Company or any Gains Taxes.
d.Applicable Law. This Agreement shall be governed by, and construed in
--------------
accordance with, the laws of the State of Delaware without reference to
choice of law principles, including all matters of construction,
validity and performance.
e.Notices. Notices, requests, permissions, waivers, and other
-------
communications hereunder shall be in writing and shall be deemed to have
been duly given if signed by the respective Persons giving them (in the
case of any corporation the signature shall be by an officer thereof)
and delivered by hand, deposited in the United States mail (registered
or certified, return receipt requested), properly addressed and postage
prepaid, or delivered by telecopy:
If to the Company, to:
Continental Cablevision, Inc.
The Pilot House
Lewis Wharf
Boston, Massachusetts 02110
Telephone: (617) 742-9500
Telecopy: (617) 742-0530
Attention: Amos B. Hostetter, Jr.
<PAGE>
with a copy to:
Chadbourne & Parke LLP
30 Rockefeller Plaza
New York, New York 10112
Telephone: (212) 408-5100
Telecopy: (212) 541-5369
Attention: Dennis J. Friedman, Esq.
and:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Telephone: (617) 338-2800
Telecopy: (617) 338-2880
Attention: Patrick K. Miehe, Esq.
If to Acquiror, to:
U S WEST, Inc
7800 East Orchard Road
Englewood, Colorado 80111
Telephone: (303) 793-6310
Telecopy: (303) 793-6707
Attention: General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
Attention: Dennis J. Block, Esq.
Such names and addresses may be changed by notice given in accordance with this
Section 10.5.
f.Entire Agreement. This Agreement and the Transaction Documents
----------------
(including the Exhibits attached hereto, all of which are a part hereof)
contain the entire understanding of the parties hereto and thereto with
respect to the subject matter contained herein and therein, supersede
and cancel all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or
<PAGE>
written, respecting such subject matter. There are no restrictions,
promises, representations, warranties, agreements or undertakings of any
party hereto or to any of the Transaction Documents with respect to the
transactions contemplated by this Agreement and the Transaction
Documents other than those set forth herein or therein or made hereunder
or thereunder. Notwithstanding the foregoing, the Confidentiality
Agreements shall remain in full force and effect and shall survive any
termination of this Agreement.
g.Headings; References. The article, section and paragraph headings
--------------------
contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement.
All references herein to "Articles", "Sections" or "Exhibits" shall be
deemed to be references to Articles or Sections hereof or Exhibits
hereto unless otherwise indicated.
h.Counterparts. This Agreement may be executed in one or more
------------
counterparts and each counterpart shall be deemed to be an original, but
all of which shall constitute one and the same original.
i.Parties in Interest; Assignment. Neither this Agreement nor any of the
-------------------------------
rights, interest or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other
parties. This Agreement shall inure to the benefit of and be binding
upon the Company and Acquiror and shall inure to the sole benefit of the
Company and Acquiror and their respective successors and permitted
assigns. Except as set forth in Section 7.11 and Section 7.14(c),
nothing in this Agreement, express or implied, is intended to confer
upon any other Person any rights or remedies under or by reason of this
Agreement.
<PAGE>
j. Severability; Enforcement. The invalidity of any portion hereof shall
-------------------------
not affect the validity, force or effect of the remaining portions hereof.
If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees
that a court of competent jurisdiction may enforce such restriction to the
maximum extent permitted by law, and each party hereby consents and agrees
that such scope may be judicially modified accordingly in any proceeding
brought to enforce such restriction.
k. Specific Performance. The parties hereto agree that the remedy at law
--------------------
for any breach of this Agreement will be inadequate and that any party by
whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such
party may, in its sole discretion, apply to a court of competent
jurisdiction for specific performance or injunctive or such other relief
as such court may deem just and proper in order to enforce this Agreement
or prevent any violation hereof and, to the extent permitted by Applicable
Law, each party waives any objection to the imposition of such relief.
l. Jurisdiction. Each party to this Agreement hereby irrevocably agrees
------------
that any legal action, suit or proceeding arising out of or relating to
this Agreement, the Transaction Documents or any other agreements or
transactions contemplated hereby shall be brought in the Chancery Court of
the State of Delaware and each party hereto agrees not to assert, by way
of motion, as a defense or otherwise, in any such action, suit or
proceeding any claim that it is not subject personally to the jurisdiction
of such court, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is
improper or that this Agreement, any Transaction
<PAGE>
Document, any other agreement or transaction or the subject matter hereof
or thereof may not be enforced in or by such court. Each party hereto
further and irrevocably submits to the jurisdiction of such court in any
action, suit or proceeding.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the date first above written.
U S WEST, INC.
By:/s/ Charles M. Lillis
--------------------------------
Name: Charles M. Lillis
Title: Executive Vice President; President
and Chief Executive Officer of the U S WEST
Media Group
CONTINENTAL CABLEVISION, INC.
By:/s/ Amos B. Hostetter, Jr.
--------------------------------
Name: Amos B. Hostetter, Jr.
Title: Chairman of the Board and Chief
Executive Officer
<PAGE>
Exhibit A
---------
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
CONTINENTAL CABLEVISION, INC.
Continental Cablevision, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation, at a meeting duly
called and held on February 27, 1996, in accordance with the provisions of
Section 242 of the General Corporation Law of the State of Delaware, duly
adopted resolutions setting forth a proposed amendment to the Restated
Certificate of Incorporation of the Corporation. The resolutions setting forth
the proposed amendment are as follows:
RESOLVED: That Section H of Article FOURTH of the Corporation's Restated
-------- Certificate of Incorporation be amended to read as follows:
H.Other Rights. Except as otherwise required by the Delaware
------------
General Corporation Law or as otherwise provided in this
Restated Certificate of Incorporation, and except as provided in
the Agreement and Plan of Merger, dated as of February 27, 1996,
as the same may be amended from time to time, between U S WEST,
Inc., a Delaware corporation, and the Corporation, each share of
Class A Common Stock
<PAGE>
and each share of Class B Common Stock shall have identical
powers, preferences, rights and privileges.
RESOLVED: That the foregoing amendment to the Restated Certificate of
-------- Incorporation of the Corporation is recommended to the
stockholders for approval as being in the best interests of the
Corporation and that said amendment be presented to the
stockholders for their adoption and that a special meeting of
the stockholders duly be called for that purpose.
SECOND: The stockholders of the Corporation (including (i) the holders of the
Class A Common Stock, the Class B Common Stock, and the Series A Convertible
Preferred Stock voting together as a single class, (ii) the holders of the Class
A Common Stock voting together as a separate class and (iii) the holders of the
Class B Common Stock voting together as a separate class) approved said proposed
amendment at a special meeting of stockholders for which written notice was
given pursuant to Section 222 of the General Corporation Law of the State of
Delaware.
THIRD: That said amendment was duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed
by William T. Schleyer, its duly authorized officer, this ___ day of
___________, 1996.
CONTINENTAL CABLEVISION, INC.
By:
----------------------------
Name: William T. Schleyer
Title: President
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of _________ __, 1996, among U S WEST,
INC. , a Delaware corporation ("Acquiror"), Amos B. Hostetter, Jr.
("Hostetter"), the Amos B. Hostetter, Jr. 1989 Trust (the "Trust") and the
Hostetter Foundation (the "Foundation" and, together with Hostetter and the
Trust, the "Stockholders").
W I T N E S S E T H:
-------------------
WHEREAS, Acquiror and CONTINENTAL CABLEVISION, INC., a Delaware
corporation (the "Company"), are parties to an Agreement and Plan of Merger,
dated as of February 27, 1996 (as in effect on the date hereof, the "Merger
Agreement"), pursuant to which the Company will merge with and into Acquiror
(the "Merger"), with Acquiror continuing as the surviving corporation; and
WHEREAS, Acquiror has agreed to provide registration rights to the
Stockholders with respect to the stock to be received in connection with the
Merger, subject to the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereby agree as follows:
Section 1 Definitions. Capitalized terms used but not defined herein shall
-----------
have the meanings assigned to such terms in the Merger Agreement. For purposes
of this Agreement, the following terms shall have the following meanings:
"Blackout Period" shall mean any Section 6(a) Period and any Section 6(b)
---------------
Period.
"Closing Price", for any class of securities, shall mean the last reported
-------------
sale price per share of such security, regular way, as shown on the Composite
Tape of the NYSE, or, in case no such sale takes place on such day, the average
of the closing bid and asked prices on the NYSE, or, if such security is not
listed or admitted to trading on the NYSE, on the principal national securities
exchange on which such security is listed or admitted to trading, or, if it is
<PAGE>
not listed or admitted to trading on any national securities exchange, the last
reported sale price per share of such security, or, in case no such sale takes
place on such day, the average of the closing bid and asked prices, in either
case as reported by Nasdaq.
"Current Market Price" for any class of securities on any applicable date
--------------------
shall mean the average of the daily Closing Prices per share of such security
for the ten (10) consecutive Trading Days ending on the third Trading Day
immediately preceding such date.
"Effective Period" shall mean a period commencing on the date of this
----------------
Agreement and ending on the earliest of (i) the first date as of which all
Registrable Securities cease to be Registrable Securities, (ii) the sixth
anniversary of the Closing Date and (iii) the date on which the aggregate number
of Registrable Securities issued and outstanding (assuming conversion of all
shares of Series D Preferred Stock held by the Holders) shall no longer exceed
one tenth (1/10) of the aggregate number of Registrable Securities (adjusted
appropriately to reflect any stock dividends, splits, combinations, exchange,
reorganization, recapitalization or reclassification involving the Media Stock
or Series D Preferred Stock or resulting from a merger or consolidation or
similar transaction involving Acquiror or the like after the date hereof)
outstanding on the date hereof.
"Holder" shall mean each Stockholder listed on Schedule A hereto and each
------
Permitted Assignee that becomes a holder of Registrable Securities, provided
that if such Person is not a Stockholder listed on Schedule A hereto, such
Permitted Assignee has agreed in writing to become a Holder hereunder and to be
bound by the terms and conditions of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"Nasdaq" shall mean the Nasdaq National Market.
------
"NYSE" shall mean the New York Stock Exchange, Inc.
----
"Permitted Assignee" shall mean (w) Hostetter, (x) Hostetter's lineal
------------------
descendants, (y) a trust for the benefit of, the estate of, executors, personal
representatives, administrators, guardians or conservators of any of the
individuals referred to in the foregoing
<PAGE>
clauses (w) and (x) (but only in their capacity as such) and (z) charitable
trusts and charitable foundations (in addition to the Foundation) formed by
Hostetter or the Trust.
"Prospectus" shall mean the prospectus included in any Registration Statement,
----------
as amended or supplemented by any prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Securities covered by
any Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.
"Registrable Securities" shall mean any and all of (i) the shares of Media
----------------------
Stock issued pursuant to the Merger, (ii) the shares of Series D Preferred Stock
issued pursuant to the Merger, (iii) the shares of Media Stock or other
securities of Acquiror issuable or issued upon conversion of the Series D
Preferred Stock issued pursuant to the Merger and (iv) any securities issuable
or issued or distributed in respect of any of the securities identified in
clauses (i), (ii) or (iii) by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, reorganization,
merger, consolidation or otherwise. Securities will cease to be Registrable
Securities in accordance with Section 2 hereof.
"Registration Expenses" means any and all expenses incident to performance of
---------------------
or compliance with this Agreement, including, without limitation, (i) all SEC,
NASD and securities exchange registration and filing fees, (ii) all fees and
expenses of complying with state securities or blue sky laws (including fees and
disbursements of counsel for any underwriters in connection with blue sky
qualifications of the Registrable Securities), (iii) all processing, printing,
copying, messenger and delivery expenses, (iv) all fees and expenses incurred in
connection with the listing of the Registrable Securities on any securities
exchange pursuant to Section 7(h), (v) the fees and disbursements of counsel for
Acquiror and of its independent public accountants and (vi) the reasonable fees
and expenses of any special experts retained in connection with the requested
registration, but excluding (x) underwriting discounts and commissions and
transfer taxes, if any, and (y) any fees or disbursements of counsel to the
Holders or any Holder.
<PAGE>
"Registration Statement" means any registration statement (including a Shelf
----------------------
Registration) of Acquiror referred to in Section 3 or 4, including any
Prospectus, amendments and supplements to any such registration statement,
including post-effective amendments, and all exhibits and all material
incorporated by reference in any such registration statement.
"Related Securities" means any securities of Acquiror similar or identical to
------------------
any of the Registrable Securities, including, without limitation, any class of
capital stock of Acquiror and all options, warrants, rights and other securities
convertible into, or exchangeable or exercisable for, any class of capital stock
of Acquiror.
"Section 6(a) Period" has the meaning specified in Section 6(a).
-------------------
"Section 6(b) Period" has the meaning specified in Section 6(b).
-------------------
"Shelf Registration" means a "shelf" registration statement on an appropriate
------------------
form pursuant to Rule 415 under the Securities Act (or any successor rule that
may be adopted by the SEC).
"Trading Day", for any class of securities, shall mean, so long as such
-----------
securities are listed or admitted to trading on the NYSE, a day on which the
NYSE is open for the transaction of business, or, if such securities are not
listed or admitted to trading on the NYSE, a day on which the principal national
securities exchange on which such securities are listed is open for the
transaction of business, or, if such securities are not so listed or admitted
for trading on any national securities exchange, a day on which Nasdaq is open
for the transaction of business.
"underwritten registration or underwritten offering" shall mean an offering in
--------------------------------------------------
which securities of Acquiror are sold to an underwriter for reoffering to the
public.
Section 2 Securities Subject to this Agreement. The securities entitled to
------------------------------------
the benefits of this Agreement are the Registrable Securities. For the purposes
of this Agreement, as to any particular Registrable Securities, such Registrable
Securities shall cease to be Registrable Securities when and to the extent that
(i) a Registration Statement covering such Registrable Securities has been
declared effective under the Securities Act and such
<PAGE>
Registrable Securities have been disposed of pursuant to such effective
Registration Statement, (ii) such Registrable Securities are distributed to the
public pursuant to and in accordance with Rule 144 (or any similar provision
then in force) under the Securities Act, (iii) such Registrable Securities have
been otherwise transferred to a party that is not a Permitted Assignee, (iv) the
Effective Period ends or (v) such Registrable Securities have ceased to be
outstanding.
Section 3 Piggy-Back Registration Rights. Whenever Acquiror shall propose
------------------------------
to file a Registration Statement under the Securities Act relating to the public
offering of Media Stock for cash (other than pursuant to a Registration
Statement on Form S-4 or Form S-8 or any successor forms thereto, or filed in
connection with an exchange offer or an offering of securities solely to
existing stockholders or employees of Acquiror and other than pursuant to a
Registration Statement filed in connection with an offering by Acquiror of
securities convertible into or exchangeable for Media Stock) for sale for its
own account, Acquiror shall (i) give written notice at least fifteen Business
Days prior to the filing thereof to each Holder then outstanding, specifying the
approximate date on which Acquiror proposes to file such Registration Statement
and the intended method of distribution in connection therewith, and advising
such Holder of such Holder's right to have any or all of the Registrable
Securities then held by such Holder included among the securities to be covered
thereby and (ii) at the written request of any such Holder given to Acquiror at
least two Business Days prior to the proposed filing date, include among the
securities covered by such Registration Statement the number of Registrable
Securities that such Holder shall have requested be so included. Subject to
reduction in accordance with paragraph (b) of this Section 3, Acquiror shall
cause the Registration Statement to include the Registrable Securities requested
to be included in the Registration Statement for such offering in the case of
Registrable Securities which are Media Stock, on the same terms and conditions
as the shares of Media Stock included therein and in the case of Registrable
Securities which are Series D Preferred Stock, on terms which would not conflict
or interfere with in any material respect (including, without limitation,
adversely affect the pricing of) the offering by Acquiror of Media Stock.
i. If the lead managing underwriter selected by Acquiror for an
underwritten
<PAGE>
offering pursuant to Section 3(a) determines in writing that
marketing factors require a limitation on the number of shares of
Media Stock and/or Series D Preferred Stock (or other securities
convertible into or exchangeable for Media Stock) to be offered and
sold by stockholders of Acquiror in such offering, there shall be
included in the offering, first, all securities proposed by Acquiror
to be sold for its account and, second, only that number of shares of
Media Stock and Series D Preferred Stock (and other securities
convertible into or exchangeable for Media Stock), if any, requested
to be included in such Registration Statement by stockholders of
Acquiror that such lead managing underwriter reasonably and in good
faith believes will not substantially interfere with (including,
without limitation, adversely affect the pricing of) the offering of
all the shares of Media Stock that the Company desires to sell for
its own account. In such event and provided the managing underwriter
has so notified Acquiror in writing, the number of shares of Media
Stock and Series D Preferred Stock (and other securities of Acquiror
convertible into or exchangeable for Media Stock) to be offered and
sold by stockholders of Acquiror, including Holders of Registrable
Securities, desiring to participate in such offering shall be
allocated among such stockholders of Acquiror on a pro rata basis
based upon the number of shares of Media Stock (assuming conversion
of the Series D Preferred Stock and other securities convertible into
or exchangeable for Media Stock held by such stockholders) each such
stockholder beneficially owns.
ii. Nothing in this Section 3 shall create any liability on the part
of Acquiror to the Holders of Registrable Securities if Acquiror for
any reason should decide not to file a Registration Statement
proposed to be filed under Section 3(a) or to withdraw such
Registration Statement
<PAGE>
subsequent to its filing, regardless of any action whatsoever that a
Holder may have taken, whether as a result of the issuance by
Acquiror of any notice hereunder or otherwise.
a. A request by Holders to include Registrable Securities in a
proposed offering pursuant to Section 3(a) shall not be deemed to be
a request for a demand registration pursuant to Section 4.
Section 4 Demand Registration Rights. Upon the written request (the
--------------------------
"Initial Request") of Holders of at least a majority in number of the
Registrable Securities (assuming conversion of all Series D Preferred Stock held
by Holders) that Acquiror effect the registration with the SEC under and in
accordance with the provisions of the Securities Act of all or part of such
Holder's or Holders' Registrable Securities and specifying the aggregate number
of shares of Registrable Securities requested to be so registered, Acquiror will
promptly give written notice of such requested registration to all other
Holders. Within 15 days after receipt of Acquiror's notice (such 15 day period
being the "Additional Request Period"), each such other Holder shall notify
Acquiror in writing as to whether such Holder wishes to have any or all of its
Registrable Securities included in such requested registration. Thereupon,
subject to Section 4(f), Acquiror shall use its best efforts to file a
Registration Statement as expeditiously as practicable (the terms of any
underwritten offering or other distribution to be determined by the Holders of a
majority of the Registrable Securities so requested to be registered); provided,
--------
however, that Acquiror shall not be required to take any action pursuant to this
- -------
Section 4:
(a)if prior to the date of such request Acquiror shall have effected
four registrations pursuant to this Section 4;
(1)if Acquiror has effected a registration pursuant to this Section 4
within the 90-day period next preceding such request;
(2) if Acquiror shall at the time have effective a Shelf Registration
pursuant to which the Holder or Holders that requested registration
could effect the disposition
<PAGE>
of such Registrable Securities pursuant to an underwritten offering
or such other method of distribution requested by such Holder or
Holders;
(3)if the Registrable Securities that Acquiror shall have been
requested to register shall have a then current market value of less
than $100,000,000, unless such registration request is for all
remaining Registrable Securities; or
(4)during the pendency of any Blackout Period;
and provided, further, that Acquiror shall be permitted to satisfy its
-------- -------
obligations under this Section 4(a) by amending (to the extent permitted by
applicable law) any Shelf Registration previously filed by Acquiror under the
Securities Act so that such Shelf Registration (as amended) shall permit the
disposition (in accordance with the intended methods of disposition specified as
aforesaid) of all of the Registrable Securities for which a demand for
registration has been made under this Section 4(a). If Acquiror shall so amend
a previously filed Shelf Registration, it shall be deemed to have effected a
registration for purposes of this Section 4.
i. A registration requested pursuant to this Section 4 shall not be
deemed to be effected for purposes of this Section 4: (i) if it has
not been declared effective by the SEC or become effective in
accordance with the Securities Act, (ii) if after it has become
effective, such registration is materially interfered with by any
stop order, injunction or similar order or requirement of the SEC or
other governmental agency or court for any reason not attributable to
any of the Holders and has not thereafter become effective, or (iii)
if the conditions to closing specified in the underwriting agreement,
if any, entered into in connection with such registration are not
satisfied or waived, other than by reason of a failure on the part of
any of the Holders.
<PAGE>
ii. Should a Registration Statement filed pursuant to this Section 4
not become effective due to the failure of the Holders to perform
their obligations under this Agreement or the inability of the
Holders to reach agreement with the underwriters on price or other
customary terms for such transaction, or in the event the Holders of
a majority in number of the Registrable Securities (assuming
conversion of all Series D Preferred Stock held by Holders) determine
to withdraw or do not pursue a request for registration pursuant to
this Section 4 (in each of the foregoing cases, provided that at such
time Acquiror is in compliance in all material respects with its
obligations under this Agreement), then (subject to the last sentence
of this Section 4(c)) such registration shall be deemed to have been
effected for purposes of this Section 4. In such event, the Holders
of Registrable Securities who requested registration shall reimburse
Acquiror for all its out-of-pocket expenses incurred in the
preparation, filing and processing of the Registration Statement. If
such reimbursement is made within 30 Business Days following a
request therefor, such registration shall not be deemed to have been
effected for purposes of this Section 4.
iii. Acquiror will not include any securities that are not
Registrable Securities in any Registration Statement (including a
Shelf Registration referred to in the second proviso of Section 4(a))
filed pursuant to a demand made under this Section 4 without the
prior written consent of the Holders of a majority in number of the
Registrable Securities covered by such Registration Statement
(including a Shelf Registration referred to in the second proviso of
Section 4(a)).
iv. If the lead managing underwriter of an underwritten offering
made pursuant to this Section 4 shall advise Acquiror in writing
(with a copy to the Holders of Registrable
<PAGE>
Securities participating in such offering) that, in its opinion, the
number of Registrable Securities requested to be included in such
registration exceeds the number which can be sold in such offering
within a price range acceptable to the Holders of a majority in
number of the Registrable shares requested to be included in such
offering, Acquiror will reduce to the number which Acquiror is so
advised can be sold in such offering within such price range the
Registrable Securities requested to be included in such offering. If,
as a result of any such reduction, the number of Registrable
Securities requested to be included in such registration by the
Holders of Registrable Securities participating in such offering is
reduced by twenty-five percent (25%) or more, then notwithstanding
anything to the contrary contained in this Agreement, a registration
will not be deemed to have been effected for purposes of this Section
4; provided, however, that the provisions of this sentence shall only
-------- -------
apply to the first request made by Holders for a registration
pursuant to this Section 4. In the case of such a registration which
would have been deemed to be a registration for purposes of this
Section 4 but for the application of the immediately preceding
sentence, Acquiror nonetheless shall pay the Registration Expenses in
connection with such registration.
v. Prior to the filing by Acquiror of a Registration Statement
pursuant to Section 4(a), Acquiror shall have the right, exercisable
for the ten day period following the end of the Additional Request
Period, upon written notice to the Holders requesting registration,
to purchase for cash from such Holders on a pro rata basis all of the
Registrable Securities which such Holders requested to be registered
pursuant to such Registration Statement (the "Purchased Securities").
The exercise of such right shall constitute Acquiror's legal and
binding commitment to purchase
<PAGE>
the Purchased Securities in accordance with this Section 4(f). The
closing of the purchase by Acquiror of the Purchased Securities shall
take place within 30 days of delivery of such notice and the purchase
price per Purchased Security shall be equal to the Current Market
Price of such Purchased Security on the date of the Initial Request,
less the amount of any customary discounts and commissions that would
be payable by Acquiror or a similar issuer in connection with an
underwritten offering of similar securities (which discounts and
commissions shall not exceed 5% of such Current Market Price). At the
closing of the sale of the Purchased Securities, the Holders shall
deliver to Acquiror certificates representing the Purchased
Securities and Acquiror shall deliver to the Holders the purchase
price of the Purchased Securities by wire transfer of immediately
available funds. Following the purchase of the Purchased Shares by
Acquiror, a registration shall be deemed to have been effected for
purposes of this Section 4.
Section 5 Selection of Underwriters. In connection with any offering
-------------------------
pursuant to a Registration Statement filed pursuant to a demand made in
accordance with Section 4, Acquiror shall have the right to select a managing
underwriter or underwriters to administer the offering, so long as such managing
underwriter or underwriters shall be reasonably satisfactory to Holders of a
majority in number of the Registrable Securities to be included in such offering
(assuming conversion of all Series D Preferred Stock held by Holders); provided,
--------
however, that such Holders shall have the right to select one co-managing
- -------
underwriter, so long as such co-managing underwriter shall be reasonably
satisfactory to Acquiror. The managing underwriter or underwriters selected by
Acquiror shall be deemed reasonably satisfactory to Holders of a majority in
number of the Registrable Securities to be included in such offering (assuming
conversion of all Series D Preferred Stock held by Holders) unless such Holders
sends a written notice of objection to Acquiror within 10 days of receipt of
notice from Acquiror of the appointment of a managing underwriter or
underwriters and the co-managing underwriter selected by such Holders shall be
deemed to be reasonably satisfactory
<PAGE>
to Acquiror unless Acquiror sends a written notice of objection to such Holders
within 10 days of receipt of notice from such Holders of the appointment of a
co-managing underwriter.
Section 6 Blackout Periods.
----------------
i. If Acquiror determines in good faith that the registration
and distribution of Registrable Securities (or the use of the
Registration Statement or related Prospectus) would interfere
with any pending financing, acquisition, corporate reorganization
or any other corporate development involving Acquiror or any of
its subsidiaries (or would require premature disclosure thereof)
and promptly gives the Holders of Registrable Securities written
notice of such determination, Acquiror shall be entitled to (i)
postpone the filing of the Registration Statement otherwise
required to be prepared and filed by Acquiror pursuant to Section
3 or 4, or (ii) elect that the Registration Statement not be
used, in either case for a reasonable period of time, but not to
exceed 90 days (a "Section 6(a) Period"). Any such written notice
shall contain a general statement of the reasons for such
postponement or restriction on use and an estimate of the
anticipated delay. Acquiror shall promptly notify each Holder of
the expiration or earlier termination of a Section 6(a) Period.
ii. If (i) during the Effective Period, Acquiror shall file a
registration statement (other than in connection with the
registration of securities issuable pursuant to an employee stock
option, stock purchase or similar plan on Form S-8 or pursuant to
a merger, exchange offer or a transaction of the type specified
in Rule 145(a) under the Securities Act) with respect to any
Related Securities and (ii) with reasonable written prior notice,
(A) Acquiror (in the case of a non-underwritten offering pursuant
to such registration statement) advises the Holders
<PAGE>
in writing that a sale or distribution of Registrable Securities
would adversely affect such offering or (B) the managing
underwriter or underwriters (in the case of an underwritten
offering) advise Acquiror in writing (in which case Acquiror
shall notify the Holders), that a sale or distribution of
Registrable Securities would adversely impact such offering, then
each Holder shall, to the extent not inconsistent with Applicable
Law, refrain from effecting any sale or distribution of
Registrable Securities, including sales pursuant to Rule 144
under the Securities Act, during the 10-day period prior to, and
during the 90-day period beginning on, the effective date of such
registration statement (a "Section 6(b) Period").
iii. The Effective Period and, in the case where the use of an
effective Registration Statement is prohibited under Section
6(a), the period for which a Registration Statement shall be kept
effective pursuant to Section 7(b), as the case may be, shall be
extended by a number of days equal to the number of days of any
Blackout Period occurring during such period. Except as provided
below, the beginning of any Blackout Period shall be at least 120
days after the end of any prior Blackout Period; provided,
--------
however, that once during any consecutive 12 months during the
-------
Effective Period a Section 6(b) Period may begin on or within
five days of the last day of a Section 6(a) Period.
Notwithstanding anything to the contrary contained herein, the
aggregate number of days included in all Blackout Periods during
any consecutive 18 months during the Effective Period shall not
exceed 180 days.
iv. During the five day period prior to, and during the 30 day
period commencing on, the effective date of a registration
statement filed by Acquiror on behalf of Holders in connection
with an underwritten offering pursuant to Section 4(a), Acquiror
hereby agrees not to effect (except
<PAGE>
pursuant to employee benefit plans, the U S WEST Shareowner
Investment Plan or a similar plan) any public sale or
distribution of (i) Media Stock, if the Registrable Securities
included in such registration include shares of Media Stock, and
(ii) preferred stock convertible into Media Stock, if the
Registrable Securities included in such registration include
shares of Series D Preferred Stock.
Section 7 Registration Procedures. If and whenever Acquiror is required to
-----------------------
use its best efforts to effect or cause the registration of any Registrable
Securities under the Securities Act as provided in this Agreement, Acquiror
shall, as expeditiously as possible:
i. prepare and file with the SEC a Registration Statement with
respect to such Registrable Securities on any form for which
Acquiror then qualifies or that counsel for Acquiror shall deem
appropriate, and which form shall be available for the sale of
the Registrable Securities in accordance with the intended
methods of distribution thereof, and use its best efforts to
cause such Registration Statement to become and remain effective;
ii. prepare and file with the SEC amendments and post-effective
amendments to such Registration Statement and such amendments and
supplements to the Prospectus used in connection therewith as may
be necessary to maintain the effectiveness of such registration
or as may be required by the rules, regulations or instructions
applicable to the registration form utilized by Acquiror or by
the Securities Act for a Shelf Registration or otherwise
necessary to keep such Registration Statement effective for at
least 90 days and cause the Prospectus as so supplemented to be
filed pursuant to Rule 424 under the Securities Act, and to
otherwise comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such
Registration Statement until the
<PAGE>
earlier of (x) such 90th day and (y) such time as all Registrable
Securities covered by such Registration Statement have ceased to
be Registrable Securities (it being understood that Acquiror at
its option may determine to maintain such effectiveness for a
longer period, whether pursuant to a Shelf Registration or
otherwise); provided, however, that a reasonable time before
-------- -------
filing a Registration Statement or Prospectus, or any amendments
or supplements thereto (other than reports required to be filed
by it under the Exchange Act), Acquiror shall furnish to the
Holders, the managing underwriter and their respective counsel
for review and comment, copies of all documents proposed to be
filed and shall not file any such documents (other than as
aforesaid) to which any of them reasonably object prior to the
filing thereof;
iii. furnish to each Holder of such Registrable Securities and
to any underwriter in connection with an underwritten offer such
number of conformed copies of such Registration Statement and of
each amendment and post-effective amendment thereto (in each case
including all exhibits) and such number of copies of any
Prospectus or Prospectus supplement and such other documents as
such Holder or underwriter may reasonably request in order to
facilitate the disposition of the Registrable Securities by such
Holder or underwriter (Acquiror hereby consenting to the use
(subject to the limitations set forth in the last paragraph of
this Section 7) of the Prospectus or any amendment or supplement
thereto in connection with such disposition);
iv. use its best efforts to register or qualify such Registrable
Securities covered by such Registration Statement under such
other securities or "blue sky" laws of such jurisdictions as each
Holder shall reasonably request, except that Acquiror shall not
for any such purpose be required
<PAGE>
to qualify generally to do business as a foreign corporation in
any jurisdiction where, but for the requirements of this Section
7(d), it would not be obligated to be so qualified, to subject
itself to taxation in any such jurisdiction, or to consent to
general service of process in any such jurisdiction;
v. notify each Holder of any such Registrable Securities covered
by such Registration Statement, at any time when a Prospectus
relating thereto is required to be delivered under the Securities
Act within the appropriate period mentioned in Section 7(b), of
Acquiror's becoming aware that the Prospectus included in such
Registration Statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then
existing, and at the request of any such Holder, prepare and
furnish to such Holder a reasonable number of copies of an
amendment or supplement to such Registration Statement or related
Prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such Registrable Securities, such Prospectus
shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in light
of the circumstances then existing;
vi. notify each Holder covered by such Registration Statement at
any time:
(1)when the Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the
same has become effective;
<PAGE>
(2) of any request by the SEC for amendments or supplements to
the Registration Statement or the Prospectus or for additional
information;
(3) of the issuance by the SEC of any stop order suspending the
effectiveness of the Registration Statement or any order
preventing the use of a related Prospectus, or the initiation (or
any overt threats) of any proceedings for such purposes;
(4) of the receipt by Acquiror of any written notification of the
suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation (or
overt threats) of any proceeding for that purpose); and
(5)if at any time the representations and warranties of Acquiror
contemplated by paragraph (i)(1) below cease to be true and
correct in all material respects;
vii. otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available
to its security holders an earnings statement that shall satisfy
the provisions of Section 11(a) of the Securities Act, provided
that Acquiror shall be deemed to have complied with this
paragraph if it has complied with Rule 158 of the Securities Act;
viii. use its best efforts to cause all such Registrable
Securities to be listed on any securities exchange on which the
class of Registrable Securities being registered is then listed,
if such Registrable Securities are not already so listed and if
such listing is then permitted under the rules of such exchange,
and to provide a transfer agent and registrar for such
Registrable Securities covered by such Registration Statement no
later than the effective date of such Registration Statement;
<PAGE>
ix. enter into agreements (including an underwriting agreement
in the form customarily entered into by Acquiror in a comparable
underwritten offering) and take all other appropriate and all
commercially reasonable actions in order to expedite or
facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an
underwritten registration:
(1)make such representations and warranties to the Holders of
such Registrable Securities and the underwriters, if any, in
form, substance and scope as are customarily made by Acquiror to
underwriters in comparable underwritten offerings;
(2) obtain opinions of counsel to Acquiror and updates thereof
(which counsel and opinions shall be reasonably satisfactory (in
form, scope and substance) to the managing underwriters, if any,
and the Holders of a majority in number of the Registrable
Securities being sold) addressed to such Holders and the
underwriters covering the matters customarily covered in opinions
requested in comparable underwritten offerings by Acquiror;
(3) obtain "cold comfort" letters and updates thereof from
Acquiror's independent certified public accountants addressed to
the selling Holders of Registrable Securities and the
underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold
comfort" letters by independent accountants in connection with
comparable underwritten offerings on such date or dates as may be
reasonably requested by the managing underwriter;
(4) provide the indemnification in accordance with the
provisions and
<PAGE>
procedures of Section 10 hereof to all parties to be indemnified
pursuant to such Section; and
(5)deliver such documents and certificates as may be reasonably
requested by the Holders of a majority in number of the
Registrable Securities being sold and the managing underwriters,
if any, to evidence compliance with clause (f) above and with any
customary conditions contained in the underwriting agreement or
other agreement entered into by Acquiror;
x. cooperate with the Holders of Registrable Securities covered
by such Registration Statement and the managing underwriter or
underwriters to facilitate, to the extent reasonable under the
circumstances, the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing
the securities to be sold under such Registration Statement, and
enable such securities to be in such denominations and registered
in such names as the managing underwriter or underwriters, if
any, or such Holders may request and/or in a form eligible for
deposit with the Depository Trust Company;
xi. make available for inspection by any Holder included in such
Registration Statement, any underwriter participating in any
disposition pursuant to such Registration Statement, and any
attorney, accountant or other agent retained by any such Holder
or underwriter (collectively, the "Inspectors"), reasonable
access to appropriate officers of Acquiror and Acquiror's
subsidiaries to ask questions and to obtain information
reasonably requested by such Inspector and all financial and
other records and other information, pertinent corporate
documents and properties of any of Acquiror and its subsidiaries
and affiliates (collectively, the "Records"), as shall be
reasonably necessary to enable them to exercise their
<PAGE>
due diligence responsibility; provided, however, that the Records
-------- -------
that Acquiror determines, in good faith, to be confidential and
which it notifies the Inspectors in writing are confidential
shall not be disclosed to any Inspector unless such Inspector
signs a confidentiality agreement reasonably satisfactory to
Acquiror or either (i) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission of a
material fact in such Registration Statement or (ii) the release
of such Records is ordered pursuant to a subpoena or other order
from a court of competent jurisdiction; provided, further, that
-------- -------
any decision regarding the disclosure of information pursuant to
subclause (i) shall be made only after consultation with counsel
for the applicable Inspectors; and provided, further, that each
-------- -------
Holder agrees that it will, promptly after learning that
disclosure of such Records is sought in a court having
jurisdiction, give notice to Acquiror and allow Acquiror, at
Acquiror's expense, to undertake appropriate action to prevent
disclosure of such Records; and
xii. in the event of the issuance of any stop order suspending
the effectiveness of the Registration Statement or of any order
suspending or preventing the use of any related Prospectus or
suspending the qualification of any Registrable Securities
included in the Registration Statement for sale in any
jurisdiction, Acquiror will use all commercially reasonable
efforts promptly to obtain its withdrawal.
Acquiror may require each Holder as to which any registration is
being effected to furnish Acquiror with such information regarding such Holder
and pertinent to the disclosure requirements relating to the registration and
the distribution of such securities as Acquiror may from time to time reasonably
request in writing.
Each Holder agrees that, upon receipt of any notice from Acquiror
of the happening of any event of
<PAGE>
the kind described in Section 7(e), such Holder shall forthwith discontinue
disposition of Registrable Securities pursuant to the Prospectus or Registration
Statement covering such Registrable Securities until such Holder's receipt of
the copies of the supplemented or amended Prospectus contemplated by Section
7(e), and, if so directed by Acquiror, such Holder will deliver to Acquiror (at
Acquiror's expense) all copies, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. In the event Acquiror shall give
any such notice, the Effective Period and the period mentioned in Section 7(b)
shall be extended by the number of days during the period from the date of the
giving of such notice pursuant to Section 7(e) and through the date when each
seller of Registrable Securities covered by such Registration Statement shall
have received the copies of the supplemented or amended Prospectus contemplated
by Section 7(e).
Section 8 Registration Expenses. Acquiror shall pay all Registration
---------------------
Expenses in connection with all registrations of Registrable Securities pursuant
to Sections 3 and 4 and each Holder shall pay (x) all fees and expenses of
counsel to such Holder and any counsel to the Holders and (y) all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the Registration
Statement.
Section 9 Rule 144. Acquiror agrees that it shall timely file the reports
--------
required to be filed by it under the Securities Act or the Exchange Act
(including, without limitation, the reports under sections 13 and 15 (d) of the
Exchange Act referred to in paragraph (c)(1) of Rule 144 under the Securities
Act), and shall take such further actions as any Holder may reasonably request,
all to the extent required to enable Holders to sell Registrable Securities,
from time to time, pursuant to the resale limitations of (a) Rule 144 under the
Securities Act, as such rule may be hereafter amended, or (b) any similar rules
or regulations hereafter adopted by the SEC. Upon the written request of any
Holder, Acquiror shall deliver to such Holder a written statement verifying that
it has complied with such requirements.
Section 10 Indemnification; Contribution. Indemnification by Acquiror.
----------------------------- ---------------------------
Acquiror agrees to indemnify and hold harmless each Holder included in any
registration of
<PAGE>
Registrable Securities pursuant to this Agreement, its trustees, officers and
directors and each Person who controls such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act), and any
agent or investment adviser thereof against all losses, claims, damages,
liabilities and expenses (including reasonable attorneys' fees and expenses)
incurred by such party pursuant to any actual or threatened action, suit,
proceeding or investigation arising out of or based upon (i) any untrue or
alleged untrue statement of material fact contained in any Registration
Statement, any Prospectus or preliminary Prospectus, or any amendment or
supplement to any of the foregoing or (ii) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a Prospectus or a preliminary Prospectus,
in light of the circumstances then existing) not misleading, except in each case
insofar as the same arise out of or are based upon, any such untrue statement or
omission made in reliance on and in conformity with information with respect to
such Holder furnished in writing to Acquiror by such Holder or its counsel
expressly for use therein. In connection with an underwritten offering,
Acquiror will indemnify the underwriters thereof, their officers, directors and
agents and each Person who controls such underwriters (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same
extent as provided above with respect to the indemnification of the Holders.
Notwithstanding the foregoing provisions of this Section 10(a), Acquiror will
not be liable to any Holder, any Person who participates as an underwriter in
the offering or sale of Registrable Securities or any other Person, if any, who
controls such Holder or underwriter (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), under the indemnity agreement
in this Section 10(a) for any such loss, claim, damage, liability (or action or
proceeding in respect thereof) or expense that arises out of such Holder's or
other Person's failure to send or deliver a copy of a final Prospectus to the
Person asserting an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the sale of the
Registrable Securities to such Person if such statement or omission was
corrected in such final Prospectus and Acquiror has previously furnished copies
thereof to such Holder in accordance with this Agreement.
i.Indemnification by Holders of Registrable Securities.
----------------------------------------------------
In connection with the any
<PAGE>
registration of Registrable Securities pursuant to this Agreement, each
Holder included in such registration shall furnish to Acquiror and any
underwriter in writing such information, including the name, address and
the amount of Registrable Securities held by such Holder, as Acquiror or
any underwriter reasonably requests for use in the Registration Statement
relating to such registration or the related Prospectus and agrees to
indemnify and hold harmless Acquiror, all other Holders and any
underwriter, each such party's officers and directors and each Person who
controls each such party (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act), and any agent or
investment adviser thereof against all losses, claims, damages, liabilities
and expenses (including reasonable attorneys' fees and expenses) incurred
by each such party pursuant to any actual or threatened action, suit,
proceeding or investigation arising out of or based upon (i) any untrue or
alleged untrue statement of material fact contained in any Registration
Statement, any Prospectus or preliminary Prospectus, or any amendment or
supplement to any of the foregoing or (ii) any omission or alleged omission
to state therein a material fact required to be stated therein or necessary
to make the statements therein (in the case of a Prospectus or a
preliminary Prospectus, in light of the circumstances then existing) not
misleading, but only to the extent that any such untrue statement or
omission is made in reliance on and in conformity with information with
respect to such Holder furnished in writing to Acquiror or any underwriter
by such Holder or its counsel specifically for inclusion therein.
ii.Conduct of Indemnification Proceedings. Any Person entitled to
--------------------------------------
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such indemnified party of any
written notice of the commencement of any
<PAGE>
action, suit, proceeding or investigation or threat thereof made in writing
for which such indemnified party may claim indemnification or contribution
pursuant to this Section 10 (provided that failure to give such
notification shall not affect the obligations of the indemnifying party
pursuant to this Section 10 except to the extent the indemnifying party
shall have been actually prejudiced as a result of such failure). In case
any such action shall be brought against any indemnified party and it shall
notify the indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent that it
shall wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such
indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party), and after notice
from the indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party under these indemnification provisions for any legal
expenses of other counsel or any other expenses, in each case subsequently
incurred by such indemnified party, in connection with the defense thereof
other than reasonable costs of investigation. Notwithstanding the
foregoing, if (i) the indemnifying party shall not have employed counsel
reasonably satisfactory to such indemnified party to take charge of the
defense of such action within a reasonable time after notice of
commencement of such action (so long as such failure to employ counsel is
not the result of an unreasonable determination by such indemnified party
that counsel selected pursuant to the immediately preceding sentence is
unsatisfactory), or (ii) the actual or potential defendants in, or targets
of, any such action include both the indemnifying party and such
indemnified party and such indemnified party shall have
<PAGE>
reasonably concluded that there may be legal defenses available to it which
are different from or additional to those available to the indemnifying
party which, if the indemnifying party and such indemnified party were to
be represented by the same counsel, could result in a conflict of interest
for such counsel or materially prejudice the prosecution of the defenses
available to such indemnified party, then such indemnified party shall have
the right to employ separate counsel, in which case the fees and expenses
of one counsel or firm of counsel (plus one local or regulatory counsel or
firm of counsel) selected by a majority in interest of the indemnified
parties shall be borne by the indemnifying party and the fees and expenses
of all other counsel retained by the indemnified parties shall be paid by
the indemnified parties. No indemnified party shall consent to entry of any
judgment or enter into any settlement without the consent (which consent,
in the case of an action, suit, claim or proceeding exclusively seeking
monetary relief, shall not be unreasonably withheld) of each indemnifying
party.
iii.Contribution. If the indemnification from the indemnifying party
------------
provided for in this Section 10 is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or
expenses referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages, liabilities and expenses in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and indemnified party
in connection with the actions which resulted in such losses, claims,
damages, liabilities and expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party and
indemnified party shall be
<PAGE>
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 by, or relates to information supplied by, such indemnifying party or
indemnified party, and the parties' 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,
subject to the limitations set forth in Section 10(c), any legal and other
fees and expenses reasonably incurred by such indemnified 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 10(d) 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 the immediately preceding paragraph.
Notwithstanding the provisions of this Section 10(d), no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and distributed to
the public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission and no Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such Holder were offered to the
public exceeds the amount of any damages which such Holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. 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.
If indemnification is available under this Section 10, the indemnifying
parties shall indemnify each indemnified party to the fullest extent provided in
Section 10(a) or (b), as the case may be, without regard to the relative
<PAGE>
fault of such indemnifying parties or indemnified party or any other equitable
consideration provided for in this Section 10(d).
iv.The provisions of this Section 10 shall be in addition to any liability
which any party may have to any other party and shall survive any
termination of this Agreement. The indemnification provided by this Section
10 shall remain in full force and effect irrespective of any investigation
made by or on behalf of an indemnified party, so long as such indemnified
party does not act in a fraudulent, reckless or grossly negligent manner.
Section 11
Participation in Underwritten Offerings. No Holder may participate in any
---------------------------------------
underwritten offering hereunder unless such Holder in the case of a registration
pursuant to Section 3, agrees to sell such Holder's securities on the basis
provided in any underwriting arrangements approved by Acquiror in its reasonable
discretion and completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
Section 12
Miscellaneous. Remedies. Each Holder, in addition to being entitled to
------------- --------
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement.
i.Amendments and Waivers. Except as otherwise provided herein, the
----------------------
provisions of this Agreement may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless Acquiror has obtained the written consent of Holders of at
least a majority in number of the Registrable Securities then outstanding.
ii.Notices. Notices, requests, permissions, waivers, and other
-------
communications hereunder shall be in writing and shall be deemed to have
been duly given if signed by the respective Persons giving them (in the
case
<PAGE>
of any corporation the signature shall be by an officer thereof) and
delivered by hand, deposited in the United States mail (registered or
certified, return receipt requested), properly addressed and postage
prepaid, or delivered by telecopy:
If to a Holder, to:
Amos B. Hostetter, Jr.
c/o CONTINENTAL CABLEVISION, INC.
The Pilot House, Lewis Wharf
Boston, Massachusetts 02110
Telephone: (617) 742-9500
Telecopy: (617) 742-0530
Attention: Amos B. Hostetter, Jr.
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Telephone: (617) 338-2800
Telecopy: (617) 338-2880
Attention: Patrick K. Miehe, Esq.
If to Acquiror, to:
U S WEST, INC.
7800 East Orchard Road
Englewood, Colorado 80111
Telephone: (303) 793-6310
Telecopy: (303) 793-6707
Attention: General Counsel
<PAGE>
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
Attention: Dennis J. Block, Esq.
iii.Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors of each of the parties; provided,
--------
however, that any successor to a Holder shall have agreed in writing to
-------
become a Holder under this Agreement and to be bound by the terms and
conditions hereof and to become a Stockholder under the Stockholders
Agreement and to be bound by the terms and conditions thereof. This
Agreement and the provisions of this Agreement that are for the benefit of
the Holders shall not be assignable by any Holder to any Person and any
such purported assignment shall be null and void.
iv.Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed
by each of the parties and delivered to the other parties.
v.Descriptive Headings. The descriptive headings used 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.
vi.Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York, regardless of the laws
that might otherwise govern under applicable principles of conflicts of
laws thereof.
<PAGE>
vii.Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions contained herein shall not be in
any way impaired thereby, it being intended that all remaining provisions
contained herein shall not be in any way impaired thereby, it being
intended that all of the rights and privileges of the Holder shall be
enforceable to the fullest extent permitted by law.
viii.Entire Agreement. This Agreement is intended by the parties as a final
----------------
expression and a complete and exclusive statement of the agreement and
understanding of the parties hereto in respect of the subject matter
hereof. There are no restrictions, promises, warranties or undertakings
with respect to the subject matter hereof, other than those set forth or
referred to herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
U S WEST, INC.
By: ___________________________
Name:
Title:
________________________________________
<PAGE>
Amos B. Hostetter, Jr.
THE AMOS B. HOSTETTER, JR. 1989 TRUST
By:_____________________________________
Name: Amos B. Hostetter, Jr.
Title: Trustee
By:_____________________________________
Name: Timothy P. Neher
Title: Trustee
THE HOSTETTER FOUNDATION
By:_____________________________________
Name:
Title:
<PAGE>
EXHIBIT C
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER
SPECIAL RIGHTS, AND QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF SERIES D CONVERTIBLE
PREFERRED STOCK
OF
U S WEST, INC.
_____________________
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
_____________________
U S WEST, INC., a corporation organized and existing by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that the following resolution was duly adopted by action of the
Board of Directors of the Corporation at a meeting duly held on February 26,
1996.
RESOLVED that pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of Section
3 of Article V of the Restated Certificate of Incorporation of the Corporation
(the "Certificate of Incorporation"), and Section 151(g) of the General
Corporation Law of the State of Delaware, such Board of Directors hereby
creates, from the authorized shares of Preferred Stock, par value $1.00 per
share (the "Preferred Stock"), of the Corporation authorized to be issued
pursuant to the Certificate of Incorporation, a series of Preferred Stock, and
hereby fixes the voting powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, of the shares of such series as follows:
The series of Preferred Stock hereby established shall consist of
20,000,000 shares designated as Series D Convertible Preferred Stock. The
rights,
<PAGE>
preferences and limitations of such series shall be as follows:
Section 1 Definitions. Unless otherwise defined herein, terms used herein
-----------
shall have the meanings assigned to them in Section 2.6 of Article V of the
Certificate of Incorporation and the following terms shall have the indicated
meanings:
a. "Board of Directors" shall mean the Board of Directors of the Corporation
or, with respect to any action to be taken by the Board of Directors, any
committee of the Board of Directors duly authorized to take such action.
b. "Capital Stock" shall mean any and all shares of corporate stock of a
Person (however designated and whether representing rights to vote, rights
to participate in dividends or distributions upon liquidation or otherwise
with respect to the Corporation, or any division or subsidiary thereof, or
any joint venture, partnership, corporation or other entity).
c. "Certificate" shall mean the certificate of the voting powers,
designations, preferences and relative, participating, optional or other
special rights, and qualifications, limitations or restrictions thereof, of
Series D Convertible Preferred Stock filed with respect to this resolution
with the Secretary of State of the State of Delaware pursuant to Section
151 of the General Corporation Law of the State of Delaware.
d. "Closing Price" shall mean the last reported sale price of the Media Stock
(or such other class or series of common stock into which shares of this
Series are then convertible), regular way, as shown on the Composite Tape
of the NYSE, or, in case no such sale takes place on such day, the
<PAGE>
average of the closing bid and asked prices on the NYSE, or, if the Media
Stock (or such other class or series of common stock) is not listed or
admitted to trading on the NYSE, on the principal national securities
exchange on which such stock is listed or admitted to trading, or, if it is
not listed or admitted to trading on any national securities exchange, the
last reported sale price of the Media Stock (or such other class or series
of common stock), or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, in either case as reported by
Nasdaq.
e. "Communications Stock" shall mean the class of U S WEST Communications
Group Common Stock, par value $.01 per share, of the Corporation or any
other class of stock resulting from (x) successive changes or
reclassifications of such stock consisting solely of changes in par value,
or from par value to no par value or (y) a subdivision or combination, and
in any such case including any shares thereof authorized after the date of
the Certificate, together with any associated rights to purchase other
securities of the Corporation which are at the time represented by the
certificates representing such shares.
f. "Conversion Date" shall have the meaning set forth in Section 3.5.
g. "Conversion Price" shall have the meaning set forth in Section 3.1 hereof.
h. "Conversion Rate" shall have the meaning set forth in Section 3.1 hereof.
i. "Converting Holder" shall have the meaning set forth in Section 3.5
hereof.
<PAGE>
j. "Current Market Price" on any applicable record date, Conversion Date or
Redemption Date referred to in Section 3 or Section 4 shall mean the
average of the daily Closing Prices per share of Media Stock (or such other
class or series of common stock into which shares of this Series are then
convertible) for the ten (10) consecutive Trading Days ending on the third
Trading Day immediately preceding such record date, Conversion Date or
Redemption Date.
k. "Dividend Payment Date" shall have the meaning set forth in Section 2.1
hereof.
l. "Effective Time" shall mean the effective time of the Merger.
m. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
n. "Exchange Rate" for each share of this Series called for exchange shall
be a number of shares of Media Stock (or such other class or series of
common stock into which shares of this Series are then convertible) equal
to the quotient of (x) the sum of (I) the Liquidation Value plus (II) the
amount of accrued and unpaid dividends on such share of Series D Stock to
the Redemption Date divided by (y) the product of (I) .95 multiplied by
(II) the Current Market Price on the Redemption Date.
o. "Extraordinary Cash Distributions" shall mean, with respect to any
consecutive 12-month period, all cash dividends and cash distributions on
the outstanding shares of Media Stock during such period (other than cash
dividends or cash distributions for which a prior adjustment to the
Conversion
<PAGE>
Rate was previously made) to the extent such cash dividends and cash
distributions exceed, on a per share of Media Stock basis, 10% of the
average daily Closing Price of the Media Stock over such period.
p. "Junior Stock" shall mean the Media Stock, the Communications Stock and
the shares of any other class or series of stock of the Corporation which,
by the terms of the Certificate of Incorporation or of the instrument by
which the Board of Directors, acting pursuant to authority granted in the
Certificate of Incorporation, shall fix the relative rights, preferences
and limitations thereof, shall be junior to the Series D Stock in respect
of the right to receive dividends or to participate in any distribution of
assets other than by way of dividends.
q. "Liquidation Value" shall have the meaning set forth in Section 6.2
hereof.
r. "Media Group Disposition Redemption" shall have the meaning set forth in
Section 4.1 hereof.
s. "Media Group Disposition Dividend" shall have the meaning set forth in
Section 4.1 hereof.
t. "Media Group Special Dividend" shall have the meaning set forth in
Section 4.1 hereof.
u. "Media Group Special Events" shall have the meaning set forth in Section
4.1 hereof.
v. "Media Group Subsidiary Redemption" shall
<PAGE>
have the meaning set forth in Section 4.1 hereof.
w. "Media Stock" shall mean the class of U S WEST Media Group Common Stock,
par value $.01 per share, of the Corporation or any other class of stock
resulting from (x) successive changes or reclassifications of such stock
consisting solely of changes in par value, or from par value to no par
value or (y) a subdivision or combination, and in any such case including
any shares thereof authorized after the date of the Certificate, together
with any associated rights to purchase other securities of the Corporation
which are at the time represented by the certificates representing such
shares.
x. "Media Group Tender or Exchange Offer" shall have the meaning set forth
in Section 4.1 hereof.
y. "Merger" shall mean the merger of Continental Cablevision, Inc., a
Delaware corporation, with and into the Corporation pursuant to the terms
of the Merger Agreement.
z. "Merger Agreement" shall mean the Agreement and Plan of Merger, dated as
of February 27, 1996, between the Corporation and Continental Cablevision,
Inc., a Delaware corporation.
aa. "Nasdaq" shall mean the Nasdaq National Market.
bb. "NYSE" shall mean the New York Stock Exchange, Inc.
cc. "Parity Stock" shall mean the Series A
<PAGE>
Stock, the Series B Stock, the Series C Stock and the shares of any other
class or series of stock of the Corporation (other than Junior Stock)
which, by the terms of the Certificate of Incorporation or of the
instrument by which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall fix the relative rights,
preferences and limitations thereof, shall, in the event that the stated
dividends thereon are not paid in full, be entitled to share ratably with
the Series D Stock in the payment of dividends, including accumulations, if
any, in accordance with the sums which would be payable on such shares if
all dividends were declared and paid in full, or shall, in the event that
the amounts payable thereon on liquidation are not paid in full, be
entitled to share ratably with the Series D Stock in any distribution of
assets other than by way of dividends in accordance with the sums which
would be payable in such distribution if all sums payable were discharged
in full; provided, however, that the term "Parity Stock" shall be deemed to
-------- -------
refer (i) in Section 6 hereof, to any stock which is Parity Stock in
respect of the distribution of assets; and (ii) in Sections 5.1 and 5.2
hereof, to any stock which is Parity Stock in respect of either dividend
rights or the distribution of assets and which, pursuant to the Certificate
of Incorporation or any instrument in which the Board of Directors, acting
pursuant to authority granted in the Certificate of Incorporation, shall so
designate, is entitled to vote with the holders of Series D Stock.
dd. "Person" shall mean an individual, corporation, limited liability
company, partnership, joint venture, association, trust, unincorporated
organization or other entity.
ee. "Preferred Stock" shall mean the class of
<PAGE>
Preferred Stock, par value $1.00 per share, of the Corporation authorized
at the date of the Certificate, including any shares thereof authorized
after the date of the Certificate.
ff. "Record Date" shall have the meaning set forth in Section 2.1 hereof.
gg. "Redemption Date" shall mean the date on which the Corporation shall
effect the redemption or exchange of all or any part of the outstanding
shares of this Series pursuant to Section 4.1.
hh. "Redemption Price" for each share of this Series called for redemption
shall be equal to the sum of (x) the Liquidation Value plus (y) an amount
equal to the accrued and unpaid dividends on such share of Series D Stock
to the Redemption Date.
ii. "Redemption Rescission Event" shall mean the occurrence of (a) any
general suspension of trading in, or limitation on prices for, securities
on the principal national securities exchange on which shares of Media
Stock (or such other class or series of common stock into which shares of
this Series are then convertible) are registered and listed for trading
(or, if shares of Media Stock (or such other class or series of common
stock) are not registered and listed for trading on any such exchange, in
the over-the-counter market) for more than six-and-one-half (6 1/2)
consecutive trading hours, (b) any decline in either the Dow Jones
Industrial Average or the Standard & Poor's Index of 500 Industrial
Companies (or any successor index published by Dow Jones & Company, Inc. or
Standard & Poor's Corporation) by either (i) an amount in excess of 10%,
measured from the close of business on any Trading Day to the close of
business on the
<PAGE>
next succeeding Trading Day during the period commencing on the Trading Day
preceding the day notice of any redemption or exchange of shares of this
Series is given (or, if such notice is given after the close of business on
a Trading Day, commencing on such Trading Day) and ending at the Redemption
Date or (ii) an amount in excess of 15% (or, if the time and date fixed for
redemption or exchange is more than 15 days following the date on which
notice of redemption or exchange is given, 20%), measured from the close of
business on the Trading Day preceding the day notice of such redemption or
exchange is given (or, if such notice is given after the close of business
on a Trading Day, from such Trading Day) to the close of business on any
Trading Day on or prior to the Redemption Date, (c) a declaration of a
banking moratorium or any suspension of payments in respect of banks by
Federal or state authorities in the United States or (d) the commencement
of a war or armed hostilities or other national or international calamity
directly or indirectly involving the United States which in the reasonable
judgment of the Corporation could have a material adverse effect on the
market for the Media Stock (or such other class or series of common stock
into which shares of this Series are then convertible).
jj. "Rescission Date" shall have the meaning set forth in Section 4.5
hereof.
kk. "Senior Stock" shall mean the shares of any class or series of stock of
the Corporation which, by the terms of the Certificate of Incorporation or
of the instrument by which the Board of Directors, acting pursuant to
authority granted in the Certificate of Incorporation, shall fix the
relative rights, preferences and limitations thereof, shall be senior to
the Series D Stock in respect of the right to
<PAGE>
receive dividends or to participate in any distribution of assets other
than by way of dividends.
ll. "Series A Stock" shall mean the series of Preferred Stock authorized
and designated as Series A Junior Participating Cumulative Preferred Stock
at the date of the Certificate, including any shares thereof authorized and
designated after the date of the Certificate.
mm. "Series B Stock" shall mean the series of Preferred Stock authorized
and designated as Series B Junior Participating Cumulative Preferred Stock
at the date of the Certificate, including any shares thereof authorized and
designated after the date of the Certificate.
nn. "Series C Stock" shall mean the series of Preferred Stock authorized
and designated as Series C Cumulative Redeemable Preferred Stock at the
date of the Certificate, including any shares thereof authorized and
designated after the date of the Certificate.
oo. "Series D Stock" and "this Series" shall mean the series of Preferred
Stock authorized and designated as the Series D Convertible Preferred
Stock, including any shares thereof authorized and designated after the
date of the Certificate.
pp. "Surrendered Shares" shall have the meaning set forth in Section 3.5
hereof.
qq. "Trading Day" shall mean, so long as the Media Stock (or such other
class or series of common stock into which shares of this Series are then
convertible) is listed or admitted to trading on the NYSE, a day on
<PAGE>
which the NYSE is open for the transaction of business, or, if the Media
Stock (or such other class or series of common stock) is not listed or
admitted to trading on the NYSE, a day on which the principal national
securities exchange on which the Media Stock (or such other class or series
of common stock) is listed is open for the transaction of business, or, if
the Media Stock (or such other class or series of common stock) is not so
listed or admitted for trading on any national securities exchange, a day
on which Nasdaq is open for the transaction of business.
Section 2 Dividends.
---------
a. The holders of the outstanding Series D Stock shall be entitled to receive
dividends, as and when declared by the Board of Directors out of funds
legally available therefor, and any dividends declared by the Board of
Directors out of funds legally available therefor in accordance with
Section 3.6(d). Each dividend shall be at the annual rate equal to ____%
per share of Series D Stock (which is equivalent to $__________ quarterly
and $__________ annually per share)./1/ All
- --------------------------
/1/. The dividend rate (the "Dividend Rate") shall be equal to the sum of
4.375% (the "Base Dividend Rate") plus the Adjustment Amount (as defined below).
If the Calculation Price (as defined in the Merger Agreement) is less than
$24.50, the Corporation shall have the right, in its sole discretion, to (i)
increase the Base Dividend Rate to 6.00% and (ii) increase the Conversion Rate
pursuant to footnote 2.
The Base Dividend Rate shall be subject to adjustment in the following manner:
(i) If the Adjustment Amount is less than seven basis points in absolute
terms, then the Adjustment Amount shall be deemed to be zero and the
Dividend Rate shall equal the Base Dividend Rate.
(continued...)
<PAGE>
- -------------------------
1. (...continued)
(ii) If the Adjustment Amount is greater than or equal to seven basis points
in absolute terms, then the Dividend Rate shall be equal to the Base
Dividend Rate plus the Adjustment Amount, rounded to the nearest
multiple of 0.125%.
"Adjustment Amount" shall be equal to the product of (x) the sum of (1) the
Change In Weighted Average Yield plus (2) the Change In Credit Spread multiplied
by (y) the Discount Factor.
"Change In Weighted Average Yield" shall equal the sum (whether positive or
negative) of the following, based upon the average market closing levels of
Treasury securities for the 10 Trading Days ending 5 Trading Days prior to the
Effective Time:
(i) the change (whether positive or negative) since February 27, 1996 in
basis points in 3-year Treasury yields x 0.25;
(ii) the change (whether positive or negative) since February 27, 1996 in
basis points in 5-year Treasury yields x 0.25;
(iii) the change (whether positive or negative) since February 27, 1996 in
basis points in 10-year Treasury yields x 0.25; and
(iv) the change (whether positive or negative) since February 27, 1996 in
basis points in 20-year Treasury yields x 0.25.
"Change In Credit Spread" shall equal (whether positive or negative) the
average credit spread measured in basis points on U S WEST Financing I's 7.96%
Trust Originated Preferred Securities (based upon the closing market price
expressed as a stripped current yield) over the 30-year Treasury "pricing bond"
for the 10 Trading Days ending 5 Trading Days prior to the Effective Time minus
159.5 basis points.
"Discount Factor" shall equal 0.55.
For example, if (i) the Base Dividend Rate is 4.375%,
(continued...)
<PAGE>
dividends shall be payable in cash on or about the first day of November,
February, May and August in each year, beginning on the first such date
that is more than 15 days after the Effective Time, as fixed by the Board
of Directors, or such other dates as are fixed by the Board of Directors
(each a "Dividend Payment Date"), to the holders of record of Series D
Stock at the close of business on or about the 15th day of the month next
preceding such first day of January, April, July or October as the case may
be, as fixed by the Board of Directors, or such other dates as are fixed by
the Board of Directors (each a "Record Date"). Such dividends shall accrue
on each share cumulatively on a daily basis, whether or not there are
unrestricted funds legally available for the payment of such dividends and
whether or not earned or declared, from and after the day immediately
succeeding the Effective Time and any such dividends that become payable
for any partial dividend period shall be computed on the basis of the
actual days elapsed in such period. All dividends that accrue in accordance
with the foregoing provisions shall be cumulative from and after the day
immediately succeeding the Effective Time. The per share dividend amount
payable to each holder of record of Series D Stock on any Dividend Payment
Date shall be rounded to the nearest cent. The dividend rate per share of
this Series shall be appropriately adjusted from time
- ----------------------
1. (...continued)
(ii) the average 3-year Treasury, 5-year Treasury, 10-year Treasury and 20-year
Treasury yields are each 20 basis points lower at the Effective Time than they
are on February 27, 1996 and (iii) the Change In Credit Spread is fifty basis
points, then the Adjustment Amount shall equal 16.5 basis points ((-20 basis
points + fifty basis points) x 0.55). Because such Adjustment Amount is greater
than seven basis points, the Dividend Rate would be equal to the Base Dividend
Rate plus the Adjustment Amount (or 4.540%), rounded to the yield which is at
the nearest multiple of 0.125% (or 4.500%).
<PAGE>
to time to reflect any split or combination of the shares of this Series.
b. Except as hereinafter provided in this Section 2.2 and except for
redemptions by the Corporation pursuant to Sections 4.1(b), 4.1(c) or
4.1(d), unless all dividends on the outstanding shares of Series D Stock
and any Parity Stock that shall have accrued through any prior Dividend
Payment Date shall have been paid, or declared and funds set apart for
payment thereof, no dividend or other distribution (payable other than in
shares of Junior Stock) shall be paid to the holders of Junior Stock or
Parity Stock, and no shares of Series D Stock, Parity Stock or Junior Stock
shall be purchased, redeemed or otherwise acquired by the Corporation or
any of its subsidiaries (except by conversion into or exchange for Junior
Stock), nor shall any monies be paid or made available for a purchase,
redemption or sinking fund for the purchase or redemption of any Series D
Stock, Junior Stock or Parity Stock. When dividends are not paid in full
upon the shares of this Series and any Parity Stock, all dividends declared
upon shares of this Series and all Parity Stock shall be declared pro rata
so that the amount of dividends declared per share on this Series and all
such Parity Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of this Series and all such
Parity Stock bear to each other. No interest, or sum of money in lieu of
interest, shall be payable in respect of any dividend payment or payments
on this Series which may be in arrears.
Section 3 Conversion Rights.
-----------------
a. Subject to Section 3.1(b), each holder of a share of this Series shall
have the right at any time to convert such share into a number of shares of
Media Stock equal to
<PAGE>
[ ] shares of Media Stock for each share of this Series, subject to
adjustment as provided in this Section 3 (such rate, as so adjusted from
time to time, is herein called the "Conversion Rate"; and the "Conversion
Price" at any time shall mean the Liquidation Value per share divided by
the Conversion Rate in effect at such time (rounded to the nearest one
hundredth of a cent))/2/.
i. The right of a holder of a share of this Series called for redemption or
exchange pursuant to Sections 4.1(a) or 4.1(c) to convert such share into
Media Stock (or such other class or series of common stock into which
shares of this Series are then convertible) pursuant to Section 3.1(a)
shall terminate at the close of business on the Redemption Date unless the
Corporation defaults in the payment of the Redemption Price or Exchange
Rate or, in the case of a redemption or exchange pursuant to Section
4.1(a), the Corporation exercises its right to rescind such redemption or
exchange pursuant to Section 4.5, in which case such right of conversion
shall not terminate at the close of business on such date. The right of a
holder of a share of this Series called for redemption pursuant to Section
4.1(b): (i) in connection with a Media Group Subsidiary Redemption, a Media
Group Tender or Exchange Offer or a Media Group Disposition Redemption
involving a Disposition of all (not merely substantially all) of the
properties and
- ----------------
2. The Conversion Rate shall be equal to the quotient of (x) $50 divided by
(y) the product of (I) 1.25 multiplied by (II) the Calculation Price (as defined
in the Merger Agreement). If the Calculation Price is less than $24.50, the
Corporation shall have the right, in its sole discretion, to (i) set the
Conversion Rate equal to the quotient of (x) $50 divided by (y) the product of
(I) 1.40 multiplied by (II) the Calculation Price and (ii) increase the Base
Dividend Rate in accordance with footnote 1.
<PAGE>
assets attributed to the Media Group, to convert such share into Media
Stock pursuant to Section 3.1(a) shall terminate at the close of business
on the Redemption Date; (ii) in connection with a Media Group Disposition
Dividend or Media Group Special Dividend, to convert such share into Media
Stock pursuant to Section 3.1(a) shall terminate at the close of business
on the record date for determining holders entitled to receive such
dividend; and (iii) in connection with a Media Group Disposition Redemption
involving a Disposition of substantially all (but not all) of the
properties and assets attributed to the Media Group, to convert such share
into Media Stock shall terminate at the close of business on the date on
which shares of Media Stock are selected to be redeemed in such Media Group
Disposition Redemption, unless, in any of the foregoing cases, the
Corporation defaults in the payment of the Redemption Price or the
conditions to such redemption set forth in the last sentence of Section
4.1(b) shall not have been satisfied, in which event such right of
conversion shall not terminate at the close of business on such date. In
the event the Corporation converts all of the outstanding shares of Media
Stock into shares of Communications Stock (or, if the Communications Stock
is not Publicly Traded at such time and shares of any other class or series
of common stock of the Corporation (other than Media Stock) are then
Publicly Traded, of such other class or series of common stock as has the
largest Market Capitalization), the right of a holder of a share of this
Series called for redemption pursuant to Section 4.1(d) in connection with
an event substantially similar to a Media Group Special Event to convert
such share into Communications Stock (or such other class or series of
common stock) shall terminate on a date comparable to the date specified in
the preceding sentence with respect to a Media Group Special Event
substantially similar to such event.
<PAGE>
b. If any shares of this Series are surrendered for conversion subsequent to
the Record Date preceding a Dividend Payment Date but on or prior to such
Dividend Payment Date (except shares called for redemption or exchange on
a Redemption Date between such Record Date and Dividend Payment Date and
with respect to which such redemption or exchange has not been rescinded),
the registered holder of such shares at the close of business on such
Record Date shall be entitled to receive the dividend, if any, payable on
such shares on such Dividend Payment Date notwithstanding the conversion
thereof. Except as provided in this Section 3.2, no adjustments in respect
of payments of dividends on shares surrendered for conversion or any
dividend on the Media Stock issued upon conversion shall be made upon the
conversion of any shares of this Series.
c. The Corporation may, but shall not be required to, in connection with any
conversion of shares of this Series, issue a fraction of a share of Media
Stock, and if the Corporation shall determine not to issue any such
fraction, the Corporation shall, subject to Section 3.6(g), make a cash
payment (rounded to the nearest cent) equal to such fraction multiplied by
the Closing Price of the Media Stock on the last Trading Day prior to the
date of conversion.
d. Any holder of shares of this Series electing to convert such shares into
Media Stock shall surrender the certificate or certificates for such
shares at the office of the transfer agent or agents therefor (or at such
other place in the United States as the Corporation may designate by
notice to the holders of shares of this Series) during regular business
hours, duly
<PAGE>
endorsed to the Corporation or in blank, or accompanied by instruments of
transfer to the Corporation or in blank, or in form satisfactory to the
Corporation, and shall give written notice to the Corporation at such
office that such holder elects to convert such shares of this Series. The
Corporation shall, as soon as practicable and in any event within five
Trading Days (subject to Section 3.6(g)) after such surrender of
certificates for shares of this Series, accompanied by the written notice
above prescribed issue and deliver at such office to the holder for whose
account such shares were surrendered, or to his nominee, (i) certificates
representing the number of shares of Media Stock to which such holder is
entitled upon such conversion and (ii) if less than the full number of
shares of this Series represented by such certificate or certificates is
being converted, a new certificate of like tenor representing the shares
of this Series not converted.
e. Conversion shall be deemed to have been made immediately prior to the
close of business as of the date that certificates for the shares of this
Series to be converted, and the written notice prescribed in Section 3.4,
are received by the transfer agent or agents for this Series (such date
being referred to herein as the "Conversion Date"). The Person entitled to
receive the Media Stock issuable upon such conversion shall be treated for
all purposes as the record holder of such Media Stock as of the close of
business on the Conversion Date and such conversion shall be at the
Conversion Rate in effect on such date. Notwithstanding anything to the
contrary contained herein, in the event the Corporation shall have
rescinded a redemption or exchange of shares of this Series pursuant to
Section 4.5, any holder of shares of this Series that shall have
surrendered shares of this Series for conversion following the day on
<PAGE>
which notice of the redemption or exchange shall have been given but prior
to the later of (a) the close of business on the Trading Day next
succeeding the date on which public announcement of the rescission of such
redemption or exchange shall have been made and (b) the date which is
three Trading Days following the mailing of the notice of rescission
required by Section 4.5 (a "Converting Holder") may rescind the conversion
of such shares surrendered for conversion by (i) properly completing a
form prescribed by the Corporation and mailed to holders of shares of this
Series (including Converting Holders) with the Corporation's notice of
rescission, which form shall provide for the certification by any
Converting Holder rescinding a conversion on behalf of any beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of shares
of this Series that the beneficial ownership (within the meaning of such
Rule) of such shares shall not have changed from the date on which such
shares were surrendered for conversion to the date of such certification
and (ii) delivering such form to the Corporation no later than the close
of business on that date which is fifteen (15) Trading Days following the
date of the mailing of the Corporation's notice of rescission. The
delivery of such form by a Converting Holder shall be accompanied by (x)
any certificates representing shares of Media Stock issued to such
Converting Holder upon a conversion of shares of this Series that shall be
rescinded by the proper delivery of such form (the "Surrendered Shares"),
(y) any securities, evidences of indebtedness or assets (other than cash)
distributed by the Corporation to such Converting Holder by reason of such
Converting Holder's being a record holder of the Surrendered Shares and
(z) payment in New York Clearing House funds or other funds acceptable to
the Corporation of an amount equal to the sum of (I) any cash such
Converting Holder may have received in lieu of the issuance of fractional
shares
<PAGE>
upon conversion and (II) any cash paid or payable by the Corporation to
such Converting Holder by reason of such Converting Holder being a record
holder of the Surrendered Shares. Upon receipt by the Corporation of any
such form properly completed by a Converting Holder and any certificates,
securities, evidences of indebtedness, assets or cash payments required to
be returned or made by such Converting Holder to the Corporation as set
forth above, the Corporation shall instruct the transfer agent or agents
for shares of Media Stock and shares of this Series to cancel any
certificates representing the Surrendered Shares (which Surrendered Shares
shall be deposited in the treasury of the Corporation) and reissue
certificates representing shares of this Series to such Converting Holder
(which shares of this Series shall, notwithstanding their surrender for
conversion, be deemed to have been outstanding at all times). The
Corporation shall, as promptly as practicable, and in no event more than
five (5) Trading Days, following the receipt of any such properly
completed form and any such certificates, securities, evidences of
indebtedness, assets or cash payments required to be so returned or made,
pay to the Converting Holder or as otherwise directed by such Converting
Holder any dividend or other payment made on such shares of this Series
during the period from the time such shares shall have been surrendered
for conversion to the rescission of such conversion. All questions as to
the validity, form, eligibility (including time of receipt) and acceptance
of any form submitted to the Corporation to rescind the conversion of
shares of this Series, including questions as to the proper completion or
execution of any such form or any certification contained therein, shall
be resolved by the Corporation, whose good faith determination shall be
final and binding. The Corporation shall not be required to deliver
certificates for shares of Media
<PAGE>
Stock while the stock transfer books for such stock or for this Series are
duly closed for any purpose (but not for a period in excess of two Trading
Days) or during any period commencing at a Redemption Rescission Event and
ending at either (i) the time and date at which the Corporation's right of
rescission shall expire pursuant to Section 4.5 if the Corporation shall
not have exercised such right or (ii) the close of business on that day
which is fifteen (15) Trading Days following the date of the mailing of a
notice of rescission pursuant to Section 4.5 if the Corporation shall have
exercised such right of rescission, but certificates for shares of Media
Stock shall be delivered as soon as practicable after the opening of such
books or the expiration of such period.
f. The Conversion Rate shall be adjusted from time to time as follows for
events occurring after the Effective Time:
i.In case the Corporation shall, at any time or from time to time, (i) pay
a dividend or make a distribution in shares of Media Stock, (ii) combine
the outstanding shares of Media Stock into a smaller number of shares, or
(iii) subdivide or reclassify the outstanding shares of Media Stock, then
the Conversion Rate in effect immediately before such action shall be
adjusted so that immediately following such event the holders of the
Series D Stock shall be entitled to receive upon conversion thereof the
kind and amount of shares of capital stock of the Corporation which they
would have owned or been entitled to receive upon or by reason of such
event if such shares of Series D Stock had been converted immediately
before the record date (or, if no record date, the effective date) for
such event. An adjustment made pursuant to this Section 3.6(a) shall
become effective immediately after the opening of business
<PAGE>
on the day next following the record date in the case of a dividend or
distribution and shall become effective immediately after the opening of
business on the day next following the effective date in the case of a
subdivision, combination or reclassification. For the purposes of this
Section 3.6(a), if holders of Media Stock are entitled to elect the kind
or amount of securities receivable upon the payment of any such divided,
subdivision, combination or reclassification, each holder of Series D
Stock shall be deemed to have failed to exercise any such right of
election (provided that if the kind or amount of securities receivable
upon such dividend, distribution, subdivision, combination or
reclassification is not the same for each nonelecting share, then the kind
and amount of securities receivable upon such dividend, distribution,
subdivision, combination or reclassification for each nonelecting share
shall be deemed to be the kind and amount so receivable per share by a
plurality of the nonelecting shares).
ii.If the Corporation shall issue rights, warrants or options to all
holders of Media Stock entitling them (for a period not exceeding 45 days
from the record date referred to below) to subscribe for or purchase
shares of Media Stock at a price per share less than the Current Market
Price (determined as of the record date for the determination of
stockholders entitled to receive such rights, warrants or options), then,
in any such event, the Conversion Rate shall be adjusted by multiplying
the Conversion Rate in effect immediately prior to the opening of business
on such record date by a fraction, the numerator of which shall be the
number of shares of Media Stock outstanding on such record date plus the
maximum number of additional shares of Media Stock offered for
subscription pursuant to such rights, warrants or options, and the
denominator of which shall be the number of shares of
<PAGE>
Media Stock outstanding on such record date plus the maximum number of
additional shares of Media Stock which the aggregate offering price of the
maximum number of shares of Media Stock so offered for subscription or
purchase pursuant to such rights, warrants or options would purchase at
such Current Market Price (determined by multiplying such maximum number
of shares by the exercise price of such rights, warrants or options (plus
any other consideration received by the Corporation upon the issuance or
exercise of such rights, warrants or options) and dividing the product so
obtained by such Current Market Price). Such adjustment shall become
effective at the opening of business on the day next following the record
date for the determination of stockholders entitled to receive such
rights, warrants or options. To the extent that shares of Media Stock are
not delivered after the expiration of such rights, warrants or options,
the Conversion Rate shall be readjusted to the Conversion Rate which would
then be in effect had the adjustments made upon the record date for the
determination of stockholders entitled to receive such rights, warrants or
options been made upon the basis of delivery of only the number of shares
of Media Stock actually delivered and the amount actually paid therefor.
In determining whether any rights, warrants or options entitle the holders
to subscribe for or purchase shares of Media Stock at a price per share
less than such Current Market Price, there shall be taken into account any
consideration received by the Corporation upon issuance and upon exercise
of such rights, warrants or options. The value of such consideration, if
other than cash, shall be determined by the good faith business judgment
of the Board of Directors, whose determination shall be conclusive.
iii. If the Corporation shall pay a dividend or make a distribution to all
holders of outstanding shares of Media
<PAGE>
Stock, of capital stock, cash, evidences of its indebtedness or other
assets of the Corporation (but excluding (x) any cash dividends or
distributions (other than Extraordinary Cash Distributions) and (y)
dividends or distributions referred to in Section 3.6(a)), then the
Conversion Rate shall be adjusted by multiplying the Conversion Rate in
effect immediately prior to the opening of business on the record date for
the determination of stockholders entitled to receive such dividend or
distribution by a fraction, the numerator of which shall be the Current
Market Price (determined as of such record date), and the denominator of
which shall be such Current Market Price less either (A) the fair market
value (as determined by the good faith business judgment of the Board of
Directors, whose determination shall be conclusive), as of such record
date, of the portion of the capital stock, assets or evidences of
indebtedness to be so distributed applicable to one share of Media Stock
or (B), if applicable, the amount of the Extraordinary Cash Distribution
to be distributed per share of Media Stock. The adjustment pursuant to the
foregoing provisions of this Section 3.6(c) shall become effective at the
opening of business on the day next following the record date for the
determination of stockholders entitled to receive such dividend or
distribution.
iv. In lieu of making an adjustment to the Conversion Rate pursuant to
Sections 3.6(a), 3.6(b) or 3.6(c) above for a dividend or distribution or
an issue of rights, warrants or options, the Corporation may distribute
out of funds legally available therefor to the holders of shares of this
Series, or reserve for distribution out of funds legally available
therefor with each share of Media Stock delivered to a person converting a
share of this Series pursuant to this Section 3, such dividend or
distribution or such rights, warrants or options; provided,
--------
<PAGE>
however, that in the case of such a reservation, on the date, if any,
-------
on which a person converting a share of this Series would no longer
be entitled to receive such dividend or distribution or receive or
exercise such rights, warrants or options, such dividend or
distribution shall be deemed to have occurred, or such rights,
warrants or options shall be deemed to have issued, and the
Conversion Rate shall be adjusted as provided in Section 3.6(a),
3.6(b) or 3.6(c), as the case may be (with such termination date
being the relevant date of determination for purposes of determining
the Current Market Price).
v.The Corporation shall be entitled to make such additional increases
in the Conversion Rate, in addition to the adjustments required by
subsections 3.6(a) through 3.6(c), as shall be determined by the
Board of Directors to be necessary in order that any dividend or
distribution in Media Stock, any subdivision, reclassification or
combination of shares of Media Stock or any issuance of rights or
warrants referred to above, shall not be taxable to the holders of
Media Stock for United States Federal income tax purposes.
vi.To the extent permitted by applicable law, the Corporation may
from time to time increase the Conversion Rate by any amount for any
period of time if the period is at least 20 Trading Days, the
increase is irrevocable during such period and the Board of Directors
shall have made a determination that such increase would be in the
best interests of the Corporation, which determination shall be
conclusive.
vii.In any case in which this Section 3.6 shall require that any
adjustment be made effective as of or immediately following a record
date, the Corporation may elect to defer (but only for five (5)
Trading Days following the occurrence of the event which necessitates
the filing of the statement referred to in Section 3.9(a)) issuing to
<PAGE>
the holder of any shares of this Series converted after such record
date (i) the shares of Media Stock and other capital stock of the
Corporation issuable upon such conversion over and above the shares
of Media Stock and other capital stock of the Corporation issuable
upon such conversion on the basis of the Conversion Rate prior to
adjustment and (ii) paying to such holder any amount in cash in lieu
of any fraction thereof pursuant to Section 3.3; provided, however,
-------- -------
that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such
additional shares upon the occurrence of the event requiring such
adjustment.
viii.All calculations under this Section 3 shall be made to the
nearest cent, one-hundredth of a share or, in the case of the
Conversion Rate, one hundred-thousandth. Notwithstanding any other
provision of this Section 3, the Corporation shall not be required to
make any adjustment of the Conversion Rate unless such adjustment
would require an increase or decrease of at least 1.00000% of such
Conversion Rate. Any lesser adjustment shall be carried forward and
shall be made at the time of and together with the next subsequent
adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least
1.00000% in such rate. Any adjustments under this Section 3 shall be
made successively whenever an event requiring such an adjustment
occurs.
ix.If the Corporation shall take a record of the holders of Media
Stock for the purpose of entitling them to receive a dividend or
other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver
such dividend or distribution, then thereafter no adjustment in the
Conversion Rate then in effect shall
<PAGE>
be required by reason of the taking of such record.
x.Subject to Section 3.6(e) hereof, no adjustment shall be made
pursuant to this Section 3.6 with respect to any share of Series D
Stock that is converted prior to the time such adjustment otherwise
would be made.
g. In case of (a) any consolidation or merger to which the Corporation
is a party, other than a merger or consolidation in which the
Corporation is the surviving or continuing corporation and which does
not result in any reclassification of, or change (other than a change
in par value or from par value to no par value or from no par value
to par value, or as a result of a subdivision or combination) in,
outstanding shares of Media Stock (or such other class or series of
common stock into which shares of this Series are then convertible)
or (b) any sale or conveyance of all or substantially all of the
property and assets of the Corporation, then lawful provision shall
be made as part of the terms of such transaction whereby the holder
of each share of Series D Stock which is not converted into the right
to receive stock or other securities and property in connection with
such transaction shall have the right thereafter, during the period
such share shall be convertible, to convert such share into the kind
and amount of shares of stock or other securities and property
receivable upon such consolidation, merger, sale or conveyance by a
holder of the number of shares of Media Stock (or such other class or
series of common stock into which shares of this Series are then
convertible) into which such shares of this Series could have been
converted immediately prior to such consolidation, merger, sale or
conveyance, subject to adjustment which shall be as nearly equivalent
as may be practicable to the adjustments provided for in this
<PAGE>
Section 3. If holders of Media Stock (or such other class or series
of common stock into which shares of this Series are then
convertible) are entitled to elect the kind or amount of securities
or other property receivable upon such consolidation, merger, sale or
conveyance, all adjustments made pursuant to this Section 3.7 shall
be based upon (i) the election, if any, made in writing to the
Secretary of the Corporation by the record holder of the largest
number of shares of Series D Stock prior to the earlier of (x) the
last date on which a holder of Media Stock (or such other class or
series of common stock) may make such an election and (y) the date
which is five (5) Trading Days prior to the record date for
determining the holders of Media Stock (or such other class or series
of common stock) entitled to participate in the transaction (or if no
such record date is established, the effective date of such
transaction) or (ii) if no such election is timely made, an
assumption that such holder of Media Stock (or such other class or
series of common stock) failed to exercise such rights of election
(provided that if the kind or amount of securities or other property
receivable upon such consolidation, merger, sale or conveyance is not
the same for each nonelecting share, then the kind and amount of
securities or other property receivable upon such consolidation,
merger, sale or conveyance for each nonelecting share shall be deemed
to be the kind and amount so receivable per share by a plurality of
the nonelecting shares). Concurrently with the mailing to holders of
Media Stock (or such other class or series of common stock) of any
document pursuant to which such holders may make an election
regarding the kind or amount of securities or other property that
will be receivable by such holder in any transaction described in
clause (a) or (b) of the first sentence of this Section 3.7, the
Corporation shall mail a copy thereof to the holders of shares of the
Series D Stock. The Corporation shall not enter into any of the
transactions referred to in
<PAGE>
clauses (a) or (b) of the first sentence of this Section 3.7 unless,
prior to the consummation thereof, effective provision shall be made
in a certificate or articles of incorporation or other constituent
document or written instrument of the Corporation or the entity
surviving the consolidation or merger, if other than the Corporation,
or the entity acquiring the Corporation's assets, unless, in either
case, such entity is a direct or indirect subsidiary of another
entity, in which case such provision shall be made in the certificate
or articles of incorporation or other constituent document or written
instrument of such other entity (any such entity or other entity
being the "Surviving Entity") so as to assume the obligation to
deliver to each holder of shares of Series D Stock such stock or
other securities and property and otherwise give effect to the
provisions set forth in this Section 3.7. The provisions of this
Section 3.7 shall apply similarly to successive consolidations,
mergers, sales or conveyances .
h. After the date, if any, on which all outstanding shares of Media
Stock (or such other class or series of common stock into which
shares of this Series are then convertible) are converted into or
exchanged for shares of another class or series of common stock of
the Corporation, each share of this Series shall thereafter be
convertible into or exchangeable for the number of shares of such
other class or series of common stock receivable upon such conversion
or exchange by a holder of that number of shares or fraction thereof
of Media Stock (or such other class or series of common stock into
which shares of this Series are then convertible) into which one
share of this Series was convertible immediately prior to such
conversion or exchange. From and after any such conversion or
exchange, Conversion Rate adjustments as nearly equivalent as may be
<PAGE>
practicable to the adjustments pursuant to Sections 3.6 and 3.7
which, prior to such exchange, were made in respect of Media Stock
(or such other class or series of common stock into which shares of
this Series are then convertible) shall instead be made pursuant to
such Sections 3.6 and 3.7 in respect of shares of such other class or
series of common stock.
i. Whenever the Conversion Rate is adjusted as provided in this Section
3, the Corporation (or, in the case of Section 3.7, the Corporation
or the Surviving Entity, as the case may be, shall forthwith place on
file with its transfer agent or agents for this Series a statement
signed by a duly authorized officer of the Corporation or the
Surviving Entity, as the case may be, stating the adjusted Conversion
Rate determined as provided herein. Such statements shall set forth
in reasonable detail such facts as shall be necessary to show the
reason for and the manner of computing such adjustment. Promptly
after the adjustment of the Conversion Rate, the Corporation or the
Surviving Entity, as the case may be, shall mail a notice thereof to
each holder of shares of this Series. Whenever the Conversion Rate is
increased pursuant to Section 3.6(f), such notice shall be mailed to
each holder of shares of this Series as promptly as possible after
the Corporation shall have determined to effect such increase and, in
any event, at least 15 Trading Days prior to the date such increased
Conversion Rate takes effect, and such notice shall state such
increased Conversion Rate and the period during which it will be in
effect. Where appropriate, the notice required by this Section 3.9(a)
may be given in advance and included as part of the notice required
pursuant to Section 3.9(b) or 3.9(c).
i. Subject to the provisions of Section
<PAGE>
3.9(c), if: the Corporation takes any action that would require an
adjustment of the Conversion Rate pursuant to Sections 3.6 through
3.8; there shall be any consolidation or merger to which the
Corporation is a party and for which approval of any stockholders of
the Corporation is required, or the sale or transfer of all or
substantially all of the assets of the Corporation; or there shall
occur the voluntary or involuntary liquidation, dissolution or
winding up of the Corporation, then the Corporation shall, as
promptly as possible, but at least 10 Trading Days prior to the
record date or other date set for definitive action if there shall be
no record date, a notice stating the action or event for which such
notice is being given and the record date for and the anticipated
effective date of such action or event. Failure to give or receive
such notice or any defect therein shall not affect the legality or
validity of the related transaction.
ii.If the Corporation intends to convert all of the outstanding
shares of Media Stock into shares of Communications Stock (or, if the
Communications Stock is not Publicly Traded at such time and shares
of any other class or series of common stock of the Corporation
(other than Media Stock) are then Publicly Traded, of such other
class or series of common stock as has the largest Market
Capitalization) (as provided in Section 2.4 of Article V of the
Certificate of Incorporation), then the Corporation shall, not
earlier than the 35th Trading Day and not later than the 45th Trading
Day prior to the date of such conversion, cause notice to be filed
with the transfer agent or agents for this Series and given to each
record holder of shares of this Series, setting forth: (1) a
statement that all outstanding shares of Media Stock shall be
converted; (2) the date of such conversion; (3) the per share
<PAGE>
number of shares of Communications Stock (or such other class or
series of common stock) to be received with respect to each share of
Media Stock, including details as to the calculation thereof; (4) the
place or places where certificates for shares of Media Stock,
properly endorsed or assigned for transfer (unless the Corporation
shall waive such requirement), are to be surrendered for delivery of
certificates for shares of Communications Stock (or such other class
or series of common stock); (5) the number of shares of Media Stock
outstanding and the number of shares of Media Stock into or for which
outstanding Convertible Securities are then convertible, exchangeable
or exercisable and the conversion, exchange or exercise price
thereof, including the number of outstanding shares of this Series
and the Conversion Price; (6) a statement to the effect that, subject
to Section 2.4.5(I) of Article V of the Certificate of Incorporation,
dividends on shares of such Media Stock shall cease to be paid as of
the date of such conversion; (7) that a holder of shares of this
Series shall be entitled to receive shares of Communications Stock
(or such other class or series of common stock) pursuant to such
conversion if such holder converts shares of this Series on or prior
to the date of such conversion; and (8) a statement as to what such
holder will be entitled to receive pursuant to the terms of Section
3.8 if such holder thereafter properly converts shares of this
Series. In addition, from and after any conversion of Media Stock
effected in accordance with Section 2.4 of Article V of the
Certificate of Incorporation, if (x) a class or series of common
stock of the Corporation exists in addition to the class or series of
common stock into which the Media Stock was converted and (y) the
Corporation intends to convert the class or series of common stock
into which the Media Stock was converted into another such class or
series of common stock of the Corporation, then
<PAGE>
the Corporation shall give notice comparable to the notice described
in the preceding sentence of its intention to effect such a
conversion. In the event of any conflict between the notice
provisions of this Section 3.9(c) and Section 3.9(b), the notice
provisions of this Section 3.9(c) shall govern.
j. There shall be no adjustment of the Conversion Rate in case of the
issuance of any stock of the Corporation in a reorganization,
acquisition or other similar transaction except as specifically set
forth in this Section 3. If any action or transaction would require
adjustment of any Conversion Rate established hereunder pursuant to
more than one paragraph of this Section 3, only the adjustment which
would result in the largest increase of such Conversion Rate shall be
made.
k. The Corporation shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued stock, for
the purpose of effecting the conversion of the shares of this Series,
such number of its duly authorized shares of Media Stock (or, if
applicable, any other shares of Capital Stock of the Corporation) as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of this Series into such Media Stock (or such
other shares of Capital Stock) at any time; provided, however, that
-------- -------
nothing contained herein shall preclude the Corporation from
satisfying its obligations in respect of the conversion of the shares
by delivery of purchased shares of Media Stock (or such other shares
of Capital Stock) that are held in the treasury of the Corporation.
All shares of Media Stock (or such other shares of Capital Stock of
the Corporation) which shall be deliverable upon conversion of the
shares of this Series shall be duly and validly issued, fully paid
and
<PAGE>
nonassessable. For purposes of this Section 3, the number of shares
of Media Stock or any other class or series of common stock of the
Corporation at any time outstanding shall not include any shares of
Media Stock or such other class or series of common stock then owned
or held by or for the account of Corporation or any subsidiary of the
Corporation.
l. If any shares of Media Stock (or such other class or series of common
stock into which shares of this Series are then convertible) which
would be issuable upon conversion of shares of this Series hereunder
require registration with or approval of any governmental authority
before such shares may be issued upon conversion, the Corporation
will in good faith and as expeditiously as possible cause such shares
to be duly registered or approved, as the case may be. The
Corporation will endeavor to list the shares of (or depositary shares
representing fractional interests in) Media Stock (or such other
class or series of common stock into which shares of this Series are
then convertible) required to be delivered upon conversion of shares
of this Series prior to such delivery upon the principal national
securities exchange upon which the outstanding Media Stock (or such
other class or series of common stock) is listed at the time of such
delivery.
m. The Corporation shall pay any and all issue, stamp, documentation,
transfer or other taxes that may be payable in respect of any issue
or delivery of shares of Media Stock (or such other class or series
of common stock into which shares of this Series are then
convertible) on conversion of shares of this Series pursuant hereto.
The Corporation shall not, however, be required to pay any tax which
is payable in respect of any transfer involved in the issue or
delivery of Media Stock (or such
<PAGE>
other class or series of common stock) in a name other than that in
which the shares of this Series so converted were registered, and no
such issue or delivery shall be made unless and until the Person
requesting such issue has paid to the Corporation the amount of such
tax, or has established, to the satisfaction of the Corporation, that
such tax has been paid.
Section 4 Redemption or Exchange.
----------------------
a. Except as provided in Section 4.1(b), the shares of this Series shall
not be redeemable by the Corporation prior to the third anniversary
of the Effective Time. The Corporation may, at its sole option,
subject to Section 2.2 hereof, from time to time on and after the
third anniversary of the Effective Time and prior to the fifth
anniversary of the Effective Time, exchange shares of Media Stock (or
such other class or series of common stock into which shares of this
Series are then convertible) for all or any part of the outstanding
shares of this Series at the Exchange Rate; provided, however, that
-------- -------
such an exchange may only be effected if the Closing Price shall be
greater than the product of (x) the Conversion Price multiplied by
(y) 1.35, on 20 of the 30 Trading Days immediately prior to the date
of the notice delivered by the Corporation pursuant to Section 4.3(a)
to holders of shares of this Series to be exchanged. The Corporation
may, at its sole option, subject to Section 2.2 hereof, from time to
time on and after the fifth anniversary of the Effective Time, at its
election either: (i) redeem, out of funds legally available therefor,
all or any part of the outstanding shares of this Series at the
Redemption Price; (ii) exchange shares of Media Stock (or such other
class or series of common stock into which shares of this Series are
then convertible) for all or any part of the outstanding shares of
this Series at the Exchange Rate; or (iii) effect a
<PAGE>
combination of the options described in the foregoing clauses (i) and
(ii) (in which event each holder of shares of this Series which are
selected for redemption and exchange pursuant to Section 4.2 shall
receive the same proportion of cash and shares of Media Stock (or
such other class or series of common stock into which shares of this
Series are then convertible) (except for cash paid in lieu of
fractional shares) paid to other holders of shares of this Series
selected for redemption and exchange).
i. The Corporation shall redeem, out of funds legally available
therefor, all of the outstanding shares of this Series, at the
Redemption Price, if any of the following events with respect to the
Media Group occur (such events being collectively referred to herein
as the "Media Group Special Events"):
(1) (A) the Corporation redeems all of the outstanding shares of
Media Stock in exchange for shares of common stock of the Media Group
Subsidiaries as provided in Section 2.4.3 of Article V of the
Certificate of Incorporation (the "Media Group Subsidiary
Redemption") or (B) following a Disposition of all or substantially
all of the properties and assets attributed to the Media Group, the
Corporation either (1) pays a dividend on the Media Stock in an
amount equal to the product of the Outstanding Media Fraction
multiplied by the Fair Value of the Net Proceeds of such Disposition
as provided in Section 2.4.1(A)(1)(a) of Article V of the Certificate
of Incorporation (the "Media Group Disposition Dividend"), or (2)
redeems shares of Media Stock for an amount equal to the product of
the Outstanding Media Fraction multiplied by the Fair Value of the
Net Proceeds of such Disposition as provided in Section
2.4.1(A)(1)(b) of Article V of the
<PAGE>
Certificate of Incorporation (the "Media Group Disposition
Redemption"); or
(2) the Corporation pays a dividend on, or the Corporation or any of
its subsidiaries consummates a tender offer or exchange offer for,
shares of Media Stock and the aggregate amount of such dividend or
the consideration paid in such tender offer or exchange offer is an
amount equal to the Fair Value of all or substantially all of the
properties and assets attributed to the Media Group (the "Media Group
Special Dividend" or the "Media Group Tender or Exchange Offer",
respectively); provided, however, that the calculation of the Fair
-------- -------
Value of all or substantially all of the properties and assets
attributed to the Media Group shall be made without giving effect to
any money borrowed by the Corporation or any of its subsidiaries in
connection with such dividend or tender offer or exchange offer, as
the case may be.
The Redemption Date for shares of this Series to be redeemed by the Corporation
pursuant to this Section 4.1(b) shall be, if the applicable Media Group Special
Event is (I) the Media Group Subsidiary Redemption, the date of such exchange,
(II) the Media Group Disposition Dividend or the Media Group Special Dividend,
the date of payment of such dividend, (III) the Media Group Disposition
Redemption, the date of such redemption or (IV) the Media Group Tender or
Exchange Offer, the date such tender offer or exchange offer is consummated.
Notwithstanding anything to the contrary contained in this Section 4.1(b), any
redemption pursuant to this Section 4.1(b) shall be conditioned upon the actual
redemption of Media Stock for shares of common stock of the Media Group
Subsidiaries, payment of the Media Group Disposition Dividend or the amount due
as a result of the Media Group Disposition Redemption (in each case in the
required kind of capital stock, cash, securities and/or other property), payment
of the Media Group Special Dividend or the consummation of the Media Group
Tender or Exchange Offer, as the case may be.
ii. The Corporation shall, on the twentieth anniversary of the
Effective
<PAGE>
Time, at its election either: (i) redeem, out of funds legally
available therefor, all of the outstanding shares of this Series at
the Redemption Price; (ii) exchange shares of Media Stock (or such
other class or series of common stock into which shares of this
Series are then convertible) for all of the outstanding shares of
this Series at the Exchange Rate; or (iii) effect a combination of
the options described in the foregoing clauses (i) and (ii) (in which
event each holder of shares of this Series shall receive the same
proportion of cash and shares of Media Stock (or such other class or
series of common stock into which shares of this Series are then
convertible) (except for cash paid in lieu of fractional shares) paid
to other holders of shares of this Series).
iii. The Corporation shall redeem, out of funds legally available
therefore, all of the outstanding shares of this Series at the
Redemption Price, if (i) the Corporation converts all of the
outstanding shares of Media Stock into shares of Communications Stock
(or, if the Communications Stock is not Publicly Traded at such time
and shares of any other class or series of common stock of the
Corporation (other than Media Stock) are then Publicly Traded, of
such other class or series of common stock as has the largest Market
Capitalization) as provided in Section 2.4 of Article V of the
Certificate of Incorporation and (ii) at any time following such
conversion (A) an event substantially similar to any Media Group
Special Event occurs in respect to the Communications Stock (or such
other class or series of common stock) and (B) at the time of such
event shares of another class or series of common stock of the
Corporation (other then Communications Stock or such other class or
series of common stock) are then Publicly Traded. The Redemption Date
for, and the conditions
<PAGE>
to, any such redemption shall be determined in a manner consistent
with the Redemption Date and conditions set forth in Section 4.1(b)
for a redemption resulting from a substantially similar Media Group
Special Event.
iv. The Corporation shall be entitled to effect an exchange of shares
of Media Stock (or such other class or series of common stock into
which shares of this Series are then convertible) for shares of
Series D Stock pursuant to Section 4.1(a) or 4.1(c) only to the
extent Media Stock (or such other class or series of common stock)
shall be available for issuance (including delivery of previously
issued shares of Media Stock (or such other class or series) held in
the Corporation's treasury on the Redemption Date). The Corporation
may, but shall not be required to, in connection with any exchange of
shares of this Series pursuant to Section 4.1(a) or 4.1(c), issue a
fraction of a share of Media Stock (or such other class or series of
common stock into which shares of this Series are then convertible),
and if the Corporation shall determine not to issue any such
fraction, the Corporation shall make a cash payment (rounded to the
nearest cent) equal to such fraction multiplied by the Closing Price
of the Media Stock (or such other class or series of common stock) on
the last Trading Day prior to the Redemption Date.
b. In the event that fewer than all of the outstanding shares of this
Series are to be redeemed and/or exchanged pursuant to Section
4.1(a), subject to clause (iii) of the third sentence of Section
4.1(a), the aggregate number of shares of this Series held by each
holder which will be redeemed and/or exchanged shall be determined by
the Corporation by lot or pro rata or by any other method as may be
determined by the Board of Directors in its sole discretion to be
equitable, and the certificate of the
<PAGE>
Corporation's Secretary or an Assistant Secretary filed with the
transfer agent or transfer agents for this Series in respect of such
determination by the Board of Directors shall be conclusive.
c. If the Corporation determines to redeem and/or exchange shares of
this Series pursuant to Section 4.1(a) or 4.1(c), the Corporation
shall, not later than the 15th Trading Day nor earlier than the 60th
Trading Day prior to the Redemption Date, cause notice to be filed
with the transfer agent or agents for this Series and to be given to
each record holder of the shares to be redeemed and/or exchanged,
setting forth: (1) the Redemption Date; (2) in the case of a
redemption or exchange pursuant to Section 4.1(c), that all shares of
this Series outstanding on the Redemption Date shall be redeemed
and/or exchanged by the Corporation; (3) in the case of a redemption
or exchange pursuant to Section 4.1(a), the total number of shares of
this Series to be redeemed and/or exchanged and, if fewer than all
the shares held by such holder are to be redeemed and/or exchanged,
the aggregate number of such shares which will be redeemed and/or
exchanged; (4) the Redemption Price and/or the manner in which the
Exchange Rate will be calculated prior to the Redemption Date; (5)
that, if applicable, the Corporation shall determine on or prior to
the second Trading Day preceding the Redemption Date the percentage
of such holder's shares to be redeemed and the percentage of such
holder's shares to be exchanged; (6) that shares of this Series
called for redemption or exchange may be converted at any time prior
to the Redemption Date (unless the Corporation (i) shall, in the case
of a redemption, default in payment of the Redemption Price or, in
the case of an exchange, fail to exchange the shares of this Series
for the applicable number of shares of Media Stock or (ii) shall, in
the case of a redemption pursuant to Section
<PAGE>
4.1(a), exercise its right to rescind such redemption or exchange
pursuant to Section 4.5, in which case such right of conversion shall
not terminate at such time and date); (7) the applicable Conversion
Price; (8) the place or places where certificates for such shares are
to be surrendered for payment of the Redemption Price and/or the
Exchange Rate, as the case may be; and (9) that dividends on the
shares to be redeemed and/or exchanged will cease to accrue on the
Redemption Date. Promptly, following the Redemption Date, the
Corporation shall cause notice to be filed with the transfer agent or
agents for this Series and to be given to each record holder of the
shares to be redeemed and/or exchanged setting forth the percentage
of such holder's shares which the Corporation has elected to redeem
and the percentage of such holder's shares which the Corporation has
elected to exchange.
i. If the Corporation determines to effect a Media Group Subsidiary
Redemption, the Corporation shall, not later than the 30th Trading
Day and not earlier than the 45th Trading Day prior to the Redemption
Date, cause notice to be filed with the transfer agent or agents for
this Series and given to each record holder of shares of this Series,
setting forth: (1) the Redemption Date (which, pursuant to the
penultimate sentence of Section 4.1(b), shall be the same as the date
specified in clause (8) below); (2) that all shares of this Series
outstanding on the Redemption Date shall be redeemed by the
Corporation; (3) the Redemption Price; (4) that the redemption of the
shares of this Series shall be conditioned upon the consummation of
the Media Group Subsidiary Redemption; (5) the place or places where
certificates for shares of this Series, properly endorsed or assigned
for transfer (unless the Corporation waives such requirement), are to
be surrendered for payment of the Redemption Price; (6) that
dividends on the
<PAGE>
shares to be redeemed will cease to accrue on the Redemption Date;
(7) a statement that all shares of Media Stock outstanding on the
date of the Media Group Subsidiary Redemption shall be redeemed in
exchange for shares of common stock of the Media Group Subsidiaries;
(8) the date of such Media Group Subsidiary Redemption; (9) the
Outstanding Media Fraction on the date of such notice; (10) the place
or places where certificates for shares of Media Stock, properly
endorsed or assigned for transfer (unless the Corporation shall waive
such requirement), are to be surrendered for delivery of certificates
for shares of the Media Group Subsidiaries; (11) a statement to the
effect that, subject to Section 2.4.5(I) of Article V of the
Certificate of Incorporation, dividends on the Media Stock shall
cease to be paid as of the Redemption Date; (12) the number of shares
of Media Stock outstanding and the number of shares of Media Stock
into or for which outstanding Convertible Securities are then
convertible, exchangeable or exercisable and the conversion, exchange
or exercise price thereof, including the number of outstanding shares
of this Series and the Conversion Price; and (13) that a holder of
shares of this Series shall be entitled to receive shares of common
stock of the Media Group Subsidiaries upon the Media Group Subsidiary
Redemption in lieu of the Redemption Price only if such holder
converts such shares of this Series on or prior to the Redemption
Date.
ii. If the Corporation determines to effect a Media Group Disposition
Dividend, the Corporation shall, not later than the 30th Trading Day
following the consummation of the Disposition by the Corporation of
all or substantially all of the properties and assets attributed to
the Media Group, cause notice to be filed with the transfer agent or
agents for this Series and given to each record holder of shares of
this Series, setting forth: (1) the anticipated
<PAGE>
Redemption Date (which, pursuant to the penultimate sentence of
Section 4.1(b), shall be the same as the date specified in clause (8)
below); (2) that all shares of this Series outstanding on the
Redemption Date shall be redeemed by the Corporation; (3) the
Redemption Price; (4) that the redemption of the shares of this
Series shall be conditioned upon the payment of the Media Group
Disposition Dividend; (5) the place or places where certificates for
shares of this Series, properly endorsed or assigned for transfer
(unless the Corporation waives such requirement), are to be
surrendered for payment of the Redemption Price; (6) that dividends
on the shares to be redeemed will cease to accrue on the Redemption
Date; (7) the record date for determining holders of Media Stock
entitled to receive the Media Group Disposition Dividend, which shall
be not earlier than the 40th Trading Day and not later than the 50th
Trading Day following the consummation of such Disposition; (8) the
anticipated date of payment of the Media Group Disposition Dividend
(which shall not be more than 85 Trading Days following the
consummation of such Disposition); (9) the type of property to be
paid as such dividend in respect of the outstanding shares of Media
Stock; (10) the Net Proceeds of such Disposition; (11) the
Outstanding Media Fraction on the date of such notice; (12) the
number of outstanding shares of Media Stock and the number of shares
of Media Stock into or for which outstanding Convertible Securities
are then convertible, exchangeable or exercisable and the conversion,
exchange or exercise price thereof, including the number of
outstanding shares of this Series and the Conversion Price in effect
at such time; and (13) that a holder of shares of this Series shall
be entitled to receive such dividend in lieu of the Redemption Price
only if such holder properly converts such shares on or prior to the
record date referred to in clause (7) of this sentence
<PAGE>
and that shares of this Series shall not be convertible after such
record date.
iii. If the Corporation determines to effect a Media Group
Disposition Redemption following a Disposition of all (not merely
substantially all) of the properties and assets attributed to the
Media Group (in accordance with Section 2.4.1(A)(1)(b)(i) of Article
V of the Certificate of Incorporation), the Corporation shall, not
later than the 35th Trading Day and not earlier than the 45th Trading
Day prior to the Redemption Date, cause notice to be filed with the
transfer agent or agents for this Series and given to each record
holder of shares of this Series, setting forth: (1) the Redemption
Date (which, pursuant to the penultimate sentence of Section 4.1(b),
shall be the same as the date specified in clause (8) below); (2)
that all shares of this Series outstanding on the Redemption Date
shall be redeemed by the Corporation; (3) the Redemption Price; (4)
that the redemption of shares of this Series shall be conditioned
upon the consummation of the Media Group Disposition Redemption; (5)
the place or places where certificates for shares of this Series,
properly endorsed or assigned for transfer (unless the Corporation
waives such requirement), are to be surrendered for payment of the
Redemption Price; (6) that dividends on the shares to be redeemed
will cease to accrue on the Redemption Date; (7) that all shares of
Media Stock outstanding on the date of such Media Group Disposition
Redemption shall be redeemed; (8) the date of such Media Group
Disposition Redemption (which shall not be more than 85 Trading Days
following the consummation of such Disposition); (9) the type of
property in which the redemption price for the shares of Media Stock
to be redeemed is to be paid; (10) the Net Proceeds of such
Disposition; (11) the Outstanding Media Fraction on the date of such
notice; (12) the place or places where certificates
<PAGE>
for shares of Media Stock, properly endorsed or assigned for transfer
(unless the Corporation waives such requirement), are to be
surrendered for delivery of cash and/or securities or other property;
(13) the number of outstanding shares of Media Stock and the number
of shares of Media Stock into or for which such outstanding
Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof,
including the number of outstanding shares of this Series and the
Conversion Price in effect at such time; (14) that a holder of shares
of this Series shall be entitled to participate in the Media Group
Disposition Redemption in lieu of participating in the redemption of
the shares of this Series only if such holder properly converts such
shares of this Series on or prior to the Redemption Date; and (15)
that, except as otherwise provided by Section 2.4.5(I) of Article V
of the Certificate of Incorporation, dividends on shares of Media
Stock shall cease to be paid as of the Redemption Date.
iv. If the Corporation determines to effect a Media Group Disposition
Redemption following a Disposition of substantially all (but not all)
of the properties and assets attributed to the Media Group (in
accordance with Section 2.4.1(A)(1)(b)(ii) of Article V of the
Certificate of Incorporation), the Corporation shall, not later than
the 30th Trading Day following the consummation of such Disposition,
cause notice to be filed with the transfer agent or agents for this
Series and given to each record holder of shares of this Series,
setting forth: (1) the anticipated Redemption Date (which, pursuant
to the penultimate sentence of Section 4.1(b), shall be the same as
the date specified in clause (8) below); (2) that all shares of this
Series outstanding on the Redemption Date shall be redeemed by the
Corporation; (3) the Redemption Price; (4) that the
<PAGE>
redemption of shares of this Series shall be conditioned upon the
consummation of the Media Group Disposition Redemption; (5) the place
or places where certificates for shares of this Series, properly
endorsed or assigned for transfer (unless the Corporation waives such
requirement), are to be surrendered for payment of the Redemption
Price; (6) that dividends on the shares to be redeemed will cease to
accrue on the Redemption Date; (7) a date not earlier than the 40th
Trading Day and not later than the 50th Trading Day following the
consummation of such Disposition on which shares of Media Stock shall
be selected for redemption pursuant to such Media Group Disposition
Redemption; (8) the anticipated date of such Media Group Disposition
Redemption (which shall not be more than 85 Trading Days following
the consummation of such Disposition); (9) the type of property in
which the redemption price for the shares of Media Stock to be
redeemed is to be paid; (10) the Net Proceeds of such Disposition;
(11) the Outstanding Media Fraction; (12) the number of shares of
Media Stock outstanding and the number of shares of Media Stock into
or for which outstanding Convertible Securities are then convertible,
exchangeable or exercisable and the conversion, exchange or exercise
price thereof, including the number of outstanding shares of this
Series and the Conversion Price in effect at such time; (13) that a
holder of shares of this Series shall be eligible to participate in
such selection for redemption pursuant to such Media Group
Disposition Redemption in lieu of participating in the redemption of
shares of this Series only if such holder properly converts such
shares of this Series on or prior to the date referred to in clause
(7) of this sentence and that shares of this Series shall not be
convertible after such date; and (14) a statement that the
Corporation will not be required to register a transfer of any shares
of Media Stock for a period of 15
<PAGE>
Trading Days next preceding the date referred to in clause (7) of
this sentence.
v. If the Corporation determines to effect a Media Group Special
Dividend, the Corporation shall, not later than the 45th Trading Day
and not earlier than the 60th Trading day prior to the date of
payment of such dividend, cause notice to be filed with transfer
agent or agent for this Series and given to each record holder of
shares of this Series, setting forth: (1) the anticipated Redemption
Date (which, pursuant to the penultimate sentence of Section 4.1(b),
shall be the same as the date specified in clause (8) below); (2)
that all shares of this Series outstanding on the Redemption Date
shall be redeemed by the Corporation; (3) the Redemption Price; (4)
that the redemption of the shares of this Series shall be conditioned
upon the payment of the Media Group Special Dividend; (5) the place
or places where certificates for shares of this Series, properly
endorsed or assigned for transfer (unless the Corporation waives such
requirement), are to be surrendered for payment of the Redemption
Price; (6) that dividends on the shares to be redeemed will cease to
accrue on the Redemption Date; (7) the record date for determining
holders of Media Stock entitled to receive the Media Group Special
Dividend, which shall be not earlier than the 20th Trading Day prior
to the date of payment of such dividend; (8) the anticipated date of
payment of the Media Group Special Dividend; (9) the type of property
to be paid as such dividend in respect of the outstanding shares of
Media Stock; (10) the Outstanding Media Fraction on the date of such
notice; (11) the number of outstanding shares of Media Stock and the
number of shares of Media Stock into or for which outstanding
Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price
<PAGE>
thereof, including the number of outstanding shares of this Series
and the Conversion Price in effect at such time; and (12) that a
holder of shares of this Series shall be entitled to receive such
dividend in lieu of the Redemption Price only if such holder properly
converts such shares on or prior to the record date referred to in
clause (7) of this sentence and that shares of this Series shall not
be convertible after such record date.
vi. If the Corporation or any of its subsidiaries determines to
effect a Media Group Tender or Exchange Offer, the Corporation shall,
on the date of the public announcement of such tender offer or
exchange offer by the Corporation or any of its subsidiaries but in
any event not later than the 35th Trading Day prior to such
redemption, cause notice to be filed with the transfer agent or agent
for this Series and given to each record holder of shares of this
Series, setting forth: (1) the anticipated Redemption Date (which,
pursuant to the penultimate sentence of Section 4.1(b), shall be the
same as the date specified in clause (7) below); (2) that all shares
of this Series outstanding on the Redemption Date shall be redeemed
by the Corporation; (3) the Redemption Price; (4) that the redemption
of shares of this Series shall be conditioned upon the consummation
of the Media Group Tender or Exchange Offer; (5) the place or places
where certificates for shares of this Series, properly endorsed or
assigned for transfer (unless the Corporation waives such
requirement), are to be surrendered for payment of the Redemption
Price; (6) that dividends on the shares to be redeemed will cease to
accrue on the Redemption Date; (7) the anticipated date of
consummation of such Media Group Tender or Exchange Offer; (8) the
type of consideration to be paid by the Corporation or its subsidiary
in such Media Group Tender Offer or Exchange Offer for shares
<PAGE>
of Media Stock; (9) the date on which such Media Group Tender or
Exchange Offer commenced, the date on which such Media Group Tender
or Exchange Offer is scheduled to expire unless extended and any
other material terms thereof (or the material terms of any amendment
thereto); (10) the Outstanding Media Fraction on the date of such
notice; (11) the number of outstanding shares of Media Stock and the
number of shares of Media Stock into or for which such outstanding
Convertible Securities are then convertible, exchangeable or
exercisable and the conversion, exchange or exercise price thereof,
including the number of outstanding shares of this Series and the
Conversion Price in effect at such time; and (12) that a holder of
shares of this Series shall be entitled to participate in the Media
Group Tender or Exchange Offer in lieu of participating in the
redemption of the shares of this Series only if such holder properly
converts such shares of this Series on or prior to the Redemption
Date and then complies with the terms and conditions of the Media
Group Tender or Exchange Offer and that such holder shall be
permitted to tender or exchange shares of Media Stock upon conversion
of shares of this Series by notice of guaranteed delivery so long as
physical certificates are tendered as soon as practicable after
physical receipt thereof.
vii. In the event the Corporation shall redeem shares of this Series
pursuant to Section 4.1(d), notice of such redemption shall be given
by the Corporation at a time, and such notice shall contain
information, comparable to the time or information, as the case may
be, specified in Sections 4.3(b) through (g) with respect to a notice
of a redemption pursuant to Section 4.1(b) resulting from a
substantially similar Media Group Special Event.
<PAGE>
d. If notice of redemption or exchange shall have been given by the
Corporation as provided in Section 4.3, from and after the Redemption
Date, dividends on the shares of this Series so called for redemption
or exchange shall cease to accrue, such shares shall no longer be
deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation with respect to shares so called for
redemption or exchange (except, in the case of a redemption, the
right to receive from the Corporation the Redemption Price without
interest and, in the case of an exchange, the right to receive from
the Corporation the Exchange Rate without interest) shall cease
(including any right to receive dividends otherwise payable on any
Dividend Payment Date that would have occurred after the Redemption
Date), unless (a) the Corporation, in the case of a redemption,
defaults in the payment of the Redemption Price and, in the case of
an exchange, the Corporation fails to exchange the shares of this
Series for the applicable number of shares of Media Stock, (b) in the
case of a redemption or exchange pursuant to Section 4.1(a), the
Corporation exercises its right to rescind such redemption or
exchange pursuant to Section 4.5 or (c) in the case of a redemption
pursuant to Section 4.1(b) or 4.1(d), the conditions to such
redemption shall not have been satisfied, in which case such rights
shall not terminate at the close of business on such date. On or
before the Redemption Date, the Corporation shall deposit with a bank
or trust company doing business in New York, as paying agent, in the
case of a redemption, money sufficient to pay the Redemption Price on
the Redemption Date, and in the case of an exchange, certificates
representing the shares of Media Stock to be exchanged on the
Redemption Date, in trust, with irrevocable instructions that such
money or shares be applied to the redemption or exchange of shares of
this Series so called
<PAGE>
for redemption or exchange. Any money or certificates so deposited
with any such paying agent which shall not be required for such
redemption or exchange because of the exercise of any right of
conversion, rescission or otherwise (including if the conditions to a
redemption pursuant to Section 4.1(b) or 4.1(d) are not satisfied)
shall be returned to the Corporation forthwith. Upon surrender (in
accordance with the notice of redemption or exchange) of the
certificate or certificates for any shares of this Series to be so
redeemed or exchanged (properly endorsed or assigned for transfer, if
the Corporation shall so require and the notice of redemption or
exchange shall so state), such shares shall be redeemed by the
Corporation at the Redemption Price or exchanged by the Corporation
at the Exchange Rate, as applicable (unless, in the case of a
redemption or exchange pursuant to Section 4.1(a), the Corporation
shall have exercised its right to rescind such redemption or exchange
pursuant to Section 4.5 or, in the case of a redemption pursuant to
Section 4.1(b) or 4.1(d), the conditions to such redemption shall not
have been satisfied). In case fewer than all the shares represented
by any such certificate are to be redeemed or exchanged, a new
certificate shall be issued representing the unredeemed and
unexchanged shares (or fractions thereof as provided in Section 7.4),
without cost to the holder thereof. Subject to applicable escheat
laws, any moneys or shares so set aside by the Corporation and
unclaimed at the end of two years from the Redemption Date shall
revert to the general funds of the Corporation, after which reversion
the holders of such shares so called for redemption or exchange shall
look only to the Corporation for the payment of the Redemption Price
or the Exchange Rate, as the case may be, without interest. Any
interest accrued on any funds so deposited shall be paid to the
Corporation from time to time.
<PAGE>
e. If notice of redemption or exchange pursuant to Section 4.1(a) shall
have been given by the Corporation pursuant to Section 4.3(a), in the
event that a Redemption Rescission Event shall occur following the
date of such notice but at or prior to the Redemption Date, the
Corporation may, at its sole option, at any time prior to the earlier
of (i) the close of business on that day which is five (5) Trading
Days following such Redemption Rescission Event and (ii) the
Redemption Date, rescind such redemption or exchange by making a
public announcement of such rescission (the date on which such public
announcement shall have been made being hereinafter referred to as
the "Rescission Date"). The Corporation shall be deemed to have made
such announcement if it shall issue a release to the Dow Jones News
Service and Reuters Information Services or any successor news wire
service. From and after the making of such announcement, the
Corporation shall have no obligation to effect such redemption or
exchange or to pay the Redemption Price or Exchange Rate therefor and
all rights of holders of shares of this Series shall be restored as
if notice of redemption or exchange had not been given. The
Corporation shall give notice of any such rescission by first-class
mail, postage prepaid, mailed as promptly as practicable, but in no
event later than the close of business on that date which is five (5)
Trading Days following the Rescission Date to each record holder of
shares of this Series at the close of business on the Rescission Date
and to any other Person or entity that was a record holder of shares
of this Series and that shall have surrendered shares of this Series
for conversion following the giving of notice of the subsequently
rescinded redemption or exchange. Each notice of rescission shall (w)
state that such redemption or exchange has been rescinded, (x) state
that any
<PAGE>
Converting Holder shall be entitled to rescind the conversion of
shares of this Series surrendered for conversion following the day on
which notice of such redemption or exchange was given but on or prior
to the later of (I) the close of business on the Trading Day next
succeeding the date on which public announcement of the rescission of
such redemption or exchange shall have been made and (II) the date
which is three Trading Days following the mailing of the
Corporation's notice of rescission, (y) be accompanied by a form
prescribed by the Corporation to be used by any Converting Holder
rescinding the conversion of shares so surrendered for conversion
(and instructions for the completion and delivery of such form,
including instructions with respect to payments that may be required
to accompany such delivery in accordance with Section 3.5) and (z)
state that such form must be properly completed and received by the
Corporation no later than the close of business on a date that shall
be fifteen (15) Trading Days following the date of the mailing of
such notice of rescission.
Section 5 Voting.
------
The shares of this Series shall have no voting rights except as required by
law or as set forth below.
a. So long as any shares of this Series remain outstanding, unless a
greater percentage shall then be required by law, the Corporation
shall not, without the affirmative vote at a meeting or the written
consent with or without a meeting of the holders of shares of this
Series representing at least a majority of the shares of this Series
then outstanding (i) authorize any Senior Stock or reclassify any
Junior Stock or Parity Stock as Senior Stock, or (ii) amend, alter or
repeal any of the provisions of the Certificate or the Certificate of
Incorporation, so as in any such case to materially and adversely
affect the voting
<PAGE>
powers, designations, preferences and relative, participating,
optional or other special rights, and qualifications, limitations or
restrictions of the shares of this Series; provided, however, that an
-------- -------
amendment which effects a split of this Series or which effects a
combination of the shares of this Series into a fewer number of
Shares shall not be deemed to have any such material adverse effect.
i.No vote or consent of holders of shares of this Series shall be
required for (i) the creation of any indebtedness of any kind of the
Corporation, (ii) the authorization or issuance of any class of
Junior Stock (including any class or series of common stock of the
Corporation) or Parity Stock, (iii) the authorization, designation or
issuance of additional shares of Series D Stock or (iv) subject to
Section 5.1(a), the authorization or issuance of any other shares of
Preferred Stock.
b. If and whenever at any time or times dividends payable on shares of
this Series shall have been in arrears and unpaid in an aggregate
amount equal to or exceeding the amount of dividends payable thereon
for six quarterly dividend periods, then the number of directors
constituting the Board of Directors shall be automatically increased
by two and the holders of shares of this Series, together with the
holders of any shares of any Parity Stock as to which in each case
dividends are in arrears and unpaid in an aggregate amount equal to
or exceeding the amount of dividends payable thereon for six
quarterly dividend periods, shall have the exclusive right, voting
separately as a class with such other series, to elect two directors
of the Corporation.
i.Such voting right may be exercised
<PAGE>
initially either by written consent or at a special meeting of the
holders of the Preferred Stock having such voting right, called as
hereinafter provided, or at any annual meeting of stockholders held
for the purpose of electing directors, and thereafter at each such
annual meeting until such time as all dividends in arrears on the
shares of this Series shall have been paid in full and all dividends
payable on the shares of this Series on four subsequent consecutive
Dividend Payment Dates shall have been paid in full on such dates or
funds shall have been set aside for the payment thereof, at which
time such voting right and the term of the directors elected pursuant
to Section 5.2(a) shall terminate.
ii.At any time when such voting right shall have vested in holders of
shares of such series of Preferred Stock described in Section 5.2(b),
and if such right shall not already have been exercised by written
consent, a proper officer of the Corporation may call, and, upon the
written request, addressed to the Secretary of the Corporation, of
the record holders of either (i) shares representing twenty-five
percent (25%) of the voting power of the shares then outstanding of
the Series D Stock or (ii) shares representing twenty-five percent
(25%) of the voting power of shares of all series of Preferred Stock
having such voting right, shall call, a special meeting of the
holders of Preferred Stock having such voting right. Such meeting
shall be held at the earliest practicable date upon the notice
required for annual meetings of stockholders at the place for holding
annual meetings of stockholders of the Corporation, or, if none, at a
place designated by the Board of Directors. Notwithstanding the
provisions of this Section 5.2(c), no such special meeting shall be
called during a period within 60 days immediately preceding the
<PAGE>
date fixed for the next annual meeting of stockholders.
iii.At any meeting held for the purpose of electing directors at
which the holders of such Preferred Stock shall have the right to
elect directors as provided herein, the presence in person or by
proxy of the holders of shares representing more than fifty percent
(50%) in voting power of the then outstanding shares of such
Preferred Stock having such right shall be required and shall be
sufficient to constitute a quorum of such class for the election of
directors by such class.
iv.Any director elected by holders of Preferred Stock pursuant to the
voting right created under this Section 5.2 shall hold office until
the next annual meeting of stockholders (unless such term has
previously terminated pursuant to Section 5.2(b)) and any vacancy in
respect of any such director shall be filled only by vote of the
remaining director so elected, or if there be no such remaining
director, by the holders of such Preferred Stock entitled to elect
such director or directors by written consent or at a special meeting
called in accordance with the procedures set forth in Section 5.2(c),
or, if no special meeting is called or written consent executed, at
the next annual meeting of stockholders.
v.In exercising the voting rights set forth in this Section 5.2, each
share of this Series shall have one vote per share.
Section 6 Liquidation Rights.
------------------
a. Upon the dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, the holders of the shares of this
Series shall be entitled to receive out of the assets of the
<PAGE>
Corporation available for distribution to stockholders, in preference
to the holders of, and before any payment of distribution shall be
made on, Junior Stock, the Liquidation Value in effect at such time,
plus an amount equal to all accrued and unpaid dividends to the date
of final distribution.
b. The Liquidation Value shall initially be equal to $50 per share of
Series D Stock. The Liquidation Value shall be subject to adjustment
from time to time to appropriately give effect to any split or
combination of the shares of this Series.
c. Neither the sale, exchange or other conveyance (for cash, shares of
stock, securities or other consideration) of all or substantially all
the property and assets of the Corporation nor the merger or
consolidation of the Corporation into or with any other corporation,
or the merger or consolidation of any other corporation into or with
the Corporation, shall be deemed to be a dissolution, liquidation or
winding up, voluntary or involuntary, for the purposes of this
Section 6.
d. After the payment to the holders of the shares of this Series of full
preferential amounts provided for in this Section 6, the holders of
this Series as such shall have no right or claim to any of the
remaining assets of the Corporation.
e. In the event the assets of the Corporation available for distribution
to the holders of shares of this Series upon any dissolution,
liquidation or winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to
which such holders are entitled pursuant to Section 6.1, no such
distribution shall be made on account
<PAGE>
of any shares of any Parity Stock upon such dissolution, liquidation
or winding up unless proportionate distributive amounts shall be paid
on account of the shares of this Series, ratably, in proportion to
the full distributable amounts for which holders of all Parity Stock
are entitled upon such dissolution, liquidation or winding up.
Section 7 Other Provisions.
----------------
a. All notices from the Corporation to the holders shall be given by
first class mail, postage prepaid, to the holders of shares of this
Series at their last address as it shall appear on the stock
register. With respect to any notice to a holder of Shares of this
Series required to be provided hereunder, neither failure to mail
such notice, nor any defect therein or in the mailing thereof, shall
affect the sufficiency of the notice or the validity of the
proceedings referred to in such notice or affect the legality or
validity of any distribution, right, warrant, reclassification,
consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up, or the vote upon any such action. Any notice which was
mailed in the manner herein provided shall be conclusively presumed
to have been duly given whether or not the holder receives the
notice.
b. All notices and other communications from a holder of shares of this
Series shall be deemed given if delivered personally or sent by
overnight courier (providing proof of delivery) to the Corporation at
the following address (or at such other address as the Corporation
shall specify in a notice pursuant to Section 7.1): U S WEST, Inc.,
7800 East Orchard Road, Englewood, Colorado 80111, Attention: General
Counsel.
<PAGE>
c. Any shares of this Series which have been converted, redeemed,
exchanged or otherwise acquired by the Corporation shall, after such
conversion, redemption, exchange or acquisition, as the case may be,
be retired and promptly cancelled and the Corporation shall take all
appropriate action to cause such shares to obtain the status of
authorized but unissued shares of Preferred Stock, without
designation as to series, until such shares are once more designated
as part of a particular series by the Board of Directors. The
Corporation may cause a certificate setting forth a resolution
adopted by the Board of Directors that none of the authorized shares
of this Series are outstanding to be filed with the Secretary of
State of the State of Delaware. When such certificate becomes
effective, all references to Series D Stock shall be eliminated from
the Certificate of Incorporation and the shares of Preferred Stock
designated hereby as Series D Stock shall have the status of
authorized and unissued shares of Preferred Stock and may be reissued
as part of any new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
d. The shares of this Series shall be issuable in whole shares or in any
fraction of a whole share or any integral multiple of such fraction.
e. The Corporation shall, to the fullest extent permitted by law, be
entitled to recognize the exclusive right of a Person registered on
its records as the holder of shares of this Series, and such record
holder shall be deemed the holder of such shares for all purposes.
f. All notice periods referred to in the Certificate shall commence on
the date of the mailing of the applicable notice.
<PAGE>
g. Subject to applicable law, any determinations made in the exercise of
the good faith business judgment of the Board of Directors under any
provision of the Certificate shall be final and binding on all
stockholders of the Corporation, including the holders of shares of
this Series.
h. Certificates for shares of this Series shall bear such legends as the
Corporation shall from time to time deem appropriate.
IN WITNESS WHEREOF, U S WEST, INC. has caused this certificate to be
signed and attested this [ ] day of [ ], 1996.
U S WEST, INC.
By:
----------------------------------------
Name:
Title:
<PAGE>
EXHIBIT D
EXHIBIT D
[Form of Affiliate Letter]
U S WEST, Inc.
7800 East Orchard Road
Englewood, Colorado 80111
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of Continental Cablevision, Inc., a Delaware corporation (the
"Company"), as such term is (i) defined for purposes of paragraphs (c) and (d)
of Rule 145 of the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), or (ii) used in and for purposes of
Accounting Series Releases 130 and 135, as amended, of the Commission. Pursuant
to the terms of the Agreement and Plan of Merger, dated as of February 27, 1996
(as amended from time to time, the "Merger Agreement"), between U S WEST, Inc.,
a Delaware corporation ("Acquiror"), and the Company, the Company will be merged
with and into Acquiror (the "Merger"), with Acquiror continuing as the surviving
corporation.
Pursuant to the Merger, each share of Class A Common Stock, par value $.01
per share, of the Company owned by me, if any, and each share of Class B Common
Stock, par value $.01 per share, of the Company ("Class B Common Stock") owned
by me will be converted into the right to receive, at my election, either (i)
cash (in the case of
<PAGE>
shares of Class B Common Stock only) or (ii) shares of U S WEST Media Group
Common Stock, par value $.01 per share, of Acquiror (the "Media Stock") and
shares of Series D Convertible Preferred Stock, par value $1.00 per share, of
Acquiror (the "Series D Preferred Stock").
I represent, warrant and covenant to Acquiror that, with respect to all
Media Stock and Series D Preferred Stock received by me as a result of the
Merger:
i.I shall not make any sale, transfer or other disposition of Media Stock
or Series D Preferred Stock in violation of the Securities Act or the Rules
and Regulations.
ii.I have carefully read this letter and the Merger Agreement and discussed
the requirements of such documents and any other applicable limitations
upon my ability to sell, transfer or otherwise dispose of Media Stock or
Series D Preferred Stock to the extent I felt necessary, with my counsel or
counsel for the Company.
iii.I have been advised that the issuance of Media Stock and Series D
Preferred Stock to me pursuant to the Merger has been registered with the
Commission under the Securities Act. However, I have also been advised
that, since at the time the Merger Agreement was submitted for a vote of
the stockholders of the Company, I may be deemed to have been an
"affiliate" of the Company and the distribution by me of Media Stock and
Series D Preferred Stock has not been registered under the Act, I may not
sell, transfer or otherwise dispose of Media Stock and Series D Preferred
Stock issued to me in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Securities Act or is made in
conformity with Rule 145 under
<PAGE>
the Securities Act, or (ii) in the opinion of counsel reasonably acceptable
to Acquiror, or pursuant to a "no action" letter obtained by me from the
staff of the Commission, such sale, transfer or other disposition is
otherwise exempt from registration under the Securities Act.
iv.I understand, that, except as may be provided in a registration rights
agreement, if any, to be entered into by Acquiror and me as contemplated by
the Merger Agreement, Acquiror is under no obligation to register under the
Securities Act the sale, transfer or other disposition of Media Stock or
Series D Preferred Stock by me or on my behalf or to take any other action
necessary in order to make compliance with an exemption from such
registration available.
v.I understand that Acquiror will give stop transfer instructions to
Acquiror's transfer agents with respect to the Media Stock and Series D
Preferred Stock and that the certificates for the Media Stock and Series D
Preferred Stock issued to me, or any substitutions therefor, will bear a
legend substantial to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT, DATED _________ __, 1996, BETWEEN THE REGISTERED
HOLDER HEREOF AND U S WEST, INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE
PRINCIPAL OFFICES OF U S WEST, INC."
vi.I also understand that unless the transfer by me of my Media Stock or
Series D Preferred Stock has been registered under the Securities Act or is
a
<PAGE>
sale made in conformity with the provisions of Rule 145, Acquiror reserves
the right to place the following legend on the certificates issued to any
transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH
SECURITIES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SECURITIES HAVE NOT BEEN ACQUIRED BY THE HOLDER WITH A
VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE
MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs 5 and
6 above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Securities Act. It is
understood and agreed that such legends and the stop orders referred to above
will be removed if (i) two years shall have elapsed from the date I acquired
Media Stock and Series D Preferred Stock received in the Merger and the
provisions of Rule 145(d)(2) are then available to me, (ii) three years shall
have elapsed from the date I acquired Media Stock and Series D Preferred Stock
received in the Merger and the provisions of Rule 145(d)(3) are then available
to me, or (iii) Acquiror has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Acquiror, or a "no-
action" letter obtained by me from the staff of the Commission, to the effect
that the restrictions imposed by Rule 145 under the Securities Act no longer
apply to me.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter or as a waiver of any rights that I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
<PAGE>
Sincerely,
_________________________________
Name:
Accepted this __ day of
_______ __, 1996:
U S WEST, INC.
By: __________________________
Name:
Title:
<PAGE>
Exhibit E
---------
CONTINENTAL CABLEVISION, INC.
CERTIFICATE OF DESIGNATION
OF SERIES B CONVERTIBLE
PREFERRED STOCK SETTING FORTH THE POWERS,
PREFERENCES RIGHTS, QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF
SUCH SERIES OF PREFERRED STOCK
Pursuant to Section 151 of the General Corporation Law of the State of
Delaware, Continental Cablevision, Inc. (the "Corporation"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, in accordance with the provisions of Section 103 thereof, DOES HEREBY
CERTIFY:
That pursuant to the authority conferred upon the Board of Directors of the
Corporation by Article FOURTH of the Restated Certificate of Incorporation of
the Corporation (as in effect on the date hereof and as amended from time to
time in accordance with its terms, the "Restated Certificate of Incorporation"),
and in accordance with the provisions of Section 151 of the General Corporation
Law of the State of Delaware, the Board of Directors of the Corporation on
______, 199_, adopted the following resolution creating a series of Preferred
Stock designated as Series B Convertible Preferred Stock:
RESOLVED that, pursuant to the authority vested in the Board of Directors
of the Corporation in accordance with the provisions of the Restated Certificate
of Incorporation, a series of the class of authorized Preferred Stock, par value
$.01 per share, of the Corporation is hereby created and that the designation
and number of shares thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations and restrictions thereof are as follows:
Section 1 Designation and Number. (a) The shares of such series shall be
----------------------
designated as "Series B Convertible Preferred Stock" (the "Series B Preferred
Stock" or "this Series"). The number of shares initially constituting the
Series B Preferred Stock shall be 5,650,000, which number may be decreased (but
not increased) by the Board of Directors without a vote of stockholders;
provided, however, that such number may not be decreased below the number of
- -------- -------
then outstanding shares of Series B Preferred Stock.
<PAGE>
Notwithstanding any other provision in this Certificate of Designation, the
Corporation shall not be required to issue fractional shares of the Series B
Preferred Stock.
Section 2 Ranking. The Series B Preferred Stock shall, with respect to
-------
dividend rights and rights on liquidation, dissolution or winding up, rank pari
passu with the Series A Preferred Stock and prior to or pari passu with all
other classes and series of the Corporation's preferred stock (other than
preferred stock that is not convertible into or exchangeable for any class or
series of the Corporation's equity securities or for any other property,
including without limitation securities other than the Corporation's equity
securities referred to herein) and prior to all classes of the Common Stock, par
value $.01 per share, of the Corporation (the "Common Stock").
Section 3 Dividends and Distributions. (a) The holders of shares of Series
---------------------------
B Preferred Stock shall be entitled to receive as and when declared by the Board
of Directors out of funds legally available therefor, cash dividends at the rate
(the "Dividend Rate") of ___________ ___________________ percent (_____%) per
annum/3/, through and _______________________
3. The Dividend Rate shall be subject to an adjustment such that the final
Dividend Rate equals the sum of 5.875%, (the "Base Dividend Rate") plus the
Adjustment Amount (as defined below).
The Base Dividend Rate shall be subject to adjustment in the following
manner:
(i) If the Adjustment Amount is less than seven basis points in absolute
terms, then the Adjustment Amount shall be deemed to be zero and the Dividend
Rate shall equal the Base Dividend Rate.
(ii) If the Adjustment Amount is greater than or equal to seven basis
points in absolute terms, then the Dividend Rate shall be equal to the Base
Dividend Rate plus the Adjustment Amount (whether positive or negative), rounded
to the nearest multiple of 0.125%.
"Adjustment Amount" shall be equal to the product of (x) the sum of (1) the
Change In Weighted Average Yield plus (2) the Credit Spread multiplied by (y)
the Discount Factor.
"Average Credit Spread" shall be equal to the average of the difference
between the closing bid-side yield of the Corporation's 8.30% senior unsecured
notes due 2006 and the
(continued...)
<PAGE>
_____________________ including the date on which such Series B Preferred Stock
is no longer issued and outstanding, which dividends shall be payable in equal
- ---------------------
3. (...continued)
10-year Treasury yield, calculated for each of the 10 Trading Days after
announcement of the termination of the transactions contemplated by the Merger
Agreement (as defined in Section 12).
"Change In Weighted Average Yield" shall equal the sum (whether positive or
negative) of the following, based upon the average market closing levels of
Treasury securities for the 10 Trading Days after announcement of the
termination of the transactions contemplated by the Merger Agreement:
(i) the change (whether positive or negative) since February 27, 1996 in
basis points in 3-year Treasury yields x 0.25;
(ii) the change (whether positive or negative) since February 27, 1996 in
basis points in 5-year Treasury yields x 0.25; and
(iii) the change (whether positive or negative) since February 27, 1996 in
basis points in 10-year Treasury yields x 0.25; and
(iv) the change (whether positive or negative) since February 27, 1996 in
basis points in 20-year Treasury yields x 0.25.
"Credit Spread" shall equal the difference between (A) the product of
1.87234 multiplied by the Average Credit Spread minus (B) 440 basis points.
"Discount Factor" shall equal 0.55.
For example, if (i) the Base Dividend Rate is 5.875%, (ii) the average 3-year
Treasury, 5-year Treasury, 10-year Treasury and 20-year Treasury yields are each
20 basis points lower at closing than they are currently and (iii) the Average
Credit Spread is 260 basis points, the Credit Spread would be equal to 47 basis
points ((260 x 1.87234) -440). The resulting Adjustment Amount would be equal
to 14.85 basis points ((-20 + 47) x 0.55). Because such Adjustment Amount is
greater than seven basis points, the Dividend Rate would be equal to the Base
Dividend Rate plus the Adjustment Amount (or 6.0235%), rounded to the yield
which is at the nearest multiple of 0.125% (or 6.00%).
<PAGE>
quarterly installments on _______, ________, _________ and _______ each year
(each such date, regardless of whether any dividends have been paid or declared
and set aside for payment on such date, being a "Dividend Payment Date") to
holders of record as they appear on the stock books on such record dates as are
fixed by the Board of Directors, but only when, as and if declared by the Board
of Directors out of funds at the time legally available for the payment of
dividends. For purposes of calculation of such cash dividends, the Series B
Preferred Stock shall be valued at the Stated Value (as defined in Section 12).
Such dividends shall begin to accrue on outstanding shares of Series B Preferred
Stock from the date of issuance and shall be deemed to accrue from day to day
whether or not earned or declared until paid; provided, however, that dividends
-------- -------
accrued or deemed to have accrued for any period shorter than the full three-
month period between Dividend Payment Dates shall be computed based on the
actual number of days elapsed in the three-month period for which such dividends
are payable. Dividends on the Series B Preferred Stock shall be cumulative.
The Dividend Rate per share of Series B Preferred Stock shall be appropriately
adjusted from time to time to reflect any split or combination of the shares of
the Series B Preferred Stock.
(b) No dividends or other distributions, other than dividends or other
distributions payable solely in shares of capital stock ranking junior (both as
to dividends and upon liquidation, dissolution or winding up) to the Series B
Preferred Stock (or cash in lieu of fractional shares with respect to such
dividends or distributions) and liquidating distributions which are subject to
the provisions of Section 8 hereof, shall be paid or set aside for payment on,
and no purchase, redemption or other acquisition shall be made of, any shares of
capital stock of the Corporation (other than any class or series of Preferred
Stock that, in accordance with Section 2 hereof, (i) ranks senior to the Series
B Preferred Stock or (ii) is Parity Stock (as defined in Section 12), so long as
any dividend payments per share on Parity Stock as a percentage of accrued and
unpaid dividends per share on Parity Stock do not exceed contemporaneous
dividend payments per share on the Series B Preferred Stock as a percentage of
accrued and unpaid dividends per share on the Series B Preferred Stock), unless
and until all accrued and unpaid dividends on the Series B Preferred Stock for
any prior quarterly dividend period shall have been declared and paid or a sum
sufficient for the payment thereof set aside for such purposes. No interest, or
sum of money in lieu of interest, shall be payable in respect of any dividend
payment or payments on the Series B Preferred Stock which may be in arrears.
(c) Any reference to "distribution" contained in this Section 3 shall not
be deemed to include any stock dividend or distributions made in connection with
any
<PAGE>
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary.
(d) The holders of shares of Series B Preferred Stock shall not be
entitled to receive any dividends or other distributions with respect to such
shares except as provided herein.
Section 4 Voting. (a) The holders of record of shares of Series B
------
Preferred Stock shall have no voting rights except as required by law or as set
forth below; provided, however, that the rights set forth in Section 4(c) hereof
-------- -------
may be exercised only to the extent that such exercise would not result in a
Legal Prohibition or any violation of applicable law or regulation.
(b) (i) So long as any shares of Series B Preferred Stock remain
outstanding, unless a greater percentage shall then be required by law, the
Corporation shall not, without the affirmative vote at a meeting or the written
consent with or representing at least 51% of the shares of Series B Preferred
Stock then outstanding (A) authorize any Senior Stock or reclassify any Junior
Stock or Parity Stock as Senior Stock or (B) amend, alter or repeal any of the
provisions of the Certificate or the Restated Certificate of Incorporation, so
as in any such case to materially and adversely affect the voting powers,
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions of the Series B
Preferred Stock; provided, however, that an amendment which effects a split of
-------- -------
Series B Preferred Stock or which effects a combination of the shares of Series
B Preferred Stock into a fewer number of shares shall not be deemed to have any
such material adverse effect.
(ii) No vote or consent of holders of shares of Series B Preferred Stock
shall be required for (A) the creation of any indebtedness of any kind of the
Corporation, (B) the authorization or issuance of any class of Junior Stock
(including any class or series of common stock of the Corporation) or Parity
Stock, (C) the authorization, designation or issuance of additional shares of
Series B Preferred Stock or (D) subject to Section 4(b)(i), the authorization
or issuance of any other shares of Preferred Stock.
(c) (i) If and whenever at any time or times dividends payable on shares
of this Series shall have been in arrears and unpaid in an aggregate amount
equal to or exceeding the amount of dividends payable thereon for six quarterly
dividend periods, then the number of directors constituting the Board of
Directors shall be automatically increased by two and the holders of shares of
Series B Preferred Stock, together with the holders of any shares of
<PAGE>
any Parity Stock as to which in each case dividends are in arrears and unpaid in
an aggregate amount equal to or exceeding the amount of dividends payable
thereon for six quarterly dividend periods, shall have the exclusive right,
voting separately as a class with the holders of any such Parity Stock, to elect
two directors of the Corporation.
(ii) Such voting right may be exercised initially either by written
consent or at a special meeting of the holders of Preferred Stock having such
voting right, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at each
such annual meeting until such time as all dividends in arrears on the shares of
this Series shall have been paid in full and all dividends payable on the shares
on this Series on four subsequent consecutive Dividend Payment Dates shall have
been paid in full on such dates or funds shall have been set aside for the
payment thereof, at which time such voting right and the term of the directors
elected pursuant to Section 4(c)(i) shall terminate.
(iii) At any time when such voting right shall have vested in holders of
shares of such series of Preferred Stock described in Section 4(c)(ii), and if
such right shall not already have been exercised by written consent, a proper
officer of the Corporation may call, and, upon the written request, addressed to
the Secretary of the Corporation, of the record holders of either (A) shares
representing twenty-five percent (25%) of the voting power of the shares then
outstanding of Series B Preferred Stock or (B) shares representing twenty-five
percent (25%) of the voting power of shares of all series of Preferred Stock
having such voting right, shall call, a special meeting of the holders of all
such series of Preferred Stock having such voting right. Such meeting shall be
held at the earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings of
stockholders of the Corporation, or, if none, at a place designated by the Board
of Directors. Notwithstanding the provisions of this Section 4(c)(iii), no such
special meeting shall be called during a period within 60 days immediately
preceding the date fixed for the next annual meeting of stockholders.
(iv) At any meeting held for the purpose of electing directors at which
the holders of such Preferred Stock shall have the right to elect directors as
provided herein, the presence in person or by proxy of the holders of shares
representing more than fifty percent (50%) in voting power of the then
outstanding shares of such Preferred Stock having such right shall be required
and shall be sufficient to constitute a quorum of such class for the election of
directors by such class.
<PAGE>
(v) Any director elected by holders of such Preferred Stock pursuant to
the voting right created under this Section 4(c) shall hold office until the
next annual meeting of stockholders (unless such term has previously terminated
pursuant to Section 4(c)(ii)) and any vacancy in respect of any such director
shall be filled only by vote of the remaining director so elected, or if there
be no such remaining director, by the holders of such Preferred Stock entitled
to elect such director or directors by written consent or at a special meeting
called in accordance with the procedures set forth in Section 4(c)(iii), or, if
no special meeting is called or written consent executed, at the next annual
meeting of stockholders.
(vi) In exercising the voting rights set forth in this Section 4(c), each
share of Series B Preferred Stock shall have one vote per share.
Section 5 Certain Restrictions. (a) Whenever dividends or distributions
--------------------
payable on shares of Series B Preferred Stock as provided in Section 3 for any
prior quarterly dividend period are not paid in full, thereafter and until all
such unpaid dividends or distributions payable, whether or not declared, on the
outstanding shares of Series B Preferred Stock shall have been paid in full or
declared and set apart for payment, the Corporation shall not: (i) redeem,
purchase or otherwise acquire for consideration any shares of Junior Stock or
Parity Stock pursuant to any mandatory redemption, put, sinking fund or other
similar obligation; provided that (A) the Corporation may at any time redeem,
--------
purchase or otherwise acquire shares of Junior Stock or Parity Stock, in
exchange for any shares of Common Stock or for other capital stock of the
Corporation ranking junior (both as to dividends and upon liquidation,
dissolution or winding up) to the Series B Preferred Stock and (B) the
Corporation may accept shares of any Parity Stock for conversion; or (ii) redeem
or purchase or otherwise acquire for consideration any shares of Series B
Preferred Stock; provided that the Corporation may accept shares of Series B
--------
Preferred Stock surrendered for conversion into shares of capital stock of the
Corporation pursuant to Section 9.
(b) The Corporation shall not permit any Subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of capital stock of
the Corporation or to make or extend any loan or advance specified in clause
(iii) of Section 5(a) unless the Corporation could, pursuant to paragraph (a) of
this Section 5, purchase such shares at such time and in such manner or make or
extend such loan or advance at such time, as the case may be.
Section 6 Redemption or Exchange. (a) The Corporation shall not have any
----------------------
right to redeem any shares of
<PAGE>
Series B Preferred Stock prior to the third anniversary of the Issue Date (as
defined in Section 12). The Corporation may, at its sole option, subject to
Section 3(b) hereof, from time to time on and after the third anniversary of the
Issue Date, at its election either: (i) redeem, out of funds legally available
therefor, all or any part of the outstanding shares of the Series B Preferred
Stock at the Redemption Price (as defined in Section 12); (ii) subject to
Section 6(f) hereof, exchange shares of Class A Common Stock (or such other
class or series of common stock into which shares of this Series are then
convertible) for all or any part of the outstanding shares of this Series at the
Exchange Price (as defined in Section 12); or (iii) subject to Section 6(f)
hereof, effect a combination of the options described in the foregoing clauses
(i) and (ii) (in which event each holder of shares of this Series which are
selected for redemption and exchange pursuant to Section 6(e) shall receive the
same proportion of cash and shares of Class A Common Stock (or such other class
or series of common stock into which shares of this Series are then convertible)
(except for cash paid in lieu of fractional shares) paid to other holders of
shares of this Series selected for redemption and exchange); provided, however,
-------- -------
that shares of Series B Preferred Stock shall not be redeemable by the
Corporation prior to the fifth anniversary of the Issue Date unless the Current
Market Price (as defined in Section 12) shall be greater than the product of (x)
the Conversion Price (as defined in Section 9) multiplied by (y) 1.35 , on at
least 20 of the 30 Trading Days immediately prior to the date of the notice
delivered by the Corporation to holders of shares of Series B Preferred Stock to
be redeemed pursuant to paragraph (d) of this Section 6.
(b) Not more than 60 nor less than 15 Trading Days prior to the Redemption
Date, the Corporation shall, if the Series B Preferred Stock is listed on any
national securities exchange or traded in the over-the-counter market, give
notice by publication in a newspaper of general circulation in the Borough of
Manhattan, The City of New York, that the Corporation has elected in accordance
with paragraph (a) of this Section 6 to redeem and/or exchange any or all shares
of the Series B Preferred Stock. The notice shall also specify (i) the
percentage of the Series B Preferred Stock to be redeemed and/or exchanged, if
less than all, (ii) if more than one form of consideration has been elected by
the Corporation, the portion of such shares to be redeemed and the portion of
such shares to be exchanged, (iii) the Redemption Price and the manner in which
the Exchange Price shall be calculated prior to the Redemption Date, and (iv)
the procedures to be followed to receive payment of the Redemption Price and/or
the Exchange Price, as the case may be; and, a similar notice shall be mailed
concurrently to each record holder of shares of Series B Preferred Stock, at
such holder's address as it
<PAGE>
appears on the transfer books of the Corporation; provided, however, that if the
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Series B Preferred Stock is owned of record by 50 or fewer holders or groups of
affiliated holders, the Corporation shall publicly announce the information
contained in the notice by issuance of a press release and such notice shall be
mailed in not more than 60 or less than 15 Trading Days prior to the Redemption
Date, and shall set forth the information contained above.
(c) On or before the Redemption Date, the Corporation shall deposit for
the benefit of the holders of shares of Series B Preferred Stock, in the case of
a redemption, the funds necessary for such redemption and, in the case of an
exchange, certificates representing the shares of Class A Common Stock to be
exchanged, with a bank or trust company in the Borough of Manhattan, The City of
New York, or in the City of Boston, in either case having a capital and surplus
of at least $2,000,000,000. Any moneys or certificates so deposited by the
Corporation and unclaimed at the end of two years from the date designated for
such redemption or exchange shall be released from any such deposit and revert
to the general funds of the Corporation. After such conversion, any such bank or
trust company shall, upon demand, pay over to the Corporation such unclaimed
amounts or certificates, as the case may be, and thereupon such bank or trust
company shall be relieved of all responsibility in respect thereof and any
holder of shares of Series B Preferred Stock to be redeemed shall look only to
the Corporation for the payment of the Redemption Price. In the event that
moneys or certificates are deposited pursuant to this paragraph (c) in respect
of shares of Series B Preferred Stock that are converted in accordance with the
provisions of Section 9, such moneys or certificates, as the case may be, shall,
upon such conversion, be released from any such deposit and revert to the
Corporation. After such reversion, any such bank or trust company shall pay over
to the Corporation such moneys or certificates and shall be relieved of all
responsibility to the holders of such converted shares in respect thereof. Any
interest accrued on funds deposited pursuant to this paragraph (c) shall be paid
from time to time to the Corporation.
(d) Notice of redemption or exchange having been given as aforesaid, upon
the deposit of funds or certificates, as the case may be, pursuant to paragraph
(c) in respect of shares of Series B Preferred Stock to be redeemed or exchanged
pursuant to this Section 6, notwithstanding that any certificates for such
shares to be redeemed or exchanged shall not have been surrendered for
cancellation, from and after the Redemption Date (i) the shares represented
thereby shall no longer be deemed outstanding, (ii) the rights to receive
dividends thereon shall cease and terminate and dividends on the Series B
Preferred Stock shall cease to accrue and (iii) all rights
<PAGE>
of the holders of shares of Series B Preferred Stock to be redeemed or exchange
shall cease and terminate, excepting only the right to receive the Redemption
Price and/or Exchange Price therefor, without any interest thereon.
(e) In the event that fewer than all of the outstanding shares of this
Series are to be redeemed and/or exchanged pursuant to Section 6(a), subject to
clause (iii) of the second sentence of section 6(a), the aggregate number of
shares of this Series held by each holder which will be redeemed and/or
exchanged shall be determined by the Corporation by lot or pro rata or by any
other method as may be determined by the Board of Directors in its sole
discretion to be equitable, and the certificate of the Corporation's Secretary
or an Assistant Secretary filed with the transfer agent or transfer agents for
this Series in respect of such determination by the Board of Directors shall be
conclusive.
(f) Notwithstanding anything contained herein to the contrary, the
Corporation shall not be permitted to exchange any shares of Class A Common
Stock (or such other class or series of common stock into which shares of this
Series are convertible) for all or any part of the outstanding shares of this
Series if such stock which the Corporation seeks to exchange for shares of this
Series is not listed or admitted for trading on any national securities exchange
or the Nasdaq National Market. In connection with the exchange of any shares of
this Series, the Corporation may, but shall not be required to, issue a fraction
of a share of Class A Common Stock (or such other class or series of common
stock into which shares of this Series are then convertible) and, if the
Corporation shall determine not to issue such fraction, the Corporation shall
pay a cash payment (rounded to the nearest cent) equal to such fraction
multiplied by the Current Market Price per share of Class A Common Stock (or
such other class or series of common stock into which shares of this Series are
then convertible) on the last Trading Day prior to the Redemption Date.
Notwithstanding the foregoing, this Section 6(f) shall in no way restrict or
limit the Corporation's right to redeem all or any part of the outstanding
shares of this Series for cash at the Redemption Price.
Section 7 Reacquired Shares. Any shares of Series B Preferred Stock
-----------------
converted, redeemed, purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares of Series B Preferred Stock shall upon their
cancellation, and upon the filing of an appropriate certificate with the
Secretary of State of the State of Delaware, become authorized but unissued
shares of Preferred Stock, par value $.01 per share, of the Corporation and may
be reissued as part of another series of
<PAGE>
Preferred Stock, par value $.01 per share, of the Corporation subject to the
conditions or restrictions on issuance set forth herein.
Section 8 Liquidation, Dissolution or Winding Up. (a) Upon the
--------------------------------------
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, no distribution shall be made (i) to the holders of shares of
Junior Stock upon liquidation, dissolution or winding up unless, prior thereto,
the holders of shares of Series B Preferred Stock, subject to Section 9, shall
have received the Liquidation Preference (as defined in Section 12 with respect
to each share, or (ii) to the holders of shares of Parity Stock upon
liquidation, dissolution or winding up, except distributions made ratably on all
such Parity Stock and the Series B Preferred Stock in proportion to the total
amounts to which the holders of all shares of such Parity Stock and the Series B
Preferred Stock are entitled upon such liquidation, dissolution or winding up.
(b) Neither the consolidation, merger or other business combination of the
Corporation with or into any other Person or Persons nor the sale of all or
substantially all the assets of the Corporation shall be deemed to be a
liquidation, dissolution or winding up of the Corporation for purposes of this
Section 8.
Section 9 Conversion. (a) Each holder of shares of Series B Preferred
----------
Stock may, at its option at any time and from time to time, upon surrender of
the certificates therefor, convert any or all of its shares of Series B
Preferred Stock into Common Stock as follows. The number of fully paid and
nonassessable shares of Class A Common Stock deliverable on conversion of a
share of Series B Preferred Stock is referred to as the "Conversion Ratio". The
Conversion Ratio shall initially be equal to the quotient of $50 per share
divided by the Conversion Price and shall be subject to adjustment from time to
time pursuant to paragraph (f) of this Section 9. The "Conversion Price" shall
be equal to the product of 1.25 multiplied by the greater of: (i) $20 per share,
(ii) if shares of Class A Common Stock are publicly traded on the New York Stock
Exchange, then over the fifteen Trading Days beginning the first Trading Day
after the announcement of the termination of the Merger Agreement (the
"Measurement Period"), (a) if the average of the daily volume of Class A Common
Stock traded during the Measurement Period exceeds or is equal to 100,000 shares
per day, the average of the Current Market Price of Class A Common Stock over
the Measurement Period, or (b) if the average of the daily volume of Class A
Common Stock traded during the Measurement Period is less than 100,000 shares
per day, the product of .925 multiplied by the average of the Current Market
Price of Class A Common Stock over the Measurement Period, or (iii) if shares of
Class A Common Stock are publicly traded on the Nasdaq
<PAGE>
National Market, over the Measurement Period, (a) if the average of the daily
volume of Class A Common Stock traded during the Measurement Period exceeds or
is equal to 200,000 shares per day, the average of the Current Market Price of
Class A Common Stock over the Measurement Period, or (b) if the average of the
daily volume of Class A Common Stock traded during the Measurement Period is
less than 200,000 shares per day, the product of .925 multiplied by the average
of the Current Market Price of Class A Common Stock over the Measurement Period.
(b) Conversion of the Series B Preferred Stock may be effected by any such
holder upon the surrender to the Corporation at the principal office of the
Corporation in the Commonwealth of Massachusetts (the "Transfer Agent") or at
the office of any agent or agents of the Corporation, as may be designated by
the Board of Directors of the Corporation, of the certificate for such Series B
Preferred Stock to be converted at any time after the Issue Date accompanied by
a written notice stating that such holder elects to convert all or a specified
whole number of such shares in accordance with the provisions of this Section 9
and specifying the name or names in which such holder wishes the certificate or
certificates for shares of Common Stock to be issued. In case such notice shall
specify a name or names other than that of such holder, such notice shall be
accompanied by payment of all issue, stamp, documentation and transfer taxes
payable upon the issuance of shares of Common Stock in such name or names.
Other than such taxes, the Corporation will pay any and all issue, stamp,
documentation, transfer and other taxes (other than taxes based on gross or net
income) that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of Series B Preferred Stock pursuant hereto. As
promptly as practicable, and in any event within five Business Days after the
surrender of such certificate or certificates and the receipt of such notice
relating thereto and, if such notice shall specify a name or names other than
that of such holder, (a) payment of all transfer taxes (or the demonstration to
the satisfaction of the Corporation that such taxes have been paid), and (b)
unless such issuance is registered under the Securities Act and all applicable
state securities laws, the holder of the applicable shares of Series B Preferred
Stock which are to be converted into Class A Common Stock hereunder shall have
furnished to the Corporation evidence satisfactory to it that such issuance is
exempt from registration under the Securities Act and all applicable state
securities laws, the Corporation shall deliver or cause to be delivered (i)
certificates representing the number of validly issued, fully paid and non
assessable full shares of Class A Common Stock to which the holder of shares of
Series B Preferred Stock being converted shall be entitled and (ii) if less than
the full number of shares of Series B Preferred Stock evidenced by the
surrendered certificate or certificates is
<PAGE>
being converted, a new certificate or certificates, of like tenor, for the
number of shares evidenced by such surrendered certificate or certificates less
the number of shares being converted. Such conversion shall be deemed to have
been made at the close of business on the date of receipt of such notice and of
such surrender of the certificate or certificates representing the shares of
Series B Preferred Stock to be converted so that the rights of the holder
thereof as to the shares being converted shall cease except for the right to
receive shares of Class A Common Stock in accordance herewith, and the person
entitled to receive the shares of Class A Common Stock shall be treated for all
purposes as having become the record holder of such shares of Class A Common
Stock at such time. The Corporation shall not be required to convert, and no
surrender of shares of Series B Preferred Stock shall be effective for that
purpose, while the transfer books of the Corporation for the Common Stock are
closed for any purpose (but not for any period in excess of 2 days); but the
surrender of shares of Series B Preferred Stock for conversion during any period
while such books are so closed shall become effective for conversion immediately
upon the reopening of such books, as if the conversion had been made on the date
such shares of Series B Preferred Stock were surrendered, and at the Conversion
Ratio in effect at the date of such surrender.
(c) In case any shares of Series B Preferred Stock are to be redeemed
pursuant to Section 6, the right of conversion under this Section 9 shall cease
and terminate as to the shares of Series B Preferred Stock to be redeemed at the
close of business on the second Business Day next preceding the Redemption Date
unless the Corporation shall default in the payment of the Redemption Price.
(d) In connection with the conversion of any shares of Series B Preferred
Stock, no fractions of shares of Class A Common Stock shall be issued, but in
lieu thereof the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount equal to such fractional interest multiplied by
the Current Market Price per share of Class A Common Stock on the Trading Day on
which such shares of Series B Preferred Stock are deemed to have been converted.
If more than one share of Series B Preferred Stock shall be surrendered for
conversion by the same holder at the same time, the number of full shares of
Class A Common Stock issuable on conversion thereof shall be computed on the
basis of the total number of shares of Series B Preferred Stock so surrendered.
(e) The Corporation shall at all times reserve and keep available for
issuance upon the conversion of the Series B Preferred Stock, such number of its
authorized but unissued shares of Class A Common Stock as will from time to time
be sufficient to permit the
<PAGE>
conversion of all outstanding shares of Series B Preferred Stock, and shall take
all action required to increase the authorized number of shares of Class A
Common Stock if necessary to permit the conversion of all outstanding shares of
Series B Preferred Stock.
(f) The Conversion Ratio shall be subject to adjustment from time to time
as follows:
(i)In case the Corporation shall (i) declare a dividend or make a
distribution on the outstanding shares of its Common Stock in shares of its
Common Stock, (ii) subdivide its outstanding shares of Common Stock into a
greater number of shares, or (iii) combine its outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price in effect at
the time of the record date for such dividend or distribution or the
effective date of such subdivision or combination shall be proportionately
adjusted so that the holder of any shares of Series B Preferred Stock
surrendered for conversion after such time shall be entitled to receive the
aggregate number of shares of Class A Common Stock which the holder would
have owned or been entitled to receive had such shares of Series B
Preferred Stock been converted immediately prior to such record date or
effective date and the resulting Common Stock had been subject to such
dividend, distribution, subdivision or combination. An adjustment made
pursuant to this clause (i) shall become effective (x) in the case of any
such dividend or distribution, immediately after the close of business on
the record date for the determination of holders of shares of Common Stock
entitled to receive such dividend or distribution, or (y) in the case of
any such subdivision, combination, consolidation or reclassification, at
the close of business on the day upon which such corporate action becomes
effective.
(ii)If the Corporation shall issue rights, warrants or options to all
holders of Class A Common Stock entitling them (for a period not exceeding
45 days from the record date referred to below) to subscribe for or
purchase shares of Class A Common Stock at a price per share less than the
Current Market Price (determined over the Value Period (as defined in
Section 12) as of the date of determination of stockholders entitled to
receive such rights, warrants or options), then, in any such event, the
Conversion Ratio shall be adjusted by multiplying the Conversion Ratio in
effect immediately prior to the opening of business on such record date by
a fraction, the numerator of which shall be the number of shares of Class A
Common Stock outstanding on such record date plus the maximum number of
additional shares of Class A Common Stock offered for subscription pursuant
to such
<PAGE>
rights, warrants or options, and the denominator of which shall be the
number of shares of Class A Common Stock outstanding on such record date
plus the maximum number of additional shares of Class A Common Stock which
the aggregate offering price of the maximum number of shares of Class A
Common Stock so offered for subscription or purchase pursuant to such
rights, warrants or options would purchase at such Current Market Price
(determined by multiplying such maximum number of shares by the exercise
price of such rights, warrants or options (plus any other consideration
received by the Corporation upon the issuance or exercise of such rights,
warrants or options) and dividing the product so obtained by such Current
Market Price). Such adjustment shall become effective at the opening of
business on the day next following the record date for the determination of
stockholders entitled to receive such rights, warrants or options. To the
extent that shares of Class A Common Stock are not delivered after the
expiration of such rights, warrants or options, the Conversion Ratio shall
be readjusted to the Conversion Ratio which would then be in effect had the
adjustments made upon the record date for the determination of stockholders
entitled to receive such rights, warrants or options been made upon the
basis of delivery of only the number of shares of Class A Common Stock
actually delivered and the amount actually paid therefor. In determining
whether any rights, warrants or options entitle the holders to subscribe
for or purchase shares of Class A Common Stock at a price per share less
than such Current Market Price, there shall be taken into account any
consideration received by the Corporation upon issuance and upon exercise
of such rights, warrants or options. The value of such consideration, if
other than cash, shall be determined by the good faith business judgment of
the Board of Directors, whose determination shall be conclusive.
(iii) If the Corporation shall pay a dividend or make a distribution to all
holders of outstanding shares of Class A Common Stock, of capital stock,
cash, evidences of its indebtedness or other assets of the Corporation (but
excluding (x) any cash dividends or distributions (other than Extraordinary
Cash Distributions) and (y) dividends or distributions referred to in
Section 9(f)(i)), then the Conversion Ratio shall be adjusted by
multiplying the Conversion Ratio in effect immediately prior to the opening
of business on the record date for the determination of stockholders
entitled to receive such dividend or distribution by a fraction, the
numerator of which shall be the Current Market Price (determined over the
Value Period as of such record date), and the denominator of which shall be
such Current Market Price
<PAGE>
less either (A) the fair market value (as determined by the good faith
business judgment of the Board of Directors, whose determination shall be
conclusive), as of such record date, of the portion of the capital stock
assets or evidences of indebtedness to be so distributed applicable to one
share of Class A Common Stock or (B), if applicable, the amount of the
Extraordinary Cash Distribution to be distributed per share of Class A
Common Stock. The adjustment pursuant to the foregoing provisions of this
Section 9(f)(iii) shall become effective at the opening of business on the
day next following the record date for the determination of stockholders
entitled to receive such dividend or distribution.
(iv)In lieu of making an adjustment to the Conversion Ratio pursuant to
Sections 9(f)(i), 9(f)(ii) or 9(f)(iii) above for a dividend or
distribution or an issue or rights, warrants or options, the Corporation
may distribute to the holders of shares of Series B Preferred Stock, or
reserve for distribution with each share of Class A Common Stock delivered
to a person converting a share of Series B Preferred Stock pursuant to this
Section 9, such dividend or distribution or such rights, warrants or
options; provided, however, that in the case of such a reservation, on the
-------- -------
date, if any, on which a person converting a share of Series B Preferred
Stock would no longer be entitled to receive such dividend or distribution
or to receive or exercise such rights, warrants or options, such dividend
or distribution shall be deemed to have occurred, or such rights, warrants
or options shall be deemed to have issued, and the Conversion Ratio shall
be adjusted as provided in Section 9(f)(i), 9(f)(ii) or 9(f)(iii), as the
case may be (with such termination date being the relevant date of
determination for purposes of determining the Current Market Price).
(v)The Corporation shall be entitled to make such additional increases in
the Conversion Ratio, in addition to those required by subsections 9(f)(i)
thorough 9(f)(iii), as shall be determined by the Board of Directors to be
necessary in order that any dividend or distribution in Class A Common
Stock, any subdivision, reclassification or combination of shares of Class
A Common Stock or any issuance of rights or warrants referred to above,
shall not be taxable to the holders of Class A Common Stock for United
States Federal income tax purposes.
(vi)To the extent permitted by applicable law, the Corporation may from
time to time increase the Conversion Ratio by any amount for any period of
time if the period is at least 20 Trading Days, the increase is irrevocable
during such period and the Board of
<PAGE>
Directors shall have made a determination that such increase would be in
the best interests of the Corporation, which determination shall be
conclusive.
(vii) In any case in which this Section 9(f) shall require that any
adjustment be made effective as of or immediately following a record date,
the Corporation may elect to defer (but only for five (5) Trading Days
following the occurrence of the event which necessitates the filing of the
statement referred to in Section 10) issuing to the holder of any shares of
this Series converted after such record date (i) the shares of Class A
Common Stock and other capital stock of the Corporation issuable upon such
conversion over and above the shares of Class A Common Stock and other
capital stock of the Corporation issuable upon such conversion on the basis
of the Conversion Ratio prior to adjustment and (ii) paying to such holder
any amount in cash in lieu of any fraction thereof pursuant to Section
9(d); provided, however, that the Corporation shall deliver to such holder
-------- -------
a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares upon the occurrence of the event
requiring such adjustment.
(viii) For purposes of this paragraph (f), the number of shares of Common
Stock at any time outstanding shall not include any shares of Common Stock
then owned or held by or for the account of the Corporation or a Subsidiary
of the Corporation.
(xi) The certificate of any firm of independent public accountants of
recognized standing selected by the Board of Directors of the Corporation
(which may be the firm of independent public accountants regularly employed
by the Corporation) shall be presumptively correct for any computation made
under this paragraph (f).
(x)If the Corporation shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such
dividend or distribution, then thereafter no adjustment in the number of
shares of Common Stock issuable upon exercise of the right of conversion
granted by this paragraph (f) or in the Conversion Ratio then in effect
shall be required by reason of the taking of such record.
(g) In case of any capital reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
paragraph (f)(i) of this Section 9), or in case of any consolidation or
<PAGE>
merger of the Corporation with or into another corporation, or in case of any
sale or conveyance to another corporation of the property of the Corporation as
an entirety or substantially as an entirety (each of the foregoing being
referred to as a "Transaction"), each share of Series B Preferred Stock then
outstanding shall thereafter be convertible into, in lieu of the Class A Common
Stock issuable upon such conversion prior to the consummation of such
Transaction, the kind and amount of shares of stock and other securities and
property (including cash) receivable upon the consummation of such Transaction
by a holder of that number of shares of Class A Common Stock into which one
share of Series B Preferred Stock was convertible immediately prior to such
Transaction (including, on a pro rata basis, the cash, securities or property
received by holders of Class A Common Stock in any tender or exchange offer that
is a step in such Transaction). In any such case, if necessary, appropriate
adjustment (as determined by the Board of Directors) shall be made in the
application of the provisions set forth in this Section 9 with respect to rights
and interests thereafter of the holders of shares of Series B Preferred Stock to
the end that the provisions set forth herein for the protection of the
conversion rights of the Series B Preferred Stock shall thereafter be
applicable, as nearly as reasonably may be, to any such other shares of stock
and other securities and property deliverable upon conversion of the shares of
Series B Preferred Stock remaining outstanding. In case securities or property
other than Class A Common Stock shall be issuable or deliverable upon conversion
as aforesaid, then all references in this Section 9 shall be deemed to apply, so
far as appropriate and as nearly as may be, to such other securities or
property.
Notwithstanding anything contained herein to the contrary, the Corporation
will not effect any Transaction unless, prior to the consummation thereof, the
Surviving Person (as defined in Section 12) thereof shall assume, by written
instrument mailed to each record holder of shares of Series B Preferred Stock at
the addresses of each as shown on the books of the Corporation maintained by the
Transfer Agent thereof if such shares are held by 50 or fewer holders or groups
of affiliated holders or to each Transfer Agent for the shares of Series B
Preferred Stock at the addresses of each as shown on the books of the
Corporation maintained by the Transfer Agent thereof, if such shares are held by
a greater number of holders, the obligation to deliver to such holder such cash
and such securities to which, in accordance with the foregoing provisions, such
holder is entitled and such Surviving Person shall have mailed to each record
holder of shares of Series B Preferred Stock at the addresses of each as shown
on the books of the Corporation maintained by the Transfer Agent thereof, if
such shares are held by 50 or fewer holders or groups of affiliated holders, or
to each Transfer
<PAGE>
Agent for the shares of Series B Preferred Stock, if such shares are held by a
greater number of holders, an opinion of independent counsel for such Person
stating that such assumption agreement is a valid, binding and enforceable
agreement of the Surviving Person (subject to customary exceptions).
(h) In case at any time or from time to time the Corporation shall pay any
dividend or make any other distribution to the holders of its Common Stock, or
shall offer for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or any other right, or there shall be
any capital reorganization or reclassification of the Common Stock of the
Corporation or consolidation or merger of the Corporation with or into another
corporation, or any sale or conveyance to another corporation of the property of
the Corporation as an entirety or substantially as an entirety, or there shall
be a voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, then, in any one or more of said cases the Corporation shall give
at least 10 days' prior written notice (the time of mailing of such notice shall
be deemed to be the time of giving thereof) to the record holders of the Series
B Preferred Stock at the addresses of each as shown on the books of the
Corporation maintained by the Transfer Agent thereof of the date on which (i)
the books of the Corporation shall close or a record shall be taken for such
stock dividend, distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, sale or conveyance, dissolution,
liquidation or winding up shall take place, as the case may be, provided that in
the case of any Transaction to which paragraph (g) of this Section 9 applies the
Corporation shall give at least 30 days' prior written notice as aforesaid.
Such notice shall also specify the date as of which the holders of the Common
Stock and of the Series B Preferred Stock of record shall participate in said
dividend, distribution or subscription rights or shall be entitled to exchange
their Common Stock or Series B Preferred Stock for securities or other property
deliverable upon such reorganization, reclassification, consolidation, merger,
sale or conveyance or participate in such dissolution, liquidation or winding
up, as the case may be. Failure to give such notice shall not invalidate any
action so taken.
(i) The Corporation will at no time effect conversion of any Series B
Preferred Stock pursuant to this Section 9, and any purported conversion of any
Series B Preferred Stock shall be null and void, if such conversion would result
in the violation of a Legal Prohibition (as defined in Section 12).
(j) All calculations under this Section 9 shall be made to the nearest
cent or to the nearest one
<PAGE>
one-hundredth of a share of Common Stock as the case may be. Notwithstanding any
other provision of this Section 9, the Corporation shall not be required to make
any adjustment of the Conversion Ratio unless such adjustment would require an
increase or decrease of at least 1.00% of such Conversion Ratio. Any lesser
adjustment shall be carried forward and shall be made at the time of and
together with the next subsequent adjustment which, together with any adjustment
or adjustments so carried forward, shall amount to an increase or decrease of at
least 1.00% in the Conversion Ratio. Any adjustments under this Section 9 shall
be made successively whenever an event requiring such an adjustment occurs.
(k) Upon the surrender of certificates representing shares of Series B
Preferred Stock in accordance with the terms hereof, the Person converting or
exchanging shall be deemed to be the holder of record at such time of the shares
of Class A Common Stock and other securities or property issuable on such
conversion or exchange and all rights with respect to the shares of Series B
Preferred Stock surrendered shall forthwith terminate except the right to
receive the shares of Class A Common Stock or other securities or property
issuable on such conversion or exchange, as the case may be. If any shares of
Series B Preferred Stock are surrendered for conversion or exchange subsequent
to the record date preceding a Dividend Payment Date but on or prior to such
Dividend Payment Date (except shares called for redemption or exchange on a
Redemption Date between such record date and Dividend Payment Date), the
registered holder of such shares at the closed of business on such record date
shall be entitled to receive the dividend, if any, payable on such shares on
such Dividend Payment Date notwithstanding the conversion thereof. Except as
provided in this Section 9, no adjustments in respect of payments of dividends
on shares surrendered for conversion or exchange or any dividend on the Common
Stock issued upon conversion or exchange shall be made upon the conversion or
exchange of any shares of this Series.
(l) The Corporation will endeavor to list the shares of (or depositary
shares representing fractional interests in) Class A Common Stock required to be
delivered upon conversion of shares of Series B Preferred Stock prior to such
delivery upon the principal national securities exchange upon which the
outstanding Class A Common Stock is listed at the time of such delivery.
Section 10 Reports as to Adjustments. Upon any adjustment of the
-------------------------
Conversion Ratio then in effect and any increase or decrease in the number of
shares of Common Stock issuable upon the operation of the conversion set forth
in Section 9, then, and in each such case, the Corporation shall promptly
deliver to the Transfer Agent of the Series B Preferred Stock and Common Stock a
certificate signed by the
<PAGE>
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the Conversion Ratio then in
effect following such adjustment and the increased or decreased number of shares
issuable upon the conversion set forth in Section 9. The Corporation shall also
promptly after the making of such adjustment give written notice to the record
holders of the Series B Preferred Stock at the address of each holder as shown
on the books of the Corporation maintained by the Transfer Agent thereof, which
notice shall state the Conversion Ratio then in effect, as adjusted, and the
increased or decreased number of shares issuable upon the exercise of the right
of conversion granted by Section 9, and shall set forth in reasonable detail the
method of calculation of each and a brief statement of the facts requiring such
adjustment. Where appropriate, such notice to record holders of the Series B
Preferred Stock may be given in advance and included as part of the notice
required under the provisions of Section 9(h).
Section 11 Certain Covenants. Any record holder of Series B Preferred
-----------------
Stock may proceed to protect and enforce its rights and the rights of such
holders by any available remedy by proceeding at law or in equity to protect and
enforce any such rights, whether for the specific enforcement of any provision
in this Certificate of Designation or in aid of the exercise of any power
granted herein, or to enforce any other proper remedy.
Section 12 Definitions. For the purposes of this Certificate of
-----------
Designation of Series B Convertible Preferred Stock, the following terms shall
have the meanings indicated:
"Affiliate" and "Associate" shall have the respective meanings ascribed to
such terms in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"Business Day" shall mean any day other than a Saturday, Sunday or a day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Certificate" shall mean the certificate of the voting powers,
designations, preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of Series B
Preferred Stock filed with respect to this Certificate of Designation with the
Secretary of State of the State of Delaware pursuant to Section 151 of the
General Corporation Law of the State of Delaware.
<PAGE>
"Class A Common Stock" and "Class B Common Stock" each shall have the
meaning assigned to such term in the Corporation's Restated Certificate of
Incorporation. "Common Stock" shall mean either the Class A Common Stock or the
Class B Common Stock.
"Current Market Price", when used with reference to shares of Common Stock
or other securities on any date, shall mean the closing price per share of
Common Stock or such other securities on such date and, when used with reference
to shares of Common Stock or other securities for any period shall mean the
average of the daily closing prices per share of Common Stock or such other
securities for such period. The closing price for each day shall be the last
sale price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock or such other securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting systems with respect to securities listed on
the principal national securities exchange on which the Common Stock or such
other securities are listed or admitted to trading or, if the Common Stock or
such other securities are not listed or admitted to trading on any national
securities exchange, the last quoted sale price or, if not so quoted, the
average of the high bid and low asked prices, as reported by the Nasdaq National
Market or such other system then in use, or, if on any such date the Common
Stock or such other securities are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by the primary
professional market maker making a market in the Common Stock or such other
securities as selected by the Board of Directors of the Corporation. If the
Common Stock is not publicly held or so listed or publicly traded, "Current
Market Price" shall mean the amount as determined by investment bankers mutually
agreeable to the Corporation and the holders of a majority of the outstanding
shares of Series B Preferred Stock (the fees and expenses of which shall be paid
by the Corporation) equal to the net proceeds that would be expected to be
received by a stockholder of the Corporation from the sale of such shares of
Common Stock in an underwritten public offering after being reduced by pro forma
expenses and underwriting discounts and commissions. If securities other than
Common Stock are not publicly held or so listed or publicly traded, "Current
Market Price" shall mean the Fair Market Value per share of such other
securities as determined by an independent investment banking firm mutually
agreeable to the Corporation and the holders of a majority of the outstanding
shares of Series B Preferred Stock (the fees and expenses of which shall be paid
by the Corporation).
<PAGE>
"Dividend Payment Date" shall have the meaning set forth in Section 3(a)
hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"Exchange Price" for each share of this Series called for exchange shall be
a number of shares of Class A Common Stock (or such other class or series of
common stock into which shares of this Series are then convertible) equal to the
quotient of (x) the sum of (I) the Stated Value plus (II) the amount of accrued
or unpaid dividends on this Series to the Redemption Date divided by (y) the
product of (I) .95 multiplied by (II) the Current Market Price determined over
the Value Period as of the Redemption Date.
"Extraordinary Cash Distributions" shall mean, with respect to any
consecutive 12-month period, all cash dividends and cash distributions on the
outstanding shares of Series B Preferred Stock during such period (other than
cash dividends or cash distributions for which a prior adjustment to the
Conversion Ratio was previously made) to the extent such cash dividends and cash
distributions exceed, on a per share of Series B Preferred Stock basis, 10% of
the average daily Closing Price of the Series B Preferred Stock over such
period.
"Fair Market Value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.
"Issue Date" shall mean the date on which shares of Series B Preferred
Stock are issued.
"Junior Stock" shall mean any capital stock of the Corporation ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series B Preferred Stock.
"Legal Prohibition" shall mean any law, statute, rule, regulation or
judicial or administrative decision which would prohibit a holder of Series B
Preferred Stock from owning such number of shares of Common Stock which such
holder would receive upon converting the Series B Preferred Stock or which would
require the Corporation to dispose of any assets or terminate any business
activity as a result of a holder of the Series B Preferred Stock owning such
number of shares of Common Stock which such holder would receive upon converting
the Series B Preferred Stock.
"Liquidation Preference" with respect to a share of the Series B Preferred
Stock shall mean an amount equal to the Stated Value plus an amount per share
equal to
<PAGE>
all unpaid dividends accrued thereon to the date of final distribution to the
holder thereof (without interest).
"Merger Agreement" shall mean the Agreement and Plan of Merger, dated as of
February 27, 1996, between the Corporation and US WEST, Inc., a Delaware
Corporation.
"Parity Stock" shall mean the Series A Participating Convertible Preferred
Stock and any other capital stock of the Corporation (other than Junior Stock)
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series B Preferred Stock.
"Person" shall mean any individual, firm, trust, partnership, corporation
or other entity, and shall include any successor (by merger or otherwise) of
such entity.
"Preferred Stock" shall mean the class of Preferred Stock, par value $0.01
per share, of the Corporation authorized at the date of the Certificate,
including any shares thereof authorized after the date of the Certificate.
"Redemption Date" shall mean the date on which the Corporation shall effect
the redemption or exchange, as the case may be, of all or any part of the
outstanding shares of the Series B Preferred Stock pursuant to Section 6 hereof.
"Redemption Price" in respect of a share of Series B Preferred Stock shall
mean the Stated Value as of the Redemption Date, plus an amount per share equal
to all unpaid dividends thereon, whether or not declared, to the date of
redemption (without interest).
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Senior Stock" shall mean the shares of any class or series of stock of the
Corporation which, by the terms of the Restated Certificate of Incorporation or
of the instrument by which the Board of Directors, acting pursuant to authority
granted in the Restated Certificate of Incorporation, shall fix the relative
rights, preferences and limitations thereof, shall be senior to the Series B
Preferred Stock in respect of the right to receive dividends or to participate
in any distribution of assets other than by way of dividends.
"Stated Value" in respect of the Series B Preferred Stock shall initially
be $50 per share, as appropriately adjusted from time to time to reflect any
<PAGE>
split or combination of the shares of the Series B Preferred Stock.
"Subsidiary" of any Person means any corporation or other entity of which a
majority of the voting power of the voting equity securities or equity interest
is owned, directly or indirectly, by such Person.
"Surviving Person" shall mean the continuing or surviving Person of a
merger, consolidation or other corporate combination, the Person receiving a
transfer of all or a substantial part of the properties and assets of the
Corporation, or the Person consolidating with or merging into the Corporation in
a merger, consolidation or other corporate combination in which the Corporation
is the continuing or surviving person, but in connection with which the Series B
Preferred Stock or Common Stock of the Corporation is exchanged, converted or
reinstated into the securities of any other Person or cash or other property;
provided, however, if such Surviving Person is a direct or indirect Subsidiary
- -------- -------
of a Person, the parent entity also shall be deemed to be a Surviving Person.
"Trading Day" means a day on which the principal national securities
exchange on which the Common Stock is listed or admitted to trading is open for
the transaction of business or, if the Common Stock is not listed or admitted to
trading on any national securities exchange, a Business Day.
"Transaction" has the meaning specified in Section 9(g).
<PAGE>
"Value Period" shall mean the ten (10) consecutive Trading Days ending on
the third Trading Day immediately preceding the applicable date.
IN WITNESS WHEREOF, Continental Cablevision, Inc. has caused this
Certificate to be duly executed in its corporate name as of the th day of [ ]
CONTINENTAL CABLEVISION, INC.
By___________________________
Attest:
____________________
<PAGE>
EXHIBIT F
---------
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and entered
into as of _________ __, 199_ among Continental Cablevision, Inc., a Delaware
corporation (the "Company"), and U S WEST, Inc., a Delaware corporation (the
"Holder").
RECITALS
--------
A. This Agreement is being entered into in connection with, and pursuant
to section [_.__] of, the Agreement and Plan of Merger, dated as of February 27,
1996, between the Company and the Holder (the "Merger Agreement").
B. The Company has heretofore entered into (i) a Registration Rights
Agreement dated as of June 22, 1992 with Corporate Partners, L.P. and certain
other signatories thereto and (ii) an amendment thereto dated as of July 15,
1992 (said Registration Rights Agreement and amendment are hereinafter referred
to as the "CP Agreement").
C. The Company has heretofore entered into a Registration Rights
Agreement dated as of July 15, 1992 with Boston Ventures Limited Partnership III
and certain other signatories thereto (said Registration Rights Agreement is
hereinafter referred to as the "BV Agreement").
D. The Company has heretofore entered into a Registration Rights
Agreement dated as of October 5, 1995 with The Providence Journal Company, as
Representative, and certain other signatories thereto (said Registration Rights
Agreement is hereinafter referred to as the "ProJo Agreement").
E. It is intended by the Company and the Holder that this Agreement shall
become effective immediately upon the issuance to the Holder of the [_________]
shares of Series D Convertible Preferred Stock, par value $.01 per share, of the
Company to be issued pursuant to Section [_.__] of the Merger Agreement (the
"Preferred Securities").
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
covenants contained herein, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Holder, intending to be legally bound, each hereby agrees as follows:
<PAGE>
ARTICLE 13.
REGISTRATION UNDER SECURITIES ACT
---------------------------------
Section 1.01 Registration Upon Request. (a) Request. Subject to the
------------------------- -------
provisions of this Agreement (including Section 4.11 hereof), upon the written
request of the Holder requesting that the Company effect the registration under
the Securities Act of Registrable Securities (as hereinafter defined), which
request shall specify in reasonable detail the number of Registrable Securities
to be registered and the intended method of distribution thereof, the Company
shall use its best efforts to register under the Securities Act (a "Demand
Registration"), including by means of a shelf registration pursuant to Rule 415
under the Securities Act if so requested in such request and if the Company is
then eligible to use such a registration, as expeditiously as may be
practicable, the Registrable Securities which the Company has been requested to
register by the Holder, all to the extent requisite to permit the disposition of
such Registrable Securities in accordance with the plan of distribution set
forth in the applicable registration statement. In the case of such Demand
Registration, the Holder must request registration of Registrable Securities
representing not less than such number of Registrable Securities the Expected
Proceeds of which, on the date of the aforementioned written request, would
equal at least $100 million unless such registration request is for all
remaining Registrable Securities.
(b) Registration of Other Securities. Whenever the Company shall effect
--------------------------------
a registration pursuant to this Section 1.01 in connection with an underwritten
offering by the Holder of Registrable Securities, no securities (other than
Registrable Securities) shall be included among the securities covered by such
registration if the managing underwriter, if any, of such offering shall have
advised the Holder and the Company in writing of its belief that the inclusion
of such other securities would substantially interfere with such offering.
(c) Registration Statement Form. Registrations under this Section 1.01
---------------------------
shall be on such appropriate registration form of the Commission as shall be
selected by the Company and available to it under the Securities Act. The
Company agrees to include in any such registration statement all information
which, in the opinion of counsel to the Holder and counsel to the Company, is
reasonably required to be included therein under the Securities Act.
(d) Limitations on Registration; Expenses. The Company will not be
-------------------------------------
required to effect more than two (2) Demand Registrations pursuant to this
Section 1.01. Subject to the provisions of Sections 1.01(h) and 1.02(b) hereof,
<PAGE>
the Company shall pay the Registration Expenses in connection with such Demand
Registration.
(e) Effective Registration Statement. Subject to the provisions of
--------------------------------
Section 1.01(i) hereof, a registration requested pursuant to this Section 1.01
shall not be deemed to have been effected (i) unless a registration statement
with respect thereto has become effective, (ii) if after it has become
effective, such registration is materially interfered with by any stop order,
injunction or similar order or requirement of the Commission or other
governmental agency or court for any reason not attributable to any of the
Holder and has not thereafter become effective, or (iii) if the conditions to
closing specified in the underwriting agreement, if any, entered into in
connection with such registration are not satisfied or waived, other than by
reason of a failure on the part of the Holder.
(f) Selection of Underwriters. In the case of such Demand Registration,
-------------------------
the selection of any managing underwriter(s) shall be made by the Company (with
the consent of the Holder, which consent shall not be unreasonably withheld),
provided, however, that (i) the Holder shall be entitled to select (with the
- -------- -------
consent of the Company, which consent shall not be unreasonably withheld) one
(1) managing underwriter other than the lead managing underwriter, and (ii) the
selection of the underwriters (other than the managing underwriter(s)) shall be
made by the mutual agreement of the Company and the Holder.
(g) Certain Requirements in Connection with Registration Rights. In the
-----------------------------------------------------------
case of such Demand Registration, if the Holder has determined to enter into one
or more underwriting agreements in connection therewith, no Person may
participate in such Demand Registration unless such Person agrees to sell his or
its securities on the basis provided in the underwriting arrangements and
completes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents which are reasonable and customary under the
circumstances.
(h) Priority in Demand Registration. If the managing underwriter of any
-------------------------------
underwritten offering shall advise the Company in writing (with a copy to the
Holder) that, in its opinion, the number of Registrable Securities requested to
be included in such registration exceeds the number which can be sold in such
offering within a price range acceptable to the Holder, the Company will reduce
to the number which the Company is so advised can be sold in such offering
within such price range (the "Actual Number of Securities to be Registered"),
the Registrable Securities requested to be included in such registration. If,
as a result of any such reduction, the number of Registrable Securities
requested to be included in such registration by the Holder of the Registrable
Securities is reduced by
<PAGE>
twenty-five percent (25%) or more, then notwithstanding anything to the contrary
contained in this Agreement, a Demand Registration in connection with such
registration will not be deemed to have been effected under Section 1.01(e)
hereof; provided, however, that the provisions of this sentence shall apply to
-------- -------
and be operative in respect of only the first request in writing made by the
Holder under this Section 1.01 for the registration of Registrable Securities.
In the case of such a registration which would have been deemed to be a Demand
Registration under Section 1.01(e) hereof but for the application of the
immediately preceding sentence of this Section 1.01(h), (i) the Company
nonetheless shall pay the Registration Expenses of the Holder in connection with
such registration, and (ii) no securities other than Registrable Securities
shall be covered by such registration.
(i) Certain Other Matters. For purposes of Section 1.01(e)(i) hereof,
---------------------
should a Demand Registration not become effective due to the failure of the
Holder to perform its obligations under this Agreement or the inability of the
Holder to reach agreement with the underwriters on price or other customary
terms for such transaction, or in the event the Holder 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, except as otherwise provided
in the last sentence of this Section 1.01(i), such Demand Registration shall be
deemed to have been effected. In such event, the Holder shall reimburse the
Company for all of the Registration Expenses (other than the Registration
Expenses referred to in clause (a) of the definition of Registration Expenses)
incurred by the Company in the preparation, filing and processing of such
registration. If such reimbursement is made within thirty (30) business days
following a request therefor, a Demand Registration shall not be deemed to have
been effected for purposes of this Section 1.01.
Section 1.02 Incidental Registration. (a) Rights to Include. Subject to
----------------------- -----------------
the provisions of this Agreement (including Section 4.11 hereof)and the rights
of the holders of the CP/BV Registrable Securities under the BV Agreement or the
CP Agreement, if at any time the Company proposes to register the offering for
cash of any shares of Class A Common Stock under the Securities Act on Form S-1,
S-2 or S-3 (or any successor or similar form thereto) for the account of the
Company, the Company shall furnish prompt written notice to the Holder of its
intention to effect such registration and the intended method of distribution in
connection therewith. Upon the written request of the Holder made to the Company
within fifteen (15) business days after the delivery of the aforementioned
notice by the Company, which request shall specify the number of shares of
Registrable Securities intended to be registered, the
<PAGE>
Company shall include such Registrable Securities in such registration, subject
however to the following sentence of this Section 1.02(a) and to the provisions
of Section 1.02(c) hereof. If the Company shall thereafter determine in its
sole discretion not to register or to delay the registration of such securities,
the Company may, at its election, provide written notice of such determination
to the Holder and, (i) in the case of a determination not to effect a
registration, shall thereupon be relieved of the obligation to register such
Registrable Securities (but, under such circumstances, the Company shall pay any
Registration Expenses reasonably incurred by the Holder until such time as the
Holder received the Company's written notice) and, (ii) in the case of a
determination to delay a registration, shall thereupon be permitted to delay
registering any Registrable Securities for the same period as the delay in
respect of securities being registered for the Company's own account. No
incidental registration effected pursuant to this Section 1.02 shall be deemed
to have been effected or otherwise relieve the Company of any of its obligations
to the Holder pursuant to Section 1.01 hereof.
(b) In connection with any incidental registration as provided in
Section 1.02(a) hereof, the Company shall pay the Registration Expenses for the
registration in question.
(c) Priority in Incidental Registrations. If the lead managing
------------------------------------
underwriter of any underwritten offering shall inform the Company by letter of
its belief that the number of Registrable Securities requested to be included in
such registration would substantially interfere with (including without
limitation adversely affect the pricing of) such offering, then the Company will
include in such registration, to the extent of the number and type which the
Company is so advised can be sold in (or during the time of) such offering
without such substantial interference, first, all securities proposed by the
Company to be sold for its own account, second, subject to the provisions of
Section 4.11 hereof, all securities of the Company ranking senior to or on a
parity with (as to rights to dividends and upon liquidation) the Company's
Series A Participating Convertible Preferred Stock ("Senior Securities") and
CP/BV Registrable Securities requested to be included in such registration (such
securities to be included in such registration pro rata on the basis of the
Expected Proceeds from the sale thereof), and third, any other securities of the
Company requested to be included in such registration.
Section 1.03 Registration Procedures. If and whenever the Company is
-----------------------
required by the provisions of this Agreement to effect or cause the registration
of any Registrable Securities under the Securities Act as provided in this
<PAGE>
Agreement, the Company shall, as expeditiously as practicable:
(a) In the case of a Demand Registration, use its best efforts to prepare
and file with the Commission and obtain the effectiveness of a registration
statement on such form as is available for the sale of Registrable Securities by
the Holder in accordance with the plan of distribution set forth in such
registration statement; provided, however, if a request for registration
-------- -------
pursuant to Section 1.01 hereof is made within sixty (60) days before the end of
the Company's fiscal year and the Company is not then eligible to effect a
registration under the Securities Act by use of Form S-3 (or other comparable
short-form registration statement), the Company shall be entitled to delay the
filing of such registration statement until the earlier of (i) such time as the
Company receives audited financial statements for such fiscal year and (ii) the
expiration of 90 days after the last day of such fiscal year; and provided,
--------
further, that if the Company shall furnish to the Holder a certificate signed by
- -------
the President of the Company stating that, in the good faith judgment of the
Board of Directors of the Company, it would be seriously detrimental to the
Company and its stockholders for such registration statement to be filed on the
date filing would be required under this Agreement because such registration
would require premature disclosure of any acquisition, corporate reorganization
or other material transaction involving the Company and that it is therefore
essential to defer taking action with respect to the filing of such registration
statement, then the Company may direct that such request for registration be
delayed for a period not to exceed ninety (90) days, such right to delay a
request to be exercised by the Company not more than once in any 12-month
period.
(b) Prepare and file with the Commission such amendments, post-effective
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 up to ninety (90) days (unless the Registrable
Securities registered thereunder have been sold or disposed of prior to the
expiration of such 90-day period); and to 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 time as such
registration statement is effective.
(c) Furnish to the Holder and each underwriter of the Registrable
Securities being sold, as the Holder and such underwriter may reasonably request
in order to facilitate the disposition of Registrable Securities in accordance
with the plan of distribution set forth in such registration statement, (i) such
number of copies (including manually executed and conformed copies) of such
registration
<PAGE>
statement and of each such amendment thereof and supplement thereto (including
all annexes, appendices, schedules and exhibits), (ii) such number of copies of
the prospectus used in connection with such registration statement (including
each preliminary prospectus and the final prospectus filed pursuant to Rule
424(b) under the Securities Act), and (iii) such other documents incident
thereto.
(d) Use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under the securities or "blue
sky" laws of such jurisdictions in which an exemption is not available as the
Holder and the managing underwriter shall reasonably request, and do any and all
other reasonable acts and things which may be necessary or advisable to permit
the offering and disposition of Registrable Securities in such jurisdictions in
accordance with the plan of distribution set forth in the registration
statement; provided, however, the Company shall not be required to qualify
-------- -------
generally to do business as a foreign corporation, subject itself to taxation,
or consent to general service of process, in any jurisdiction wherein it would
not, but for the requirements of this Section 1.03, be obligated to do so.
(e) Use its best efforts to cause the Registrable Securities covered by
such registration statement to be registered with, or approved by, such other
public, governmental or regulatory authorities as may be necessary in the
reasonable judgment of counsel for the Holder and the Company to facilitate the
disposition of such Registrable Securities in accordance with the plan of
distribution set forth in such registration statement.
(f) Notify the Holder and the managing underwriter, if any, promptly and,
if requested by any such Person, confirm such notification in writing, (i) when
a prospectus or any prospectus supplement has been filed with the Commission,
and, with respect to such registration statement or any post-effective amendment
thereto, when the same has been declared effective by the Commission, (ii) of
any request by the Commission for amendments or supplements to such registration
statement or related prospectus, or any written request by the Commission for
additional information, (iii) of the issuance by the Commission of any stop
order or the receipt of notice of the initiation of any proceedings for such or
a similar purpose (and the Company shall make every reasonable effort to obtain
the withdrawal of any such order at the earliest possible moment and the Holder
shall cooperate in all reasonable respects in such efforts), (iv) of the receipt
by the Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale in any jurisdiction
or the receipt of notice of the initiation or threatening of any proceeding for
such purpose (and the Company shall make every reasonable effort to
<PAGE>
obtain the withdrawal of any such suspension at the earliest possible moment and
the Holder shall cooperate in all reasonable respects in such efforts), (v) of
the occurrence of any event during the period when a prospectus with respect to
the Registrable Securities is required to be delivered under the Securities Act
which requires the making of any changes to such registration statement or
related prospectus so that such documents will not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading (and the Company shall
promptly prepare and furnish to the Holder and any managing underwriter a
reasonable number of copies of a supplemented or amended prospectus or
preliminary prospectus such that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus or preliminary prospectus shall not
include an untrue statement of a material fact or omit 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 are made, not misleading), and (vi)
of the Company's determination that the filing of a post-effective amendment to
such registration statement shall be necessary or appropriate. The Holder shall
be deemed to have agreed by its acquisition of Registrable Securities that upon
the receipt of any notice from the Company of the occurrence of any event of the
kind described in clause (v) of this Section 1.03(f), the Holder shall forthwith
discontinue the Holder's offer and disposition of Registrable Securities until
the Holder shall have received copies of an appropriately supplemented or
amended prospectus or preliminary prospectus and, if so directed by the Company,
shall deliver to the Company, at its expense, all copies (other than permanent
file copies) of the prospectus or preliminary prospectus covering such
Registrable Securities which are then in the Holder's possession. In the event
the Company shall provide any notice of the type referred to in the preceding
sentence, the 90-day period mentioned in Section 1.03(b) hereof shall be
extended by the number of days from and including the date such notice is
provided to and including the date when each seller of any Registrable
Securities covered by such registration statement and the managing underwriter
shall have received copies of the corrected prospectus contemplated by clause
(v) of this Section 1.03(f), plus an additional seven (7) days. The
underwriters or, if there are no underwriters, the Holder shall deliver such
supplemented or amended prospectus or preliminary prospectus to all purchasers
or offerees of the Registrable Securities sold by it to which such delivery may
be required or advisable under the Securities Act and any applicable state
securities or "blue sky" laws.
(g) Otherwise use its best efforts in connection with each registration
and offering of Registrable
<PAGE>
Securities 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.
(h) Use its best efforts to cause all such Registrable Securities covered
by such registration statement to be listed on each securities exchange on which
the same class of securities issued by the Company are then listed, if the
listing of such Registrable Securities is then permitted under the rules and
regulations of such exchange and, if requested by the Holder, cause all such
Registrable Securities that are of a different class or series than those
Company securities already listed or traded to be listed on one (but not more
than one) securities exchange reasonably requested by the Holder.
(i) Engage and provide a transfer agent and registrar for all Registrable
Securities covered by such registration statement not later than the effective
date of such registration statement.
(j) Furnish to the Holder a signed counterpart of an opinion from counsel
to the Company, and a "cold comfort" letter from the Company's independent
certified public accounting firm covering such matters of the type customarily
covered by such opinions and "cold comfort" letters as any managing underwriter
and the Holder shall reasonably request.
(k) 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 Holder, by any managing underwriter or
other underwriters participating in any disposition of Registrable Securities,
and by any attorney, accountant or other agent, representative or advisor
retained by any such seller or underwriters, all pertinent financial and other
records and corporate documents of the Company; and cause all of the Company's
officers, directors and employees to discuss pertinent aspects of the Company's
business with the Holder and any such underwriter, accountant, agent,
representative or advisor in connection with such registration statement;
provided, however, that the Company shall not be obligated pursuant to this
- -------- -------
Section 1.03(k) to provide access to any information which it reasonably
considers to be a trade secret or similar confidential information.
(l) Permit the Holder, if the Holder, 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
<PAGE>
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 Holder and its counsel, is required to be included therein; and
(m) If any registration statement refers to the Holder by name or
otherwise as the holder of any securities of the Company, and if the Holder
reasonably believes it is or may be deemed to be a control person in relation
to, or an Affiliate of, the Company, then the Holder shall have the right to
require (i) the insertion in such registration statement of language, in form
and substance reasonably satisfactory to the Holder, to the effect that the
ownership by the Holder of such securities is not to be construed as and is not
intended to be a recommendation by the Holder 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
Holder will assist in meeting any future financial or operating requirements of
the Company, or (ii) in the case where the reference to the Holder 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 Holder.
Section 1.04 Underwritten Offerings. (a) Requested Underwritten Offerings.
---------------------- --------------------------------
If requested by the underwriters for any underwritten offering by the Holder of
Registrable Securities pursuant to a Demand Registration, the Company and the
Holder will use their best efforts to enter into an underwriting agreement with
such underwriters for such offering, such agreement (i) to be reasonably
satisfactory in substance and form to the Company, the Holder and the
underwriters and (ii) to contain such representations and warranties by the
Company and such other terms as are reasonable and customary in the
circumstances on the part of an issuer in agreements of that type, including,
without limitation, indemnities to the effect and to the extent provided in
Article 2 hereof. The Holder shall cooperate with the Company in the negotiation
of the underwriting agreement, and shall be party to such underwriting agreement
and may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Company to and for
the benefit of such underwriters shall also be made to and for the benefit of
the Holder and that any or all of the conditions precedent to the obligations of
such underwriters under such underwriting agreement be conditions precedent to
the obligations of the Holder. The Company shall notify the Holder if at any
time the representations and warranties contemplated by such underwriting
agreement cease to be true and correct in all material respects. The Holder
shall not be required to make any representations or warranties to or agreements
with the Company other than representations,
<PAGE>
warranties or agreements regarding the Holder, the Holder's Registrable
Securities and the Holder's intended method of distribution as otherwise
required by law.
(b) Incidental Underwritten Offerings. If the Company proposes to
---------------------------------
register any of its securities under the Securities Act as contemplated by
Section 1.02 hereof and such securities are distributed by or through one or
more underwriters, the Holder of Registrable Securities to be distributed by
such underwriters shall be party to the underwriting agreement between the
Company and such underwriters and may, at its option, require that any or all of
the representations and warranties by, and the other agreements on the part of,
the Company to and for the benefit of such underwriters shall also be made to
and for the benefit of the Holder and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of the Holder. The Company
shall notify the Holder if at any time the representations and warranties
contemplated by such underwriting agreement cease to be true and correct in all
material respects. The Holder shall not be required to make any representations
or warranties to or agreements with the Company or the underwriters other than
representations, warranties or agreements regarding the Holder, the Holder's
Registrable Securities and the Holder's intended method of distribution or as
otherwise required by law.
(c) Limitations on Sale or Distribution of Other Securities. Anything
-------------------------------------------------------
herein to the contrary notwithstanding (including Section 1.01(a) hereof), if
the Company shall file a registration statement with respect to any of the
Company's securities, whether or not for its own account, by means of an
underwritten offering, the Holder agrees not to effect any public sale or
distribution of any Registrable Securities, including any resale pursuant to
Rule 144 under the Securities Act, and to use the Holder's best efforts not to
effect any such public sale or distribution (other than as part of such
underwritten offering) of any other securities which, with notice, lapse of time
and/or payment of monies, are exchangeable or exercisable for or convertible
into any Registrable Securities, during the 15-day period prior to, and during
the 120-day period (or such longer period as shall have been requested by the
managing underwriters) commencing on, the effective date of the registration
statement filed with the Commission in connection with such underwritten
offering.
(d) In order to ensure compliance with the provisions of Section 1.04(c)
hereof, the Company hereby agrees to notify the Holder as to the status and
proposed effective date of any registration statement of the Company which is
filed with the Commission.
<PAGE>
(e) The Company hereby agrees not to effect, except pursuant to employee
benefit plans, any public sale or distribution of any securities of the same
class as (or otherwise similar to) the Registrable Securities, 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 1.01 of this Agreement,
except to the extent otherwise required by the CP Agreement, the BV Agreement or
the ProJo Agreement.
(f) Without limiting the generality of the foregoing, the provisions of
Section 1.04(c) hereof shall not apply to the Holder if the Holder is prevented
by statute or other applicable regulation from agreeing to such provisions.
Section 1.05 Certain Agreements of the Company and Holder. (a) The
--------------------------------------------
Holder, in connection with any registration of Registrable Securities, shall
furnish to the Company such information regarding the Holder and the plan of
distribution proposed by the Holder as the Company may reasonably request and as
shall reasonably be required in connection with any registration, qualification
or compliance referred to in this Agreement. In the case of a Demand
Registration, the Company agrees that any plan of distribution included in the
registration statement (which plan relates to the Holder) shall be as reasonably
specified by the Holder.
If requested by the Company, information with respect to the Holder
required, in the opinion of counsel for the Company, to be included pursuant to
the Securities Act in any registration statement or prospectus for an offering
of Registrable Securities shall be furnished to the Company promptly by the
Holder in writing in a form specifically and expressly for use in such
registration statement or prospectus.
(b) If at the time of any transfer of any Registrable Securities, such
Registrable Securities shall not have been theretofore registered under the
Securities Act, the Company may require, as a condition of allowing such
transfer, that the Holder or the Holder's transferee furnish to the Company (i)
such information as is necessary in order to establish that such transfer may be
made without registration under the Securities Act; and (ii) at the expense of
the Holder or the Holder's transferee, an opinion of legal counsel designated by
the Holder or the Holder's transferee to the effect that such transfer may be
made without registration under the Securities Act, except that nothing
contained in this Section 1.05(b) shall relieve the
<PAGE>
Company from complying with any request for registration, qualification or
compliance made pursuant to the other provisions of this Agreement.
(c) The Holder agrees that it will keep confidential and will not
disclose or divulge any confidential, proprietary or secret information that the
Holder may obtain from the Company, and that the Company has marked
"Confidential", "Proprietary" or "Secret" or has otherwise identified as being
such, pursuant to financial information, reports and other materials and
discussions with officers, directors, employees or agents made available by the
Company as required hereunder unless such information is or becomes known to the
Holder from a Person other than the Company (other than as a result of a breach
of a duty of confidentiality owed to the Company by such Person) or is or
becomes publicly known other than as a result of a breach of this provision, or
unless the Company gives its written consent to the Holder's release of such
information, except that no such written consent shall be required (and the
Holder shall be free to release such information) if such information is to be
provided to the Holder's counsel or accountant, or to an officer, director,
employee, advisor or partner of the Holder, provided that the Holder shall
--------
inform the recipient of the confidential nature of such information, and shall
require the recipient to treat the information as confidential to the same
extent as the Holder.
(d) The Holder agrees to perform any further acts and to execute and
deliver any further documents that may reasonably be requested or necessary to
confirm, or to carry out, the provisions of this Agreement (including the
provisions of Article 2 of this Agreement).
ARTICLE 14.
INDEMNIFICATION
---------------
Section 2.01 Indemnification. (a) With respect to each registration of
---------------
Registrable Securities pursuant to this Agreement, the Company hereby
indemnifies, to the fullest extent permitted by law, the Holder, its officers
and directors, if any, and each Person, if any, who controls the Holder within
the meaning of section 15 of the Securities Act and section 20 of the Exchange
Act, against all losses, claims, damages, liabilities (or proceedings in respect
thereof) and reasonable expenses (under the Securities Act, common law and
otherwise), joint or several, caused by (i) any untrue statement or alleged
untrue statement of a material fact contained in the applicable registration
statement or prospectus or any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light (in the case of a prospectus) of the circumstances
<PAGE>
under which they were made, not misleading, or (ii) any untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or any omission or alleged omission to state therein a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading if used prior to the effective date
of such registration statement (unless such statement or omission is corrected
in the final prospectus and the Company has previously furnished copies thereof
to the Holder included in such registration which is seeking such
indemnification and to the underwriters of the registration in question);
provided, however, that such indemnification shall not extend to any such
- -------- -------
losses, claims, damages, liabilities (or proceedings in respect thereof) or
expenses which are caused (x) by any untrue statement or alleged untrue
statement contained in, or by any omission or alleged omission from, information
furnished in writing to the Company by the Holder or any underwriter thereof
specifically and expressly for use in any such registration statement or
prospectus or (y) any failure by the Holder or any underwriter to deliver a
prospectus or preliminary prospectus (or amendment or supplement thereto) as and
when required under the Securities Act after such prospectus has been timely
furnished by the Company.
(b) In the case of an underwritten offering in which the registration
statement covers Registrable Securities, the Company agrees to indemnify the
underwriters, their officers and directors, if any, and each Person, if any, who
controls such underwriters within the meaning of section 15 of the Securities
Act and section 20 of the Exchange Act, to the extent customary in the
circumstances for an issuer in an underwritten public offering.
(c) In connection with any written information furnished to the Company
or any underwriter of any underwritten offering specifically and expressly for
use in a registration statement with respect to the Holder, the Holder hereby
indemnifies severally (but not jointly), to the fullest extent permitted by law,
the Company, its officers and directors and each Person, if any, who controls
the Company within the meaning of section 15 of the Securities Act and section
20 of the Exchange Act, against any losses, claims, damages, liabilities (or
proceedings in respect thereof) and expenses caused by (i) any untrue statement
or alleged untrue statement of a material fact contained in the applicable
registration statement, prospectus or preliminary prospectus or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light (in the case of a
prospectus) of the circumstances under which they were made, not misleading;
provided, however, that the indemnification set forth in
- -------- -------
<PAGE>
this Section 2.01(c) shall only apply if, and the Holder shall be liable
hereunder if and only to the extent that, any such loss, claim, damage or
liability arises solely out of or is based solely upon an untrue statement or
alleged untrue statement or omission or alleged omission, made in reliance upon
and in conformity with information pertaining to the Holder, which is furnished
in writing to the Company or any underwriter of any underwritten offering by the
Holder expressly for use in any such registration statement or prospectus.
(d) In the case of an underwritten offering of Registrable Securities,
the Holder shall agree to indemnify such underwriters, their officers and
directors, if any, and each Person, if any, who controls such underwriters
within the meaning of section 15 of the Securities Act and section 20 of the
Exchange Act, to the extent customary in the circumstances for a selling
stockholder in an underwritten public offering.
Section 2.02 Notices of Claims. (a) Any Person seeking indemnification
-----------------
under the provisions of this Article 2 shall, promptly after receipt by such
Person of notice of the existence of such claim or of the commencement of any
action, suit, claim or proceeding, notify each party against whom
indemnification is to be sought in writing of the existence or commencement
thereof; provided, however, the failure so to notify an indemnifying party shall
-------- -------
not relieve the indemnifying party from any liability which it may have under
this Article 2 or from any liability which the indemnifying party may otherwise
have (except if and to the extent that it has been prejudiced in any material
respect by such failure). In case any such action, suit, claim or proceeding is
brought against any indemnified party, and it notifies an indemnifying party of
the commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent it may elect by written notice delivered
to the indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party, except as otherwise provided in Section
2.02(c) hereof. Upon delivery of such notice by the Company (if it is the
indemnifying party) to such indemnified party and approval of such counsel by
such indemnified party, the Company will not be liable under this Article 2 for
any legal or other expenses subsequently incurred by the Holder in connection
with the defense of such action, suit, claim or proceeding, except as otherwise
provided in Section 2.02(b) hereof.
(b) Notwithstanding the foregoing, the indemnified party shall have the
right to employ its own counsel in any such case, but the fees and expenses of
such counsel shall be at the expense of such indemnified party unless (i) the
employment of such counsel shall have been authorized in
<PAGE>
writing by the indemnifying party in connection with the defense of such suit,
action, claim or proceeding, (ii) the indemnifying party shall not have employed
counsel (reasonably satisfactory to the indemnified party) to take charge of the
defense of such action, suit, claim or proceeding within a reasonable time after
notice of commencement of the action, suit, claim or proceeding, or (iii) such
indemnified party shall have reasonably concluded that there may be defenses
available to it which are different from or additional to those available to the
indemnifying party which, if the indemnifying party and the indemnified party
were to be represented by the same counsel, could result in a conflict of
interest for such counsel or materially prejudice the prosecution of the
defenses available to such indemnified party. If any of the events specified in
clauses (ii) or (iii) of the preceding sentence shall have occurred or such
clauses shall otherwise be applicable, then the fees and expenses of one counsel
or firm of counsel, plus one local or regulatory counsel or firm of counsel,
selected by a majority in interest of the indemnified parties shall be borne by
the indemnifying party.
(c) If, in any case, the indemnified party employs separate counsel, the
indemnifying party shall not have the right to direct the defense of such
action, suit, claim or proceeding on behalf of the indemnified party.
(d) Anything in this Article 2 to the contrary notwithstanding, an
indemnifying party shall not be liable for any settlement or compromise of, or
consent to entry of any judgment with respect to, any action, suit, claim or
proceeding effected without its prior written consent (which consent in the case
of an action, suit, claim or proceeding exclusively seeking monetary relief
shall not be unreasonably withheld). Such indemnification shall remain in full
force and effect irrespective of any investigation made by or on behalf of an
indemnified party.
Section 2.03 Contribution. (a) If the indemnification from the
------------
indemnifying party as provided in this Article 2 is unavailable or is otherwise
insufficient to hold harmless an indemnified party 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 indemnified parties in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations,
subject to the provisions of Section 2.03(b) hereof. The relative fault of such
indemnifying party shall be determined by reference to,
<PAGE>
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 parties, 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, subject to the
limitations set forth in Section 2.02 hereof, 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 Article 2 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 2.03(a).
Notwithstanding the provisions of this Section 2.03, no underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities underwritten by it and offered to the
public exceeds the amount of any damages for which such underwriter has
otherwise been held liable by reason of such untrue statement or alleged untrue
statement or omission or alleged omission; and the Holder shall not be required
to contribute any amount in excess of the amount by which the total price at
which the Registrable Securities offered to the public exceeds the amount of any
damages for which the Holder has otherwise been held liable by reason of such
untrue statement or alleged untrue statement or omission or alleged omission.
(b) 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.
(c) If indemnification is available under this Article 2, the
indemnifying parties shall indemnify each indemnified party to the fullest
extent provided in Section 2.01 and Section 2.02 hereof without regard to the
relative fault of said indemnifying party or indemnified party or any other
equitable consideration provided for in this Section 2.03.
Section 2.04 Indemnification Payments. The indemnification and
------------------------
contribution required by this Article 2 shall be made by periodic payments of
the amount thereof during the course of the investigation or defense, as and
when bills are received or expense, loss, damage or liability is incurred.
ARTICLE 15.
<PAGE>
CERTAIN DEFINITIONS
-------------------
As used herein, the following terms have the following respective meanings:
"Affiliate" shall have the meaning specified for "affiliate" in Rule 12b-2
under the Exchange Act.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Class A Common Stock" shall mean Class A Common Stock, par value $.01 per
share, of the Company.
"CP/BV Registrable Securities" shall mean the securities of the Company
which are defined as "Registrable Securities" under either the CP Agreement or
the BV Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.
"Expected Proceeds" shall mean, as of any date, the aggregate proceeds that
would be expected to be received by a holder of securities from the sale of such
securities in an offering made on such date (without being reduced by any pro
forma expenses or underwriting discounts). The determination of Expected
Proceeds shall be made (a) if the offering is intended to be made in an
underwritten public offering, then by the intended managing underwriter of such
offering or (b) if the offering is not intended to be made in an underwritten
public offering, then by investment bankers mutually agreeable to the Company
and the Holder, the fees and expenses of which shall be paid by the Company.
"Person" shall mean a corporation, an association, a partnership, an
organization, a business, an individual, a governmental or political subdivision
thereof or a governmental agency.
"Register", "registered" and "registration" shall mean a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act and the declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean, subject to the provisions of Sections
4.02(b) and 4.11 hereof, any and all shares of Class A Common Stock issued or
issuable upon conversion of the Preferred Securities. As to any particular
Registrable Securities, such securities shall cease to constitute Registrable
Securities when (i) a registration statement with respect to the sale of such
<PAGE>
securities shall have been declared effective under the Securities Act and such
securities shall have been disposed of in accordance with the methods
contemplated by the registration statement, (ii) such securities (or the
Preferred Securities that are convertible into such securities) shall have been
sold in satisfaction of all applicable conditions to the resale provisions of
Rule 144 under the Securities Act (or any successor provision thereto), (iii)
such securities (or the Preferred Securities that are convertible into such
securities) shall have been otherwise transferred except to a permitted assignee
pursuant to Section 4.02(b) hereof, or (iv) such securities shall have been
issued upon conversion of the Preferred Securities and thereafter shall have
ceased to be issued and outstanding.
"Registration Expenses" shall mean all expenses incident to the Company's
performance of or compliance with Article 1, including, without limitation, (a)
any allocation of salaries and expenses of Company personnel or other general
overhead expenses of the Company, or other expenses for the preparation of
historical and pro forma financial statements or other data normally prepared by
the Company in the ordinary course of business; (b) all registration,
application, filing, listing, transfer and registrar fees; (c) all NASD fees and
fees and expenses of registration or qualification of Registrable Securities
under state securities or "blue sky" laws pursuant to Section 1.03(d) hereof;
(d) all word processing, duplicating and printing expenses, messenger and
delivery expenses; (e) the fees and disbursements of counsel for the Company and
of its independent public accountants, including the expenses of customary "cold
comfort" letters required by or incident to such performance and compliance; and
(f) any fees and disbursements of underwriters and broker-dealers customarily
paid by issuers or sellers of securities; provided, however, Registration
-------- -------
Expenses shall exclude, and the sellers of the Registrable Securities being
registered shall pay, the fees and disbursements of counsel to such sellers, and
underwriting discounts and commissions and transfer taxes in respect of the
Registrable Securities being registered and, to the extent such laws prohibit
the Company from paying such expenses on behalf of the Holder, expenses of
registering or qualifying Registrable Securities under state securities or blue
sky laws.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
ARTICLE 16.
MISCELLANEOUS
-------------
<PAGE>
Section 4.01 Rule 144. If the Company shall have filed with the
--------
Commission and obtained the effectiveness of a registration statement covering
the Company's equity securities pursuant to the requirements of section 12 of
the Exchange Act or pursuant to the requirements of the Securities Act, the
Company agrees that it shall timely file the reports required to be filed by it
under the Securities Act or the Exchange Act (including, without limitation, the
reports under sections 13 and 15(d) of the Exchange Act referred to in paragraph
(c)(1) of Rule 144 under the Securities Act), and shall take such further
actions as the Holder may reasonably request, all to the extent necessary to
enable the Holder to sell Registrable Securities, from time to time, pursuant to
the resale limitations of (a) Rule 144 under the Securities Act, as such rule
may be hereafter amended, or (b) any similar rules or regulations hereafter
adopted by the Commission. Upon the written request of the Holder, the Company
shall deliver to the Holder a written statement verifying that it has complied
with such requirements.
Section 4.02 Assignment. (a) This Agreement shall be binding upon and
----------
inure to the benefit of and be enforceable by the Company and the Holder and,
with respect to the Company, its respective successors and assigns.
(b) The rights of the Holder to cause the Company to register Registrable
Securities under Sections 1.01 and 1.02 hereof may not be assigned or otherwise
conveyed, whether directly or indirectly or by operation of law or otherwise, to
any Person, including any transferee or assignee of any of the Preferred
Securities or the Registrable Securities; provided, however, that the Holder
-------- -------
shall have the right to assign, on one and only one occasion (whether by
instrument of assignment, operation of law or otherwise), to a third party any
of its rights to require the Company to register Registrable Securities under
Section 1.01 or 1.02 hereof in connection with a transfer by the Holder of more
than fifty percent (50%) of the aggregate number of Registrable Securities
(adjusted appropriately to reflect any stock dividends, splits, combinations,
exchange, reorganization, recapitalization or reclassification involving the
Class A Common Stock or resulting from a merger or consolidation or similar
business combination transaction involving the Company after the date hereof)
issuable at the date hereof upon conversion of the Preferred Securities,
provided that such third party shall have executed and delivered to the Company
a written agreement, in form and substance reasonably satisfactory to the
Company, by which such third party shall have agreed to become party to and
bound by the terms and conditions of this Agreement as though it were the
Holder.
Section 4.03 Notices. Except as otherwise provided below, whenever it is
-------
provided in this Agreement that any
<PAGE>
notice, demand, request, consent, approval, declaration or other communication
shall or may be given to or served upon the Company, the Holder, or whenever the
Company or the Holder desires to provide to or serve upon any Person any other
communication with respect to this Agreement, each such notice, demand, request,
consent, approval, declaration or other communication shall be in writing and
either shall be delivered in person with receipt acknowledged or sent by
registered or certified mail (return receipt requested, postage prepaid), or by
overnight mail, courier, or delivery service or by telecopy and confirmed by
telecopy answerback, addressed as follows:
(a) If to the Company, to:
---------------------
Attention: Vice President and Treasurer
---------
- With a copy to -
Sullivan & Worcester
One Post Office Square
Boston, Massachusetts 02109
Telephone: (617) 338-2800
Telecopy: (617) 338-2880
Attention: Patrick K. Miehe, Esq.
---------
(b) If to the Holder, to:
----------------
- With a copy to -
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
Attention: Dennis J. Block, Esq.
---------
or at such other address as may be substituted by it by notice delivered as
provided herein. The furnishing of any notice required hereunder may be waived
in writing by the
<PAGE>
party entitled to receive such notice. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall be deemed to have
been duly delivered, furnished or served on (i) the date on which personally
delivered, with receipt acknowledged, (ii) the date on which telecopied and
confirmed by telecopy answerback, (iii) the next business day if delivered by
overnight or express mail, courier or delivery service, or (iv) three business
days after the same shall have been deposited in the United States mail, as the
case may be. Failure or delay in delivering copies of any notice, demand,
request, consent, approval, declaration or other communication to the persons
designated above to receive copies shall in no way adversely affect the
effectiveness of such notice, demand, request, consent, approval, declaration or
other communication.
Section 4.04 Entire Agreement; Amendment. This Agreement represents the
---------------------------
entire agreement and understanding among the parties hereto with respect to the
subject matter hereof and supersedes any and all prior oral and written
agreements, arrangements and understandings among the parties hereto with
respect to such subject matter; and can be amended, supplemented or changed, and
any provision hereof can be waived, only by a written instrument making specific
reference to this Agreement signed by the Company and the Holder.
Section 4.05 Paragraph Headings, etc. The paragraph headings contained in
-----------------------
this Agreement are for general reference purposes only and shall not affect in
any manner the meaning, interpretation or construction of the terms or other
provisions of this Agreement. The terms "including", "includes" and "included"
shall not be limiting.
Section 4.06 Applicable Law. This Agreement shall be governed by,
--------------
construed and enforced in accordance with the laws of The Commonwealth of
Massachusetts, applicable to contracts to be made, executed, delivered and
performed wholly within such state and, in any case, without regard to the
conflicts of law principles of such state.
Section 4.07 Severability. If at any time subsequent to the date hereof,
------------
any provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of such provision shall
have no effect upon and shall not impair the enforceability of any other
provision of this Agreement.
Section 4.08 Equitable Remedies. The parties hereto agree that
------------------
irreparable harm would occur in the event that any of the agreements and
provisions of this Agreement were not performed fully by the parties hereto in
accordance with their specific terms or conditions or were otherwise
<PAGE>
breached, and that money damages are an inadequate remedy for breach of this
Agreement because of the difficulty of ascertaining and quantifying the amount
of damage that will be suffered by the parties hereto in the event that this
Agreement is not performed in accordance with its terms or conditions or is
otherwise breached. It is accordingly hereby agreed that the parties hereto
shall be entitled to an injunction or injunctions to restrain, enjoin and
prevent breaches of this Agreement by the other parties and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, such remedy being in addition to and not in
lieu of, any other rights and remedies to which the other parties are entitled
to at law or in equity.
Section 4.09 No Waiver. The failure of any party at any time or times to
---------
require performance of any provision hereof shall not affect the right at a
later time to enforce the same. No waiver by any party of any condition, and no
breach of any provision, term, covenant, representation or warranty contained in
this Agreement, whether by conduct or otherwise, in any one or more instances,
shall be deemed to be construed as a further or continuing waiver of any such
condition or of the breach of any other provision, term, covenant,
representation or warranty of this Agreement.
Section 4.10 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute but one and the same original instrument.
Section 4.11 Special Limitation and Termination of Registration Rights.
---------------------------------------------------------
Anything in this Agreement to the contrary notwithstanding:
(a) The obligations of the Company to the Holder with respect to its
rights of registration provided for in Sections 1.01 and 1.02 hereof shall cease
and terminate upon the earlier of (i) six (6) years after the date hereof and
(ii) the date on which the aggregate number of Registrable Securities issued and
outstanding (or issuable and which would be outstanding upon conversion of the
Preferred Securities) shall no longer exceed one third (1/3) of the aggregate
number of shares (adjusted appropriately downward or upward to reflect any stock
dividends, splits, combinations, exchange, reorganization, recapitalization or
reclassification involving Class A Common Stock of the Company or pursuant to a
merger or consolidation or similar transaction involving the Company or the like
after the date hereof) of Registrable Securities issuable at the date hereof
upon conversion of the Preferred Securities.
(b) The rights of registration provided for in Sections 1.01 and 1.02
hereof are subject to and limited by the terms and provisions of Article XIII of
the Restated By-
<PAGE>
Laws of the Company effective as of May 14, 1992, as amended through the date
hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized as of the
date first above written.
CONTINENTAL CABLEVISION, INC.
By:________________________________
Name:
Title:
U S WEST, INC.
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
CONTINENTAL CABLEVISION, INC.
Under Sections 242 and 245
of the
Delaware General Corporation Law
CONTINENTAL CABLEVISION, INC. (hereinafter the "Corporation"), a
corporation organized and existing under the laws of the State of Delaware,
hereby certifies as follows:
FIRST: The name of the Corporation is Continental Cablevision, Inc.
-----
SECOND: The original Certificate of Incorporation of the Corporation was
------
filed with the Secretary of State, Dover, Delaware, on May 29, 1963.
THIRD: This Restated Certificate of Incorporation restates, integrates and
-----
further amends the provisions of the Certificate of Incorporation of the
Corporation as heretofore amended, restated or supplemented.
FOURTH: This Restated Certificate of Incorporation is intended to
------
constitute a tax-free recapitalization of the Corporation under Section
368(a)(1)(E) of the Internal Revenue Code of 1986, as amended.
FIFTH: This Restated Certificate of Incorporation was duly adopted by the
-----
Board of Directors and stockholders of the Corporation pursuant to Sections 242
and 245 of the Delaware General Corporation Law.
SIXTH: The text of this Restated Certificate of Incorporation of the
-----
Corporation as amended, restated and
<PAGE>
supplemented is hereby restated and further amended to read in its entirety as
follows:
-2-
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
CONTINENTAL CABLEVISION, INC.
FIRST: The name of the corporation (hereinafter the "Corporation") is
-----
CONTINENTAL CABLEVISION, INC.
SECOND: The respective names of the County and of the City within the
------
County in which the registered office of the Corporation is located in the State
of Delaware are the County of Kent and the City of Dover. The name of the
registered agent of the Corporation is The Prentice-Hall Corporation System,
Inc. The street and number of said registered office and the address by street
and number of said registered agent is 32 Loockerman Square, Suite L-100, Dover,
Kent County, Delaware 19901.
THIRD: The nature of the business of the Corporation and the objects or
-----
purposes to be transacted, promoted or carried on by it are as follows: To
engage in any lawful act or activity for which corporations may be organized
under the Delaware General Corporation Law.
FOURTH: The aggregate number of shares of all classes of stock which the
------
Corporation is authorized to issue is 825,000,000 shares, of which 200,000,000
shall be shares of Preferred Stock, $.01 par value per share (the "Preferred
Stock"), and 625,000,000 shall be shares of Common Stock, $.01 par value per
share (the "Common Stock"), of which 425,000,000 shall be shares of Class A
Common Stock, $.01 par value per share (the "Class A Common Stock"), and
200,000,000 shall be shares of Class B Common Stock, $.01 par value per share
(the "Class B Common Stock").
On the effective date of this Restated Certificate of Incorporation, each
issued share of the Corporation's existing common stock, par value $.01,
outstanding as of said effective date (the "Existing Common Stock") shall,
without any action on the part of the holders thereof, be reclassified and
changed into one fully paid and nonassessable share of Class A Common Stock, and
the aggregate amount of stated capital represented by such shares of Class A
Common Stock shall be equal to the aggregate amount of stated capital
represented by the shares of Existing Common Stock so reclassified and changed.
-3-
<PAGE>
Any and all such shares issued for which the full consideration has been
paid or delivered, shall be deemed fully paid stock and the holders of such
shares shall not be liable for any further call or assessment or any other
payment thereon.
No holder of any of the shares of stock of this Corporation, whether now or
hereafter authorized or issued, shall be entitled as of right to purchase or
subscribe for (1) any unissued stock of any class, or (2) any additional share
of any class to be issued by reason of any increase of the authorized stock of
the Corporation of any class, or (3) bonds, certificates of indebtedness,
debentures or other securities convertible into stock of the Corporation or
carrying any right to purchase stock of any class of the Corporation, but any
such unissued stock or additionally authorized issue of any stock or other
securities convertible into stock of the Corporation may be issued and disposed
of pursuant to resolution of the Board of Directors to such persons, firms,
corporations, associations or other entities and upon such terms as may be
deemed advisable by the Board of Directors in the exercise of its discretion.
Every reference in this Restated Certificate of Incorporation to a majority
or other portion of shares of stock, including the provisions set forth in
Articles NINTH and TENTH below, shall refer to such majority or other portion of
the votes of such shares of stock.
Preferred Stock. The Board of Directors is expressly authorized to provide
---------------
for the issuance of all or any shares of the Preferred Stock in one or more
classes or series, and to fix for each such class or series such voting powers,
full or limited, or no voting powers, and such distinctive designations,
preferences and relative, participating, optional or other special rights and
such qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series and as may be permitted by
the Delaware General Corporation Law, including, without limitation, the
authority to determine with respect to the shares of any such class or series
(i) whether such shares shall be redeemable, and, if so, the terms and
conditions of such redemption, including the date or dates upon or after which
they shall be redeemable, and the amount per share payable in case of
redemption, which amount may vary under different conditions and at different
redemption dates; (ii) whether such shares shall be entitled to receive
dividends (which may be cumulative or non-cumulative) and, if so, the rates and
conditions of such dividends, including the times at which such dividends are
-4-
<PAGE>
payable and the preferences in relation to the dividends payable on any other
class or classes or any other series of the same or any other class or classes
of stock; (iii) the rights of such shares in the event of voluntary or
involuntary liquidation, dissolution or winding up of the Corporation, and the
relative rights of priority, if any, of payment of such shares; (iv) whether
such shares shall be convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock, and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in such events as the
Board of Directors shall determine; (v) whether the class or series shall have a
sinking fund for the redemption or purchase of such shares, and, if so, the
terms and amount of such sinking fund; and (vi) any other relative rights,
preferences or limitations.
Common Stock. Subject to all the rights which may be granted to holders of
------------
the Preferred Stock and except as otherwise required by applicable law, the
relative voting, dividend, liquidation and other rights, preferences and
limitations or restrictions of the Class A Common Stock and the Class B Common
Stock are as follows:
A. Voting Rights and Powers. Except as otherwise provided in this
------------------------
Restated Certificate of Incorporation, with respect to all matters upon which
stockholders are entitled to vote, the holders of the outstanding shares of
Class A Common Stock shall be entitled to one vote in person or by proxy for
each share of Class A Common Stock standing in the name of such stockholders on
the record of stockholders, and the holders of the outstanding shares of Class B
Common Stock shall be entitled to ten votes in person or by proxy for each share
of Class B Common Stock standing in the name of such stockholders on the record
of stockholders. Except as otherwise required by applicable law or any other
provision of this Restated Certificate of Incorporation, holders of Class A
Common Stock and Class B Common Stock shall vote together as a single class on
all matters submitted to the stockholders for a vote, including any amendment to
this Restated Certificate of Incorporation which would increase or decrease the
number of authorized shares of Class A Common Stock and Class B Common Stock,
subject to any voting rights which may be granted to holders of Preferred Stock.
B. Dividends and Distributions. At any time shares of Class A Common
---------------------------
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 Class B Common
-5-
<PAGE>
Stock) or other property 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 in all cases be equal to the amount of such dividend payable
on each share of Class B Common Stock, and the amount of any such dividend
payable on each share of Class B Common Stock shall in all cases be equal to the
amount of the dividend payable on each share of Class A Common Stock. Dividends
and distributions 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 and dividends payable in shares of Class B Common Stock may
not be made on or to shares of any class of the Corporation's capital stock
other than the Class B 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 Class B Common Stock
shall be made simultaneously on the shares of Class B Common Stock, and the
number of shares of Class B Common Stock payable on each share of Class B Common
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. If a dividend or distribution
payable in shares of Class B Common Stock shall be made on the shares of Class B
Common Stock, a dividend or distribution payable in shares of Class A Common
Stock shall be made simultaneously on the shares of Class A Common Stock, and
the number of shares of Class A Common Stock payable on each share of Class A
Common Stock pursuant to such dividend or distribution shall be equal to the
number of shares of Class B Common Stock payable on each share of Class B Common
Stock pursuant to such dividend or distribution.
C. 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 shares of the Preferred Stock then outstanding the full preferential amounts
to which they may be entitled, if any, under the resolutions authorizing the
issuance of such Preferred Stock, the net assets of the Corporation remaining
thereafter shall be distributed equally to each share of Class A Common Stock
and Class B Common Stock.
D. Optional Conversion of Class A Common Stock.
-------------------------------------------
(i) At any time commencing after the effective date of this
Restated Certificate of Incorporation and ending 180 days thereafter, (the
"Initial Conversion Period"), each fully paid share of the Class A Common
Stock
-6-
<PAGE>
outstanding as of the effective date of this Restated Certificate of
Incorporation, may be converted at the election of the registered holder
thereof, as of the effective date of this Restated Certificate of
Incorporation, into one share of Class B Common Stock. Any registered
holder of shares of Class A Common Stock may elect to convert any or all of
such shares at one time or at various times in such holder's discretion
during such Initial Conversion Period. Such rights shall be exercised by
the surrender of the certificate representing each share of Class A Common
Stock (which certificate may be the certificate representing shares of
Existing Common Stock, which on the effective date of this Restated
Certificate of Incorporation automatically represents shares of Class A
Common Stock) to be converted to the Corporation at its principal executive
offices, accompanied by a written notice of the election by the registered
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 shares of Class B Common Stock upon
conversion of shares of Class A Common Stock shall be made without charge
for any stamp or other similar tax in respect of such issuance. Each such
certificate shall be issued to or registered in such name as provided in
Section D (ii) below. As promptly as practicable after the surrender for
conversion of a certificate or certificates representing shares of Class A
Common Stock, the Corporation will deliver to, or upon the written order
of, the registered holder of such certificate or certificates, a
certificate or certificates representing the number of shares of Class B
Common Stock issuable upon such conversion. 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 shares of
Class A Common Stock (or, if the transfer books of the Corporation shall be
closed on such date, then immediately prior to the close of business on the
first date thereafter that said books shall be open), and all rights of
such holder arising from ownership of shares of Class A Common Stock shall
cease at such time and the person or persons in whose name or names that
certificate or certificates representing shares of Class B Common Stock are
to be issued shall be treated for all purposes as having become the record
holder or holders of such shares of Class B Common Stock at such time and
shall have and may exercise all the rights and powers appertaining thereto.
The Corporation shall reserve and keep available, solely for
-7-
<PAGE>
the purpose of issuance upon conversion of outstanding shares of Class A
Common Stock, such number of shares of Class B Common Stock as may be
issuable upon the conversion of all such outstanding shares of Class A
Common Stock, provided, that the Corporation may deliver shares of Class B
Common Stock which are held in the treasury of the Corporation for shares
of Class A Common Stock converted. All shares of Class B Common Stock which
may be issued upon conversion of shares of Class A Common Stock will, upon
issuance, be fully paid and nonassessable. The aggregate amount of stated
capital represented by shares of Class B Common Stock issued upon
conversion of shares of Class A Common Stock shall be the same as the
aggregate amount of stated capital represented by the shares of Class A
Common Stock so converted.
(ii) Shares of Class B Common Stock issued upon conversion of
shares of Class A Common Stock shall be issued to or registered in the
names of the beneficial owners (as defined in Section E below) thereof and
not in "street" or "nominee" names; provided, however, that shares of Class
A Common Stock registered either in "street" or "nominee" names as of the
effective date of this Restated Certificate of Incorporation, may continue
to be registered in such names when issued as shares of Class B Common
Stock upon conversion of the Class A Common Stock, provided such registered
owner files a certificate with the Corporation identifying the names of all
beneficial owners of such shares. If there is more than one beneficial
owner of shares of Class B Common Stock, the shares may be registered in
the name of one such beneficial owner, provided such registered owner files
a certificate with the Corporation identifying the names of all beneficial
owners of such shares. The Corporation may, in connection with preparing a
list of stockholders entitled to vote at any meeting of stockholders, or as
a condition to the registration of shares of Class B Common Stock on the
Corporation's books, require the furnishing of such affidavits or other
proof as it deems necessary to establish that the registered owner of such
shares is in fact the beneficial owner, or to establish the identity of the
economic owner (as defined in Section E below) of such shares.
(iii) The Corporation shall note on the certificates for shares
of Class B Common Stock issued upon conversion of shares of Class A Common
Stock that the shares represented by such certificates are subject to the
-8-
<PAGE>
restrictions on transfer and registration of transfer imposed by Section E
below.
E. Automatic Conversion of Class B Common Stock Upon Non-Permitted
---------------------------------------------------------------
Transfer of Class B Common Stock.
--------------------------------
(i) No person holding shares of Class B Common Stock may transfer,
and the Corporation shall not register the transfer of, any share of Class
B Common Stock, whether by sale, assignment, merger, consolidation, gift,
bequest, appointment or otherwise, except to a Permitted Transferee (as
defined below) of the economic owner of the share of Class B Common Stock
(the "Class B Holder") (such transfer being referred to herein as a
"Permitted Transfer"). Any purported transfer of economic, record or
beneficial ownership of shares of Class B Common Stock other than in
accordance with the terms of this Section E shall, without any act on
anyone's part, result in the conversion of each share of the purportedly
transferred shares of Class B Common Stock into one share of Class A Common
Stock effective on the date of such purported transfer, and the stock
certificates formerly representing such shares of Class B Common Stock
shall thereupon and thereafter be deemed to represent such number of shares
of Class A Common Stock. The term Permitted Transferee has the following
meanings with respect to each Class B Holder:
(a) the following persons shall be "Permitted Transferees" of
each Class B Holder who is a natural person:
1. The spouse or former spouse of such Class B Holder,
any lineal descendant of a grandparent of such Class B Holder
or a grandparent of the spouse or former spouse of such Class
B Holder and any spouse or former spouse of such lineal
descendant (such lineal descendants, their spouses or former
spouses and the spouse or former spouses shall constitute
such Class B Holder's "Family Members");
2. A voting trust, or, the trustee or trustees of such
voting trust solely in their capacities as trustees of such
voting trust, of which a Controlling Number (as defined in
clause (iii) of this Section E) of such trustees are any of
the following (each a "Qualified Person"): such Class B
Holder, one of such
-9-
<PAGE>
Class B Holder's Family Members or an executive officer (as
defined in Rule 3b-7 of the General Rules and Regulations
under the Exchange Act, as in effect on April 1, 1992) of the
Corporation or any wholly owned subsidiary of the
Corporation;
3. A trust (other than a voting trust) or, the trustee or
trustees of such trust solely in their capacities as trustees
of such trust, solely for the benefit of such Class B Holder
or one or more of such Class B Holder's Permitted Transferees
described in any subclause of this clause (a) other than
subclause (2) or this subclause (3);
4. Any organization contributions to which are deductible
for federal income, estate or gift tax purposes or any split-
interest trust described in Section 4947 of the Internal
Revenue Code of 1986, as it may from time to time be amended,
if a Controlling Number of the members of the Board of
Directors or other governing body or group having the
ultimate authority, inter alia, to vote, dispose or
----- ----
direct the voting or disposition of the shares of Class B
Common Stock held by such organization ("Governing Body") are
Qualified Persons (a "Charitable Organization");
5. A corporation of which a majority of the outstanding
shares of capital stock entitled to vote generally for the
election of directors is beneficially owned by and under the
control of, or a partnership of which a majority of the
partnership interests entitled to participate in the
management of the partnership are beneficially owned by and
under the control of, such Class B Holder or his or her
Permitted Transferees described in any subclause of this
clause (a) other than this subclause (5); and
6. If the Class B Holder is deceased, bankrupt or
insolvent, the estate of such Class B Holder.
(b) the following persons shall have the "Permitted
Transferees" as indicated:
-10-
<PAGE>
1. In the case of any corporation which is a Class B
Holder, "Permitted Transferee" means (X) any person with
economic ownership of a majority of the outstanding shares of
capital stock entitled to vote generally for the election of
directors of such corporation as of the effective date of
this Restated Certificate of Incorporation, and the Permitted
Transferees of such person, or (Y) any entity which is more
than 90% owned by such corporation.
2. In the case of any partnership which is a Class B
Holder, "Permitted Transferee" means (X) each of the partners
of such partnership as of the effective date of this Restated
Certificate, and the Permitted Transferees of such partners,
provided that either such partnership or the general
partner(s) of such partnership retains all voting rights with
respect to the Class B Common Stock or (Y) any partner of a
limited partnership, or affiliate of such partner of a
limited partnership, provided such limited partnership was a
party to, or had agreed to be bound by, a contract with the
Corporation for the purchase of shares of Preferred Stock of
the Corporation as of the effective date of this Restated
Certificate of Incorporation and provided further that such
partner, or affiliate of such partner, as the case may be, in
its individual capacity, separately agrees to be bound by the
terms of such contract.
3. In the case of a revocable trust which is a Class B
Holder, "Permitted Transferee" means (x) with respect to
shares of Class B Common Stock held by such trust as a Class
B Holder, the settlor of such trust and Permitted Transferees
of such settlor and the beneficiaries of such trust as of the
effective date of this Restated Certificate of Incorporation
and Permitted Transferees of such beneficiaries, and (y) with
respect to each share of Class B Common Stock transferred to
such trust in a Permitted Transfer, any person who
transferred such share of Class B Common Stock to such trust
and any Permitted Transferee of any such transferor, and (z)
with respect to each Subsequent Class B Share, any person who
is a Permitted Transferee with respect
-11-
<PAGE>
to the share of Class B Common Stock in respect of which such
Subsequent Class B Share was issued.
4. In the case of a trust (other than a voting trust or a
Charitable Organization) which was irrevocable on the
effective date of this Restated Certificate of Incorporation,
"Permitted Transferee" means with respect to shares of Class
B Common Stock held by such trust as a Class B Holder and
with respect to each share of Class B Common Stock
transferred to such trust in a Permitted Transfer and with
respect to each Subsequent Class B Share, any person to whom
or for whose benefit principal may be distributed either
during or at the end of the term of such trust whether by
power of appointment or otherwise.
5. In the case of a voting trust or any other trust
(other than a Charitable Organization or a trust described in
paragraph (3) or (4) above), "Permitted Transferee" means (X)
with respect to each share of Class B Common Stock
transferred to such trust in a Permitted Transfer, any person
who transferred such share of Class B Common Stock to such
trust and any Permitted Transferee of any such transferor,
and (Y) with respect to each Subsequent Class B Share any
person who is a Permitted Transferee with respect to the
share of Class B Common Stock in respect of which such
Subsequent Class B Share was issued.
6. In the case of any Charitable Organization, "Permitted
Transferee" means (X) with respect to any share of Class B
Common Stock transferred to such Charitable Organization in a
Permitted Transfer, the transferor in such Permitted Transfer
and any Permitted Transferee of such transferor, and (Y) with
respect to each Subsequent Class B Share held by such
Charitable Organization, any person who is a Permitted
Transferee with respect to the share of Class B Common Stock
in respect of which such Subsequent Class B Share was issued.
7. In the case of any corporation or partnership (other
than a Charitable
-12-
<PAGE>
Organization), "Permitted Transferee" means (X) with respect
to each share of Class B Common Stock so transferred to such
corporation or partnership in a Permitted Transfer, the
transferor in such Permitted Transfer and any Permitted
Transferee of such transferor, and (Y) with respect to each
Subsequent Class B Share held by such corporation or
partnership, any person who is a Permitted Transferee with
respect to the share of Class B Common Stock in respect of
which such Subsequent Class B Share was issued.
8. In the case of a holder of Class B Common Stock which
is the estate of a deceased, bankrupt or insolvent Class B
Holder, "Permitted Transferee" means, with respect to each
share of Class B Common Stock transferred to such estate in a
Permitted Transfer and with respect to each Subsequent Class
B Share, a Permitted Transferee of such deceased, bankrupt or
insolvent Class B Holder.
(ii) Notwithstanding anything to the contrary set forth herein, any
Class B Holder may pledge his shares of Class B Common Stock to a pledgee
pursuant to a bona fide pledge of such shares as collateral security for
indebtedness due to the pledgee, provided that such shares shall not be
transferred to or registered in the name of the pledgee and shall remain
subject to the provisions of this Section D. In the event of foreclosure or
other similar action with respect to such shares by the pledgee, such
pledged shares of Class B Common Stock may only be transferred to a
Permitted Transferee of the pledgor or converted into shares of Class A
Common Stock, as the pledgee may elect; provided however, in the event of
foreclosure or other similar action taken with respect to shares of
Existing Common Stock pledged prior to the effective date of this Restated
Certificate of Incorporation (including any extensions, amendments, or
renewals of such pledge, or of any underlying indebtedness for which such
shares have been pledged as collateral security, occurring before or after
the effective date of this Restated Certificate of Incorporation), such
pledged shares may be transferred as Class B Common Stock (i) to the
pledgee, whether or not such pledgee is a Permitted Transferee, or (ii) to
the pledgor of
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<PAGE>
such shares and Permitted Transferees of such pledgor, whether or not such
transfer is a Permitted Transfer.
(iii) For purposes of this Section E:
(a) The term "Controlling Number" means the minimum number of
trustees, in the case of a trust, or members of a Governing Body, in
the case of any other form of entity, whose affirmative vote is
necessary to take any action on, or whose negative vote, abstention or
failure to attend is sufficient to prevent any action with respect to
the voting or disposition of shares of capital stock held by such
entity.
(b) The term "Exchange Act" means the Securities Exchange Act
of 1934, as amended.
(c) The term "Subsequent Class B Share" means any share of
Class B Common Stock issued by the Corporation to a Class B Holder in
respect of an existing share of Class B Common Stock held by such Class
B Holder.
(d) The relationship of any person that is derived by or
through legal adoption shall be considered a natural one.
(e) A minor for whom shares of Class B Common Stock are held
pursuant to the Uniform Gifts to Minors Act, as in effect in any state,
or any similar law, shall be considered a Class B Holder.
(f) Unless otherwise specified, the term "person" means both
natural persons and legal entities.
(g) Subject to (iv) below, each reference to a corporation
shall include any successor corporation resulting from merger or
consolidation, provided such corporation is the surviving corporation,
and each reference to a partnership shall include any successor
partnership resulting solely from the death, bankruptcy or other
withdrawal of a partner.
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<PAGE>
(h) The term "beneficial owner" has the meaning ascribed to
such term in Rule 13d-3 of the General Rules and Regulations under the
Exchange Act, as in effect on April 1, 1992 and the term "economic
owner" has the meaning ascribed to the term "beneficial owner" in Rule
16a-1(a)(2) of the Exchange Act, as in effect on April 1, 1992.
(iv) If at any time after the effective date of this Restated
Certificate of Incorporation, any of the following events shall occur:
(a) A Controlling Number of the trustees of any voting trust
that is a Permitted Transferee of a Class B Holder shall cease to be
Qualified Persons;
(b) A Controlling Number of the Governing Body of any
Charitable Organization that is a Permitted Transferee of a Class B
Holder shall cease to be Qualified Persons;
(c) A corporation or partnership that first became a Class B
Holder as a result of a Permitted Transfer shall thereafter by reason
of any transfer of the beneficial ownership of the capital stock or
partnership interests thereof cease to be a Permitted Transferee of the
transferor in such Permitted Transfer;
(d) A majority of the shares of capital stock entitled to vote
in the election of directors of a corporation or a majority of the
partnership interests of a partnership entitled to participate in the
management of a partnership, which in each case was a Permitted
Transferee of a Class B Holder as the result of a Permitted Transfer,
shall cease to be beneficially owned and controlled by the owners
thereof on the first date upon which such corporation or partnership
was a Permitted Transferee of such owners; or
(e) Any other transferee who at the time of such transfer is a
Permitted Transferee, but thereafter shall fail to meet the
requirements of a "Permitted Transferee" pursuant to this Section E (an
"Unpermitted Transferee"),
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<PAGE>
then such trustee, Charitable Organization, corporation, partnership,
majority of stockholders in a corporation, holders of a majority of
partnership interests in a partnership or such Unpermitted Transferee
shall immediately notify the Corporation of such change in status, and
at any time after the occurrence of any such event, the Corporation
shall (after receipt of such notice from such trustee, Charitable
Organization, corporation, partnership or Unpermitted Transferee or
otherwise learning of such change in status) give written notice to the
trustees of such voting trust, to the Charitable Organization, or to
the corporation, partnership or other Unpermitted Transferee, as the
case may be, that, without any further act, each share of Class B
Common Stock held by such entity shall be converted into one share of
Class A Common Stock effective upon the giving of such notice, and the
stock certificates formerly representing the shares of Class B Common
Stock held by such entity shall thereupon and thereafter be deemed to
represent such shares of Class A Common Stock. In the absence of such
notice to the Corporation from the respective holder, the Corporation,
may, in its sole discretion, conclusively presume that such trustee,
Charitable Organization, corporation, partnership, majority of
stockholders in a corporation, holders of a majority of partnership
interests in a partnership or such Unpermitted Transferee, as the case
may be, is or are entitled to hold Class B Common Stock.
(v) Notwithstanding anything to the contrary contained in
this Section E, any repurchase by the Corporation of Class B
Common Stock shall be deemed to be a Permitted Transfer.
(vi) Shares of Class B Common Stock issued upon transfer to
a Permitted Transferee shall be issued to or registered in the
names of the beneficial owners thereof and not in "street" or
"nominee" names. If there is more than one beneficial owner of
such transferred shares of Class B Common Stock, the shares may
be registered in the name of one such beneficial owner, provided
such registered owner files a certificate with the Corporation
identifying the names of all beneficial owners of such shares.
The Corporation may, in connection with preparing a list of
stockholders entitled to vote at any meeting of stockholders, or
as a condition to the transfer or the registration of shares of
Class B Common Stock on the Corporation's books, require the
furnishing of such affidavits or other proof as it deems
necessary to establish that the registered owner of such shares
is
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<PAGE>
in fact the beneficial owner of such shares, or to establish the
identity of the economic owner, as the case may be, of such
shares or to establish that any transferee of such shares is a
Permitted Transferee of a Class B Holder.
(vii) The Corporation shall note on the certificates for
shares of Class B Common Stock issued upon transfer that the
shares represented by such certificates are subject to the
restrictions on transfer and registration of transfer imposed by
this Section E.
F. Optional Conversion of the Class B Common Stock. At any time after
-----------------------------------------------
the effective date of this Restated Certificate of Incorporation, each fully
paid share of the Class B Common Stock may be converted at the election of the
holder thereof into one share of Class A Common Stock. Any holder of shares of
Class B Common Stock may elect to convert any or all of such shares at one time
or at various times in such holder's discretion. Such rights shall be exercised
by the surrender of the certificate representing each share of Class B Common
Stock 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 shares of
Class A Common Stock upon conversion of shares of Class B Common Stock shall be
made without charge for any stamp or other similar tax in respect of such
issuance. However, if any such certificate or certificates is or are to be
issued in a name other than that of the holder of the shares of Class B Common
Stock to 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 shares of
Class B Common Stock and 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 shares of Class A Common Stock issuable upon such conversion. 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 shares of Class B Common Stock (or, if the transfer books of the
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<PAGE>
Corporation shall be closed on such date, then immediately prior to the close of
business on the first date thereafter that said books shall be open), and all
rights of such holder arising from ownership of shares of Class B Common Stock
shall cease at such time and the person or persons in whose name or names that
certificate or certificates representing shares of Class A Common Stock are to
be issued shall be treated for all purposes as having become the record holder
or holders of such shares of Class A Common Stock at such time and shall have
and may exercise all the rights and powers appertaining thereto. The
Corporation shall reserve and keep available, solely for the purpose of issuance
upon conversion of outstanding shares of Class B Common Stock, such number of
shares of Class A Common Stock as may be issuable upon the conversion of all
such outstanding shares of Class B Common Stock, provided, that the Corporation
may deliver shares of Class A Common Stock which are held in the treasury of the
Corporation for shares of Class B Common Stock converted. All shares of Class A
Common Stock which may be issued upon conversion of shares of Class B Common
Stock will, upon issuance, be fully paid and nonassessable. The aggregate
amount of stated capital represented by shares of Class A Common Stock issued
upon conversion of shares of Class B Common Stock shall be the same as the
aggregate amount of stated capital represented by the shares of Class B Common
Stock so converted.
G. Mandatory Conversion of Class B Common Stock. At any time after the
--------------------------------------------
Initial Conversion Period when the number of outstanding shares of Class B
Common Stock as reflected on the stock transfer books of the Corporation falls
below 7-1/2% of the aggregate number of the issued and outstanding shares of
Class A Common Stock and Class B Common Stock of the Corporation, or the Board
of Directors and the holders of a majority of the outstanding shares of Class B
Common Stock approve the conversion of all of the shares of Class B Common Stock
into Class A Common Stock, then, immediately upon the occurrence of either such
event, without any further act, the outstanding shares of Class B Common Stock
shall be converted into shares of Class A Common Stock in accordance with
Section F above. In the event of such a conversion, certificates formerly
representing outstanding shares of Class B Common Stock shall thereupon and
thereafter be deemed to represent the number of shares of Class A Common Stock
into which such shares of Class B Common Stock are convertible.
H. Other Rights. Except as otherwise required by the Delaware General
------------
Corporation Law or as otherwise provided in this Restated Certificate of
Incorporation, each share of Class A Common Stock and each share of Class B
Common Stock shall have identical powers, preferences, rights and privileges.
-18-
<PAGE>
I. Issuance of the Common Stock and the Preferred Stock. The Board of
----------------------------------------------------
Directors of the Corporation may from time to time authorize by resolution the
issuance of any or all shares of the Common Stock and the Preferred Stock herein
authorized in accordance with the terms and conditions set forth in this
Restated Certificate of Incorporation for such purposes, in such amounts, to
such persons, corporations, or entities, for such consideration, and in the case
of the Preferred Stock, in one or more series or classes, all as the Board of
Directors in its discretion may determine and without any vote or other action
by the stockholders, except as otherwise required by law.
FIFTH: For the management of the business and for the conduct of the
-----
affairs of the Corporation, and in further definition, limitation and regulation
of the powers of the Corporation and of its directors and stockholders, it is
further provided that:
(a) The business and affairs of the Corporation shall be
managed by or under the direction of the Board of Directors. In
addition to the powers and authorities herein or by statute expressly
conferred upon it, the Board of Directors may exercise all such powers
and do all such acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of the laws of
the State of Delaware, of this Restated Certificate of Incorporation
and the By-Laws of the Corporation;
(b) The number of directors of the Corporation shall be as
specified in the By-Laws of the Corporation but such number may from
time to time be increased or decreased in such manner as may be
prescribed by the By-Laws. Commencing at the 1992 annual meeting of
stockholders, the directors shall be divided into three classes,
designated Class A, Class B and Class C, respectively, with the initial
term of office of the initial Class A directors to expire at the 1993
annual meeting of stockholders, the initial term of office of the
initial Class B directors to expire at the 1994 annual meeting of
stockholders, and the initial term of office of the initial Class C
directors to expire at the 1995 annual meeting of stockholders. At each
subsequent annual meeting of stockholders following the initial
classification and election, directors
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<PAGE>
elected to succeed those directors whose terms expire shall be elected
for a term of office to expire at the third succeeding annual meeting
of stockholders after their election. Each director shall hold office
until the annual meeting of the stockholders held in the year in which
his term expires and his successor is duly elected and qualified, or
until his earlier death, resignation or removal in the manner provided
herein. Directors shall be allocated as evenly as possible to the three
classes;
(c) Newly created directorships resulting from any increase in
the authorized number of directors or any vacancy in the Board of
Directors resulting from death, resignation, retirement,
disqualification, removal from office or otherwise shall, unless
otherwise provided by law or by resolution of the Board of Directors,
be filled by a majority vote of the directors then in office, though
less than a quorum, or by a sole remaining director, and directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class of directors to
which they have been chosen expires. If there are no directors in
office, any officer or stockholder may call a special meeting of
stockholders in accordance with the provisions of the By-Laws of the
Corporation, at which meeting such vacancies shall be filled. No
decrease in the authorized number of directors shall shorten the term
of any incumbent director; and
(d) Unless and except to the extent that the By-Laws of the
Corporation shall so require, the election of directors of the
Corporation need not be by written ballot. Directors need not be
stockholders.
SIXTH: No director shall be personally liable to the Corporation or any
-----
stockholder for monetary damages for breach of fiduciary duty as director,
except, in addition to any and all other requirements for such liability, (i)
for any breach of such directors' duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) to the extent
provided under Section 174 of the
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<PAGE>
Delaware General Corporation Law, or (iv) for any transaction for which such
director derived an improper personal benefit. Neither the amendment nor repeal
of this Article SIXTH nor the adoption of any provision of this Restated
Certificate of Incorporation inconsistent with this Article SIXTH shall reduce,
eliminate, or adversely affect the effect of this Article SIXTH in respect of
any matter occurring, or any cause of action, suit or claim that, but for this
Article SIXTH, would accrue or arise, prior to such amendment, repeal or
adoption of an inconsistent provision.
SEVENTH: The Corporation shall indemnify each officer, director, employee
-------
or agent of the Corporation (and his or her heirs, successors and
administrators) to the fullest extent permitted by law, subject to any
limitations set forth in the By-Laws.
EIGHTH: Stock Ownership and Governmental Regulations
------ --------------------------------------------
(a) Requests for Information. So long as the Corporation or any
------------------------
of its subsidiaries holds any authority or licenses from, or has any
contracts with or obligations to, any recognized governmental
authority, or if the Corporation has a good faith reason to believe
that the ownership, or proposed ownership, of shares of stock of the
Corporation by any stockholder or any person presenting any shares of
stock of the Corporation for transfer into his name (a "Proposed
Transferee") may be inconsistent with, or in violation of, any
provision of any applicable governmental regulation or law, such
stockholder 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 stock of the
Corporation by such stockholder or Proposed Transferee is inconsistent
with, or in violation of, any applicable governmental regulation or
law.
(b) Denial of Rights, Refusal to Transfer. If any stockholder
-------------------------------------
or Proposed Transferee from whom information is requested should fail
to
-21-
<PAGE>
respond to such request pursuant to Section (a) of this Article EIGHTH,
or the Corporation shall conclude, in its good faith judgment, that the
ownership of, or the exercise of any rights of ownership with respect
to, shares of stock of the Corporation, by such stockholder or Proposed
Transferee, could result in any inconsistency with, or violation of,
any applicable governmental regulation or law, so that such
inconsistency with or violation of any applicable governmental
regulation or law would materially adversely affect the Corporation's
business or the business of any of the Corporation's significant
subsidiaries, the Corporation may: (i) refuse to permit the transfer of
shares of stock of the Corporation to such Proposed Transferee, (ii)
suspend the rights of stock ownership the exercise of which would
result in any inconsistency with, or violation of, any applicable
governmental regulation or law (such refusal of transfer or suspension
to remain in effect until the earlier to occur of the following events:
(x) the requested information has been received, (y) the Corporation
has determined that such transfer, or the exercise of such suspended
rights as the case may be, is permissible under such governmental
regulation or law, or (z) the Corporation exercises its right to redeem
such shares pursuant to Section (c) below (provided all the
requirements of Section (c) have been met)) or (iii) may redeem such
stock pursuant to the requirements of Section (c) below (provided all
the requirements of Section (c) have been met). The Corporation may
exercise any and all appropriate remedies, in law or in equity, in any
court of competent jurisdiction, against any such stockholder or
Proposed Transferee, with a view towards obtaining such information or
preventing or curing any situation which would cause any inconsistency
with, violation of, or failure to comply with, any material additional
requirements under any provision of any applicable governmental
regulation or law.
(c) Redemption of Stock. Notwithstanding any other provision of
-------------------
this Restated Certificate of Incorporation to the contrary, the
Corporation, in its sole discretion, may redeem any or all
-22-
<PAGE>
shares of the Corporation's outstanding stock pursuant to Section
151(b) of the Delaware General Corporation Law or any other applicable
provision of law, to the extent necessary to prevent the loss or secure
the reinstatement of any license or franchise from any governmental
agency held by the Corporation or any of its subsidiaries to conduct
any portion of the business of the Corporation or any of its
subsidiaries, which license or franchise is conditioned upon some or
all of the holders of the Corporation's stock possessing prescribed
qualifications, according to the following terms:
(1) The redemption price of the shares to be redeemed
pursuant to this Article EIGHTH shall be equal to the lesser of
(i) the Fair Market Value (as defined below) or (ii) if such
stock was purchased by such Disqualified Holder (as defined
below) within one year of the Redemption Date (as defined
below), such Disqualified Holder's purchase price for such
shares;
(2) The redemption price of such shares may be paid in
cash, Redemption Securities (as defined below) or any
combination thereof;
(3) If less than all of the shares held by Disqualified
Holders are to be redeemed, the shares to be redeemed shall be
selected in such manner as shall be determined by the Board of
Directors, which may include selection first of the most
recently purchased shares thereof, selection by lot or
selection in any other manner determined by the Board of
Directors;
(4) At least thirty (30) days' written notice of the
Redemption Date shall be given to the record holders of the
shares selected to be redeemed (unless waived in writing by any
such holder), provided that the Redemption Date may be the date
on which written notice shall be given to record holders if the
cash or Redemption Securities necessary to effect the
redemption shall have
-23-
<PAGE>
been deposited in trust for the benefit of such record holders
and subject to immediate withdrawal by them upon surrender of
the stock certificates for their shares to be redeemed;
(5) From and after the Redemption Date, any and all rights
of whatever nature which may be held by the owners of shares
selected for redemption (including without limitation any
rights to vote or participate in dividends declared on stock of
the same class or series as such shares), shall cease and
terminate and they shall thenceforth be entitled only to
receive the cash or Redemption Securities payable upon
redemption; and
(6) Such redemption shall be made in accordance with any
other terms and conditions as the Board of Directors shall
determine from time to time.
(7) For purposes of this Section (c),
(i) "Disqualified Holder" shall mean any holder of shares of stock
of the Corporation whose holding of such stock, either individually or when
taken together with the holding of shares of stock of the Corporation by
any other holders, may result, in the judgment of the Board of Directors,
in the loss of, or the failure to secure the reinstatement of any license
or franchise from any governmental agency held by the Corporation or any of
its subsidiaries to conduct any portion of the business of the Corporation
or any of its subsidiaries.
(ii) "Fair Market Value" of a share of the Corporation's stock of
any class or series shall mean the average Closing Price for such share for
each of the 45 most recent days on which shares of stock of such class or
series shall have been traded preceding the day on which notice of
redemption shall be given pursuant to subparagraph (c)(4) of this Article
EIGHTH; provided, however, that if shares of stock of such class or series
are not traded on any securities exchange or in the over-the-counter
market, "Fair Market Value" shall be determined by the Board of Directors
in good faith. "Closing Price" on any day
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<PAGE>
means the reported closing sales price or, in case no such sale takes
place, the average of the reported closing bid and asked prices on the
principal United States securities exchange registered under the Exchange
Act on which such stock is listed, or if such stock is not listed on any
such exchange, the highest closing sales price or bid quotation for such
stock on the National Association of Securities Dealers, Inc. Automated
Quotations System or any similar system then in use, or if no such prices
or quotations are available, the fair market value on the day in question
as determined by the Board of Directors in good faith.
(iii) "Redemption Date" shall mean the date fixed by the Board of
Directors for the redemption of any shares of stock of the Corporation
pursuant to this Article EIGHTH.
(iv) "Redemption Securities" shall mean (X) any debt or equity
securities of the Corporation or any of its subsidiaries or (Y) any debt or
equity secu rities of any other corporation unaffiliated with the
Corporation, or (Z) any combination thereof, having such terms and
conditions as shall be approved by the Board of Directors and which,
together with any cash to be paid as part of the redemption price, in the
opinion of any nationally recognized investment banking firm selected by
the Board of Directors (which may be a firm which provides other investment
banking, brokerage or other services to the Corporation), has a value, at
the time notice of redemption is given pursuant to subparagraph (c)(4) of
this Article EIGHTH, at least equal to the price required to be paid
pursuant to subparagraph (c)(1) of this Article EIGHTH (assuming, in the
case of Redemption Securities to be publicly traded, such Redemption
Securities were fully distributed and subject only to normal trading
activity).
(d) Legends. The Corporation shall 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 EIGHTH.
(e) Certain Definitions. For purposes of this Article EIGHTH,
the word "person" shall include not only natural persons but
partnerships,
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<PAGE>
associations, corporations, joint ventures and other entities, and the
word "regulation" shall include not only regulations but rules,
published policies and published controlling interpretations by an
administrative agency or body empowered to administer the provisions of
any governmental regulation.
NINTH: In furtherance and not in limitation of the powers conferred by the
-----
laws of the State of Delaware, the Board of Directors is expressly authorized
and empowered to make, alter, amend, and repeal the By-Laws. The By-Laws of the
Corporation may be amended, altered, changed or repealed, and a provision or
provisions inconsistent with the provisions of the By-Laws as they exist from
time to time may be adopted, only by the majority of the entire Board of
Directors or by the affirmative vote of the holders of record representing not
less than sixty-six and two-thirds percent (66-2/3%) of the then outstanding
shares entitled to vote generally in the election of directors.
TENTH: Except for the provisions in Articles FOURTH, FIFTH, SIXTH,
-----
SEVENTH, EIGHTH, NINTH, and this Article TENTH, which shall not be amended,
altered, changed or repealed except by the approval of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the total number of the then
outstanding shares of stock of the Corporation entitled to vote generally in the
election of directors, the Corporation reserves the right at any time and from
time to time to amend, alter, change or repeal any provision contained in this
Restated Certificate of Incorporation (including provisions as may hereafter be
added or inserted in this Restated Certificate of Incorporation as authorized by
the laws of the State of Delaware) in the manner now or hereafter prescribed by
law; and all rights, preferences and privileges of whatsoever nature conferred
upon stockholders, directors or any other person whomsoever by and pursuant to
this Restated Certificate of Incorporation in its present form or as hereafter
amended are granted subject to the rights reserved in this Article TENTH. From
time to time any of the provisions of this Restated Certificate of Incorporation
may be amended, altered or repealed, and other provisions authorized by the laws
of the State of Delaware at the time in force may be added or inserted in the
manner and at the time prescribed by said laws, and all rights at any time
conferred upon the stockholders of the Corporation by this Restated Certificate
of Incorporation are granted subject to the provisions of this Article TENTH.
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<PAGE>
Executed at Boston, Massachusetts on May 8, 1992.
Attest: CONTINENTAL CABLEVISION, INC.
/s/ W. Lee H. Dunham /s/ Michael J. Ritter
- -------------------- ---------------------
W. Lee H. Dunham, Michael J. Ritter, President
Assistant Secretary
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<PAGE>
Exhibit 3.2
RESTATED BY-LAWS
OF
CONTINENTAL CABLEVISION, INC.,
a Delaware Corporation
Effective as of May 14, 1992
<PAGE>
CONTINENTAL CABLEVISION, INC.
(A DELAWARE CORPORATION)
By-Laws
(Restated and effective as of May 14, 1992)
ARTICLE I.
----------
Offices
-------
Section 1. Registered Office. The registered office of the Corporation
---------- -----------------
shall be at 32 Loockerman Square, Suite L-100, in the City of Dover, County of
Kent, State of Delaware, 19901.
Section 2. Additional Offices. The Corporation may also have offices at
---------- ------------------
such other places, both within and without the State of Delaware, as the Board
of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE II.
-----------
Meetings of Stockholders
------------------------
Section 1. Time and Place. A meeting of stockholders for any purpose may
---------- --------------
be held at such time and place within or without the State of Delaware as the
Board of Directors may fix from time to time and as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 2. Annual Meeting. Annual meetings of stockholders shall be held
---------- --------------
on such date after the end of the Corporation's fiscal year and at such time and
place as shall be designated by the Board of Directors each year and as stated
in the notice of such annual meeting. At such annual meetings, the stockholders
shall elect directors to the Board of Directors as provided herein and in the
Corporation's Certificate of Incorporation, as may be amended or restated from
time to time, and as authorized by Section 141(d) of the Delaware General
Corporation Law, and transact such other business as may properly be brought
before the meeting.
Section 3. Notice of Annual Meeting. Written notice of the annual
---------- ------------------------
meeting, stating the place, date, and time thereof, shall be given to each
stockholder entitled to vote at such
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<PAGE>
meeting by mailing such notice, postage prepaid, directed to each stockholder at
the address thereof as it appears on the records of the Corporation, not less
than 10 (unless a longer period is required by law or regulation) nor more than
60 days prior to the meeting. Such notice shall be deemed to be effective when
deposited in the United States mail.
Section 4. Special Meetings. Special meetings of the stockholders may be
---------- ----------------
called for any purpose or purposes, unless otherwise prescribed by statute or by
the Certificate of Incorporation, by the Chairman or Vice Chairman of the Board
or by a majority of the Board of Directors then in office, and shall be called
by the President or Secretary at the request in writing of the stockholders
holding of record a majority of the shares of stock of the Corporation issued
and outstanding and entitled to vote. Such request shall state the purpose or
purposes of the proposed meeting.
Section 5. Notice of Special Meeting. Written notice of a special
---------- -------------------------
meeting, stating the place, date, and time thereof and the purpose or purposes
for which the meeting is called, shall be given to each stockholder entitled to
vote at such meeting by mailing such notice, postage prepaid, directed to each
stockholder at the address thereof as it appears on the records of the
Corporation not less than 10 (unless a longer period is required by law or
regulation) nor more than 60 days prior to the meeting. Such notice shall be
deemed to be effective when deposited in the United States mail. Business to be
conducted at the special meeting shall only be that as specified in the notice
of the special meeting.
Section 6. List of Stockholders. The officer in charge of the stock
---------- --------------------
ledger of the Corporation or the transfer agent shall prepare and make, at least
10 days before every meeting of stockholders, a complete list of the
stockholders entitled to vote at the meeting, arranged in alphabetical order,
and showing the address of each stockholder and the number of shares registered
in the name of each stockholder. Such list shall be open to the examination of
any stockholder, for any purpose germane to the meeting, during ordinary
business hours, for a period of at least 10 days prior to the meeting, at a
place within the city where the meeting is to be held, which place, if other
than the place of the meeting, shall be specified in the notice of the meeting.
The list shall also be produced and kept at the place of the meeting during the
whole time thereof, and may be inspected by any stockholder who is present in
person thereat.
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<PAGE>
Section 7. Presiding Officer and Order of Business. Meetings of
---------- ---------------------------------------
stockholders shall be presided over by the Chairman of the Board, or if he is
not present or there is none, by the Vice Chairman of the Board, or if he is not
present or there is none, by the President, or if he is not present or there is
none, by a Vice President, or, if he is not present or there is none, by a
person chosen by the Board of Directors, or, if no such person is present or has
been chosen, by a chairman to be chosen by the stockholders owning a majority of
the shares of capital stock of the Corporation issued and outstanding and
entitled to vote at the meeting and who are present in person or represented by
proxy. The Secretary of the Corporation, or, if he is not present, an Assistant
Secretary, or, if he is not present, a person chosen by the Board of Directors,
shall act as secretary at meetings of stockholders; if no such person is present
or has been chosen, the stockholders owning a majority of the shares of capital
stock of the Corporation issued and outstanding and entitled to vote at the
meeting who are present in person or represented by proxy shall choose any
person present to act as secretary of the meeting.
Section 8. Quorum and Adjournments. The presence in person or
---------- -----------------------
representation by proxy of the holders of a majority of the shares of the
capital stock of the Corporation issued and outstanding and entitled to vote
shall be necessary to, and shall constitute a quorum for, the transaction of
business at all meetings of the stockholders, except as otherwise provided by
statute or by the Certificate of Incorporation. If two or more classes of stock
are entitled to vote as separate classes upon any question, then in the case of
each such class a quorum for the consideration of such question shall, except as
otherwise provided by statute or by the Certificate of Incorporation, consist of
a majority of the shares of such class issued, outstanding and entitled to vote.
If a quorum shall not be present or represented at any meeting of the
stockholders, the Chairman or a majority of the stockholders entitled to vote
thereat who are present in person or represented by proxy shall have the power
to adjourn the meeting from time to time until a quorum shall be present or
represented. Subject to the requirements of law or the Certificate of
Incorporation, on any issue on which two or more classes of stock are entitled
to vote separately, no adjournment shall be taken with respect to any class for
which a quorum is present unless the chairman of the meeting so directs. If the
time and place of the adjourned meeting are announced at the meeting at which
the adjournment is taken, no further notice of the adjourned meeting need be
given, otherwise notice shall be given. Even if a quorum shall be present or
represented at any meeting of the stockholders, the
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<PAGE>
Chairman or a majority of the stockholders entitled to vote thereat who are
present in person or represented by proxy shall have the power to adjourn the
meeting from time to time to a date that is not more than 30 days after the date
of the original meeting. Further notice of the adjourned meeting need not be
given if the time and place thereof are announced at the meeting at which the
adjournment is taken, otherwise notice shall be given. At any adjourned meeting
at which a quorum is present in person or represented by proxy, any business may
be transacted that might have been transacted at the meeting as originally
called. If the adjournment is for more than 30 days, or if, after the
adjournment, a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote thereat.
Section 9. Voting.
---------- ------
a. At any meeting of stockholders, every stockholder having the right
to vote shall be entitled to vote in person or by proxy. A proxy must be in
writing and executed by the stockholder or his or her duly authorized attorney.
In lieu thereof, to the extent permitted by law, a proxy may be transmitted in a
telegram, cablegram, facsimile or other means of electronic transmission
provided that the telegram, cablegram, facsimile or electronic transmission
either sets forth or is submitted with information from which it can be
determined that the telegram, cablegram, facsimile or other electronic
transmission was authorized by the stockholder. A copy, facsimile transmission
or other reliable reproduction of a written or electronically transmitted proxy
authorized by this Section 9a may be substituted for or used in lieu of the
original writing or electronic transmission. No proxy authorized by this Section
9a shall be voted or acted upon more than three years from its date, unless the
proxy provides for a longer period. Except as otherwise provided below, by law,
or by the Certificate of Incorporation, each stockholder of record shall be
entitled to one vote for each share of capital stock registered in his name on
the books of the Corporation, as provided in the Certificate of Incorporation.
Except as otherwise required by applicable law or any other provision of the
Certificate of Incorporation, holders of stock of the Corporation shall vote
together as a single class on all matters submitted to the stockholders for a
vote, including any amendment to the Certificate of Incorporation which would
increase or decrease the number of authorized shares of any class of capital
stock of the Corporation, subject to any voting rights which may be granted to
any holders of any preferred stock of the Corporation.
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<PAGE>
b. All elections of directors shall be determined by a plurality vote,
and, except as otherwise provided by law or the Certificate of Incorporation,
all other matters shall be determined by a vote of a majority of the shares
present in person or represented by proxy and voting on such other matters.
Elections of directors need not be by written ballot unless requested by any
stockholder entitled to vote; if the chairman of the meeting shall so determine,
a vote may be taken upon any such elections or upon any other matter by ballot
and shall be so taken upon the request of any stockholder entitled to vote on
such matter.
c. Every reference in the By-Laws to a majority or other portion of
shares of stock, including the provision in Article XII set forth below, shall
refer to such majority or other portion of the votes of such shares of stock.
Section 10. Action by Written Consent. Any action required or permitted
----------- -------------------------
by law or the Certificate of Incorporation to be taken at any meeting of
stockholders may be taken without a meeting, without prior notice, and without a
vote if the written consent, setting forth the action so taken, shall be signed
by the holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a meeting at
which all shares entitled to vote thereon were present or represented by proxy
and voted. Such written consent shall be filed with the minutes of the meetings
of stockholders. Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing thereto.
ARTICLE III.
------------
Directors
---------
Section 1. General Powers, Number, and Tenure.
---------- ----------------------------------
a. The business of the Corporation shall be managed by its Board of
Directors, which may exercise all powers of the Corporation and perform all
lawful acts that are not by law, the Certificate of Incorporation or these By-
Laws directed or required to be exercised or performed by stockholders. The
number of directors shall be determined by the Board of Directors from time to
time, but shall be not less than three. At any time during any year the number
of directors may be increased or decreased, in each case by vote of a majority
of the stock
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<PAGE>
outstanding and entitled to vote for the election of directors or a majority of
the directors. Directors must be nominated and elected in accordance with
procedures and the sequence set out in this Section 1. The directors to be
elected in each year shall be elected at the annual meeting of the stockholders,
except as otherwise provided in Section 2 of this Article III, and each director
elected shall hold office as specified herein and in the Certificate of
Incorporation until his successor is elected and qualified or until his earlier
death, resignation or removal. Directors need not be stockholders.
b. The number of directors of the Corporation shall be as specified in
Section 1a above, but such number may from time to time be increased or
decreased in such manner as may be prescribed by these By-Laws. Commencing at
the 1992 annual meeting of stockholders, the directors shall be divided into
three classes, designated Class A, Class B and Class C, respectively, with the
initial term of office of the initial Class A directors to expire at the 1993
annual meeting of stockholders, the initial term of office of the initial Class
B directors to expire at the 1994 annual meeting of stockholders, and the
initial term of office of the initial Class C directors to expire at the 1995
annual meeting of stockholders. At each annual meeting of stockholders following
the initial classification and election, directors elected to succeed those
directors whose terms expire shall be elected for a term of office to expire at
the third succeeding annual meeting of stockholders after their election. Each
director shall hold office until the annual meeting of the stockholders held in
the year in which his term expires and his successor is duly elected and
qualified, or until his earlier death, resignation or removal in the manner
provided herein. Directors shall be allocated as evenly as possible to the three
classes; provided, however, that upon the death, resignation or removal of a
director or upon the creation of any new directorships, directors in each of the
three classes may be adjusted and reallocated by the Board of Directors to
maintain as even a distribution as possible.
c. In addition to any other applicable requirements, only persons who
are nominated in accordance with the following procedures shall be eligible for
election as directors. Nominations of persons for election to the Board of
Directors of the Corporation may be made at a meeting of stockholders by or at
the direction of the Board of Directors, by any nominating committee or person
appointed by the Board of Directors or by any stockholder of the Corporation
entitled to vote for the election of directors at the meeting.
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<PAGE>
d. Notwithstanding the foregoing, whenever the holders of any
preferred stock, as provided in the Certificate of Incorporation or in any
resolution or resolutions of the Board of Directors establishing any such
preferred stock, shall have the right, voting as a class, to elect directors at
the annual meeting of stockholders, or any special meeting, the then authorized
number of directors of the Corporation may be increased by such number as may be
therein provided, and at such meeting the holders of such preferred stock shall
be entitled to elect the additional directors so provided for by a vote of the
holders of at least a majority of such preferred stock present or represented at
such meeting voting as a class. Any directors so elected, unless so re-elected
at the annual meeting of stockholders or special meeting held in place thereof,
next succeeding the time when the holders of any such preferred stock become
entitled to elect directors as above provided, shall not hold office beyond such
annual or special meeting. This provision shall apply notwithstanding the
maximum number of directors determined in accordance with the provisions of
these By-Laws .
Section 2. Vacancies. If any vacancies occur in the Board of Directors,
---------- ---------
or if any new directorships are created, they may be filled by a majority of the
directors then in office, although less than a quorum, or by a sole remaining
director. If there are no directors in office, any officer or stockholder may
call a special meeting of stockholders in accordance with the provisions of the
Certificate of Incorporation or these By-Laws, at which meeting such vacancies
shall be filled.
Section 3. Removal or Resignation.
---------- ----------------------
a. Any director or the entire Board of Directors may be removed only
for cause, as provided in the Delaware General Corporation Law.
b. Any director may resign at any time by giving written notice to the
Board of Directors, the Chairman of the Board, if any, or the President or
Secretary of the Corporation. Unless otherwise specified in such written notice,
a resignation shall take effect upon delivery thereof to the Board of Directors
or the designated officer. It shall not be necessary for a resignation to be
accepted before it becomes effective.
Section 4. Place of Meetings. The Board of Directors may hold meetings,
---------- -----------------
both regular and special, either within or without the State of Delaware.
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Section 5. Annual Meeting. The annual meeting of each newly elected Board
---------- --------------
of Directors shall be held immediately following the annual meeting of
stockholders, and no notice of such meeting shall be necessary to the newly
elected directors in order to constitute the meeting legally, provided a quorum
shall be present.
Section 6. Regular Meetings. Additional regular meetings of the Board of
---------- ----------------
Directors may be held at such time and place as may be determined from time to
time by the Board of Directors, at any place within or without the State of
Delaware. If the directors receive at the annual meeting of newly elected
directors, or any other meeting of directors, a schedule of any subsequent
regular meetings of the Board of Directors to be held until the next annual
meeting of directors, then such regular meetings may be held without additional
notice to the directors. If no such schedule of regular meetings is distributed,
then regular meetings may only be held on at least five (5) business days'
notice to each director if such notice is sent by mail, or on at least three (3)
business days' notice if such notice is delivered personally or sent by telegram
or given by telephone or by facsimile, provided that any notice given by mail
shall also be given by telephone or by facsimile.
Section 7. Special Meetings. Special Meetings of the Board of Directors
---------- ----------------
may be called by the Chairman of the Board, the Vice Chairman, or the President,
or by a majority of the Board of Directors then in office on at least two (2)
business days' notice to each director, if such notice is delivered personally
or sent by telegram or given by telephone or by facsimile, or on at least five
(5) business days' notice if sent by mail, provided that any notice given by
mail shall also be given by telephone or by facsimile. Special meetings shall
be called by the Chairman of the Board, the Vice Chairman, or the President, or
Secretary, or by a majority of the Board of Directors then in office in like
manner and on like notice on the written request of one-half or more of the
number of directors then in office. Any such notice need not state the purpose
or purposes of such meeting except as required by law.
Section 8. Quorum and Adjournments. At all meetings of the Board of
---------- -----------------------
Directors, a majority of the directors then in office, but not less than three,
shall constitute a quorum for the transaction of business, and the vote of a
majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by law or the Certificate of Incorporation. If a quorum is
not present at any meeting of the Board of
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<PAGE>
Directors, the directors present may adjourn the meeting from time to time, upon
announcement at the meeting at which the adjournment is taken and notice to any
director not present at the meeting, until a quorum shall be present.
Section 9. Compensation. Directors shall be entitled to such compensation
---------- ------------
for their services as directors and to such reimbursement for any reasonable
expenses incurred in attending directors' meetings as may from time to time be
fixed by the Board of Directors. The compensation of directors may be on such
basis as is determined by the Board of Directors. Any director may waive
compensation for any meeting. Any director receiving compensation under these
provisions shall not be barred from serving the Corporation in any other
capacity and receiving compensation and reimbursement for reasonable expenses
for such other services.
Section 10. Action by Written Consent. Any action required or permitted
----------- -------------------------
to be taken at any meeting of the Board of Directors may be taken without a
meeting if a written consent to such action is signed by all members of the
Board of Directors and such written consent is filed with the minutes of its
proceedings.
Section 11. Meetings by Telephone or Similar Communications Equipment.
----------- ---------------------------------------------------------
The Board of Directors, or any director, may participate in a meeting by means
of conference telephone or similar communications equipment by means of which
all directors participating in the meeting can hear each other, and
participation in such a meeting shall constitute presence in person by any such
director at such meeting.
ARTICLE IV.
-----------
Committees
----------
Section 1. Executive Committee. The Board of Directors, by resolution
---------- -------------------
adopted by a majority of the whole Board, may appoint an Executive Committee
consisting of two or more directors, one of whom shall be designated as chairman
of the Executive Committee. Each member of the Executive Committee shall
continue as a member thereof until the expiration of his term as a director or
his earlier resignation, unless sooner removed as a member or as a director.
Section 2. Powers. The Executive Committee shall have and may exercise
---------- ------
those rights, powers, and authority of the Board
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<PAGE>
of Directors as may from time to time be granted to it by the Board of Directors
to the extent permitted by law, and may authorize the seal of the Corporation to
be affixed to all papers that may require it.
Section 3. Procedure and Meetings. The Executive Committee shall fix its
---------- ----------------------
own rules of procedure and shall meet at such times and at such place or places
as may be provided by such rules or as the members of the Executive Committee
shall fix. The Executive Committee shall keep regular minutes of its meetings,
which it shall deliver to the Board of Directors from time to time. The
chairman of the Executive Committee or, in his absence a member of the Executive
Committee chosen by a majority of the members present shall preside at meetings
of the Executive Committee, and another member chosen by the Executive Committee
shall act as Secretary of the Executive Committee.
Section 4. Quorum. A majority of the Executive Committee or any other
---------- ------
committee shall constitute a quorum for the transaction of business, and the
affirmative vote of a majority of the members present at any meeting at which
there is a quorum shall be required for any action of the Executive Committee or
any other committee.
Section 5. Audit Committee. The Board of Directors, by resolution adopted
---------- ---------------
by a majority of the entire Board, may appoint an Audit Committee consisting of
two or more directors, which directors shall be independent of management and
free from any relationship that in the opinion of the Board of Directors would
interfere with their exercise of independent judgment as a member of the Audit
Committee. Each member of the Audit Committee shall continue as a member
thereof until the expiration of his term as a director or his earlier
resignation, unless sooner removed as a member or as a director.
Section 6. Powers. The Audit Committee shall have such powers and perform
---------- ------
such duties as may be prescribed by the resolution or resolutions creating such
committee.
Section 7. Other Committees. The Board of Directors, by resolutions
---------- ----------------
adopted by a majority of the whole Board, may appoint such other committee or
committees as it shall deem advisable and with such rights, powers, and
authority as it shall prescribe. Each such committee shall consist of two or
more directors.
Section 8. Committee Changes. The Board of Directors shall have the power
---------- -----------------
at any time to fill vacancies in, to change the membership of, and to discharge
any committee.
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<PAGE>
Section 9. Compensation. Members of any committee shall be entitled to
---------- ------------
such compensation for their services as members of the committee and to such
reimbursement for any reasonable expenses incurred in attending committee
meetings as may from time to time be fixed by the Board of Directors. Any
member may waive compensation for any meeting. Any committee member receiving
compensation under these provision shall not be barred from serving the
Corporation in any other capacity (unless otherwise required by law or
regulation) and from receiving compensation and reimbursement of reasonable
expenses for such other services.
Section 10. Action by Written Consent. Any action required or permitted
----------- -------------------------
to be taken at any meeting of any committee of the Board of Directors may be
taken without a meeting if a written consent to such action is signed by all
members of the committee and such written consent is filed with the minutes of
its proceedings.
Section 11. Meetings by Telephone or Similar Communications Equipment.
----------- ---------------------------------------------------------
The members of any committee designated by the Board of Directors may
participate in a meeting of such committee by means of conference telephone or
similar communications equipment by means of which all persons participating in
such meeting can hear each other, and participation in such a meeting shall
constitute presence in person by any such committee member at such meeting.
Section 12. Limitation of Committee Powers. No committee provided for in
----------- ------------------------------
this Article IV shall have or exercise the power or authority of the whole Board
of Directors in reference to amending the Certificate of Incorporation, adopting
an agreement of merger or consolidation, recommending to the stockholders the
sale, lease or exchange of all or substantially all of the Corporation's
property and assets, recommending to the stockholders a dissolution of the
Corporation or a revocation of a dissolution, or amending the By-Laws of the
Corporation, and no such committee shall have the power or authority to declare
a dividend or to issue stock.
ARTICLE V.
----------
Notices
-------
Section 1. Form and Delivery. Whenever a provision of any law, the
---------- -----------------
Certificate of Incorporation or these By-Laws requires that notice be given to
any director or stockholder, it
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<PAGE>
shall not be construed to require personal notice unless so specifically
provided, but such notice may be given in writing, by mail addressed to the
address of the director or stockholder as it appears on the records of the
Corporation, with postage prepaid. Such notices shall be deemed to be given
when they are deposited in the United States mail. Notice to a director may
also be given personally, by telegram or by facsimile sent to his address as it
appears on the records of the Corporation. Notices to a director pursuant to
Section 6 or Section 7 given by mail shall also be given by telegram or
facsimile.
Section 2. Waiver. Whenever any notice is required to be given under
---------- ------
the provisions of any law, the Certificate of Incorporation or these By-Laws, a
written waiver thereof signed by the person entitled to said notice, whether
before or after the time stated therein, shall be deemed to be equivalent to
such notice. In addition, any stockholder who attends a meeting of stockholders
in person or is represented at such meeting by proxy, without protesting at the
commencement of the meeting the lack of notice thereof to him, or any director
who attends a meeting of the Board of Directors without protesting at the
commencement of the meeting the lack of notice, shall be conclusively deemed to
have waived notice of such meeting.
ARTICLE VI.
-----------
Officers
--------
Section 1. Designations. The officers of the Corporation shall be chosen
---------- ------------
by the Board of Directors. The Board of Directors shall choose a President, a
Secretary and a Treasurer and may choose a Chairman of the Board, a Vice
Chairman of the Board, a Vice President or Vice Presidents, one or more
Assistant Secretaries and/or Assistant Treasurers, and other officers and agents
that it shall deem necessary or appropriate. All officers of the Corporation
shall exercise the powers and perform the duties provided for in these By-Laws
or which shall from time to time be determined by the Board of Directors. Any
number of offices may be held by the same person, unless the Certificate of
Incorporation or these By-Laws provide otherwise.
Section 2. Term of, and Removal from, Office. At its first regular
---------- ---------------------------------
meeting after each annual meeting of stockholders, the Board of Directors shall
choose a President, a Secretary and a Treasurer. It may also choose a Chairman
of the Board, a Vice Chairman of the Board, a Vice President or Vice Presidents,
one or more Assistant Secretaries and/or Assistant Treasurers, and
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<PAGE>
such other officers and agents as it shall deem necessary or appropriate. Each
officer of the Corporation shall hold office until his successor is chosen and
shall qualify. Any officer elected or appointed by the Board of Directors may
be removed, with or without cause, at any time by the affirmative vote of a
majority of the directors then in office. Removal from office, however, shall
not prejudice the contract rights, if any, of the person removed. Any vacancy
occurring in any office of the Corporation may be filled for the unexpired
portion of the term by the Board of Directors.
Section 3. Compensation. No officer shall be prevented from receiving a
---------- ------------
salary because he is also a director of the Corporation.
Section 4. Chairman of the Board. The Chairman of the Board of Directors,
---------- ---------------------
if any, shall be the chief executive officer of the Corporation, and, subject to
the direction of the Board of Directors, shall have general charge of the
management and direction of the business, affairs and property of the
Corporation, and general supervision over its other officers and agents, and,
when present, shall preside at all meetings of the stockholders and the Board of
Directors. The Chairman of the Board of Directors shall perform such other
duties and have such other powers as the Board of Directors shall designate from
time to time.
Section 5. Vice Chairman of the Board. The Vice Chairman of the Board, if
---------- --------------------------
any, shall be an officer of the Corporation and, subject to the direction of the
Board of Directors, shall perform such executive, supervisory, and management
functions and duties as may be assigned to him from time to time by the Board of
Directors or the Chairman of the Board. If the Chairman of the Board is absent,
he shall, if present, preside at meetings of the stockholders and the Board of
Directors.
Section 6. The President. The President shall be the chief operating
---------- -------------
officer of the Corporation. In general, he shall perform all duties incident to
the office of President and chief operating officer and shall see that all
orders and resolutions of the Board of Directors are carried into effect and
shall perform such other executive, supervisory and management functions and
duties as may be assigned to him from time to time by the Board of Directors or
the Chairman of the Board.
Section 7. The Vice President. The Vice President, if any, or in the
---------- ------------------
event there be more than one, the Vice Presidents
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<PAGE>
in the order designated, or in the absence of any designation in the order of
their election, shall, in the absence of the President or in the event of his
disability, perform the duties and exercise the powers of the President and
shall generally assist the President and perform such other duties and have such
other powers as may from time to time be prescribed by the Board of Directors.
Section 8. The Secretary. The Secretary shall attend all meetings of the
---------- -------------
Board of Directors and the stockholders and record all votes and the proceedings
of the meetings in a book to be kept for that purpose. He shall perform like
duties for the Executive Committee or other committees, if required. He, or any
other authorized officer of the Corporation, shall give, or cause to be given,
notice of all meetings of stockholders and special meetings of the Board of
Directors, and shall perform such other duties as may from time to time be
prescribed by the Board of Directors, the Chairman of the Board or the
President, under whose supervision he shall act. He shall have custody of the
seal of the Corporation, and he, or an Assistant Secretary, shall have authority
to affix it to any instrument requiring it, and, when so affixed, the seal may
be attested by his signature or by the signature of the Assistant Secretary.
The Board of Directors may give general authority to any other officer to affix
the seal of the Corporation and to attest the affixing thereof by his signature.
Section 9. The Assistant Secretary. The Assistant Secretary, if any, or
---------- -----------------------
in the event there be more than one, the Assistant Secretaries in the order
designated, or in the absence of any designation in the order of their election,
shall, in the absence of the Secretary or in the event of his disability,
perform the duties and exercise the powers of the Secretary and shall perform
such other duties and have such other powers as may from time to time be
prescribed by the Board of Directors.
Section 10. The Treasurer. The Treasurer shall be the principal financial
----------- -------------
officer of the Corporation and shall perform all duties incident to that office,
shall have the custody of the corporate funds and other valuable effects,
including securities, and shall keep full and accurate accounts or receipts and
disbursements in books belonging to the Corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the Corporation in
such depositories as may from time to time be designated by the Board of
Directors. The Treasurer shall disburse the funds of the Corporation in accord
with the orders of the Board of Directors, taking proper vouchers for such
disbursements, and shall render to the Chairman of the
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<PAGE>
Board, if any, the President, and the Board of Directors, whenever they may
require it or at regular meetings of the Board, an account of all the
Treasurer's transactions as Treasurer and of the financial condition of the
Corporation.
Section 11. The Assistant Treasurer. The Assistant Treasurer, if any, or
----------- -----------------------
in the event there shall be more than one, the Assistant Treasurers in the order
designated, or in the absence of any designation in the order of their election,
shall, in the absence of the Treasurer or in the event of his disability,
perform the duties and exercise the powers of the Treasurer and shall perform
such other duties and have such other powers as may from time to time be
prescribed by the Board of Directors.
Section 12. Subordinate Officers. The Board of Directors may appoint such
----------- --------------------
subordinate officers as it may deem desirable. Each such officer shall hold
office for such period, have such authority and perform such duties as the Board
of Directors may prescribe. The Board of Directors may, from time to time,
authorize any officers to appoint and remove subordinate officers and prescribe
the powers and duties thereof.
ARTICLE VII.
------------
Indemnification of Officers,
Directors, Employees and Agents
-------------------------------
Section 1. Indemnification.
---------- ---------------
a. The Corporation shall provide indemnification to and shall hold
harmless any person who was or is a party or is threatened to be made a party to
or is involved (as a party, witness or otherwise) in any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, to the fullest extent permitted by the
Delaware General Corporation Law, as it may be amended or interpreted from time
to time, against all expenses, liability and loss (including attorneys' fees),
judgments, fines and amounts paid in settlement, actually and reasonably
incurred or suffered by him in connection with
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<PAGE>
investigating, defending, being a witness in, or participating in (including on
appeal), or preparing for any such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interest of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interest
of the Corporation, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that his conduct was unlawful.
b. The Corporation shall also indemnify and hold harmless any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred or
suffered by him in connection with the defense or settlement of such action or
suit 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 except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the Corporation unless and only to
the extent that the Court of Chancery or the court in which such action or suit
was brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery or such other court shall deem proper.
c. To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in this Section, or in defense of any
claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith. The rights provided to any person by this Article VII
shall be enforceable against the Corporation by such
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<PAGE>
person who shall be presumed to have relied upon it in serving or continuing to
serve as an officer, director, employee or agent as described above.
Section 2. Authorization. Any indemnification under Section 1 of this
---------- -------------
Article VII (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in this Article VII. Such
determination shall be made: (a) by the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to such action, suit or
proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, or (c) by a majority vote of the stockholders.
Section 3. Expense Advance. Expenses (including attorneys' fees) incurred
---------- ---------------
by a director, officer, employee or agent of the Corporation in defending any
civil, administrative, investigative or criminal action, suit or proceeding may
be paid by the Corporation in advance of the final disposition of such action,
suit or proceeding as authorized by the Board of Directors in the manner
provided in Section 2 of this Article VII upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay such amount
unless it shall ultimately be determined that he is entitled to be indemnified
by the Corporation as provided in this Article VII. Any obligation to reimburse
the Corporation for expense advances shall be unsecured and no interest shall be
charged thereon.
Section 4. Non-exclusivity. The indemnification provided by this Article
---------- ---------------
VII shall not be deemed exclusive of any other rights to which a person seeking
indemnification may be entitled under these By-Laws, or any agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
Section 5. Insurance. The Corporation shall have power to purchase and
---------- ---------
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
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<PAGE>
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VII.
Section 6. Settlement of Claims. The Corporation shall not be liable to
---------- --------------------
indemnify any officer, director, employee or agent under this Article VII for
any amounts paid in settlement of any action or claim effected without the
Corporation's written consent, which consent shall not be unreasonably withheld,
or for any judicial award if the Corporation was not given a reasonable and
timely opportunity, at its expense, to participate in the defense of such
action.
Section 7. Effect of Amendment. Any amendment, repeal, or modification of
---------- -------------------
this Article VII shall not adversely affect any right or protection of any
officer, director, employee or agent existing at the time of such amendment,
repeal, or modification.
Section 8. Subrogation. In the event of payment under this Article VII,
---------- -----------
the Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of the officer, director, employee or agent, who shall
execute all papers required and shall do everything that may be necessary to
secure such rights, including the execution of such documents necessary to
enable the Corporation effectively to bring suit to enforce such rights.
Section 9. No Duplication of Payments. The Corporation shall not be
---------- --------------------------
liable under this Article VII to make any payment in connection with any claim
made against the officer, director, employee or agent to the extent such
officer, director, employee or agent has otherwise actually received payment
(under any insurance policy, agreement, vote, or otherwise) of the amounts
otherwise indemnifiable hereunder.
Section 10. "The Corporation". For the purposes of this Article VII,
----------- -----------------
references to "the Corporation" shall include, in addition to the resulting
corporation, and at the election of the Board of Directors of the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of
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<PAGE>
such constituent corporation as director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise (but only to
the extent the Board of Directors of the resulting corporation so decides) shall
stand in the same position under the provisions of this Article VII with respect
to the resulting or surviving corporation as he would have with respect to such
constituent corporation if its separate existence had continued.
Section 11. Other Enterprises. For purposes of this Article VII,
----------- -----------------
references to "other enterprises" shall include employee benefit plans;
references to "fines" shall include any excise taxes assessed on a person with
respect to an employee benefit plan; and references to "serving at the request
of the Corporation" shall include any service as a director, officer, employee
or agent of the Corporation which imposes duties on, or involves services by,
such director, officer, employee, or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and a person who acted in good faith
and in a manner he reasonably believed to be in the interest of the participants
and beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the Corporation" as referred to in
this Article VII.
Section 12. Continuation of Indemnification. The indemnification and
----------- -------------------------------
advancement of expenses provided by, or granted pursuant to, these By-laws
shall, unless otherwise provided when authorized or ratified, continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such a
person.
ARTICLE VIII.
-------------
Affiliated Transactions and Interested Directors
------------------------------------------------
Section 1. Affiliated Transactions.
---------- -----------------------
a. No contract or transaction between the Corporation and one or more
of its directors or officers, or between the Corporation and any other
corporation, partnership, association, or other organization in which one or
more of its directors or officers are directors or officers or have a financial
interest, shall be void or voidable solely for this reason, or solely because
the director or officer is present at or participates in the meeting of the
Board of Directors or committee thereof that
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<PAGE>
authorizes the contract or transaction or solely because his or their votes are
counted for such purpose, if:
i) The material facts as to his or their interest and as to the contract or
transaction are disclosed or are known to the Board of Directors or the
committee thereof, and the Board of Directors or committee thereof in good faith
authorizes the contract or transaction by a vote sufficient for such purpose
without counting the vote of the interested director or directors, even though
the disinterested directors be less than a quorum; or
ii) The material facts as to his or their interest and as to the contract
or transaction are disclosed or are known to the stockholders entitled to vote
thereon, and the contract or transaction is specifically approved in good faith
by the vote of the stockholders; or
iii) The contract or transaction is fair as to the Corporation as of the
time it is first authorized, approved, or ratified by the Board of Directors, a
committee thereof, or the stockholders.
b. No director or officer shall be liable to account to the
Corporation for any profit realized by him from or through such contract or
transaction solely by reason of the fact that he or any other corporation,
partnership, association, or other organization in which he is a director or
officer, or has a financial interest, was interested in such contract or
transaction.
Section 2. Determining Quorum. Interested directors may be counted in
---------- ------------------
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee thereof which authorizes the contract or transaction.
ARTICLE IX.
-----------
Stock Certificates
------------------
Section 1. Form and Signatures.
---------- -------------------
a. Every holder of stock of the Corporation shall be entitled to a
certificate stating the number, class, and series, if any, of shares owned by
him, signed by either the Chairman or Vice Chairman of the Board, the President
or Vice President and the Treasurer or an Assistant Treasurer, or the Secretary
or an
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<PAGE>
Assistant Secretary of the Corporation, and bearing the seal of the Corporation.
The signatures and the seal may be facsimile. A certificate may be signed,
manually or by facsimile, by a transfer agent or registrar other than the
Corporation or its employee. In case any officer who has signed, or whose
facsimile signature was placed on, a certificate shall have ceased to be such
officer before the certificate is issued, it may nevertheless be issued by the
Corporation with the same effect as if he were such officer at the date of its
issue.
b. Every certificate representing shares of capital stock which are
subject to any restriction on transfer pursuant to law, the Certificate of
Incorporation, these By-Laws, or any agreement to which the Corporation is a
party, shall have the restriction noted conspicuously on the certificate, and
shall also set forth, on the face or back, either the full text of the
restriction or a statement of the existence of such restriction and (except if
such restriction is imposed by law) a statement that the Corporation will
furnish a copy thereof to the holder of such certificate upon written request
and without charge.
Every certificate representing shares of capital stock issued when the
Corporation is authorized to issue more than one class or series of stock shall
set forth on its face or back either the full text of the preferences, voting
powers, qualifications, and special and relative rights of the shares of each
class and series authorized to be issued, or a statement of the existence of
such preferences, powers, qualifications and rights, and a statement that the
Corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge.
Section 2. Transfer of Shares. Subject to any applicable restrictions
---------- ------------------
noted upon the face or back of a stock certificate pursuant to law, the
Certificate of Incorporation, these By-Laws, or any agreement to which the
Corporation is a party, or as may be required by law, the shares of stock of the
Corporation shall be transferred on the books of the Corporation by the holder
thereof in person or by his attorney lawfully constituted upon surrender for
cancellation of certificates for the same number of shares to the Corporation or
any transfer agent of the Corporation with an assignment and power of transfer
endorsed thereon or attached thereto duly executed with such proof or guaranty
of the authenticity of the signature as the Corporation or its agents may
reasonably require, and the Corporation or its transfer agent shall issue a new
certificate to the person entitled thereto, cancel the old certificate, and
record the transaction upon its books.
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<PAGE>
Section 3. Registered Stockholders.
---------- -----------------------
a. Except as otherwise provided by law or the Certificate of
Incorporation, the Corporation shall be entitled to recognize the exclusive
right of a person who is registered on its books as the owner of shares of its
capital stock to receive dividends or other distributions and to vote or consent
as such owner, and, in the event the stock is not fully paid, to hold liable for
calls and assessments any person who is registered on its books as the owner of
shares of its capital stock. The Corporation shall not be bound to recognize any
equitable or legal claim to, or interest in, such shares on the part of any
other person.
b. If a stockholder desires that notices and/or dividends shall be sent
to a name or address other than the name or address appearing on the stock
ledger maintained by the Corporation, or its transfer agent or registrar, if
any, the stockholder shall have the duty to notify the Corporation, or its
transfer agent or registrar, if any, in writing of his desire and specify the
alternate name or address to be used.
Section 4. Fixing Date for Determination of Stockholders of Record. In
---------- -------------------------------------------------------
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or to
express consent to corporate action in writing without a meeting, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix a record date, which record date shall not precede the date
upon which the resolution fixing the record date is adopted by the Board of
Directors and which record date: (a) in the case of determination of
stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall unless otherwise required by law, not be more than sixty (60) nor
less than ten (10) days before the date of such meeting; (b) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten (10) days from the date
upon which the resolution fixing the record date is adopted by the Board of
Directors; and (c) in the case of any other action, shall not be more than sixty
(60) days prior to such other action. If no record date is fixed: (a) the
record date for determining stockholders entitled to notice of or to vote at a
meeting of stockholders shall be at the close of business on the day next
preceding the day on which notice is given, or, if notice is waived, at the
close of
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<PAGE>
business on the day next preceding the day on which the meeting is held; (b) the
record date for determining stockholders entitled to express consent to
corporate action in writing without a meeting when no prior action of the Board
of Directors is required by law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation in accordance with applicable law, or, if prior
action by the Board of Directors is required by law, shall be at the close of
business on the day on which the Board of Directors adopts the resolution taking
such prior action; and (c) the record date for determining stockholders for any
other purpose shall be at the close of business on the day one which the Board
of Directors adopts the resolution relating thereto. A determination of
stockholders of record entitled to notice of or to vote at a meeting of
stockholders shall apply to any adjournment of the meeting; provided, however,
that the Board of Directors may fix a new record date for the adjourned meeting.
Section 5. Lost, Stolen, or Destroyed Certificates. The Board of
---------- ---------------------------------------
Directors may direct that a new certificate be issued to replace any certificate
theretofore issued by the Corporation that, it is claimed, has been lost,
stolen, or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen, or destroyed. When
authorizing the issue of a new certificate, the Board of Directors may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of the lost, stolen, or destroyed certificate, or his legal
representative, to advertise the same in such manner as it shall require, and/or
to give the Corporation a bond in such sum, or other security in such form, as
it may direct as indemnity against any claim that may be made against the
Corporation with respect to the certificate claimed to have been lost, stolen,
or destroyed.
ARTICLE X.
----------
Execution of Documents By The Corporation
-----------------------------------------
Section 1. Execution of Checks, Notes, Etc. All checks and drafts on the
---------- -------------------------------
Corporation's bank accounts, all bills of exchange and promissory notes, and all
acceptances, obligations and other instruments for the payment of money shall be
signed by such officer or agent or agents as shall be thereunto authorized from
time to time by the Board of Directors, which may in its discretion authorize
any such signature to be facsimile.
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<PAGE>
Section 2. Execution of Contracts, Assignments, Etc. Unless the Board of
---------- ----------------------------------------
Directors shall have otherwise provided generally or in a specific case, all
contracts, agreements, endorsements, assignments, transfers, stock powers, or
other instruments shall be signed by the Chairman, the Vice Chairman, the
President, any Vice President, the Secretary or the Treasurer. The Board of
Directors may, however, in its discretion, require any or all of such
instruments to be signed by any two or more of such officers or may permit any
or all such instruments to be signed by such other officer or officers or agent
or agents as it shall thereunto authorize from time to time.
Section 3. Voting Stock of Other Corporations. Unless otherwise
---------- ----------------------------------
prescribed by the Board of Directors, the Chairman, Vice Chairman or President
shall have full power and authority to attend, act, and vote on behalf of the
Corporation at any meeting of the security holders of other corporations in
which the Corporation may hold securities. At any such meeting, the Chairman,
Vice Chairman or President shall possess and may exercise any and all rights and
powers incident to the ownership of such securities that the Corporation might
have possessed and exercised if it had been present. The Board of Directors may
from time to time confer like powers upon any other person or persons.
Section 4. Execution of Proxies. The Chairman, Vice Chairman or
---------- --------------------
President, or in their absence or disability, a Vice President, may authorize
from time to time the signature and issuance of proxies to vote upon shares of
stock of other corporations or other legal entities standing in the name of the
Corporation. All such proxies shall be signed in the name of the Corporation by
the Chairman, Vice Chairman, President, a Vice President, the Secretary or the
Treasurer, or by such other or further officer or officers or agent or agents as
shall be thereunto authorized from time to time by the Board of Directors.
ARTICLE XI.
-----------
General Provisions
------------------
Section 1. Dividends. Subject to the provisions of law and the
---------- ---------
Certificate of Incorporation, dividends upon the outstanding capital stock of
the Corporation may be declared by the Board of Directors at any regular or
special meeting, and may
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<PAGE>
be paid in cash, in property, or in the authorized shares of the Corporation's
capital stock.
Section 2. Reserves. The Board of Directors shall have full power,
---------- --------
subject to the provisions of law and the Certificate of Incorporation, to
determine whether any, and, if so, what part, of the funds legally available for
the payment of dividends shall be declared as dividends and paid to the
stockholders of the Corporation.
Section 3. Capital. The Board of Directors, in its sole discretion, may
---------- -------
fix a sum that may be allocated, set aside or reserved over and above the paid-
in capital of the Corporation as capital of the Corporation in respect of any
shares of the Corporation or any designated class or classes or as a reserve for
any proper purpose, and any such reserve may, from time to time, be increased,
diminished, or varied.
Section 4. Inspection of Books. The Board of Directors shall determine
---------- -------------------
from time to time whether, and if allowed, to what extent and at what time and
places and under what conditions and regulations, the accounts and books of the
Corporation (except such as may by law be specifically open to inspection) or
any of them, shall be open to the inspection of the stockholders and no
stockholder shall have any right to inspect any account or book or document of
the Corporation, except as conferred by the laws of the State of Delaware.
Section 5. Fiscal year. The fiscal year of the Corporation shall be
---------- -----------
determined from time to time by the Board of Directors.
Section 6. Seal. The corporate seal shall have inscribed thereon the name
---------- ----
of the Corporation, the year of its incorporation, and the words "Corporate
Seal" and "Delaware".
ARTICLE XII.
------------
Amendments
----------
The Board of Directors shall have the power to alter or repeal these
By-Laws and to adopt new By-Laws by an affirmative vote of a majority of the
entire Board of Directors then in office. Any By-Law which may be adopted or
amended by the Board of Directors may be also amended, changed or repealed by
the vote of the holders of not less than sixty-six and two-thirds percent (66-
2/3%) of the outstanding stock of the Corporation entitled to vote generally in
the election of directors.
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<PAGE>
ARTICLE XIII./1/
-------------
Restrictions on
Transfer of Certain Shares of Capital Stock of the Corporation
--------------------------------------------------------------
Section 1. Restrictions on Transfer. Any Person who receives or is
---------- ------------------------
entitled to receive any shares of Class A Common Stock of the Corporation (the
"Merger Securities") issued pursuant to the Agreement and Plan of Merger dated
as of November 18, 1994, as amended and restated as of August 1, 1995, by and
among the Corporation, Providence Journal Company, The Providence Journal
Company, King Holding Corp. and King Broadcasting Company, as amended to date
(the "Merger Agreement"), shall not Transfer (as defined herein), and the
Corporation shall not be required to register the Transfer of, any share of such
Merger Securities until the first anniversary of the effective date of the
merger of Providence Journal Company with and into the Corporation pursuant to
the terms of the Merger Agreement (the "Effective Date")/2/, except a Permitted
Transfer (as defined below) to a Permitted Transferee (as defined below) of the
economic owner of the share of the Merger Securities (the "Restricted Holder").
Capitalized terms used herein and not otherwise defined shall have the meanings
prescribed therefor in the Merger Agreement.
The term "Permitted Transferee" has the following meanings with respect to
each Restricted Holder:
a. the following persons shall be "Permitted Transferees" of each
Restricted Holder who is a natural person:
(1) The spouse or former spouse of such Restricted Holder, any lineal
descendant of a grandparent of such Restricted Holder or of a
grandparent of the spouse or former spouse of such Restricted Holder
and any spouse or former spouse of such lineal descendant (such lineal
descendants, their spouses or former spouses and the spouse or former
spouses shall constitute such Restricted Holder's "Family Members");
- ----------------------
/1/ Article XIII was adopted by the Board of Directors on September 7, 1995.
/2/ The "Effective Date" was October 5, 1995.
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<PAGE>
(2) A voting trust, or the trustee or trustees of such voting trust
solely in their capacities as trustees of such voting trust, of which a
Controlling Number of such trustees are any of the following (each a
"Qualified Person"): such Restricted Holder, one of such Restricted
Holder's Family Members or an executive officer (as defined in Rule 3b-7
of the General Rules and Regulations under the Exchange Act, as in
effect on June 7, 1995) of the Corporation or any wholly owned
subsidiary of the Corporation;
(3) A trust (other than a voting trust), or the trustee or trustees of
such trust solely in their capacities as trustees of such trust, solely
for the benefit of such Restricted Holder or one or more of such
Restricted Holder's Permitted Transferees described in any subclause of
this clause (a) other than subclause (2) or this subclause (3);
(4) A corporation of which a majority of the outstanding shares of
capital stock entitled to vote generally for the election of directors
is beneficially owned by and under the control of, or a partnership of
which a majority of the partnership interests entitled to participate in
the management of the partnership are beneficially owned by and under
the control of, such Restricted Holder or his or her Permitted
Transferees described in any subclause of this clause (a) other than
this subclause
(5) If the Restricted Holder is deceased, bankrupt or insolvent, the
estate of such Restricted Holder; and
(6) A corporation, trust, partnership or financial institution which
shall hold any Merger Securities in a custodial or nominee arrangement.
b. the following persons shall be entitled to have the "Permitted
Transferees" indicated:
(1) In the case of any corporation or limited liability company that is
a Restricted Holder, "Permitted Transferee" means (x) any Person with
economic ownership of any of the outstanding shares of capital stock
entitled to vote generally for the election of directors of such
corporation or limited liability company, as the case may be, as of the
Effective Date, and the Permitted Transferees of such
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<PAGE>
person, or (y) any entity which is more than 90% owned by such
corporation or limited liability company.
(2) In the case of any partnership which is a Restricted Holder and
which is dissolved or liquidated, "Permitted Transferee" means (x) each
of the partners of such partnership as of the Effective Date, and (y)
the Permitted Transferees of such partners.
(3) In the case of any other corporation or partnership, "Permitted
Transferee" means (x) with respect to each share of Merger Securities
so transferred to such corporation or partnership in a Permitted
Transfer, the transferor in such Permitted Transfer and any Permitted
Transferee of such transferor, and (y) with respect to each Subsequent
Merger Share held by such corporation or partnership, any person who is
a Permitted Transferee with respect to the share of Merger Securities
in respect of which such Subsequent Merger Share was issued.
(4) In the case of a revocable trust which is a Restricted Holder,
"Permitted Transferee" means (x) with respect to shares of Merger
Securities held by such trust as a Restricted Holder, the settlor of
such trust and Permitted Transferees of such settlor and the
beneficiaries of such trust as of the Effective Date and Permitted
Transferees of such beneficiaries, and (y) with respect to each share
of Merger Securities transferred to such trust in a Permitted Transfer,
any person who transferred such share of Merger Securities to such
trust and any Permitted Transferee of any such transferor, and (z) with
respect to each Subsequent Merger Share, any person who is a Permitted
Transferee with respect to the share of Merger Securities in respect of
which such Subsequent Merger Share was issued.
(5) In the case of a trust (other than a voting trust) which was
irrevocable on the Effective Date, "Permitted Transferee" means with
respect to shares of Merger Securities held by such trust as a
Restricted Holder and with respect to each share of Merger Securities
transferred to such trust in a Permitted Transfer and with respect to
each Subsequent Merger Share, any person to whom or for whose benefit
principal may be distributed either during or at the end of the term of
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<PAGE>
such trust whether by power of appointment or otherwise.
(6) In the case of a voting trust or any other trust (other than a
trust described in paragraph (4) or (5) above), "Permitted Transferee"
means (x) with respect to each share of Merger Securities transferred
to such trust in a Permitted Transfer, any person who transferred such
share of Merger Securities to such trust and any Permitted Transferee
of any such transferor, and (y) with respect to each Subsequent Merger
Share any person who is a Permitted Transferee with respect to the
share of Merger Securities in respect of which such Subsequent Merger
Share was issued.
(7) In the case of a holder of Merger Securities which is the estate
of a deceased, bankrupt or insolvent Restricted Holder, "Permitted
Transferee" means, with respect to each share of Merger Securities
transferred to such estate in a Permitted Transfer and with respect to
each Subsequent Merger Share, a Permitted Transferee of such deceased,
bankrupt or insolvent Restricted Holder.
(8) In the case of a corporation, trust, partnership or financial
institution which is the holder of record of Merger Securities as
nominee for the person who is the beneficial owner of such shares,
"Permitted Transferee" means such beneficial owner and any Permitted
Transferee of such beneficial owner.
Section 2. Pledges. Notwithstanding anything to the contrary set forth
---------- -------
herein, any Restricted Holder may pledge his shares of Merger Securities to a
pledgee pursuant to a bona fide pledge of such shares as collateral security for
indebtedness (which indebtedness must be full recourse against the Restricted
Holder) due to the pledgee, provided that such shares shall not be transferred
to or registered in the name of the pledgee and shall remain subject to the
provisions of this ARTICLE XIII. In the event of foreclosure or other similar
action with respect to such shares by the pledgee, such pledged shares of Merger
Securities may only be transferred to a Permitted Transferee of the pledgor.
Section 3. Definitions. For purposes of this ARTICLE XIII of these By-
---------- -----------
Laws:
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<PAGE>
a. The term "Controlling Number" means the minimum number of
trustees, in the case of a trust, or members of a governing body, in the
case of any other form of entity, whose affirmative vote is necessary to
take any action on, or whose negative vote, abstention or failure to attend
is sufficient to prevent any action with respect to the voting or
disposition of shares of capital stock held by such entity.
b. The term "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
c. The term "Subsequent Merger Share" means any share of Merger
Securities issued by the Corporation to a Restricted Holder in respect of
an existing share of Merger Securities held by such Restricted Holder.
d. The term "Permitted Transfer" means a Transfer not for any value
or consideration, including but not limited to, a Transfer by gift, by
bequest, pursuant to the terms of a trust or the laws of descent or
distribution, or by operation of law.
e. The term "Transfer" includes, but is not limited to, any indirect
or direct transfer, offer to sell, sale, assignment, grant of an option to
acquire, pledge, or other disposition.
f. The relationship of any person that is derived by or through legal
adoption shall be considered a natural one.
g. A minor for whom shares of Merger Securities are held pursuant to
the Uniform Gifts to Minors Act, as in effect in any state, or any similar
law, shall be considered a Restricted Holder.
h. Unless otherwise specified, the term "Person" means both natural
persons and legal entities.
i. Each reference to a corporation shall include any corporation
resulting from merger or consolidation, and each reference to a partnership
shall include any successor partnership resulting solely from the death,
bankruptcy or other withdrawal of a partner.
j. The term "beneficial owner" has the meaning ascribed to such term
in Rule 13d-3 of the General Rules and Regulations under the Exchange Act,
as in effect on April 1,
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<PAGE>
1992 and the term "economic owner" has the meaning ascribed to the term
"beneficial owner" in Rule 16a-1(a)(2) of the Exchange Act, as in effect on
June 7, 1995.
Section 4. Legend on Stock Certificates. The Corporation shall note on
---------- ----------------------------
the certificates for shares of Merger Securities issued upon transfer that the
shares represented by such certificates are subject to the restrictions on
transfer and registration of transfer imposed by this ARTICLE XIII.
Section 5. Termination of Restrictions on Transfers. The provisions of
---------- ----------------------------------------
this ARTICLE XIII shall terminate in their entirety on the first anniversary of
the Effective Date.
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<PAGE>
============================================================
Exhibit 4.9
CONTINENTAL CABLEVISION, INC.
and
BANK OF MONTREAL TRUST COMPANY,
as Trustee
__________
INDENTURE
Dated as of December 13, 1995
__________
$600,000,000
8.30% Senior Notes Due 2006
============================================================
<PAGE>
TABLE OF CONTENTS/*/
Page
----
PARTIES.............................................. 1
RECITALS............................................. 1
Purpose of Indenture............................ 1
Form of Face of Note............................ 1
Form of Trustee's Certificate of
Authentication................................ 4
Form of Reverse of Note......................... 5
Assignment Form................................. 10
Option of Holder to Elect Prepayment............ 11
Compliance with Legal Requirements.............. 12
ARTICLE ONE
DEFINITIONS
SECTION 1.01 Definitions.......................... 12
Acceleration Notice.................. 12
Accreted Value....................... 12
Affiliate............................ 13
Annualized Cash Flow................. 13
Banking Day.......................... 13
Board of Directors................... 13
Capital Stock........................ 13
Common Stock......................... 13
Company.............................. 14
Defaulted Interest................... 14
Depositary........................... 14
Event of Default..................... 14
Exchange Notes....................... 14
Exempt Repurchase Indebtedness....... 14
Exempt Repurchase.................... 14
GAAP................................. 15
Global Notes......................... 15
Indebtedness......................... 15
Indenture............................ 16
Initial Tender Period................ 16
Institutional Accredited Investor.... 16
Interest Rate Agreement.............. 16
- ----------
/*/ This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
-i-
<PAGE>
Page
----
Investment Grade Rated............... 16
June Senior Debt Securities........... 17
Lien................................. 17
New Borrowing Group.................. 17
1998-1999 Share Repurchase
Program............................ 18
1995 Credit Facility................. 18
1994 Credit Facility................. 18
1992 Preferred Stock................. 18
Non-U.S. Person...................... 18
Note or Notes; Outstanding........... 18
Noteholder........................... 19
Note Restricted Group................ 19
Officers' Certificate................ 19
Offshore Global Note................. 20
Offshore Notes Exchange Date......... 20
Offshore Physical Notes.............. 20
Operating Cash Flow.................. 20
Opinion of Counsel................... 21
Permanent Offshore Global Note....... 21
Person............................... 21
Physical Notes....................... 21
Pre-Acceleration Notice.............. 21
Predecessor Note..................... 21
Preferred Event Put Notice........... 21
Preferred Event Redemption Date...... 21
Preferred Event Redemption Price..... 21
Preferred Stock Change
of Control Event................... 21
Preferred Stock Redemption Payment... 22
Principal Office of the Trustee...... 22
Principal Property................... 22
Private Placement Legend............. 22
Proposed Date........................ 22
Put Option Borrowing................. 22
Put Option Redemption Date........... 23
Put Option Redemption Price.......... 23
Put Option Stock Repurchase.......... 23
Put Option Transaction............... 23
Put Option Transaction Date.......... 23
QIB.................................. 23
Registration......................... 23
Registration Rights Agreement........ 23
Registration Statement............... 23
Regulation S......................... 23
Responsible Officer.................. 23
-ii-
<PAGE>
Page
----
Restricted Payments.................. 23
Restricted Stock Purchase
Agreement.......................... 23
Rule 144A............................ 24
SEC.................................. 24
Securities Act of 1933............... 24
Senior Subordinated Debt............. 24
Stock Liquidation Agreement.......... 24
Subsidiary........................... 24
Temporary Offshore Global Note....... 24
Tender Discharge Date................ 24
Tender Period........................ 24
Total Interest Expense............... 24
Trustee.............................. 25
Trust Indenture Act of 1939.......... 25
2005 Debentures...................... 25
2001 Notes........................... 25
2013 Debentures...................... 25
Unrestricted Subsidiary.............. 25
U.S. Global Note..................... 25
U.S. Government Obligations.......... 25
U.S. Physical Notes.................. 26
Vice President....................... 26
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND
EXCHANGE OF NOTES
SECTION 2.01 Designation, Amount and Issue of
Notes.............................. 26
2.02 Form of Notes........................ 26
2.03 Restrictive Legends.................. 27
2.04 Date and Denomination of Notes....... 29
2.05 Execution of Notes................... 31
2.06 Exchange and Registration of
Notes; Transfer of Notes............. 32
2.07 Book-Entry Provisions for U.S. Global
Note and Offshore Global Note.. 33
2.08 Special Transfer Provisions.......... 35
2.09 Mutilated, Destroyed, Lost or
Stolen Notes......................... 39
2.10 Temporary Notes...................... 40
2.11 Cancellation of Notes Paid, etc...... 41
2.12 CUSIP Numbers........................ 41
-iii-
<PAGE>
Page
----
ARTICLE THREE
REDEMPTION OF NOTES; PREPAYMENT AT
THE OPTION OF THE HOLDERS
SECTION 3.01 Redemption at the Option of the
Company.............................. 41
3.02 Prepayment at the Option of the
Holder - Preferred Stock
Redemption Payment................... 41
3.03 Prepayment at the Option of the
Holder - Exempt Repurchases
and Borrowing........................ 44
3.04 Mailing of Notices..................... 46
3.05 Cancellation of Notes
after Prepayment..................... 47
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
SECTION 4.01 Payment of Principal, Premium and
Interest............................. 47
4.02 Offices for Notices and Payments,
etc.................................. 47
4.03 Appointments to Fill Vacancies
in Trustee's Office.................. 48
4.04 Provision as to Paying Agent.......... 48
4.05 Corporate Existence and Maintenance
of Properties.......................... 49
4.06 Restricted Payments................... 49
4.07 Limitation on Indebtedness............ 50
4.08 Limitation on Investment in
Subsidiaries other than Note
Restricted Group....................... 50
4.09 Transactions with Stockholders and
Affiliates............................. 51
4.10 Certificate to Trustee................ 51
4.11 Limitation on Liens................... 51
-iv-
<PAGE>
Page
----
ARTICLE FIVE
NOTEHOLDERS LISTS AND REPORTS BY THE COMPANY
AND THE TRUSTEE
SECTION 5.01 Noteholders Lists..................... 53
5.02 Reports by the Company................ 53
5.03 Reports by the Trustee................ 54
ARTICLE SIX
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON THE OCCURRENCE OF AN EVENT OF DEFAULT
SECTION 6.01 Events of Default..................... 54
6.02 Payment of Notes on Default;
Suit Therefor....................... 57
6.03 Application of Monies Collected
by Trustee.......................... 59
6.04 Proceedings by Noteholder............. 60
6.05 Proceedings by Trustee................ 61
6.06 Remedies Cumulative and Continuing.... 61
6.07 Direction of Proceedings and Waiver
of Defaults by Majority
Noteholders......................... 61
ARTICLE SEVEN
CONCERNING THE TRUSTEE
SECTION 7.01 Duties and Responsibilities of
Trustee; During Default;
Prior to Default.................... 62
7.02 Certain Rights of the Trustee......... 64
7.03 No Responsibility for Recitals, etc... 65
7.04 Trustee, Paying Agents or Registrar
May Own Notes....................... 65
7.05 Monies to Be Held in Trust............ 65
7.06 Compensation and Expenses of
Trustee............................. 66
7.07 Officers' Certificate as Evidence..... 66
7.08 Eligibility of Trustee................ 67
7.09 Resignation or Removal of Trustee..... 67
7.10 Acceptance by Successor Trustee....... 68
-v-
<PAGE>
Page
----
7.11 Succession by Merger, etc............. 69
7.12 Disqualification; Conflicting
Interests........................... 70
ARTICLE EIGHT
CONCERNING THE NOTEHOLDERS
SECTION 8.01 Action by Noteholders................. 70
8.02 Proof of Execution by
Noteholders; Record Date............ 70
8.03 Who Are Deemed Absolute Owners........ 71
8.04 Company-Owned Notes Disregarded....... 71
8.05 Revocation of Consents; Future
Holders Bound....................... 71
ARTICLE NINE
NOTEHOLDERS' MEETINGS
SECTION 9.01 Purposes of Meetings.................. 72
9.02 Call of Meetings by Trustee........... 72
9.03 Call of Meetings by Company or
Noteholders......................... 73
9.04 Qualifications for Voting............. 73
9.05 Regulations........................... 73
9.06 Voting................................ 74
9.07 No Delay of Rights by Meeting......... 74
ARTICLE TEN
SUPPLEMENTAL INDENTURES
SECTION 10.01 Supplemental Indentures without
Consent of Noteholders............... 75
10.02 Supplemental Indentures with Consent
of Noteholders....................... 76
10.03 Compliance with Trust Indenture Act;
Effect of Supplemental Indentures.... 77
10.04 Notation on Notes...................... 77
10.05 Evidence of Compliance of Supple-
mental Indenture to Be Furnished
to the Trustee....................... 77
-vi-
<PAGE>
Page
----
ARTICLE ELEVEN
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.01 Company May Consolidate, etc., on
Certain Terms........................ 78
11.02 Successor Corporation to Be
Substituted.......................... 78
11.03 Opinion of Counsel to Be Given
to Trustee........................... 79
ARTICLE TWELVE
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 12.01 Discharge of Indenture................. 79
12.02 Deposited Monies to Be Held in Trust
by Trustee........................... 80
12.03 Paying Agent to Repay Monies Held...... 80
12.04 Return of Unclaimed Monies............. 80
ARTICLE THIRTEEN
DEFEASANCE
SECTION 13.01 Defeasance in Respect of
the Notes............................ 80
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS, DIRECTORS AND EMPLOYEES
SECTION 14.01 Indenture and Notes Solely
Corporate Obligations................ 82
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<PAGE>
Page
----
ARTICLE FIFTEEN
MISCELLANEOUS PROVISIONS
SECTION 15.01 Provisions Binding on Company's
Successors........................... 83
15.02 Official Acts by Successor
Corporation......................... 83
15.03 Addresses for Notices, etc............ 83
15.04 Governing Law......................... 83
15.05 Evidence of Compliance with
Conditions Precedent................ 83
15.06 Legal Holidays........................ 84
15.07 Trust Indenture Act to Control........ 84
15.08 No Security Interest Created.......... 84
15.09 Benefits of Indenture................. 84
15.10 Table of Contents, Headings, etc...... 85
15.11 Execution in Counterparts............. 85
Signatures............................................ 86
Acknowledgments....................................... 87
EXHIBIT A Form of Certificate................... A-1
EXHIBIT B Form of Certificate to Be Delivered
in Connection with Transfers to
Non-QIB Accredited Investors.......... B-1
EXHIBIT C Form of Certificate to Be Delivered
in Connection with Transfers Pursuant
to Regulation S....................... C-1
-viii-
<PAGE>
THIS INDENTURE dated as of December 13, 1995 between CONTINENTAL CABLEVISION,
INC., a Delaware corporation (hereinafter sometimes called the "Company"), and
BANK OF MONTREAL TRUST COMPANY, a New York banking corporation, as trustee
hereunder (hereinafter sometimes called the "Trustee"),
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized
the issue of its 8.30% Senior Notes Due 2006 (hereinafter sometimes called the
"Notes"), in an aggregate principal amount not to exceed $600,000,000 (except as
otherwise provided below) and, to provide the terms and conditions upon which
the Notes are to be authenticated, issued and delivered, the Company has duly
authorized the execution and delivery of this Indenture; and
WHEREAS, the Notes and the certificate of authentication to be borne by the
Notes are to be substantially in the following forms, respectively:
[FORM OF FACE OF NOTE]
No. R- $
CUSIP No.____________
CONTINENTAL CABLEVISION, INC.
8.30% Senior Note Due 2006
CONTINENTAL CABLEVISION, INC., a corporation duly organized and existing under
the laws of the State of Delaware (herein called the "Company"), for value
received, hereby promises to pay to , or registered assigns, the principal
sum of Dollars on May 15, 2006 at the office or agency of the Company
maintained for that purpose in the Borough of Manhattan, The City of New York,
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts, and
to pay interest, semi-annually on May 15 and November 15 of each year,
commencing on May 15, 1996 on said principal sum at said office or agency, in
like coin or currency, at the rate per annum specified in the title of this Note
[(subject to adjustment as provided below)]/*/, from the May 15 or the November
15, as the case may be, next preceding the date of this Note to which
- ----------
/*/ To be deleted in Exchange Notes.
<PAGE>
interest has been paid or duly provided for, unless the date hereof is a date to
which interest has been paid or duly provided for, in which case from the date
of this Note, or unless no interest has been paid or duly provided for on the
Notes, in which case from December 13, 1995 until payment of said principal sum
has been made or duly provided for. Notwithstanding the foregoing, if the date
hereof is after any May 1 or November 1, as the case may be, and before the
following May 15 or November 15, this Note shall bear interest from such May 15
or November 15; provided, however, that if the Company shall default in the
-------- -------
payment of interest due on such May 15 or November 15, then this Note shall bear
interest from the next preceding May 15 or November 15 to which interest has
been paid or duly provided for or, if no interest has been paid or duly provided
for on the Notes, from December 13, 1995. The interest so payable on any May 15
or November 15 will be paid to the person in whose name this Note (or one or
more predecessor Notes) is registered at the close of business on the record
date which shall be the May 1 or November 1 (whether or not a business day) next
preceding such May 15 or November 15; provided that any such interest not
--------
punctually paid or duly provided for shall be payable as provided in the
Indenture. Interest will be computed on the basis of a 360-day year of twelve
30-day months. Interest may, at the option of the Company, be paid by check
mailed to the registered address of such person.
[If an exchange offer registered under the Securities Act of 1933 (as defined
in the Indenture) is not consummated, or a registration statement under the
Securities Act of 1933 with respect to resales of the Notes is not declared
effective by the SEC (as defined in the Indenture), by the 180th calendar day
following the initial sale of the Notes, in accordance with the terms of a
Registration Rights Agreement dated December 13, 1995 by and among the Company,
Morgan Stanley & Co. Incorporated and Lazard Freres & Co. LLC, interest due per
annum on the Notes shall be increased by one-half of one percent, commencing as
of the 181st calendar day following the initial sale of the Notes, until the
date such exchange offer is consummated or the date such resale registration
statement becomes effective. The holder of this Note is entitled to the
benefits of such Registration Rights Agreement.]/*/
Reference is made to the further provisions of this Note set forth on the
reverse side hereof. Such further provisions shall for all purposes have the
same effect as though fully set forth at this place.
- ----------
/*/ To be deleted in Exchange Notes.
-2-
<PAGE>
This Note shall be deemed to be a contract made under the laws of the State of
New York, and for all purposes shall be construed in accordance with and
governed by the laws of said State.
This Note shall not be valid or become obligatory for any purpose until the
certificate of authentication hereon shall have been manually signed by the
Trustee under the Indenture.
IN WITNESS WHEREOF, CONTINENTAL CABLEVISION, INC. has caused this instrument
to be duly executed.
CONTINENTAL CABLEVISION, INC.
By____________________________
[Title]
Attest:
_____________________
[Title]
-3-
<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes described in the within-mentioned Indenture.
Dated:
BANK OF MONTREAL TRUST COMPANY
as Trustee
By__________________________
Authorized Signatory
-4-
<PAGE>
[FORM OF REVERSE OF NOTE]
CONTINENTAL CABLEVISION, INC.
8.30% Senior Note Due 2006
1. This Note is one of a duly authorized issue of Notes of the Company,
designated as its 8.30% Senior Notes Due 2006 (herein called the "Notes"),
limited (except as otherwise provided in the Indenture mentioned below) to the
aggregate principal amount of $600,000,000, all issued or to be issued under and
pursuant to an Indenture dated as of December 13, 1995 (herein called the
"Indenture"), duly executed and delivered in the Borough of Manhattan, The City
of New York, the State of New York, by the Company to Bank of Montreal Trust
Company, Trustee (herein called the "Trustee"), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities thereunder
of the Trustee, the Company and the holders of the Notes.
2. In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal hereof may be declared, and upon such
declaration shall become, due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.
3. The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the holders of a majority in aggregate principal amount of
the Notes at the time outstanding, evidenced as in the Indenture provided, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the holders of
the Notes; provided, however, that no such supplemental indenture shall (i)
-------- -------
extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or any
premium thereon, or make the principal thereof or any premium or interest
thereon payable in any coin or currency other than that hereinbefore provided
without the consent of the holder of each Note so affected or (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent to
any such supplemental indenture, without the consent of the holders of all Notes
then outstanding. It is also provided in the Indenture that, prior to any
declaration accelerating the maturity of the Notes, the holders of a majority in
aggregate principal amount of the Notes at the time outstanding may on behalf of
the holders of all of the Notes waive any past default or Event of Default under
-5-
<PAGE>
the Indenture and its consequences except a default in the payment of interest
or any premium on or the principal of any of the Notes. Any such consent or
waiver by the holder of this Note (unless revoked as provided in the Indenture)
shall be conclusive and binding upon such holder and upon all future holders and
owners of this Note and any Notes which may be issued in exchange or
substitution therefor, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes.
4. No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this Note at the place, at the respective times, at the rate and in the coin
or currency herein prescribed.
5. The Notes are issuable in registered form without coupons in denominations
of $100,000 and any multiple of $50,000 in excess thereof. At the office or
agency of the Company in the Borough of Manhattan, The City of New York and in
the manner and subject to the limitations provided in the Indenture, but without
payment of any service charge, Notes may be exchanged for a like aggregate
principal amount of Notes of other authorized denominations.
6. The Notes shall not be redeemable at the option of the Company.
7. If the Company proposes to make certain cash redemptions (a "Preferred
Stock Redemption Payment", as defined in the Indenture) with respect to its 1992
Preferred Stock (as defined in the Indenture) in connection with a Preferred
Stock Change of Control Event (as defined in the Indenture), the Company shall
mail notice thereof (the "Preferred Event Put Notice", as defined in the
Indenture) to each holder of Notes at his or her last registered address at
least 31 and no more than 60 days before the proposed date of such Preferred
Stock Redemption Payment. For 30 days from the date of the Preferred Event Put
Notice, or such longer period as the Company may elect by written notice to the
holders of the Notes (the "Tender Period", as defined in the Indenture), each
holder of the Notes shall have the right to tender all, but not less than all,
his or her Notes to the Company and thereby require the Company to prepay, on
the date (if any) of the Preferred Stock Redemption Payment (which shall be (i)
at least 31 and no more than 60 days after the date of the Preferred Event Put
Notice and (ii) no more than five days after the last day of the Tender Period),
all, but not less than all, of such holder's Notes at the principal amount
thereof together with accrued interest to the date fixed for prepayment. Such
date shall be the same as the date on which the Company repurchases any 2001
Notes, 2005 Debentures, 2013
-6-
<PAGE>
Debentures or June Senior Debt Securities (as such terms are defined in the
Indenture) as a result of a Preferred Stock Redemption Payment. If the proposed
Preferred Stock Redemption Payment is not made on or prior to the earlier to
occur of (i) the 60th day after the date of the Preferred Event Put Notice with
respect thereto or (ii) the fifth day after the last day of the Tender Period,
the Company shall no longer have the right or obligation to prepay Notes
tendered in connection with, and as a result of, such proposed Preferred Stock
Redemption Payment and the Company shall cause the Notes tendered by each holder
to be returned to such holder. The Company shall not thereafter make a
Preferred Stock Redemption Payment unless a subsequent Preferred Event Put
Notice has been sent to the holders of the Notes in connection therewith. If
the Company has previously satisfied and discharged the Indenture or has
previously effected a defeasance with respect to the Notes, the right of a
holder to require such a prepayment shall expire.
8. If the Company proposes to make certain repurchases with respect to the
Common Stock (as defined in the Indenture) or certain borrowings, and
immediately after any such repurchase or borrowing (and related transactions)
the aggregate Indebtedness (as so defined) of the Note Restricted Group (as
defined in the Indenture) would exceed certain specified levels (each a "Put
Option Transaction", as defined in the Indenture), the Company shall mail notice
thereof to each holder of the Notes at his or her last registered address not
less than 15 days nor more than 45 days before the proposed date of such Put
Option Transaction. On the date the Put Option Transaction takes place (which
shall be no more than 30 days after the date proposed in the initial notice
provided by the Company), the Company shall mail notice thereof to each holder
of the Notes at his or her last registered address. For 30 days from the date
of such notice, each holder of the Notes shall have the right to tender his or
her Notes to the Company and thereby require the Company to prepay all, but not
less than all, of such holder's Notes at a price equal to the principal amount
of such Notes plus accrued interest thereon to the date fixed for prepayment
(which shall be 35 days from the date on which the Put Option Transaction takes
place), plus a premium (expressed as a percentage of the principal amount
prepaid) determined as follows:
-7-
<PAGE>
If prepaid during the 18-month period ending May 14, 1997 or during the
subsequent 12-month periods, each ending May 14,
<TABLE>
<CAPTION>
Year Premium Year Premium
---- ------- ---- -------
<S> <C> <C> <C>
1997 8.3000% 2002 3.1125%
1998 7.2625% 2003 2.0750%
1999 6.2250% 2004 1.0375%
2000 5.1875% 2005 and thereafter -0-
2001 4.1500%
</TABLE>
Following the consummation of a Put Option Transaction and the repurchase of
those Notes, if any, properly tendered for repurchase, (i) holders of Notes will
have no further right to cause the Company to prepay their Notes as a result of
any subsequent Put Option Transaction and (ii) the Company will no longer be
bound by certain covenants as set forth in the Indenture. If the Company has
previously satisfied and discharged the Indenture or has previously effected a
defeasance with respect to the Notes, the right of a holder to request such a
prepayment shall expire.
9. Upon due presentment for registration of transfer of this Note at the
office or agency of the Company in the Borough of Manhattan, The City of New
York, a new Note or Notes of authorized denominations for an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture, without charge except for any tax
or other governmental charge imposed in connection therewith.
10. The Company, the Trustee, any paying agent and any Note registrar may
deem and treat the registered holder hereof as the absolute owner of this Note
(whether or not this Note shall be overdue and notwithstanding any notation of
ownership or other writing hereon) for the purpose of receiving payment hereof,
or on account hereof and for all other purposes, and neither the Company nor the
Trustee nor any paying agent nor any Note registrar shall be affected by any
notice to the contrary. All payments made to or upon the order of such
registered holder shall, to the extent of the sum or sums paid, satisfy and
discharge liability for monies payable on this Note.
11. No recourse for the payment of the principal of or any premium or
interest on this Note, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Note,
-8-
<PAGE>
or because of the creation of any indebtedness represented thereby, shall be had
against any incorporator, stockholder, officer or director, as such, past,
present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
______________
-9-
<PAGE>
ASSIGNMENT FORM
For value received __________________________________________
hereby sell, assign and transfer unto
--------------------------------
--------------------------------
Please insert social security or
other identifying number of assignee
Please print or typewrite name
and address including zip code
of assignee:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- ---------------------------------------------------
the within Note and do hereby irrevocably constitute and appoint
_________________ Attorney to transfer the Note on the books of the Company with
full power of substitution in the premises.
Date:________________ Your Signature:______________________
(Sign exactly as
name appears on the
other side of this
Note)
Signature Guarantee:__________________________________________
(Signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
-10-
<PAGE>
[MANNER OF TRANSFER
Transfer to Continental Cablevision, Inc. [ ]
Transfer to Qualified Institutional Buyer [ ]
Transfer to Institutional Accredited Investor [ ]
Transfer outside the United States in
compliance with Rule 904 under
the Securities Act of 1933 [ ]
______________]/*/
OPTION OF HOLDER TO ELECT PREPAYMENT
If you want to elect to have this Note prepaid in its entirety by the Company
pursuant to Section 3.02 or 3.03 of the Indenture, check the box:
------
Dated: Your Signature:___________________
(Sign exactly as name appears on
the other side of this Note)
Signature Guarantee:__________________________________________
(Signature must be guaranteed by an "eligible guarantor institution" meeting
the requirements of the registrar, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may be determined by the registrar
in addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.)
-------------
- ----------
/*/ To be deleted in the Exchange Notes.
-11-
<PAGE>
AND WHEREAS all acts and things necessary to make the Notes, when executed by
the Company and authenticated and delivered by the Trustee, as in this Indenture
provided, and issued, valid, binding and legal obligations of the Company, and
to constitute these presents a valid agreement according to its terms, have been
done and performed, and the execution of this Indenture and the issue hereunder
of the Notes have in all respects been duly authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the Notes are,
and are to be, authenticated, issued and delivered, and in consideration of the
premises, of the purchase and acceptance of the Notes by the holders thereof and
of the sum of one dollar duly paid to it by the Trustee at the execution of
these presents, the receipt whereof is hereby acknowledged, the Company
covenants and agrees with the Trustee for the equal and proportionate benefit of
the respective holders from time to time of the Notes (except as otherwise
provided below), as follows:
ARTICLE ONE
DEFINITIONS
SECTION 1.01. Definitions. The terms defined in this Section 1.01 (except as
-----------
herein otherwise expressly provided or unless the context otherwise clearly
requires) for all purposes of this Indenture and of any indenture supplemental
hereto shall have the respective meanings specified in this Section 1.01. All
other terms used in this Indenture which are defined in the Trust Indenture Act
of 1939 or which are by reference therein defined in the Securities Act of 1933
(except as herein otherwise expressly provided or unless the context otherwise
clearly requires) shall have the meanings assigned to such terms in said Trust
Indenture Act and in said Securities Act of 1933 as in force at the date of the
execution of this Indenture; provided that with respect to the Registration of
--------
the Notes, the Securities Act of 1933 shall mean said Securities Act of 1933 as
in force at the relevant time of Registration.
Acceleration Notice: The term "Acceleration Notice" shall have the meaning
-------------------
specified in Section 6.01.
Accreted Value: The term "Accreted Value", for each share of 1992 Preferred
--------------
Stock, as of any date, shall mean the sum of $350 and an amount calculated to
provide the holder of a share of 1992 Preferred Stock, as of such date, with a
yield of eight percent thereon, compounded semi-annually in arrears, from the
-12-
<PAGE>
date issued to and including such date, provided that such Accreted Value shall
be reduced by the fair market value at such date of any dividends or
distributions which have been previously paid on such share of 1992 Preferred
Stock, assuming the same eight percent per annum yield from the date of payment
of such dividend or distribution and compounded on the same basis. The fair
market value of any non-cash dividend or distribution shall be (a) in the case
of any securities, the current market price of such securities (determined in
accordance with the terms of the Company's Certificate of Incorporation); and
(b) in the case of any other property, the fair market value of such property on
a fully-distributed basis as determined at the time of such distribution by
investment bankers mutually agreeable to the Company and the holders of a
majority of the voting power represented by the outstanding shares of 1992
Preferred Stock.
Affiliate: The term "Affiliate" shall mean, as to any Person, any other
---------
Person directly or indirectly controlling, controlled by, or under common
control with, that Person. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling", "controlled by"
and "under common control with") as applied to any Person, means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the ownership of voting
securities, by contract or otherwise.
Annualized Cash Flow: The term "Annualized Cash Flow" shall mean Operating
--------------------
Cash Flow for the latest fiscal quarter for which financial statements are
available multiplied by four.
Banking Day: The term "Banking Day" shall mean any day other than a day on
-----------
which commercial banks are required to close in the Borough of Manhattan, The
City of New York.
Board of Directors: The term "Board of Directors" shall mean the Board of
------------------
Directors of the Company, or the Executive Committee thereof, as from time to
time constituted, or any other committee of such Board duly authorized to act
for it in respect of matters pertaining to this Indenture.
Capital Stock: The term "Capital Stock" shall mean, with respect to any
-------------
Person, any and all shares, interests, participations or other equivalents
(however designated) of such Person's capital stock whether now outstanding or
issued after the date of this Indenture, including, without limitation, all
Common Stock and 1992 Preferred Stock.
Common Stock: The term "Common Stock" shall mean the Common Stock of the
------------
Company, whether now outstanding or issued
-13-
<PAGE>
after the date of this Indenture, including, without limitation, all series and
classes of such Common Stock.
Company: The term "Company" shall mean Continental Cablevision, Inc., a
-------
Delaware corporation, and subject to the provisions of Article Eleven, shall
include its successors and assigns.
Defaulted Interest: The term "Defaulted Interest" shall have the meaning
------------------
specified in Section 2.04.
Depositary: The term "Depositary" shall mean The Depository Trust Company,
----------
its nominees, and their respective successors.
Event of Default: The term "Event of Default" shall mean any event specified
----------------
in Section 6.01, continued for the period of time, if any, and after the giving
of the notice, if any, therein designated.
Exchange Notes: The term "Exchange Notes" shall mean 8.30% Senior Notes Due
--------------
2006 issued by the Company, and containing terms identical to those of the Notes
(except that such Exchange Notes (i) shall have been issued in an exchange offer
registered under the Securities Act of 1933 and (ii) shall have an interest rate
of 8.30% per annum, without provision for adjustment as provided on the face of
the Notes), that are issued and exchanged for the Notes pursuant to the
Registration Rights Agreement and this Indenture.
Exempt Repurchase Indebtedness: The term "Exempt Repurchase Indebtedness"
------------------------------
shall mean Indebtedness or any portion thereof specifically incurred or to be
incurred (in either instance, within 75 days of the Exempt Repurchase to which
it relates) for the purpose of making an Exempt Repurchase, or a refinancing
thereof.
Exempt Repurchase: The term "Exempt Repurchase" shall mean the repurchase by
-----------------
the Company at any time or from time to time of up to 16,684,150 shares of its
Common Stock that are subject to the 1998-1999 Share Repurchase Program,
provided that the Company shall have received prior to any such Exempt
- --------
Repurchase of Common Stock an opinion of an investment banker knowledgeable in
the communications industry (who may be the Company's investment banker) that
the price per share of Common Stock paid pursuant to any such Exempt Repurchase
does not exceed the greater of (A) the dollar amount that a holder of Common
Stock would then receive per share of Common Stock upon a sale of the Company as
a whole pursuant to a merger or sale of stock or, if greater, the dollar amount
that a holder of Common Stock would then receive per share of Common Stock
derived from the sale of
-14-
<PAGE>
the Company's assets and subsequent distribution of the proceeds therefrom (net
of taxes, including corporate, sales and capital gain taxes in connection with
such sale of assets), in each case less a discount of 22.5 percent or (B) the
net proceeds which would be expected to be received by a shareholder of the
Company from the sale of a share of the Company's Common Stock in an
underwritten public offering held at the time any such Exempt Repurchase is to
occur after being reduced by pro forma expenses and underwriting discounts
unless the Common Stock is publicly traded and such expenses and underwriting
discounts would not be incurred in connection with an underwritten public sale
of a shareholder's non-registered shares in the opinion of the investment
banker; provided, further, that no such opinion of an investment banker shall be
-------- -------
required for repurchases of shares of Common Stock which are subject to the
1998-1999 Share Repurchase Program to the extent that the aggregate purchase
price paid therefor in any calendar year does not exceed $10,000,000.
GAAP: The term "GAAP" shall mean generally accepted accounting principles in
----
the United States as in effect as of the date of this Indenture, including,
without limitation, those set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such other entity as approved by
a significant segment of the accounting profession.
Global Notes: The term "Global Notes" shall have the meaning specified in
------------
Section 2.02.
Indebtedness: The term "Indebtedness" shall mean (without duplication), with
------------
respect to any Person, any indebtedness, contingent or otherwise, in respect of
borrowed money (whether or not the recourse of the lender is to the whole
of the assets of such Person or only to a portion thereof), or evidenced by
bonds, notes, debentures or similar instruments or representing the balance
deferred and unpaid of the purchase price of any property (excluding any
balances that constitute subscriber advance payments and deposits, accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course) if and to the extent any of the foregoing indebtedness would appear as a
liability upon a balance sheet of such Person prepared in accordance with
generally accepted accounting principles, and shall also include, to the extent
not otherwise included, the maximum fixed repurchase price of any equity
securities or other similar interests of such Person which by their terms or
otherwise are required to be redeemed prior to the maturity of the Notes or at
the option of the holder thereof, obligations secured by a Lien to which the
property or assets owned or held by such Person is subject, whether or not the
-15-
<PAGE>
obligation or obligations secured thereby shall have been assumed, all
obligations to reimburse any bank or other Person in respect of amounts paid
under letters of credit, acceptances or other similar instruments, and
guaranties of any of the above items (whether or not such items would appear
upon such balance sheet). The term "Indebtedness" shall not include (i) any
Interest Rate Agreement, however denominated, of the Company or any of its
Subsidiaries, (ii) as to the Note Restricted Group, any indebtedness of any
Subsidiary which is non-recourse to the Note Restricted Group or any pledge of
the stock of any such Subsidiary to secure such indebtedness, (iii) as to the
Note Restricted Group, Indebtedness of a Subsidiary that is part of the Note
Restricted Group to the Company or another Subsidiary that is part of the Note
Restricted Group, and Indebtedness of the Company to a Subsidiary that is part
of the Note Restricted Group, (iv) any obligation of the Company to redeem, or
to pay dividends on, its outstanding 1992 Preferred Stock, (v) any obligation of
the Company to repurchase shares of its outstanding Common Stock pursuant to the
1998-1999 Share Repurchase Program, or (vi) any equity securities or other
similar interests which, at the option of the Company or otherwise, are
redeemable into shares of Capital Stock of the Company.
Indenture: The term "Indenture" shall mean this instrument as originally
---------
executed or as it may be amended or supplemented from time to time by one or
more indentures supplemental to this Indenture entered into pursuant to the
applicable provisions of this Indenture.
Initial Tender Period: The term "Initial Tender Period" shall have the
---------------------
meaning specified in Section 3.02(a).
Institutional Accredited Investor: The term "Institutional Accredited
---------------------------------
Investor" shall mean an institution that is an "accredited investor" as that
term is defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933.
Interest Rate Agreement: The term "Interest Rate Agreement" shall mean any
-----------------------
interest rate swap agreement, interest rate cap agreement, interest rate collar
agreement or other similar agreement designed to protect the party indicated
therein against fluctuations in interest rates.
Investment Grade Rated: The term "Investment Grade Rated" shall mean, with
----------------------
respect to any security, both a rating of such security by Standard & Poor's
Ratings Group (or successor entity) of BBB- or better and a rating of such
security by Moody's Investors Service (or successor entity) of Baa3 or better.
-16-
<PAGE>
June Senior Debt Securities: The term "June Senior Debt Securities" shall
---------------------------
mean the 8-5/8% Senior Notes Due August 15, 2003 of the Company issued pursuant
to an indenture dated as of June 1, 1993 between the Company and The First
National Bank of Chicago, as trustee, and the 9% Senior Debentures Due September
1, 2008 of the Company issued pursuant to an indenture dated as of June 1, 1993
between the Company and The First National Bank of Chicago, as trustee.
Lien: The term "Lien" shall mean, as to the Note Restricted Group and as used
----
in the definition of "Indebtedness", any mortgage, pledge, lien or security
interest except for (i) pledges of the stock of any Subsidiaries that are not
part of the Note Restricted Group to secure Indebtedness; (ii) Liens for taxes,
assessments or governmental charges or claims the payment of which is being
contested in good faith by appropriate proceedings and with respect to which the
Company or a Subsidiary that is part of the Note Restricted Group shall have
created adequate reserves on its books; (iii) Liens of mechanics, carriers,
warehousemen or materialmen arising in the ordinary course of business in
respect of obligations which are not overdue or which are being contested in
good faith; (iv) Liens resulting from deposits or pledges made in the ordinary
course of business to secure payment of workers' compensation, unemployment
insurance, old age pension or other social security, or in connection with, or
to secure the performance of, bids, tenders or contracts made in the ordinary
course of business, or to secure statutory obligations or surety, performance or
appeal bonds; (v) Liens in respect of judgments or awards the payment of which
is being contested in good faith by appropriate proceedings and with respect to
which the Note Restricted Group shall have created adequate reserves on its
books; (vi) purchase money security interests (including mortgages, any
conditional sale or other title retention agreement and any capitalized lease);
provided, however, that the principal amount of Indebtedness secured by each
- -------- -------
such security interest in each such item (or group of items) of property shall
not exceed the cost of the item (or group of items) subject thereto and each
such security interest shall attach only to the particular item (or group of
items) so acquired and any additions or accessions thereto; (vii) landlord's or
lessor's Liens under leases to which any member of the Note Restricted Group is
a party; and (viii) Liens of utilities and other persons pursuant to pole
attachment agreements, and restrictions on the transfer of rights under
franchises or pole attachment agreements, and any encumbrances created in favor
of franchising authorities and subscribers by provisions of franchises on cable
television plant and equipment located in the areas covered thereby.
New Borrowing Group: The term "New Borrowing Group" shall mean those certain
-------------------
Subsidiaries of the Company that are
-17-
<PAGE>
parties to the 1995 Credit Facility, whether as borrowers or as guarantors.
1998-1999 Share Repurchase Program: The term "1998-1999 Share Repurchase
----------------------------------
Program" shall mean the Common Stock repurchase program of the Company under the
Stock Liquidation Agreement under which the Company will offer to purchase, and
certain shareholders of the Company will sell to the Company, on December 15,
1998 (or January 15, 1999, at the election of each such shareholder), at a price
established pursuant to a specified formula, up to 16,684,150 shares of Common
Stock.
1995 Credit Facility: The term "1995 Credit Facility" shall mean that certain
--------------------
Credit Agreement dated as of July 18, 1995, among Colony Communications, Inc., a
Rhode Island corporation, Columbia Cable of Michigan, Inc., a Delaware
corporation, and each of their respective Subsidiaries and certain financial
institutions, as amended from time to time.
1994 Credit Facility: The term "1994 Credit Facility" shall mean that certain
--------------------
Amended and Restated Credit Agreement dated as of October 1, 1994, among the
Company, the Restricted Subsidiaries and certain financial institutions, as
amended from time to time.
1992 Preferred Stock: The term "1992 Preferred Stock" shall mean the Series A
--------------------
Participating Convertible Preferred Stock, $.01 par value per share, of the
Company.
Non-U.S. Person: The term "Non-U.S. Person" shall mean a person who is not a
---------------
U.S. person, as defined in Regulation S.
Note or Notes; Outstanding. The terms "Note" or "Notes" shall mean any Note
--------------------------
or Notes, as the case may be, authenticated and delivered under this Indenture.
For all purposes of this Indenture, the term "Notes" shall include any Exchange
Notes to be issued and exchanged for any Notes pursuant to the Registration
Rights Agreement and this Indenture and, for purposes of this Indenture, all
Notes and Exchange Notes shall vote together as one series of Notes under this
Indenture.
The term "outstanding", when used with reference to Notes, shall, subject to
the provisions of Section 8.04, mean, as of any particular time, all Notes
authenticated and delivered by the Trustee under this Indenture, except
(a) Notes theretofore canceled by the Trustee or delivered to the Trustee for
cancellation;
(b) Notes, or portions thereof, for the payment or prepayment of which monies
in the necessary amount shall have
-18-
<PAGE>
been deposited in trust with the Trustee or with any paying agent (other than
the Company) or shall have been set aside and segregated in trust by the Company
(if the Company shall act as its own paying agent), provided that, if such Notes
are to be prepaid prior to the maturity thereof, notice of such prepayment shall
have been given as in Article Three provided, or provision satisfactory to the
Trustee shall have been made for giving such notice; and
(c) Notes replaced pursuant to Section 2.09 or in lieu of or in substitution
for which other Notes shall have been authenticated and delivered pursuant to
the terms of Section 2.09 unless proof satisfactory to the Trustee is presented
that any such Notes are held by bona fide holders in whose hands the Notes are
valid obligations of the Company.
Noteholder: The terms "Noteholder" or "holder of Notes", or other similar
----------
terms, shall mean any person in whose name at the time a particular Note is
registered on the books of the Company kept for that purpose in accordance with
the terms hereof.
Note Restricted Group: The term "Note Restricted Group" shall mean the
---------------------
Company and (i) any Subsidiary that is a member of the New Borrowing Group and
any other Subsidiary of the Company, whether existing on or after the date of
this Indenture, which has been designated a Restricted Subsidiary for purposes
of the Company's 1994 Credit Facility, unless any such Subsidiary is
subsequently classified as a Subsidiary that is not part of the Note Restricted
Group by the Company for purposes of this Indenture, as evidenced by an
Officers' Certificate delivered to the Trustee, and (ii) any Subsidiary which is
classified as a member of the Note Restricted Group for purposes of this
Indenture by the Company, as evidenced by an Officers' Certificate delivered to
the Trustee. The Company may not classify a Subsidiary as not part of the Note
Restricted Group for purposes of this Indenture if such Subsidiary is classified
as a Restricted Subsidiary for purposes of the 1994 Credit Facility or any
similar, successor agreements.
Officers' Certificate: The term "Officers' Certificate", when used with
---------------------
respect to the Company, shall mean a certificate signed by the Chairman of the
Board, the Vice Chairman of the Board, the Chief Executive Officer, the
President, the Chief Financial Officer or any Vice President and by the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Company. Each such certificate shall include the statements provided for in
Section 15.05 if and to the extent required by the provisions of such Section.
-19-
<PAGE>
Offshore Global Note: The term "Offshore Global Note" shall have the meaning
--------------------
provided in Section 2.02.
Offshore Notes Exchange Date: The term "Offshore Notes Exchange Date" shall
----------------------------
have the meaning provided in Section 2.02.
Offshore Physical Notes: The term "Offshore Physical Notes" shall have the
-----------------------
meaning provided in Section 2.02.
Operating Cash Flow: The term "Operating Cash Flow" shall mean, for any
-------------------
period, an amount equal to (i) aggregate operating revenues plus interest and
ordinary dividend income minus (ii) aggregate operating expenses, excluding
therefrom non-operating expenses such as interest expense, depreciation and
amortization, non-cash amounts and taxes on income, of the Note Restricted Group
for such period, determined on a consolidated basis, after eliminating all
inter-company items, in accordance with generally accepted accounting principles
consistently applied. For purposes of calculating Operating Cash Flow, there
shall be included in the Operating Cash Flow of the Note Restricted Group for
any fiscal quarter for which Operating Cash Flow is being calculated the
Operating Cash Flow for such fiscal period of any Subsidiary which has been
designated a Subsidiary that is part of the Note Restricted Group or of any
operating assets acquired by the Company or a Subsidiary that is part of the
Note Restricted Group (including assets constituting a cable television system
acquired by the Company or a Subsidiary that is part of the Note Restricted
Group) after the commencement of such fiscal period. If the actual financial
statements of any such new Subsidiary to the Note Restricted Group or new
operating assets for any fiscal period or portion thereof prior to the inclusion
of such Subsidiary as part of the Note Restricted Group or the acquisition of
such operating assets by the Company or a Subsidiary that is part of the Note
Restricted Group are unavailable or inaccurate in the reasonable opinion of the
Company, then the Operating Cash Flow of such new Subsidiary to the Note
Restricted Group or new operating assets may be determined from pro forma
financial statements of such new Subsidiary to the Note Restricted Group or new
operating assets for such period as prepared in good faith by the Company,
provided, however, that not more than $10,000,000 of Operating Cash Flow
- -------- -------
determined on an annualized basis from such pro forma financial statements shall
be included in the Operating Cash Flow of the Note Restricted Group. For
purposes of calculating Operating Cash Flow, there will not be included in the
Operating Cash Flow of the Note Restricted Group for any fiscal quarter for
which Operating Cash Flow is being calculated the Operating Cash Flow for such
fiscal period of any Subsidiary that is part of the Note Restricted Group which
has been designated an Unrestricted Subsidiary after the commencement of such
fiscal period or of operating assets (including assets constituting a cable
-20-
<PAGE>
television system) owned by the Company or a Subsidiary that is part of the Note
Restricted Group which have been transferred to an Unrestricted Subsidiary or
any third party after the commencement of such fiscal period.
Opinion of Counsel: The term "Opinion of Counsel" shall mean an opinion in
------------------
writing signed by legal counsel, who may be an employee of or counsel to the
Company or other counsel reasonably acceptable to the Trustee. Each such
opinion shall include the statements provided for in Section 15.05 if and to the
extent required by the provisions of such Section.
Permanent Offshore Global Note: The term "Permanent Offshore Global Note"
------------------------------
shall have the meaning provided in Section 2.02.
Person: The term "Person" shall mean a corporation, an association, a
------
partnership, an organization, an individual, a government or a political
subdivision thereof or a governmental agency.
Physical Notes: The term "Physical Notes" shall have the meaning provided in
--------------
Section 2.02.
Pre-Acceleration Notice: The term "Pre-Acceleration Notice" shall have the
-----------------------
meaning specified in Section 6.01.
Predecessor Note: The term "Predecessor Note" of any particular Note shall
----------------
mean every previous Note evidencing all or a portion of the same debt as that
evidenced by such particular Note; and, for the purposes of this definition, any
Note authenticated and delivered under Section 2.09 in lieu of a lost, destroyed
or stolen Note shall be deemed to evidence the same debt as the lost, destroyed
or stolen Note, and any Exchange Note issued in exchange for a Note in
connection with an effective Registration pursuant to the Registration Rights
Agreement shall be deemed to evidence the same debt as such Note.
Preferred Event Put Notice: The term "Preferred Event Put Notice" shall have
--------------------------
the meaning set forth in Section 3.02(c).
Preferred Event Redemption Date: The term "Preferred Event Redemption Date"
-------------------------------
shall have the meaning specified in Section 3.02(b).
Preferred Event Redemption Price: The term "Preferred Event Redemption Price"
--------------------------------
shall have the meaning specified in Section 3.02(a).
Preferred Stock Change of Control Event: The term "Preferred Stock Change of
---------------------------------------
Control Event" shall mean the right of
-21-
<PAGE>
holders of 1992 Preferred Stock, pursuant to the terms of the Company's
Certificate of Incorporation, to cause the Company to redeem any of their shares
of 1992 Preferred Stock at the then Accreted Value, payable, at the Company's
sole option, in cash or in shares of Common Stock (based on a value of 90
percent of the Common Stock's then-current market value (as determined in
accordance with the terms of the Company's Certificate of Incorporation)) if (i)
there is (subject to certain exceptions) an acquisition by any person or group
of 50 percent or more of the combined voting or economic power of the then
outstanding voting securities of the Company, including pursuant to a
reorganization, consolidation or merger, or a sale of all or substantially all
of the Company's assets and (ii) at the time of any such event, the value of the
Common Stock issuable upon conversion of a share of 1992 Preferred Stock is less
than the then Accreted Value of such share of 1992 Preferred Stock.
Preferred Stock Redemption Payment: The term "Preferred Stock Redemption
----------------------------------
Payment" shall mean the redemption by the Company of shares of the 1992
Preferred Stock, for an aggregate cash redemption price exceeding 25 percent of
the Accreted Value as of the date of redemption of all outstanding shares of the
1992 Preferred Stock, in response to the exercise by holders of the 1992
Preferred Stock of their right to cause the Company to redeem any of their
shares upon the occurrence of a Preferred Stock Change of Control Event.
Principal Office of the Trustee: The term "Principal Office of the Trustee",
-------------------------------
or other similar term, shall mean the principal office of the Trustee at which
at any particular time its corporate trust business shall be administered.
Principal Property: The term "Principal Property" shall mean, as of any date
------------------
of determination, any property or assets owned by any Subsidiary that is part of
the Note Restricted Group other than (1) any such property which, in the good
faith opinion of the Board of Directors, is not of material importance to the
business conducted by the Note Restricted Group taken as a whole and (2) any
shares of any class of stock or any other security of any Subsidiary that is not
part of the Note Restricted Group.
Private Placement Legend: The term "Private Placement Legend" shall mean the
------------------------
legend initially set forth on the Notes in the form set forth in Section 2.03.
Proposed Date: The term "Proposed Date" shall have the meaning set forth in
-------------
Section 3.03(c).
Put Option Borrowing: The term "Put Option Borrowing" shall have the meaning
--------------------
specified in Section 3.03(b)(ii).
-22-
<PAGE>
Put Option Redemption Date: The term "Put Option Redemption Date" shall have
--------------------------
the meaning specified in Section 3.03(a).
Put Option Redemption Price: The term "Put Option Redemption Price" shall
---------------------------
have the meaning specified in Section 3.03(a).
Put Option Stock Repurchase: The term "Put Option Stock Repurchase" shall
---------------------------
have the meaning specified in Section 3.03(b)(i).
Put Option Transaction: The term "Put Option Transaction" shall have the
----------------------
meaning set forth in Section 3.03(c).
Put Option Transaction Date: The term "Put Option Transaction Date" shall
---------------------------
have the meaning specified in Section 3.03(d).
QIB: The term "QIB" shall mean a "qualified institutional buyer" as defined
---
in Rule 144A.
Registration: The term "Registration" shall have the meaning provided in
------------
Section 5.02.
Registration Rights Agreement: The term "Registration Rights Agreement" shall
-----------------------------
mean the Registration Rights Agreement, dated as of December 13, 1995, by and
among the Company, Morgan Stanley & Co. Incorporated and Lazard Freres & Co.
LLC.
Registration Statement: The term "Registration Statement" shall mean the
----------------------
Registration Statement as defined and described in the Registration Rights
Agreement.
Regulation S: The term "Regulation S" shall mean Regulation S under the
------------
Securities Act of 1933.
Responsible Officer: The term "Responsible Officer", when used with respect
-------------------
to the Trustee, shall mean any officer of the Trustee assigned by the Trustee to
administer its corporate trust matters and shall include any officer in its
corporate trust department.
Restricted Payments: The term "Restricted Payments" shall have the meaning
-------------------
specified in Section 4.06. Restricted Payments shall not include any Exempt
Repurchases.
Restricted Stock Purchase Agreement: The term "Restricted Stock Purchase
-----------------------------------
Agreement" shall mean an agreement between the Company and an employee selected
by the Board of
-23-
<PAGE>
Directors pursuant to which that employee may purchase shares of Common Stock.
Rule 144A: The term "Rule 144A" shall mean Rule 144A under the Securities Act
---------
of 1933.
SEC: The term "SEC" shall mean the Securities and Exchange Commission.
---
Securities Act of 1933: The term "Securities Act of 1933" shall mean the
----------------------
Securities Act of 1933, as amended, as the same may be hereafter amended.
Senior Subordinated Debt: The term "Senior Subordinated Debt" shall mean the
------------------------
10-5/8% Senior Subordinated Notes of the Company Due June 15, 2002, the Senior
Subordinated Floating Rate Debentures Due November 1, 2004 and the 11% Senior
Subordinated Debentures Due June 1, 2007.
Stock Liquidation Agreement: The term "Stock Liquidation Agreement" shall
---------------------------
mean that certain Stock Liquidation Agreement dated March 6, 1989, as amended,
among the Company and certain holders of the Common Stock of the Company.
Subsidiary: The term "Subsidiary" shall mean (i) any corporation of which the
----------
outstanding stock having at least a majority in voting power in the election of
directors under ordinary circumstances shall at the time be owned, directly or
indirectly, by the Company or by the Company and one or more Subsidiaries or by
one or more Subsidiaries or (ii) any other Person of which at least a majority
in voting interest, under ordinary circumstances, is at the time, directly or
indirectly, owned or controlled by the Company or by the Company and one or more
Subsidiaries or by one or more Subsidiaries. A partnership of which the Company
or any Subsidiary is the managing general partner shall be deemed to be a
Subsidiary.
Temporary Offshore Global Note: The term "Temporary Offshore Global Note"
------------------------------
shall have the meaning provided in Section 2.02.
Tender Discharge Date: The term "Tender Discharge Date" shall have the
---------------------
meaning specified in Section 3.02(b).
Tender Period: The term "Tender Period" shall have the meaning specified in
-------------
Section 3.02(a).
Total Interest Expense: The term "Total Interest Expense" shall mean, for any
----------------------
period, the aggregate amount of interest in respect of Indebtedness (including
amortization of original issue discount on any Indebtedness and the interest
-24-
<PAGE>
portion of any deferred payment obligation and after taking into account the
effect of any Interest Rate Agreement, however denominated, with respect to such
Indebtedness) and all but the principal component of rentals in respect of
capital lease obligations, paid, accrued or scheduled to be paid or accrued by
the Note Restricted Group during such period, determined on a consolidated
basis, after eliminating all intercompany items, in accordance with generally
accepted accounting principles; provided that such amounts paid, accrued and
--------
scheduled to be paid or accrued by any Person which is not a Subsidiary but the
accounts of which are consolidated with those of the Company shall be deducted
therefrom. For purposes of this definition, interest on a capital lease
obligation shall be deemed to accrue at an interest rate reasonably determined
by the Company to be the rate of interest implicit in such capital lease
obligation in accordance with generally accepted accounting principles.
Trustee: The term "Trustee" shall mean Bank of Montreal Trust Company and,
-------
subject to the provisions of Article Seven hereof, shall also include its
successors and assigns as Trustee hereunder.
Trust Indenture Act of 1939: The term "Trust Indenture Act of 1939" shall
---------------------------
mean the Trust Indenture Act of 1939 as it was in force at the date of execution
of this Indenture, except as provided in Section 10.03.
2005 Debentures: The term "2005 Debentures" shall mean the 8-7/8% Senior
---------------
Debentures of the Company Due September 15, 2005.
2001 Notes: The term "2001 Notes" shall mean the 8-1/2% Senior Notes of the
----------
Company Due September 15, 2001.
2013 Debentures: The term "2013 Debentures" shall mean the 9-1/2% Senior
---------------
Debentures of the Company Due August 1, 2013.
Unrestricted Subsidiary: The term "Unrestricted Subsidiary" shall mean any
-----------------------
Subsidiary of the Company, whether existing on or after the date of this
Indenture, which is not a member of the Note Restricted Group.
U.S. Global Note: The term "U.S. Global Note" shall have the meaning provided
----------------
in Section 2.02.
U.S. Government Obligations: The term "U.S. Government Obligations" shall
---------------------------
mean direct obligations of, or obligations the timely payment of the principal
of and interest on which are unconditionally guaranteed by, the United States of
America.
-25-
<PAGE>
U.S. Physical Notes: The term "U.S. Physical Notes" shall have the meaning
-------------------
provided in Section 2.02.
Vice President: The term "Vice President" shall mean any vice president of
--------------
the Company, whether or not designated by a number or a word or words added
before or after the title "vice president".
ARTICLE TWO
ISSUE, DESCRIPTION, EXECUTION, REGISTRATION AND
EXCHANGE OF NOTES
SECTION 2.01. Designation, Amount and Issue of Notes. The Notes shall be
--------------------------------------
designated as "8.30% Senior Notes Due 2006". Notes not to exceed the aggregate
principal amount of $600,000,000 (except as provided in Section 2.09) upon the
execution of this Indenture, or from time to time thereafter, may be executed by
the Company and delivered to the Trustee for authentication, and the Trustee
shall thereupon authenticate and deliver said Notes to or upon the written order
of the Company, signed by its Chairman or Vice Chairman of the Board of
Directors or its Chief Executive Officer or its President or its Chief Financial
Officer or any Vice President and by its Treasurer or Assistant Treasurer or its
Secretary or any Assistant Secretary, without any further action by the Company
hereunder.
The Notes shall be senior in right of payment to all subordinated indebtedness
of the Company, including, without limitation, the Senior Subordinated Debt.
SECTION 2.02. Form of Notes. The Notes and the Trustee's certificate of
-------------
authentication to be borne by the Notes shall be substantially in the form as in
this Indenture above recited. Any of the Notes may have imprinted thereon such
legends or endorsements as the officers executing the same may approve
(execution thereof to be conclusive evidence of such approval) and as are not
inconsistent with the provisions of this Indenture, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any stock exchange on which the Notes may be listed,
or to conform to usage.
Notes offered and sold in reliance on Rule 144A shall be issued initially in
the form of one or more permanent global Notes in registered form, substantially
in the form as above recited (the "U.S. Global Note"), deposited with the
Trustee, as custodian for the Depositary, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The
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aggregate principal amount of the U.S. Global Note may from time to time be
increased or decreased by adjustments made on the records of the Trustee, as
custodian for the Depositary or its nominee, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on Regulation S
shall be issued initially in the form of one or more temporary global Notes in
registered form substantially in the form as above recited (the "Temporary
Offshore Global Note") deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. At any time beginning 40 days after the later of the
commencement of the offering and the closing in connection with the Notes (the
"Offshore Notes Exchange Date"), upon receipt by the Trustee and the Company of
a certificate substantially in the form of Exhibit A hereto, one or more
permanent global Notes in registered form substantially in the form as above
recited (the "Permanent Offshore Global Note" and, together with the Temporary
Offshore Global Note, the "Offshore Global Note") duly executed by the Company
and authenticated by the Trustee as hereinafter provided shall be deposited with
the Trustee, as custodian for the Depositary, and the registrar shall reflect on
its books and records the date and a decrease in the principal amount of the
Temporary Offshore Global Note in an amount equal to the principal amount of the
beneficial interest in the Temporary Offshore Global Note transferred.
Notes offered and sold in reliance on Regulation D under the Securities Act of
1933 shall be issued in the form of permanent certificated Notes in registered
form in substantially the form as above recited (the "U.S. Physical Notes").
Notes issued pursuant to Section 2.07 in exchange for interests in the Offshore
Global Note shall be in the form of permanent certificated Notes in registered
form substantially in the form as above recited (the "Offshore Physical Notes").
The Offshore Physical Notes and U.S. Physical Notes are sometimes collectively
herein referred to as the "Physical Notes". The U.S. Global Note and the
Offshore Global Note are sometimes referred to as the "Global Notes".
The definitive Notes shall be typed, printed, lithographed or engraved or
produced by any combination of these methods or may be produced in any other
manner permitted by the rules of any securities exchange on which the Notes may
be listed, all as determined by the officers executing such Notes, as evidenced
by their execution of such Notes.
SECTION 2.03. Restrictive Legends. Unless and until a Note is exchanged for
-------------------
an Exchange Note in connection with an
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effective Registration pursuant to the Registration Rights Agreement, the U.S.
Global Note, Temporary Offshore Global Note and each U.S. Physical Note shall
bear the following legend on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3), OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES
THAT IT WILL NOT, WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF
THIS NOTE OR THE LAST DATE ON WHICH THIS NOTE WAS HELD BY AN AFFILIATE OF THE
COMPANY, RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL
BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE
UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS
NOTE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE) AND, IF SUCH
TRANSFER IS IN RESPECT OF AN AGGREGATE PRINCIPAL AMOUNT OF NOTES AT THE TIME OF
TRANSFER OF LESS THAN $250,000, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE
144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE OF THIS NOTE OR THE
LAST DATE ON WHICH THIS NOTE WAS HELD BY AN AFFILIATE OF THE COMPANY, THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH HEREIN RELATING TO THE MANNER OF SUCH
TRANSFER AND SUBMIT THIS NOTE TO THE TRUSTEE. IF
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THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT. THE INDENTURE CONTAINS A PROVISION
REQUIRING THE TRUSTEE TO REFUSE TO REGISTER ANY TRANSFER OF THIS NOTE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
Each Global Note, whether or not an Exchange Note, shall bear the following
legend on the face thereof:
Unless this Note is presented by an authorized representative of The Depository
Trust Company, a New York corporation ("DTC"), to the Company or its agent for
registration of transfer, exchange or payment, and any Note issued is registered
in the name of Cede & Co. or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co. or to such other
entity as is requested by an authorized representative of DTC), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an interest
herein.
Transfers of this Note shall be limited to transfers in whole, but not in part,
to nominees of Cede & Co. or to a successor thereof or such successor's nominee
and transfers of portions of this Note shall be limited to transfers made in
accordance with the restrictions set forth in section 2.08 of the Indenture.
SECTION 2.04. Date and Denomination of Notes. The Notes shall be issuable in
------------------------------
registered form without coupons in denominations of $100,000 and any multiple of
$50,000 in excess thereof. Every Note shall be dated the date of its
authentication and, except as provided in this Section, shall bear interest,
payable semi-annually on May 15 and November 15 of each year, commencing on May
15, 1996, from the May 15 or November 15, as the case may be, next preceding the
date of such Note to which interest has been paid or duly provided for, unless
the date of such Note is the date to which interest has been paid or duly
provided for, in which case from the date of such Note, or unless no interest
has been paid or duly provided for on the Notes, in which case from December 13,
1995 until payment of the
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principal sum has been made or duly provided for. Notwithstanding the foregoing,
when there is no existing default in the payment of interest on the Notes, all
Notes authenticated by the Trustee after the close of business on the record
date (as hereinafter defined) for any interest payment date (May 15 or November
15, as the case may be) and prior to such interest payment date shall be dated
the date of authentication but shall bear interest from such interest payment
date; provided, however, that if and to the extent that the Company shall
-------- -------
default in the payment of interest due on such interest payment date then any
such Note shall bear interest from the May 15 or November 15, as the case may
be, next preceding the date of such Note to which interest has been paid or duly
provided for, unless no interest has been paid or duly provided for on the
Notes, in which case from December 13, 1995. Interest will be computed on the
basis of a 360-day year of twelve 30-day months.
The person in whose name any Note (or its Predecessor Note) is registered at
the close of business on any record date with respect to any interest payment
date shall be entitled to receive the interest payable on such interest payment
date (subject to the provisions of Article Three in the case of any Note or
Notes, or portion thereof, prepaid on a date subsequent to the record date and
prior to such interest payment date) notwithstanding the cancellation of such
Note upon any transfer or exchange subsequent to the record date and prior to
such interest payment date. Interest may, at the option of the Company, be paid
by check mailed to the address of such person on the registry kept for such
purposes. The term "record date" with respect to any interest payment date
shall mean the May 1 or November 1 preceding said May 15 or November 15.
Any interest on any Note which is payable, but is not paid or duly provided
for within 30 days after the date on which it becomes due and payable on any
said May 15 or November 15 (herein called "Defaulted Interest") shall forthwith
cease to be payable to the Noteholder on the relevant record date by virtue of
having been such Noteholder; and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in clause (1) or (2) below:
(1) The Company may elect to make payment of any Defaulted Interest to the
Persons in whose names the Notes (or their respective Predecessor Notes) are
registered at the close of business on a special record date for the payment of
such Defaulted Interest, which shall be fixed in the following manner. At least
45 days before the proposed payment date, the Company shall notify the Trustee
in writing of the amount of Defaulted Interest proposed to be paid on each Note
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the
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aggregate amount proposed to be paid in respect of such Defaulted Interest or
shall make arrangements satisfactory to the Trustee for such deposit prior to
the date of the proposed payment, such money when deposited to be held in trust
for the benefit of the Persons entitled to such Defaulted Interest as in this
clause provided. Thereupon, not more than 15 days and not less than 10 days
after receipt by the Trustee of notice of the proposed payment, the Trustee
shall fix a special record date for the payment of such Defaulted Interest which
shall be not more than 15 days and not less than 10 days prior to the date of
the proposed payment. The Trustee shall promptly notify the Company of such
special record date and, in the name and at the expense of the Company, shall
cause notice of the proposed payment of such Defaulted Interest and the special
record date therefor to be mailed, first-class postage prepaid to each
Noteholder at his or her address as it appears in the Note register, not less
than 15 days prior to such special record date. Notice of the proposed payment
of such Defaulted Interest and the special record date therefor having been so
mailed, such Defaulted Interest shall be paid to the Persons in whose names the
Notes (or their respective Predecessor Notes) are registered at the close of
business on such special record date and shall no longer be payable pursuant to
the following clause (2).
(2) The Company may make payment of any Defaulted Interest in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, if, after notice given by the Company to the Trustee of the
proposed payment pursuant to this clause, such manner of payment shall be deemed
practicable by the Trustee.
SECTION 2.05. Execution of Notes. The Notes shall be signed in the name and
------------------
on behalf of the Company by the facsimile signature of its Chairman or Vice
Chairman of the Board of Directors, its Chief Executive Officer, its President,
its Chief Financial Officer or any of its Vice Presidents and attested by the
facsimile signature of its Secretary or any of its Assistant Secretaries (which
may be printed, engraved or otherwise reproduced thereon, by facsimile or
otherwise). Only such Notes as shall bear thereon a certificate of
authentication substantially in the form hereinbefore recited, manually executed
by the Trustee, shall be entitled to the benefits of this Indenture or be valid
or obligatory for any purpose. Such authentication by the Trustee upon any Note
executed by the Company shall be conclusive evidence that the Note so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
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In case any officer of the Company who shall have signed any of the Notes
shall cease to be such officer before the Notes so signed shall have been
authenticated and delivered by the Trustee, or disposed of by the Company, such
Notes nevertheless may be authenticated and delivered or disposed of as though
the person who signed such Notes had not ceased to be such officer of the
Company; and any Note may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Note, shall be the proper officers
of the Company, although at the date of the execution of this Indenture any such
person was not such an officer.
SECTION 2.06. Exchange and Registration of Notes; Transfer of Notes. Notes
-----------------------------------------------------
may be exchanged for a like aggregate principal amount of Notes of other
authorized denominations. Notes to be exchanged shall be surrendered at the
office or agency to be maintained by the Company in the Borough of Manhattan,
The City of New York (which office for purposes of this Section 2.06 shall be
the office of the registrar hereunder), and the Company shall execute and
register and the Trustee shall authenticate and deliver in exchange therefor the
Note or Notes which the Noteholder making the exchange shall be entitled to
receive. The Company hereby appoints the Trustee to be, and the Trustee agrees
to serve as, the initial registrar of the Notes.
The registrar (or the Company if there is no registrar) shall keep at said
office in the Borough of Manhattan, The City of New York, a register in which,
subject to such reasonable regulations as it may prescribe, Notes shall be
registered and the transfer of Notes shall be registered as in this Article Two
provided. Such register shall be in written form or in any other form capable
of being converted into written form within a reasonable time. At all
reasonable times such register shall be open for inspection by the Trustee.
Upon due presentment for registration of transfer of any Note at such office or
agency maintained by the Company in the Borough of Manhattan, The City of New
York, the Company shall execute and register and the Trustee shall authenticate
and deliver in the name of the transferee or transferees a new Note or Notes for
an equal aggregate principal amount. Furthermore, the Depositary shall, by
acceptance of a Global Note, agree that transfers of beneficial interests in
such Global Note may be effected only through a book-entry system maintained by
the Depositary (or its agent), and that ownership of a beneficial interest in
the Global Note shall be required to be reflected in a book entry. When Notes
are presented to the registrar with a request to register the transfer or to
exchange them for an equal principal amount of Notes of other authorized
denominations (including on exchange of Notes for Exchange Notes), the registrar
shall register the transfer or make the exchange as requested if its
requirements
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for such transactions are met; provided that no exchanges of Notes for Exchange
--------
Notes shall occur until a Registration Statement shall have been declared
effective by the SEC and that any Notes that are exchanged for Exchange Notes
shall be canceled by the Trustee; provided, further, that any Exchange Note
-------- -------
issued in exchange for a Physical Note shall upon such exchange be represented
by a Global Note. To permit registrations of transfers and exchanges in
accordance with the terms, conditions and restrictions hereof, the Company shall
execute and the Trustee shall authenticate Notes at the registrar's request.
All Notes presented for registration of transfer or for exchange, prepayment
or payment shall (if so required by the Company or the Trustee) be duly endorsed
by, or be accompanied by a written instrument or instruments of transfer in form
satisfactory to the Company and the registrar duly executed by, the holder or
his or her attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of transfer
of Notes, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
SECTION 2.07. Book-Entry Provisions for U.S. Global Note and Offshore Global
--------------------------------------------------------------
Note. (a) The U.S. Global Note and Offshore Global Note initially shall (i) be
- ----
registered in the name of the Depositary for such Global Notes or the nominee of
such Depositary, (ii) be delivered to the Trustee as custodian for such
Depositary and (iii) bear legends as set forth in Section 2.03.
Members of, or participants in, the Depositary ("Agent Members") shall have no
rights under this Indenture with respect to any U.S. Global Note or Offshore
Global Note, as the case may be, held on their behalf by the Depositary, or the
Trustee as its custodian, or under the U.S. Global Note or Offshore Global Note,
as the case may be, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such U.S. Global Note or Offshore Global Note, as the case may be, for all
purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent
the Company, the Trustee or any agent of the Company or the Trustee, from giving
effect to any written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
holder of any Note.
(b) Transfers of the U.S. Global Note and the Offshore Global Note shall be
limited to transfers of such U.S. Global Note or Offshore Global Note in whole,
but not in part, to the
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Depositary, its successors or their respective nominees. Beneficial interests in
the U.S. Global Note and the Offshore Global Note may be transferred in
accordance with the applicable rules and procedures of the Depositary and the
provisions of Section 2.08. In addition, U.S. Physical Notes and Offshore
Physical Notes shall be transferred to all beneficial owners in exchange for
their beneficial interests in the U.S. Global Note or the Offshore Global Note,
as the case may be, if (i) the Depositary notifies the Company that it is
unwilling or unable to continue as Depositary for the U.S. Global Note or the
Offshore Global Note, as the case may be, and a successor depositary is not
appointed by the Company within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing and the registrar has received a request
from the Depositary.
(c) Any beneficial interest in one of the Global Notes that is transferred to
a person who takes delivery in the form of an interest in the other Global Note
will, upon transfer, cease to be an interest in such Global Note and become an
interest in the other Global Note and, accordingly, will thereafter be subject
to all transfer restrictions, if any, and other procedures applicable to
beneficial interests in such other Global Note for as long as it remains such an
interest.
(d) In connection with any transfer of a beneficial interest in the U.S.
Global Note to a transferee receiving U.S. Physical Notes pursuant to paragraph
(b) of this Section, the registrar shall reflect on its books and records the
date and a decrease in the principal amount of the U.S. Global Note in an amount
equal to the principal amount of the beneficial interest in the U.S. Global Note
to be transferred, and the Company shall execute, and the Trustee shall
authenticate and deliver, one or more U.S. Physical Notes of like tenor and
amount.
(e) In connection with the transfer of the entire U.S. Global Note or
Offshore Global Note to beneficial owners pursuant to paragraph (b) of this
Section, the U.S. Global Note or Offshore Global Note, as the case may be, shall
be deemed to be surrendered to the Trustee for cancellation, and the Company
shall execute, and the Trustee shall authenticate and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the U.S. Global Note or Offshore Global Note, as the case may be, an
equal aggregate principal amount of U.S. Physical Notes or Offshore Physical
Notes, as the case may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an interest in the U.S.
Global Note pursuant to paragraph (b) or (d) of this Section shall, except as
otherwise provided by paragraph (f) of Section 2.08, bear the legend regarding
transfer
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restrictions applicable to the U.S. Physical Note set forth in Section 2.03.
(g) Any Offshore Physical Note delivered in exchange for an interest in the
Offshore Global Note pursuant to paragraph (b) of this Section shall, except as
otherwise provided by paragraph (f) of Section 2.08, bear the legend regarding
transfer restrictions applicable to the Offshore Physical Note set forth in
Section 2.03.
(h) The registered holder of the U.S. Global Note and the Offshore Global
Note may grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent Members, to take any
action which such holder is entitled to take under this Indenture or the Notes.
SECTION 2.08. Special Transfer Provisions. Unless and until a Note is
---------------------------
exchanged for an Exchange Note, or the Notes are registered for sale in
connection with an effective Registration pursuant to the Registration Rights
Agreement, the following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The following
-------------------------------------------------------
provisions shall apply with respect to the registration of any proposed transfer
of a Note to any Institutional Accredited Investor which is not a QIB (excluding
transfers to or by Non-U.S. Persons):
(i) The registrar shall register the transfer of any Note, whether or not
such Note bears the Private Placement Legend, if (x) the requested transfer is
at least three years after the later of the original issue date of the Notes and
the last date on which such Note was held by an affiliate of the Company or (y)
the proposed transferee has delivered to the registrar (A) a certificate
substantially in the form of Exhibit B hereto and (B) if the aggregate principal
amount of the Notes being transferred is less than $250,000 at the time of such
transfer, an opinion of counsel acceptable to the Company and the registrar that
such transfer is in compliance with the Securities Act of 1933.
(ii) If the proposed transferor is an Agent Member holding a beneficial
interest in the U.S. Global Note, upon receipt by the registrar of (x) the
documents, if any, required by paragraph (i) and (y) instructions given in
accordance with the Depositary's and the registrar's procedures, the registrar
shall reflect on its books and records the date and decrease in the principal
amount of the U.S. Global Note in an amount equal to the principal
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amount of the beneficial interest in the U.S. Global Note to be transferred, and
the Company shall execute, and the Trustee shall authenticate and deliver, one
or more U.S. Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with respect to
-----------------
the registration of any proposed transfer of a Note to a QIB (excluding
transfers to or by Non-U.S. Persons):
(i) If the Note to be transferred consists of U.S. Physical Notes or an
interest in the Temporary Offshore Global Note, the registrar shall register the
transfer if such transfer is being made by a proposed transferor who has checked
the box provided for on the form of Note stating, or has otherwise advised the
Company and the registrar in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Note stating, or has otherwise advised
the Company and the registrar in writing, that it is purchasing the Note for its
own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the Note to be
transferred consists of U.S. Physical Notes or an interest in the Temporary
Offshore Global Note, upon receipt by the registrar of the documents referred to
in clause (i) and instructions given in accordance with the Depositary's and the
registrar's procedures, the registrar shall reflect on its books and records the
date and an increase in the principal amount of the U.S. Global Note in an
amount equal to the principal amount of the U.S. Physical Note or the interest
in the Temporary Offshore Global Note, as the case may be, to be transferred,
and the Trustee shall cancel the Physical Note or decrease the amount of the
Temporary Offshore Global Note so transferred.
(c) Transfers of Interest in the Temporary Offshore Global Note. The
-----------------------------------------------------------
following provisions shall apply with
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respect to registration of any proposed transfer of interests in the Temporary
Offshore Global Note:
(i) The registrar shall register the transfer of any Note (x) if the proposed
transferee is a Non-U.S. Person and the proposed transferor has delivered to the
registrar a certificate substantially in the form of Exhibit C hereto or (y) if
the proposed transferee is a QIB and the proposed transferor has checked the box
provided for on the form of Note stating, or has otherwise advised the Company
and registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Note stating, or has otherwise advised the Company
and the registrar in writing, that it is purchasing the Note for its own account
or an account with respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of Rule 144A, and is
aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as it
has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon receipt by the
registrar of the documents referred to in clause (i)(y) above and instructions
given in accordance with the Depositary's and the registrar's procedures, the
registrar shall reflect on its books and records the date and an increase in the
principal amount of the U.S. Global Note in an amount equal to the principal
amount of the Temporary Offshore Global Note to be transferred, and the Trustee
shall decrease the amount of the Temporary Offshore Global Note so transferred.
(d) Transfers of Interests in the Permanent Offshore Global Note or Offshore
------------------------------------------------------------------------
Physical Note. The registrar shall register the transfer of any interests in
- -------------
the Permanent Offshore Global Note or Offshore Physical Notes without requiring
any additional certification.
(e) Transfers to Non-U.S. Persons at any Time. The following provisions shall
-----------------------------------------
apply with respect to any transfer of a Note to a Non-U.S. Person:
(i) Prior to the 40th day after the later of the commencement of the offering
and the closing date in
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connection with the Notes, the registrar shall register any proposed transfer of
a Note to a Non-U.S. Person upon receipt of a certificate substantially in the
form of Exhibit C hereto from the proposed transferor.
(ii) On and after the 40th day after the later of the commencement of the
offering and the closing date in connection with the Notes, the registrar shall
register any proposed transfer to any Non-U.S. Person if the Note to be
transferred is a U.S. Physical Note or an interest in the U.S. Global Note, upon
receipt of a certificate substantially in the form of Exhibit C from the
proposed transferor.
(iii) (a) If the proposed transferor is an Agent Member holding a beneficial
interest in the U.S. Global Note, upon receipt by the registrar of (x)
documents, if any, required by paragraph (ii) and (y) instructions in accordance
with the Depositary's and the registrar's procedures, the registrar shall
reflect on its books and records the date and a decrease in the principal amount
of the U.S. Global Note in an amount equal to the principal amount of the
beneficial interest in the U.S. Global Note to be transferred, and (b) if the
proposed transferee is an Agent Member, upon receipt by the registrar of
instructions given in accordance with the Depositary's and the registrar's
procedures, the registrar shall reflect on its books and records the date and an
increase in the principal amount of the Offshore Global Note in an amount equal
to the principal amount of the U.S. Physical Notes or the U.S. Global Note, as
the case may be, to be transferred, and the Trustee shall cancel the Physical
Note, if any, so transferred or decrease the amount of the U.S. Global Note.
(f) Private Placement Legend. Upon the transfer, exchange or replacement of
------------------------
Notes not bearing the Private Placement Legend, the registrar shall deliver
Notes that do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Notes bearing the Private Placement Legend, the
registrar shall deliver only Notes that bear the Private Placement Legend unless
either (i) the circumstances contemplated by the third paragraph of Section 2.02
or paragraphs (a)(i)(x) or (e)(ii) of this Section 2.08 exist or (ii) there is
delivered to the registrar an opinion of counsel reasonably satisfactory to the
Company and the registrar to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act of 1933.
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(g) General. By its acceptance of any Note bearing the Private Placement
-------
Legend, each holder of such a Note acknowledges the restrictions on transfer of
such Note set forth in this Indenture and in the Private Placement Legend and
agrees that it will transfer such Note only as provided in this Indenture. The
registrar shall not register a transfer of any Note unless such transfer
complies with the restrictions on transfer of such Note set forth in this
Indenture. In connection with any transfer of Notes, each holder agrees by its
acceptance of the Notes to furnish the registrar or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act of 1933; provided that the registrar shall not be required
--------
to determine (but may rely on a determination made by the Company with respect
to) the sufficiency of any such certifications, legal opinions or other
information.
The registrar shall retain copies of all letters, notices and other written
communications received pursuant to Section 2.07 or this Section 2.08. The
Company shall have the right to inspect and make copies of all such letters,
notices or other written communications at any reasonable time upon the giving
of reasonable written notice to the registrar.
SECTION 2.09. Mutilated, Destroyed, Lost or Stolen Notes. In case any
------------------------------------------
temporary or definitive Note shall become mutilated or be destroyed, lost or
stolen, the Company in its discretion may execute, and upon its request the
Trustee shall authenticate and deliver, a new Note, bearing a number not
contemporaneously outstanding, in exchange and substitution for the mutilated
Note, or in lieu of and in substitution for the Note so destroyed, lost or
stolen. In every case the applicant for a substituted Note shall furnish to the
Company and to the Trustee such security or indemnity as may be required by them
to save each of them harmless, and, in every case of destruction, loss or theft,
the applicant shall also furnish to the Company and to the Trustee evidence to
their satisfaction of the destruction, loss or theft of such Note and of the
ownership thereof.
The Trustee may authenticate any such substituted Note and deliver the same
upon the written request or authorization of any officer of the Company. Upon
the issuance of any substituted Note, the Company may require the payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation thereto and any other expenses connected therewith. In case any
Note which has matured or is about to mature shall become mutilated or be
destroyed, lost or stolen, the Company
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may, instead of issuing a substitute Note, pay or authorize the payment of the
same (without surrender thereof except in the case of a mutilated Note) if the
applicant for such payment shall furnish to the Company and to the Trustee such
security or indemnity as may be required by them to save each of them harmless
and, in case of destruction, loss or theft, evidence satisfactory to the Company
and the Trustee of the destruction, loss or theft of such Note and of the
ownership thereof.
Every substituted Note issued pursuant to the provisions of this Section 2.09
by virtue of the fact that any Note is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Note shall be found at any time, and shall be
entitled to all the benefits, and subject to all the provisions, of this
Indenture equally and proportionately with any and all other Notes duly issued
hereunder. To the extent permitted by law, all Notes shall be held and owned
upon the express condition that the foregoing provisions are exclusive with
respect to the replacement or payment of mutilated, destroyed, lost or stolen
Notes and shall preclude any and all other rights or remedies notwithstanding
any law or statute existing or hereafter enacted to the contrary with respect to
the replacement or payment of negotiable instruments or other securities without
their surrender.
SECTION 2.10. Temporary Notes. Pending the preparation of definitive Notes,
---------------
the Company may execute and the Trustee shall authenticate and deliver temporary
Notes (typed, printed or lithographed). Temporary Notes shall be issuable in
any authorized denomination, and substantially in the form of the definitive
Notes but with such omissions, insertions and variations as may be appropriate
for temporary Notes, all as may be determined by the Company. Every such
temporary Note shall be authenticated by the Trustee upon the same conditions
and in substantially the same manner, and with the same effect, as the
definitive Notes. Without unreasonable delay the Company will execute and
deliver to the Trustee definitive Notes and thereupon any or all temporary Notes
may be surrendered in exchange therefor, at the office or agency of the Company
in the Borough of Manhattan, The City of New York (which office for purposes of
this Section 2.10 shall be the office in the said Borough of the registrar
hereunder), and the Trustee shall authenticate and deliver in exchange for such
temporary Notes an equal aggregate principal amount of definitive Notes;
provided, however, that if all Notes are exchanged for Exchange Notes
- --------
represented by one or more Global Notes, the Global Notes may remain in
temporary form until such Global Notes are exchanged for Physical Notes pursuant
to Section 2.07(b). Such exchange shall be made by the Company at its own
expense and without any charge therefor. Until so exchanged, the temporary
Notes shall in all respects be entitled
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to the same benefits under this Indenture as definitive Notes authenticated and
delivered hereunder.
SECTION 2.11. Cancellation of Notes Paid, etc. All Notes surrendered for the
--------------------------------
purpose of payment, prepayment, exchange or registration of transfer, or in
discharge, shall, if surrendered to the Company or any paying agent or any Note
registrar, be surrendered to the Trustee and promptly canceled by it, or, if
surrendered to the Trustee, shall be promptly canceled by it, and no Notes shall
be issued in lieu thereof except as expressly permitted by any of the provisions
of this Indenture. The Company may at any time deliver to the Trustee for
cancellation any Notes previously authenticated and delivered hereunder which
the Company may have acquired in any manner whatsoever and the Trustee shall
cancel any Notes so delivered. The Trustee shall return all canceled Notes to
the Company.
SECTION 2.12. CUSIP Numbers. The Company in issuing the Notes may use CUSIP
-------------
numbers (if then generally in use), and, if so, the Trustee shall use CUSIP
numbers in notices of prepayment as a convenience to Noteholders; provided that
--------
any such notice may state that no representation is made as to the correctness
of such numbers either as printed on the Notes or as contained in any notice of
a prepayment and that reliance may be placed only on the other identification
numbers printed on the Notes, and any such prepayment shall not be affected by
any defect in or omission of such numbers.
ARTICLE THREE
REDEMPTION OF NOTES;
PREPAYMENT AT THE OPTION OF THE HOLDERS
SECTION 3.01. Redemption at the Option of the Company.
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(a) The Notes shall not be redeemable at the option of the Company prior to
maturity.
(b) The Notes shall not be entitled to the benefits of a sinking fund.
SECTION 3.02. Prepayment at the Option of the Holder -Preferred Stock
-------------------------------------------------------
Redemption Payment.
- ------------------
(a) The holder of any Note shall have the right, at his or her option, upon
the giving of a Preferred Event Put Notice, and subject to the terms and
conditions hereof, to tender all, but not less than all, Notes held by that
holder, without regard to the fact that the Notes may not then be otherwise
prepayable,
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for cash, in an amount equal to the principal amount of the Notes (the
"Preferred Event Redemption Price") together with accrued interest to the date
fixed for prepayment of such holder's Notes. The right of each holder to tender
his or her Note or Notes shall continue for 30 days after the date of the
Preferred Event Put Notice (the "Initial Tender Period"), unless such period
shall be extended by the Company by written notice delivered to the holders of
the Notes in accordance with Section 3.02(c) hereof (the Initial Tender Period,
together with all such extensions, is hereinafter referred to as the "Tender
Period"), and shall be exercised by any surrender of such Note or Notes to the
office or agency to be maintained by the Company pursuant to Section 4.02 of
this Indenture, accompanied by written notice that the holder elects to tender
such Note or Notes and (if so required by the Company or the Trustee) by a
written instrument or instruments of transfer in form satisfactory to the
Company and the Trustee duly executed by the holder or his or her duly
authorized legal representative and transfer tax stamps or funds therefor, if
required. Such tender by a holder shall be irrevocable. The holders of Notes
shall not have the right to tender Notes if on the date of the Preferred Event
Put Notice the Company shall have satisfied and discharged this Indenture
pursuant to Article Twelve or effected a defeasance with respect to the Notes
pursuant to Article Thirteen (except that the Company may not satisfy this
Indenture or effect defeasance in anticipation of a Preferred Stock Redemption
Payment).
(b) Any such prepayment of Notes shall occur on the date on which the Company
shall make the Preferred Stock Redemption Payment (the "Preferred Event
Redemption Date"), which date, if any, shall be (i) at least 31 and no more than
60 days after the date of the Preferred Event Put Notice and (ii) no more than
five days after the last day of the Tender Period (the "Tender Discharge Date").
Such date shall be the same as the date on which the Company repurchases any
2001 Notes, 2005 Debentures, 2013 Debentures or June Senior Debt Securities as a
result of a Preferred Stock Redemption Payment. In no case may the Company make
a Preferred Stock Redemption Payment prior to purchasing Notes which have been
properly tendered in accordance with this Section 3.02. If the Company elects
not to make a particular Preferred Stock Redemption Payment, then the Company
shall have no obligation to purchase the Notes tendered in connection with that
Preferred Stock Redemption Payment. If the proposed Preferred Stock Redemption
Payment is not made on or prior to the earlier to occur of (i) the 60th day
after the date of the Preferred Event Put Notice with respect thereto or (ii)
the Tender Discharge Date with respect thereto, (A) the Company shall, on or
prior to the earlier to occur of the 61st day after the date of such Preferred
Event Put Notice or such Tender Discharge Date, mail, or cause the Trustee to
mail, notice in accordance with Section 3.04 to each Noteholder stating that the
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proposed Preferred Stock Redemption Payment was not made, (B) the Company shall,
on or prior to the earlier to occur of the 66th day after the date of such
Preferred Event Put Notice or such Tender Discharge Date, return, or cause to be
returned, any Notes tendered to the Company in accordance with this Section 3.02
to the holders thereof (together with any written instrument or instruments of
transfer and any transfer tax stamps or funds therefor which accompanied such
Notes when they were delivered by the Noteholder), and (C) the Company shall no
longer have the right or obligation to purchase Notes tendered in connection
with, and as a result of, such proposed Preferred Stock Redemption Payment. The
Company shall not thereafter make a Preferred Stock Redemption Payment unless a
subsequent Preferred Event Put Notice shall have been sent to holders of Notes
in connection therewith and the holders of Notes shall have been afforded an
opportunity to tender their Notes in accordance with, and subject to, the terms
of this Section 3.02.
(c) The Company shall file with the Trustee and shall mail, or cause the
Trustee to mail, to each Noteholder notice in accordance with Section 3.04 (the
"Preferred Event Put Notice") stating that the Company is proposing to make a
Preferred Stock Redemption Payment and that each holder has the right for no
more than 30 days from the date of such notice to tender all, but not less than
all, of his or her Notes for cash in accordance with and subject to the terms
hereof. If the Company elects to extend the Initial Tender Period or any
extension thereof, the Company shall file with the Trustee and shall mail, or
cause the Trustee to mail, at least five days prior to the termination of such
period, notice in accordance with Section 3.04 stating that the Company is
extending such period and that each holder's ability to tender his or her Notes
in accordance with this Section 3.02 will be extended until the end of such
extended period. The Trustee shall not be deemed to have knowledge of any
Preferred Stock Change of Control Event or any corresponding obligation with
respect thereto until so notified by the Company.
(d) On or before, but not more than three Banking Days prior to, the
Preferred Event Redemption Date, the Company shall deposit with the Trustee or
with a paying agent an amount of money sufficient to pay the Preferred Event
Redemption Price, and (except if the Preferred Event Redemption Date shall be an
interest payment date) accrued interest on all the Notes to be purchased on the
Preferred Event Redemption Date.
(e) After a holder has tendered Notes for prepayment as provided in clause
(a) above, the Notes of such holder shall, on the Preferred Event Redemption
Date, become due and payable at the Preferred Event Redemption Price, together
with accrued interest to the Preferred Event Redemption Date, and from and after
such date (unless the Company shall default in the payment
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of such Notes at the Preferred Event Redemption Price) such Notes shall cease to
bear interest. Upon surrender of any such Note for prepayment in accordance
herewith, such Note shall be paid on the Preferred Event Redemption Date by the
Trustee or paying agent at a price equal to the applicable Preferred Event
Redemption Price (together with accrued interest to the Preferred Event
Redemption Date); provided, however, that if the Preferred Event Redemption Date
-------- -------
is an interest payment date, interest accrued to such Preferred Event Redemption
Date shall be payable to the holders of record of such Note or Notes at the
close of business on the relevant record date according to the provisions of
this Indenture.
If any Note to be prepaid shall not be so purchased on the Preferred Event
Redemption Date, the Preferred Event Redemption Price and accrued interest
shall, until paid, bear interest from the Preferred Event Redemption Date at the
rate borne by the Notes.
SECTION 3.03. Prepayment at the Option of the Holder -Exempt Repurchases and
--------------------------------------------------------------
Borrowing.
- ---------
(a) The holder of any Note shall have the right, at his or her option, upon
the giving of notice described in clause (d) below, and subject to the terms and
provisions hereof, to tender all, but not less than all, Notes held by such
holder without regard to the fact that the Notes may not then be otherwise
prepayable, for cash in an amount equal to the principal of such Notes plus a
premium, if any, as set forth in paragraph 8 of the Notes (together, the "Put
Option Redemption Price"), plus accrued interest to the date fixed for
prepayment. Such prepayment shall occur on a date (the "Put Option Redemption
Date") 35 days after the Put Option Transaction Date (as defined below). The
holder's right to tender shall continue for 30 days after the Put Option
Transaction Date, and shall be exercised by any surrender of such Notes to the
office or agency to be maintained by the Company pursuant to Section 4.02 of
this Indenture, accompanied by written notice that the holder elects to tender
such Notes and (if so required by the Company or the Trustee) by a written
instrument or instruments of transfer in form satisfactory to the Company and
the Trustee duly executed by the holder or his or her duly authorized legal
representative and transfer tax stamps or funds therefor, if required. Such
tender by a holder shall be irrevocable.
(b) The holder shall have the right to tender under clause (a) upon the
occurrence of an event or series of events set forth below, provided that at the
--------
time of the occurrence of such event, the Company shall not have satisfied and
discharged this Indenture pursuant to Article Twelve or effected a defeasance
with respect to the Notes pursuant to Article Thirteen
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(except that the Company may not satisfy this Indenture or effect defeasance in
anticipation of (i) or (ii) below):
(i) The Company makes an Exempt Repurchase and immediately thereafter and
after giving effect to any Exempt Repurchase Indebtedness incurred or to be
incurred for the purpose of making such Exempt Repurchase, the Company is unable
to incur an additional One Dollar ($1.00) of Indebtedness under Section 4.07,
without giving effect to Section 4.07(b) (hereinafter referred to as a "Put
Option Stock Repurchase").
(ii) The Company incurs Indebtedness and immediately thereafter, and after
giving effect to such Indebtedness, the Company is able to incur an additional
$1 of Indebtedness under Section 4.07, but only because of the effect of Section
4.07(b) (hereinafter referred to as a "Put Option Borrowing").
(c) The Company shall file with the Trustee and shall mail, or cause the
Trustee to mail, to each Noteholder not more than 45 days and not less than 15
days prior to the proposed date on which a Put Option Stock Repurchase or Put
Option Borrowing (either, a "Put Option Transaction") is to occur (the "Proposed
Date") a notice as provided in Section 3.04 stating that the Company is
proposing to make a Put Option Stock Repurchase or a Put Option Borrowing,
whichever the case may be, on the Proposed Date, and that if the Put Option
Transaction is consummated, each holder shall have the right to tender all, but
not less than all, of his or her Notes for cash pursuant to the terms hereof.
(d) The date on which the proposed Put Option Transaction shall occur (the
"Put Option Transaction Date") shall be no more than 30 days after the Proposed
Date. On the Put Option Transaction Date, the Company shall mail, or cause the
Trustee to mail, notice in accordance with Section 3.04 to each Noteholder
stating that the Put Option Transaction has been consummated and that each
holder of Notes has the right to tender his or her Notes for a period of 30 days
after the Put Option Transaction Date.
(e) On or before, but not more than three Banking Days prior to, the Put
Option Redemption Date, the Company shall deposit with the Trustee or with a
paying agent an amount of money sufficient to pay the Put Option Redemption
Price, and (except if the Put Option Redemption Date shall be an interest
payment date) accrued interest on, all the Notes to be purchased on the Put
Option Redemption Date. Prior to the consummation of any Put Option
Transaction, the Company shall deliver to the Trustee an Officers' Certificate
to the effect that it has arranged for committed financing sufficient to
purchase all of the Notes in accordance with this Section 3.03.
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(f) All Notes properly tendered for prepayment pursuant to clause (a) above
shall, on the Put Option Redemption Date, become due and payable at the
applicable Put Option Redemption Price plus accrued interest, if any, and from
and after such date (unless the Company shall default in the payment thereof)
such Notes shall cease to bear interest. Upon surrender of any such Note for
prepayment in accordance herewith, such Note shall be paid on the Put Option
Redemption Date by the Trustee or paying agent at a price equal to the
applicable Put Option Redemption Price, together with accrued interest to the
Put Option Redemption Date; provided, however, that if the Put Option Redemption
-------- -------
Date is an interest payment date, interest accrued to such Put Option Redemption
Date shall be payable to the holders of record of such Notes at the close of
business on the relevant record date according to the provisions of this
Indenture.
If any Note to be prepaid shall not be so purchased on the Put Option
Redemption Date, the Put Option Redemption Price and accrued interest shall,
until paid, bear interest from the Put Option Redemption Date at the rate borne
by the Notes.
(g) Upon (A) the consummation of the proposed Put Option Transaction no later
than 30 days after the Proposed Date, and (B) the prepayment of all Notes
properly tendered for prepayment pursuant to clause (a) above, the Company shall
no longer be bound by the provisions of this Section 3.03 and Sections 4.07,
4.08 and 4.11.
(h) If the proposed Put Option Transaction that was the subject of the notice
provided pursuant to clause (c) above is not consummated within 30 days of the
Proposed Date, the Company shall, on the 31st day after the Proposed Date, mail,
or cause the Trustee to mail, notice in accordance with Section 3.04 to each
Noteholder stating that the proposed Put Option Transaction was not consummated.
SECTION 3.04. Mailing of Notices. If pursuant to this Article Three, the
------------------
Company or the Trustee is required to mail to one or more Noteholders notice of
the right of the Noteholders to require prepayment, such notice shall be given
in the manner hereinafter provided. Notice shall be mailed to the subject
Noteholders at their last addresses as the same shall appear on the register for
the Notes described in Section 2.06. Such mailing shall be by first-class mail.
The notice if mailed in the manner herein provided shall be conclusively
presumed to have been duly given, whether or not the holder receives such
notice. In any case, failure to give such notice by mail or any defect in the
notice to any subject Noteholder shall not affect the validity of the
proceedings for the prepayment of any other Note.
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Each such notice of the right of the holders to require prepayment shall
specify (except as otherwise provided in Sections 3.02 and 3.03) the date fixed
for prepayment, the prepayment price at which Notes are to be purchased, the
place or places of payment, the CUSIP number of the Notes, that payment will be
made upon presentation and surrender of such Notes to be prepaid (and other
conditions of payments, if any), the terms and conditions to which each
Noteholder's right to require prepayment is subject, that interest accrued to
the date fixed for prepayment on Notes or portions thereof to be prepaid will be
paid as specified in the notice, that on or after said date interest on Notes or
portions thereof to be prepaid will cease to accrue and such other information
as is provided for in the Section of this Article Three calling for such notice.
Either the Company shall give the notice or shall provide the Trustee with
copies of the notice and shall request the Trustee to mail the notice on the
Company's behalf.
SECTION 3.05. Cancellation of Notes after Prepayment. All Notes surrendered
--------------------------------------
for prepayment shall, if surrendered to the Company or any prepayment agent, be
delivered to the Trustee for cancellation and, if surrendered to the Trustee,
shall be canceled by it upon the occurrence of the prepayment.
ARTICLE FOUR
PARTICULAR COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Principal, Premium and Interest. The Company
------------------------------------------
covenants and agrees that it will duly and punctually pay or cause to be paid
the principal of and premium, if any, and interest on each of the Notes at the
places, at the respective times and in the manner provided herein and in the
Notes.
SECTION 4.02. Offices for Notices and Payments, etc. So long as any of the
--------------------------------------
Notes remain outstanding, the Company will maintain in the Borough of Manhattan,
The City of New York, an office or agency where the Notes may be presented for
payment, and an office or agency where the Notes may be presented for
registration of transfer and for exchange as in this Indenture provided and an
office or agency where notices and demands to or upon the Company in respect of
the Notes or of this Indenture may be served. The Company will give to the
Trustee written notice of the location of each such office or agency and of any
change of location thereof. If the Company shall fail to maintain any such
office or agency or shall fail to give such notice of the location or of any
change in the location thereof, presentations and demands may be made and
notices may be served at the office of the Trustee and the Company hereby
appoints the Trustee to be,
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and the Trustee agrees to serve as, the Company's initial agent to receive all
such presentations, demands and notices.
SECTION 4.03. Appointments to Fill Vacancies in Trustee's Office. The
--------------------------------------------------
Company, whenever necessary to avoid or fill a vacancy in the office of Trustee,
will appoint, in the manner provided in Section 7.09, a Trustee, so that there
shall at all times be a Trustee hereunder.
SECTION 4.04. Provision as to Paying Agent. (a) If the Company shall
----------------------------
appoint a paying agent other than the Trustee, it will cause such paying agent
to execute and deliver to the Trustee an instrument in which such agent shall
agree with the Trustee, subject to the provisions of this Section 4.04:
(1) that it will hold all sums held by it as such agent for the payment of
the principal of and premium, if any, or interest on the Notes (whether such
sums have been paid to it by the Company or by any other obligor on the Notes)
in trust for the benefit of the holders of the Notes;
(2) that it will give the Trustee notice of any failure by the Company (or by
any other obligor on the Notes) to make any payment of the principal of and
premium, if any, or interest on the Notes when the same shall become due and
payable; and
(3) that at any time during the continuance of an Event of Default, upon
request of the Trustee, it will forthwith pay to the Trustee all sums so held in
trust.
(b) If the Company shall act as its own paying agent, it will, on or before
each due date of the principal of and premium, if any, or interest on the Notes,
set aside, segregate and hold in trust for the benefit of the holders of the
Notes a sum sufficient to pay such principal and premium, if any, or interest so
becoming due and will notify the Trustee of any failure to take such action and
of any failure by the Company (or by any other obligor on the Notes) to make any
payment of the principal of and premium, if any, or interest on the Notes when
the same shall become due and payable.
(c) Anything in this Section 4.04 to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by any paying agent hereunder as required by
this Section 4.04, such sums to be held by the Trustee upon the trusts herein
contained and upon such payment by any paying agent to the Trustee, such paying
agent shall be released from all further liability with respect to such money.
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(d) Anything in this Section 4.04 to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section 4.04 is subject to
Sections 12.03 and 12.04.
SECTION 4.05. Corporate Existence and Maintenance of Properties. Except as
-------------------------------------------------
provided in Section 11.01 hereof, the Company will at all times maintain its
corporate existence, will maintain its properties in adequate condition for the
conduct of its business and will do or cause to be done all things necessary to
preserve and keep in full force and effect its rights (charter and statutory)
and franchises; provided, however, that the Company will not be required to
-------- -------
preserve any right or franchise if the Board of Directors of the Company shall
determine that the preservation thereof is no longer desirable in the conduct of
the business of the Company and that the loss thereof is not disadvantageous in
any material respect to the Noteholders.
SECTION 4.06. Restricted Payments. The Company covenants and agrees, so long
-------------------
as any of the Notes remain outstanding, that it will not declare or pay any
dividend on, or authorize or make any distribution in respect of, any shares of
any class of the Company's Capital Stock (except dividends or distributions
payable in shares of its Capital Stock), or authorize or make any purchase,
redemption or acquisition for value of, or permit any Subsidiary to purchase or
otherwise acquire for value, any shares of any class of the Company's Capital
Stock (or any rights, warrants or options to purchase any class of Capital Stock
of the Company, except if such rights, warrants or options are held by an
employee of the Company and such purchase, redemption or acquisition occurs in
connection with the termination of such employee's employment with the Company),
otherwise than pursuant to Exempt Repurchases (any declaration, authorization or
payment so restricted being herein called a "Restricted Payment"): (i) if a
default shall have occurred and be continuing at the time of such proposed
Restricted Payment or shall occur as a consequence thereof; or (ii) if the
aggregate of all Restricted Payments made from September 30, 1995 through and
including the date on which such Restricted Payment is made, would exceed the
sum of (a) the amount by which Operating Cash Flow of the Note Restricted Group
on a consolidated basis for the period, treated as a single accounting period,
from September 30, 1995 through the fiscal quarter immediately preceding such
proposed Restricted Payment for which financial statements are available exceeds
1.20 times the Total Interest Expense for the period, treated as a single
accounting period, from September 30, 1995 through said fiscal quarter
immediately preceding such proposed Restricted Payment, plus (b) $1,029,726,000,
plus (c) the aggregate net proceeds, including the fair market value of property
other than cash, received by the Company from the issue or sale (other than to a
Subsidiary) subsequent to September 30, 1995 of any class of
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Capital Stock of the Company. For all purposes of this Section 4.06, any
recapitalization of the Company (whether or not effected through a merger or
consolidation with, or sale of substantially all of the assets of the Company
to, any Person) that has the effect of transferring money, property, or
securities other than Capital Stock of the Company to any holder of any shares
of the Capital Stock of the Company (otherwise than in connection with an Exempt
Repurchase) shall be deemed a Restricted Payment.
For purposes of this Section 4.06, "default" shall mean the occurrence of any
event specified in clauses (a), (b), (c), (d), (e) or (f) of Section 6.01, not
including periods of grace, if any, provided for therein.
SECTION 4.07. Limitation on Indebtedness. (a) Except as provided in Section
--------------------------
3.03(g), the Company covenants and agrees, so long as any of the Notes remain
outstanding, that it shall not, and shall not permit any member of the Note
Restricted Group to, incur, create, assume, directly or indirectly guarantee or
in any other manner become liable with respect to, or become responsible for the
payment of, any additional Indebtedness (other than Exempt Repurchase
Indebtedness) if, immediately thereafter and giving effect thereto on a pro
forma basis, the aggregate Indebtedness of the Note Restricted Group would be
more than the product of (i) four times the Operating Cash Flow of the Note
Restricted Group for the fiscal quarter most recently preceding such incurrence
for which financial statements are available, multiplied by (ii) nine.
(b) For purposes of the above calculation, the aggregate Indebtedness of the
Note Restricted Group shall be reduced by the aggregate Exempt Repurchase
Indebtedness of the Note Restricted Group.
SECTION 4.08. Limitation on Investment in Subsidiaries other than the Note
------------------------------------------------------------
Restricted Group. Except as provided in Section 3.03(g), the Company covenants
- ----------------
and agrees, so long as any of the Notes remain outstanding, that it shall not,
and shall not permit any member of the Note Restricted Group to, directly or
indirectly make any loan or transfer of property to, or investment in, any
Subsidiary that is not part of the Note Restricted Group (other than (i) the
provision of goods and services to such a Subsidiary if such goods and services
are billed to such a Subsidiary on the basis of the provider's cost therefor and
(ii) advances to any Subsidiary that is not part of the Note Restricted Group in
the ordinary course of business by the Note Restricted Group if the interest
payable on such advances is generally consistent with the Company's cost of
borrowings under its credit facilities), unless, immediately after giving effect
to such loan or investment on a pro forma
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basis, the Note Restricted Group would be able to incur an additional One Dollar
($1.00) of Indebtedness under Section 4.07, as determined for the fiscal quarter
most recently completed for which financial statements are available at the date
of such loan, transfer or investment.
The Company's obligation to comply with this covenant will be suspended once
the Notes or the Exchange Notes are Investment Grade Rated.
SECTION 4.09. Transactions with Stockholders and Affiliates. The Company
---------------------------------------------
covenants and agrees, so long as any of the Notes remain outstanding, that it
will not, and will not permit any Subsidiary that is part of the Note Restricted
Group to, enter into any transaction (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) with any holder of five percent or more of any class of Capital Stock
of the Company or with any Affiliate of the Company or of any such holder, on
terms that are less favorable to the Company or such Subsidiary, as the case may
be, than those which might be obtained at the time of such transaction from a
Person who is not such a holder or Affiliate; provided, however, that this
-------- -------
Section 4.09 shall not limit, or be applicable to, (i) Exempt Repurchases, (ii)
transactions between the Company and a Subsidiary or between Subsidiaries, (iii)
transactions pursuant or relating to Restricted Stock Purchase Agreements or
(iv) the payment of reasonable and customary regular fees to directors of the
Company who are not employees of the Company.
The Company's obligation to comply with this covenant will be suspended at any
time once the Notes or the Exchange Notes are Investment Grade Rated.
SECTION 4.10. Certificate to Trustee. The Company will furnish to the
----------------------
Trustee not more than 90 days after the end of the Company's fiscal year
(beginning with fiscal 1995) in each year a brief certificate from the principal
executive, financial or accounting officer of the Company as to his or her
knowledge of the Company's compliance with all conditions and covenants under
this Indenture (such compliance to be determined without regard to any period of
grace or requirement of notice provided under this Indenture), stating that in
the course of the performance by the signer of his or her duties as an officer
of the Company, he or she would normally have knowledge of any default by the
Company and, if he or she has knowledge of any default, specifying each such
default of which the signer has knowledge and the nature thereof.
SECTION 4.11. Limitation on Liens. Except as provided in Section 3.03(g),
-------------------
the Company will not, and will not permit any
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Subsidiary that is part of the Note Restricted Group to, create, incur or assume
any Lien on any Principal Property or any shares of Capital Stock or
Indebtedness of any such Subsidiary without making effective provision for all
of the Notes and all other amounts due under this Indenture to be directly
secured equally and ratably with (or prior to) the obligation or liability
secured by such Lien unless, at the time of such creation, incurrence or
assumption and, after giving effect thereto, the aggregate amount of all
Indebtedness of the Note Restricted Group so secured does not exceed five times
Annualized Cash Flow; provided, however, that if all Liens (other than Liens
-------- -------
created pursuant to this Section or the comparable provisions of the indentures
relating to the other senior debt securities of the Company) on Principal
Property or on shares of Capital Stock or Indebtedness of any Subsidiary that is
part of the Note Restricted Group which secure Indebtedness of the Company or
any such Subsidiary are released, then (i) all then existing Liens created
pursuant to this Section (together with all then existing Liens created pursuant
to the comparable provisions of the indentures relating to the other senior debt
securities of the Company) shall be automatically released and (ii) the Trustee
shall be authorized to execute and deliver to the Company any documents
requested by the Company which are required to evidence the release of such
Liens.
The foregoing limitation does not apply to:
(i) Liens securing obligations of the Company to reimburse any bank or other
Person in respect of amounts paid under letters of credit, acceptances or other
similar instruments; or
(ii) Liens securing Indebtedness on the assets of any entity existing at the
time such assets are acquired by the Company or any of its Subsidiaries that are
part of the Note Restricted Group, whether by merger, consolidation, purchase of
assets or otherwise; provided that such Liens (x) are not created, incurred or
--------
assumed in connection with, or in contemplation of, such assets being acquired
by the Company or any of its Subsidiaries that are part of the Note Restricted
Group and (y) do not extend to any other Principal Property or assets of the
Company or any of its Subsidiaries that are part of the Note Restricted Group.
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ARTICLE FIVE
NOTEHOLDERS LISTS AND REPORTS BY THE
COMPANY AND THE TRUSTEE
SECTION 5.01. Noteholders Lists. If and so long as the Trustee shall not be
-----------------
the Note registrar, the Company will furnish or cause to be furnished to the
Trustee a list in such form as the Trustee may reasonably require of the names
and addresses of the holders of the Notes pursuant to Section 312 of the Trust
Indenture Act of 1939 (a) not more than 15 days after each record date for the
payment of semi-annual interest on the Notes (as specified in Section 2.04
hereof), as of such record date, and (b) at such other times as the Trustee may
request in writing, within 30 days after receipt by the Company of any such
request, such information to be as of a date not more than 15 days prior to the
time such information is furnished.
SECTION 5.02. Reports by the Company. (a) The Company covenants to file
----------------------
with the SEC all reports and other information required to be filed by the
Company with the SEC pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 at all times from and after the earlier of (i) the date of
the consummation of a registered exchange offer for the Notes by the Company or
other registration of the Notes (the "Registration") and (ii) the date that is
six months after the date of the original issuance of the Notes under this
Indenture. The Company covenants to file with the Trustee copies of such reports
or other information within 15 days after their being filed with the SEC.
(b) The Company covenants and agrees that it will deliver to the Trustee and
mail, or cause the Trustee to mail, to each holder of Notes:
(1) as soon as available and in any event within 90 days after the end of
each fiscal year of the Company (i) a consolidated balance sheet of the Company
and its Subsidiaries as of the end of such fiscal year and the related
consolidated statements of operations, shareholders' equity and cash flows for
such fiscal year, all reported on by Deloitte & Touche LLP or other independent
public accountants of nationally recognized standing, (ii) a report containing a
management's discussion and analysis of financial condition and results of
operations and a description of the business and properties of the Company and
(iii) a report as to the maximum amount of Restricted Payments that the Company
could have made as of the end of the fiscal year without violating Section 4.06,
such report explaining
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how such maximum amount was calculated and briefly describing any transaction
that occurred during the last quarter that affected such maximum amount;
(2) as soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of the Company (i) an
unaudited consolidated financial report for such quarter, (ii) a report
containing a management's discussion and analysis of financial condition and
results of operations and (iii) a report as to the maximum amount of Restricted
Payments that the Company could have made as of the end of the quarter without
violating Section 4.06, such report explaining how such maximum amount was
calculated and briefly describing any transaction that occurred during the
quarter that affected such maximum amount;
(3) promptly upon the mailing thereof to the shareholders of the Company
generally, copies of annual letters; and
(4) promptly upon the filing thereof, copies of all annual, quarterly, monthly
or periodic reports which the Company shall have filed with the SEC.
(c) The Company covenants to supply the information required under Rule 144A
to any holder of Notes or any prospective purchaser of Notes designated by a
holder, upon the request of such holder or prospective purchaser, at all times
prior to the Registration.
SECTION 5.03. Reports by the Trustee. Any Trustee's report required under
----------------------
Section 313(a) of the Trust Indenture Act of 1939 shall be transmitted on or
before June 1, 1996, and on or before every June 1 thereafter, and shall be
dated as of a date 60 days prior to such June 1.
ARTICLE SIX
REMEDIES OF THE TRUSTEE AND NOTEHOLDERS
ON THE OCCURRENCE OF AN EVENT OF DEFAULT
SECTION 6.01. Events of Default. In case one or more of the following Events
-----------------
of Default shall have occurred and be continuing:
(a) default in the payment of any installment of interest upon any of the
Notes as and when the same shall
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become due and payable, and continuance of such default for a period of 30 days;
or
(b) default in the payment of the principal of or premium, if any, on any of
the Notes as and when the same shall become due and payable either at maturity
or in connection with any prepayment, by declaration or otherwise; or
(c) failure on the part of the Company duly to observe or perform any other
of the covenants or agreements on the part of the Company in the Notes or in
this Indenture continued for a period of 60 days after the date on which written
notice of such failure, requiring the Company to remedy the same, shall have
been given to the Company by the Trustee, or to the Company and the Trustee by
the holders of at least 25 percent in aggregate principal amount of the Notes at
the time outstanding; or
(d) (i) default by the Company in the payment when due at maturity of any
indebtedness for borrowed money (other than indebtedness which is non-recourse
to the Company) in excess of $25,000,000 issued under an indenture or instrument
evidencing such indebtedness, whether such indebtedness is outstanding at the
date of this Indenture or is hereafter outstanding, and continuation of such
default for the greater of any period of grace applicable thereto or 10 days
from the date of such default or (ii) an event of default, as defined in any
indenture or instrument evidencing or under which the Company has at the date of
this Indenture or shall hereafter have outstanding at least $25,000,000
aggregate principal amount of indebtedness for borrowed money, shall happen and
be continuing and such indebtedness shall have been accelerated so that the same
shall be or become due and payable prior to the date on which the same would
otherwise have become due and payable, and such acceleration shall not be
rescinded or annulled, or such indebtedness shall not be discharged, within 10
days after notice thereof shall have been given to the Company by the Trustee
(if such event be known to it), or to the Company and the Trustee by the holders
of at least 25 percent in aggregate principal amount of the Notes at the time
outstanding; provided that if such event of default or event of default under
--------
such indenture or instrument shall be remedied or cured by the Company or waived
by the holders of such indebtedness, then the Event of Default hereunder by
reason thereof shall be deemed likewise to have been thereupon remedied, cured
or waived without further action upon the part of either the Trustee or any of
the Noteholders, and provided further, however, that, subject to the provisions
-------- ------- -------
of Section 7.01, the Trustee shall not be charged with knowledge of any such
default or event of default unless written notice thereof
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<PAGE>
shall have been given to the Trustee by the Company, by the holder or an agent
of the holder of any such indebtedness, by the trustee then acting under any
indenture or other instrument under which such default or event of default shall
have occurred, or by the holders of not less than 25 percent in the aggregate
principal amount of the Notes at the time outstanding; or
(e) the Company shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect
or seeking the appointment of a trustee, receiver, liquidator, custodian, or
other similar official of it or any substantial part of its property, or shall
consent to any such relief or to the appointment of or taking possession by any
such official in an involuntary case or other proceeding commenced against it,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due; or
(f) an involuntary case or other proceeding shall be commenced against the
Company seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, and such involuntary case or other proceeding shall remain
undismissed and unstayed for a period of 60 consecutive days;
then and in each and every such case, unless the principal of all of the Notes
shall have already become due and payable, either the Trustee or the holders of
not less than 25 percent in aggregate principal amount of the Notes then
outstanding hereunder, by notice (an "Acceleration Notice") in writing to the
Company (and to the Trustee if given by Noteholders), may declare the principal
of all the Notes and the interest accrued thereon and premium, if any, to be due
and payable immediately, and (unless prior to the date of such Acceleration
Notice all Events of Default in respect of the Notes shall have been cured or
waived) upon any such declaration the same shall become and shall be immediately
due and payable, anything in this Indenture or in the Notes contained to the
contrary notwithstanding, provided that except in the case (A) of an Event of
--------
Default under clause (e) or (f) above or (B) that no more than 10 days and no
less than five days prior to the giving of an Acceleration Notice the Trustee
shall have given to the Company (or, in the case of an acceleration by the
Noteholders, the Noteholders shall have given to the Trustee and the Company) a
notice (a "Pre-Acceleration Notice") in writing that in no more than 10 days the
Trustee (or
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<PAGE>
the Noteholders) intends to give an Acceleration Notice, an Acceleration Notice
shall not become effective until five days after receipt of such notice by the
Company (and the Trustee if given by Noteholders). The provision above
regarding acceleration, however, is subject to the condition that if, at any
time after the principal of the Notes shall have been so declared due and
payable, and before any judgment or decree for the payment of the monies due
shall have been obtained or entered as hereinafter provided, the Company shall
pay or shall deposit with the Trustee a sum sufficient to pay all matured
installments of interest upon all the Notes and the principal of and premium, if
any, on any and all Notes which shall have become due otherwise than by
acceleration (with interest on overdue installments of interest (to the extent
that payment of such interest is enforceable under applicable law) and on such
principal and premium, if any, at the rate borne by the Notes, to the date of
such payment or deposit) and the expenses of the Trustee, and any and all
defaults under this Indenture, other than the nonpayment of principal of and
accrued interest on Notes which shall have become due by acceleration, shall
have been remedied--then and in every such case the holders of a majority in
aggregate principal amount of the Notes then outstanding, by written notice to
the Company and to the Trustee, may waive all defaults and rescind and annul
such declaration and its consequences; but no such waiver or rescission and
annulment shall extend to or shall affect any subsequent default, or shall
impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under this
Indenture and such proceedings shall have been discontinued or abandoned because
of such rescission or annulment or for any other reason or shall have been
determined adversely to the Trustee, then and in every such case the Company,
the holders of Notes, and the Trustee shall be restored respectively to their
several positions and rights hereunder, and all rights, remedies and powers of
the Company, the holders of Notes and the Trustee shall continue as though no
such proceeding had been taken.
The Trustee shall give the Noteholders notice of any default hereunder as and
to the extent provided by the Trust Indenture Act of 1939. For the purpose of
this paragraph, the term "default" means any event which is, or after notice or
lapse of time or both would become, an Event of Default.
SECTION 6.02. Payment of Notes on Default; Suit Therefor. The Company
------------------------------------------
covenants that (a) in case default shall be made in the payment of any
installment of interest upon any of the Notes as and when the same shall become
due and payable, and such default shall have continued for a period of 30 days,
or (b) in case default shall be made in the payment of the principal of
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and premium, if any, on any of the Notes as and when the same shall have become
due and payable, whether at maturity of the Notes or in connection with any
prepayment, by declaration or otherwise--then, upon demand of the Trustee, the
Company will pay to the Trustee, for the benefit of the holders of the Notes,
the whole amount that then shall have become due and payable on all such Notes
for principal and premium, if any, or interest, or both, as the case may be,
with interest upon the overdue principal and premium, if any, and (to the extent
that payment of such interest is enforceable under applicable law) upon the
overdue installments of interest at the rate borne by the Notes; and, in
addition thereto, such further amount as shall be sufficient to cover the costs
and expenses of collection, including a reasonable compensation to the Trustee,
its agents, attorneys and counsel, and any expenses or liabilities incurred by
the Trustee hereunder other than through its negligence or bad faith.
In case the Company shall fail forthwith to pay such amounts upon such demand,
the Trustee, in its own name and as trustee of an express trust, shall be
entitled and empowered to institute any actions or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or any other obligor on the Notes
and collect in the manner provided by law out of the property of the Company or
any other obligor on the Notes wherever situated the monies adjudged or decreed
to be payable.
In case there shall be pending proceedings for the bankruptcy or for the
reorganization of the Company or any other obligor on the Notes under Title 11
of the United States Code, or any other applicable law, or in case a receiver or
trustee shall have been appointed for the property of the Company or such other
obligor, or in the case of any other similar judicial proceedings relative to
the Company or other obligor upon the Notes, or to the creditors or property of
the Company or such other obligor, the Trustee, irrespective of whether the
principal of the Notes shall then be due and payable as therein expressed or by
declaration or otherwise and irrespective of whether the Trustee shall have made
any demand pursuant to the provisions of this Section 6.02, shall be entitled
and empowered, by intervention in such proceedings or otherwise, to file and
prove a claim or claims for the whole amount of principal, premium, if any, and
interest owing and unpaid in respect of the Notes, and, in case of any judicial
proceedings, to file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee and of the
Noteholders allowed in such judicial proceedings relative to the Company or any
other obligor on the Notes, its or their creditors, or its or
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their property, and to collect and receive any monies or other property payable
or deliverable on any such claims, and to distribute the same after the
deduction of its charges and expenses; and any receiver, assignee or trustee in
bankruptcy or reorganization is hereby authorized by each of the Noteholders to
make such payments to the Trustee, and, in the event that the Trustee shall
consent to the making of such payments directly to the Noteholders, to pay to
the Trustee any amount due it for compensation and expenses, including counsel
fees and expenses incurred by it up to the date of such distribution. To the
extent that such payment of reasonable compensation, expenses and counsel fees
and expenses out of the estate in any such proceedings shall be denied for any
reason, payment of the same shall be secured by a lien on, and shall be paid out
of, any and all distributions, dividends, monies, securities and other property
which the holders of the Notes may be entitled to receive in such proceedings,
whether in liquidation or under any plan of reorganization or arrangement or
otherwise.
Nothing herein contained shall be deemed to authorize the Trustee to authorize
or consent to or adopt on behalf of any Noteholder any plan of reorganization or
arrangement, affecting the Notes or the rights of any Noteholder, or to
authorize the Trustee to vote in respect of the claim of any Noteholder in any
such proceeding.
All rights of action and of asserting claims under this Indenture, or under
any of the Notes, may be enforced by the Trustee without the possession of any
of the Notes, or the production thereof at any trial or other proceeding
relative thereto, and any such suit or proceeding instituted by the Trustee
shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall be for the ratable benefit of the holders of the
Notes.
SECTION 6.03. Application of Monies Collected by Trustee. Any monies
------------------------------------------
collected by the Trustee shall be applied in the order following, at the date or
dates fixed by the Trustee for the distribution of such monies, upon
presentation of the several Notes, and stamping thereon the payment, if only
partially paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection and reasonable
compensation to the Trustee, its agents, attorneys and counsel, and of all other
expenses and liabilities incurred, and all advances made, by the Trustee except
as a result of its negligence or bad faith;
Second: In case the principal of the outstanding Notes shall not have become
due and be unpaid, to the payment of interest on the Notes in the order of the
maturity of the
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installments of such interest, with interest (to the extent that such interest
has been collected by the Trustee) upon the overdue installments of interest at
the rate borne by the Notes, such payments to be made ratably to the persons
entitled thereto;
Third: In case the principal of the outstanding Notes shall have become due,
by declaration or otherwise, to the payment of the whole amount then owing and
unpaid upon the Notes for principal and premium, if any, and interest, with
interest on the overdue principal and premium, if any, and (to the extent that
such interest has been collected by the Trustee) upon overdue installments of
interest at the rate borne by the Notes; and in case such monies shall be
insufficient to pay in full the whole amounts so due and unpaid upon the Notes,
then to the payment of such principal and premium, if any, and interest without
preference or priority of principal and premium, if any, over interest, or of
interest over principal and premium, if any, or of any installment of interest
over any other installment of interest, or of any Note over any other Note,
ratably to the aggregate of such principal and premium, if any, and accrued and
unpaid interest;
Fourth: To the payment of the remainder, if any, to the Company.
SECTION 6.04. Proceedings by Noteholder. No holder of any Note shall have
-------------------------
any right by virtue of or by availing of any provision of this Indenture to
institute any suit, action or proceeding in equity or at law upon or under or
with respect to this Indenture or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless such holder previously shall have
given to the Trustee written notice of default and of the continuance thereof,
as hereinbefore provided, and unless also the holders of not less than 25
percent in aggregate principal amount of the Notes then outstanding shall have
made written request upon the Trustee to institute such action, suit or
proceeding in its own name as Trustee hereunder and shall have offered to the
Trustee such reasonable indemnity as it may require against the costs, expenses
and liabilities to be incurred therein or thereby, and the Trustee for 60 days
after its receipt of such notice, request and offer of indemnity, shall have
neglected or refused to institute any such action, suit or proceeding, it being
understood and intended, and being expressly covenanted by the taker and holder
of every Note with every other taker and holder and the Trustee, that no one or
more holders of Notes shall have any right in any manner whatever by virtue of
or by availing of any provision of this Indenture to affect, disturb or
prejudice the rights of any other holder of such Notes, or to obtain or seek to
obtain priority over or preference to any other
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such holder, or to enforce any right under this Indenture, except in the manner
herein provided and for the equal, ratable and common benefit of all holders of
Notes (except as otherwise provided herein). For the protection and enforcement
of this Section 6.04, each and every Noteholder and the Trustee shall be
entitled to such relief as can be given either at law or in equity.
Notwithstanding any other provisions of this Indenture (including the first
paragraph of this Section 6.04), however, the right of any holder of any Note to
receive payment of the principal of and premium, if any, and interest on such
Note, on or after the respective due dates expressed in such Note, or to
institute suit for the enforcement of any such payment on or after such
respective dates against the Company shall not be impaired or affected without
the consent of such holder.
SECTION 6.05. Proceedings by Trustee. In case of an Event of Default
----------------------
hereunder the Trustee may in its discretion proceed to protect and enforce the
rights vested in it by this Indenture by such appropriate judicial proceedings
as the Trustee shall deem most effectual to protect and enforce any of such
rights, either by suit in equity or by action at law or by proceeding in
bankruptcy or otherwise, whether for the specific enforcement of any covenant or
agreement contained in this Indenture or in aid of the exercise of any power
granted in this Indenture, or to enforce any other legal or equitable right
vested in the Trustee by this Indenture or by law.
SECTION 6.06. Remedies Cumulative and Continuing. All powers and remedies
----------------------------------
given by this Article Six to the Trustee or to the Noteholders shall, to the
extent permitted by law, be deemed cumulative and not exclusive of any thereof
or of any other powers and remedies available to the Trustee or the holders of
the Notes, by judicial proceedings or otherwise, to enforce the performance or
observance of the covenants and agreements contained in this Indenture, and no
delay or omission of the Trustee or of any holder of any of the Notes to
exercise any right or power accruing upon any default occurring and continuing
as aforesaid shall impair any such right or power, or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 6.04, every power and remedy given by this Article Six or
by law to the Trustee or to the Noteholders may be exercised from time to time,
and as often as shall be deemed expedient, by the Trustee or by the Noteholders.
SECTION 6.07. Direction of Proceedings and Waiver of Defaults by Majority
-----------------------------------------------------------
Noteholders. The holders of a majority in aggregate principal amount of the
- -----------
Notes at the time outstanding determined in accordance with Section 8.04 shall
have the right
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to direct the time, method, and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee; provided, however, that (subject to the provisions of Section 7.01)
-------- -------
the Trustee shall have the right to decline to follow any such direction if the
Trustee shall be advised by counsel that the action or proceeding so directed
may not lawfully be taken or if the Trustee in good faith by its board of
directors or trustees, executive committee, or a trust committee of directors or
trustees and/or Responsible Officers shall determine that the action or
proceedings so directed could involve the Trustee in personal liability. Prior
to any declaration accelerating the maturity of the Notes, the holders of a
majority in aggregate principal amount of the Notes at the time outstanding may
on behalf of the holders of all of the Notes waive any past default or Event of
Default hereunder and its consequences except a default in the payment of
interest, or premium, if any, on, or the principal of, the Notes. Upon any such
waiver the Company, the Trustee and the holders of the Notes shall be restored
to their former positions and rights hereunder, respectively; but no such waiver
shall extend to any subsequent or other default or Event of Default or impair
any right consequent thereon. Whenever any default or Event of Default hereunder
shall have been waived as permitted by this Section 6.07, said default or Event
of Default shall for all purposes of the Notes and this Indenture be deemed to
have been cured and to be not continuing.
ARTICLE SEVEN
CONCERNING THE TRUSTEE
SECTION 7.01. Duties and Responsibilities of Trustee; During Default; Prior
-------------------------------------------------------------
to Default. The Trustee, prior to the occurrence of an Event of Default and
- ----------
after the curing or waiving of all Events of Default which may have occurred,
undertakes to perform such duties and only such duties as are specifically set
forth in this Indenture. In case an Event of Default has occurred (which has
not been cured or waived) the Trustee shall exercise such of the rights and
powers vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
No provision of this Indenture shall be construed to relieve the Trustee from
liability for its own negligent action, its own negligent failure to act or its
own willful misconduct, except that:
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(a) prior to the occurrence of an Event of Default and after the curing or
waiving of all Events of Default which may have occurred:
(1) the duties and obligations of the Trustee shall be determined solely by
the express provisions of this Indenture, and the Trustee shall not be liable
except for the performance of such duties and obligations as are specifically
set forth in this Indenture and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(2) in the absence of bad faith on the part of the Trustee, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of the
opinions expressed therein, upon any statements, certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture;
but, in the case of any such statements, certificates or opinions which by any
provisions hereof are specifically required to be furnished to the Trustee, the
Trustee shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this Indenture;
(b) the Trustee shall not be liable for any error of judgment made in good
faith by a Responsible Officer or Officers of the Trustee, unless it shall be
proved that the Trustee was negligent in ascertaining the pertinent facts; and
(c) the Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of the
holders of not less than a majority in principal amount of the Notes at the time
outstanding determined as provided in Section 8.04 relating to the time, method
and place of conducting any proceeding for any remedy available to the Trustee,
or exercising any trust or power conferred upon the Trustee, under this
Indenture.
None of the provisions contained in this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur personal financial liability
in the performance of any of its duties or in the exercise of any of its rights
or powers, if there is reasonable ground for believing that the repayment of
such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
The Trustee shall not be deemed to have notice of any Event of Default
described in Section 6.01(c), 6.01(d), 6.01(e) or 6.01(f) or any event which,
with the passage of time, might
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become an Event of Default described in Section 6.01(c), 6.01(d), 6.01(e) or
6.01(f) unless the Trustee has received written notice thereof, addressed to a
Responsible Officer of the Trustee.
This Section 7.01 is in furtherance of and subject to Sections 315 and 316 of
the Trust Indenture Act of 1939.
SECTION 7.02. Certain Rights of the Trustee. In furtherance of and subject
------------------------------
to the Trust Indenture Act of 1939, and subject to Section 7.01:
(a) the Trustee may rely and shall be protected in acting upon any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, bond, debenture or other paper or document believed by
it to be genuine and to have been signed or presented by the proper party or
parties;
(b) any request, direction, order or demand of the Company mentioned herein
shall be sufficiently evidenced by an Officers' Certificate (unless other
evidence in respect thereof be herein specifically prescribed); and any
resolution of the Board of Directors may be evidenced to the Trustee by a copy
thereof certified by the Secretary or an Assistant Secretary of the Company;
(c) the Trustee may consult with counsel of its selection and any advice or
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken or omitted by it hereunder in good faith and in
accordance with such advice or Opinion of Counsel;
(d) the Trustee shall be under no obligation to exercise any of the rights or
powers vested in it by this Indenture at the request, order or direction of any
of the Noteholders, pursuant to the provisions of this Indenture, unless such
Noteholders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be incurred therein or
thereby;
(e) the Trustee shall not be liable for any action taken or omitted by it in
good faith and believed by it to be authorized or within the discretion or
rights or powers conferred upon it by this Indenture;
(f) subject to the second sentence of Section 7.01, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond, debenture, note or other paper or
document unless requested in writing to do so by the
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holders of not less than a majority in principal amount of the Notes then
outstanding, but the Trustee, in its discretion, may make such further inquiry
or investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney, during reasonable business hours; provided,
--------
however, that if the payment within a reasonable time to the Trustee of the
- -------
costs, expenses or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to the
Trustee by the security afforded to it by the terms of this Indenture, the
Trustee may require reasonable indemnity against such expense or liability as a
condition to so proceeding; and
(g) the Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents or attorneys and
the Trustee shall not be responsible for any misconduct or negligence on the
part of any agent or attorney appointed by it with due care hereunder.
SECTION 7.03. No Responsibility for Recitals, etc. The recitals contained
------------------------------------
herein and in the Notes (except in the Trustee's certificate of authentication)
shall be taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Notes. The Trustee shall not be responsible for the statements relating to the
Notes in any registration statement for the Notes filed with the SEC. The
Trustee shall not be accountable for the use or application by the Company of
any Notes or the proceeds of any Notes authenticated and delivered by the
Trustee in conformity with the provisions of this Indenture.
SECTION 7.04. Trustee, Paying Agents or Registrar May Own Notes. The Trustee
---------------------------------------------------
or any paying agent or Note registrar or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee of Notes with
the same rights it would have if it were not Trustee, paying agent, Note
registrar or such other agent.
SECTION 7.05. Monies to Be Held in Trust. Subject to the provisions of
--------------------------
Section 12.04, all monies received by the Trustee shall, until used or applied
as herein provided, be held in trust for the purposes for which they were
received. Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money
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received by it hereunder except as otherwise agreed in writing with the Company.
SECTION 7.06. Compensation and Expenses of Trustee. The Company covenants
------------------------------------
and agrees to pay to the Trustee from time to time, and the Trustee shall be
entitled to, such compensation as the Company and the Trustee shall from time to
time agree upon in writing (which shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust), and the Company
will pay or reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except to the extent any such expense, disbursement or
advance may arise from its negligence or bad faith. The Company also covenants
to indemnify and defend each of the Trustee and any predecessor Trustee for, and
to hold it harmless against, any and all loss, damage, claims, liability or
expense, including taxes (other than taxes based on the income, profits, capital
or net worth of the Trustee or any franchise or general doing business tax of
the Trustee), arising out of or in connection with the acceptance or
administration of this trust and the performance of its duties hereunder,
including the costs and expenses of defending itself against any claim of
liability in the premises, except to the extent any such loss, liability or
expense may arise from the Trustee's negligence or bad faith. The obligations of
the Company under this Section 7.06 to compensate or indemnify the Trustee and
to pay or reimburse the Trustee for expenses, disbursements and advances shall
be secured by a lien prior to that of the Notes upon all property and funds held
or collected by the Trustee as such, except funds held in trust for the benefit
of the holders of particular Notes. The obligation of the Company under this
Section 7.06 shall survive the satisfaction and discharge of this Indenture.
Any compensation or expense incurred by the Trustee after a default specified in
Section 6.01(e) or 6.01(f) is intended to constitute an expense of
administration under any then applicable bankruptcy or insolvency law.
"Trustee" for purposes of this Section 7.06 shall include any predecessor
Trustee but the negligence or bad faith of any Trustee shall not affect the
rights of any other Trustee under this Section 7.06.
SECTION 7.07. Officers' Certificate as Evidence. Except as otherwise
---------------------------------
provided in Section 7.01, whenever in the administration of the provisions of
this Indenture the Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or omitting any action hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of negligence or bad faith on the part of the
Trustee, be deemed to be conclusively
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proved and established by an Officers' Certificate delivered to the Trustee, and
such Certificate, in the absence of negligence or bad faith on the part of the
Trustee, shall be full warrant to the Trustee for any action taken or omitted by
it under the provisions of this Indenture upon the faith thereof.
SECTION 7.08. Eligibility of Trustee. The Trustee hereunder shall at all
----------------------
times be a corporation having a combined capital and surplus of at least
$10,000,000 and which is eligible in accordance with the provisions of Section
310(a) of the Trust Indenture Act of 1939. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of a Federal, State, or District of Columbia supervising or examining authority,
then for the purposes of this Section 7.08, the combined capital and surplus of
such corporation shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published.
SECTION 7.09. Resignation or Removal of Trustee. (a) The Trustee may at
---------------------------------
any time resign by giving written notice of resignation to the Company and by
mailing, at the request and expense of the Company, notice thereof to the
holders of Notes at their addresses as they shall appear on the registry books
of the Company. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee by written instrument, in duplicate,
executed by order of the Board of Directors, one copy of which instrument shall
be delivered to the resigning Trustee and one copy to the successor trustee. If
no successor trustee shall have been so appointed and have accepted appointment
within 60 days after the mailing of such notice of resignation to the
Noteholders, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor trustee, or any Noteholder who
has been a bona fide holder of a Note or Notes for at least six months may,
subject to the provisions of Section 315(e) of the Trust Indenture Act of 1939,
on behalf of himself and all others similarly situated, petition any such court
for the appointment of a successor trustee. Such court may thereupon, after
such notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall occur:
(1) the Trustee shall fail to comply with the provisions of Section 310(b) of
the Trust Indenture Act of 1939, after written request therefor by the Company
or by any Noteholder who has been a bona fide holder of a Note or Notes for at
least six months, or
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(2) the Trustee shall cease to be eligible in accordance with the provisions
of Section 7.08 and shall fail to resign after written request therefor by the
Company or by any such Noteholder, or
(3) the Trustee shall become incapable of acting as the Trustee under this
Indenture, or shall be adjudged a bankrupt or insolvent, or a receiver of the
Trustee or of its property shall be appointed, or any public officer shall take
charge or control of the Trustee or of its property or affairs for the purpose
of rehabilitation, conservation or liquidation,
then, in any such case the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors, one copy of which instrument shall be delivered to the
Trustee so removed and one copy to the successor trustee, or, subject to Section
315(e) of the Trust Indenture Act of 1939, any Noteholder who has been a bona
fide holder of a Note or Notes for at least six months may, on behalf of himself
or herself and all others similarly situated, petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the Notes at
the time outstanding may at any time remove the Trustee and nominate a successor
trustee which shall be deemed appointed as successor trustee unless within 10
days after such nomination the Company objects thereto, in which case the
Trustee so removed or any Noteholder, upon the terms and conditions and
otherwise as in subdivision (a) of this Section 7.09 provided, may petition any
court of competent jurisdiction for an appointment of a successor trustee.
(d) Any resignation or removal of the Trustee and appointment of a successor
trustee to any of the provisions of this Section 7.09 shall become effective
upon acceptance of appointment by the successor trustee as provided in Section
7.10.
SECTION 7.10. Acceptance by Successor Trustee. Any successor trustee
-------------------------------
appointed as provided in Section 7.09 shall execute, acknowledge and deliver to
the Company and to its predecessor trustee an instrument accepting such
appointment hereunder, and thereupon the resignation or removal of the
predecessor trustee shall become effective and such successor trustee, without
any further act, deed or conveyance, shall become vested with all the rights,
powers, duties and obligations of its predecessor hereunder, with like effect as
if originally named as trustee herein; but, nevertheless, on the written
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request of the Company or of the successor trustee, the trustee ceasing to act
shall, upon payment of any amounts then due it pursuant to the provisions of
Section 7.06, execute and deliver an instrument transferring to such successor
trustee all the rights and powers of the trustee so ceasing to act. Upon
request of any such successor trustee, the Company shall execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor trustee all such rights and powers. Any trustee ceasing to act
shall, nevertheless, retain a lien upon all property or funds held or collected
by such trustee to secure any amounts then due it pursuant to the provisions of
Section 7.06.
Upon acceptance of appointment by a successor trustee as provided in this
Section 7.10, the Company shall mail notice of the succession of such trustee
hereunder to the holders of Notes at their addresses as they shall appear on the
registry books of the Company. If the Company fails to mail such notice within
10 days after acceptance of appointment by the successor trustee, the successor
trustee shall cause such notice to be mailed at the expense of the Company.
No successor trustee shall accept appointment as provided in this Section 7.10
unless at the time of such acceptance such successor trustee shall be qualified
under the provisions of Section 7.12 and eligible under the provisions of
Section 7.08.
SECTION 7.11. Succession by Merger, etc. Any corporation into which the
--------------------------
Trustee may be merged or converted or with which it may be consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Trustee shall be a party, or any corporation succeeding to all or substantially
all of the corporate trust business of the Trustee, shall be the successor to
the Trustee hereunder, provided such corporation shall be eligible under the
provisions of Section 7.08 without the execution or filing of any paper or any
further act on the part of any of the parties hereto, anything to the contrary
notwithstanding.
In case at the time such successor to the Trustee shall succeed to the trusts
created by this Indenture any of the Notes shall have been authenticated but not
delivered, any such successor to the Trustee may adopt the certificate of
authentication of any predecessor trustee, and deliver such Notes so
authenticated; and, in case at that time any of the Notes shall not have been
authenticated, any successor to the Trustee may authenticate such Notes either
in the name of any predecessor hereunder or in the name of the successor
trustee; and in all such cases such certificates shall have the full force which
it is anywhere in the Notes or in this Indenture provided that the certificate
of the Trustee shall have; provided, however, that
-------- -------
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the right to adopt the certificate of authentication of any predecessor trustee
or to authenticate Notes in the name of any predecessor trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
SECTION 7.12. Disqualification; Conflicting Interests. If the Trustee has or
---------------------------------------
shall acquire a conflicting interest within the meaning of the Trust Indenture
Act of 1939, the Trustee shall either eliminate such interest or resign, to the
extent and in the manner provided by, and subject to the provisions of, the
Trust Indenture Act of 1939 and this Indenture.
ARTICLE EIGHT
CONCERNING THE NOTEHOLDERS
SECTION 8.01. Action by Noteholders. Whenever in this Indenture it is
---------------------
provided that the holders of a specified percentage in aggregate principal
amount of the Notes may take any action (including the making of any demand or
request, the giving of any notice, consent or waiver or the taking of any other
action), the fact that at the time of taking any such action the holders of such
specified percentage have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor executed by Noteholders in person
or by agent or proxy appointed in writing, or (b) by the record of the holders
of Notes voting in favor thereof at any meeting of Noteholders duly called and
held in accordance with the provisions of Article Nine, or (c) by a combination
of such instrument or instruments and any such record of such a meeting of
Noteholders.
SECTION 8.02. Proof of Execution by Noteholders; Record Date. Subject to the
----------------------------------------------
provisions of Sections 7.01, 7.02 and 9.05, proof of the execution of any
instrument by a Noteholder or his or her agent or proxy shall be sufficient if
made in accordance with such reasonable rules and regulations as may be
prescribed by the Trustee or in such manner as shall be satisfactory to the
Trustee. The ownership of Notes shall be proved by the registry of such Notes
or by a certificate of the Note registrar. The Company may set a record date
for purposes of determining the identity of holders of Notes entitled to vote or
consent to any action referred to in Section 8.01 or Section 9.01, which record
date may be set at any time or from time to time by notice to the Trustee, for
any date or dates (in the case of any adjournment or resolicitation) not more
than 60 days nor less than five days prior to the proposed date of such vote or
consent, and thereafter, notwithstanding any other provisions hereof, only
holders of Notes of record on such record date shall be entitled
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to so vote or give such consent or to withdraw such vote or consent.
The record of any Noteholders' meeting shall be proved in the manner provided
in Section 9.06.
SECTION 8.03. Who Are Deemed Absolute Owners. The Company, the Trustee, any
------------------------------
paying agent, and any Note registrar may deem the person in whose name such Note
shall be registered upon the books of the Company to be, and may treat him or
her as, the absolute owner of such Note (whether or not such Note shall be
overdue and notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving payment of or on account of the principal of and
premium, if any, and interest on such Note; and neither the Company nor the
Trustee nor any paying agent nor any Note registrar shall be affected by any
notice to the contrary. All such payments so made to any holder for the time
being, or upon his or her order shall be valid, and, to the extent of the sum or
sums so paid, effectual to satisfy and discharge the liability for monies
payable upon any such Note.
SECTION 8.04. Company-Owned Notes Disregarded. In determining whether the
-------------------------------
holders of the requisite aggregate principal amount of Notes have concurred in
any direction, consent, waiver or other action under this Indenture, Notes which
are owned by the Company or any other obligor on the Notes or by any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company or any other obligor on the Notes shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination; provided that for the purposes of determining whether the Trustee
--------
shall be protected in relying on any such direction, consent, waiver or other
action only Notes which the Trustee knows are so owned shall be so disregarded.
Notes so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section 8.04 if the pledgee shall establish
to the satisfaction of the Trustee the pledgee's right to vote such Notes and
that the pledgee is not the Company or any other obligor or a person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any such other obligor. In the case of a dispute as
to such right, any decision by the Trustee taken upon the advice of counsel
shall be full protection to the Trustee.
SECTION 8.05. Revocation of Consents; Future Holders Bound. At any time
--------------------------------------------
prior to (but not after) the evidencing to the Trustee, as provided in Section
8.01, of the taking of any action by the holders of the percentage in aggregate
principal amount of the Notes specified in this Indenture in connection with
such action, any holder of a Note which is shown by the evidence to be included
in the Notes the holders of which have
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consented to such action may, by filing written notice with the Trustee at the
Principal Office of the Trustee and upon proof of holding as provided in Section
8.02, revoke such action so far as concerns such Note. Except as aforesaid, any
such action taken by the holder of any Note shall be conclusive and binding upon
such holder and upon all future holders and owners of such Note, irrespective of
whether any notation in regard thereto is made upon such Note or any Note issued
in exchange or substitution therefor.
ARTICLE NINE
NOTEHOLDERS' MEETINGS
SECTION 9.01. Purposes of Meetings. A meeting of Noteholders may be called
--------------------
at any time and from time to time pursuant to the provisions of this Article
Nine for any of the following purposes:
(1) to give any notice to the Company or to the Trustee or to give any
directions to the Trustee, or to consent to the waiving of any default hereunder
and its consequences, or to take any other action authorized to be taken by
Noteholders pursuant to any of the provisions of Article Six;
(2) to remove the Trustee and nominate a successor trustee pursuant to the
provisions of Article Seven;
(3) to consent to the execution of an indenture or indentures supplemental
hereto pursuant to the provisions of Section 10.02; or
(4) to take any other action authorized to be taken by or on behalf of the
holders of any specified aggregate principal amount of the Notes under any other
provision of this Indenture or under applicable law.
SECTION 9.02. Call of Meetings by Trustee. The Trustee may at any time call
---------------------------
a meeting of Noteholders to take any action specified in Section 9.01, to be
held at such time and at such place in the Borough of Manhattan, The City of New
York, New York, as the Trustee shall determine. Notice of every meeting of the
Noteholders, setting forth the time and the place of such meeting and in general
terms the action proposed to be taken at such meeting, shall be mailed to
holders of Notes at their addresses as they shall appear on the registry books
of the Company. Such notice shall be mailed not less than 20 nor more than 90
days prior to the date fixed for the meeting.
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Any meeting of Noteholders shall be valid without notice if the holders of all
Notes then outstanding are present in person or by proxy or if notice is waived
before or after the meeting by the holders of all Notes outstanding, and if the
Company and the Trustee are either present by duly authorized representatives or
have, before or after the meeting, waived notice.
SECTION 9.03. Call of Meetings by Company or Noteholders. In case at any
------------------------------------------
time the Company, pursuant to a resolution of its Board of Directors, or the
holders of at least 10 percent in aggregate principal amount of the Notes then
outstanding, shall have requested the Trustee to call a meeting of Noteholders,
by written request setting forth in reasonable detail the action proposed to be
taken at the meeting, and the Trustee shall not have mailed the notice of such
meeting within 20 days after receipt of such request, then the Company or such
Noteholders may determine the time and the place in said Borough of Manhattan
for such meeting and may call such meeting to take any action authorized in
Section 9.01, by mailing notice thereof as provided in Section 9.02.
SECTION 9.04. Qualifications for Voting. To be entitled to vote at any
-------------------------
meeting of Noteholders a person shall (a) be a holder of one or more Notes as of
the record date in respect of such vote set pursuant to Section 8.02 or (b) be a
person appointed by an instrument in writing as proxy by a holder of one or more
Notes. The only persons who shall be entitled to be present or to speak at any
meeting of Noteholders shall be the persons entitled to vote at such meeting and
their counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
SECTION 9.05. Regulations. Notwithstanding any other provision of this
-----------
Indenture, the Trustee may make such reasonable regulations as it may deem
advisable for any meeting of Noteholders, in regard to proof of the holding of
Notes and of the appointment of proxies, and in regard to the appointment and
duties of inspectors of votes, the submission and examination of proxies,
certificates and other evidence of the right to vote, and such other matters
concerning the conduct of the meeting as it shall think fit.
The Trustee shall, by an instrument in writing, appoint a temporary chairman
of the meeting, unless the meeting shall have been called by the Company or by
Noteholders as provided in Section 9.03, in which case the Company or the
Noteholders calling the meeting, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of
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the holders of a majority in principal amount of the Notes represented at the
meeting and entitled to vote at the meeting.
Subject to the provisions of Section 8.04, at any meeting each Noteholder or
proxy shall be entitled to one vote for each $50,000 principal amount of Notes
held or represented by him or her; provided, however, that no vote shall be cast
-------- -------
or counted at any meeting in respect of any Note challenged as not outstanding
and ruled by the chairman of the meeting not to be outstanding. The chairman of
the meeting shall have no right to vote other than by virtue of Notes held by
him or her or instruments in writing as aforesaid duly designating him or her as
the person to vote on behalf of other Noteholders. Any meeting of Noteholders
duly called pursuant to the provisions of Section 9.02 or 9.03 may be adjourned
from time to time by a majority of the votes present, whether or not
constituting a quorum, and the meeting may be held as so adjourned without
further notice.
SECTION 9.06. Voting. The vote upon any resolution submitted to any meeting
------
of Noteholders shall be by written ballot on which shall be subscribed the
signatures of the holders of Notes or of their representatives by proxy and the
principal amount of the Notes held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Noteholders shall be prepared by the secretary of
the meeting and there shall be attached to said record the original reports of
the inspectors of votes on any vote by ballot taken thereat and affidavits by
one or more persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was mailed as provided in
Section 9.02. The record shall show the principal amount of the Notes voting in
favor of or against any resolution. The record shall be signed and verified by
the affidavits of the permanent chairman and secretary of the meeting and one of
the duplicates shall be delivered to the Company and the other to the Trustee to
be preserved by the Trustee, the latter to have attached thereto the ballots
voted at the meeting.
Any record so signed and verified shall be conclusive evidence of the matters
therein stated.
SECTION 9.07. No Delay of Rights by Meeting. Nothing in this Article Nine
-----------------------------
contained shall be deemed or construed to authorize or permit, by reason of any
call of a meeting of Noteholders or any rights expressly or impliedly conferred
hereunder to make such call, any hindrance or delay in the exercise of any right
or rights conferred upon or reserved to the
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Trustee or to the Noteholders under any of the provisions of this Indenture or
of the Notes.
ARTICLE TEN
SUPPLEMENTAL INDENTURES
SECTION 10.01. Supplemental Indentures without Consent of Noteholders. The
------------------------------------------------------
Company, when authorized by the resolutions of the Board of Directors, and the
Trustee may from time to time and at any time enter into an indenture or
indentures supplemental hereto for one or more of the following purposes:
(a) to evidence the succession of another corporation to the Company, or
successive successions, and the assumption by the successor corporation of the
covenants, agreements and obligations of the Company pursuant to Article Eleven
hereof;
(b) to add to the covenants of the Company such further covenants,
restrictions or conditions as the Board of Directors and the Trustee shall
consider to be for the benefit of the holders of Notes, and to make the
occurrence, or the occurrence and continuance, of a default in any such
additional covenants, restrictions or conditions a default or an Event of
Default permitting the enforcement of all or any of the several remedies
provided in this Indenture as herein set forth; provided, however, that in
-------- -------
respect of any such additional covenant, restriction or condition such
supplemental indenture may provide for a particular period of grace after
default (which period may be shorter or longer than that allowed in the case of
other defaults) or may provide for an immediate enforcement upon such default or
may limit the remedies available to the Trustee upon such default;
(c) to provide for the issuance under this Indenture of Notes in coupon form
(including Notes registrable as to principal only) and to provide for
exchangeability of such Notes with the Notes issued hereunder in fully
registered form and to make all appropriate changes for such purpose; or
(d) to cure any ambiguity or to correct or supplement any provision contained
herein or in any supplemental indenture which may be inconsistent with any other
provision contained herein or in any supplemental indenture, or to make such
other provisions in regard to matters or questions arising under this Indenture
which shall not adversely affect the interests of the holders of the Notes in
any material respect.
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The Trustee is hereby authorized to join with the Company in the execution of
any such supplemental indenture, to make any further appropriate agreements and
stipulations which may be therein contained and to accept the conveyance,
transfer and assignment of any property thereunder, but the Trustee shall not be
obligated to, but may in its discretion, enter into any such supplemental
indenture which affects the Trustee's own rights, duties or immunities under
this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section 10.01
may be executed by the Company and the Trustee without the consent of the
holders of any of the Notes at the time outstanding, notwithstanding any of the
provisions of Section 10.02.
SECTION 10.02. Supplemental Indentures with Consent of Noteholders. With the
---------------------------------------------------
consent (evidenced as provided in Section 8.01) of the holders of a majority in
aggregate principal amount of the Notes at the time outstanding, the Company,
when authorized by the resolutions of the Board of Directors, and the Trustee
may from time to time and at any time enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of any
supplemental indenture or of modifying in any manner the rights of the holders
of the Notes; provided, however, that no such supplemental indenture shall (i)
-------- -------
extend the fixed maturity of any Note, or reduce the rate or extend the time of
payment of interest thereon, or reduce the principal amount thereof or premium,
if any, thereon, or make the principal thereof or interest or premium, if any,
thereon payable in any coin or currency other than that provided in the Notes
without the consent of the holder of each Note so affected, or (ii) reduce the
aforesaid percentage of Notes, the holders of which are required to consent to
any such supplemental indenture, without the consent of the holders of all Notes
then outstanding.
Upon the request of the Company, accompanied by a copy of the resolutions of
the Board of Directors certified by its Secretary or Assistant Secretary
authorizing the execution of any such supplemental indenture, and upon the
filing with the Trustee of evidence of the consent of Noteholders as aforesaid,
the Trustee shall join with the Company in the execution of such supplemental
indenture unless such supplemental indenture affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise, in which case the
Trustee may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Noteholders under this
Section 10.02 to approve the particular
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form of any proposed supplemental indenture, but it shall be sufficient if such
consent shall approve the substance thereof.
After an amendment under this Section 10.02 becomes effective, the Company, or
at its request, the Trustee in the name and at the expense of the Company, shall
mail to each Noteholder a notice briefly describing the amendment.
SECTION 10.03. Compliance with Trust Indenture Act; Effect of Supplemental
-----------------------------------------------------------
Indentures. Any supplemental indenture executed pursuant to the provisions of
- ----------
this Article Ten, and this Indenture as affected by such supplemental indenture,
shall comply with the Trust Indenture Act of 1939, as then in effect. Upon the
execution of any supplemental indenture pursuant to the provisions of this
Article Ten, this Indenture shall be and be deemed to be modified and amended in
accordance therewith and the respective rights, limitation of rights,
obligations, duties and immunities under this Indenture of the Trustee, the
Company and the holders of Notes shall thereafter be determined, exercised and
enforced hereunder subject in all respects to such modifications and amendments
and all the terms and conditions of any such supplemental indenture shall be and
be deemed to be part of the terms and conditions of this Indenture for any and
all purposes.
SECTION 10.04. Notation on Notes. Notes authenticated and delivered after
-------------------
the execution of any supplemental indenture pursuant to the provisions of this
Article Ten may bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company or the Trustee
shall so determine, new Notes so modified as to conform, in the opinion of the
Trustee and the Board of Directors, to any modification of this Indenture
contained in any such supplemental indenture may be prepared and executed by the
Company, authenticated by the Trustee and delivered in exchange for the Notes
then outstanding, upon surrender of such Notes then outstanding.
SECTION 10.05. Evidence of Compliance of Supplemental Indenture to Be
------------------------------------------------------
Furnished to the Trustee. The Trustee, subject to the provisions of Sections
- ------------------------
7.01 and 7.02, may receive an Officers' Certificate and an Opinion of Counsel as
conclusive evidence that any supplemental indenture executed pursuant hereto
complies with the requirements of this Article Ten.
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ARTICLE ELEVEN
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.01. Company May Consolidate, etc., on Certain Terms. Subject to
-----------------------------------------------
the provisions of Section 11.02, nothing contained in this Indenture or in any
of the Notes shall prevent any consolidation or merger of the Company with or
into any other corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale,
conveyance or lease (or successive sales, conveyances or leases) of all or
substantially all of the property of the Company, to any other corporation
(whether or not affiliated with the Company), if (i) either (A) the Company is
the surviving corporation, or (B) the resulting, surviving or transferee
corporation is organized under the laws of a state of the United States or the
District of Columbia and agrees to pay promptly when due the principal of and
premium, if any, and interest on the Notes, and to assume, perform and observe
all the covenants and conditions of this Indenture to be performed by the
Company, and (ii) immediately after the giving effect to such transaction, no
Event of Default has occurred.
SECTION 11.02. Successor Corporation to Be Substituted. In case of any such
----------------------------------------
consolidation, merger, sale, conveyance or lease and upon the assumption by the
successor corporation, by supplemental indenture, executed and delivered to the
Trustee and satisfactory in form to the Trustee, of the due and punctual payment
of the principal of and premium, if any, and interest on all of the Notes and
the due and punctual performance of all of the covenants and conditions of this
Indenture to be performed by the Company, such successor corporation shall
succeed to and be substituted for the Company, with the same effect as if it had
been named herein as the party of the first part. Such successor corporation
thereupon may cause to be signed, and may issue in its own name any or all of
the Notes issuable hereunder which theretofore shall not have been signed by the
Company and delivered to the Trustee; and, upon the order of such successor
corporation instead of the Company and subject to all the terms, conditions and
limitations in this Indenture prescribed, the Trustee shall authenticate and
deliver any Notes which previously shall have been signed and delivered by the
officers of the Company to the Trustee for authentication, and any Notes which
such successor corporation thereafter shall cause to be signed and delivered to
the Trustee for that purpose. All the Notes so issued shall in all respects
have the same legal rank and benefit under this Indenture as the Notes
theretofore or thereafter issued in accordance with the terms of this Indenture
as though all of such Notes had been issued at the date of the execution
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hereof. In the event of any such sale, conveyance or lease, the person named as
the "Company" in the first paragraph of this Indenture or any successor which
shall thereafter have become such in the manner prescribed in this Article
Eleven may be dissolved, wound up and liquidated at any time thereafter and such
person shall be released from its liabilities as obligor and maker of the Notes
and from its obligations under this Indenture.
In case of any such consolidation, merger, sale, conveyance or lease, such
changes in phraseology and form (but not in substance) may be made in the Notes
thereafter to be issued as may be appropriate.
SECTION 11.03. Opinion of Counsel to Be Given to Trustee. The Trustee,
-----------------------------------------
subject to Sections 7.01 and 7.02, may receive an Officers' Certificate and an
Opinion of Counsel as conclusive evidence that any such consolidation, merger,
sale, conveyance or lease and any such assumption complies with the provisions
of this Article Eleven.
ARTICLE TWELVE
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 12.01. Discharge of Indenture. When (a) the Company shall deliver to
----------------------
the Trustee for cancellation all Notes theretofore authenticated (other than any
Notes which shall have been destroyed, lost or stolen and in lieu of or in
substitution for which other Notes shall have been authenticated and delivered)
and not theretofore canceled, or (b) all the Notes not theretofore canceled or
delivered to the Trustee for cancellation shall have become due and payable, or
are by their terms to become due and payable within one year, and the Company
shall deposit with the Trustee, in trust, funds sufficient to pay at maturity
all of the Notes (other than any Notes which shall have been mutilated,
destroyed, lost or stolen and in lieu of or in substitution for which other
Notes shall have been authenticated and delivered) not theretofore canceled or
delivered to the Trustee for cancellation, including principal and premium, if
any, and interest due or to become due to such date of maturity, and if in
either case the Company shall also pay or cause to be paid all other sums
payable hereunder by the Company, then this Indenture shall cease to be of
further effect (except as to (i) remaining rights of registration of transfer,
substitution and exchange of Notes, (ii) rights hereunder of holders to receive
payments of principal of, and premium, if any, and interest on, the Notes and
the other rights, duties and obligations of Noteholders, as beneficiaries hereof
with respect to the amounts, if any, so deposited with the Trustee and
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(iii) the rights, obligations and immunities of the Trustee hereunder), and the
Trustee, on demand of the Company accompanied by an Officers' Certificate and an
Opinion of Counsel as required by Section 15.05 and at the cost and expense of
the Company, shall execute proper instruments acknowledging satisfaction of and
discharging this Indenture, the Company, however, hereby agreeing to reimburse
the Trustee for any costs or expenses thereafter reasonably and properly
incurred by the Trustee in connection with this Indenture or the Notes.
SECTION 12.02. Deposited Monies to Be Held in Trust by Trustee. Subject to
-----------------------------------------------
Section 12.04, all monies deposited with the Trustee pursuant to Section 12.01
shall be held in trust and applied by it to the payment, either directly or
through any paying agent (including the Company if acting as its own paying
agent), to the holders of the particular Notes for the payment of which such
monies have been deposited with the Trustee, of all sums due and to become due
thereon for principal and interest and premium, if any.
SECTION 12.03. Paying Agent to Repay Monies Held. Upon the satisfaction and
---------------------------------
discharge of this Indenture, all monies then held by any paying agent of the
Notes (other than the Trustee) shall, upon demand of the Company, be repaid to
it or paid to the Trustee, and thereupon such paying agent shall be released
from all further liability with respect to such monies.
SECTION 12.04. Return of Unclaimed Monies. Any monies deposited with or paid
--------------------------
to the Trustee for payment of the principal of, premium, if any, or interest on
Notes and not applied but remaining unclaimed by the holders of Notes for two
years after the date upon which the principal of, premium, if any, or interest
on such Notes, as the case may be, shall have become due and payable, shall be
repaid to the Company by the Trustee on written demand and all liability of the
Trustee shall thereupon cease with respect to such monies; and the holder of any
of the Notes shall thereafter look only to the Company for any payment which
such holder may be entitled to collect.
ARTICLE THIRTEEN
DEFEASANCE
SECTION 13.01. Defeasance in Respect of the Notes. (a) If the Company shall
------------------------------------
provide for the payment of the aggregate outstanding principal amount of and
premium (if any) on the Notes and each installment of interest due and to become
due, as the same shall become due on the Notes (calculated as provided below),
in each case to the date of maturity of the Notes through
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a deposit of funds in an amount which satisfies subsection (i) below, or of
investments in an amount which satisfies subsection (ii) below, or a combination
of funds and investments, each of which component satisfies the appropriate test
as to its respective portion of the total principal, premium (if any) and
interest to be funded (as provided below):
(i) by depositing with the Trustee in trust for the sole benefit of the
Noteholders, funds in an amount sufficient to pay (A) such principal amount of
and premium (if any) on the Notes in full on the date of maturity of the Notes
and (B) the interest on such aggregate principal amount to the date of maturity
of the Notes, taking into account all intervening interest payment dates, for
the period from the date through which interest on the Notes has been paid to
the date of maturity of the Notes; and provided further that such funds, if
invested, shall be invested only in U.S. Government Obligations maturing prior
to the date of maturity of the Notes and such intervening interest payment
dates; or
(ii) by depositing with the Trustee, in trust for the sole benefit of the
Noteholders, U.S. Government Obligations in such aggregate principal amount and
maturing on such dates as will, together with the income or increment to accrue
thereon, but without consideration of any reinvestment of such income or
increment, be sufficient to pay when due (including any intervening interest
payment dates) the amounts set forth in clauses (A) and (B) of subsection (i)
above;
and if the Trustee shall receive (x) an Officers' Certificate, dated the date of
such deposit and in form and substance satisfactory to the Trustee, to the
effect that the amount of the trust deposit will be sufficient to pay when due
on the date of maturity of the Notes and on such intervening interest payment
dates the amounts described in clauses (A) and (B) in subsection (i) above and
that such defeasance is not in anticipation of a Preferred Stock Redemption
Payment and (y) an Opinion of Counsel, dated the date of such deposit and in
form and substance satisfactory to the Trustee, to the effect that the trust
deposit of such funds or investments or both to defease the Company's
obligations in respect of the Notes (A) does not contravene applicable law and
is in accordance with the provisions of this Indenture, (B) describing either a
private ruling concerning the Notes or a published ruling of the Internal
Revenue Service to the effect that Noteholders, or persons in the position of
Noteholders, will not recognize income, gain or loss for federal income tax
purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount and in the same manner and at
the same times as would have been the case if such deposit, defeasance and
discharge had not occurred and (C) does not require that the Company, the trust
or
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the Trustee register as an investment company under the Investment Company Act
of 1940, as amended; and if the Company shall also pay or cause to be paid all
other sums then due and payable hereunder, then the Company's obligations in
respect of the Notes shall cease, determine and be terminated and this Indenture
shall cease to be of further effect (except as specified in Section 13.01(b)).
(b) Notwithstanding the foregoing, this Indenture shall continue to be
effective, regardless of any defeasance specified in this Section 13.01, as to
(i) remaining rights of registration of transfer, substitution and exchange of
Notes, (ii) rights hereunder of holders regarding replacement of stolen, lost or
mutilated Notes, (iii) the obligation of the Company to maintain an office or
agency as provided in Section 4.02, (iv) rights hereunder of Noteholders to
receive payments of principal of and premium, if any, and interest on the Notes
and the other rights, duties and obligations of Noteholders, as beneficiaries
hereof with respect to the amounts, if any, so deposited with the Trustee and
(v) the rights, obligations and immunities of the Trustee hereunder.
(c) The Trustee, on demand of the Company and following the Trustee's receipt
of all documents, funds and investments and payments specified in Section
13.01(a), and at the cost and expense of the Company, shall execute proper
instruments acknowledging satisfaction of and discharging this Indenture; the
Company, however, hereby agreeing to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in
connection with this Indenture or the Notes.
ARTICLE FOURTEEN
IMMUNITY OF INCORPORATORS, STOCKHOLDERS,
OFFICERS, DIRECTORS AND EMPLOYEES
SECTION 14.01. Indenture and Notes Solely Corporate Obligations. No recourse
------------------------------------------------
for the payment of the principal of or premium, if any, or interest on any Note,
or for any claim based thereon or otherwise in respect thereof, and no recourse
under or upon any obligation, covenant or agreement of the Company in this
Indenture or in any supplemental indenture, or in any Note, or because of the
creation of any indebtedness represented thereby, shall be had against any
incorporator, stockholder, officer, director, employee or controlling person as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it
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being expressly understood that all such liability is hereby expressly waived
and released as a condition of, and as a consideration for, the execution of
this Indenture and the issue of the Notes.
ARTICLE FIFTEEN
MISCELLANEOUS PROVISIONS
SECTION 15.01. Provisions Binding on Company's Successors. All the
------------------------------------------
covenants, stipulations, promises and agreements in this Indenture contained by
the Company shall bind its successors and assigns whether so expressed or not.
SECTION 15.02. Official Acts by Successor Corporation. Any act or proceeding
--------------------------------------
by any provision of this Indenture authorized or required to be done or
performed by any board, committee or officer of the Company shall and may be
done and performed with like force and effect by the like board, committee or
officer of any corporation that shall at the time be the lawful sole successor
of the Company.
SECTION 15.03. Addresses for Notices, etc. Any notice or demand which by any
---------------------------
provision of this Indenture is required or permitted to be given or served by
the Trustee or by the holders of Notes on the Company may be given or served by
being deposited postage prepaid by registered or certified mail in a post office
letter box addressed (until another address is filed by the Company with the
Trustee) to Continental Cablevision, Inc., Attention: Corporate Secretary, The
Pilot House, Lewis Wharf, Boston, Massachusetts 02110. Any notice, direction,
request or demand by any Noteholder to or upon the Trustee shall be deemed to
have been sufficiently given or made, for all purposes, if given or made in
writing at the Principal Office of the Trustee, 77 Water Street, New York, New
York 10005, Attention: Corporate Trust Department.
SECTION 15.04. Governing Law. This Indenture and each Note shall be deemed
-------------
to be a contract made under the laws of the State of New York, and for all
purposes shall be construed in accordance with the laws of the State of New
York, without regard to conflicts of laws principles thereof.
SECTION 15.05. Evidence of Compliance with Conditions Precedent. Upon any
------------------------------------------------
application or demand by the Company to the Trustee to take any action under any
of the provisions of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any, provided
for in this Indenture relating to the proposed action
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<PAGE>
have been complied with and an Opinion of Counsel stating that, in the opinion
of such counsel, all such conditions precedent have been complied with.
Each certificate or opinion provided for in this Indenture and delivered to
the Trustee with respect to compliance with a condition or covenant provided for
in this Indenture shall include (1) a statement that the person making such
certificate or opinion has read such covenant or condition; (2) a brief
statement as to the nature and scope of the examination or investigation upon
which the statement or opinion contained in such certificate or opinion are
based; (3) a statement that, in the opinion of such person, he or she has made
such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and (4) a statement as to whether or not, in the opinion of
such person, such condition or covenant has been complied with.
SECTION 15.06. Legal Holidays. In any case where the date of maturity of
--------------
interest or premium, if any, on or principal of the Notes or the date fixed for
prepayment of any Note will be in The City of New York, New York or the City of
Boston, Massachusetts, a legal holiday or a day on which banking institutions or
any national securities exchanges are authorized or required by law, regulation
or executive order to close ("Legal Holidays"), then payment of such interest on
or principal of the Notes need not be made on such date but may be made on the
next succeeding day not a Legal Holiday with the same force and effect as if
made on the date of maturity or the date fixed for prepayment and no interest
shall accrue for the period from and after such date.
SECTION 15.07. Trust Indenture Act to Control. If and to the extent that any
------------------------------
provision of this Indenture limits, qualifies or conflicts with another
provision included in this Indenture by operation of Sections 310 to 317,
inclusive, of the Trust Indenture Act of 1939, such incorporated provision shall
control.
SECTION 15.08. No Security Interest Created. Nothing in this Indenture or in
----------------------------
the Notes, expressed or implied, shall be construed to constitute a security
interest under the Uniform Commercial Code or similar legislation, as now or
hereafter enacted and in effect, in any jurisdiction where property of the
Company or its Subsidiaries is located.
SECTION 15.09. Benefits of Indenture. Nothing in this Indenture or in the
---------------------
Notes, express or implied, shall give to any person, other than the parties
hereto, any paying agent, any Note registrar and their successors hereunder and
the holders of
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Notes, any benefit or any legal or equitable right, remedy or claim under this
Indenture.
SECTION 15.10. Table of Contents, Headings, etc. The table of contents and
---------------------------------
the titles and headings of the articles and sections of this Indenture have been
inserted for convenience of reference only, are not to be considered a part
hereof, and shall in no way modify or restrict any of the terms or provisions
hereof.
SECTION 15.11. Execution in Counterparts. This Indenture may be executed in
-------------------------
any number of counterparts, each of which shall be an original, but such
counterparts shall together constitute but one and the same instrument.
Bank of Montreal Trust Company hereby accepts the trusts in this Indenture
declared and provided, upon the terms and conditions hereinabove set forth.
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IN WITNESS WHEREOF, Continental Cablevision, Inc. has caused this Indenture to
be signed and acknowledged by its Vice President and Treasurer, and its
corporate seal to be affixed hereunto, and the same to be attested by its
Secretary or an Assistant Secretary, and Bank of Montreal Trust Company has
caused this Indenture to be signed and acknowledged by one of its Vice
Presidents, and has caused its corporate seal to be affixed hereunto and the
same to be attested by an Assistant Vice President thereof, as of the day and
year first written above.
CONTINENTAL CABLEVISION, INC.
By /s/P. Eric Krauss
------------------------------
Name: P. Eric Krauss
Title: Vice President and Treasurer
[Seal]
Attest:
By /s/ Patrick K. Miehe
- ---------------------------
Name: Patrick K. Miehe
Title: Assistant Secretary
BANK OF MONTREAL TRUST COMPANY
By /s/ Mark F. McLaughlin
----------------------------
Name: Mark F. McLaughlin
Title: Vice President
[Seal]
Attest:
/s/Amy Roberts
- ----------------------------
Name: Amy Roberts
Title: Assistant Vice President
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<PAGE>
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF SUFFOLK )
On the 12th day of December, 1995, before me personally came P. Eric Krauss,
to me known, who, being by me duly sworn, did depose and say that he resides at
1666 Commonwealth Avenue, Brighton, Massachusetts; that he is the Vice President
and Treasurer, of Continental Cablevision, Inc., one of the corporations
described in and which executed the above instrument; that he knows the
corporate seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by the authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
/s/
-------------------------------------
Notary Public
My Commission Expires
[NOTARIAL SEAL]
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On the 11th day of December, 1995, before me personally came Mark F.
McLaughlin, to me known, who, being by me duly sworn, did depose and say that he
resides at 44 Norwood Avenue, Allenhurst, New Jersey; that he is a Vice
President of Bank of Montreal Trust Company, the bank described in and which
executed the above instrument; that he knows the seal of said bank; that the
seal affixed to the said instrument is such seal; that it was so affixed by
authority of the Board of Directors of said bank; and that he signed his name
thereto by like authority.
/s/
-----------------------------------
Notary Public
My Commission Expires
[NOTARIAL SEAL]
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<PAGE>
EXHIBIT A
Form of Certificate
-------------------
_____________, ___
Bank of Montreal Trust Company
77 Water Street
New York, New York 10005
Attention: Corporate Trust Department
Continental Cablevision, Inc.
The Pilot House
Lewis Wharf
Boston, Massachusetts 02110
Attention: Corporate Secretary
Re: Continental Cablevision, Inc. (the "Company")
8.30% Senior Notes Due 2006 (the "Notes")
---------------------------------------------
Dear Sirs:
This letter relates to U.S. $_____________ principal amount of Notes
represented by a Note (the "Legended Note") which bears a legend outlining
restrictions upon transfer of such Legended Note. Pursuant to Section 2.02 of
the Indenture (the "Indenture") dated as of December 13, 1995 relating to the
Notes, we hereby certify that we are (or we will hold such securities on behalf
of) a person outside the United States to whom the Notes could be transferred in
accordance with Rule 904 of Regulation S promulgated under the U.S. Securities
Act of 1933, as amended. Accordingly, you are hereby requested to exchange the
Legended Note for an unlegended Note representing an identical principal amount
of Notes, all in the manner provided for in the Indenture.
You and the Company are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Noteholder]
By:___________________________
Authorized Signature
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EXHIBIT B
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
-----------------------------------------
_____________, ___
Bank of Montreal Trust Company
77 Water Street
New York, New York 10005
Attention: Corporate Trust Department
Continental Cablevision, Inc.
The Pilot House
Lewis Wharf
Boston, Massachusetts 02110
Attention: Corporate Secretary
Re: Continental Cablevision, Inc. (the "Company")
8.30% Senior Notes Due 2006 (the "Notes")
----------------------------------------------
Dear Sirs:
In connection with our proposed purchase of $____________ aggregate principal
amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject to
certain restrictions and conditions set forth in the Indenture dated as of
December 13, 1995 relating to the Notes (the "Indenture") and the undersigned
agrees to be bound by, and not to resell, pledge or otherwise transfer the Notes
except in compliance with, such restrictions and conditions and the Securities
Act of 1933, as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes may not be offered or
sold except as permitted in the following sentence. We agree, on our own behalf
and on behalf of any accounts for which we are acting as hereinafter stated,
that if we should sell any Notes, we will do so only (A) to the Company or any
subsidiary thereof, (B) in accordance with Rule 144A under the Securities Act to
a "qualified institutional buyer" (as defined therein), (C) to an institutional
"accredited investor" (as defined below) that, prior to such transfer, furnishes
(or has furnished on
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<PAGE>
its behalf by a U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter, (D) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act, (E) pursuant
to the exemption from registration provided by Rule 144 under the Securities
Act, or (F) pursuant to an effective registration statement under the Securities
Act, and we further agree to provide to any person purchasing any of the Notes
from us a notice advising such purchaser that resales of the Notes are
restricted as stated herein.
3. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certifications, legal opinions
and other information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We further
understand that the Notes purchased by us will bear a legend to the foregoing
effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1),(2),(3) or (7) of Regulation D under the Securities Act) and have such
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the Notes, and we and any
accounts for which we are acting are each able to bear the economic risk of our
or its investment.
5. We are acquiring the Notes purchased by us for our own account or for one
or more accounts (each of which is an institutional "accredited investor") as to
each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By:___________________________
Authorized Signature
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EXHIBIT C
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
------------------------
_____________, ___
Bank of Montreal Trust Company
77 Water Street
New York, New York 10005
Attention: Corporate Trust Department
Continental Cablevision, Inc.
The Pilot House
Lewis Wharf
Boston, Massachusetts 02110
Attention: Corporate Secretary
Re: Continental Cablevision, Inc. (the "Company")
8.30% Senior Notes Due 2006 (the "Notes")
----------------------------------------------
Dear Sirs:
In connection with our proposed sale of $_____________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the Securities Act of 1933, as amended,
and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United States;
(2) at the time the buy order was originated, the transferee was outside the
United States or we and any person acting on our behalf reasonably believed that
the transferee was outside the United States;
(3) no directed selling efforts have been made by us in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S,
as applicable; and
(4) the transaction is not part of a plan or scheme to evade the registration
requirements of the U.S. Securities Act of 1933.
-92-
<PAGE>
You and the Company are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby. Terms used in this certificate have the meanings set
forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:___________________________
Authorized Signature
-93-
<PAGE>
Exhibit 10.21A
Execution Counterpart
---------------------
CONTINENTAL CABLEVISION, INC.
CREDIT AGREEMENT
Amendment No. 1
---------------
This Agreement, dated as of September 29, 1995 is among Continental
Cablevision, Inc., a Delaware corporation, certain of its subsidiaries, The
First National Bank of Boston, in its capacity as Administrative Agent and as a
Managing Agent for itself and the other Lenders, and The Bank of New York, in
its capacity as a Managing Agent for itself and the other Lenders. The parties
agree as follows:
1. Reference to Credit Agreement; Definitions. Reference is made to the
------------------------------------------
Amended and Restated Credit Agreement dated as of October 1, 1994, as in effect
on the date hereof prior to giving effect to this Agreement (the "Credit
------
Agreement"), among the Company, its subsidiaries from time to time party
- ---------
thereto, the Lenders from time to time party thereto, the Administrative Agent
and the Managing Agents. Terms defined in the Credit Agreement as amended
hereby (the "Amended Credit Agreement") and not otherwise defined herein are
------------------------
used herein with the meanings so defined. References in this Agreement to
"Sections" and "Exhibits", except as the context otherwise dictates, are
references to sections hereof and exhibits hereto.
2. Amendments to Credit Agreement. Subject to all the terms and conditions
------------------------------
hereof, and in reliance upon the representations and warranties set forth in
Section 3, the Credit Agreement is hereby amended as follows:
2.1. Amendment to Section 7.13.1. Section 7.13.1 of the Credit Agreement
---------------------------
is amended to read in its entirety as follows:
"7.13.1. Consolidated Total Debt to Consolidated Operating Income.
--------------------------------------------------------
On the last day of each fiscal quarter of the Company specified in the
table below, Consolidated Total Debt shall not exceed the percentage
specified in such table of four times Consolidated Operating Income for
such fiscal quarter:
Fiscal Quarter Ending Percentage
--------------------- ----------
September 30, 1994 through
March 31, 1995 690%
June 30, 1995 675%
<PAGE>
September 30, 1995 690%
December 31, 1995 through
March 31, 1996 725%
June 30, 1996 through
December 31, 1996 650%
March 31, 1997 through
June 30, 1997 625%
September 30, 1997 through
December 31, 1997 600%
March 31, 1998 through
December 31, 1998 550%
March 31, 1999 through
December 31, 1999 500%
March 31, 2000 and
thereafter 450%"
2.2. Amendment to Section 7.13.2. Section 7.13.2 of the Credit
---------------------------
Agreement is amended to read in its entirety as follows:
"7.13.2. Consolidated Operating Cash Flow to Pro Forma Interest
------------------------------------------------------
Payments. On the last day of each fiscal quarter of the Company specified
--------
in the table below, four times Consolidated Operating Cash Flow for such
fiscal quarter shall equal or exceed the percentage specified in such table
of Pro Forma Interest Payments for the four consecutive fiscal quarters of
the Company commencing immediately after such date:
Fiscal Quarter Ending Percentage
--------------------- ----------
September 30, 1994 through
September 30, 1995 150%
December 31, 1995 through
March 31, 1996 145%
June 30, 1996 through
December 31, 1997 150%
March 31, 1998 through
-2-
<PAGE>
December 31, 1998 175%
March 31, 1999 and
thereafter 200%"
3. Representations and Warranties. In order to induce the Lenders to consent
------------------------------
to, and each of the Administrative Agent and the Managing Agents to enter into,
this Agreement, each of the Company and the Guarantors represents and warrants
to each of the Lenders that immediately before and after giving effect to this
Agreement, no Default exists.
4. Amendment Fee. In the event that, on or prior to November 9, 1995, Lenders
-------------
holding at least a majority of the Voting Percentage Interests execute and
deliver to the Administrative Agent their consent to this Agreement, then, on or
prior to November 16, 1995, the Company shall pay to the Administrative Agent
for the account of the Lenders in accordance with their respective Voting
Percentage Interests an amount equal to 1/8% of the Maximum Amount of Credit.
5. General. The Amended Credit Agreement and all of the other Lender
-------
Agreements are each confirmed as being in full force and effect. This
Agreement, the Amended Credit Agreement and the other Lender Agreements referred
to herein or therein constitute the entire understanding of the parties with
respect to the subject matter hereof and thereof and supersede all prior and
current understandings and agreements, whether written or oral, with respect to
such subject matter. The invalidity or unenforceability of any provision hereof
shall not affect the validity or enforceability of any other term or provision
hereof. The headings in this Agreement are for convenience of reference only
and shall not alter, limit or otherwise affect the meaning hereof. Each of this
Agreement and the Amended Credit Agreement is a Lender Agreement and may be
executed in any number of counterparts, which together shall constitute one
instrument, and shall bind and inure to the benefit of the parties and their
respective permitted successors and assigns. This Agreement shall be governed
by and construed in accordance with the laws (other than the conflict of laws
rules) of The Commonwealth of Massachusetts.
-3-
<PAGE>
Each of the undersigned has executed this Agreement under seal by a
duly authorized officer as of the date first set forth above.
COMPANY:
CONTINENTAL CABLEVISION, INC.
By /s/ P. Eric Krauss
--------------------------------
Vice President and Treasurer
GUARANTORS:
AMERICAN CABLESYSTEMS CORPORATION
AMERICAN CABLESYSTEMS NORTHEAST, INC.
AMERICAN CABLESYSTEMS OF CALIFORNIA, INC.
AMERICAN CABLESYSTEMS OF FLORIDA, INC.
AMERICAN CABLESYSTEMS OF NEW YORK, INC.
CONTINENTAL CABLEVISION ACQUISITIONS OF
NORTHERN ILLINOIS, INC.
CONTINENTAL CABLEVISION FLORIDA LIMITED, INC.
CONTINENTAL CABLEVISION NORTHEAST
LIMITED, INC.
CONTINENTAL CABLEVISION NORTHERN COOK
COUNTY LIMITED, INC.
CONTINENTAL CABLEVISION OF CALIFORNIA, INC.
CONTINENTAL CABLEVISION OF COOK COUNTY, INC.
CONTINENTAL CABLEVISION OF ILLINOIS, INC.
CONTINENTAL CABLEVISION OF JACKSONVILLE, INC.
CONTINENTAL CABLEVISION OF MANCHESTER, INC.
CONTINENTAL CABLEVISION OF
MASSACHUSETTS, INC.
CONTINENTAL CABLEVISION OF MICHIGAN, INC.
CONTINENTAL CABLEVISION OF NEW ENGLAND, INC.
CONTINENTAL CABLEVISION OF NORTHERN COOK
COUNTY, INC.
CONTINENTAL CABLEVISION OF OHIO, INC.
CONTINENTAL CABLEVISION OF ST. LOUIS
COUNTY, INC.
CONTINENTAL CABLEVISION OF ST. PAUL, INC.
CONTINENTAL CABLEVISION OF SIERRA
VALLEYS, INC.
CONTINENTAL CABLEVISION OF SOUTHERN
MASSACHUSETTS, INC.
CONTINENTAL CABLEVISION OF VIRGINIA, INC.
-4-
<PAGE>
CONTINENTAL CABLEVISION OF WESTERN
NEW ENGLAND, INC.
CONTINENTAL CABLEVISION OF WILL COUNTY, INC.
CONTINENTAL CABLEVISION SATELLITE COMPANY
OF NORTHERN CALIFORNIA, INC.
CONTINENTAL CABLEVISION SERVICES, INC.
CONTINENTAL CABLEVISION WILL COUNTY
LIMITED, INC.
CONTINENTAL SATELLITE COMPANY OF
CHICAGO, INC.
CONTINENTAL SATELLITE COMPANY OF
FLORIDA,INC.
CONTINENTAL SATELLITE COMPANY OF
ILLINOIS, INC.
CONTINENTAL SATELLITE COMPANY OF
MICHIGAN, INC.
CONTINENTAL SATELLITE COMPANY OF
MINNESOTA, INC.
CONTINENTAL SATELLITE COMPANY OF
NEW ENGLAND, INC.
CONTINENTAL SATELLITE COMPANY OF OHIO, INC.
CONTINENTAL SATELLITE COMPANY OF
VIRGINIA, INC.
FRESNO CABLE TV LIMITED
NOR CAL CABLEVISION, INC.
POMPANO TELECABLE CORPORATION
SAN JOAQUIN TV SERVICES, INC.
TELCAB COMMUNICATIONS, INC.
By /s/ P. Eric Krauss
--------------------------------
Vice President and Treasurer of each
of the foregoing corporations
AMERICAN CABLESYSTEMS OF FLORIDA,
A LIMITED PARTNERSHIP
By AMERICAN CABLESYSTEMS OF FLORIDA, INC.,
General Partner
By /s/ P. Eric Krauss
----------------------------
Vice President and Treasurer
AMERICAN CABLESYSTEMS NORTHEAST,
A LIMITED PARTNERSHIP
-5-
<PAGE>
By AMERICAN CABLESYSTEMS NORTHEAST, INC.,
General Partner
By /s/ P. Eric Krauss
----------------------------------
Vice President and Treasurer
CONTINENTAL CABLEVISION OF WILL COUNTY,
A LIMITED PARTNERSHIP
By CONTINENTAL CABLEVISION OF WILL
COUNTY, INC., General Partner
By /s/ P. Eric Krauss
------------------------------------
Vice President and Treasurer
CONTINENTAL CABLEVISION OF NORTHERN
COOK COUNTY, A LIMITED PARTNERSHIP
By CONTINENTAL CABLEVISION OF NORTHERN
COOK COUNTY, INC., General Partner
By /s/ P. Eric Krauss
----------------------------------
Vice President and Treasurer
MANAGING AGENTS:
THE FIRST NATIONAL BANK OF BOSTON, as
Administrative Agent and as a Managing Agent
for itself and the other Lenders
By /s/
---------------------------------------
Title:
THE BANK OF NEW YORK, as a Managing Agent for
itself and the other Lenders
By /s/
---------------------------------------
Title:
-6-
<PAGE>
Each of the undersigned hereby consents to the foregoing Agreement:
AGENTS:
CANADIAN IMPERIAL BANK MELLON BANK, N.A.
OF COMMERCE
By /s/ By /s/
-------------------------- ------------------------------
Title: Title:
NATIONSBANK OF TEXAS, N.A. THE TORONTO-DOMINION BANK
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
CO-AGENTS:
THE BANK OF NOVA SCOTIA THE BANK OF TOKYO
TRUST COMPANY
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
CHEMICAL BANK, N.A. CITIBANK, N.A.
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
THE FIRST NATIONAL BANK THE FUJI BANK, LIMITED
OF CHICAGO
By /s/ By /s/
-------------------------- ------------------------------
Title: Title:
INDUSTRIAL BANK OF JAPAN THE LONG-TERM CREDIT BANK
OF JAPAN, LIMITED,
NEW YORK BRANCH
By /s/ By /s/
-------------------------- ------------------------------
Title: Title:
-7-
<PAGE>
MORGAN GUARANTY ROYAL BANK OF CANADA
TRUST COMPANY
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
SHAWMUT BANK SOCIETE GENERALE
CONNECTICUT, N.A.
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
THE SUMITOMO BANK, LIMITED, UNION BANK
CHICAGO BRANCH
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
OTHER LENDERS:
THE BANK OF CALIFORNIA, N.A. BANK OF HAWAII
By /s/ By /s/
------------------------------ ------------------------------
Title: Title:
BANK OF IRELAND, GRAND BANK OF MONTREAL
CAYMAN BRANCH
By /s/ By /s/
-------------------------- ------------------------------
Title: Title:
BANQUE FRANCAISE DU BANQUE NATIONALE DE PARIS
COMMERCE EXTERIEUR
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
By /s/
------------------------------
Title:
-8-
<PAGE>
BANQUE PARIBAS COMPAGNIE FINANCIERE DE CIC
ET DE L'UNION EUROPEENNE
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
CORESTATES BANK, N.A. CREDIT LYONNAIS CAYMAN
ISLAND BRANCH
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
CRESTAR BANK THE DAI-ICHI KANGYO BANK,
LIMITED, NEW YORK BRANCH
By /s/ By /s/
------------------------ ------------------------------
Title: Title:
THE DAIWA BANK, LIMITED DRESDNER BANK AG NEW YORK
AND GRAND CAYMAN BRANCHES
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
By /s/
------------------------------
Title:
FIRST BANK FIRST FIDELITY BANK, N.A.
NATIONAL ASSOCIATION
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
FIRST HAWAIIAN BANK THE FIRST NATIONAL BANK
OF MARYLAND
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
-9-
<PAGE>
FLEET NATIONAL BANK FUYO GENERAL LEASE
(U.S.A.), INC.
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
THE HOKKAIDO TAKUSHOKU KLEINWORT BENSON LIMITED
BANK, LTD.
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
THE MITSUBISHI BANK, LIMITED, THE MITSUBISHI TRUST AND
NEW YORK BRANCH BANKING CORPORATION
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
NBD BANK THE NIPPON CREDIT BANK, LTD.
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
THE ROYAL BANK OF THE SAKURA BANK
SCOTLAND, PLC
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
THE SANWA BANK, LIMITED THE SUMITOMO TRUST &
BANKING CO., LTD.,
NEW YORK BRANCH
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
SUN BANK, N.A. SWISS BANK CORPORATION,
NEW YORK BRANCH
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
By /s/
------------------------------
Title:
-10-
<PAGE>
THE TOKAI BANK, LIMITED UNITED JERSEY BANK
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
VAN KAMPEN MERRITT PRIME THE TOYO TRUST AND BANKING
RATE INCOME TRUST CO., LTD.
By /s/ By /s/
------------------------- ------------------------------
Title: Title:
DE NATIONAL INVESTORINGS BANK
By /s/
-------------------------
Title:
-11-
<PAGE>
EXHIBIT 10.24
-------------
- --------------------------------------------------------------------------------
REGISTRATION RIGHTS AGREEMENT
Dated as of December 13, 1995
by and among
CONTINENTAL CABLEVISION, INC.,
MORGAN STANLEY & CO. INCORPORATED
and
LAZARD FRERES & CO. LLC
- --------------------------------------------------------------------------------
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of December 13, 1995 by and among Continental Cablevision, Inc., a
Delaware corporation (the "Company"), Morgan Stanley & Co. Incorporated ("Morgan
Stanley") and Lazard Freres & Co. LLC ("Lazard Freres" and, together with Morgan
Stanley, the "Placement Agents").
This Agreement is made pursuant to the Placement Agreement dated December
13, 1995 between the Company and the Placement Agents (the "Placement
Agreement"), which provides for the sale by the Company to the Placement Agents
of $600,000,000 aggregate principal amount of 8.30% Senior Notes Due 2006 of the
Company (the "Notes"). In order to induce the Placement Agents to enter into
the Placement Agreement, the Company has agreed to provide to the Placement
Agents and their direct and indirect transferees the registration rights set
forth in this Agreement. The execution of this Agreement is a condition to the
closing under the Placement Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time to
----------
time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended from
--------
time to time.
"Closing Date" shall mean the Closing Date as defined in the Placement
------------
Agreement.
"Company" shall have the meaning set forth in the preamble and shall also
-------
include the Company's successors.
"Exchange Notes" shall mean 8.30% Senior Notes Due 2006 issued by the
--------------
Company under an indenture and containing terms identical to the Notes (except
that interest thereon shall accrue from the last date on which interest was paid
on the Notes or, if no such interest has been paid, from December 13, 1995), to
be
1
<PAGE>
offered to Holders of Notes in exchange for Notes pursuant to the Exchange
Offer.
"Exchange Offer" shall mean the exchange offer by the Company of Exchange
--------------
Notes for Registrable Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the 1933 Act
---------------------------
effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
-------------------------------------
registration statement on an appropriate form and all amendments and supplements
to such registration statement, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"Holders" shall mean the Placement Agents, for so long as they own any
-------
Registrable Notes, and each of their successors, assigns and direct and indirect
transferees who become registered owners of Registrable Notes under the
Indenture; provided that for purposes of Sections 4 and 5 of this Agreement, the
--------
term "Holders" shall include Participating Broker-Dealers (as defined in Section
4(a)).
"Indenture" shall mean the Indenture relating to the Notes dated as of
---------
December 13, 1995 between the Company and Bank of Montreal Trust Company, as
trustee, as the same may be amended from time to time in accordance with the
terms thereof.
"Majority Holders" shall mean the Holders of a majority of the aggregate
----------------
principal amount of outstanding Registrable Notes; provided that whenever the
--------
consent or approval of Holders of a specified percentage of Registrable Notes is
required hereunder, Registrable Notes held by the Company shall not be counted
in determining whether such consent or approval was given by the Holders of such
required percentage or amount.
"NASD" shall mean the National Association of Securities Dealers, Inc.
----
"Person" shall mean an individual, partnership, corporation, trust or
------
unincorporated organization, or a government or agency or political subdivision
thereof.
2
<PAGE>
"Placement Agents" shall have the meaning set forth in the preamble.
----------------
"Placement Agreement" shall have the meaning set forth in the preamble.
-------------------
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Notes covered by a Shelf Registration Statement, and by all other
amendments and supplements to such prospectus, and in each case including all
material incorporated by reference therein.
"Registrable Notes" shall mean the Notes; provided, however, that the Notes
----------------- -------- -------
shall cease to be Registrable Notes when (i) a Registration Statement with
respect to such Notes shall have been declared effective under the 1933 Act and
such Notes shall have been disposed of pursuant to such Registration Statement,
(ii) such Notes have been sold pursuant to Rule 144(k) (or any similar provision
then in force, but not Rule 144A) under the 1933 Act, (iii) such Notes shall
have ceased to be outstanding or (iv) the Exchange Offer is consummated.
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance by the Company with this Agreement, including,
without limitation: (i) all SEC, stock exchange or NASD registration and filing
fees, (ii) all fees and expenses incurred in connection with compliance with
state securities or blue sky laws (including reasonable fees and disbursements
of counsel for any underwriters or Holders in connection with blue sky
qualification of any of the Exchange Notes or Registrable Notes), (iii) all
expenses of any Persons (including counsel for the Placement Agents) in
preparing or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this Agreement,
(iv) all fees and disbursements relating to the qualification of the Indenture
under applicable securities laws, (v) the fees and disbursements of the Trustee
and its counsel, (vi) the fees and disbursements of counsel for the Company and,
3
<PAGE>
in the case of a Shelf Registration Statement, the fees and disbursements of one
counsel for the Holders (which counsel shall be selected by the Majority Holders
and which counsel may also be counsel for the Placement Agents) and (vii) the
fees and disbursements of the independent public accountants of the Company,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, but excluding fees and
expenses of counsel to the underwriters (other than fees and expenses set forth
in clause (ii) above) or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of Registrable
Notes by a Holder.
"Registration Statement" shall mean any registration statement of the
----------------------
Company that covers any of the Exchange Notes or Registrable Notes pursuant to
the provisions of this Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein. If the Company has filed an
abbreviated registration statement to register additional Exchange Notes or
Registrable Notes pursuant to Rule 462(b) under the 1933 Act, then any reference
herein to the Registration Statement shall be deemed to include such abbreviated
registration statement.
"SEC" shall mean the Securities and Exchange Commission.
---
"Shelf Registration" shall mean a registration effected pursuant to Section
------------------
2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration statement
----------------------------
of the Company pursuant to the provisions of Section 2(b) of this Agreement
which covers all of the Registrable Notes (but no other securities unless
approved by the Person or Persons on behalf of whom the Company is filing the
Shelf Registration Statement) on an appropriate form under Rule 415 under the
1933 Act, or any similar rule that may be adopted by the SEC, and all amendments
and supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein. If the
Company has filed an abbreviated shelf registration statement to register
additional Registrable Notes
4
<PAGE>
pursuant to Rule 462(b) under the 1933 Act, then any reference herein to the
Shelf Registration Statement shall be deemed to include such abbreviated shelf
registration agreement.
"Trustee" shall mean the trustee with respect to the Notes under the
-------
Indenture.
"Underwriters" shall have the meaning set forth in Section 3.
------------
"Underwritten Registration" or "Underwritten Offering" shall mean a
------------------------- ---------------------
registration in which Registrable Notes are sold to an Underwriter for
reoffering to the public.
2. Registration Under the 1933 Act.
-------------------------------
(a) Exchange Offer Registration. To the extent not prohibited by any
---------------------------
applicable law or applicable interpretation of the Staff of the SEC, the Company
shall use its best efforts to cause to become effective, no later than the 180th
calendar day following the date of original sale of the Notes, an Exchange Offer
Registration Statement covering the offer by the Company to the Holders to
exchange all of the Registrable Notes for Exchange Notes and to have such
Registration Statement remain effective until the closing of the Exchange Offer.
The Company shall commence the Exchange Offer promptly after the Exchange Offer
Registration Statement has been declared effective by the SEC and use its best
efforts to have the Exchange Offer consummated not later than 60 days after such
effective date. The Company shall commence the Exchange Offer by mailing the
related exchange offer Prospectus and accompanying documents to each Holder
stating, in addition to such other disclosures as are required by applicable
law:
(i) that the Exchange Offer is being made pursuant to this Registration
Rights Agreement and that all Registrable Notes validly tendered will be
accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a period of at
least 30 days from the date such notice is mailed) (the "Exchange Dates");
(iii) that any Registrable Note not tendered will remain outstanding and
continue to accrue interest, but will not retain any rights under this
Registration Rights Agreement;
5
<PAGE>
(iv) that Holders electing to have a Registrable Note exchanged
pursuant to the Exchange Offer will be required to surrender such Registrable
Note, together with the enclosed letters of transmittal, to the institution and
at the address (located in the Borough of Manhattan, The City of New York)
specified in the notice prior to the close of business on the last Exchange
Date; and
(v) that Holders will be entitled to withdraw their election, not later
than the close of business on the last Exchange Date, by sending to the
institution and at the address (located in the Borough of Manhattan, The City of
New York) specified in the notice a telegram, telex, facsimile transmission or
letter setting forth the name of such Holder, the principal amount of
Registrable Notes delivered for exchange and a statement that such Holder is
withdrawing his election to have such Notes exchanged.
As soon as practicable after the last Exchange Date, the Company shall:
(i) accept for exchange Registrable Notes or portions thereof tendered and
not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for cancellation all
Registrable Notes or portions thereof so accepted for exchange by the Company,
and issue, and cause the Trustee under the Indenture to promptly authenticate
and mail to each Holder, an Exchange Note equal in principal amount to the
principal amount of the Registrable Notes surrendered by such Holder.
The Company shall use its best efforts to complete the Exchange Offer as
provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the Staff of the SEC. The Company shall inform the
Placement Agents of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Placement Agents shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate the tender of
Registrable Notes in the Exchange Offer.
6
<PAGE>
(b) Shelf Registration. In the event that (i) the Company determines that
------------------
the Exchange Offer Registration provided for in Section 2(a) above is not
available or may not be consummated as soon as practicable after the last
Exchange Date because it would violate applicable law or the applicable
interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any
other reason consummated by the 180th calendar day following the date of
original sale of the Notes or (iii) in the opinion of counsel for the Placement
Agents a Registration Statement must be filed and a Prospectus must be delivered
by the Placement Agents in connection with any offering or sale of Registrable
Notes because such Registrable Notes represent an unsold allotment for the
original offering thereof, the Company shall use its best efforts to cause to be
filed as soon as practicable after such determination, date or notice of such
opinion of counsel is given to the Company, as the case may be, a Shelf
Registration Statement providing for the sale by the Holders of all of the
Registrable Notes and to have such Shelf Registration Statement declared
effective by the SEC. In the event the Company is required to file a Shelf
Registration Statement solely as a result of the matters referred to in clause
(iii) of the preceding sentence, the Company shall file and have declared
effective by the SEC both an Exchange Offer Registration Statement pursuant to
Section 2(a) with respect to all Registrable Notes and a Shelf Registration
Statement (which may be a combined Registration Statement with the Exchange
Offer Registration Statement) with respect to offers and sales of Registrable
Notes held by the Placement Agents after completion of the Exchange Offer. The
Company agrees to use its best efforts to keep the Shelf Registration Statement
continuously effective until the third anniversary of the initial sale of the
Registrable Notes (or, if the Company is required to file such Shelf
Registration Statement solely as a result of the matters referred to in clause
(iii) of the first sentence of this Section 2(b), until 180 days after the
effective date of such Shelf Registration Statement) or such shorter period that
will terminate when all of the Registrable Notes covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement. The Company further agrees to supplement or amend the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the 1933 Act or by any other rules and regulations
thereunder for shelf registration or if reasonably requested by the Majority
Holders with respect to information relating to the Holders of Notes, and to use
its best efforts to cause any such amendment to become effective and such Shelf
Registration Statement to become
7
<PAGE>
usable as soon as thereafter practicable. The Company agrees to furnish to the
Holders of Registrable Notes copies of any such supplement or amendment promptly
after its being used or filed with the SEC.
(c) Expenses. The Company shall pay all Registration Expenses in
--------
connection with the registration pursuant to Section 2(a) or Section 2(b). Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable Notes
pursuant to the Shelf Registration Statement.
(d) Effective Registration Statement. An Exchange Offer Registration
--------------------------------
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided, however, that, if,
-------- -------
after it has been declared effective, the offering of Registrable Notes pursuant
to a Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other governmental
agency or court, such Registration Statement will be deemed not to have become
effective during the period of such interference until the offering of
Registrable Notes pursuant to such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event the Exchange Offer is not
-------------------------
consummated or a Shelf Registration Statement is not declared effective by the
180th calendar day following the date of original sale of the Notes, the
interest rate borne by the Notes shall be increased by one-half of one percent
per annum. Upon the consummation of the Exchange Offer or the effectiveness of
a Shelf Registration Statement, as the case may be, the interest rate borne by
the Notes will be reduced to the original interest rate.
(f) Specific Enforcement. Without limiting the remedies available to the
--------------------
Placement Agents and the Holders, the Company acknowledges that any failure by
the Company to comply with its obligations under Section 2(a) and Section 2(b)
hereof may result in material irreparable injury to the Placement Agents or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Placement Agents or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2(a) and Section 2(b) hereof.
8
<PAGE>
3. Registration Procedures.
-----------------------
In connection with the obligations of the Company with respect to the
Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the
Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form (x) shall be selected by the
Company and (y) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Notes by the selling Holders thereof and (z) shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith, and use its best efforts to cause such Registration Statement
to become effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus supplement and, as so
supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to keep each
Prospectus current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or dealers with
respect to the Registrable Notes or Exchange Notes;
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, to counsel for the Placement Agents, to counsel for the
Holders and to each Underwriter of an Underwritten Offering of Registrable
Notes, if any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and such other
documents as such Holder or Underwriter may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable Notes; and
the Company consents to the use of such Prospectus and any amendment or
supplement thereto in accordance with applicable law by each of the selling
holders of Registrable Notes and any such Underwriters in connection with an
Underwritten Offering and sale of the Registrable Notes covered by and in the
manner described in such Prospectus or any amendment or supplement thereto in
accordance with applicable law;
9
<PAGE>
(d) use its best efforts to register or qualify the Registrable Notes under
all applicable state securities or "blue sky" laws of such jurisdictions as any
Holder of Registrable Notes covered by a Registration Statement shall reasonably
request in writing by the time the applicable Registration Statement is declared
effective by the SEC, to cooperate with the Holders in connection with any
filings required to be made with the NASD and do any and all other acts and
things which may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of such Registrable Notes
owned by such Holder; provided, however, that the Company shall not be required
-------- -------
to (i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (ii) file any general consent to service of process or (iii)
subject itself to taxation in any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify a representative Holder
designated by the Majority Holders (the "Holder Representative") and its counsel
and counsel for the Placement Agents promptly and, if requested by such Holder
Representative or counsel, confirm such advice in writing (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto have been filed and become effective, (ii) of
any request by the SEC or any state securities authority for amendments and
supplements to a Registration Statement and Prospectus or for additional
information after the Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop order
suspending the effectiveness of a Registration Statement or the initiation of
any proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Notes covered
thereby, the representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar agreement,
if any, relating to the offering cease to be true and correct in all material
respects or if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Notes for sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v) of the
happening of any event during the period a Shelf Registration Statement is
effective which makes any statement made
10
<PAGE>
in such Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not misleading
and (vi) of any determination by the Company that a post-effective amendment to
a Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide immediate notice to each Holder of the withdrawal of
any such order;
(g) in the case of a Shelf Registration, furnish to the Holder
Representative, without charge, at least one conformed copy of each Registration
Statement and any post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold and not bearing any
restrictive legends and enable such Registrable Notes to be in such
denominations (consistent with the provisions of the Indenture) and registered
in such names as the selling Holders may reasonably request at least two
business days prior to the closing of any sale of Registrable Notes;
(i) in the case of a Shelf Registration, upon the occurrence of any event
contemplated by Section 3(e)(v) hereof, use its best efforts to prepare a
supplement or post-effective amendment to a Registration Statement or the
related Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers of
the Registrable Notes, such Prospectus will not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Company agrees to notify the Holders to suspend use of the
Prospectus as promptly as practicable after the occurrence of such an event, and
the Holders hereby agree to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or omission;
11
<PAGE>
(j) a reasonable time prior to the filing of any Registration Statement,
any Prospectus, any amendment to a Registration Statement or amendment or
supplement to a Prospectus or any document which is to be incorporated by
reference into a Registration Statement or a Prospectus after initial filing of
a Registration Statement, provide copies of such document to the Placement
Agents and their counsel (and, in the case of a Shelf Registration Statement,
the Holder Representative and its counsel) and make such of the representatives
of the Company as shall be reasonably requested by the Placement Agents or their
counsel (and, in the case of a Shelf Registration Statement, the Holder
Representative or its counsel) available for discussion of such document, and
shall not at any time file or make any amendment to the Registration Statement,
any Prospectus or any amendment of or supplement to a Registration Statement or
a Prospectus or any document which is to be incorporated by reference into a
Registration Statement or a Prospectus, of which the Placement Agents and their
counsel (and, in the case of a Shelf Registration Statement, the Holder
Representative and its counsel) shall not have previously been advised and
furnished a copy or to which the Placement Agents or their counsel (and, in the
case of a Shelf Registration Statement, the Holder Representative or its
counsel) shall reasonably object;
(k) obtain a CUSIP number for all Exchange Notes, or Registrable Notes, as
the case may be, not later than the effective date of a Registration Statement;
(l) cause the Indenture to be qualified under the Trust Indenture Act of
1939, as amended (the "TIA"), in connection with the registration of the
Exchange Notes or Registrable Notes, as the case may be, and cooperate with the
Trustee and the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms of
the TIA and execute, and use its best efforts to cause the Trustee to execute,
all documents as may be required to effect such changes and all other forms and
documents required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for inspection by
the Holder Representative, any Underwriter participating in any disposition
pursuant to such Shelf Registration Statement, and attorneys and accountants
designated by the Holder
12
<PAGE>
Representative, at reasonable times and in a reasonable manner, all financial
and other records, pertinent documents and properties of the Company, and cause
the respective officers, directors and employees of the Company to supply all
information reasonably requested by any such representative, Underwriter,
attorney or accountant in connection with a Shelf Registration Statement, in
each case that would customarily be reviewed or examined in connection with a
"due diligence" review of the Company; provided that the Company shall be
--------
obligated to participate in no more than two such "due diligence" reviews
pursuant to this Section 3(m) during any 12-month period;
(n) use its best efforts to cause the Exchange Notes or Registrable Notes,
as the case may be, to be rated by two nationally recognized statistical rating
organizations (as such term is defined in Rule 436(g)(2) under the 1933 Act);
(o) if reasonably requested by any Holder of Registrable Notes covered by
a Registration Statement, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information with respect to such Holder as such
Holder reasonably requests to be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as the Company has received notification of the matters to be incorporated in
such filing; and
(p) in the case of an Underwritten Offering pursuant to a Shelf
Registration, enter into such customary agreements and take all such other
customary actions in connection therewith (including those reasonably requested
by the Majority Holders) in order to expedite or facilitate the disposition of
such Registrable Notes and in such connection, (i) to the extent possible, make
such representations and warranties to the Holders and any Underwriters of such
Registrable Notes with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents incorporated
by reference or deemed incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to underwriters in
underwritten offerings and confirm the same if and when requested, (ii) obtain
opinions of counsel to the Company (which counsel and opinions, in form, scope
and substance, shall be reasonably satisfactory to the Holders and such
Underwriters and their respective -
13
<PAGE>
counsel) addressed to each selling Holder and Underwriter of Registrable Notes,
covering the matters customarily covered in opinions requested in underwritten
offerings, (iii) obtain "cold comfort" letters from the independent certified
public accountants of the Company (and, if necessary, any other certified public
accountant of any subsidiary of the Company, or of any business acquired by the
Company for which financial statements and financial data are, or are required
to be, included in the Registration Statement) addressed to each selling Holder
and Underwriter of Registrable Notes, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings, and (iv) deliver such documents and
certificates as may be reasonably requested by the Holders of a majority in
principal amount of the Registrable Notes being sold to the Underwriters, and
which are customarily delivered in underwritten offerings, to evidence the
continued validity of the representations and warranties of the Company made
pursuant to clause (i) above and to evidence compliance with any customary
conditions contained in an underwriting agreement; provided that the Company
--------
shall be required to make no more than one Underwritten Offering in any 12-month
period and shall be required to make an Underwritten Offering only upon the
request of Holders of at least 25% of the Registrable Notes outstanding at the
time such request is delivered to the Company. In the case of any Underwritten
Offering, the Company shall provide written notice to the Holders of all
Registrable Notes of such Underwritten Offering at least 30 days prior to the
filing of a prospectus supplement for such Underwritten Offering. Such notice
shall (x) offer each such Holder the right to participate in such Underwritten
Offering, (y) specify a date, which shall be no earlier than 10 days following
the date of such notice, by which such Holder must inform the Company of its
intent to participate in such Underwritten Offering and (z) include the
instructions such Holder must follow in order to participate in such
Underwritten Offering.
In the case of a Shelf Registration Statement, the Company may require each
Holder of Registrable Notes to furnish to the Company such information regarding
the Holder and the proposed distribution by such Holder of such Registrable
Notes as the Company may from time to time reasonably request in writing.
14
<PAGE>
In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 3(e)(v) hereof, such Holder will forthwith discontinue
disposition of Registrable Notes pursuant to a Registration Statement until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section (3)(i) hereof, and, if so directed by the Company, such
Holder will deliver to the Company (at its expense) all copies in its
possession, other than permanent file copies then in such Holder's possession,
of the Prospectus covering such Registrable Notes current at the time of receipt
of such notice. If the Company shall give any such notice to suspend the
disposition of Registrable Notes pursuant to a Registration Statement, the
Company shall extend the period during which the Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days during the
period from and including the date of the giving of such notice to and including
the date when the Holders shall have received copies of the supplemented or
amended Prospectus necessary to resume such dispositions.
The Holders of Registrable Notes covered by a Shelf Registration Statement
who desire to do so may sell such Registrable Notes in an Underwritten Offering,
subject to the limitations set forth in the proviso to the first sentence of
this section 3(p). In any such Underwritten Offering, the investment banker or
investment bankers and manager or managers (the "Underwriters") that will
administer the offering will be selected by the Holders of a majority in
principal amount of the Registrable Notes included in such offering.
4. Certain Matters Relating to Broker-Dealers and the Exchange Offer.
-----------------------------------------------------------------
(a) The Staff of the SEC has taken the position that any broker-dealer
that receives Exchange Notes for its own account in the Exchange Offer in
exchange for Notes that were acquired by such broker-dealer as a result of
market-making or other trading activities (a "Participating Broker-Dealer"), may
be deemed to be an "underwriter" within the meaning of the 1933 Act and must
deliver a prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Notes.
The Company understands that it is the Staff's position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
15
<PAGE>
which Participating Broker-Dealers may resell the Exchange Notes, without naming
the Participating Broker-Dealers or specifying the amount of Exchange Notes
owned by them, such Prospectus may be delivered by Participating Broker-Dealers
to satisfy their prospectus delivery obligation under the 1933 Act in connection
with resales of Exchange Notes for their own accounts, so long as the Prospectus
otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of this
Agreement, the Company agrees that the provisions of this Agreement as they
relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be, reasonably requested by the Placement Agents or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Notes by
Participating Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; provided that:
--------
(i) the Company shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement, as would
otherwise be contemplated by Section 3(i), for a period exceeding 180 days after
the last Exchange Date (as such period may be extended pursuant to the
penultimate paragraph of Section 3 of this Agreement) and Participating Broker-
Dealers shall not be authorized by the Company to deliver and shall not deliver
such Prospectus after such period in connection with the resales contemplated by
this Section 4; and
(ii) the application of the Shelf Registration procedures set forth in
Section 3 of this Agreement to an Exchange Offer Registration, to the extent not
required by the positions of the Staff of the SEC or the 1933 Act and the rules
and regulations thereunder, will be in conformity with the reasonable request to
the Company by the Placement Agents or with the reasonable request in writing to
the Company by one or more broker-dealers who certify to the Placement Agents
and the Company in writing that they anticipate that they will be Participating
Broker-Dealers; and provided further that, in connection with such application
-------- -------
of the Shelf Registration procedures set forth in Section 3 to an Exchange Offer
Registration, the Company shall be obligated (x) to deal only with one entity
representing the Participating Broker-Dealers, which shall be the Placement
Agents unless they elect not to
16
<PAGE>
act as such representatives, (y) to pay the fees and expenses of only one
counsel representing the Participating Broker-Dealers, which shall be counsel to
the Placement Agents unless such counsel elects not to so act and (z) to cause
to be delivered only one, if any, "cold comfort" letter with respect to the
Prospectus in the form existing on the last Exchange Date.
(c) The Placement Agents shall have no liability to the Company or any
Holder with respect to any request that they may make pursuant to Section 4(b)
above.
5. Indemnification and Contribution.
--------------------------------
(a) The Company agrees to indemnify and hold harmless the Placement
Agents, each Holder and each Person, if any, who controls the Placement Agents
or any Holder within the meaning of either Section 15 of the 1933 Act or Section
20 of the 1934 Act, or is under common control with, or is controlled by, the
Placement Agents or any Holder, from and against all losses, claims, damages and
liabilities (including, without limitation, any reasonable legal or other
expenses incurred by the Placement Agents, any Holder or any such controlling
person or person who is under common control with, or is controlled by, the
Placement Agents or any Holder in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in any Registration Statement (or any amendment
thereto) pursuant to which Exchange Notes or Registrable Notes were registered
under the 1933 Act, including all documents incorporated therein by reference,
or caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto), or caused
by any omission or alleged omission to state therein a material fact necessary
to make the statements therein in light of the circumstances under which they
were made not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the Placement
Agents or any Holder furnished to the Company in writing by the Placement Agents
or any selling Holder expressly for use therein. In connection with any
Underwritten Offering permitted by Section 3 hereof, the Company will also
indemnify the Underwriters, if any, selling brokers, dealers and similar
17
<PAGE>
securities industry professionals participating in the distribution, their
officers and directors and each Person who controls such Persons within the
meaning of either Section 15 of the 1933 Act or Section 20 of the 1934 Act to
the same extent as provided above with respect to the indemnification of the
Holders, if requested in connection with any Registration Statement.
(b) Each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, the Placement Agents and the other selling Holders and
each of their respective directors, its officers who sign the Registration
Statement and each Person, if any, who controls the Company, the Placement
Agents and any other selling Holder within the meaning of either Section 15 of
the 1933 Act or Section 20 of the 1934 Act to the same extent as the foregoing
indemnity from the Company to the Placement Agents and the Holders, but only
with reference to information relating to the Placement Agents or such Holder
furnished to the Company in writing by such Holder expressly for use in any
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to either paragraph (a) or paragraph (b) above, such person (the
"indemnified party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and the
indemnifying party, upon request of the indemnified party, shall retain counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel, but the fees and expenses of such counsel shall be at the expense
of such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the fees and expenses of more than one separate
firm (in addition to any local counsel) for the Placement Agents and all
persons, if any,
18
<PAGE>
who control the Placement Agents within the meaning of either Section 15 of the
1933 Act or Section 20 of the 1934 Act, (b) the fees and expenses of more than
one separate firm (in addition to any local counsel) for the Company, its
directors, its officers who sign the Registration Statement and each person, if
any, who controls the Company within the meaning of either such Section and (c)
the fees and expenses of more than one separate firm (in addition to any local
counsel) for all Holders and all persons, if any, who control any Holders within
the meaning of either such Section, and that all such fees and expenses shall be
reimbursed as they are incurred. In such case involving the Placement Agents
and persons who control the Placement Agents, such firm shall be designated in
writing by Morgan Stanley. In such case involving the Holders and such persons
who control Holders, such firm shall be designated in writing by the Majority
Holders. In all other cases, such firm shall be designated by the Company. The
indemnifying party shall not be liable for any settlement of any proceeding
effected without its written consent but, if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment. Notwithstanding the foregoing sentence, if at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this paragraph, the indemnifying party
agrees that it shall be liable for any settlement of any proceeding effected
without its written consent if (i) such settlement is entered into more than 60
days after receipt by such indemnifying party of the aforesaid request and (ii)
such indemnifying party shall not have reimbursed the indemnified party for such
fees and expenses of counsel in accordance with such request prior to the date
of such settlement. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which such indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding.
(d) If the indemnification provided for in paragraph (a) or paragraph (b)
of this Section 5 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, in lieu of
19
<PAGE>
indemnifying such indemnified party thereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party or parties on the one hand and of the
indemnified party or parties on the other hand in connection with the statements
or omissions that resulted in such losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The relative fault of the
Company and the Holders shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the Holders and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. The Holders' respective obligations to contribute
pursuant to this Section 5(d) are several in proportion to the respective number
of Registrable Notes of such Holder that were registered pursuant to a
Registration Statement.
(e) The Company and each Holder agrees that it would not be just or
equitable if contribution pursuant to this Section 5 were determined by pro rata
--- ----
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of losses, claims, damages
and liabilities referred to in paragraph (d) above shall be deemed to include,
subject to the limitations set forth above, any reasonable legal or other
expenses incurred by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the provisions of this
Section 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Notes were
sold by such Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 are not
exclusive and shall not limit any rights or remedies which may otherwise be
available to any indemnified party at law or in equity.
The indemnity and contribution provisions contained in this Section 5 shall
remain operative and in
20
<PAGE>
full force and effect regardless of (i) any termination of this Agreement, (ii)
any investigation made by or on behalf of the Placement Agents, any Holder or
any person controlling the Placement Agents or any Holder, or by or on behalf of
the Company, its respective officers or directors or any person controlling the
Company, (iii) acceptance of any of the Exchange Notes and (iv) any sale of
Registrable Notes pursuant to a Shelf Registration Statement.
6. Miscellaneous.
-------------
(a) No Inconsistent Agreements. The Company has not entered into, and on
--------------------------
or after the date of this Agreement will not enter into, any agreement which is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement, including
----------------------
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given unless the Company has obtained the written consent of Holders of at least
a majority in aggregate principal amount of the outstanding Registrable Notes
affected by such amendment, modification, supplement, waiver or consent;
provided, however, that no amendment, modification, supplement, waiver or
- -------- -------
consent to any departure from the provisions of Section 5 hereof shall be
effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder.
(c) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery
(i) if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Placement Agents,
the address set forth in the Placement Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Placement Agreement and
thereafter at such other address notice of which is given in accordance with the
provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by
21
<PAGE>
hand, if personally delivered; five business days after being deposited in the
mail, postage prepaid, if mailed; when answered back, if telexed; when receipt
is acknowledged, if telecopied; and on the next business day, if timely
delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
----------------------
and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
--------
permit any assignment, transfer or other disposition of Registrable Notes in
violation of the terms of the Placement Agreement. If any transferee of any
Holder shall acquire Registrable Notes, in any manner, whether by operation of
law or otherwise, such Registrable Notes shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Notes such
person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement and such person shall be
entitled to receive the benefits hereof. The Placement Agents (in their
capacity as Placement Agents) shall have no liability or obligation to the
Company with respect to any failure by a Holder to comply with, or any breach by
any Holder of, any of the obligations of such Holder under this Agreement.
(e) Third Party Beneficiary. The Holders shall be third party
-----------------------
beneficiaries to the agreements made hereunder among the Company, on the one
hand, and the Placement Agents, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder.
(f) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
22
<PAGE>
(h) Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of New York.
(i) Severability. In the event that any one or more of the provisions
------------
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
23
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
CONTINENTAL CABLEVISION, INC.
By: /s/ P. Eric Krauss
--------------------------
Name: P. Eric Krauss
Title: Vice President and
Treasurer
Confirmed and accepted as of
the date first above written:
MORGAN STANLEY & CO. INCORPORATED
LAZARD FRERES & CO. LLC
By MORGAN STANLEY & CO. INCORPORATED
By: /s/ Charles Ditkoff
------------------------------
Name: Charles Ditkoff
Title: Vice President
24
<PAGE>
EXECUTION COPY
--------------
Exhibit 10.25
ASSET EXCHANGE AGREEMENT
dated as of December 20, 1995
between
CONTINENTAL CABLEVISION OF ST. LOUIS COUNTY, INC.
and
TCI CABLE PARTNERS OF ST. LOUIS, L.P.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS....................................................1
Section 1.1 Terms Defined in this Section............................1
"Affiliate"........................................................1
"Assets"...........................................................1
"Assumed Social Contract Obligations"..............................2
"Business Day".....................................................2
"Cable Act"........................................................2
"Closing Date".....................................................2
"Closing Time".....................................................2
"Code".............................................................2
"Communications Act"...............................................2
"Continental Required Consents"....................................2
"Contract".........................................................2
"Deposits".........................................................2
"ERISA"............................................................2
"ERISA Affiliate"..................................................3
"FCC"..............................................................3
"Governmental Authority"...........................................3
"Hazardous Substances".............................................3
"HSR Act"..........................................................3
"Individual Subscriber"............................................3
"Judgment".........................................................3
"Leased Property"..................................................3
"Legal Requirement"................................................4
"Lien".............................................................4
"Litigation".......................................................4
"Losses"...........................................................4
"Owned Property"...................................................4
"Permitted Lien"...................................................4
"Person"...........................................................4
"Real Property Interests"..........................................4
"Required Consents"................................................5
"Social Contract"..................................................5
"Subscriber Equivalent"............................................5
"System"...........................................................5
"Systems Contracts"................................................5
"Systems Franchises"...............................................5
"Systems Licenses".................................................5
"Tangible Personal Property".......................................5
-i-
<PAGE>
"Taxes"............................................................5
"TCI Entity".......................................................6
"TCICP Required Consents"..........................................6
"Transaction Documents"............................................6
Section 1.2 Other Definitions.......................................6
Section 1.3 Rules of Construction...................................7
ARTICLE 2 EXCHANGE.......................................................8
Section 2.1 Exchange of Continental Assets and TCICP Assets.........8
Section 2.2 TCICP Assumed Liabilities..............................11
Section 2.3 Continental Assumed Liabilities........................11
Section 2.4 Current Items Amount...................................11
Section 2.5 Current Items Amount Calculated........................13
ARTICLE 3 RELATED MATTERS...............................................14
Section 3.1 Employees..............................................14
Section 3.2 Bonds..................................................14
Section 3.3 Use of Names and Logos.................................14
Section 3.4 Transfer Laws..........................................15
Section 3.5 Transfer Taxes.........................................15
Section 3.6 Further Assurances.....................................15
ARTICLE 4 CONTINENTAL'S REPRESENTATIONS AND WARRANTIES..................15
Section 4.1 Organization of Continental............................15
Section 4.2 Authority..............................................15
Section 4.3 No Conflict; Required Consents.........................16
Section 4.4 Assets; Title, Condition, and Sufficiency..............16
Section 4.5 Continental Systems Franchises, System Licenses, System
Contracts, Owned Property and Real Property Interests..16
Section 4.6 Employee Benefits......................................17
Section 4.7 Litigation.............................................17
Section 4.8 Cable Operations.......................................18
Section 4.9 Tax Returns: Other Reports.............................18
Section 4.10 Continental Systems Information........................18
Section 4.11 Compliance with Legal Requirements.....................18
Section 4.12 Real Property..........................................20
Section 4.13 Pro Forma Financial Statements; No Adverse Change......21
Section 4.14 Employees..............................................21
Section 4.15 Environmental..........................................22
Section 4.16 Holding Period.........................................22
-ii-
<PAGE>
ARTICLE 5 TCICP'S REPRESENTATIONS AND WARRANTIES........................22
Section 5.1 Organization and Qualification of TCICP................22
Section 5.2 Authority..............................................23
Section 5.3 No Conflict; Required Consents.........................23
Section 5.4 Assets; Title, Condition, and Sufficiency..............23
Section 5.5 TCICP Systems Franchises, TCICP Systems Licenses, TCICP
Systems Contracts and TCICP Real Property Interests....24
Section 5.6 Employee Benefits......................................24
Section 5.7 Litigation.............................................25
Section 5.8 Cable Operations.......................................25
Section 5.9 Tax Returns; Other Reports.............................25
Section 5.10 System Information.....................................25
Section 5.11 Compliance with Legal Requirements.....................26
Section 5.12 Real Property..........................................27
Section 5.13 Pro Forma Financial Statements; No Adverse Change......28
Section 5.14 Employees..............................................28
Section 5.15 Environmental..........................................29
Section 5.16 Holding Period.........................................29
ARTICLE 6 COVENANTS.....................................................30
Section 6.1 Certain Affirmative Covenants..........................30
Section 6.2 Certain Negative Covenants.............................32
Section 6.3 Confidentiality and Publicity..........................32
Section 6.4 Title Insurance Commitments............................33
Section 6.5 Leased Vehicles........................................33
Section 6.6 Programming............................................33
Section 6.7 Consents...............................................33
Section 6.8 Subscriber Billing Services............................34
Section 6.9 Distant Broadcast Signals..............................34
Section 6.10 Post-Closing Cooperation upon Inquiries as to Rates....34
Section 6.11 Employee Continuation Plans............................34
Section 6.12 MPT....................................................34
Section 6.13 Updated Schedules......................................35
Section 6.14 Certain Notices........................................35
ARTICLE 7 CONDITIONS PRECEDENT..........................................35
Section 7.1 Conditions to Continental's Obligations................35
Section 7.2 Conditions to TCICP's Obligations......................37
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<PAGE>
ARTICLE 8 CLOSING.......................................................39
Section 8.1 Closing; Time and Place................................39
Section 8.2 TCICP's Obligations....................................39
Section 8.3 Continental's Obligations..............................40
ARTICLE 9 TERMINATION AND DEFAULT.......................................42
Section 9.1 Termination Events.....................................42
Section 9.2 Effect of Termination..................................42
ARTICLE 10 INDEMNIFICATION...............................................42
Section 10.1 Indemnification by TCICP...............................42
Section 10.2 Indemnification by Continental.........................43
Section 10.3 Procedure for Indemnified Third Party Claim............44
Section 10.4 Determination of Indemnification Amounts and
Related Matters........................................44
Section 10.5 Time and Manner of Certain Claims......................45
Section 10.6 Other Indemnification..................................45
ARTICLE 11 MISCELLANEOUS PROVISIONS......................................45
Section 11.1 Expenses...............................................45
Section 11.2 Brokerage..............................................45
Section 11.3 Waivers................................................45
Section 11.4 Notices................................................46
Section 11.5 Entire Agreement; Prior Representations; Amendments....47
Section 11.6 Specific Performance:Other Rights and Remedies.........47
Section 11.7 Binding Effect: Benefits...............................47
Section 11.8 Headings and Exhibits..................................48
Section 11.9 Counterparts...........................................48
Section 11.10 GOVERNING LAW..........................................48
Section 11.11 Severability...........................................48
Section 11.12 Third Parties; Joint Ventures..........................48
Section 11.13 Construction...........................................48
Section 11.14 Attorneys' Fees........................................49
Section 11.15 Risk of Loss...........................................49
Section 11.16 Tax Consequences.......................................49
Section 11.17 Commercially Reasonable Efforts........................49
Section 11.18 Time...................................................49
-iv-
<PAGE>
ASSET EXCHANGE AGREEMENT
THIS ASSET EXCHANGE AGREEMENT ("Agreement") is made and entered into
as of December 20, 1995 by and between Continental Cablevision of St. Louis
County, Inc., a Delaware corporation ("Continental") and TCI Cable Partners of
St. Louis, L.P., a Colorado limited partnership ("TCICP").
RECITALS
--------
A. Continental owns and operates cable television systems which are
franchised or hold other operating authority and operate in and around St.
Louis, Missouri (the "Continental Systems").
B. As of Closing, TCICP will own and operate cable television systems
which are franchised or hold other operating authority and operate in and around
Andover, Waltham, Nantucket and Barnstable, Massachusetts (collectively, the
"TCICP Systems").
C. This Agreement sets forth the terms and conditions on which
Continental will convey or cause to be conveyed to TCICP substantially all of
the assets of the Continental Systems, and TCICP will convey to Continental
substantially all of the assets of the TCICP Systems, in such a manner as to
effect a like-kind exchange of such assets under Section 1031 of the United
States Internal Revenue Code.
AGREEMENT
---------
In consideration of the mutual covenants and promises set forth in
this Agreement, Continental and TCICP agree as follows:
ARTICLE 1
DEFINITIONS
-----------
Section 1.1 Terms Defined in this Section. In addition to terms
----------- -----------------------------
defined elsewhere in this Agreement, the following terms with initial capital
letters, when used in this Agreement, will have the meanings set forth below:
"Affiliate" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
-v-
<PAGE>
"Assets" means theContinental Assets or the TCICP Assets, as the
context requires.
"Assumed Social Contract Obligations" means the rate, MPT and Going
Forward (as those terms are used in the Social Contract) adjustments which
Continental Cablevision, Inc. has implemented prior to Closing in accordance
with the Social Contract as currently in effect with respect to the Continental
Systems (but excluding all other obligations or liabilities, including any
refund obligations, except as provided in Section 2.4(d), pursuant to Section
--------------
III.A. of the Social Contract or upgrade commitments pursuant to Section III.E.
of the Social Contract).
"Business Day" means any day other than a Saturday or Sunday or a day
on which banks in Boston, Massachusetts or Denver, Colorado are closed.
"Cable Act" means the Cable Television Consumer Protection and
Competition Act of 1992, and, unless the context otherwise requires, the rules
and regulations promulgated thereunder.
"Closing Date" means the date on which the Closing occurs.
"Closing Time" means 11:59 P.M., eastern local time, on the Closing
Date.
"Code" means the Internal Revenue Code of 1986, as amended, and,
unless the context otherwise requires, the rules and regulations promulgated
thereunder.
"Communications Act" means the Communications Act of 1934, as amended,
and, unless the context otherwise requires, the rules and regulations
promulgated thereunder.
"Continental Required Consents" means any and all consents,
authorizations and approvals required under (i) the Continental Systems
Franchises and Continental Systems Licenses and (ii) the Continental Real
Property Interests and Continental Systems Contracts identified and marked with
an asterisk on Exhibit 4.3.
-----------
"Contract" means any written contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant, right
or other instrument, document, obligation or agreement, and any oral obligation,
right or agreement.
"Deposits" means all monies which are on deposit with third parties as
of the Closing Time for the account of Continental or TCICP (or, in the case of
TCICP, a TCI Entity with respect to the TCICP Systems), as appropriate, or as
security for such party's performance of its obligations (other than any
deposits which are Excluded Assets or the full benefit of which will not be
available to TCICP or Continental, as appropriate, following the Closing),
including deposits on real property leases and deposits for utilities.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and, unless the context otherwise requires, the rules and regulations
promulgated thereunder and published interpretations with respect thereto.
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<PAGE>
"ERISA Affiliate" means, as to any Person, any trade or business,
whether or not incorporated, which together with such Person would be deemed a
single employer within the meaning of Section 4001 of ERISA.
"FCC" means the Federal Communications Commission.
"Governmental Authority" means (i) the United States of America, (ii)
any state, commonwealth, territory or possession of the United States of America
and any political subdivision thereof (including counties, municipalities,
provinces, parishes and the like), (iii) any foreign (as to the United States of
America) sovereign entity and any political subdivision thereof and (iv) any
court, tribunal, department, commission, board, bureau, agency, authority or
instrumentality of any of the foregoing.
"Hazardous Substances" means: (i) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976 (RCRA) (42 U.S.C.A. (S)(S)
6901 et seq.), as amended, and the rules and regulations promulgated thereunder;
-- ---
(ii) any "hazardous substance'' as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (42 U.S.C.A. (S)(S) 9601 et
--
seq.) (CERCLA), as amended, and rules and regulations promulgated thereunder;
- ---
(iii) any substance regulated by the Toxic Substances Control Act (TSCA) (42
U.S.C. (S) 2601 et seq.), as amended, and the rules and regulations promulgated
-- ---
thereunder; (iv) asbestos; (v) polychlorinated biphenyls; (vi) any substances
regulated under the provisions of Subtitle I of RCRA relating to underground
storage tanks; (vii) any substance the presence, use, treatment, storage or
disposal of which on the Owned or Leased Property is prohibited by any Legal
Requirement; and (viii) any other substance which by any Legal Requirement
requires special handling, reporting or notification of any Governmental
Authority in its collection, storage, use, treatment or disposal.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and, unless the context otherwise requires, the rules and
regulations thereunder.
"Individual Subscriber" means any subscriber of a System at that
System's regular monthly subscriber rate for basic cable television service as
shown on Exhibit 4.10 or Exhibit 5.10, as applicable, who has been an active
------------ ------------
subscriber of that System's basic cable television service for at least two full
months, who is not pending disconnection for any reason and who is not, as of
the Closing Time, 60 days or more in arrears in payment for service, as measured
from the first day of the month for which service was provided.
"Judgment" means any judgment, writ, order, injunction, award or
decree of or by any Governmental Authority.
"Leased Property" means Continental Leased Property or TCICP Leased
Property, as the context requires.
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<PAGE>
"Legal Requirement" means applicable common law and any statute,
ordinance, code, law, rule, regulation, order, technical or other written
standard, requirement or procedure enacted, adopted, promulgated, applied or
followed by any Governmental Authority, including any Judgment.
"Lien" means any security agreement, financing statement filed with
any Governmental Authority, conditional sale or other title retention agreement,
any lease, consignment or bailment given for purposes of security, any lien,
mortgage, indenture, pledge, option, encumbrance, adverse interest, constructive
trust or other trust, claim, attachment, exception to or defect in title or
other ownership interest (including reservations, rights of entry, possibilities
of reverter, encroachments, easements, rights-of-way, restrictive covenants,
leases and licenses) of any kind, which otherwise constitutes an interest in or
claim against property, whether arising pursuant to any Legal Requirement, any
Contract or otherwise.
"Litigation" means any claim, action, suit, proceeding, arbitration,
investigation, hearing or other activity or procedure that could result in a
Judgment, and any notice of any of the foregoing.
"Losses" means any claims, losses, liabilities, damages, Liens,
penalties, costs and expenses, including interest which may be imposed in
connection therewith, expenses of investigation, reasonable fees and
disbursements of counsel and other experts and the cost to any Person making a
claim or seeking indemnification under this Agreement with respect to funds
expended by such Person by reason of the occurrence of any event with respect to
which indemnification is sought.
"Owned Property" means the Continental Owned Property or TCICP Owned
Property, as the context requires.
"Permitted Lien" means any (i) Lien securing Taxes, assessments and
governmental charges not yet due and payable, (ii) zoning law or ordinance or
any similar Legal Requirement, (iii) right reserved to any Governmental
Authority to regulate the affected property and (iv) as to Owned Property and
Real Property Interests, any Lien which is reflected in the public records and
which does not individually or in the aggregate with one or more other Liens
interfere with the right or ability to own, use or operate the Owned Property or
Real Property Interests as they are currently being used or operated or to
convey good, marketable and indefeasible title to the same; provided that
"Permitted Liens" will not include any Lien which could prevent or inhibit in
any way the conduct of the business of the affected System as it is currently
being conducted. Classification of any Lien as a "Permitted Lien" will not
affect any liability which TCICP or Continental may otherwise have under this
Agreement, including pursuant to any indemnity obligation under this Agreement.
"Person" means any human being, Governmental Authority, corporation,
limited liability company, partnership, joint venture, trust, association or
unincorporated entity of any kind.
"Real Property Interests" means the Continental Real Property
Interests or TCICP Real Property Interests, as the context requires.
-viii-
<PAGE>
"Required Consents" means the Continental Required Consents or TCICP
Required Consents, as the context requires.
"Social Contract" means the Social Contract for Continental
Cablevision, Inc. effective August 1, 1995 (FCC 95-335) between Continental
Cablevision, Inc. and the FCC.
"Subscriber Equivalent" means an equivalent to an Individual
Subscriber, the number of Subscriber Equivalents served by a System being equal,
as of any date, to the quotient of (i) the aggregate revenues earned by that
System for basic cable television service provided by that System, during the
last full month ending on or prior to such date, from billings to residential
multiple dwelling units, commercial accounts, other subscribers that are billed
for such service on a bulk basis and single family households which pay less
than the System's regular basic monthly subscriber rate, divided by (ii) that
System's regular monthly subscriber rate for basic cable television services as
shown on Exhibit 4.10 or Exhibit 5.10, as applicable. For purposes of the
------------ ------------
foregoing there will be excluded all revenues earned from (a) that portion of
the billings to each subscriber representing an installation or other non-
recurring charge, a charge for equipment or for any outlet or connection other
than the first outlet or first connection in any single family household or,
with respect to a bulk account in any residential unit (e.g., an individual
-----
apartment or rental unit), a charge for any tiered service (whether or not
included within Pay TV) or a pass-through charge for sales, taxes, line-itemized
franchise fees and charges and the like and (b) billings to any bulk account or
discounted family household (1) which has not been an active subscriber of that
System for at least two months, (2) which is 60 days or more in arrears in
payment for services, as measured from the first day of the month for which
service was received or (3) which is pending disconnection for any reason.
"System" means any of the Continental Systems or the TCICP Systems,
as the context requires.
"Systems Contracts" means the Continental Systems Contracts or TCICP
Systems Contracts, as the context requires.
"Systems Franchises" means the Continental Systems Franchises or TCICP
Systems Franchises, as the context requires.
"Systems Licenses" means the Continental Systems Licenses or TCICP
Systems Licenses, as the context requires.
"Tangible Personal Property" means the Continental Tangible Personal
Property or TCICP Tangible Personal Property, as the context requires.
"Taxes" means all levies and assessments of any kind or nature imposed
by any Governmental Authority, including all income, sales, use, ad valorem,
value added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes,
-ix-
<PAGE>
together with any interest thereon and any penalties, additions to tax or
additional amounts applicable thereto.
"TCI Entity" means (i) Heritage Cablevision of Massachusetts, Inc.
with respect to the TCICP System in Andover, Massachusetts, (ii) Waltham Tele-
Communications with respect to the TCICP System in Waltham, Massachusetts, and
(iii) WestMarc Development Joint Venture with respect to the TCICP Systems in
Nantucket and Barnstable, Massachusetts.
"TCICP Required Consents" means any and all consents, authorizations
and approvals required under (i) the TCICP Systems Franchises and TCICP Systems
Licenses and (ii) the TCICP Real Property Interests and TCICP Systems Contracts
identified and marked with an asterisk on Exhibit 5.3.
-----------
"Transaction Documents" means the instruments and documents described
in Sections 8.2 and 8.3 which are being executed and delivered by or on behalf
------------ ---
of Continental or TCICP, as the case may be, or any Affiliate of either of them
in connection with this Agreement or the transactions contemplated hereby.
Section 1.2 Other Definitions. The following terms are defined in
----------- -----------------
the Sections indicated:
<TABLE>
<CAPTION>
Term Section
---- -------
<S> <C>
Cash Purchase Price 2.1(a)(iii)
Closing 8.1
Continental Assets 2.1(d)
Continental Assumed Liabilities 2.3
Continental Counsel Opinion 7.2(f)
Continental Employee Continuation Plan 4.6
Continental Estoppel Certificates 6.1(h)
Continental Excluded Assets 2.1(e)
Continental FCC Counsel Opinion 7.2(e)
Continental Leased Property 4.12
Continental Leases 4.12
Continental Owned Property 2.1(d)(ii)
Continental Plans 4.6
Continental Real Property Interests 2.1(d)(ii)
Continental Systems Recital A
Continental Systems Contracts 2.1(d)(v)
Continental System Employees 4.14(a)
Continental Systems Financial Statements 4.13(a)
Continental Systems Franchises 2.1(d) (iii)
Continental Systems Licenses 2.1(d)(iv)
Continental Tangible Personal Property 2.1(d)(i)
Continental Title Policies 8.3(f)
</TABLE>
-x-
<PAGE>
<TABLE>
<S> <C>
Current Items Amount 2.4
Eligible Accounts Receivable 2.4(a)
Final Adjustment Certificate 2.5(b)
Indemnitee 10.4
Indemnitor 10.4
Initial Adjustment Certificate 2.5(a)
Minimum Damage Requirement 10.4(a)
Outside Closing Date 9.1(c)
Social Contract 2.2
Surveys 6.4
System Employees 3.1
TCI Plans 5.6
TCICP Assets 2.1(b)
TCICP Assumed Liabilities 2.2
TCICP Counsel Opinion 7.1(f)
TCICP Estoppel Certificates 6.1(h)
TCICP Excluded Assets 2.1(c)
TCICP FCC Counsel Opinion 7.1(e)
TCICP Leased Property 5.12
TCICP Leases 5.12
TCICP Owned Property 2.1(b)(ii)
TCICP Real Property Interests 2.1(b)(ii)
TCICP Systems Recital B
TCICP Systems Contracts 2.1(b)(v)
TCICP System Employees 5.14(a)
TCICP Systems Financial Statements 5.13(a)
TCICP Systems Franchises 2.1(b)(iii)
TCICP Systems Licenses 2.1(b)(iv)
TCICP Tangible Personal Property 2.1(b)(i)
TCICP Title Policies 8.2(g)
Title Commitments 6.4
Title Company 6.4
Title Defect 6.4
Transitional Billing Services 6.8
WARN 3.2
</TABLE>
Section 1.3 Rules of Construction. Unless otherwise expressly
----------- ---------------------
provided in this Agreement, accounting terms used in this Agreement will have
the meaning ascribed to them under generally accepted accounting principles as
in effect in the United States of America. Words used in this Agreement,
regardless of the gender and number used, will be deemed and construed to
include any other gender, masculine, feminine, or neuter, and any other number,
singular or plural, as the context requires. As used in this Agreement, the
word "including" is not limiting, and the word "or" is not exclusive.
"Knowledge" and words of similar import, when used with reference
-xi-
<PAGE>
to a party, mean the actual knowledge of a particular matter of the executive
officers of such party or the general manager or managers of such party's
Systems.
ARTICLE 2
EXCHANGE
--------
Section 2.1 Exchange of Continental Assets and TCICP Assets.
------------ -----------------------------------------------
(a) Exchange Covenant. Subject to the terms and conditions set forth
-----------------
in this Agreement, at the Closing:
(i) Continental and TCICP agree to exchange simultaneously the
TCICP Assets, except the TCICP Excluded Assets, for the Continental Assets,
except the Continental Excluded Assets, free and clear of all liens (except
Permitted Liens). Continental and TCICP agree to use all reasonable efforts to
structure the transaction in such a way that it will be a tax-free exchange of
like-kind assets under Section 1031 of the Code.
(ii) The Exchange is to occur as follows: (A) the Continental and
TCICP Tangible Personal Property is being exchanged each for the other; (B) the
Continental and TCICP Real Property Interests are being exchanged each for the
other; (C) the Continental and TCICP Systems Contracts, Systems Franchises and
Systems Licenses are being exchanged each for the other; (D) all other
Continental and TCICP Assets tangible or intangible, owned or leased by each are
being exchanged each for the other; and (E) the Continental and TCICP Assumed
Liabilities are being exchanged each for the other to the maximum extent
permitted by Section 1031 of the Code and regulations promulgated thereunder.
(iii) The allocated value of each class of the Continental and
TCICP Assets is as set forth on Exhibit 2.1(a)(iii). None of Continental, TCICP
-------------------
or any of the TCI Entities will take any position inconsistent with such
valuation and all will file all returns and reports with respect to the
transaction contemplated by this Agreement, including all federal, state and
local returns on a basis consistent with that valuation, and each will promptly
give notice to the other of any disallowance of or challenge to such reporting
by any Governmental Authority.
(iv) TCICP will pay to Continental, in immediately available
funds, $2,431,000, reflecting the agreed upon difference in fair market values
between (A) the Continental Assets and (B) the TCICP Assets (the "Cash Purchase
Price").
(v) TCICP or Continental, as appropriate, will pay to the other
cash in an amount equal to the net positive or negative amount of customary
prorations and allocations between TCICP and Continental of current liabilities
and current assets relating to the TCICP Assets on the one hand and the
Continental Assets on the other, as specified in Sections 2.4 and 2.5.
------------ ---
-xii-
<PAGE>
(b) TCICP Assets. "TCICP Assets" means all of the assets and
------------
properties, real and personal, tangible and intangible, owned or leased by TCICP
in the operation of the TCICP Systems as of the Closing Time that are not TCICP
Excluded Assets, including the following:
(i) Tangible Personal Property. All tangible personal property,
--------------------------
including towers, tower equipment, aboveground and underground cable,
distribution systems, headend amplifiers, line amplifiers, microwave equipment,
converters, testing equipment, motor vehicles, office equipment, furniture,
fixtures, supplies, inventory and other physical assets, the principal items of
which are described on Exhibit 2.1(b)(i) (the "TCICP Tangible Personal
-----------------
Property").
(ii) Real Property. The fee interests in the real property
-------------
described as TCICP Owned Property on Exhibit 2.1(b)(ii) and all improvements
------------------
thereon (the "TCICP Owned Property"), and the leases, easements, rights of
access and other interests in real property described as TCICP Real Property
Interests on Exhibit 2.1(b)(ii) (the "TCICP Real Property Interests").
------------------
(iii) Franchises. The franchises and similar authorizations or
----------
permits described on Exhibit 2.1(b)(iii) (the "TCICP Systems Franchises").
-------------------
(iv) Licenses. The intangible CATV channel distribution rights,
--------
cable television relay service (CARS), business radio and other licenses,
copyright notices and other licenses, authorizations, consents or permits issued
by the FCC or any other Governmental Authority described on Exhibit 2.1(b)(iv)
------------------
(the "TCICP Systems Licenses").
(v) Contracts. The pole line and joint line agreements,
---------
underground conduit agreements, crossing agreements, bulk or commercial service
agreements, retransmission consent agreements and other Contracts described on
Exhibit 2.1(b)(v) (the "TCICP Systems Contracts").
- -----------------
(vi) Accounts Receivable. All subscriber, trade and other
-------------------
accounts receivable.
(vii) Books and Records. All engineering records, files, data,
-----------------
drawings, blueprints, schematics, reports, lists, plans and processes and all
files of correspondence, lists, records and reports concerning subscribers and
prospective subscribers of the TCICP Systems, signal and program carriage and
dealings with Governmental Authorities, including all reports filed by or on
behalf of TCICP or the TCI Entity with the FCC and statements of account filed
by or on behalf of TCICP or the TCI Entity with the U.S. Copyright Office.
(c) TCICP Excluded Assets. "TCICP Excluded Assets" means: all (i)
---------------------
programming Contracts and retransmission consents; (ii) insurance policies and
rights and claims thereunder; (iii) bonds, letters of credit, surety instruments
and other similar items; (iv) cash and cash equivalents; (v) TCICP's or a TCI
Entity's trademarks, trade names, service marks, service names, logos and
similar proprietary rights; (vi) subscriber billing Contracts and equipment; and
(vii) rights, assets and properties described on Exhibit 2.1(c).
--------------
-xiii-
<PAGE>
(d) Continental Assets. "Continental Assets" means all of the assets
------------------
and properties, real and personal, tangible and intangible, used by or useful to
Continental in its operation of, or otherwise relating to, the Continental
Systems as of the Closing Time that are not Continental Excluded Assets,
including the following:
(i) Tangible Personal Property. All tangible personal property,
--------------------------
including towers, tower equipment, aboveground and underground cable,
distribution systems, headend amplifiers, line amplifiers, microwave equipment,
converters, testing equipment, motor vehicles, office equipment, furniture,
fixtures, supplies, inventory and other physical assets, the principal items of
which are described on Exhibit 2.3.(d)(i) (the "Continental Tangible Personal
------------------
Property").
(ii) Real Property. The fee interests in the real property
-------------
described as Continental Owned Property on Exhibit 2.1(d)(ii) and all
------------------
improvements thereon (the "Continental Owned Property"), and the leases,
easements, rights of access and other interests in real property described as
Continental Real Property Interests on Exhibit 2.1(d)(ii) (the "Continental Real
------------------
Property Interests").
(iii) Franchises. The franchises and similar authorizations or
----------
permits described on Exhibit 2.1(d)(iii) (the "Continental Systems Franchises").
-------------------
(iv) Licenses. The intangible CATV channel distribution rights,
--------
cable television relay service (CARS), business radio and other licenses,
copyright notices and other licenses, authorizations, consents, or permits
issued by the FCC or any other Governmental Authority described on Exhibit
-------
2.1(d)(iv) (the "Continental Systems Licenses").
- ----------
(v) Contracts. The pole line and joint line agreements,
---------
underground conduit agreements, crossing agreements, bulk or commercial service
agreements, retransmission consent agreements and other Contracts described on
Exhibit 2.1(d)(v) (the "Continental Systems Contracts").
- -----------------
(vi) Accounts Receivable. All subscriber, trade and other
-------------------
accounts receivable.
(vii) Books and Records. All engineering records, files, data,
-----------------
drawings, blueprints, schematics, reports, lists, plans and processes, and all
files of correspondence, lists, records and reports concerning subscribers and
prospective subscribers of the Continental Systems, signal and program carriage,
and dealings with Governmental Authorities, including all reports filed by or on
behalf of Continental with the FCC and statements of account filed by or on
behalf of Continental with the U.S. Copyright Office.
(e) Continental Excluded Assets. "Continental Excluded Assets" means
---------------------------
all: (i) programming Contracts and retransmission consents; (ii) insurance
policies and rights and claims thereunder; (iii) bonds, letters of credit,
surety instruments and other similar items; (iv) cash and cash equivalents; (v)
Continental's trademarks, trade names, service marks, service names, logos and
-xiv-
<PAGE>
similar proprietary rights; (vi) subscriber billing Contracts and equipment; and
(vii) rights, assets and properties described on Exhibit 2.1(e).
--------------
Section 2.2 TCICP Assumed Liabilities. After Closing, TCICP will
----------- -------------------------
assume, pay, discharge and perform the following (the "TCICP Assumed
Liabilities"): (i) those obligations and liabilities attributable to periods
after the Closing Time under or with respect to the Continental Assets assigned
and transferred to TCICP at Closing; (ii) other obligations and liabilities of
Continental only to the extent that there is an adjustment in favor of TCICP
with respect thereto pursuant to Section 2.4; (iii) the Assumed Social Contract
-----------
Obligations to the extent required by the Social Contract; (iv) all other
obligations and liabilities, attributable to periods after the Closing Time and
arising out of TCICP's ownership of the Continental Assets or operation of the
Continental Systems after Closing, except to the extent that such obligations or
liabilities relate to any Continental Excluded Asset; and (v) all obligations
for Employee Continuation Plan payments, in accordance with Section 6.11, with
respect to employees of the Continental Systems whose employment is terminated
after Closing. All obligations and liabilities arising out of or relating to
the Continental Assets or the Continental Systems other than the TCICP Assumed
Liabilities will remain and be the obligations and liabilities solely of
Continental, including any obligation or liability for the refund of monies to
subscribers of the Continental Systems with respect to periods prior to Closing.
Section 2.3 Continental Assumed Liabilities. After Closing,
----------- -------------------------------
Continental will assume, pay, discharge and perform the following (the
"Continental Assumed Liabilities"): (i) those obligations and liabilities
attributable to periods after the Closing Time under or with respect to the
TCICP Assets assigned and transferred to Continental at Closing; (ii) other
obligations and liabilities of TCICP only to the extent that there is an
adjustment in favor of Continental with respect thereto pursuant to Section 2.4;
-----------
(iii) all other obligations and liabilities attributable to periods after the
Closing Time and arising out of Continental's ownership of the TCICP Assets or
operation of the TCICP Systems after Closing, except to the extent that such
obligations or liabilities relate to any TCICP Excluded Asset; and (iv) all
obligations for Employee Continuation Plan payments, in accordance with Section
6.11, with respect to employees of TCICP Systems whose employment is terminated
after Closing. All obligations and liabilities arising out of or relating to
the TCICP Assets or the TCICP Systems other than the Continental Assumed
Liabilities will remain and be the obligations and liabilities solely of TCICP,
including any obligation or liability for the refund of monies to subscribers of
the TCICP Systems with respect to periods prior to Closing.
Section 2.4 Current Items Amount. Continental or TCICP, as
----------- --------------------
appropriate, will pay to the other the net amount in favor of the other of the
adjustments and prorations described in Section 2.4(a), (b), (c) and (d), which
------- ---------------- ---
adjustments will be made without duplication of any amount (the "Current Items
Amount").
(a) Eligible Accounts Receivable.
----------------------------
(i) Continental will be entitled to an amount equal to the sum
of (A) 100% of the face amount of all Eligible Accounts Receivable of the
Continental Systems that
-xv-
<PAGE>
are 30 or fewer days past due as of the Closing Time plus (B) 75% of the face
amount of all Eligible Accounts Receivable of the Continental Systems that are
more than 30 but less than 60 days past due as of the Closing Time.
(ii) TCICP will be entitled to an amount equal to the sum of (A)
100% of the face amount of all Eligible Accounts Receivable of the TCICP Systems
that are 30 or fewer days past due as of the Closing Time plus (B) 75% of the
face amount of all Eligible Accounts Receivable of the TCICP Systems that are
more than 30 but less than 60 days past due as of the Closing Time.
"Eligible Accounts Receivable" of a System means accounts receivable resulting
from the provision of cable television service to that System's subscribers that
are active subscribers as of the Closing Time and that relate to periods of time
prior to the Closing Time. For purposes of making "past due" calculations under
this paragraph, the billing statements of a System will be deemed to be due and
payable on the first day of the period during which the service to which such
billing statements relate is provided.
(b) Advance Payments and Deposits. Continental and TCICP each will be
-----------------------------
entitled to an amount equal to the aggregate of (i) all outstanding deposits of
subscribers of each System of the other for converters, decoders and similar
items and (ii) all payments received by the other prior to the Closing Time for
services to be rendered to subscribers of each System of the other after the
Closing Time. Continental and TCICP each will be entitled to an amount equal to
the aggregate of all Deposits relating to each System of the other.
(c) Income and Expenses. As of the Closing Time, all income and
-------------------
expenses relating to each System and its operations will be prorated, in
accordance with generally accepted accounting principles, so that, with respect
to the TCICP Systems, all income and expenses for periods prior to the Closing
Time will be for the account of TCICP and all income and expenses for periods
after the Closing Time will be for the account of Continental and, with respect
to the Continental Systems, all income and expenses for periods prior to the
Closing Time will be for the account of Continental and all income and expenses
for periods after the Closing Time will be for the account of TCICP. Without
limiting the generality of the foregoing, the following expenses will be
prorated as described in the preceding sentence:
(i) all payments and charges under or with respect to System
Franchises, System Licenses, System Contracts, Real Property Interests and Owned
Property;
(ii) general property taxes, special assessments and ad valorem
taxes levied or assessed against any Assets;
(iii) sales and use taxes, if any, payable with respect to cable
television service and related sales to System subscribers;
(iv) charges for
utilities and other goods or services furnished to each System; and
-xvi-
<PAGE>
(v) copyright fees based on signal carriage by each System.
TCICP and Continental will not prorate any item of income or expense which
relates to any TCICP Excluded Assets or Continental Excluded Assets, all of
which will remain and be solely for the account of TCICP and Continental,
respectively.
(d) Social Contract Refunds. If after the Closing Date any customers
-----------------------
of the Continental Systems exercise their rights to receive in-kind refunds
offered pursuant to the Social Contract, Continental will be obligated to
reimburse TCICP cash in an amount equal to 50% of the then applicable retail
value of the in-kind refunds honored by TCICP. Such reimbursement will be
included in the final adjustments in accordance with Section 2.5(b), to the
--------------
extent known at the time of determination, or within 10 days after TCICP
provides Continental with a statement or statements describing such amounts, for
any such refunds not included in the final adjustments.
Section 2.5 Current Items Amount Calculated.
----------- -------------------------------
(a) Estimated Current Items Amount. The adjustments and prorations
------------------------------
included in the Current Items Amount, as they relate to each System, will be
estimated in good faith by Continental and TCICP with respect to their
respective Systems and set forth, together with a detailed statement of the
calculation thereof, in a certificate (the "Initial Adjustment Certificate")
executed by an authorized representative of Continental or TCICP, as
appropriate, and delivered to the other party at least 10 days prior to Closing.
Each Initial Adjustment Certificate will be accompanied by appropriate
documentation, in summary form, supporting the adjustments proposed in such
certificate. An estimate of the Current Items Amount will be made by
Continental and TCICP based on the Initial Adjustment Certificates. At Closing,
the party against whose favor the estimated Current Items Amount is so
determined will pay to the other the estimated Current Items Amount.
(b) Final Current Items Amount. Within 90 days after Closing,
--------------------------
Continental and TCICP each will deliver to the other a certificate (the "Final
Adjustment Certificate") showing in full detail the final determination of the
Current Items Amount, which certificate will be accompanied by appropriate
documentation supporting the adjustments proposed in such certificate, including
a schedule setting forth detailed accounts receivable information, including
relevant aging information as of the Closing Time, and which will be executed by
an officer of Continental or TCICP, as appropriate. Each party will provide to
the other reasonable access to all records in its possession which were used in
the preparation of its Initial and Final Adjustment Certificates. Continental
and TCICP each will review the other's Final Adjustment Certificate and will
give written notice to the other party of any objections it has to the
calculations shown in such certificate within 30 days after its receipt thereof.
TCICP and Continental will endeavor in good faith to resolve any such objections
within 30 days after the receipt by the parties of each other's objections. If
any objections or disputes have not been resolved at the end of such 30-day
period, the disputed portion of the Current Items Amount will be determined
within the following 30 days by a partner in a major accounting firm with
substantial cable television audit experience which is not the auditor of either
Continental or TCICP and the determination of such auditor will be final and
will be
-xvii-
<PAGE>
binding upon both parties. If Continental and TCICP cannot agree with respect
to selection of an auditor, Continental and TCICP each will select an auditor
and those two auditors will select a third auditor whose determination will be
final and will be binding upon both parties. Continental and TCICP will bear
equally the expenses incurred in connection with such determination. The
payment required as a result of the determination of all disputed amounts,
whether by agreement of the parties or by an auditor's determination, will be
made by the party responsible therefor to the other party within 15 Business
Days after the final determination is made.
ARTICLE 3
RELATED MATTERS
---------------
Section 3.1 Employees. Except as otherwise expressly provided in
----------- ---------
Section 6.11, each of Continental and TCICP will remain solely responsible for,
and will indemnify and hold harmless the other from and against all Losses
arising from or with respect to, all salaries and all severance, vacation,
medical, sick, holiday, continuation coverage and other compensation or benefits
to which employees engaged in the operation of its Systems ("System Employees")
may be entitled, as a result of such employment, the termination of such
employment, the consummation of the transactions contemplated hereby, or
pursuant to any applicable Legal Requirement (including the Worker Adjustment
and Retraining Notification Act, 29 U.S.C. (S) 2101, et seq. ("WARN")), or
otherwise, whether or not such employees may be hired by the other party.
Neither Continental nor TCICP will have any obligation to hire any of the
other's System Employees, whether or not such employees' employment is
terminated by the other.
Section 3.2 Bonds. Between the date of this Agreement and the
----------- -----
Closing Date, each party will deliver to the other a listing of all franchise,
construction, fidelity, performance or other bonds posted by such party in
connection with its System or its Assets.
Section 3.3 Use of Names and Logos. For a period of 90 days after
----------- ----------------------
Closing, Continental and TCICP will be entitled to use the trademarks, trade
names, service marks, service names, logos and similar proprietary rights of the
other to the extent incorporated in or on the Assets transferred to it at
Closing, provided that each will exercise reasonable efforts to remove all such
names, marks, logos and similar proprietary rights of the other from the Assets
as soon as reasonably practicable following Closing, except that neither
Continental nor TCICP need remove any of the above from equipment used in
subscriber homes, including converter boxes.
Section 3.4 Transfer Laws. Continental and TCICP each waives
----------- -------------
compliance by the other with Legal Requirements relating to bulk transfers
applicable to the transactions contemplated hereby.
Section 3.5 Transfer Taxes. All sales, use, transfer and similar
----------- --------------
taxes or assessments, including transfer fees and similar assessments for
Franchises, Licenses and Contracts, arising from or payable by reason of the
conveyance of the TCICP Assets and the Continental Assets will be shared equally
by TCICP and Continental.
-xviii-
<PAGE>
Section 3.6 Further Assurances. At or after Closing, each of
----------- ------------------
Continental and TCICP, at the request of the other, will promptly execute and
deliver, or cause to be executed and delivered, to the other all such documents
and instruments, in addition to those otherwise required by this Agreement, in
form and substance reasonably satisfactory to the other as the other may
reasonably request in order to carry out or evidence the terms of this
Agreement, or to collect any accounts receivable or other claims included in the
Continental Assets or the TCICP Assets. Without limiting the generality of the
foregoing, each of Continental and TCICP will take, or cause to be taken, all
actions consistent with the terms of this Agreement, including execution and
delivery of any documents or instruments, as the other may reasonably request to
effect the qualification of the transactions contemplated hereby as a like-kind
exchange under Section 1031 of the Code and will adhere to Section 1060 of the
Code relating to allocations.
ARTICLE 4
CONTINENTAL'S REPRESENTATIONS AND WARRANTIES
--------------------------------------------
Continental represents and warrants to TCICP, as of the date of this Agreement
and as of Closing, as follows:
Section 4.1 Organization of Continental. Continental is a
----------- ---------------------------
corporation duly organized, validly existing and in good standing under the laws
of its state of incorporation, and has all requisite power and authority to own
and lease the Continental Assets and to conduct its activities as such
activities are currently conducted. Continental is duly qualified to do
business as a foreign corporation and is in good standing in all jurisdictions
in which the ownership or leasing of the Continental Assets or the nature of its
activities in connection with the Continental Systems makes such qualification
necessary.
Section 4.2 Authority. Continental has all requisite corporate
----------- ---------
power and authority to execute, deliver and perform this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby by Continental have been duly and validly authorized by all
necessary corporate action on the part of Continental. This Agreement has been
duly and validly executed and delivered by Continental and is the valid and
binding obligation of Continental, enforceable against Continental in accordance
with its terms.
Section 4.3 No Conflict; Required Consents. Except as described on
----------- ------------------------------
Exhibit 4.3, the execution, delivery and performance by Continental of this
- -----------
Agreement do not and will not: (i) conflict with or violate any provision of the
Certificate of Incorporation of Continental; (ii) violate any provision of any
Legal Requirement; or (iii) conflict with, violate, result in a breach of,
constitute a default under (without regard to requirements of notice, lapse of
time, or elections of other Persons, or any combination thereof), or accelerate
or permit the acceleration of the performance required by, any Contract to which
Continental is a party or by which Continental or the assets or properties owned
or leased by it are bound or affected; (iv) result in the creation or imposition
of any Lien against or upon any of the Continental Assets; or (v) require any
consent,
-xix-
<PAGE>
approval or authorization of, or filing of any certificate, notice, application,
report or other document with, any Governmental Authority or other Person.
Except as described on Exhibit 4.3, no consent, approval or authorization of, or
-----------
filing of any certificate, notice, application, report or other document with,
any Governmental Authority or other Person is required for (x) Continental to
transfer the Continental Assets to TCICP, (y) TCICP to operate the Continental
Systems and to own, lease, use and operate the Continental Assets and the
Continental Systems at the places and in the manner in which such Assets are
used and each such System is operated and (z) TCICP to assume and perform the
Continental Systems Franchises, the Continental Systems Licenses and the
Continental Systems Contracts.
Section 4.4 Assets; Title, Condition, and Sufficiency.
----------- -----------------------------------------
(a) Continental has good and marketable title to all of the owned
Continental Assets, free and clear of all Liens, except (i) Liens described on
Exhibit 4.4, all of which will be terminated, released or, in the case of the
- -----------
rights of first refusal, waived, as appropriate, at Closing and (ii) Permitted
Liens. Continental, has, or at Closing will have, valid leasehold interests in
all leased Continental Assets. Except as described on Exhibit 2.1(d)(i), the
-----------------
Continental Tangible Personal Property is in good condition and repair, ordinary
wear and tear excepted.
(b) Except for items included in the Continental Excluded Assets, the
Continental Assets are all of the assets necessary to permit TCICP (i) to
operate the Continental Systems substantially as they are being operated on the
date of this Agreement and in compliance with all applicable Legal Requirements
and requirements of Contracts the obligations under which are included in the
TCICP Assumed Liabilities and (ii) to perform all the TCICP Assumed Liabilities.
Section 4.5 Continental Systems Franchises, System Licenses, System
----------- -------------------------------------------------------
Contracts, Owned Property and Real Property Interests.
- -----------------------------------------------------
(a) Except as described on Exhibits 2.1(d)(ii), (iii), (iv) or (v) or
------------------- ----- ---- ---
2.1(e) with respect to the Continental Systems, Continental is not bound or
- ------
affected by any of the following that relate wholly or primarily to the
Continental Systems: (i) leases of real or personal property; (ii) franchises
for the construction or operation of cable television systems or Contracts of
substantially equivalent effect; (iii) other licenses, authorizations, consents
or permits of the FCC or any other Governmental Authority; (iv) material
easements or rights of access; (v) material pole line and joint line agreements,
underground conduit agreements, crossing agreements or bulk or commercial
service agreements; or (vi) Contracts other than those described in any other
clause of this Section 4.5(a) which contemplate payments by or to Continental in
any twelve-month period exceeding $10,000 individually or $50,000 in the
aggregate.
(b) Continental has delivered to TCICP true and complete copies of
each of the Continental Systems Franchises (together with any notices alleging
non-compliance with the requirements of any Continental Systems Franchise),
Continental Systems Licenses, Continental Systems Contracts, Continental Real
Property Interests, including any amendments thereto (or, in the case of oral
Continental Systems Contracts, true and complete written summaries thereof) and
-xx-
<PAGE>
of each document evidencing Continental's ownership of the Continental Owned
Property. Except as described in Exhibit 4.5: (i) Continental is in compliance
-----------
with each of the Continental Systems Franchises and Continental Systems
Licenses; (ii) Continental has fulfilled when due, or has taken all action
necessary to enable it to fulfill when due, all of its obligations under each of
the Continental Systems Contracts or Continental Real Property Interests; and
(iii) to the knowledge of Continental, there has not occurred any default
(without regard to lapse of time or the giving of notice, or both) by any Person
under any of the Continental Systems Franchises, Continental Systems Contracts
or Continental Real Property Interests.
Section 4.6 Employee Benefits. None of Continental, any ERISA
----------- -----------------
Affiliate of Continental, any employee benefit plan (as defined in Section 3(3)
of ERISA) or any multiemployer plan (as defined in Section 3(37) of ERISA)
maintained by Continental or any ERISA Affiliate of Continental or to which
Continental or any ERISA Affiliate of Continental has the obligation to
contribute ("Continental Plans"), is in material violation of any provision of
ERISA. No reportable event (within the meaning of Title IV of ERISA) has
occurred and is continuing with respect to any Continental Plan and no
prohibited transaction (as defined in Section 406 of ERISA) has occurred with
respect to any Continental Plan which would result in material liability to
Continental or any ERISA Affiliate. No material accumulated funding deficiency
(as defined in Section 302 of ERISA) exists with respect to any Continental
Plan. TCICP is not required, under ERISA, the Code or any collective bargaining
agreement, to establish, maintain or continue any Continental Plan. Exhibit 4.6
-----------
is a true and complete copy of the Employee Continuation Plan of Continental
Cablevision, Inc. (the "Continental Employee Continuation Plan") as currently in
effect, that is applicable to Continental System Employees.
Section 4.7 Litigation. Except as set forth in Exhibit 4.7: (i)
----------- ---------- -----------
there is no Litigation pending or, to Continental's knowledge, threatened, by or
before any Governmental Authority or private arbitration tribunal, against
Continental which could adversely affect the financial condition or operations
of the Continental Systems, the Continental Assets or the ability of Continental
to perform its obligations under this Agreement, or which seeks or could result
in the modification, revocation, termination, suspension or other limitation of
any of the Continental Systems Franchises, Continental Systems Licenses
Continental Systems Contracts or Continental Real Property Interests; and (ii)
there is no Judgment requiring Continental to take any action of any kind with
respect to the Continental Assets or the operation of the Continental Systems,
or to which Continental (with respect to the Continental Systems), the
Continental Systems or the Continental Assets are subject or by which they are
bound or affected.
Section 4.8 Cable Operations. To the knowledge of Continental: (i)
----------- ----------------
except as described on Exhibit 4.8, Continental is the only cable television
-----------
operator currently providing or, to Continental's knowledge, intending to
provide cable television in the service area of the Continental Systems; and
(ii) no Person other than Continental has been granted or applied for a cable
television franchise in any of the communities or unincorporated areas presently
served by the Continental Systems.
-xxi-
<PAGE>
Section 4.9 Tax Returns: Other Reports. Continental has timely
----------- --------------------------
filed in proper form all federal, state, local and foreign tax returns and other
reports required to be filed, and has timely paid all Taxes which have become
due and payable, whether or not so shown on any such return or report, the
failure to file or pay which could affect or result in the imposition of a Lien
upon the Continental Assets. Continental has received no notice of, and
Continental has no knowledge of, any deficiency or assessment or proposed
deficiency or assessment from any Governmental Authority which could affect or
result in the imposition of a Lien upon the Continental Assets.
Section 4.10 Continental Systems Information. Exhibit 4.10 sets
------------ ------------------------------- ------------
forth a materially true and complete description of the following information as
of the date of this Agreement:
(a) the number of miles of plant included in the Continental Assets;
(b) the number of Individual Subscribers and Subscriber Equivalents
served by each of the Continental Systems;
(c) the number of single family homes and residential dwelling units
passed by each of the Continental Systems;
(d) a description of basic and optional or tier services available
from each of the Continental Systems, the rates charged by Continental for each
and the number of Individual Subscribers and Subscriber Equivalents receiving
each optional or tier service;
(e) the stations and signals carried by each of the Continental
Systems and the channel position of each such signal and station;
(f) the cities, towns, villages, boroughs and counties served by each
of the Continental Systems; and
(g) information regarding current and planned construction and capital
improvement programs with respect to the Continental Systems.
Section 4.11 Compliance with Legal Requirements.
------------ ----------------------------------
(a) Except as set forth in Exhibit 4.11, and except with respect to
------------
those matters covered by Sections 4.11(b), (c), (d) and (f), which matters are
-------------------------- ---
covered exclusively by such sections, the operation of the Continental Systems
as it is currently conducted does not violate or infringe in any material
respect any Legal Requirement currently in effect. Continental has received no
notice of any violation by Continental or the Continental Systems of any Legal
Requirement applicable to the operation of the Continental Systems, as currently
conducted, and knows of no basis for the allegation of any such violation.
(b) Except as set forth in Exhibit 4.11, and subject to the
------------
limitations set forth in Section 4.11(d) and (f): with respect to the
--------------- ---
Continental Systems, Continental is in compliance in
-xxii-
<PAGE>
all material respects with the Communications Act and the Cable Act, including
requirements of those Acts specifically referred to herein; Continental has
submitted to the FCC all filings, including cable television registration
statements, annual reports and aeronautical frequency usage notices, that are
required under the rules and regulations of the FCC; the operation of the
Continental Systems has been and is in compliance with the rules and regulations
of the FCC, and Continental has not received notice from the FCC of any
violation of its rules and regulations with respect to the Continental Systems;
Continental is and since 1986 has been with respect to the Continental Systems
certified as in compliance with the FCC's equal employment opportunity rules;
the Continental Systems are in compliance with all signal leakage criteria
prescribed by the FCC; for each relevant semi-annual reporting period,
Continental has timely filed with the United States Copyright Office all
required Statements of Account in proper form, and has paid when due all
required copyright royalty fee payments, relating to the Continental System's
carriage of television broadcast signals; and Continental is otherwise in
compliance with all applicable rules and regulations of the Copyright Office.
Continental has delivered to TCICP true and complete copies of all reports and
filings for the past year, made or filed pursuant to FCC and Copyright Office
rules and regulations by Continental with respect to the Continental Systems and
will make available to TCICP all other past reports and filings made or filed
pursuant to FCC and Copyright Office rules and regulations by Continental with
respect to the Continental Systems. Continental has delivered to TCICP true and
complete copies of all FCC Forms 393, 1200, 1205, 1210, 1215 and 1220 that have
been prepared with respect to the Continental Systems, copies of all
correspondence with any Governmental Authority relating to rate regulation
generally or specific rates charged to subscribers with respect to the
Continental Systems, including copies of any complaints filed with the FCC with
respect to any rates charged to subscribers of the Continental Systems, and any
other documentation supporting an exemption from the rate regulation provisions
of the Cable Act claimed by Continental with respect to the Continental Systems.
A request for renewal has been timely filed under Section 626(a) of the Cable
Act with the proper Governmental Authority with respect to each Continental
Systems Franchise expiring within 36 months after the date of this Agreement.
(c) Except as provided in Exhibit 4.11, with respect to the
------------
Continental Systems, Continental is in compliance in all material respects with
the must carry and retransmission consent provisions of the Cable Act,
including, (i) duly and timely notifying "local commercial television stations"
of inadequate signal strength or increased copyright liability, if applicable,
(ii) duly and timely notifying non-commercial educational stations of the
location of the cable system's principal headend, (iii) duly and timely
notifying subscribers of the channel alignment on the Continental Systems, (iv)
duly and timely notifying "local commercial and noncommercial television
stations" of the broadcast signals carried on the Continental Systems and their
channel positions, (v) maintaining the requisite public file identifying
broadcast signal carriage, (vi) carrying the broadcast signals after June 1,
1993, on the Continental Systems for all "local commercial television stations"
which elected must carry status and, if required, up to two "qualified low power
stations", (vii) complying with applicable channel placement obligations and
(viii) obtaining retransmission consent for all broadcast signals carried on the
Continental Systems after October 5, 1993, except for the signals carried
pursuant to a must carry election.
-xxiii-
<PAGE>
(d) Continental has used reasonable good faith efforts to establish
rates charged and a la carte packages provided to subscribers of the Continental
----------
Systems, effective as of September 2, 1993, that would be allowable under rules
and regulations promulgated by the FCC under the Cable Act, and any
authoritative interpretation thereof, whether or not such rates or packages were
subject to regulation at that date by any Governmental Authority, including any
local franchising authority or the FCC.
(e) Continental has provided to TCICP a true and complete copy of the
Social Contract as currently in effect.
(f) Continental has used reasonable good faith efforts to comply in
all material respects with any customer service standards applicable to it with
respect to the Continental Systems.
(g) Continental does not possess any patent, patent right, trademark
or copyright and is not a party to any license or royalty agreement with respect
to any patent, trademark or copyright, except for licenses respecting program
material and obligations under the Copyright Act of 1976 applicable to cable
television systems generally. The Continental Assets are free of the rightful
claim of any third party by way of copyright infringement or the like (excluding
claims involving music performance rights).
Section 4.12 Real Property. Except under leases described on
------------ -------------
Exhibit 2.1(d)(ii) (the "Continental Leases"), Continental does not hold or use
- ------------------
under lease or lease to others any real property relating to the Continental
Systems. Except for the Continental Owned Property described on Exhibit
-------
2.1(d)(ii), Continental has no other ownership interest in real property
- ----------
relating to the Continental Systems. Except for routine repairs, all of the
improvements, leasehold improvements and the premises of the Continental Owned
Property and the premises demised under the Continental Leases (the "Continental
Leased Property") are in good condition and repair and are suitable for the
purposes used. The current use and occupancy of the Continental Owned Property
and Continental Leased Property do not constitute nonconforming uses under any
applicable Legal Requirement in the nature of a zoning law or ordinance. Each
parcel of Continental Owned Property and, to Continental's knowledge, each
parcel of Continental Leased Property (i) has access to and over public streets,
or private streets for which Continental has a valid right of ingress and
egress, (ii) conforms in its current use to all material zoning requirements
without reliance upon a variance issued by a Governmental Authority or a
classification of the parcel in question as a nonconforming use and (iii)
conforms in its use to all restrictive covenants, if any, or other encumbrances
affecting all or part of such parcel.
Section 4.13 Pro Forma Financial Statements; No Adverse Change.
------------ -------------------------------------------------
(a) Continental has delivered to TCICP pro forma financial statements
for the Continental Systems consisting of a balance sheet and a statement of
operations as of and for the 12 months ended September 30, 1995 (the
"Continental Systems Financial Statements"). The Continental Systems Financial
Statements fairly present in all material respects the financial
-xxiv-
<PAGE>
condition and the results of operations of the Continental Systems as of the
date and for the period indicated therein, as adjusted to reflect the pro forma
assumptions described therein, which assumptions are reasonable in all material
respects.
(b) Since September 30, 1995 (i) there has been no material adverse
change in the Continental Assets or the financial condition or operations of
Continental, the Continental Systems and the Continental Assets and (ii) the
financial condition and operations of the Continental Systems have not been
materially and adversely affected as a result of any fire, explosion, accident,
casualty, labor trouble, flood, drought, riot, storm, condemnation, or act of
God or public force or otherwise.
Section 4.14 Employees.
------------ ---------
(a) There are no collective bargaining agreements applicable to any
persons employed by Continental or an Affiliate of Continental that render
services in connection with the Continental Systems ("Continental System
Employees"), and neither Continental nor any Affiliate of Continental has any
duty to bargain with any labor organization with respect to any such persons.
There are not pending any unfair labor practice charges against Continental or
any Affiliate of Continental, or any demand for recognition, or any other
request or demand from a labor organization for representative status, with
respect to any Continental System Employees.
(b) Exhibit 4.14 is a true and complete list of the names and
------------
positions of all Continental System Employees. Continental has complied in all
material respects with all applicable Legal Requirements relating to the
employment of labor, including WARN, ERISA, continuation coverage requirements
of group health plans and those relating to wages, hours, collective bargaining,
unemployment insurance, worker's compensation, equal employment opportunity, age
and disability discrimination, immigration control and the payment and
withholding of Taxes.
(c) Except as described on Exhibit 4.14, Continental has no employment
------------
agreements, either written or oral, with any Continental System Employee and
none of the employment agreements listed on Exhibit 4.14 require TCICP to employ
------------
any person after Closing.
Section 4.15 Environmental.
------------ -------------
(a) Continental has received no notice that it is the subject of any
"Superfund" evaluation or investigation, or that it is the subject of any
investigation or proceeding of any Governmental Authority evaluating whether any
remedial action is necessary to respond to any release of Hazardous Substances
on or in connection with the Continental Owned Property or the Continental
Leased Property.
(b) Continental is in compliance with all Legal Requirements with
respect to pollution or protection of the environment, including Legal
Requirements relating to actual or threatened emissions, discharges or releases
of Hazardous Substances into ambient air, surface water, ground water, land or
otherwise relating to the manufacture, processing, distribution, use,
-xxv-
<PAGE>
treatment, storage, disposal, transport or handling of Hazardous Substances,
insofar as they relate to the Continental Owned Property or the Continental
Leased Property. Continental has received no notice of, and has no knowledge of
circumstances relating to, any past, present or future events, conditions,
circumstances, activities, practices or incidents (including but not limited to
the presence, use, generation, manufacture, disposal, release or threatened
release of any Hazardous Substances from or on the Continental Owned Property or
the Continental Leased Property), which could interfere with or prevent
continued compliance, or which are reasonably likely to give rise to any
liability, based upon or related to the processing, distribution, use,
treatment, storage, disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any Hazardous Substance
from or attributable to the Continental Owned Property or the Continental Leased
Property.
Section 4.16 Holding Period. At Closing, Continental or one or more
------------ --------------
of its Affiliates will have owned each of the Continental Systems for at least
36 consecutive months following the initial construction or acquisition of such
Continental System by Continental or one or more of its Affiliates.
ARTICLE 5
TCICP'S REPRESENTATIONS AND WARRANTIES
--------------------------------------
TCICP represents and warrants to Continental as follows:
Section 5.1 Organization and Qualification of TCICP. TCICP is a
----------- ---------------------------------------
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Colorado, and has all requisite partnership power and
authority to own and lease the TCICP Assets and to conduct its activities as
such activities are currently conducted. TCICP is, or on the Closing Date will
be, duly qualified to do business as a foreign limited partnership and is, or
prior to Closing will be, in good standing in all jurisdictions in which the
ownership or leasing of the TCICP Assets or the nature of its activities in
connection with the TCICP Systems makes such qualification necessary.
Section 5.2 Authority. TCICP has all requisite partnership power
----------- ---------
and authority to execute, deliver and perform this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
by TCICP have been duly and validly authorized by all necessary action on the
part of TCICP. This Agreement has been duly and validly executed and delivered
by TCICP and is the valid and binding obligation of TCICP, enforceable against
TCICP in accordance with its terms.
Section 5.3 No Conflict; Required Consents. Except as described on
----------- ------------------------------
Exhibit 5.3, the execution, delivery and performance by TCICP of this Agreement
- -----------
do not and will not: (i) conflict with or violate any provision of the
Certificate or Agreement of Limited Partnership of TCICP; (ii) violate any
provision of any Legal Requirement; (iii) conflict with, violate, result in a
breach of, constitute a default under (without regard to requirements of notice,
lapse of time, or elections of
-xxvi-
<PAGE>
other Persons, or any combination thereof), accelerate or permit the
acceleration of the performance required by, any Contract to which TCICP or a
TCI Entity is a party or by which TCICP, a TCI Entity or the assets or
properties owned or leased by TCI or a TCI Entity with respect to the TCICP
Systems are bound or affected; (iv) result in the creation or imposition of any
Lien against or upon any of the TCICP Assets; or (v) require any consent,
approval or authorization of, or filing of any certificate, notice, application,
report, or other document with, any Governmental Authority or other Person.
Except as described on Exhibit 5.3, no consent, approval or authorization of, or
-----------
filing of any certificate, notice, application, report, or other document with,
any Governmental Authority or other Person is required for (w) a TCI Entity to
transfer TCICP Assets to TCICP, (x) TCICP to transfer the TCICP Assets to
Continental, (y) Continental to operate the TCICP Systems and to own, lease, use
and operate the TCICP Assets and the Systems at the places and in the manner in
which such Assets are used and each such System is operated and (z) Continental
to assume and perform the TCICP Systems Franchises, the TCICP Systems Licenses
and the TCICP Systems Contracts.
Section 5.4 Assets; Title, Condition, and Sufficiency.
----------- -----------------------------------------
(a) The TCI Entities, taken together, have as of the date of this
Agreement, and TCICP at Closing will have, good and marketable title to all of
the owned TCICP Assets, free and clear of all Liens, except (i) Liens described
on Exhibit 5.4, all of which will be terminated, released or, in the case of any
-----------
rights of first refusal named thereon, waived, as appropriate, at Closing, and
(ii) Permitted Liens. The TCI Entities, taken together, have as of the date of
this Agreement, and TCICP at Closing will have, valid leasehold interests in all
leased TCICP Assets. Except as described on Exhibit 2.1(b)(i), the TCICP
-----------------
Tangible Personal Property is in good condition and repair, ordinary wear and
tear excepted.
(b) Except for items included in the TCICP Excluded Assets, the TCICP
Assets are all of the assets necessary to permit Continental (i) to operate the
TCICP Systems substantially as they are being operated on the date of this
Agreement and in compliance with all applicable Legal Requirements and
requirements of Contracts the obligations under which are included in the
Continental Assumed Liabilities and (ii) to perform all of the Continental
Assumed Liabilities.
Section 5.5 TCICP Systems Franchises, TCICP Systems Licenses, TCICP
----------- -------------------------------------------------------
Systems Contracts and TCICP Real Property Interests.
- ---------------------------------------------------
(a) Except as described on Exhibits 2.1(b)(ii), (iii), (iv) or (v),
------------------- ----- ---- ---
2.1(c) or 2.1(c)(i), neither TCICP nor any TCI Entity is bound or affected by
- ------ ---------
any of the following that relate wholly or primarily to the TCICP Systems: (i)
leases of real or personal property; (ii) franchises for the construction or
operation of cable television systems, or Contracts of substantially equivalent
effect; (iii) other licenses, authorizations, consents or permits of the FCC or
any other Governmental Authority; (iv) material easements or rights of access;
(v) material pole line and joint line agreements, underground conduit
agreements, crossing agreements, or bulk or commercial service agreements; or
(vi) Contracts other than those described in any other clause of this Section
5.5(a) which contemplate payments by or to any TCI Entity or TCICP in any
twelve-month period exceeding $10,000 individually or $50,000 in the aggregate.
-xxvii-
<PAGE>
(b) TCICP has delivered to Continental true and complete copies of
each of the TCICP Systems Franchises (together with any notices alleging non-
compliance with the requirements of any TCICP Systems Franchises), TCICP Systems
Licenses, TCICP Systems Contracts and TCICP Real Property Interests, including
any amendments thereto (or, in the case of oral TCICP Systems Contracts, true
and complete written summaries thereof) and of each document evidencing the TCI
Entity's or TCICP's ownership of the TCICP Owned Property. Except as described
in Exhibit 5.5: (i) TCICP and each TCI Entity is in compliance with each of the
-----------
TCICP Systems Franchises and TCICP Systems Licenses owned by it or to which it
is a party; (ii) TCICP and each TCI Entity has fulfilled when due, or has taken
all action necessary to enable it to fulfill when due, all of its obligations
under each of the TCICP Systems Contracts or TCICP Real Property Interests owned
by it or to which it is a party; and (iii) to the knowledge of TCICP and the TCI
Entity, there has not occurred any default (without regard to lapse of time or
the giving of notice, or both) by any Person under any of the TCICP Systems
Franchises, TCICP Systems Contracts or TCICP Real Property Interests owned by it
or to which it is a party.
Section 5.6 Employee Benefits. None of TCICP, any TCI Entity, any
----------- -----------------
ERISA Affiliate of TCICP or of any TCI Entity, any employee benefit plan (as
defined in section 3(3) of ERISA), or any multiemployer plan (as defined in
Section 3(37) of ERISA) maintained by TCICP, any TCI Entity or any ERISA
Affiliate or to which TCICP, any TCI Entity or any ERISA Affiliate, TCICP or of
any TCI Entity has the obligation to contribute ("TCI Plans"), is in material
violation of any provision of ERISA. No reportable event (within the meaning of
Title IV of ERISA) has occurred and is continuing with respect to any TCI Plan
and no prohibited transaction (as defined in Section 406 of ERISA) has occurred
with respect to any TCI Plan which would result in material liability to TCICP,
any TCI Entity or any ERISA Affiliate. No material accumulated funding
deficiency (as defined in Section 302 of ERISA) exists with respect to any TCI
Plan. Continental is not required, under ERISA, the Code, or any collective
bargaining agreement, to establish, maintain, or continue any TCI Plan.
Section 5.7 Litigation. Except as set forth in Exhibit 5.7: (i)
----------- ---------- -----------
there is no Litigation pending or, to TCICP's or any TCI Entity's knowledge,
threatened, by or before any Governmental Authority or private arbitration
tribunal, against TCICP or any TCI Entity which could adversely affect the
financial condition or operations of the TCICP Systems, the TCICP Assets or the
ability of TCICP to perform its obligations under this Agreement, or which seeks
or could result in the modification, revocation, termination, suspension or
other limitation of any of the TCICP Systems Franchises, TCICP Systems Licenses,
TCICP Systems Contracts or TCICP Real Property Interests; and (ii) there is not
in existence any Judgment requiring TCICP or any TCI Entity to take any action
of any kind with respect to the TCICP Assets or the operation of the TCICP
Systems, or to which TCICP or any TCI Entity (each only with respect to the
TCICP Systems), the TCICP Systems or the TCICP Assets are subject or by which
they are bound or affected.
Section 5.8 Cable Operations. To the knowledge of TCICP and each
----------- ----------------
TCI Entity (with respect to the TCICP Systems which it operates): (i) except as
described in Exhibit 5.8, TCICP or the TCI Entity is currently the only cable
-----------
television operator providing or, to the knowledge of TCICP or the TCI Entity,
intending to provide cable television in the service area of the TCICP
-xxviii-
<PAGE>
Systems; and (ii) no Person other than TCICP or a TCI Entity has been granted or
applied for a cable television franchise in any of the communities or
unincorporated areas presently served by the TCICP Systems.
Section 5.9 Tax Returns; Other Reports. TCICP, a TCI Entity or an
----------- --------------------------
Affiliate of TCICP or a TCI Entity has filed all federal, state, local and
foreign tax returns and other reports required to be filed, and has timely paid
all Taxes which have become due and payable, whether or not so shown on any such
return or report, the failure to file or pay which could affect or result in the
imposition of a Lien upon the TCICP Assets. Neither TCICP nor a TCI Entity has
received notice of, nor does TCICP or a TCI Entity have any knowledge of, any
deficiency or assessment or proposed deficiency or assessment from any taxing
Governmental Authority which could affect or result in the imposition of a Lien
upon the TCICP Assets.
Section 5.10 System Information. Exhibit 5.10 sets forth a
------------ ------------------ ------------
materially true and complete description of the following information as of the
date of this Agreement:
(a) the number of miles of plant included in the TCICP Assets;
(b) the number of Individual Subscribers and Subscriber Equivalents
served by each of the TCICP Systems;
(c) the number of single family homes and residential dwelling units
passed by each of the TCICP Systems;
(d) a description of basic and optional or tier services available
from each of the TCICP Systems, the rates charged by TCICP for each and the
number of Individual Subscribers and Subscriber Equivalents receiving each
optional or tier service;
(e) the stations and signals carried by each of the TCICP Systems and
the channel position of each such signal and station;
(f) the cities, towns, villages, boroughs and counties served by each
of the TCICP Systems; and
(g) information regarding current and planned construction and capital
improvement programs with respect to the TCICP Systems.
Section 5.11 Compliance with Legal Requirements.
------------ ----------------------------------
(a) Except as set forth in Exhibit 5.11, and except with respect to
------------
those matters covered by Sections 5.11(b), (c), (d) and (e), which matters are
--------------------- --- ---
covered exclusively by such sections, the operation of the TCICP Systems as it
is currently conducted does not violate or infringe in any material respect any
Legal Requirement currently in effect. Neither TCICP nor a TCI Entity has
received notice of any violation by TCICP, a TCI Entity or the TCICP Systems of
any Legal
-xxix-
<PAGE>
Requirement applicable to the operation of the TCICP Systems as currently
conducted, and neither TCICP nor a TCI Entity knows of any basis for the
allegation of any such violation.
(b) Except as set forth in Exhibit 5.11, and subject to the
------------
limitations set forth in Sections 5.11(d) and (e): with respect to the TCICP
---------------- ---
Systems, TCICP and each TCI Entity (with respect to the TCICP Systems operated
by such TCI Entity) are in compliance in all material respects with the
Communications Act and the Cable Act, including requirements of the Acts
specifically referred to herein, and have submitted to the FCC all filings,
including cable television registration statements, annual reports and
aeronautical frequency usage notices, that are required under the rules and
regulations of the FCC; the operation of the TCICP Systems has been and is in
compliance with the rules and regulations of the FCC, and neither TCICP nor any
TCI Entity has received notice from the FCC of any violation of its rules and
regulations with respect to the TCICP Systems; TCICP and the TCI Entity
currently are and the TCI Entity has been since 1986 (with respect to the TCICP
Systems owned by it) certified as in compliance with the FCC's equal employment
opportunity rules; the TCICP Systems are in compliance with all signal leakage
criteria prescribed by the FCC; and for each relevant semi-annual reporting
period, TCICP or the appropriate TCI Entity has timely filed with the United
States Copyright Office all required Statements of Account in proper form, and
has paid when due all required copyright royalty fee payments, relating to the
TCICP Systems' carriage of television broadcast signals and is otherwise in
compliance with all applicable rules and regulations of the Copyright Office.
TCICP has caused to be delivered to Continental true and complete copies of all
reports and filings for the past year, made or filed pursuant to FCC and
Copyright Office rules and regulations and will make available to Continental
all other past reports and filings made or filed pursuant to FCC and Copyright
Office rules and regulations. TCICP has caused to be delivered to Continental
true and complete copies of all FCC Forms 393, 1200, 1205, 1210, 1215 and 1220
that have been prepared with respect to the TCICP Systems, copies of all
correspondence with any Governmental Authority relating to rate regulation
generally or specific rates charged to subscribers with respect to the TCICP
Systems, including copies of any complaints filed with the FCC with respect to
any rates charged to subscribers of the TCICP Systems, and any other
documentation supporting an exemption from the rate regulation provisions of the
Cable Act claimed by TCICP or the TCI Entity with respect to the TCICP Systems.
A request for renewal has been timely filed under Section 626(a) of the Cable
Act with the proper Governmental Authority with respect to each TCICP Systems
Franchise expiring within 36 months after the date of this Agreement.
(c) Except as provided in Exhibit 5.11, with respect to the TCICP
------------
Systems, TCICP or the TCI Entity is in compliance in all material respects with
the must carry and retransmission consent provisions of the Cable Act and the
FCC rules and regulations promulgated thereunder, including (i) duly and timely
notifying "local commercial television stations" of inadequate signal strength
or increased copyright liability, if applicable, (ii) duly and timely notifying
non-commercial educational stations of the location of the cable system's
principal headend, (iii) duly and timely notifying subscribers of the channel
alignment on the TCICP Systems, (iv) duly and timely notifying "local commercial
and noncommercial television stations" of the broadcast signals carried on the
TCICP Systems and their channel positions, (v) maintaining the requisite public
file identifying broadcast signal carriage, (vi) carrying the broadcast signals
after
-xxx-
<PAGE>
June 1, 1993, on the TCICP Systems for all "local commercial television
stations" which elected must carry status and, if required, up to two "qualified
low power stations," (vii) complying with applicable channel placement
obligations and (viii) obtaining retransmission consent for all broadcast
signals carried on the TCICP Systems after October 5, 1993, except for the
signals carried pursuant to a must carry election.
(d) TCICP and the TCI Entity have used reasonable good faith efforts
to establish rates charged and a la carte packages provided to subscribers of
----------
the TCICP Systems, effective as of September 2, 1993, that would be allowable
under rules and regulations promulgated by the FCC under the Cable Act, and any
authoritative interpretation thereof, whether or not such rates or packages were
subject to regulation at that date by any Governmental Authority, including any
local franchising authority or the FCC.
(e) TCICP and the TCI Entity have used reasonable good faith efforts
to comply in all material respects with any customer service standards
applicable to each of them with respect to the TCICP Systems.
(f) Neither TCICP nor the TCI Entity possesses any patent, patent
right, trademark or copyright and neither is a party to any license or royalty
agreement with respect to any patent, trademark or copyright, except for
licenses respecting program material and obligations under the Copyright Act of
1976 applicable to cable television systems generally. The TCICP Assets are
free of the rightful claim of any third party by way of copyright infringement
or the like (excluding claims involving music performance rights).
Section 5.12 Real Property. Except under leases described on
------------ -------------
Exhibit 2.1(b)(ii) (the "TCICP Leases"), neither TCICP nor the TCI Entity holds
- ------------------
or uses under lease or leases to others any real property relating to the TCICP
Systems. Except for the TCICP Owned Property described on Exhibit 2.1(b)(ii),
------------------
neither TCICP nor the TCI Entity has other ownership interests in real property
relating to the TCICP Systems. Except for the vacant building at the Loon Hill
Road, Dracut location and except for routine repairs, all of the improvements,
leasehold improvements and the premises of the TCICP Owned Property and the
premises demised under the TCICP Leases (the "TCICP Leased Property") are in
good condition and repair and are suitable for the purposes used. The current
use and occupancy of the TCICP Owned Property and TCICP Leased Property do not
constitute nonconforming uses under any applicable Legal Requirement in the
nature of a zoning law or ordinance. Each parcel of TCICP Owned Property and,
to TCICP's and each TCI Entity's knowledge (with respect to the TCICP Leased
Property leased by it), each parcel of TCICP Leased Property (i) has access to
and over public streets, or private streets for which TCICP or the TCI Entity
has a valid right of ingress and egress, (ii) conforms in its current use to all
material zoning requirements without reliance upon a variance issued by a local
government or a classification of the parcel in question as a nonconforming use
and (iii) conforms in its use to all restrictive covenants, if any, or other
encumbrances affecting all or part of such parcel. To the knowledge of TCICP
and each TCI Entity (with respect to the TCICP Owned Property owned by it) the
TCICP Owned Property complies, or prior to Closing will comply, with
Massachusetts law regarding septic systems, including transfer provisions, and
will be inspected prior to Closing if applicable.
-xxxi-
<PAGE>
Section 5.13 Pro Forma Financial Statements; No Adverse Change.
------------ -------------------------------------------------
(a) TCICP has delivered to Continental pro forma financial statements
for the Continental Systems consisting of a balance sheet and a related
statement of operations as of and for the 12 months ended September 30, 1995
(the "TCICP Systems Financial Statements"). The TCICP Systems Financial
Statements fairly present in all material respects the financial condition and
the results of operations of the TCICP Systems as of the date and for the period
indicated therein, as adjusted to reflect the pro forma assumptions described
therein, which assumptions are reasonable in all material respects.
(b) Since September 30, 1995, there has been no material adverse
change in the TCICP Assets or the financial condition or operations of TCICP,
the TCI Entity or the TCICP Systems and the TCICP Assets, and the financial
condition and operations of the TCICP Systems have not been materially and
adversely affected as a result of any fire, explosion, accident, casualty, labor
trouble, flood, drought, riot, storm, condemnation, or act of God or public
force or otherwise.
Section 5.14 Employees.
------------ ---------
(a) There are no collective bargaining agreements applicable to any
persons employed by TCICP, the TCI Entity or any Affiliate of either of them
that render services in connection with the TCICP Systems ("TCICP System
Employees"), and none of TCICP, the TCI Entity or any Affiliate of either of
them has any duty to bargain with any labor organization with respect to any
TCICP System Employees. There are not pending any unfair labor practice charges
against TCICP, the TCI Entity or any Affiliate of either of them, nor any demand
for recognition, or any other request or demand from a labor organization for
representative status, with respect to TCICP System Employees.
(b) Exhibit 5.14 is a true and complete list of the names and
------------
positions of all TCICP System Employees. TCICP and the TCI Entity have complied
in all material respects with all applicable Legal Requirements relating to the
employment of labor, including WARN, ERISA, continuation coverage requirements
of group health plans, and those relating to wages, hours, collective
bargaining, unemployment insurance, worker's compensation, equal employment
opportunity, age and disability discrimination immigration control and the
payment and withholding of Taxes.
(c) Except as described on Exhibit 5.14, neither TCICP nor the TCI
------------
Entity has any employment agreement, either written or oral, with any TCICP
System Employee and none of the employment agreements listed on Exhibit 5.14
------------
require Continental to employ any person after Closing.
Section 5.15 Environmental.
------------ -------------
(a) Neither TCICP nor any TCI Entity has received notice that it is
the subject of any "Superfund" evaluation or investigation, or that it is the
subject of any investigation or
-xxxii-
<PAGE>
proceeding of any Governmental Authority evaluating whether any remedial action
is necessary to respond to any release of Hazardous Substances on or in
connection with the TCICP Owned Property or the TCICP Leased Property.
(b) TCICP and the TCI Entity are in compliance with all Legal
Requirements with respect to pollution or protection of the environment,
including Legal Requirements relating to actual or threatened emissions,
discharges or releases of Hazardous Substances into ambient air, surface water,
ground water, land or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances, insofar as they relate to the TCICP Owned Property or the
TCICP Leased Property. Neither TCICP nor the TCI Entity has received notice of,
and has no knowledge of circumstances relating to, any past, present or future
events, conditions, circumstances, activities, practices or incidents (including
but not limited to the presence, use, generation, manufacture, disposal, release
or threatened release of any Hazardous Substances from or on the TCICP Owned
Property or the TCICP Leased Property), which could interfere with or prevent
continued compliance, or which are reasonably likely to give rise to any
liability, based upon or related to the processing, distribution, use,
treatment, storage , disposal, transport or handling, or the emission,
discharge, release or threatened release into the environment, of any Hazardous
Substance from or attributable to the TCICP Owned Property or the TCICP Leased
Property.
Section 5.16 Holding Period. At Closing, TCICP or one or more of
------------ --------------
its Affiliates will have owned each of the TCICP Systems for at least 36 months
following the initial construction or acquisition of such TCICP System by TCICP
or one or more of its Affiliates.
ARTICLE 6
COVENANTS
---------
Section 6.1 Certain Affirmative Covenants. Except as the other
----------- -----------------------------
party may otherwise consent in writing, between the date of this Agreement and
Closing TCICP (on behalf of itself and each TCI Entity), with respect to each of
the TCICP Systems and the TCICP Assets, and Continental, with respect to each of
the Continental Systems and the Continental Assets, will:
(a) operate or cause to be operated that System only in the usual,
regular and ordinary course and in accordance with past practices (including
completing line extensions, placing conduit or cable in new developments,
fulfilling installation requests and continuing work on existing construction
projects) and, to the extent consistent with such operation, and use its
commercially reasonable efforts to (i) preserve the current business
organization of that System intact, including preserving existing relationships
with franchising authorities, suppliers, customers and others having business
dealings with that System, unless the other party requests otherwise, (ii) use
reasonable efforts to keep available the services of its employees providing
services in connection with the System and (iii) continue normal marketing,
advertising and promotional expenditures with respect to that System;
-xxxiii-
<PAGE>
(b) maintain or cause to be maintained (i) those Assets in good
condition and repair, ordinary wear excepted, and (ii) in full force and effect
policies of insurance with respect to those Assets and the operation of that
System, in such amounts and with respect to such risks as are customarily
maintained by operators of cable television systems of the size and in the
geographic location of that System;
(c) maintain or cause to be maintained its books, records and accounts
with respect to those Assets and the operation of that System in the usual,
regular and ordinary manner on a basis consistent with past practices;
(d) (i) give or cause to be given to the other, and its counsel,
accountants and other representatives, full access during normal business hours
to that System, its Owned Property, its Leased Property, all of its Assets, its
books and records and that System's personnel; and (ii) furnish or cause to be
furnished to the other and such representatives all such additional documents,
financial information and other information as the other from time to time
reasonably may request; provided that no investigation will affect or limit the
scope of any of the representations and warranties of the other herein or in any
Transaction Document or limit liability for any breach of such representations
and warranties;
(e) (i) complete and file, or cause to be completed and filed, on or
before February 23, 1996, any notification and report required to be filed under
the HSR Act; and (ii) take any additional action that may be necessary, proper
or advisable, and furnish to each other such necessary information and
reasonable assistance as the other may reasonably request, in connection with
the preparation of necessary filings or submissions under the HSR Act; provided
that if either party, in its sole opinion, considers a request from a
Governmental Authority for additional data and information in connection with
the HSR Act to be unduly burdensome, such party may terminate this Agreement;
(f) use its commercially reasonable efforts to obtain in writing as
promptly as possible the Required Consents and any other consent, authorization
or approval required to be obtained by such party in connection with the
transactions contemplated hereunder, and deliver to the other copies of such
Required Consents and such other consents, authorizations or approvals, in each
case in form and substance reasonably satisfactory to the other party; provided,
however, that each party will afford the other party the opportunity to review,
approve and revise the form of Required Consent prior to delivery to the party
whose consent is sought and neither party will accept or agree or accede to any
modifications or amendments to, or any conditions to the transfer of, any of the
System Franchises, System Licenses, System Contracts or Real Property Interests
of its Systems that are not approved in writing by the other, which approval
will not be unreasonably withheld;
(g) promptly deliver to the other true and complete copies of all
monthly and quarterly financial statements and operating reports and any reports
with respect to the operation of that System prepared by or for such party at
any time from the date hereof until Closing, and any other similar materials
which the other may reasonably request;
-xxxiv-
<PAGE>
(h) promptly notify the other of any circumstance, event or action by
it or otherwise (i) which, if known at the date of this Agreement, would have
been required to be disclosed in or pursuant to this Agreement or (ii) the
existence, occurrence or taking of which would result in any of its
representations and warranties in this Agreement or in any Transaction Document
not being true and correct in all material respects when made or at Closing,
and, with respect to clause (ii), use its commercially reasonable efforts to
remedy the same;
(i) use its commercially reasonable efforts to obtain certificates in
form reasonably acceptable to the other party, to be dated as of Closing,
executed by the lessor of each of the Continental Leases under which Continental
is a lessee, in the case of Continental (the "Continental Estoppel
Certificates"), and by the lessor of each of the TCICP Leases under which TCICP
or the TCI Entity is a lessee, in the case of TCICP (the "TCICP Estoppel
Certificates"), each certifying that the respective real property lease has not
been modified except as shown and is in full force and effect and that the
parties are not in default thereunder, and stating the amount of the rent
payable thereunder;
(j) give or cause to be given to the other, and its counsel,
accountants and other representatives, as soon as reasonably possible but in any
event prior to the date of submission to the appropriate Governmental Authority,
copies of all FCC Forms 1200, 1205, 1210, 1215, and 1220 or any other FCC forms
required under the regulations of the FCC promulgated under the Cable Act that
are prepared with respect to that System; and before such forms are filed, the
parties will consult in good faith concerning the contents of such forms; and
(k) use reasonable good faith efforts to establish or cause to be
established rates charged and a la carte packages provided to subscribers of
----------
that System, as of the Closing Date, that would be allowable under the
regulations of the FCC promulgated under the Cable Act.
Section 6.2 Certain Negative Covenants. Except as Continental or
----------- --------------------------
TCICP may otherwise consent in writing, or as contemplated by this Agreement
between the date of this Agreement and Closing, TCICP with respect to the TCICP
Systems and the TCICP Assets will not, and will cause the TCI Entity not to, and
Continental with respect to the Continental Systems and the Continental Assets
will not:
(a) modify, terminate, renew, suspend or abrogate any System Contract
other than in the ordinary course of business;
(b) modify, terminate, renew, suspend or abrogate any System
Franchise, Real Property Interest or System License;
(c) enter into any transaction or take any action that would result in
any of its representations and warranties in this Agreement or in any
Transaction Document not being true and correct in all material respects when
made or at Closing;
-xxxv-
<PAGE>
(d) engage in any marketing, subscriber installation or collection
practices that are inconsistent with its past practices; or
(e) change the rate charged for any level of basic cable television
service or any pay cable television service or add or delete any programming
services.
Section 6.3 Confidentiality and Publicity.
----------- -----------------------------
(a) Any non-public information that either party may obtain from the
other in connection with this Agreement with respect to the other's System will
be confidential and, unless and until the Closing occurs, such party will not
disclose any such information to any other Person (other than its and its
Affiliates' directors, officers and employees, and representatives of its
advisers and lenders whose knowledge thereof is necessary in order to facilitate
the consummation of the transactions contemplated hereby) or use such
information to the detriment of the other; provided that (i) such party may use
and disclose any such information once it has been publicly disclosed (other
than by such party in breach of its obligations under this Section) or which
rightfully has come into the possession of such party (other than from the other
party) and (ii) to the extent that such party may, in the reasonable judgment of
its counsel, be compelled by Legal Requirements to disclose any of such
information, such party may disclose such information if it has used
commercially reasonable efforts, and has afforded the other the opportunity, to
obtain an appropriate protective order, or other satisfactory assurance of
confidential treatment, for the information compelled to be disclosed. In the
event of termination of this Agreement, each party will use commercially
reasonable efforts to cause to be delivered to the other, and will retain no
copies of, any documents, work papers or other materials obtained by such party
or on its behalf from the other, whether so obtained before or after the
execution of this Agreement.
(b) TCICP and Continental each will consult with and cooperate with
the other with respect to the content and timing of all press releases and other
public announcements, and any oral or written statements to Continental System
Employees and TCICP System Employees concerning this Agreement and the
transactions contemplated hereby. Except as required by applicable Legal
Requirements, neither TCICP nor Continental will make any such release,
announcement or statement without the prior written consent and approval of the
other.
Section 6.4 Title Insurance Commitments. Continental and TCICP each
----------- ---------------------------
will provide to the other, on or before February 29, 1996, (i) commitments to
issue title insurance policies ("Title Commitments") issued by a nationally
recognized title insurance company (a "Title Company") and containing policy
limits and other terms reasonably acceptable to the other and, to the extent
available, photocopies of all recorded items described as exceptions therein,
committing to insure fee title in the other to each parcel of the Owned Property
included in its respective Assets, by ALTA Form B (1987 Rev.) owner's policies
of title insurance and (ii) surveys of each parcel of the Owned Property
included in its respective Assets in such form as is necessary to obtain the
title insurance to be issued pursuant to the Title Commitments with the standard
printed exceptions relating to survey matters deleted (the "Surveys"), certified
to the other and to the Title Company issuing a Title Commitment with respect to
that Owned Property. If Continental or TCICP notifies
-xxxvi-
<PAGE>
the other within 20 days of its receipt of both the Title Commitments and the
Surveys of any Lien or other matter affecting title to Owned Property of the
other which renders title to any parcel of Owned Property unmarketable or
prevents the use of any parcel of Owned Property for the purposes for which it
is currently used by the other (each a "Title Defect"), the other will exercise
commercially reasonable efforts to remove or, with the consent of the objecting
party, cause the Title Company to commit to insure over, each such Title Defect
prior to Closing.
Section 6.5 Leased Vehicles. Each party will pay the remaining
----------- ---------------
balances on any leases for vehicles included in its Tangible Personal Property
and will deliver title to such vehicles free and clear of all Liens to the other
party at Closing.
Section 6.6 Programming. Each party will execute and deliver such
----------- -----------
documents and take such action as may be reasonably requested by the other party
to enable such other party to comply with the requirements of its programming
agreements with respect to divestitures and acquisitions of cable television
systems; provided, however, that neither party will be required hereunder to
provide specific programming or channels or to assume any liability with respect
to or in connection with the other's programming agreements.
Section 6.7 Consents. Subsequent to Closing, each of TCICP with
----------- --------
respect to its Systems and Assets and Continental with respect to its System and
Assets will continue to use commercially reasonable efforts to obtain in writing
as promptly as possible any consent, authorization or approval required to be
obtained by it in connection with the transactions contemplated hereunder which
was not obtained on or before Closing and will deliver to the other copies of
the same, reasonably satisfactory in form and substance to the other. The
obligations set forth in this Section will survive Closing and will not be
merged in the consummation of the transactions contemplated hereby.
Section 6.8 Subscriber Billing Services. Continental and TCICP will
----------- ---------------------------
each provide to the other, upon request, reasonable access to and the right to
use its billing system computers, software and related fixed assets in
connection with the System acquired by the other for a period of up to 90 days
following the Closing to allow for conversion of existing billing arrangements
("Transitional Billing Services"). Each party will notify the other at least 10
days prior to Closing as to whether it desires Transitional Billing Services
from the other. All Transitional Billing Services, if any, that are requested
by a party will be provided on terms and conditions reasonably satisfactory to
each Party.
Section 6.9 Distant Broadcast Signals. Unless otherwise restricted
----------- -------------------------
or prohibited by any Governmental Authority or applicable Legal Requirements, if
requested by the party to which a System will be transferred under this
Agreement, the transferor of a System hereunder will delete, prior to the
Closing Date, any distant broadcast signals which the transferee determines will
result in unacceptable liability on the part of the transferee for copyright
payments with respect to continued carriage of such signals after the Closing
Date.
Section 6.10 Post-Closing Cooperation upon Inquiries as to Rates.
------------ ---------------------------------------------------
For a period of 12 months after Closing, each party will cooperate with and
assist the other by providing, upon request,
-xxxvii-
<PAGE>
all information in that party's possession (and not previously made available to
the requesting party) relating directly to the rates set forth in Exhibits 4.10
-------------
or 5.10, as applicable, or on any of FCC Forms 393, 1200, 1205, 1210, 1215,
----
1220, 1240, or other FCC Forms that the requesting party may reasonably require
to justify such rates in response to any inquiry, order or requirement of any
Governmental Authority.
Section 6.11 Employee Continuation Plans. TCICP, at its expense,
------------ ---------------------------
will provide to any Continental System Employees whose employment is terminated
after the Closing Time, and Continental, at its expense, will provide to any
TCICP System Employees whose employment is terminated after the Closing Time,
the benefits to which such System Employees are entitled (or, in the case of
TCICP System Employees, to which such System Employees would be entitled if they
were Continental System Employees) under the Continental Employee Continuation
Plan. Continental System Employees and TCICP System Employees who are entitled
to payments under this Section 6.11 will not be entitled to payments from TCICP
or Continental under any other severance or similar plan that would otherwise be
applicable to such employees.
Section 6.12 MPT. Except for the Migrated Product Tier to be
------------ ---
implemented by Continental as of January 1, 1996 in the Lake St. Louis System,
the St. Louis County System and in the Overland, Breckenridge Hills, University
City, Clayton, Brentwood and Maplewood franchise areas of the Overland System,
Continental will not implement any Migrated Product Tier in the Continental
Systems pursuant to the Social Contract that will be applicable after Closing,
without the prior written consent of TCICP, which consent will not be
unreasonably withheld.
Section 6.13 Updated Schedules. Either party may provide
------------ -----------------
substitutes for any of the Exhibits to this Agreement relating to such party's
Systems by providing notice and copies of such substitute Exhibits, along with a
copy of any substitute Exhibit marked to show changes from the form of such
Exhibit attached to this Agreement, to the other party on or before January 16,
1996. Any such substitute Exhibit will become a part of this Agreement for all
purposes, in place of the corresponding Exhibit attached to this Agreement.
Section 6.14 Certain Notices. TCICP, with respect to the TCICP
------------ ---------------
Systems, and Continental, with respect to Continental Systems, will cause to be
timely filed, a request for renewal under Section 626 of the Cable Act with the
proper Governmental Authority with respect to cable franchises that will expire
within 36 months after any date between the date of this Agreement and the
Closing Date.
Section 6.15 Continental Franchise Expirations. Prior to Closing,
------------ ----------- ---------------------
Continental will obtain renewals of the Continental Systems Franchises that are
scheduled to expire prior to the Closing Date on terms reasonably satisfactory
to TCICP.
Section 6.16 TCICP Franchise Expirations. Prior to Closing, TCICP
------------ ---------------------------
will obtain renewals of the TCICP Systems Franchises that are scheduled to
expire prior to the Closing Date on terms reasonably satisfactory to
Continental.
-xxxviii-
<PAGE>
ARTICLE 7
CONDITIONS PRECEDENT
--------------------
Section 7.1 Conditions to Continental's Obligations. The obligations
----------- ---------------------------------------
of Continental to consummate the transactions contemplated by this Agreement
will be subject to the following conditions, which may be waived by Continental:
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of TCICP in this Agreement and in any Transaction Document to
which TCICP or any TCI Entity is a party, if qualified by a reference to
materiality, are true and, if not so qualified, are true in all material
respects at and as of Closing with the same effect as if made at and as of
Closing, except for changes, if any, permitted or contemplated by this
Agreement.
(b) Performance of Agreements. TCICP has performed or caused to be
-------------------------
performed in all material respects all obligations and agreements and has
complied or caused to be complied in all material respects with all covenants in
this Agreement and in any Transaction Document to be performed and complied with
by it or a TCI Entity at or before Closing.
(c) Officer's Certificate. Continental has received a certificate
---------------------
executed by an executive officer of TCICP, dated as of Closing, reasonably
satisfactory in form and substance to Continental, certifying that the
conditions specified in Sections 7.1(a) and (b) have been satisfied.
(d) Legal Proceedings. There is no Legal Requirement, and no Judgment
-----------------
has been entered and not vacated by any Governmental Authority of competent
jurisdiction in any Litigation or arising therefrom, which (i) enjoins,
restrains, makes illegal or prohibits consummation of the transactions
contemplated by this Agreement or by any Transaction Document or (ii) requires
separation or divestiture by Continental of all or any significant portion of
the TCICP Assets after Closing, and there is no Litigation pending or threatened
seeking, or which if successful would have the effect of, any of the foregoing.
(e) Opinion of FCC Counsel. Continental has received an opinion of
----------------------
Cole, Raywid & Braverman, special FCC counsel to TCICP, dated as of Closing,
reasonably satisfactory in form and substance to Continental ("TCICP FCC Counsel
Opinion").
(f) TCICP Counsel Opinion. Continental has received an opinion of
---------------------
Mary S. Willis, Esq., counsel to TCICP, dated as of Closing, reasonably
satisfactory in form and substance to Continental (the "TCICP Counsel Opinion").
(g) HSR Act Waiting Period. The waiting period under the HSR Act with
----------------------
respect to the transactions contemplated by this Agreement has expired or been
terminated.
(h) Consents. Continental has received evidence, in form and
--------
substance reasonably satisfactory to it, that the TCICP Required Consents have
been obtained.
-xxxix-
<PAGE>
(i) No Material Adverse Change. There has been no material adverse
--------------------------
change in the TCICP Assets, or the financial condition or operations of the
TCICP Systems since the date of this Agreement.
(j) Title Defects. With respect to the TCICP Systems, there exists no
-------------
Title Defect which the Title Company has not deleted from the Title Commitments
or, with the consent of Continental, committed to insure over.
(k) Environmental Assessments. Any environmental audits or
-------------------------
assessments conducted by Continental with respect to the TCICP Owned Property or
the TCICP Leased Property do not indicate the presence thereon, or the
likelihood of presence thereon, of Hazardous Substances, which presence
reasonably could be expected to give rise to material liability on the part of
Continental.
(l) Documents and Records. TCICP has delivered to Continental (i) all
---------------------
existing blueprints, schematics, working drawings, plans, specifications,
projections, statistics, engineering records, System construction and as-built
maps and (ii) all customer lists, files and records used by TCICP or the TCI
Entity in connection with the operation of the TCICP Systems, including a list
of all pending subscriber hook-ups, disconnect and repair orders supply orders,
and any other lists reasonably necessary to the operation of the TCICP Systems.
Delivery of the foregoing will be deemed made to the extent such lists, files
and records are then located at any of the offices included in the TCICP Owned
Property or Real Property Interests.
(m) Retransmission Consents. With respect to any retransmission
-----------------------
consent agreements for broadcast signals carried on the TCICP Systems that are
included as part of the TCICP Excluded Assets, all required retransmission
consents for continued carriage of such broadcast signals have been obtained on
terms and conditions reasonably acceptable to Continental. With respect to any
retransmission consent agreements for broadcast signals carried on the
Continental Systems, Continental shall have been relieved of any obligations
under such retransmission consent agreements after the Closing Date or
indemnified by TCICP with respect thereto to the reasonable satisfaction of
Continental.
(n) TCI Noncompetition Agreement. TCI Communications, Inc. has
----------------------------
executed and delivered a Noncompetition Agreement substantially in the form
attached as Exhibit 7.1.
-----------
Section 7.2 Conditions to TCICP's Obligations. The obligations of
----------- ---------------------------------
TCICP to consummate the transactions contemplated by this Agreement will be
subject to the following conditions, which may be waived by TCICP:
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Continental in this Agreement and in any Transaction Document
to which Continental is a party, if qualified by a reference to materiality, are
true and, if not so qualified, are true in all material respects at and as of
Closing with the same effect as if made at and as of Closing.
-xl-
<PAGE>
(b) Performance of Agreements. Continental has performed in all
-------------------------
material respects all obligations and agreements and complied in all material
respects with all covenants in this Agreement and in any Transaction Document to
be performed and complied with by it at or before Closing.
(c) Officer's Certificate. TCICP has received a certificate executed
---------------------
by an executive officer of Continental, dated as of Closing, reasonably
satisfactory in form and substance to TCICP, certifying that the conditions
specified Sections in 7.2(a) and (b) have been satisfied.
(d) Legal Proceedings. There is no Legal Requirement, and no Judgment
-----------------
has been entered and not vacated by any Governmental Authority of competent
jurisdiction in any Litigation or arising therefrom, which (i) enjoins,
restrains, makes illegal or prohibits consummation of the transactions
contemplated hereby or by any Transaction Document or (ii) requires separation
or divestiture by TCICP of all or any significant portion of the Continental
Assets after Closing, and there is no Litigation pending or threatened seeking,
or which if successful would have the effect of, any of the foregoing.
(e) Opinion of FCC Counsel. TCICP has received an opinion of Cole,
----------------------
Raywid and Braverman, special FCC counsel to Continental, dated as of Closing,
reasonably satisfactory in form and substance to TCICP ("Continental FCC Counsel
Opinion").
(f) Continental Counsel Opinion. TCICP has received an opinion of
---------------------------
Sullivan & Worcester, A Registered Limited Liability Partnership, dated as of
Closing, reasonably satisfactory in form and substance to TCICP (the
"Continental Counsel Opinion").
(g) HSR Act Waiting Period. The waiting period under the HSR Act with
----------------------
respect to the transactions contemplated by this Agreement has expired or been
terminated.
(h) Consents. TCICP has received evidence, in form and substance
--------
reasonably satisfactory to it, that the Continental Required Consents have been
obtained.
(i) No Material Adverse Change. There has been no material adverse
--------------------------
change in the Continental Assets or the financial condition or operations of the
Continental Systems since the date of this Agreement.
(j) Title Defects. With respect to the Continental Systems, there
-------------
exist no Title Defect which the Title Company has not deleted from the Title
Commitments or, with the consent of TCICP, committed to insure over.
(k) Environmental Assessments. Any environmental audits or
-------------------------
assessments conducted by TCICP with respect to the Continental Owned Property or
the Continental Leased Property do not indicate the presence thereon, or the
likelihood of presence thereon, of Hazardous Substances, which presume
reasonably could be expected to give rise to a material liability on the part of
TCICP.
-xli-
<PAGE>
(l) Documents and Records. Continental has delivered to TCICP (i) all
---------------------
existing blueprints, schematics, working drawings, plans, specifications,
projections, statistics, engineering records, System construction and as-built
maps relating to the Continental Systems and (ii) all customer lists, files and
records used by Continental in connection with the operation of the Continental
Systems, including a list of all pending subscriber hook-ups, disconnect and
repair orders, supply orders and any other lists reasonably necessary to the
operation of the Continental Systems. Delivery of the foregoing will be deemed
made to the extent such lists, files and records are then located at any of the
offices included in the Continental Owned Property or Real Property Interests.
(m) Retransmission Consents. With respect to any retransmission
-----------------------
consent agreements for broadcast signals carried on the Continental Systems that
are included as part of the Continental Excluded Assets, all required
retransmission consents for continued carriage of such broadcast signals have
been obtained on terms and conditions reasonably acceptable to TCICP. With
respect to any transmission consent agreements for broadcast signals that are
carried on the TCICP Systems, TCICP shall have been relieved of any obligations
under such retransmission consent agreements after the Closing Date or
indemnified by Continental with respect thereto to the reasonable satisfaction
of TCICP.
(n) Continental Noncompetition Agreement. Continental Cablevision,
------------------------------------
Inc. has executed and delivered a Noncompetition Agreement substantially in the
form attached as Exhibit 7.2.
-----------
ARTICLE 8
CLOSING
-------
Section 8.1 Closing; Time and Place. The closing of the transactions
----------- -----------------------
contemplated by this Agreement ("Closing") will take place at a time and
location mutually determined by TCICP and Continental on the last day of
the calendar month during which all conditions set forth in Sections 7.1 and
------------
7.2 have either been satisfied or waived in writing by the party entitled to the
- ---
benefit of such condition; provided, however, that if Closing has not occurred
by June 30, 1996, then Closing will take place within 10 days after the date on
which all conditions set forth in Sections 7.1 and 7.2 have either been
------------ ---
satisfied or waived in writing by the party entitled to the benefit of such
condition.
Section 8.2 TCICP's Obligations. At Closing, TCICP will deliver or cause
----------- -------------------
to be delivered to Continental the following:
(a) Cash Purchase Price. The Cash Purchase Price, by wire transfer of
-------------------
immediately available funds to the account designated by Continental.
-xlii-
<PAGE>
(b) Current Items Amount. The agreed estimated Current Items Amount,
--------------------
if it favors Continental, by wire transfer of immediately available funds to the
account designated by Continental.
(c) Bill of Sale and Asset and Assumption Agreement. The executed
------------------------------------- ---------
Bill of Sale and Assignment and Assumption Agreement to Continental in the forms
of Exhibits 8.2(c)(i) and 8.3(b), with such modifications, if any, as may be
------------------ ------
necessary or advisable to cause such forms to be effective under applicable law.
(d) Vehicle Titles. Title certificates to all vehicles included among
--------------
the TCICP Assets, endorsed for transfer of title to Continental, and separate
bills of sale therefor, if required by the laws of the States in which such
vehicles are titled.
(e) Evidence of Necessary Actions. Certified resolutions, or other
-----------------------------
evidence reasonably satisfactory to Continental, that TCICP has taken all
actions necessary to authorize the execution of this Agreement and all other
Transaction Documents and the consummation of the transactions contemplated
hereby, including evidence of proper transfer of the TCICP Assets from each TCI
Entity to TCICP.
(f) Deeds. Special warranty deeds conveying to Continental, subject
-----
only to the exceptions reflected on the TCICP Title Policies, each parcel of the
TCICP Owned Property.
(g) Title Policies. ALTA Form B (1987 Rev.) owner's policies of title
--------------
insurance, insuring Continental's fee title in each parcel of the TCICP Owned
Property endorsed to delete or modify to the satisfaction of Continental the
standard printed exceptions and any Title Defects, the premiums and charges for
which will have been paid by TCICP (the "TCICP Title Policies"), or the
irrevocable written commitment of the Title Company to deliver the TCICP Title
Policies; Continental will pay the premiums and charges for any non-standard
endorsements Continental requests with respect to any TCICP Title Policy.
(h) Officer's Certificate. The certificate described in
---------------------
Section 7.1(c);
(i) TCICP FCC Counsel Opinion. The TCICP FCC Counsel Opinion.
-------------------------
(j) TCICP Counsel Opinion. The TCICP Counsel Opinion.
---------------------
(k) Estoppel Certificates. Any TCICP Estoppel Certificates
---------------------
obtained pursuant to Section 6.1(h).
(l) Lien Releases. Evidence satisfactory to Continental that all
-------------
Liens (other than Permitted Liens) affecting or encumbering the TCICP Assets
have been terminated, released or waived, as appropriate, or original, executed
instruments in form satisfactory to Continental effecting such terminations,
releases or waivers.
-xliii-
<PAGE>
(m) FIRPTA Certificate. A FIRPTA Non-Foreign Seller Certificate
------------------
certifying that TCICP is not a foreign person within the meaning of Section 1445
of the Internal Revenue Code of 1986, as amended, reasonably satisfactory in
form and substance to Continental.
(n) Septic System Compliance. Evidence satisfactory to Continental of
------------------------
compliance with Massachusetts law regarding septic system ownership transfer.
(o) Other. Such other documents and instruments as may be necessary
-----
to effect the intent of this Agreement and consummate the transactions
contemplated hereby.
Section 8.3 Continental's Obligations. At Closing, except as
----------- -------------------------
otherwise provided below, Continental will deliver or cause to be delivered to
TCICP the following:
(a) Current Items Amount. The agreed estimated Current Items Amount,
--------------------
if it favors TCICP, by wire transfer of immediately available funds to the
account designated by TCICP or, at TCICP's election, by reduction of the Cash
Purchase Price.
(b) Bill of Sale and Assignment. The executed Bill of Sale and
---------------------------
Assignment and Assumption Agreements in the forms of Exhibits 8.3(b) and
---------------
8.2(c)(i), with such modifications, if any, as may be necessary or advisable to
- ---------
cause such forms to be effective under applicable law.
(c) Vehicle Titles. Title certificates to all vehicles included among
--------------
the Continental Assets, endorsed for transfer of title to TCICP, and separate
bills of sale therefor, if required by the laws of the States in which such
vehicles are titled.
(d) Evidence of Authorization Actions. Certified resolutions of the
---------------------------------
Board of Directors of Continental, or other evidence reasonably satisfactory to
TCICP, that Continental has taken all action necessary to authorize the
execution of this Agreement and all other Transaction Documents and the
consummation of the transactions contemplated hereby.
(e) Deeds. Special warranty deeds conveying to TCICP, subject only to
-----
the exceptions reflected on the Continental Title Policies, each parcel of the
Continental Owned Property.
(f) Title Policies. ALTA Form B (1987 Rev.) owner's policies of title
--------------
insurance, insuring TCICP's fee title in each parcel of the Continental Owned
Property endorsed to delete or modify to the satisfaction of TCICP the standard
printed exceptions and any Title Defects, the premiums and charges for which
will have been paid by Continental (the "Continental Title Policies"), or the
irrevocable written commitment of the Title Company to deliver the Continental
Title Policies; TCICP will pay the premiums and charges for any non-standard
endorsements TCICP requests with respect to any Continental Title Policy.
(g) Officer's Certificate. The certificate described
---------------------
in Section 7.2(c).
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<PAGE>
(h) Continental FCC Counsel Opinion. The Continental FCC
-------------------------------
Counsel Opinion.
(i) Continental Counsel Opinion. The Continental Counsel Opinion.
---------------------------
(j) Estoppel Certificates. Any Continental Estoppel Certificates
---------------------
obtained pursuant to Section 6.1(h).
(k) Lien Releases. Evidence satisfactory to TCICP that all Liens
-------------
(other than Permitted Liens) affecting or encumbering the Continental Assets
have been terminated, released or waived, as appropriate, or original, executed
instruments in form satisfactory to TCICP effecting such terminations, releases
or waivers.
(l) FIRPTA Certificate. FIRPTA Non-Foreign Seller Certificate
------------------
certifying that Continental is not a foreign person within the meaning of
Section 1445 of the Internal Revenue Code of 1986, as amended, reasonably
satisfactory in form and substance to TCICP.
(m) Other. Such other documents and instruments as may be necessary
-----
to effect the intent of this Agreement and consummate the transactions
contemplated hereby.
ARTICLE 9
TERMINATION AND DEFAULT
-----------------------
Section 9.1 Termination Events. This Agreement may be terminated
----------- ------------------
and the transactions contemplated hereby may be abandoned:
(a) at any time, by the mutual agreement of Continental and TCICP;
(b) by either Continental or TCICP, at any time, if the other is in
material breach or default of its respective covenants, agreements, or other
obligations herein or in any Transaction Document, or if any of its
representations herein or in any Transaction Document are not true in all
material respects when made or when otherwise required by this Agreement or any
Transaction Document to be true;
(c) by either Continental or TCICP, upon written notice to the other,
if any of the conditions to its obligations set forth in Sections 7.1 and 7.2,
------------ ---
respectively, have not been satisfied on or before September 30, 1996 (the
"Outside Closing Date"), for any reason other than a material breach or default
by such party of its respective covenants, agreements, or other obligations
hereunder, or any of its representations herein not being true and accurate in
all material respects when made or when otherwise required by this Agreement to
be true and accurate in all material respects; or
-xlv-
<PAGE>
(d) by either Continental or TCICP, on or before January 31, 1996, if
the results and findings of such party's investigations of the Continental
Systems or the TCICP Systems are not satisfactory in the sole discretion of the
terminating party; or
(e) as otherwise provided herein.
Section 9.2 Effect of Termination. If this Agreement is terminated
----------- ---------------------
pursuant to Section 9.1., all obligations of the parties hereunder will
------------
terminate, except for the obligations set forth in Sections 6.3, 11.1, 11.2 and
------------ ---- ----
11.13. Termination of this Agreement pursuant to Sections 9.1(b) or (c) will
- ----- --------------- ---
not limit or impair any remedies that either TCICP or Continental may have with
respect to a breach or default by the other of its covenants, agreements or
obligations hereunder.
ARTICLE 10
INDEMNIFICATION
---------------
Section 10.1 Indemnification by TCICP. From and after Closing,
------------ ------------------------
TCICP will indemnify and hold harmless Continental and its Affiliates, partners,
officers, employees, agents and representatives, and any Person claiming by or
through any of them, as the case may be, from and against any and all Losses
arising out of or resulting from:
(a) any representations and warranties made by TCICP in this Agreement
or in any Transaction Document not being true and accurate in all material
respects, when made or at Closing, provided that indemnification under this
paragraph is sought within the time periods and in the manner stated in Section
-------
10.5;
- -----
(b) any failure by TCICP to perform in all material respects any of
its covenants, agreements, or obligations in this Agreement or in any
Transaction Document;
(c) the operation of the TCICP Systems prior to the Closing Time;
(d) all liabilities of TCICP or relating to the TCICP Systems that are
not Continental Assumed Liabilities; and
(e) the TCICP Assumed Liabilities.
If, by reason of the claim of any third party relating to any of the matters
subject to such indemnification, a Lien is placed or made upon any of the
properties or assets owned or leased by Continental or any other Indemnitee
under this Section, in addition to any indemnity obligation of TCICP under this
Section, TCICP will furnish a bond sufficient to obtain the prompt release
thereof within 10 days after receipt from Continental of notice thereof.
Section 10.2 Indemnification by Continental. From and after
------------ ------------------------------
Closing, Continental will indemnify and hold harmless TCICP, its Affiliates,
officers and directors, employees, agents and
-xlvi-
<PAGE>
representatives, and any Person claiming by or through any of them, as the case
may be, from and against any and all Losses arising out of or resulting from:
(a) any representations and warranties made by Continental in this
Agreement or in any Transaction Document not being true and accurate in all
material respects when made or at Closing, provided that indemnification under
this paragraph is sought within the time periods and in the manner stated in
Section 10.5;
- -------------
(b) any failure by Continental to perform in all material respects any
of its covenants, agreements, or obligations in this Agreement or in any
Transaction Document;
(c) the operation of the Continental Systems prior to the Closing
Time;
(d) all liabilities of Continental or relating to the Continental
Systems that are not TCICP Assumed Liabilities; and
(e) the Continental Assumed Liabilities.
If, by reason of the claim of any third party relating to any of the matters
subject to such indemnification, a Lien is placed or made upon any of the
properties or assets owned or leased by TCICP or any other Indemnitee under this
Section, in addition to any indemnity obligation of Continental under this
Section, Continental will furnish a bond sufficient to obtain the prompt release
thereof within 10 days after receipt from TCICP of notice thereof.
Section 10.3 Procedure for Indemnified Third Party Claim. Promptly
----------- -------------------------------------------
after receipt by a party entitled to indemnification hereunder (the
"Indemnitee") of written notice of the assertion or the commencement of any
Litigation with respect to any matter referred to in Sections 10.1 or 10.2, the
------------- ----
Indemnitee will give written notice thereof to the party from whom
indemnification is sought pursuant hereto (the "Indemnitor") and thereafter will
keep the Indemnitor reasonably informed with respect thereto if the Indemnitor
does not assume the defense of such claim; provided, however, that failure of
the Indemnitee to give the Indemnitor notice as provided herein will not relieve
the Indemnitor of its obligations hereunder, except to the extent that such
failure to give notice will prejudice any defense or claim available to the
Indemnitor. In case any Litigation will be brought against any Indemnitee, the
Indemnitor will be entitled to assume the defense thereof with counsel
reasonably satisfactory to the Indemnitee, at the Indemnitor's sole expense. If
the Indemnitor will assume the defense of any Litigation, it will not settle the
Litigation unless the settlement will include as an unconditional term thereof
the giving by the claimant or the plaintiff of a release of the Indemnitee,
satisfactory to the Indemnitee, from all liability with respect to such
Litigation. If the Indemnitor does not assume the defense of any Litigation,
the Indemnitor will nevertheless provide reasonable cooperation to the
Indemnitee in the defense of such Litigation, and any settlement of such
Litigation will be on terms reasonable satisfactory to the Indemnitor.
-xlvii-
<PAGE>
Section 10.4 Determination of Indemnification Amounts and Related Matters.
------------ -----------------------------------------------------------
(a) TCICP and Continental will have no liability under Sections
--------
10.1(a) and 10.2(a), respectively, unless, and only to the extent that, the
- ------- -------
aggregate amount of Losses otherwise subject to its indemnification obligations
thereunder exceeds $200,000 (the "Minimum Damage Requirement"); provided, that
the Minimum Damage Requirement will not apply to any Losses resulting from or
arising out of (i) the failure by TCICP or Continental, as applicable, to pay
any tax or franchise fee to any Governmental Authority when due or any other
breach of such party's representations, warranties, covenants or agreements with
respect, to tax matters contained in this Agreement, and (ii) the failure by
TCICP or Continental as applicable to pay any copyright payments, including
interest and penalties thereon, when due or any other breach of such parties'
representations, warranties, covenants or agreements with respect to copyright
payments contained in this Agreement. TCICP and Continental will have no
liability under Sections 10.1(a) and 10.2(a), respectively, to the extent that
---------------- -------
the aggregate amount of Losses otherwise subject to its indemnification
obligations hereunder exceeds $30,000,000.
(b) Amounts payable by the Indemnitor to the Indemnitee in respect of
any Losses under Sections 10.1 or 10.2 will be payable by the Indemnitor as
------------- ----
incurred by the Indemnitee, and will bear interest at the rate per annum
publicly announced from time to time by The Bank of New York as its prime rate
plus 2% from the date the Losses for which indemnification is sought were
incurred by the Indemnitee until the date of payment of indemnification by the
Indemnitor.
Section 10.5 Time and Manner of Certain Claims. The indemnification
---------------------------------
obligations and remedies set forth in this Article 10 are intended to be the
sole and exclusive remedy of the parties with respect to the matters for which
indemnification may be sought pursuant to Sections 10.1 or 10.2 elsewhere in
------------- ----
this Agreement. The representations and warranties of Continental and TCICP
(other than those set forth in Sections 4.10(a), (c) and (g) and 5.10(a),(c) and
------- --- --- ------- ---
(g), which will not survive Closing, and in Sections 4.10(b) and 5.10(b), which
- --- ---------------- -------
will survive only until the date the parties have agreed on the Current Items
Amount) in this Agreement and any Transaction Document will survive Closing for
a period of 12 months except that (i) the liability of the parties will extend
beyond such 12-month period with respect to any claim which has been asserted in
a written notice before the expiration of such 12-month period, (ii) all such
representations and warranties with respect to any federal, state or local taxes
and with respect to any FCC or Copyright matters will survive until the
expiration of the applicable statute of limitations, (iii) the representations,
covenants and agreements of the parties in this Agreement and in the Transaction
Documents with respect to title to the Assets will survive the Closing and will
continue in full force and effect without limitation, and (iv) the
representations and warranties set forth in Sections 4.15 and 5.15 will survive
------------- ----
Closing for a period of two years.
Section 10.6 Other Indemnification. The provisions of Sections 10.3,
------------ --------------------- --------
10.4 and 10.5 will be applicable to any claim for indemnification made
- ---- ----
under any other provision of this Agreement, and all references in Sections
--------
10.3, 10.4 and 10.5 to Sections 10.1 and 10.2 will be deemed to be references to
---- ---- ------------- ----
such other provisions of this Agreement.
-xlviii-
<PAGE>
ARTICLE 11
MISCELLANEOUS PROVISIONS
------------------------
Section 11.1 Expenses. Except as otherwise provided in Section 11.13
------------ -------- -------------
or elsewhere in this Agreement, each of the parties will pay its own
expenses and the fees and expenses of its counsel, accountants, and other
experts in connection with this Agreement. However, the parties will share
equally any filing fees due under the HSR Act.
Section 11.2 Brokerage. TCICP will indemnify and hold Continental
---------
harmless from and against any and all Losses arising from any employment by it
of, or services rendered to it by, any finder, broker, agency or other
intermediary, in connection with the transactions contemplated hereby, or any
allegation of any such employment or services. Continental will indemnify and
hold TCICP harmless from and against any and all Losses arising from any
employment by it of, or services rendered to it by, any finder, broker, agency
or other intermediary, in connection with the transactions contemplated hereby,
or any allegation of any such employment or services.
Section 11.3 Waivers. No action taken pursuant to this Agreement,
------------ -------
including any investigation by or on behalf of any party hereto, will be deemed
to constitute a waiver by the party taking the action of compliance with any
representation, warranty, covenant or agreement contained herein or in any
Transaction Document. The waiver by any party hereto of any condition or of a
breach of another provision of this Agreement or any Transaction Document will
be in writing and will not operate or be construed as a waiver of any other
condition or subsequent breach. The waiver by any party of any of the
conditions precedent to its obligations under this Agreement will not preclude
it from seeking redress for breach of this Agreement other than with respect to
the condition so waived.
Section 11.4 Notices. All notices, requests, demands, applications,
------------ -------
services of process and other communications which are required to be or may be
given under this Agreement or any Transaction Document will be in writing and
will be deemed to have been duly given if sent by telecopy or facsimile
transmission, answer back requested, or delivered by courier or mailed,
certified first class mail, postage prepaid, return receipt requested, to the
parties at the following addresses:
To TCICP:
c/o Tele-Communications, Inc.
5619 DTC Parkway
Englewood, CO 80111-3000
Attn: Gary S. Howard
Telecopy: (303) 488-3219
-xlix-
<PAGE>
Copies:
Legal Department
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, CO 80111-3000
Telecopy: (303) 488-3217
Sherman & Howard L.L.C.
633 17th Street, Suite 3000
Denver, CO 80202
Attn: Arlene S. Bobrow, Esq.
Telecopy: (303) 298-0940
To Continental:
c/o Continental Cablevision, Inc.
Pilot House
Lewis Wharf
Boston, MA 02110
Attn: Cristina Fernandez-Haegg
Telecopy: (617) 742-0530
Copies:
W. Lee H. Dunham, Esq.
Sullivan & Worcester, L.L.P.
One Post Office Square
Boston, MA 02109
Telecopy: (617) 338-2880
or to such other address as any party will have furnished to the other by notice
given in accordance with this Section. Such notice will be effective, (i) if
delivered in person or by courier, upon actual receipt by the intended
recipient, or (ii) if sent by telecopy or facsimile transmission, when answer
back is received, or (iii) if mailed, upon the earlier of five days after
deposit in the mail and the date of delivery as shown by the return receipt
therefor.
Section 11.5 Entire Agreement; Prior Representations; Amendments.
------------ ---------------------------------------------------
This Agreement embodies the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior representations,
agreements and understandings, oral or written, with respect thereto.
Notwithstanding any representations which may have been made by either party in
connection with the transactions contemplated by this Agreement, each party
acknowledges that (i) it has not relied on any representation by the other party
with respect to such transactions, the Assets, or the System except those
contained in this Agreement or the Exhibits hereto and (ii) its
-l-
<PAGE>
execution of this Agreement specifically precludes any negligent
misrepresentation or other claims by it based on any representation made by the
other party which is not contained in this Agreement or the Exhibits hereto.
This Agreement may not be modified orally, but only by an agreement in writing
signed by the party or parties against whom any waiver, change, amendment,
modification or discharge may be sought to be enforced.
Section 11.6 Specific Performance: Other Rights and Remedies. The
------------ ------------------------------------------------
parties recognize that their rights under this Agreement are unique and,
accordingly, the parties will, in addition to such other remedies as may be
available to any of them at law or in equity, have the right to enforce their
rights hereunder by actions for injunctive relief and specific performance to
the extent permitted by applicable law so long as the party seeking such relief
is prepared to consummate the transactions contemplated hereby and the
transactions will be accomplished in a manner that qualifies as a like-kind
exchange under Section 1031 of the Code. The parties agree that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach of the provisions of this Agreement and hereby agree to waive the defense
in any action for specific performance that a remedy at law would be adequate.
The parties waive any requirement for security or the posting of any bond or
other surety in connection with any temporary or permanent award or injunctive,
mandatory or other equitable relief.
Section 11.7 Binding Effect: Benefits. This Agreement will inure to
------------ ------------------------
the benefit of and will be binding upon the parties hereto and their respective
heirs, legal representatives, successors, and permitted assigns. Neither
Continental nor TCICP will assign this Agreement or delegate any of its duties
hereunder to any other Person without the prior written consent of the other;
provided, however, that Continental may assign its rights or delegate its duties
under this Agreement to any affiliate of Continental Cablevision, Inc. in
conjunction with its transfer to that entity of all or substantially all of its
assets, including but not limited to the Continental Assets and provided further
that TCICP may, without the consent of Continental, assign its rights or
delegate its duties under this Agreement to any Affiliate of Tele-
Communications, Inc. in conjunction with a transfer to such Affiliate of the
TCICP Assets. For purposes of this Section any change in control of Continental
or TCICP will not constitute an assignment by it of this Agreement.
Section 11.8 Headings and Exhibits. The section and other headings
------------ ---------------------
contained in this Agreement are for reference purposes only and will not affect
the meaning or interpretation of this Agreement. Reference to Exhibits will,
unless otherwise indicated, refer to the Exhibits attached to this Agreement,
which will be incorporated in and constitute a part of this Agreement by such
reference.
Section 11.9 Counterparts. This Agreement may be executed in any
----------- ------------
number of counterparts, each of which, when executed, will be deemed to be an
original and all of which together will be deemed to be one and the same
instrument.
Section 11.10 GOVERNING LAW. THE VALIDITY, PERFORMANCE, AND ENFORCEMENT OF
------------- -------------
THIS AGREEMENT AND ALL TRANSACTION DOCUMENTS, UNLESS EXPRESSLY PROVIDED TO THE
CONTRARY, WILL BE GOVERNED BY THE LAWS OF
-li-
<PAGE>
THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF
LAW OF SUCH STATE.
Section 11.11 Severability. Any term or provision of this Agreement
------------- ------------
which is invalid or unenforceable will be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining rights of the Person intended to be benefitted by such provision or
any other provisions of this Agreement.
Section 11.12 Third Parties; Joint Ventures. This Agreement
------------- -----------------------------
constitutes an agreement solely among the parties hereto, and, except as
otherwise provided herein, is not intended to and will not confer any rights,
remedies, obligations, or liabilities, legal or equitable, including any right
of employment, on any Person other than the parties hereto and their respective
successors, or assigns, or otherwise constitute any Person a third party
beneficiary under or by reason of this Agreement. Nothing in this Agreement,
expressed or implied, is intended to or will constitute the parties hereto
partners or participants in a joint venture.
Section 11.13 Construction. This Agreement has been negotiated by
------------- ------------
Continental and TCICP and their respective legal counsel, and legal or equitable
principles that might require the construction of this Agreement or any
provision of this Agreement against the party drafting this Agreement will not
apply in any construction or interpretation of this Agreement.
Section 11.14 Attorneys' Fees. If any Litigation between TCICP and
------------- ---------------
Continental with respect to this Agreement or the transactions contemplated
hereby will be resolved or adjudicated by a Judgment of any court, the party
prevailing under such Judgment will be entitled, as part of such Judgment, to
recover from the other party its reasonable attorneys' fees and costs and
expenses of litigation.
Section 11.15 Risk of Loss. The risk of any loss or damage to the
------------- ------------
Continental Assets or the TCICP Assets resulting from fire, theft or any other
casualty (except reasonable wear and tear) will be borne by Continental or
TCICP, respectively, at all times prior to the Closing Time. In the event that
any such loss or damage will be sufficiently substantial so as to preclude and
prevent resumption of normal operations of any material portion of a System or
the replacement or restoration of the lost or damaged property within 20 days
from the occurrence of the event resulting in such loss or damage, Continental
or TCICP, as appropriate, will immediately notify the other in writing of its
inability to resume normal operations or to replace or restore the lost or
damaged property, and the other, at any time within 10 days after receipt of
such notice, may elect by written notice to the notifying party to either (i)
waive such defect and proceed toward consummation of the transaction in
accordance with terms of this Agreement, or (ii) terminate this Agreement. If
the other elects to so terminate this Agreement, both parties will stand fully
released and discharged of any and all obligations hereunder. If the other will
elect to consummate the transactions contemplated by this Agreement
notwithstanding such loss or damage and does so, all insurance proceeds payable
as a result of the occurrence of the event resulting in such loss or damage will
be delivered by the notifying party to the other, or the rights thereto will be
assigned by the notifying party to the other if not yet paid over to the
notifying party, and the notifying party will pay to the
-lii-
<PAGE>
other an amount equal to the difference between the amount of such insurance
costs and the full replacement cost of the damaged or lost Assets.
Section 11.16 Tax Consequences. No party to this Agreement makes any
------------- ----------------
representation or warranty, express or implied, with respect to the tax
implications of any aspect of this Agreement on any other party to this
Agreement, and all parties expressly disclaim any such representation or
warranty with respect to any tax consequences arising under this Agreement.
Each party has relied solely on its own tax advisors with respect to the tax
implications of this Agreement.
Section 11.17 Commercially Reasonable Efforts. For purposes of this
------------- -------------------------------
Agreement, "commercially reasonable efforts" will not be deemed to require a
party to undertake extraordinary measures, including the initiation or
prosecution of legal proceedings or the payment of amounts in excess of normal
and usual filing fees and processing fees, if any.
Section 11.18 Time. Time is of the essence under this Agreement. If
------------- ----
the last day for the giving of any notice or the performance of any act required
or permitted under this Agreement is a day that is not a Business Day, the time
for the giving of such notice or the performance of such act will be extended to
the next succeeding Business Day.
Continental and TCICP have executed this Agreement as of the date first written
above.
TCI CABLE PARTNERS OF ST. LOUIS, L.P.
By: Heritage Cablevision of Massachusetts, Inc.,
its General Partner
By: /s/ Gary F. Howard
-------------------------------------
Name: Gary F. Howard
--------------------------------
Title:
-------------------------------
CONTINENTAL CABLEVISION OF ST. LOUIS
COUNTY, INC.
By: /s/ William T. Schleyer
------------------------------------------
Name: William T. Schleyer
-------------------------------------
Title: President
------------------------------------
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<PAGE>
Document A
RESTRICTED STOCK PURCHASE AGREEMENT V-E
---------------------------------------
Agreement made as of this ___________, 1996, by and between
Continental Cablevision, Inc., a Delaware corporation ("CCI") and
_________________________(the "Employee")
WITNESSETH THAT:
WHEREAS, CCI desires to provide significant incentives to selected key
employees of CCI or its Subsidiaries to remain as employees and to devote their
best efforts to achieving improvements in the equity value of CCI; and
WHEREAS, the Board of Directors of CCI by their vote have authorized
the issue and sale of shares of its authorized but unissued Class B Common
Stock, $.01 par value per share, to such selected key employees pursuant to the
Continental Cablevision, Inc. 1995 Restricted Stock Purchase Program (the
"Restricted Stock Purchase Program"); and
WHEREAS, the Employee has been selected as a Key Employee to
participate in the Restricted Stock Purchase Program;
NOW THEREFORE, the Employee and CCI, in consideration of these
premises and other good and valuable consideration, do hereby mutually agree as
follow:
1. Definitions. As used in this Agreement:
-----------
1.1 "Repurchase Event" shall mean the following: (a) any action of
the Employee to sell, pledge, or transfer (or purport to sell, pledge or
transfer) any shares of Unvested Subject Stock, or (b) any violation by the
Employee of the covenant contained in Section 6 hereof, or (c) termination for
any reason other than death or disability of the
<PAGE>
employment of the Employee by CCI and its Subsidiaries.
1.2 "Subject Stock" shall mean all of the shares of Class B Common
Stock of CCI sold by CCI to the Employee subject to the terms and conditions of
this Agreement; and any and all shares of stock or other securities or property
of CCI or any other corporation or entity issued upon conversion of, with
respect to, or in substitution for the Subject Stock as the result of any stock
dividend, stock split, recapitalization, liquidation, merger, consolidation or
reorganization, but not including dividends paid in cash upon the Subject Stock;
and any certificate representing an interest in a voting trust holding the
Subject Stock.
1.3 "Subsidiary" or "Subsidiaries" shall mean any corporation or
other entity in which, at the time in question, CCI owns (directly, or
indirectly through other corporations or entities) a majority of the voting
shares or ownership interests.
1.4 "Unvested Subject Stock" shall mean, as of any date, a number
of shares of Subject Stock equal to (a) the total number of shares of Subject
Stock multiplied by (b) the percentage which is set forth opposite such date in
the chart in Section 5.1 hereof.
1.5 "Vested Subject Stock" shall mean shares of Subject Stock to
which the repurchase rights of CCI described in Section 5.1 hereof have ceased
to apply. Any Unvested Subject Stock shall become Vested Subject Stock upon the
Employee's death or termination of employment by reason of disability.
Furthermore, notwithstanding the other provisions of this Agreement, if CCI
merges with and into U S WEST, Inc., a Delaware corporation ("Acquiror") (the
"Merger"), pursuant to an Agreement and Plan of Merger between Acquiror and CCI
dated as of February 27, 1996 (the "Merger Agreement"), then the Subject Stock
shall become Vested Subject Stock in its entirety upon the first to occur on or
after the date of such Merger of the following events:
2
<PAGE>
(a) In the case of a Pilot-House based corporate Employee, the Employee's
termination of employment by reason of the Employee's involuntary
relocation to a place of employment that is more than 25 miles from
Pilot House, or the relocation of the headquarters of the merged CCI
operations from Pilot House.
(b) The Employee's termination of employment within twenty-four months of
the effective time of the Merger (the "Effective Time"), other than in
connection with the swap for assets of a third party of the system or
other business unit in which the Employee is employed, if such
termination is:
(i) By reason of a diminution in the Employee's compensation,
including a material adverse change in employee benefits;
(ii) By reason of the assignment by Acquiror to the Employee of
duties and responsibilities which are materially less than
the Employee's duties and responsibilities as of the
Effective Time; or
(iii) An involuntary termination of the Employee's employment other
than by reason of a Termination for Cause. "Termination for
Cause" shall mean termination because of the Employee's (A)
refusal or failure (other than for reasons of illness,
incapacity due to physical or mental illness or physical
injury) to perform, or persistent and material deficiencies
in performing, duties assigned during employment by Acquiror,
provided such duties are
3
<PAGE>
substantially similar to duties assigned by CCI prior to the
Effective Time, and further provided that the Acquiror shall
provide the Employee with written notice of the reason(s) for
his proposed termination and Employee shall have thirty (30)
days from the date of such notice within which to cure any
failure or material deficiency; (B) misappropriation of any
CCI or Acquiror funds or property; or (C) conduct which could
reasonably result in the Employee's conviction of a felony;
or (D) conduct which could reasonably result in termination
of the Employee's employment due to violation of published
policies of CCI or the Acquiror.
For purposes of this Section 1.5, "termination of employment" means that the
Employee is not employed by CCI, Acquiror, or any corporation or entity in
which, at the time in question, CCI or Acquiror owns (directly or indirectly
through other corporations or entities) a majority of the voting shares or
ownership interests, or which entity owns such a majority interest in CCI or
Acquiror.
2. Sale of Subject Stock. Subject to the terms, conditions and
---------------------
restrictions of this Agreement, CCI hereby sells to the Employee _______________
_________________ shares of authorized but unissued Class B Common Stock of CCI,
having a par value of one cent ($.01) per share, for a purchase price payable in
cash of one cent ($.01) per share, receipt of which payment in full is hereby
acknowledged by CCI.
3. Voting Rights. The employee will be accorded all voting rights
-------------
of full common
4
<PAGE>
stock ownership with respect to the Subject Stock.
4. Restrictions on Transfer. The Employee hereby agrees that the
------------------------
Subject Stock shall be transferable only in accordance with the following terms
and conditions:
4.1 The Employee hereby represents and warrants to CCI that he is
acquiring the Subject Stock for investment and not with a view to effecting any
resale or distribution thereof, and that he will not in any event sell, pledge
or otherwise transfer or encumber the Subject Stock or any portion thereof
(whether voluntarily, by operation of law, by bequest or otherwise) unless and
until CCI receives an opinion from legal counsel in form and substance
reasonably satisfactory to it that the proposed transfer of Subject Stock would
not violate the provisions of any applicable federal or state securities law or
any provisions of this Agreement.
4.2 The Employee hereby agrees that he will not make or purport to
make, except to CCI, any sale, pledge, or transfer (whether voluntarily, by
operation of law, by bequest or otherwise) of Unvested Subject Stock.
4.3 Anything contained in this Agreement to the contrary
notwithstanding, no restriction or prohibition shall apply to a pledge of
Subject Stock to Continental Cablevision Investments, Inc. to secure a
Promissory Note of the Employee.
4.4 In order to make these restrictions effective, each stock
certificate or other document representing or evidencing the Subject Stock shall
have written or endorsed thereon the following legend:
"The stock or securities represented or evidenced hereby are subject to
the terms and conditions of a certain Restricted Stock Purchase
Agreement between Continental Cablevision, Inc. and the person to whom
this stock or securities were issued, and may not be transferred in
absence of compliance with said terms and conditions."
4.5 CCI shall not record on its books any transfer of ownership of
Subject
5
<PAGE>
Stock which violates the restrictions set forth in this Agreement.
5. Repurchase Rights. The Subject Stock shall be subject to repurchase
-----------------
by CCI under the following terms and conditions:
5.1 Subject to Section 1.5, upon the occurrence of a Repurchase
Event, CCI shall, by delivery of written notice to the Employee within thirty
(30) days after CCI becomes aware of such Repurchase Event, repurchase for a
price of one cent ($.01) per share the following percentage of the Subject
Stock:
<TABLE>
<CAPTION>
Percentage of Shares
of Subject Stock
Subject to Repurchase
Date of Repurchase Event ("Unvested Subject Stock")
- ------------------------ --------------------------
<S> <C> <C> <C>
Prior to 6/29/96 100.00
Between 6/30/96 - 12/30/96 91.60
Between 12/31/96 - 6/29/97 83.20
Between 6/30/97 - 12/30/97 75.00
Between 12/31/97 - 6/29/98 62.50
Between 6/30/98 - 12/30/98 50.00
Between 12/31/98 - 6/29/99 37.50
Between 6/30/99 - 12/30/99 25.00
Between 12/31/99 - 6/29/00 16.60
Between 6/30/00 - 12/30/00 8.40
Between 12/31/00 - 6/29/01 4.20
Between 6/30/01 - 12/30/01 2.10
12/31/01 and thereafter ZERO
</TABLE>
5.2 The closing of any repurchase of Subject Stock by CCI pursuant to
this Section 5 or Section 6 shall (unless otherwise mutually agreed and unless
other reasonable processes are then in effect) be held at the office of the
Secretary of CCI on the 35th business day after the delivery of any repurchase
notice by the Company pursuant to Section 5.1 or Section 6.2 (b), at which time
the holder of the Subject Stock being repurchased shall deliver to the Secretary
the stock certificates or documents representing said Subject Stock, duly
endorsed or accompanied by such duly executed stock assignments as are required
to effect the transfer of ownership
6
<PAGE>
thereof to CCI, against receipt by the holder of full payment of the purchase
price therefor.
6. Covenant Against Competitive Activity. The Employee understands
-------------------------------------
that the business in which CCI and its Subsidiaries are engaged is the
acquisition of existing telecommunications systems and the obtaining of
franchises (or the renewal of existing franchises, licenses, and other rights)
for the construction and operation of telecommunications systems to provide
voice, data and video services in communities throughout the United States of
America and in certain foreign countries and the investment in and participation
in the operation of other telecommunications and cable programming ventures. In
consideration of the issue and sale of the Subject Stock to the Employee
pursuant to Section 2 hereof, the Employee expressly agrees that during his
employment by CCI or its Subsidiary, and for a further period of one year
following termination of any such employment (unless termination occurs after
December 31, 2001, in which case CCI hereby expressly agrees that said
restriction shall cease), the Employee (alone or with others) will not without
the written consent of CCI engage in any activity in the telecommunications
business (which shall include, but not be limited to, the provision of video,
voice and data services), directly or indirectly (whether as an employee,
officer, Director, agent, consultant, proprietor, partner, principal stockholder
or otherwise), other than as required for the performance of his employment by
CCI or by a Subsidiary.
6.1 In order to avoid questions as to the application of this covenant,
so long as it is in effect, the Employee shall give written notice to CCI in
advance of any activity in the telecommunications business in which the
Employee, alone or with others, directly or indirectly, proposes to engage,
describing the activity in reasonable detail. If CCI shall not within ten (10)
business days after its receipt of such notice respond in writing to the
Employee, objecting to such activity as being in violation of this Agreement,
such activity shall thereafter be free from
7
<PAGE>
the restrictions imposed by this Section 6.
6.2 In the event that the Employee violates the provisions of this
Section 6, the Employee and CCI hereby agree that:
(a) If the Employee is then employed by CCI or its Subsidiary, he shall
be immediately discharged, and said discharge shall be deemed to
occur for due and sufficient cause.
(b) In addition to its rights under Section 5 hereof, CCI shall have
the right, by giving written notice to the Employee, to repurchase
all of the Vested Subject Stock then owned or held by him, for an
amount equal to the fair market value of such Vested Subject Stock
on the date of repurchase. In the event that the Employee and CCI
do not agree as to said fair market value, the question shall be
referred to an arbitrator selected under the rules of the American
Arbitration Association then in effect, whose determination shall
be final and binding upon CCI and the Employee.
(c) The damages suffered by CCI on account of said violation shall
specifically include, among other elements, all gains realized by
the Employee from any sale or sales of the Subject Stock, including
those arising pursuant to 6.2(b) above.
(d) The remedy of recovery of damages at law would be inadequate, and
therefore that the provisions of this Section 6 shall be
specifically enforced and any violation thereof shall be
specifically enjoined.
(e) Each of the remedies of CCI as hereinabove provided shall be deemed
nonexclusive, and all such remedies and all others arising at law
or in
8
<PAGE>
equity shall be deemed cumulative.
7. No Obligation for CCI to Continue Employment. Nothing in this
--------------------------------------------
Agreement shall be construed as imposing any obligation upon CCI or any
Subsidiary to retain the Employee in its employ or to offer future employment to
the Employee.
8. CCI Rights. If a corporation other than CCI is the employer of the
----------
Employee, the Employee recognizes the underlying interests of CCI in such
transaction, and in each instance where this Agreement refers to the Subsidiary,
CCI shall be deemed to stand in the place and stead of the Subsidiary in the
event that the Subsidiary shall fail for any reason to exercise its rights under
this Agreement.
9. Representation, Warranties and Acknowledgments of the Employee.
--------------------------------------------------------------
9.1 The Employee hereby represents and warrants to CCI that he has
read and fully understands the provisions of this Agreement and is not in
default of the provisions set forth in Section 4 or 6 hereof.
9.2 The Employee hereby acknowledges receipt of the current
financial statements of CCI and other information as to its business, and agrees
that either by virtue of his employment position or in response to his request
he has been furnished all information relating to CCI's business and financial
position as he deems necessary to make the investment decision to purchase the
Subject Stock, subject to the restrictions and provisions of this Agreement.
10. General Provisions.
------------------
10.1 This Agreement:
(a) contains the full and complete understanding and agreement of
the parties hereto as to the entire subject matter hereof and
may not be modified or amended, nor may any provision hereof
be waived, except by a further
9
<PAGE>
written agreement duly signed by each of the parties;
(b) shall inure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators,
representatives, successors and assigns; provided, however,
that (i) with respect to the Employee, this Agreement and the
Employee's rights hereunder, are deemed to be personal in
nature and may not be assigned or transferred except by will
or by the laws of descent and distribution or with the express
written consent of CCI, and (ii) if CCI is merged or
consolidated into, or sells or transfers substantially all of
its assets and business to, a successor corporation, said
successor shall specifically agree to assume the obligations
as well as the rights and benefits of CCI under this
Agreement; and
(c) shall be deemed to be an agreement made in Massachusetts and
to be construed in accordance with its laws (other than its
laws concerning choice of law).
10.2 All representations, warranties and acknowledgments made in this
Agreement shall survive the delivery of the Subject Stock pursuant hereto.
11. Waiver of Appraisal Rights. Employee hereby waives his or her
--------------------------
rights to appraisal under Section 262 of the Delaware General Corporation Law
with respect to any shares of Subject Stock owned by him or her in connection
with the transactions contemplated by the Merger Agreement.
12. Arbitration. All disputes arising under this Agreement shall be
-----------
subject to binding arbitration before the American Arbitration Association
("AAA"). The arbitration shall be
10
<PAGE>
conducted in Boston, Massachusetts before a single arbitrator in accordance with
the rules of the AAA governing resolution of commercial disputes. The parties
shall bear the costs and fees of the arbitration equally, and the arbitrator
shall have no power to award attorneys' fees, or multiple, punitive or exemplary
damages. By signing this Agreement, Employee voluntarily, knowingly and
intelligently waives any right he or she may otherwise have to seek remedies in
court or other forums, including the right to a jury trial and the right to seek
punitive damages on any common law and/or contract claims.
13. Notices. Any notice of CCI or the Employee to each other in
-------
connection with this Agreement shall be deemed to have been properly delivered
if it is in writing and is sent by registered mail, post paid, to the subject
party addressed as follows, unless another address be substituted by notice so
given.
To CCI:
-------
Continental Cablevision, Inc.
11
<PAGE>
The Pilot House Lewis Wharf
Boston, Massachusetts 02110
Attention: Human Resources
Department
To the Employee:
----------------
CONTINENTAL CABLEVISION
_________________
_____________, _________
Attention: _______________________
IN WITNESS WHEREOF, CCI, by its officer hereunto duly authorized, and the
Employee have duly executed and delivered this Agreement in duplicate
counterpart copies as of the date first hereinabove written.
CONTINENTAL CABLEVISION, INC.
BY ___________________________
THE EMPLOYEE:
______________________________
12
<PAGE>
Document D
TAX LIABILITY FINANCING AGREEMENT
---------------------------------
Agreement made this ____________, 1996, by and between Continental Cablevision
Investments, Inc., a Delaware corporation ("Investments") and __________________
_________________(the "Employee").
WITNESSETH THAT:
WHEREAS, Continental Cablevision, Inc. ("CCI"), has authorized a restricted
stock purchase program for the benefit of selected key employees of CCI or of
its subsidiaries (meaning any corporation or other entity controlled by CCI
directly or through another subsidiary of CCI), whereby the Employee (as one of
such selected key employees) will be permitted to purchase _______ _______
_______ shares of the Class B Common Stock of CCI from CCI at their one cent per
share par value, but subject to various restrictions and repurchase rights, all
as set forth in the Restricted Stock Purchase Agreement ("RSPA") which the
Employee has entered into with CCI under this program (said shares are
hereinafter referred to as the "Subject Stock");
WHEREAS, CCI recognizes that the Employee may incur substantial additional
income tax liabilities on account of such favorable purchase of the Subject
Stock; and
WHEREAS, Investments is a subsidiary of CCI;
NOW THEREFORE, Investments and the Employee hereby mutually agree as follows:
<PAGE>
1. Upon receipt of a true copy of the Employee's valid and binding election
with respect to the Subject Stock pursuant to Section 83(b) of the Internal
Revenue Code (an "83(b) Election"), Investments shall lend to the Employee any
amount which he shall from time to time request in writing, not to exceed an
amount equal to the sum of the portions of his federal, state and local income
tax liability for 1996 incurred solely as a result of his purchase of the
Subject Stock and his filing of an 83(b) Election with respect thereto, such sum
to be determined by computing the total amount of the Employee's actual income
tax liability for 1996 and subtracting therefrom the amount of such liability
had he not purchased the Subject Stock and filed the 83(b) Election, subject to
the following terms and conditions:
1.1 The loan shall be evidenced by a Promissory Note or Notes in the
form attached hereto, providing for repayment in full on or before January 2,
2002.
1.2 The loan shall be collaterally secured by a pledge to
Investments of all of the Subject Stock. At the Employee's request, he may
substitute an equal number of other vested shares of Common Stock of CCI for the
pledged shares of Subject Stock.
1.3 The loan shall be disbursed from time to time as required to meet
the Employee's income tax liabilities incurred solely as a result of his
purchase of the Subject Stock and his filing of an 83(b) Election with respect
thereto, including the amount required to satisfy his employer's tax withholding
obligations with respect to such liabilities.
2. The Employee hereby:
(a) requests that Investments lend him immediately an amount equal
<PAGE>
to $6.74 per share of the Subject Stock (28% of $24.07 per share),
to be disbursed to his employer to meet its federal income tax
withholding obligations arising in connection with the Employee's
purchase of the Subject Stock, and such further sums as he may from
time to time request pursuant to Section 1 hereof;
(b) affirms to Investments that he has submitted an 83(b) Election, a
true copy of which is attached hereto; and
(c) herewith delivers to Investments the stock certificate representing
the Subject Stock, together with a stock assignment duly endorsed
in blank.
3. This Agreement constitutes the entire understanding and agreement of
Investments and the Employee as to the subject matter hereof, and may not be
modified or amended except by a further written agreement duly signed by each of
the parties hereto.
4. All disputes arising under this Agreement shall be subject to binding
arbitration before the American Arbitration Association ("AAA"). The
arbitration shall be conducted in Boston, Massachusetts before a single
arbitrator in accordance with the rules of the AAA governing resolution of
commercial disputes. The parties shall bear the costs and fees of the
arbitration equally, and the arbitrator shall have no power to award attorneys'
fees, or multiple, punitive or exemplary damages.
<PAGE>
IN WITNESS WHEREOF, Investments, by its officer hereunto duly authorized, and
the Employee have made this Agreement as of the date first hereinabove written.
CONTINENTAL CABLEVISION
INVESTMENTS, INC.
By___________________________
The Employee:
______________________________
Signature
______________________________
Address
<PAGE>
AMENDMENT TO RESTRICTED STOCK PURCHASE AGREEMENT IV
---------------------------------------------------
Agreement (this "Agreement") made as of February 28, 1996, by and
between Continental Cablevision, Inc., a Delaware corporation ("CCI"), and
_____________ _____________ (the "Employee").
WITNESSETH THAT:
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") dated as of February 27, 1996 between CCI and U S WEST, Inc., a
Delaware corporation ("Acquiror"), CCI will merge with and into Acquiror or its
designee, with Acquiror or its designee continuing as the surviving corporation
(the "Merger") (defined terms used in this Agreement and not herein defined
shall have the meaning given to them in the Merger Agreement);
WHEREAS, CCI and Employee are parties to a Restricted Stock Purchase
Agreement IV made as of January 10, 1992 (the "RSPA");
WHEREAS, in the Merger the Employee will receive Media Stock and
Series D Preferred Stock in exchange for the shares of CCI stock to which the
RSPA applies;
WHEREAS, the Employee and CCI each desire that the Media Stock and
Series D Preferred Stock shall constitute Subject Stock as defined by the RSPA,
that the RSPA shall be amended as provided herein, and that, after the
consummation of the Merger, the Acquiror and the Employee shall be bound by the
RSPA as so amended;
NOW THEREFORE, the Employee and CCI, in consideration of these
premises and other good and valuable consideration, do hereby mutually agree as
follows:
1. The RSPA, as amended by this Agreement, shall inure to the benefit
of and be
<PAGE>
binding upon each of the Employee and the Acquiror in accordance with its terms,
as of the Effective Time.
2. The Media Stock and Series D Preferred Stock which is to be
received by the Employee in the Merger in exchange for the Subject Stock under
the RSPA shall be Subject Stock under such RSPA as amended herein.
3. Section 1.1 of the RSPA shall be deleted and all references to a
"Permitted Transferee" in the RSPA shall be stricken.
4. Section 4.2 of the RSPA shall be amended by substituting the
following therefor: 4.2 The Employee hereby agrees that he will
not make or purport to make, except to CCI, any sale, pledge, or
transfer (whether voluntarily, by operation of law, by bequest or
otherwise) of Unvested Subject Stock.
5. Sections 5.2 and 5.4 of the RSPA shall be stricken.
6. Section 5.3 of the RSPA shall be renumbered as Section 5.2, and
the parenthetical in the second line shall be changed to read: "(unless
otherwise mutually agreed and unless other reasonable processes are then in
effect)."
7. Section 6 of the RSPA shall be amended by substituting
the following therefor: 6. Covenant Against Competitive
----------------------------
Activity. The Employee understands that the business in which CCI
---------
and its Subsidiaries are engaged is the acquisition of existing
telecommunications systems and the obtaining of franchises (or the
renewal of existing franchises, licenses, and other rights) for
the construction and operation of telecommunications systems to
provide voice, data and video
<PAGE>
services in communities throughout the United States of America
and in certain foreign countries and the investment in and
participation in the operation of other telecommunications and
cable programming ventures. The Employee expressly agrees that
during his employment by CCI or its Subsidiary, and for a further
period of one year following termination of any such employment
(unless termination occurs after December 31, 2001, in which case
CCI hereby expressly agrees that said restriction shall cease),
the employee (alone or with others) will not without the written
consent of CCI engage in any activity in the telecommunications
business (which shall include, but not be limited to, the
provision of video, voice and data services), directly or
indirectly (whether as an employee, officer, Director, agent,
consultant, proprietor, partner, principal stockholder or
otherwise), other than as required for the performance of his
employment by CCI or by a Subsidiary.
8. Section 10(c) of the RSPA shall be amended by adding at the end
thereof: "(other than its laws concerning choice of law)."
9. Notwithstanding the other provisions of the RSPA, the Subject
Stock shall become Vested Subject Stock in its entirety in accordance with the
terms of the RSPA or, if earlier, upon the first to occur of the following
events if CCI has, no later than the date of such event, merged with and into
Acquiror:
(1) The Employee's death;
(2) The Employee's termination of employment by reason of
disability;
<PAGE>
(c) In the case of a Pilot-House based corporate Employee, the Employee's
termination of employment by reason of the Employee's involuntary
relocation to a place of employment that is more than 25 miles from Pilot
House, or the relocation of the headquarters of the merged CCI operations
from Pilot House.
(d) The Employee's termination of employment within twenty-four months of the
Effective Time, other than in connection with the sale, swap or other
disposition of the system or other business unit in which the Employee is
employed, if such termination is:
(i) By reason of a diminution in the Employee's compensation,
including a material adverse change in employee benefits;
(ii) By reason of the assignment by Acquiror to the Employee of
duties and responsibilities which are materially less than the
Employee's duties and responsibilities as of the Effective Time;
or
(iii) An involuntary termination of the Employee's employment other
than by reason of a Termination for Cause. "Termination for
Cause" shall mean termination because of the Employee's (A)
refusal or failure (other than for reasons of illness,
incapacity due to physical or mental illness or physical injury)
to perform, or persistent and material deficiencies in
performing, duties assigned
<PAGE>
during employment by Acquiror, provided such duties are
substantially similar to duties assigned by CCI prior to the
Effective Time, and further provided that the Acquiror shall
provide the Employee with written notice of the reason(s) for
his proposed termination and Employee shall have thirty (30)
days from the date of such notice within which to cure any
failure or material deficiency; (B) misappropriation of any CCI
or Acquiror funds or property; or (C) conduct which could
reasonably result in the Employee's conviction of a felony; or
(D) conduct which could reasonably result in termination of the
Employee's employment due to violation of published policies of
CCI or the Acquiror.
For purposes of this Section 9, "termination of employment" means that the
Employee is not employed by CCI, Acquiror, or any corporation or entity in
which, at the time in question, CCI or Acquiror owns (directly or indirectly
through other corporations or entities) a majority of the voting shares or
ownership interests, or which entity owns such a majority interest in CCI or
Acquiror.
10. Employee hereby waives his or her rights to appraisal under
Section 262 of the Delaware General Corporation Law with respect to any shares
of Subject Stock owned by him or her in connection with the transactions
contemplated by the Merger Agreement.
11. All disputes arising under the RSPA and this Agreement shall be
subject to binding arbitration before the American Arbitration Association
("AAA"). The arbitration shall
<PAGE>
be conducted in Boston, Massachusetts before a single arbitrator in accordance
with the rules of the AAA governing resolution of commercial disputes. The
parties shall bear the costs and fees of the arbitration equally, and the
arbitrator shall have no power to award attorneys' fees, or multiple, punitive
or exemplary damages. By signing this Agreement, Employee voluntarily,
knowingly and intelligently waives any right he or she may otherwise have to
seek remedies in court or other forums, including the right to a jury trial and
the right to seek punitive damages on any common law and/or contract claims.
12. Except as amended herein, the RSPA shall continue in full force
and effect.
IN WITNESS WHEREOF, CCI, by its officer hereunto duly authorized, and
the Employee have duly executed and delivered this Agreement in duplicate
counterpart copies as of the date first hereinafter written.
CONTINENTAL CABLEVISION, INC. The Employee:
By:__________________________ By:___________________________
<PAGE>
FOR RSPA-IV ONLY
AMENDMENT TO TAX LIABILITY FINANCING AGREEMENT
----------------------------------------------
Agreement (this "Agreement") made as of February 28, 1996, among
Continental Cablevision, Inc., a Delaware corporation ("CCI"), Continental
Cablevision Investments, Inc., a Delaware Corporation ("Investments") and
___________________________________ (the "Employee").
WITNESSETH THAT:
WHEREAS, pursuant to an Agreement and Plan of Merger (the "Merger
Agreement") dated as of February 27, 1996 between Acquiror and CCI, CCI will
merge with and into U S WEST, Inc., a Delaware corporation ("Acquiror") or its
designee, with Acquiror or its designee continuing as the surviving corporation
(the "Merger");
WHEREAS, Investments and Employee are parties to a Tax Liability
Financing Agreement made as of __________ (the "TLFA"), under which Investments
has heretofore loaned certain sums (the "Loan") to Employee;
NOW THEREFORE, Investments, the Employee and CCI, in consideration of
these premises and other good and valuable consideration, do hereby mutually
agree as follows:
1. The TLFA, as amended by this Agreement, shall inure to the benefit
of and be binding upon each of Investments, the Employee and CCI in all cases.
2. The date by which the Loan shall be repaid in full is hereby
extended to January 2, 2002.
1. The TLFA shall be amended to add after Section 1.3 thereof, the
following Sections:
1.4. One-third of the outstanding principal amount of the Loan shall
be forgiven on January 2, 1997; one-half of the remaining outstanding principal
amount of the Loan
<PAGE>
shall be forgiven on January 2, 1998; and the remaining outstanding principal
amount shall be forgiven on January 2, 1999; provided, however, (a) that no
forgiveness shall occur under this Section 1.4 prior to the day that follows the
consummation of the Merger (as that term is defined in the RSPA); (b) that the
Loan shall be payable by the Employee in full (including any amounts previously
forgiven) in the case of any violation by the Employee of the covenant contained
in Section 6 of the RSPA (as that term is defined in the TLFA) as amended by an
amendment of even date herewith; and (c) that no forgiveness shall occur under
this Section 1.4 on any date as of which the Employee is not employed by CCI,
Acquiror, or any corporation or entity in which, at the time in question, CCI or
Acquiror owns (directly or indirectly through other corporations or entities) a
majority of the voting shares or ownership interests, or which entity owns such
a majority interest in CCI or Acquiror.
1.5. The Loan shall be forgiven in full upon the first to occur of any of the
following events if CCI has, no later than the date of such event, merged with
and into Acquiror:
(a) The Employee's death.
(b) The Employee's termination of employment by reason of disability.
(c) In the case of a Pilot-House based corporate Employee, the Employee's
termination of employment by reason of the Employee's involuntary
relocation to a place of employment that is more than 25 miles from
Pilot House, or the relocation of the headquarters of the merged CCI
operations from Pilot House.
(d) The Employee's termination of employment within twenty-four months of
the Effective Time (as that term is defined in the Merger Agreement),
<PAGE>
other than in connection with the swap for assets of a third party
of the system or other business unit in which the Employee is
employed, if such termination is:
(i) By reason of a diminution in the Employee's compensation,
including a material adverse change in employee benefits;
(ii) By reason of the assignment by Acquiror to the Employee of
duties and responsibilities which are materially less than the
Employee's duties and responsibilities as of the Effective
Time; or
(iii) An involuntary termination of the Employee's employment other
than by reason of a Termination for Cause. "Termination for
Cause" shall mean termination because of the Employee's (A)
refusal or failure (other than for reasons of illness,
incapacity due to physical or mental illness or physical
injury) to perform, or persistent and material deficiencies in
performing, duties assigned during employment by Acquiror,
provided such duties are substantially similar to duties
assigned by CCI prior to the Effective Time, and further
provided that the Acquiror shall provide the Employee with
written notice of the reason(s) for his proposed termination
and Employee shall have thirty (30) days from the date of such
notice within which to cure any failure or material
deficiency; (B)
<PAGE>
misappropriation of any CCI or Acquiror funds or property; or
(C) conduct which could reasonably result in the Employee's
conviction of a felony; or (D) conduct which could reasonably
result in termination of the Employee's employment due to
violation of published policies of CCI or the Acquiror.
For purposes of this Section 1.5, "termination of employment" means that the
Employee is not employed by CCI, Acquiror, or any corporation or entity in
which, at the time in question, CCI or Acquiror owns (directly or indirectly
through other corporations or entities) a majority of the voting shares or
ownership interests, or which entity owns such a majority interest in CCI or
Acquiror.
4. The TLFA shall be amended to add after Section 2 thereof, the following
Section 3, and to renumber the current Section 3 as Section 4:
3. All disputes arising under this Agreement shall be subject to binding
arbitration before the American Arbitration Association ("AAA"). The
arbitration shall be conducted in Boston, Massachusetts before a single
arbitrator in accordance with the rules of the AAA governing resolution
of commercial disputes. The parties shall bear the costs and fees of the
arbitration equally, and the arbitrator shall have no power to award
attorneys' fees, or multiple, punitive or exemplary damages. By signing
this Agreement, Employee voluntarily, knowingly and intelligently waives
any right he or she may otherwise have to seek remedies in court or
other forums, including the right to a jury trial and the right to seek
<PAGE>
punitive damages on any common law and/or contract claims.
5. The parties hereto agree that the Employee may substitute an equal number
of other vested shares of Common Stock of CCI for the pledged shares of Subject
Stock.
6. Except as amended herein, the TLFA shall continue in full force and
effect.
IN WITNESS WHEREOF, Investments and CCI, each by its officer hereunto duly
authorized, and the Employee have duly executed and delivered this Agreement in
counterpart copies as of the date first hereinafter written.
CONTINENTAL CABLEVISION
INVESTMENTS, INC. THE EMPLOYEE:
By: By:
------------------------ --------------------------
Name:
Title:
CONTINENTAL CABLEVISION:
By:
------------------------
Name:
Title:
<PAGE>
AMENDMENT TO PROMISSORY NOTES
THIS AMENDMENT, dated as of February 28, 1996, is entered into by and
between CONTINENTAL CABLEVISION INVESTMENTS, INC. ("the Payee"), a Delaware
corporation, and _________________________________ ("Maker").
WHEREAS, Maker delivered to Payee three Promissory Notes in the total
original principal amount of ______________ on January 10, 1992 (which
Promissory Notes are referred to herein as the "Notes"); and
WHEREAS, the parties hereto have agreed to amend the Notes to extend
their stated maturity dates and the events upon which such maturity dates may be
accelerated on the terms hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, the parties hereto agree as follows with respect
to each Note:
1. Defined Terms. Except as otherwise expressly provided herein, all
-------------
defined terms in the Note shall have the same meanings as in the
Restricted Stock Purchase Agreement executed in connection with the
Note.
2. Maturity Date. The maturity date of the Note set forth therein
-------------
(currently December 31, 1996) is hereby amended to January 2, 2002.
3. Acceleration Events. The entire unpaid principal hereof shall
-------------------
immediately become due and payable, without further demand or notice
of any kind, in the event that (a) a default shall exist in the
payment of principal of the Note, or (b) the maker sells or transfers,
other than to a Permitted Transferee, any of the Unvested Subject
Stock.
4. No Other Amendments. Except as expressly provided in this Amendment,
-------------------
all of the terms and conditions of the Note shall remain in full force
and effect and are hereby ratified and confirmed.
5. Miscellaneous. This Amendment shall be deemed to be a contract under
-------------
the laws of the Commonwealth of Massachusetts and for all purposes
shall be construed in accordance with and governed by the laws of said
Commonwealth or of the United States of America, as applicable.
<PAGE>
IN WITNESS WHEREOF, the Payee, by its officer hereunto duly
authorized, and the Maker have each caused this Amendment to be executed as a
sealed instrument as of the date first written above.
CONTINENTAL CABLEVISION
INVESTEMENTS, INC.
Witness:
By:
- ----------------------------- Name:
Name: Title:
Witness: MAKER:
- ----------------------------- ---------------------------------
Name: Name:
<PAGE>
PURCHASE AGREEMENT
dated as of March 15, 1996
between
MEREDITH/NEW HERITAGE PARTNERSHIP
and
NEW HERITAGE ASSOCIATES
as Sellers
and
CONTINENTAL CABLEVISION, INC.
as Buyer
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (this "AGREEMENT") is made and entered as of March
15, 1996 by and between Meredith/New Heritage Partnership, an Iowa general
partnership ("MNHP"), New Heritage Associates, an Iowa general partnership
("NHA") (MNHP and NHA are sometimes hereinafter referred to, collectively, as
"SELLERS" and, singly, as a "SELLER"), and Continental Cablevision, Inc., a
Delaware corporation ("BUYER" or "CCI").
RECITALS
--------
A. Meredith/New Heritage Strategic Partners L.P. ("MNH") is an Iowa
limited partnership. MNH owns and operates indirectly through its subsidiaries
certain cable television systems.
B. MNHP is the sole general partner of MNH. MNHP owns a general
partnership interest (the "MNHP GENERAL PARTNERSHIP INTEREST") representing at
the date hereof a 62.1% Ownership Interest (as defined in the Restated Agreement
of Limited Partnership of Meredith/New Heritage Strategic Partners L.P., dated
as of December 30, 1991 (the "MNH PARTNERSHIP AGREEMENT"), among MNHP, NHA and
Continental Cablevision of Minnesota, Inc., a Minnesota corporation ("CCM")) in
MNH.
C. NHA is a limited partner of MNH. NHA owns a limited partnership
interest in MNH (the "NHA LIMITED PARTNERSHIP INTEREST") (the MNHP General
Partnership Interest and the NHA Limited Partnership Interest are sometimes
hereinafter referred to, collectively, as the "SUBJECT INTERESTS" and, singly,
as a "SUBJECT INTEREST") representing at the date hereof a 0.0% Ownership
Interest (as defined in the MNH Partnership Agreement) in MNH and a carried
interest in MNH effective pursuant to Section 3.7 of the MNH Partnership
Agreement at such time as CCM is deemed to have received distributions from MNH
equal to its capital contributions to MNH.
D. Buyer desires to purchase, and Sellers desire to sell to Buyer, the
Subject Interests on and subject to the terms and conditions hereinafter set
forth.
<PAGE>
AGREEMENTS
----------
ARTICLE 1
DEFINITIONS AND CONSTRUCTION
----------------------------
Section 1.1 Certain Defined Terms. The following terms with initial
----------- ---------------------
capital letters, when used in this Agreement, shall have the meanings set forth
below:
"ACCOUNTS RECEIVABLE" means all subscriber, trade and other accounts
receivable and receivables of the MNH Entities.
"ACCUMULATED FUNDING DEFICIENCY" is defined in Section 4.17(q).
"AFFILIATE" means, with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of a
Person, whether through the ownership of voting securities or voting interests,
by contract or otherwise.
"ASSETS" means all of the assets and properties, real and personal,
tangible and intangible, owned or leased by any of the MNH Entities that are not
Excluded Assets, including Tangible Personal Property, Owned Property, Systems
Franchises, Systems Licenses, Systems Contracts, Systems Leases, Accounts
Receivable and Books and Records.
"BANKS" is defined in Section 2.1(d).
"BANK CO-AGENTS" is defined in Section 2.1(d).
"BANK AGENT" is defined in Section 2.1(d).
"BASIC SUBSCRIBER" means any basic subscriber of a System, with the
number of such basic subscribers as of any date to be determined using the same
methods and criteria as used in determining the number of basic subscribers of
the MNH Entities at October 31, 1995 set forth in line 01 of the page of the
CableData Report for the month of October 1995 with respect to the MNH Entities
(which number of basic subscribers was 119,781 at October 31, 1995) attached
hereto as SCHEDULE 1.1.
"BENEFIT ARRANGEMENT" is defined in Section 4.17(q).
"BOOKS AND RECORDS" means all engineering records, files, data,
drawings, blueprints, schematics, reports, lists, plans and processes of the MNH
Entities and all files of correspondence,
-2-
<PAGE>
lists, records and reports of the MNH Entities, including all files of
correspondence, lists, records and reports concerning subscribers and
prospective subscribers, signal and program carriage and dealings with
Governmental Authorities and all reports filed by or on behalf of any MNH Entity
with the FCC and all statements of account filed by or on behalf of any MNH
Entity with the United States Copyright Office.
"BUSINESS DAY" means any day other than a Saturday or Sunday or a day
on which banks in Boston, Massachusetts or Des Moines, Iowa are closed.
"BUYER" is defined in the preamble preceding the Recitals to this
Agreement.
"BUYER PURCHASE PRICE CALCULATION" is defined in Section 8.3(b).
"BUYER REQUIRED CONSENTS" means any and all Consents identified on
SCHEDULE 5.2.
"CABLE ACT" means the Cable Television Consumer Protection and
Competition Act of 1992, and the rules and regulations promulgated thereunder.
"CABLE BENEFIT ARRANGEMENT" is defined in Section 4.17(q).
"CABLE EMPLOYEE PLAN" is defined in Section 4.17(q).
"CABLE EMPLOYEE" is defined in Section 4.17(q).
"CABLE FRANCHISE AREAS" is defined in Section 7.1(k).
"CABLE PLAN" is defined in Section 4.17(q).
"CAPITAL EXPENDITURES" shall mean, for any period, any and all
expenditures in respect of any one or more of the Systems made, accrued or
incurred by any MNH Entity which, under GAAP, would be classified as capital
expenditures for such period.
"CAPITAL EXPENDITURES ADJUSTMENT" is defined in Section 8.3(b).
"CCI" is defined in the preamble preceding the Recitals to this
Agreement.
"CCI BALANCE SHEET" is defined in Section 5.5.
"CCI BALANCE SHEET DATE" is defined in Section 5.5.
"CCI COUNSEL OPINION" is defined in Section 7.2(e).
-3-
<PAGE>
"CCI MERGER AGREEMENT" means the Agreement and Plan of Merger, dated
as of February 27, 1996, between CCI and U S WEST, Inc., a Delaware corporation,
as heretofore or hereafter amended.
"CCI PROXY STATEMENT" means the Proxy Statement and the exhibits
thereto to be filed with the SEC and delivered to the stockholders of CCI in
connection with the CCI Merger Agreement, including any amendments and
supplements thereto.
"CCI SEC FILINGS" means (i) the Registration Statement on Form S-4 and
the exhibits thereto, as filed by CCI with the SEC on January 27, 1995,
including Amendment No. 1, Amendment No. 2, Amendment No. 3 and Amendment No. 4
thereto, each as filed with the SEC, and Prospectus Supplement No. 1, dated
September 22, 1995, to the Joint Proxy-Prospectus included in said Registration
Statement on Form S-4, (ii) all reports on Form 10-K, Form 10-Q or Form 8-K
filed by CCI with the SEC on or after January 1, 1995 and (iii) the CCI Proxy
Statement and all amendments thereto.
"CCM" is defined in Recital B.
"CLOSING" is defined in Section 8.1.
"CLOSING DATE" means the date on which the Closing occurs.
"CLOSING TIME" means 11:59 P.M., eastern local time, on the Closing
Date.
"COBRA" is defined in Section 4.17(q).
"CODE" means the Internal Revenue Code of 1986, as amended, and,
unless the context otherwise requires, the rules and regulations promulgated
thereunder.
"COMMUNICATIONS ACT" means the Communications Act of 1934, as amended
to date, and the rules and regulations thereunder.
"COMMUNICATIONS ACTS" means the Communications Act, the Cable
Communications Policy Act of 1984 and the Cable Act, all as amended to date, and
the rules and regulations thereunder.
"CONSENT" means any vote, consent, permit, approval or authorization
of, or filing of any certificate, notice, application, report or other document
with, any Governmental Authority or other Person.
"CONTRACT" means any written contract, mortgage, deed of trust, bond,
indenture, lease, license, note, franchise, certificate, option, warrant, right
or other instrument, document, obligation or agreement, and any oral obligation,
right or agreement.
-4-
<PAGE>
"DEAL PRICE" is defined in Section 8.3(b).
"ELIGIBLE ACCOUNTS RECEIVABLE" is defined in Section 8.3(b).
"EMPLOYEE BENEFIT PLAN" is defined in Section 4.17(q).
"ENFORCEABILITY EXCEPTIONS" is defined in Section 3.1(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations promulgated thereunder and published
interpretations with respect thereto.
"ERISA AFFILIATE" means, as to any Person, any trade or business,
whether or not incorporated, which together with such Person would be deemed, at
any time through the Closing Date, a single employer within the meaning of (S)
4001 of ERISA or (S) 414(b), (c), (m) or (o) of the Code; provided that "ERISA
AFFILIATE" shall, as to any MNH Entity, not include at any time (whether before
or after September 1, 1992) any trade or business that would not be deemed at
any time on or after September 1, 1992 to be such a single employer with any MNH
Entity.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"EXCLUDED ASSETS" means the assets of the MNH Entities located in Des
Moines, Iowa that are described in EXHIBIT A hereto.
"EXPENSES" means any and all expenses reasonably incurred in
connection with investigating, preparing, defending, bringing or prosecuting any
claim, action, suit or proceeding (including court filing fees, court costs,
arbitration fees or costs, witness fees and reasonable fees of legal counsel,
investigators, expert witnesses, accountants and other professionals).
"FCC" means the Federal Communications Commission.
"FCC LICENSES" means all Licenses issued by the FCC.
"FRANCHISE" means any governmental franchise or similar authorization
(other than FCC Licenses) pursuant to which a Person is authorized to provide
cable television service.
"GAAP" means generally accepted accounting principles as in effect in
the United States of America on the date hereof.
"GOVERNMENTAL AUTHORITY" means (i) the United States of America, (ii)
any state, commonwealth, territory or possession of the United States of America
and any political subdivision thereof (including counties, municipalities,
provinces, parishes and the like), (iii) any foreign (as to the United States of
-5-
<PAGE>
America) sovereign entity and any political subdivision thereof and (iv) any
court, tribunal, department, commission, board, bureau, agency, authority or
instrumentality of any of the foregoing.
"GROUP HEALTH PLAN" is defined in Section 4.17(q).
"HAZARDOUS SUBSTANCES" means (i) any "hazardous waste" as defined by
the Resource Conservation and Recovery Act of 1976 (RCRA) (42 U.S.C.A. (S)(S)
6901 et seq.), as amended, and the rules and regulations promulgated thereunder;
-- ---
(ii) any "hazardous substance" as defined by the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (CERCLA)(42 U.S.C.A. (S)(S)
9601 et seq.), as amended, and the rules and regulations promulgated thereunder;
-- ---
(iii) any substance regulated by the Toxic Substances Control Act (TSCA) (42
U.S.C. (S) 2601 et seq.), as amended, and the rules and regulations promulgated
-- ---
thereunder; (iv) asbestos; (v) polychlorinated biphenyls; (vi) any substances
regulated under the provisions of Subtitle I of RCRA relating to underground
storage tanks; (vii) any substance the presence, use, treatment, storage or
disposal of which on the Owned or Leased Property is prohibited by any Legal
Requirement; and (viii) any other substance which by any Legal Requirement
requires special handling, reporting to or notification of any Governmental
Authority in its collection, storage, use, treatment or disposal.
"HSR ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.
"INDEMNITEE" is defined in Section 10.3.
"INDEMNITOR" is defined in Section 10.3.
"INGERSOLL" is defined in Section 3.2(b).
"INGERSOLL EQUITY HOLDERS" means the registered holders at the date
hereof of the issued and outstanding shares of capital stock of Ingersoll, which
registered holders are listed in SCHEDULE 3.2(B)(V).
"IRS" means the Internal Revenue Service.
"JUDGMENT" means any judgment, writ, order, decision, injunction,
award or decree of or by any Governmental Authority or private arbitration
tribunal.
"LEASE" means any written or oral lease, sublease, license, easement,
grant, pole attachment or conduit or reach agreement or other attachment right
or similar instrument under which a Person has the right to use real or personal
property or a right of way.
-6-
<PAGE>
"LEASED PROPERTY" is defined in Section 4.14.
"LEGAL REQUIREMENT" means applicable common law and any statute,
ordinance, code, law, rule, regulation, order or other written standard,
requirement or procedure enacted, adopted, promulgated, applied or followed by
any Governmental Authority, and includes any Judgment.
"LICENSE" means any approval, consent, right, certificate, order,
franchise, determination, permission, license, authority or grant granted,
issued, declared, designated or adopted by any Governmental Authority, including
any Franchise.
"LIEN" means any security agreement, conditional sale, financing lease
or other title retention agreement, any consignment or bailment given for
purposes of security, any lien, mortgage, pledge, option, encumbrance, security
interest, rights of entry, possibilities of reverter, encroachments, easements,
rights-of-way, restrictive covenants and licenses of any kind, which otherwise
constitutes an interest in or claim against property, whether arising pursuant
to any Legal Requirement, any Contract or otherwise.
"LITIGATION" means, with respect to any Person, any claim, action,
suit, proceeding, arbitration, investigation, hearing or other activity or
procedure that could result in a Judgment, and any written notice of any of the
foregoing.
"LOSSES" means any claims, losses, liabilities, obligations, costs,
damages, Liens, penalties, fines, settlement payments, awards, judgments,
deficiencies and other charges, including interest which may be imposed in
connection therewith.
"MATERIAL ADVERSE EFFECT" means, with respect to any Person or
Persons, a material adverse effect on the business, condition (financial or
other), operations or assets of such Person or such Persons taken as a whole (as
the case may be).
"MEREDITH" is defined in Section 3.2(a).
"MEREDITH EQUITY HOLDER" means the registered holder at the date
hereof of the issued and outstanding shares of capital stock of Meredith, which
registered holder is listed in Schedule 3.2(a)(iv).
"MINIMUM DAMAGE REQUIREMENT" is defined in Section 10.6(d).
"MNH" is defined in Recital A.
"MNH BALANCE SHEET" is defined in Section 4.6.
"MNH BALANCE SHEET DATE" is defined in Section 4.6.
-7-
<PAGE>
"MNH EMPLOYEES" is defined in Section 4.15.
"MNH ENTITY" means any of MNH and the MNH Subsidiaries.
"MNH FCC COUNSEL OPINION" is defined in Section 7.1(e).
"MNH FINANCIAL STATEMENTS" is defined in Section 4.5.
"MNH LOAN AGREEMENT" is defined in Section 2.1(d).
"MNH PARTNERSHIP AGREEMENT" is defined in Recital B.
"MNH SUBSIDIARY" means any Subsidiary of MNH.
"MNHP" is defined in the preamble preceding the Recitals to this
Agreement.
"MNHP GENERAL PARTNERSHIP INTEREST" is defined in Recital B.
"MNHP PARTNERSHIP AGREEMENT" is defined in Section 3.2(a).
"MULTIEMPLOYER PLAN" is defined in Section 4.17(q).
"NEW HERITAGE" is defined in Section 3.2(b).
"NEW HERITAGE EQUITY HOLDERS" means the registered holders at the date
hereof of the issued and outstanding shares of capital stock of New Heritage,
which registered holders are listed in SCHEDULE 3.2(B)(V).
"NHA" is defined in the preamble preceding the Recitals to this
Agreement.
"NHA EQUITY HOLDERS" means the partners of NHA at the date hereof,
which partners are Ingersoll and New Heritage.
"NHA LIMITED PARTNERSHIP INTEREST" is defined in Recital C.
"NHA PARTNERSHIP AGREEMENT" is defined in Section 3.2(b).
"NLRB" means the National Labor Relations Board.
"OUTSIDE CLOSING DATE" is defined in Section 9.1.
"OWNED PROPERTY" is defined in Section 4.14.
"PBGC" means the Pension Benefit Guaranty Corporation.
"PENSION PLAN" is defined in Section 4.17(q).
"PERMITTED LIENS" means any (i) Liens securing current Taxes,
assessments and governmental charges not yet due and
-8-
<PAGE>
payable or being contested in good faith, (ii) 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, and (iii) Liens or minor imperfection of title that do not, individually
or in the aggregate, in any material respect interfere with or detract from the
ownership, use, operation, value or marketability of the affected property;
provided that "Permitted Liens" shall not include any Lien which could prevent
or inhibit in any material respect the conduct of the business of any System as
it is currently being conducted.
"PERSON" means any human being, Governmental Authority, corporation,
limited liability company, partnership, joint venture, trust, association or
unincorporated entity of any kind.
"PRIME RATE" means the "Prime Rate" or base rate on corporate loans at
large U.S. money center commercial banks as published in The Wall Street Journal
-----------------------
or, if publication of such rate shall be suspended or terminated, "PRIME RATE"
shall mean the annual rate of interest, determined daily and expressed as a
percentage, from time to time announced by CitiBank, N.A. as its prime or base
rate on corporate loans. Each change in the Prime Rate shall take effect
simultaneously with the date of publication or announcement, as applicable, of
each corresponding change in the Prime Rate.
"PROCEEDS" is defined in Section 7.1(k)(iii).
"PROHIBITED TRANSACTION" is defined in Section 4.17(q).
"PURCHASE PRICE" is defined in Section 8.3(b).
"REPORTABLE EVENT" is defined in Section 4.17(q).
"REQUIRED PERCENTAGE" is defined in Section 7.1(k).
"SEC" means the Securities and Exchange Commission.
"SECTION 3.1(C) EXCEPTIONS" is defined in Section 3.1(c).
"SECTION 4.3(A) EXCEPTIONS" is defined in Section 4.3(a).
"SECURITIES ACT" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"SELLER BENEFIT ARRANGEMENT" is defined in Section 4.17(q).
"SELLERS" is defined in the preamble preceding the Recitals to this
Agreement.
"SELLERS COUNSEL OPINIONS" is defined in Section 7.1(f).
-9-
<PAGE>
"SELLERS INDEMNIFICATION PERCENTAGE" means the quotient (expressed as
a percentage) of the Purchase Price (other than the $5,000,000 payable by Buyer
pursuant to Section 8.3(b)(i)(C)), as estimated at Closing pursuant to Section
8.3(b)(iii)(A), divided by the Deal Price.
"SELLERS PURCHASE PRICE CALCULATION" is defined in Section 8.3(b).
"SELLERS REQUIRED CONSENTS" means any and all Consents identified on
SCHEDULE 4.3.
"SUBJECT INTERESTS" is defined in Recital C.
"SUBSIDIARY" means, with respect to any Person, any other Person,
whether or not incorporated, of which (i) such Person or any other Subsidiary of
such Person is a general partner or (ii) at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such other Person is directly or indirectly owned or controlled by
such Person, by one or more Subsidiaries of such Person, or by such Person and
one or more of its Subsidiaries.
"SYSTEM" means any of the cable television systems in and around
Minneapolis and St. Paul, Minnesota owned and operated by an MNH Entity,
including any extension or additions thereto made after the date hereof.
"SYSTEMS CONTRACTS" means any and all (i) pole line and joint line
agreements, underground conduit agreements, crossing agreements, bulk or
commercial service or multiple dwelling unit agreements, and retransmission
consent agreements, (ii) other Contracts which contemplate payments by or to any
MNH Entity exceeding $50,000 in any 12-month period or $100,000 in the
aggregate, and (iii) other Contracts that are material to the operation of the
Systems taken as a whole (other than the Systems Franchises).
"SYSTEMS FRANCHISES" means any and all Franchises used or useful by
the MNH Entities in the operation of the Systems.
"SYSTEMS LEASES" means (i) any and all Leases of real property to
which any MNH Entity is a party or by which any of the Assets are bound, and
(ii) any and all written Leases of personal property to which any MNH Entity is
a party or by which any of the Assets are bound, under which the annual rental
exceeds $50,000 in any 12-month period or $100,000 in the aggregate.
"SYSTEMS LICENSES" means (i) any and all Licenses, including all of
the intangible cable television channel distribution
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<PAGE>
rights, cable television relay service (CARS), business radio and other
licenses, and other licenses, authorizations, consents or permits issued by the
FCC that are used or useful by the MNH Entities in the operation of the Systems
and (ii) all other material Licenses that are used by the MNH Entities in the
operation of the System.
"TANGIBLE PERSONAL PROPERTY" means all tangible personal property of
the MNH Entities, including all tangible personal property used or useful by the
MNH Entities in the operation of the Systems (including towers, tower equipment,
aboveground and underground cable, distribution systems, headend amplifiers,
line amplifiers, microwave equipment, converters, testing equipment, motor
vehicles, office equipment, furniture, fixtures, supplies, inventory and other
physical assets).
"TAXES" means all levies and assessments of any kind or nature imposed
by any Governmental Authority, including all income, sales, use, ad valorem
value added, franchise, severance, net or gross proceeds, withholding, payroll,
employment, excise or property taxes, together with any interest thereon and any
penalties, additions to tax or additional amounts applicable thereto.
"TRANSACTION DOCUMENTS" means the agreements, instruments and
documents executed and delivered in connection with this Agreement or the
transactions contemplated hereby, including the agreements, instruments and
documents described in Sections 8.2 and 8.3 which are being executed and
delivered by or on behalf of a Seller or Buyer, as the case may be, or, an
Affiliate or direct or indirect equity holder of either of them in connection
with this Agreement or the transactions contemplated hereby.
"TRANSFERABLE FRANCHISE AREAS" is defined in Section 7.1(k).
"U S WEST, INC. REGISTRATION STATEMENT" means the Registration
Statement on Form S-4 and the exhibits thereto to be filed with the SEC by U S
WEST, Inc. in connection with the CCI Merger Agreement, including any amendments
thereto filed with the SEC, and the Prospectus included in said Registration
Statement on Form S-4 and any supplements to such Prospectus.
"ULTIMATE EQUITY HOLDER GUARANTIES" is defined in Section 7.1(m).
"ULTIMATE EQUITY HOLDERS" means the Meredith Equity Holders, the
Ingersoll Equity Holders and the New Heritage Equity Holders.
"WELFARE PLANS" is defined in Section 4.17(q).
"WITHDRAWAL LIABILITY" is defined in Section 4.17(q).
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<PAGE>
"WORKING CAPITAL ADJUSTMENT" is defined in Section 8.3(b).
Section 1.2 Rules of Construction.
----------- ---------------------
(a) Unless otherwise expressly provided in this Agreement, accounting
terms used in this Agreement will have the meaning ascribed to them under GAAP.
(b) Words used in this Agreement, regardless of the gender and number
used, will be deemed and construed to include any other gender, masculine,
feminine, or neuter, and any other number, singular or plural, as the context
requires.
(c) As used in this Agreement, the word "INCLUDING" is not limiting,
and the word "OR" is not exclusive.
(d) The words "THIS AGREEMENT", "HERETO", "HEREIN", "HEREUNDER",
"HEREOF", and words or phrases of similar import refer to this Agreement as a
whole, together with any and all Appendices, Schedules and Exhibits hereto, and
not to any particular article, section, subsection, paragraph, clause or other
portion of this Agreement.
(e) Unless the context requires otherwise, a reference herein to a
particular article, section, subsection, paragraph or clause shall refer to such
article, section, subsection, paragraph or clause of this Agreement.
(f) This Agreement has been negotiated by Sellers and Buyer and their
respective legal counsel, and legal or equitable principles that might require
the construction of this Agreement or any provision of this Agreement against
the party drafting this Agreement will not apply in any construction or
interpretation of this Agreement.
(g) The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement. Reference to Schedules and Exhibits shall, unless otherwise
indicated, refer to the Schedules and Exhibits attached to this Agreement, which
shall be incorporated in and constitute a part of this Agreement by such
reference.
(h) The words "TO THE KNOWLEDGE OF SELLERS" and words or phrases of
similar import shall, except as may be otherwise expressly stated herein, refer
to the knowledge after due inquiry (or what would reasonably be the knowledge if
due inquiry were made) of James Cownie, David Lundquist, Loran Schiltz, Charles
Berger or Kevin Griffin.
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ARTICLE 2
PURCHASE AND SALE
-----------------
Section 2.1 Purchase and Sale of Subject Interests. Subject to the
----------- --------------------------------------
terms and conditions set forth in this Agreement, at the Closing:
(a) MNHP shall convey, assign and transfer to Buyer the MNHP General
Partnership Interest, free and clear of all Liens;
(b) NHA shall convey, assign and transfer to Buyer the NHA Limited
Partnership Interest, free and clear of all Liens;
(c) Buyer shall pay to the Sellers the Purchase Price in accordance
with Section 8.3, subject to adjustment as provided in Section 8.3(b)(iii); and
(d) Buyer shall either (i) pay in full the principal indebtedness of
MNH, all interest accrued thereon and any other amounts otherwise due arising
under that certain Loan Agreement, dated as of March 31, 1992, among MNH,
Toronto-Dominion Bank and the other banks named therein (the "BANKS"), The Bank
of New York, The First National Bank of Chicago and NationsBank of Texas, N.A.,
as co-agents (the "BANK CO-AGENTS"), and Toronto-Dominion Bank Trust Company as
agent (the "BANK AGENT") for the Banks and the Co-Agents, including any security
or other agreements entered into pursuant thereto, in each case, as amended
(collectively, the "MNH LOAN AGREEMENT") or (ii) deliver to the Sellers releases
duly executed by the Banks, the Co-Agents and the Agent in favor of the Sellers
releasing the Sellers from any liability under the MNH Loan Agreement and the
other agreements and instruments delivered in connection with the MNH Loan
Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES REGARDING SELLERS
------------------------------------------------
Section 3.1 Seller Matters. Each Seller severally and not jointly
----------- --------------
represents and warrants as to itself and not as to any other Seller to Buyer as
follows:
(a) Organization and Qualification of each Seller. Such Seller is a
---------------------------------------------
general partnership duly formed and validly existing under the laws of the State
of Iowa. Such Seller has all requisite partnership power and authority to own
and lease its assets and properties and to conduct its activities as such
activities are currently conducted.
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<PAGE>
(b) Authority. Such Seller has all requisite partnership power and
---------
authority to execute, deliver and perform this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement and each Transaction Document to which such Seller is or will be
a party, and the consummation by such Seller of the transactions contemplated
hereby or thereby, have been duly and validly authorized by all necessary
partnership action on the part of such Seller and its partners. This Agreement
and each Transaction Document to which such Seller is or will be a party have
been or will be (as the case may be) duly executed and delivered by such Seller
and are or will be (as the case may be) the valid and binding obligations of
such Seller, enforceable against such Seller and its general partners in
accordance with their respective 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, and (ii) for the limitations imposed by
general principles of equity. The foregoing exceptions are hereinafter referred
to as the "ENFORCEABILITY EXCEPTIONS".
(c) No Conflict; Required Consents.
------------------------------
(i) Except for (A) obtaining the Sellers Required Consents identified
on SCHEDULE 4.3 and for (B) such other exceptions (the "SECTION 3.1(C)
EXCEPTIONS") from which the aggregate amount of resulting Losses and Expenses
suffered or incurred by Buyer or the MNH Entities, together with the aggregate
amount of Losses and Expenses resulting from any Section 4.3(a) Exceptions,
would not exceed $250,000, neither the execution, delivery or performance by
such Seller of this Agreement or any Transaction Document to which such Seller
is or will be a party, nor the consummation of the transactions contemplated
hereby or thereby, does or will:
(A) conflict with or violate any provision of the MNHP Partnership
Agreement (in the case of MNHP) or the NHA Partnership Agreement (in the case of
NHA);
(B) violate any provision of any Legal Requirement applicable to such
Seller;
(C) conflict with, violate, result in a breach of, constitute a
default under (without regard to requirements of notice, lapse of time, or
elections of other Persons, or any combination thereof), accelerate or permit
the acceleration of the performance required by, any Contract or License to
which such Seller is a party or by which such Seller or any of the assets or
properties owned or leased by such Seller are bound;
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<PAGE>
(D) result in the creation or imposition of any Lien against or upon
any of the Subject Interests; or
(E) require any Consent.
(ii) Sellers have delivered to Buyer a true and complete copy of the
MNH Partnership Agreement, as in effect at the date hereof.
(d) Compliance with Legal Requirements. Such Seller holds all
----------------------------------
Contracts and Licenses necessary for the lawful conduct of its business, except
where the failure to hold such Contracts and Licenses would not in the aggregate
have a Material Adverse Effect on such Seller. Such Seller has not violated and
is not in violation of any Contract or Legal Requirement, except where such
violations do not and will not have a material adverse effect on the
authorization, execution or delivery, or the consummation of the transactions
contemplated by, this Agreement or any Transaction Document.
(e) Litigation and Judgments. There is no Litigation pending or, to
------------------------
the knowledge of such Seller, threatened by or before any Governmental Authority
or private arbitration tribunal against such Seller or any of its partners or
its partners' respective shareholders that, individually or in the aggregate,
could prevent, hinder or materially delay or affect in any material respect the
consummation of the transactions contemplated by this Agreement or any
Transaction Document.
Section 3.2 Ultimate Equity Holder Matters.
----------- ------------------------------
(a) MNHP. MNHP represents and warrants to Buyer as follows:
----
(i) Sellers have delivered to Buyer a true and complete copy of the
Meredith/New Heritage Partnership Agreement, dated as of September 1, 1991, as
in effect at the date hereof (the "MNHP PARTNERSHIP AGREEMENT"). The Management
Committee (as defined in the MNHP Partnership Agreement) has approved and
consented to this Agreement and the transactions contemplated hereby.
(ii) Meredith Cable, Inc., an Iowa corporation ("MEREDITH"), and NHA
are the only partners of MNHP. Sellers have delivered to Buyer true and complete
copies of the charter and bylaws of Meredith, each as in effect at the date
hereof.
(iii) Meredith is a corporation duly organized, validly existing and
in good standing under the laws of the State of Iowa. Meredith has all
requisite corporate power and authority to own and lease its assets and
properties and to
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<PAGE>
conduct its activities as such activities are currently conducted, except where
the failure to have such power or authority would not have a Material Adverse
Effect on the ability of Meredith to execute, deliver or perform its obligations
under this Agreement and any Transaction Document to which it is or will be a
party. Meredith has all requisite corporate power and authority to execute,
deliver and perform, for itself and in its capacity as a general partner of MNHP
each of the Transaction Documents to which it is or will be a party and to
consummate the transactions contemplated thereby. The execution, delivery and
performance of each Transaction Document to which Meredith is or will be a
party, and the consummation by Meredith of the transactions contemplated
thereby, have been duly and validly authorized by all necessary corporate action
on the part of Meredith and its shareholders. Each Transaction Document to
which Meredith is or will be a party has been or will be (as the case may be)
duly executed and delivered by Meredith and is or will be (as the case may be)
the valid and binding obligation of Meredith enforceable against Meredith in
accordance with its terms, subject to the Enforceability Exceptions. The Board
of Directors and the sole shareholder of Meredith have, by resolutions duly
adopted in accordance with all Legal Requirements and the charter and bylaws of
Meredith, approved and adopted this Agreement and the transactions contemplated
hereby on the terms and conditions set forth herein and authorized MNHP to
execute and deliver this Agreement and the other Transaction Documents and
perform its obligations hereunder and thereunder.
(iv) SCHEDULE 3.2(A)(IV) sets forth the authorized and issued and
outstanding shares of capital stock or other equity interests of Meredith and
the registered and beneficial holders thereof. All such outstanding shares are
duly authorized, validly issued and fully paid and nonassessable. There are no
outstanding options, warrants, rights, puts, calls, commitments, or other
contracts, arrangements or understandings requiring or providing for, and there
are no outstanding debt or equity securities of Meredith which upon the
conversion, exchange or exercise thereof would require or provide for, the
issuance or transfer of any shares of capital stock or other equity interests of
Meredith (or any other securities which, with notice, lapse of time and/or
payment of monies, are or would be convertible into or exercisable or
exchangeable for shares of capital stock or other equity interests of Meredith).
There are no voting trusts or other agreements or understandings with respect to
the voting of capital stock or other equity interests of Meredith.
(b) NHA. NHA represents and warrants to Buyer as follows:
---
(i) Sellers have delivered to Buyer a true and complete copy of the
New Heritage Associates Partnership
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<PAGE>
Agreement, dated as of September 1, 1991, as in effect at the date hereof (the
"NHA PARTNERSHIP AGREEMENT").
(ii) SCHEDULE 3.2(B)(II) sets forth all of the authorized and issued
and outstanding partnership interests or other equity interests of NHA and the
legal and beneficial holders thereof. There are no outstanding options,
warrants, rights, puts, calls, commitments, or other contracts, arrangements or
understandings requiring or providing for, and there are no outstanding debt or
equity securities of NHA which upon the conversion, exchange or exercise thereof
would require or provide for, the issuance or transfer of any shares of
partnership interests or other equity interests of NHA (or any other securities
which, with notice, lapse of time and/or payment of monies, are or would be
convertible into or exercisable or exchangeable for shares of partnership
interests or other equity interests of NHA). There are no voting trusts or
other agreements or understandings with respect to the voting of partnership
interests or other equity interests of NHA.
(iii) Ingersoll Group, Inc., an Iowa corporation ("INGERSOLL"), and
New Heritage Associates, Inc., an Iowa corporation ("NEW HERITAGE"), are the
only partners of NHA. Sellers have delivered to Buyer true and complete copies
of the charter and bylaws of Ingersoll, each as in effect at the date hereof.
(iv) Each of Ingersoll and New Heritage is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Iowa. Each of Ingersoll and New Heritage has all requisite corporate power and
authority to own and lease its assets and properties and to conduct its
activities as such activities are currently conducted, except where the failure
to have such power or authority could not reasonably be expected to have a
Material Adverse Effect on the ability of Ingersoll or New Heritage to execute,
deliver or perform, for itself and in its capacity as a general partner of NHA,
its obligations under this Agreement and any Transaction Document to which it is
or will be a party. Each of Ingersoll and New Heritage has all requisite
corporate power and authority to execute, deliver and perform, for itself and in
its capacity as a general partner of NHA, each of the Transaction Documents to
which it is or will be a party and to consummate the transactions contemplated
thereby. The execution, delivery and performance, for itself and in its
capacity as a general partner of NHA, of this Agreement and each Transaction
Document to which Ingersoll or New Heritage is or will be a party, and the
consummation by Ingersoll or New Heritage of the transactions contemplated
hereby or thereby, have been duly and validly authorized by all necessary
corporate action on the part of Ingersoll and New Heritage and their respective
shareholders. Each Transaction Document to which Ingersoll or New Heritage is
or will be a party
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<PAGE>
has been or will be (as the case may be) duly executed and delivered by
Ingersoll or New Heritage (as the case may be) and is or will be (as the case
may be) its valid and binding obligation enforceable against it in accordance
with such Transaction Document's terms, subject to the Enforceability
Exceptions. The Board of Directors and the shareholders of each of Ingersoll
and New Heritage have, by resolutions duly adopted in accordance with all Legal
Requirements and the charter and bylaws of Ingersoll and New Heritage (as the
case may be) approved and adopted this Agreement and the transactions
contemplated hereby on the terms and conditions set forth herein and authorized
each of MNHP and NHA to execute and deliver this Agreement and the other
Transaction Documents and perform their respective obligations hereunder and
thereunder.
(v) SCHEDULE 3.2(B)(V) sets forth the authorized and issued and
outstanding shares of capital stock or other equity interests of each of
Ingersoll and New Heritage and the registered and beneficial holders thereof.
All such outstanding shares are duly authorized, validly issued and fully paid
and nonassessable. There are no outstanding options, warrants, rights, puts,
calls, commitments, or other contracts, arrangements or understandings requiring
or providing for, and there are no outstanding debt or equity securities of
Ingersoll or New Heritage which upon the conversion, exchange or exercise
thereof would require or provide for, the issuance or transfer of any shares of
capital stock or other equity interests of Ingersoll or New Heritage (or any
other securities which, with notice, lapse of time and/or payment of monies, are
or would be convertible into or exercisable or exchangeable for shares of
capital stock or other equity interests of Ingersoll or New Heritage). There
are no voting trusts or other agreements or understandings with respect to the
voting of capital stock or other equity interests of Ingersoll or New Heritage.
Section 3.3 Title to the Subject Interests.
----------- ------------------------------
(a) MNHP represents and warrants to Buyer that MNHP has good and
marketable title to the MNHP General Partnership Interest, free and clear of all
Liens. Subject to the Closing, upon the execution and delivery by MNHP of the
Bill of Sale and Assignment to be executed and delivered by MNHP pursuant to
Section 8.2(a), MNHP will have assigned, transferred and conveyed to and vested
in Buyer (or its permitted assignee) legal and valid title to the MNHP General
Partnership Interest, free and clear of all Liens.
(b) NHA represents and warrants to Buyer that NHA has good and
marketable title to the NHA Limited Partnership Interest, free and clear of all
Liens, except for any lien and security interest granted by NHA in connection
with the MNH Loan Agreement. Subject to the Closing, upon the execution and
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delivery by NHA of the Bill of Sale and Assignment to be executed and delivered
by NHA pursuant to Section 8.2(b), NHA will have assigned, transferred and
conveyed to and vested in Buyer (or its permitted assignee) legal and valid
title to the NHA Limited Partnership Interest, free and clear of all Liens.
Section 3.4 Brokers and Finders. Each of Sellers represents and
----------- -------------------
warrants, jointly and severally, to Buyer that neither of Sellers nor any MNH
Entity nor any partner, director, officer, employee, agent or Affiliate of
either Seller or any MNH Entity has employed any broker or finder or incurred
any liability for any brokerage fees, commissions, finder's fees or similar fees
or liabilities in connection with the transactions contemplated herein, except
that MNH has employed Daniels & Associates, for whose fees and expenses MNH
shall be exclusively responsible.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES REGARDING THE MNH ENTITIES
---------------------------------------------------------
Each of Sellers represents and warrants, jointly and severally, to
Buyer as follows:
Section 4.1 Organization, Qualification and Business.
----------- ------------------------------- --------
(a) MNH is a limited partnership duly formed, validly existing and in
good standing under the laws of the State of Iowa. MNH has all requisite
partnership power and authority to own and lease its assets and properties and
to conduct its activities as such activities are currently conducted. MNH is
duly qualified to do business as a foreign partnership and is in good standing
in Minnesota. True and complete copies of the MNH Partnership Agreement and the
certificate of limited partnership of MNH, each as in effect at the date hereof,
have been delivered by Sellers to Buyer.
(b) Each MNH Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation.
Each MNH Subsidiary has all requisite corporate power and authority to own and
lease its assets and properties and to conduct its activities as such activities
are currently conducted. Each MNH Subsidiary is duly qualified to do business
as a foreign corporation and is in good standing in Minnesota.
(c) The MNH Entities engage in no material business other than the
construction, ownership, operation and management of the Systems. All of the
Systems are located entirely within Minnesota. No MNH Entity has a place of
business, or owns or leases any material assets or properties, located in any
jurisdiction other than in Minnesota and Iowa.
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<PAGE>
Section 4.2 Authority. Each MNH Entity has all requisite partnership
----------- ---------
(in the case of MNH) or corporate (in the case of each MNH Subsidiary) power and
authority to execute, deliver and perform, and to consummate the transactions
contemplated by, any Transaction Document to which such MNH Entity is or will be
a party. The execution, delivery and performance and the consummation by each
MNH Entity of the transactions contemplated by each Transaction Document to
which such MNH Entity is or will be a party have been duly and validly
authorized by all necessary action on the part of such MNH Entity and its
respective partners (in the case of MNH) and shareholders (in the case of each
MNH Subsidiary). Each Transaction Document to which any MNH Entity is or will
be a party has been or will be (as the case may be) duly executed and delivered
by such MNH Entity and is or will be (as the case may be) the valid and binding
obligation of such MNH Entity, enforceable against such MNH Entity in accordance
with its terms, subject to the Enforceability Exceptions.
Section 4.3 No Conflict; Required Consents.
----------- ------------------------------
(a) Subject to obtaining the Sellers Required Consents identified on
SCHEDULE 4.3, and except for such other exceptions (the "SECTION 4.3(A)
EXCEPTIONS") from which the aggregate amount of resulting Losses and Expenses
suffered or incurred by Buyer or the MNH Entities, together with the aggregate
amount of Losses and Expenses resulting from any Section 3.1(c) Exceptions,
would not exceed $250,000, neither the execution, delivery or performance by any
MNH Entity of any Transaction Document to which such MNH Entity is or will be a
party, nor the consummation of the transactions contemplated thereby, does or
will:
(i) conflict with or violate any provision of the MNH Partnership
Agreement or the certificate of limited partnership of MNH;
(ii) conflict with or violate any provision of the charter or bylaws
of any MNH Subsidiary;
(iii) violate any provision of any Legal Requirement;
(iv) conflict with, violate, result in a breach of, constitute a
default under (without regard to requirements of notice, lapse of time, or
elections of other Persons, or any combination thereof), accelerate or permit
the acceleration of the performance required by, any Contract or License to
which such MNH Entity is a party or by which such MNH Entity or any of the
assets or properties owned or leased by such MNH Entity are bound;
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<PAGE>
(v) result in the creation or imposition of any Lien against or upon
any of the assets or properties owned or leased by such MNH Entity; or
(vi) require any Consent.
(b) Except as specified in SCHEDULE 4.3, no MNH Entity is a party to
or bound by any Contract that restricts or purports to restrict in any material
respect the ability of any MNH Entity or any Affiliate of any MNH Entity to
engage in any location in the cable television business or in any other
business.
Section 4.4 Capitalization.
----------- --------------
(a) SCHEDULE 4.4 sets forth the name, jurisdiction of organization and
the authorized and issued and outstanding shares of capital stock, partnership
interests or other equity interests of each MNH Entity and the registered and
beneficial holders thereof. All such outstanding shares are duly authorized,
validly issued and fully paid and nonassessable. Other than the transactions
contemplated by this Agreement or as specified in SCHEDULE 4.4, there are no
outstanding options, warrants, rights, puts, calls, commitments, or other
contracts, arrangements or understandings issued by or binding upon any MNH
Entity requiring or providing for, and there are no outstanding debt or equity
securities of any MNH Entity which upon the conversion, exchange or exercise
thereof would require or provide for the issuance or transfer of any shares of
capital stock, partnership interests or other equity interests of any MNH Entity
(or any other securities which, with notice, lapse of time and/or payment of
monies, are or would be convertible into or exercisable or exchangeable for
shares of capital stock, partnership interests or other equity interests of any
MNH Entity). There are no voting trusts or other agreements or understandings
to which any MNH Entity is a party with respect to the voting of capital stock,
partnership interests or other equity interests of any MNH Entity.
(b) All of the Subsidiaries of MNH are at the date hereof and will at
the Closing Time be wholly owned, directly or indirectly, by MNH.
Section 4.5 Financial Statements. Schedule 4.5 contains (i) the
----------- --------------------
audited consolidated balance sheet of the MNH Entities as of June 30, 1995 and
the related statements of operations and cash flows (including the notes
thereto) for the year then ended and (ii) the unaudited consolidated balance
sheet of the MNH Entities as of December 31, 1995 and the related statement of
operations for the six months then ended. The financial statements referred to
in clauses (i) and (ii) of the preceding sentence are herein referred to
collectively as the "MNH FINANCIAL STATEMENTS." The MNH Financial Statements
were prepared in accordance with GAAP applied on a consistent basis
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throughout the periods covered thereby except to the extent otherwise indicated
therein. The MNH Financial Statements present fairly the financial condition of
the MNH Entities at the respective dates thereof, and the results of their
operations and their cash flows for each of the respective periods covered
thereby, all in accordance with GAAP, subject in the case of unaudited financial
statements to normal year-end accruals and audit adjustments and to the lack of
footnotes.
Section 4.6 Absence of Undisclosed Liabilities. Except as set forth
----------- ----------------------------------
in SCHEDULE 4.6, as of the date (the "MNH BALANCE SHEET DATE") of the most
recent consolidated balance sheet (including the notes thereto) forming part of
the MNH Financial Statements (the "MNH BALANCE SHEET"), no MNH Entity had any
indebtedness, liabilities or obligations, contingent or otherwise, except as
reflected or reserved against in the MNH Balance Sheet and except for such
indebtedness, liabilities and obligations as do not and will not in the
aggregate have a Material Adverse Effect on the MNH Entities. Since the MNH
Balance Sheet Date, no MNH Entity has incurred any such indebtedness,
liabilities or obligations other than in the ordinary course of business or as
permitted or contemplated by this Agreement or any Transaction Document.
Section 4.7 Absence of Certain Changes. Except as set forth in
----------- --------------------------
SCHEDULE 4.7 or as permitted or contemplated by this Agreement or any
Transaction Document, since the MNH Balance Sheet Date:
(i) the MNH Entities have conducted their respective business solely
in the ordinary course; and
(ii) there has not occurred (A) any Material Adverse Effect on the MNH
Entities or (B) 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 MNH Entities, except in each case for any Material Adverse
Effect or other event or condition that is due to general economic or industry-
wide conditions (including, without limitation, determinations by the FCC, state
or local franchising authorities affecting or applicable to the offering or
packaging of a la carte channels or cost-of-service showings and any rate
adjustments pursuant to such determinations).
Section 4.8 Assets: Title; Sufficiency; Condition.
----------- --------------------------- ---------
(a) Except as set forth on SCHEDULE 4.8 and except for leased Assets,
each MNH Entity has good title to its Assets (other than Owned Property and
Leased Property, which are covered by Section 4.14), free and clear of all Liens
other than
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Permitted Liens. Each MNH Entity has valid leasehold interests in all of the
Assets leased by it pursuant to the System Leases.
(b) Except as does not and will not result in any Material Adverse
Effect on the MNH Entities, each MNH Entity owns or has the lawful right to use
all assets, properties, Contracts and Licenses necessary to operate its business
lawfully and to maintain the same as presently conducted. Without limiting the
generality of the foregoing, except for the office equipment, furniture and
supplies located at the date hereof in MNH's executive offices in Des Moines,
Iowa and described in SCHEDULE 4.8, the Assets constitute all of the assets
necessary to permit Buyer to operate the Systems substantially as they are being
operated on the date of this Agreement and in compliance in all material
respects with all applicable Legal Requirements and requirements of Systems
Contracts, except for such non-compliances as do not and will not in the
aggregate have Material Adverse Effect on the MNH Entities. The Tangible
Personal Property is in all material respects in good condition and repair,
ordinary wear and tear excepted.
Section 4.9 Compliance with Legal Requirements. Except as set
----------- ----------------------------------
forth in SCHEDULE 4.9:
(a) To the knowledge of Sellers, the operation of the business of the
MNH Entities (including the operation of the Systems) as it is currently
operated does not violate or infringe in any material respect any Legal
Requirement. Each MNH Entity holds all Contracts and Licenses (including the
Systems Franchises) necessary for the lawful conduct of its business (including
the operation of each System) directly or indirectly owned or operated by it,
except where any failures to hold any such Contract or License do not and will
not in the aggregate have a Material Adverse Effect on the MNH Entities.
(b) Each MNH Entity and System has not violated and is not in
violation of any Contract or Legal Requirement (including any Systems
Franchise), except for any such violations as do not and will not in the
aggregate have a Material Adverse Effect on the MNH Entities. Neither of
Sellers nor any MNH Entity (i) has received on or after September 1, 1992
written notice of any violation by any MNH Entity or any System of any Legal
Requirement, or (ii) knows (without having made any inquiry with respect
thereto) of any basis for the allegation of any material violation of any Legal
Requirement by any MNH Entity or any System.
(c) The MNH Entities are each in compliance in all material respects
with the Communications Acts, and have submitted to the FCC all fees and
filings, including cable television registration statements, annual reports and
aeronautical frequency usage notices, that are required under the
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rules and regulations of the FCC, except for such failures to submit such
filings which do not and (as far as can be reasonably foreseen) will not in the
aggregate have a Material Adverse Effect on the MNH Entities. The operation of
the Assets (including the Systems) has been and is in compliance in all material
respects with the rules and regulations of the FCC (including rules and
regulations of the FCC pertaining to customer service standards), and neither of
Sellers nor any MNH Entity has received written notice from the FCC of any
violation of its rules and regulations with respect to the Assets (including the
Systems). Each relevant MNH Entity has been certified for the years ended
December 31, 1993 and 1994 as in compliance with the FCC's equal employment
opportunity rules. The Assets (including the Systems) are in compliance in all
material respects with all signal leakage criteria prescribed by the FCC. For
each relevant semi-annual reporting period, each MNH Entity has timely filed
with the United States Copyright Office all required statements of account in
proper form, and has paid when due all required copyright royalty fee payments,
relating to the carriage of television broadcast signals and is otherwise in
compliance in all material respects with all applicable rules and regulations of
the United States Copyright Office. Sellers have delivered to Buyer true and
complete copies of all reports and filings for the past year, made or filed
pursuant to FCC and United States Copyright Office rules and regulations and
will make available to Buyer all other past reports and filings made or filed
pursuant to FCC and United States Copyright Office rules and regulations.
(d) Each MNH Entity has used reasonable good faith efforts to
establish rates charged and a la carte packages provided to subscribers of the
Systems, effective as of September 2, 1993, that would be allowable under the
Cable Act, whether or not such rates or packages were subject to regulation at
that date by any Governmental Authority, including any local franchising
authority or the FCC.
(e) No MNH Entity possesses any patent, patent right, trademark or
copyright and neither is a party to any license or royalty agreement with
respect to any patent, trademark or copyright, except for licenses respecting
program material and obligations under the Copyright Act of 1976 applicable to
cable television systems generally. To the knowledge of Sellers (without having
made any inquiry with respect thereto), the Assets are free of the rightful
claim of any third party by way of copyright infringement (excluding claims
involving music performance rights).
Section 4.10 Systems Franchises, etc.
------------ ------------------------
(a) SCHEDULE 4.10(A) sets forth a list of each of the Systems
Franchises.
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<PAGE>
(b) SCHEDULE 4.10(B) sets forth a list (including the name of the
licensor) of each of the Systems Licenses.
(c) SCHEDULE 4.10(C) sets forth a list (including the name of the
contracting parties and the general subject matter) of each of the Systems
Contracts other than Systems Leases and Systems Licenses and Systems Franchises.
(d) SCHEDULE 4.10(D) sets forth a list (including the name of the
lessor and a general description of the property leased) of each of the Systems
Leases. None of the MNH Entities is party to or bound by any material oral
Lease.
(e) Sellers have made, and will make, available to CCI the fixed asset
records of the MNH Entities as to tangible personal property (including, without
limitation, all equipment, machinery and vehicles) owned by the MNH Entities.
Such records have been prepared in the ordinary course of business and the MNH
Entities have used reasonable efforts to keep such records accurate in all
material respects, it being understood that no such representation is being made
with respect to the records relating to personal property acquired by the MNH
Entities prior to September 1, 1992.
(f) Except as described on SCHEDULE 4.10(A), (B), (C), (D) or (K), no
MNH Entity is bound or affected by any Franchise or any material License,
Contract or Lease. Except as set forth on SCHEDULE 4.10(F), since September 15,
1995, no MNH Entity has amended, terminated, extended or renewed any Systems
Franchise or entered into any Franchise.
(g) Sellers have caused to be delivered or made available to Buyer
true and complete copies of each of the Systems Franchises, Systems Licenses,
Systems Contracts and Systems Leases described in SCHEDULE 4.10(A), (B), (C) or
(D) (together with any written notices alleging non-compliance with any of the
requirements thereof) and of each document evidencing an MNH Entity's ownership
of any Owned Property. Except as described in SCHEDULE 4.10(G): (i) the MNH
Entities are in compliance in all material respects with each of the Systems
Franchises and Systems Licenses; (ii) the MNH Entities have fulfilled in all
material respects when due, or have taken all action necessary to enable it to
fulfill in all material respects when due, all of their obligations under each
of the Systems Contracts and Systems Leases; and (iii) to the knowledge of each
Seller, there has not occurred any material default (without regard to lapse of
time or the giving of notice, or both) by any Person under any of the Systems
Franchises, Systems Contracts or Systems Leases.
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<PAGE>
(h) Except as set forth on SCHEDULE 4.10(H), each Systems Franchise,
Systems License, Systems Contract and Systems Lease of the MNH Entities is the
validly existing, legally enforceable obligation of each MNH Entity party
thereto and, to the knowledge of Sellers, of the other parties thereto.
(i) Except as previously disclosed to Buyer in writing or in SCHEDULE
4.10(I), no Person (including any Governmental Authority) has any right to
acquire any interest in any cable television system or assets of any MNH Entity
(including any right of first refusal or similar right) upon an assignment or
transfer of control of a Systems Franchise, other than rights of condemnation or
eminent domain afforded by Legal Requirement.
(j) To the knowledge of Sellers, as of the date hereof no Person
(other than an MNH Entity) (i) has been granted or has sought the Consent of any
Governmental Authority for the installation, construction, development,
ownership, or operation of a cable television system (as defined in the
Communications Acts) within all or part of the geographic area served by any of
the Systems or (ii) operates, or has commenced the construction, installation or
development of, any cable television system within all or part of the geographic
area served by any cable television system of the MNH Entities, regardless of
whether the Consent of any Governmental Authority is required or has been
obtained.
(k) Except as set forth in SCHEDULE 4.10(K), no MNH Entity has made
any material commitments in writing to any Governmental Authority with respect
to the operation and construction of the Systems which are not fully reflected
in the Systems Franchises, Systems Licenses, Systems Contracts or Systems
Leases, and no MNH Entity has entered into any written agreements with community
groups or similar third parties restricting or limiting the types of programming
that may be shown on any of the Systems.
(l) No Governmental Authority has advised any MNH Entity in writing,
or otherwise formally notified in accordance with the terms of any applicable
Systems Franchise, of its intention to deny renewal of an existing Systems
Franchise. The MNH Entities have duly and timely filed notices of renewal in
accordance with the Communications Act with all Governmental Authorities with
respect to each Systems 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, an MNH Entity 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 such System by such MNH Entity.
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<PAGE>
(m) Except as set forth in SCHEDULE 4.10(M), the MNH Entities are
operating the Systems in compliance in all material respects with the provisions
of the Communications Acts 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 the MNH
Entities. Except as previously disclosed to Buyer in writing, no written
notices or demands have been received since January 1, 1993 from any television
station or from any other Person claiming to have a right, or objecting to or
challenging the right under Sections 614 or 615 of the Cable Act of the Systems,
to carry any signal or deliver the same, or challenging the channel position on
which any television station is carried.
(n) SCHEDULE 4.10(N) indicates which television signals carried by the
Systems are carried without retransmission consent agreements (other than
stations which have elected must-carry status or for which retransmission
consents are not required). Sellers have delivered or made available to Buyer
full and complete copies of all retransmission consent agreements of the MNH
Entities. 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 4.10(N) lists the signal and
the reason for non-carriage.
(o) Sellers have made available to Buyer true and complete copies of
(i) all FCC Forms 393, 1200, 1205, 1210 and 1215 that have been prepared with
respect to the Systems, and (ii) all complaints filed with the FCC with respect
to any rates charged to subscribers of the Systems which have been received by
Sellers. No MNH Entity has sought or claims exemption from the rate regulation
provisions of the Communications Acts with respect to any of the Systems.
SCHEDULE 4.10(O) sets forth (A) a list of all rate complaints (if any) filed
pursuant to the Communications Acts and received by any MNH Entity which have
not been deemed invalid by the FCC, and further sets forth those Systems
Franchises that have been certified or, to Sellers' knowledge, filed for
certification under the Communications Acts with respect to rate regulation, and
(B) a list of all docketed letters of inquiry from the FCC received by any MNH
Entity since September 1, 1993 with regard to rate restructuring.
Section 4.11 Litigation and Judgments. Except as set forth in
------------ ------------------------
SCHEDULE 4.11, there is no Litigation pending or, to Sellers' knowledge,
threatened against any MNH Entity (other than proceedings or investigations
affecting the cable television industry generally) that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse Effect on the
MNH Entities or the Systems taken as a whole or prevent, hinder
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<PAGE>
or materially delay the consummation of the transactions contemplated by this
Agreement, or seeks or could result in the modification, revocation,
termination, suspension or other limitation of any of the Systems Franchises,
Systems Licenses, Systems Contracts or Systems Leases. There is not any
Judgment outstanding against any MNH Entities or any of their properties,
unsatisfied or unperformed which could reasonably be expected to have a Material
Adverse Effect on the MNH Entities or the Systems taken as a whole.
Section 4.12 Tax Returns.
------------ -----------
(a) Each MNH Entity has timely filed all tax returns and other tax
reports required to be filed by it on or after September 1, 1992; and, to the
knowledge of Sellers (without having made any inquiry with respect thereto),
each MNH Entity has timely filed all tax returns and other tax reports required
to be filed by it prior to September 1, 1992. Subject to Section 4.12(c), all
such tax returns and other tax reports are true, correct and complete in all
material respects; each MNH Entity has timely paid all Taxes payable by such MNH
Entity which have become due and payable, whether or not shown on any such tax
return or other tax report, other than Taxes that are currently being contested
in good faith (all of which Taxes are fully reserved for on the MNH Balance
Sheet); and all Taxes payable by any MNH Entity that were not yet due and
payable at the MNH Balance Sheet Date have been fully paid or adequate provision
therefor has been made and reflected on the MNH Balance Sheet.
(b) Except as set forth on SCHEDULE 4.12, there is no claim,
deficiency, assessment or investigation involving an amount greater than $10,000
pending or threatened against any MNH Entity for past Taxes, and adequate
provision for the claims or investigations set forth on SCHEDULE 4.12 has been
made as reflected on the MNH Balance Sheet or will have been made at Closing
(either as (i) an inclusion in the consolidated liabilities of the MNH Entities
to be deducted pursuant to Section 8.3(b)(i)(A)(I)(x) in determining the
Purchase Price or (ii) as an inclusion in the Consolidated Current Liabilities
to be deducted pursuant to Section 8.3(b)(iv)(E) in determining the Working
Capital Adjustment). Except as set forth on SCHEDULE 4.12, no MNH Entity has
waived or extended any applicable statute of limitations relating to the
assessment of any Taxes on or after September 1, 1992; and, to the knowledge of
Sellers (without having made any inquiry with respect thereto), no MNH Entity
has waived or extended any applicable statute of limitations relating to the
assessment of any Taxes prior to September 1, 1992.
(c) No representation is being made pursuant to this Section 4.12 to
the extent that any representation or warranty contained herein relates to net
operating losses or investment
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<PAGE>
tax credits reflected on tax returns filed prior to September 1, 1992.
Section 4.13 System Information.
------------ ------------------
(a) SCHEDULE 4.13(A) sets forth a materially true and complete
description of the following information as of December 31, 1995:
(i) the number of miles of plant included in each System;
(ii) a description of basic and optional or tier services available
from each of the Systems, and the rates charged by each MNH Entity for each
System.
(iii) the stations and signals carried by each of the Systems and the
channel position of each such signal and station; and
(iv) the cities, towns, villages, boroughs and counties served by each
of the Systems.
(b) The subscriber information set forth on the CableData Reports,
dated as of October 31, 1995, November 30, 1995, December 31, 1995, January 31,
1996 and February 29, 1996, included in SCHEDULE 4.13(B) is true and accurate in
all material respects as of the respective dates of such reports, and the
subscriber information reported thereon has been compiled in a manner consistent
with the past practices of Sellers. Except as set forth on SCHEDULE 4.13(B),
there has been no material adverse change since October 31, 1995 in such
subscriber information, taken as a whole, as reported in such CableData Report,
dated as of October 31, 1995.
Section 4.14 Real Property. Except under the Systems Leases, no MNH
------------ -------------
Entity holds or uses under lease or leases to others any land or buildings
relating to the Systems or otherwise. Except for the land and buildings
described (including the record owner) on SCHEDULE 4.14 (the "OWNED PROPERTY"),
no MNH Entity has other ownership interests in land or buildings relating to the
Systems or otherwise. The MNH Entity that is the record owner of each parcel of
Owned Property has good and marketable title in fee simple absolute to each such
parcel and all buildings, structures and other improvements thereon, in each
case free and clear of all Liens except for Permitted Encumbrances. Except as
set forth in SCHEDULE 4.14, there are no leases, subleases, tenancies or rights
of occupancy affecting any Owned Property. Complete and correct copies of any
title opinions, surveys and appraisals in the Sellers' or MNH's possession, and
of any policies of title insurance currently in force, with respect to any Owned
Property have been delivered by
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<PAGE>
the Sellers to CCI. Except for routine repairs, all of the Owned Property and
the land and buildings demised under the Systems Leases (the "LEASED PROPERTY")
are, taken as a whole, in good condition and repair and are suitable for the
purposes used.
Section 4.15 Employees.
------------ ---------
(a) No MNH Entity is a party to any labor or collective bargaining
agreement and there are no collective bargaining agreements applicable to any
Persons employed by any MNH Entity ("MNH EMPLOYEES").
(b) Except as set forth on SCHEDULE 4.15(B), (i) no MNH Employees are
represented by any labor organization and (ii) as of the date hereof, no labor
organization or group of employees of any MNH Entities 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 Sellers, threatened to be brought or
filed with any Governmental Authority. To the knowledge of Sellers, there are
no formal organizing activities involving a material number of MNH Employees
pending with, or threatened by, any labor organization.
(c) There are (i) no strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances or other material labor disputes
pending or, to the knowledge of Sellers, threatened against or involving any of
the MNH Entities and (ii) no unfair labor practice charges, grievances or
complaints pending or, to the knowledge of Sellers, threatened by or on behalf
of any MNH Employee or group of MNH Employees.
(d) SCHEDULE 4.15(D) is a true and complete list as of January 31,
1996 of the names and positions of all full-time MNH Employees whose annual
compensation (including bonuses) was in excess of $50,000 in 1995 or is expected
to be in excess of $50,000 in 1996. Each MNH Entity has complied in all
material respects with all applicable Legal Requirements relating to (i) wages,
hours, collective bargaining, unemployment insurance, worker's compensation, and
the payment and withholding of Taxes and, (ii) to the knowledge of Sellers
(without having made any inquiry with respect thereto), equal employment
opportunity, age and disability discrimination and immigration control.
(e) Except as described on SCHEDULE 4.15(E), no MNH Entity has any
employment agreement, either written or, to the knowledge of Sellers, oral, with
any MNH Employee and none of the employment agreements listed on SCHEDULE
4.15(E) requires Buyer or any MNH Entity to employ any Person after the Closing.
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<PAGE>
Section 4.16 Environmental. Except as disclosed on SCHEDULE 4.16:
------------ -------------
(a) Neither of Sellers nor any MNH Entity has received notice that it
is the subject of any "Superfund" evaluation or investigation, or that it is the
subject of any investigation or proceeding of any Governmental Authority
evaluating whether any remedial action is necessary to respond to any release of
Hazardous Substances on or in connection with any of the Owned Property or
Leased Property.
(b) Each MNH Entity is in compliance in all material respects with all
Legal Requirements with respect to pollution or protection of the environment,
including Legal Requirements relating to actual or threatened emissions,
discharges or releases of Hazardous Substances into ambient air, surface water,
ground water, land or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances, insofar as they relate to any of the Owned Property or
Leased Property. Neither of Sellers nor any MNH Entity has received notice of,
and Sellers have no knowledge of, any circumstances relating to, any past,
present or future events, conditions, circumstances, activities, practices or
incidents (including but not limited to the presence, use, generation,
manufacture, disposal, release or threatened release of any Hazardous Substances
from or on any of the Owned Property or the Leased Property), which are
reasonably likely to give rise to any material liability, based upon or related
to the processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
environment, of any Hazardous Substance from or attributable to any of the Owned
Property or Leased Property.
Section 4.17 Employee Benefits; ERISA Matters.
------------ --------------------------------
(a) Plans and Seller Benefit Arrangements. SCHEDULE 4.17(A) lists
-------------------------------------
each Employee Benefit Plan and Benefit Arrangement covering Cable Employees.
Sellers have made available to Buyer with respect to each Employee Benefit Plan
and Benefit Arrangement covering Cable Employees true and complete copies of (i)
all written documents comprising such plans and arrangements (including
amendments and individual agreements relating thereto); (ii) the two most recent
Federal Form 5500 series (including all schedules thereto) filed with respect to
each Employee Benefit 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 Employee Benefit Plan.
(b) Multiemployer Plans.
-------------------
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<PAGE>
(i) No MNH Entity nor any ERISA Affiliate of any MNH Entity has
incurred any unsatisfied Withdrawal Liability with respect to any Multiemployer
Plan to which any MNH Entity or any ERISA Affiliate of any MNH Entity is
required to make or accrue a contribution or has, either at any time on or after
September 1, 1992 or, to the knowledge of Sellers (without having made any
inquiry with respect thereto), at any time from January 1, 1990 through August
31, 1992, been required to make or accrue a contribution, nor, to the knowledge
of either of Sellers or any MNH Entity, is any MNH Entity or any present ERISA
Affiliate of any MNH Entity reasonably expected to incur any Withdrawal
Liability with respect to any such Multiemployer Plan.
(ii) No MNH Entity nor any ERISA Affiliate of any MNH Entity has been
notified by the sponsor of any Multiemployer Plan to which any MNH Entity or any
ERISA Affiliate of any MNH Entity is required to make or accrue a contribution
or has, either at any time on or after September 1, 1992 or, to the knowledge of
Sellers (without having made any inquiry with respect thereto), at any time from
January 1, 1990 through August 31, 1992, 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 knowledge of
Sellers no such Multiemployer Plan is reasonably expected to be in
reorganization or to be terminated, within the meaning of Title IV of ERISA.
(c) Union Welfare Funds. No MNH Entity nor any ERISA Affiliate of any
-------------------
MNH Entity has, at any time on or after September 1, 1992 or, to the knowledge
of Sellers (without having made any inquiry with respect thereto), at any time
prior to September 1, 1992, incurred any liability based on withdrawal from any
union-sponsored multiemployer welfare benefit fund maintained pursuant to any
Welfare Plan to which any MNH Entity or any ERISA Affiliate of any MNH Entity
contributes pursuant to the terms of a collective bargaining agreement.
(d) Welfare Plans. No MNH Entity nor any ERISA Affiliate of any MNH
-------------
Entity maintains any plan which is funded through a "welfare benefit fund" as
defined in (S) 419(e) of the Code.
(e) Retiree Welfare Benefits Plans. Except as set forth in SCHEDULE
------------------------------
4.17(E) and pursuant to the provisions of COBRA, no MNH Entity nor any ERISA
Affiliate of any MNH Entity maintains any Employee Benefit Plan or Benefit
Arrangement that provides benefits described in (S) 3(l) of ERISA to any former
employees or retirees of any MNH Entity. Any disclosure in SCHEDULE 4.17(E)
shall indicate the present value of accumulated plan liabilities calculated in a
manner consistent with FAS 106
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<PAGE>
and actual annual expense for such benefits for each of the last two years.
(f) Pension Plans. All Cable Employee Plans that are Pension Plans
-------------
intended to be qualified under (S) 401 of the Code maintained by any MNH Entity
or any ERISA Affiliate of any MNH Entity have received favorable determinations
with respect to such qualified status from the IRS. To the knowledge of
Sellers, nothing has occurred since such determinations to affect adversely such
determinations, and true and correct copies of such determination letters have
been made available to Buyer.
(g) Prohibited Transactions and Fiduciary Responsibility. To the
----------------------------------------------------
knowledge of Sellers, none of the Cable 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 any MNH Entity or any ERISA
Affiliate of any MNH Entity. To the knowledge of Sellers, no officer, partner,
director or employee of any MNH Entity or any ERISA Affiliate of any MNH Entity
has committed a material breach of any responsibility or obligation imposed upon
fiduciaries by Title I of ERISA or engaged in any Prohibited Transaction with
respect to any Cable Employee Plan.
(h) Reporting and Disclosure. Except with respect to any violation
------------------------
relating to any Multiemployer Plan where such violation could not result in any
liability to any MNH Entity or any ERISA Affiliate of any MNH Entity, there
have, at any time on or after September 1, 1992 and, to the knowledge of Sellers
(without having made any inquiry with respect thereto), at any time prior to
September 1, 1992, been no material violations of any reporting or disclosure
requirements under ERISA with respect to any Cable Employee Plan.
(i) Annual Reports. Sellers have made available to Buyer a copy of
--------------
(i) the two most recently filed Federal Form 5500 series and accountant's
opinion, if applicable, for each Cable Employee Plan other than Multiemployer
Plans and (ii) the two most recent actuarial valuation reports for each Cable
Employee Plan that is a Pension Plan subject to Title IV of ERISA. To the
knowledge of Sellers, all information provided by either Seller or any MNH
Entity, as applicable, to any actuary in connection with the preparation of such
actuarial valuation report was true, correct and complete in all respects.
(j) Funding Obligations. No Cable 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
$25,000, determined as of the last applicable annual valuation date, using the
actuarial methods, factors and assumptions used
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<PAGE>
for the most recent actuarial report with respect to such plan, (iii) been a
plan with respect to which a Reportable Event has occurred and is continuing, or
(iv) to the knowledge of Sellers, been a plan with respect to which any
termination liability to the PBGC has been or is 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.
(k) Liens and Penalties. No MNH Entity nor any ERISA Affiliate of any
-------------------
MNH Entity has any unsatisfied material liability with respect to any Cable
Employee Plan (i) for the termination of any Cable Employee Plan that is a
single employer plan under ERISA (S) 4062 or a multiple employer plan under
ERISA (S) 4063, (ii) for any lien imposed under (S) 302(f) of ERISA or (S)
412(n) of the Code, (iii) for any interest payments required under (S) 302(e) of
ERISA or (S) 412(m) of the Code, (iv) for any excise tax imposed by (S)(S) 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 (S)
302(c)(11) of ERISA or (S) 412(c)(11) of the Code.
(l) Acts or Omissions. There have, at any time on or after September
-----------------
1, 1992 and, to the knowledge of Sellers (without having made any inquiry with
respect thereto), at any time prior to September 1, 1992, been no acts or
omissions with respect to any Cable Plan by any MNH Entity or any ERISA
Affiliate of any MNH Entity which have given rise to or may give rise to any
material fines, penalties or related charges under (S) 502 or (S) 4071 of ERISA
or Chapter 43 of the Code for which the MNH Entity or any ERISA Affiliate of any
MNH Entity may be liable.
(m) COBRA. The MNH Entities and their ERISA Affiliates have, at all
-----
times on or after September 1, 1992 and, to the knowledge of Sellers (without
having made any inquiry with respect thereto), at all times prior to September
1, 1992, complied in all material respects with the provisions of COBRA with
respect to all Cable Employee Plans that are Group Health Plans.
(n) Additional Benefits. Except as set forth on SCHEDULE 4.17(N), no
-------------------
Cable Employee shall accrue or receive additional benefits, service or
accelerated rights to payments of benefits under any Cable Plan or Seller
Benefit Arrangement, including the right to receive any parachute payment, as
defined in (S) 280G of the Code, or become entitled to severance, termination
allowance or similar payments as a direct result of the transactions
contemplated by this Agreement.
(o) Claims. Other than claims for benefits in the ordinary course,
------
there is no claim pending or, to the knowledge of either of Sellers or any MNH
Entity, threatened involving any Cable Plan by any Person against such plan or
any of the MNH
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<PAGE>
Entities or any of their ERISA Affiliates. There is no pending or, to the
knowledge of either of Sellers, threatened proceeding involving any Cable
Employee Plan before the IRS, the United States Department of Labor or any other
governmental authority.
(p) Compliance with Laws; Contributions. To the knowledge of Sellers,
-----------------------------------
each Cable Plan has, at all times on or after September 1, 1992 and, to the
knowledge of Sellers (without having made any inquiry with respect thereto), at
all times prior to September 1, 1992, been maintained in all material respects,
by its terms and in operation, in accordance with all Legal Requirements
(including (S) 1862(b)(1) of the Social Security Act). The MNH Entities and
their ERISA Affiliates have made full and timely payment of all amounts required
to be contributed under the terms of each Cable Plan and Legal Requirements or
required to be paid as expenses under such Cable Plan, and the MNH Entities and
their ERISA Affiliates shall continue to do so through the Closing, except as
Sellers and Buyer may otherwise agree.
(q) Definitions.
-----------
(i) "ACCUMULATED FUNDING DEFICIENCY" means an accumulated funding
deficiency, as defined in (S) 302 of ERISA and (S) 412 of the Code.
(ii) "BENEFIT ARRANGEMENT" means any material benefit arrangement 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.
(iii) "CABLE BENEFIT ARRANGEMENT" means any Benefit Arrangement that
covers exclusively one or more of the employees, former employees, directors and
former directors of the MNH Entities and the beneficiaries of any of them.
(iv) "CABLE EMPLOYEE" means any employee or former employee of any MNH
Entity.
(v) "CABLE EMPLOYEE PLAN" means any Employee Benefit Plan that is
sponsored or contributed to by either Seller or any MNH Entity or any ERISA
Affiliate of any of them that covers any Cable Employees.
(vi) "CABLE PLAN" means any Cable Employee Plan or Cable Benefit
Arrangement.
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<PAGE>
(vii) "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.
(viii) "EMPLOYEE BENEFIT PLAN" has the meaning given such term in (S)
3(3) of ERISA.
(ix) "GROUP HEALTH PLAN" means group health plan, as defined in (S)
5000(b)(1) of the Code.
(x) "MULTIEMPLOYER PLAN" means a multiemployer plan, as defined in
(S)(S) 3(37) and 4001(a)(3) of ERISA.
(xi) "PENSION PLAN" means any employee pension benefit plan, as
defined in (S) 3(2) of ERISA.
(xii) "PROHIBITED TRANSACTION" means a transaction that is prohibited
under (S) 4975 of the Code or (S) 406 of ERISA and not exempt under (S) 4975 of
the Code or (S) 408 of ERISA respectively.
(xiii) "REPORTABLE EVENT" means a reportable event, as defined in (S)
4043 of ERISA to the extent that the reporting of such event to the PBGC has not
been waived.
(xiv) "SELLER BENEFIT ARRANGEMENT" means any Benefit Arrangement
covering any employees, former employees, directors or former directors of
either Seller or the ERISA Affiliates of either of them, and the beneficiaries
of any of them, other than any Cable Benefit Arrangement.
(xv) "WELFARE PLANS" means any employee welfare benefit plan, as
defined in (S) 3(1) of ERISA.
(xvi) "WITHDRAWAL LIABILITY" has the meaning given such term in (S)
4201 of ERISA.
Section 4.18 Full Disclosure. To the knowledge of Sellers (without
------------ ---------------
having made any inquiry with respect thereto), all of the statements made by
either Seller in this Article 4 (including the statements made by either Seller
in any Schedule referred to in this Article 4) do not include or contain any
untrue statement of a material fact, and do not omit to state any material fact
required to be stated in this Article 4 (including the statements made by either
Seller in any Schedule referred to in this Article 4) or necessary in order to
make the statements in this Article 4 (including the statements made by either
Seller in any Schedule referred to in this Article 4), in light of the
circumstances under which they were made, not misleading.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES REGARDING BUYER
----------------------------------------------
Buyer represents and warrants to Sellers as follows:
Section 5.1 Organization and Authority. CCI and each of its
----------- --------------------------
corporate Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its state of incorporation. CCI and each of its
Subsidiaries have all requisite power and authority (corporate or partnership,
as the case may be) to own, lease and operate their properties and to carry on
their business as now being conducted, except where the failure to have such
power or authority would not have a Material Adverse Effect on CCI and its
Subsidiaries. CCI has all requisite corporate power and authority to execute,
deliver and perform this Agreement and each Transaction Document to which CCI is
or will be a party and to consummate the transactions contemplated hereby and
thereby. The execution, delivery and performance of the Agreement and each
Transaction Document to which CCI is or will be a party, and the consummation by
CCI of the transactions contemplated thereby, have been duly and validly
authorized by all necessary corporate action on the part of CCI. The Agreement
and each Transaction Document to which CCI is or will be a party constitutes or
will constitute (as the case may be) a valid and binding obligation of CCI,
enforceable against CCI in accordance with its terms, subject to the
Enforceability Exceptions.
Section 5.2 No Conflict; Required Consents.
----------- ------------------------------
(a) Subject to obtaining the Buyer Required Consents identified on
SCHEDULE 5.2, neither the execution, delivery or performance by Buyer of this
Agreement or any Transaction Document to which Buyer is or will be a party, nor
the consummation of the transactions contemplated hereby or thereby, does or
will:
(i) conflict with or violate any provision of the charter or bylaws of
Buyer;
(ii) violate any provision of any Legal Requirement applicable to
Buyer;
(iii) conflict with, violate, result in a breach of, constitute a
default under (without regard to requirements of notice, lapse of time, or
elections of other Persons, or any combination thereof), accelerate or permit
the acceleration of the performance required by, any material Contract or
License to which Buyer is a party or by which Buyer or any of the assets or
properties owned or leased by Buyer are bound; or
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<PAGE>
(iv) result in the creation or imposition of any Lien against or upon
any of the assets or properties owned or leased by Buyer;
except as would not result in the aggregate in (A) a Material Adverse Effect on
CCI and its Subsidiaries or (B) a material adverse effect on the ability of
Buyer to execute, deliver or perform its obligations under this Agreement and
any Transaction Document to which it is or will be a party.
(b) Except for the Buyer Required Consents identified on SCHEDULE 5.2,
no Consent is required for the execution, delivery or performance by Buyer of
this Agreement or any Transaction Document to which Buyer is or will be a party,
or the consummation of the transactions contemplated hereby or thereby, except
for such Consents as, if not obtained or made, would not have a Material Adverse
Effect on CCI and its Subsidiaries.
Section 5.3 Approval of the Board. The Board of Directors of CCI
----------- ---------------------
has, by resolutions duly adopted at a meeting duly called and held, unanimously
approved and adopted this Agreement and the transactions contemplated hereby on
the terms and conditions set forth herein.
Section 5.4 [This Section has been intentionally left blank.]
-----------
Section 5.5 Financial Statements. The consolidated balance sheets of
----------- --------------------
CCI and its Subsidiaries and the notes thereto as of December 31, 1994, 1993 and
1992 and consolidated statements of income, shareholder's equity and cash flows
and the notes thereto for the three fiscal years ended December 31, 1994, 1993
and 1992 certified by Deloitte & Touche, whose reports thereon are included
therewith, and the unaudited condensed consolidated balance sheet (the "CCI
BALANCE SHEET") of CCI and its Subsidiaries as of September 30, 1995 (the "CCI
BALANCE SHEET DATE") and unaudited consolidated statements of income and cash
flow for the nine months then ended, were prepared in accordance with GAAP
applied on a consistent basis throughout the periods covered thereby except to
the extent otherwise indicated therein, and present fairly as of their
respective dates, in all material respects, the consolidated financial position
of CCI and its Subsidiaries as at the dates thereof and the consolidated results
of their operations and their consolidated cash flows for each of the respective
periods covered thereby, in conformity with GAAP.
Section 5.6 [This Section has been intentionally left blank.]
Section 5.7 Absence of Certain Changes. Except as disclosed on
----------- --------------------------
SCHEDULE 5.7 or in the CCI SEC Filings filed prior
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to the date hereof, since the CCI Balance Sheet Date there has not occurred (i)
any Material Adverse Effect on CCI and its Subsidiaries 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 CCI and its
Subsidiaries or on the ability of CCI or Buyer to perform (including a material
delay in CCI's or Buyer's ability to obtain any Consents necessary for the
transfer of the Systems Franchises) its material obligations under the
Transaction Documents to which it is or will be a party, except for any Material
Adverse Effect or other event or condition due to general economic or industry-
wide conditions (including, without limitation, determinations by the FCC or
local franchising authorities affecting or applicable to the offering or
packaging of a la carte channels or cost-of-service showings and any rate
adjustments pursuant to such determinations).
Section 5.8 Compliance with Laws. To Buyer's knowledge, none of CCI
----------- --------------------
or any of its Subsidiaries has violated, nor is CCI or are any of them in
violation of, any such Franchises or Licenses or any Legal Requirement, except
where such violations do not and, insofar as reasonably can be foreseen, will
not prevent, hinder, or materially delay (including a material delay in the
obtaining of any Consents necessary for the transfer of the Systems Franchises)
for CCI to be able to consummate the transactions contemplated by this
Agreement.
Section 5.9 Litigation. Except as may be otherwise disclosed in
----------- ----------
SCHEDULE 5.9 hereto or the CCI SEC Filings filed prior to the date hereof, there
is no Litigation pending or, to the knowledge of CCI, threatened against or
affecting CCI or any of its Subsidiaries (except for proceedings or
investigations affecting the cable television industry generally) that,
individually or in the aggregate, would reasonably be expected to prevent,
hinder, or materially delay (including a material delay in the obtaining of any
Consents necessary for the transfer of the Systems Franchises) the ability of
CCI to consummate the transactions contemplated by this Agreement, nor is there
any Judgment outstanding, unsatisfied or unperformed against CCI or any of its
Subsidiaries which could have any such effect in the future.
Section 5.10 [This Section has been intentionally left blank.]
------------
Section 5.11 [This Section has been intentionally left blank.]
------------
Section 5.12 Financing. Buyer has sufficient cash on hand and
------------ ---------
availability under its existing loan facilities to pay the Purchase Price
hereunder.
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<PAGE>
Section 5.13 Investment Intent. Buyer represents that it is
------------ -----------------
acquiring the Subject Interests for its own account or for one of its wholly
owned Subsidiaries for investment with no present intention of distributing or
reselling the same, subject nevertheless to its right to dispose of the Subject
Interests, or any part thereof, in compliance with applicable law if at some
future time in its sole discretion it deems it advisable to do so.
ARTICLE 6
CERTAIN COVENANTS
-----------------
Section 6.1 Conduct of Business of the Sellers; Ownership of MNH
----------- ----------------------------------------------------
Entities. Except as contemplated by this Agreement or as Buyer may otherwise
- --------
consent in writing, which consent shall not be unreasonably withheld or delayed,
between the date hereof and the Closing Time neither of Sellers shall:
(a) amend its partnership agreement or admit any new partners except
as set forth in SCHEDULE 6.1(A); or
(b) issue, sell, deliver or agree to commit to issue, sell or deliver
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to acquire or otherwise) any partnership interests or
other equity securities or amend any of the terms of any partnership interests
or other equity securities or agreements outstanding on the date hereof.
Section 6.2 Conduct of the Business of the MNH Entities. Except as
----------- -------------------------------------------
contemplated by this Agreement or as Buyer may otherwise consent in writing,
which consent shall not be unreasonably withheld or delayed, between the date
hereof and the Closing Time, each of Sellers shall and shall cause the MNH
Entities to:
(a) operate or cause the business of the MNH Entities to be operated
(including the Systems) only in the ordinary course and consistent with past
practices (including completing line extensions, placing conduit or cable in new
developments, fulfilling installation requests and continuing work on existing
construction projects) and, to the extent consistent with such operation, use
its reasonable efforts to (i) preserve the current business organization of the
Systems intact (including preserving existing relationships with Governmental
Authorities, suppliers, subscribers, customers and others having business
dealings with any of the Systems) unless Buyer requests otherwise in writing,
(ii) keep available the services of the MNH Employees and (iii) continue normal
marketing, advertising and promotional expenditures with respect to the business
of the MNH Entities (including the Systems);
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<PAGE>
(b) maintain (i) the Assets as a whole in good condition and repair
and consistent with past practices, ordinary wear and tear excepted, and (ii) in
full force and effect policies of insurance with respect to the Assets and the
business of the MNH Entities (including the Systems), in such amounts and with
respect to such risks as are customarily maintained by operators of cable
television systems of the size and in the geographic location of the Systems
(and in any event in such amounts and with respect to such risks as are insured
against at the date hereof);
(c) maintain their Books and Records with respect to the Assets and
the operation of the Systems in the ordinary course on a basis consistent with
past practices;
(d) (i) give to Buyer, and its counsel, accountants and other
representatives, upon reasonable request after reasonable notice shall have been
given to Sellers, access during normal business hours to the Assets (including
the Systems) and to the General Manager of the System and the MNH Employees
provided, that, Buyer shall obtain the prior approval of the General Manager
(which approval shall not be unreasonably withheld or delayed) prior to being
granted access to any other MNH Employee; and (ii) furnish or cause to be
furnished to Buyer and such representatives all such additional documents,
financial information and other information as Buyer from time to time may
reasonably request; provided that no investigation will affect or limit the
scope of any of the representations and warranties contained herein or in any
Transaction Document or limit liability for any breach of such representations
and warranties;
(e) not accept or agree or accede to any modifications or amendments
to any of the Systems Franchises (including modifications or amendments in
connection with the renewal of any of the Systems Franchises), or material
adverse modifications to any of the Systems Licenses, Systems Contracts or
Systems Leases that are not acceptable to Buyer, other than the modifications or
amendments described in SCHEDULE 6.2(E);
(f) promptly deliver to Buyer true and complete copies of all monthly
and quarterly financial statements and operating reports and any reports with
respect to the operation of any of the Systems prepared at any time from the
date hereof until Closing, and any other similar materials which Buyer may
reasonably request;
(g) promptly notify Buyer of any circumstance, event or action by it
or that comes to the knowledge of Sellers (i) which, if known at the date of
this Agreement, would have been required to be disclosed in or pursuant to this
Agreement or (ii) the existence, occurrence or taking of which would result in
any
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<PAGE>
of the representations and warranties in this Agreement or in any Transaction
Document not being true and correct in all material respects when made or at
Closing, and, with respect to clause (ii), use its reasonable efforts to remedy
the same (subject, nonetheless, to the provisions of Section 7.1(c));
(h) deliver to Buyer, prior to the execution and delivery of this
Agreement, a schedule of all franchise, construction, fidelity, performance or
other bonds posted by any MNH Entity (and Buyer hereby acknowledges that Sellers
have heretofore delivered such schedule to Buyer, a copy of which is attached
hereto as SCHEDULE 6.2(H));
(i) promptly furnish to Buyer, upon written request by Buyer, and its
counsel, accountants and other representatives copies of all FCC Forms 1200,
1205, 1210 and 1215 or any other FCC forms required under the regulations of the
FCC promulgated under the Cable Act that are prepared with respect to any of the
Systems; and
(j) use reasonable good faith efforts to establish or cause to be
established rates charged and a la carte packages provided to subscribers of any
of the Systems as of the Closing Date, that would be allowable under the
regulations of the FCC promulgated under the Cable Act.
Section 6.3 Certain Negative Covenants.
----------- --------------------------
(a) Except as contemplated by this Agreement or as Buyer may otherwise
consent in writing, which consent shall not be unreasonably withheld or delayed,
between the date hereof and the Closing Time, each of Sellers shall not and
shall cause each MNH Entity not to:
(i) (A) create, incur or assume any long-term debt not currently
outstanding (including obligations in respect of capital leases), provided that
the MNH Entities shall be permitted to extend the maturity date of the
indebtedness arising under the MNH Loan Agreement, (B) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person other than
another MNH Entity or (C) make any loans, advances or capital contributions to,
or investments in, any Person other than another MNH Entity;
(ii) acquire, sell, lease or dispose of any assets other than sales of
inventory and equipment in the ordinary course of business consistent with past
practice; provided, however, that notwithstanding anything in this Agreement to
-------- -------
the contrary MNH may assign and transfer the Excluded Assets to any Person
immediately prior to the Closing;
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<PAGE>
(iii) mortgage, pledge or subject to any Lien any of its properties
or assets, tangible or intangible (other than a Permitted Lien);
(iv) fail to use reasonable efforts to effect Capital Expenditures
substantially in accordance with the Capital Expenditure budget attached hereto
as SCHEDULE 6.3(A)(IV) (it being understood that such expenditures may be
subject to construction and other delays, and other factors including the
availability of equipment and labor, beyond the control of the MNH Entities), or
fail in any event to effect Capital Expenditures for the period from July 1,
1995 through the Closing Date in an aggregate amount equal to at least 90% of
the aggregate amount of Capital Expenditures provided for in such Capital
Expenditure budget for the period between July 1, 1995 and the Closing Date;
(v) effect any Capital Expenditure at a time when the amount of such
Capital Expenditure together with the aggregate amount of all other Capital
Expenditures theretofore effected by the MNH Entities during the period between
July 1, 1995 and such time would exceed 105% of the aggregate amount of Capital
Expenditures provided for in the Capital Expenditure budget attached hereto as
SCHEDULE 6.3(A)(IV) for the period between July 1, 1995 and such time;
(vi) except as set forth in SCHEDULE 6.3(A)(VI), (A) grant any
material increases in the compensation of any MNH Employees except in the
ordinary course of business consistent with past practice, (B) pay or agree to
pay any pension, retirement allowance or other material employee benefit not
required or contemplated by any of the existing benefit, severance, pension or
employment plans, agreements or arrangements as in effect on the date hereof to
any MNH Employee, whether past or present, (C) enter into any new or materially
amend any existing employment agreement with any MNH Employee, except for
employment agreements with new employees entered into in the ordinary course of
business consistent with past practice, (D) enter into any new or materially
amend any existing severance agreement with any MNH Employee or, (E) except as
may be required to comply with applicable Legal Requirements, become obligated
under any new Pension Plan, Welfare Benefit Plan, Multiemployer Plan, Employee
Benefit Plan or similar plan or arrangement that is not in existence on the date
hereof, or amend any such plan or arrangement in existence on the date hereof;
(vii) except as set forth on SCHEDULE 6.3(A)(VII):
(A) enter into any Contract or Lease relating to the purchase, lease
or other acquisition of any
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goods, equipment, materials or supplies involving an aggregate expenditure in
excess of $100,000; or
(B) enter into any Lease or License or any Contract for services
which, by its terms, is not to expire or be completed or performed in its
entirety prior to the Closing Date and involves expenditures in excess of (I)
$50,000 during the one-year period immediately following the Closing Date or
(II) $100,000 in the aggregate;
(viii) amend or modify the MNH Partnership Agreement or admit any new
partner to MNH;
(ix) amend the charter or bylaws of any MNH Subsidiary or alter
through merger, liquidation, reorganization, restructuring or in any other
fashion the ownership of any MNH Entity;
(x) 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 stock or other
securities outstanding on the date hereof; or
(xi) knowingly take or agree in writing or otherwise to take any
action that would (A) make any representation or warranty contained in this
Agreement untrue or incorrect as of the date when made or as of the Closing
Time, (B) result in any of the conditions to Closing contained in this Agreement
not being satisfied or (C) be inconsistent with the terms of this Agreement or
the transactions contemplated hereby or by any Transaction Document.
(b) Except as contemplated by this Agreement or as Buyer may otherwise
consent in writing, between the date hereof and the Closing Time, each of
Sellers shall not and shall cause each MNH Entity not to 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, partnership interests
or other equity interests, or redeem or otherwise acquire any of its securities
or partnership interests; provided, however, that (i) any MNH Entity may declare
-------- -------
and pay dividends to any other MNH Entity and (ii) MNH may distribute the
Excluded Assets to any Person immediately prior to the Closing.
(c) After the date hereof and prior to the Closing Date and
notwithstanding any other notice provision set forth in this Agreement, Buyer
hereby authorizes any of Cristina Fernandez-Haegg, Emmet White, Alan
Jastczemski, Stephen Bouchard or Robert Ryan of Buyer (the "Authorized
Representative") to receive and respond, on Buyer's behalf, to any written
request
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for consent of Buyer required by Sellers pursuant to Section 6.2, 6.3(a) or
6.3(b) hereof. The Authorized Representative shall respond to any such request
for consent as soon as reasonably practicable and in any event within fourteen
days from the date of receipt of such request. If the Authorized Representative
fails to respond to such a request for consent within such fourteen-day period,
such consent shall have been deemed to have been given by Buyer.
Section 6.4 Conduct of Business of Buyer. CCI shall not without the
----------- ----------------------------
prior written consent of Sellers, knowingly take or agree in writing or
otherwise to take any action that would (i) make any representation or warranty
of CCI contained in this Agreement untrue or incorrect as of the date when made
or as of the Closing Time, (ii) result in any of the conditions to Closing
contained in this Agreement not being satisfied or (iii) be inconsistent with
the terms of this Agreement or the transactions contemplated hereby or by any
Transaction Document.
Section 6.5 Confidentiality and Publicity.
----------- -----------------------------
(a) Any non-public information that a party may obtain from another
party in connection with the negotiation and execution of this Agreement or the
consummation of the transactions contemplated hereby will be confidential and,
unless and until the Closing occurs, such party will not disclose any such
information to any other Person (other than its and its Affiliates' directors,
officers and employees, and representatives of its advisers and lenders whose
knowledge thereof is necessary in order to facilitate the consummation of the
transactions contemplated hereby) or use such information to the detriment of
any other party; provided that (i) such party may use and disclose any such
information once it has been publicly disclosed (other than by such party in
breach of its obligations under this Section) or that has rightfully come into
the possession of such party (other than in connection with this Agreement) and,
(ii) to the extent that such party may, in the reasonable judgment of its
counsel, be compelled by Legal Requirements to disclose any of such information,
such party may disclose such information.
(b) Sellers and Buyer each will consult with and cooperate with the
other with respect to the content and timing of all press releases and other
public announcements, and any written statements to MNH Employees concerning
this Agreement and the transactions contemplated hereby. Prior to Closing,
neither of Sellers nor Buyer will make any such release, announcement or
statement without the prior written consent and approval of the other (which
approval shall not be unreasonably withheld or delayed), except as required by
applicable Legal Requirements, in which case the other party or parties shall be
consulted to the
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<PAGE>
extent reasonably practicable as to the content and timing of such release,
announcement or statement to be issued.
Section 6.6 Distant Broadcast Signals. Unless otherwise restricted
----------- -------------------------
or prohibited by any Governmental Authority or applicable Legal Requirements, if
requested by Buyer, Sellers will cause the MNH Entities to delete, prior to the
Closing Date, any distant broadcast signals which Buyer determines will result
in unacceptable liability for copyright payments with respect to continued
carriage of such signals after the Closing Date unless Sellers reasonably object
to any such deletion.
Section 6.7 Post-Closing Cooperation upon Inquiries as to Rates or a
----------- --------------------------------------------------------
la Carte Packages. For a period of 6 months after Closing, each Seller will
- -----------------
cooperate with and assist Buyer by providing, upon request, all information in
such Seller's possession (and not previously made available to Buyer) relating
directly to the rates set forth in SCHEDULE 4.10 or on any of FCC Forms 393,
1200, 1205, 1210 or 1215, that Buyer may reasonably require to justify such
rates in response to any inquiry, order or requirement of any Governmental
Authority.
Section 6.8 Use of Names and Logos. For a period of 60 days after
----------- ----------------------
Closing, Buyer shall have a non-exclusive license and be entitled to use the
trademarks, trade names, service marks, service names, logos and similar
proprietary rights of Sellers to the extent incorporated in or on the Assets at
Closing, provided that Buyer will exercise reasonable efforts to remove all such
names, marks, logos and similar proprietary rights of the other from the Assets
as soon as reasonably practicable following Closing.
Section 6.9 Consents.
----------- --------
(a) Each of Sellers and Buyer agrees to use all reasonable efforts to
obtain all Consents necessary for its execution and delivery of and the
performance of its obligations pursuant to this Agreement, and will cooperate
fully with the other parties in promptly seeking to obtain all such Consents.
Without limiting the foregoing, Sellers and Buyer shall each make an appropriate
filing of a notification and report form pursuant to the HSR Act as promptly as
practicable but in no event later than 30 days following the execution of this
Agreement. Each such filing shall request early termination of the waiting
period imposed by the HSR Act.
(b) Any application to any Governmental Authority for a Consent
necessary for the transfer of control of any License or Systems Franchise shall
be mutually acceptable to Sellers and Buyer and, if applicable, shall request
that the relevant Governmental Authority agree that no further Consent of such
Governmental Authority will be required if a security interest is
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<PAGE>
granted in such License or Systems Franchise to any lender. Without limiting the
obligations of Sellers and Buyer under paragraph (a) of this Section, each of
Sellers and Buyer 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 Systems Franchise.
(c) If any Consent of any Governmental Authority necessary for the
transfer of control of any License or Systems Franchise shall not have been
obtained prior to the Closing Time, Sellers and Buyer shall, at the option of
Buyer, cooperate with each other and use all reasonable efforts (i) to
restructure the ownership and control of such License or Systems Franchise from
and after the Closing Time in such a manner that, to the extent feasible,
prevents any violation of the terms of such License or Systems Franchise that
would have a Material Adverse Effect on Buyer and its Subsidiaries or on the MNH
Entities yet preserves the intent of the parties as set forth in this Agreement
with respect to the transactions contemplated hereby, and (ii) notwithstanding
the Closing, to continue to seek any Consent necessary for the transfer of
control of such License or Systems Franchise.
Section 6.10 Further Assurances. 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 and evidence the transactions contemplated hereby or, at and after
the Closing Date, to evidence the consummation of the transactions contemplated
by this Agreement or any Transaction Document. Without limiting the generality
of the immediately preceding sentence, subsequent to Closing, each of Sellers
shall continue to use all reasonable efforts to obtain in writing as promptly as
possible any Consent required to be obtained by it in connection with the
transactions contemplated hereunder which was not obtained on or before Closing
and will deliver to Buyer copies of the same, reasonably satisfactory in form
and substance to Buyer. Upon the terms and subject to the conditions hereof,
each of the parties hereto shall 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.
Section 6.11 No Related Party Agreements. Except as otherwise
------------ ---------------------------
contemplated hereby, neither of Sellers nor any of either Seller's Affiliates
will at the Closing Time be a party to any material Contract with any MNH
Entity, including any material Contract providing for the furnishing of services
or rental of real or personal property to or from or otherwise relating to the
business or operations of any MNH Entity or pursuant to which any MNH Entity may
have any obligation or liability.
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<PAGE>
Section 6.12 Termination of Seller's Profit Sharing Plan. Sellers
------------ -------------------------------------------
shall, on or prior to the Closing Date, arrange for termination of the New
Heritage Associates Profit Sharing Plan. In connection with the termination,
plan assets shall be distributed to, or as directed by, plan participants.
Section 6.13 Cooperation with CCI Merger, etc. Sellers shall, and
------------ --------------------------------
prior to the Closing Sellers shall cause the MNH Entities to, at the expense of
CCI, (i) furnish in writing to CCI such information (including audited and
unaudited financial statements), and in such form, regarding Sellers, the MNH
Entities, MNHP, NHA, Meredith, Ingersoll, New Heritage and the Ultimate Equity
Holders as CCI may reasonably request in connection with the CCI Proxy Statement
and the U S WEST, Inc. Registration Statement, (ii) cooperate with CCI in its
efforts to respond to any comments of the SEC with respect to the CCI Proxy
Statement or the U S WEST, Inc. Registration Statement relating to Sellers, the
MNH Entities, MNHP, NHA, Meredith, Ingersoll, New Heritage or the Ultimate
Equity Holders, (iii) cause the MNH Entities' independent auditors to deliver a
letter to CCI and U S WEST, Inc. in connection with the CCI Proxy Statement and
the U S WEST, Inc. Registration Statement, such letter to be in form and
substance reasonably satisfactory to CCI and U S WEST, Inc. and customary in
scope and substance for letters delivered by independent public accountants in
connection with proxy statements similar to the CCI Proxy Statement and with
registration statements similar to the U S WEST, Inc. Registration Statement,
and (iv) take any other action reasonably requested by CCI in connection with
the CCI Proxy Statement or the U S WEST, Inc. Registration Statement. Sellers
shall, prior to the Closing Date, similarly cooperate with CCI and take such
other actions, all as and consistent with the cooperation and actions
contemplated by the foregoing clauses (i), (ii), (iii) and (iv) and at the
expense of CCI, in connection with such other proxy statements or registration
statements as CCI may submit to or file with, or propose to submit to or file
with, the SEC after the date hereof, to the extent that such cooperation and
actions do not unreasonably interfere with the normal operations of Sellers and
the MNH Entities.
Section 6.14 Access to Records. Subject to the Closing, Buyer shall
------------ -----------------
cause MNH to (i) use its reasonable efforts to preserve all material Books and
Records pertaining to the MNH Entities operations of the Systems prior to the
Closing Date for a period of five years after the Closing Date, and (ii) give
such access during normal business hours to such Books and Records to Sellers,
their counsel, accountants and other authorized representatives, during such
five-year period, on reasonable advance written notice and in a manner that is
not disruptive of the operation of the Systems, as may be reasonably necessary
in connection with any legitimate purpose (including, without
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limitation, the preparation of tax reports and returns and the preparation of
financial statements). Sellers shall have the right to make copies at their own
expense.
Section 6.15 Form 394. Buyer shall use all reasonable efforts to
------------ --------
prepare, with the cooperation of Sellers, on or before April 15, 1996 a Form 394
for filing with each franchising authority for which such Form 394 is required
to be filed. Upon approval of Sellers as to the form and content of such Form
394 (which approval shall not be unreasonably withheld or delayed), Buyer shall
immediately file such Form 394 with each such franchising authority. Each of
Buyer and Sellers represents that the information provided by it in such filings
will be, as of the date filed, true and correct in all material respects and
will comply in all material respects with the requirements of such Form 394.
Each of Buyer and Sellers agrees to use all reasonable efforts to promptly
respond to any request for additional information by any such franchising
authority and Buyer agrees to promptly file any such additional information
after any such request. Sellers acknowledge and agree that, at Buyer's option,
(i) each such Form 394 may contain information regarding and seek approval from
such franchising authority of the transfer of (or the transfer of control of)
the Systems Franchises (including the particular Systems Franchise within the
jurisdiction of such franchising authority) from Buyer to U S WEST, Inc. by
reason of the transactions contemplated by the CCI Merger Agreement (or from
Sellers directly to U S WEST, Inc. if the transactions contemplated by the CCI
Merger Agreement are consummated prior to the transactions contemplated hereby),
or (ii) U S WEST, Inc. or Buyer or an Affiliate thereof may file a separate Form
394 with each such franchising authority containing information regarding and
seeking approval from such franchising authority of the transfer of (or the
transfer of control of) the Systems Franchises (including the particular Systems
Franchise within the jurisdiction of such franchising authority) from Buyer to U
S WEST, Inc. by reason of the transactions contemplated by the CCI Merger
Agreement (or from Sellers directly to U S WEST, Inc. if the transactions
contemplated by the CCI Merger Agreement are consummated prior to the
transactions contemplated hereby), either concurrently with or subsequent to the
filing of the Form 394 with such franchising authority relating to the
transactions contemplated by this Agreement.
Section 6.16 Tax Returns. Sellers shall prepare and cause to be
------------ -----------
filed all tax returns and other tax reports required to be filed by MNH as a
result of or subsequent to the Closing, for the period ending on the Closing
Date. Buyer shall reimburse Sellers for the reasonable out-of-pocket costs
incurred by them in connection with the preparation and filing of such final tax
returns and other tax reports up to an amount equal to the product of (i) the
aggregate amount of such reasonable out-of-
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pocket costs, multiplied by (ii) the remainder of 100% minus the Sellers
Indemnification Percentage.
ARTICLE 7
CONDITIONS PRECEDENT
--------------------
Section 7.1 Conditions to Buyer's Obligations. The obligations of
----------- ---------------------------------
Buyer to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction of the following conditions on or prior to the
Closing Date (any of which may be waived in writing by CCI):
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Sellers in this Agreement and of Sellers in any Transaction
Document shall be true and correct in all material respects at and as of the
Closing with the same effect as if made at and as of the Closing, except for
changes, if any, permitted or contemplated by this Agreement or to which Buyer
may consent in writing pursuant to Section 6.1, 6.2 or 6.3 or may be deemed to
consent pursuant to Section 6.3(c).
(b) Performance of Agreements. Each Seller shall have performed or
-------------------------
caused to be performed in all material respects all of its obligations and
agreements contained in this Agreement or in any Transaction Document that is to
be performed by it at or before Closing.
(c) Officer's Certificate. Buyer shall have received a certificate
---------------------
executed by a general partner of each Seller, dated as of the Closing Date,
reasonably satisfactory in form and substance to CCI, certifying that the
conditions specified in Sections 7.1 (a) and (b) have been satisfied.
(d) Legal Proceedings. There shall be (i) no Legal Requirement, and
-----------------
no Judgment shall have been entered and not vacated by any Governmental
Authority of competent jurisdiction in any Litigation or arising therefrom,
which (i) enjoins, restrains, makes illegal or prohibits consummation of the
transactions contemplated by this Agreement or by any Transaction Document or
(ii) requires separation or divestiture by CCI of all or any portion of the
Assets after Closing, and no Governmental Authority shall have instituted or
threatened in writing any action, suit or similar proceeding seeking or which,
in the good faith judgment of Buyer, might reasonably be expected to have the
effect of, any of the foregoing.
(e) Opinion of FCC Counsel. Buyer shall have received an opinion of
----------------------
Fleischman and Walsh, L.L.P., special FCC counsel to the MNH Entities, dated as
of the Closing Date, in form and substance reasonably satisfactory to Buyer and
its counsel (the "MNH FCC COUNSEL OPINION").
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(f) MNH Counsel Opinions. Buyer shall have received opinions of
--------------------
Sidley & Austin and Nyemaster, Goode, McLaughlin, West, Hansell & O'Brien,
counsel to Sellers, the MNH Entities, Meredith, Ingersoll, NHA and the Ultimate
Equity Holders, dated as of the Closing Date, in form and substance reasonably
satisfactory to Buyer and its counsel (the "SELLERS COUNSEL OPINIONS").
(g) HSR Act Waiting Period. The waiting period under the HSR Act with
----------------------
respect to the transactions contemplated by this Agreement shall have expired or
been terminated.
(h) Consents. Except to the extent otherwise permitted by Section
--------
7.1(k), Buyer shall have received evidence, in form and substance reasonably
satisfactory to it, that the Sellers Required Consents and Buyer Required
Consents have been obtained.
(i) No Material Adverse Change. There shall have been no material
--------------------------
adverse change in the Assets, or the financial condition or operations of the
Systems, in each case taken as a whole, since the date of this Agreement. There
shall not have occurred or been suffered any casualty or loss, whether or not
covered by insurance, which either alone or in the aggregate has had or is
reasonably likely to have a Material Adverse Effect on the MNH Entities.
(j) Subscribers. The Systems shall be serving at least 115,000 Basic
-----------
Subscribers as of the end of the calendar month immediately preceding the
Closing Date.
(k) Transferable Franchise Areas. The aggregate number of Basic
----------------------------
Subscribers in the Cable Franchise Areas (as defined below) that are
Transferable Franchise Areas (as defined below) shall be not less than 95% (the
"REQUIRED PERCENTAGE") of the aggregate number of Basic Subscribers in all Cable
Franchise Areas; provided, however, that the condition set forth in this Section
-------- -------
7.1(k) shall not be deemed to be satisfied until the earlier to occur of (x)
thirty (30) days following the date on which the Required Percentage is
obtained, (y) the date on which the condition set forth in this Section 7.1(k)
would be satisfied if the Required Percentage were one hundred percent, or (z)
December 31, 1996. For purposes of this Section 7.1(k):
(i) "CABLE FRANCHISE AREA" means any of the geographic areas in which
the MNH Entities are authorized to provide cable television service pursuant to
a Systems Franchise or provide cable television service without a Franchise;
(ii) A Cable Franchise Area is a "TRANSFERABLE FRANCHISE AREA" if (A)
any Consent necessary for
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the transfer of control of the Systems Franchise for such Cable Franchise Area
in connection with the consummation of the transactions contemplated by this
Agreement shall have been obtained; (B) no Consent is necessary for the transfer
of control of the Systems Franchise for such Cable Franchise Area in connection
with the consummation of the transactions contemplated by this Agreement; or (C)
no Franchise is required for the provision of cable television service in the
Cable Franchise Area;
(iii) If at any time prior to the Closing Date any Governmental
Authority exercises any right reserved to it in a Systems Franchise for any
Cable Franchise Area to acquire the Systems Franchise or related System upon the
actual or proposed transfer of control of such Systems Franchise, then during
the pendency of any proceeding with respect to the acquisition of such Systems
Franchise or related System by such Governmental Authority, and notwithstanding
any other action taken by such Governmental Authority, (A) such Systems
Franchise shall be deemed to be one with respect to which Consent is required
for the transfer of control of such Systems Franchise in connection with the
consummation of the transactions contemplated by this Agreement, (B) such
Governmental Authority shall be deemed not to have granted its consent to the
transfer of control of such Systems Franchise, (C) the proceeds (the "PROCEEDS")
received by any MNH Entity in connection with such acquisition shall be held in
escrow by such MNH Entity until after the Closing, and, (D) anything herein to
the contrary notwithstanding, the Proceeds shall not be counted as current
assets of the MNH Entities for purposes of the Working Capital Adjustment; and
(iv) In calculating the number of Basic Subscribers in a Cable
Franchise Area, the number of Basic Subscribers in such Cable Franchise Area on
October 31, 1995 shall be used.
Notwithstanding the foregoing, Sellers and Buyers agree to use their respective
reasonable efforts to contest any attempt to so acquire a System Franchise or a
related System, including, without limitation, by commencing and prosecuting
such legal actions as may be necessary to prevent such acquisition in
circumstances where such action is appropriate.
(l) [This Section has been intentionally left blank.]
(m) Ultimate Equity Holder Guaranties. Each of the Ultimate Equity
---------------------------------
Holders shall have duly executed and delivered to Buyer a Guaranty of
Indemnification Obligations in the form attached hereto as EXHIBIT B (the
"ULTIMATE EQUITY HOLDER GUARANTIES").
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<PAGE>
(n) Removal of Liens. Except as set forth in SCHEDULE 7.1(N), all
----------------
Liens set forth in SCHEDULE 4.8 shall have been removed, released or discharged
at or prior to Closing.
Section 7.2 Conditions to Sellers' Obligations. The obligations of
----------- ----------------------------------
Sellers to consummate the transactions contemplated by this Agreement shall be
subject to the satisfaction of the following conditions on or prior to the
Closing Date (any of which may be waived in writing by Sellers):
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of Buyer in this Agreement and in any Transaction Document to
which Buyer is a party shall be true and correct in all material respects at and
as of the Closing with the same effect as if made at and as of the Closing.
(b) Performance of Agreements. Buyer shall have performed in all
-------------------------
material respects all of its obligations and agreements contained in this
Agreement or in any Transaction Document that is to be performed by it at or
before Closing.
(c) Officer's Certificate. Sellers shall have received a certificate
---------------------
executed by an executive officer of Buyer, dated as of the Closing Date,
reasonably satisfactory in form and substance to Sellers, certifying that the
conditions specified in Section 7.2(a) and (b) have been satisfied.
(d) Legal Proceedings. There shall be no Legal Requirement, and no
-----------------
Judgment shall have been entered and not vacated by any Governmental Authority
of competent jurisdiction in any Litigation or arising therefrom, which enjoins,
restrains, makes illegal or prohibits consummation of the transactions
contemplated hereby or by any Transaction Document, and no Governmental
Authority shall have instituted or threatened any action, suit or similar
proceeding which, in the good faith judgment of Sellers, might reasonably be
expected to have the effect of, any of the foregoing.
(e) Buyer Counsel Opinion. Sellers shall have received an opinion of
---------------------
Sullivan & Worcester, dated as of Closing, in form and substance reasonably
satisfactory to Sellers and their counsel (the "CCI COUNSEL OPINION").
(f) HSR Act Waiting Period. The waiting period under the HSR Act with
----------------------
respect to the transactions contemplated by this Agreement shall have expired or
been terminated.
(g) Consents. Except to the extent otherwise permitted by Section
--------
7.1(k), Sellers shall have received evidence, in form and substance reasonably
satisfactory to them, that the Buyer Required Consents have been obtained.
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<PAGE>
(h) [This Section has been intentionally left blank.]
(i) [This Section has been intentionally left blank.]
(j) [This Section has been intentionally left blank.]
Section 7.3 Exceptions to Conditions to Obligations.
----------- ---------------------------------------
(a) Exception to Section 7.1(a).
---------------------------
(i) The condition contained in Section 7.1(a) to the obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
deemed satisfied notwithstanding any failures of any representations and
warranties of Sellers to be true and correct as of the Closing Date due to
events or occurrences or other circumstances (other than any intentional breach
by either Seller of any of its obligations under this Agreement to be performed
prior to Closing) taking place or arising after the date hereof if (A) the
aggregate amount of Losses and Expenses that could reasonably be expected to be
suffered or incurred by Buyer as a result of such failures as of the Closing
Date would not exceed $5,000,000 and (B) there shall be no failure of any of the
representations and warranties of Sellers contained in Sections 3.1(b),
3.1(c)(i)(A), 3.2(a)(iii) (other than the first and second sentences) and (iv),
3.2(b)(ii), (iv) (other than the first and second sentences) and (v), 3.3, 4.2,
4.3(a)(i) and (ii) and 4.4 to be true and correct in all material respects;
provided, however, that nothing contained in this Section 7.3(a) shall limit in
any way whatsoever the obligations of Sellers under this Agreement to indemnify
Buyer against any and all Losses and Expenses arising out of or resulting from
such failures or otherwise except as otherwise provided in Section
7.3(a)(ii)(B). Sellers shall use all reasonable efforts to give written notice
to Buyer of any such failures, which notice (I) shall state with reasonable
specificity the facts and circumstances underlying each such failure, (II) shall
set forth Sellers' good faith estimate of the aggregate amount of Losses and
Expenses that could reasonably be expected to be suffered by Buyer as a result
of such failures (which estimate shall be for information purposes only and
shall in no way be binding on Buyer or Seller or determinative of the amount of
such Losses and Expenses for purposes of Section 7.3(a)(ii)), and (III) shall
state that such notice is being given pursuant to this Section 7.3(a). Sellers
shall use all reasonable efforts to give any such notice to Buyer at least seven
Business Days prior to the Closing Date. Anything in this Agreement to the
contrary notwithstanding, if any such notice is given less than seven Business
Days prior to the Closing Date, the Closing Date may be postponed at the option
of Buyer for up to seven Business Days after the date such notice is given.
Subject to the Closing, any such notice given by Sellers pursuant to this
Section 7.3(a) shall be deemed to constitute the giving
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<PAGE>
of any initial notice pertaining to such failures from Buyer or any Indemnitee
required under or contemplated by any provision of Article 10, including Section
10.5 and Section 10.6(d) but excluding the second sentence of Section 10.3.
(ii) If the aggregate amount of Losses and Expenses that could
reasonably be expected to be suffered by Buyer as a result of such failures as
of the Closing Date would exceed $5,000,000, Buyer may at its option:
(A) Refuse to proceed with Closing, whereupon this Agreement shall be
deemed to have been terminated (I) pursuant to Section 9.1(a) of this Agreement
so long as neither Seller has materially breached any of its obligations
hereunder and (II) pursuant to Section 9.1(d) of this Agreement if either Seller
has materially breached any of its obligations hereunder; or
(B) Proceed with Closing (subject to satisfaction of the other
conditions contained in Section 7.1), whereupon Sellers shall not be liable to
Buyer under Section 10.1 of this Agreement or otherwise for any Losses or
Expenses of Buyer in excess of $5,000,000 arising from any such failures that
are described in the notice given by Sellers pursuant to Section 7.3(a)(i)
hereof.
(b) Exception to Section 7.2(a).
---------------------------
(i) The condition contained in Section 7.2(a) to the obligations of
Sellers to consummate the transactions contemplated by this Agreement shall be
deemed satisfied notwithstanding any failures of any representations and
warranties of Buyer to be true and correct as of the Closing Date due to events
or occurrences or other circumstances (other than any intentional breach by
Buyer of any of its obligations under this Agreement to be performed prior to
Closing) taking place or arising after the date hereof if (A) such failures, in
the aggregate, would reasonably be expected not to have a Material Adverse
Effect on CCI and its Subsidiaries and (B) there shall be no failure of any of
the representations and warranties of Buyer contained in Sections 5.1 (third and
fourth sentences only), 5.2(a)(i) and (ii), and 5.3. to be true and correct in
all material respects; and Buyer shall not be liable to either of Sellers under
Section 10.2 of this Agreement or otherwise for any Losses or Expenses of either
of Sellers arising from such failures to the extent that (I) Buyer shall have
given written notice to Sellers of such failures, (II) such notice states with
reasonable specificity the facts and circumstances underlying each such failure
upon which such notice is based, and (III) it is expressly stated in such notice
that it is being given pursuant to this Section 7.3(b). Buyer shall use all
reasonable efforts to give any such notice to Sellers at least seven
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<PAGE>
Business Days prior to the Closing Date. Anything in this Agreement to the
contrary notwithstanding, if any such notice is given less than seven Business
Days prior to the Closing Date, the Closing Date may be postponed at the option
of Sellers for up to seven business days after the date such notice is given.
Subject to the Closing, any such notice given by Buyer pursuant to this Section
7.3(b) shall be deemed to constitute the giving of any initial notice pertaining
to such failures from Sellers or any Indemnitee required under or contemplated
by any provision of Article 10, including Section 10.5 and Section 10.6(d) but
excluding the second sentence of Section 10.3.
(ii) If such failures, in the aggregate, would reasonably be expected
to have a Material Adverse Effect on CCI and its Subsidiaries, Sellers may at
their option:
(A) Refuse to proceed with Closing, whereupon this Agreement shall be
deemed to have been terminated (i) pursuant to Section 9.1(a) of this Agreement
so long as Buyer has not materially breached any of its obligations hereunder
and (ii) pursuant to Section 9.1(c) of this Agreement if Buyer has materially
breached any of its obligations hereunder; or
(B) Proceed with Closing (subject to satisfaction of the other
conditions contained in Section 7.2), whereupon Buyer shall not be liable to
Sellers under Section 10.2 of this Agreement or otherwise for any Losses or
Expenses of either Seller arising from such failures.
(c) Exception to Section 7.1(h).
---------------------------
(i) The condition contained in Section 7.1(h) to the obligations of
Buyer to consummate the transactions contemplated by this Agreement shall be
deemed satisfied notwithstanding any failures of Sellers to obtain any Sellers
Required Consents (other than any failure to obtain any Consents necessary for
the transfer of control of any Systems Franchise (except to the extent otherwise
expressly permitted under Section 7.1(k) and other than any failure where the
consummation of the transactions contemplated hereby, without having obtained
the Sellers Required Consent in question, would result in a material violation
of any Legal Requirement) if the aggregate amount of Losses and Expenses that
could reasonably be expected to be suffered or incurred by Buyer or the MNH
Entities as a result of such failures as of the Closing Date, together with the
aggregate amount of Losses and Expenses that could reasonably be expected to be
suffered or incurred by Buyer or the MNH Entities resulting from any Section
3.1(c) Exceptions and Section 4.3(a) Exceptions, would not exceed $1,000,000;
provided, however, that nothing contained in this Section 7.3(c) shall limit in
any way whatsoever the obligations of Sellers under this Agreement to indemnify
Buyer against any and all Losses and
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<PAGE>
Expenses arising out of or resulting from such failures or otherwise. Sellers
shall use all reasonable efforts to give written notice to Buyer of any such
failures, which notice (A) shall state with reasonable specificity the facts and
circumstances underlying each such failure, (B) shall set forth Sellers' good
faith estimate of the aggregate amount of Losses and Expenses that could
reasonably be expected to be suffered or incurred by Buyer or the MNH Entities
as a result of such failures (which estimate shall be for information purposes
only and shall in no way be binding on Buyer or Seller or determinative of the
amount of such Losses and Expenses for purposes of Section 7.3(c)(ii)), and
(III) shall state that such notice is being given pursuant to this Section
7.3(c). Sellers shall use all reasonable efforts to give any such notice to
Buyer at least seven Business Days prior to the Closing Date. Anything in this
Agreement to the contrary notwithstanding, if any such notice is given less than
seven Business Days prior to the Closing Date, the Closing Date may be postponed
at the option of Buyer for up to seven Business Days after the date such notice
is given. Subject to the Closing, any such notice given by Sellers pursuant to
this Section 7.3(c) shall be deemed to constitute the giving of any initial
notice pertaining to such failures from Buyer or any Indemnitee required under
or contemplated by any provision of Article 10, including Section 10.5 and
Section 10.6(d) but excluding the second sentence of Section 10.3.
(ii) If the aggregate amount of Losses and Expenses that could
reasonably be expected to be suffered by Buyer or the MNH Entities as a result
of such failures as of the Closing Date, together with the aggregate amount of
Losses and Expenses that could reasonably be expected to be suffered or incurred
by Buyer or the MNH Entities resulting from any Section 3.1(c) Exceptions and
Section 4.3(a) Exceptions, would exceed $1,000,000, Buyer may at its option:
(A) Refuse to proceed with Closing, whereupon this Agreement shall be
deemed to have been terminated (I) pursuant to Section 9.1(a) of this Agreement
so long as neither Seller has materially breached any of its obligations
hereunder and (II) pursuant to Section 9.1(d) of this Agreement if either Seller
has materially breached any of its obligations hereunder; or
(B) Proceed with Closing (subject to satisfaction of the other
conditions contained in Section 7.1), whereupon Sellers shall be liable to Buyer
under and to the extent provided in Article 10 (including Section 10.1) for any
Losses or Expenses of Buyer or any MNH Entity arising from any such failures.
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ARTICLE 8
CLOSING
-------
Section 8.1 Closing, Time and Place. The closing of the transactions
----------- -----------------------
contemplated by this Agreement ("CLOSING") will take place at the offices of
Sullivan & Worcester LLP in Boston, Massachusetts at a time mutually determined
by Sellers and Buyer on the last day of the calendar month during which all
conditions set forth in Sections 7.1 and 7.2 have either been satisfied or
waived in writing by the party entitled to the benefit of such condition;
provided, however, that all conditions set forth in Sections 7.1 and 7.2 have
either been satisfied or waived in writing by the party entitled to the benefit
of such condition.
Section 8.2 Sellers' Obligations. At the Closing, Sellers shall
----------- --------------------
deliver to Buyer (or its nominee) the following:
(a) MNHP Bill of Sale and Assignment. A Bill of Sale and Assignment
--------------------------------
duly executed by MNHP in the form attached hereto as EXHIBIT C and with such
modifications, if any, as may be necessary or advisable to cause such forms to
be effective under applicable Legal Requirements.
(b) NHA Bill of Sale and Assignment. A Bill of Sale and Assignment
-------------------------------
duly executed by NHA in the form attached hereto as EXHIBIT D and with such
modifications, if any, as may be necessary or advisable to cause such forms to
be effective under applicable Legal Requirements.
(c) Evidence of Necessary Actions. Certified resolutions, or other
-----------------------------
evidence reasonably satisfactory to Buyer, that Sellers, the MNH Entities,
Meredith, Ingersoll and the Ultimate Equity Holders have taken all actions
necessary to authorize the execution of this Agreement and all other Transaction
Documents and the consummation of the transactions contemplated hereby.
(d) Officer's Certificate. The certificate described in Section 7.1
---------------------
(c).
(e) FCC Counsel Opinion. The MNH FCC Counsel Opinion.
-------------------
(f) Sellers Counsel Opinions. The Sellers Counsel Opinions.
------------------------
(g) [This Section has been intentionally left blank.]
(h) Ultimate Equity Holder Guaranties. The Ultimate Equity Holder
---------------------------------
Guaranties.
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(i) Lien Releases. Evidence satisfactory to Buyer that all Liens
-------------
(other than Permitted Liens and the Liens specified in SCHEDULE 7.1(N))
affecting or encumbering the Assets have been terminated, released or waived, as
appropriate, or original, executed instruments in form satisfactory to Buyer
effecting such terminations, releases or waivers.
(j) Instruments under MNH Partnership Agreement. Such instruments as
-------------------------------------------
may be necessary or advisable under the MNH Partnership Agreement to permit the
transfer of the Subject Interests to Buyer (or its nominee) and the admission of
Buyer (or its nominee) as a successor limited partner and successor general
partner of MNH.
(k) Other. Such other documents and instruments as may be necessary
-----
to effect the intent of this Agreement and consummate the transactions
contemplated hereby or as Buyer may reasonably request.
Section 8.3 Buyer's Obligations.
----------- -------------------
(a) At the Closing, Buyer shall deliver or cause to be delivered to
Sellers the following:
(i) Purchase Price. The Purchase Price (subject to adjustment as
--------------
provided in Section 8.3(b)(iii)), which shall be determinable and payable as
provided in Section 8.3(b). The amount of the Purchase Price to be paid at the
Closing shall be equal to the estimate thereof set forth in the Sellers Purchase
Price Calculation (subject to any changes or modifications thereto agreed to by
Sellers and Buyer on or before the Closing Date).
(ii) Evidence of Authorization of Actions. Certified resolutions of
------------------------------------
the Board of Directors of CCI, or other evidence reasonably satisfactory to
Sellers, that Buyer has taken all action necessary to authorize the execution of
this Agreement and all other Transaction Documents and the consummation of the
transactions contemplated hereby.
(iii) Officer's Certificate. The certificate described in
---------------------
Section 7.2(c).
(iv) CCI Counsel Opinion. The CCI Counsel Opinion.
-------------------
(v) [This Section has been intentionally left blank.]
(vi) [This Section has been intentionally left blank.]
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(vii) Interest. An amount equal to interest accruing, at the Prime
--------
Rate from October 1, 1996 through the earlier of (A) the Closing Date and (B)
December 31, 1996, on the Purchase Price payable at Closing. Such amount shall
be payable, in cash, by wire transfer of immediately available funds to such
accounts as designated in writing by Sellers to Buyer at least 5 Business Days
prior to the Closing Date.
(viii) Other. Such other documents and instruments as may be
-----
necessary to effect the intent of this Agreement and consummate the transactions
contemplated hereby.
In addition to the foregoing, Buyer shall either (i) pay in full the principal
indebtedness of MNH, all interest accrued thereon and any other amounts
otherwise due through the Closing Date arising under the MNH Loan Agreement or
(ii) deliver to the Sellers releases duly executed by the Banks, the Co-Agents
and the Agent in favor of the Sellers releasing the Sellers from any liability
under the MNH Loan Agreement and the other agreements and instruments delivered
in connection with the MNH Loan Agreement.
(b) Purchase Price. The purchase price (subject to adjustment as
--------------
provided in Section 8.3(b)(iii), the "PURCHASE PRICE") to be paid by Buyer at
the Closing for the Subject Interests shall be determined and payable as
follows:
(i) The Purchase Price shall be equal to the greater of $-0- and
the sum of:
(A) the product of (I) the sum (such sum being referred to herein as
the "DEAL PRICE") of (x) the remainder of $257,500,000 minus the consolidated
liabilities of the MNH Entities as of the Closing Time other than the
Consolidated Current Liabilities (as defined below), determined in accordance
with GAAP as consistently applied by the MNH Entities, plus (y) the Working
Capital Adjustment (as defined below), plus (z) the Capital Expenditures
Adjustment (as defined below), multiplied by (II) 0.7378, plus
(B) the product of (I) the Deal Price minus $138,250,000, multiplied
by (II) 0.020976, plus
(C) $5,000,000.
(ii) The Purchase Price shall be payable entirely in cash, which shall
be payable by wire transfer of immediately available funds, in an aggregate
amount equal to the Purchase Price in such amounts and to such accounts as
designated in writing by Sellers to Buyer at least 5 Business Days prior to the
Closing Date.
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(iii) The Purchase Price shall be determined as follows:
(A) At least 5 Business Days prior to the Closing Date, Sellers shall
prepare and deliver to Buyer a detailed schedule showing Sellers' best good
faith estimate of the Purchase Price as of the Closing Time (the "SELLERS
PURCHASE PRICE CALCULATION"). Buyer shall have the opportunity to review the
Sellers Purchase Price Calculation prior to the Closing (and shall have full
access to the Assets, including the Books and Records for that purpose) and
Sellers and Buyer shall negotiate in good faith to resolve any disagreement that
may exist between Sellers and Buyer as to proper calculation of the Purchase
Price for purposes of the Closing.
(B) As promptly as practicable after the Closing Date, but in any
event within 45 days thereafter, Buyer shall prepare and deliver to Sellers a
schedule showing Buyer's determination of the Purchase Price as of the Closing
Time (the "BUYER PURCHASE PRICE CALCULATION"). If Sellers disagree with the
Buyer Purchase Price Calculation, Sellers shall give notice thereof to Buyer
within fifteen days after delivery of the Buyer Purchase Price Calculation to
Sellers.
(C) Buyer and Sellers shall attempt to settle any such disagreement;
any such settlement shall be final and binding upon Buyer and Sellers. If,
however, Buyer and Sellers are unable to settle such disagreement within 15 days
after receipt by Buyer of such notice of disagreement, such disagreement shall
be submitted to an independent certified public accounting firm mutually
acceptable to Buyer and Sellers for resolution, and the decision of such
certified public accountants shall be final and binding upon Buyer and Sellers.
All costs incurred in connection with the resolution of such disagreement by
such certified public accountants, including expenses and fees for services
rendered, shall be paid one half by Buyer and one half by Sellers. Buyer and
Sellers shall use reasonable efforts to have any such disagreement resolved
within 30 days after such disagreement is submitted to such certified public
accountants, but neither Buyer nor Sellers shall have any liability to any party
if such disagreement is not resolved within such 30-day period.
(D) Within 5 Business Days following a final determination of the
Purchase Price (whether as a result of Sellers failing to give timely notice of
Sellers's disagreement with the Buyer Purchase Price Calculation, a resolution
by Buyer and Sellers of any such disagreement, or a determination by such a
certified public accounting firm selected pursuant to paragraph (C) above to
resolve any disagreement among the parties), Buyer shall pay to Sellers the
amount of any underpayment plus interest on such amount from the Closing Date to
the date of payment at a
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per annum rate equal to the Prime Rate or Sellers shall pay to Buyer the amount
of any overpayment plus interest on such amount from the Closing Date to the
date of payment at a per annum rate equal to the Prime Rate, as the case may be,
of the Purchase Price as adjusted pursuant to this Section by wire transfer in
immediately available funds.
(iv) For purposes of this Agreement:
(A) "CAPITAL EXPENDITURES ADJUSTMENT" means an amount equal to the
remainder (which may be a negative number, which, in such case, would reduce the
Purchase Price) of (I) all amounts actually expended by the MNH Entities in
respect of Capital Expenditures (determined in accordance with GAAP applied
consistently with the past practices of the MNH Entities) between July 1, 1995
and the Closing Date, minus (II) the aggregate amount of Capital Expenditures
provided for in the Capital Expenditure budget attached hereto as SCHEDULE
6.3(A)(IV) for the period between July 1, 1995 and the Closing Date.
(B) "CONSOLIDATED CURRENT ASSETS" means the consolidated current
assets of the MNH Entities as of the Closing Time other than (I) any Accounts
Receivable, (II) any Proceeds and (III) any current assets arising out of the
CCM Note (as defined in the MNH Partnership Agreement), all determined in
accordance with GAAP applied consistently with the past practices of the MNH
Entities.
(C) "CONSOLIDATED CURRENT LIABILITIES" means the consolidated current
liabilities of the MNH Entities (including any and all accrued unpaid taxes but
excluding any unearned revenue) as of the Closing Time other than the current
portion of any principal indebtedness owed by MNH under the MNH Loan Agreement,
all determined in accordance with GAAP applied consistently with the past
practices of the MNH Entities.
(D) "ELIGIBLE ACCOUNTS RECEIVABLE" means an amount equal to the sum of
(I) 95% of advertising Accounts Receivables (other than interconnect advertising
Accounts Receivables) not more than 90 days past due, 60% of such advertising
Accounts Receivables more than 90 days and not more than 120 days past due, and
0% of such advertising Accounts Receivables more than 120 days past due; (II)
97% of all interconnect advertising Accounts Receivables; and (III) 100% of all
other Accounts Receivables not more than 30 days past due, 75% of such other
Accounts Receivables more than 30 days and not more than 90 days past due, and
0% of such other Accounts Receivables more than 90 days past due, all determined
in accordance with GAAP applied consistently with the past practices of the MNH
Entities. In valuing Accounts Receivables not more than 30 days past due,
unearned revenue shall first be netted and
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the amount of Accounts Receivable shall be determined without deducting any
reserves for bad accounts.
(E) "WORKING CAPITAL ADJUSTMENT" means an amount equal to (which may
be a negative number, which, in such case, would reduce the Purchase Price) (I)
the sum of (x) the Consolidated Current Assets plus (y) Eligible Accounts
Receivable, minus (II) the Consolidated Current Liabilities.
ARTICLE 9
TERMINATION AND DEFAULT
-----------------------
Section 9.1 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 of Sellers and Buyer;
(b) By either Buyer or Sellers, so long as the terminating party has
not breached any of its obligations hereunder, after December 31, 1996 or such
later date to which the Closing may be extended by Sellers or Buyer pursuant to
Section 7.3 (such date being herein referred to as the "OUTSIDE CLOSING DATE"),
if the Closing shall not have occurred on or before such date;
(c) By Sellers, so long as neither Seller has breached any of its
obligations hereunder, if either (i) Buyer fails to perform any covenant in this
Agreement when performance thereof is due and does not cure such failure within
20 Business Days after Sellers deliver written notice thereof to Buyer, or (ii)
any condition in Section 7.2 of this Agreement is not satisfied or capable of
being satisfied on or before the Outside Closing Date;
(d) By Buyer, so long as Buyer has not breached any of its obligations
hereunder, if either (i) either of Sellers fails to perform any covenant in this
Agreement when performance thereof is due, and does not cure the failure within
20 Business Days after written notice by Buyer thereof to Sellers, or (ii) any
condition in Section 7.1 of this Agreement is not satisfied or capable of being
satisfied on or before the Outside Closing Date.
Section 9.2 Effect of Termination. If this Agreement is terminated
----------- ---------------------
pursuant to Section 9.1, all rights and obligations of the parties hereunder
shall terminate, except for the rights and obligations set forth in Sections
6.5(a), 11.1, 11.2 and 11.11. Subject to the provisions of Section 7.3,
termination of this Agreement pursuant to Section 9.l(c) or (d) shall not limit
or impair any remedies that either Sellers or Buyer may have
with
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respect to a breach or default by the other of its representations, warranties,
covenants or agreements or obligations hereunder.
ARTICLE 10
INDEMNIFICATION
---------------
Section 10.1 Indemnification by Sellers. From and after Closing,
------------ --------------------------
each Seller shall indemnify and hold harmless CCI and its Affiliates, directors,
officers, employees, agents and representatives, and any Person claiming by or
through any of them, as the case may be, from and against any and all Losses and
Expenses arising out of or resulting from:
(a) Any representations and warranties made by either Seller, any MNH
Entity, Meredith, Ingersoll or any of the Ultimate Equity Holders in this
Agreement or in any Transaction Document not being true and accurate in all
material respects, when made or at Closing, provided that indemnification under
this paragraph is sought within the applicable time periods and in the manner
stated in Section 10.5;
(b) Any failure by either Seller, any MNH Entity, MNHP, NHA, Meredith,
Ingersoll or any of the Ultimate Equity Holders to perform in all material
respects any of its covenants, agreements, or obligations in this Agreement or
in any Transaction Document;
(c) Any indebtedness, liability or obligation set forth on SCHEDULE
4.6 to the extent not provided for in determining the Purchase Price (either as
(i) an inclusion in the consolidated liabilities of the MNH Entities to be
deducted pursuant to Section 8.3(b)(i)(A)(I)(x) in determining the Purchase
Price or (ii) as an inclusion in the Consolidated Current Liabilities to be
deducted pursuant to Section 8.3(b)(iv)(E) in determining the Working Capital
Adjustment); and
(d) The non-delivery or non-obtaining on or before the Closing Date of
any Sellers Required Consents to the extent that the aggregate Losses and
Expenses arising out of or resulting therefrom, together with the aggregate
amount of Losses and Expenses arising out of or resulting from any Section
3.1(c) Exceptions and Section 4.3(a) Exceptions, exceed $250,000; provided,
--------
however, that Sellers shall be liable to Buyer under this Section 10.1(d) for
- -------
any Losses or Expenses of Buyer arising from the non-delivery or non-obtaining
of any Sellers Required Consents that are described in a notice given by Sellers
pursuant to Section 7.3(c)(i) hereof to the extent (and only to the extent) that
the aggregate amount of such Losses and Expenses, together with the aggregate
amount of Losses and Expenses resulting from any Section 3.1(c) Exceptions and
Section 4.3(a)
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Exceptions, (i) exceed $250,000 but (ii) do not exceed $1,000,000.
Section 10.2 Indemnification by Buyer. From and after Closing, Buyer
------------ ------------------------
shall indemnify and hold harmless each Seller and its Affiliates, partners,
directors, officers, employees, agents and representatives, and any Person
claiming by or through any of them, as the case may be, from and against any and
all Losses and Expenses arising out of or resulting from:
(a) Any representations and warranties made by Buyer in this Agreement
or in any Transaction Document not being true and accurate in all material
respects when made or at Closing, provided that indemnification under this
paragraph is sought within the applicable time periods and in the manner stated
in Section 10.5;
(b) Any failure by Buyer to perform in all material respects any of
its covenants, agreements, or obligations in this Agreement or in any
Transaction Document; and
(c) The operation of the Systems after the Closing Time.
Section 10.3 Procedure for Indemnified Third Party Claim. If any
------------ -------------------------------------------
person entitled to indemnification hereunder (the "INDEMNITEE") believes that it
has suffered or incurred any Losses and Expenses for which it is entitled to
indemnification hereunder, such Indemnitee shall notify the party or parties
from whom indemnification is sought (the "INDEMNITOR") with reasonable
promptness and with reasonable particularity in light of the circumstances then
existing. Promptly after receipt by an Indemnitee of written notice of the
assertion or the commencement of any Litigation by a third party giving rise to
any claim for indemnification with respect to any matter referred to in this
Article 10, the Indemnitee shall give written notice thereof to each Indemnitor
from whom indemnification is sought and thereafter will keep the Indemnitor
reasonably informed with respect thereto if the Indemnitor does not assume the
defense of such claim; provided, however, that failure of the Indemnitee to give
the Indemnitor notice as provided in this Section 10.3 shall not relieve any
Indemnitor of its obligations hereunder except to the extent that such
Indemnitor shall have been prejudiced by such failure. In case any Litigation
is brought against any Indemnitee, the Indemnitor shall be entitled to assume
the defense thereof, at the Indemnitor's sole expense. If the Indemnitor
assumes the defense of any Litigation, it will not settle the Litigation without
the prior written consent of the Indemnitee (which consent shall not be
unreasonably withheld or delayed); provided, however, that the Indemnitor may
-------- -------
settle any Litigation without the Indemnitee's consent if such settlement (i)
makes no admission or acknowledgment of liability or
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culpability with respect to the Indemnitee, (ii) includes a complete release of
the Indemnitee and (iii) does not require the Indemnitee to make any payment or
take (or forgo) any action. The Indemnitee shall cooperate in all reasonable
respects with the Indemnitor and its attorneys in the investigation, trial and
defense of any Litigation and any appeal arising therefrom (including the filing
in the Indemnitee's name of appropriate cross claims and counterclaims). The
Indemnitee may, at its own cost, participate in any investigation, trial and
defense of such Litigation controlled by the Indemnitor and any appeal arising
therefrom. If, after receipt of a written notice pursuant to this Section 10.3,
the Indemnitor does not undertake to defend any such Litigation, the Indemnitee
may, but shall have no obligation to, contest or defend against any Litigation
and the Indemnitor shall be bound by the result obtained with respect thereto by
the Indemnitee (including, without limitation, the settlement thereof without
the consent of the Indemnitor). If there are one or more legal defenses
available to the Indemnitee that conflict with those available to the
Indemnitor, the Indemnitee shall have the right, at the expense of the
Indemnitor, to assume the defense of the Litigation; provided, however, that the
Indemnitee may not settle such Litigation without the consent of the Indemnitor,
which consent shall not be unreasonably withheld or delayed.
Section 10.4 Payment of Indemnification Amounts. Amounts payable by
------------ ----------------------------------
the Indemnitor to the Indemnitee in respect of any Losses and Expenses under
Sections 10.1 or 10.2 shall be payable by the Indemnitor as incurred by the
Indemnitee, and shall bear interest at the Prime Rate from the date of demand by
the Indemnitee for indemnification of such Losses and Expenses until the date of
payment of indemnification by the Indemnitor.
Section 10.5 Time and Manner of Certain Claims. The representations
------------ ---------------------------------
and warranties of Sellers and Buyer in this Agreement and any Transaction
Document shall survive Closing for a period of six months except that,
(a) The representations and warranties in Sections 4.9(c), 4.9(d) and
4.9(e) shall survive closing for a period of one year;
(b) The representations and warranties contained in Sections 3.1(b),
3.1(c)(i)(A), 3.2(a)(iii) (other than the first and second sentences) and (iv),
3.2(b)(ii), (iv) (other than the first and second sentences) and (v), 3.3, 4.2,
4.3(a)(i) and (ii), 4.4, 4.12, 5.1 (third and fourth sentences only), 5.2(a)(i)
and (ii), and 5.3 shall survive until the expiration of the applicable statute
of limitations; and
(c) The obligations of Sellers to indemnify Buyer with respect to any
Litigation by a third party (including any claim
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against or contingent liability of MNH under section 3.01 or 9.01 of the
Contract of Sale, dated December 20, 1994, between MNH and Sioux Falls Cable),
that relates to any claim, indebtedness, liability or obligation existing at the
Closing Time (whether or not contingent at such time) to the extent that such
claim, indebtedness, liability or obligation (i) was not reflected or reserved
against on the MNH Balance Sheet or (ii) was incurred or arose after the MNH
Balance Sheet Date (other than in the ordinary course of business of the MNH
Entities or otherwise as permitted by this Agreement or with the consent of
Buyer) and was not provided for in determining the Purchase Price (either as (A)
an inclusion in the consolidated liabilities of the MNH Entities to be deducted
pursuant to Section 8.3(b)(i)(A)(I)(x) in determining the Purchase Price or (B)
as an inclusion in the Consolidated Current Liabilities to be deducted pursuant
to Section 8.3(b)(iv)(E) in determining the Working Capital Adjustment), shall
survive closing for a period of one year from the Closing Date;
provided, however, that in any of the foregoing cases the liability of the
parties shall extend beyond such applicable survival periods with respect to any
specific breach which has been asserted in a written notice before the
expiration of the applicable survival period. No claim for indemnification
arising out of an alleged breach of any representation or warranty hereunder
shall be valid unless notice of the breach thereof shall have been given in
writing (or deemed to have been given in writing pursuant to Section 7.3(a) or
(b) hereof) prior to the expiration of the applicable survival period specified
in the preceding sentence.
Section 10.6 Certain Limitations on Indemnification. Anything in this
------------ --------------------------------------
Article 10 to the contrary notwithstanding:
(a) The amount of any particular Losses and Expenses required to be
indemnified against under Section 10.1 or 10.2 shall be reduced by (i) the
amount of any insurance proceeds paid to the Indemnitee or any of its Affiliates
with respect to such Losses and Expenses (and no right of subrogation shall
accrue to any insurer hereunder), and (ii) the amount of any tax benefit
actually realized by the Indemnitee or any of its Affiliates with respect to
such Losses and Expenses (after giving effect to the tax effect of receipt of
the indemnification payments). With respect to any claim for which indemnity
has been paid hereunder, the Indemnitor shall be subrogated to all rights of
recovery of the Indemnitee and its Affiliates against any insurer or other third
party.
(b) Neither CCI nor any of its Affiliates shall be entitled to
indemnification under Section 10.1 for any Losses and Expenses to the extent
that such Losses and Expenses arise out of breaches of representations or
warranties of Sellers contained
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herein that constitute breaches of representation or warranties for which, as at
the Closing Time, MNH would be entitled to indemnification under Section 12.3 of
the Stock Purchase Agreement, dated as of February 11, 1992, Regarding North
Central Cable Communications Corporation, as amended through the date hereof.
(c) The amount of any particular Losses that Sellers are required to
indemnify CCI and its Affiliates against pursuant to Section 10.1(a) of this
Agreement shall be limited to the product of (i) the aggregate amount of such
Losses (after giving effect to Sections 10.8(a) and (b)), multiplied by (ii) the
Sellers Indemnification Percentage.
(d) Subject to the Closing, Sellers shall have no liability under
Section 10.1(a) or (b) unless and until the aggregate amount of Losses and
Expenses otherwise subject to their indemnification obligations thereunder
exceeds $600,000 (the "MINIMUM DAMAGE REQUIREMENT"), in which case all such
Losses and Expenses in excess of $125,000 shall be indemnifiable by Sellers;
provided, however, that the Minimum Damage Requirement shall not apply to any
Losses or Expenses resulting from or arising out of any default by Sellers of
their obligations under Section 6.10 or 8.3(b)(iii). Subject to the Closing,
Sellers shall have no liability under Section 10.1, and Buyer shall have no
liability under Section 10.2 to the extent that the aggregate amount of Losses
and Expenses otherwise subject to indemnification obligations of Sellers or
Buyer, as the case may be, hereunder exceeds $20,000,000, which amount shall be
reduced to $10,000,000 with respect to any claims with respect to which notice
is not given to Sellers or Buyer (as the case may be) on or prior to the first
anniversary of the date hereof.
Section 10.7 Exclusive Remedy. Subject to the Closing, the
------------ ----------------
indemnification rights provided for in this Article 10 shall be the exclusive
remedy for Sellers or Buyer, as the case may be, for damages for any breach of
any representation, warranty, covenant or agreement contained in this Agreement
or in any certificate delivered by either Seller or Buyer at or prior to the
Closing pursuant to this Agreement; provided that the provisions of this Section
10.7 shall not apply to, or limit in any way the remedies of Sellers or Buyer,
as the case may be, with respect to any breach of, Section 8.3(b)(iii), 11.1,
11.2 or 11.11 or the respective rights of Buyer and Sellers under Section 11.13
or the rights of Buyer under any of the Ultimate Equity Holder Guaranties.
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ARTICLE 11
MISCELLANEOUS PROVISIONS
------------------------
Section 11.1 Expenses. Except as otherwise provided in Section 11.11
------------ --------
or elsewhere in this Agreement or as may otherwise be agreed to in writing by
the parties, each of the parties will pay its own expenses and the fees and
expenses of its counsel, accountants, and other experts in connection with this
Agreement and the consummation of the transactions contemplated hereby;
provided, however, that (i) filing fees under the HSR Act shall be borne one-
half by MNH and one-half by Buyer; (ii) fees, costs and expenses to be paid to
third parties that Sellers and Buyer mutually agree to in connection with
obtaining any Consents necessary for the transfer of control of any Systems
Franchise or License shall be borne by the MNH Entities (except that Buyer shall
be solely responsible for all costs and expenses which result from material
amendments to the terms of a Systems Franchise made solely at the request of
Buyer).
Section 11.2 Brokerage. Except as otherwise expressly provided in
------------ ---------
Section 3.4 as to the fees and expenses of Daniels & Associates, Sellers shall
indemnify and hold CCI harmless from and against any and all Losses and Expenses
arising from any employment by either of Sellers or any of the MNH Entities of,
or services rendered to any of them by, any finder, broker, agency or other
intermediary, in connection with the transactions contemplated hereby or any
allegation of any such employment or services; and Buyer shall indemnify and
hold Sellers harmless from and against any and all Losses and Expenses arising
from any employment by CCI of, or services rendered to it by, any finder,
broker, agency or other intermediary, in connection with the transactions
contemplated hereby or any allegation of any such employment or services. The
obligations of Sellers and Buyer under this Section 11.2 shall not be limited or
otherwise affected by the provisions of Article 10 of this Agreement, including
Section 10.5 and Section 10.6.
Section 11.3 Waivers. In the absence of a written waiver delivered
------------ -------
by a party hereto, no action taken pursuant to this Agreement, including any
investigation by or on behalf of such party, will be deemed to constitute a
waiver by such party of compliance by any other party hereto with any
representation, warranty, covenant or agreement contained herein or in any
Transaction Document. No waiver by any party hereto of any condition or of a
breach of another provision of this Agreement or any Transaction Document shall
be effective unless in writing; and no such waiver shall operate or be construed
as a waiver of any other condition or subsequent breach. The waiver by any
party of any of the conditions precedent to its obligations under this Agreement
shall not preclude it from seeking redress for
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breach of this Agreement other than with respect to the condition so waived.
Section 11.4 Notices. All notices and other communications which are
------------ -------
required to be given under this Agreement shall be in writing and shall be
deemed to have been duly given if sent by telecopy or facsimile transmission,
answer back requested, or delivered by courier or mailed, certified first class
mail, postage prepaid, return receipt requested, to the parties at the following
addresses:
To Sellers:
(Prior to the Closing)
New Heritage Associates
2600 Grand Avenue, 3rd Floor
Des Moines, IA 50312
Attention: David J. Lundquist
---------
Telecopy: 515/246-8210
and
(After the Closing)
New Heritage Associates
2600 Grand Avenue, 2nd Floor
Des Moines, IA 50312
Attention: David J. Lundquist
Telecopy: [To be supplied at Closing]
Copy:
Sidley & Austin
One First National Plaza
Chicago, IL 60603
Attention: John J. Sabl, Esq.
---------
Telecopy: 312/853-7036
To Buyer:
Continental Cablevision, Inc.
The Pilot House
Lewis Wharf
Boston, MA 02110
Attention: Mr. Timothy P. Neher
---------
Telecopy: 617/742-0530
Copy:
Sullivan & Worcester LLP
One Post Office Square
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Boston, MA 02109
Attention: Patrick K. Miehe, Esq.
---------
Telecopy: 617/338-2880
or to such other address as any party will have furnished to the other by notice
given in accordance with this Section. Such notice or other communication shall
be effective (i) if delivered in person or by courier, upon actual receipt by
the intended recipient, or (ii) if sent by telecopy or facsimile transmission,
when answer back is received, or (iii) if mailed, upon the earlier of five days
after deposit in the mail and the date of delivery as shown by the return
receipt therefor.
Section 11.5 Entire Agreement; Prior Representations; Amendments.
------------ ---------------------------------------------------
This Agreement embodies the entire agreement between the parties hereto with
respect to the subject matter hereof and supersedes all prior representations,
agreements and understandings, oral or written, with respect thereto.
Notwithstanding any representations which may have been made by either party in
connection with the transactions contemplated by this Agreement, each party
acknowledges that (i) it has not relied on any representation by the other party
with respect to such transactions, the Assets, or the Systems except those
contained in this Agreement or the Schedules and Exhibits hereto and (ii) its
execution of this Agreement specifically precludes any negligent
misrepresentation or other claims by it based on any representation made by the
other party which is not contained in this Agreement or the Schedules or
Exhibits hereto. This Agreement may not be modified orally, but only by an
agreement in writing signed by the party or parties against whom any waiver,
change, amendment, modification or discharge may be sought to be enforced.
Section 11.6 Binding Effect; Benefits. This Agreement will inure to
------------ ------------------------
the benefit of and will be binding upon the parties hereto and their respective
heirs, legal representatives, successors and permitted assigns. Neither of
Sellers nor Buyer may assign this Agreement prior to the Closing or delegate any
of its duties hereunder prior to the Closing to any other Person without the
prior written consent of the other; except that Buyer may assign its rights or
delegate its duties under this Agreement to any Affiliate of CCI, provided that
in the case of any such assignment (i) the assignee shall assume in writing all
of Buyer's obligations hereunder, (ii) Buyer shall not be released from any of
its representations, warranties and obligations hereunder by reason of such
assignment, and (iii) the obligations of the Sellers to consummate the
transactions contemplated by Article 2 of this Agreement shall be subject to the
delivery by such assignee, on or prior to the Closing Date, of an agreement
signed on its behalf and in form reasonably acceptable to the Sellers containing
representations and warranties substantially
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similar to those made by Buyer in Article 5 and an opinion of counsel to the
assignee similar to the CCI Counsel Opinion.
Section 11.7 Counterparts. This Agreement may be executed in any
------------ ------------
number of counterparts, each of which, when executed, will be deemed to be an
original and all of which together will be deemed to be one and the same
instrument.
Section 11.8 GOVERNING LAW. THE VALIDITY, PERFORMANCE AND
------------ -------------
ENFORCEMENT OF THIS AGREEMENT AND ALL TRANSACTION DOCUMENTS, UNLESS EXPRESSLY
PROVIDED TO THE CONTRARY, WILL BE GOVERNED BY THE LAWS OF THE COMMONWEALTH OF
MASSACHUSETTS, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW OF
SUCH COMMONWEALTH.
Section 11.9 Severability. Any term or provision of this Agreement
------------ ------------
which is held to be invalid or unenforceable for any reason will be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining rights of the Person intended to be benefitted by
such provision or any other provisions of this Agreement.
Section 11.10 Third Parties, Joint Ventures. This Agreement
------------- -----------------------------
constitutes an agreement solely among the parties hereto and, except as
otherwise provided herein, is not intended to and will not confer any rights,
remedies, obligations or liabilities, legal or equitable, including any right of
employment, on any Person other than the parties hereto and their respective
successors or permitted assigns, or otherwise constitute any Person a third
party beneficiary under or by reason of this Agreement. Nothing in this
Agreement, express or implied, is intended to or will constitute the parties
hereto partners or participants in a joint venture.
Section 11.11 Attorneys' Fees. If any Litigation between Sellers and
------------- ---------------
Buyer with respect to this Agreement or the transactions contemplated hereby
will be resolved or adjudicated by a Judgment of any court, the party prevailing
under such Judgment shall be entitled, as part of such Judgment, to recover from
the other party its reasonable attorneys' fees and costs and expenses of
litigation.
Section 11.12 Tax Consequences. No party to this Agreement makes any
------------- ----------------
representation or warranty, express or implied, with respect to the tax
implications of any aspect of this Agreement on any other party to this
Agreement, and all parties expressly disclaim any such representation or
warranty with respect to any tax consequences arising under this Agreement.
Each party has relied solely on its own tax advisors with respect to the tax
implications of this Agreement.
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Section 11.13 Specific Performance. Sellers acknowledge that money
------------- --------------------
damages are not an adequate remedy for violations of this Agreement by either of
Sellers and that Buyer may, in its sole discretion, apply to a court of
competent jurisdiction for specific performance or injunctive or other relief as
such court may deem just and proper in order to enforce this Agreement or
prevent any violation hereof by either of Sellers and, to the extent permitted
by applicable Legal Requirements, Seller waives any objection to the imposition
of such relief.
[The remainder of this page has been intentionally left blank.]
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Sellers and Buyer have duly executed this Agreement as of the date
first written above.
SELLERS:
MEREDITH/NEW HERITAGE PARTNERSHIP
By: New Heritage Associates, General Partner
By: Ingersoll Group, Inc., General Partner
By: /s/ James S. Cownie
--------------------------------
Name:
Title: Chairman
NEW HERITAGE ASSOCIATES
By: Ingersoll Group, Inc., General Partner
By: /s/ James S. Cownie
--------------------------------
Name:
Title: Chairman
BUYER:
CONTINENTAL CABLEVISION, INC.
By: /s/ Timothy P. Neher
--------------------------------
Name:
Title: Vice Chairman
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EXHIBIT A
---------
Exhibit A lists Inventory Items and will be provided upon request by the
Commission.
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EXHIBIT B TO THE PURCHASE AGREEMENT
Continental Cablevision, Inc.
The Pilot House
Lewis Wharf
Boston, MA 02110
GUARANTY AGREEMENT
------------------
Dear Sirs and Mesdames:
Reference is hereby made to the Purchase Agreement, dated as of March __,
1996 (as from time to time amended and in effect, the "PURCHASE AGREEMENT"), by
and among Meredith/New Heritage Partnership, an Iowa general partnership
("MNHP"), New Heritage Associates, an Iowa general partnership ("NHA" and,
together with MNHP, "SELLERS"), and Continental Cablevision, Inc., a Delaware
corporation ("BUYER"). Capitalized terms used herein and not otherwise defined
herein shall have the respective meanings ascribed to them in the Purchase
Agreement.
The Purchase Agreement provides, among other things, for the purchase by
Buyer of the Subject Interests of the Sellers for cash consideration. The
undersigned (the "GUARANTOR") is one of the Ultimate Equity Holders and, as
such, will receive directly or indirectly from the Seller of which the
undersigned is an Ultimate Equity Holder one or more distributions of a portion
of such cash consideration. Accordingly, the Guarantor is receiving a
substantial and material benefit, and otherwise substantially and materially
benefits indirectly as an Ultimate Equity Holder, from the Closing of the
transactions contemplated by the Purchase Agreement.
In consideration of benefits received by the Guarantor from Buyer's Closing
of the transactions contemplated by the Purchase Agreement, and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor, intending to be legally bound, hereby agrees as
follows:
Section 1. Unconditional Guaranty.
----------------------
(a) The Guarantor hereby unconditionally guarantees to Buyer the due
and punctual payment and performance of all present and future indebtedness,
obligations and liabilities, whether absolute or contingent, now existing or
hereafter arising, of Sellers, or either of them, arising out of any of the
agreements, covenants, obligations or liabilities of Sellers under Article 10 of
the Purchase Agreement, as amended and in effect from time to time and together
with any substitutions or replacements therefor and each other agreement and
instrument now or from time to time evidencing, securing or pertaining to any of
the agreements, covenants or obligations of Sellers under Article 10 of the
<PAGE>
-2-
Purchase Agreement (collectively, the "GUARANTEED OBLIGATIONS"), including the
due and punctual payment of all amounts and other sums, together with all
interest accrued thereon to the extent provided in such Article 10, of any and
all Guaranteed Obligations now or hereafter owed by Sellers, or either of them,
or any other Person under the Guaranteed Obligations, in each case as and when
the same shall become due and payable, and the due and punctual performance and
observance of all other obligations under the Guaranteed Obligations, this
guaranty being an absolute, unconditional, present and continuing guaranty of
payment and not of collectibility and being in no way conditional or contingent;
and in case any part of the Guaranteed Obligations shall not have been paid,
performed or observed when payable or requested to be performed or observed, the
Guarantor will, promptly upon receipt of notice from Buyer, immediately pay or
cause to be paid to Buyer the amount of, or perform or cause the performance of,
such Guaranteed Obligations.
(b) The Guarantor further agrees that if at any time all or any part of
any payment theretofore applied by Buyer to any of the Guaranteed Obligations is
or must be rescinded or returned or restored for any reason whatsoever
(including the in solvency, bankruptcy or reorganization of either Seller), such
Guaranteed Obligations shall, for the purposes of this Agreement, to the extent
that such payment is or must be rescinded, restored or returned, be deemed to
have continued in existence, notwithstanding such application, and this
Agreement shall continue to be effective or be reinstated, as the case may be,
as to such Guaranteed Obligations, all as though such application by Buyer had
not been made.
(c) The obligations of the Guarantor hereunder shall be absolute and
unconditional, shall not be subject to any counterclaim, setoff, recoupment or
defense based upon any claim the Guarantor may have against Buyer or any other
Person (whether or not arising in connection with the Purchase Agreement
(including the Guaranteed Obligations or any of the transactions contemplated
thereby), and shall remain in full force and effect without regard to, and shall
not be released, altered, exhausted, discharged or in any way affected by any
circumstance or condition (whether or not the Guarantor shall have any knowledge
or notice thereof), including: (i) any amendment or modification of or
supplement to the Purchase Agreement (including the Guaranteed Obligations) or
of any obligation, duty or agreement of Sellers, or either of them, or any
other Person thereunder or in respect thereof, (ii) any assignment or transfer
in whole or in part of any Guaranteed Obligations, (iii) any furnishing or
acceptance of any direct or indirect security or guaranty, or any release of or
non-perfection or invalidity of any direct or indirect security or guaranty, for
the Guaranteed Obligations, (iv) any waiver, consent, extension, renewal,
indulgence, settlement, compromise or other action or inaction under or in
<PAGE>
-3-
respect of any such instrument, or any exercise or non-exercise of any right,
remedy, power or privilege under or in respect of any such instrument (whether
by operation of law or otherwise), (v) any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or similar
proceeding with respect to Sellers, or either of them, or any other Person or
any of their respective properties or creditors or any resulting release or
discharge of any Guaranteed Obligations; (vi) the voluntary or involuntary sale
or other disposition of all or substantially all the assets of Sellers, or
either of them, or any other Person, (vii) the voluntary or involuntary
liquidation, dissolution or termination of Sellers, or either of them, or any
other Person, (viii) any invalidity or unenforceability, in whole or in part, of
any term hereof or of the Purchase Agreement (including the Guaranteed
Obligations) or any provision of any applicable law or regulation purporting to
prohibit the payment or performance by Sellers, or either of them, or any other
Person of any Guaranteed Obligations, or (ix) any failure on the part of
Sellers, or either of them, or any other Person for any reason to perform or
comply with any term of the Guaranteed Obligations.
(d) If for any reason Sellers, or either of them, or any other Person
is under no legal obligation to discharge any of the Guaranteed Obligations, or
if any other moneys included in the Guaranteed Obligations have become
unrecoverable from Sellers, or either of them, or any other Person by operation
of law or for any other reason, including the invalidity or irregularity in
whole or in part of any Guaranteed Obligation, the legal disability of Sellers,
or either of them, or any other obligor in respect of any Guaranteed
Obligations, any discharge of or limitation on the liability of Sellers, or
either of them, or any other Person or any limitation on the method or terms of
payment under any Guaranteed Obligation which may now or hereafter be caused or
imposed in any manner whatsoever (whether consensual or arising by operation of
law or otherwise), the guaranty contained in this Agreement shall nevertheless
remain in full force and effect and shall be binding upon the Guarantor to the
same extent as if the Guarantor at all times had been the principal obligor on
all such Guaranteed Obligations.
Section 2. Waivers. The Guarantor hereby waives, to the fullest extent
-------
permitted by applicable law, (i) all presentments, demands for performance,
notices of nonperformance, protests, notices of protests and notices of dishonor
in connection with the Guaranteed Obligations or any agreement relating thereto,
(ii) notice of acceptance of this Agreement, (iii) notice of any indulgence,
extensions or renewals granted to any obligor with respect to any of the
Guaranteed Obligations, (iv) any requirement of diligence or promptness in the
enforcement of rights under any of the Guaranteed Obligations or any other
agreement or instrument directly or indirectly relating thereto or to the
Guaranteed Obligations, (v) any enforcement of any
<PAGE>
-4-
present or future agreement or instrument relating directly or indirectly
thereto or to the Guaranteed Obligations, (vi) notice of any of the matters
referred to in Section 1(c) hereof, (vii) any and all notices of every kind and
description which may be required to be given by any statute or rule of law and
any defense of any kind which it may now or hereafter have with respect to its
liability under this Agreement, (viii) any right to require Buyer, as a
condition of enforcement of this Agreement, to proceed against Sellers, or
either of them, or any other Person or to proceed against or exhaust any
security held by Buyer at any time or to pursue any other right or remedy in
Buyer's power before proceeding against Guarantor, (ix) any defense that may
arise by reason of the incapacity, lack of authority, death or disability of any
other Person or Persons or the failure of Buyer to file or enforce a claim
against the estate (in administration, bankruptcy, reorganization, insolvency or
any other proceeding) of any other Person or Persons, (x) any defense based upon
an election of remedies by Buyer, (xi) any defense based upon any lack of
diligence by Buyer in the collection of any Guaranteed Obligation, (xii) any
duty on the part of Buyer to disclose to the Guarantor any facts Buyer may now
or hereafter know about Sellers, or either of them, (xiii) any defense arising
because of an election made by Buyer under Section 1111(b)(2) of the Federal
Bankruptcy Code, (xiv) any defense based on any borrowing or grant of a security
interest under Section 364 of the Federal Bankruptcy Code, and (xv) any defense
based upon or arising out of any defense which Sellers, or either of them, or
any other Person may have to the payment or performance of the Guaranteed
Obligations.
Section 3. Waiver of Subrogation and Claims. The Guarantor hereby
--------------------------------
irrevocably waives, until such time as the Guaranteed Obligations shall have
been paid and satisfied in full, any and all rights of subrogation,
indemnification, contribution and other claims which the Guarantor may now or
hereafter have against Sellers, or either of them, or any other Person liable
with respect to the Guaranteed Obligations or any affiliates of Sellers, or
with respect to any of such Persons respective properties, by reason of any
payment made hereunder, including the benefit of any setoff or counterclaim or
proof against dividend, composition or payment by Sellers, or either of them, or
any such Person.
Section 4. No Effect of Automatic Stay. If payment or performance of
---------------------------
any Guaranteed Obligation is stayed upon the insolvency, bankruptcy or
reorganization of Sellers, or either of them, or any other Person or otherwise,
all such amounts shall nonetheless be payable by the Guarantor hereunder
forthwith upon demand.
Section 5. Limitation of Liability. The liability of the Guarantor
-----------------------
under this Agreement (other than the liability of
<PAGE>
-5-
the Guarantor under Section 6 hereof) shall not exceed $____________.
Section 6. Expenses. The Guarantor will pay all costs and expenses of
--------
Buyer of obtaining performance under this Agreement, including all reasonable
attorneys fees and costs and expenses of collection if default is made in
payment under this Agreement; provided, however, that, if any litigation between
Buyer and the Guarantor with respect to this Agreement or the transactions
contemplated hereby is resolved or adjudicated by a final judgment or order of
any court, the party prevailing under such judgment or order shall be entitled,
as part of such judgment or order, to recover from the other party its
reasonable attorneys' fees and costs and expenses of litigation. The
obligations of the Guarantor under this Section 6 shall be in addition to the
other obligations of the Guarantor hereunder and shall not be limited or
otherwise affected by Section 6 hereof.
Section 7. Miscellaneous Provisions.
------------------------
(a) Notices.
-------
(i) All notices and other communications under this Agreement shall be in
writing (which shall include communications by telecopy, answer back requested,
if a telecopier number is listed below) and shall be deemed to have been given
when deposited in the mail, first class, post-prepaid, or sent out by
telecopier, answer back requested, addressed to the party to which such notice
is directed at its respective address as follows:
(A) In the case of the Guarantor, to it at:
(B) In the case of Buyer, to it at: Continental Cablevision, Inc.,
Lewis Wharf, The Pilot House, Boston, Massachusetts 02110, Attention: Mr.
Timothy P. Neher Telecopy No. 617-742-____); with a copy to Sullivan &
Worcester, a Registered Limited Liability Partnership, One Post Office Square,
Boston, Massachusetts 02109, Attention: Patrick K. Miehe, Esq. (Telecopy No.
617-338-2880).
(ii) Any party hereto may change the address to which notices shall be
directed to it under this Section 7(a) by giving written notice of such change
to the other party in accordance with this Section 7(a).
<PAGE>
-6-
(b) No Waivers of Rights Hereunder; Amendments. No course of dealing
------------------------------------------
or performance by Buyer, including any delay or forbearance in exercising any
right under any of the Guaranteed Obligations, shall operate as a waiver or
relinquishment of any rights hereunder, or the amendment, release or novation of
any provision hereof, nor shall any single or partial exercise of any right
hereunder preclude other or further exercises thereof or the exercise of any
other right hereunder. No waiver of any rights of Buyer under, nor any
amendment of any provision of, this Agreement shall be enforceable against Buyer
unless in writing and signed by its officers, and unless it expressly refers to
the right or provision affected. Any such waiver shall be limited solely to the
specific event waived.
(c) Assignment. All the provisions of this Agreement shall be binding
----------
upon the Guarantor and its successors and assigns and inure to the benefit of
Buyer its successors, assigns and transferees. The Guarantor may not assign or
transfer any of its rights or obligations under this Agreement without the prior
written consent of Buyer unless the Guarantor remains liable hereunder along
with the assignee or transferee.
(d) Construction.
------------
(i) Words used in this Agreement, regardless of the gender and number used,
shall be deemed and construed to include any other gender, masculine, feminine,
or neuter, and any other number, singular or plural, as the context requires.
(ii) As used in this Agreement, the word "INCLUDING" is not limiting, and
the word "OR" is not exclusive.
(iii) The words "THIS AGREEMENT", "HERETO", "HEREIN", "HEREUNDER",
"HEREOF", and words or phrases of similar import refer to this Agreement as a
whole and not to any particular article, section, subsection, paragraph, clause
or other portion of this Agreement.
(iv) Unless the context requires otherwise, a reference herein to a
particular article, section, subsection, paragraph or clause shall refer to such
article, section, subsection, paragraph or clause of this Agreement.
(v) This Agreement has been negotiated by Sellers, the Guarantor and Buyer
and their respective legal counsel, and legal or equitable principles that might
require the construction of this Agreement or any provision of this Agreement
against the party drafting this Agreement shall not apply in any construction or
interpretation of this Agreement.
<PAGE>
-7-
(vi) The section and other headings contained in this Agreement are for
reference purposes only and shall not affect the meaning or interpretation of
this Agreement.
(e) Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original, but all such
separate counterparts shall together constitute but one and the same instrument.
(f) Governing Law; Jurisdiction. THIS AGREEMENT SHALL BE CONSTRUED IN
---------------------------
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS.
EACH OF THE GUARANTOR AND BUYER SUBMITS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT OF COMPETENT JURISDICTION IN THE STATE OF MINNESOTA FOR ALL
MATTERS IN CONNECTION HEREWITH. THE GUARANTOR HEREBY IRREVOCABLY AGREES TO BE
ACCEPT AND BE BOUND BY SERVICE OF PROCESS EFFECTED IN ANY MANNER AUTHORIZED BY
THE RULES OF PRACTICE OF ANY SUCH COURT, AND, TO THE EXTENT THAT IT MAY LAWFULLY
DO SO, EXPRESSLY AND IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT, BY WAY OF
MOTION, DEFENSE, COUNTERCLAIM OR OTHERWISE, THAT IT IS NOT SUBJECT TO THE
JURISDICTION OF ANY SUCH COURT OR THAT THE ACTION, SUIT OR PROCEEDING IS BROUGHT
IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS IMPROPER. THE GUARANTOR
HEREBY AGREES THAT ALL OF BUYER'S RIGHTS HEREUNDER WERE THE RESULT OF
NEGOTIATIONS AMONG BUYER, SELLERS AND THE GUARANTOR, AND THAT THE BENEFITS TO
SELLERS AND THE GUARANTOR UNDER THE PURCHASE AGREEMENT WERE INDUCED IN A
MATERIAL RESPECT BY THE BENEFITS GRANTED TO THE BUYER HEREUNDER. IN THIS
CONTEXT, THE GUARANTOR HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY
JURY AS TO ANY AND ALL MATTERS AND ISSUES WHICH MAY ARISE DIRECTLY OR INDIRECTLY
HEREFROM OR FROM ANY OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED IN
CONJUNCTION HEREWITH, INCLUDING COUNTERCLAIMS, IF ANY.
(g) Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof in that jurisdiction or affecting
the validity or enforceability of such provision in any other jurisdiction.
(h) Person Defined. As used herein, the term "Person" shall include an
--------------
human being, corporation, partnership, limited liability company, trust or
unincorporated association, or a government or any agency or political
subdivision thereof, or any other entity.
(i) Advice of Counsel. The Guarantor acknowledges that it has been
------------------
represented by, and has received the advice of, legal counsel of its choosing in
connection with its execution
<PAGE>
-8-
and delivery of this Agreement and its debts, liabilities and obligations
hereunder.
(j) Exclusive Remedy. The rights of Buyer provided for in this
----------------
Agreement shall be the exclusive remedy for Buyer against the Guarantor for
damages for any breach of any representation, warranty, covenant or agreement of
Seller, or either of them, contained in the Purchase Agreement or in any
certificate delivered by either Seller at or prior to the Closing pursuant to
the Purchase Agreement; provided that the provisions of this Section 7(j) shall
not apply to or limit in any way the remedies of Buyer against any other Person
or the right of Buyer to seek specific performance or injunctive or other
equitable relief against the Guarantor in order to enforce this Agreement or
prevent any violation or avoidance hereof by the Guarantor and, to the extent
permitted by applicable law, the Guarantor waives any objection to the
imposition of such relief.
This Agreement shall become a binding agreement under seal as of the day and
year first above written upon the execution and delivery hereof by or on behalf
of the Guarantor.
Very truly yours,
_______________________________________
(Signature)
Print Name:____________________________
Print Address:_________________________
_________________________
_________________________
Telecopy No.:__________________________
The foregoing is hereby accepted:
CONTINENTAL CABLEVISION, INC.
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT C TO THE
PURCHASE AGREEMENT
BILL OF SALE AND ASSIGNMENT
---------------------------
THIS BILL OF SALE AND ASSIGNMENT, dated as of ________ __, 1996, from
Meredith/New Heritage Partnership, an Iowa general partnership ("SELLER"), to
Continental Cablevision, Inc., a Delaware corporation ("BUYER"),
WITNESSETH:
----------
WHEREAS, pursuant to the Purchase Agreement dated as of March __, 1996 (the
"PURCHASE AGREEMENT") among Buyer, Seller and New Heritage Associates, an Iowa
general partnership, Seller has agreed to sell, assign, transfer and convey to
Buyer and Buyer has agreed to accept assignment, transfer and conveyance from
Seller of Seller's ______________ percent (__.__%) general partnership interest
(the "PARTNERSHIP INTEREST") in Meredith/New Heritage Strategic Partners L.P.,
an Iowa limited partnership (the "PARTNERSHIP");
NOW, THEREFORE, in consideration of the premises and the payment to Seller
of the Purchase Price (as defined in the Agreement) required to be paid to
Seller on the date hereof pursuant to the Purchase Agreement, the receipt and
sufficiency of which are hereby acknowledged by Seller, and for other good and
valuable consideration:
Section 1. Seller has granted, bargained, sold, conveyed, assigned,
-------- ----
transferred, set over and delivered, and by these presents does hereby grant,
bargain, sell, convey, assign, transfer, set over and deliver, absolutely, to
Buyer, and its successors and assigns, the Partnership Interest and all of
Seller's right, title and interest therein and thereto.
Section 2. Buyer shall, from and after the date hereof, have all of the
-------- ----
rights, privileges and powers of a general partner of the Partnership under the
Certificate of Limited Partnership, dated December 29, 1991, of the Partnership,
as from time to time amended and in effect, and the Restated Agreement of
Limited Partnership, dated as of December 30, 1991, of the Partnership, as from
time to time amended and in effect, including but not limited to the right to
receive all distributions from the Partnership with respect to the Partnership
<PAGE>
Interest and all other rights, privileges and powers appertaining thereto.
Section 3. Buyer hereby consents to and accepts the assignment of the
-------- ----
Partnership Interest and all of Seller's right, title and interest therein, and
Buyer agrees to pay and perform all of the obligations arising after the date
hereof of a general partner of the Partnership.
Section 4. Seller covenants and agrees that it shall execute, deliver
-------- ----
and acknowledge (or cause to be executed, acknowledged and delivered), from time
to time at the request of Buyer and without further consideration, all such
further instruments of conveyance, transfer, assignment and further assurance
and perform or cause to be performed all such other acts as may reasonably be
required by Buyer (including but not limited to amendments to partnership
agreements and amendments to certificates of limited partnership) in order to
vest in and confirm to Buyer the title of Seller to, and its right and interest
in, the Partnership Interest and to carry out the purpose and assure the
benefits of this Bill of Sale and Assignment and the Purchase Agreement to Buyer
in all respects.
Section 5. This Bill of Sale and Assignment is executed by, and shall
-------- ----
be binding upon, Seller and its successors and assigns, for the uses and
purposes above set forth and referred to and shall inure to the benefit of Buyer
and its successors and assigns; shall be effective for all purposes as of the
day and year first set forth above; is intended to and shall take effect as a
sealed instrument; and shall be governed by and construed and enforced in
accordance with the laws (other than those governing conflict of law questions)
of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale and Assignment to be
duly executed on the day and year first above set forth.
SELLER:
MEREDITH/NEW HERITAGE PARTNERSHIP
<PAGE>
By: NEW HERITAGE ASSOCIATES, General Partner
By: Ingersoll Group, Inc., General Partner
By:_________________________________
Name:
Title:
By: New Heritage Associates, Inc., General Partner
By:_________________________________
Name:
Title:
By: MEREDITH CABLE, INC., General Partner
By:_________________________________
Name:
Title:
ACCEPTED:
CONTINENTAL CABLEVISION, INC.
By:____________________________
Name:
Title:
COMMONWEALTH OF MASSACHUSETTS)
) ss.
COUNTY OF SUFFOLK )
On this ______ day of ___________, 1996, before me personally appeared
__________________, to me known and known by me to be the ____________ of
Ingersoll Group, Inc., an Iowa corporation, and acknowledged said instrument by
him/her executed to be his/her free act and deed as ____________ as aforesaid.
_________________________
Notary Public
My commission expires:
<PAGE>
COMMONWEALTH OF MASSACHUSETTS)
) ss.
COUNTY OF SUFFOLK )
On this ______ day of ___________, 1996, before me personally appeared
__________________, to me known and known by me to be the ____________ of New
Heritage Associates, Inc., an Iowa corporation, and acknowledged said instrument
by him/her executed to be his/her free act and deed as ____________ as
aforesaid.
_________________________
Notary Public
My commission expires:
COMMONWEALTH OF MASSACHUSETTS)
) ss.
COUNTY OF SUFFOLK )
On this ______ day of ___________, 1996, before me personally appeared
__________________, to me known and known by me to be the ____________ of
Meredith Cable, Inc., an __________ corporation, and acknowledged said
instrument by him/her executed to be his/her free act and deed as ____________
as aforesaid.
_________________________
Notary Public
My commission expires:
<PAGE>
EXHIBIT D TO THE
PURCHASE AGREEMENT
BILL OF SALE AND ASSIGNMENT
---------------------------
THIS BILL OF SALE AND ASSIGNMENT, dated as of ________ __, 1996, from New
Heritage Associates, an Iowa general partnership ("SELLER"), to Continental
Cablevision, Inc., a Delaware corporation ("BUYER"),
WITNESSETH:
----------
WHEREAS, pursuant to the Purchase Agreement dated as of March __, 1996 (the
"PURCHASE AGREEMENT") among Buyer, Seller and Meredith/New Heritage Partnership,
an Iowa general partnership, Seller has agreed to sell, assign, transfer and
convey to Buyer and Buyer has agreed to accept assignment, transfer and
conveyance from Seller of Seller's ______________ percent (__.__%) limited
partnership interest (the "PARTNERSHIP INTEREST") in Meredith/New Heritage
Strategic Partners L.P., an Iowa limited partnership (the "PARTNERSHIP");
NOW, THEREFORE, in consideration of the premises and the payment to Seller
of the Purchase Price (as defined in the Agreement) required to be paid to
Seller on the date hereof pursuant to the Purchase Agreement, the receipt and
sufficiency of which are hereby acknowledged by Seller, and for other good and
valuable consideration:
Section 1. Seller has granted, bargained, sold, conveyed, assigned,
-------- ----
transferred, set over and delivered, and by these presents does hereby grant,
bargain, sell, convey, assign, transfer, set over and deliver, absolutely, to
Buyer, and its successors and assigns, the Partnership Interest and all of
Seller's right, title and interest therein and thereto.
Section 2. Buyer shall, from and after the date hereof, have all of the
-------- ----
rights, privileges and powers of a general partner of the Partnership under the
Certificate of Limited Partnership, dated December 26, 1991, of the Partnership,
as from time to time amended and in effect, and the Restated Agreement of
Limited Partnership, dated as of December 30, 1991, of the Partnership, as from
time to time amended and in effect, including but not limited to the right to
receive all distributions from the Partnership with respect to the Partnership
<PAGE>
Interest and all other rights, privileges and powers appertaining thereto.
Section 3. Buyer hereby consents to and accepts the assignment of the
-------- ----
Partnership Interest and all of Seller's right, title and interest therein, and
Buyer agrees to pay and perform all of the obligations arising after the date
hereof of a limited partner of the Partnership.
Section 4. Seller covenants and agrees that it shall execute, deliver
-------- ----
and acknowledge (or cause to be executed, acknowledged and delivered), from time
to time at the request of Buyer and without further consideration, all such
further instruments of conveyance, transfer, assignment and further assurance
and perform or cause to be performed all such other acts as may reasonably be
required by Buyer (including but not limited to amendments to partnership
agreements and amendments to certificates of limited partnership) in order to
vest in and confirm to Buyer the title of Seller to, and its right and interest
in, the Partnership Interest and to carry out the purpose and assure the
benefits of this Bill of Sale and Assignment and the Purchase Agreement to Buyer
in all respects.
Section 5. This Bill of Sale and Assignment is executed by, and shall
-------- ----
be binding upon, Seller and its successors and assigns, for the uses and
purposes above set forth and referred to and shall inure to the benefit of Buyer
and its successors and assigns; shall be effective for all purposes as of the
day and year first set forth above; is intended to and shall take effect as a
sealed instrument; and shall be governed by and construed and enforced in
accordance with the laws (other than those governing conflict of law questions)
of The Commonwealth of Massachusetts.
IN WITNESS WHEREOF, Seller has caused this Bill of Sale and Assignment to be
duly executed on the day and year first above set forth.
SELLER:
NEW HERITAGE ASSOCIATES
<PAGE>
By: Ingersoll Group, Inc., General Partner
By:_________________________________
Name:
Title:
By: New Heritage Associates, Inc., General Partner
By:_________________________________
Name:
Title:
ACCEPTED:
BUYER:
CONTINENTAL CABLEVISION, INC.
By:____________________________
Name:
Title:
COMMONWEALTH OF MASSACHUSETTS)
) ss.
COUNTY OF SUFFOLK )
On this ______ day of ___________, 1996, before me personally appeared
__________________, to me known and known by me to be the ____________ of
Ingersoll Group, Inc., an Iowa corporation, and acknowledged said instrument by
him/her executed to be his/her free act and deed as ____________ as aforesaid.
_________________________
Notary Public
My commission expires:
COMMONWEALTH OF MASSACHUSETTS)
) ss.
COUNTY OF SUFFOLK )
On this ______ day of ___________, 1996, before me personally appeared
__________________, to me known and known by me to be
<PAGE>
the ____________ of New Heritage Associates, Inc., an Iowa corporation, and
acknowledged said instrument by him/her executed to be his/her free act and deed
as ____________ as aforesaid.
_________________________
Notary Public
My commission expires:
<PAGE>
STOCKHOLDERS' AGREEMENT
AGREEMENT, dated as of February 27, 1996, among Amos B. Hostetter, Jr.
("Hostetter"), the Amos B. Hostetter, Jr. 1989 Trust (the "Hostetter Trust"),
Timothy P. Neher ("Neher"), Corporate Advisors, L.P., a Delaware limited
partnership ("Corporate Advisors"), the stockholders set forth on Schedule A-1
(collectively, the "Boston Ventures Stockholders"), the stockholders set forth
on Schedule A-2 (collectively, the "Other Stockholders"), and U S WEST, INC., a
Delaware corporation ("Acquiror"). Hostetter, the Hostetter Trust, Neher, the
Boston Ventures Stockholders, and the Other Stockholders sometimes are referred
to herein collectively as the "Stockholders" and individually as a
"Stockholder."
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, each of the Stockholders is the beneficial and record owner of the
shares of capital stock of CONTINENTAL CABLEVISION, INC., a Delaware corporation
(the "Company"), set forth opposite each such Stockholder's name on Schedule
B-1;
WHEREAS, Corporate Advisors possesses certain rights with respect to the
shares of capital stock of the Company owned by the entities listed on Schedule
A-3 (the "CP Entities");
WHEREAS, concurrently with the execution of this Agreement, Acquiror and
the Company are entering into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which the Company will be merged with and into Acquiror
(the "Merger"), with Acquiror continuing as the Surviving Corporation; and
WHEREAS, in order to induce Acquiror to enter into the Merger Agreement,
the Stockholders and Corporate Advisors wish to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms used herein but not otherwise defined
-----------
herein shall have the respective meanings ascribed thereto in the Merger
Agreement and the following terms shall have the following meanings:
"beneficially own" shall have the meaning set forth in Rule 13d-3 under
----------------
the Exchange Act.
"Control" shall mean, as to any person, the power to direct or cause the
-------
direction of the management and policies of such person, whether through the
ownership of voting securities, by contract or otherwise. The term "Controlling
Person" shall have a correlative meaning.
"CP Shares" shall mean the shares of Company Preferred Stock owned by the
---------
CP Entities set forth on Schedule B-2.
"Equity Securities" shall have the meaning set forth in Rule 405 under the
-----------------
Securities Act.
"Permitted Assignee" shall mean (i) with respect to Hostetter and the
------------------
Hostetter Trust, (w) Hostetter, (x) Hostetter's lineal descendants, (y) a trust
for the benefit of, the estate of, executors, personal representatives,
administrators, guardians or conservators of, any of the individuals referred to
in the foregoing clauses (w) and (x) (but only in their capacity as such) and
(z) charitable trusts and charitable foundations formed by Hostetter (including,
without limitation, the Hostetter Foundation); (ii) with respect to Neher, (w)
Neher, (x) Neher's lineal descendants, (y) a trust for the benefit of, the
estate of, executors, personal representatives, administrators, guardians or
conservators of, any of the individuals referred to in the foregoing clauses (w)
and (x) (but only in their capacity as such) and (z) charitable trusts and
charitable foundations formed by Neher and (iii) with respect to the CP
Entities, the Boston Ventures Stockholders and the Other Stockholders, (x) any
Person Controlled by such Stockholder or CP Entity and (y) its respective
partners, members, stockholders or other holders of equity interests in such
Stockholder or CP Entity.
2
<PAGE>
"Representatives" shall have the meaning set forth in Section 3.4.
---------------
"Restricted Stockholder" shall mean any Stockholder that, individually or
----------------------
together with its Affiliates, beneficially owns, or is a member of a "group"
(within the meaning of Section 13(d)(3) of the Exchange Act) that beneficially
owns, 5% or more of Media Stock.
"Stockholder Disclosure Letter" shall have the meaning set forth in
-----------------------------
Section 2.1.
"Voting Securities" shall have the meaning set forth in Rule 405 under the
-----------------
Securities Act.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
2.1 Representations and Warranties of the Stockholders. Each Stockholder
--------------------------------------------------
represents and warrants, severally but not jointly, to Acquiror as follows:
(a) Ownership of Company Shares. Except as disclosed in Section 2.1(a)
---------------------------
of the letter from the Stockholders to Acquiror, dated the date hereof (the
"Stockholder Disclosure Letter"), such Stockholder is the beneficial owner of
the shares of Company Capital Stock set forth opposite such Stockholder's name
on Schedule B-1, free and clear of all liens, claims, charges, security
interests or other encumbrances and, except for this Agreement and the Merger
Agreement, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which such Stockholder is a
party relating to the pledge, disposition or voting of any shares of capital
stock of the Company or any of its Subsidiaries that are owned by such
Stockholder, and there are no voting trusts or voting agreements with respect to
such shares. The shares of Company Capital Stock set forth opposite such
Stockholder's name on Schedule B-1 constitute all of the outstanding shares of
capital stock of the Company owned beneficially or of record by such Stockholder
and such Stockholder does not have any options, warrants or other rights to
acquire any additional shares of capital stock of the Company or any security
exercisable or exchangeable for, or convertible into, shares of capital stock of
the Company.
3
<PAGE>
(b) Authority to Execute and Perform Agreements. Such Stockholder has
-------------------------------------------
the full legal right and power and all authority required to enter into, execute
and deliver this Agreement and to perform fully such Stockholder's obligations
hereunder. The execution and delivery of this Agreement by such Stockholder have
been duly authorized by all requisite organizational action, if any, on the part
of such Stockholder. This Agreement has been duly executed and delivered and
constitutes the legal, valid and binding obligation of such Stockholder
enforceable against such Stockholder in accordance with its terms, except as the
enforceability may be limited by bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or similar laws now or hereafter in effect
generally affecting creditors' rights or by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(c) No Conflicts; Consents. (i) Except as set forth in Section 2.1(c)
----------------------
of the Stockholder Disclosure Letter, the execution and delivery by such
Stockholder of this Agreement do not, and the consummation of the transactions
contemplated hereby will not, conflict with or result in any violation of or
default (with or without notice or lapse of time, or both) under (A) any
contract, agreement or other binding arrangement to which such Stockholder is a
party or (B) any judgment, order, writ, injunction or decree of any court,
governmental body, administrative agency or arbitrator applicable to such
Stockholder.
(ii) Except as set forth in Section 2.1(c) of the Stockholder Disclosure
Letter, no consents, approvals or authorizations of, or notices or filings with,
any Governmental Authority or any Third Party are required to be obtained or
made by such Stockholder in connection with the execution and delivery by such
Stockholder of this Agreement and the consummation of the transactions
contemplated hereby.
(d) Ownership of Acquiror Common Stock. As of the date hereof, except as
----------------------------------
disclosed in Section 2.1(d) of the Stockholder Disclosure Letter or provided for
in this Agreement, (i) such Stockholder does not, and, to its best knowledge,
its Affiliates do not, beneficially own, directly or indirectly, shares of
Communications Stock or Media Stock (or securities convertible into or
exchangeable for any shares of Communications Stock or Media Stock) and (ii)
such
4
<PAGE>
Stockholder is not, and, to its best knowledge, its Affiliates are not, parties
to any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of, shares of Communications Stock or Media Stock
(or securities convertible into or exchangeable for any shares of Communications
Stock or Media Stock).
(e) Information Supplied. None of the information specifically supplied
--------------------
or to be supplied by such Stockholder with respect to such Stockholder for
inclusion or incorporation by reference in (i) the Form S-4 will, at the time
the Form S-4 is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the Proxy Statement will, at the date
the Proxy Statement is first mailed to Stockholders and at the time of the
Stockholders' Meeting, contain any untrue statement of a material fact or 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
are made, not misleading.
2.2 Authority of Corporate Advisors to Act. (a) Corporate Advisors
--------------------------------------
represents and warrants that it has full power and authority: (i) pursuant to
the provisions of an Investment Management Agreement dated as of June 17, 1988,
between the State Board of Administration of Florida (the "SBA") and Corporate
Advisors, as amended (the "Management Agreement"), to act on behalf of the SBA
in connection with the transactions contemplated by this Agreement, (ii)
pursuant to the provisions of an Amended and Restated Limited Partnership
Agreement dated as of June 20, 1988, to act on behalf of each of Corporate
Partners, L.P. and Corporate Offshore Partners, L.P. in connection with the
transactions contemplated by this Agreement, and (iii) pursuant to the
provisions of a Co-Investment Agreement dated as of April 27, 1992 (the "Co-
Investment Agreement") to control the voting and, except as set forth in Section
2.2 of the letter from Corporate Advisors to Acquiror, dated the date hereof
(the "Corporate Partners Disclosure Letter"), the disposition of the securities
of the Company owned by Vencap Holdings (1992) Pte Ltd. and Contcable Co-
Investors, L.P. (the "Co-Investors") identified on Schedule B-2 hereto.
5
<PAGE>
(b) Corporate Advisors also represents and warrants that it has been
granted irrevocable proxies to vote all shares of Company Preferred Stock
indicated as owned by the SBA and the Co-Investors on Schedule B-2 hereto as
well as any shares of Company Common Stock issued upon the conversion or
redemption of such shares of Company Preferred Stock and all other equity
securities of the Company having voting rights obtained by it pursuant to
ownership of the shares of Company Preferred Stock.
ARTICLE III
COVENANTS
3.1 No Disposition or Acquisition of Shares. Subject to Section 3.5
---------------------------------------
hereof, each of the Stockholders agrees that, except as set forth in Section 3.1
of the Stockholder Disclosure Letter, such Stockholder shall not, and, except as
set forth in Section 3.1 of the Corporate Partners Disclosure Letter, Corporate
Advisors agrees, with respect to the CP Shares, to cause the CP Entities not to,
sell, transfer, pledge, hypothecate, encumber or otherwise dispose of (except
upon such Stockholder's death), or enter into any contract, option or other
arrangement or understanding with respect to the sale, transfer, pledge,
hypothecation, encumbrance or other disposition of, any of the shares of Company
Capital Stock set forth opposite such Stockholder's name on Schedule B-1 or the
CP Shares, as applicable; provided, however, that such Stockholder or CP
-------- -------
Entity shall have the right to transfer such shares to a Permitted Assignee if
such Permitted Assignee becomes a party to this Agreement and agrees to be bound
by the terms hereof. Each Stockholder and Corporate Advisors agrees that the
certificates representing the shares of Company Capital Stock owned by such
Stockholder or the CP Entities, as applicable, shall bear a legend indicating
that such shares are subject to this Agreement, which legend may be removed upon
termination of this Agreement. Except as specifically set forth herein, each
Stockholder and Corporate Advisors agrees, with respect to the CP Shares to
cause the CP Entity, not to exchange or convert any shares of Class B Common
Stock for or into shares of Class A Common Stock. Each Stockholder agrees that,
during the Measurement Period (as such term is defined in the Certificate of
Designation of Series B Convertible Preferred Stock of the Company attached as
Exhibit E to the Merger Agreement), such Stockholder shall not, and shall use
its best efforts to
6
<PAGE>
cause its Affiliates not to, purchase or otherwise acquire (including through
any derivative transactions) any shares of Company Capital Stock.
3.2 Voting Arrangements. Each of the Stockholders agrees, and Corporate
-------------------
Advisors agrees with respect to the CP Shares, that, except pursuant to this
Agreement, it shall not grant any proxies, deposit any shares of Company Capital
Stock into a voting trust or enter into any voting agreement with respect to any
shares of Company Capital Stock now or hereafter owned by such Stockholder or
now owned by the CP Entities, as applicable, other than proxies to vote such
shares at any annual or special meeting of stockholders of the Company on
matters unrelated to the matters set forth in Section 4.1 hereof.
3.3 Satisfaction of Conditions to the Merger. Each of the Stockholders
----------------------------------------
agrees and Corporate Advisors agrees with respect to the CP Shares that such
Stockholder, in its capacity as such, and Corporate Advisors, acting on behalf
of the CP Entities, shall assist and cooperate with the parties to the Merger
Agreement in doing all things necessary, proper or advisable under Applicable
Laws as promptly as practicable to consummate and make effective the Merger and
the other transactions contemplated by the Merger Agreement and the Transaction
Documents and such Stockholder and Corporate Advisors shall not take any action
that would or is reasonably likely to result in any of its representations and
warranties set forth in this Agreement being untrue as of the date made or in
any of the conditions set forth in Article VIII of the Merger Agreement not
being satisfied.
3.4 No Solicitation. Each of the Stockholders agrees that such
---------------
Stockholder shall not, and, except as set forth in Section 3.4 of the Corporate
Partners Disclosure Letter, Corporate Advisors agrees that it shall not, nor
shall it permit any of its Subsidiaries or Affiliates to, nor shall it authorize
or permit any of its officers, directors, employees, agents, investment bankers,
attorneys, financial advisors or other representatives (collectively,
"Representatives") to, directly or indirectly, solicit, initiate or encourage
(including by way of furnishing information or assistance) or take other action
to facilitate any inquiries or the making of any proposal that constitutes or
may reasonably be expected to lead to, an Acquisition Proposal from any Third
Party, or engage in any discussions or negotiations relating thereto or in
furtherance thereof
7
<PAGE>
or accept or enter into any agreement with respect to any Acquisition Proposal;
provided, however, that, notwithstanding any other provision of this Agreement,
- -------- -------
if such Stockholder or any representative of Corporate Advisors is a member of
the Board of Directors, such Stockholder or representative may take any action
in such Person's capacity as a director that the Board of Directors would be
permitted to take in accordance with Section 7.10 of the Merger Agreement. Such
Stockholder and Corporate Advisors shall immediately cease and cause to be
terminated any existing solicitation, initiation, encouragement, activity,
discussion or negotiation with any parties conducted heretofore by such
Stockholder or Corporate Advisors, as the case may be, or any of its
Representatives with respect to any of the foregoing. Each such Stockholder and
Corporate Advisors shall promptly (but in any event within 24 hours thereafter)
notify Acquiror orally and in writing of any Acquisition Proposal or any inquiry
which could lead to an Acquisition Proposal, within 24 hours of the receipt
thereof, including the identity of the Third Party making any such Acquisition
Proposal or inquiry and the material terms and conditions of any Acquisition
Proposal, and if such inquiry or proposal is in writing, such Stockholder shall
deliver to Acquiror a copy of such inquiry or proposal.
3.5 Standstill; Transfer Restrictions. (a) Each of Hostetter and the
---------------------------------
Hostetter Trust agrees that, (i) from the date hereof until the Closing Date and
(ii) from and after the Closing Date for so long as such Stockholder shall be a
Restricted Stockholder, such Stockholder shall not, and shall use its best
efforts to cause its Affiliates not to, without the prior written consent of the
board of directors of Acquiror, (A) in any manner acquire, agree to acquire or
make any proposal to acquire, directly or indirectly, any Equity Securities of
Acquiror, or any rights or options to acquire such Equity Securities (other than
the shares of Media Stock and Series D Preferred Stock received by such
Stockholder in the Merger or acquisitions of Equity Securities of Acquiror in
aggregate amounts not to exceed $20 million), (B) propose to enter into,
directly or indirectly, a merger or other business combination involving
Acquiror or propose to purchase, directly or indirectly, a material portion of
the assets of Acquiror, (C) make, or in any way participate, directly or
indirectly, in, any "solicitation" of "proxies" (as such terms are used in
Regulation 14A under the Exchange Act) to vote or consent or seek to advise or
influence any Person with respect to the
8
<PAGE>
voting of, or granting of a consent with respect to, any Voting Securities of
Acquiror, (D) form, join or in any way participate in a "group" (within the
meaning of Section 13(d)(3) of the Exchange Act) for the purpose of acquiring,
holding, voting or disposing of any Equity Securities of Acquiror (other than
any such group consisting solely of Hostetter, the Hostetter Trust and their
Permitted Assignees), (E) otherwise act, alone or in concert with others, to
seek to control or influence in any public manner or public forum the management
or policies of Acquiror; provided, however, that the foregoing shall not limit
-------- -------
the ability to vote any shares of any Equity Securities of Acquiror, (F)
disclose any intention, plan or arrangement inconsistent with the foregoing, (G)
advise, assist (including by knowingly providing or arranging financing for that
purpose) or encourage any other Person in connection with any of the foregoing,
(H) request Acquiror or any agent of Acquiror, directly or indirectly, to amend
or waive any provision of this Section 3.5(a) (including this sentence) or (I)
take any action which might require Acquiror to make a public announcement
regarding the possibility of a transaction between such Stockholder and Acquiror
(including any of their respective Affiliates).
(b) Hostetter, the Hostetter Trust and, subject to Section 3.5 of the
Corporate Partners Disclosure Letter, Corporate Advisors agree that, from the
date hereof until the Closing Date, such Stockholder and Corporate Advisors
shall not, and shall use its best efforts to cause its Affiliates not to,
without the prior written consent of the board of directors of Acquiror, sell,
transfer, pledge, encumber or otherwise dispose of, or agree to sell, transfer,
pledge, encumber or otherwise dispose of (including through any "short sales" or
derivative transactions), any Equity Securities of Acquiror or any of its
Subsidiaries or any rights or options to acquire such Equity Securities.
(c) Each of Hostetter and the Hostetter Trust agrees that, from and after
the Closing Date, for so long as such Stockholder shall be a Restricted
Stockholder, such Stockholder shall not, and shall use its best efforts to cause
its Affiliates not to, without the prior written consent of the board of
directors of Acquiror, sell, transfer, pledge, encumber or otherwise dispose of,
or agree to sell, transfer, pledge, encumber or otherwise dispose of (including
through any "short sales" or derivative transactions), any Equity Securities of
Acquiror, or any
9
<PAGE>
rights or options to acquire such Equity Securities, except (i) to the
underwriters in connection with an underwritten public offering of shares of
such securities on a firm commitment basis registered under the Securities Act
in accordance with the terms of the Registration Rights Agreement, pursuant to
which the sale of such securities is in a manner that will effect a broad
distribution, (ii) to any Permitted Assignee, provided that such Permitted
Assignee becomes a party to this Agreement and agrees to be bound by the terms
of this Section 3.5(c), (iii) to a Third Party in a transaction that complies
with the volume and manner of sale provisions contained in Rule 144(e) and (f)
as in effect on the date hereof under the Securities Act, (iv) to any Third
Party in a transaction or series of related transactions (other than "short
sales" or derivative transactions) whenever occurring, provided that this clause
(iv) shall be unavailable in any case where such Stockholder sells more than 3%
of any class or series of Equity Securities of Acquiror to a Person or "group"
(within the meaning of Section 13(d)(3) of the Exchange Act), (v) a bona fide
pledge of shares of Equity Securities of Acquiror to a financial institution to
secure borrowings of such Stockholder as permitted by Applicable Laws, and (vi)
pursuant to the terms of any tender or exchange offer for Equity Securities of
Acquiror made in compliance with the applicable provisions of the Exchange Act
(but only so long as such Stockholder is at the time in compliance with the
provisions of Section 3.5(a) hereof and such tender or exchange offer does not
involve any past violation of such provisions by such Stockholder).
(d) Each of Hostetter and the Hostetter Trust agree that from and after
the Closing Date until the one-year anniversary thereof, such Stockholder shall
not sell, transfer, pledge, encumber or otherwise dispose of (including through
any "short sales" or derivative transactions) any equity securities of Acquiror
received by such Stockholder pursuant to the Merger; provided, however, that
-------- -------
such Stockholder shall have the right to transfer such shares to a Permitted
Assignee if such Permitted Assignee becomes a party to this Agreement and
agrees to be bound by the terms hereof.
(e) For the purposes of this Section 3.5, the term Acquiror shall
include any successor, by operation of law or otherwise, or any Person that
acquires or succeeds to all or substantially all of the assets of the Media
Group. In the event of any such succession or acquisition, notwith-
10
<PAGE>
standing anything to the contrary contained herein, the provisions of Section
3.5(a) hereof shall continue for a period of five years from the consummation of
such event.
3.6 Non-Competition. (a) Except as otherwise provided in Section 3.6(b),
---------------
(1) Hostetter shall not, until the first anniversary of the date (the
"Termination Date") Hostetter ceases to be an employee of the Company or
Acquiror or their respective Subsidiaries or Affiliates or, if the Termination
Date is after December 31, 2001, the six month anniversary of the Termination
Date and (2) Neher shall not, until the later of (x) the first anniversary of
the date Neher ceases to be an employee of the Company or Acquiror or their
respective Subsidiaries or Affiliates and (y) December 31, 1998, directly or
indirectly:
(i) engage in any activity in the telecommunications business (which shall
include, but not be limited to, the provision of video, voice and data
services), directly or indirectly (whether as an employee, officer, director,
agent, consultant, proprietor, partner, principal stockholder or otherwise),
other than as required for the performance of his employment by the Company or
by a Subsidiary. For the purposes of this Section 3.6, the telecommunications
business shall include the acquisition of existing telecommunications systems
and the obtaining of franchises (or the renewal of existing franchises) for the
construction and operation of telecommunications systems to provide voice, data
and video services in communities throughout the United States of America and in
certain foreign countries and the investment in and participation in the
operating of other telecommunications and cable programming ventures; or
(ii) engage in any action, activity or course of conduct which is
detrimental to the business or business reputation of the Company or any of its
Subsidiaries, including (A) soliciting, recruiting or hiring any employees of
the Company or any of its Subsidiaries and (B) soliciting or encouraging any
employee of the Company or any of its Subsidiaries to leave the employment of
the Company or any of its Subsidiaries and (C) disclosing or furnishing to
anyone any confidential information relating to the Company or any of its
Subsidiaries or otherwise using such confidential information for its own
benefit or the benefit of any other person.
(b) Nothing contained in Section 3.6(a) shall prohibit or otherwise
restrict Hostetter from acquiring or
11
<PAGE>
owning, directly or indirectly, for investment or other legitimate business
purposes not intended to circumvent this Agreement, securities of any entity
engaged, directly or indirectly, in a business engaged in the telecommunications
business if either (i) such entity is a public entity and Hostetter (A) is not a
Controlling Person of, or a member of a group which Controls, such entity and
(B) owns, directly or indirectly, no more than 5% of any class of Equity
Securities of such entity or (ii) such entity is not a public entity and
Hostetter (A) is not a Controlling Person of, or a member of a group that
Controls, such entity and (B) owns, directly or indirectly, no more than 10% of
any class of Equity Securities of such entity.
(c) Hostetter and Neher acknowledge and agree that the covenants and
restrictions contained in this Section 3.6 are reasonable and that they shall
not in any way challenge the reasonableness or the enforceability of this
Section 3.6 or any covenant or restriction contained herein.
3.7 Conversion of Class B Common Stock. In the event the Charter
----------------------------------
Amendment is not approved at the Initial Stockholders' Meeting, then promptly
thereafter, but in any event prior to the record date established by the Company
for the Additional Stockholders' Meeting, Hostetter and the Hostetter Trust
agree to convert a number of shares of Class B Common Stock into Class A Common
Stock in an amount equal to the lesser of (i) all of their respective shares of
Class B Common Stock or (ii) that number of shares of Class B Common Stock such
that Hostetter will beneficially own at least a majority of the outstanding
shares of Class A Common Stock as of such record date. Hostetter and the
Hostetter Trust agree to comply with the provisions of Section 4.1 hereof with
respect to such shares including, without limitation, voting all of such shares
of Class B Common Stock in favor of the Charter Amendment. The number of shares
of Class B Common Stock to be converted by Hostetter and the Hostetter Trust
shall be reduced by the number of shares of Class A Common Stock beneficially
owned by Persons other than Hostetter for which an irrevocable voting agreement
or proxy has been submitted to Acquiror to vote such shares in favor of the
Charter Amendment and the Merger Agreement.
12
<PAGE>
ARTICLE IV
PROXY; CONVERSION;
ELECTIONS; WAIVER OF RIGHTS
4.1 Proxy. Each Stockholder hereby agrees and Corporate Advisors agrees
-----
with respect to the CP Shares that, at any meeting of the stockholders of the
Company, however called, including any Stockholders' Meeting, and at every
adjournment thereof, and in any action by written consent of the stockholders of
the Company, to (a) vote all of the shares of Company Capital Stock then owned
by such Stockholder or the CP Shares, as applicable, in favor of the adoption of
the Merger Agreement as in effect on the date hereof (as such agreement may be
amended (1) as contemplated by Section 7.16(b) of the Merger Agreement or (2)
with the consent of such Stockholder or Corporate Advisors, as the case may be)
and each of the other transactions contemplated thereby and any action required
in furtherance thereof, (b) vote such shares in favor of adoption of the Charter
Amendment, (c) vote such shares against any action or agreement that would
result in a breach in any material respect of any covenant, representation or
warranty or any other obligation of the Company under the Merger Agreement, and
(d) vote such shares against any Acquisition Proposal or any other action or
agreement that, directly or indirectly, is inconsistent with or that would, or
is reasonably likely to, directly or indirectly, impede, interfere with or
attempt to discourage the Merger or any other transaction contemplated by the
Merger Agreement, including, but not limited to (i) any extraordinary corporate
transaction (other than the Merger on the terms set forth in the Merger
Agreement), such as a merger, consolidation, business combination,
reorganization, recapitalization or liquidation involving the Company or any of
its Subsidiaries, (ii) a sale or transfer of a material amount of assets of the
Company or any of its Subsidiaries, or (iii) any material change in the
Company's corporate structure or business; provided, however, that, if such
-------- -------
Stockholder or any representative of Corporate Advisors is a member of the Board
of Directors of the Company, nothing herein shall be construed to obligate such
Stockholder or representative to act in such Stockholder's or representative's
capacity as a director in any manner which may conflict with such Person's
fiduciary duties as a director of the Company.
In furtherance of the foregoing, (i) each Stockholder hereby appoints
Acquiror and the proper officers
13
<PAGE>
of Acquiror, and each of them, with full power of substitution in the premises,
its proxies to vote all such Stockholder's shares of Company Capital Stock at
any meeting, general or special, of the stockholders of the Company, and to
execute one or more written consents or other instruments from time to time in
order to take such action without the necessity of a meeting of the stockholders
of the Company, in accordance with the provisions of the preceding paragraph and
(ii) Acquiror hereby agrees to vote such shares or execute written consents or
other instruments in accordance with the provisions of the preceding paragraph.
The proxy and power of attorney granted herein shall be irrevocable during
the term of this Agreement, shall be deemed to be coupled with an interest and
shall revoke all prior proxies granted by such Stockholder. Such Stockholder
shall not grant any proxy to any person which conflicts with the proxy granted
herein, and any attempt to do so shall be void. The power of attorney granted
herein is a durable power of attorney and shall survive the disability or
incompetence of such Stockholder.
4.2 Conversion. Immediately prior to the Effective Time, Corporate
----------
Advisors agrees to cause the conversion of all of the CP Shares into shares of
Company Common Stock.
4.3 Waiver of Appraisal Rights. Each Stockholder and Corporate Advisors,
--------------------------
with respect to the CP Shares, hereby waives its rights to appraisal under
Section 262 of the DGCL with respect to any shares of Company Capital Stock
owned by it or the CP Shares, as applicable, in connection with the transactions
contemplated by the Merger Agreement.
4.4 Waiver of Certain Rights. Each Stockholder hereby waives and agrees
------------------------
not to assert any claims or rights it may have against any director of the
Company in respect of approval or adoption of the Merger Agreement or the
consummation of the Merger or the other transactions contemplated thereby.
14
<PAGE>
ARTICLE V
MISCELLANEOUS
5.1 Termination. This Agreement shall terminate upon the earlier to
-----------
occur of (i) the mutual consent of Acquiror, all of the Stockholders and
Corporate Advisors, (ii) the termination of the Merger Agreement prior to the
consummation of the Merger (except that if the Merger Agreement is terminated
pursuant to Section 9.1(h) thereof, the last sentence of Section 3.1 of this
Agreement shall not terminate), and (iii) the tenth anniversary of the Closing
Date.
5.2 Amendment. This Agreement may be amended only by a written
---------
instrument executed by the parties or their respective successors or assigns.
5.3 Notices. Notices, requests, permissions, waivers and other
-------
communications hereunder shall be in writing and shall be deemed to have been
duly given if signed by the respective persons giving them (in the case of any
corporation the signature shall be by an officer thereof) and delivered by hand,
deposited in the United States mail (registered or certified, return receipt
requested), properly addressed and postage prepaid, or delivered by telecopy:
If to Acquiror, to:
U S WEST, INC.
7800 East Orchard Road
Englewood, Colorado 80111
Telephone: (303) 793-6500
Telecopy: (303) 793-6654
Attention: General Counsel
with a copy to:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Telephone: (212) 310-8000
Telecopy: (212) 310-8007
Attention: Dennis J. Block, Esq.
15
<PAGE>
If to Amos B. Hostetter, Jr., the Hostetter Trust or to Timothy P.
Neher, to:
c/o Continental Cablevision, Inc.
The Pilot House
Lewis Wharf
Boston, Massachusetts 02110
with a copy to:
Sullivan & Worcester LLP
One Post Office Square
Boston, Massachusetts 02109
Telephone: (617) 338-2800
Telecopy: (617) 338-2880
Attention: Patrick K. Miehe, Esq.
If to Corporate Advisors, the Boston Ventures Stockholders or to the
Other Stockholders, at such address as may be furnished to Acquiror
from time to time.
5.4 Counterparts. This Agreement may be executed in one or more
------------
counterparts and each counterpart shall be deemed to be an original, but all of
which shall constitute one and the same original.
5.5 Applicable Law. This Agreement shall be governed by, and construed
--------------
in accordance with, the laws of the State of Delaware without reference to
choice of law principles, including all matters of construction, validity and
performance.
5.6 Severability; Enforcement. The invalidity of any portion hereof
-------------------------
shall not affect the validity, force or effect of the remaining portions hereof.
If it is ever held that any restriction hereunder is too broad to permit
enforcement of such restriction to its fullest extent, each party agrees that a
court of competent jurisdiction may enforce such restriction to the maximum
extent permitted by law, and each party hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction. In furtherance of the foregoing, if any court
construes any of the provisions of Section 3.6, or any part thereof, to be
unreasonable because of the duration of such provision or the geographic scope
thereof, such court shall have the power to reduce the duration or restrict the
geographic
16
<PAGE>
scope of such provision and to enforce such provision as so reduced or
restricted.
5.7 Further Assurances. Each party hereto shall execute and deliver
------------------
such additional documents as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
5.8 Parties in Interest; Assignment. Neither this Agreement nor any of
-------------------------------
the rights, interest or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties.
5.9 Entire Agreement. This Agreement and the Merger Agreement and the
----------------
Transaction Documents contain the entire understanding of the parties hereto and
thereto with respect to the subject matter contained herein and therein, and
supersede and cancel all prior agreements, negotiations, correspondence,
undertakings and communications of the parties, oral or written, respecting such
subject matter. There are no restrictions, promises, representations,
warranties, agreements or undertakings of any party hereto or to the Merger
Agreement or any of the Transaction Documents with respect to the transactions
contemplated by this Agreement and the Merger Agreement and the Transaction
Documents other than those set forth herein or therein or made hereunder or
thereunder.
5.10 Specific Performance. The parties hereto agree that the remedy at
--------------------
law for any breach of this Agreement will be inadequate and that any party by
whom this Agreement is enforceable shall be entitled to specific performance in
addition to any other appropriate relief or remedy. Such party may, in its sole
discretion, apply to a court of competent jurisdiction for specific performance
or injunctive or such other relief as such court may deem just and proper in
order to enforce this Agreement or prevent any violation hereof and, to the
extent permitted by applicable law, each party waives any objection to the
imposition of such relief.
5.11 Headings; References. The section and paragraph headings contained
--------------------
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. All references herein
to "Sections" or "Exhibits" shall be deemed to be
17
<PAGE>
EXHIBIT 11.1
CONTINENTAL CABLEVISION, INC. AND SUBSIDIARIES
COMPUTATION OF LOSS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993(1) 1994(1) 1995(1)
--------- --------- ---------
<S> <C> <C> <C>
Loss Before Extraordinary Item and Cumulative
Effect of Change in Accounting for Income
Taxes........................................ $ (25,774) $ (68,576) $(112,027)
Extraordinary Item, Net of Income Taxes....... -- (18,265) --
Cumulative Effect of Change in Accounting for
Income Taxes................................. (184,996) -- --
--------- --------- ---------
Net Loss...................................... (210,770) (86,841) (112,027)
Preferred Stock Preferences................... (34,115) (36,800) (39,802)
--------- --------- ---------
Loss Applicable to Common Stockholders........ $(244,885) $(123,641) $(151,829)
========= ========= =========
Loss Per Common Share Before Extraordinary
Item and Cumulative Effect of Change in
Accounting for Income Taxes.................. $ (.53) $ (.92) $ (1.22)
Extraordinary Item Per Common Share........... -- (.16) --
Loss Per Common Share from Cumulative Effect
of Change in Accounting for Income Taxes..... (1.62) -- --
--------- --------- ---------
Loss Per Common Share......................... $ (2.15) $ (1.08) $ (1.22)
========= ========= =========
Weighted Average Number of Shares Outstanding
During the Period............................ 114,055 114,334 124,882
========= ========= =========
</TABLE>
- -------
(1) For purposes of calculating loss per common share for the years ended
December 31, 1993, 1994 and 1995, shares of the Series A Convertible
Preferred Stock were not assumed to be converted into shares of Common
Stock since the result would be anti-dilutive.
<PAGE>
Exhibit 21
----------
SUBSIDIARIES OF
---------------
CONTINENTAL CABLEVISION, INC.
----------------------------
("CCI")
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Alrif Co., Inc. Massachusetts 100,000 CCJ 100.00%
Alternet of Virginia Virginia NA CTCV 63.00%
Others 37.00%
American Cablesystems
Corporation ("ACC") Delaware 1,000 CCI 100.00%
American Cablesystems of
California, Inc. ("ACCal") California 6,000,000
common ACC 100.00%
600,000
preferred ACC 100.00%
American Cablesystems of
New York, Inc. New York 50,000 ACC 100.00%
American Cablesystems of
South Central Los Angeles,
Inc. Delaware 10,626 ACCal 84.16%
</TABLE>
<PAGE>
-2-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
CCF Management Services,
Inc. Florida 1,000 Colony 100.00%
CCI Cable News, Inc. Massachusetts 1,000 CCII 100.00%
CCI Management Services,
Inc. California 1,000 Colony 100.00%
CCI Telecommunications
of Virginia, Inc. Virginia 1,000 CTC 100.00%
Colony Communications, Inc.
("Colony") Rhode Island 50,000 CCI 100.00%
Colony Cablevision of
Lakewood, Inc. California l,000 Colony 100.00%
Colony Interconnects, Inc. Delaware 1,000 Colony 100.00%
Continental Cablevision
Acquisitions of Northern
Illinois, Inc. Illinois 100 CCI 100.00%
Continental Cablevision
Asia Pacific, Inc.
("CCAP") Massachusetts 100 CCI 100.00%
</TABLE>
<PAGE>
-3-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Continental Cablevision
Asset Management
Corporation Massachusetts 100 CCII 100.00%
Continental Cablevision
Digital Radio, Inc. Massachusetts 1,000 CCI 100.00%
Continental Cablevision
Investments, Inc.
("CCII") Delaware 100 CCI 100.00%
Continental Cablevision of
Australia, Inc. Massachusetts 100 CCI 100.00%
Continental Cablevision of
Brockton, Inc. Delaware 13,980 CCI 99.90%
7 Others 0.10%
Continental Cablevision of
California, Inc. California 200,000 CCI 100.00%
Continental Cablevision of
Eastern Michigan, Inc. Delaware 1 CCM 100.00%
Continental Cablevision of
Illinois, Inc. Delaware 5,000 CCI 100.00%
</TABLE>
<PAGE>
-4-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Continental Cablevision of
Jacksonville, Inc. Florida 100 CCI 100.00%
Continental Cablevision of 172.95 100.00%
Manchester, Inc. Maryland Voting
Common CCNE
521.62 100.00%
Non-Voting
Common
Continental Cablevision of
Massachusetts,
Inc.("CCMA") Massachusetts 1,000 CCI 100.00%
Continental Cablevision of
Michigan, Inc. ("CCMI") Michigan 10 CCI 100.00%
Continental Cablevision of
Minnesota, Inc. ("CCMN") Minnesota 100 CCI 100.00%
Continental Cablevision of
Needham, Inc. Delaware 4,788 CCI 99.80%
11 Others 0.20%
Continental Cablevision of
New England, Inc. ("CCNE") New Hampshire 200 CCI 100.00%
Continental Cablevision of
Northern Illinois, Inc. Delaware 100 CCI 100.00%
Continental Cablevision of
Ohio, Inc. Ohio 2 CCI 100.00%
</TABLE>
<PAGE>
-5-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Continental Cablevision of
Richmond, Inc. Virginia 800,000 CCVA 100.00%
Class A
Common
460,000 CCVA 100.00%
Preferred
71,500 Others 36.00%
Class B
Common
128,500 CCVA 64.00%
Class B
Common
Continental Cablevision of
Southeastern Michigan,
Inc. Michigan 100 CCII 100.00%
Continental Cablevision of
St. Louis County, Inc. Delaware 100 CCI 100.00%
Continental Cablevision of
St. Paul, Inc. Minnesota 26,000 CCI 100.00%
</TABLE>
<PAGE>
-6-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Continental Cablevision of
Sierra Valleys, Inc.
("CCSV") California 100 CCI 100.00%
Continental Cablevision of
Southern New England, Inc. Massachusetts 550 Colony 100.00%
Continental Cablevision of
Virginia, Inc. ("CCVA") Virginia 1,000 CCI 100.00%
Continental Cablevision of
Western New England, Inc. Delaware 100 CCI 100.00%
Continental Cablevision
Satellite Company of
Northern California, Inc. California 100 CCI 100.00%
Continental Fiberphone,
Inc. Massachusetts 100 CTC 100.00%
Continental Fiber 80 CTC 80.00%
Technologies, Inc. Florida 20 Others 20.00%
Continental Florida Florida 100 CTC 100.00%
Telecommunications, Inc.
Continental Information
Technology Systems, Inc. Massachusetts 100 CTC 100.00%
</TABLE>
<PAGE>
-7-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Continental Internet, Inc. Massachusetts 100 CTC 100.00%
Continental Online of
California, Inc. California 100 CTC 100.00%
Continental Online of
Florida, Inc. Florida 100 CTC 100.00%
Continental Online of
Illinois, Inc. Illinois 100 CTC 100.00%
Continental Online of
New England, Inc. Massachusetts 100 CTC 100.00%
Continental Online-
Midwest, Inc. Ohio 100 CTC 100.00%
Continental Programming
Partners I, Inc. Massachusetts 100 CCIV 100.00%
Continental Satellite
Company, Inc. Massachusetts 100 CCI 100.00%
Continental Satellite Illinois 100 CCI 100.00%
Company of Chicago, Inc.
</TABLE>
<PAGE>
-8-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Continental Satellite Florida 100 CCJ 100.00%
Company of Florida, Inc.
Continental Satellite Illinois 100 CCI 100.00%
Company of Illinois, Inc.
Continental Satellite
Company of Michigan, Inc. Michigan 100 CCMI 100.00%
Continental Satellite
Company of Minnesota, Inc. Minnesota 100 CCI 100.00%
Continental Satellite
Company of New England,
Inc. New Hampshire 100 CCI 100.00%
Continental Satellite
Company of Ohio, Inc. Ohio 100 CCI 100.00%
Continental Satellite
Company of Virginia, Inc. Virginia 100 CCI 100.00%
Continental Cablevision
Singapore Pte Ltd. Singapore 100,000 CCAP 100.00%
Common
1,265,000 CCAP 100.00%
Preferred
</TABLE>
<PAGE>
-9-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Continental
Telecommunications
Corp. ("CTC") Massachusetts l00 CCI l00.00%
Continental
Telecommunications
Corp. of Los Angeles California 100 CTC 100.00%
Continental
Telecommunications
Corp. of Michigan Michigan 100 CTC 100.00%
Continental
Telecommunications
Corp. of Minnesota Minnesota 100 CTC 100.00%
Continental
Telecommunications
Corp. of New England Massachusetts 100 CTC l00.00%
Continental
Telecommunications
Corp. of Ohio Ohio 100 CTC 100.00%
Continental
Telecommunications
Corp. of St. Louis County Illinois 100 CTC 100.00%
Continental
Telecommunications
Corp. of Virginia Virginia 100 CTC 100.00%
Continental
Telecommunications
of California, Inc. California 100 CTC 100.00%
</TABLE>
<PAGE>
-10-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Continental
Telecommunications
of Illinois, Inc. Illinois 100 CTC 100.00%
Continental
Telecommunications
of Massachusetts, Inc. Massachusetts 100 CTC 100.00%
Continental
Telecommunications
of Michigan, Inc. Michigan 100 CTC 100.00%
CCI Telecommunications of
New Hampshire, Inc. New Hampshire 100 CTC 100.00%
Continental
Telecommunications
of Ohio, Inc. Ohio 100 CTC 100.00%
Continental Teleport, Inc.
("CTI") Massachusetts 100 CTC 100.00%
Continental Teleport Corp.
of Florida Florida 100 CTC 100.00%
Continental Teleport
Partners, Inc. Massachusetts l00 CTC l00.00%
Copley/Colony, Inc. Delaware 1,000 Colony 100.00%
("Copley") Class A
1,000
Class B
</TABLE>
<PAGE>
-11-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Copley/Colony Cablevision
of Costa Mesa, Inc. California 1,000 Copley 100.00%
Copley/Colony Cablevision
of Cypress, Inc. California 1,000 Copley 100.00%
Copley/Colony Cablevision
of Lomita, Inc. California 1,000 Copley 100.00%
Copley/Colony Cablevision
of Los Angeles County, Inc California 2,065 Copley 100.00%
Copley/Colony Cablevision
of Orange County, Inc. California 100 Copley 100.00%
Copley/Colony Harbor
Cablevision, Inc. California 1,725 Copley 100.00%
Dynamic Cablevision of
Florida, Inc. Florida 900 Colony 100.00%
Fostoria Communications,
Inc. Massachusetts 100 CCII 100.00%
Fresno Cable TV Limited California 9,000 CCSV 100.00%
RS,G Common
1,000 CCSV 100.00%
Preferred
</TABLE>
<PAGE>
-12-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Greater Boston Cable Massachusetts NA CCMA 50.00%
Advertising CCNE 50.00%
King Videocable Company Washington 428,500 Colony 100.00%
("KVC")
King Videocable Company -
Minnesota Washington 3,001,000 KVC 100.00%
Common
377,050
Class A
Preferred
1,320,000
Class B
Preferred
King Videocable Company-
Newhall California 7,125 KVC 100.00%
King Videocable Company-
Twin Falls ("KV-TF") Idaho 10,000 KVC 100.00%
King Videocable Company-
Idaho Colorado 50,000 KV-TF 100.00%
King Videocable Company-
Valencia California 1,500 KVC 100.00%
</TABLE>
<PAGE>
-13-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Milton Cablesystems
Corporation Massachusetts 10,706.5 ACC 99.00%
130.0 Others 1.00%
Minnesota Cable
Communications Holding
Company Inc ("MCCH"). Delaware 100 CCMN 100.00%
Pilot House Associates,
Inc. Massachusetts 100 CCII 100.00%
Nor Cal Cablevision, Inc. California 11,700 CCSV 100.00%
S.A. Ventures, Inc. Massachusetts 100 CCI 100.00%
("SAV")
Telcab Communications, Inc. Nevada 500,000 CCSV 100.00%
Telefiber Networks Illinois 100 CTC 100.00%
of Illinois, Inc.
U.S. Cablevision Corp. Rhode Island 1,000 Colony 100.00%
Vision-Cable Company
of Rhode Island, Inc. Rhode Island 10,000 Colony 100.00%
Upper Midwest Cable
Partners* Minnesota NA MCCH 34.33%
</TABLE>
<PAGE>
-14-
<TABLE>
<CAPTION>
Percentage
of Stock
or General
Jurisdiction Number of Names of Partnership
of Shares Owners Interests
Name Organization Issued of Record Owned
- ---- ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Southwest Florida Cable
Advertising** Florida NA Colony 67.40% of
Inter- Preferred
connects 69.60% of
Inc. Regular
Partner-
ships
Interests
</TABLE>
* MCCH is the managing partner.
**Colony Interconnects, Inc. is the managing partner.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1995
<PERIOD-START> DEC-31-1994 JAN-01-1995
<PERIOD-END> DEC-31-1994 DEC-31-1995
<CASH> 11,564 18,551
<SECURITIES> 122,510 151,378
<RECEIVABLES> 58,212 110,132
<ALLOWANCES> 9,771 12,476
<INVENTORY> 62,517 88,687
<CURRENT-ASSETS> 0 0
<PP&E> 1,353,789 2,107,473
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 2,483,639 5,080,593
<CURRENT-LIABILITIES> 0 0
<BONDS> 3,449,907 5,285,159
232,399 256,135
11 11
<COMMON> 86 388
<OTHER-SE> (1,688,431) (1,216,350)
<TOTAL-LIABILITY-AND-EQUITY> 2,483,639 5,080,593
<SALES> 1,197,977 1,442,392
<TOTAL-REVENUES> 0 0
<CGS> 0 0
<TOTAL-COSTS> 967,383 1,190,417
<OTHER-EXPENSES> 339,589 411,911
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 315,541 363,826
<INCOME-PRETAX> (108,995) (159,936)
<INCOME-TAX> (40,419) (47,909)
<INCOME-CONTINUING> (68,576) (112,027)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (18,265) 0
<CHANGES> 0 0
<NET-INCOME> (86,841) (112,027)
<EPS-PRIMARY> (1.08) (1.22)
<EPS-DILUTED> 0 0
</TABLE>
