SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
June 23, 1998
AT&T CORP.
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(Exact name of registrant as specified in charter)
New York
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(State or other jurisdiction of incorporation)
1-1105 13-4924710
(Commission File No.) (IRS employer identification no.)
32 Avenue of the Americas, New York, New York 10013-3412
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(212) 387-5400
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Form 8-K
AT&T Corp.
June 23, 1998
ITEM 5. OTHER EVENTS
On June 24, 1998, AT&T Corp. (the "Company") and Tele-Communications,
Inc. ("TCI") announced that they had entered into an Agreement and Plan of
Restructuring and Merger, dated as of June 23, 1998 (the "Merger Agreement"),
which sets forth the terms and conditions of the proposed merger of a subsidiary
of the Company with and into TCI (the "Merger") pursuant to which TCI will
become a wholly owned subsidiary of the Company. A copy of the Merger Agreement
is included herein as Exhibit 2.1 and a copy of the joint press release of the
Company and TCI with respect to the Merger is included as Exhibit 99.1 Such
documents are incorporated by reference into this Item 5 and the foregoing
description of such documents are qualified in its entirety by reference to such
Exhibits.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits.
2.1 Agreement and Plan of Restructuring and
Merger, among AT&T Corp., Italy Merger Corp.
and Tele-Communications, Inc., dated as of
June 23, 1998*
99.1 Joint press release, dated June 24, 1998
* The Merger Agreement contains lists identifying the
items, including exhibits and schedules, annexed
thereto. A copy of any omitted item will be furnished
supplementally to the Commission upon request.
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Form 8-K
AT&T Corp.
June 23, 1998
SIGNATURES
Pursuant to the requirements 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.
AT&T CORP.
By:/s/ Marilyn J. Wasser
Name: Marilyn J. Wasser
Title: Vice President and Secretary
Date: July 6, 1998
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EXHIBIT INDEX
Exhibit
No. Description
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99.1 Agreement and Plan of Restructuring and Merger, among AT&T Corp.,
Italy Merger Corp. and Tele-Communications, Inc., dated as of
June 23, 1998*
99.1 Joint press release, dated June 24, 1998
* The Merger Agreement contains lists identifying the items, including
exhibits and schedules, annexed thereto. A copy of any omitted item
will be furnished supplementally to the Commission upon request.
EXHIBIT 2.1
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
AMONG
AT&T CORP.
ITALY MERGER CORP.
AND
TELE-COMMUNICATIONS, INC.
Dated as of June 23, 1998
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TABLE OF CONTENTS
ARTICLE I
Definitions...............................................................1
ARTICLE II
The Restructuring and the Merger..................................... 13
2.1. The Restructuring...................................... 13
2.2. The Merger............................................. 14
2.3. Effective Time......................................... 14
2.4. Closing................................................ 15
ARTICLE III
Terms of Merger ..................................................... 15
3.1. Certificate of Incorporation........................... 15
3.2. The By-Laws............................................ 15
3.3. Directors.............................................. 15
3.4. Officers............................................... 15
ARTICLE IV
Share Consideration; Conversion or
Cancellation of Shares in the Merger............................. 16
4.1. Share Consideration; Conversion or
Cancellation of Shares in the Merger................. 16
4.2. Payment for Shares in the Merger....................... 21
4.3. Fractional Shares...................................... 25
4.4. Transfer of Shares after the Effective
Time................................................. 28
4.5. Treatment of Series F Preferred Stock ................. 28
4.6. Company Series Preferred Stock......................... 28
ARTICLE V
Representations and Warranties of the Company........................ 28
5.1. Organization, Etc. of the Company...................... 28
5.2. Subsidiaries........................................... 29
5.3. Agreement.............................................. 29
5.4. Permits; Compliance.................................... 30
5.5. Opinion of the Company's Financial Advisor............. 30
5.6. Capital Stock.......................................... 30
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5.7. Litigation............................................. 33
5.8. Compliance with Other Instruments, Etc................. 34
5.9. Employee Benefit Plans................................. 34
5.10. Taxes.................................................. 37
5.11. Intellectual Property.................................. 38
5.12. Reports and Financial Statements....................... 38
5.13. Absence of Certain Changes or Events................... 39
5.14. Affiliated Transactions and Certain
Other Agreements..................................... 40
5.15. Brokers and Finders.................................... 40
5.16. Registration Statement................................. 40
5.17. Separation of Assets and Liabilities................... 41
ARTICLE VI
Representations and Warranties of Parent and
Merger Sub ..................................................... 43
6.1. Organization, Etc. of Parent........................... 43
6.2. Subsidiaries........................................... 43
6.3. Agreement.............................................. 43
6.4. Permits; Compliance.................................... 44
6.5. Opinions of Parent's Financial Advisors................ 44
6.6. Capital Stock.......................................... 44
6.7. Parent Shares.......................................... 44
6.8. Litigation........................................ 45
6.9. Compliance with Other Instruments, Etc................. 45
6.10. Taxes.................................................. 46
6.11. Intellectual Property.................................. 46
6.12. Reports and Financial Statements....................... 47
6.13. Brokers and Finders.................................... 48
6.14. Registration Statement................................. 48
6.15. Ownership of Merger Sub; No Prior Activities;
Assets of Merger Sub................................. 48
6.16. Ownership of Company Stock............................. 49
ARTICLE VII
Additional Covenants and Agreements.................................. 49
7.1. Conduct of Business of the Company..................... 49
7.2. Other Transactions................................ 55
7.3. Stockholder Approval.................................. 56
7.4. Registration Statement and Proxy Statement............. 57
7.5. Reasonable Efforts..................................... 58
7.6. Access to Information.................................. 60
7.7. Indemnification of Directors and Officers............. 61
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7.8. Registration and Listing of Parent
Common Shares........................................ 63
7.9. Affiliates of Parent and the Company................... 63
7.10. Tax Matters............................................ 64
7.11. New York Real Property Transfer Tax.................... 64
7.12. Employee Matters....................................... 64
7.13. Tax Sharing Agreement.................................. 66
7.14. Other Intercompany Agreements.......................... 66
7.15. Parent Board of Directors.............................. 66
7.16. Parent Charter Amendment; Bylaw Amendment
and Policy Statement................................. 67
7.17. Intercompany Transactions.............................. 67
7.18. Certain Inter-Group Relationships...................... 67
7.19. TCI Joint Ventures..................................... 67
7.20. Certain Actions by Parent and the
Surviving Corporation................................ 67
ARTICLE VIII
Conditions........................................................... 68
8.1. Conditions to Each Party's Obligations................. 68
8.2. Conditions to Obligations of Parent
and Merger Sub....................................... 69
8.3. Conditions to Obligations of the Company............... 71
ARTICLE IX
Termination.......................................................... 72
9.1. Termination by Mutual Consent.......................... 72
9.2. Termination by Either Parent or the Company............ 72
9.3. Termination by the Company............................. 73
9.4. Termination by Parent and Merger Sub................... 73
9.5. Effect of Termination and Abandonment.................. 73
9.6. Payment of Certain Fees................................ 73
ARTICLE X
Miscellaneous and General............................................ 74
10.1. Expenses............................................... 74
10.2. Notices, Etc........................................... 74
10.3. Amendments, Waivers, Etc............................... 75
10.4. No Assignment.......................................... 75
10.5. Entire Agreement....................................... 75
10.6. Specific Performance................................... 76
10.7. Remedies Cumulative.................................... 76
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10.8. No Waiver.............................................. 76
10.9. No Third Party Beneficiaries........................... 76
10.10. Jurisdiction........................................... 77
10.11. Public Announcements................................... 77
10.12. Governing Law.......................................... 77
10.13. Name, Captions, Etc.................................... 77
10.14. Counterparts........................................... 77
10.15. Survival of Representations, Warranties,
Covenants and Agreements............................. 77
10.16. Severability........................................... 78
10.17. Disclosure Statements.................................. 78
EXHIBITS
A Form of Amendment to the Parent Charter
B Form of Affiliate Letter
C Terms of Amendment to Tax Sharing Agreement
D Form of Bylaw Amendment and Policy Statement
SCHEDULES
2.1(a) Terms of the Company Restructuring
2.1(c)(i) Form of Certificate of Incorporation and Bylaws
of Liberty Media Corporation 2.1(c)(ii) Form of Contribution
Agreement
2.1(c)(iii) Form of LLC Agreement of Liberty Group LLC 2.1(c)(iv) Form
of Section
2.1(c)(iv) Letter 7.12(b) Definitions of "Good Reason" and "Cause"
7.12(e) Form of Tax Protection Agreement 7.14 Intercompany Agreement
Principles
7.18 Certain Terms of Inter-Group Relationship
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of June
23, 1998, among AT&T Corp., a New York corporation ("Parent"), Italy Merger
Corp., a Delaware corporation and a direct wholly owned subsidiary of Parent
("Merger Sub"), and Tele-Communications, Inc., a Delaware corporation (the
"Company").
RECITALS
WHEREAS, the Boards of Directors of Parent, Merger Sub and the
Company each have determined that it is advisable and in the best interests of
their respective stockholders for Merger Sub to merge with and into the Company,
upon the terms and subject to the conditions of this Agreement (the "Merger");
WHEREAS, for United States federal income tax purposes, it is
intended that the Merger shall qualify as a tax-free reorganization within the
meaning of Section 368(a) of the Code;
WHEREAS, Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
WHEREAS, Parent and Merger Sub have required, as a condition to
their willingness to enter into this Agreement, that the Stockholders
contemporaneously enter into the Voting Agreement concurrently with the
execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements set forth herein, Parent, Merger Sub and
the Company hereby agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the
respective meanings set forth below:
"Adjusted Liberty Media Group Outstanding Interest Fraction": As
defined in the Company Charter.
"Adjusted TCI Ventures Group Outstanding Interest Fraction": As
defined in the Company Charter.
"Affiliate": As defined in Rule 12b-2 under the Exchange Act.
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"@Home": At Home Corporation, a Delaware corporation.
"@Home Class A Shares": Series A Common Stock, par value $.01
per share, of @Home.
"@Home Class B Shares": Series B Common Stock, par value $.01
per share, of @Home.
"@Home Shares": Collectively, @Home Class A Shares and @Home
Class B Shares.
"Authorization": Any consent, approval or authorization of,
expiration or termination of any waiting period requirement (including
pursuant to the HSR Act) by, or filing, registration, qualification,
declaration or designation with, any Governmental Body.
"Benefit Arrangement": As defined in Section 5.9(a).
"Capital Spending Plan": As defined in Section 7.1.
"Certificate of Merger": The certificate of merger with respect to
the merger of Merger Sub with and into the Company, containing the provisions
required by, and executed in accordance with, Section 251 of the DGCL.
"Certificates": Collectively, TCI Group Certificates, Liberty
Media Certificates and, if applicable, TCI Ventures Certificates.
"Claim": As defined in Section 7.7(a).
"Closing": The closing of the Merger.
"Closing Date": The date on which the Closing occurs.
"Code": The Internal Revenue Code of 1986, as amended, and all
regulations promulgated thereunder, as in effect from time to time.
"Committed Acquisition Shares": As defined in the Company
Charter.
"Company": Tele-Communications, Inc., a Delaware corporation.
"Company Charter": The Amended and Restated Certificate of
Incorporation of the Company, as amended to the date hereof and as it may be
further amended prior to the Effective Date with the consent of Parent
pursuant to Section 7.1.
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"Company Class A Preferred Stock": As defined in Section 5.6(c).
"Company Class B Junior Preferred Stock": As defined in Section
5.6(c).
"Company Common Stock": As defined in Section 5.6(a).
"Company Disclosure Statement": The disclosure statement, dated
the date of this Agreement, delivered by the Company to Parent.
"Company Employees": As defined in Section 7.12(d).
"Company Permits": As defined in Section 5.4.
"Company Preferred Stock": As defined in Section 5.6(a).
"Company Representatives": As defined in Section 7.6.
"Company SEC Reports": As defined in Section 5.12.
"Company Series Preferred Stock": As defined in Section 5.6(c).
"Company Stockholders Meeting": The stockholders meeting of the
Company in connection with the transactions contemplated hereby, including
any adjournments or postponements thereof.
"Confidentiality Agreement": The Nondisclosure Agreement, dated
as of May 26, 1998, between Parent and the Company.
"Contribution Agreement": As defined in Section 2.1(c).
"Control": With respect to any Person, the possession, direct or
indirect, of 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.
"Controlled Group Liability": As defined in Section 5.9(e).
"DGCL": The Delaware General Corporation Law.
"Effective Time": As defined in Section 2.3.
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"Employee Plan": As defined in Section 5.9(a).
"Employees": As defined in Section 5.9(a).
"ERISA": The Employee Retirement Income Security Act of 1974, as
amended, and all regulations promulgated thereunder, as in effect from time
to time.
"ERISA Affiliates": Any trade or business, whether or not
incorporated, that is treated as a single employer with the Company or any of
its Subsidiaries under Section 414(b) or (c) of the Code.
"Excess Parent Common Shares": As defined in Section 4.3(a).
"Excess Parent Liberty Tracking (Liberty) Shares": As defined in
Section 4.3(b).
"Excess Parent Liberty Tracking (Ventures) Shares": As defined
in Section 4.3(c).
"Exchange Act": The Securities Exchange Act of 1934, as amended.
"Exchange Agent": As defined in Section 4.2(a).
"Exchange Fund": The TCI Group Exchange Fund, the Liberty Media
Exchange Fund or, if applicable, the TCI Ventures Exchange Fund.
"Exchange Ratios": The TCI Group Exchange Ratios, the Liberty
Media Exchange Ratios and, if applicable, the TCI Ventures Exchange Ratios.
"Executive Agreements": As defined in Section
7.12(a).
"FCC": The Federal Communications Commission.
"FCC Consent": Actions by the FCC granting its consent to the
transfer of control of the FCC Licenses in connection with the consummation of
the transactions contemplated hereby.
"FCC Licenses": All licenses, permits, construction permits and
other authorizations issued by the FCC in connection with the business and
operations of the Company and its Subsidiaries.
"Fractional Fund": The Fractional Parent Common Fund, or
the Fractional Parent Liberty Tracking (Liberty) Fund or,
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if applicable, the Fractional Parent Liberty Tracking (Ventures) Fund.
"Fractional Parent Common Fund": As defined in Section 4.3(a).
"Fractional Parent Liberty Tracking (Liberty) Fund": As defined
in Section 4.3(b).
"Fractional Parent Liberty Tracking (Ventures) Fund": As defined
in Section 4.3(c).
"Governmental Body": Any federal, state, municipal, political
subdivision or other governmental department, court, commission, board,
bureau, agency or instrumentality, domestic or foreign.
"Group": The TCI Group, the Liberty Media Group or the TCI
Ventures Group.
"HSR Act": The Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Indemnified Parties": As defined in Section 7.7(a).
"Intellectual Property": All industrial and intellectual property
rights, including Proprietary Technology, patents, patent applications,
trademarks, trademark applications and registrations, service marks, service
mark applications and registrations, copyrights, know-how, licenses, trade
secrets, proprietary processes, formulae and customer lists.
"knowledge": With respect to the Company, the actual knowledge of
any executive officer (determined in accordance with Rule 16a-1(f) under the
Exchange Act as in effect on the date hereof) of the Company and, with respect
to Parent or Merger Sub, the actual knowledge of any executive officer
(determined in accordance with Rule 16a-1(f) under the Exchange Act as in effect
on the date hereof) of Parent or Merger Sub, as the case may be.
"Law": Any foreign or domestic law, statute, code, ordinance,
rule, regulation promulgated, or order, judgment, writ, stipulation, award,
injunction or decree entered by a Governmental Body.
"Liberty Media Corporation": Liberty Media Corporation, a
Delaware corporation.
"Liberty/Ventures Group": Collectively, the TCI Ventures Group
and the Liberty Media Group.
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"Liberty Group LLC": As defined in the Contribution Agreement.
"Liberty Media Certificates": As defined in Section 4.2(b).
"Liberty Media Class A Exchange Ratio": As defined in Section
4.1(b).
"Liberty Media Class A Stock": Series A Liberty Media Group
Common Stock, par value $1.00 per share, of the Company.
"Liberty Media Class B Exchange Ratio": As defined in Section
4.1(b).
"Liberty Media Class B Stock": Series B Liberty Media Group
Common Stock, par value $1.00 per share, of the Company.
"Liberty Media Exchange Fund": As defined in Section 4.2(a).
"Liberty Media Exchange Ratios": As defined in Section 4.1(b).
"Liberty Media Group": The assets, liabilities and businesses of
the Company known as "Liberty Media Group" (as represented by the Liberty
Media Tracking Shares).
"Liberty Media Group Outstanding Interest Fraction": As defined
in the Company Charter.
"Liberty Media Members": Those Subsidiaries of the Company whose
assets, businesses and results of operations are attributed to the Liberty
Media Group (assuming that the Restructuring had occurred as contemplated by
Section 2.1).
"Liberty Media Option": As defined in Section 4.1(f).
"Liberty Media Share Consideration": As defined in Section
4.1(d).
"Liberty Media Tracking Shares": Collectively, shares of Liberty
Media Class A Stock and shares of Liberty Media Class B Stock.
"Material Adverse Effect": With respect to Parent, a material
adverse effect on the business, properties, operations or financial condition
of Parent and its Subsidiaries taken as a whole, other than any such effect
arising out of or resulting
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from general economic conditions or from changes in or affecting the long-
distance telecommunications industry generally With respect to the Company, a
material adverse effect on the business, properties, operations or financial
condition of the Company and its Subsidiaries taken as a whole, other than any
such effect arising out of or resulting from general economic conditions or from
changes in or affecting the cable television industry generally. With respect to
the TCI Group, a material adverse effect on the business, properties, operations
or financial condition of the TCI Group taken as a whole (and assuming that the
Restructuring had occurred as contemplated by Section 2.1), other than any such
effect arising out of or resulting from general economic conditions or from
changes in or affecting the cable television industry generally. With respect to
the Liberty/Ventures Group, a material adverse effect on the business,
properties, operations or financial condition of the Liberty Media Group and the
TCI Ventures Group, taken as a whole, other than any such effect arising out of
or resulting from general economic conditions or from changes in or affecting
the cable television programming industry generally.
"Merger": As defined in the Recitals.
"Merger Sub": Italy Merger Corp., a Delaware corporation and a
direct wholly owned subsidiary of Parent.
"NDTC": The assets and business of the Company's National
Digital Television Center.
"Number of Shares Issuable with Respect to the Liberty Media
Group Inter-Group Interest": As defined in the Company Charter.
"Number of Shares Issuable with Respect to the TCI Ventures Group
Inter-Group Interest": As defined in the Company Charter.
"NASDAQ": The Nasdaq Stock Market.
"NYSE": The New York Stock Exchange, Inc.
"Parent": AT&T Corp., a New York corporation.
"Parent Charter": The Certificate of Incorporation of Parent, as
amended to the date hereof.
"Parent Charter Amendment": The proposed amendment to the Parent
Charter set forth as Exhibit A hereto and approved by Parent's Board of
Directors pursuant to this Agreement.
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"Parent Common Option": As defined in Section 4.1(f).
"Parent Common Shares": Shares of common stock, par value $1.00
per share, of Parent.
"Parent Disclosure Statement": The disclosure statement, dated
the date of this Agreement, delivered by Parent to the Company.
"Parent Liberty Class A Stock": The Class A Liberty Group Common
Stock, par value $1.00 per share, of Parent having the terms set forth in the
Parent Charter Amendment.
"Parent Liberty Class B Stock": The Class B Liberty Group Common
Stock, par value $1.00 per share, of Parent having the terms set forth in the
Parent Charter Amendment.
"Parent Liberty Group": The Liberty Group as defined in the
Parent Charter Amendment.
"Parent Liberty Tracking Option": As defined in Section 4.1(f).
"Parent Liberty Tracking Shares": Collectively, the shares of
Parent Liberty Class A Stock and the shares of Parent Liberty Class B Stock.
"Parent Permits": As defined in Section 6.4.
"Parent Representatives": As defined in Section 7.6.
"Parent SEC Reports": As defined in Section 6.12(a).
"Parent Shares": Collectively, the Parent Common Shares and the
Parent Liberty Tracking Shares.
"Parent Stockholders Meeting": The stockholders meeting of
Parent in connection with the transactions contemplated hereby, including any
adjournments or postponements thereof.
"Permit": Any franchise, grant, authorization, license, permit,
easement, variance, exception, consent, certificate, approval, clearance or
order of any Governmental Body.
"Person": Any individual or corporation, company, partnership,
trust, incorporated or unincorporated association, joint venture or other
entity of any kind.
"Proprietary Technology": All proprietary processes, formulae,
inventions, trade secrets, know-how, development
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tools and other proprietary rights used by the Company and its Subsidiaries or
Parent and its Subsidiaries, as the case may be, pertaining to any product,
software or service manufactured, marketed, licensed or sold by the Company and
its Subsidiaries or Parent and its Subsidiaries, as the case may be, in the
conduct of their business or used, employed or exploited in the development,
license, sale, marketing, distribution or maintenance thereof, and all
documentation and media constituting, describing or relating to the above,
including manuals, memoranda, know-how, notebooks, software, records and
disclosures.
"Proxy Statement": The joint proxy statement to be sent to
stockholders of Parent and of the Company to solicit proxies for use at the
Stockholders Meetings.
"Registration Statement": As defined in Section 7.4.
"Restructuring": As defined in Section 2.1(d).
"Rule 145 Affiliate": As defined in Section 7.9.
"SEC": The Securities and Exchange Commission.
"Securities Act": The Securities Act of 1933, as amended.
"Series C-Liberty Media Conversion Rate": 56.25 per share.
"Series C-Liberty Media Exchange Ratio": As defined in Section
4.1(i).
"Series C-Liberty Media Preferred Stock": As defined in Section
5.6(c).
"Series C Preferred Stock": As defined in Section 5.6(c).
"Series C-TCI Group Preferred Conversion Rate": 132.86 per share.
"Series C-TCI Group Preferred Exchange Ratio": As defined in
Section 4.1(h).
"Series C-TCI Group Preferred Stock": As defined in Section
5.6(c).
"Series D Preferred Stock": As defined in Section 5.6(c).
"Series E Preferred Stock": As defined in Section 5.6(c).
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"Series F Preferred Stock": As defined in Section 5.6(c).
"Series G Conversion Rate": 1.19 per share.
"Series G Exchange Ratio": As defined in Section 4.1(j).
"Series G Preferred Stock": As defined in Section 5.6(c).
"Series H Conversion Rate": 0.590625 per share.
"Series H Exchange Ratio": As defined in Section 4.1(k).
"Series H Preferred Stock": As defined in Section 5.6(c).
"Series Preferred Exchange Ratios": Collectively, the Series
C-TCI Group Preferred Exchange Ratio, the Series C-Liberty Media Exchange
Ratio, the Series G Exchange Ratio and the Series H Exchange Ratio.
"Share Consideration": The TCI Group Share Consideration, the
Liberty Media Share Consideration or, if applicable, the TCI Ventures Share
Consideration.
"Shares": Collectively, the TCI Group Shares, the Liberty Media
Tracking Shares and the TCI Ventures Tracking Shares.
"Significant Subsidiary": As defined in Section 7.2(a).
"Sprint PCS Investment": The interests held by the Company in
the Sprint Spectrum partnerships.
"Stockholders": Collectively, Dr. John C. Malone and Leslie
Malone.
"Stockholders Meetings": The Company Stockholders Meeting and
the Parent Stockholders Meeting.
"Subsidiary": As to any Person, any other Person of which at least
(i) 50% of the equity and (ii) 50% of the voting interests are owned, directly
or indirectly, by such first Person; provided that, for purposes of the
covenants set forth in Article VII, references to Subsidiaries shall not include
any Person as to which such first Person's voting interests are subject to a
voting agreement, proxy, management contract or other arrangement as a result of
which such first Person does not Control such other Person.
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"Superior Proposal": As defined in Section 7.2(b).
"Surviving Corporation": The surviving corporation in the
Merger.
"Takeover Proposal": As defined in Section 7.2(a).
"Tax": As defined in Section 5.10(d).
"Tax Return": As defined in Section 5.10(d).
"Tax Sharing Agreement": The Tax Sharing Agreement, dated as of
October 1, 1997, by and among the Company, TCI Communications, Inc., Liberty
Media Corporation and TCI Ventures Group L.L.C.
"TCI Group": As defined in the Company Charter (assuming that
the Restructuring had occurred as contemplated by Section 2.1).
"TCI Group Class B Stock": Series B TCI Group Common Stock, par
value $1.00 per share, of the Company.
"TCI Group Certificates": As defined in Section 4.2(b).
"TCI Group Class A Exchange Ratio": As defined in Section 4.1(a).
"TCI Group Class A Stock": Series A TCI Group Common Stock, par
value $1.00 per share, of the Company.
"TCI Group Class B Exchange Ratio": As defined in Section 4.1(a).
"TCI Group Class B Stock": Series B TCI Group Common Stock, par
value $1.00 per share, of the Company.
"TCI Group Exchange Fund": As defined in Section 4.2(a).
"TCI Group Exchange Ratios": As defined in Section 4.1(a).
"TCI Group Members": Those Subsidiaries of the Company whose assets,
businesses and results of operations are attributed to the TCI Group (assuming
that the Restructuring had occurred as contemplated by Section 2.1).
"TCI Group Option": As defined in Section 4.1(f).
"TCI Group Share Consideration": As defined in Section 4.1(d).
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"TCI Group Shares": Collectively, the shares of TCI Group Class
A Stock and the shares of TCI Group Class B Stock.
"TCI Ventures Certificates": As defined in Section 4.2(b).
"TCI Ventures Class A Exchange Ratio": As defined in Section
4.1(c).
"TCI Ventures Class A Stock": Series A TCI Ventures Group Common
Stock, par value $1.00 per share, of the Company.
"TCI Ventures Class B Exchange Ratio": As defined in Section
4.1(c).
"TCI Ventures Class B Stock": Series B TCI Ventures Group Common
Stock, par value $1.00 per share, of the Company.
"TCI Ventures Exchange Fund": As defined in Section 4.2(a).
"TCI Ventures Exchange Ratios": As defined in Section 4.1(c).
"TCI Ventures Group": The assets, liabilities and businesses of
the Company known as "TCI Ventures Group" (as represented by the TCI Ventures
Tracking Shares).
"TCI Ventures Group Outstanding Interest Fraction": As defined
in the Company Charter.
"TCI Ventures Members": Those Subsidiaries of the Company whose
assets, businesses and results of operations are attributed to the TCI Ventures
Group (assuming that the Restructuring had occurred as contemplated by Section
2.1).
"TCI Ventures Option": As defined in Section 4.1(f).
"TCI Ventures Group Preferred Interest": As defined in the
Company Charter.
"TCI Ventures Share Consideration": As defined in Section 4.1(d).
"TCI Ventures Tracking Shares": Collectively, shares of TCI
Ventures Class A Stock and shares of TCI Ventures Class B Stock.
"TCG": Teleport Communications Group Inc., a Delaware
corporation.
"UA Notes": As defined in Section 5.6(e).
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"Voting Agreement": The Voting Agreement, dated the date hereof,
by and among Parent and each of the Stockholders.
"Westmarc Preferred": As defined in Section 7.20(b).
"Wholly Owned Subsidiary": As to any Person, a Subsidiary of
such Person 100% of the equity and voting interest in which is owned,
directly or indirectly, by such Person.
ARTICLE II
THE RESTRUCTURING AND THE MERGER
2.1. The Restructuring. (a) Subject to the terms and conditions of
this Agreement, prior to the Effective Time, and provided that all of the
conditions set forth in Article VIII to be satisfied prior to the Closing have
been satisfied or duly waived, the Company shall take the actions set forth in
Schedule 2.1(a). By virtue of the transfers contemplated by Schedule 2.1(a), TCI
Group will obtain ownership of, among other things, (i) 31,060,000 @Home Class A
Shares and 15,400,000 @Home Class B Shares (representing all of the shares of
capital stock of @Home owned directly or indirectly by the Company), together
with any dividends, distributions or other consideration whatsoever paid or
distributed in respect thereof after the date of this Agreement, (ii) 1,011,528
shares of Class A common stock of TCG and 48,779,388 shares of Class B common
stock of TCG (representing all of the shares of capital stock of TCG owned
directly or indirectly by the Company), together with any dividends,
distributions or other consideration whatsoever paid or distributed in respect
thereof or in exchange therefor after the date of this Agreement, and (iii) all
of the assets of or outstanding equity interests in NDTC, together with any
dividends, distributions or other consideration whatsoever paid or distributed
in respect thereof after the date of this Agreement. The actions contemplated by
Schedule 2.1(a) will be effected on a tax-free basis to the extent feasible,
without creating any deferred intercompany gain or other tax consequences, in a
manner reasonably satisfactory to Parent.
(b) To the extent practicable prior to the Effective Time, and
subject to the reasonable satisfaction of Parent with the form and substance of
such transactions, the Company shall use its reasonable best efforts to cause
direct or indirect TCI Group Subsidiaries owning TCI Group Shares to merge into
the Company (or their respective parent corporations) or otherwise to liquidate
so that such TCI Group Shares are not outstanding for federal income tax
purposes at the Effective Time, provided that any such merger or liquidation is
tax-free.
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(c) At or prior to the Effective Time, to the extent the Board of
Directors of the Company so determines, the Company may, but shall not be
required to: (i) amend and restate the certificate of incorporation and bylaws
of Liberty Media Corporation to be in substantially the form set forth in
Schedule 2.1(c)(i), (ii) cause Liberty Media Corporation to enter into a
Contribution Agreement in the form set forth in Schedule 2.1(c)(ii) with the
other parties set forth in such agreement (the "Contribution Agreement"), and
(iii) create the Liberty Group LLC pursuant to an LLC Agreement in the form set
forth in Schedule 2.1(c)(iii). In the event the Company takes the foregoing
actions, the rights and obligations of Liberty Media Corporation under the
agreement contemplated by Section 7.18 shall be assignable to the Liberty Group
LLC. In the event the Company causes Liberty Media Corporation to execute the
Contribution Agreement, Parent will execute and deliver a letter at the Closing
in the form attached as Schedule 2.1(c)(iv).
(d) Subject to the terms and conditions of this Agreement, prior to
the Effective Time, provided that all of the conditions set forth in Article
VIII to be satisfied prior to the Closing have been satisfied or duly waived,
the Company and its appropriate Affiliates shall, on a tax-free basis, make such
other transfers of assets and businesses, and assumptions of liabilities, if
any, as are reasonably necessary in order to cause the representations and
warranties in Section 5.17 to be true and correct in all material respects.
The actions described in this Section 2.1 are collectively referred to as the
"Restructuring."
2.2. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time, Merger Sub shall be merged with and into the
Company in accordance with the provisions of Section 251 of the DGCL and with
the effect provided in Sections 259 and 261 of the DGCL. The separate corporate
existence of Merger Sub shall thereupon cease and the Company shall be the
Surviving Corporation and shall continue its corporate existence as a Subsidiary
of Parent and shall continue to be governed by the laws of the State of
Delaware. At the election of Parent, any direct Wholly Owned Subsidiary of
Parent with respect to which the representation and warranty set forth in
Section 6.15 is true and correct may be substituted for Merger Sub as a
constituent corporation in the Merger by an appropriate amendment to this
Agreement complying with the provisions of the DGCL.
2.3. Effective Time. The Merger shall become effective on the date
and at the time (the "Effective Time") that the Certificate of Merger shall have
been accepted for filing by the Secretary of State of the State of Delaware (or
such later date and time as may be specified in the Certificate of
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Merger by mutual agreement of Parent, Merger Sub and the Company), which shall
be on the Closing Date or as soon as practicable thereafter.
2.4. Closing. Subject to the fulfillment or waiver of the conditions
set forth in Article VIII, the Closing shall take place (a) at the offices of
Wachtell, Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York, at
10:00 a.m. on the earliest practicable date (but no later than the fifth
business day) following the satisfaction or waiver of the conditions set forth
in Article VIII (other than those conditions to be satisfied or waived at the
Closing) or (b) at such other place and/or time and/or on such other date as
Parent, Merger Sub and the Company may agree.
ARTICLE III
TERMS OF MERGER
3.1. Certificate of Incorporation. At the Effective Time, the
Company Charter shall be amended pursuant to the Certificate of Merger to be
identical to the Certificate of Incorporation of Merger Sub in effect
immediately prior to the Effective Time, except that Article FIRST thereof shall
read as follows: "The name of the Corporation (which is hereinafter called the
"Corporation") is Tele-Communications, Inc." Such Company Charter as so amended
shall be the Certificate of Incorporation of the Surviving Corporation, until
duly amended in accordance with the terms thereof and of the DGCL.
3.2. The By-Laws. The By-Laws of the Company shall be amended as of
the Effective Time to be identical to the By-Laws of Merger Sub immediately
prior to the Effective Time and, in such amended form, shall be the By-Laws of
the Surviving Corporation, until duly amended in accordance with the terms
thereof, of the Certificate of Incorporation of the Surviving Corporation and of
the DGCL.
3.3. Directors. The directors of the Company at the Effective Time
shall, from and after the Effective Time, be the directors 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 By-Laws.
3.4. Officers. The officers of the Company at the Effective Time
shall, from and after the Effective Time, be the 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
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the Surviving Corporation's Certificate of Incorporation and By-Laws.
ARTICLE IV
SHARE CONSIDERATION; CONVERSION OR
CANCELLATION OF SHARES IN THE MERGER
4.1. Share Consideration; Conversion or Cancellation of Shares in
the Merger. Subject to the provisions of this Article IV, at the Effective Time,
by virtue of the Merger and without any action on the part of the holders
thereof, the shares of the constituent corporations shall be converted or
cancelled as follows:
(a) Each share of TCI Group Class A Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive .7757 of a Parent Common Share (the "TCI Group A Exchange
Ratio") and each share of TCI Group Class B Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive .8533 of a Parent Common Share (the "TCI Group B Exchange
Ratio" and, together with the TCI Group A Exchange Ratio, the "TCI Group
Exchange Ratios"). If, prior to the Effective Time, Parent should split or
combine the Parent Common Shares, or pay a stock dividend or other stock
distribution in Parent Common Shares, or otherwise effect any transaction
that changes the Parent Common Shares into any other securities (including
securities of another corporation), or make any other dividend or
distribution on the Parent Common Shares (other than normal quarterly cash
dividends as the same may be adjusted from time to time in the ordinary
course consistent with past practice), then the TCI Group Exchange Ratios
and the terms of the foregoing exchanges will be appropriately adjusted to
reflect such split, combination, transaction, dividend or other
distribution or change.
(b) Each share of Liberty Media Class A Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive one share of Parent Liberty Class A Stock (the "Liberty Media
Class A Exchange Ratio") and each share of Liberty Media Class B Stock
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive one share of Parent Liberty Class B
Stock (the "Liberty Media Class B Exchange Ratio" and, together with the
Liberty Media Class A Exchange Ratio, the "Liberty Media Exchange
Ratios"). If, prior to the Effective Time, Parent should effect any
transaction that changes the Parent Common Shares into the securities of
another corporation, the
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Liberty Media Exchange Ratios and the terms of the foregoing exchanges
will be appropriately adjusted to provide for the issuance of shares of
such other corporation having terms identical to the appropriate series of
Parent Liberty Tracking Shares.
(c) To the extent that any TCI Ventures Tracking Shares remain
outstanding as of the Effective Time, each share of TCI Ventures Class A
Stock issued and outstanding immediately prior to the Effective Time shall
be converted into the right to receive .52 of a share of Parent Liberty
Class A Stock (the "TCI Ventures Class A Exchange Ratio") and each share
of TCI Ventures Class B Stock issued and outstanding immediately prior to
the Effective Time shall be converted into the right to receive .52 of a
share of Parent Liberty Class B Stock (the "TCI Ventures Class B Exchange
Ratio" and, together with the TCI Ventures Class A Exchange Ratio, the
"TCI Ventures Exchange Ratios"); provided that the Company may, in its
discretion, adjust the TCI Ventures Exchange Ratios as it deems
appropriate to reflect the relative values of the TCI Ventures Group and
the Liberty Media Group. If, prior to the Effective Time, Parent should
effect any transaction that changes the Parent Common Shares into the
securities of another corporation, the Liberty Media Exchange Ratios and
the terms of the foregoing exchanges will be appropriately adjusted to
provide for the issuance of shares of such other corporation having terms
identical to the appropriate series of Parent Liberty Tracking Shares.
(d) All Shares converted into the right to receive Parent Common
Shares or Parent Liberty Tracking Shares pursuant to this Section 4.1
shall cease to be outstanding, shall be canceled and retired and shall
cease to exist, and each holder of a certificate representing any such
Shares shall thereafter cease to have any rights with respect to such
Shares, except the right to receive for each of the Shares, upon the
surrender of such certificate in accordance with Section 4.2, (i) in the
case of each series of TCI Group Shares, the amount of Parent Common
Shares with respect to each such series specified above (the "TCI Group
Share Consideration") and cash in lieu of fractional Parent Common Shares
as contemplated by Section 4.3, (ii) in the case of Liberty Media Tracking
Shares, the amount of Parent Liberty Tracking Shares specified above (the
"Liberty Media Share Consideration") and cash in lieu of fractional Parent
Liberty Tracking Shares as contemplated by Section 4.3 and (iii) in the
case of TCI Ventures Tracking Shares, if applicable, the amount of Parent
Liberty Tracking Shares specified above (the "TCI Ventures Share
Consideration") and cash in lieu of fractional Parent Liberty Tracking
Shares as contemplated by Section 4.3.
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(e) Each share of Common Stock, par value $0.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time shall
be converted into one share of common stock, par value $0.01 per share, of
the Surviving Corporation.
(f) (i) Each of the then outstanding stock options, if any, to
purchase TCI Group Shares (each, a "TCI Group Option") issued by the
Company pursuant to any stock option or similar plan of the Company, and
any non-plan options to acquire TCI Group Shares set forth in Section 5.6
of the Company Disclosure Statement issued by the Company pursuant to an
option agreement or otherwise issued by the Company, shall, by virtue of
the Merger, and without any further action on the part of any holder
thereof, be assumed by Parent and converted into a option (a "Parent
Common Option") to purchase that number of Parent Common Shares determined
by multiplying the number of TCI Group Shares subject to such TCI Group
Option at the Effective Time by the appropriate TCI Group Exchange Ratio,
at an exercise price per Parent Common Share equal to the exercise price
per share of such TCI Group Option immediately prior to the Effective Time
divided by such TCI Group Exchange Ratio, rounded down to the nearest
whole cent. If the foregoing calculation results in an assumed TCI Group
Option being exercisable for a fraction of a Parent Common Share, then the
number of Parent Common Shares subject to such option shall be rounded up
to the nearest whole number of shares, with no cash being payable for such
fractional share. The terms and conditions of each Parent Common Option
shall otherwise remain as set forth in the TCI Group Option converted into
such Parent Common Option.
(ii) Each of the then outstanding stock options, if any, to purchase
Liberty Media Tracking Shares (each, a "Liberty Media Option") issued by
the Company pursuant to any stock option or similar plan of the Company,
and any non-plan options to acquire Liberty Media Tracking Shares set
forth in Section 5.6 of the Company Disclosure Statement issued by the
Company pursuant to an option agreement or otherwise issued by the
Company, shall, by virtue of the Merger, and without any further action on
the part of any holder thereof, be assumed by Parent and converted into an
option (a "Parent Liberty Tracking Option") to purchase a number of Parent
Liberty Tracking Shares equal to the number of Liberty Media Tracking
Shares subject to such Liberty Media Option at the Effective Time, at an
exercise price per Parent Liberty Tracking Share equal to the exercise
price per share of such Liberty Media Option immediately prior to the
Effective Time. The terms and conditions of each Parent Liberty Tracking
Option shall otherwise remain as set forth in the Liberty Media Option
converted into such Parent Liberty Tracking Option.
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(iii) Each of the then outstanding stock options, if any, to
purchase TCI Ventures Tracking Shares (each, a "TCI Ventures Option")
issued by the Company pursuant to any stock option or similar plan of the
Company, and any non-plan options to acquire TCI Ventures Tracking Shares
set forth in Section 5.6 of the Company Disclosure Statement issued by the
Company pursuant to an option agreement or otherwise issued by the
Company, shall, by virtue of the Merger, and without any further action on
the part of any holder thereof, be assumed by Parent and converted into a
Parent Liberty Tracking Option to purchase that number of Parent Liberty
Tracking Shares determined by multiplying the number of TCI Ventures
Tracking Shares subject to such TCI Ventures Option at the Effective Time
by the appropriate TCI Ventures Exchange Ratio, at an exercise price per
Parent Liberty Tracking Share equal to the exercise price per share of
such TCI Ventures Option immediately prior to the Effective Time divided
by such TCI Ventures Exchange Ratio, rounded down to the nearest whole
cent. If the foregoing calculation results in an assumed TCI Ventures
Option being exercisable for a fraction of a Parent Liberty Tracking
Share, then the number of Parent Liberty Tracking Shares subject to such
option shall be rounded up to the nearest whole number of shares, with no
cash being payable for such fractional share. The terms and conditions of
each Parent Liberty Tracking Option shall otherwise remain as set forth in
the TCI Ventures Option converted into such Parent Liberty Tracking
Option.
(iv) The adjustment provided herein with respect to any options
which are "incentive stock options" (as defined in Section 422 of the
Code) shall be and is intended to be effected in a manner which is
consistent with Section 424(a) of the Code.
(v) All restricted Shares granted pursuant to any Employee Plan or
Benefit Arrangement, and all individual awards of restricted Shares not
granted pursuant to any Employee Plan or Benefit Arrangement, shall be
converted into restricted Parent Common Shares or Parent Liberty Tracking
Shares, as the case may be, pursuant to this Section 4.1 and will remain
subject to the same restrictions applicable to such restricted Shares
immediately prior to the Effective Time.
(vi) The Company shall take all action necessary to provide that all
outstanding awards of any type granted pursuant to any Employee Plan or
Benefit Arrangement, and all outstanding individual awards not granted
pursuant to any Employee Plan or Benefit Arrangement, will not vest or
become exercisable on an accelerated basis in connection
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with the Merger and will not terminate if not exercised prior to the
Closing Date.
(g) Each share of Company Class B Junior Preferred Stock issued and
outstanding immediately prior to the Effective Time, other than any shares
with respect to which appraisal rights are perfected under the DGCL, shall
remain outstanding in the Merger as one share of Class B Junior Preferred
Stock of the Surviving Corporation.
(h) Each share of Series C-TCI Group Preferred Stock issued and
outstanding immediately prior to the Effective Time, other than any shares
with respect to which appraisal rights are perfected under the DGCL, shall
be converted into the right to receive a number of Parent Common Shares
equal to the product of (i) the Series C-TCI Group Preferred Conversion
Rate, and (ii) the TCI Group A Exchange Ratio (the "Series C-TCI Group
Preferred Exchange Ratio").
(i) Each share of Series C-Liberty Media Preferred Stock issued and
outstanding immediately prior to the Effective Time shall be converted
into the right to receive a number of shares of Parent Liberty Class A
Stock equal to the product of (i)the Series C-Liberty Media Conversion
Rate, and (ii) the Liberty Media Class A Exchange Ratio (the "Series
C-Liberty Media Exchange Ratio").
(j) Each share of Series G Preferred Stock issued and outstanding
immediately prior to the Effective Time, other than any shares with
respect to which appraisal rights are perfected under the DGCL, shall be
converted into the right to receive a number of Parent Common Shares equal
to the product of (i) the Series G Conversion Rate, and (ii) the TCI Group
A Exchange Ratio (the "Series G Preferred Ratio").
(k) Each share of Series H Preferred Stock issued and outstanding
immediately prior to the Effective Time shall be converted into the right
to receive a number of shares of Parent Liberty Class A Stock equal to the
product of (i)the Series H Conversion Rate, and (ii) the Liberty Media
Class A Exchange Ratio (the "Series H Preferred Ratio").
(l) If, prior to the Effective Time, Parent should split or combine
the Parent Common Shares, or pay a stock dividend or other stock
distribution in Parent Common Shares, or otherwise effect any transaction
that changes the Parent Common Shares into any other securities (including
securities of another corporation), or make any other dividend or
distribution on the Parent Common Shares (other than normal quarterly cash
dividends as the same
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may be adjusted from time to time in the ordinary course consistent with
past practice), the Series Preferred Exchange Ratios and the terms of the
exchanges described in Sections 4.1(h) through (k) will be appropriately
adjusted to provide for the issuance of shares of such other corporation
having terms substantially identical to the Parent Common Shares or
identical to the appropriate series of Parent Liberty Tracking Shares, as
appropriate.
4.2. Payment for Shares in the Merger. The manner of making payment
for Shares in the Merger shall be as follows:
(a) At the Effective Time, Parent shall make available to an
exchange agent selected by Parent and reasonably acceptable to the Company
(the "Exchange Agent"), (i) for the benefit of those Persons who
immediately prior to the Effective Time were the holders of TCI Group
Shares, a sufficient number of certificates representing Parent Common
Shares required to effect the delivery of the aggregate TCI Group Share
Consideration required to be issued pursuant to Section 4.1 (the
certificates representing Parent Common Shares comprising such aggregate
TCI Group Share Consideration being hereinafter referred to as the "TCI
Group Exchange Fund"), (ii) for the benefit of those Persons who
immediately prior to the Effective Time were the holders of Liberty Media
Tracking Shares, a sufficient number of certificates representing the
appropriate series of Parent Liberty Tracking Shares required to effect
the delivery of the aggregate Liberty Media Share Consideration required
to be issued pursuant to Section 4.1 (the certificates representing Parent
Liberty Tracking Shares comprising such aggregate Liberty Media Share
Consideration being hereinafter referred to as the "Liberty Media Exchange
Fund"), and (iii) if applicable, for the benefit of those Persons who
immediately prior to the Effective Time were the holders of TCI Ventures
Tracking Shares, a sufficient number of certificates representing the
appropriate series of Parent Liberty Tracking Shares required to effect
the delivery of the aggregate TCI Ventures Share Consideration required to
be issued pursuant to Section 4.1 (the certificates representing Parent
Liberty Tracking Shares comprising such aggregate TCI Ventures Share
Consideration being hereinafter referred to as the "TCI Ventures Exchange
Fund"). The Exchange Agent shall, pursuant to irrevocable instructions,
deliver the Parent Common Shares and the Parent Liberty Tracking Shares
contemplated to be issued pursuant to Section 4.1 and effect the sales
provided for in Section 4.3 out of the applicable Exchange Fund. The
Exchange Funds shall not be used for any other purpose.
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(b) (i) Promptly after the Effective Time, the Exchange Agent shall
mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding TCI Group
Shares (the "TCI Group Certificates") (1) a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the TCI Group Certificates shall pass, only upon proper delivery
of the TCI Group Certificates to the Exchange Agent) and (2) instructions
for use in effecting the surrender of the TCI Group Certificates for
payment therefor. Upon surrender of TCI Group Certificates for
cancellation to the Exchange Agent, together with such letter of
transmittal duly executed and any other required documents, the holder of
such TCI Group Certificates shall be entitled to receive for each of the
TCI Group Shares represented by such TCI Group Certificates the
appropriate TCI Group Share Consideration and the TCI Group Certificates
so surrendered shall forthwith be canceled. Until so surrendered, TCI
Group Certificates shall represent solely the right to receive the
appropriate TCI Group Share Consideration and any cash in lieu of
fractional Parent Common Shares as contemplated by Section 4.3 with
respect to each of the TCI Group Shares represented thereby. No dividends
or other distributions that are declared on the Parent Common Shares and
payable to the holders of record thereof after the Effective Time will be
paid to Persons entitled by reason of the Merger to receive Parent Common
Shares until such Persons surrender their TCI Group Certificates. Upon
such surrender, there shall be paid to the Person in whose name the Parent
Common Shares are issued any dividends or other distributions having a
record date after the Effective Time and payable with respect to such
Parent Common Shares between the Effective Time and the time of such
surrender. After such surrender, there shall be paid on the applicable
payment date, to the Person in whose name the Parent Common Shares are
issued, any dividends or other distributions on such Parent Common Shares,
as applicable, which shall have a record date after the Effective Time and
prior to such surrender and a payment date after such surrender. In no
event shall the Persons entitled to receive such dividends or other
distributions be entitled to receive interest on such dividends or other
distributions.
(ii) Promptly after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate or certificates which
immediately prior to the Effective Time represented outstanding Liberty
Media Tracking Shares (the "Liberty Media Certificates") (1) a form of
letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Liberty Media Certificates
shall pass, only upon proper delivery of the Liberty Media Certificates to
the
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Exchange Agent) and (2) instructions for use in effecting the
surrender of the Liberty Media Certificates for payment therefor. Upon
surrender of Liberty Media Certificates for cancellation to the Exchange
Agent, together with such letter of transmittal duly executed and any
other required documents, the holder of such Liberty Media Certificates
shall be entitled to receive for each of the Liberty Media Tracking Shares
represented by such Liberty Media Certificates the appropriate Liberty
Media Share Consideration and the Liberty Media Certificates so
surrendered shall forthwith be canceled. Until so surrendered, Liberty
Media Certificates shall represent solely the right to receive the
appropriate Liberty Media Share Consideration and any cash in lieu of
fractional Parent Liberty Tracking Shares as contemplated by Section 4.3
with respect to each of the Liberty Media Tracking Shares represented
thereby. No dividends or other distributions that are declared on the
Parent Liberty Tracking Shares and payable to the holders of record
thereof after the Effective Time will be paid to Persons entitled by
reason of the Merger to receive Parent Liberty Tracking Shares until such
Persons surrender their Liberty Media Certificates. Upon such surrender,
there shall be paid to the Person in whose name the Parent Liberty
Tracking Shares are issued any dividends or other distributions having a
record date after the Effective Time and payable with respect to such
Parent Liberty Tracking Shares between the Effective Time and the time of
such surrender. After such surrender, there shall be paid on the
applicable payment date, to the Person in whose name the Parent Liberty
Tracking Shares are issued, any dividends or other distributions on such
Parent Liberty Tracking Shares, as applicable, which shall have a record
date after the Effective Time and prior to such surrender and a payment
date after such surrender. In no event shall the Persons entitled to
receive such dividends or other distributions be entitled to receive
interest on such dividends or other distributions.
(iii) Promptly after the Effective Time, the Exchange Agent
shall mail to each holder of record, if any, of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding TCI Ventures Tracking Shares (the "TCI Ventures Certificates")
(1) a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the TCI Ventures
Certificates shall pass, only upon proper delivery of the TCI Ventures
Certificates to the Exchange Agent) and (2) instructions for use in
effecting the surrender of the TCI Ventures Certificates for payment
therefor. Upon surrender of TCI Ventures Certificates for cancellation to
the Exchange Agent, together with such letter of transmittal duly executed
and any
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other required documents, the holder of such TCI Ventures Certificates
shall be entitled to receive for each of the TCI Ventures Tracking Shares
represented by such TCI Ventures Certificates the appropriate TCI Ventures
Share Consideration and the TCI Ventures Certificates so surrendered shall
forthwith be canceled. Until so surrendered, TCI Ventures Certificates
shall represent solely the right to receive the appropriate TCI Ventures
Share Consideration and any cash in lieu of fractional Parent Liberty
Tracking Shares as contemplated by Section 4.3 with respect to each of the
TCI Ventures Tracking Shares represented thereby. No dividends or other
distributions that are declared on the Parent Liberty Tracking Shares and
payable to the holders of record thereof after the Effective Time will be
paid to Persons entitled by reason of the Merger to receive Parent Liberty
Tracking Shares until such Persons surrender their TCI Ventures
Certificates. Upon such surrender, there shall be paid to the Person in
whose name the Parent Liberty Tracking Shares are issued any dividends or
other distributions having a record date after the Effective Time and
payable with respect to such Parent Liberty Tracking Shares between the
Effective Time and the time of such surrender. After such surrender, there
shall be paid on the applicable payment date, to the Person in whose name
the Parent Liberty Tracking Shares are issued, any dividends or other
distributions on such Parent Liberty Tracking Shares, as applicable, which
shall have a record date after the Effective Time and prior to such
surrender and a payment date after such surrender. In no event shall the
Persons entitled to receive such dividends or other distributions be
entitled to receive interest on such dividends or other distributions.
(iv) If any cash or any certificate representing Parent Common
Shares or Parent Liberty Tracking Shares is to be paid to or issued in a
name other than that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the
Certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer and that the Person requesting such exchange
shall pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of certificates for such Parent Common Shares or
Parent Liberty Tracking Shares, as applicable, in a name other than that
of the registered holder of the Certificate surrendered, or shall
establish to the reasonable satisfaction of the Exchange Agent that such
tax has been paid or is not applicable. Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be liable to a
holder of Shares for any Parent Common Shares or Parent Liberty Tracking
Shares, as applicable, or dividends thereon or other distributions with
respect thereto
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or, in accordance with Section 4.3, proceeds of the sale of fractional
interests, delivered to a public official pursuant to applicable escheat
law. The Exchange Agent shall not be entitled to vote or exercise any
rights of ownership with respect to the Parent Common Shares or Parent
Liberty Tracking Shares held by it from time to time hereunder, except
that, subject to applicable escheat law, it shall receive and hold all
dividends or other distributions paid or distributed with respect to such
Parent Common Shares or Parent Liberty Tracking Shares, as applicable, for
the account of the Persons entitled thereto.
(c) Certificates surrendered for exchange by any Person constituting
a Rule 145 Affiliate of the Company shall not be exchanged for
certificates representing Parent Common Shares or Parent Liberty Tracking
Shares, as applicable, until Parent has received a written agreement from
such Person as provided in Section 7.9.
(d) Any portion of the applicable Exchange Fund and the applicable
Fractional Fund (and any dividends or other distributions with respect to
such portion of the applicable Exchange Fund) which remains unclaimed by
the former stockholders of the Company for one year after the Effective
Time shall be delivered to Parent, upon demand of Parent, and any former
stockholders of the Company shall thereafter look only to Parent for
payment of their claim for the applicable Share Consideration (and any
such dividends or other distributions) or for any cash in lieu of
fractional Parent Common Shares or Parent Liberty Tracking Shares, as
applicable.
(e) In the event that any Certificate has been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required
by the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as Parent may direct as indemnity against any claim that
may be made against it with respect to such Certificate, Parent will, in
exchange for such lost, stolen or destroyed Certificate, issue or cause to
be issued the number of Parent Common Shares or Parent Liberty Tracking
Shares, as applicable, and pay or cause to be paid any amounts deliverable
in respect thereof pursuant to this Article IV.
4.3. Fractional Shares. (a) No fractional Parent Common Shares shall
be issued in the Merger. In lieu of any such fractional securities, each holder
of TCI Group Shares who would otherwise have been entitled to a fraction of a
Parent Common Share upon surrender of TCI Group Certificates for exchange
pursuant to this Article IV will be paid an amount in cash (without interest)
equal to such holder's proportionate
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interest in the net proceeds from the sale or sales in the open market by the
Exchange Agent, on behalf of all such holders, of the aggregate fractional
Parent Common Shares issued pursuant to this Article IV. As soon as practicable
following the Effective Time, the Exchange Agent shall determine the excess of
(i) the number of full Parent Common Shares delivered to the Exchange Agent by
Parent over (ii) the aggregate number of full Parent Common Shares to be
distributed to holders of TCI Group Shares (such excess being herein called the
"Excess Parent Common Shares"). The Exchange Agent, as agent for the former
holders of TCI Group Shares, shall sell the Excess Parent Common Shares at the
prevailing prices on the NYSE. The sales of the Excess Parent Common Shares by
the Exchange Agent shall be executed on the NYSE through one or more member
firms of the NYSE and shall be executed in round lots to the extent practicable.
Parent shall pay all commissions, transfer taxes and other out-of-pocket
transaction costs, including the expenses and compensation of the Exchange
Agent, incurred in connection with such sale of Excess Parent Common Shares.
Until the net proceeds of such sale have been distributed to the former holders
of TCI Group Shares, the Exchange Agent will hold such proceeds in trust for
such former holders (the "Fractional Parent Common Fund"). As soon as
practicable after the determination of the amount of cash to be paid to former
holders of TCI Group Shares in lieu of any fractional interests, the Exchange
Agent shall make available in accordance with this Agreement such amounts to
such former holders.
(b) No fractional Parent Liberty Tracking Shares shall be issued in
the Merger to any former holder of Liberty Media Tracking Shares. In lieu of any
such fractional securities, each holder of Liberty Media Tracking Shares who
would otherwise have been entitled to a fraction of a Parent Liberty Tracking
Share upon surrender of Liberty Media Certificates for exchange pursuant to this
Article IV will be paid an amount in cash (without interest) equal to such
holder's proportionate interest in the net proceeds from the sale or sales in
the open market by the Exchange Agent, on behalf of all such holders, of the
aggregate fractional Parent Liberty Tracking Shares attributable to the Liberty
Media Tracking Shares and issued pursuant to this Article IV. As soon as
practicable following the Effective Time, the Exchange Agent shall determine the
excess of (i) the number of full Parent Liberty Tracking Shares delivered to the
Exchange Agent by Parent over (ii) the aggregate number of full Parent Liberty
Tracking Shares to be distributed to holders of Liberty Media Tracking Shares
(such excess being herein called the "Excess Parent Liberty Tracking (Liberty)
Shares"). The Exchange Agent, as agent for the former holders of Liberty Media
Tracking Shares, shall sell the Excess Parent Liberty Tracking (Liberty) Shares
at the prevailing prices on the NYSE (or on such other exchange or trading
system on which the Parent Liberty Tracking Shares are authorized). The sales of
the Excess Parent Liberty Tracking (Liberty) Shares by the
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Exchange Agent shall be executed in such manner as determined reasonably by the
Exchange Agent. Parent shall pay all commissions, transfer taxes and other
out-of-pocket transaction costs, including the expenses and compensation of the
Exchange Agent, incurred in connection with such sale of Excess Parent Liberty
Tracking (Liberty) Shares. Until the net proceeds of such sale have been
distributed to the former holders of Liberty Media Tracking Shares, the Exchange
Agent will hold such proceeds in trust for such former holders (the "Fractional
Parent Liberty Tracking (Liberty) Fund"). As soon as practicable after the
determination of the amount of cash to be paid to former holders of Liberty
Media Tracking Shares in lieu of any fractional interests, the Exchange Agent
shall make available in accordance with this Agreement such amounts to such
former holders.
(c) If applicable, no fractional Parent Liberty Tracking Shares
shall be issued in the Merger to any former holder of TCI Ventures Tracking
Shares. In lieu of any such fractional securities, each holder of TCI Ventures
Tracking Shares who would otherwise have been entitled to a fraction of a Parent
Liberty Tracking Share upon surrender of TCI Ventures Certificates for exchange
pursuant to this Article IV will be paid an amount in cash (without interest)
equal to such holder's proportionate interest in the net proceeds from the sale
or sales in the open market by the Exchange Agent, on behalf of all such
holders, of the aggregate fractional Parent Liberty Tracking Shares attributable
to the TCI Ventures Tracking Shares and issued pursuant to this Article IV. As
soon as practicable following the Effective Time, the Exchange Agent shall
determine the excess of (i) the number of full Parent Liberty Tracking Shares
delivered to the Exchange Agent by Parent over (ii) the aggregate number of full
Parent Liberty Tracking Shares to be distributed to holders of TCI Ventures
Tracking Shares (such excess being herein called the "Excess Parent Liberty
Tracking (Ventures) Shares"). The Exchange Agent, as agent for the former
holders of TCI Ventures Tracking Shares, shall sell the Excess Parent Liberty
Tracking (Ventures) Shares at the prevailing prices on the NYSE (or on such
other exchange or trading system on which the Parent Liberty Tracking Shares are
authorized). The sales of the Excess Parent Liberty Tracking (Ventures) Shares
by the Exchange Agent shall be executed in such manner as determined reasonable
by the Exchange Agent. Parent shall pay all commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and compensation
of the Exchange Agent, incurred in connection with such sale of Excess Parent
Liberty Tracking (Ventures) Shares. Until the net proceeds of such sale have
been distributed to the former holders of TCI Ventures Tracking Shares, the
Exchange Agent will hold such proceeds in trust for such former holders (the
"Fractional Parent Liberty Tracking (Ventures) Fund"). As soon as practicable
after the determination of the amount of cash to be paid to former holders of
TCI
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Ventures Tracking Shares in lieu of any fractional interests, the Exchange
Agent shall make available in accordance with this Agreement such amounts to
such former holders.
4.4. Transfer of Shares after the Effective Time. No transfers of
Shares shall be made on the stock transfer books of the Company after the close
of business on the day prior to the date of the Effective Time.
4.5. Treatment of Series F Preferred Stock. Prior to the Effective
Time, the Company shall take all action necessary either (a) to cause each share
of Series F Preferred Stock beneficially owned by it or any of its Subsidiaries
to be converted into 1,496.65 shares of TCI Group Class A Stock in accordance
with the terms of the Company Charter, or (b) to redeem all shares of Series F
Preferred Stock in exchange for an aggregate of 416,528,172 shares of TCI Group
Class A Stock, plus any additional shares of TCI Group Class A Stock issuable in
accordance with the Company Charter as a result of the accrual of dividends
thereon after the date hereof.
4.6. Company Series Preferred Stock. After the Effective Time,
Parent and the Surviving Corporation shall establish reasonable procedures to
facilitate the exchange of the Company Series Preferred Stock for Parent Common
Shares or Parent Liberty Tracking Shares as contemplated by Sections 4.1(g)
through (l). All shares of Company Series Preferred Stock converted into the
right to receive Parent Common Shares or Parent Liberty Tracking Shares pursuant
to Section 4.1 shall cease to be outstanding, shall be canceled and retired and
shall cease to exist, and each holder of a certificate representing any such
shares of Company Series Preferred Stock shall thereafter cease to have any
rights with respect to such shares of Company Series Preferred Stock, except the
right to receive therefor, upon the surrender of such certificate in accordance
with such procedures, the Parent Common Shares or Parent Liberty Tracking Shares
specified therein and cash in lieu of any fractional shares as reasonably
determined by the Surviving Corporation.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub
that, except as set forth in the Company Disclosure Statement:
5.1. Organization, Etc. of the Company. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has all
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requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now conducted and proposed by the Company to be
conducted. The Company is duly qualified and in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary and where the
failure to be so qualified or in good standing has or would have, individually
or in the aggregate, a Material Adverse Effect on the Company or on the TCI
Group.
5.2. Subsidiaries. Section 5.2 of the Company Disclosure Statement
contains a complete and accurate list of all of the Subsidiaries of the Company
(by Group) as of the date hereof. Each Subsidiary of the Company (a) is a
corporation or other legal entity duly organized, validly existing and (if
applicable) in good standing under the laws of the jurisdiction of its
organization and has all requisite corporate, partnership or similar power and
authority to own its properties and conduct its business and operations as
currently conducted, except where the failure to be duly organized, validly
existing and in good standing or to have such power and authority does not and
would not have, individually or in the aggregate, a Material Adverse Effect on
the Company or on the TCI Group, and (b) is duly qualified and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification necessary,
except where the failure to be so qualified or in good standing does not and
would not have, individually or in the aggregate, a Material Adverse Effect on
the Company or on the TCI Group.
5.3. Agreement. The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. This Agreement
and the consummation of the transactions contemplated hereby have been approved
by the Board of Directors of the Company and have been duly authorized by all
other necessary corporate action on the part of the Company, except for the
approval of the Company's stockholders contemplated by Section 7.3. This
Agreement has been duly executed and delivered by a duly authorized officer of
the Company and (assuming the due execution and delivery of this Agreement by
the other parties hereto) constitutes a valid and binding agreement of the
Company, enforceable against the Company in accordance with its terms. The Board
of Directors of the Company has approved the transactions contemplated by this
Agreement and the Voting Agreement, including the Merger, so as to render the
provisions of Section 203 of the DGCL inapplicable to the transactions
contemplated by this Agreement and to Parent and Merger Sub in connection with
this Agreement and the Voting Agreement. The Board of Directors of the Company
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has directed that this Agreement be submitted to the stockholders of the Company
for their approval. The affirmative approval, by vote or written consent, of the
holders of Shares representing a majority of the votes that may be cast by the
holders of all outstanding Shares (voting as a single class) is the only vote of
the holders of any class or series of capital stock of the Company necessary to
adopt this Agreement and approve the Merger.
5.4. Permits; Compliance. Each of the Company and its Subsidiaries
is in possession of all Permits from appropriate Governmental Bodies (including
the FCC) necessary for the Company or any of its Subsidiaries to own, lease and
operate its properties or to carry on their respective businesses as they are
now being conducted (the "Company Permits"), and all such Company Permits are
valid, and in full force and effect, except where the failure to have, or the
suspension or cancellation of, any of the Company Permits does not and would
not, individually or in the aggregate, (a) have a Material Adverse Effect on the
Company or on the TCI Group or (b) prevent or materially delay the consummation
of the Merger. No suspension or cancellation of any of the Company Permits is
pending or, to the knowledge of the Company, threatened, except where the
failure to have, or the suspension or cancellation of, any of the Company
Permits does not and would not, individually or in the aggregate, (x) have a
Material Adverse Effect on the Company or on the TCI Group or (y) prevent or
materially delay the consummation of the Merger. Neither the Company nor any of
its Subsidiaries is in conflict with, or in default or violation of, (i) any Law
applicable to the Company or any of its Subsidiaries or by which any property,
asset or operation of the Company or any of its Subsidiaries is bound or
affected or (ii) any Company Permits, except for such conflicts, defaults or
violations that do not and would not, individually or in the aggregate, (A) have
a Material Adverse Effect on the Company or on the TCI Group or (B) prevent or
materially delay the consummation of the Merger.
5.5. Opinion of the Company's Financial Advisor. The Board of
Directors of the Company has received the opinion, dated as of the date hereof,
of Donaldson, Lufkin & Jenrette Securities Corporation to the effect that the
Exchange Ratios are fair to the stockholders of the Company from a financial
point of view.
5.6. Capital Stock. (a) The authorized capital stock of the Company
consists of 3,602,375,096 shares, consisting of 3,550,000,000 shares of common
stock, par value $1.00 per share ("Company Common Stock"), and 52,375,096 shares
of preferred stock, par value $.01 per share ("Company Preferred Stock").
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(b) The authorized Company Common Stock consists of (1)
1,750,000,000 shares of TCI Group Class A Stock, (2) 150,000,000 shares of TCI
Group Class B Stock, (3) 750,000,000 shares of Liberty Media Class A Stock, (4)
75,000,000 shares of Liberty Media Class B Stock, (5) 750,000,000 shares of TCI
Ventures Class A Stock, and (6) 75,000,000 shares of TCI Ventures Class B Stock.
As of the close of business on April 30, 1998, there were issued and outstanding
(net of shares held in treasury and shares held by Subsidiaries all of the
common stock of which is beneficially owned by the Company): 472,207,363 shares
of TCI Group Class A Stock, 50,126,345 shares of TCI Group Class B Stock,
326,076,668 shares of Liberty Media Class A Stock, 31,745,757 shares of Liberty
Media Class B Stock, 377,114,654 shares of TCI Ventures Class A Stock and
45,367,134 shares of TCI Ventures Class B Stock. As of the close of business on
April 30, 1998, there were held in the treasury of the Company (including shares
held by Subsidiaries): 137,008,021 shares of TCI Group Class A Stock, 23,954,972
shares of TCI Group Class B Stock, 31,780,822 shares of Liberty Media Class A
Stock, 3,499,261 shares of Liberty Media Class B Stock, 61,450 shares of TCI
Ventures Class A Stock and 432,196 shares of TCI Ventures Class B Stock. Except
for one share of TCI Group Class A Stock owned by a Liberty Media Member, there
are no TCI Group Shares, shares of Company Class B Junior Preferred Stock,
Series C-TCI Group Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock or any other securities convertible into or exchangeable or exercisable
for TCI Group Shares held by any Liberty Media Member or TCI Ventures Member.
(c) The Company Preferred Stock consists of (1) 700,000 shares of
Class A Preferred Stock ("Company Class A Preferred Stock"), (2) 1,675,096
shares of Class B 6% Cumulative Redeemable Exchangeable Junior Preferred Stock
("Company Class B Junior Preferred Stock"), and (3) 50,000,000 shares of Series
Preferred Stock ("Company Series Preferred Stock"). Of the Company Series
Preferred Stock, 80,000 shares have been designated Convertible Preferred Stock,
Series C ("Series C Preferred Stock"), 70,575 shares have been designated
Convertible Preferred Stock, Series C-TCI Group ("Series C-TCI Group Preferred
Stock"), 70,575 shares have been designated Convertible Preferred Stock, Series
C-Liberty Media ("Series C-Liberty Media Preferred Stock"), 1,000,000 shares
have been designated Convertible Preferred Stock, Series D ("Series D Preferred
Stock"), 400,000 shares have been designated Redeemable Convertible Preferred
Stock, Series E ("Series E Preferred Stock"), 500,000 shares have been
designated Convertible Redeemable Participating Preferred Stock, Series F
("Series F Preferred Stock"), 7,259,380 shares have been designated Redeemable
Convertible TCI Group Preferred Stock, Series G ("Series G Preferred Stock"),
and 7,259,380 shares have been designated Redeemable Convertible Liberty Media
Group Common Stock, Series H ("Series H Preferred Stock"). As of the close
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of business on April 30, 1998, there were issued and outstanding no shares of
Company Class A Preferred Stock, 1,552,490 shares of Company Class B Junior
Preferred Stock, no shares of Series C Preferred Stock, 53,120 shares of Series
C-TCI Group Preferred Stock, 70,575 shares of Series C-Liberty Media Preferred
Stock, no shares of Series D Preferred Stock, no shares of Series E Preferred
Stock, 278,307 shares of Series F Preferred Stock, 6,547,294 shares of Series G
Preferred Stock and 6,567,794 shares of Series H Preferred Stock.
(d) All outstanding shares of Company Common Stock and Company
Preferred Stock are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock of the Company is entitled to
preemptive rights.
(e) As of March 31, 1998, there were no options, warrants or other
rights to acquire capital stock (or securities convertible into or exercisable
or exchangeable for capital stock) from the Company, other than (i) the right of
the holders of (A) TCI Group Class B Stock to convert shares of TCI Group Class
B Stock into TCI Group Class A Stock, (B) Liberty Media Class B Stock to convert
shares of Liberty Media Class B Stock into Liberty Media Class A Stock, and (C)
TCI Ventures Class B Stock to convert shares of TCI Group Class B Stock into TCI
Group Class A Stock, in each case, pursuant to the Company Charter, (ii) options
or other rights outstanding as of the close of business on March 31, 1998
representing in the aggregate the right to purchase or otherwise acquire up to
15,256,188 shares of TCI Group Class A Stock, 14,511,570 shares of TCI Group
Class B Stock, 11,986,412 shares of Liberty Media Class A Stock, no shares of
Liberty Media Class B Stock, 13,700,856 shares of TCI Ventures Class A Stock,
and 2,800,000 shares of TCI Ventures Class B Stock, pursuant to Employee Plans
or Benefit Arrangements or otherwise, (iii) 24,163,259 shares of TCI Group Class
A Stock, 19,416,910 shares of Liberty Media Class A Stock, and 20,711,373 shares
of TCI Ventures Class A Stock issuable upon exchange of the TCI UA, Inc.
Convertible Notes due December 12, 2021 (the "UA Note"), and (iv)(A) 7,057,523
shares of TCI Group Class A Stock issuable upon conversion of the Series C-TCI
Group Preferred Stock, at a conversion rate equal to the Series C-TCI Group
Preferred Conversion Rate, (B) 3,969,844 shares of Liberty Media Class A Stock
issuable upon conversion of the Series C-Liberty Media Preferred Stock, at a
conversion rate equal to the Series C-Liberty Media Conversion Rate, (C) 60,210
shares of TCI Group Class A Stock and 33,868 shares of Liberty Media Class A
Stock issuable upon conversion of the Series D Preferred Stock, (D) 7,791,280
shares of TCI Group Class A Stock issuable upon conversion of the Series G
Preferred Stock, at a conversion rate equal to the Series G Conversion Rate, (E)
3,879,103 shares of Liberty Media Class A Stock issuable upon conversion of the
Series H Preferred Stock, at a conversion rate equal to the Series H Conversion
Rate, (F) 9,747,400 shares of TCI Group
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Class A Stock issuable upon exchange of
the shares of Series A Preferred Stock, par value $.01 per share, of TCI
Communications, Inc., (G) 34,087,114 shares of TCI Group Class A Stock issuable
upon exchange of the shares of Class A Senior Cumulative Exchangeable Preferred
Stock, par value $100 per share, of TCI Pacific Communications, Inc., and (H)
1,084,056 shares of TCI Group Class A Stock issuable upon exchange of the
Exchangeable Preferred Stock, Series A, par value $.01 per share, of ETC NSCI
Holdings, Inc. Upon consummation of the Merger, none of such options or
convertible securities will be exercisable for or convertible into any shares of
capital stock of the Company, but instead, will either be exchanged in the
Merger or be adjusted to be exercisable for or convertible into Parent Common
Shares or Parent Liberty Tracking Shares (and, if applicable, will continue to
be exercisable for or convertible into TSATA shares) in accordance with the
terms of this Agreement and of such securities.
(f) Since March 31, 1998 until the execution of this Agreement, the
Company has not issued any capital stock or any options, warrants or other
rights to acquire capital stock (or securities convertible into or exercisable
or exchangeable for capital stock) other than (i) the issuance of shares of
Company Common Stock pursuant to options referred to in clause (ii) of the
foregoing paragraph (e) that were outstanding as of March 31, 1998 or that were
issued subsequently as set forth in clause (ii) of this paragraph (f), and (ii)
the award of options to purchase or restricted shares under Employee Plans and
Benefits Arrangements with respect to an aggregate of not more than 1,350,000
shares of TCI Group Class A Stock (and grants of options and awards with respect
to Liberty Media Class A Stock or TCI Ventures Class A Stock). Except as
disclosed in Section 5.6 of the Company Disclosure Statement, all outstanding
shares of capital stock of, or other equity or voting interest in, the
Significant Subsidiaries of the Company are owned by the Company or a direct or
indirect Wholly Owned Subsidiary of the Company, free and clear of all liens,
charges, encumbrances, claims and options of any nature and no Person has any
right to acquire any shares of capital stock of, or other equity or voting
interest in, any Subsidiary of the Company.
(g) As of March 31, 1998 and the date hereof, the following were all
zero: Number of Shares Issuable with Respect to the Italy Programming Group
Inter-Group Interest, the Number of Shares Issuable with Respect to the Italy
Ventures Inter-Group Interest, the Committed Acquisition Shares and the Italy
Ventures Preferred Interest.
5.7. Litigation. Except as disclosed in the Company SEC Reports
filed prior to the date hereof, there are, as of the date hereof, no actions,
suits, investigations or proceedings (adjudicatory, rulemaking or otherwise)
pending or,
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to the knowledge of the Company, threatened against the Company or
any of its Subsidiaries (or any Employee Plan or Benefit Arrangement), or any
property of the Company or any such Subsidiary (including Intellectual
Property), before any arbitrator of any kind or in or before or by any
Governmental Body, except actions, suits, investigations or proceedings which,
individually or in the aggregate, would not, if adversely determined, (a) have a
Material Adverse Effect on the Company or on the TCI Group or (b) prevent or
materially delay the consummation of the Merger.
5.8. Compliance with Other Instruments, Etc. Neither the Company nor
any Subsidiary of the Company is in violation of any term of (a) its charter,
by-laws or other organizational documents, or (b) any agreement or instrument
related to indebtedness for borrowed money or any other agreement to which it is
a party or by which it is bound, the consequences of which violation, whether
individually or in the aggregate, do or would (i) have a Material Adverse Effect
on the Company or on the TCI Group or (ii) prevent or materially delay the
consummation of the Merger. Assuming the approval of the Company's stockholders
as contemplated by Section 7.3, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
result in any violation of or conflict with, or constitute a default under, the
charter, bylaws or other organizational documents of the Company (or any of its
Subsidiaries). Except as set forth in Section 5.8 of the Company Disclosure
Statement, the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby will not result in any
violation of or conflict with, constitute a default under, require any consent,
waiver or notice under any term of, or result in the reduction or loss of any
benefit or the creation or acceleration of any right or obligation under, any
agreement, note, bond, mortgage, indenture, contract, lease, Permit or other
obligation or right (excluding options, restricted stock, employment contracts
and other employee related obligations or rights which are addressed in Section
5.9(f)) to which the Company or any of its Subsidiaries is a party or by which
any of the assets or properties of the Company or any of its Subsidiaries is
bound, or any instrument or Law, or result in the creation of (or impose any
obligation on the Company or any of its Subsidiaries to create) any mortgage,
lien, charge, security interest or other encumbrance upon any of the properties
or assets of the Company or any of its Subsidiaries pursuant to any such term,
except where any of the foregoing, individually or in the aggregate, does not
and would not (i) have a Material Adverse Effect on the Company or on the TCI
Group or (ii) prevent or materially delay the consummation of the Merger.
5.9. Employee Benefit Plans. (a) The Company Disclosure Statement
sets forth as of the date hereof a true and
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complete list of each material "employee benefit plan" (as defined in Section
3(3) of ERISA) of the Company and its Subsidiaries in which current or former
employees, agents, directors, or independent contractors of the Company or its
Subsidiaries ("Employees") participate or pursuant to which the Company or any
of its Subsidiaries may have a liability with respect to Employees (each, an
"Employee Plan"), and each other material plan, program, policy, contract or
arrangement of the Company and its Subsidiaries providing for bonuses, pensions,
deferred pay, stock or stock related awards, severance pay, salary continuation
or similar benefits, hospitalization, medical, dental or disability benefits,
life insurance or other employee benefits, or compensation to or for any
Employees or any beneficiaries or dependents of any Employees (other than
directors' and officers' liability policies), whether or not insured or funded
(each, a "Benefit Arrangement"). Except as disclosed on the Company Disclosure
Statement, neither the Company nor any of its Subsidiaries has any commitment to
establish any material additional Employee Plans or Benefit Arrangements or to
modify or change materially any existing Employee Plan or Benefit Arrangement.
The Company has made available to Parent with respect to each Employee Plan and
Benefit Arrangement: (i) a true and complete copy of all written documents
comprising such Employee Plan or Benefit Arrangement (including amendments and
individual agreements relating thereto) or, if there is no such written
document, an accurate and complete description of such Employee Plan or Benefit
Arrangement; (ii) the most recent Form 5500 or Form 5500-C (including all
schedules thereto), if applicable; (iii) the most recent financial statements
and actuarial reports, if any; (iv) the summary plan description currently in
effect and all material modifications thereof, if any; and (v) the most recent
Internal Revenue Service determination letter, if any. For purposes of the
Company Disclosure Statement and for making available documents with respect to
Employee Plans and Benefit Arrangements, but not for purposes of the remainder
of this Section 5.9, Employee Plans and Benefit Arrangements shall be limited to
Employee Plans and Benefit Arrangements of the Company and its ERISA Affiliates.
(b) Each Employee Plan and Benefit Arrangement has been established
and maintained in accordance with its terms and in compliance with all
applicable Laws, including ERISA and the Code (and the prohibited transaction
provisions of ERISA and the Code), and all contributions required to be made to
the Employee Plans and Benefit Arrangements have been made in a timely fashion,
except where such failure to establish, maintain or comply, or to make such
contributions, individually or in the aggregate, does not and would not have a
Material Adverse Effect on the Company or on the TCI Group. Each Employee Plan
that is intended to be qualified under Section 401(a) of the Code has received a
favorable determination letter or is subject to a favorable notification letter
from the Internal
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Revenue Service, and, to the knowledge of the Company, no event has occurred
which results or would result in a revocation of such letter.
(c) Except as set forth in Section 5.9 of the Company Disclosure
Statement, no Employee Plan is subject to Title IV of ERISA.
(d) Except as set forth in Section 5.9 of the Company Disclosure
Statement, no Employee Plan is a "multiemployer plan" (as defined in Section
3(37) of ERISA) or a "multiple employer plan" described in Section 4063(a) of
ERISA, and the Company has not at any time in the past five years, contributed
to or been obligated to contribute to such a multiemployer plan or multiple
employer plan.
(e) Neither the Company nor any ERISA Affiliate has any Controlled
Group Liability, nor do any circumstances exist that could result in any of them
having any Controlled Group Liability, which would have a Material Adverse
Effect on the Company or on the TCI Group. "Controlled Group Liability" means
any and all liabilities under (i) Title IV of ERISA, (ii) Section 302 of ERISA,
(iii) Sections 412 and 4971 of the Code, or (iv) the continuation coverage
requirements of Sections 601 et seq. of ERISA and section 4980B of the Code.
(f) Except as set forth in Section 5.9 of the Company Disclosure
Statement, none of the execution or delivery of this Agreement, the Voting
Agreement, stockholder approval of the Merger by the stockholders of the Company
at the Company Stockholders Meeting or otherwise, or the consummation of the
transactions contemplated hereby or thereby (either alone or together with any
additional or subsequent events), constitutes an event under any Employee Plan,
Benefit Arrangement, loan to, or individual agreement or contract with, an
Employee that may result in any material payment (whether of severance pay or
otherwise), restriction or limitation upon the assets of any Employee Plan or
Benefit Agreement, acceleration of payment or vesting, increase in benefits or
compensation, or required funding, with respect to any Employee, or the
forgiveness of any loan or other commitment of any Employees.
(g) There are no actions, suits, arbitrations, inquiries,
investigations or other proceedings (other than routine claims for benefits)
pending or, to the Company's knowledge, threatened, with respect to any Employee
Plan or Benefit Arrangement, except for any of the foregoing that do not and
would not have, individually or in the aggregate, a Material Adverse Effect on
the Company or on the TCI Group.
(h) Except as disclosed on the Company Disclosure Statement, no
material amounts paid or payable by the Company or any ERISA Affiliate to or
with respect to any Employee
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(including any such amounts that may be payable as a result of the execution and
delivery of this Agreement or the Voting Agreement or the consummation of the
transactions contemplated hereby or thereby) will fail to be deductible for
United States federal income tax purposes by reason of Section 280G of the Code.
(i) Except as set forth in Section 5.9 of the Company Disclosure
Statement, no Employees and no beneficiaries or dependents of Employees are
entitled under any Employee Plan or Benefit Arrangement to post-employment
welfare benefits of any kind, including death or medical benefits, other than
coverage mandated by Section 4980B of the Code.
(j) Except as set forth in Section 5.9 of the Company Disclosure
Statement, there are no agreements with, or pending petitions for recognition
of, a labor union or association as the exclusive bargaining agent for any of
the employees of the Company or any of its Subsidiaries; no such petitions have
been pending at any time within two years of the date of this Agreement and, to
the knowledge of the Company, there has not been any organizing effort by any
union or other group seeking to represent any employees of the Company or any of
its Subsidiaries as their exclusive bargaining agent at any time within two
years of the date of this Agreement. There are no labor strikes, work stoppages
or other labor troubles, other than routine grievance matters, now pending, or,
to the Company's knowledge, threatened, against the Company or any of its
Subsidiaries which have or would have, individually or in the aggregate, a
Material Adverse Effect on the Company or on the TCI Group, and there have not
been any such labor strikes, work stoppages or other labor troubles, other than
routine grievance matters, with respect to the Company or any of its
Subsidiaries at any time within two years of the date of this Agreement.
5.10. Taxes. (a) The Company and its Subsidiaries have filed all
income Tax Returns and all material other United States federal, state, county,
local and foreign Tax Returns required to be filed by them. The Company and its
Subsidiaries have paid all material Taxes due, other than Taxes appropriate
reserves for which have been made in the Company's financial statements (and, to
the extent material, such reserves have been accurately described in the Company
SEC Reports). There are no material assessments or adjustments that have been
asserted in writing against the Company or its Subsidiaries for any period for
which the Company has not made appropriate reserves in the Company's financial
statements included in the Company SEC Reports.
(b) There are no material claims or assessments pending against the
Company or any of its Subsidiaries for any alleged deficiency in any Tax, and
the Company has not been
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notified in writing of any proposed material Tax claims or assessments against
the Company or any of its Subsidiaries (other than, in each case, claims or
assessments for which adequate reserves in the Company financial statements have
been established or which are being contested in good faith or are immaterial in
amount). Except as set forth in Section 5.10(b) of the Company Disclosure
Statement and subject to the qualifications set forth therein, there are no
material "deferred intercompany transactions" or "intercompany transactions" the
gain or loss in which has not yet been taken into account under the consolidated
return Treasury Regulations currently or previously in effect.
(c) There are no liens for Taxes on the assets of the Company or any
of its Subsidiaries, except for statutory liens for current Taxes not yet due
and payable (and except for liens which do not and would not, individually or in
the aggregate, have a Material Adverse Effect on the Company or on the TCI
Group).
(d) For purposes of this Agreement, the term "Tax" means any United
States federal, state, county or local, or foreign or provincial income, gross
receipts, property, sales, use, license, excise, franchise, employment, payroll,
value added, alternative or added minimum, ad valorem or transfer tax, or any
other tax, custom, duty or governmental fee or other like assessment or charge
of any kind whatsoever, together with any interest or penalty imposed by any
Governmental Body. The term "Tax Return" means a report, return or other
information (including any attached schedules or any amendments to such report,
return or other information) required to be supplied to or filed with a
Governmental Body with respect to any Tax, including an information return,
claim for refund, amended return or declaration or estimated Tax.
5.11. Intellectual Property. The Company and its Subsidiaries own,
have the defensible right to use, or are indemnified for or otherwise protected
from any material risk for using, the Intellectual Property used in their
respective businesses, except where the failure to own, have the right to use or
be indemnified for or protected from any material risk of using such
Intellectual Property, individually or in the aggregate, does not and would not
have a Material Adverse Effect on the Company or on the TCI Group.
5.12. Reports and Financial Statements. (a) The Company has filed
all Reports on Form 10-K, Form 10-Q and Form 8-K, registration statements and
proxy statements required to be filed with the SEC since January 1, 1996
(collectively, the "Company SEC Reports"). The Company has previously furnished
or made available to Parent true and complete copies of all the Company SEC
Reports filed prior to the date hereof. None of
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the Company SEC Reports, as of their respective dates, contained any untrue
statement of 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. Each of the
consolidated balance sheets (including the related notes) included in the
Company SEC Reports presents fairly, in all material respects, the consolidated
financial position of the Company and its Subsidiaries as of the respective
dates thereof, and the other related statements (including the related notes)
included in the Company SEC Reports present fairly, in all material respects,
the results of operations and the changes in financial position of the Company
and its Subsidiaries for the respective periods or as of the respective dates
set forth therein, all in conformity with generally accepted accounting
principles consistently applied during the periods involved, except as otherwise
noted therein and subject, in the case of the unaudited interim financial
statements, to normal year-end adjustments. All of the Company SEC Reports, as
of their respective dates, complied as to form in all material respects with the
requirements of the Exchange Act, the Securities Act and the applicable rules
and regulations thereunder.
(b) The Company and its Subsidiaries have not made any misstatements
of fact, or omitted to disclose any fact, to any Governmental Body, or taken or
failed to take any action, which misstatements or omissions, actions or failures
to act, individually or in the aggregate, subject or would subject any Company
Permits referred to in Section 5.4 to revocation or failure to renew, except
where such revocation or failure to renew, individually or in the aggregate,
does not and would not have a Material Adverse Effect on the Company or on the
TCI Group.
(c) Except (i) as and to the extent disclosed or reserved against on
the balance sheet of the Company as of December 31, 1997 included in the Company
SEC Reports, or (ii) as incurred after the date thereof in the ordinary course
of business consistent with prior practice and not prohibited by this Agreement,
the Company does not have any liabilities or obligations of any nature,
absolute, accrued, contingent or otherwise and whether due or to become due,
that, individually or in the aggregate, have or would have a Material Adverse
Effect on the Company or on the TCI Group.
5.13. Absence of Certain Changes or Events. During the period since
December 31, 1997, except as disclosed in the Company SEC Reports filed prior to
the date hereof, (a) the business of the Company and its Subsidiaries has been
conducted only in the ordinary course, consistent with past practice, except for
the execution and delivery of this Agreement and the
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consummation of the transactions contemplated hereby, and except as otherwise
expressly permitted or required by this Agreement, (b) neither the Company nor
any of its Subsidiaries has taken any action or omitted to take any action, or
entered into any contract, agreement, commitment or arrangement to take any
action or omit to take any action, which, if taken or omitted after the date
hereof, would violate Section 7.1, and (c) there has not been, and, to the best
knowledge of the Company, nothing has occurred that would have, a Material
Adverse Effect on the Company or on the TCI Group.
5.14. Affiliated Transactions and Certain Other Agreements. Set
forth in Section 5.14 of the Company Disclosure Statement is an accurate and
complete listing, as of the date hereof, of (a) all contracts, leases,
agreements or understandings, whether written or oral, to which the Company or
any of its Subsidiaries is a party or is otherwise bound which contain any
restriction or limitation on the ability of the Company or any of its Affiliates
(other than the Stockholders and their non-Company Affiliates) to engage in any
business anywhere in the world, other than any such contracts, leases,
agreements or understandings the loss or breach of which, individually or in the
aggregate, does not and would not have a Material Adverse Effect on the Company
or on the TCI Group, and (b) all contracts, leases, agreements or
understandings, whether written or oral, giving any Person the right to require
the Company to register Shares or to participate in any registration of Shares.
The Company has previously provided or made available to Parent true and
complete copies of each of the foregoing agreements. Except as disclosed in the
Company SEC Reports, there are no relationships or transactions of a type
required to be disclosed in the Company SEC Reports pursuant to Item 404 of
Regulation S-K promulgated under the Securities Act.
5.15. Brokers and Finders. Except for the fees and expenses payable
to Donaldson, Lufkin & Jenrette Securities Corporation, which fees and expenses
are reflected in its agreements with the Company, copies of which have been
furnished to Parent, the Company has not employed any investment banker, broker,
finder, consultant or intermediary in connection with the transactions
contemplated by this Agreement which would be entitled to any investment
banking, brokerage, finder's or similar fee or commission in connection with
this Agreement or the transactions contemplated hereby.
5.16. Registration Statement. None of the information supplied or to
be supplied by the Company in writing for inclusion or incorporation by
reference in the Registration Statement will at the time it becomes effective,
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 not misleading. If at any time
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prior to the Effective Time any event with respect to the Company, its officers
and directors or any of its Subsidiaries shall occur which is required to be
described in an amendment of, or a supplement to the Registration Statement, the
Company shall notify Parent thereof by reference to this Section 5.16 and such
event shall be so described. Any such amendment or supplement shall be promptly
filed with the SEC and, as and to the extent required by law, disseminated to
the stockholders of the Company, and such amendment or supplement shall comply
in all material respects with all provisions of the Securities Act.
5.17. Separation of Assets and Liabilities. (a) Each of the combined
balance sheets (including the related notes) of each of the TCI Group, the
Liberty Media Group and the TCI Ventures Group included in the Company SEC
Reports presents fairly, respectively, in all material respects, the combined
financial position of each of the TCI Group, the Liberty Media Group and the TCI
Ventures Group as of the respective dates thereof, and the other related
statements (including the related notes) included in the Company SEC Reports
present fairly, respectively, in all material respects, the results of
operations and the changes in financial position of each of the TCI Group, the
Liberty Media Group and the TCI Ventures Group for the respective periods or as
of the respective dates set forth therein, all in conformity with generally
accepted accounting principles consistently applied during the periods involved,
except as otherwise noted therein and subject, in the case of the unaudited
interim financial statements, to normal year-end adjustments. Except (i) as and
to the extent disclosed or reserved against on the balance sheet of the TCI
Group, the Liberty Media Group or the TCI Ventures Group as of December 31, 1997
included in the Company SEC Reports, or (ii) as incurred after the date thereof
in the ordinary course of business consistent with prior practice and not
prohibited by this Agreement, none of the TCI Group, the Liberty Media Group or
the TCI Ventures Group has any liabilities or obligations of any nature,
absolute, accrued, contingent or otherwise and whether due or to become due,
that, individually or in the aggregate, have or would have a Material Adverse
Effect on the Company or on the TCI Group.
(b) Set forth in Section 5.17(b) of the Company Disclosure Statement
is an accurate and complete listing, as of the date hereof, of all contracts,
leases, agreements or understandings, whether written or oral, that are material
to TCI Group taken as a whole, with or on behalf of any Liberty Media Member or
TCI Ventures Member to which any TCI Group Member is a party or is otherwise
bound, or by which any of their respective properties or assets is subject or
bound, other than contracts or agreements between any Liberty Media Member or
TCI Ventures Member, on the one hand, and any TCI Group Member, on the other
hand, entered into in the ordinary course of business
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and having terms and conditions that are no less favorable to TCI Group than
those available to unaffiliated third parties generally. Section 5.17(b) of the
Company Disclosure Statement also sets forth a summary as of March 31, 1998 and
the date hereof of the material debt and equity interests of any TCI Group
Member, Liberty Media Member or TCI Ventures Member in any member of any other
Group.
(c) (i) Except as set forth in Section 5.17(c)(i) of the Company
Disclosure Statement, all of the material properties and assets (tangible,
intangible or otherwise) and obligations and liabilities of any nature,
absolute, accrued, contingent or otherwise and whether due or to become due,
that are reflected on the financial statements referred to in Section 5.17(a)
relate to the respective business and operations of the TCI Group, the Liberty
Media Group and the TCI Ventures Group (as such businesses and operations are
described in Note 1 to the Company's consolidated audited financial statements
for the year ended December 31, 1997) (respectively, the "TCI Group Business,"
the "Liberty Media Business," and the "TCI Ventures Business").
(ii) As of the Effective Time, except as set forth in Section
5.17(c)(ii) of the Company Disclosure Statement or as otherwise expressly
permitted or required pursuant to this Agreement, and assuming that the
Restructuring has occurred, (A) TCI Ventures LLC, directly or through its
Subsidiaries, will own all of the material properties and assets (tangible,
intangible or otherwise) of the Company or any of its Subsidiaries primarily
relating to the Liberty Media Business or the TCI Ventures Business, and will
have primary liability for, or will have assumed, all material obligations and
liabilities of any nature, absolute, accrued, contingent or otherwise and
whether due or to become due, primarily relating to the Liberty Media Business
or the TCI Ventures Business, and (B) the Company and its Subsidiaries, other
than TCI Ventures LLC and its Subsidiaries, will own all of the material
properties and assets (tangible, intangible or otherwise) of the Company or any
of its Subsidiaries primarily relating to the TCI Group Business, and will have
primary liability for, or will have assumed, all material obligations and
liabilities of any nature, absolute, accrued, contingent or otherwise and
whether due or to become due, primarily relating to the TCI Group Business;
provided that the shares of TCG (or the Parent Common Shares into which they may
be exchanged) will be held by TCI Ventures LLC but will be attributed to the TCI
Group.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub each represents and warrants to the Company
that, except as set forth in the Parent Disclosure Statement (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant as specified therein):
6.1. Organization, Etc. of Parent. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York and has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now conducted and
proposed by Parent to be conducted. Parent is duly qualified and in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary and where the failure to be so qualified or in good standing has or
would have, individually or in the aggregate, a Material Adverse Effect on
Parent.
6.2. Subsidiaries. Each Subsidiary of Parent (a) is a corporation or
other legal entity duly organized, validly existing and (if applicable) in good
standing under the laws of the jurisdiction of its organization and has all
requisite corporate, partnership or similar power and authority to own its
properties and conduct its business and operations as currently conducted,
except where the failure to be duly organized, validly existing and in good
standing or to have such power and authority does not and would not have,
individually or in the aggregate, a Material Adverse Effect on Parent, and (b)
is duly qualified and in good standing in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary, except where the failure to be so
qualified or in good standing does not and would not have, individually or in
the aggregate, a Material Adverse Effect on Parent.
6.3. Agreement. Each of Parent and Merger Sub has all necessary
corporate power and authority to execute and deliver this Agreement, to perform
its obligations hereunder and to consummate the transactions contemplated
hereby. This Agreement and the consummation of the transactions contemplated
hereby have been approved by the respective Boards of Directors of Parent and
Merger Sub and by Parent as the sole stockholder of Merger Sub, and have been
duly authorized by all other necessary corporate action on the part of Parent or
Merger Sub, except for the approval of the Parent's stockholders contemplated by
Section 7.3. This Agreement has been duly executed and delivered by a duly
authorized officer of Parent and of Merger Sub and (assuming the due execution
and delivery of this
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Agreement by the Company) constitutes a valid and binding agreement of Parent
and Merger Sub, enforceable against Parent and Merger Sub in accordance with its
terms.
6.4. Permits; Compliance. Each of Parent and its Subsidiaries is in
possession of all Permits from appropriate Governmental Bodies (including the
FCC) necessary for Parent or any of its Subsidiaries to own, lease and operate
its properties or to carry on their respective businesses as they are now being
conducted (the "Parent Permits"), and all such Parent Permits are valid, and in
full force and effect, except where the failure to have, or the suspension or
cancellation of, any of the Parent Permits does not and would not, individually
or in the aggregate, (a) have a Material Adverse Effect on Parent or (b) prevent
or materially delay the consummation of the Merger. No suspension or
cancellation of any of the Parent Permits is pending or, to the knowledge of
Parent, threatened, except where the failure to have, or the suspension or
cancellation of, any of the Parent Permits does not and would not, individually
or in the aggregate, (x) have a Material Adverse Effect on Parent or (y) prevent
or materially delay the consummation of the Merger. Neither Parent nor any of
its Subsidiaries is in conflict with, or in default or violation of, (i) any Law
applicable to Parent or any of its Subsidiaries or by which any property, asset
or operation of Parent or any of its Subsidiaries is bound or affected or (ii)
any Parent Permits, except for such conflicts, defaults or violations that do
not and would not, individually or in the aggregate, (A) have a Material Adverse
Effect on Parent or (B) prevent or materially delay the consummation of the
Merger.
6.5. Opinions of Parent's Financial Advisors. The Board of Directors
of Parent has received the opinions, dated as of the date of this Agreement, of
Goldman Sachs & Co. and Credit Suisse First Boston Corporation to the effect
that, as of such date, the Exchange Ratios, collectively, are fair to Parent
from a financial point of view.
6.6. Capital Stock. As of the date hereof, the authorized capital
stock of Parent consists of (a) 6,000,000,000 Parent Common Shares and (ii)
100,000,000 shares of preferred stock, $1.00 par value per share. All of the
outstanding shares of capital stock of Parent are duly authorized, validly
issued, fully paid and nonassessable, and no class of capital stock of Parent is
entitled to preemptive rights. As of the close of business on April 30, 1998,
1,624,198,000 Parent Common Shares and no shares of Parent preferred stock were
issued and outstanding. Except as disclosed in the Parent SEC Reports, all
outstanding shares of capital stock of the Significant Subsidiaries (as defined
for purposes of Regulation S-X under the Exchange Act) of Parent are owned by
Parent or a direct or indirect Wholly Owned Subsidiary of Parent, free and clear
of all liens, charges, encumbrances, claims and options
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of any nature. As of the close of business on April 30, 1998, there were
outstanding options to acquire no more than 69,000,000 Parent Common Shares.
6.7. Parent Shares. The Parent Common Shares and the Parent Liberty
Tracking Shares to be issued pursuant to Article IV will, when issued, be duly
authorized, validly issued, fully paid and nonassessable and no stockholder of
Parent will have any preemptive right of subscription or purchase in respect
thereof. The Parent Common Shares and the Parent Liberty Tracking Shares to be
issued in the Merger will, when issued, be registered under the Securities Act
and the Exchange Act and registered or exempt from registration under any
applicable state securities laws.
6.8. Litigation. Except as disclosed in the Parent SEC Reports filed
prior to the date hereof, there are, as of the date hereof, no actions, suits,
investigations or proceedings (adjudicatory, rulemaking or otherwise) pending
or, to the knowledge of Parent, threatened against Parent or any of its
Subsidiaries or any Benefit Plans of Parent or any of its Subsidiaries, or any
property of Parent or any such Subsidiary (including Intellectual Property), in
any court or before any arbitrator of any kind or in or before or by any
Governmental Body, except actions, suits, investigations or proceedings or
which, individually or in the aggregate, would not, if adversely determined, (a)
have a Material Adverse Effect on Parent or (b) prevent or materially delay the
consummation of the Merger.
6.9. Compliance with Other Instruments, Etc. Neither Parent nor any
Subsidiary of Parent is in violation of any term of (a) its charter, by-laws or
other organizational documents, or (b) any agreement or instrument related to
indebtedness for borrowed money or any other agreement to which it is a party or
by which it is bound, the consequences of which violation, whether individually
or in the aggregate, do or would (i) have a Material Adverse Effect on Parent or
(ii) prevent or materially delay the consummation of the Merger. Assuming the
approval of Parent's stockholders as contemplated by Section 7.3, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any violation of or conflict
with, or constitute a default under, the charter, bylaws or other organizational
documents of Parent (or any of its Subsidiaries). Except as set forth in Section
6.9 of the Parent Disclosure Statement, the execution, delivery and performance
of this Agreement and the consummation of the transactions contemplated hereby
will not result in any violation of or conflict with, constitute a default
under, require any consent, waiver or notice under any term of, or result in the
reduction or loss of any benefit or the creation or acceleration of any
obligation
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under, any agreement, note, bond, mortgage, indenture, contract, lease, Permit
or other obligation or any instrument to which Parent or any of its Subsidiaries
is a party or by which any of the assets or properties of Parent or any of its
Subsidiaries is bound or any instrument or Law, or result in the creation of (or
impose any obligation on Parent or any of its Subsidiaries to create) any
mortgage, lien, charge, security interest or other encumbrance upon any of the
properties or assets of Parent or any of its Subsidiaries pursuant to any such
term, except where any of the foregoing, individually or in the aggregate, does
not and would not (i) have a Material Adverse Effect on Parent or (ii) prevent
or materially delay the consummation of the Merger.
6.10. Taxes. (a) Parent and its Subsidiaries have filed all income
Tax Returns and all material other United States federal, state, county, local
and foreign Tax Returns required to be filed by them. Parent and its
Subsidiaries have paid all material Taxes due, other than Taxes appropriate
reserves for which have been made in Parent's financial statements (and, to the
extent material, such reserves have been accurately described in the Parent SEC
Reports). There are no material assessments or adjustments that have been
asserted in writing against Parent or its Subsidiaries for any period for which
Parent has not made appropriate reserves in Parent's financial statements
included in Parent SEC Reports.
(b) There are no material claims or assessments pending against
Parent or any of its Subsidiaries for any alleged deficiency in any Tax, and
Parent has not been notified in writing of any proposed material Tax claims or
assessments against Parent or any of its Subsidiaries (other than, in each case,
claims or assessments for which adequate reserves in Parent financial statements
have been established or which are being contested in good faith or are
immaterial in amount).
(c) There are no liens for Taxes on the assets of Parent or any of
its Subsidiaries, except for statutory liens for current Taxes not yet due and
payable (and except for liens which do not and would not, individually or in the
aggregate, have a Material Adverse Effect on Parent).
6.11. Intellectual Property. Parent and its Subsidiaries own, have
the defensible right to use, or are indemnified for or otherwise protected from
any material risk for using the Intellectual Property used in their respective
businesses, except where the failure to own, have the right to use or be
indemnified for or protected from any material risk of using such Intellectual
Property, individually or in the aggregate, does not and would not have a
Material Adverse Effect on Parent.
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6.12. Reports and Financial Statements. (a) Parent has filed all
Reports on Form 10-K, Form 10-Q and Form 8-K, registration statements and proxy
statements required to be filed with the SEC since January 1, 1996
(collectively, the "Parent SEC Reports"). Parent has previously furnished or
made available to the Company true and complete copies of all Parent SEC Reports
filed prior to the date hereof. None of the Parent SEC Reports, as of their
respective dates, contained any untrue statement of 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. Each of the balance sheets (including the related notes)
included in the Parent SEC Reports presents fairly, in all material respects,
the consolidated financial position of Parent and its Subsidiaries as of the
respective dates thereof, and the other related statements (including the
related notes) included in the Parent SEC Reports present fairly, in all
material respects, the results of operations and the changes in financial
position of Parent and its Subsidiaries for the respective periods or as of the
respective dates set forth therein, all in conformity with generally accepted
accounting principles consistently applied during the periods involved, except
as otherwise noted therein and subject, in the case of the unaudited interim
financial statements, to normal year-end adjustments. All of the Parent SEC
Reports, as of their respective dates, complied as to form in all material
respects with the requirements of the Exchange Act, the Securities Act and the
applicable rules and regulations thereunder.
(b) Parent and its Subsidiaries have not made any misstatements of
fact, or omitted to disclose any fact, to any Governmental Body, or taken or
failed to take any action, which misstatements or omissions, actions or failures
to act, individually or in the aggregate, subject or would subject any Parent
Permits referred to in Section 6.4 to revocation or failure to renew, except
where such revocation or failure to renew, individually or in the aggregate,
does not and would not have a Material Adverse Effect on Parent.
(c) Except (i) as and to the extent disclosed or reserved against on
the balance sheet of Parent as of December 31, 1997 included in the Parent SEC
Reports, or (ii) as incurred after the date thereof in the ordinary course of
business consistent with prior practice and not prohibited by this Agreement,
Parent does not have any liabilities or obligations of any nature, absolute,
accrued, contingent or otherwise and whether due or to become due, that,
individually or in the aggregate, have or would have a Material Adverse Effect
on Parent.
(d) During the period since December 31, 1997, except as disclosed
in the Parent SEC Reports filed prior to the
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date hereof, there has not been, and, to the best knowledge of Parent, nothing
has occurred that would have, a Material Adverse Effect on Parent.
6.13. Brokers and Finders. Except for the fees and expenses payable
to Credit Suisse First Boston Corporation and Goldman Sachs & Co., which fees
and expenses will be paid by Parent, Parent has not employed any investment
banker, broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or similar fee or commission in
connection with this Agreement or the transactions contemplated hereby.
6.14. Registration Statement. None of the information to be supplied
by Parent or Merger Sub in writing for inclusion or incorporation by reference
in the Registration Statement will at the time it becomes effective, 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 not
misleading. If at any time prior to the Effective Time any event with respect to
Parent, its officers and directors or any of its Subsidiaries shall occur which
is required to be described in an amendment of, or a supplement to the
Registration Statement, Parent shall notify the Company thereof by reference to
this Section 6.14 and such event shall be so described. Any such amendment or
supplement shall be promptly filed with the SEC and, as and to the extent
required by law, disseminated to the stockholders of the Company, and such
amendment or supplement shall comply in all material respects with all
provisions of the Securities Act. The Registration Statement will comply (with
respect to Parent and Merger Sub and information provided in writing therefor by
Parent or Merger Sub) as to form in all material respects with the provisions of
the Securities Act.
6.15. Ownership of Merger Sub; No Prior Activities; Assets of
Merger Sub.
(a) Merger Sub was formed by Parent solely for the purpose of
engaging in the transactions contemplated hereby.
(b) As of the date hereof and the Effective Time, the capital stock
of Merger Sub is and will be owned 100% by Parent directly. Further, there are
not as of the date hereof and there will not be at the Effective Time any
outstanding or authorized options, warrants, calls, rights, commitments or any
other agreements of any character to or by which Merger Sub is a party or may be
bound requiring it to issue, transfer, sell, purchase, redeem or acquire any
shares of capital stock or any securities or rights convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire, any
shares of capital stock of Merger Sub.
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(c) As of the date hereof and immediately prior to the Effective
Time, except for obligations or liabilities incurred in connection with its
incorporation or organization and the transactions contemplated hereby and by
the Voting Agreement, Merger Sub has not and will not have incurred, directly or
indirectly through any Subsidiary or Affiliate, any obligations or liabilities
or engaged in any business or activities of any type or kind whatsoever or
entered into any agreements or arrangements with any Person.
(d) Parent will take all action necessary to ensure that Merger Sub
at no time prior to the Effective Time owns any material assets other than an
amount of cash necessary to incorporate Merger Sub and to pay the expenses of
the Merger attributable to Merger Sub if the Merger is consummated.
6.16. Ownership of Company Stock. Neither Parent nor any Subsidiary
of Parent (excluding any employee benefit plan, or related trust, of Parent or
its Subsidiaries) owns or, to the knowledge of Parent, has owned within the last
two years, any shares of the capital stock of the Company. Between the date of
this Agreement and the Effective Time, neither Parent nor any Subsidiary of
Parent (excluding any employee benefit plan, or related trust, of Parent or its
Subsidiaries) will purchase or otherwise acquire any shares of the capital stock
of the Company (except pursuant to the terms of this Agreement).
ARTICLE VII
ADDITIONAL COVENANTS AND AGREEMENTS
7.1. Conduct of Business of the Company. Except as set forth in
Section 7.1 of the Company Disclosure Statement, as expressly permitted by this
Agreement (any transaction permitted by Schedule 7.18 or pursuant to the
Restructuring being deemed expressly permitted), as described in the Company's
Capital Spending Plan, dated June 2, 1998, previously delivered by the Company
to Parent (the "Capital Spending Plan"), as required by any change in applicable
Law, or as otherwise agreed by Parent in writing, during the period from the
date of this Agreement to the Effective Time, (i) the Company will, and will
cause each of the TCI Group Members to, conduct the TCI Group Business in the
ordinary course of business consistent with past practice, and (ii) to the
extent consistent with the foregoing, the Company will, and will cause each of
the TCI Group Members to, seek to preserve intact its current business
organizations, keep available the service of its current officers and employees,
and preserve its relationships with customers, suppliers and others having
business dealings with it, in each case with respect to the TCI
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Group Business, with the objective that the goodwill and ongoing businesses of
the TCI Group shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, from and including the date hereof to the Effective
Time, the Company will not, and will not permit any of the TCI Group Members to,
without the prior written consent of Parent (except to the extent set forth in
Section 7.1 of the Company Disclosure Statement):
(a) except for (i) TCI Group Shares issued upon exercise of options
or other rights outstanding as of the date hereof under Employee Plans or
Benefit Arrangements in accordance with the terms thereof, (ii) TCI Group
Shares issued in connection with the conversion of convertible or
exchangeable securities of the Company or its Subsidiaries outstanding as
of the date hereof in accordance with the terms of such securities, (iii)
shares of TCI Group Class A Stock issued upon conversion of shares of TCI
Group Class B Stock outstanding on the date hereof or issued pursuant to
convertible securities to acquire TCI Group Class B Stock outstanding on
the date hereof, in accordance with the terms of the Company Charter as in
effect on the date hereof, (iv) with respect to Liberty Media Tracking
Shares or TCI Ventures Tracking Shares to the extent permitted pursuant to
Section 7.18, (v) options to purchase, restricted stock awards of, or
other compensation payable in shares of, TCI Group Class A Stock, up to an
aggregate of 3,000,000 shares of TCI Group Class A Stock, and (vi)
issuance of up to 14,511,570 shares of TCI Group Class B Stock which John
C. Malone and certain members of the Magness family have the right to
acquire from the Company, upon exercise of such right in accordance with
the terms thereof, issue, deliver, sell, dispose of, pledge or otherwise
encumber, or authorize or propose the issuance, sale, disposition or
pledge or other encumbrance of (A) any additional shares of its capital
stock of any class (including the Shares), or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe
for any shares of its capital stock, or any rights, warrants, options,
calls, commitments or any other agreements of any character to purchase or
acquire any shares of its capital stock or any securities or rights
convertible into, exchangeable for, or evidencing the right to subscribe
for, any shares of its capital stock, or (B) any other securities in
respect of, in lieu of, or in substitution for, Shares outstanding on the
date hereof;
(b) except with respect to Liberty Media Tracking Shares or TCI
Ventures Tracking Shares to the extent permitted pursuant to Section 7.18,
redeem, purchase or otherwise acquire, or propose to redeem, purchase or
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otherwise acquire, any of its outstanding securities (including the
Shares), other than pursuant to existing agreements requiring the Company
to repurchase or acquire any shares of its capital stock (provided that
such repurchase or acquisition is in accordance with the terms of such
agreement as in effect on the date hereof);
(c) except for conversions of shares of TCI Group Class B Stock
outstanding on the date hereof into shares of TCI Group Class A Stock, in
accordance with the terms of the Company Charter as in effect on the date
hereof, split, combine, subdivide or reclassify any shares of its capital
stock or declare, set aside for payment or pay any dividend, or make any
other actual, constructive or deemed distribution in respect of any shares
of its capital stock or otherwise make any payments to stockholders in
their capacity as such (other than dividends or distributions paid by any
Wholly Owned Subsidiary of the Company to the Company or another Wholly
Owned Subsidiary within the same Group);
(d) (i) grant any increases in the compensation of any of its
directors, officers or employees, except in the ordinary course of
business consistent with past practice, (ii) pay or award or agree to pay
or award any pension, retirement allowance, or other nonequity incentive
awards, or other employee benefit, not required by any of the Employee
Plans or Benefit Arrangements to any current or former director, officer
or employees, whether past or present, or to any other Person, except for
payments or awards that are in the ordinary course of business, consistent
with past practice, and that are not material, (iii) pay or award or agree
to pay or award any stock option or equity incentive awards, except to the
extent permitted by Section 7.1(a)(v) and except for options to purchase
or awards of Liberty Media Shares or TCI Ventures Shares (subject to the
limitations of Section 7.18), (iv) enter into any new or amend any
existing employment agreement with any director, officer or employee,
except for employment agreements with new employees entered into in the
ordinary course of business consistent with past practice and except for
amendments in the ordinary course of business, consistent with past
practice, that do not materially increase benefits or payments, (v) enter
into any new or amend any existing severance agreement with any current or
former director, officer or employee, except for agreements or amendments
in the ordinary course of business, consistent with past practice, that do
not provide for material benefits, or (vi) become obligated under any new
Employee Plan or
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Benefit Arrangement, which was not in existence on the date hereof, or
amend or exercise discretion pursuant to any such Employee Plan or Benefit
Arrangement in existence on the date hereof, except for any such amendment
or exercise of discretion in the ordinary course of business, consistent
with past practice, that does not provide for material benefits; provided,
however, that the foregoing shall not be applicable to any such payment or
increase, or any such agreement, so long as the associated costs and
expenses related thereto are attributed to the Liberty/Ventures Group; and
provided, further, that the Company is expressly authorized to enter into
tax protection agreements in the form set forth in Schedule 7.12(e) with
those employees listed on Schedule 7.12(e);
(e) adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any TCI Group Member not constituting an
inactive Subsidiary (other than the Merger or as provided in Section
2.1(b), and other than (i) with respect to TCI Group Member such of the
foregoing as do not change the beneficial ownership interest of the
Company in such TCI Group Member and (ii) with respect to the Company, any
such merger, consolidation, restructuring, recapitalization or other
reorganization that is used to effect an acquisition permitted pursuant to
Section 7.1(f) and which does not result in a change of control of the
Company or change the Shares into a different number or kind of
securities);
(f) make any acquisition, by means of merger, consolidation or
otherwise (other than any acquisition by any Liberty Media Member or any
TCI Ventures Member to the extent permitted under Section 7.18), of (i)
any direct or indirect ownership interest in or assets comprising any
business enterprise or operation or (ii) except in the ordinary course and
consistent with past practice, any other assets; provided, however, that
the Company may make such acquisitions for cash in an amount not to exceed
$10 million in the case of any single acquisition or $50 million for all
such acquisitions in the aggregate during any 12-month period; provided
further that such acquisitions do not and would not prevent or materially
delay the consummation of the Merger; and provided further that the
foregoing shall not prevent the Company from exploring on a preliminary
basis and conducting diligence investigations (including having
discussions with any potential acquisition target) with respect to any
potential acquisition that would require Parent's consent hereunder, for
the purpose of determining the desirability of such potential acquisition
and developing the basis on which to seek Parent's consent, so long as the
Company does not submit any formal proposal or indication of interest with
respect to such an acquisition to such acquisition target, or make any
binding commitments with
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respect to such potential acquisition, without obtaining Parent's consent;
and provided further that in the event the Company is offered an
opportunity under which it is required either to acquire or dispose of
certain of its cable television system and related assets or related
investments prior to the Effective Time and the taking of such action
requires Parent's consent hereunder, Parent will not withhold its consent
unreasonably;
(g) (i) dispose of any controlling interest in any material business
enterprise or operation of the TCI Group, (ii) make any other disposition
of any other direct or indirect ownership interest in or assets comprising
a material business enterprise or operation of the TCI Group (except for
the replacement or upgrade of assets, or disposition of unnecessary
assets, in the ordinary course and consistent with past practice), or
(iii) except in the ordinary course and consistent with past practice,
dispose of any other assets of the TCI Group;
(h) adopt any amendments to the Company Charter or the By-Laws of
the Company or alter through merger, liquidation, reorganization,
restructuring or in any other fashion the corporate structure or ownership
of any TCI Group Member not constituting an inactive Subsidiary of the
Company;
(i) incur any indebtedness for borrowed money or guarantee any
indebtedness of any other Person or make any loans, advances or capital
contributions to, or investments in, any other Person (other than to the
Company or any Wholly Owned Subsidiary of the Company), except that (A)
the Company may incur additional indebtedness after the date hereof, under
existing credit facilities (or any renewals thereof), resulting in
aggregate net proceeds to the Company from such additional indebtedness
not exceeding $50 million, (B) the Company may refinance outstanding
indebtedness (including indebtedness incurred pursuant to this Section
7.1), without increase in the amount thereof, so long as the terms thereof
are no less favorable to the Company and the maturity thereof is no more
than one year or such debt is prepayable without penalty, and (C) any
Subsidiary of the Company that is not a member of the TCI Group shall be
permitted to do any of the foregoing to the extent permitted pursuant to
Section 7.18;
(j) engage in the conduct of any business other than the Company's
existing businesses (except that the Liberty Media Group and the TCI
Ventures Group may engage in other businesses to the extent permitted
pursuant to Section 7.18);
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(k) enter into any agreement or exercise any discretion providing
for acceleration of payment or performance as a result of a change of
control of the Company or its Subsidiaries; provided that this paragraph
(k) shall not restrict the Company's right to respond or take action in
response to any such acceleration so long as such action is permitted
under this Section 7.1;
(l) enter into any contracts, arrangements or understandings
requiring in the aggregate the purchase of equipment, materials, supplies
or services in excess of $50 million (or, with respect to the Liberty
Media Group and the TCI Ventures Group, as permitted pursuant to Section
7.18), other than any such contracts, arrangements or understandings
providing for capital spending of the Company or the TCI Group Members in
accordance with the Capital Spending Plan;
(m) enter into or amend or waive any right under any agreement with
any Affiliates of the Company (other than its Subsidiaries) or with any
Stockholder or any Affiliate of any Stockholder (other than as set forth
in the Voting Agreement), other than any of the foregoing as may be done
in the ordinary course of business and that is not material, individually
or in the aggregate, to TCI Group;
(n) settle or compromise any material litigation with respect to TCI
Group or waive, release or assign any material rights or claims with
respect to TCI Group, except in the ordinary course of business consistent
with past practice;
(o) take any action (other than the Merger and as specified in
Section 4) that would result in a change in any of the following: (i) the
Number of Shares Issuable with Respect to the Liberty Media Group
Inter-Group Interest, (ii) the Adjusted Liberty Media Group Outstanding
Interest Fraction, (iii) the Liberty Media Group Outstanding Interest
Fraction, (iv) the Number of Shares Issuable with Respect to the TCI
Ventures Group Inter-Group Interest, (v) the Adjusted TCI Ventures Group
Outstanding Interest Fraction, (vi) the TCI Ventures Group Outstanding
Interest Fraction, (vii) the Committed Acquisition Shares (other than a
reduction thereof) and (viii) the TCI Ventures Group Preferred Interest;
(p) except as expressly contemplated by the Restructuring or except
as expressly permitted by Section 7.17, (i) engage in or allow any direct
or indirect transfer of any material properties or assets or obligations
or liabilities between any of the TCI Group Members, on the one hand, and
any Liberty Media Member or TCI Ventures Member, on the other hand, or
(ii) engage in any other transaction
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involving any TCI Group Member, on the one hand, and any Liberty Media
Member or TCI Ventures Member, on the other hand;
(q) authorize, recommend or propose (other than to Parent), or
announce an intention to do any of the foregoing, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing.
7.2. Other Transactions. (a) The Company shall not, nor shall it
permit any of its Subsidiaries to, nor shall it authorize or permit any officer,
director or employee or any investment banker, attorney, accountant, agent or
other advisor or representative of the Company or any of its respective
Subsidiaries to, (i) solicit, initiate or knowingly encourage the submission of
any Takeover Proposal, (ii) enter into any agreement with respect to a Takeover
Proposal or (iii) participate in any discussions or negotiations regarding, or
furnish to any Person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Takeover Proposal; provided, however,
that to the extent required by the fiduciary obligations of the Board of
Directors of the Company, as determined in good faith by a majority of the
members thereof (after receipt of advice from Richards, Layton & Finger, outside
legal counsel to the Board of Directors), the Company may, in response to
unsolicited requests therefor, participate in discussions or negotiations with,
or furnish information pursuant to a confidentiality agreement no less favorable
to such party than the Confidentiality Agreement to, any Person who indicates a
willingness to make a Superior Proposal. For all purposes of this Agreement,
"Takeover Proposal" means any proposal for a merger, consolidation, share
exchange, business combination or other similar transaction involving the
Company or any of its Significant Subsidiaries or any proposal or offer to
acquire, directly or indirectly, an equity interest in, any voting securities
of, or a substantial portion of the assets of, the Company or any of its
Significant Subsidiaries, other than the transactions contemplated by this
Agreement and other than any transaction involving solely Liberty Media Members
or TCI Ventures Members which would not prevent or materially delay consummation
of the Merger. The Company immediately shall cease and cause to be terminated
all existing discussions or negotiations with any Persons conducted heretofore
with respect to, or that could reasonably be expected to lead to, any Takeover
Proposal. As used herein, a "Significant Subsidiary" means any Subsidiary that
would constitute a "significant subsidiary" within the meaning of Rule 1-02 of
Regulation S-X of the SEC.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent, the approval
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or recommendation by the Board of Directors of the Company or any such committee
of this Agreement or the Merger or (ii) approve or recommend, or propose to
approve or recommend, any Takeover Proposal. Notwithstanding the foregoing, (A)
the Board of Directors of the Company or any committee thereof, to the extent
required by its fiduciary obligations, as determined in good faith by a majority
of the members thereof (after receipt of advice from Richards, Layton & Finger,
outside legal counsel to the Board of Directors), may approve or recommend a
Superior Proposal (and, in connection therewith, withdraw or modify its approval
or recommendation of this Agreement or the Merger) and (B) nothing contained in
this Agreement shall prevent the Board of Directors of Parent or the Company
from complying with Rule 14d-9 and Rule 14e-2 promulgated under the Exchange Act
with regard to a Takeover Proposal. For all purposes of this Agreement,
"Superior Proposal" means a bona fide written proposal made by a third party to
acquire the Company pursuant to a tender or exchange offer, a merger, a share
exchange, a sale of all or substantially all its assets or otherwise on terms
which a majority of the members of the Board of Directors of the Company
determines in good faith (taking into account the advice of independent
financial advisors) to be more favorable to the Company and its stockholders
than the Merger (and any revised proposal made by Parent) and for which
financing, to the extent required, is then fully committed or reasonably
determined to be available by the Board of Directors of the Company.
7.3. Stockholder Approval. (a) Parent and the Company each shall
call its respective Stockholders Meeting to be held as promptly as practicable
for the purpose of voting upon, in the case of Parent, the Parent Charter
Amendment and the issuance of Parent Common Shares and Parent Liberty Tracking
Shares in connection with the Merger and, in the case of the Company, this
Agreement and the transactions contemplated hereby. Except as otherwise required
by the fiduciary duties of its Board of Directors (as determined in good faith
by such Board following the receipt of advice of its outside legal counsel to
such effect), (i)(A) the Company will, through the Board of Directors (based on
the recommendation of its Special Committee), recommend to its stockholders the
approval and adoption of this Agreement and the Merger, and (B) Parent will,
through its Board of Directors, recommend to its stockholders the approval of
the Parent Charter Amendment and the approval of the issuance of the Parent
Common Shares and Parent Liberty Tracking Shares in connection with the Merger,
and (ii) each of the Company and Parent will use their respective best efforts
to obtain the foregoing approval of their respective stockholders. Parent and
the Company shall coordinate and cooperate with respect to the timing of the
Stockholders Meetings and shall use their respective reasonable best efforts to
hold the Stockholders Meeting on the same day as soon as practicable
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after the date on which the Registration Statement becomes effective.
(b) Notwithstanding the provisions of Section 7.3(a), after the
adoption of this Agreement by the stockholders of the Company, without the
affirmative approval, by vote or written consent, of the holders of Shares
representing a majority of the votes that may be cast by the holders of all then
outstanding Shares, the Company will not (i) enter into any amendment to this
Agreement that would alter or change any of the terms and conditions of this
Agreement if such alteration or change would adversely affect the holders of
Shares, or (ii) waive any condition set forth in Section 8.1 or Section 8.3 if
such waiver would materially adversely affect the holders of Shares.
(c) Parent, as the sole stockholder of Merger Sub, hereby consents
to the adoption of this Agreement by Merger Sub and agrees that such consent
shall be treated for all purposes as a vote duly adopted at a meeting of the
stockholders of Merger Sub held for this purpose.
7.4. Registration Statement and Proxy Statement. (a) As promptly as
practicable after the date of this Agreement, Parent and the Company shall
prepare and file with the SEC a preliminary joint proxy statement in form and
substance reasonably satisfactory to each of Parent and the Company and Parent
shall prepare and file with the SEC a registration statement on Form S-4 (the
"Registration Statement"), in which the joint proxy statement will be included
as part of a prospectus, in connection with the registration under the
Securities Act of the Parent Common Shares and Parent Liberty Tracking Shares
issuable upon conversion of the Shares (and any securities convertible into or
exchangeable for Shares) and the other transactions contemplated hereby. Each of
Parent and the Company shall use its reasonable best efforts to respond to any
comments of the SEC, to have the Registration Statement to be declared effective
as promptly as practicable after such filing and to cause the Proxy Statement
approved by the SEC to be mailed to the Company's stockholders at the earliest
practicable time. The Company and Parent will notify the other party promptly of
the receipt of any comments from the SEC or its staff and of any request by the
SEC or its staff or any other governmental officials for amendments or
supplements to the Registration Statement, the Proxy Statement or any other
filing or for additional information, and will supply the other with copies of
all correspondence between it and any of its representatives, on the one hand,
and the SEC, or its staff or any other governmental officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Restructuring, the Merger or any other filing relating thereto. The Proxy
Statement, the Registration Statement and such other filings shall comply in all
material respects with all
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applicable requirements of law. Whenever any event occurs which is required to
be set forth in an amendment or supplement to the Proxy Statement, the
Registration Statement or any other filing, Parent or the Company, as the case
may be, shall promptly inform the other party of such occurrence and cooperate
in filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of the Company, such amendment or supplement. The
Company and Parent each shall promptly provide the other (or its counsel) copies
of all filings made by it with any Governmental Body in connection with this
Agreement and the transactions contemplated hereby. Each party hereto agrees to
cooperate reasonably with each other party in connection with the preparation
and filing of the Registration Statement, including providing information to the
other party with respect to itself as may be reasonably required in connection
therewith.
(b) The Proxy Statement shall include the recommendation of the
Board of Directors of the Company in favor of approval and adoption of this
Agreement and the Merger except to the extent the Board of Directors of the
Company shall have withdrawn or modified its approval or recommendation of this
Agreement or the Merger as permitted by Section 7.2(b) or 7.3(a), and the
recommendation of the Board of Directors of Parent in favor of approval of the
issuance of Parent Shares in the Merger and the Parent Charter Amendment, except
to the extent the Board of Directors of Parent shall have withdrawn or modified
its approval or recommendation of the issuance of Parent Shares in the Merger or
the Parent Charter Amendment as permitted by Section 7.3(a). The Company shall
use its reasonable best effort to cause the Proxy Statement to be mailed to its
stockholders, and Parent shall use its reasonable best efforts to cause the
Proxy Statement to be mailed to its stockholders, in each case as promptly as
practicable after the Registration Statement becomes effective.
7.5. Reasonable Efforts. (a) Subject to Section 7.5(c), the Company
and Parent shall, and shall use all reasonable efforts to cause their respective
Subsidiaries, as applicable, to: (i) promptly make all filings and seek to
obtain all Authorizations required under all applicable Laws with respect to the
Merger and the other transactions contemplated hereby and will reasonably
consult and cooperate with each other with respect thereto; (ii) not take any
action (including effecting or agreeing to effect or announcing an intention or
proposal to effect, any acquisition, business combination or other transaction
except as set forth in the Parent Disclosure Statement or the Company Disclosure
Statement, as the case may be) which would impair the ability of the parties to
consummate the Merger (regardless of whether such action would otherwise be
permitted or not prohibited hereunder); and (iii) use all reasonable efforts to
promptly (x) take, or cause to be taken, all other actions and (y) do, or cause
to be done, all other
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things reasonably necessary, proper or appropriate to satisfy the conditions set
forth in Article VIII (unless waived) and to consummate and make effective the
transactions contemplated by this Agreement on the terms and conditions set
forth herein (including seeking to remove promptly any injunction or other legal
barrier that may prevent such consummation). Each party shall promptly notify
the other party of any communication to that party from any Governmental Body in
connection with any required filing with, or approval or review by, such
Governmental Body in connection with the Merger and permit the other party to
review in advance any proposed communication to any Governmental Body in such
connection to the extent permitted by applicable law. Notwithstanding the
foregoing, in connection with any filing or submission required or action to be
taken by either the Company or Parent or any of their respective Subsidiaries to
effect the Merger and to consummate the other transactions contemplated hereby,
(A) neither the Company nor any of its Subsidiaries shall, without Parent's
prior written consent, commit to any divestiture or hold separate or similar
transaction with respect to any asset or business of TCI Group, and each of the
Company and the TCI Group Members shall commit to, and shall use reasonable
efforts to effect, such thereof (which commitments may, at the Company's option,
be conditioned upon and effective as of the Effective Time) as Parent shall
reasonably request, and (B) neither Parent nor any of its Subsidiaries shall be
required to divest or hold separate or otherwise take (or refrain from taking)
or commit to take (or refrain from taking) any action that limits its freedom of
action with respect to, or its ability to retain, the Company or any of its
Subsidiaries or any material portion of the assets of the Company and its
Subsidiaries, or any of the business, product lines or assets of Parent or any
of its Subsidiaries, if any of the foregoing, individually or in the aggregate,
would have a Material Adverse Effect on the Company or on the TCI Group (or an
effect on Parent and its Subsidiaries that, were such effect applied to the
Company and its Subsidiaries, would constitute a Material Adverse Effect on the
Company or on the TCI Group).
(b) In addition to the foregoing, the Company agrees that, in
connection with obtaining any Authorization required in connection with the
Merger and the transactions contemplated hereby, the Company will and will cause
its Subsidiaries (i) to commit to the divestiture by the Company and its
Subsidiaries of their entire interest in the Spectrum PCS Investment, and (ii)
following stockholder approval of the Parent Charter Amendment and the issuance
of Parent Shares in the Merger, (x) to place such interest in a trust or other
arrangement acceptable to the applicable Governmental Bodies pending such
divestiture, and (y) otherwise to comply with such requirements in connection
with such divestiture as may be imposed by the applicable Governmental Bodies.
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(c) Nothing in this Agreement shall prevent or restrict Parent and
its Subsidiaries from engaging in any merger, acquisition, business combination
or other transaction (whether or not Parent is the surviving corporation);
provided that such merger, acquisition, business combination or other
transaction would not (i) prevent, or delay beyond September 30, 1999, the
ability of Parent to consummate the Merger or (ii) cause the Merger to fail to
qualify as a tax-free reorganization; and provided, further, that the parties
will not delay the Closing in order to obtain any Authorizations to close
another subsequently announced transaction, or until such other Authorizations
are obtained.
7.6. Access to Information. Subject to currently existing
contractual and legal restrictions applicable to the Company (which the Company
represents and warrants are not material with respect to TCI Group), and upon
reasonable notice, the Company shall (and shall cause each TCI Group Member to)
afford to officers, employees, counsel, accountants and other authorized
representatives of Parent ("Parent Representatives") reasonable access, during
normal business hours throughout the period prior to the Effective Time, to its
properties, books and records (including, subject to execution of appropriate
access letters, the work papers of independent accountants), such access not to
unreasonably interfere with the Company's business or operations, and, during
such period, shall (and shall cause each of the TCI Group Members to) furnish
promptly to such Parent Representatives all information concerning its business,
properties and personnel as may reasonably be requested, provided that no
investigation pursuant to this Section 7.6 shall affect or be deemed to modify
any of the respective representations or warranties made by the Company. Subject
to currently existing contractual and legal restrictions applicable to Parent
(which Parent represents and warrants are not material), and upon reasonable
notice, Parent shall (and shall cause its Significant Subsidiaries to) furnish
to to officers, employees, counsel, accountants and other authorized
representatives of the Company ("Company Representatives") such information
concerning its business, properties and personnel as may reasonably be
requested, provided that no investigation pursuant to this Section 7.6 shall
affect or be deemed to modify any of the respective representations or
warranties made by Parent. Each of Parent and the Company agrees that it will
not, and will cause the Parent Representatives or Company Representatives, as
the case may be, not to, use any information obtained pursuant to this Section
7.6 for any purpose unrelated to the consummation of the transactions
contemplated by this Agreement. All information obtained pursuant to this
Section 7.6 shall be subject to the Confidentiality Agreement, which shall
remain in full force and effect until consummation of the Merger or, if the
Merger is not consummated, for the period specified therein; provided, however,
that neither Parent nor the Company shall be precluded
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from making any disclosure which it deems required by law in connection with the
Merger. All requests for access to the Company and the TCI Group Members
pursuant to this Section 7.6 shall be made through the representatives of the
Company named in Section 7.6 of the Company Disclosure Statement, and all
requests for information to Parent and its Significant Subsidiaries pursuant to
this Section 7.6 shall be made through the representatives of Parent named in
Section 7.6 of the Parent Disclosure Statement.
7.7. Indemnification of Directors and Officers. (a) From and after
the Effective Time, Parent and the Surviving Corporation shall jointly and
severally indemnify, defend and hold harmless the present and former officers,
directors and employees of the Company and any of its Subsidiaries, and any
Person who is or was serving at the request of the Company as an officer,
director or employee or agent of another Person, against all losses, expenses,
claims, damages or liabilities arising out of actions or omissions occurring on
or prior to the Effective Time (including the transactions contemplated by this
Agreement) to the fullest extent permitted under applicable Law (and shall also,
subject to Section 7.7(b), advance expenses as incurred to the fullest extent
permitted under applicable Law, provided that the Person to whom expenses are
advanced provides an undertaking to repay such advances if it is ultimately
determined that such Person is not entitled to indemnification); provided,
however, that such indemnification shall be provided only to the extent any
directors' and officers' liability insurance policy of the Company or its
Subsidiaries does not provide coverage and actual payment thereunder with
respect to the matters that would otherwise be subject to indemnification
hereunder (it being understood that Parent or the Surviving Corporation shall,
subject to Section 7.7(b), advance expenses on a current basis as provided in
this paragraph (a) notwithstanding such insurance coverage to the extent that
payments thereunder have not yet been made, in which case Parent or the
Surviving Corporation, as the case may be, shall be entitled to repayment of
such advances from the proceeds of such insurance coverage); and provided,
further, that (subject to Parent not causing the Surviving Corporation to divest
the assets of the Parent Liberty Group) Parent's indemnification obligation will
not apply to any losses, expenses, claims, damages or liabilities arising out of
actions or omissions, whether occurring on, prior to or following the Effective
Time, that relate to the Liberty Media Group or the TCI Ventures Group
(including with respect to the Liberty Media Exchange Ratios or, if applicable,
the TCI Ventures Exchange Ratios, the Restructuring insofar as it relates to the
Liberty Media Group and the TCI Ventures Group, disclosures with respect to the
Liberty Media Group or the TCI Ventures Group, or any other decisions with
respect to the Liberty Media Group or the TCI Ventures Group); provided that the
foregoing shall not be deemed to affect the obligations of the Surviving
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Corporation hereunder. Parent and Merger Sub agree that all rights to
indemnification, including provisions relating to advances of expenses incurred
in defense of any action, suit or proceeding, whether civil, criminal,
administrative or investigative (each, a "Claim"), existing in favor of the
present or former directors, officers, employees, fiduciaries and agents of the
Company or any of its Subsidiaries, and any Person who is or was serving at the
request of the Company as an officer, director or employee or agent of another
Person (collectively, the "Indemnified Parties") as provided in the Company
Charter or By-Laws or pursuant to other agreements, or certificates of
incorporation or by-laws or similar documents of any of the Company's
Subsidiaries, as in effect as of the date hereof, with respect to matters
occurring through the Effective Time, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time; provided, however, that all rights to indemnification in
respect of any Claim asserted, made or commenced within such period shall
continue until the final disposition of such Claim. The Surviving Corporation
shall maintain in effect for not less than six years after the Effective Time
the current policies of directors' and officers' liability insurance maintained
by the Company and the Company's Subsidiaries with respect to matters occurring
prior to the Effective Time; provided, however, that (i) the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are no less advantageous to the
Indemnified Parties with an insurance company or companies, the claims paying
ability of which is substantially equivalent to the claims paying ability of the
insurance company or companies providing such insurance coverage for directors
and officers of Parent and (ii) the Surviving Corporation shall not be required
to pay an annual premium for such insurance in excess of three times the last
annual premium paid prior to the date hereof, but in such case shall purchase as
much coverage as possible for such amount.
(b) In the event that any Claim relating hereto or to the
transactions contemplated by this Agreement is commenced, before the Effective
Time, the parties hereto agree to cooperate and use their respective reasonable
efforts to vigorously defend against and respond thereto. Any Indemnified Party
wishing to claim indemnification under paragraph (a) of Section 7.7, upon
learning of any such claim, action, suit, proceeding or investigation, shall
promptly notify Parent thereof, whereupon Parent or the Surviving Corporation
shall have the right, from and after the Effective Time, to assume and control
the defense thereof, and upon such assumption, the Surviving Corporation shall
not be liable to such Indemnified Parties for any legal expenses of other
counsel or any other expenses subsequently incurred by such Indemnified Parties
in connection with the defense thereof. Notwithstanding the foregoing, if
counsel for the Indemnified Parties advises that
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there are issues which raise conflicts of interest between Parent or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain separate counsel and the Surviving Corporation will pay all reasonable
fees and expenses of such counsel; provided that the Surviving Corporation will
not be obligated pursuant to this sentence to pay for more than one firm of
counsel for all Indemnified Parties in any jurisdiction. The Surviving
Corporation shall not be liable for any settlement effected without its prior
written consent.
(c) This Section 7.7 is intended to benefit the Indemnified Parties
and shall be binding on all successors and assigns of Parent, Merger Sub and the
Surviving Corporation.
7.8. Registration and Listing of Parent Common Shares. (a) Parent
will use all reasonable efforts to register the Parent Common Shares and Parent
Liberty Tracking Shares to be issued pursuant to this Agreement, and upon
exercise of stock options granted to employees of the Company and its
Subsidiaries (or upon conversion of any convertible or exchangeable securities),
under the applicable provisions of the Securities Act and, if required, under
any applicable state securities laws.
(b) Parent will use all reasonable efforts to cause the Parent
Common Shares and Parent Liberty Tracking Shares to be issued pursuant to this
Agreement and upon exercise of stock options granted to employees of the Company
and its Subsidiaries (or upon conversion of any convertible or exchangeable
securities), to be listed for trading on the NYSE or, in the case of the Parent
Liberty Tracking Shares, at Parent's option, on the National Market System of
NASDAQ.
7.9. Affiliates of Parent and the Company. Concurrently with the
execution of this Agreement, each of the directors of the Company has executed
an agreement to the effect set forth in this Section 7.9. Prior to the Effective
Time, the Company shall deliver to Parent a letter identifying all other Persons
who, to the Company's knowledge, at the time of the Company Stockholders Meeting
or at the Effective Time, may be deemed to be "affiliates" of the Company for
purposes of Rule 145 under the Securities Act or who may otherwise be deemed to
be Affiliates of the Company (the "Rule 145 Affiliates"). The Company shall use
all reasonable efforts to cause each Person who is identified as a Rule 145
Affiliate in such list to deliver to Parent on or prior to the 30th day prior to
the Effective Time, a written agreement, in the form attached hereto as Exhibit
B, that such Rule 145 Affiliate will not sell, pledge, transfer or otherwise
dispose of any Parent Common Shares or Parent Liberty Tracking Shares issued to
such Rule 145 Affiliate pursuant to the Merger, except pursuant to an effective
registration statement or in compliance with Rule 145
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under the Securities Act or an exemption from the registration requirements of
the Securities Act.
7.10. Tax Matters. Each of the parties shall use all reasonable
efforts to cause the Merger to constitute a tax-free "reorganization" under
Section 368(a) of the Code. None of the parties will knowingly take any action,
and none of the parties will permit any of its Subsidiaries or Affiliates
knowingly to take any action, that would cause the Merger to fail to qualify as
a tax-free reorganization under Section 368(a) of the Code. Each of the parties
shall use all reasonable efforts to permit Wachtell, Lipton, Rosen & Katz and
Baker & Botts, L.L.P. to issue their opinions provided in Sections 8.2(d) and
8.3(d), respectively. Each party agrees to report the Merger on all tax returns
and other filings as a tax-free reorganization under Section 368(a) of the Code.
Except as otherwise provided herein, without the prior written consent of Parent
or unless the Liberty/Ventures Group agrees to assume the tax burden thereof,
the Company shall not (and shall not permit any Subsidiary to) take any action
that would cause a material acceleration of income under any "deferred
intercompany transaction" or "intercompany transaction" that is disclosed in
Part 2 of Section 5.10(b) of the Company Disclosure Statement.
7.11. New York Real Property Transfer Tax. Any liability arising out
of New York State and/or New York City Real Property Transfer Taxes, with
respect to interests in real property owned, directly or indirectly, by the
Company immediately prior to the Merger, if applicable and due with respect to
the Merger, shall be borne by the Surviving Corporation and expressly shall not
be a liability of the stockholders of the Company.
7.12. Employee Matters. (a) From and after the Effective Time,
Parent will cause the Surviving Corporation to honor, in accordance with their
terms, the executive, employment and other agreements and arrangements relating
to officers and employees of TCI Group set forth in Section 7.12(a) of the
Company Disclosure Statement (the "Executive Agreements") and all the Employee
Plans and Benefit Arrangements relating to TCI Group; provided, however, that
nothing herein shall preclude any change in any Executive Agreement, Employee
Plan or Benefit Arrangement effective on a prospective basis that is permitted
pursuant to the terms of the applicable Employee Plan or Benefit Arrangement.
Company performance in respect of any performance or other programs shall be
calculated without taking into account any expenses or costs directly associated
with or arising as a result of the transactions contemplated by this Agreement
or any non-recurring charges that would not reasonably be expected to have been
incurred had the transactions contemplated by this Agreement not occurred. With
respect to employees of TCI Group, Parent shall assume the obligations of the
Company under the Employee Plans and Benefit Arrangements
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as in effect immediately prior to the Effective Time and will provide employee
benefit plans with aggregate employee benefits to Company Employees that are no
less favorable than the aggregate benefits provided to them immediately prior to
the Effective Time; provided that Parent at its sole option may provide employee
benefits to Company Employees which, in the aggregate, are no less favorable
than those applicable to similarly situated employees of Parent. With respect to
any plans established by Parent, to the extent a Company Employee becomes
eligible to participate in any such plans, Parent shall grant to such Company
Employee from and after the Effective Time, credit for all service with the
Company and its affiliates and predecessors (and any other service credited by
the Company under similar Employee Plans and Benefit Arrangements) prior to the
Effective Time for eligibility to participate, benefit accrual and vesting
purposes (except that no such credit shall be required for (i) benefit accrual
purposes under defined benefit pension plans, or the schedule of benefits under
Parent's severance pay and short-term disability plans and programs, (ii)
eligibility to receive post-retirement ancillary benefits (consisting at this
time of medical, dental, death and telephone concession benefits) or (iii)
calculating Parent service for purposes of "bridging" prior Parent service under
Parent benefit plans). To the extent Parent benefit plans provide medical or
dental welfare benefits, such plans shall waive any preexisting conditions and
actively at-work exclusions with respect to Company Employees (but only to the
extent such Company Employees were provided coverage under the Employee Plans
and Benefit Arrangements) and shall provide that any expenses incurred on or
before the Effective Time in the applicable plan year by or on behalf of any
Company Employees shall be taken into account under the Parent benefit plans for
the purposes of satisfying applicable deductible, co-insurance and maximum
out-of-pocket provisions for such Company Employees.
(b) The Company may amend and/or take action with respect to its
1996 Stock Incentive Plan prior to the Effective Time to provide that upon a
termination of employment by a Company Employee with good reason or by the
Company without cause (in each case as defined in Schedule 7.12(b) attached
hereto) following the Effective Time, that options, stock appreciation rights or
other awards granted under such plan in 1997 and outstanding as of the Effective
Time shall be fully vested, and in the case of stock options or stock
appreciation rights be immediately exercisable, and will remain outstanding for
their full original term as if the individual had remained employed by the
Company.
(c) Parent agrees to maintain the Company's severance plans as in
effect on the date hereof for a period of two years from the Effective Time,
without adverse amendment, for the benefit of Company Employees.
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(d) For purposes of this Section 7.12, the term "Company Employees"
shall mean all individuals employed by the TCI Group (including those on
lay-off, disability or leave of absence, paid or unpaid) immediately prior to
the Effective Time.
(e) The Company may enter into excise tax protective agreements with
certain of its employees and consultants (including non-employee directors) in
substantially the form attached as Schedule 7.12(e); provided that the TCI Group
shall assume the obligations under such agreements solely for Company Employees,
and the obligations under such agreements for employees of the Liberty/Ventures
Group shall be assumed by the Liberty/Ventures Group.
7.13. Tax Sharing Agreement. Concurrently with the Closing, the
parties shall enter into an amendment to the Tax Sharing Agreement consistent
with the transactions contemplated by this Agreement, with respect to taxable
periods (or portions thereof) beginning on or after the Effective Time, on the
terms set forth in Exhibit C hereto.
7.14. Other Intercompany Agreements. The TCI Group, the Liberty
Media Group and the TCI Ventures Group will comply with the principles set forth
in Schedule 7.14 with respect to any agreements between any TCI Group Member, on
the one hand, and any Liberty Media Member or TCI Ventures Member, on the other
hand. At the Effective Time, the Company, on behalf of the TCI Group, and the
appropriate Subsidiary or Subsidiaries of the Company, on behalf of the Parent
Liberty Group, will enter into an agreement having the terms set forth in
Schedule 7.14.
7.15. Parent Board of Directors. At the Effective Time, Parent will
expand the size of its Board of Directors by one and will appoint Dr. John C.
Malone (or, in the event Dr. Malone is unable to serve, such other person as may
be designated by the Company and reasonably satisfactory to Parent) to the
Parent Board of Directors. From the Effective Time until the third anniversary
thereof, Parent will nominate Dr. Malone (or such other person) for reelection
to the Parent Board of Directors at each subsequent annual or special meeting of
the stockholders of Parent at which Dr. Malone's (or such other person's) term
is to expire. Thereafter (and during such period to the extent Dr. Malone or
such other person is unable to serve as a director), so long as any Parent
Liberty Tracking Shares remain outstanding, Parent will nominate and recommend
the election to the Parent Board of Directors a person (who may be Dr. Malone)
who, in the Parent Board of Directors' reasonable judgment, by virtue of his or
her background and experience, will understand and reflect issues of concern to
the Parent Liberty Group and the holders of Parent Liberty Tracking Shares.
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7.16. Parent Charter Amendment, Bylaw Amendment and Policy
Statement. The Board of Directors of Parent has approved the Parent Charter
Amendment in the form attached hereto as Exhibit A which amendment, subject to
the approval of the holders of a majority of the Parent Common Shares
outstanding at the special meeting of stockholders referred to in Section 7.3
and the filing thereof with the Secretary of State of New York, will become
effective immediately prior to the Effective Time. The Board of Directors has
also approved the amendment to Parent's bylaws, and the policy statement with
respect to Parent Liberty Tracking Shares, in the form attached hereto as
Exhibit D, each of which will become effective as of the Effective Time.
7.17. Intercompany Transactions. Except as otherwise expressly
provided by the Restructuring, in the event that after the date hereof and prior
to the Effective Time, the Company or any of its Subsidiaries engages in any
action or transaction contemplated by clause (i) or (ii) of Section 7.1(p), the
applicable entities shall establish a commercially reasonable arms' length
intercompany loan or other non-equity based account to reflect such
transactions.
7.18. Certain Inter-Group Relationships. From and including the date
hereof to the Effective Time, the Company will and will cause its Subsidiaries
to comply with the provisions set forth in Schedule 7.18. At the Effective Time,
Parent, on behalf of the Common Stock Group (as defined in Schedule 7.18), the
Company, on behalf of TCI Group, and the appropriate Subsidiary or Subsidiaries
of the Company, on behalf of the Parent Liberty Group, will enter into an
agreement having the terms set forth in Schedule 7.18, which agreement shall be
valid, binding and in full force and effect at the Effective Time.
7.19. Cable Joint Ventures. The Company is currently in the process
of restructuring certain of its cable television system assets by contributing
certain assets to partnerships and other joint ventures. The Company agrees that
as and when reasonably requested by Parent, the Company will consult with Parent
regarding the status of such restructuring transactions, including the terms and
conditions upon which such joint ventures would assume certain indebtedness
associated with such cable systems.
7.20. Certain Actions by Parent and the Surviving Corporation. (a)
Prior to the Effective Time, neither Parent nor its Subsidiaries will enter into
any exchange offer or similar transaction in which the holders of Parent Common
Shares become entitled to exchange shares of Parent Common Shares for other
securities of Parent or any Subsidiary of Parent.
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(b) For a period of 15 years following the Effective Time, neither
Parent nor the Surviving Corporation shall directly or indirectly take any
action to redeem or change or modify the terms and provisions of the preferred
stock of Westmarc, Inc. (the "Westmarc Preferred") or cause the holders of the
Westmarc Preferred to become entitled to rights of appraisal, including, without
limitation, by merger, consolidation, binding share exchange or otherwise, or
sell, transfer or dispose of all or substantially all of the assets of Westmarc,
or take any other action the effect of which is to impair Westmarc's ability to
pay dividends on the Westmarc Preferred in accordance with its terms.
(c) Prior to the Effective Time, Parent will not issue or sell any
Parent Liberty Tracking Shares, or issue or grant any options, warrants or other
rights to acquire Parent Liberty Tracking Shares or issue or sell any security
which is convertible into or exercisable or exchangeable for Parent Liberty
Tracking Shares.
ARTICLE VIII
CONDITIONS
8.1. Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the transactions contemplated by this
Agreement are subject to the fulfillment at or prior to the Effective Time of
each of the following conditions, any or all of which may be waived in whole or
in part by the party being benefitted thereby, to the extent permitted by
applicable Law:
(a) Stockholder Approval. The Parent Charter Amendment and Parent's
issuance of Parent Shares as contemplated hereby shall have been duly
approved and adopted by the requisite holders of Parent Common Shares at
the Parent Stockholders Meeting, and this Agreement and the transactions
contemplated hereby shall have been duly approved and adopted by the
requisite holders of Shares at the Company Stockholders Meeting, in each
case, in accordance with applicable Law and the Certificates of
Incorporation and By-Laws of the Parent and the Company, respectively (it
being agreed that the condition set forth in this Section 8.1(a) shall not
be waived by the parties), and the Parent Charter Amendment, and the
amendment to Parent's bylaws and policy statement set forth in Exhibit D,
shall each be in full force and effect;
(b) HSR Act; FCC. Any waiting period applicable to this Agreement
and the transactions contemplated hereby under the HSR Act shall have
expired or early termination thereof shall have been granted, and the FCC
Consent shall
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have been granted, in each case without limitation, restriction or
condition that has or would have a Material Adverse Effect on the Company
or on the TCI Group or on the Liberty/Ventures Group (or an effect on
Parent and its Subsidiaries that, were such effect applied to the Company
and its Subsidiaries, would constitute a Material Adverse Effect on the
Company or on the TCI Group).
(c) No Injunction. There shall not be in effect any judgment, writ,
order, injunction or decree of any court or Governmental Body of competent
jurisdiction, restraining, enjoining or otherwise preventing consummation
of the transactions contemplated by this Agreement or permitting such
consummation only subject to any condition or restriction that has or
would have a Material Adverse Effect on the Company or on the TCI Group or
on the Liberty/Ventures Group (or an effect on Parent and its Subsidiaries
that, were such effect applied to the Company and its Subsidiaries, would
constitute a Material Adverse Effect on the Company or on the TCI Group).
(d) Registration Statement. The Registration Statement shall have
been declared effective and shall be effective at the Effective Time, and
no stop order suspending effectiveness shall have been issued, no action,
suit, proceeding or investigation by the SEC to suspend the effectiveness
thereof shall have been initiated and be continuing, and all necessary
approvals under state securities laws or the Securities Act or Exchange
Act relating to the issuance or trading of the Parent Common Shares or the
Parent Liberty Tracking Shares shall have been received.
(e) Listing of Parent Shares. The Parent Common Shares and the
Parent Liberty Tracking Shares required to be issued hereunder shall have
been approved for listing on the NYSE (or, in the case of the Parent
Liberty Tracking Shares, at Parent's option, on the National Market System
of NASDAQ), subject only to official notice of issuance.
8.2. Conditions to Obligations of Parent and Merger Sub. The
respective obligations of Parent and Merger Sub to consummate the transactions
contemplated by this Agreement are subject to the fulfillment at or prior to the
Effective Time of each of the following additional conditions, any or all of
which may be waived in whole or part by Parent to the extent permitted by
applicable Law:
(a) Representations and Warranties True. The representations and
warranties of the Company contained herein or otherwise required to be
made after the date hereof in a writing expressly referred to herein by or
on
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behalf of the Company pursuant to this Agreement, to the extent
qualified by materiality or Material Adverse Effect, shall have been true
and, to the extent not qualified by materiality or Material Adverse
Effect, shall have been true in all material respects, in each case when
made and on and as of the Closing Date as though made on and as of the
Closing Date (except for representations and warranties made as of a
specified date, which need be true, or true in all material respects, as
the case may be, only as of the specified date).
(b) Performance. The Company shall have performed or complied in all
material respects with all agreements and conditions contained herein
required to be performed or complied with by it prior to or at the time of
the Closing.
(c) Compliance Certificate. The Company shall have delivered to
Parent a certificate, dated the date of the Closing, signed by the
President or any Vice President of the Company (but without personal
liability thereto), certifying as to the fulfillment of the conditions
specified in Sections 8.2(a) and 8.2(b).
(d) Tax Opinion. Parent shall have received an opinion of Wachtell,
Lipton, Rosen & Katz, dated the Effective Time, 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 Parent, Merger Sub and the Company should be a party to the
reorganization within the meaning of Section 368(b) of the Code; (iii) no
gain or loss should be recognized by the Company, Parent or Merger Sub as
a result of the Merger; and (iv) no gain or loss should be recognized by a
stockholder of the Company as a result of the Merger with respect to the
Shares converted solely into Parent Common Shares or Parent Liberty
Tracking Shares. In rendering such opinion, Wachtell, Lipton, Rosen & Katz
may receive and rely upon representations contained in certificates of the
Company, Parent, Merger Sub and others, in each case in form and substance
reasonably acceptable to Wachtell, Lipton, Rosen & Katz.
(e) Other Authorizations. All Authorizations (other than those
specified in Section 8.1(b) hereof) required in connection with the
execution and delivery of this Agreement and the performance of the
obligations hereunder shall have been made or obtained, without any
limitation, restriction or condition that has or would have a Material
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Adverse Effect on the Company (or an effect on Parent and its Subsidiaries
that, were such effect applied to the Company and its Subsidiaries, would
constitute a Material Adverse Effect on the Company), except for such
Authorizations the failure of which to have been made or obtained does not
and would not, individually or in the aggregate, have a Material Adverse
Effect on the Company (or an effect on Parent and its Subsidiaries that,
were such effect applied to the Company and its Subsidiaries, would
constitute a Material Adverse Effect on the Company).
8.3. Conditions to Obligations of the Company. The obligations of
the Company to consummate the transactions contemplated by this Agreement are
subject to the fulfillment at or prior to the Effective Time of each of the
following conditions, any or all of which may be waived in whole or in part by
the Company to the extent permitted by applicable Law:
(a) Representations and Warranties True. The representations and
warranties of Parent and Merger Sub contained herein or otherwise required
to be made after the date hereof in a writing expressly referred to herein
by or on behalf of Parent and Merger Sub pursuant to this Agreement, to
the extent qualified by materiality or Material Adverse Effect, shall have
been true and, to the extent not qualified by materiality or Material
Adverse Effect, shall have been true in all material respects, in each
case when made and on and as of the Closing Date as though made on and as
of the Closing Date (except for representations and warranties made as of
a specified date, which need be true, or true in all material respects, as
the case may be, only as of the specified date).
(b) Performance. Parent shall have performed or complied in all
material respects with all agreements and conditions contained herein
required to be performed or complied with by it prior to or at the time of
the Closing.
(c) Compliance Certificate. Parent shall have delivered to the
Company a certificate, dated the date of the Closing, signed by the
President or any Vice President of Parent (but without personal liability
thereto), certifying as to the fulfillment of the conditions specified in
Sections 8.3(a) and 8.2(b).
(d) Tax Opinion. The Company shall have received an opinion of Baker
& Botts, L.L.P., dated the Effective Time, 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 Parent, Merger Sub and the Company should be a party to the
reorganization within the meaning of Section 368(b) of the Code; (iii) no
gain or loss should be recognized by the Company
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as a result of the Merger; and (iv) no gain or loss should be recognized
by a stockholder of the Company as a result of the Merger with respect to
the Shares converted solely into Parent Common Shares or Parent Liberty
Tracking Shares. In rendering such opinion, Baker & Botts, L.L.P. may
receive and rely upon representations contained in certificates of Parent
and Merger Sub, the Company and others, in each case in form and substance
reasonably acceptable to Baker & Botts, L.L.P.
ARTICLE IX
TERMINATION
9.1. Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by holders of Shares, either by the mutual written consent
of Parent and the Company, or by mutual action of their respective Boards of
Directors.
9.2. Termination by Either Parent or the Company. This Agreement may
be terminated (upon notice from the terminating party to the other parties) and
the Merger may be abandoned by action of the Board of Directors of either Parent
or the Company if: (a) the Merger shall not have been consummated by March 31,
1999, provided that the right to terminate this Agreement under this clause (a)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure of the
Merger to occur on or before such date, and provided, further, that in the event
that the failure of the Merger to occur on or before March 31, 1999 is the
result of (i) a delay attributable to any transaction permitted pursuant to
Section 7.5(c) or (ii) the failure of any of the conditions set forth in Section
8.1(b), 8.1(c) or 8.2(e) to be satisfied or waived prior to March 31, 1999,
either Parent or the Company may extend such date to June 30, 1999 and, if such
conditions have not been satisfied or waived by such date, to further extend
such date to September 30, 1999 (so long as the party extending such date
believes in good faith that such conditions are capable of being satisfied by
such date), (b) any court of competent jurisdiction in the United States or
Governmental Body in the United States shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and nonappealable, (c) the amendment to the Parent Charter and
Parent's issuance of Parent Common Shares and Parent Liberty Tracking Shares as
contemplated hereby are not duly approved and adopted by the requisite holders
of Parent Common Shares on or prior to March 31, 1999, or (d) this Agreement and
the transactions contemplated hereby are not duly approved and adopted by the
requisite holders of Shares on or prior to March 31, 1999. In
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addition, this Agreement may be terminated by Parent (upon notice from Parent to
the Company) and the Merger may be abandoned by action of the Board of Directors
of Parent if any of the Stockholders shall have breached any of their
representations, covenants or obligations under the Voting Agreement in any
material respect and such breach shall not be curable.
9.3. Termination by the Company. This Agreement may be terminated
(upon notice to Parent) by the Company and the Merger may be abandoned by action
of the Board of Directors of the Company if (a) the Board of Directors of Parent
shall have withdrawn or modified its approval or recommendation of the issuance
of Parent Shares in the Merger or the Parent Charter Amendment as permitted by
Section 7.3(a) or (b) Parent or Merger Sub breaches or fails in any material
respect to perform or comply with its covenants and agreements contained herein
or breaches its representations and warranties, in each case that is not
curable, such that the conditions set forth in Sections 8.3(a) and (b) cannot be
satisfied.
9.4. Termination by Parent and Merger Sub. This Agreement may be
terminated (upon notice to the Company) by Parent and Merger Sub, and the Merger
may be abandoned by action of the Board of Directors of Parent if (a) the Board
of Directors of the Company shall have withdrawn or modified its approval or
recommendation of this Agreement or the Merger as permitted by Section 7.2(b) or
7.3(a) or (b) the Company breaches or fails in any material respect to perform
or comply with its covenants and agreements contained herein or breaches its
representations and warranties, in each case that is not curable, such that the
conditions set forth in Section 8.2(a) and (b) cannot be satisfied.
9.5. Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article IX, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in Section 7.6 or Section 9.6, and except that nothing herein will
relieve any party from liability for any breach of this Agreement.
9.6. Payment of Certain Fees. (a) In the event that (i) Parent
announces or effects a merger, acquisition, joint venture, business combination
or other transaction, as contemplated by Section 7.5(c), that involves the
acquisition of significant businesses, assets or properties, (ii) such
announcement or transaction is a significant factor in the failure of any of the
conditions set forth in Section 8.1(b), 8.1(c) or 8.2(e) to be satisfied or
waived prior to September 30, 1999 (which test will not be met if such
announcement or transaction would not have been a significant factor but for a
transaction or transactions announced by the Company following
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execution of this Agreement), (iii) this Agreement is terminated pursuant to
Section 9.2(a), and (iv) Parent would have been obligated to consummate the
Merger but for the failure of any of the conditions set forth in Section 8.1(b),
8.1(c) or 8.2(e) to be satisfied or waived prior to the date of such
termination, then promptly following such termination Parent will pay to the
Company the sum of $1.75 billion in cash.
(b) In the event that this Agreement is terminated pursuant to
Section 9.2(c) or 9.3(a), promptly following such termination Parent will pay to
the Company the sum of $1.75 billion in cash. In the event that that this
Agreement is terminated pursuant to Section 9.2(d) or 9.4(a), promptly following
such termination the Company will pay to Parent the sum of $1.75 billion in
cash.
ARTICLE X
MISCELLANEOUS AND GENERAL
10.1. Expenses. Except as set forth in Sections 7.11 and 7.18, each
party shall bear its own expenses, including the fees and expenses of any
attorneys, accountants, investment bankers, brokers, finders or other
intermediaries or other Persons engaged by it, incurred in connection with this
Agreement and the transactions contemplated hereby.
10.2. Notices, Etc. All notices, requests, demands or other
communications required by or otherwise with respect to this Agreement shall be
in writing and shall be deemed to have been duly given to any party when
delivered personally (by courier service or otherwise), when delivered by
telecopy and confirmed by return telecopy, or upon receipt after being mailed by
first-class mail, postage prepaid and return receipt requested in each case to
the applicable addresses set forth below:
If to the Company:
Tele-Communications, Inc.
Terrance Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attn: Stephen M. Brett, Esq.
Facsimile: (303) 488-3245
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with a copy to:
Baker & Botts L.L.P.
599 Lexington Avenue
New York, New York 10022
Attn: Elizabeth M. Markowski, Esq.
Frederick H. McGrath, Esq.
Facsimile: (212) 705-5125
If to Parent or Merger Sub:
AT&T, Inc.
295 North Maple Avenue
Basking Ridge, New Jersey 07920
Attn: Vice President-Law
and Corporate Secretary
Facsimile: (908) 221-6618
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attn: Richard D. Katcher, Esq.
Steven A. Rosenblum, Esq.
Facsimile: (212) 403-2000
or to such other address as such party shall have designated by notice so given
to each other party.
10.3. Amendments, Waivers, Etc. This Agreement may be amended,
changed, supplemented, waived or otherwise modified only by an instrument in
writing signed by the party (or, in the case of Section 7.7, the Indemnified
Party) against whom enforcement is sought; provided that, after the adoption of
this Agreement by the stockholders of the Company, no such amendment, change,
supplement or waiver shall be made without the further requisite approval of
such stockholders if such amendment, change, supplement or waiver by law
requires the further approval by such stockholders.
10.4. No Assignment. This Agreement shall be binding upon and shall
inure to the benefit of and be enforceable by the parties and their respective
successors and assigns; provided that, except as otherwise expressly set forth
in this Agreement, neither the rights nor the obligations of any party may be
assigned or delegated without the prior written consent of the other party.
10.5. Entire Agreement. Except as otherwise provided herein, this
Agreement (together with the Confidentiality
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Agreement between Parent and the Company and the other agreements expressly
contemplated hereby) embodies the entire agreement and understanding between the
parties relating to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter. There are no
representations, warranties or covenants by the parties hereto relating to such
subject matter other than those expressly set forth in this Agreement (including
the Company Disclosure Statement and the Parent Disclosure Statement) and any
writings expressly required hereby.
10.6. Specific Performance. The parties acknowledge that money
damages are not an adequate remedy for violations of this Agreement and that any
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.
10.7. Remedies Cumulative. All rights, powers and remedies provided
under this Agreement or otherwise available in respect hereof at law or in
equity shall be cumulative and not alternative, and the exercise or beginning of
the exercise of any thereof by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by such party.
10.8. No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Agreement or otherwise available in
respect hereof at law or in equity, or to insist upon compliance by any other
party hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by such
party of its right to exercise any such or other right, power or remedy or to
demand such compliance.
10.9. No Third Party Beneficiaries. This Agreement is not intended
to be for the benefit of and shall not be enforceable by any Person or entity
who or which is not a party hereto, except for the indemnification provisions
contained in Section 7.7, which provisions may be enforced by any Indemnified
Party referred to therein and except that the provisions of Section 7.3(b) may
be enforced by holders of Shares. Notwithstanding anything to the contrary
contained in this Agreement, the provisions of Section 7.7 of this Agreement may
not be amended or altered in any manner with respect to any Indemnified Party
without the written consent of such Indemnified Party. No assignment of this
Agreement shall relieve Parent from its obligations to any Indemnified Party
contained in Section 7.7 of this Agreement.
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10.10. Jurisdiction. Each party hereby irrevocably submits to the
exclusive jurisdiction of the United States District Court for the District of
Delaware or the Chancery Court of the State of Delaware in any action, suit or
proceeding arising in connection with this Agreement, and agrees that any such
action, suit or proceeding shall be brought only in such court (and waives any
objection based on forum non conveniens or any other objection to venue
therein); provided, however, that such consent to jurisdiction is solely for the
purpose referred to in this Section 10.10 and shall not be deemed to be a
general submission to the jurisdiction of said courts or in the State of
Delaware other than for such purpose. Parent, Merger Sub and the Company hereby
waive any right to a trial by jury in connection with any such action, suit or
proceeding.
10.11. Public Announcements. Parent and the Company will agree upon
the timing and content of the initial press release to be issued describing the
transactions contemplated by this Agreement, and will not make any public
announcement thereof prior to reaching such agreement unless required to do so
by applicable Law or regulation. To the extent reasonably requested by either
party, each party will thereafter consult with and provide reasonable
cooperation to the other in connection with the issuance of further press
releases or other public documents describing the transactions contemplated by
this Agreement.
10.12. Governing Law. This Agreement and all disputes hereunder
shall be governed by and construed and enforced in accordance with the internal
laws of the State of Delaware, without regard to principles of conflict of laws.
10.13. Name, Captions, Etc. The name assigned this Agreement and the
section captions used herein are for convenience of reference only and shall not
affect the interpretation or construction hereof. Unless otherwise specified,
(a) the terms "hereof", "herein" and similar terms refer to this Agreement as a
whole and (b) references herein to Articles or Sections refer to articles or
sections of this Agreement. Wherever appearing herein, the word "including"
shall be deemed to be followed by the words "without limitation."
10.14. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one instrument. Each counterpart may consist of a
number of copies each signed by less than all, but together signed by all, the
parties hereto.
10.15. Survival of Representations, Warranties, Covenants and
Agreements. The respective representations and warranties of the parties
contained herein or in any certificates or other documents delivered prior to or
at the Closing shall
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survive the execution and delivery of this Agreement, notwithstanding any
investigation made or information obtained by the other parties, but shall
terminate at the Effective Time. The respective covenants and agreements of the
parties contained herein or in any other documents delivered prior to or at the
Closing shall survive the execution and delivery of this Agreement and shall
only terminate in accordance with their respective terms.
10.16. Severability. In case any provision in this Agreement shall
be held invalid, illegal or unenforceable in a jurisdiction, such provision
shall be modified or deleted, as to the jurisdiction involved, only to the
extent necessary to render the same valid, legal and enforceable, and the
validity, legality and enforceability of the remaining provisions hereof shall
not in any way be affected or impaired thereby nor shall the validity, legality
or enforceability of such provision be affected thereby in any other
jurisdiction.
10.17. Disclosure Statements. The parties acknowledge that the
Company Disclosure Statement and the Parent Disclosure Statement to this
Agreement (i) relate to certain matters concerning the disclosures required and
transactions contemplated by this Agreement, (ii) are qualified in their
entirety by reference to specific provisions of this Agreement, (iii) are not
intended to constitute and shall not be construed as indicating that such matter
is required to be disclosed, nor shall such disclosure be construed as an
admission that such information is material with respect to the Company or
Parent, as the case may be, except to the extent required by this Agreement, and
(iv) disclosure of the information contained in one section or part of the
Company Disclosure Statement or the Parent Disclosure Statement shall be deemed
as proper disclosure for all sections or parts of the Company Disclosure
Statement or the Parent Disclosure Statement, as the case may be, only if
appropriately cross-referenced or if the relevance thereof is reasonably
apparent from the context in which it appears.
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IN WITNESS WHEREOF, this Agreement has been executed and delivered
by the parties set forth below.
TELE-COMMUNICATIONS, INC.
By:/s/ John C. Malone
__________________________
Name: John C. Malone
Title: Chairman and CEO
AT&T CORP.
By: /s/ C. Michael Armstrong
___________________________
Name: C. Michael Armstrong
Title: Chairman and CEO
ITALY MERGER CORP.
By: /s/ Daniel E. Somers
___________________________
Name: Daniel E. Somers
Title: President
1
EXHIBIT 99.1
[TCI LOGO] [AT&T LOGO]
NEWS RELEASE
- --------------------------------------------------------------------------------
For Further Information:
Adele Ambrose, AT&T Eileen Connolly, AT&T
908-221-6900/office 908-221-6731/office
888-602-5420/pager 888-602-5417/pager
LaRae Marsik/TCI Katina Vlahadamis/TCI
303-267-5277/office 303-267-5659/office
888-788-1282/pager 800-209-5011/pager
AT&T AND TCI TO MERGE
AT&T TO CREATE SEPARATELY TRADED UNIT TO PROVIDE CONSUMER COMMUNICATIONS
AND ENTERTAINMENT SERVICES
AT&T'S SECOND QUARTER EARNINGS TO EXCEED ESTIMATES
FOR RELEASE WEDNESDAY, JUNE 24, 1998
NEW YORK -- AT&T announced today that it has signed a definitive merger
agreement with Tele-Communications, Inc. (TCI) for an all-stock transaction
valued at approximately $48 billion. Under the agreement, AT&T will issue 0.7757
shares of AT&T common stock for each share of TCI Group Series A stock and
0.8533 shares of AT&T for each share of TCI Group Series B stock.
Immediately following the merger, AT&T will combine its current
consumer long distance, wireless and Internet services units with TCI's cable,
telecommunications, and high-speed Internet businesses to create a new
subsidiary - AT&T Consumer Services. The company will trade as a "letter" or
"tracking stock" on the New York Stock Exchange and have a significant public
ownership. AT&T will also issue separate tracking stock to holders of TCI's
programming arm, Liberty Media Group, to continue the holders' interests in the
assets now represented by those shares.
Separately, AT&T announced that its second quarter earnings would
exceed analyst estimates of 80 cents to 82 cents per share by 8 cents to 10
cents due to earlier
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and better than expected benefits from its on-going cost reduction efforts. The
company anticipates 1998 earnings of $3.35 to $3.45 per share, adjusted for the
effects of the company's pending merger with TCG.
AT&T Consumer Services
AT&T Consumer Services will provide the broadest set of consumer
communications services -- including local, long distance, wireless and
international communications, cable television, dial-up and high-speed Internet
access services -- all under the AT&T brand name.
AT&T Consumer Services will own and operate the nation's most
extensive, broadband local network platform. Following the merger, the new unit
intends to significantly accelerate the upgrading of its cable infrastructure,
enabling it to begin providing digital telephony and data services to consumers
by the end of 1999, in addition to digital video services.
"Today we are beginning to answer a big part of the question about how
we will provide local service to U.S. consumers," said C. Michael Armstrong,
chairman and CEO of AT&T.
"We are merging with TCI not only for what it is but for what we can
become together," Armstrong explained. "Through its own systems and in
partnership with affiliates, AT&T Consumer Services will bring to people's homes
the first fully integrated package of communications, electronic commerce and
video entertainment services. And it will do it with the quality and reliability
that people have come to expect from AT&T."
"This merger is a tremendous growth opportunity for TCI's shareowners
and employees," said John C. Malone, chairman and CEO of TCI. "As TCI continues
the large-scale deployment of advanced digital set-top devices, AT&T's
extraordinary brand and resources are ideal complements to TCI's broadband cable
distribution and operations. AT&T Consumer Services will offer consumers a wide
variety of entertainment, information and communications products, which
thoughtfully address personal tastes, needs, choice and convenience."
John D. Zeglis, currently president of AT&T, will be chairman and CEO
of AT&T Consumer Services and will remain on the AT&T Board of Directors. Leo J.
Hindery, Jr., currently president of TCI, will be the new unit's president and
chief operating officer. Malone has agreed to become a member of the AT&T Board
of Directors.
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AT&T Consumer Services will provide its services to consumers through a
combination of its own broadband networks and services it will procure from
others, including AT&T. The new unit will include all of the cable television
systems AT&T is acquiring in the merger with TCI, as well as AT&T's fixed
wireless technology and related spectrum rights covering more than 90 percent of
the nation. When the merger and pending TCI cable system transactions are
complete, AT&T Consumer Services' wholly owned and affiliated cable systems will
pass 33 million homes.
In addition to these physical assets, AT&T Consumer Services will also
include all elements of AT&T's existing consumer businesses, except network
operations that it will procure from its parent. AT&T's consumer businesses
include the nation's leading long distance services, with annual revenues of
approximately $23 billion, and the most broadly available wireless services,
with annual revenues greater than $3 billion.
AT&T's consumer businesses include WorldNet, one of the industry's
leading dial-up Internet access services. Through the acquisition of TCI, AT&T
Consumer Services will also hold a controlling interest in the @Home Network,
the leading provider of high-speed Internet access and content services. @Home
currently has affiliate agreements with TCI and several major cable companies
that collectively pass more than 50 million homes.
On a pro forma basis, before considering synergies, the company
projects that AT&T Consumer Services could have 1999 revenue of approximately
$33 billion and earnings before interest, taxes, depreciation and amortization
(EBITDA) of approximately $7 billion to $7.5 billion. AT&T and TCI anticipate
their merger will result in increased revenue and lower costs, producing
synergies of approximately $2 billion per year beginning three years after the
merger closes. For example, the merger is expected to improve TCI's cable
service penetration and improve customer retention for AT&T's consumer long
distance service. It will also help reduce the charges AT&T pays to local
telephone companies to handle long distance calls and allow both companies to
reduce their respective customer care, billing and advertising expenses.
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4
Business Communications and Wholesale Networking Services
AT&T itself will remain the world leader in business communications services and
become the leader in wholesale networking services. On a pro forma basis, the
company projects its 1999 revenues from those businesses could exceed $29
billion and its EBITDA could reach approximately $12 billion. AT&T will continue
to provide global communications, outsourcing and systems integration services
to more than 15 million businesses and institutions. It will own and operate the
world's most extensive and advanced communications network, the nation's largest
wireless infrastructure, and, following the pending acquisition of TCG, a local
access network reaching more than 250 cities from coast to coast.
"AT&T is now better positioned for growth," said Armstrong. "When this
transaction is completed, AT&T will be the undisputed leader in three of the
fastest growing segments of the communications services industry consumer,
business and wholesale networking services."
Neither AT&T nor TCI anticipates any significant downsizing to result
from the merger. Most AT&T and TCI employees will follow their jobs, and both
companies have established senior management teams to ensure a smooth
transition. In fact, both companies expect the merger and the creation of AT&T
Consumer Services to accelerate their growth, significantly enhancing career
opportunities for all employees involved.
AT&T and TCI said that they expect the merger, which is contingent on
regulatory and other approvals, to be tax-free to their respective shareholders
and to close in the first half of 1999.
EDITOR'S NOTE: NEWS CONFERENCE - AT&T will hold a news conference at NOON EDT
today at its world headquarters at 32 Avenue of the Americas in New York City.
AT&T Chairman C. Michael Armstrong and TCI Chairman John C. Malone will co-host
the news conference. Reporters who cannot attend can participate by calling in
prior to noontime at 1-800-553-0351 in the U.S. or 1-612-332-1020 elsewhere. A
replay of the news conference will be available for 48 hours starting at 4:00
p.m. EDT today at 1-800-248-7600 in the U.S. or 1-402-496-9635 elsewhere.
ANALYST CALL - Reporters can LISTEN ONLY to a briefing for analysts at 9:00 a.m.
EDT today. The briefing will feature Armstrong and Malone as well as AT&T's
chief financial officer, Daniel E. Somers. Leaders of the proposed new AT&T
Consumer Services - John D. Zeglis, chairman and CEO, and Leo J. Hindery, Jr.,
president and COO - will also participate. Reporters in the U.S. can call
1-800-553-0272 or 1-612-332-1210 elsewhere.
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SATELLITE COORDINATES - A satellite feed of the news conference is available at
the following coordinates: Ku band satellite TELSTAR 5, transponder 11. Downlink
polarity, vertical; downlink frequency, 11929 Mhz; location, 97 degrees west
The foregoing are forward looking statements within the meaning of the
Securities Act, including statements concerning future operating performance,
AT&T's share of new and existing markets, and AT&T's revenue and earnings growth
rates. Such forward looking statements, which are not a guarantee of
performance, are subject to a number of uncertainties and other factors, that
could cause actual results to differ materially from such statements, including
the ability to realize potential synergies and integrate operations; competitive
pressures, including the timing and level of RBOC entry into long distance; and
the success and market acceptance of new products and services. For a more
detailed description of the factors that could cause such a difference, please
see AT&T's filings with the Securities and Exchange Commission. AT&T disclaims
any intention or obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
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