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):
September 22, 1995
TIME WARNER INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8637 13-1388520
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
75 Rockefeller Plaza, New York, NY 10019
(Address of principal executive offices) (zip code)
(212) 484-8000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events.
Time Warner Inc. ("Time Warner") has entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of
September 22, 1995, among Time Warner, Time Warner Acquisition
Corp. ("Sub"), a Delaware corporation and a wholly owned
subsidiary of Time Warner, and Turner Broadcasting System, Inc.
("TBS"), a Georgia corporation, a copy of which is attached as
Exhibit 2(a) hereto and incorporated herein by reference.
Pursuant to the Merger Agreement, TBS will merge with Sub and
become a wholly owned subsidiary of Time Warner. Alternatively,
the Merger Agreement contemplates that the structure of the
transaction may be changed, if the parties so agree, so that each
of Time Warner and TBS will merge with separate subsidiaries of a
newly-formed holding company and will become wholly owned
subsidiaries of such newly-formed holding company. The merger of
TBS contemplated by the Merger Agreement is referred to herein as
the "Merger". The alternative transaction in which both TBS and
Time Warner would become wholly owned subsidiaries of a
newly-formed holding company (to be named Time Warner Inc.) is
referred to herein as the "Holding Company Transaction". In the
Merger, each issued and outstanding share of Class A Common
Stock, par value $0.0625 per share, of TBS (the "TBS Class A
Common Stock") and each issued and outstanding share of Class B
Common Stock, par value $0.0625 per share, of TBS (the "TBS Class
B Common Stock") will be converted into the right to receive 0.75
shares of the common stock, par value $1.00 per share, of Time
Warner (or, if the Holding Company Transaction is implemented, of
the newly-formed holding company) (the "Common Stock"), and each
share of Class C Convertible Preferred Stock, par value $0.125
per share, of TBS (the "TBS Class C Preferred Stock") will be
converted into the right to receive 4.80 shares of Common Stock,
in each case subject to the exercise of dissenters' rights and
the delivery of cash in lieu of fractional shares. If the Holding
Company Transaction is implemented, each issued and outstanding
share of each class of the capital stock of Time Warner will be
converted into the right to receive one share of an identical
class of the capital stock of the newly-formed holding company,
subject to the exercise of applicable appraisal rights by the
holders of preferred stock of Time Warner. Time Warner currently
believes that the parties to the Merger Agreement will agree to
implement the Holding Company Transaction.
The Merger is subject to customary closing conditions,
including the approval of the shareholders of TBS and of Time
Warner, all necessary approvals of the Federal Communications
Commission (the "FCC") and appropriate antitrust approvals. There
can be no assurance that all these approvals can be obtained or,
in the case of governmental approvals, if obtained, will not be
conditioned upon changes to the terms of the Merger Agreement or
the related agreements described below.
In connection with the Merger Agreement, Time Warner has
entered into (a) a Shareholders' Agreement dated as of September
22, 1995 (the "Shareholders' Agreement"), with R. E. Turner
("Turner"), and certain associates and affiliates of Turner
(together with Turner, the "Turner Shareholders"), a copy of
which is attached as Exhibit 10(a) hereto and incorporated herein
by reference, and (b) an LMC Agreement dated as of September 22,
1995, with Liberty Media Corporation ("LMC") and certain direct
and indirect wholly owned subsidiaries of LMC (the "LMC
Agreement"), a copy of which is attached as Exhibit 10(b) hereto
and incorporated herein by reference. In addition, LMC has agreed
to grant Time Warner an option, exercisable under certain
conditions, to acquire all the TBS shares owned by LMC and its
wholly owned subsidiaries at the same price that would be payable
for such TBS shares in the Merger.
Pursuant to the Shareholders' Agreement, the Turner
Shareholders have agreed to vote all their TBS shares in favor of
the approval of the Merger and each of the other transactions
contemplated by the Merger Agreement and in favor of the approval
and adoption of the Merger Agreement. In addition,
<PAGE>
pursuant to the Merger Agreement and the Shareholders' Agreement,
Time Warner and the Turner Shareholders have agreed that, upon
consummation of the Merger, Time Warner and the Turner
Shareholders will enter into Investors' Agreements and a
Registration Rights Agreement (the forms of which are attached as
Exhibits C-1 and C-2 and B, respectively to the Merger Agreement
and are incorporated herein by reference), pursuant to which (a)
Turner will, subject to certain conditions, be entitled to
designate two people for election to the Board of Directors of
Time Warner, (b) certain of the Turner Shareholders will be
subject to certain restrictions on transfer of Common Stock and
certain restrictions on other activities relating to Time Warner
and (c) Time Warner will grant to the Turner Shareholders rights
to require the registration of sales of shares of Common Stock
received in the Merger under the Securities Act of 1933, as
amended (the "Securities Act").
Pursuant to the LMC Agreement, LMC and certain of its
subsidiaries have agreed, subject to certain conditions, to vote all
their TBS shares in favor of the approval of the Merger and each of
the other transactions contemplated by the Merger Agreement and in
favor of the approval and adoption of the Merger Agreement. Time
Warner has agreed with LMC that Time Warner will terminate the Merger
Agreement and abandon the Merger under certain circumstances,
including (a) the imposition by any regulatory authority of any
restrictions or burdens on LMC and its affiliates as a condition to
approval of the Merger and related transactions and (b) the failure by
Time Warner to amend the Time Warner stockholder rights agreement as
set forth in Exhibit G to the LMC Agreement, which is incorporated
herein by reference.
In addition, the LMC Agreement contemplates that (a) all the
shares of Common Stock issued in the Merger to LMC and its wholly
owned subsidiaries will be exchanged for shares of a new class of
voting stock of Time Warner economically equivalent to the Common
Stock (the "LMC Class Stock") at a ratio of 1,000 shares of
Common Stock for each share of LMC Class Stock and (b) all the
shares of LMC Class Stock received by LMC and its subsidiaries,
together with all other voting securities of Time Warner from
time to time held by LMC or any of its controlled affiliates
(and, for so long as LMC is a controlled affiliate of
Tele-Communications Inc. ("TCI"), all voting securities of Time
Warner from time to time held by TCI or any of its controlled
affiliates) will be deposited in a voting trust (the "Voting
Trust") to be established pursuant to the Voting Trust Agreement
(the form of which is attached as Exhibit J to the LMC Agreement
and is incorporated herein by reference) to be voted by the
trustee thereunder, who initially shall be Gerald M. Levin, the
Chairman and Chief Executive Officer of Time Warner. The terms of
the LMC Class Stock are set forth in the form of certificate of
designation for such security, which is attached as Exhibit C to
the LMC Agreement and is incorporated herein by reference. The
LMC Class Stock is the economic equivalent of the Common Stock,
with identical rights, except that (i) the LMC Class Stock may
not be redeemed by Time Warner pursuant to Section 5 of Article
IV of the Restated Certificate of Incorporation of Time Warner,
as amended, and (ii) the LMC Class Stock will be entitled to a de
minimis liquidation preference over the Common Stock equal to
1/1000th of a cent per share on a per share of Common Stock
equivalent basis (approximately $56,000 in the aggregate).
The LMC Agreement also provides that (a) if the Voting Trust
is terminated under certain circumstances, all shares of Common
Stock and shares of LMC Class Stock distributed out of the Voting
Trust shall be exchanged for shares of a new series of nonvoting,
convertible, participating preferred stock of Time Warner (the
"Non-voting Exchange Preferred Stock") and (b) if the FCC
conditions its required consent or approval in connection with
the Merger upon any changes to the terms of the Voting Trust or
the identity of the trustee thereunder, or does not accept that
the Voting Trust, without such changes, would be sufficient to
preclude LMC and its subsidiaries from having an attributable
interest in the assets and businesses of Time Warner, and LMC is
unwilling to agree to such changes, then at the request of either
Time Warner or LMC, in lieu of entering into the Voting Trust,
the shares of Common Stock of Time Warner issued to LMC and its
subsidiaries pursuant to the Merger and the shares
<PAGE>
of LMC Class Stock issued as consideration for the Option (as
defined below) will be exchanged for shares of Non-voting
Exchange Preferred Stock. The terms of the Non-voting Exchange
Preferred Stock are set forth in the form of certificate of
designation for such security, which is attached as Exhibit A to
the LMC Agreement and is incorporated herein by reference. The
Non-voting Exchange Preferred Stock is equivalent to the LMC
Class Stock except that the holders of the Non-voting Exchange
Preferred Stock will not be entitled to vote except on very
limited matters affecting them.
Pursuant to the LMC Agreement, if the Merger is consummated,
Time Warner or TBS, on the one hand, and LMC or one of its
subsidiaries, on the other hand, will enter into certain other
agreements, and additional agreements between TBS and LMC will
take effect. These agreements include:
(a) a Stockholders' Agreement among Time Warner,
Turner, an affiliate of Turner, LMC and certain subsidiaries
of LMC, pursuant to which Turner and the Turner-related
stockholder, on the one hand, and LMC and the LMC-related
stockholders, on the other hand, grant first to the other
group and then to Time Warner a right of first refusal with
respect to dispositions of securities of Time Warner (the
form of the Stockholders' Agreement is attached as Exhibit B
to the LMC Agreement and is incorporated herein by
reference);
(b) an Option Agreement, for which Time Warner will
issue to LMC 5,000 shares of LMC Class Stock, pursuant to
which Time Warner will have an option (the "Option"),
exercisable for six years, to purchase for $160 million
(payable in the form of additional shares of LMC Class
Stock) a subsidiary of LMC that currently uplinks and
distributes the WTBS signal to cable systems and other video
distribution systems (the form of the Option Agreement is
attached as Exhibit D to the LMC Agreement and is
incorporated herein by reference);
(c) an LMC Registration Rights Agreement, pursuant to
which Time Warner will grant to LMC rights to require the
registration under the Securities Act of sales of Common
Stock received in the Merger or pursuant to the Option, or
upon conversion of LMC Class Stock or Non-voting Exchange
Preferred Stock so received (the form of the LMC
Registration Rights Agreement is attached as Exhibit F to
the LMC Agreement and is incorporated herein by reference);
(d) an agreement by which an extension and amendment of
the existing affiliation agreements between TCI and TBS
relating to the carriage by TCI-affiliated cable systems of
TBS-produced programming will be amended and extended;
(e) a SportSouth Stock Purchase Agreement, pursuant to
which TBS has agreed to sell its interest in SportSouth, a
regional sports cable network, to LMC for approximately $60
million; and
(f) a Sunshine Option Agreement pursuant to which Time
Warner Entertainment Company, L.P. ("TWE") will grant to LMC
an option to purchase the interests of TWE and certain
affiliates in the Sunshine Network, a Florida-based sports
cable network, for approximately $14 million.
Pursuant to the LMC Agreement, Time Warner has agreed that,
under certain circumstances, if LMC or any of its controlled
affiliates (and, for so long as LMC is a controlled affiliate of
TCI, TCI and each controlled affiliate of TCI) is required for
regulatory reasons to dispose of shares of Time Warner or would
otherwise suffer certain other adverse consequences by reason of
continued ownership of shares of Time Warner, Time Warner will
indemnify such person for certain assumed incremental tax
liabilities incurred in such disposition and in the disposition
of certain other shares of Time Warner.
<PAGE>
The Merger or the Holding Company Transaction, as the case
may be, and the transactions contemplated by the Shareholders'
Agreement and the LMC Agreement are referred to herein as the
"TBS Transaction".
On September 22, 1995, U S WEST, Inc. ("U S WEST") and U S
West Multimedia Communications, Inc. ("USWMC"), a wholly owned
subsidiary of U S WEST, filed a complaint in the Court of
Chancery of the State of Delaware individually and allegedly in a
derivative capacity on behalf of TWE against Time Warner,
alleging that the Merger would breach fiduciary duties owed by
Time Warner to U S WEST and that the Merger would breach certain
provisions of the agreements pursuant to which TWE is organized
and managed and USWMC was admitted as a limited partner in TWE.
U S WEST seeks equitable relief, including an injunction against
consummation of the Merger and declarations that Time Warner has
breached fiduciary duties and violated such agreements. The
complaint filed by U S WEST and USWMC is attached hereto as
Exhibit 99(d).
In addition to the complaint filed by U S WEST, fourteen
other complaints have been filed against Time Warner, certain
officers and directors of Time Warner or TWE, and other
defendants in Superior Court, Fulton County, Georgia, purportedly
on behalf of a class of TBS shareholders. These complaints
allege, among other things, that the terms of the Merger are
unfair to TBS shareholders and that some or all of the defendants
have breached fiduciary duties owed to TBS shareholders. All of
the complaints seek damages, and thirteen of the complaints seek
an injunction against consummation of the Merger.
Time Warner intends to vigorously defend each of the
foregoing lawsuits.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired:
(i) The Consolidated Financial Statements of Turner
Broadcasting System, Inc. as of December 31, 1994 and
for the year ended December 31, 1994 are incorporated by
reference herein.
(ii) The Unaudited Consolidated Condensed Financial
Statements of Turner Broadcasting System, Inc. as of
June 30, 1995 and for the six months ended June 30, 1995
are incorporated by reference herein.
(b) Pro Forma Financial Information:
Pro Forma Consolidated Condensed Financial Statements
The following pro forma consolidated condensed balance sheet
of Time Warner at June 30, 1995 gives effect to the KBLCOM
Acquisition, the CVI Acquisition, the Unclustered Cable
Disposition, the 1995 Debt Refinancings and the ITOCHU/Toshiba
Transaction, as more fully described in Time Warner's Current
Reports on Form 8-K dated August 14, 1995 and August 31, 1995,
and the TBS Transaction, as if such transactions occurred on such
date. The following pro forma consolidated statements of
operations of Time Warner for the six months ended June 30, 1995
and the year ended December 31, 1994 give effect to the Summit
Acquisition, the KBLCOM Acquisition, the CVI Acquisition, the
Asset Sale Transactions, the TWE-A/N Transaction, the 1995 Debt
Refinancings and the ITOCHU/Toshiba Transaction, as more fully
described in Time Warner's Current Reports on Form 8-K dated
August 14, 1995 and August 31, 1995, and the TBS Transaction, as
if each applicable transaction had occurred at the beginning of
such
<PAGE>
periods. The pro forma consolidated condensed financial
statements should be read in conjunction with (1) the historical
financial statements of Time Warner and TWE, including the notes
thereto, which are contained in the Time Warner Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995 and the Time
Warner Annual Report on Form 10-K for the year ended December 31,
1994, (2) the historical financial statements of TBS as of and
for the six months ended June 30, 1995 and for the year ended
December 31, 1994, which have been incorporated herein by
reference and (3) the historical financial statements and pro
forma consolidated condensed financial statements included or
incorporated by reference in Time Warner's Current Reports on
Form 8-K dated August 14, 1995 and August 31, 1995. Capitalized
terms are as defined and described in such Reports, or elsewhere
herein.
The pro forma consolidated condensed financial statements
are presented for informational purposes only and are not
necessarily indicative of the financial position or operating
results that would have occurred if the transactions had been
consummated as of the dates indicated, nor are they necessarily
indicative of future financial conditions or operating results.
Pro forma adjustments for the TBS Transaction reflect (1)
the issuance of approximately 171.3 million shares of Common
Stock, of which 50.8 million shares will be received by LMC, (2)
the exchange of the 50.8 million shares of Common Stock received
by LMC for a number of shares of LMC Class Stock equivalent to
such number of shares of Common Stock and the issuance of a
number of shares of LMC Class Stock in connection with the Option
Agreement equivalent to 5,000,000 shares Common Stock, all of
which will be placed in the Voting Trust, (3) the issuance of
approximately 13 million stock options to replace all outstanding
TBS options and (4) the assumption or incurrence of approximately
$2.4 billion of indebtedness, including $283 million of
convertible debt securities. The convertible debt securities may
be converted at the option of the holders into an additional 9.1
million shares of TBS Class B Common Stock prior to the
consummation of the Merger. Should such conversion occur, (1)
Time Warner's pro forma shareholders' equity at June 30, 1995
would be increased by approximately $300 million to reflect the
issuance of approximately 6.8 million additional shares of Common
Stock, (2) Time Warner's pro forma indebtedness at June 30, 1995
would be reduced by $283 million and (3) Time Warner's pro forma
net loss and net loss per common share for the six months ended
June 30, 1995 and the year ended December 31, 1994 would be
reduced by $6 million ($.01 per common share) and $12 million
($.04 per common share), respectively.
The TBS Transaction will be accounted for by the purchase
method of accounting for business combinations and, accordingly,
the estimated cost to acquire such assets will be allocated to
the underlying net assets in proportion to their respective fair
values. The valuations and other studies which will provide the
basis for such an allocation have not been completed. As more
fully described in the notes to the pro forma consolidated
condensed financial statements, the allocation of the excess of
cost over the book value of the net assets to be acquired has
been made preliminarily for pro forma purposes to goodwill.
The TBS Transaction is subject to customary closing
conditions, including the receipt of certain regulatory
approvals. The FCC's regulations limit the ownership by LMC of
voting securities of Time Warner. If FCC approval is not obtained
for the receipt by LMC of voting securities of Time Warner in
exchange for its interest in TBS and the deposit of such voting
securities in the Voting Trust, Time Warner will issue Non-voting
Exchange Preferred Stock to LMC in lieu of LMC Class Stock, which
would increase Time Warner's pro forma net loss per common share
for the six months ended June 30, 1995 and the year ended
December 31, 1994 by an additional $.08 per common share and $.15
per common share, respectively.
<PAGE>
TIME WARNER INC.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
June 30, 1995
(millions, unaudited)
TBS Transaction
Time Adjusted
Warner TBS Pro Forma Pro
Pro Forma(a) Historical(b) Adjustments(c) Forma
ASSETS
Cash and
equivalents $ 137 $ 69 $ - $ 206
Other current
assets 2,628 972 (131) 3,469
------ ------- -------- -------
Total current assets 2,765 1,041 (131) 3,675
Investments in and
amounts due to
and from Entertainment
Group 6,936 - - 6,936
Other investments 2,441 - (529) 1,912
Noncurrent inventories - 1,909 - 1,909
Property, plant and
equipment 1,479 324 - 1,803
Goodwill 6,326 264 8,088 14,678
Cable television
franchises 4,270 - - 4,270
Other assets 1,684 329 - 2,013
-------- -------- ------- --------
Total assets $25,901 $ 3,867 $ 7,428 $37,196
========= ========= ======== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Total current
liabilities $ 3,203 $ 623 $ - $ 3,826
Long-term debt 11,794 2,287 100 14,181
Deferred income taxes 4,540 396 - 4,936
Other long-term
liabilities 1,078 179 - 1,257
Company obligated
mandatorily redeemable
preferred securities
of subsidiary(1) 374 - - 374
Shareholders' equity:
Preferred stock 37 - - 37
LMC Class Stock - - 56 56
Common stock 387 - 120 507
Paid-in capital 6,370 - 7,534 13,904
Unrealized gains
on certain
marketable
securities 134 - - 134
Accumulated
deficit (2,016) - - (2,016)
TBS shareholders'
equity - 382 (382) -
--------- --------- --------- -------
Total shareholders'
equity 4,912 382 7,328 12,622
--------- --------- --------- -------
Total liabilities
and shareholders'
equity $25,901 $ 3,867 $ 7,428 $37,196
========= ========= ========= ========
- -----------------
(1) The sole assets of the subsidiary that is the obligor on the preferred
securities are $385 million principal amount of subordinated notes of
Time Warner due December 23, 1997. Such preferred securities are
redeemable for cash or, at Time Warner's option, approximately 12.1
million shares of Hasbro, Inc. common stock owned by Time Warner.
See accompanying notes.
<PAGE>
TIME WARNER INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Six Months Ended June 30, 1995
(millions except per share amounts, unaudited)
TBS Transaction
Time Adjusted
Warner TBS Pro Forma Pro
Pro Forma(d) Historical(e) Adjustments(f) Forma
Revenues $4,138 $1,508 $ - $5,646
Cost of revenues* 2,433 933 123 3,489
Selling, general and
administrative* 1,387 403 - 1,790
----- ----- ----- -----
Operating expenses 3,820 1,336 123 5,279
----- ------ ---- ------
Business segment operating
income (loss) 318 172 (123) 367
Equity in pretax income
of Entertainment Group 130 - - 130
Interest and other, net (482) (97) (3) (582)
Corporate expenses (39) - - (39)
------ ------- ---- -------
Income (loss) before
income taxes (73) 75 (126) (124)
Income tax (provision)
benefit (54) (31) 10 (75)
------ ------- ---- -------
Net income (loss) (127) 44 (116) (199)
Preferred dividend
requirements (73) - - (73)
------ ------- ---- -------
Net income (loss)
application to
common shares $ (200) $ 44 $ (116) $ (272)
======= ======= ===== =======
Net loss per common
share $ (.52) $ (.48)
======= =======
Average common shares 385.0 561.3
======= =======
- -----------------
* Includes depreciation
and amortization
expense of: $ 465 $ 89 $ 101 $ 655
======== ====== ===== =======
See accompanying notes.
<PAGE>
TIME WARNER INC.
PRO FORMA CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1994
(millions except per share amounts, unaudited)
TBS Transaction
Time Adjusted
Warner TBS Pro Forma Pro
Pro Forma(d) Historical(e) Adjustments(f) Forma
Revenues $8,217 $2,809 $ - $11,026
Cost of revenues* 4,979 1,815 237 7,031
Selling, general
and administrative* 2,590 706 - 3,296
----- ------ ------- -------
Operating expenses 7,569 2,521 237 10,327
----- ------ ------- -------
Business segment
operating income
(loss) 648 288 (237) 699
Equity in pretax
income of
Entertainment Group 208 - - 208
Interest and other,
net (949) (209) 6 (1,152)
Corporate expenses (76) - - (76)
------- ------ ------ --------
Income (loss) before
income taxes (169) 79 (231) (321)
Income tax
(provision) benefit (105) (33) 13 (125)
-------- ------- ------ ---------
Net income (loss) (274) 46 (218) (446)
Preferred dividend
requirements (146) - - (146)
--------- ------- ------- ---------
Net income (loss)
application to
common shares $ (420) $ 46 $ (218) $ (592)
======== ======== ========= ========
Net loss per
common share $(1.09) $ (1.06)
======== ========
Average common
shares 384.0 560.3
======== =======
- -----------------
* Includes depreciation
and amortization
expense of: $ 916 $ 153 $ 199 $1,268
======= ======= ======== =======
See accompanying notes.
<PAGE>
TIME WARNER INC.
NOTES TO THE TIME WARNER PRO FORMA CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
(a) Reflects Time Warner's pro forma consolidated condensed balance sheet
at June 30, 1995 as previously reported in Time Warner's Current
Report on Form 8-K dated August 31, 1995, which gives effect to the
KBLCOM Acquisition, the CVI Acquisition, the Unclustered Cable
Disposition, the 1995 Debt Refinancings and the ITOCHU/Toshiba
Transaction, as if such transactions occurred on such date.
(b) Reflects the historical financial position of TBS at June 30, 1995,
including $2.287 billion of long-term indebtedness that will be
assumed pursuant to the TBS Transaction.
(c) Pro forma adjustments to record the TBS Transaction reflect (1) the
issuance by Time Warner of (i) 171.3 million shares of Common Stock,
of which 50.8 million shares will be received by LMC, (ii) 50,800
shares of LMC Class Stock in exchange for the 50.8 million shares of
Common Stock received by LMC, (iii) 5,000 shares of LMC Class Stock in
connection with the Option Agreement and (iv) approximately 13 million
stock options to replace all outstanding TBS stock options, valued at
an aggregate of $7.710 billion for pro forma purposes based on a
Common Stock price of $42.375 per share, (2) the writeoff of
approximately $264 million of pre-existing goodwill of TBS and
approximately $131 million of TBS inventory to conform TBS' accounting
policy with respect to the capitalization and amortization of film
exploitation costs to Time Warner's accounting policy, (3) the
incurrence of $100 million of additional indebtedness for the payment
of transaction costs and other related liabilities, (4) the allocation
of the excess of the purchase price over the book value of the net
assets acquired of $8.352 billion to goodwill and (5) the elimination
of (i) Time Warner's historical investment in TBS in the amount of
$529 million and (ii) TBS' historical stockholders' equity in the
amount of $382 million.
(d) Reflects Time Warner's pro forma consolidated condensed statements of
operations for the six months ended June 30, 1995 and the year ended
December 31, 1994 as previously reported in Time Warner's Current
Report on Form 8-K dated August 31, 1995, which give effect to the
Summit Acquisition, the KBLCOM Acquisition, the CVI Acquisition, the
Asset Sale Transactions, the TWE-A/N Transaction, the 1995 Debt
Refinancings and the ITOCHU/Toshiba Transaction, as if each applicable
transaction had occurred at the beginning of such periods.
(e) Reflects the historical operating results of TBS for the six months
ended June 30, 1995 and the year ended December 31, 1994, excluding an
extraordinary loss on the retirement of debt of $25 million in 1994.
(f) Pro forma adjustments to record the TBS Transaction for the six months
ended June 30, 1995 and the year ended December 31, 1994 reflect (1)
an increase of $123 million and $237 million, respectively, in cost of
revenues consisting of (i) a $4 million and $10 million reduction,
respectively, of TBS' historical amortization of pre-existing
goodwill, (ii) a $105 million and $209 million increase, respectively,
in amortization with respect to the excess cost to acquire TBS that
has been allocated to goodwill and amortized on a straight-line basis
over a forty-year period and (iii) a $22 million and $38 million
increase, respectively, in the amortization of capitalized film
exploitation costs to conform TBS' accounting policy to Time Warner's
accounting policy, (2) an increase of $3 million and $6 million,
respectively, in interest expense on the $100 million of additional
indebtedness for the payment of transaction costs and other related
liabilities, (3) a decrease of $12 million in interest and other, net,
in 1994 only, due to the elimination
<PAGE>
of Time Warner's historical equity accounting for its investment in
TBS and (4) a decrease of $10 million and $13 million, respectively,
in income tax expense as a result of income tax benefits provided at a
41% tax rate.
(c) Exhibits:
*(i) Exhibit 2(a): Agreement and Plan of Merger dated as of September
22, 1995, among Time Warner Inc., Turner Broadcasting System, Inc. and
Time Warner Acquisition Corp.
*(ii) Exhibit 10(a): Shareholders' Agreement dated as of September 22,
1995, among Time Warner Inc., R.E. Turner and certain associates and
affiliates of R.E. Turner.
*(iii) Exhibit 10(b): LMC Agreement dated as of September 22, 1995,
among Time Warner Inc., Liberty Media Corporation, TCI Turner
Preferred, Inc., Communication Capital Corp. and United Turner
Investment, Inc.
(iv) Exhibit 23(a): Consent of Price Waterhouse LLP, Independent
Accountants.
(v) Exhibit 99(a): Consolidated Financial Statements of Turner
Broadcasting System, Inc. as of December 31, 1994 and for the year
ended December 31, 1994 (incorporated by reference from pages 31 to 53
of the Annual Report to Shareholders incorporated by reference into
the Annual Report on Form 10-K for the year ended December 31, 1994 of
Turner Broadcasting System, Inc.).
(vi) Exhibit 99(b): Unaudited Consolidated Condensed Financial
Statements of Turner Broadcasting System, Inc. as of June 30, 1995 and
for the six months ended June 30, 1995 (incorporated by reference from
pages 2 to 18 of the Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1995 of Turner Broadcasting System, Inc.).
(viii) Exhibit 99(c): Complaint in US WEST, Inc., et al. v. Time
Warner Inc., et al. (Civil Action No. 14555) filed by US WEST, Inc. in
the Court of Chancery of the State of Delaware in and for New Castle
County.
*Not all schedules and similar such attachments have been filed.
Time Warner will furnish to the Commission such other schedules
and similar such attachments as the Commission may request.
<PAGE>
SIGNATURE
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, in the City of New York, State of New York, on
October 4, 1995.
TIME WARNER INC.,
By:/s/ Peter R. Haje
--------------------------------
Name: Peter R. Haje
Title: Executive Vice President
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description of Exhibit Page Number
2(a) Agreement and Plan of Merger dated as of
September 22, 1995, among Time Warner
Inc., Turner Broadcasting System, Inc.
and Time Warner Acquisition Corp.
10(a) Shareholders' Agreement dated as of
September 22, 1995, among Time Warner
Inc., R.E. Turner and certain associates
and affiliates of R.E. Turner.
10(b) LMC Agreement dated as of September 22,
1995, among Time Warner Inc., Liberty
Media Corporation, TCI Turner Preferred,
Inc., Communication Capital Corp. and
United Turner Investment, Inc.
23(a) Consent of Price Waterhouse LLP,
Independent Accountants.
99(a) Consolidated Financial Statements of *
Turner Broadcasting System, Inc. as of
December 31, 1994 and for the year ended
December 31, 1994 (incorporated by
reference from pages 31 to 53 of the
Annual Report to Shareholders
incorporated by reference into the
Annual Report on Form 10-K for the year
ended December 31, 1994 of Turner
Broadcasting System, Inc.).
99(b) Unaudited Consolidated Condensed *
Financial Statements of Turner
Broadcasting System, Inc. as of June 30,
1995 and for the six months ended
June 30, 1995 (incorporated by reference
from pages 2 to 18 of the Quarterly
Report on Form 10-Q for the quarterly
period ended June 30, 1995 of Turner
Broadcasting System, Inc.).
99(c) Complaint in US WEST, Inc., et al. v.
Time Warner Inc., et al. (Civil Action
No. 14555) filed by US WEST, Inc. in the
Court of Chancery of the State of
Delaware in and for New Castle County.
--------------------
* Incorporated by reference.
Exhibit 2(a)
------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Dated as of September 22, 1995
Among
TIME WARNER INC.,
TIME WARNER ACQUISITION CORP.
And
TURNER BROADCASTING SYSTEM, INC.
------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
Parties and Recitals . . . . . . . . . . . . . . 1
ARTICLE I
The Merger
----------
SECTION 1.01. The Merger . . . . . . . . . . . . 2
SECTION 1.02. Closing . . . . . . . . . . . . . . 2
SECTION 1.03. Effective Time . . . . . . . . . . 3
SECTION 1.04. Effects of the Merger . . . . . . . 3
SECTION 1.05. Certificate of Incorporation and
By-Laws . . . . . . . . . . . . 3
SECTION 1.06. Directors . . . . . . . . . . . . . 3
SECTION 1.07. Officers . . . . . . . . . . . . . 4
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock . . . . . . 4
SECTION 2.02. Exchange of Certificates . . . . . 7
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of
the Company . . . . . . . . . . 11
SECTION 3.02. Representations and Warranties of
Parent and Sub . . . . . . . . . 24
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business . . . . . . . . 34
SECTION 4.02. No Solicitation . . . . . . . . . . 38
<PAGE>
Contents, p. 3
Page
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of Form S-4 and the
Proxy Statement; Shareholders
Meeting and Parent's Stockholders
Meeting . . . . . . . . . . . . 39
SECTION 5.02. Letter of the Company's
Accountants . . . . . . . . . . 40
SECTION 5.03. Letter of Parent's Accountants . . 41
SECTION 5.04. Access to Information;
Confidentiality . . . . . . . . 41
SECTION 5.05. Best Efforts; Notification . . . . 41
SECTION 5.06. Board Authority . . . . . . . . . . 43
SECTION 5.07. Public Announcements . . . . . . . 44
SECTION 5.08. Benefit Plans . . . . . . . . . . . 44
SECTION 5.09. Indemnification . . . . . . . . . . 45
SECTION 5.10. Fees and Expenses . . . . . . . . . 46
SECTION 5.11. Affiliates . . . . . . . . . . . . 46
SECTION 5.12. Stock Exchange Listing . . . . . . 47
SECTION 5.13. Execution of the Registration
Rights Agreement . . . . . . . . 47
SECTION 5.14. Tax Treatment . . . . . . . . . . . 47
SECTION 5.15. Transfer and Real Property Transfer
Gains Taxes . . . . . . . . . . . 47
SECTION 5.16. Material Transactions by Parent . . 47
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's
Obligation To Effect The Merger 49
SECTION 6.02. Conditions to Obligations of Parent
and Sub . . . . . . . . . . . . 50
SECTION 6.03. Conditions to Obligation of the
Company . . . . . . . . . . . . 53
<PAGE>
Contents, p. 4
Page
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination . . . . . . . . . . . 54
SECTION 7.02. Effect of Termination . . . . . . . 57
SECTION 7.03. Amendment . . . . . . . . . . . . . 58
SECTION 7.04. Extension; Waiver . . . . . . . . . 59
SECTION 7.05. Procedure for Termination,
Amendment, Extension or Waiver . 59
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties . . . . . . . . . . . 60
SECTION 8.02. Notices . . . . . . . . . . . . . . 60
SECTION 8.03. Definitions . . . . . . . . . . . . 61
SECTION 8.04. Interpretation . . . . . . . . . . 61
SECTION 8.05. Counterparts . . . . . . . . . . . 62
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries . . . . . . . . . 62
SECTION 8.07. Governing Law . . . . . . . . . . . 62
SECTION 8.08. Assignment . . . . . . . . . . . . 62
SECTION 8.09. Enforcement . . . . . . . . . . . . 62
SECTION 8.10. Waivers . . . . . . . . . . . . . . 63
EXHIBITS
Exhibit A Form of Affiliate Letter
Exhibit B Form of Registration Rights Agreement
Exhibit C-1 Form of Investors' Agreement with
Principal Shareholder and Related
Parties
Exhibit C-2 Form of Investors' Agreement with
Qualified Stockholders
Exhibit D Form of Certificates and Letters of
Representation regarding Tax Matters
<PAGE>
Index of Defined Terms
In
Agreement and Plan of Merger
Term Section
"affiliate" 8.03(a)
"Approved Matters" 4.01(a)
"Benefit Plans" 3.01(i)
"Certificate of Merger" 1.03
"Certificates" 2.02(b)
"Class A Common Stock" 2.01(b)
"Class A Preferred Stock" 3.01(c)
"Class B Common Stock" 2.01(b)
"Class B Preferred Stock" 3.01(c)
"Class C Preferred Stock" 2.01(b)
"Class C Shareholders" 3.01(c)(ii)
"Class D Preferred Stock" 3.01(c)
"Closing" 1.02
"Closing Date" 1.02
"Code" Recitals
"Common Conversion Number" 2.01(c)
"Common Stock Equivalents" 5.16
"Communications Act" 3.01(d)
"Company" Recitals
"Company Capital Stock" 2.01(b)
"Company Disclosure Letter" 3.01(a)
"Company Material Adverse Effect" 3.01(a)
"Company Programming Subsidiary" 3.01(a)
"Company Stock Options" 3.01(c)
<PAGE>
Term Section
"Company Stock Plans" 3.01(c)
"Company Subsidiary" 3.01(a)
"Confidentiality Agreement" 5.04
"Corporation" 1.05
"D&O Insurance" 5.09
"DGCL" 1.01
"Dissenting Shares" 2.01(d)
"Effective Time of the Merger" 1.03
"employee benefit plan" 3.02(m)
"employee pension benefit plan" 5.08(b)
"ERISA" 3.01(j)
"Exchange Act" 3.01(d)
"Exchange Agent" 2.02(a)
"Exchange Fund" 2.02(a)
"FCC" 3.01(d)
"Filed Parent SEC Documents" 3.02(g)
"Filed SEC Documents" 3.01(g)
"Form S-4" 3.01(f)
"Georgia BCC" 1.01
"Governmental Entity" 3.01(d)
"HSR Act" 3.01(d)
"incentive stock option" 2.01(e)
"Liens" 3.01(b)
"LMC" Recitals
"LMC Agreement" Recitals
"Material Breach" 7.01(b)(v)
"Material Company Subsidiary" 3.01(a)
"Material Parent Subsidiary" 3.02(a)
"Material Transaction" 5.16
"Maximum Premium" 5.09
<PAGE>
Term Section
"Merger" Recitals
"New Line" 3.01(c)
"New Line Debentures" 3.01(c)
"New Line Options" 3.01(c)
"New Line Plans" 3.01(c)
"NYSE" 3.02(i)
"Parent" Recitals
"Parent Common Stock" Recitals
"Parent Disclosure Letter" 3.02(c)
"Parent Material Adverse Effect" 3.02(a)
"Parent Preferred Stock" 3.02(c)
"Parent SEC Documents" 3.02(e)
"Parent Stockholder Approvals" 3.02(i)
"Parent Stock Plans" 3.02(c)
"Parent Subsidiary" 3.02(a)
"Parent's Stockholders Meeting" 5.01(c)
"person" 8.03(b)
"Principal Shareholder" Recitals
"Programming Agreement" 3.01(d)
"Proxy Statement" 3.01(d)
"Registration Rights Agreement" 5.13
"Rights Agreement" 3.02(c)
"SEC" 3.01(a)
"SEC Documents" 3.01(e)
"Securities Act" 3.01(e)
"Shareholder Approvals" 3.01(d)
"Shareholders Meeting" 5.01(b)
"Sub" Recitals
"subsidiary" 8.03(c)
<PAGE>
Term Section
"Support Agreement" Recitals
"Surviving Corporation" 1.01
"takeover proposal" 4.02(a)
"Taxes" 3.01(n)(A)
"Tax Returns" 3.01(n)(B)
"TWE Proceeding" 6.01(g)
"Voting Agreements" Recitals
<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of
September 22, 1995, among TIME WARNER INC., a
Delaware corporation ("Parent"), TIME WARNER
ACQUISITION CORP., a Delaware corporation ("Sub")
and a wholly owned subsidiary of Parent, and
TURNER BROADCASTING SYSTEM, INC., a Georgia
corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Sub
and the Company have approved the merger of the Company into Sub (the
"Merger"), upon the terms and subject to the conditions set forth in
this Agreement, whereby each issued and outstanding share of Company
Capital Stock (as defined in Section 2.01(b)), not owned by the
Company or by Parent, except Dissenting Shares (as defined in Section
2.01(d)), will be converted into the right to receive common stock,
par value $1.00 per share, of Parent ("Parent Common Stock"), and have
adopted this Agreement;
WHEREAS Parent, Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the
Merger;
WHEREAS for Federal income tax purposes it is intended that
the Merger qualify as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
and
WHEREAS, as a condition to the willingness of Parent to
enter into this Agreement, (a) R. E. Turner, III (the "Principal
Shareholder") and certain of his associates and affiliates have
entered into a Shareholders' Agreement with Parent, dated as of the
date hereof (the "Support Agreement") and (b) Liberty Media
Corporation ("LMC") and certain of its subsidiaries and affiliates
have entered into a LMC Agreement with Parent, dated as of the date
hereof (the "LMC Agreement" and, together with the Support Agreement,
the "Voting Agreements"), in each case providing, among other things,
that such persons will vote their shares
<PAGE>
of Company Capital Stock in favor of the Merger and the approval and
adoption of this Agreement.
NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the
parties agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the
Delaware General Corporation Law (the "DGCL") and the Georgia Business
Corporation Code (the "Georgia BCC"), the Company shall be merged into
Sub at the Effective Time of the Merger (as defined in Section 1.03).
Following the Merger, the separate corporate existence of the Company
shall cease and Sub shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the
rights, properties, liabilities and obligations of the Company in
accordance with the DGCL and the Georgia BCC. At the election of
Parent, any direct wholly owned subsidiary (as defined in Section
8.03(c)) of Parent may be substituted for Sub as a constituent
corporation in the Merger. In such event, the parties agree to execute
an appropriate amendment to this Agreement in order to reflect such
substitution. Furthermore, if Parent and the Company agree, the
structure of the Merger (as set forth in this Section 1.01) will be
changed in order to qualify the transaction as another form of
tax-free reorganization under Section 368 of the Code or as a tax-free
incorporation transaction under Section 351 of the Code (and in the
latter case the Company Capital Stock will be converted into the right
to receive common stock of a newly-formed corporation that will become
the sole stockholder of Parent and the Company and certain holders of
Parent Preferred Stock (as defined in Section 3.02(c)) may become
entitled to appraisal rights under Section 262 of the DGCL), and
otherwise on substantially the same terms as set forth in this
Agreement. In such case, the parties agree to execute an appropriate
amendment to this Agreement in order to reflect such change in
structure.
SECTION 1.02. Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to
<PAGE>
be specified by the parties (the "Closing Date"), which (subject to
satisfaction or waiver of the conditions set forth in Sections 6.02
and 6.03) shall be no later than the second business day after
satisfaction of the conditions set forth in Section 6.01 (other than
the condition set forth in Section 6.01(d)), at the offices of
Cravath, Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York,
N.Y. 10019, unless another time, date or place is agreed to in writing
by the parties hereto.
SECTION 1.03. Effective Time. As soon as practicable
following the satisfaction or waiver of the conditions set forth in
Article VI, the parties shall file a certificate of merger or other
appropriate documents (in any such case, the "Certificate of Merger")
executed in accordance with the relevant provisions of the DGCL and
the Georgia BCC and shall make all other filings, recordings or
publications required by the DGCL and the Georgia BCC in connection
with the Merger. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of
State and the Georgia Secretary of State, or at such other later time
as may be specified in the Certificate of Merger (the time the Merger
becomes effective being the "Effective Time of the Merger").
SECTION 1.04. Effects of the Merger. The Merger shall have
the effects set forth in Section 259 of the DGCL and Section 14-2-1106
of the Georgia BCC.
SECTION 1.05. Certificate of Incorporation and By-laws. (a)
The Certificate of Incorporation of Sub as in effect immediately prior
to the Effective Time of the Merger shall be amended at the Effective
Time of the Merger so that Article I thereof reads in its entirety as
follows: "The name of the corporation (hereinafter called the
"Corporation") is Turner Broadcasting System, Inc." and, as so
amended, such Certificate of Incorporation shall be the certificate of
incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
(b) The By-laws of Sub as in effect at the Effective Time of
the Merger shall be the By-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable
law.
SECTION 1.06. Directors. The directors of Sub at the
Effective Time of the Merger shall be the directors of
<PAGE>
the Surviving Corporation until the earlier of their resignation or
removal or until their respective successors are duly elected and
qualified, as the case may be. Immediately after the Effective Time of
the Merger, Parent and Sub shall take all action necessary to elect,
among others, the Chief Executive Officer of the Company and four
other persons to be agreed upon between Parent and the Chief Executive
Officer of the Company, as directors of the Surviving Corporation.
SECTION 1.07. Officers. The officers of the Company at the
Effective Time of the Merger shall be the officers of the Surviving
Corporation until the earlier of their resignation or removal or until
their respective successors are duly elected and qualified, as the
case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. As of the Effective
Time of the Merger, by virtue of the Merger and without any action on
the part of the holder of any shares of Company Capital Stock or any
shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share
of capital stock of Sub shall remain outstanding as one fully
paid and nonassessable share of Common Stock, par value $1.00 per
share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock. Each share of Class A
Common Stock, par value $.0625 per share, of the Company (the
"Class A Common Stock"), each share of Class B Common Stock, par
value $.0625 per share, of the Company (the "Class B Common
Stock" and, together with the Class A Common Stock, the "Company
Common Stock") and each share of Class C Convertible Preferred
Stock, par value $.125 per share, of the Company (the "Class C
Preferred Stock" and, together with the Company Common Stock, the
"Company Capital Stock") that is owned by the Company and each
share of Company Capital Stock that is owned by Parent shall
automatically be canceled and retired and shall cease
<PAGE>
to exist, and no Parent Common Stock or other consideration shall
be delivered in exchange therefor.
(c) Conversion of Company Capital Stock. Subject to Sections
2.01(d) and 2.02(e), (i) each issued and outstanding share of
Company Common Stock (other than shares to be canceled in
accordance with Section 2.01(b)), shall be converted into the
right to receive 0.75 (the "Common Conversion Number") of a fully
paid and nonassessable share of Parent Common Stock and (ii) each
issued and outstanding share of Class C Preferred Stock (other
than shares to be canceled in accordance with Section 2.01(b))
shall be converted into the right to receive 4.80 fully paid and
nonassessable shares of Parent Common Stock. Pursuant to the
Rights Agreement (as defined in Section 3.02(c)), one Right (as
defined in the Rights Agreement) will be attached to each share
of Parent Common Stock issued upon conversion of Company Capital
Stock in accordance with this Section 2.01(c). As of the
Effective Time of the Merger, all such shares of Company Capital
Stock shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of
a certificate representing any such shares of Company Capital
Stock shall cease to have any rights with respect thereto, except
the right to receive, upon the surrender of any such
certificates, certificates representing the shares of Parent
Common Stock and any cash in lieu of fractional shares of Parent
Common Stock to be issued or paid in consideration therefor upon
surrender of such certificate in accordance with Section 2.02,
without interest.
(d) Dissenting Shares. (i) The Board of Directors of the
Company has adopted a resolution pursuant to Section 1302(c)(2)
of the Georgia BCC conferring dissenters' rights with respect to
the Company Common Stock in connection with the Merger.
Notwithstanding anything in this Agreement to the contrary,
shares of Company Capital Stock that are outstanding immediately
prior to the Effective Time of the Merger and that are held by
any shareholder who has delivered to the Company, prior to the
Shareholder Approvals (as defined in Section 3.01(d)), a written
notice of such shareholder's intent to demand payment for such
holder's shares of Company Capital Stock if the Merger is
effected, in accordance with Article 13
<PAGE>
of the Georgia BCC, and who shall have not voted such shares in
favor of the approval and adoption of this Agreement ("Dissenting
Shares") shall not be converted into the right to receive Parent
Common Stock as provided in Section 2.01(c), but the holders of
Dissenting Shares shall be entitled to payment of the fair value
of such Dissenting Shares in accordance with the provisions of
such Article 13; provided, however, that if any such holder shall
fail to perfect or otherwise waive the right to demand payment
under Article 13 of the Georgia BCC or a court of competent
jurisdiction shall determine that such holder is not entitled to
the relief provided by such Article 13, then the right of such
holder of Dissenting Shares to be paid the fair value of such
holder's Dissenting Shares shall cease and such Dissenting Shares
shall be treated as if they had been converted as of the
Effective Time of the Merger into the right to receive the shares
of Parent Common Stock as provided in Section 2.01(c) and any
cash in lieu of fractional shares of Parent Common Stock as
provided in Section 2.02(e), without any interest thereon.
(ii) The Company shall give Parent (A) prompt notice of any
notices or other instruments received by the Company pursuant to
Article 13 of the Georgia BCC and (B) the opportunity to direct
all negotiations and proceedings with respect to demands for
payment for Dissenting Shares. The Company shall not, except with
the prior written consent of Parent, voluntarily offer to make or
make any payment with respect to any demands for payment for
Dissenting Shares or offer to settle or settle any such demands.
(e) Exchange Ratio for Options. (i) At the Effective Time of
the Merger, each outstanding Company Stock Option (as defined in
Section 3.01(c)) and each outstanding New Line Option (as defined
in Section 3.01(c)) shall be assumed by Parent and converted into
an option to purchase shares of Parent Common Stock, as provided
below. Following the Effective Time of the Merger, each Company
Stock Option shall continue to have, and shall be subject to, the
same terms and conditions set forth in the applicable Company
Stock Plan (as defined in Section 3.01(c)) pursuant to which such
Company Stock Option was granted, as in effect immediately prior
to the Effective Time of the Merger, and each New Line Option
<PAGE>
shall continue to have, and shall be subject to, the same terms
and conditions set forth in the applicable New Line Plan (as
defined in Section 3.01(c)) pursuant to which such New Line
Option was granted, as in effect immediately prior to the
Effective Time of the Merger, except that (i) each such Company
Stock Option and New Line Option shall be exercisable for that
number of shares of Parent Common Stock equal to the product of
(x) the number of shares of Class B Common Stock for which such
Company Stock Option or New Line Option was exercisable
immediately prior to the Effective Time of the Merger and (y) the
Common Conversion Number, rounded, in the case of any Company
Stock Option or New Line Option other than any "incentive stock
option" (within the meaning of Section 422 of the Code), up and,
in the case of any incentive stock option, down to the nearest
whole share, if necessary, and (ii) the exercise price per share
of such Company Stock Option or New Line Option shall be equal to
the aggregate exercise price of such Company Stock Option or New
Line Option immediately prior to the Effective Time of the Merger
divided by the number of shares of Parent Common Stock for which
such Company Stock Option or New Line Option shall be exercisable
as determined in accordance with the preceding clause (i),
rounded up to the next highest cent, if necessary.
(ii) As of the Effective Time of the Merger, Parent will
enter into an assumption agreement with respect to each Company
Stock Option and New Line Option, which shall provide for
Parent's assumption of the obligations of the Company under the
applicable Company Stock Plan or New Line Plan. Prior to the
Effective Time of the Merger, the Company shall make such
amendments, if any, to the Company Stock Plans and the New Line
Plans as shall be necessary to permit such assumption in
accordance with this Section 2.01(e).
(iii) It is the intention of the parties that, to the extent
that any Company Stock Option or New Line Option constitutes an
incentive stock option immediately prior to the Effective Time of
the Merger, such Company Stock Option or New Line Option shall
continue to qualify as an incentive stock option to the maximum
extent permitted by Section 422 of the Code, and that the
assumption of the Company Stock Options and New Line Options
provided by this Section 2.01(e)
<PAGE>
shall satisfy the conditions of Section 424(a) of the Code.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent.
As of the Effective Time of the Merger, Parent shall deposit with
Chemical Bank or such other bank or trust company as may be designated
by Parent (the "Exchange Agent"), for the benefit of the holders of
shares of Company Capital Stock, for exchange in accordance with this
Article II, through the Exchange Agent, certificates representing the
shares of Parent Common Stock (such shares of Parent Common Stock,
together with any dividends or distributions with respect thereto with
a record date after the Effective Time of the Merger, being
hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.01 in exchange for outstanding shares of Company Capital
Stock.
(b) Exchange Procedures. As soon as reasonably practicable
after the Effective Time of the Merger, the Exchange Agent shall mail
to each holder of record of a certificate or certificates which
immediately prior to the Effective Time of the Merger represented
outstanding shares of Company Capital Stock (the "Certificates") whose
shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 2.01, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have
such other provisions as Parent may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock.
Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent,
together with such letter of transmittal, duly executed, and such
other documents as may reasonably be required by the Exchange Agent,
the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole
shares of Parent Common Stock which such holder has the right to
receive pursuant to the provisions of this Article II, and the
Certificate so surrendered shall forthwith be canceled. In the event
of a transfer of ownership of Company Capital Stock which is not
registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may
be issued to a person other than the person in whose
<PAGE>
name the Certificate so surrendered is registered, if such Certificate
shall be properly endorsed or otherwise be in proper form for transfer
and the person requesting such payment shall pay any transfer or other
taxes required by reason of the issuance of shares of Parent Common
Stock to a person other than the registered holder of such Certificate
or establish to the satisfaction of Parent that such tax has been paid
or is not applicable. Until surrendered as contemplated by this
Section 2.02, each Certificate shall be deemed at any time after the
Effective Time of the Merger to represent only the right to receive
upon such surrender the certificate representing shares of Parent
Common Stock and cash in lieu of any fractional shares of Parent
Common Stock as contemplated by this Section 2.02. No interest will be
paid or will accrue on any cash payable in lieu of any fractional
shares of Parent Common Stock.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock
with a record date after the Effective Time of the Merger shall be
paid to the holder of any unsurrendered Certificate with respect to
the shares of Parent Common Stock represented thereby, and no cash
payment in lieu of fractional shares shall be paid to any such holder
pursuant to Section 2.02(e), until the surrender of such Certificate
in accordance with this Article II. Subject to the effect of
applicable laws, following surrender of any such Certificate, there
shall be paid to the holder of the certificate representing whole
shares of Parent Common Stock issued in exchange therefor, without
interest, (i) at the time of such surrender, the amount of any cash
payable in lieu of a fractional share of Parent Common Stock to which
such holder is entitled pursuant to Section 2.02(e) and the amount of
dividends or other distributions with a record date after the
Effective Time of the Merger theretofore paid with respect to such
whole shares of Parent Common Stock, and (ii) at the appropriate
payment date, the amount of dividends or other distributions with a
record date after the Effective Time of the Merger but prior to such
surrender and a payment date subsequent to such surrender payable with
respect to such whole shares of Parent Common Stock.
(d) No Further Ownership Rights in Company Capital Stock.
All shares of Parent Common Stock issued upon the surrender for
exchange of Certificates in accordance with the terms of this Article
II (including any cash paid pursuant to Section 2.02(c) or 2.02(e))
shall be
<PAGE>
deemed to have been issued (and paid) in full satisfaction of all
rights pertaining to the shares of Company Capital Stock theretofore
represented by such Certificates, subject, however, to the Surviving
Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time of the
Merger which may have been declared or made by the Company on such
shares of Company Capital Stock in accordance with the terms of this
Agreement or prior to the date of this Agreement and which remain
unpaid at the Effective Time of the Merger, and there shall be no
further registration of transfers on the stock transfer books of the
Surviving Corporation of the shares of Company Capital Stock which
were outstanding immediately prior to the Effective Time of the
Merger. If, after the Effective Time of the Merger, Certificates are
presented to the Surviving Corporation or the Exchange Agent for any
reason, they shall be canceled and exchanged as provided in this
Article II, except as otherwise provided by law.
(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued
upon the surrender for exchange of Certificates, and such fractional
share interests will not entitle the owner thereof to vote or to any
other rights of a stockholder of Parent.
(ii) Notwithstanding any other provision of this Agreement,
each holder of shares of Company Capital Stock converted pursuant to
the Merger who would otherwise have been entitled to receive a
fraction of a share of Parent Common Stock (after taking into account
all Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional
part of a share of Parent Common Stock multiplied by the closing price
of a share of Parent Common Stock on the Closing Date as reported on
the NYSE-Composite Transactions Tape (as reported by The Wall Street
Journal or, if not reported thereby, any other authoritative source).
(f) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of the
Certificates for six months after the Effective Time of the Merger
shall be delivered to Parent, upon demand, and any holders of the
Certificates who have not theretofore complied with this Article II
shall thereafter look only to Parent for payment of their claim for
Parent Common Stock, any cash in lieu of fractional shares of Parent
Common Stock
<PAGE>
and any dividends or distributions with respect to Parent Common
Stock.
(g) No Liability. None of Parent, Sub, the Company or the
Exchange Agent shall be liable to any person in respect of any shares
of Parent Common Stock (or dividends or distributions with respect
thereto) or cash from the Exchange Fund delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
If any Certificates shall not have been surrendered prior to seven
years after the Effective Time of the Merger (or immediately prior to
such earlier date on which any shares of Parent Common Stock, any cash
in lieu of fractional shares of Parent Common Stock or any dividends
or distributions with respect to Parent Common Stock in respect of
such Certificate would otherwise escheat to or become the property of
any Governmental Entity (as defined in Section 3.01(d)), any such
shares, cash, dividends or distributions in respect of such
Certificate shall, to the extent permitted by applicable law, become
the property of the Surviving Corporation, free and clear of all
claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent,
on a daily basis. Any interest and other income resulting from such
investments shall be paid to Parent.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of the Company.
The Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Each of the
Company and each of the Material Company Subsidiaries (as defined
below) is a corporation, partnership or other legal entity duly
organized, validly existing and in good standing under the laws
of the jurisdiction in which it is organized and has the
requisite power and authority to carry on its business as now
being conducted. Each of the Company and its subsidiaries (each a
"Company Subsidiary") is duly qualified or licensed to do
business and is in good
<PAGE>
standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such
qualification or licensing necessary, other than in such
jurisdictions where the failure to be so qualified or licensed
(individually or in the aggregate) would not have a material
adverse effect on the business, properties, assets, condition
(financial or otherwise), results of operations or prospects of
the Company and the Company Subsidiaries, taken as a whole (a
"Company Material Adverse Effect"). The Company has delivered to
Parent complete and correct copies of its Restated Articles of
Incorporation and By-laws and the certificates of incorporation
and by-laws or comparable organizational documents of the
Material Company Subsidiaries, in each case as amended to the
date of this Agreement. For purposes of this Agreement, a
"Material Company Subsidiary" means each Company Subsidiary that
(i) constitutes a significant subsidiary within the meaning of
Rule 1-02 of Regulation S-X of the Securities and Exchange
Commission (the "SEC") or (ii) is party to an agreement pursuant
to which such Company Subsidiary or another Company Subsidiary
distributes programming or licenses programming from any person
other than a Company Subsidiary and is listed in Section 3.01(a)
of the letter from the Company, dated the date of this Agreement,
addressed to Parent (the "Company Disclosure Letter") (a "Company
Programming Subsidiary"). The Company is not in violation of any
provision of its Restated Articles of Incorporation or By-laws
and no Material Company Subsidiary is in violation of any
provision of its certificate of incorporation, by-laws or
comparable organizational documents, except to the extent that
such violations would not, individually or in the aggregate, have
a Company Material Adverse Effect.
(b) Subsidiaries. Section 3.01(b) of the Company Disclosure
Letter sets forth each Material Company Subsidiary and the
ownership or interest therein of the Company. All the outstanding
shares of capital stock of each such Material Company Subsidiary
have been validly issued and are fully paid and nonassessable
and, except as set forth in Section 3.01(b) of the Company
Disclosure Letter, are owned by the Company, by another Company
Subsidiary or by the Company and another Company Subsidiary, free
and clear of all pledges, claims, liens, charges, encumbrances
and
<PAGE>
security interests of any kind or nature whatsoever
(collectively, "Liens"). Except for the capital stock of the
Company Subsidiaries and except for the ownership interests set
forth in Section 3.01(b) of the Company Disclosure Letter, the
Company does not own, directly or indirectly, any capital stock
or other ownership interest, with a fair market value as of the
date of this Agreement greater than $2,000,000, in any
corporation, partnership, limited liability company, joint
venture or other entity.
(c) Capital Structure. (i) The authorized capital stock of
the Company consists of 75,000,000 shares of Class A Common
Stock, 300,000,000 shares of Class B Common Stock, 500,000 shares
of Class A Serial Preferred Stock, par value $.10 per share (the
"Class A Preferred Stock"), 12,600,000 shares of Class B
Cumulative Preferred Stock, par value $.125 per share (the "Class
B Preferred Stock"), 12,600,000 shares of Class C Convertible
Preferred Stock and 100,000,000 shares of Class D Serial
Preferred Stock, par value $.0625 per share (the "Class D
Preferred Stock"). Each share of Class C Preferred Stock is
convertible into six shares of Class B Common Stock. At the close
of business on August 29, 1995, (A)(I) 68,330,388 shares of Class
A Common Stock were outstanding, all of which were validly
issued, fully paid and nonassessable, (II) 137,819,078 shares of
Class B Common Stock were outstanding, all of which were validly
issued, fully paid and nonassessable, (III) 12,396,976 shares of
Class C Preferred Stock were outstanding, all of which were
validly issued, fully paid and nonassessable, and (iv) no shares
of Class A Preferred Stock, Class B Preferred Stock or Class D
Preferred Stock were issued or outstanding; and (B)(I) 81,822,278
shares of Class B Common Stock were reserved for issuance upon
conversion of the Class C Preferred Stock and the Company's Zero
Coupon Subordinated Convertible Notes due 2007, (II) 13,904,724
shares of Class B Common Stock were reserved for issuance upon
the exercise of outstanding stock options (the "Company Stock
Options") granted pursuant to the Company's 1988 Stock Option
Plan, the Company's 1993 Stock Option and Equity Award Plan and
the agreement, dated June 1, 1993, among CNN America, Inc., the
Company, Larry King Enterprises, Inc., and Larry King (the
"Company Stock Plans") and (III) 4,892,214 shares of Class B
Common Stock were reserved for issuance upon conversion of the
6-1/2%
<PAGE>
Convertible Subordinated Debentures (the "New Line Debentures")
of New Line Cinema Corporation ("New Line"), upon the exercise of
outstanding stock options (the "New Line Options") granted
pursuant to the New Line 1986 Stock Option Plan, the New Line
1990 Stock Option Plan, the New Line 1991 Stock Option Plan, the
Stock Option Agreements, dated January 17, 1986, and February 14,
1990, among New Line, Michael Lynne and Richard L. Blumenthal,
the Stock Option Agreements, dated February 14, 1990, September
27, 1990, and January 22, 1993, between New Line and Michael
Lynne, and the Stock Option Agreement, dated October 6, 1993,
between New Line and Mitch Goldman (the "New Line Plans") or upon
the exercise of outstanding warrants issued by New Line pursuant
to the Warrant to Purchase Common Stock of New Line, dated May
31, 1991, initially issued to NHI Nelson Holdings International
Ltd. Except as set forth above, at the close of business on
August 29, 1995, no shares of capital stock or other voting
securities of the Company were issued, reserved for issuance or
outstanding and, since such date, no shares of capital stock or
other voting securities or options in respect thereof have been
issued except upon the conversion of the securities or the
exercise of the Company Stock Options or other options and
warrants referred to in clauses (B)(I) through (III) above.
Except as set forth in this Section 3.01(c) or in Section 3.01(c)
of the Company Disclosure Letter and except for Company Stock
Options granted in the ordinary course of business to employees
of the Company and the Company Subsidiaries who are not senior
executive officers and covering not in excess of an aggregate of
1,000,000 shares of Class B Common Stock for all such grants
during the period from the date of this Agreement through the
Effective Time of the Merger, there are not now, and at the
Effective Time of the Merger there will not be, any options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which the Company or any Company
Subsidiary is a party or by which any of them is bound relating
to the issued or unissued capital stock of the Company or any
Company Subsidiary, or obligating the Company or any Company
Subsidiary to issue, transfer, grant or sell any shares of
capital stock of, or other equity interests in, or securities
convertible into or exchangeable for any capital stock or other
equity interests in, the Company or any Company Subsidiary or
obligating the Company or any
<PAGE>
Company Subsidiary to issue, grant, extend or enter into any such
option, warrant, call, right, commitment, agreement, arrangement
or undertaking. All shares of Class B Common Stock subject to
issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and
nonassessable. There are not any outstanding contractual
obligations of the Company or any Company Subsidiary to
repurchase, redeem or otherwise acquire any shares of capital
stock of the Company or any Company Subsidiary, or make any
material investment (in the form of a loan, capital contribution
or otherwise) in, any Company Subsidiary or any other person.
(ii) The Company has previously delivered to Parent (A) a
true and complete list of the holders of record of the Class C
Preferred Stock (the "Class C Shareholders") and the number of
shares of Class C Preferred Stock owned of record by each such
Class C Shareholder, (B) a true and complete list of the number
of shares of each class of capital stock of the Company owned of
record by the Principal Shareholder and each person known by the
Company to be an affiliate of the Principal Shareholder and (C)
true and complete copies of any agreement relating to the
ownership or voting of the Class C Preferred Stock to which the
Company is a party.
(d) Authority; Noncontravention. The Company has the
requisite corporate power and authority to enter into this
Agreement and, subject to approval of this Agreement by the
holders of (i) a majority of the voting power of the outstanding
Company Capital Stock, voting as a single class, (ii) a majority
of the voting power of the outstanding Class A Common Stock and
the Class B Common Stock, voting as a single class, and (iii) the
holders of a majority of the outstanding shares of Class C
Preferred Stock, voting as a separate class (the "Shareholder
Approvals"), to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of the Company, subject to
the Shareholder Approvals. This Agreement has been duly executed
and delivered by the Company and constitutes a valid and
<PAGE>
binding obligation of the Company, enforceable against the
Company in accordance with its terms. Except as set forth in
Section 3.01(d) of the Company Disclosure Letter, the execution
and delivery of this Agreement by the Company do not, and the
consummation of the transactions contemplated by this Agreement
and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to
a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in
the creation of any Lien upon any of the properties or assets of
the Company or any Company Subsidiary under, (i) the Restated
Articles of Incorporation or By-laws of the Company or the
comparable organizational documents of any Company Subsidiary,
(ii) any agreement pursuant to which the Company or any Company
Programming Subsidiary distributes programming or licenses
programming from a person other than a Company Subsidiary
individually involving annual payments to or by the Company and
the Company Subsidiaries of $20,000,000 or more (any such
agreement, a "Programming Agreement"), (iii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other
agreement (but excluding any Programming Agreement), instrument,
permit, concession, franchise or license applicable to the
Company or any Company Subsidiary or their respective properties
or assets or (iv) subject to the governmental filings and other
matters referred to in the following sentence, any judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any Company Subsidiary or their
respective properties or assets, other than, in the case of
clauses (iii) and (iv), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not
(x) have a Company Material Adverse Effect, (y) prevent the
Company from performing its obligations under this Agreement in
any material respect or (z) prevent or delay in any material
respect the consummation of any of the transactions contemplated
by this Agreement. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Federal,
state or local government or any court, administrative agency or
commission or other governmental authority or agency, domestic or
foreign, including the European Union (a "Governmental Entity"),
is required by or with
<PAGE>
respect to the Company or any of the Company Subsidiaries in
connection with the execution and delivery of this Agreement by
the Company or the consummation by the Company of the
transactions contemplated by this Agreement, except for (i) the
filing of a premerger notification and report form by the
Principal Shareholder as the ultimate parent entity of the
Company under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (the "HSR Act"), (ii) the filing with the SEC of (A) a joint
proxy statement relating to the meetings of the Company's
shareholders and Parent's stockholders to be held in connection
with the Merger and the transactions contemplated by this
Agreement (as amended or supplemented from time to time, the
"Proxy Statement"), and (B) such reports under Section 13(a) of
the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as may be required in connection with this Agreement and
the transactions contemplated by this Agreement, (iii) the filing
of the Certificate of Merger with the Delaware Secretary of State
and the Georgia Secretary of State and appropriate documents with
the relevant authorities of other states in which the Company is
qualified to do business, (iv) such filings with, and orders of,
the Federal Communications Commission (the "FCC") as may be
required under the Communications Act of 1934, as amended (the
"Communications Act"), and the FCC's rules and regulations in
connection with this Agreement and the transactions contemplated
by this Agreement and (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings (x) as
may be required under the laws of any foreign country in which
the Company or any of the Company Subsidiaries conducts any
business or owns any property or assets or (y) which, if not
obtained or made, would not prevent or delay in any material
respect the consummation of any of the transactions contemplated
by this Agreement or otherwise prevent the Company from
performing its obligations under this Agreement in any material
respect or have, individually or in the aggregate, a Company
Material Adverse Effect.
(e) SEC Documents; Undisclosed Liabilities. The Company has
filed all required reports, schedules, forms, statements and
other documents with the SEC since December 31, 1992 (as such
documents have been amended prior to the date hereof, the "SEC
Documents"). As of their respective dates, the SEC Documents
<PAGE>
complied in all material respects with the requirements of the
Securities Act of 1933 (the "Securities Act"), or the Exchange
Act, as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such SEC Documents, and none
of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated
therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading, except to the extent such statements have been
modified or superseded by a later Filed SEC Document (as defined
in Section 3.01(g)). Except to the extent that information
contained in any SEC Document has been revised or superseded by a
later Filed SEC Document, neither the Company's Annual Report on
Form 10-K for the year ended December 31, 1994, nor any SEC
Document filed after December 31, 1994, contains any untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The consolidated financial
statements of the Company included in the SEC Documents comply as
to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC
with respect thereto, have been prepared in accordance with
generally accepted accounting principles (except, in the case
of unaudited statements, as permitted by Form 1O-Q of the SEC)
applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto) and fairly present the
consolidated financial position of the Company and the
consolidated Company Subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as set forth in the
Filed SEC Documents, neither the Company nor any Company
Subsidiary has any liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be set forth on a
consolidated balance sheet of the Company and the consolidated
Company Subsidiaries or in the notes thereto and which,
individually or in the aggregate, could reasonably be expected to
have a Company Material Adverse Effect.
<PAGE>
(f) Information Supplied. None of the information supplied
or to be supplied by the Company for inclusion or incorporation
by reference in (i) the registration statement on Form S-4 to be
filed with the SEC by Parent in connection with the issuance of
Parent Common Stock in the Merger (the "Form S-4") will, at the
time the Form S-4 is filed with the SEC, at any time it is
amended or supplemented or at the time it becomes effective under
the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not mislead-
ing, or (ii) the Proxy Statement will, at the date the Proxy
Statement is first mailed to the Company's shareholders or
Parent's stockholders or at the time of the Shareholders Meeting
(as defined in Section 5.01(b)) or the Parent's Stockholders
Meeting (as defined in Section 5.01(c)), contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as
to form in all material respects with the requirements of the
Exchange Act and the rules and regulations promulgated
thereunder, except that no representation is made by the Company
with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub
specifically for inclusion or incorporation by reference in the
Proxy Statement.
(g) Absence of Certain Changes or Events. Except as
disclosed in the SEC Documents filed and publicly available prior
to the date of this Agreement (the "Filed SEC Documents"), since
the date of the most recent audited financial statements included
in the Filed SEC Documents, the Company has conducted its
business only in the ordinary course, and there has not been:
(i) any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result
in a change or effect) which, individually or in the
aggregate, has had or is likely to have, a Company Material
Adverse Effect;
<PAGE>
(ii) except for regular quarterly dividends not in
excess of $.0175 per share of Class A Common Stock, $.0175
per share of Class B Common Stock and $.105 per share of
Class C Preferred Stock, with customary record and payment
dates, any declaration, setting aside or payment of any
dividend or other distribution (whether in cash, stock or
property) with respect to any of the Company Capital Stock;
(iii) any split, combination or reclassification of any
of the Company's capital stock or any issuance or the
authorization of any issuance of any other securities in
exchange or in substitution for shares of the Company's
capital stock;
(iv) except as disclosed in Section 3.01(g) of the
Company Disclosure Letter, (A) any granting by the Company
or any Company Subsidiary to any executive officer of the
Company or any of the Company Subsidiaries of any increase
in compensation, except in the ordinary course of business
consistent with prior practice or as was required under
employment agreements in effect as of the date of the most
recent audited financial statements included in the Filed
SEC Documents, (B) any granting by the Company or any of the
Company Subsidiaries to any such executive officer of any
increase in severance or termination pay, except as was
required under any employment, severance or termination
agreements in effect as of the date of the most recent
audited financial statements included in the Filed SEC
Documents, or (C) any entry by the Company or any of the
Company Subsidiaries into any employment, severance or
termination agreement with any such executive officer;
(v) any damage, destruction or loss, whether or not
covered by insurance, that has had or is likely to have a
Company Material Adverse Effect; or
(vi) any change in accounting methods, principles or
practices by the Company or any Material Company Subsidiary
materially affecting its assets, liabilities or business,
except
<PAGE>
insofar as may have been required by a change in generally
accepted accounting principles.
(h) Litigation. Except as disclosed in the Filed SEC
Documents or in Section 3.01(h) of the Company Disclosure Letter,
there is no suit, action or proceeding (including any proceeding
by or before the FCC) pending or, to the knowledge of the
Company, threatened against or affecting the Company or any of
the Company Subsidiaries (and the Company is not aware of any
basis for any such suit, action or proceeding) that, individually
or in the aggregate, could reasonably be expected to (i) have a
Company Material Adverse Effect or (ii) prevent the Company from
performing its obligations under this Agreement in any material
respect, and there is not any judgment, decree, injunction, rule
or order of any Governmental Entity or arbitrator outstanding
against the Company or any of the Company Subsidiaries having, or
which, insofar as reasonably can be foreseen, in the future would
have, any Company Material Adverse Effect. As of the date of this
Agreement, except as disclosed in the Filed SEC Documents or in
Section 3.01(h) of the Company Disclosure Letter, there is no
suit, action or proceeding pending, or, to the knowledge of the
Company, threatened, against the Company or any of the Company
Subsidiaries (and the Company is not aware of any basis for any
such suit, action or proceeding) that, individually or in the
aggregate, could reasonably be expected to prevent or delay in
any material respect the consummation of the Merger or any of the
transactions contemplated by this Agreement.
(i) Absence of Changes in Benefit Plans. Except as disclosed
in the Filed SEC Documents or in Section 3.01(i) of the Company
Disclosure Letter, since the date of the most recent audited
financial statements included in the Filed SEC Documents, there
has not been any adoption or amendment in any material respect by
the Company or any of the Company Subsidiaries of any collective
bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, retirement,
vacation, severance, disability, death benefit, hospitalization,
medical or other plan, arrangement or understanding (whether or
not legally binding) providing benefits to any current or former
<PAGE>
employee, officer or director of the Company or any of the
Company Subsidiaries (collectively, "Benefit Plans").
(j) ERISA Compliance. Except as described in the Filed SEC
Documents or in Section 3.01(j) of the Company Disclosure Letter
or as would not have a Company Material Adverse Effect, (i) all
employee benefit plans or programs maintained for the benefit of
the current or former employees or directors of the Company or
any Company Subsidiary that are sponsored, maintained or
contributed to by the Company or any Company Subsidiary, or with
respect to which the Company or any Company Subsidiary has any
liability, including any such plan that is an "employee benefit
plan" as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974 ("ERISA"), are in compliance with all
applicable requirements of law, including ERISA and the Code, and
(ii) neither the Company nor any Company Subsidiary has any
liabilities or obligations with respect to any such employee
benefit plans or programs, whether accrued, contingent or
otherwise, nor to the knowledge of the executive officers of the
Company are any such liabilities or obligations expected to be
incurred. Except as set forth in Section 3.01(j) of the Company
Disclosure Letter, the execution of, and performance of the
transactions contemplated in, this Agreement will not (either
alone or upon the occurrence of any additional or subsequent
events) constitute an event under any benefit plan, policy,
arrangement or agreement or any trust or loan that will or may
result in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting, distribution,
increase in benefits or obligation to fund benefits with respect
to any employee. The only severance agreements or severance
policies applicable to the Company or the Company Subsidiaries
are the agreements and policies specifically referred to in
Section 3.01(j) of the Company Disclosure Letter.
(k) Voting Requirements. The Shareholder Approvals are the
only votes of the holders of any class or series of the Company's
capital stock necessary to approve this Agreement and the trans-
actions contemplated by this Agreement.
<PAGE>
(l) Brokers; Schedule of Fees and Expenses. Except as set
forth in Section 3.01(l) of the Company Disclosure Letter, no
broker, investment banker, financial advisor or other person is
entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company will pay the fees and
expenses of the persons listed in Section 3.01(1) of the Company
Disclosure Letter. The fees incurred and to be incurred by the
Company in connection with this Agreement and the transactions
contemplated by this Agreement for the persons listed in Section
3.01(l) of the Company Disclosure Letter are set forth in Section
3.01(l) of the Company Disclosure Letter. The Company has
furnished to Parent true and complete copies of all the
agreements referred to in Section 3.01(l) of the Company
Disclosure Letter and all indemnification and other agreements
related to the engagement of the persons so listed.
(m) Opinions of Financial Advisors. The Company has received
the opinions of CS First Boston Corporation and Merrill Lynch &
Co., each dated the date of this Agreement, to the effect that,
as of such date, the consideration to be received in the Merger
by the Company's shareholders is fair to the Company's
shareholders other than Parent from a financial point of view, a
signed copy of which opinions have been delivered to Parent.
(n) Taxes. (i) The Company and each Company Subsidiary have
timely filed (or have had timely filed on their behalf) or will
file or cause to be timely filed, all material Tax Returns
required by applicable law to be filed by any of them prior to or
as of the Effective Time of the Merger. All such Tax Returns are,
or will be at the time of filing, true, complete and correct in
all material respects.
(ii) The Company and each Company Subsidiary have paid (or
have had paid on their behalf), or where payment is not yet due,
have established (or have had established on their behalf and for
their sole benefit and recourse), or will establish or cause to
be established on or before the Effective Time of the Merger, an
adequate accrual for
<PAGE>
the payment of, all material Taxes due with respect to any period
ending prior to or as of the Effective Time of the Merger.
(iii) For purposes of this Agreement, the following terms
shall have the following meanings:
(A) "Taxes" shall mean all Federal, state, local and
foreign taxes, and other assessments of a similar nature (whether
imposed directly or through withholding), including any interest,
additions to tax, or penalties applicable thereto.
(B) "Tax Returns" shall mean all Federal, state, local
and foreign tax returns, declarations, statements, reports,
schedules, forms and information returns and any amended tax
return relating to Taxes.
(o) Compliance with Laws. Neither the Company nor any of the
Company Subsidiaries has violated or failed to comply with any
statute, law, ordinance, regulation, rule, judgment, decree or
order of any Governmental Entity applicable to its business or
operations (including the Communications Act and the FCC's rules
and regulations), except for violations and failures to comply
that could not, individually or in the aggregate, reasonably be
expected to result in a Company Material Adverse Effect.
SECTION 3.02. Representations and Warranties of Parent and
Sub. Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent,
Sub and each of the Material Parent Subsidiaries (as defined below) is
a corporation, partnership or other legal entity duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it is organized and has the requisite power and
authority to carry on its business as now being conducted. Each of
Parent and Parent's subsidiaries, including Sub (each a "Parent
Subsidiary"), is duly qualified or licensed to do business and is in
good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification
or licensing necessary, other than in such jurisdictions
<PAGE>
where the failure to be so qualified or licensed (individually or
in the aggregate) would not have a material adverse effect on the
business, properties, assets, condition (financial or otherwise),
results of operations or prospects of Parent and the Parent
Subsidiaries, taken as a whole (a "Parent Material Adverse
Effect"). Parent has delivered to the Company complete and
correct copies of its Restated Certificate of Incorporation and
By-laws and the certificates of incorporation and by-laws or
comparable organizational documents of Sub and the Material
Parent Subsidiaries, in each case as amended to the date of this
Agreement. Neither Parent nor Sub is in violation of any
provision of its certificate of incorporation or by-laws and no
Material Parent Subsidiary is in violation of any provision of
its certificate of incorporation, by-laws or comparable
organizational documents, except to the extent that such
violations would not, individually or in the aggregate, have a
Parent Material Adverse Effect. Time Warner Entertainment
Company, L.P. ("TWE"), and each other Parent Subsidiary that
constitutes a significant subsidiary of Parent within the meaning
of Rule 1-02 of Regulation S-X of the SEC (determined without
regard to paragraph (3) of the definition thereof) is referred to
herein as a "Material Parent Subsidiary".
(b) Subsidiaries. Section 3.02(b) of the Parent Disclosure
Letter (as defined in Section 3.02(c)) sets forth as of the date
of this Agreement each Material Parent Subsidiary and the
ownership or interest therein of Parent. All the outstanding
shares of capital stock of each such Material Parent Subsidiary
have been validly issued and are fully paid and nonassessable
and, except as set forth in Section 3.02(b) of the Parent
Disclosure Letter, are owned by Parent, by another Parent
Subsidiary or by Parent and another Parent Subsidiary, free and
clear of all Liens. Except for the ownership interests in the
Parent Subsidiaries and except for the ownership interests set
forth in Section 3.02(b) of the Parent Disclosure Letter, as of
the date of this Agreement Parent does not own, directly or
indirectly, any capital stock or other ownership interest, with a
fair market value as of the date of this Agreement greater than
$5,000,000, in any corporation, partnership, limited liability
company, joint venture or other entity.
<PAGE>
(c) Capital Structure. As of the date of this Agreement, the
authorized capital stock of Parent consists of 750,000,000 shares
of Parent Common Stock and 250,000,000 shares of preferred stock,
par value $1.00 per share ("Parent Preferred Stock"). At the
close of business on August 31, 1995, (i) (A) 387,166,475 shares
of Parent Common Stock were outstanding, all of which were
validly issued, fully paid and nonassessable, (B) 43,739,664
shares of Parent Common Stock were held by Parent Subsidiaries
and (C) 1,988,026 shares of Parent Common Stock were held by
Parent in treasury, (ii) 464,638 shares of Series B 6.40%
Preferred Stock were outstanding, all of which were validly
issued, fully paid and nonassessable, (iii) 3,264,508 shares of
Series C Preferred Stock were outstanding, all of which were
validly issued, fully paid and nonassessable, (iv) 11,000,000
shares of Series D Convertible Preferred Stock were outstanding,
all of which were validly issued, fully paid and nonassessable,
(v) 82,786,025 shares of Parent Common Stock were reserved for
issuance pursuant to the Time Warner 1981 Stock Option Plan, the
Time Warner 1986 Stock Option Plan, the 1988 Stock Incentive Plan
of Time Warner Inc., the Time Warner 1989 Stock Incentive Plan,
the Time Warner 1989 WCI Replacement Stock Option Plan, the Time
Warner 1989 Lorimar Non-Employee Replacement Stock Option Plan,
the Time Warner 1993 Stock Option Plan, the Time Warner 1994
Stock Option Plan, the Time Warner Corporate Group Stock
Incentive Plan, the Time Warner Cable Television Group Stock
Incentive Plan, the Time Warner Filmed Entertainment Group Stock
Incentive Plan, the Time Warner Music Group Stock Incentive Plan,
the Time Warner Programming Group Stock Incentive Plan, the Time
Warner Publishing Group Stock Incentive Plan and the Time Warner
1988 Restricted Stock Plan for Non-Employee Directors (the
"Parent Stock Plans"), (vi) 4,000,000 shares of Parent Preferred
Stock were reserved for issuance in connection with the rights to
purchase shares of Parent Common Stock pursuant to the Rights
Agreement dated as of January 20, 1994 (the "Rights Agreement"),
between Parent and Chemical Bank, as Rights Agent, and (vii)
additional shares of capital stock of Parent were reserved for
issuance as described in Section 3.02(c) of the letter from
Parent, dated the date of this Agreement, addressed to the
Company (the "Parent Disclosure Letter"). Except as set forth
above, at the close of business on August 31, 1995, no shares of
<PAGE>
capital stock or other voting securities of Parent were issued,
reserved for issuance or outstanding. All shares of capital stock
of Parent which may be issued pursuant to this Agreement will be,
when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set
forth above or in Section 3.02(c) of the Parent Disclosure
Letter, as of the date of this Agreement, there are not any
options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which Parent or any
Parent Subsidiary is a party or by which any of them is bound
relating to the issued or unissued capital stock of Parent or any
Parent Subsidiary, or obligating Parent or any Parent Subsidiary
to issue, transfer, grant or sell, or cause to be issued,
transferred, granted or sold, additional shares of capital stock
or other voting securities of Parent or any Material Parent
Subsidiary or obligating Parent or any Parent Subsidiary to
issue, grant, extend or enter into any such option, warrant,
call, right, commitment, agreement, arrangement or undertaking.
Except as set forth in Section 3.02(c) of the Parent Disclosure
Letter, as of the date of this Agreement, there are not any
outstanding contractual obligations of Parent or any Parent
Subsidiary to repurchase, redeem or otherwise acquire any shares
of capital stock of Parent or any Material Parent Subsidiary or
make any material investment (in the form of a loan, capital
contribution or otherwise) in any person (other than a wholly
owned Parent Subsidiary). As of the date of this Agreement, the
authorized capital stock of Sub consists of 1,000 shares of
common stock, par value $1.00 per share, all of which have been
validly issued, are fully paid and nonassessable and are owned by
Parent free and clear of any Lien.
(d) Authority; Noncontravention. Parent and Sub have all
requisite corporate power and authority to enter into this
Agreement and, subject to the Parent Stockholder Approvals (as
defined in Section 3.02(i)), to consummate the transactions
contemplated by this Agreement. The execution and delivery of
this Agreement by Parent and Sub and the consummation by Parent
and Sub of the transactions contemplated by this Agreement have
been duly authorized by all necessary corporate action on the
part of Parent and Sub, subject to the Parent Stockholder
Approvals. This Agreement
<PAGE>
has been duly executed and delivered by Parent and Sub and
constitutes a valid and binding obligation of each such party,
enforceable against each such party in accordance with its terms.
Except as set forth in Section 3.02(d) of the Parent Disclosure
Letter, the execution and delivery of this Agreement by Parent
and Sub do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions
of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of any Lien
upon any of the properties or assets of Parent, Sub or any other
Parent Subsidiary under, (i) the certificate of incorporation or
by-laws of Parent or Sub or the comparable organizational
documents of any Parent Subsidiary, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other
agreement, instrument, permit, concession, franchise or license
applicable to Parent, Sub or any Parent Subsidiary or their
respective properties or assets or (iii) subject to the
governmental filings and other matters referred to in the
following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Sub or any
other Parent Subsidiary or their respective properties or assets,
other than, in the case of clauses (ii) and (iii), any such
conflicts, violations, defaults, rights or Liens that
individually or in the aggregate would not (x) have a Parent
Material Adverse Effect, (y) prevent Parent or Sub from
performing their respective obligations under this Agreement in
any material respect or (z) prevent or delay in any material
respect the consummation of any of the transactions contemplated
by this Agreement. No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Parent, Sub or any other
Parent Subsidiary in connection with the execution and delivery
of this Agreement by Parent and Sub or the consummation by Parent
or Sub, as the case may be, of any of the transactions
contemplated by this Agreement, except for (i) the filing of a
premerger notification and report form by Parent under the HSR
Act and possible filings of premerger notification and report
forms by shareholders of the Company under the HSR Act
<PAGE>
with respect to the acquisition of shares of Parent Common Stock
pursuant to the Merger, (ii) the filing with the SEC of the Proxy
Statement and the Form S-4 and such reports under Sections 13 and
16(a) of the Exchange Act as may be required in connection with
this Agreement and the transactions contemplated by this
Agreement and the receipt of all state securities or "blue sky"
authorizations necessary to issue the Parent Common Stock as
contemplated by this Agreement, (iii) the filing of the
Certificate of Merger with the Delaware Secretary of State and
the Georgia Secretary of State and appropriate documents with the
relevant authorities of other states in which the Company is
qualified to do business, (iv) such filings with, and orders of,
the FCC under the Communications Act and the FCC's rules and
regulations as may be required in connection with this Agreement
and the transactions contemplated by this Agreement, (v) such
filings with, and orders of, cable franchising authorities as may
be required in connection with this Agreement and the
transactions contemplated by this Agreement and (vi) such other
consents, approvals, orders, authorizations, registrations,
declarations and filings (x) as may be required under the laws of
any foreign country in which Parent or any of the Parent
Subsidiaries conducts any business or owns any property or assets
or (y) which, if not obtained or made, would not prevent or delay
in any material respect the consummation of any of the
transactions contemplated by this Agreement or otherwise prevent
Parent or Sub from performing their respective obligations under
this Agreement in any material respect or have, individually or
in the aggregate, a Parent Material Adverse Effect.
(e) SEC Documents; Undisclosed Liabilities. Parent has filed
all required reports, schedules, forms, statements and other
documents with the SEC since December 31, 1992 (as such documents
have been amended prior to the date hereof, the "Parent SEC Docu-
ments"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the
rules and regulations of the SEC promulgated thereunder
applicable to such Parent SEC Documents, and none of the Parent
SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary in order to make the
<PAGE>
statements therein, in light of the circumstances under which
they were made, not misleading, except to the extent such
statements have been modified or superseded by a later Filed
Parent SEC Document (as defined in Section 3.02(g)). Except to
the extent that information contained in any Parent SEC Document
has been revised or superseded by a later Filed Parent SEC
Document, neither Parent's Annual Report on Form 10-K for the
year ended December 31, 1994, nor any Parent SEC Document filed
after December 31, 1994, contains any untrue statement of a
material fact or omits to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of
Parent included in the Parent SEC Documents comply as to form in
all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited
statements, as permitted by Form 1O-Q of the SEC) applied on a
consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present the consoli-
dated financial position of Parent and the consolidated Parent
Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments). Except as set forth in the Filed Parent SEC
Documents, neither Parent nor any Parent Subsidiary has any
liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by generally accepted
accounting principles to be set forth on a consolidated balance
sheet of Parent and the consolidated Parent Subsidiaries or in
the notes thereto and which, individually or in the aggregate,
could reasonably be expected to have a Parent Material Adverse
Effect.
(f) Information Supplied. None of the information supplied
or to be supplied by Parent or Sub for inclusion or incorporation
by reference in (i) the Form S-4 will, at the time the Form S-4
is filed with the SEC, at any time it is amended or supplemented
or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or
<PAGE>
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, or (ii)
the Proxy Statement will, at the date the Proxy Statement is
first mailed to the Company's shareholders or Parent's
stockholders or at the time of the Shareholders Meeting or the
Parent's Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. The Form S-4 and the Proxy Statement will
comply as to form in all material respects with the requirements
of the Securities Act and the Exchange Act, as applicable, and
the rules and regulations promulgated thereunder, except that no
representation or warranty is made by Parent or Sub with respect
to statements made or incorporated by reference therein based on
information supplied by the Company specifically for inclusion or
incorporation by reference in the Form S-4 or the Proxy
Statement.
(g) Absence of Certain Changes or Events. Except as
disclosed in the Parent SEC Documents filed and publicly
available prior to the date of this Agreement (the "Filed Parent
SEC Documents") or in Section 3.02(g) of the Parent Disclosure
Letter, since the date of the most recent audited financial
statements included in the Filed Parent SEC Documents, Parent has
conducted its business only in the ordinary course, and there has
not been:
(i) any change or effect (or any development that,
insofar as can reasonably be foreseen, is likely to result
in a change or effect) which, individually or in the
aggregate, has had or is likely to have, a Parent Material
Adverse Effect;
(ii) except for regular quarterly dividends not in
excess of $0.09 per share of Parent Common Stock and the
stated or required amount of dividends on any series of
Parent Preferred Stock, in each case with customary record
and payment dates, any declaration, setting aside or payment
of any dividend or other distribution (whether in cash,
stock or property) with respect to the Parent Common Stock
or any series of Parent Preferred Stock;
<PAGE>
(iii) any split, combination or reclassification of the
Parent Common Stock or any issuance or the authorization of
any issuance of any other securities in exchange or in
substitution for shares of the Parent Common Stock;
(iv) any damage, destruction or loss, whether or not
covered by insurance, that has had or is likely to have a
Parent Material Adverse Effect; or
(v) any change in accounting methods, principles or
practices by Parent or any Material Parent Subsidiary
materially affecting its assets, liabilities or business,
except insofar as may have been required by a change in
generally accepted accounting principles.
(h) Litigation. Except as disclosed in the Filed Parent SEC
Documents or in Section 3.02(h) of the Parent Disclosure Letter, there
is no suit, action or proceeding (including any proceeding by or
before the FCC) pending or, to the knowledge of Parent, threatened
against or affecting Parent or any of the Parent Subsidiaries (and
Parent is not aware of any basis for any such suit, action or
proceeding) that, individually or in the aggregate, could reasonably
be expected to (i) have a Parent Material Adverse Effect or (ii)
prevent Parent or Sub from performing their respective obligations
under this Agreement in any material respect, and there is not any
judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against Parent or any of the Parent
Subsidiaries having, or which, insofar as reasonably can be foreseen,
in the future would have, any Parent Material Adverse Effect. As of
the date of this Agreement, except as disclosed in the Filed Parent
SEC Documents or in Section 3.02(h) of the Parent Disclosure Letter,
there is no suit, action or proceeding pending, or, to the knowledge
of Parent, threatened, against Parent or any of the Parent
Subsidiaries (and Parent is not aware of any basis for any such suit,
action or proceeding) that, individually or in the aggregate, could
reasonably be expected to prevent or delay in any material respect the
consummation of the Merger or any of the transactions contemplated by
this Agreement.
<PAGE>
(i) Voting Requirements. The (A) approval by Parent's
stockholders of the issuance of shares of Parent Common Stock
pursuant to the Merger as required by Rule 312 of the New York
Stock Exchange (the "NYSE") and (B) approval by the holders of a
majority of the outstanding Parent Common Stock, voting as a
separate class, and by the holders of a majority of the voting
power of the outstanding Parent Common Stock and the outstanding
voting Parent Preferred Stock, voting together as a single class,
of an amendment to the Restated Certificate of Incorporation of
Parent to increase the number of authorized shares of Parent
Common Stock (collectively, the "Parent Stockholder Approvals")
are the only votes of the holders of any class or series of
Parent's capital stock necessary to approve this Agreement and
the transactions contemplated by this Agreement.
(j) Brokers. No broker, investment banker, financial advisor
or other person, other than Morgan Stanley & Co Incorporated, the
fees and expenses of which will be paid by Parent, is entitled to
any broker's, finder's, financial advisor's or other similar fee
or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
(k) Taxes. (i) Parent and each Parent Subsidiary have timely
filed (or have had timely filed on their behalf) or will file or
cause to be timely filed, all material Tax Returns required by
applicable law to be filed by any of them prior to or as of the
Effective Time of the Merger. All such Tax Returns are, or will
be at the time of filing, true, complete and correct in all
material respects.
(ii) Parent and each Parent Subsidiary have paid (or have
had paid on their behalf), or where payment is not yet due, have
established (or have had established on their behalf and for
their sole benefit and recourse), or will establish or cause to
be established on or before the Effective Time of the Merger, an
adequate accrual for the payment of, all material Taxes due with
respect to any period ending prior to or as of the Effective Time
of the Merger.
(l) Compliance with Laws. Neither Parent nor any of the
Parent Subsidiaries has violated or failed to
<PAGE>
comply with any statute, law, ordinance, regulation, rule,
judgment, decree or order of any Governmental Entity applicable
to its business or operations (including the Communications Act
and the FCC's rules and regulations), except for violations and
failures to comply that could not, individually or in the
aggregate, reasonably be expected to result in a Parent Material
Adverse Effect.
(m) ERISA Compliance. Except as described in the Parent
Filed SEC Documents or as would not have a Parent Material
Adverse Effect, (i) all employee benefit plans or programs
maintained for the benefit of the current or former employees or
directors of Parent or any Parent Subsidiary that are sponsored,
maintained or contributed to by Parent or any Parent Subsidiary,
or with respect to which Parent or any Parent Subsidiary has any
liability, including any such plan that is an "employee benefit
plan" as defined in Section 3(3) of ERISA, are in compliance with
all applicable requirements of law, including ERISA and the Code,
and (ii) neither Parent nor any Parent Subsidiary has any
liabilities or obligations with respect to any such employee
benefit plans or programs, whether accrued, contingent or
otherwise, nor to the knowledge of the executive officers of
Parent are any such liabilities or obligations expected to be
incurred.
(n) Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated by this
Agreement and has not engaged in any business activities or
conducted any operations other than in connection with the
transactions contemplated by this Agreement.
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business. (a) Conduct of Business
by the Company. During the period from the date of this Agreement to
the Effective Time of the Merger, the Company shall, and shall cause
the Company Subsidiaries to, carry on their respective businesses in
the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and in compliance in all material
respects with all applicable laws and regulations (including
<PAGE>
the Communications Act and the FCC's rules and regulations) and, to
the extent consistent therewith, use commercially reasonable efforts
to preserve intact their current business organizations, keep
available the services of their current officers and employees and
preserve their relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them.
Without limiting the generality of the foregoing, during the period
from the date of this Agreement to the Effective Time of the Merger,
the Company shall not, and shall not permit any of the Company
Subsidiaries to:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock,
other than dividends and distributions by a direct or indirect
wholly owned Company Subsidiary to its parent and regular
quarterly cash dividends on the Company Capital Stock in an
amount per share per quarter for each class of Company Capital
Stock not in excess of the amount paid for the quarter
immediately preceding the date of this Agreement, (y) split,
combine or reclassify any of its capital stock or issue or
authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or
(z) purchase, redeem or otherwise acquire any shares of capital
stock of the Company or any of the Company Subsidiaries or any
other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any
securities convertible into, or any rights, warrants or options
to acquire, any such shares, voting securities or convertible
securities (other than (x) the issuance of shares of Class B
Common Stock upon the exercise of Company Stock Options
outstanding on the date of this Agreement and in accordance with
their present terms and (y) the issuance of shares of Class B
Common Stock reserved for issuance as described in clauses (B)(I)
and (B)(III) of Section 3.01(c));
(iii) amend its articles of incorporation, by-laws or other
comparable organizational documents;
(iv) except for Approved Matters (as defined below), acquire
or agree to acquire (x) by merging or
<PAGE>
consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any
corporation, partnership, limited liability company, joint
venture, association or other business organization or division
thereof or (y) any assets that are material, individually or in
the aggregate, to the Company and the Company Subsidiaries taken
as a whole;
(v) except for Approved Matters, sell, lease, license,
mortgage or otherwise encumber or subject to any Lien or
otherwise dispose of any of its properties or assets, other than
encumbrances and Liens that are incurred in the ordinary course
of business;
(vi) except for Approved Matters, (y) incur any indebtedness
for borrowed money or guarantee any such indebtedness of another
person, issue or sell any debt securities or warrants or other
rights to acquire any debt securities of the Company or any of
the Company Subsidiaries, guarantee any debt securities of
another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of
the foregoing, except for short-term borrowings incurred in the
ordinary course of business consistent with past practice, or (z)
make any loans, advances (other than advances to employees in the
ordinary course of business consistent with prior practice) or
capital contributions to, or investments in, any other person,
other than to the Company or any direct or indirect wholly owned
Company Subsidiary;
(vii) except for Approved Matters, make or agree to make any
new capital expenditure or expenditures;
(viii) make any material Tax election or settle or
compromise any material Tax liability or refund;
(ix) except in the ordinary course of business pursuant to
existing employment agreements or Benefit Plans, or as required
by applicable laws, and except for Approved Matters, (A) increase
the compensation payable or to become payable to its executive
officers or employees, (B) grant any severance or termination pay
to, or enter into any employment or severance agreement with, any
director, executive officer or
<PAGE>
employee of the Company or any Company Subsidiary or (C)
establish, adopt, enter into or amend in any material respect or
take action to accelerate any rights or benefits under any
collective bargaining agreement or any stock option, employee
benefit plan, agreement or policy except as contemplated by this
Agreement;
(x) without limiting the generality of clause (ix) above,
make any amendment to any Company Stock Plan or New Line Plan as
a result of this Agreement or in contemplation of the Merger;
(xi) terminate or amend on terms less favorable to the
Company any agreement filed as an exhibit to any SEC Document or
any Programming Agreement; or
(xii) authorize any of, or commit or agree to take any of,
the foregoing actions.
For purposes of this Agreement, "Approved Matters" means
matters that are (x) expressly included in a Master Budget
contemplated by Section 3 of Article XII of the By-Laws of the
Company as in effect on the date of this Agreement or as hereafter
approved by Parent prior to its approval by the Board of Directors of
the Company or (y) otherwise approved by Parent pursuant to the
immediately succeeding sentence. Each matter subject to Section 3 of
Article XII of the By-Laws of the Company shall first be submitted to
Parent for its approval and shall only thereafter be submitted to the
Board of Directors of the Company to the extent Parent shall have
approved such matter.
(b) No Amendments by Parent. During the period from the date
of this Agreement to the Effective Time of the Merger, except as
contemplated by this Agreement, Parent will not amend its Restated
Certificate of Incorporation or By-laws in any manner that would be
materially adverse to the holders of Parent Common Stock.
(c) Other Actions. The Company and Parent shall not, and
shall not permit any of their respective subsidiaries to, take any
action that would, or that could reasonably be expected to, result
in (i) any of the representations and warranties of such party set
forth in this Agreement that are qualified as to materiality
becoming untrue, (ii) any of such representations and warranties that
are not
<PAGE>
so qualified becoming untrue in any material respect or
(iii) any of the conditions to the Merger set forth in
Article VI not being satisfied.
(d) Advice of Changes. The Company and Parent
shall promptly advise the other orally and in writing of any
change or event having, or which, insofar as can reasonably
be foreseen, would have, a Company Material Adverse Effect
or a Parent Material Adverse Effect, as applicable.
SECTION 4.02. No Solicitation. (a) The Company
shall not, nor shall it permit any of the Company
Subsidiaries to, nor shall it authorize or permit any
officer, director or employee of or any investment banker,
attorney or other advisor or representative of, the Company
or any Company Subsidiary to, (i) solicit, initiate or
encourage the submission of any takeover proposal (as
defined below), (ii) enter into any agreement with respect
to any 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
nothing contained in this Agreement shall prevent the
Company or its Board of Directors from (A) furnishing
nonpublic information to, or entering into discussions or
negotiations with, any person in connection with an
unsolicited bona fide written takeover proposal to the
Company or its shareholders, if and only to the extent that
(1) the Board of Directors of the Company determines in good
faith based on written advice of its outside legal counsel
that such action is necessary for the Board of Directors of
the Company to comply with its fiduciary duties to
shareholders under applicable law and (2) prior to
furnishing such nonpublic information to, or entering into
discussions or negotiations with, such person, the Board of
Directors of the Company receives from such person or entity
an executed confidentiality agreement with terms no less
favorable to the Company than those contained in the
Confidentiality Agreement (as defined in Section 5.04), or
(B) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to a takeover proposal. Without
limiting the foregoing, it is understood that any violation
of the restrictions set forth in the preceding sentence by
any executive officer of the Company or any of the Company
Subsidiaries or any investment banker, attorney or other
advisor or representative of the Company or any of the
<PAGE>
Company Subsidiaries, whether or not such person is
purporting to act on behalf of the Company or any of the
Company Subsidiaries or otherwise, shall be deemed to be a
breach of this Section 4.02(a) by the Company. For purposes
of this Agreement, "takeover proposal" means any proposal
for a merger, consolidation or other business combination
involving the Company or any of the Material Company
Subsidiaries or any proposal or offer to acquire in any
manner, directly or indirectly, more than 15% of any class
of voting securities of the Company or any of the Material
Company Subsidiaries, or assets representing a substantial
portion of the assets of the Company, and the Company
Subsidiaries, taken as a whole, other than the transactions
contemplated by this Agreement. The Company will
immediately cease and cause to be terminated any existing
activities, discussions or negotiations by the Company or
any of its officers, investment bankers, attorneys or other
advisors or representatives with any parties conducted
heretofore with respect to any of the foregoing.
(b) Subject to Section 7.01(e), 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 or Sub, the adoption, approval or
recommendation by such Board of Directors or any such
committee of this Agreement or the Merger or (ii) approve or
recommend, or propose to approve or recommend, any takeover
proposal.
(c) The Company promptly shall advise Parent
orally and in writing of any takeover proposal or any
inquiry with respect to or which could lead to any takeover
proposal and the identity of the person making any such
takeover proposal or inquiry. The Company will keep Parent
promptly and fully informed in all material respects of the
status and details of any such takeover proposal or inquiry.
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of Form S-4 and the
Proxy Statement; Shareholders Meeting and Parent's
Stockholders Meeting. (a) As soon as practicable following
the date of this Agreement, the Company and Parent shall
prepare and file with the SEC the Proxy Statement and Parent
shall prepare and file with the SEC the Form S-4, in which
<PAGE>
the Proxy Statement will be included as a prospectus. Each
of the Company and Parent shall use its best efforts to have
the Form S-4 declared effective under the Securities Act as
promptly as practicable after such filing. Each of the
Company and Parent will use its best efforts to cause the
Proxy Statement to be mailed to the Company's shareholders
or Parent's stockholders, respectively, as promptly as
practicable after the Form S-4 is declared effective under
the Securities Act. Parent shall also take any action
(other than qualifying to do business in any jurisdiction in
which it is not now so qualified) required to be taken under
any applicable state securities or "blue sky" laws in
connection with the issuance of Parent Common Stock pursuant
to the Merger, and the Company shall furnish all information
concerning the Company and the holders of the Company
Capital Stock and rights to acquire Company Capital Stock
pursuant to the Company Stock Plans or the New Line Plans as
may be reasonably requested in connection with any such
action.
(b) The Company will, as soon as practicable
following the date of this Agreement, duly call, give notice
of, convene and hold a meeting of its shareholders (the
"Shareholders Meeting") for the purpose of obtaining the
Shareholder Approvals. Subject to Section 7.01(e), the
Company will, through its Board of Directors, recommend to
its shareholders approval of this Agreement and the
transactions contemplated by this Agreement. Without
limiting the generality of the foregoing, the Company agrees
that its obligations pursuant to the first sentence of this
Section 5.01(b) shall not be altered by the commencement,
public proposal, public disclosure or communication to the
Company of any takeover proposal. Parent shall vote or
cause to be voted all the shares of Company Capital Stock
owned of record by Parent or any Parent Subsidiary in favor
of the Shareholder Approvals.
(c) Parent will, as soon as practicable following
the date of this Agreement, duly call, give notice of,
convene and hold a meeting of its stockholders (the
"Parent's Stockholders Meeting") for the purpose of
obtaining the Parent Stockholder Approvals. Subject to any
contrary fiduciary obligations, Parent will, through its
Board of Directors, recommend to its stockholders approval
of the matters submitted to them for such purpose.
SECTION 5.02. Letter of the Company's
Accountants. The Company shall use its best efforts to
<PAGE>
cause to be delivered to Parent a letter of Price
Waterhouse LLP, the Company's independent public
accountants, dated a date within two business days before
the date on which the Form S-4 shall become effective and
addressed to Parent, in form and substance reasonably
satisfactory to Parent and customary in scope and substance
for letters delivered by independent public accountants in
connection with registration statements similar to the
Form S-4.
SECTION 5.03. Letter of Parent's Accountants.
Parent shall use its best efforts to cause to be delivered
to the Company a letter of Ernst & Young LLP, Parent's
independent public accountants, and, with respect to persons
or assets acquired by Parent, one or more other independent
public accountants, dated a date within two business days
before the date on which the Form S-4 shall become effective
and addressed to the Company, in form and substance
reasonably satisfactory to the Company and customary in
scope and substance for letters delivered by independent
public accountants in connection with registration
statements similar to the Form S-4.
SECTION 5.04. Access to Information; Confidenti-
ality. Each of the Company and Parent shall, and shall
cause each of its respective subsidiaries to, afford to the
other party and to the officers, employees, accountants,
counsel, financial advisors and other representatives of
such other party, reasonable access during normal business
hours during the period prior to the Effective Time of the
Merger to all their respective properties, books, contracts,
commitments, personnel and records and, during such period,
each of the Company and Parent shall, and shall cause each
of its respective subsidiaries to, furnish promptly to the
other party (a) a copy of each report, schedule, registra-
tion statement and other document filed by it during such
period pursuant to the requirements of Federal or state
securities laws and (b) all other information concerning its
business, properties and personnel as such other party may
reasonably request. Except as required by law, each of the
Company and Parent will hold, and will cause its respective
officers, employees, accountants, counsel, financial
advisors and other representatives and affiliates to hold,
any nonpublic information in confidence to the extent
required by, and in accordance with, the provisions of the
letter dated August 26, 1995, between the Company and Parent
(the "Confidentiality Agreement").
<PAGE>
SECTION 5.05. Best Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth
in this Agreement and, in the case of Parent, in the LMC
Agreement, each of the parties agrees to use its best
efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with
the other parties in doing, all things necessary, proper or
advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement and the Voting
Agreements, including (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary
registrations and filings (including filings with
Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval
or waiver from, or to avoid an action or proceeding by, any
Governmental Entity, (ii) the obtaining of all necessary
consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging this
Agreement or the Voting Agreements or the consummation of
the transactions contemplated by this Agreement or the
Voting Agreements, including seeking to have any stay or
temporary restraining order entered by any court or other
Governmental Entity vacated or reversed, and (iv) the
execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement;
provided, however, that a party shall not be obligated to
take any action pursuant to the foregoing if the taking of
such action or the obtaining of any waiver, consent,
approval or exemption is reasonably likely (x) to be
materially burdensome to such party and its subsidiaries
taken as a whole or to impact in a materially adverse manner
the economic or business benefits of the transactions
contemplated by this Agreement, the Voting Agreements and
the Investors' Agreements referred to in Section 6.02(f) so
as to render inadvisable the consummation of the Merger or
(y) to result in the imposition of a condition or
restriction of the type referred to in clause (ii), (iii) or
(iv) of Section 6.02(e). In connection with and without
limiting the foregoing, the Company and its Board of
Directors shall (i) take all reasonable action necessary so
that no state takeover statute or similar statute or
regulation is or becomes applicable to the Merger, this
Agreement or any of the other transaction contemplated by
this Agreement or the Voting Agreements and (ii) if any
<PAGE>
state takeover statute or similar statute or regulation
becomes applicable to the Merger, this Agreement or any
other transaction contemplated by this Agreement or any
Voting Agreement, take all action necessary so that the
Merger and the other transactions contemplated by this
Agreement and the Voting Agreements may be consummated as
promptly as practicable on the terms contemplated by this
Agreement and the Voting Agreements and otherwise to
minimize the effect of such statute or regulation on the
Merger and the other transactions contemplated by this
Agreement and the Voting Agreements.
(b) The Company shall give prompt notice to
Parent, and Parent or Sub shall give prompt notice to the
Company, of (i) any representation or warranty made by it
contained in this Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or
any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect or
(ii) the failure by it to comply with or satisfy in any
material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement;
provided, however, that no such notification shall affect
the representations, warranties, covenants or agreements of
the parties or the conditions to the obligations of the
parties under this Agreement.
SECTION 5.06. Board Authority. The Company
represents and warrants to Parent and Sub that (a) on or
prior to the date of execution of this Agreement, the Board
of Directors of the Company has adopted resolutions
providing that (i) any action to be subsequently taken by
the Board of Directors of the Company to implement the
transactions contemplated by this Agreement (excluding any
amendment to this Agreement, except as contemplated by
Section 1.01, or to the other agreements entered into in
connection with the Merger to which the Company is a party)
shall be authorized if approved by a majority vote of the
directors of the Company (other than any directors that are
interested directors under Section 3 of Article XII of the
Company's By-laws) present and voting at a meeting at which
a quorum is present, without regard to class, and (ii) any
action to be subsequently taken by the Company to implement
the transactions contemplated by this Agreement (excluding
any amendment to this Agreement, except as contemplated by
Section 1.01, or to the other agreements entered into in
connection with the Merger to which the Company is a party)
that otherwise requires the approval of the Board of
<PAGE>
Directors of the Company shall be authorized if approved by
a majority vote of the directors of the Company (other than
any directors that are interested directors under Section 3
of Article XII of the Company's By-laws) present and voting
at a meeting at which a quorum is present, without regard to
class, and (b) such resolutions were validly adopted, are in
full force and effect, do not conflict with any provision of
the Company's Articles of Incorporation or By-laws or any
contract, agreement, or other instrument to which the
Company is a party and are effective in accordance with
their terms. The Board of Directors of the Company shall
not amend, rescind or repeal any of such resolutions. The
Company shall not enter into any contract, agreement or
other instrument, or adopt any resolution, that, directly or
indirectly, would (A) result in any action to be taken by
the Board of Directors of the Company to implement the
transactions contemplated by this Agreement (excluding any
amendment to this Agreement, except as contemplated by
Section 1.01, or to the other agreements entered into in
connection with the Merger to which the Company is a party)
requiring any approval other than the approval by the
majority vote of all the directors of the Company (other
than any directors that are interested directors under
Section 3 of Article XII of the Company's By-laws) present
and voting at a meeting at which a quorum is present,
without regard to class, or (B) result in any action to be
taken by the Company to implement the transactions
contemplated by this Agreement requiring the approval (if
not currently required) of the directors of the Company or
any group or committee thereof. The Company represents and
warrants to Parent and Sub that neither the Company nor its
Board of Directors is subject to any such contract,
agreement or other instrument as of the date of this
Agreement.
SECTION 5.07. Public Announcements. Parent and
Sub, on the one hand, and the Company, on the other hand,
will consult with each other before issuing, and provide
each other the opportunity to review and comment upon, any
press release or other public statements with respect to the
transactions contemplated by this Agreement, including the
Merger, and shall not issue any such press release or make
any such public statement prior to such consultation, except
as may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any
national securities exchange.
<PAGE>
SECTION 5.08. Benefit Plans. (a) Maintenance of
Benefits. For a period of two years after the Effective
Time of the Merger, Parent shall (i) either (A) maintain or
cause the Surviving Corporation (or in the case of a
transfer of all or substantially all the assets and business
of the Surviving Corporation, its successors or assigns) to
maintain the Benefit Plans (other than medical plans) at the
benefit levels in effect on the date of this Agreement or
(B) provide or cause the Surviving Corporation (or, in such
case, its successors or assigns) to provide benefits to
employees of the Company and the Company Subsidiaries that
are not materially less favorable in the aggregate to such
employees than those in effect on the date of this Agreement
and (ii) provide or cause to be provided medical benefits to
employees of the Company and the Company Subsidiaries that
are substantially equivalent to those provided to similarly
situated employees of Parent.
(b) Service. With respect to any "employee
benefit plan", as defined in Section 3(3) of ERISA,
maintained by Parent or any Parent Subsidiary (including any
severance plan), for purposes of determining eligibility to
participate, vesting, entitlement to benefits, benefit
accrual (but in the case of any "employee pension benefit
plan", as defined in Section 3(2) of ERISA, solely to the
extent necessary to comply with Section 5.08(a)) and in all
other respects where length of service is relevant, service
with the Company or any Company Subsidiary shall be treated
as service with Parent or the Parent Subsidiaries; provided,
however, that such service need not be recognized to the
extent that such recognition would result in any duplication
of benefits.
(c) Third Party Beneficiaries. This Section 5.08
is intended to be for the benefit of and shall be
enforceable by each person who is an employee of the Company
or any Company Subsidiary as of the Effective Time of the
Merger (but only with respect to those provisions applicable
to such employee), and his heirs and personal
representatives and, to the extent set forth above, shall be
binding on all successors and assigns of Parent, the Parent
Subsidiaries, the Company and the Company Subsidiaries. To
the extent that any provision of this Section 5.08 shall be
reflected in a plan or arrangement subject to ERISA, the
exclusive remedy of any employee referred to in the
preceding sentence with respect to such provisions or
request for a related benefit provided by such plan or
<PAGE>
arrangement shall be the claims procedure under such plan or
arrangement.
SECTION 5.09. Indemnification. Parent and Sub
agree that all rights to indemnification for acts or omis-
sions occurring prior to the Effective Time of the Merger
now existing in favor of the current or former directors or
officers of the Company as provided in its Restated Articles
of Incorporation or By-laws shall survive the Merger and
shall continue in full force and effect in accordance with
their terms from the Effective Time of the Merger until the
expiration of the applicable statute of limitations with
respect to any claims against the current or former
directors or officers of the Company arising out of such
acts or omissions. Parent will cause to be maintained for a
period of not less than six years from the Effective Time of
the Merger the Company's current directors' and officers'
insurance and indemnification policy to the extent that it
provides coverage for events occurring prior to the
Effective Time of the Merger (the "D&O Insurance") for all
persons who are directors and officers of the Company who
are covered persons under the Company's D&O insurance
policies in effect on the date of this Agreement, so long as
the annual premium therefor would not be in excess of 150%
of the last annual premium paid prior to the date of this
Agreement (the "Maximum Premium"). If the existing D&O
Insurance expires, is terminated or canceled during such
six-year period, Parent will use all reasonable efforts to
cause to be obtained as much D&O Insurance as can be
obtained for the remainder of such period for an annualized
premium not in excess of the Maximum Premium, on terms and
conditions no less advantageous to the covered persons than
the existing D&O Insurance. The Company represents to
Parent that the Maximum Premium is $631,735.
SECTION 5.10. Fees and Expenses. Except as
provided in Sections 5.15, 7.02(a), 7.02(b) and 7.02(c), all
fees and expenses incurred in connection with the Merger,
this Agreement and the transactions contemplated by this
Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated, except
that expenses incurred in connection with printing and
mailing the Proxy Statement and the Form S-4 shall be shared
equally by Parent and the Company).
SECTION 5.11. Affiliates. Prior to the Closing
Date, the Company shall deliver to Parent a letter identify-
ing all persons who are, at the time this Agreement is
<PAGE>
submitted for approval to the shareholders of the Company,
"affiliates" of the Company for purposes of Rule 145 under
the Securities Act. The Company shall use its best efforts
to cause each such person to deliver to Parent on or prior
to the Closing Date a written agreement substantially in the
form attached as Exhibit A.
SECTION 5.12. Stock Exchange Listing. Parent
shall use its best efforts to cause the shares of Parent
Common Stock to be issued in the Merger and pursuant to the
Company Stock Options, the New Line Options, the notes
referred to in Section 3.01(c)(i)(B)(I) and the other
securities referred to in Section 3.01(c)(i)(B)(III) to be
approved for listing on the NYSE, subject to official notice
of issuance, prior to the Closing Date.
SECTION 5.13. Execution of the Registration
Rights Agreement. Parent shall execute and deliver to the
other parties thereto the Registration Rights Agreement in
the form of Exhibit B (the "Registration Rights Agreement")
at or prior to the Closing.
SECTION 5.14. Tax Treatment. Each of Parent and
the Company shall use its reasonable best efforts to cause
the Merger to qualify as a reorganization under the
provisions of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code or as a tax-free incorporation transaction under
Section 351 of the Code and to obtain the opinions of
counsel referred to in Sections 6.02(d) and 6.03(c).
SECTION 5.15. Transfer and Real Property Transfer
Gains Taxes. Parent shall be responsible for any
liabilities, without deduction or withholding from any
amount payable to the holders of Company Capital Stock,
arising under any New York State Real Estate Transfer Tax,
New York State Tax on Gains Derived from certain Real
Property Transfers, New York City Real Property Transfer
Tax, New York State Stock Transfer Tax and any similar taxes
imposed by any other State of the United States (and any
penalties and interest with respect to such Taxes), to the
extent any such Taxes become payable in connection with the
transactions contemplated by this Agreement, on behalf of
the shareholders of the Company. The Company and Parent
shall cooperate in complying with the requirements of such
taxes.
SECTION 5.16. Material Transactions by Parent.
Parent shall promptly notify the Company if, after the date
<PAGE>
of this Agreement and prior to the Effective Time of the
Merger, Parent or any Parent Subsidiary enters into a
definitive agreement providing for the implementation of a
Material Transaction (as defined below). In such event, the
Board of Directors of the Company may request the Company's
financial advisor, CS First Boston Corporation, to deliver a
written opinion, substantially in the same form as the
opinion referred to in Section 3.01(m), that, after giving
effect to the Material Transaction, the consideration to be
received in the Merger by the Company's shareholders is fair
to the Company's shareholders other than Parent from a
financial point of view. The Company and Parent shall
cooperate in furnishing such information to CS First Boston
Corporation as shall be reasonably required in order for
such opinion to be delivered as promptly as practicable, and
the Company shall use all commercially reasonable efforts to
cause such opinion or the written advice referred to in the
following sentence to be delivered within 15 days following
request therefor from the Company. In the event that CS
First Boston Corporation advises the Company and Parent in
writing that it is unable to deliver such opinion, the
Company shall be entitled to terminate this Agreement
pursuant to Section 7.01(f), if such termination is approved
by the Board of Directors of the Company. For purposes of
the foregoing, "Material Transaction" means (i) the issuance
by Parent of more than 90,000,000 "common stock equivalents"
(one common stock equivalent being equal to one share of
Parent Common Stock, including any share of Parent Common
Stock issuable by Parent upon conversion, exercise or
exchange of any other capital stock, warrant or other
security or right of Parent, any Parent Subsidiary or any
other controlled affiliate of Parent) in any single
transaction or in any series of individual transactions,
each of which involves the issuance of more than 20,000,000
common stock equivalents, whether or not such individual
transactions are related to each other, or (ii) the sale or
other disposition in any transaction or series of
transactions, whether or not related to each other, by
Parent or any Parent Subsidiary of any business or assets
with an aggregate fair market value in excess of
$3,500,000,000, excluding from such amount (x) sales of
inventory in the ordinary course of business consistent with
prior practice and (y) the sale or disposition, in a single
transaction or series of related transactions, of assets
with an aggregate fair market value of $500,000,000 or less.
The fair market value of any cable television systems
disposed of by Parent or any Parent Subsidiary in exchange
for cable television systems owned by third parties shall be
<PAGE>
included in such amount only to the extent, if any, in
excess of the fair market value of the cable televisions
systems acquired in such exchange by Parent or any Parent
Subsidiary.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's
Obligation To Effect the Merger. The respective obligation
of each party to effect the Merger is subject to the
satisfaction or waiver on or prior to the Closing Date of
the following conditions:
(a) Shareholder Approvals and Parent Stockholder
Approvals. The Company shall have obtained the
Shareholder Approvals and Parent shall have obtained
the Parent Stockholder Approvals.
(b) NYSE Listing. The shares of Parent Company
Stock issuable to the Company's shareholders pursuant
to this Agreement shall have been approved for listing
on the NYSE, subject to official notice of issuance.
(c) Antitrust. The waiting periods (and any
extensions thereof) applicable to the transactions
contemplated by this Agreement under the HSR Act shall
have been terminated or shall have expired. Any
consents, approvals and filings under any foreign
antitrust law the absence of which would prohibit the
consummation of the Merger shall have been obtained or
made.
(d) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction
or other order issued by any court of competent juris-
diction or other legal restraint or prohibition
preventing the consummation of the Merger or preventing
LMC or any of its subsidiaries from voting, as
contemplated by the LMC Agreement, shares of Company
Capital Stock that LMC or any such subsidiary is
otherwise entitled to vote, shall be in effect;
provided, however, that, subject to the proviso in
Section 5.05(a), each of the parties shall have used
its best efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as
<PAGE>
possible any such injunction or other order that may be
entered.
(e) Form S-4. The Form S-4 shall have become
effective under the Securities Act and shall not be the
subject of any stop order or proceedings seeking a stop
order, and Parent shall have received all state
securities or "blue sky" authorizations necessary to
issue the Parent Common Stock pursuant to this
Agreement.
(f) FCC Approvals. All orders and approvals of
the FCC required in connection with the consummation of
the transactions contemplated by this Agreement shall
have been obtained without the imposition of any
conditions or restrictions of the type referred to in
Section 6.02(e)(ii), (iii) or (iv) that are not
acceptable to Parent in its sole discretion.
(g) Certain Proceedings. If any action or
proceeding relating to the issue of whether the
transactions contemplated by this Agreement violate, or
require the consent of any person under, the TWE
Partnership Agreement (a "TWE Proceeding") shall have
been commenced, then either (i) such TWE Proceeding
shall have been dismissed with prejudice or (ii) a
final judgment that remains unstayed for a period of
60 days shall have been entered in such TWE Proceeding;
provided, however, that this condition shall cease to
be effective on December 23, 1996.
(h) Voting Trust Approval. Either (A) Parent and
the Company shall be satisfied that, and the FCC shall
have confirmed that, the Voting Trust (as defined in
the LMC Agreement) will be effective to prevent the
beneficiaries thereunder from having an attributable
interest, within the meaning of the FCC's rules and
regulations, in the assets and businesses of Parent by
reason of the Parent Common Stock subject thereto or
(B) the parties to the LMC Agreement (other than
Parent) shall have acknowledged that the procedures set
forth in Section 4.1 of the LMC Agreement relating to
exchange for nonvoting shares of Parent Preferred Stock
are applicable.
<PAGE>
SECTION 6.02. Conditions to Obligations of Parent
and Sub. The obligations of Parent and Sub to effect the
Merger are further subject to the satisfaction or waiver by
Parent on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The repre-
sentations and warranties of the Company set forth in
this Agreement that are qualified as to materiality
shall be true and correct, and the representations and
warranties of the Company set forth in this Agreement
that are not so qualified shall be true and correct in
all material respects, in each case as of the date of
this Agreement and as of the Closing Date as though
made on and as of the Closing Date, except to the
extent any such representation or warranty expressly
relates to an earlier date (in which case as of such
date), and Parent shall have received a certificate
signed on behalf of the Company by the Chief Executive
Officer (or the Executive Vice President) and the Chief
Financial Officer of the Company to such effect.
(b) Performance of Obligations of the Company.
The Company shall have performed in all material
respects all obligations required to be performed by it
under this Agreement at or prior to the Closing Date,
and Parent shall have received a certificate signed on
behalf of the Company by the Chief Executive Officer
(or the Executive Vice President) and the Chief
Financial Officer of the Company to such effect.
(c) Letters from Company Affiliates. Parent
shall have received from each person named in the
letter referred to in Section 5.11 an executed copy of
an agreement substantially in the form of Exhibit A.
(d) Tax Opinion. Parent shall have received an
opinion dated the Closing Date from Cravath, Swaine &
Moore, based upon certificates and letters, which
letters and certificates are substantially in the form
set forth in Exhibit D and dated the Closing Date, to
the effect that the Merger will qualify as a
reorganization under the provisions of Section 368(a)
of the Code.
(e) No Litigation. There shall not be pending
any suit, action or proceeding by any Governmental
Entity (i) challenging the acquisition by Parent or Sub
<PAGE>
of any shares of capital stock of the Company or the
Surviving Corporation, seeking to restrain or prohibit
the consummation of the Merger or any of the other
transactions contemplated by this Agreement and the LMC
Agreement or seeking to obtain from the Company, Parent
or Sub any damages that are material in relation to the
Company and its subsidiaries taken as a whole,
(ii) seeking to prohibit or limit the ownership or
operation by the Company, Parent, any Material Company
Subsidiary or any Material Parent Subsidiary of any
material portion of the business or assets of the
Company, Parent, any Material Company Subsidiary or any
Material Parent Subsidiary or to compel the Company,
Parent or any of their respective subsidiaries to
dispose of or hold separate any material portion of the
business or assets of the Company, Parent, any Material
Company Subsidiary or any Material Parent Subsidiary as
a result of the Merger or any of the other transactions
contemplated by this Agreement, (iii) seeking to impose
limitations on the ability of Parent or Sub to acquire
or hold, or exercise full rights of ownership of, any
shares of capital stock of the Surviving Corporation,
including, without limitation, the right to vote such
capital stock on all matters properly presented to the
stockholders of the Surviving Corporation, (iv) seeking
to prohibit Parent or any of the Parent Subsidiaries
from effectively controlling in any material respect
the business or operations of the Company or any
Material Company Subsidiary or (v) which otherwise is
reasonably likely to have a Company Material Adverse
Effect or a Parent Material Adverse Effect.
(f) Investors' Agreements. Each of the other
parties thereto shall have executed and delivered to
Parent an Investors' Agreement in the form of
Exhibit C-1 or C-2, as applicable.
(g) Cable Franchise Authorities. All necessary
orders and permits approving the transactions
contemplated by this Agreement from all applicable
cable franchising authorities having jurisdiction over
all or any portion of any material cable system
operated by Parent or any Parent Subsidiary shall have
been received.
(h) Dissenters' Rights. The Company shall not
have received pursuant to Section 1321(a)(1) of the
Georgia BCC written notices of intent to demand payment
<PAGE>
in connection with the Merger with respect to shares of
Company Capital Stock representing more than 28,000,000
Company Common Stock equivalents (calculated on the
basis that each share of Company Common Stock
represents one Company Common Stock equivalent and each
share of Class C Preferred Stock represents six Company
Common Stock equivalents).
SECTION 6.03. Conditions to Obligation of
the Company. The obligation of the Company to effect the
Merger is further subject to the satisfaction or waiver by
the Company on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. The repre-
sentations and warranties of Parent and Sub set forth
in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and
warranties of Parent and Sub set forth in this Agree-
ment that are not so qualified shall be true and
correct in all material respects, in each case as of
the date of this Agreement and as of the Closing Date
as though made on and as of the Closing Date, except to
the extent any such representation or warranty
expressly relates to an earlier date (in which case as
of such date), and the Company shall have received a
certificate signed on behalf of Parent by the chief
executive officer (or any executive vice president) and
the chief financial officer of Parent to such effect.
(b) Performance of Obligations of Parent and Sub.
Parent and Sub shall have performed in all material
respects all obligations required to be performed by
them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate
signed on behalf of Parent by the chief executive
officer (or any executive vice president) and the chief
financial officer of Parent to such effect.
(c) No Litigation. There shall not be pending
any suit, action or proceeding by any Governmental
Entity (i) seeking to obtain from the Company, Parent
or Sub any damages that are material in relation to
Parent and its subsidiaries taken as a whole
(determined after giving effect to the Merger),
(ii) seeking to prohibit or limit the ownership or
operation by Parent or any Material Parent Subsidiary
of any material portion of the business or assets of
<PAGE>
Parent or any Material Parent Subsidiary (determined
after giving effect to the Merger) or to compel Parent
or any of its subsidiaries to dispose of or hold
separate any material portion of the business or assets
of Parent or any Material Parent Subsidiary (determined
after giving effect to the Merger), as a result of the
Merger or any of the other transactions contemplated by
this Agreement, or (iii) which otherwise is reasonably
likely to have a Parent Material Adverse Effect
(determined after giving effect to the Merger).
(d) Tax Opinion. The Company shall have received
an opinion dated the Closing Date from Skadden, Arps,
Slate, Meagher & Flom, based upon certificates and
letters, which letters and certificates are
substantially in the form set forth in Exhibit D and
dated the Closing Date, to the effect that the Merger
will qualify as a reorganization under the provisions
of Section 368(a) of the Code.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be
terminated at any time prior to the Effective Time of the
Merger, whether before or after the Shareholder Approvals:
(a) by mutual written consent of Parent, Sub and
the Company;
(b) by either Parent or the Company:
(i) if, at a duly held shareholders meeting
of the Company or any adjournment thereof at which
the Shareholder Approvals are voted upon, the
Shareholder Approvals shall not have been
obtained;
(ii) if, at a duly held stockholders meeting
of Parent or any adjournment thereof at which the
Parent Stockholder Approvals are voted upon, the
Parent Stockholder Approvals shall not have been
obtained;
(iii) if the Merger shall not have been
consummated on or before September 30, 1996,
<PAGE>
unless the failure to consummate the Merger is the
result of a wilful and material breach of this
Agreement by the party seeking to terminate this
Agreement; provided, however, that if all the
conditions set forth in Sections 6.01 (other than
6.01(g)), 6.02 and 6.03 have been satisfied at
such date, either Parent or the Company may, by
notice to the other prior to such date, extend
such date to the latest date so extended by either
party but in no event later than December 31,
1996;
(iv) if any court of competent jurisdiction
or other Governmental Entity shall have issued an
order, decree or ruling or taken any other action
permanently enjoining, restraining or otherwise
prohibiting the Merger and such order, decree,
ruling or other action shall have become final and
non-appealable;
(v) in the event of a breach by the other
party of any representation, warranty, covenant or
other agreement contained in this Agreement which
(A) would give rise to the failure of a condition
set forth in Section 6.02(a) or 6.02(b) or
Section 6.03(a) or 6.03(b), as applicable, and
(B) cannot be or has not been cured within 30 days
after the giving of written notice to the
breaching party of such breach (a "Material
Breach") (provided that the terminating party is
not then in breach of any representation,
warranty, covenant or other agreement that would
give rise to a failure of a condition as described
in clause (A) above); or
(vi) if the FCC shall have issued an order
or ruling or taken other action denying approval
of the transactions contemplated by this
Agreement, and such order, ruling or other action
shall have become final and non-appealable;
(c) by either Parent or the Company in the event
that (i) all the conditions to the obligation of such
party to effect the Merger set forth in Section 6.01
shall have been satisfied and (ii) any condition to the
obligation of such party to effect the Merger set forth
in Section 6.02 (in the case of Parent) or Section 6.03
(in the case of the Company) is not capable of being
<PAGE>
satisfied prior to the end of the period referred to in
Section 7.01(b)(iii);
(d) by Parent, if any order or approval of the
FCC contemplated by Section 6.01(f) when obtained shall
have included any conditions or restrictions of the
type referred to in Section 6.02(e)(ii), (iii) or (iv)
that are not acceptable to Parent in its sole
discretion and such order or approval shall have become
final and non-appealable;
(e) by the Company, subject to Section 7.05(b),
if the Board of Directors of the Company shall
concurrently approve, and the Company shall
concurrently enter into, a definitive agreement
providing for the implementation of the transactions
contemplated by a takeover proposal; provided, however,
that (i) the Company is not then in breach of
Section 4.02 or in breach of any other representation,
warranty, covenant or agreement that would give rise to
a failure of a condition set forth in Section 6.02(a)
or 6.02(b), (ii) the Board of Directors of the Company
shall have complied with Section 7.05(b) in connection
with such takeover proposal and (iii) no termination
pursuant to this Section 7.01(e) shall be effective
unless the Company shall simultaneously make the
payment required by Section 7.02(a);
(f) by the Company, as contemplated by
Section 5.16;
(g) by the Company within 30 days of (i) Parent
entering into any agreement providing for any merger or
consolidation of Parent with or into any other person
in which the shares of capital stock of Parent are to
be exchanged for or converted into the right to receive
anything other than Parent Common Stock, (ii) any
person becoming an Acquiring Person (as defined in the
Rights Agreement, as in effect on the date of this
Agreement), other than with the prior approval of the
Board of Directors of Parent, or (iii) any person
becoming an Acquiring Person (as defined in the Rights
Agreement, as in effect on the date of this Agreement,
but determined, for purposes of this clause (iii), as
if the reference therein to "15%" were to "30%"), in
the case of clauses (ii) and (iii) above, (x) including
any person excluded from the definition of "Acquiring
Person" in the Rights Agreement by virtue of the
<PAGE>
acquisition of shares pursuant to a Qualifying Offer
(as defined in the Rights Agreement, as in effect on
the date of this Agreement) and (y) regardless of
whether the Rights Agreement is then in effect (and
excluding, in all cases, any amendment of this
Agreement as contemplated by Section 1.01); or
(h) by Parent to the extent required by
Section 2.3 of the LMC Agreement.
SECTION 7.02. Effect of Termination. (a) In the
event that any person shall make a takeover proposal and
thereafter (i) this Agreement is terminated pursuant to
Section 7.01(b)(i), pursuant to Section 7.01(b)(iii) (if at
the time of termination (x) the Company is in breach of any
representation, warranty, covenant or other agreement that
would give rise to a failure of a condition set forth in
Section 6.02(a) or 6.02(b) and (y) such breach cannot be or
has not been cured within 30 days after the Company becomes
aware of such breach or such shorter period as may elapse
between the date the Company becomes aware of such breach
and the time of termination), by the Company pursuant to
Section 7.01(b)(iv) (if at the time of termination (x) the
Company is in breach of any representation, warranty,
covenant or other agreement that would give rise to a
failure of a condition set forth in Section 6.02(a) or
6.02(b) and (y) such breach cannot be or has not been cured
within 30 days after the Company becomes aware of such
breach), by Parent pursuant to Section 7.01(b)(v), pursuant
to Section 7.01(b)(vi) (if at the time of termination (x)
the Company is in breach of any representation, warranty,
covenant or other agreement that would give rise to a
failure of a condition set forth in Section 6.02(a) or
6.02(b) and (y) such breach cannot be or has not been cured
within 30 days after the Company becomes aware of such
breach), by the Company pursuant to Section 7.01(c) or
pursuant to Section 7.01(e), and (ii) a definitive agreement
with respect to a takeover proposal is executed, or a
takeover proposal is consummated, at or within eighteen
months after such termination, then the Company shall pay to
Parent a fee of $175,000,000 (reduced by any amount actually
paid by the Company pursuant to Section 7.02(b) in
connection with such termination), which amount shall be
payable by wire transfer of same day funds on the date such
agreement is executed, or such takeover proposal is
consummated, as applicable. The Company acknowledges that
the agreements contained in this Section 7.02(a) are an
integral part of the transactions contemplated by this
<PAGE>
Agreement, and that, without these agreements, Parent would
not enter into this Agreement; accordingly, if the Company
fails to promptly pay the amount due pursuant to this
Section 7.02(a), and, in order to obtain such payment,
commences a suit which results in a judgment against the
Company for the fee set forth in this Section 7.02(a), the
Company shall also pay to Parent its costs and expenses
(including reasonable attorneys' fees) in connection with
such suit.
(b) In the event of termination of this Agreement
by either Parent or the Company pursuant to
Section 7.01(b)(i) or by Parent pursuant to
Section 7.01(b)(v), then the Company shall reimburse Parent
for all its reasonable out-of-pocket expenses actually
incurred in connection with this Agreement and the
transactions contemplated hereby, up to a maximum amount of
$15,000,000, which amount shall be payable by wire transfer
of same day funds within three business days of written
demand, accompanied by a reasonably detailed statement of
such expenses and appropriate supporting documentation,
therefor.
(c) In the event of termination of this Agreement
by either Parent or the Company pursuant to
Section 7.01(b)(ii) or by the Company pursuant to
Section 7.01(b)(v), then Parent shall reimburse the Company
for all its reasonable out-of-pocket expenses actually
incurred in connection with this Agreement and the
transactions contemplated hereby, up to a maximum amount of
$15,000,000, which amount shall be payable by wire transfer
of same day funds within three business days of written
demand, accompanied by a reasonably detailed statement of
such expenses and appropriate supporting documentation,
therefor.
(d) In the event of termination of this Agreement
by either the Company or Parent as provided in Section 7.01,
this Agreement shall forthwith become void and have no
effect, without any liability or obligation on the part of
Parent, Sub or the Company, other than the provisions of
Sections 3.01(l) and 3.02(j), the second sentence of
Section 5.04, Section 5.10, this Section 7.02 and
Article VIII and except to the extent that such termination
results from the wilful and material breach by a party of
any of its representations, warranties, covenants or other
agreements set forth in this Agreement.
<PAGE>
SECTION 7.03. Amendment. This Agreement may be
amended by the parties at any time before or after the
Shareholder Approvals; provided, however, that after the
Shareholder Approvals, there shall be made no amendment that
pursuant to the Georgia BCC requires further approval by the
shareholders of the Company without the further approval of
such shareholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of the
parties.
SECTION 7.04. Extension; Waiver. At any time
prior to the Effective Time of the Merger, the parties may
(a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive
any inaccuracies in the representations and warranties
contained in this Agreement or in any document delivered
pursuant to this Agreement or (c) subject to the proviso of
Section 7.03, waive compliance with any of the agreements or
conditions contained in this Agreement. Any agreement on
the part of a party to any such extension or waiver shall
be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this
Agreement or otherwise shall not constitute a waiver of such
rights.
SECTION 7.05. Procedure for Termination,
Amendment, Extension or Waiver. (a) A termination of this
Agreement pursuant to Section 7.01, an amendment of this
Agreement pursuant to Section 7.03 or an extension or waiver
pursuant to Section 7.04 shall, in order to be effective,
require, in the case of Parent, Sub or the Company, action
by its Board of Directors or, in the case of an extension or
waiver pursuant to Section 7.04, the duly authorized
designee of its Board of Directors.
(b) The Company shall provide to Parent written
notice prior to any termination of this Agreement pursuant
to Section 7.01(e) advising Parent (i) that the Board of
Directors of the Company in the exercise of its good faith
judgment as to its fiduciary duties to the shareholders of
the Company under applicable law, after receipt of written
advice of outside legal counsel, has determined (on the
basis of such takeover proposal and the terms of this
Agreement, as then in effect) that such termination is
required in connection with a takeover proposal that is more
favorable to the shareholders of the Company than the
transactions contemplated by this Agreement (taking into
<PAGE>
account all terms of such takeover proposal and this
Agreement, including all conditions) and (ii) as to the
material terms of any such takeover proposal. At any time
after two business days following receipt of such notice,
the Company may terminate this Agreement as provided in
Section 7.01(e) only if the Board of Directors of the
Company determines that such proposal is more favorable to
the shareholders of the Company than the transactions
contemplated by this Agreement (taking into account all
terms of such takeover proposal and this Agreement,
including all conditions, and which determination shall be
made in light of any revised proposal made by Parent prior
to the expiration of such two business day period) and
concurrently enters into a definitive agreement providing
for the implementation of the transactions contemplated by
such takeover proposal.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties. None of the representations and warranties in
this Agreement or in any instrument delivered pursuant to
this Agreement shall survive the Effective Time of the
Merger. This Section 8.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates
performance after the Effective Time of the Merger.
SECTION 8.02. Notices. All notices, requests,
claims, demands and other communications under this Agree-
ment shall be in writing and shall be deemed given if
delivered personally or sent by overnight courier (providing
<PAGE>
proof of delivery) to the parties at the following addresses
(or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Sub, to
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Attention: General Counsel
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Peter S. Wilson, Esq.
(b) if to the Company, to
Turner Broadcasting System, Inc.
One CNN Center
Atlanta, GA 30303
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, CA 90071
Attention: Thomas C. Janson, Jr., Esq.
SECTION 8.03. Definitions. For purposes of this
Agreement:
(a) an "affiliate" of any person means another
person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under
common control with, such first person;
(b) "person" means an individual, corporation,
partnership, limited liability company, joint venture,
association, trust, unincorporated organization or
other entity; and
<PAGE>
(c) a "subsidiary" of any person means another
person, an amount of the voting securities or other
voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its
Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the
equity interests of which) is owned directly or
indirectly by such first person.
SECTION 8.04. Interpretation. When a reference
is made in this Agreement to a Section or Exhibit such
reference shall be to a Section of, or an Exhibit to, this
Agreement unless otherwise indicated. The table of contents
and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words
"include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation".
SECTION 8.05. Counterparts. This Agreement may
be executed in two or more counterparts, all of which shall
be considered one and the same agreement and shall become
effective when two or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries. This Agreement (including the documents
referred to herein) (a) constitutes the entire agreement,
and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the
subject matter of this Agreement and (b) except for the
provisions of Article II, Section 5.08 and Section 5.09, are
not intended to confer upon any person other than the
parties any rights or remedies.
SECTION 8.07. Governing Law. This Agreement
shall be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of
conflicts of laws thereof (except to the extent that the
provisions of the Georgia BCC shall be mandatorily
applicable to the Merger or this Agreement).
SECTION 8.08. Assignment. Neither this Agreement
nor any of the rights, interests or obligations under this
Agreement shall be assigned, in whole or in part, by opera-
tion of law or otherwise by any of the parties without the
<PAGE>
prior written consent of the other parties, except that Sub
may assign, in its sole discretion, any of or all its
rights, interests and obligations under this Agreement to
Parent or to any direct wholly owned Parent Subsidiary, but
no such assignment shall relieve Sub of any of its
obligations under this Agreement. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their
respective successors and assigns.
SECTION 8.09. Enforcement. The parties agree
that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall
be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the
<PAGE>
terms and provisions of this Agreement in any court of the
United States located in the State of Delaware or in
Delaware state court, this being in addition to any other
remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court
in the event any dispute arises out of this Agreement or any
of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave
from any such court and (c) agrees that it will not initiate
any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court
other than a Federal court sitting in the State of Delaware
or a Delaware state court. The Company hereby appoints the
Prentice-Hall Corporation System, Inc., 32 Lockerman Square,
Suite L-100, Dover, Delaware 19901, as its agent for service
of process in Delaware.
SECTION 8.10. Waivers. Except as provided in
this Agreement or any waiver pursuant to Section 7.04, no
action taken pursuant to this Agreement, including any
investigation by or on behalf of any party, shall be deemed
to constitute a waiver by the party taking such action of
compliance with any representations, warranties, covenants
or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder
shall not operate or be construed as a waiver of any prior
or subsequent breach of the same or any other provision
hereunder.
IN WITNESS WHEREOF, Parent, Sub and the Company
have caused this Agreement to be signed by their respective
officers thereunto duly authorized, all as of the date first
written above.
TIME WARNER INC.,
by
/s/ Gerald M. Levin
-------------------------
Name: Gerald M. Levin
Title: Chairman and CEO
<PAGE>
TIME WARNER ACQUISITION CORP.,
by
/s/ Peter R. Haje
-------------------------
Name: Peter R. Haje
Title: President
TURNER BROADCASTING SYSTEM,
INC.,
by
/s/ R. E. Turner
-------------------------
Name: R. E. Turner, III
Title: Chairman, President
and CEO
<PAGE>
EXHIBIT A
FORM OF AFFILIATE LETTER
Time Warner, Inc.
75 Rockefeller Plaza
New York, New York 10019
Ladies and Gentlemen:
I have been advised that as of the date of this
letter agreement I may be deemed to be an "affiliate" of
Turner Broadcasting System, Inc., a Georgia corporation (the
"Company"), as such term is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and
regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), or (ii) used
in and for purposes of Accounting Series Releases 130 and
135, as amended, of the Commission. Pursuant to the terms
of the Agreement and Plan of Merger, dated as of
September --, 1995 (as amended from time to time, the
"Merger Agreement"), by and among Time Warner, Inc., a
Delaware corporation ("Parent"), the Company and Time Warner
Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), the Company will be merged
with and into Sub (the "Merger").
Pursuant to the Merger each share of Class A
Common Stock, par value $.0625 per share, of the Company
owned by the undersigned, and each share of Class B Common
Stock, par value $.0625 per share, of the Company owned by
the undersigned will be converted into the right to receive
0.75 of a share of Common Stock, par value $1.00 per share,
of Parent ("Parent Common Stock"), and each share of Class C
Convertible Preferred Stock, par value $.125 per share, of
the Company owned by the undersigned will be converted into
the right to receive 4.80 shares of Parent Common Stock.
<PAGE>
I represent, warrant and covenant to Parent that,
with respect to all Parent Common Stock received as a result
of the Merger:
1. I shall not make any sale, transfer or other
disposition of Parent Common Stock in violation of the Act
or the Rules and Regulations.
2. I have carefully read this letter and the
Merger Agreement and have had an opportunity to discuss the
requirements of such documents and any other applicable
limitations upon my ability to sell, transfer or otherwise
dispose of Parent Common Stock with my counsel or counsel
for the Company.
3. I have been advised that the issuance of
Parent Common Stock to me pursuant to the Merger has been
registered with the Commission under the Act. However, I
have also been advised that, since at the time the Merger
was submitted for a vote of the stockholders of the Company,
I may be deemed to have been an affiliate of the Company and
the distribution by me of Parent Common Stock has not been
registered under the Act, I may not offer to sell, sell,
transfer or otherwise dispose of Parent Common Stock issued
to me in the Merger unless (i) such offer, sale, transfer or
other disposition has been registered under the Act or is
made in conformity with Rule 145 under the Act, or (ii) in
the opinion of counsel reasonably acceptable to Parent, or
pursuant to a "no action" letter obtained by the undersigned
from the staff of the Commission, such sale, transfer or
other disposition is otherwise exempt from registration
under the Act.
4. I understand that, except as provided in the
Registration Rights Agreement to be entered into by Parent
and the undersigned as contemplated by the Merger Agreement,
Parent is under no obligation to register under the Act the
sale, transfer or other disposition of Parent Common Stock
by me or on my behalf or to take any other action necessary
in order to make compliance with an exemption from such
registration available.
5. I understand that Parent will give stop
transfer instructions to Parent's transfer agents with
respect to Parent Common Stock, that the Parent Common Stock
issued to me will all be in certificated form and that the
<PAGE>
certificates therefor, or any substitutions therefor, will
bear a legend substantially to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
WERE ISSUED IN A TRANSACTION TO WHICH RULE 145
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
ONLY BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT,
DATED SEPTEMBER __, 1995, BETWEEN THE REGISTERED
HOLDER HEREOF AND TIME WARNER, INC., A COPY OF
WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF TIME WARNER."
6. I also understand that unless the transfer by
me of my Parent Common Stock has been registered under the
Act or is a sale made in conformity with the provisions of
Rule 145, Parent reserves the right to place a legend
substantially to the following effect on the certificates
issued to any transferee:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SECURITIES IN A TRANSACTION TO WHICH
RULE 145 UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SECURITIES HAVE NOT BEEN ACQUIRED BY THE
HOLDER WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING
OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR
IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
It is understood and agreed that the legends set
forth in paragraphs 5 and 6 above shall be removed by
delivery of substitute certificates without such legend if
such legend is not required for purposes of the Act. It is
understood and agreed that such legends and the stop orders
referred to above will be removed if (i) two years shall
have elapsed from the date the undersigned acquired Parent
Common Stock received in the Merger and the provisions of
Rule 145(d)(2) are then available to the undersigned,
(ii) three years shall have elapsed from the date the
undersigned acquired Parent Common Stock received in the
Merger and the provisions of Rule 145(d)(3) are then
<PAGE>
available to the undersigned, or (iii) Parent has received
either an opinion of counsel, which opinion and counsel
shall be reasonably satisfactory to Parent, or a "no action"
letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by
Rule 145 under the Act no longer apply to the undersigned.
Execution of this letter should not be considered
an admission on my part that I am an "affiliate" of the
Company as described in the first paragraph of this letter.
Sincerely,
---------------------------
Name:
Accepted this day of
September, 1995:
Time Warner, Inc.
By----------------------
Name:
Title:
<PAGE>
EXHIBIT B
REGISTRATION RIGHTS AGREEMENT, dated as
of , among TIME WARNER INC.,
a Delaware corporation (the "Company"), and
the Holders (as defined below).
WHEREAS, in connection with the Agreement and Plan
of Merger, dated as of September 22, 1995 (the "Merger
Agreement"), among the Company, Time Warner Acquisition
Corp., a Delaware corporation, and Turner Broadcasting
System, Inc., a Georgia corporation, each initial Holder
will receive shares of Common Stock (as defined below); and
WHEREAS, in order to induce the initial Holders to
execute and deliver to the Company the letters contemplated
by Section 5.11 of the Merger Agreement, the Company has
agreed to provide each Holder with the registration rights
set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, and for other
good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto,
intending to be legally bound hereby, agree as follows:
SECTION 1. Definitions. As used in this
Agreement, the following terms shall have the following
meanings:
"Advice" shall have the meaning set forth in
Section 5 hereof.
"Affiliate" means, with respect to any specified
person, any other person directly or indirectly controlling
or controlled by or under direct or indirect common control
with such specified person. For the purposes of this
definition, "control" when used with respect to any
specified person means the power to direct the management
and policies of such person, directly or indirectly, whether
through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have
meanings correlative to the foregoing.
"Business Day" means any day that is not a
Saturday, a Sunday or a legal holiday on which banking
institutions in the State of New York are not required to be
open.
<PAGE>
"Capital Stock" means, with respect to any person,
any and all shares, interests, participations or other
equivalents (however designated) of corporate stock issued
by such person, including each class of common stock and
preferred stock of such person.
"Common Stock" means the Common Stock, par value
$1.00 per share, of the Company issued pursuant to the
Merger Agreement or any other shares of capital stock or
other securities of the Company into which such shares of
Common Stock shall be reclassified or changed, including, by
reason of a merger, consolidation, reorganization or
recapitalization. If the Common Stock has been so
reclassified or changed, or if the Company pays a dividend
or makes a distribution on the Common Stock in shares of
capital stock, or subdivides (or combines) its outstanding
shares of Common Stock into a greater (or smaller) number of
shares of Common Stock, a share of Common Stock shall be
deemed to be such number of shares of stock and amount of
other securities to which a holder of a share of Common
Stock outstanding immediately prior to such change,
reclassification, exchange, dividend, distribution,
subdivision or combination would be entitled.
"Company" shall have the meaning set forth in the
introductory clauses hereof.
"Delay Period" shall have the meaning set forth in
Section 2(d) hereof.
"Demand Notice" shall have the meaning set forth
in Section 2(a) hereof.
"Demand Registration" shall have the meaning set
forth in Section 2(b) hereof.
"Effectiveness Period" shall have the meaning set
forth in Section 2(d) hereof.
"Exchange Act" means the Securities Exchange Act
of 1934, as amended, and the rules and regulations of the
SEC promulgated thereunder.
"Hold Back Period" shall have the meaning set
forth in Section 4 hereof.
"Holder" means a person who owns Registrable
Shares and is either (i) named on the signature pages hereof
<PAGE>
as a Holder, or (ii) a person who has agreed to be bound by
the terms of this Agreement as if such person were a Holder
and is (A) a person to whom a Holder has transferred
Registrable Shares pursuant to Rule "4(1-1/2)" (or any
similar private transfer exemption), (B) upon the death of
any Holder, the executor of the estate of such Holder or any
of such Holder's heirs, devisees, legatees or assigns or
(iii) upon the disability of any Holder, any guardian or
conservator of such Holder.
"Interruption Period" shall have the meaning set
forth in Section 5 hereof.
"Merger Agreement" shall have the meaning set
forth in the introductory clauses hereof.
"person" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or
any agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning
set forth in Section 3 hereof.
"Prospectus" means the prospectus included in any
Registration Statement (including a prospectus that
discloses information previously omitted from a prospectus
filed as part of an effective registration statement in
reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Shares covered by
such Registration Statement and all other amendments and
supplements to such prospectus, including post-effective
amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"Registrable Shares" means shares of Common Stock
unless (i) they have been effectively registered under
Section 5 of the Securities Act and disposed of pursuant to
an effective Registration Statement, (ii) such securities
can be freely sold and transferred without restriction under
Rule 145 or any other restrictions under the Securities Act
or (iii) such securities have been transferred pursuant to
Rule 144 under the Securities Act or any successor rule such
that, after any such transfer referred to in this clause
(iii), such securities may be freely transferred without
restriction under the Securities Act.
<PAGE>
"Registration" means registration under the
Securities Act of an offering of Registrable Shares pursuant
to a Demand Registration or a Piggyback Registration.
"Registration Period" shall have the meaning set
forth in Section 2(a) hereof.
"Registration Statement" means any registration
statement under the Securities Act of the Company that
covers any of the Registrable Shares pursuant to the
provisions of this Agreement, including the related
Prospectus, all amendments and supplements to such
registration statement, including pre- and post-effective
amendments, all exhibits thereto and all material
incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"SEC" means the Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933,
as amended, and the rules and regulations of the SEC
promulgated thereunder.
"Shelf Registration" shall have the meaning set
forth in Section 2(b) hereof.
"underwritten registration or underwritten
offering" means a registration under the Securities Act in
which securities of the Company are sold to an underwriter
for reoffering to the public.
SECTION 2. Demand Registration. (a) The Holders
shall have the right, during the period (the "Registration
Period") commencing on the date of this Agreement and ending
on the third anniversary of the date of this Agreement, by
written notice (the "Demand Notice") given to the Company,
to request the Company to register under and in accordance
with the provisions of the Securities Act all or any portion
of the Registrable Shares designated by such Holders;
provided, however, that the aggregate number of Registrable
Shares requested to be registered pursuant to any Demand
Notice and pursuant to any related Demand Notices received
pursuant to the following sentence shall be at least
5,000,000. Upon receipt of any such Demand Notice, the
Company shall promptly notify all other Holders of the
receipt of such Demand Notice and allow them the opportunity
to include Registrable Shares held by them in the proposed
<PAGE>
registration by submitting their own Demand Notice. In
connection with any Demand Registration in which more than
one Holder participates, in the event that such Demand
Registration involves an underwritten offering and the
managing underwriter or underwriters participating in such
offering advise in writing the Holders of Registrable Shares
to be included in such offering that the total number of
Registrable Shares to be included in such offering exceeds
the amount that can be sold in (or during the time of) such
offering without delaying or jeopardizing the success of
such offering (including the price per share of the
Registrable Shares to be sold), then the amount of
Registrable Shares to be offered for the account of such
Holders shall be reduced pro rata on the basis of the number
of Registrable Shares to be registered by each such Holder.
The Holders as a group shall be entitled to three Demand
Registrations pursuant to this Section 2 unless any Demand
Registration does not become effective or is not maintained
for a period (whether or not continuous) of at least 120
days (or such shorter period as shall terminate when all the
Registrable Shares covered by such Demand Registration have
been sold pursuant thereto), in which case the Holders will
be entitled to an additional Demand Registration pursuant
hereto.
(b) The Company, within 45 days of the date on
which the Company receives a Demand Notice given by Holders
in accordance with Section 2(a) hereof, shall file with the
SEC, and the Company shall thereafter use its best efforts
to cause to be declared effective, a Registration Statement
on the appropriate form for the registration and sale, in
accordance with the intended method or methods of
distribution, of the total number of Registrable Shares
specified by the Holders in such Demand Notice, which may
include a "shelf" registration (a "Shelf Registration")
pursuant to Rule 415 under the Securities Act (a "Demand
Registration").
(c) The Company shall use commercially reasonable
efforts to keep each Registration Statement filed pursuant
to this Section 2 continuously effective and usable for the
resale of the Registrable Shares covered thereby (i) in the
case of a Registration that is not a Shelf Registration, for
a period of 120 days from the date on which the SEC declares
such Registration Statement effective and (ii) in the case
of a Shelf Registration, for a period of 180 days from the
date on which the SEC declares such Registration Statement
effective, in either case (x) until all the Registrable
<PAGE>
Shares covered by such Registration Statement have been sold
pursuant to such Registration Statement), and (y) as such
period may be extended pursuant to this Section 2.
(d) The Company shall be entitled to postpone the
filing of any Registration Statement otherwise required to
be prepared and filed by the Company pursuant to this
Section 2, or suspend the use of any effective Registration
Statement under this Section 2, for a reasonable period of
time, but not in excess of 90 days (a "Delay Period"), if
any executive officer of the Company determines that in such
executive officer's reasonable judgment and good faith the
registration and distribution of the Registrable Shares
covered or to be covered by such Registration Statement
would materially interfere with any pending material
financing, acquisition or corporate reorganization or other
material corporate development involving the Company or any
of its subsidiaries or would require premature disclosure
thereof and promptly gives the Holders written notice of
such determination, containing a general statement of the
reasons for such postponement and an approximation of the
period of the anticipated delay; provided, however, that (i)
the aggregate number of days included in all Delay Periods
during any consecutive 12 months shall not exceed the
aggregate of (x) 180 days minus (y) the number of days
occurring during all Hold Back Periods and Interruption
Periods during such consecutive 12 months and (ii) a period
of at least 60 days shall elapse between the termination of
any Delay Period, Hold Back Period or Interruption Period
and the commencement of the immediately succeeding Delay
Period. If the Company shall so postpone the filing of a
Registration Statement, the Holders of Registrable Shares to
be registered shall have the right to withdraw the request
for registration by giving written notice from the Holders
of a majority of the Registrable Shares that were to be
registered to the Company within 45 days after receipt of
the notice of postponement or, if earlier, the termination
of such Delay Period (and, in the event of such withdrawal,
such request shall not be counted for purposes of
determining the number of requests for registration to which
the Holders of Registrable Shares are entitled pursuant to
this Section 2). The time period for which the Company is
required to maintain the effectiveness of any Registration
Statement shall be extended by the aggregate number of days
of all Delay Periods, all Hold Back Periods and all
Interruption Periods occurring during such Registration and
such period and any extension thereof is hereinafter
referred to as the "Effectiveness Period". The Company
<PAGE>
shall not be entitled to initiate a Delay Period unless it
shall (A) to the extent permitted by agreements with other
security holders of the Company, concurrently prohibit sales
by such other security holders under registration statements
covering securities held by such other security holders and
(B) in accordance with the Company's policies from time to
time in effect, forbid purchases and sales in the open
market by senior executives of the Company.
(e) Except to the extent required by agreements
with other security holders of the Company entered into
prior to the date of the Merger Agreement, the Company shall
not include any securities that are not Registrable Shares
in any Registration Statement filed pursuant to this
Section 2 without the prior written consent of the Holders
of a majority in number of the Registrable Shares covered by
such Registration Statement.
(f) Holders of a majority in number of the
Registrable Shares to be included in a Registration
Statement pursuant to this Section 2 may, at any time prior
to the effective date of the Registration Statement relating
to such Registration, revoke such request by providing a
written notice to the Company revoking such request. The
Holders of Registrable Shares who revoke such request shall
reimburse the Company for all its out-of-pocket expenses
incurred in the preparation, filing and processing of the
Registration Statement; provided, however, that, if such
revocation was based on the Company's failure to comply in
any material respect with its obligations hereunder, such
reimbursement shall not be required.
SECTION 3. Piggyback Registration. (a) Right to
Piggyback. If at any time during the Registration Period
the Company proposes to file a registration statement under
the Securities Act with respect to a public offering of
securities of the same type as the Registrable Shares
pursuant to a firm commitment underwritten offering solely
for cash for its own account (other than a registration
statement (i) on Form S-8 or any successor forms thereto, or
(ii) filed solely in connection with a dividend reinvestment
plan or employee benefit plan covering officers or directors
of the Company or its Affiliates) or for the account of any
holder of securities of the same type as the Registrable
Shares (to the extent that the Company has the right to
include Registrable Shares in any registration statement to
be filed by the Company on behalf of such holder), then the
Company shall give written notice of such proposed filing to
<PAGE>
the Holders at least 15 days before the anticipated filing
date. Such notice shall offer the Holders the opportunity
to register such amount of Registrable Shares as they may
request (a "Piggyback Registration"). Subject to
Section 3(b) hereof, the Company shall include in each such
Piggyback Registration all Registrable Shares with respect
to which the Company has received written requests for
inclusion therein within 10 days after notice has been given
to the Holders. Each Holder shall be permitted to withdraw
all or any portion of the Registrable Shares of such Holder
from a Piggyback Registration at any time prior to the
effective date of such Piggyback Registration; provided,
however, that if such withdrawal occurs after the filing of
the Registration Statement with respect to such Piggyback
Registration, the withdrawing Holders shall reimburse the
Company for the portion of the registration expenses payable
with respect to the Registrable Shares so withdrawn.
(b) Priority on Piggyback Registrations. The
Company shall permit the Holders to include all such
Registrable Shares on the same terms and conditions as any
similar securities, if any, of the Company included therein.
Notwithstanding the foregoing, if the Company or the
managing underwriter or underwriters participating in such
offering advise the Holders in writing that the total amount
of securities requested to be included in such Piggyback
Registration exceeds the amount which can be sold in (or
during the time of) such offering without delaying or
jeopardizing the success of the offering (including the
price per share of the securities to be sold), then the
amount of securities to be offered for the account of the
Holders and other holders of securities who have piggyback
registration rights with respect thereto shall be reduced
(to zero if necessary) pro rata on the basis of the number
of common stock equivalents requested to be registered by
each such Holder or holder participating in such offering.
(c) Right To Abandon. Nothing in this Section 3
shall create any liability on the part of the Company to the
Holders if the Company in its sole discretion should decide
not to file a registration statement proposed to be filed
pursuant to Section 3(a) hereof or to withdraw such
registration statement subsequent to its filing, regardless
of any action whatsoever that a Holder may have taken,
whether as a result of the issuance by the Company of any
notice hereunder or otherwise.
<PAGE>
SECTION 4. Holdback Agreement. If (i) during the
Effectiveness Period, the Company shall file a registration
statement (other than in connection with the registration of
securities issuable pursuant to an employee stock option,
stock purchase or similar plan or pursuant to a merger,
exchange offer or a transaction of the type specified in
Rule 145(a) under the Securities Act) with respect to the
Common Stock or similar securities or securities convertible
into, or exchangeable or exercisable for, such securities
and (ii) with reasonable prior notice, the Company (in the
case of a nonunderwritten public offering by the Company
pursuant to such registration statement) advises the Holders
in writing that a public sale or distribution of such
Registrable Shares would materially adversely affect such
offering or the managing underwriter or underwriters (in the
case of an underwritten public offering by the Company
pursuant to such registration statement) advises the Company
in writing (in which case the Company shall notify the
Holders) that a public sale or distribution of Registrable
Shares would materially adversely impact such offering, then
each Holder shall, to the extent not inconsistent with
applicable law, refrain from effecting any public sale or
distribution of Registrable Shares during the ten days prior
to the effective date of such registration statement and
until the earliest of (A) the abandonment of such offering,
(B) 90 days from the effective date of such registration
statement and (C) if such offering is an underwritten
offering, the termination in whole or in part of any "hold
back" period obtained by the underwriter or underwriters in
such offering from the Company in connection therewith (each
such period, a "Hold Back Period").
SECTION 5. Registration Procedures. In
connection with the registration obligations of the Company
pursuant to and in accordance with Sections 2 and 3 hereof
(and subject to Sections 2 and 3 hereof), the Company shall
use commercially reasonable efforts to effect such
registration to permit the sale of such Registrable Shares
in accordance with the intended method or methods of
disposition thereof, and pursuant thereto the Company shall
as expeditiously as possible (but subject to Sections 2 and
3 hereof):
(a) prepare and file with the SEC a Registration
Statement for the sale of the Registrable Shares on any
form for which the Company then qualifies or which
counsel for the Company shall deem appropriate in
accordance with such Holders' intended method or
<PAGE>
methods of distribution thereof, subject to
Section 2(b) hereof, and, subject to the Company's
right to terminate or abandon a registration pursuant
to Section 3(c) hereof, use commercially reasonable
efforts to cause such Registration Statement to become
effective and remain effective as provided herein;
(b) prepare and file with the SEC such amendments
(including post-effective amendments) to such
Registration Statement, and such supplements to the
related Prospectus, as may be required by the rules,
regulations or instructions applicable to the
Securities Act during the applicable period in
accordance with the intended methods of disposition
specified by the Holders of the Registrable Shares
covered by such Registration Statement, make generally
available earnings statements satisfying the provisions
of Section 11(a) of the Securities Act (provided that
the Company shall be deemed to have complied with this
clause if it has complied with Rule 158 under the
Securities Act), and cause the related Prospectus as so
supplemented to be filed pursuant to Rule 424 under the
Securities Act; provided, however, that before filing a
Registration Statement or Prospectus, or any amendments
or supplements thereto (other than reports required to
be filed by it under the Exchange Act), the Company
shall furnish to the Holders of Registrable Shares
covered by such Registration Statement and their
counsel for review and comment, copies of all documents
required to be filed;
(c) notify the Holders of any Registrable Shares
covered by such Registration Statement promptly and (if
requested) confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-
effective amendment has been filed, and, with respect
to such Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of
any request by the SEC for amendments or supplements to
such Registration Statement or the related Prospectus
or for additional information regarding such Holders,
(iii) of the issuance by the SEC of any stop order
suspending the effectiveness of such Registration
Statement or the initiation of any proceedings for that
purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the
qualification or exemption from qualification of any of
the Registrable Shares for sale in any jurisdiction or
<PAGE>
the initiation or threatening of any proceeding for
such purpose, and (v) of the happening of any event
that requires the making of any changes in such
Registration Statement, Prospectus or documents
incorporated or deemed to be incorporated therein by
reference so that they will not contain any untrue
statement of a material fact or omit to state any
material fact required to be stated therein or
necessary to make the statements therein not
misleading:
(d) use commercially reasonable efforts to obtain
the withdrawal of any order suspending the
effectiveness of such Registration Statement, or the
lifting of any suspension of the qualification or
exemption from qualification of any Registrable Shares
for sale in any jurisdiction in the United States;
(e) furnish to the Holder of any Registrable
Shares covered by such Registration Statement, each
counsel for such Holders and each managing underwriter,
if any, without charge, one conformed copy of such
Registration Statement, as declared effective by the
SEC, and of each post-effective amendment thereto, in
each case including financial statements and schedules
and all exhibits and reports incorporated or deemed to
be incorporated therein by reference; and deliver,
without charge, such number of copies of the
preliminary prospectus, any amended preliminary
prospectus, each final Prospectus and any post-
effective amendment or supplement thereto, as such
Holder may reasonably request in order to facilitate
the disposition of the Registrable Shares of such
Holder covered by such Registration Statement in
conformity with the requirements of the Securities Act;
(f) prior to any public offering of Registrable
Shares covered by such Registration Statement, use
commercially reasonable efforts to register or qualify
such Registrable Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as
the Holders of such Registrable Shares shall reasonably
request in writing; provided, however, that the Company
shall in no event be required to qualify generally to
do business as a foreign corporation or as a dealer in
any jurisdiction where it is not at the time so
qualified or to execute or file a general consent to
service of process in any such jurisdiction where it
<PAGE>
has not theretofore done so or to take any action that
would subject it to general service of process or
taxation in any such jurisdiction where it is not then
subject;
(g) upon the occurrence of any event contemplated
by paragraph 5(c)(v) above, prepare a supplement or
post-effective amendment to such Registration Statement
or the related Prospectus or any document incorporated
or deemed to be incorporated therein by reference and
file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Shares
being sold thereunder (including upon the termination
of any Delay Period), such Prospectus will not contain
an untrue statement of a material fact or omit to state
any material fact required to be stated therein or
necessary to make the statements therein, in light of
the circumstances under which they were made, not
misleading;
(h) use commercially reasonable efforts to cause
all Registrable Shares covered by such Registration
Statement to be listed on each securities exchange or
automated interdealer quotation system, if any, on
which similar securities issued by the Company are then
listed or quoted;
(i) on or before the effective date of such
Registration Statement, provide the transfer agent of
the Company for the Registrable Shares with printed
certificates for the Registrable Shares covered by such
Registration Statement, which are in a form eligible
for deposit with The Depository Trust Company;
(j) if such offering is an underwritten offering,
make available for inspection by any Holder of
Registrable Shares included in such Registration
Statement, any underwriter participating in any
offering pursuant to such Registration Statement, and
any attorney, accountant or other agent retained by any
such Holder or underwriter (collectively, the
"Inspectors"), all financial and other records and
other information, pertinent corporate documents and
properties of any of the Company and its subsidiaries
and affiliates (collectively, the "Records"), as shall
be reasonably necessary to enable them to exercise
their due diligence responsibilities; provided,
however, that the Records that the Company determines,
<PAGE>
in good faith, to be confidential and which it notifies
the Inspectors in writing are confidential shall not be
disclosed to any Inspector unless such Inspector signs
a confidentiality agreement reasonably satisfactory to
the Company (which shall permit the disclosure of such
Records in such Registration Statement or the related
Prospectus if necessary to avoid or correct a material
misstatement in or material omission from such
Registration Statement or Prospectus) or either (i) the
disclosure of such Records is necessary to avoid or
correct a misstatement or omission in such Registration
Statement or (ii) the release of such Records is
ordered pursuant to a subpoena or other order from a
court of competent jurisdiction; provided further,
however, that (A) any decision regarding the disclosure
of information pursuant to subclause (i) shall be made
only after consultation with counsel for the applicable
Inspectors and the Company and (B) with respect to any
release of Records pursuant to subclause (ii), each
Holder of Registrable Shares agrees that it shall,
promptly after learning that disclosure of such Records
is sought in a court having jurisdiction, give notice
to the Company so that the Company, at the Company's
expense, may undertake appropriate action to prevent
disclosure of such Records; and
(k) if such offering is an underwritten offering,
enter into such agreements (including an underwriting
agreement in form, scope and substance as is customary
in underwritten offerings) and take all such other
appropriate and reasonable actions requested by the
Holders of a majority of the Registrable Shares being
sold in connection therewith (including those
reasonably requested by the managing underwriters) in
order to expedite or facilitate the disposition of such
Registrable Shares, and in such connection, (i) use
commercially reasonable efforts to obtain opinions of
counsel to the Company and updates thereof (which
counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing
underwriters and counsel to the Holders of the
Registrable Shares being sold), addressed to each
selling Holder of Registrable Shares covered by such
Registration Statement and each of the underwriters as
to the matters customarily covered in opinions
requested in underwritten offerings and such other
matters as may be reasonably requested by such counsel
and underwriters, (ii) use commercially reasonable
<PAGE>
efforts to obtain "cold comfort" letters and updates
thereof from the independent certified public
accountants of the Company (and, if necessary, any
other independent certified public accountants of any
subsidiary of the Company or of any business acquired
by the Company for which financial statements and
financial data are, or are required to be, included in
the Registration Statement), addressed to each selling
holder of Registrable Shares covered by the
Registration Statement (unless such accountants shall
be prohibited from so addressing such letters by
applicable standards of the accounting profession) and
each of the underwriters, such letters to be in
customary form and covering matters of the type
customarily covered in "cold comfort" letters in
connection with underwritten offerings, (iii) if
requested and if an underwriting agreement is entered
into, provide indemnification provisions and procedures
substantially to the effect set forth in Section 8
hereof with respect to all parties to be indemnified
pursuant to said Section. The above shall be done at
each closing under such underwriting or similar
agreement, or as and to the extent required thereunder.
The Company may require each Holder of Registrable
Shares covered by a Registration Statement to furnish such
information regarding such Holder and such Holder's intended
method of disposition of such Registrable Shares as it may
from time to time reasonably request in writing. If any
such information is not furnished within a reasonable period
of time after receipt of such request, the Company may
exclude such Holder's Registrable Shares from such
Registration Statement.
Each Holder of Registrable Shares covered by a
Registration Statement agrees that, upon receipt of any
notice from the Company of the happening of any event of the
kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv) or
5(c)(v) hereof, that such Holder shall forthwith discontinue
disposition of any Registrable Shares covered by such
Registration Statement or the related Prospectus until
receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(g) hereof, or until
such Holder is advised in writing (the "Advice") by the
Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amended or
supplemented Prospectus or any additional or supplemental
filings which are incorporated, or deemed to be
<PAGE>
incorporated, by reference in such Prospectus (such period
during which disposition is discontinued being an
"Interruption Period") and, if requested by the Company, the
Holder shall deliver to the Company (at the expense of the
Company) all copies then in its possession, other than
permanent file copies then in such holder's possession, of
the Prospectus covering such Registrable Shares at the time
of receipt of such request.
Each Holder of Registrable Shares covered by a
Registration Statement further agrees not to utilize any
material other than the applicable current preliminary
prospectus or Prospectus in connection with the offering of
such Registrable Shares.
SECTION 6. Registration Expenses. Whether or not
any Registration Statement is filed or becomes effective,
the Company shall pay all costs, fees and expenses incident
to the Company's performance of or compliance with this
Agreement, including (i) all registration and filing fees,
including NASD filing fees, (ii) all fees and expenses of
compliance with securities or Blue Sky laws, including
reasonable fees and disbursements of counsel in connection
therewith, (iii) printing expenses (including expenses of
printing certificates for Registrable Shares and of printing
prospectuses if the printing of prospectuses is requested by
the Holders or the managing underwriter, if any),
(iv) messenger, telephone and delivery expenses, (v) fees
and disbursements of counsel for the Company, (vi) fees and
disbursements of all independent certified public
accountants of the Company (including expenses of any "cold
comfort" letters required in connection with this Agreement)
and all other persons retained by the Company in connection
with such Registration Statement, (vii) fees and
disbursements of one counsel, other than the Company's
counsel, selected by Holders of a majority of the
Registrable Shares being registered, to represent all such
Holders, (viii) fees and disbursements of underwriters
customarily paid by the issuers or sellers of securities and
(ix) all other costs, fees and expenses incident to the
Company's performance or compliance with this Agreement.
Notwithstanding the foregoing, the fees and expenses of any
persons retained by any Holder, other than one counsel for
all such Holders, and any discounts, commissions or brokers'
fees or fees of similar securities industry professionals
and any transfer taxes relating to the disposition of the
Registrable Shares by a Holder, will be payable by such
<PAGE>
Holder and the Company will have no obligation to pay any
such amounts.
SECTION 7. Underwriting Requirements. (a)
Subject to Section 7(b) hereof, any Holder shall have the
right, by written notice, to request that any Demand
Registration provide for an underwritten offering.
(b) In the case of any underwritten offering
pursuant to a Demand Registration, the Holders of a majority
of the Registrable Shares to be disposed of in connection
therewith shall select the institution or institutions that
shall manage or lead such offering, which institution or
institutions shall be reasonably satisfactory to the
Company. In the case of any underwritten offering pursuant
to a Piggyback Registration, the Company shall select the
institution or institutions that shall manage or lead such
offering. No Holder shall be entitled to participate in an
underwritten offering unless and until such Holder has
entered into an underwriting or other agreement with such
institution or institutions for such offering in such form
as the Company and such institution or institutions shall
determine.
SECTION 8. Indemnification. (a) Indemnification
by the Company. The Company shall, without limitation as to
time, indemnify and hold harmless, to the full extent
permitted by law, each Holder of Registrable Shares whose
Registrable Shares are covered by a Registration Statement
or Prospectus, the officers, directors and agents and
employees of each of them, each Person who controls each
such Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such
controlling person, to the fullest extent lawful, from and
against any and all losses, claims, damages, liabilities,
judgment, costs (including, without limitation, costs of
preparation and reasonable attorneys' fees) and expenses
(collectively, "Losses"), as incurred, arising out of or
based upon any untrue or alleged untrue statement of a
material fact contained in such Registration Statement or
Prospectus or in any amendment or supplement thereto or in
any preliminary prospectus, or arising out of or based upon
any omission or alleged omission of a material fact required
to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are based
upon information furnished in writing to the Company by or
on behalf of such Holder expressly for use therein;
<PAGE>
provided, however, that the Company shall not be liable to
any such Holder to the extent that any such Losses arise out
of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any
preliminary prospectus if (i) having previously been
furnished by or on behalf of the Company with copies of the
Prospectus, such Holder failed to send or deliver a copy of
the Prospectus with or prior to the delivery of written
confirmation of the sale of Registrable Shares by such
Holder to the person asserting the claim from which such
Losses arise and (ii) the Prospectus would have corrected in
all material respects such untrue statement or alleged
untrue statement or such omission or alleged omission; and
provided further, however, that the Company shall not be
liable in any such case to the extent that any such Losses
arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission in
the Prospectus, if (x) such untrue statement or alleged
untrue statement, omission or alleged omission is corrected
in all material respects in an amendment or supplement to
the Prospectus and (y) having previously been furnished by
or on behalf of the Company with copies of the Prospectus as
so amended or supplemented, such Holder thereafter fails to
deliver such Prospectus as so amended or supplemented, prior
to or concurrently with the sale of Registrable Shares.
(b) Indemnification by Holder of Registrable
Shares. In connection with any Registration Statement in
which a Holder is participating, such Holder shall furnish
to the Company in writing such information as the Company
reasonably requests for use in connection with such
Registration Statement or the related Prospectus and agrees
to indemnify, to the full extent permitted by law, the
Company, its directors, officers, agents or employees, each
Person who controls the Company (within the meaning of
Section 15 of the Securities Act and Section 20 of the
Exchange Act) and the directors, officers, agents or
employees of such controlling Persons, from and against all
Losses arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in such
Registration Statement or the related Prospectus or any
amendment or supplement thereto, or any preliminary
prospectus, or arising out of or based upon any omission or
alleged omission of a material fact required to be stated
therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such
untrue or alleged untrue statement or omission or alleged
omission is based upon any information so furnished in
<PAGE>
writing by or on behalf of such Holder to the Company
expressly for use in such Registration Statement or
Prospectus.
(c) Conduct of Indemnification Proceedings. If
any Person shall be entitled to indemnity hereunder (an
"indemnified party"), such indemnified party shall give
prompt notice to the party from which such indemnity is
sought (the "indemnifying party") of any claim or of the
commencement of any proceeding with respect to which such
indemnified party seeks indemnification or contribution
pursuant hereto; provided, however, that the delay or
failure to so notify the indemnifying party shall not
relieve the indemnifying party from any obligation or
liability except to the extent that the indemnifying party
has been prejudiced by such delay or failure. The
indemnifying party shall have the right, exercisable by
giving written notice to an indemnified party promptly after
the receipt of written notice from such indemnified party of
such claim or proceeding, to assume, at the indemnifying
party's expense, the defense of any such claim or
proceeding, with counsel reasonably satisfactory to such
indemnified party; provided, however, that (i) an
indemnified party shall have the right to employ separate
counsel in any such claim or proceeding and to participate
in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such indemnified party
unless: (1) the indemnifying party agrees to pay such fees
and expenses; (2) the indemnifying party fails promptly to
assume the defense of such claim or proceeding or fails to
employ counsel reasonably satisfactory to such indemnified
party; or (3) the named parties to any proceeding (including
impleaded parties) include both such indemnified party and
the indemnifying party, and such indemnified party shall
have been advised by counsel that there may be one or more
legal defenses available to it that are inconsistent with
those available to the indemnifying party or that a conflict
of interest is likely to exist among such indemnified party
and any other indemnified parties (in which case the
indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party);
and (ii) subject to clause (3) above, the indemnifying party
shall not, in connection with any one such claim or
proceeding or separate but substantially similar or related
claims or proceedings in the same jurisdiction, arising out
of the same general allegations or circumstances, be liable
for the fees and expenses of more than one firm of attorneys
(together with appropriate local counsel) at any time for
<PAGE>
all of the indemnified parties, or for fees and expenses
that are not reasonable. Whether or not such defense is
assumed by the indemnifying party, such indemnified party
shall not be subject to any liability for any settlement
made without its consent. The indemnifying party shall not
consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such
indemnified party of a release, in form and substance
reasonably satisfactory to the indemnified party, from all
liability in respect of such claim or litigation for which
such indemnified party would be entitled to indemnification
hereunder.
(d) Contribution. If the indemnification
provided for in this Section 8 is unavailable to an
indemnified party in respect of any Losses (other than in
accordance with its terms), then each applicable
indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by
such indemnified party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault
of the indemnifying party, on the one hand, and such
indemnified party, on the other hand, in connection with the
actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other
hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue
statement of a material fact or omission or alleged omission
to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or
indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct
or prevent any such action, statement or omission. The
amount paid or payable by a party as a result of any Losses
shall be deemed to include any legal or other fees or
expenses incurred by such party in connection with any
investigation or proceeding. The parties hereto agree that
it would not be just and equitable if contribution pursuant
to this Section 8(d) were determined by pro rata allocation
or by any other method of allocation that does not take
account of the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the
provision of this Section 8(d), an indemnifying party that
is a Holder shall not be required to contribute any amount
which is in excess of the amount by which the total proceeds
<PAGE>
received by such Holder from the sale of the Registrable
Shares sold by such Holder (net of all underwriting
discounts and commissions) exceeds the amount of any damages
that such indemnifying party has otherwise been required to
pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such
fraudulent misrepresentation.
SECTION 9. Miscellaneous. (a) Termination. This
Agreement and the obligations of the Company and the Holders
hereunder (other than Section 8 hereof) shall terminate on
the first date on which no Registrable Shares remain
outstanding.
(b) Notices. All notices or communications
hereunder shall be in writing (including telecopy or similar
writing), addressed as follows:
To the Company:
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Telecopier: (212) 765-0899
Attention: General Counsel
With a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Telecopier: (212) 474-3700
Attention: Peter S. Wilson, Esq.
<PAGE>
To the Holders:
R.E. Turner, III
c/o Turner Broadcasting System, Inc.
One CNN Center
Box 105366
Atlanta, GA 30348-5366
Telecopier: (404) 827-3000
For Courier delivery
100 International Boulevard
Atlanta, GA 3030
Attention: General Counsel
With a copy to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071
Telecopier: (213) 687-5600
Attention: Thomas C. Janson, Jr., Esq.
Any such notice or communication shall be deemed
given (i) when made, if made by hand delivery, (ii) upon
transmission, if sent by confirmed telecopier, (iii) one
business day after being deposited with a next-day courier,
postage prepaid, or (iv) three business days after being
sent certified or registered mail, return receipt requested,
postage prepaid, in each case addressed as above (or to such
other address or to such other telecopier number as such
party may designate in writing from time to time).
(c) Separability. If any provision of this
Agreement shall be declared to be invalid or unenforceable,
in whole or in part, such invalidity or unenforceability
shall not affect the remaining provisions hereof which shall
remain in full force and effect.
(d) Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and
their respective heirs, devisees, legatees, legal
representatives, successors and assigns.
(e) Entire Agreement. This Agreement represents
the entire agreement of the parties and shall supersede any
and all previous contracts, arrangements or understandings
<PAGE>
between the parties hereto with respect to the subject
matter hereof.
(f) Amendments and Waivers. Except as otherwise
provided herein, the provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given,
unless the Company has obtained the written consent of
Holders of at least a majority in number of the Registrable
Shares then outstanding.
(g) Publicity. No public release or announcement
concerning the transactions contemplated hereby shall be
issued by any party without the prior consent of the other
parties, except to the extent that such party is advised by
counsel that such release or announcement is necessary or
advisable under applicable law or the rules or regulations
of any securities exchange, in which case the party required
to make the release or announcement shall to the extent
practicable provide the other party with an opportunity to
review and comment on such release or announcement in
advance of its issuance.
(h) Expenses. Whether or not the transactions
contemplated hereby are consummated, except as otherwise
provided herein, all costs and expenses incurred in
connection with the execution of this Agreement shall be
paid by the party incurring such costs or expenses, except
as otherwise set forth herein.
(i) Interpretation. The headings contained in
this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this
Agreement.
(j) Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be one and
the same agreement, and shall become effective when
counterparts have been signed by each of the parties and
delivered to each other party.
(k) Governing Law. This Agreement shall be
construed, interpreted, and governed in accordance with the
internal laws of New York.
(l) Calculation of Time Periods. Except as
otherwise indicated, all periods of time referred to herein
shall include all Saturdays, Sundays and holidays; provided,
<PAGE>
however, that if the date to perform the act or give any
notice with respect to this Agreement shall fall on a day
other than a Business Day, such act or notice may be timely
performed or given if performed or given on the next
succeeding Business Day.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the date and year first
written above.
TIME WARNER INC.,
by
________________________
Name:
Title:
__________________________
R.E. Turner, III
TURNER OUTDOOR, INC.,
by
________________________
Name:
Title:
TURNER FOUNDATION, INC.
by
_________________________
Name:
Title:
ROBERT E. TURNER CHARITABLE
REMAINDER UNITRUST NO. 2,
by
_________________________
Name:
Title:
<PAGE>
EXHIBIT C-1
INVESTORS' AGREEMENT (NO. 1) dated as of
, among TIME WARNER INC., a
Delaware corporation ("Parent"), and the
other parties signatory hereto (each an
"Investor").
This Agreement is entered into pursuant to
Section 6.02(f) of the Agreement and Plan of Merger (as
amended from time to time, the "Merger Agreement") dated as
of September 22, 1995, among Parent, Time Warner Acquisition
Corp. ("Sub"), a Delaware corporation and a wholly owned
subsidiary of Parent, and Turner Broadcasting System, Inc.
(the "Company"), a Georgia corporation. In the Merger (as
defined in the Merger Agreement), subject to certain
exceptions, (a) each share of Class A Common Stock, par
value $.0625 per share, of the Company and each share of
Class B Common Stock, par value $.0625 per share, of the
Company will be converted into the right to receive 0.75
shares of Common Stock, par value $1.00 per share, of Parent
("Parent Common Stock") and (b) each share of Class C
Convertible Preferred Stock, par value $.125 per share, of
the Company will be converted into the right to receive 4.80
shares of Parent Common Stock. As a condition to the
obligations of Parent and Sub to effect the Merger, Parent
and Sub have required that each initial Investor enter into
this Agreement.
Accordingly, it is hereby agreed as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Capitalized terms
used but not defined herein shall have the meanings assigned
to such terms in the Merger Agreement. For purposes of this
Agreement, the following terms shall have the following
meanings:
"Affiliate" and "Associate", when used with
reference to any person, shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the Exchange Act, as
in effect on the date of this Agreement. Neither Parent nor
any of its subsidiaries or controlled Affiliates, on the one
hand, nor the Principal Investor, on the other hand, shall
be an "Affiliate" or an "Associate" of the other. The
<PAGE>
Turner Foundation, Inc. and the Robert E. Turner Charitable
Foundation Unitrust No. 2 shall be deemed not to be
Affiliate or Associates of any Investor.
A person shall be deemed the "beneficial owner"
of, and shall be deemed to "beneficially own", and shall be
deemed to have "beneficial ownership" of:
(i) any securities that such person or any of such
person's Affiliates or Associates is deemed to
"beneficially own" within the meaning of Rule 13d-3
under the Exchange Act, as in effect on the date of
this Agreement; and
(ii) any securities (the "underlying securities")
that such person or any of such person's Affiliates or
Associates has the right to acquire (whether such right
is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or
understanding (written or oral), or upon the exercise
of conversion rights, exchange rights, rights, warrants
or options, or otherwise (it being understood that such
person shall also be deemed to be the beneficial owner
of the securities convertible into or exchangeable for
the underlying securities).
"Board" shall mean the board of directors of
Parent.
"Charitable Transferee" shall mean any charitable
organization described in Section 501(c)(3) of the Code.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as in effect on the date in question, unless
otherwise specifically provided.
"Investor" shall mean each person that executes
this Agreement in such capacity and each successor, assign
and other person that pursuant to the terms hereof is
required to become a party hereto as an Investor.
"Investors' Agreement (No. 2)" shall mean an
Investors' Agreement (No. 2), substantially in the form of
Exhibit C-2 to the Merger Agreement.
"permitted transferee" of any natural person shall
mean (i) in the case of the death of such person, such
person's executors, administrators, testamentary trustees,
<PAGE>
heirs, devisees and legatees and (ii) such person's current
or future spouse, parents, siblings or descendants or such
parents', siblings' or descendants' spouses (the "Family
Members").
"person" shall have the meaning given such term in
the Merger Agreement.
"Principal Investor" shall mean R.E. Turner, III.
"Qualified Stockholder" shall mean any Charitable
Transferee or Qualified Trust from time to time bound as an
"Investor" under an Investors' Agreement (No. 2).
"Qualified Trust" shall mean any trust described
in Section 664 of the Code of which the Principal Investor
and members of his family are income beneficiaries.
"Voting Power", when used with reference to any
class or series of securities of Parent, or any classes or
series of securities of Parent entitled to vote together as
a single class or series, shall mean the power of such class
or series (or such classes or series) to vote for the
election of directors. For purposes of determining the
percentage of Voting Power of any class or series (or
classes or series) beneficially owned by any person, any
securities not outstanding which are subject to conversion
rights, exchange rights, rights, warrants, options or
similar securities held by such person shall be deemed to be
outstanding for the purpose of computing the percentage of
outstanding securities of the class or series (or classes or
series) beneficially owned by such person, but shall not be
deemed to be outstanding for the purpose of computing the
percentage of the class or series (or classes or series)
beneficially owned by any other person.
"Voting Securities", when used with reference to
any person, shall mean any securities of such person having
Voting Power or any securities convertible into or
exchangeable for any securities having Voting Power.
<PAGE>
ARTICLE II
Securities Act; Legend
SECTION 2.01. Transfers of Parent Common Stock.
None of the Investors may offer for sale or sell any shares
of Parent Common Stock acquired pursuant to the Merger
Agreement, or any interest therein, except (a) pursuant to a
registration of such shares under the Securities Act and
applicable state securities laws or (b) in a transaction as
to which such Investor has delivered an opinion of counsel
or other evidence reasonably satisfactory to Parent, to the
effect that such transaction is exempt from, or not subject
to, the registration requirements of, the Securities Act and
applicable state securities laws.
SECTION 2.02. Legends on Certificates. Each
Investor shall hold in certificate form all shares of Parent
Common Stock owned by such Investor. Each certificate for
shares of Parent Common Stock issued to or beneficially
owned by a person that is subject to the provisions of this
Agreement shall bear the following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO AN INVESTORS' AGREEMENT (NO. 1) DATED AS OF
(THE "INVESTORS' AGREEMENT"), AMONG
THE CORPORATION, THE ORIGINAL HOLDER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE AND CERTAIN OTHER
STOCKHOLDERS OF THE CORPORATION. A COPY OF THE
INVESTORS' AGREEMENT MAY BE OBTAINED FROM THE
CORPORATION FREE OF CHARGE. BY ITS ACCEPTANCE HEREOF,
THE HOLDER OF THIS CERTIFICATE AGREES TO COMPLY IN ALL
RESPECTS WITH THE REQUIREMENTS OF THE INVESTORS'
AGREEMENT.
ARTICLE III
Covenants of the Parties
SECTION 3.01. Standstill. None of the Investors
may (and each Investor shall cause its Affiliates and
Associates that it controls, and use reasonable efforts to
cause its other Affiliates and Associates, not to), without
the prior written consent of the Board:
(a) publicly propose that any Investor or
Qualified Stockholder or any Affiliate or Associate of any
<PAGE>
Investor or Qualified Stockholder enter into, directly or
indirectly, any merger or other business combination
involving Parent or propose to purchase, directly or
indirectly, a material portion of the assets of Parent or
any Material Parent Subsidiary, or make any such proposal
privately if it would reasonably be expected to require
Parent to make a public announcement regarding such
proposal;
(b) make, or in any way participate in, directly
or indirectly, any "solicitation" of "proxies" (as such
terms are used in Regulation 14A promulgated under the
Exchange Act) to vote or consent with respect to any Voting
Securities of Parent or become a "participant" in any
"election contest" (as such terms are defined or used in
Rule 14a-11 under the Exchange Act) with respect to Parent;
(c) form, join or participate in or encourage the
formation of a "group" (within the meaning of
Section 13(d)(3) of the Exchange Act) with respect to any
Voting Securities of Parent, other than a group consisting
solely of Investors and Qualified Stockholders;
(d) deposit any Voting Securities of Parent into a
voting trust or subject any such Voting Securities to any
arrangement or agreement with respect to the voting thereof,
other than any such trust, arrangement or agreement (i) the
only parties to, or beneficiaries of, which are Investors
and Qualified Stockholders and (ii) the terms of which do
not require or expressly permit any party thereto to act in
a manner inconsistent with this Agreement;
(e) initiate, propose or otherwise solicit
stockholders of Parent for the approval of one or more
stockholder proposals with respect to Parent as described in
Rule 14a-8 under the Exchange Act, or induce or attempt to
induce any other person to initiate any stockholder proposal
with respect to Parent;
(f) except in accordance with Section 3.04, seek
election to or seek to place a representative on the Board
or seek the removal of any member of the Board;
(g) call or seek to have called any meeting of the
stockholders of Parent;
(h) (A) solicit, seek to effect, negotiate with or
provide non-public information to any other person with
<PAGE>
respect to, (B) make any statement or proposal, whether
written or oral, to the Board or any director or officer of
Parent with respect to, or (C) otherwise make any public
announcement or proposal whatsoever with respect to any form
of business combination transaction (with any person)
involving a change of control of Parent or the acquisition
of a substantial portion of the equity securities or assets
of Parent or any Material Parent Subsidiary, including a
merger, consolidation, tender offer, exchange offer or
liquidation of Parent's assets, or any restructuring,
recapitalization or similar transaction with respect to
Parent or any Material Parent Subsidiary; provided, however,
that the foregoing shall not (x) apply to any discussion
between or among the Investors and the Qualified
Stockholders or any of their respective officers, employees,
agents or representatives or (y) in the case of clause (B)
above, be interpreted to limit the ability of any Investor
or Qualified Stockholder, or any designee of any Investor or
Qualified Stockholder, on the Board to make any such
statement or proposal or to discuss any such proposal with
any officer or director of or advisor to Parent or advisor
to the Board unless, in either case, it would reasonably be
expected to require Parent to make a public announcement
regarding such discussion, statement or proposal;
(i) otherwise act, alone or in concert with
others, to seek to control or influence the management or
policies of Parent (except for (A) voting as a holder of
Voting Securities in accordance with the terms of such
Voting Securities and (B) actions taken as a director or
officer of Parent);
(j) publicly disclose any intention, plan or
arrangement inconsistent with the foregoing, or make any
such disclosure privately if it would reasonably be expected
to require Parent to make a public announcement regarding
such intention, plan or arrangement; or
(k) advise, assist (including by knowingly
providing or arranging financing for that purpose) or
knowingly encourage any other person in connection with any
of the foregoing.
SECTION 3.02. Transfer Restrictions. None of the
Investors may, without the prior written consent of Parent,
sell, transfer, pledge, encumber or otherwise dispose of, or
agree to sell, transfer, pledge, encumber or otherwise
dispose of, any Voting Securities of Parent, or any rights
<PAGE>
or options to acquire such Voting Securities, except in a
transaction complying with any of the following clauses:
(a) to the underwriters in connection with an
underwritten public offering of shares of such securities on
a firm commitment basis registered under the Securities Act,
pursuant to which the sale of such securities is in a manner
that is intended to effect a broad distribution;
(b) to any wholly owned subsidiary of such
Investor; provided, however, that such transferee becomes a
party to this Agreement as an Investor;
(c) to any person in a transaction that complies
with the volume and manner of sale provisions contained in
Rules 144(e) and Rule 144(f) as in effect on the date hereof
under the Securities Act (whether or not Rule 144 is in
effect on the date of such transaction); provided, however,
that dispositions pursuant to this clause (c) may not be
made during any period that a person has made and not
withdrawn or terminated a tender or exchange offer for
Voting Securities of Parent or announced its intention to
make such an offer;
(d) to any person (including any pledgee of shares
of Voting Securities), other than a person that such
Investor, or any of its Affiliates or Associates, knows or,
after commercially reasonable inquiry should have known,
beneficially owns or, after giving effect to such sale, will
beneficially own more than 5% of the aggregate Voting Power
of the Voting Securities of Parent;
(e) in the case of a natural person, to any
permitted transferee of such person; provided, however, that
such transferee becomes a party to this Agreement as an
Investor;
(f) in a bona fide pledge of shares of Voting
Securities of Parent to a financial institution to secure
borrowings as permitted by applicable laws, rules and
regulations; provided, however, that (i) such financial
institution agrees to be bound by this Section 3.02 and
(ii) the borrowings so secured are full recourse obligations
of the pledgor and are entered into substantially
simultaneously with such pledge;
<PAGE>
(g) upon five Business Days' prior notice to
Parent, pursuant to the terms of any tender or exchange
offer for Voting Securities of Parent made pursuant to the
applicable provisions of the Exchange Act or pursuant to any
merger or consolidation of Parent (but in the case of any
tender or exchange offer, only so long as each Investor and
Qualified Stockholder is at the time in substantial
compliance with the provisions of Sections 3.01 and 3.05(c),
whether or not bound by such provisions, and such tender or
exchange offer is not materially related to any past
noncompliance with such provisions by any Investor or
Qualified Stockholder (whether or not bound by such
provisions);
(h) a gift to a Charitable Transferee or Qualified
Trust; provided, however, that (i) at the time of such gift,
the Principal Investor and his Family Members constitute a
sufficient number of the directors or trustees, as
appropriate, of such Charitable Transferee or Qualified
Trust to permit approval of matters by such Charitable
Transferee or Qualified Trust without the approval of any
other director or trustee of such Charitable Transferee or
Qualified Trust and (ii) such Charitable Transferee or
Qualified Trust is or simultaneously becomes a Qualified
Stockholder (and Parent agrees upon request to enter into an
Investors' Agreement (No. 2) with such Charitable Transferee
or Qualified Trust);
(i) to TCI Turner Preferred, Inc. ("TCITP") or its
designee in accordance with the Stockholders' Agreement
dated as of the same date as this Agreement among TCITP,
Parent and certain stockholders of Parent; or
(j) to Parent.
SECTION 3.03. Additional Agreements. None of the
Investors may (and each Investor shall cause its Affiliates
and Associates that it controls, and use reasonable efforts
to cause its other Affiliates and Associates, not to)
(a) publicly request Parent or any of its agents, directly
or indirectly, to amend or waive any provision of this
Agreement or (b) knowingly take any action that would
reasonably be expected to require Parent to make a public
announcement regarding the possibility of a transaction with
such Investor.
SECTION 3.04. Board Representation. (a) Upon
execution of this Agreement, Parent shall use reasonable
<PAGE>
efforts to cause to be elected to the Board two persons
designated by the Principal Investor who are Eligible
Persons. "Eligible Person" means (i) the Principal Investor
and (ii) any other individual (A) who is reasonably
acceptable to the Board, (B) whose election to the Board
would not, in the opinion of counsel for Parent, violate or
be in conflict with, or result in any material limitation on
the ownership or operation of any business or assets of
Parent or any of its subsidiaries under, any statute, law,
ordinance, regulation, rule, judgment, decree or order of
any Governmental Entity and (C) who has agreed in writing
with Parent to comply with Section 3.01 and to resign as a
director of Parent if requested to do so pursuant to this
Section 3.04. With respect to each meeting of stockholders
of Parent at which any designee of the Principal Investor on
the Board comes up for reelection, Parent shall use
reasonable efforts to cause such designee (or another
Eligible Person designated by the Principal Investor) to be
included in the list of candidates recommended by the Board
for election to the Board. Upon the death, resignation or
removal of any designee of the Principal Investor on the
Board, Parent shall use reasonable efforts to have the
vacancy thereby created filled with an Eligible Person
designated by the Principal Investor.
(b) Upon the Investors and (subject to
Section 3.06) the Qualified Stockholders, taken together,
ceasing to own of record and beneficially at least 50% of
the Voting Securities of Parent owned by the Investors and
the Qualified Stockholders, taken together, immediately
following the Merger (appropriately adjusted for stock
dividends, stock splits, reverse stock splits and similar
transactions), the number of persons that the Principal
Investor shall be entitled to designate for election to the
Board shall be reduced to one. If at such time there are
two designees of the Principal Investor on the Board, the
Principal Investor shall specify which of such designees
shall continue to be entitled to the benefits of
Section 3.04(a), and the other designee shall thereafter
cease to constitute a designee of the Principal Investor for
the purposes of Section 3.04(a) (and, if requested by
Parent, such other designee shall resign from the Board).
(c) Upon (i) (A) the Investors and (subject to
Section 3.06) the Qualified Stockholders, taken together,
ceasing to own of record and beneficially at least one-third
of the Voting Securities of Parent owned by the Investors
and the Qualified Stockholders, taken together, immediately
<PAGE>
following the Merger (appropriately adjusted for stock
dividends, stock splits, reverse stock splits and similar
transactions) and (B) the Principal Investor ceasing to be
an employee of Parent or any Parent Subsidiary, (ii) the
death or incapacity of the Principal Investor, (iii) the
wilful violation in any material respect of this Article by
any Investor or (iv) five business days' prior written
notice of termination from the Principal Investor, the
number of persons that the Principal Investor shall be
entitled to designate for election to the Board shall be
reduced to zero. At such time, if requested by Parent, each
designee of the Principal Investor shall resign from the
Board.
(d) The right of the Principal Investor to
membership on the Board, as set forth in his employment
agreement with Parent to be entered into at the Effective
Time of the Merger, is not in addition to his rights under
this Section 3.04.
(e) For the purposes of the calculations required
by the first sentence of Section 3.04(b) and by
Section 3.04(c)(i)(A), any Exempt Stock (as defined below)
shall be excluded from the calculation of each of (i) the
Voting Securities of Parent owned of record and beneficially
by the Qualified Stockholders on the date of such
calculation and (ii) the Voting Securities of Parent owned
by the Qualified Stockholders immediately following the
Merger. "Exempt Stock" shall mean (A) any Parent Common
Stock acquired by any Qualified Stockholder pursuant to the
Merger in exchange for Company Capital Stock owned by such
Qualified Stockholder on the date of the Merger Agreement
and (B) any Parent Common Stock acquired after the Effective
Time of the Merger by any Qualified Stockholder other than
pursuant to Section 3.02(h).
SECTION 3.05. Additional Covenants. (a) None of
the Investors shall permit any other Investor that is at any
time after the date hereof a wholly owned subsidiary of such
Investor to cease to be a wholly owned subsidiary of such
Investor for so long as such other Investor owns any Voting
Securities of Parent.
(b) None of the Investors shall permit any of its
subsidiaries, other than any such subsidiaries that are
Investors, to hold, directly or indirectly, any shares of
Voting Securities of Parent.
<PAGE>
(c) Each Investor shall use reasonable efforts to
cause each of its officers, employees, agents and
representatives not to take any action that would be
prohibited under Section 3.01 if taken by such Investor.
SECTION 3.06. Certain Special Provisions. If at
any time the Principal Investor and his Family Members cease
to constitute a sufficient number of the directors or
trustees, as applicable, of any Qualified Stockholder to
permit approval of matters by such Qualified Stockholder
without the approval of any other director or trustee of
such Qualified Stockholder, the Voting Securities of Parent
held by such Qualified Stockholder shall thereafter be
deemed not to be owned of record and beneficially by such
Qualified Stockholder (or any Investor) for the purposes of
Sections 3.04(b) and 3.04(c). The Principal Investor shall
be liable to Parent under this Agreement for any actions
taken by any Qualified Stockholder that would have been
violations of Section 3.01, 3.03 or 3.05(c) had such
Qualified Stockholder been bound by such Sections.
ARTICLE IV
Miscellaneous
SECTION 4.01. Termination. (a) The covenants and
agreements of the Investors in Sections 3.01, 3.03 and
3.05(c) shall terminate, except with respect to liability
for prior breaches thereof, upon the last to occur of
(i) the Principal Investor ceasing to be an employee of
Parent or any Parent Subsidiary, (ii) the Principal Investor
ceasing to be a member of the Board, and (iii) the Principal
Investor ceasing pursuant to Section 3.04(c) to be entitled
to designate any Eligible Persons for election to the Board.
(b) The covenants and agreements of the Investors
in Section 3.02 shall terminate, except with respect to
liability for prior breaches thereof, on the fifth
anniversary of the Effective Time of the Merger.
(c) The covenants and agreements of Parent in
Section 3.04 shall terminate, except with respect to
liability for prior breaches thereof, upon the Principal
Investor ceasing pursuant to Section 3.04(c) to be entitled
to designate any Eligible Persons for election to the Board.
<PAGE>
(d) Without limiting Sections 4.01(a) and
4.01(b), the covenants and agreements of the Investors in
Article III shall terminate, except with respect to
liability for prior breaches thereof, if the Board does not
(i) on the date of execution of this Agreement, elect to the
Board the two Eligible Persons designated by the Principal
Investor, (ii) recommend for election by the stockholders of
Parent to the Board any Eligible Person designated by the
Principal Investor in accordance with Section 3.04 or
(iii) reasonably promptly after request from the Principal
Investor, fill any vacancy created on the Board upon the
death, resignation or removal of any designee of the
Principal Investor on the Board with another Eligible Person
designated by the Principal Investor, in each case if the
effect of such failure is that the Principal Investor does
not have the representation on the Board to which he is
entitled under Section 3.04.
(e) The other covenants and agreements set forth
in this Agreement shall terminate, except with respect to
liability for prior breaches thereof, upon the later of
(i) the termination of Section 3.01 pursuant to
Section 4.01(a) or 4.01(d) and (ii) the termination of
Section 3.02 pursuant to Section 4.01(b) or 4.01(d).
SECTION 4.02. Entire Agreement; Assignment. This
Agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings,
both written and oral, among the parties with respect to the
subject matter hereof and (ii) except as provided in
Section 3.02, shall not be assigned by operation of law or
otherwise without the prior written consent of the other
parties. Any person who agrees pursuant to Section 3.02 to
become a party to this Agreement as an Investor shall
thereupon become, and have all the rights and obligations
of, an Investor hereunder. Any attempted assignment or
transfer in violation of this Section 4.02 shall be void and
of no effect. Subject to the foregoing, the provisions of
this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective estates,
heirs, successors and assigns.
SECTION 4.03. Amendments; Waivers. This
Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto. The
waiver by any party of a breach of any provision of this
<PAGE>
Agreement shall not operate, or be construed, as a waiver of
any subsequent breach thereof.
SECTION 4.04. Notices. All notices, requests,
claims, demands and other communications hereunder shall be
in writing and shall be deemed given (i) on the first
Business Day following the date received, if delivered
personally or by telecopy (with telephonic confirmation of
receipt by the addressee), (ii) on the Business Day
following timely deposit with an overnight courier service,
if sent by overnight courier specifying next day delivery
and (iii) on the first Business Day that is at least five
days following deposit in the mails, if sent by first class
mail, to the parties at the following addresses (or at such
other address for a party as shall be specified by like
notice):
If to any Investor, to:
R.E. Turner, III
c/o Turner Broadcasting System, Inc.
One CNN Center
Box 105366
Atlanta, GA 30348-5366
For Courier delivery:
100 International Boulevard
Atlanta, GA 30303
Facsimile: (404) 827-3000
Attention: General Counsel
If to Parent, to:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Facsimile: (212) 956-7281
Attention: General Counsel
<PAGE>
with a copy (which shall not constitute
notice) to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile: (212) 474-3700
Attention: Peter S. Wilson, Esq.
SECTION 4.05. Governing Law. This Agreement
shall be governed by and construed in accordance with the
internal laws of the State of Delaware.
SECTION 4.06. Specific Performance. Each party
recognizes and acknowledges that a breach by it of
Article III would cause the other parties to sustain damages
for which they would not have an adequate remedy at law for
money damages, and therefore each party agrees that in the
event of any such breach any of the other parties shall be
entitled to seek the remedy of specific performance of such
Article III and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at
law or in equity.
SECTION 4.07. Counterparts; Effectiveness. This
Agreement may be executed in two or more counterparts, all
of which shall be considered one and the same agreement, and
shall become effective when two or more counterparts have
been signed by each of the parties and delivered to the
other parties.
SECTION 4.08. Descriptive Headings. The
descriptive headings used herein are inserted for
convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this
Agreement.
SECTION 4.09. Severability. Whenever possible,
each provision or portion of any provision of this Agreement
shall be interpreted in such manner as to be effective but
if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or portion of any
provision, and this Agreement will be reformed, construed
and enforced as if such invalid, illegal or unenforceable
provision or portion of any provision had never been
contained herein. The parties shall endeavor in good faith
negotiations to replace any invalid, illegal or
<PAGE>
unenforceable provision with a valid provision the effects
of which come as close as possible to those of such invalid,
illegal or unenforceable provision.
SECTION 4.10. Attorneys' Fees. If any action at
law or in equity is necessary to enforce or interpret the
terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such
party may be entitled.
IN WITNESS WHEREOF, Parent and each Investor have
caused this Agreement to be duly executed as of the day and
year first above written.
TIME WARNER INC.,
by
________________________
Name:
Title:
____________________________
R.E. Turner, III
TURNER OUTDOOR, INC.,
by
________________________
Name:
Title:
<PAGE>
EXHIBIT C-2
INVESTORS' AGREEMENT (NO. 2) dated as of
, among TIME WARNER INC., a Delaware corporation
("Parent"), and the other parties signatory hereto
(each an "Investor").
This Agreement is entered into pursuant to
Section 6.02(f) of the Agreement and Plan of Merger (as
amended from time to time, the "Merger Agreement") dated as
of September 22, 1995, among Parent, Time Warner Acquisition
Corp. ("Sub"), a Delaware corporation and a wholly owned
subsidiary of Parent, and Turner Broadcasting System, Inc.
(the "Company"), a Georgia corporation. In the Merger (as
defined in the Merger Agreement), subject to certain
exceptions, (a) each share of Class A Common Stock, par
value $.0625 per share, of the Company and each share of
Class B Common Stock, par value $.0625 per share, of the
Company will be converted into the right to receive 0.75
shares of Common Stock, par value $1.00 per share, of Parent
("Parent Common Stock") and (b) each share of Class C
Convertible Preferred Stock, par value $.125 per share, of
the Company will be converted into the right to receive 4.80
shares of Parent Common Stock.
Accordingly, it is hereby agreed as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Capitalized terms
used but not defined herein shall have the meanings assigned
to such terms in the Merger Agreement. For purposes of this
Agreement, the following terms shall have the following
meanings:
"Affiliate" and "Associate", when used with
reference to any person, shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the Exchange Act, as
in effect on the date of this Agreement.
<PAGE>
A person shall be deemed the "beneficial owner"
of, and shall be deemed to "beneficially own", and shall be
deemed to have "beneficial ownership" of:
(i) any securities that such person or any of such
person's Affiliates or Associates is deemed to
"beneficially own" within the meaning of Rule 13d-3
under the Exchange Act, as in effect on the date of
this Agreement; and
(ii) any securities (the "underlying securities")
that such person or any of such person's Affiliates or
Associates has the right to acquire (whether such right
is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or
understanding (written or oral), or upon the exercise
of conversion rights, exchange rights, rights, warrants
or options, or otherwise (it being understood that such
person shall also be deemed to be the beneficial owner
of the securities convertible into or exchangeable for
the underlying securities).
"Covered Parent Common Stock" shall mean (i) any
shares of Parent Common Stock transferred to an Investor
pursuant to Section 3.02(h) of the Investors' Agreement
(No. 1) dated as of [ ] among Parent and certain
stockholders of Parent and (ii) any shares of Parent Common
Stock acquired by any Investor pursuant to the Merger
otherwise than in exchange for Company Common Stock owned by
such Investor on the date of the Merger Agreement.
"Exchange Act" shall mean the Securities Exchange
Act of 1934, as in effect on the date in question, unless
otherwise specifically provided.
"Investor" shall mean each person that executes
this Agreement in such capacity.
"person" shall have the meaning given such term in
the Merger Agreement.
"Voting Power", when used with reference to any
class or series of securities of Parent, or any classes or
series of securities of Parent entitled to vote together as
a single class or series, shall mean the power of such class
or series (or such classes or series) to vote for the
election of directors. For purposes of determining the
percentage of Voting Power of any class or series (or
<PAGE>
classes or series) beneficially owned by any person, any
securities not outstanding which are subject to conversion
rights, exchange rights, rights, warrants, options or
similar securities held by such person shall be deemed to be
outstanding for the purpose of computing the percentage of
outstanding securities of the class or series (or classes or
series) beneficially owned by such person, but shall not be
deemed to be outstanding for the purpose of computing the
percentage of the class or series (or classes or series)
beneficially owned by any other person.
"Voting Securities", when used with reference to
any person, shall mean any securities of such person having
Voting Power or any securities convertible into or
exchangeable for any securities having Voting Power.
ARTICLE II
Securities Act; Legend
SECTION 2.01. Transfers of Parent Common Stock.
None of the Investors may offer for sale or sell any shares
of Parent Common Stock acquired pursuant to the Merger
Agreement, or any interest therein, except (a) pursuant to a
registration of such shares under the Securities Act and
applicable state securities laws or (b) in a transaction as
to which such Investor has delivered an opinion of counsel
or other evidence reasonably satisfactory to Parent, to the
effect that such transaction is exempt from, or not subject
to, the registration requirements of, the Securities Act and
applicable state securities laws.
SECTION 2.02. Legends on Certificates. Each
Investor shall hold in certificate form all shares of
Covered Parent Common Stock owned by such Investor. Each
certificate for shares of Covered Parent Common Stock issued
to or beneficially owned by a person that is subject to the
provisions of this Agreement shall bear the following
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO AN INVESTORS' AGREEMENT (NO. 2) DATED AS OF
, (THE "INVESTORS' AGREEMENT"),
BETWEEN THE CORPORATION AND THE HOLDER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE. A COPY OF
THE INVESTORS' AGREEMENT MAY BE OBTAINED FROM THE
CORPORATION FREE OF CHARGE. BY ITS ACCEPTANCE HEREOF,
<PAGE>
THE HOLDER OF THIS CERTIFICATE AGREES TO COMPLY IN ALL
RESPECTS WITH THE REQUIREMENTS OF THE INVESTORS'
AGREEMENT.
ARTICLE III
Covenants of the Investors
SECTION 3.01. Transfer Restrictions. None of the
Investors may, without the prior written consent of Parent,
sell, transfer, pledge, encumber or otherwise dispose of, or
agree to sell, transfer, pledge, encumber or otherwise
dispose of, any Covered Parent Common Stock, or any rights
or options to acquire Covered Parent Common Stock, except in
a transaction complying with any of the following clauses:
(a) to the underwriters in connection with an
underwritten public offering of shares of such securities on
a firm commitment basis registered under the Securities Act,
pursuant to which the sale of such securities is in a manner
that is intended to effect a broad distribution;
(b) to any person in a transaction that complies
with the volume and manner of sale provisions contained in
Rules 144(e) and Rule 144(f) as in effect on the date hereof
under the Securities Act (whether or not Rule 144 is in
effect on the date of such transaction); provided, however,
that dispositions pursuant to this clause (b) may not be
made during any period that a person has made and not
withdrawn or terminated a tender or exchange offer for
Voting Securities of Parent or announced its intention to
make such an offer;
(c) to any person (including any pledgee of
Covered Parent Common Stock), other than a person that such
Investor, or any of its Affiliates, Associates, directors or
trustees, knows or, after commercially reasonable inquiry
should have known, beneficially owns or, after giving effect
to such sale, will beneficially own more than 5% of the
aggregate Voting Power of the Voting Securities of Parent;
(d) in a bona fide pledge of shares of Covered
Parent Common Stock to a financial institution to secure
borrowings as permitted by applicable laws, rules and
regulations; provided, however, that (i) such financial
institution agrees to be bound by this Section 3.01 and
<PAGE>
(ii) the borrowings so secured are full recourse obligations
of the pledgor and are entered into substantially
simultaneously with such pledge;
(e) upon five Business Days' prior notice to
Parent, pursuant to the terms of any tender or exchange
offer for Covered Parent Common Stock made pursuant to the
applicable provisions of the Exchange Act or pursuant to any
merger or consolidation of Parent;
(f) to TCI Turner Preferred, Inc. ("TCITP") or its
designee in accordance with the Stockholders' Agreement
dated as of the date of this Agreement among TCITP, Parent
and certain stockholders of Parent; or
(g) to Parent.
ARTICLE IV
Miscellaneous
SECTION 4.01. Termination. The covenants and
agreements of the Investors in Section 3.01 shall terminate,
except with respect to liability for prior breaches thereof,
on the earlier of (a) the fifth anniversary of the Effective
Time of the Merger and (b) the date on which the covenants
and agreements contained in Section 3.02 of the Investors'
Agreement (No. 1) dated as of [ ], among Parent and
certain of its other stockholders, have been terminated.
SECTION 4.02. Entire Agreement; Assignment. This
Agreement (i) constitutes the entire agreement between the
parties with respect to the subject matter hereof and
supersedes all other prior agreements and understandings,
both written and oral, among the parties with respect to the
subject matter hereof and (ii) shall not be assigned by
operation of law or otherwise without the prior written
consent of the other parties. Any attempted assignment or
transfer in violation of this Section 4.02 shall be void and
of no effect. Subject to the foregoing, the provisions of
this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective
successors and assigns.
SECTION 4.03. Amendments; Waivers. This
Agreement may not be modified, amended, altered or
supplemented, except upon the execution and delivery of a
<PAGE>
written agreement executed by the parties hereto. The
waiver by any party of a breach of any provision of this
Agreement shall not operate, or be construed, as a waiver of
any subsequent breach thereof.
SECTION 4.04. Notices. All notices, requests,
claims, demands and other communications hereunder shall be
in writing and shall be deemed given (i) on the first
Business Day following the date received, if delivered
personally or by telecopy (with telephonic confirmation of
receipt by the addressee), (ii) on the Business Day
following timely deposit with an overnight courier service,
if sent by overnight courier specifying next day delivery
and (iii) on the first Business Day that is at least five
days following deposit in the mails, if sent by first class
mail, to the parties at the following addresses (or at such
other address for a party as shall be specified by like
notice):
If to any Investor, to:
R.E. Turner, III
c/o Turner Broadcasting System, Inc.
One CNN Center
Box 105366
For courier delivery:
100 International Boulevard
Atlanta, GA 30303
Facsimile: (404) 827-3000
Attention: General Counsel
If to Parent, to:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Facsimile: (212) 956-7281
Attention: General Counsel
<PAGE>
with a copy (which shall not constitute notice)
to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile: (212) 474-3700
Attention: Peter S. Wilson, Esq.
SECTION 4.05. Governing Law. This Agreement
shall be governed by and construed in accordance with the
internal laws of the State of Delaware.
SECTION 4.06. Specific Performance. Each party
recognizes and acknowledges that a breach by it of
Article III would cause the other parties to sustain damages
for which they would not have an adequate remedy at law for
money damages, and therefore each party agrees that in the
event of any such breach any of the other parties shall be
entitled to seek the remedy of specific performance of such
Article III and injunctive and other equitable relief in
addition to any other remedy to which it may be entitled, at
law or in equity.
SECTION 4.07. Counterparts; Effectiveness. This
Agreement may be executed in two or more counterparts, all
of which shall be considered one and the same agreement, and
shall become effective when two or more counterparts have
been signed by each of the parties and delivered to the
other parties.
SECTION 4.08. Descriptive Headings. The
descriptive headings used herein are inserted for
convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this
Agreement.
SECTION 4.09. Severability. Whenever possible,
each provision or portion of any provision of this Agreement
shall be interpreted in such manner as to be effective but
if any provision or portion of any provision of this
Agreement is held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or portion of any
provision, and this Agreement will be reformed, construed
and enforced as if such invalid, illegal or unenforceable
<PAGE>
provision or portion of any provision had never been
contained herein. The parties shall endeavor in good faith
negotiations to replace any invalid, illegal or
unenforceable provision with a valid provision the effects
of which come as close as possible to those of such invalid,
illegal or unenforceable provision.
SECTION 4.10. Attorneys' Fees. If any action at
law or in equity is necessary to enforce or interpret the
terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary
disbursements, in addition to any other relief to which such
party may be entitled.
IN WITNESS WHEREOF, Parent and each Investor have
caused this Agreement to be duly executed as of the day and
year first above written.
TIME WARNER INC.,
by
________________________
Name:
Title:
INITIAL INVESTORS:
TURNER FOUNDATION, INC.
by
________________________
Name:
Title:
ROBERT E. TURNER CHARITABLE
FOUNDATION UNITRUST NO. 2,
by
________________________
Name:
Title:
Exhibit 10(a)
SHAREHOLDERS' AGREEMENT dated as of
September 22, 1995, among Time Warner Inc., a
Delaware corporation ("Parent"), R. E.
Turner, III, an individual (the "Principal
Shareholder"), and certain associates and
affiliates of the Principal Shareholder
listed on the signature pages hereto
(collectively with the Principal Shareholder,
the "Shareholders").
Parent, Time Warner Acquisition Corp. ("Sub"), a
Delaware corporation and a wholly owned subsidiary of Parent, and
Turner Broadcasting System, Inc. (the "Company"), a Georgia
corporation, are entering into an Agreement and Plan of Merger
dated as of the date hereof (as amended from time to time
pursuant to Section 1.01 thereof, the "Merger Agreement"). The
Merger (as defined in the Merger Agreement) is subject to certain
conditions, including the approval of the Merger and the approval
and adoption of the Merger Agreement: by the holders of a
majority of the outstanding shares of Class C Convertible
Preferred Stock, par value $.125 per share, of the Company (the
"Class C Preferred Stock"), voting as a separate class; by the
holders of a majority of the voting power of the outstanding
shares of Class A Common Stock, par value $.0625 per share, of
the Company (the "Class A Common Stock"), and Class B Common
Stock, par value $.0625 per share, of the Company (the "Class B
Common Stock"; together with the Class A Common Stock, the
"Common Stock"), voting as a single class; and by the holders of
a majority of the voting power of the outstanding shares of
Common Stock and Class C Preferred Stock, voting as a single
class.
Each Shareholder is the record and beneficial owner of
the shares of Class A Common Stock and Class B Common Stock (such
shares of Class A Common Stock and Class B Common Stock, together
with any shares of capital stock of the Company acquired by such
Shareholder after the date hereof and during the term of this
Agreement, being collectively referred to herein as the
"Shareholder Shares" of such Shareholder) set forth opposite such
Shareholder's name on Schedule I hereto.
As a condition to the willingness of Parent to enter
into the Merger Agreement, and as an inducement to it to do so,
each Shareholder has agreed for the benefit of Parent as set
forth in this Agreement.
<PAGE>
NOW, THEREFORE, in consideration of the
representations, warranties, covenants and agreements contained
in this Agreement, the parties hereby agree as follows:
ARTICLE I
Definitions
SECTION 1.01. Definitions. Capitalized terms used but not
defined herein, and the terms "affiliate", "person" and "subsidiary",
shall have the meanings assigned to such terms in the Merger
Agreement.
ARTICLE II
Covenants of the Shareholders
SECTION 2.01. Agreement to Vote. At any meeting of the
shareholders of the Company held prior to the Termination Date
(as defined in Section 5.04), however called, and at every
adjournment thereof prior to the Termination Date, or in
connection with any written consent of the shareholders of the
Company given prior to the Termination Date, each Shareholder
shall, and the Principal Shareholder shall cause any Shareholder
that is his controlled affiliate to, vote the Shareholder Shares
(and each class thereof) of such Shareholder that such
Shareholder is entitled to vote, (a) in favor of the approval of
the Merger and each of the other transactions contemplated by the
Merger Agreement and in favor of the approval and adoption of the
Merger Agreement, and any actions required in furtherance hereof
and thereof; (b) against any action or agreement that would,
directly or indirectly, result in a breach in any material
respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger
Agreement; and (c) against any takeover proposal (as defined in
the Merger Agreement) or any other action or agreement that,
directly or indirectly, is inconsistent with or that is
reasonably likely, directly or indirectly, to impede, interfere
with, delay, postpone or attempt to discourage the Merger or any
other transaction contemplated by the Merger Agreement. None of
the Shareholders shall, nor shall the Principal Shareholder
permit any Shareholder that is a
<PAGE>
controlled affiliate of the Principal Shareholder to, enter into
any agreement or understanding with any person prior to the
Termination Date, directly or indirectly, to vote, grant any
proxy or give instructions with respect to the voting of the
Shareholder Shares of such Shareholder in any manner inconsistent
with the preceding sentence.
SECTION 2.02. Proxies and Voting Agreements. (a) Each
Shareholder hereby revokes any and all previous proxies granted with
respect to matters set forth in Section 2.01 for the Shareholder
Shares of such Shareholder.
(b) Prior to the Termination Date, none of the
Shareholders shall, nor shall the Principal Shareholder permit
any Shareholder that is a controlled affiliate of the Principal
Shareholder to, directly or indirectly, except as contemplated
hereby, grant any proxies or powers of attorney with respect to
matters set forth in Section 2.01, deposit any of the Shareholder
Shares owned by such Shareholder into a voting trust or enter
into a voting agreement with respect to any of the Shareholder
Shares, in each case with respect to such matters.
SECTION 2.03. Transfer of Shareholder Shares by any
Shareholder. Prior to the Termination Date, none of the
Shareholders shall, nor shall the Principal Shareholder permit
any Shareholder that is a controlled affiliate of the Principal
Shareholder to, (a) place any Encumbrance (as defined in the
Shareholders' Agreement (as defined in Section 3.01)) on any
Shareholder Shares of such Shareholder, other than pursuant to
this Agreement, or (b) make any Disposition (as defined in the
Shareholders' Agreement) of any Shareholder Shares owned by such
Shareholder, other than a disposition by operation of law in
connection with the Merger, if, in the case of this clause (b),
the effect thereof would be to create a Prohibited Effect (as
defined in the Shareholders' Agreement), determined as if The
Turner Foundation, Inc., and the Robert E. Turner Charitable
Remainder Unitrust No. 2 (collectively, the "Specified Holders")
did not own any shares of Company Capital Stock.
SECTION 2.04. Dissenters' Rights. None of the
Shareholders shall, nor shall the Principal Shareholder permit
any Shareholder that is a controlled affiliate of the Principal
Shareholder to, give notice pursuant to Section 1321 of the
Georgia BCC of such Shareholder's intent to demand payment for
any shares of Company Capital Stock,
<PAGE>
or take any other action to exercise dissenters' rights under
Article 13 of the Georgia BCC, if the Merger is effectuated.
ARTICLE III
Representations, Warranties and
Additional Covenants of the Shareholders
Each Shareholder represents, warrants and covenants to
Parent, as to himself or itself and, in the case of the Principal
Shareholder, as to each other Shareholder, that:
SECTION 3.01. Ownership. Such Shareholder is as of the
date hereof the beneficial and record owner of the Shareholder
Shares set forth opposite the name of such Shareholder on
Schedule I hereto, such Shareholder has the sole right to vote
such Shareholder Shares and there are no restrictions on rights
of disposition or other Liens pertaining to such Shareholder
Shares other than the Shareholders' Agreement dated as of June 3,
1987, as amended by the First Amendment dated as of April 15,
1988, among the Company, the Principal Shareholder and the
original holders of the Series C Preferred Stock (the
"Shareholders' Agreement"). None of the Shareholder Shares of
such Shareholder is subject to any voting trust or other
agreement, arrangement or restriction with respect to the voting
of such Shareholder Shares, other than the Shareholders'
Agreement.
SECTION 3.02. Authority and Non-Contravention. The
Principal Shareholder has the right, power and authority, and
each other Shareholder has the corporate power and authority (in
the case of a Shareholder that is a corporation), and in each
case such Shareholder has been duly authorized by all necessary
action (including consultation, approval or other action by or
with any other person), to execute, deliver and perform this
Agreement and consummate the transactions contemplated hereby.
Such actions by such Shareholder (a) require no action by or in
respect of, or filing with, any Governmental Entity with respect
to such Shareholder, other than any required filings under
Section 13 of the Exchange Act, and (b) do not and will not
contravene or constitute a default under, or give rise to a right
of termination, cancellation or acceleration of any right or
obligation of such Shareholder or to a loss
<PAGE>
of any benefit of such Shareholder under, any provision of
applicable law or regulation or any agreement (including the
Shareholders' Agreement), judgment, injunction, order, decree or
other instrument binding on such Shareholder or result in the
imposition of any Lien on any asset of such Shareholder or any of
its affiliates (other than as provided in this Agreement with
respect to Shareholder Shares).
SECTION 3.03. Binding Effect. This Agreement has been
duly executed and delivered by such Shareholder and is the valid
and binding agreement of such Shareholder, enforceable against
such Shareholder in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium
or other similar laws relating to creditors' rights generally and
by equitable principles to which the remedies of specific
performance and injunctive and similar forms of relief are
subject.
SECTION 3.04. Total Shares. The Shareholder Shares
listed in Schedule I hereto opposite the name of such Shareholder
and, in the case of the Principal Shareholder, opposite the name
of the other Shareholders listed therein, are the only shares of
capital stock of the Company owned beneficially or of record as
of the date hereof by such Shareholder, and such Shareholder does
not have any option to purchase or right to subscribe for or
otherwise acquire any securities of the Company and has no other
interest in or voting rights with respect to any other securities
of the Company.
SECTION 3.05. Finder's Fees. No investment banker,
broker or finder is entitled to a commission or fee from the
Company, Parent or Sub in respect of this Agreement based upon
any arrangement or agreement made by or on behalf of such
Shareholder, except as otherwise provided in the Merger Agreement
or the Company Disclosure Letter.
SECTION 3.06. Reasonable Efforts. (a) Prior to the
Termination Date, the Principal Shareholder shall use reasonable
efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with Parent in
doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable,
the Merger and the other transactions contemplated by the Merger
Agreement and this Agreement, including (i) the obtaining of all
necessary actions or nonactions, waivers, consents and approvals
from Governmental Entities and the making of all necessary
<PAGE>
registrations and filings (including any necessary filings under
the HSR Act relating to the acquisition of the Company or
relating to the acquisition of Parent Common Stock in the Merger
and all other necessary filings with Governmental Entities, if
any) and the taking of all reasonable steps as may be necessary
to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (ii) the obtaining of all
necessary consents, approvals or waivers from third parties,
(iii) the defending of any lawsuits or other legal proceedings,
whether judicial or administrative, challenging the Merger
Agreement or this Agreement or the consummation of any of the
transactions contemplated by the Merger Agreement and this
Agreement, including seeking to have any stay or temporary
restraining order entered by any court or other Governmental
Entity vacated or reversed, and (iv) the execution and delivery
of any additional instruments necessary to consummate the
transactions contemplated by, and to fully carry out the purposes
of, the Merger Agreement and this Agreement.
(b) On or prior to the Closing Date, each Shareholder
shall execute and deliver to Parent the Investors' Agreement in
the form attached as Exhibit C-1 to the Merger Agreement.
SECTION 3.07. Certain Payments. (a) If the Merger
Agreement is terminated pursuant to Section 7.01(e) of the Merger
Agreement, each Shareholder shall pay to Parent an amount equal
to all profit (determined in accordance with Section 3.07(b)) of
such Shareholder from the consummation of any takeover proposal
(i) that is consummated within 18 months of such termination or
(ii) with respect to which a definitive agreement is executed
within 18 months of such termination. Such payment shall be made
by each Shareholder (A) within three business days of the receipt
of any cash consideration under such takeover proposal, in an
amount equal to the lesser of the profit of such Shareholder and
the aggregate consideration under such takeover proposal paid to
such Shareholder in cash; (B) within three business days after
receipt by such Shareholder of cash proceeds from the sale of any
non-cash consideration in the form of securities received on
consummation of such takeover proposal, but in any event within
30 days of such consummation, the lesser of the remaining profit
of such Shareholder and such cash proceeds; provided, however,
that if such securities have not been sold by such Shareholder at
the end of such 30-day period, such Shareholder shall transfer to
Parent (x) an amount of
<PAGE>
such securities with a fair market value on the date of transfer
equal to the remaining profit of such Shareholder (or if the fair
market value of all such unsold securities is less than such
remaining profit, all such unsold securities) or (y) at the
option of such Shareholder, cash in an amount equal to such
remaining profit; and (C) within three business days after
receipt by such Shareholder of cash proceeds from the sale of any
other non-cash consideration received on consummation of such
takeover proposal, but in any event within six months of such
consummation, cash in an amount equal to the remaining profit of
such Shareholder. Each Shareholder shall use all reasonable
efforts to sell, within 30 days of such consummation, a portion
of such other non-cash consideration sufficient to provide cash
with which to pay over any profit of such Shareholder that
remains unpaid following the application of amounts under clauses
(A) and (B) above.
(b) The profit of any Shareholder, for the purposes of
Section 3.07(a), from any takeover proposal shall equal (i) the
aggregate consideration received by such Shareholder pursuant to
such takeover proposal, valuing any non-cash consideration
(including any residual interest in the Company) at its fair
market value on the date of such consummation, plus (ii) the fair
market value, on the date of disposition, of all Shareholder
Shares of such Shareholder disposed of after the termination of
the Merger Agreement and prior to the date of such consummation
less (iii) the aggregate consideration that would have been
issuable or payable to such Shareholder in the Merger, valuing
each share of Parent Common Stock at the average of the closing
price per share of Parent Common Stock, as reported on the NYSE
Composite Tape, for the five trading days ending on the trading
day prior to the first public announcement by the Company of its
intention to terminate the Merger Agreement to pursue a takeover
proposal, if the Merger had been consummated on the date of such
public announcement. For the purpose of determining the "profit"
of the Principal Shareholder, there shall be included an amount
equal to the profit that would have been realized by the
Specified Holders had they both been Shareholders and been
subject to this Section 3.07.
(c) Any payment of profit under this Section 3.07 shall
(i) if paid in cash, be paid by wire transfer of same day funds
to an account designated by Parent and (ii) if paid through the
transfer of securities, be paid through the
<PAGE>
delivery of such securities, suitably endorsed for transfer, to
Parent at its address set forth in Section 5.08.
ARTICLE IV
Representations, Warranties and Covenants
of Parent
Parent represents, warrants and covenants to each
Shareholder that:
SECTION 4.01. Corporate Power and Authority. Parent has
all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The
execution, delivery and performance by Parent of this Agreement
and the consummation by Parent of the transactions contemplated
hereby have been duly authorized by all necessary corporate
action on the part of Parent.
SECTION 4.02. Binding Effect. This Agreement has been
duly executed and delivered by Parent and is a valid and binding
agreement of Parent, enforceable against Parent in accordance
with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium or other similar laws relating
to creditors' rights generally and by equitable principles to
which the remedies of specific performance and injunctive and
similar forms of relief are subject.
SECTION 4.03. Investors' Agreement. On or prior to the
Closing Date, Parent shall execute and deliver to each
Shareholder the Investors' Agreement in the form attached as
Exhibit C-1 to the Merger Agreement.
ARTICLE V
Miscellaneous
SECTION 5.01. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring
such cost or expense.
SECTION 5.02. Further Assurances. From time to time, at the
request of Parent, in the case of a Shareholder, or at the request of
a Shareholder, in the case of
<PAGE>
Parent, and without further consideration, each party shall
execute and deliver or cause to be executed and delivered such
additional documents and instruments and take all such further
action as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
SECTION 5.03. Specific Performance. Each Shareholder
agrees that Parent would be irreparably damaged if for any reason
such Shareholder fails to perform any of such Shareholder's
obligations under this Agreement, and that Parent would not have
an adequate remedy at law for money damages in such event.
Accordingly, Parent shall be entitled to seek specific
performance and injunctive and other equitable relief to enforce
the performance of this Agreement by such Shareholder. This
provision is without prejudice to any other rights that Parent
may have against such Shareholder for any failure to perform its
obligations under this Agreement.
SECTION 5.04. Amendments; Termination. This Agreement
may not be modified, amended, altered or supplemented, except
upon the execution and delivery of a written agreement executed
by the parties hereto. The representations, warranties, covenants
and agreements set forth in Article II and Sections 3.01 and 3.06
and Article IV shall terminate, except with respect to liability
for prior breaches thereof, upon the termination of the Merger
Agreement in accordance with its terms or, if earlier, the
Effective Time of the Merger (the "Termination Date").
SECTION 5.05. Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective estates, heirs,
successors and permitted assigns; provided, however, that a party
may not assign, delegate or otherwise transfer any of such
party's rights or obligations under this Agreement without the
consent of the other parties hereto and any purported assignment,
delegation or transfer without such consent shall be null and
void.
SECTION 5.06. Certain Events. Each Shareholder agrees
that this Agreement and the obligations hereunder shall attach to
the Shareholder Shares beneficially owned by such Shareholder and
shall be binding upon any person to which legal or beneficial
ownership of such shares shall pass, whether by operation of law
or otherwise.
<PAGE>
SECTION 5.07. Entire Agreement. This Agreement
constitutes the entire agreement among the parties with respect
to the subject matter hereof and supersedes all other prior
agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof.
SECTION 5.08. Notices. All notices, requests, claims,
demands and other communications hereunder shall be in writing
and shall be deemed given (i) on the first business day following
the date received, if delivered personally or by telecopy (with
telephonic confirmation of receipt by the addressee), (ii) on the
business day following timely deposit with an overnight courier
service, if sent by overnight courier specifying next day
delivery and (iii) on the first business day that is at least
five days following deposit in the mails, if sent by first class
mail, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to Parent, to:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Facsimile: (212) 956-7281
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile: (212) 474-3700
Attention: Peter S. Wilson, Esq.
<PAGE>
If to any Shareholder, to:
R.E. Turner, III
c/o Turner Broadcasting System, Inc.
One CNN Center
Box 105366
Atlanta, GA 30348-5366
Facsimile: (404) 827-3000
For Courier delivery:
100 International Boulevard
Atlanta, GA 30303
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, CA 90071
Facsimile: (213) 687-5600
Attention: Thomas C. Janson, Jr., Esq.
SECTION 5.09. Governing Law. This Agreement shall be
governed by and construed in accordance with the internal laws of the
State of Delaware.
SECTION 5.10. Counterparts; Effectiveness. This
Agreement may be executed in two or more counterparts, all of
which shall be considered one and the same agreement, and, as to
any Shareholder, shall become effective when two or more
counterparts have been signed by each of such Shareholder and
Parent and delivered to the other.
SECTION 5.11. Descriptive Headings. The descriptive headings
used herein are inserted for convenience of reference only and are
not intended to be part of or to affect the meaning or interpretation
of this Agreement.
SECTION 5.12. Severability. Whenever possible, each
provision or portion of any provision of this Agreement will be
interpreted in such manner as to be effective and valid but if any
provision or portion of any provision of
<PAGE>
this Agreement is held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability will
not affect any other provision or portion of any provision, and
this Agreement will be reformed, construed and enforced as if
such invalid, illegal or unenforceable provision or portion of
any provision had never been contained herein. The parties shall
endeavor in good faith negotiations to replace any invalid,
illegal or unenforceable provision with a valid provision the
effects of which come as close as possible to those of such
invalid, illegal or unenforceable provision.
SECTION 5.13. Attorneys' Fees. If any action at law or
in equity is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and necessary disbursements, in addition
to any other relief to which such party may be entitled.
IN WITNESS WHEREOF, Parent and the Shareholders have
caused this Agreement to be duly executed as of the day and year
first above written.
TIME WARNER INC.,
by /s/ Gerald M. Levin
-------------------------
Name: Gerald M. Levin
Title: Chairman and CEO
/s/ R. E. Turner
-------------------------
R. E. Turner, III
TURNER OUTDOOR, INC.,
by /s/ R. E. Turner
--------------------------
Name: R. E. Turner, III
Title: Chairman, President
and CEO
<PAGE>
SCHEDULE I
to Shareholders' Agreement
Ownership of Shareholder Shares
(As of 9/20/95)
Class A Class B
Common Stock Common Stock
R.E. Turner 57,170,091 16,756,313 <F1>
Turner Outdoor, Inc. 559,962 559,962
<F1> Share amount does not include shares of Class B
Common Stock held by the Robert E. Turner Charitable
Remainder Unitrust No. 2.
EXHIBIT 10(b)
LMC AGREEMENT
AMONG
TIME WARNER INC.,
LIBERTY MEDIA CORPORATION,
and certain subsidiaries of
Liberty Media Corporation
Dated as of September 22, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions ..........................................2
SECTION 1.2 Terms Generally ......................................8
ARTICLE II
COVENANTS WITH RESPECT TO THE MERGER
SECTION 2.1 Agreement to Vote; Related Matters....................9
SECTION 2.2 Reasonable Efforts....................................1
SECTION 2.3 Agreement to Abandon..................................1
SECTION 2.4 Closing Deliveries....................................3
SECTION 2.5 Dissenters' Rights....................................3
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of LMC Parent and the
Shareholders..........................................3
SECTION 3.2 Representations and Warranties of TW Parent..........15
ARTICLE IV
CERTAIN POST-CLOSING COVENANTS
SECTION 4.1 Voting Trust; Share Exchange..........................8
SECTION 4.2 No Redemption.........................................9
SECTION 4.3 Certain Post-Closing Compensation Obligations........20
<PAGE>
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Expenses.............................................22
SECTION 5.2 Specific Performance.................................22
SECTION 5.3 Amendments; Termination..............................22
SECTION 5.4 Successors and Assigns...............................23
SECTION 5.5 Entire Agreement.....................................23
SECTION 5.6 Notices..............................................23
SECTION 5.7 Governing Law........................................24
SECTION 5.8 Counterparts; Effectiveness..........................24
SECTION 5.9 Descriptive Headings.................................24
SECTION 5.10 Severability.........................................25
SECTION 5.11 Attorney's Fees......................................25
EXHIBITS AND SCHEDULES
EXHIBIT A Terms of Non-Voting Exchange Preferred Stock
EXHIBIT B Form of First Refusal Agreement
EXHIBIT C Terms of Voting Exchange Preferred Stock
EXHIBIT D Form of Option Agreement
EXHIBIT E Program Service Agreement
EXHIBIT F Form of LMC Registration Rights Agreement
EXHIBIT G Form of Rights Amendment
EXHIBIT H Form of SportsSouth Agreement
EXHIBIT I Form of Sunshine Agreement
EXHIBIT J Form of Voting Trust Agreement
Schedule I Schedule of Shareholder Shares
Schedule 3.1 Litigation
<PAGE>
LMC AGREEMENT, dated as of September 22, 1995,
among TIME WARNER INC., a Delaware corporation ("TW
Parent"), LIBERTY MEDIA CORPORATION, a Delaware
corporation ("LMC Parent"), TCI TURNER PREFERRED, INC.,
a Colorado corporation ("LMC Sub") and certain other
subsidiaries of LMC Parent listed with LMC Sub under
"Subsidiaries of LMC Parent" on the signature pages
hereto (LMC Sub and such subsidiaries collectively, the
"Shareholders").
Concurrently with the execution and delivery of this Agreement,
TW Parent, Time Warner Acquisition Corp. ("Merger Sub"), a Delaware
corporation and a wholly owned subsidiary of TW Parent, and Turner
Broadcasting System, Inc. (the "Company"), a Georgia corporation, are
entering into an Agreement and Plan of Merger dated as of the date hereof
(the "Merger Agreement"). The Merger (as defined in the Merger Agreement)
is subject to certain conditions, including the approval of the Merger and
the approval and adoption of the Merger Agreement: by the holders of a
majority of the outstanding shares of Class C Convertible Preferred Stock,
par value $.125 per share, of the Company (the "Class C Preferred Stock"),
voting as a separate class; by the holders of a majority of the voting
power of the outstanding shares of Class A Common Stock, par value $.0625
per share, of the Company (the "Class A Common Stock"), and Class B Common
Stock, par value $.0625 per share, of the Company (the "Class B Common
Stock"; together with the Class A Common Stock, the "Common Stock"), voting
as a single class; and by the holders of a majority of the voting power of
the outstanding shares of Common Stock and Class C Preferred Stock, voting
as a single class. The term "Merger Agreement" as used herein includes the
Merger Agreement as the same may be amended pursuant to, and solely in the
respects contemplated by, Section 1.01 of the Merger Agreement as in effect
on the date hereof and, in the event the Merger Agreement is amended
pursuant to the last sentence of said Section, the term "TW Parent" shall,
if applicable, mean the newly formed corporation that will become the sole
stockholder of TW Parent and the Company.
Each Shareholder is the record and beneficial owner of the number
of shares of Class A Common Stock, Class B Common Stock and Class C
Preferred Stock, set forth opposite such Shareholder's name on Schedule I
hereto (such shares of Class A Common Stock, Class B Common Stock and Class
C Preferred Stock, together with any shares of capital stock of the Company
acquired by such Shareholder after the date hereof and prior to the
Effective Time of the Merger (as defined in the Merger Agreement) being
collectively referred to herein as the "Shareholder Shares").
<PAGE>
NOW, THEREFORE, the parties agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Capitalized terms used but not defined
herein and the term "subsidiary" shall have the meanings assigned to such
terms in the Merger Agreement. In this Agreement:
"Action" shall mean any of (i) the direct or indirect acquisition
(through purchase, exchange, merger or consolidation, exercise of rights or
otherwise) by TW Parent or any Controlled Affiliate of TW Parent of any
assets, securities or business; (ii) any merger or consolidation of TW
Parent with or into any other person; (iii) the commencement by TW Parent
or any of its Controlled Affiliates of any new business; (iv) any
investment by TW Parent or any Controlled Affiliate of TW Parent in any
other person; and (v) the sale or issuance by TW Parent or any Controlled
Affiliate of TW Parent of TW Securities to any person or the repurchase,
redemption or other acquisition by TW Parent or any Controlled Affiliate of
TW Parent of any TW Securities; excluding, in all of the cases, any of the
foregoing actions that TW Parent or any Controlled Affiliate of TW Parent
is required to take pursuant to, or that is expressly contemplated by, this
Agreement, the Merger Agreement, any Additional Agreement or any other
agreement expressly contemplated by this Agreement, the Merger Agreement or
any Additional Agreement.
"Additional Agreements" shall mean the Voting Trust, the
Registration Rights Agreement, the First Refusal Agreement, the Option
Agreement, the Program Service Agreement, the Rights Amendment, the TW/LMC
Letter Agreement, the SportSouth Agreement and the Sunshine Agreement.
"Adjustment Amount", with respect to the disposition of any TW
Securities as to which TW Parent is obligated to pay an Adjustment Amount
to a Liberty Party, means an amount equal to the Nominal Tax Amount divided
by the Gross-up Factor. For purposes of this definition, the "Nominal Tax
Amount" means an amount equal to the product of (i) the gain or income
recognized for Federal income tax purposes from the disposition of such TW
Securities and (ii) the Blended Rate, and the "Gross-up Factor" is equal to
1 minus the Blended Rate.
"Affiliate", when used with respect to a specified person, means
any other person which directly or indirectly Controls, is under common
Control with or is Controlled by such first person. The term "affiliated"
(whether or not capitalized) shall have a
<PAGE>
correlative meaning. For purposes of this Agreement, no Liberty Party shall
be deemed to be an Affiliate of TW Parent or any of its subsidiaries and
neither TW Parent nor any of its Affiliates shall be deemed to be an
Affiliate of any Liberty Party. Prior to the Effective Time of the Merger,
neither TW Parent nor any of its Affiliates nor TCI, LMC Parent or any of
their respective Affiliates shall be deemed to be an Affiliate of the
Company or any of its subsidiaries.
"Blended Rate", as to any Liberty Party for any relevant taxable
year, means the tax rate that is the highest combined corporate Federal,
state and local marginal capital gain rate (determined by taking into
account any deduction for net capital gain) applicable to gain or income
upon dispositions of TW Securities beneficially owned by such Liberty Party
during such taxable year as contemplated by Section 4.3, provided, however,
that if the tax liability of the Liberty Party (or of the consolidated
group of which such Liberty Party is a member for tax purposes) with
respect to such income or gain for such taxable year is not determined
under Section 1201 of the Internal Revenue Code of 1986, as amended (or any
successor Section), such tax rate shall be the highest combined regular
corporate Federal, state and local ordinary income tax rate applicable to
such Liberty Party (or such consolidated group) for such taxable year. Such
tax rate shall be determined taking into account such Liberty Party's (or
its consolidated group's) relevant state and local apportionment factors
with respect to such gain or income, the deductibility of state and local
taxes for Federal income tax purposes (and the deductibility of taxes
imposed by any taxing jurisdiction for purposes of computing the tax
liability to any other taxing jurisdiction), the dividends received
deduction (where such gain or income is eligible for such deduction) and
any other relevant considerations.
"Change in Control Event" shall mean any of the following events:
(i) any person becoming an Acquiring Person (as defined in the Rights
Agreement as in effect on the date hereof as if amended in accordance with
the Rights Amendment), including any person that would otherwise be
excluded from the definition of Acquiring Person in the Rights Agreement by
virtue of the acquisition of shares pursuant to a Qualifying Offer (as
defined in the Rights Agreement as in effect on the date hereof, as if
amended in accordance with the Rights Amendment) and regardless of whether
the Rights Agreement continues to be in effect or is so amended, or (ii) TW
Parent's entering into any agreement (other than the Merger Agreement or
any amendment thereto) providing for any merger or consolidation of TW
Parent into any other person, a binding share exchange, or a merger of TW
Parent with any other person in which the shares of capital stock of TW
Parent are exchanged for or converted into the right to receive anything
other than common stock, par value $1.00 per share, of TW Parent.
"Communications Laws" shall mean the Communications Act of 1934
(as amended and supplemented from time to time and any successor statute or
statutes regulating
<PAGE>
tele-communications companies) and the rules and regulations (and
interpretations thereof and determinations with respect thereto)
promulgated, issued or adopted from time to time by the FCC. All references
herein to the Communications Laws shall include as of any relevant date in
question the Communications Laws as then in effect (including any
Communications Law or part thereof the effectiveness of which is then
stayed) and as then formally proposed by the FCC by publication in the
Federal Register or promulgated with a delayed effective date.
"Company Letter" shall mean the letter dated the date hereof from
the Company to TW Parent and LMC Parent.
"Contract" shall mean any agreement, contract, commitment,
indenture, lease, license, instrument, note, bond, security, undertaking,
promise, covenant, or legally binding arrangement or understanding.
"Control", as to any person, shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of such person (whether through ownership of
securities, partnership interests or other ownership interests, by
contract, by participation or involvement in the board of directors,
management committee or other management structure of such person, or
otherwise). The terms "Controlled," "Controlling" and similar variations
shall have correlative meanings.
"Controlled Affiliate" of any specified person shall mean an
Affiliate of such specified person that is Controlled by such specified
person and is not Controlled by another person (other than another
Controlled Affiliate of the specified person), except that as used in the
definition of "Action" in this Section 1.1, the term "Controlled Affiliate"
shall include an Affiliate of the specified person that is also Controlled
by another person if the specified person has the power (by contract,
ownership of voting securities or otherwise) to cause such Affiliate to
refrain from taking the Action in question.
"Covered TW Securities" shall mean (i) (A) if the Merger is
consummated, the shares of TW Parent Common Stock beneficially owned by LMC
Parent immediately following the consummation of the Merger as a result of
the conversion in the Merger of the shares of Company Capital Stock
beneficially owned by LMC Parent on the date hereof, (B) if the
Contribution Election (as defined in the Elective Merger Agreement) is made
and LMC Sub makes the contribution of its assets described therein, the
shares of TW Parent Common Stock received by LMC Sub in connection with
such contribution, determined in accordance with the Elective Merger
Agreement assuming that the shares of Company Capital Stock so contributed
by LMC Sub or owned by the subsidiaries of LMC Sub so contributed did not
include any shares of Company Capital Stock not beneficially owned by LMC
Parent on the date hereof, or (C) if the Elective Merger is consummated,
the shares of
<PAGE>
TW Parent Common Stock received by LMC Parent or its designee in connection
with the consummation of the Elective Merger (determined in accordance with
the Elective Merger Agreement assuming that the shares of Company Capital
Stock owned by LMC Sub and its subsidiaries immediately prior to the
consummation of the Elective Merger did not include any shares of Company
Capital Stock not beneficially owned by LMC Parent on the date hereof),
plus, if the Merger is thereafter consummated, such additional number of
shares of TW Parent Common Stock, if any, issuable to LMC Parent or its
designee pursuant to Section 3.3 of the Elective Merger Agreement, (ii) the
shares of Voting Exchange Preferred Stock issued pursuant to the Option
Agreement and (iii) all shares of Voting Exchange Preferred Stock and
Non-Voting Exchange Preferred Stock for which the shares of TW Parent
Common Stock and Voting Exchange Preferred Stock referred to in clauses (i)
and (ii) above and this clause (iii) may be exchanged pursuant to Section
4.1, in each case as such shares may have been changed after issuance
thereof. The number of Covered TW Securities shall be appropriately
adjusted from time to time to take into account the occurrence of any stock
dividends, splits, reverse splits, combinations and the like.
"Elective Merger" shall mean the merger of LMC Sub into TW Parent
or, at the election of TW Parent, into a wholly owned subsidiary of TW
Parent contemplated by the Elective Merger Agreement.
"Elective Merger Agreement" shall mean that certain Agreement and
Plan of Merger, to be dated as of the date hereof, among TW Parent, LMC
Parent and LMC Sub, as contemplated by the TW/LMC Letter Agreement.
"FCC" shall mean the Federal Communications Commission and any
successor agency or other agency charged with the administration of any
Communications Law.
"First Refusal Agreement" shall mean that certain Stockholders
Agreement substantially in the form of Exhibit B hereto to be entered into
by TW Parent, the Shareholders and certain other shareholders of the
Company at or prior to the Closing.
"Horizontal Rule" shall mean the rule promulgated by the FCC that
is set forth at 47 C.F.R. 76.503 on the date hereof.
"Judgment" shall mean any order, judgment, writ, decree,
injunction, award or other determination, decision or ruling of any court,
any other Governmental Entity or any arbitrator.
"Liberty Party" shall mean LMC Parent and each Affiliate of LMC
Parent that is controlled by LMC Parent from time to time and, for so long
as LMC Parent is an
<PAGE>
Affiliate of TCI that is controlled by TCI, shall also mean TCI and each
Affiliate of TCI that is controlled by TCI.
"Non-Voting Exchange Preferred Stock" shall mean the Series J
Non-Voting Participating Convertible Preferred Stock of TW Parent, having
the terms set forth on Exhibit A hereto.
"Option Agreement" shall mean that certain Option Agreement
substantially in the form of Exhibit D hereto to be entered into by TW
Parent and LMC Parent at or prior to the Closing.
"Option Consideration" shall mean the shares of Voting Exchange
Preferred Stock to be issued and delivered by TW Parent pursuant to the
Option Agreement.
"person" shall have the meaning ascribed to such term in the
Merger Agreement and shall include any Governmental Entity.
"Prohibited Effect" shall mean the effect or consequence (in each
case either immediately or following any notice, demand, hearing,
proceeding, determination or other action by any Governmental Entity) (a)
of making the continued ownership by the Liberty Parties or any of them of
any TW Securities then owned by the Liberty Parties or any of them illegal
under any Specified Law or (b) of imposing or resulting in the imposition
under any Specified Law on the Liberty Parties or any of them of damages or
penalties by reason of or as a result of such continued ownership or (c) of
requiring the divestiture of, or resulting in the requirement to divest,
any of such TW Securities by any Liberty Party under any Specified Law, or
(d) of requiring, or resulting in the requirement, under any Specified Law
that any Liberty Party discontinue any business or divest of any business
or assets or that any license that such Liberty Party holds or is required
to hold under the Communications Laws be modified in any significant
respect or not be renewed as a result of such continued ownership.
"Program Service Agreement" shall mean the letter agreement,
dated September 15, 1995 between Satellite Services, Inc. ("SSI") and the
Company with respect to the provision of certain program services to SSI, a
copy of which is annexed as Exhibit E hereto.
"Registration Rights Agreement" shall mean the LMC Registration
Rights Agreement substantially in the form of Exhibit F hereto to be
entered into by TW Parent, LMC Parent and the Shareholders at or prior to
the Closing.
<PAGE>
"Requirement of Law", when used with respect to any person, shall
mean any law, statute, code, rule, regulation or Judgment, and any
interpretation of or determination with respect to any of the foregoing, of
any court or other Governmental Entity applicable to or binding upon such
person, or to which such person, any of its assets or any business
conducted by it is subject, whether now existing or at any time hereafter
enacted, promulgated, issued, entered or otherwise becoming effective.
"Restriction Period" shall mean the period of time commencing on
the date any Covered TW Securities are first issued and continuing until
the first time that the ownership or deemed ownership by the Liberty
Parties of the TW Parent Common Stock and other voting securities of TW
Parent then owned by the Liberty Parties (assuming conversion in full of
all Non-Voting Exchange Preferred Stock) would, unless the exercise by the
Liberty Parties of the rights of a holder of TW Common Stock or other
voting securities of TW Parent were restricted through a voting trust or
other arrangement satisfactory to the FCC, have a Prohibited Effect under
any Communications Law (determined on the assumption that the Horizontal
Rule, unless previously declared invalid by a final unappealable Judgment,
is in full force and effect). Notwithstanding the foregoing, (a) if the
Voting Trust is terminated prior to the expiration of the Restriction
Period and the TW Securities held by the trustee thereunder are released to
the Liberty Parties, then unless LMC Parent complies with its covenant
pursuant to Section 4.1 to deliver such TW Securities to TW Parent for
exchange for Non-Voting Exchange Preferred Stock within five business days
thereafter, the Restriction Period shall be deemed to terminate upon the
expiration of such five business day period, and (b) if any Non-Voting
Exchange Preferred Stock is converted into TW Parent Common Stock or into
Voting Exchange Preferred Stock by the Liberty Parties, then the
Restriction Period shall be deemed to terminate upon such conversion.
"Rights Amendment" shall mean those amendments described on
Exhibit G hereto to the terms of the Rights Agreement.
"Specified Law", when used with respect to the Liberty Parties,
shall mean (i) the Communications Laws, (ii) any United States federal law
or statute and any law or statute of any state of the United States or of
the District of Columbia and (iii) the rules and regulations (and
interpretations thereof or determinations with respect thereto) of any
agency charged with the administration of any Specified Law within the
meaning of clause (ii), applicable to or binding upon a Liberty Party or to
which a Liberty Party, any of its assets or any business conducted by it is
subject. All references herein to Specified Law shall include as of any
relevant date in question each Specified Law as then in effect (including
any Specified Law or part thereof the effectiveness of which is then
stayed) and as then formally proposed by the relevant Governmental Entity
or promulgated with a delayed effective date.
<PAGE>
"SportSouth Agreement" shall mean the Stock Purchase Agreement,
dated as of September 22, 1995, between the Company and LMC Southeast
Sports, Inc., and the Exhibits and Schedules thereto, a copy of which is
annexed as Exhibit H hereto.
"Sunshine Agreement" shall mean an agreement substantially in the
form of Exhibit I to be entered into by Time Warner Entertainment Company,
L.P. and Liberty Sports, Inc. at or prior to the Closing.
A "Takeover Proposal" shall be pending if any bona fide tender or
exchange offer for the TW Parent Common Stock shall have been commenced or
publicly announced and not terminated or withdrawn if consummation of such
offer in accordance with its terms would result in a Change in Control
Event. A tender offer will not be deemed to be bona fide that is not fully
financed unless it is made or guaranteed by a person whose senior debt
securities have investment grade ratings in one of the four highest
investment grade categories.
"Transactions" shall mean the Merger, the other transactions
contemplated by the Merger Agreement and the transactions contemplated by
this Agreement and the Additional Agreements.
"Turner Letter" shall mean that certain letter dated the date
hereof from R.E. Turner, III to TW Parent and LMC Parent.
"TW/LMC Letter Agreement" shall mean the letter dated September
22, 1995 from TW Parent to LMC Parent with respect to the negotiation,
execution and delivery of the Elective Merger Agreement.
"TW Parent Common Stock" shall mean the common stock, par value
$1.00 per share, of TW Parent as it exists on the date hereof and shall
include, where appropriate, in the case of any reclassification,
recapitalization or other change in the TW Parent Common Stock, or in the
case of a consolidation or merger of TW Parent with or into another person
affecting the TW Parent Common Stock, such capital stock or other
securities to which a holder of TW Parent Common Stock shall be entitled
upon the occurrence of such event.
"TW Securities" shall mean any and all shares of capital stock
and any and all other equity securities of TW Parent of any class, series,
issue or other type, whether now authorized or existing or hereafter
authorized or designated or otherwise created, including the TW Parent
Common Stock, the Voting Exchange Preferred Stock and the Non-Voting
Exchange Preferred Stock.
<PAGE>
"Voting Exchange Preferred Stock" shall mean the Series K Voting
Participating Convertible Preferred Stock of TW Parent, having the terms
set forth on Exhibit C hereto.
"Voting Trust" shall mean the Voting Trust Agreement
substantially in the form of Exhibit J hereto to be entered into by the
Shareholders and the Trustee named therein at the Closing, subject however
to Section 4.1.
SECTION 1.2 Terms Generally. The definitions of terms contained
in this Agreement shall apply equally to both the singular and plural forms
of the terms defined. Whenever the context may require, any pronoun shall
include the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The words "herein", "hereof" and "hereunder"
and words of similar import refer to this Agreement in its entirety and not
to any part hereof unless the context shall otherwise require. All
references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules
to, this Agreement unless the context shall otherwise require. Any
reference in this Agreement to a "day" or number of "days" (without the
explicit qualification of "business") shall be interpreted as a reference
to a calendar day or number of calendar days. If any action or notice is to
be taken or given on or by a particular calendar day, and such calendar day
is not a business day, then such action or notice shall be deferred until,
or may be taken or given on, the next business day.
ARTICLE II
COVENANTS WITH RESPECT TO THE MERGER
SECTION 2.1 Agreement to Vote; Related Matters.
(a) Subject to the terms and conditions of this Agreement, each
of the Shareholders agrees that such Shareholder shall attend, and LMC
Parent shall cause the Shareholders to attend, the Shareholders Meeting and
each adjournment thereof (provided in each case that the same is held prior
to the Termination Date), in person or by proxy, and shall vote all the
Shareholder Shares (and each class thereof) of such Shareholder that such
Shareholder is entitled to vote, in favor of the approval of the Merger and
each of the other transactions contemplated by the Merger Agreement and in
favor of the approval of the Merger Agreement (as the same may be amended
from time to time to the extent consistent with clause (i) of the following
sentence). The foregoing agreement of LMC Parent and each Shareholder is
subject to the satisfaction of the following conditions as of the time of
the Shareholders Meeting or any adjournment thereof at which the
Shareholder Approvals are
<PAGE>
sought: (i) the Merger Agreement shall be in full force and effect in the
form originally executed and shall not have been amended in any respect,
nor shall any right of the Company or obligation of TW Parent thereunder
(including any condition to the obligation of the Company to consummate the
Merger and the other transactions contemplated by the Merger Agreement)
have been waived, other than (x) amendments contemplated by Section 1.01 of
the Merger Agreement as in effect on the date hereof and (y) any amendments
and waivers that do not change the consideration to be received in exchange
for Company Capital Stock in the Merger or the exchange ratio therefor
(except to increase the number of shares of TW Parent Common Stock to be
issued in exchange for each share of Company Capital Stock or to provide
additional consideration to all stockholders of the Company that does not
affect the tax-free nature of the transaction) and that, when taken
together with all other amendments and waivers, do not have a material
adverse effect on the value of the consideration to be received in exchange
for Company Capital Stock in the Merger; (ii) R.E. Turner, III, as a
shareholder of the Company, shall have voted or shall simultaneously be
voting all his shares of Company Capital Stock in favor of the approval of
the Merger; (iii) if the Parent Stockholder Approvals shall have been voted
upon, the Parent Stockholder Approvals shall have been obtained; (iv) no
Judgment shall have been entered and be continuing that restrains or
enjoins (preliminarily, temporarily or permanently) LMC Parent or any
Shareholder from voting the Shareholder Shares; and (v) no Change of
Control Event shall have occurred.
(b) While this Agreement is in effect, each Shareholder agrees
that it shall not, and LMC Parent agrees to cause each Shareholder not to,
(i) grant or permit any of its subsidiaries to grant any proxy or other
right with respect to the voting of the Shareholder Shares of such
Shareholder or (ii) transfer or permit any of its subsidiaries to transfer
(including by operation of law in a merger) any of such shares to any
person (other than TW Parent) unless such transferee agrees to be bound
with respect to such transferred shares by this Section 2.1 to the same
extent as the transferor was so bound with respect to such transferred
shares and such transfer is made in compliance with all applicable
requirements of the Stock Agreements (as defined in Section 3.1(a)).
(c) To the extent that such consent or waiver is required by the
terms of any agreement (any "Relevant Agreement") to which the Company, TW
Parent, Time TBS Holdings, Inc. ("Time-TBS"), Tele-Communications, Inc.
("TCI"), TCI Communications, Inc. ("TCIC") and/or any of the Shareholders
is a party which relates to the ownership, voting or disposition of any
shares of the capital stock of the Company of any class or series
(including the Stock Agreements), each of TW Parent, Time-TBS, TCI, TCIC
and each Shareholder hereby consents to the execution, delivery and
performance of the Support Agreement, this Agreement, the Additional
Agreements, the Merger Agreement and the Elective Merger Agreement by all
parties (and intended parties) to each such agreement and waives any
inconsistent provision of any Relevant Agreement and any rights or remedies
which such party might otherwise have under any Relevant Agreement or by
virtue thereof
<PAGE>
by reason of such execution, delivery or performance. Each of TW Parent,
Time-TBS, TCI, TCIC, LMC Parent and each Shareholder confirms and agrees
that the execution, delivery and performance of this Agreement, the Merger
Agreement, the Additional Agreements, the Elective Merger Agreement and the
Support Agreement by all parties (and intended parties) thereto do not and
will not conflict with any provision of the Amended and Restated Articles
of Incorporation of the Company and do not and will not result in the loss
of any right, power, privilege, remedy or benefit which any holder of Class
C Preferred Stock otherwise has or might have or in the reduction,
qualification or other modification of any such right, power, privilege,
remedy or benefit; none of them shall make, join in, endorse or recognize
any claim to the contrary, and each of them shall vigorously oppose any
such claim made by any other person.
(d) Nothing contained in this Agreement shall create any
obligation on the part of LMC Parent, any Shareholder or any of LMC
Parent's Affiliates or restrict LMC Parent, any Shareholder or any of LMC
Parent's Affiliates in the exercise and enjoyment of full rights of
ownership of shares of capital stock of the Company, except as expressly
provided in this Section 2.1. Without limiting the generality of the
immediately preceding sentence, if the grant or effectiveness of any
consent or approval of any Governmental Entity required in connection with
the consummation of the Transactions shall be conditioned upon the
surrender or modification in any significant respect of any license,
franchise or permit held by TCI or any of its Affiliates, the divestiture
or rearrangement of the composition of any assets of TCI or any of its
Affiliates, the holding of any assets of any such person in a trust or
otherwise separate and apart from such person's other assets, limitations
on any such person's freedom of action with respect to future acquisitions
of assets or with respect to any existing or future business or activities
or its enjoyment of the full rights of ownership, possession and use of any
asset now owned or hereafter acquired by such person (including any
requirement not to receive shares of TW Parent Common Stock or Voting
Exchange Preferred Stock pursuant to the Merger Agreement, the Option
Agreement, the First Refusal Agreement or otherwise), or to agree to divest
of any such shares, or any requirement not to receive, or to agree to
divest, shares of Voting Exchange Preferred Stock or Non-Voting Exchange
Preferred Stock to be received pursuant to Section 4.1, any change in such
person's ownership or in any rights of or arrangements among its equity
holders or any other restrictions, limitations, requirements or conditions
which are or might be burdensome or adverse to any such person (other than,
in any case, the holding of TW Parent Common Stock and other TW Securities
in the voting trust created by, and in accordance with the terms of, the
Voting Trust, the required exchange of TW Parent Common Stock for Voting or
Non-Voting Exchange Preferred Stock, as contemplated by Section 4.1, or
compliance with this Agreement and the Additional Agreements), then nothing
in this Agreement (including Section 2.2) shall be construed as imposing
any obligation or duty on the part of TCI or any of its Affiliates to agree
to, approve or otherwise be bound by or satisfy any such condition. Nothing
contained in this Agreement shall require LMC Parent, any Shareholder
<PAGE>
or any of LMC Parent's other Affiliates to terminate or modify the terms of
any existing pledge of any shares of capital stock of the Company held by
LMC Parent, such Shareholder or Affiliate until the Closing.
SECTION 2.2 Reasonable Efforts. Prior to the Termination Date,
TCI and LMC Parent shall, and LMC Parent shall cause each Shareholder to,
and TW Parent shall, use reasonable efforts (a) to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and
cooperate with each other in good faith in doing, all things necessary to
obtain, in the most expeditious manner practicable, all actions or
nonactions, waivers, consents and approvals from Governmental Entities and
the making of all necessary registrations and filings with Governmental
Entities, in each case as may be necessary for the consummation of the
Transactions or to avoid any action or proceeding by any Governmental
Entity; and (b) to defend any lawsuits or other legal proceedings, whether
judicial or administrative, challenging the Merger Agreement, this
Agreement, any of the Additional Agreements or the consummation of the
Transactions, including seeking to have any stay or temporary restraining
order entered by any court or other Governmental Entity vacated or
reversed; provided, however, that nothing in this Section 2.2 shall require
any such person (i) to agree to, approve or otherwise be bound by or
satisfy any condition of any kind referred to in Section 2.1(d), (ii) to
agree to enter into or be bound by any settlement or judgment, or (iii)
subject to Section 4.1, to agree to any change to the terms of the Voting
Trust (including the identity of the Trustee), this Agreement or any of the
other Additional Agreements.
SECTION 2.3 Agreement to Abandon. Unless the Elective Merger has
theretofore occurred, TW Parent shall, upon the written request of LMC
Parent, terminate the Merger Agreement and abandon the Merger if:
(a) on the date fixed for the Closing (i) this Agreement, any
Additional Agreement or the Merger Agreement or consummation of the Merger
or any other Transaction shall be illegal, the consummation of the Merger
or any other Transaction would result in the imposition on the Liberty
Parties of damages or penalties (other than any such damages or penalties
arising out of a breach of this Agreement or any Additional Agreement by
LMC Parent or any of its Affiliates or for which TW Parent has agreed to
indemnify LMC Parent and its Affiliates) or there shall be pending any
suit, action or proceeding by any Governmental Entity in which the relief
sought would have any of the effects described in clause (i) and (ii) above
or in Section 2.1(d); or
(b) on the date fixed for the Closing, any consent or approval of
any Governmental Entity required in connection with the consummation of the
Transactions shall be subject to any condition of any kind referred to in
Section 2.1(d) and LMC Parent, any
<PAGE>
Shareholder or any other Affiliate of LMC Parent has (without the consent
of TCI or LMC Parent) become bound to comply with such condition; or
(c) at or prior to the Closing, the Rights Agreement, if still in
effect, shall have been amended in any material respect other than as
contemplated by this Agreement or shall not have been amended in accordance
with the Rights Amendment; or
(d) on or prior to the date fixed for the Closing, a Change in
Control Event shall have occurred or on the Closing Date a Takeover
Proposal shall be pending; or
(e) on the date fixed for the Closing, the condition set forth in
Section 6.03(a) of the Merger Agreement to the Company's obligations has
not been satisfied (determined without regard to the Company's willingness
to waive the failure of such condition); or
(f) any Action shall have been taken by TW Parent or any of its
Controlled Affiliates after the date hereof and prior to the Closing which
if taken after the Effective Time of the Merger would result in a
Prohibited Effect; or
(g) as of the date fixed for the Closing, (i) the representations
and warranties of TW Parent made herein and to be made in each Additional
Agreement to which TW Parent is intended to be a party shall not be true
and correct in all material respects as of such date with the same force
and effect as if then made, or (ii) any signatory hereto (other than TCI,
LMC Parent and the Shareholders) shall be in breach or default in any
material respect of any of its obligations hereunder, or (iii) any party
(other than TCI, LMC Parent or any of their respective Affiliates) to any
of the Additional Agreements then in effect shall be in breach or default
in any material respect of any of its obligations thereunder or any
intended party (other than TCI, LMC Parent or any of their respective
Affiliates) to any of the Additional Agreements shall have failed to
execute and deliver to the other parties thereto any such Additional
Agreement or any of the other closing deliveries contemplated by the Turner
Letter or the Company Letter shall not have been made; or
(h) as of the date fixed for the Closing, any required approval
by the stockholders of TW Parent of the issuance of the Option
Consideration or of this Agreement, any of the Additional Agreements or the
Transactions has not been obtained.
Notwithstanding anything in this Agreement or any other agreement to the
contrary, if TW Parent notifies LMC Parent within 15 days following the
date hereof that it is unwilling to execute and deliver the Option
Agreement, then TW Parent shall have no obligation to do so, provided that
in such event LMC Parent shall have the right to elect, within five
business days of such notice, not to consummate all (but not less than all)
of the transactions
<PAGE>
contemplated by this Agreement and the Additional Agreements, without any
further liability on the part of any party hereunder or thereunder, and in
such event TW Parent shall terminate the Merger Agreement and abandon the
Merger.
SECTION 2.4 Closing Deliveries. At the Closing, TW Parent, LMC
Parent and the Shareholders shall (and shall cause their respective
Affiliates which are named as parties in the Additional Agreements to)
execute and deliver to the other parties thereto each Additional Agreement
to which he or it is intended to be a party or, in the case of the Program
Service Agreement and any other Additional Agreement entered into prior to
the Closing, deliver an officer's certificate signed by its president or a
senior vice president confirming that such Additional Agreement is
effective in accordance with its terms and such party is in compliance with
its obligations thereunder in all material respects. Immediately following
the Effective Time of the Merger, TW Parent shall deliver to LMC Parent, or
to LMC Parent's designee (which shall be a wholly-owned subsidiary of LMC
Parent) the Option Consideration. LMC Parent and TW Parent shall each
deliver to the other at the Closing, an officer's certificate signed by its
president or a senior vice president to the effect that the representations
and warranties set forth in Section 3.1 and Section 3.2, respectively, are
true in all material respects on and as of the Closing Date with the same
force and effect as if then made.
SECTION 2.5 Dissenters' Rights. None of the Shareholders shall,
nor shall LMC Parent permit any Shareholder to, give notice pursuant to
Section 1321 of the Georgia BCC of such Shareholder's intent to demand
payment for any shares of Company Capital Stock, or take any other action
to exercise dissenters' rights under Article 13 of the Georgia BCC, if the
Merger is effectuated.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of LMC Parent and the
Shareholders. Each Shareholder represents and warrants to TW Parent, as to
itself, and LMC Parent represents and warrants to TW Parent as to itself
and as to each Shareholder, that (assuming that the consents, waivers and
agreements given and made by TW Parent and Time-TBS pursuant to Section
2.1(c) and by the Company in the Company Letter and by R.E. Turner, III in
the Turner Letter are valid and effective for the intended purposes):
(a) Each Shareholder is as of the date hereof the record and
beneficial owner of the Shareholder Shares set forth opposite the name of
such Shareholder on Schedule I hereto, such Shareholder has the right to
vote such Shareholder Shares in the manner
<PAGE>
provided in Section 2.1(a), and such Shareholder Shares constitute all of
the shares of capital stock of the Company owned of record or beneficially
by such Shareholder. The Shareholder Shares constitute all shares of
capital stock of the Company beneficially owned by TCI, other than the
Excluded Shares (as defined in Section 4.1). None of the Shareholder Shares
owned by any Shareholder is subject to any proxy, voting trust or other
agreement, arrangement or restriction with respect to the voting of such
Shareholder Shares which is inconsistent with the agreement of such
Shareholder pursuant to Section 2.1 hereof, other than the Stock
Agreements. The "Stock Agreements" means (a) the Investors Agreement dated
as of June 3, 1987, among the Company and the original holders of the Class
C Preferred Stock; (b) the Shareholders' Agreement dated as of June 3,
1987, as amended by the First Amendment dated as of April 15, 1988, among
the Company, R.E. Turner, III, and the original holders of the Class C
Preferred Stock; (c) the Voting Agreement dated as of June 3, 1987, among
certain holders of Class C Preferred Stock and (d) the Agreement dated as
of June 3, 1987 among TW Parent, certain of the Shareholders and certain
other holders of Class C Preferred Stock affiliated with TW Parent and/or
LMC Parent. To the knowledge of TCI and LMC Parent, none of TCI, LMC Parent
or any of their respective Affiliates are party to any agreement with the
Company, any of the Company's Affiliates, TW Parent or any of TW Parent's
Affiliates that would require the consent, waiver or approval of or by TCI,
LMC Parent or any of their respective Affiliates of the Merger or for the
consummation of any of the Transactions, or the execution, delivery or
performance of the Merger Agreement, this Agreement or the Additional
Agreements, other than the Stock Agreements.
(b) LMC Parent and the Shareholders each have the requisite
corporate power and authority to enter into this Agreement and each of the
Additional Agreements to which it is contemplated to be a party and to
consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and each of such Additional Agreements by
LMC Parent and the Shareholders and the consummation by them of the
Transactions have been duly authorized by all necessary corporate action.
This Agreement has been, and when delivered at or prior to the Closing of
the Merger each of such Additional Agreements will have been, duly executed
and delivered by LMC Parent, the Shareholders and the applicable Affiliates
of LMC Parent named as parties thereto (each, an "Applicable LMC
Affiliate") and constitutes, or in the case of such Additional Agreements
will as of the Closing constitute, a valid and binding obligation of each
such party, enforceable against each such party in accordance with its
terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies). The execution and delivery of this
Agreement and each of the Additional Agreements to which it is contemplated
to be a party by LMC Parent and each Applicable LMC Affiliate do not, and
the performance by them of their respective obligations hereunder and
thereunder and the consummation of the Transactions will not,
<PAGE>
conflict with, or result in any violation of or default (with or without
notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to the loss
of a material benefit under, or result in the creation of any Lien upon any
of the properties or assets of LMC Parent or any Applicable LMC Affiliate
under, (i) the Certificate of Incorporation or By-laws of LMC Parent or the
comparable organizational documents of any Applicable LMC Affiliate, (ii)
any Contract to which LMC Parent or any Applicable LMC Affiliate is a party
or by which any of them or their respective properties or assets are bound,
or (iii) subject to the governmental filings and other matters referred to
in Sections 3.01(d) and 3.02(d) of the Merger Agreement and in the
following sentence, any Requirement of Law applicable to LMC Parent or any
Applicable LMC Affiliate or their respective properties or assets, other
than the Horizontal Rule as to which no representation is being made, and
other than, in the case of clauses (ii) and (iii), any such conflicts,
violations, defaults, rights or Liens that individually or in the aggregate
would not (x) prevent LMC Parent or any Applicable LMC Affiliate from
performing its obligations under this Agreement or any applicable
Additional Agreement in any material respect or (y) prevent or delay in any
material respect the consummation of any of the Transactions. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required by or with respect to LMC Parent
or any Applicable LMC Affiliate in connection with the execution and
delivery of this Agreement or any applicable Additional Agreement by them
or the consummation by them of the Transactions, except for (i) filings
under the HSR Act, (ii) such filings with, and orders of, the FCC as may be
required under the Communications Laws in connection with the Transactions
and (iii) such other consents, approvals, orders, authorizations,
registrations, declarations and filings which, if not obtained or made,
would not prevent or delay in any material respect the consummation of any
of the Transactions or prevent LMC Parent or any Applicable LMC Affiliate
from performing its obligations under this Agreement or any applicable
Additional Agreement in any material respect.
(c) Except as disclosed on Schedule 3.1, as of the date of this
Agreement, there is no suit, action or proceeding (including any proceeding
by or before the FCC) pending or, to the knowledge of LMC Parent and TCI,
threatened against or affecting LMC Parent or any of its Affiliates (and
LMC Parent and TCI are not aware of any basis for any such suit, action or
proceeding) that, individually or in the aggregate, could reasonably be
expected to (i) prevent LMC Parent or any Applicable LMC Affiliate from
performing its obligations under this Agreement or any applicable
Additional Agreement in any material respect or (ii) prevent or delay in
any material respect the consummation of the Merger or any of the other
Transactions. As of the date of this Agreement, and other than the
Horizontal Rule, neither LMC Parent nor any Applicable LMC Affiliate is
aware of any current or formally proposed Communications Law that would
prevent any Shareholder from receiving, or would require any Shareholder to
divest all or any part of, the TW Parent
<PAGE>
Common Stock issuable to such Shareholder in connection with the Merger
(assuming no exchange of such TW Parent Common Stock pursuant to Section
4.1).
(d) No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of LMC Parent or any Shareholder.
SECTION 3.2 Representations and Warranties of TW Parent. TW
Parent represents and warrants to LMC Parent and each Shareholder that
(assuming that the consents, waivers and agreements given and made by TCI,
LMC Parent and the Shareholders pursuant to Section 2.1(c) and by the
Company in the Company Letter and by R.E. Turner, III in the Turner Letter
are valid and effective for the intended purposes):
(a) TW Parent has delivered to LMC Parent complete and correct
copies of its Restated Certificate of Incorporation, By-laws and the Rights
Agreement and of the certificates of incorporation and by-laws or
comparable organizational documents of the Material Parent Subsidiaries, in
each case as amended to the date of this Agreement. As of the date hereof,
no amendments to the Rights Agreement have been authorized, approved or
adopted and there is no commitment, arrangement or understanding by TW
Parent to effect any amendment other than the Rights Amendment. All shares
of Voting Exchange Preferred Stock and Non-Voting Exchange Preferred Stock
which may be issued pursuant to Sections 4.1 or 4.2 of this Agreement or
pursuant to the Option Agreement will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights.
(b) TW Parent has all requisite corporate power and authority to
enter into this Agreement and each of the Additional Agreements to which it
is contemplated to be a party and to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this
Agreement and each such Additional Agreement by TW Parent and the
consummation by it of the Transactions have been duly authorized by all
necessary corporate action subject to the Parent Stockholder Approvals.
This Agreement has been, and when delivered at or prior to the Closing each
of such Additional Agreements will have been, duly executed and delivered
by TW Parent and the applicable Affiliates of TW Parent named as parties
thereto (if any) (each, an "Applicable TW Affiliate") and constitutes, or
in the case of such Additional Agreements will as of the Closing of the
Merger constitute, a valid and binding obligation of each such party,
enforceable against each such party in accordance with its terms (except as
enforceability may be limited be applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or by principles governing the availability of equitable
remedies). Except as otherwise set forth in the Merger Agreement or in the
Parent Disclosure Letter, the execution and delivery of this Agreement and
each of the Additional Agreements to which it is contemplated to be a party
<PAGE>
by TW Parent and each Applicable TW Affiliate and the consummation by them
of the transactions contemplated hereby and thereby and compliance with the
provisions hereof and thereof will not, conflict with, or result in any
violation of or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration
of any obligation or to the loss of a material benefit under, or result in
the creation of any Lien upon any of the properties or assets of TW Parent
or any Parent Subsidiary under, (i) the Restated Certificate of
Incorporation or By-laws of TW Parent or the comparable organizational
documents of any Parent Subsidiary, (ii) any Contract to which TW Parent or
any Parent Subsidiary is a party or by which any of them or their
respective properties or assets are bound, other than the Stock Agreements
as to which no representation is being made or (iii) subject to the
governmental filings and other matters referred to in Sections 3.01(d) and
3.02(d) of the Merger Agreement and in the following sentence, any
Requirement of Law applicable to TW Parent or any Parent Subsidiary or
their respective properties or assets, other than the Horizontal Rule as to
which no representation is being made, and other than, in the case of
clauses (ii) and (iii), any such conflicts, violations, defaults, rights or
Liens that individually or in the aggregate would not (x) have a Parent
Material Adverse Effect, (y) prevent TW Parent or any Applicable TW
Affiliate from performing its obligations under this Agreement or any
applicable Additional Agreement in any material respect or (z) prevent or
delay in any material respect the consummation of any of the Transactions.
Except as otherwise set forth in the Merger Agreement or in the Parent
Disclosure Letter, no consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is
required by or with respect to TW Parent or any Applicable TW Affiliate in
connection with the execution and delivery of this Agreement or any
applicable Additional Agreement by TW Parent or any Applicable TW Affiliate
or the consummation by TW Parent or any Applicable TW Affiliate, as the
case may be, of any of the Transactions, except for (i) filings under the
HSR Act, (ii) such filings with, and orders of, the FCC as may be required
under the Communications Laws in connection with the Transactions, (iii)
approvals of cable franchising authorities and (iv) such other consents,
approvals, orders, authorizations, registrations, declarations and filings
which, if not obtained or made, would not prevent or delay in any material
respect the consummation of any of the Transactions or otherwise prevent TW
Parent or any Applicable TW Affiliate from performing its obligations under
this Agreement or any applicable Additional Agreement in any material
respect or have, individually or in the aggregate, a Parent Material
Adverse Effect. To the knowledge of TW Parent, none of TW Parent or any of
its Affiliates are party to any agreement with the Company, any of the
Company's Affiliates, TCI or any of TCI's Affiliates that would require the
consent, waiver or approval of or by TW Parent or any of its Affiliates of
the Merger or for the consummation of any of the Transactions, or the
execution, delivery or performance of the Merger Agreement, this Agreement
or the Additional Agreements, other than the Stock Agreements.
<PAGE>
(c) Except as disclosed in the Parent Disclosure Letter, as of
the date of this Agreement, there is no suit, action or proceeding
(including any proceeding by or before the FCC) pending or, to the
knowledge of TW Parent, threatened against or affecting TW Parent or any
its Affiliates (and TW Parent is not aware of any basis for any such suit,
action or proceeding) that, individually or in the aggregate, could
reasonably be expected to (i) prevent TW Parent or any Applicable TW
Affiliate from performing its obligations under this Agreement or any
applicable Additional Agreement in any material respect, or (ii) prevent or
delay in any material respect the consummation of the Merger or any of the
other Transactions.
(d) As of the date of this Agreement, and other than the
Horizontal Rule, TW Parent is not aware of any current or formally proposed
Communications Law that would prevent any Shareholder from receiving, or
would require any Shareholder to divest all or any part of, the TW Parent
Common Stock issuable to such Shareholder in connection with the Merger
(assuming no exchange of such TW Parent Common Stock pursuant to Section
4.1).
(e) No broker, investment banker, financial advisor or other
person, other than Morgan Stanley & Co Incorporated, the fees and expenses
of which will be paid by TW Parent, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with
the Transactions based upon arrangements made by or on behalf of TW Parent.
ARTICLE IV
CERTAIN POST-CLOSING COVENANTS
SECTION 4.1 Voting Trust; Share Exchange. Immediately following
the Effective Time of the Merger or the Elective Merger (and subject to the
third sentence of this Section), each Shareholder shall cause all of its
Covered TW Securities that consist of shares of TW Parent Common Stock to
be delivered to TW Parent for exchange into, and TW Parent shall issue in
exchange therefor, shares of Voting Exchange Preferred Stock. Each
Shareholder shall deposit the shares of Voting Exchanged Preferred Stock
received for such Covered TW Securities with the Trustee under the Voting
Trust and take such other action as may be required of it pursuant to the
Voting Trust. Notwithstanding the foregoing, if the FCC conditions its
required consent or approval in connection with the Merger upon any changes
to the terms of the Voting Trust or the identity of the Trustee thereunder,
or does not accept that the Voting Trust, without such changes, would be
sufficient to preclude the Liberty Parties from having an attributable
interest in the assets and businesses of TW Parent, and LMC Parent is
unwilling to agree to such changes, then at the request of either
<PAGE>
TW Parent or LMC Parent, in lieu of entering into the Voting Trust, each
Shareholder will cause to be delivered to TW Parent all such Covered TW
Securities for exchange into, and TW Parent shall issue in exchange
therefor, shares of Non-Voting Exchange Preferred Stock. The rate of any
exchange pursuant to the foregoing provisions of this Section 4.1 shall be
1,000 shares of TW Parent Common Stock for each whole share of Voting
Exchange Preferred Stock or Non-Voting Exchange Preferred Stock (and
fractional shares of Voting or Non-Voting Exchange Preferred Stock, as the
case may be, will be issued to each Shareholder for the balance of its
shares of TW Parent Common Stock). An exchange for Voting Exchange
Preferred Stock or Non-Voting Exchange Preferred Stock shall be effected
through a direction from each Shareholder to the Exchange Agent to register
all of the shares of TW Common Stock issuable to such Shareholder in the
Merger in the name of, and to deliver the appropriate certificates to, TW
Parent and, upon receipt by TW Parent of such certificates, the issuance
and delivery by TW Parent to each Shareholder of the appropriate number of
shares of Voting Exchange Preferred Stock or Non-Voting Exchange Preferred
Stock, as the case may be. All shares of Voting Exchange Preferred Stock
and Non-Voting Exchange Preferred Stock delivered to the Liberty Parties
shall be duly authorized, validly issued, fully paid and nonassessable and
free of preemptive rights. If any shares of Voting Exchange Preferred Stock
are deposited under the Voting Trust, then until the Voting Trust shall
have terminated in accordance with its terms (and irrespective of the
termination of any other provision of this Agreement), all voting
securities of TW Parent from time to time owned beneficially or of record
by LMC Parent or any of its Controlled Affiliates shall be deposited with
the Trustee under the Voting Trust and, for so long as LMC Parent is a
Controlled Affiliate of TCI, all voting securities of TW Parent owned
beneficially or of record by TCI or any of its Controlled Affiliates, other
than the shares (the "Excluded Shares") described in the letter from Baker
& Botts, L.L.P., counsel to TCI, to Peter Haje, Esq., General Counsel of TW
Parent, dated the date hereof, shall be deposited with the Trustee unless
TCI has made alternative arrangements for the voting of such shares that
are satisfactory to the FCC. If the Voting Trust is terminated prior to the
expiration of the Restriction Period, LMC Parent shall as promptly as
practicable notify TW Parent of such termination in writing and shall cause
to be delivered to TW Parent all TW Parent Common Stock and Voting Exchange
Preferred Stock distributed to the Liberty Parties from the trust, for
exchange for Non-Voting Exchange Preferred Stock. For so long prior to the
expiration of the Restriction Period as the Liberty Parties hold any
Non-Voting Exchange Preferred Stock, then until the expiration of the
Restriction Period all of the TW Parent Common Stock and Voting Exchange
Preferred Stock from time to time owned beneficially or of record by LMC
Parent or any of its Controlled Affiliates shall be delivered to TW Parent
for exchange for Non-Voting Exchange Preferred Stock and for so long as LMC
Parent is a Controlled Affiliate of TCI all TW Parent Common Stock and
Voting Exchange Preferred Stock owned beneficially or of record by TCI or
any of its Controlled Affiliates (other than any Excluded Shares) shall
also be delivered to TW Parent for exchange for Non-Voting Exchange
Preferred Stock. TW Parent shall issue, in exchange for the TW Parent
Common Stock
<PAGE>
delivered to it pursuant to the two immediately preceding sentences, a
number of shares of Non-Voting Exchange Preferred Stock equal to (i) the
number of shares of TW Parent Common Stock so delivered divided by (ii) the
Formula Number then in effect pursuant to the terms of the Non-Voting
Exchange Preferred Stock, and, in exchange for each share of Voting
Exchange Preferred Stock delivered to it at any time pursuant to the two
immediately preceding sentences, one share of Non-Voting Exchanged
Preferred Stock.
SECTION 4.2 No Redemption.
The Voting Exchange Preferred Stock and the Non-Voting Exchange
Preferred Stock shall not be redeemable at the option of TW Parent,
including pursuant to Section 5 of Article IV of its Restated Certificate
of Incorporation, as amended, as in effect on the date hereof (or any
equivalent provision in any further amendment to or restatement of TW
Parent's Restated Certificate of Incorporation) ("TW Article IV"). TW
Parent further agrees that it shall not exercise any right pursuant to TW
Article IV to require the redemption from any Liberty Party of any of its
shares of TW Common Stock unless it has first given at least 10 business
days prior written notice of such redemption to each Liberty Party (which
notice shall state that TW Parent intends to effect the redemption of
shares of TW Common Stock by such Liberty Party, the number of shares to be
redeemed and the proposed redemption date (in addition to any other
information required by TW Article IV)), and each Liberty Party shall have
the right at any time prior to the redemption date to exchange the shares
to be redeemed for a number of shares of Voting Exchange Preferred Stock
that are convertible into the same number of shares of TW Parent Common
Stock so called for redemption.
SECTION 4.3 Certain Post-Closing Compensation Obligations.
(a) If, after the Effective Time of the Merger and during the
Restriction Period,
(i) any Action shall be taken by TW Parent or any of
its Controlled Affiliates (including, after the Effective Time,
the Company and its Controlled Affiliates) which has a Prohibited
Effect under any Specified Law then in effect (including any
Specified Law the effectiveness of which has been stayed if such
stay is subsequently lifted) or then formally proposed or
promulgated with a delayed effective date if such Specified Law
becomes effective thereafter, and
(ii) such Prohibited Effect did not exist prior to the
taking of such Action and did not result from any breach of this
Agreement by LMC Parent or any Applicable LMC Affiliate or any
breach by them of the Voting Trust,
<PAGE>
then, in any such case, the provisions of this Section 4.3 shall apply.
(b) As promptly as practicable after obtaining actual knowledge
that TW Parent intends to take an Action and that such Action will likely
result in a Prohibited Effect, LMC Parent shall notify TW Parent thereof.
If such notice is received by TW Parent prior to the taking of the
referenced Action, then either TW Parent and its Controlled Affiliates
shall not take such Action or if the Action is taken and a Prohibited
Effect described in Section 4.3(a) occurs, TW Parent shall be obligated to
compensate the Liberty Parties pursuant to this Section 4.3.
(c) As promptly as practicable after obtaining actual knowledge
that a Prohibited Effect has occurred or will likely occur (other than a
Prohibited Effect with respect to which notice has been given under Section
4.3(b)), LMC Parent shall notify TW Parent thereof. Following the giving of
such notice, LMC Parent shall at TW Parent's request consult with TW Parent
as to such Prohibited Effect and its causes and discuss in good faith the
actions that either party might take to avoid or cure such Prohibited
Effect. If LMC Parent and TW Parent agree that certain actions can be taken
by TW Parent and its Controlled Affiliates to cure or avoid the Prohibited
Effect, then TW Parent and its Controlled Affiliates shall either take such
actions or become obligated to compensate the Liberty Parties pursuant to
this Section 4.3 if a Prohibited Effect described in Section 4.3(a) occurs;
provided, however, that if LMC Parent and TW Parent also agree that certain
actions could be taken by LMC Parent and its Controlled Affiliates to
eliminate the Prohibited Effect which would be substantially less
burdensome to LMC Parent and its Controlled Affiliates than the actions
that TW Parent and its Controlled Affiliates would be required to take in
order to cure the Prohibited Effect would be to TW Parent and its
Controlled Affiliates and the costs to effect such actions would be
substantially less than the cost to compensate the Liberty Parties pursuant
to this Section 4.3, then subject to the following sentence the Liberty
Parties shall, at TW Parent's expense, use reasonable efforts to take such
actions. Notwithstanding the foregoing, unless such Liberty Party otherwise
agrees, no Liberty Party shall be required to dispose of any of its TW
Securities (other than by way of exchange of TW Securities held pursuant to
the Voting Trust for Non-Voting Exchange Preferred Stock), to dispose of
any assets or discontinue any business or investments that LMC Parent
determines in good faith are material to the Liberty Parties or their
respective strategic objectives, or to agree to any restrictions or
limitations that LMC Parent deems significant on the future operation of
its business.
(d) If the Prohibited Effect cannot be cured or avoided, or for
any reason (including the failure of the parties to agree upon any course
of action or alternative courses of action that would cure or avoid the
Prohibited Effect or the relative burdens thereof) has not been cured or
avoided (x) within 60 days after notice has been given to TW Parent
pursuant to this Section 4.3 (unless prior to the expiration of such 60-day
period, TW Parent
<PAGE>
or the Liberty Parties, as agreed by TW Parent and LMC Parent, have
commenced an agreed upon course of action to cure such Prohibited Effect
and such cure is effected within an agreed period of time thereafter), or
(y) if earlier, by such date as any Liberty Party would be required by any
Governmental Entity or pursuant to any Judgment against it or its
properties to divest of any TW Securities or suffer any consequences of the
kind enumerated in clauses (b) through (d) of the definition of Prohibited
Effect, then in any such event TW Parent shall be obligated to compensate
the Liberty Parties pursuant to this Section 4.3.
(e) If TW Parent becomes obligated to compensate the Liberty
Parties pursuant to this Section 4.3, then TW Parent shall be required to
(i) compensate any Liberty Party that disposes of Covered TW Securities to
the extent required by or to the extent necessary to avoid the applicable
Prohibited Effect and (ii) if the aggregate number of Covered TW Securities
disposed of by the Liberty Parties pursuant to clause (i) above equals or
exceeds (on an as converted basis, if applicable) 5% of the number of
Covered TW Securities of all Shareholders immediately after the Effective
Time of the Merger or the Elective Merger (including the Option
Consideration) (as such number shall be appropriately adjusted from time to
time to take into account the occurrence of any stock dividends, splits,
reverse splits, combinations and the like), then, at the option of LMC
Parent (exercised by notice in writing to TW Parent within 60 days of the
first disposition pursuant to clause (i) above), compensate all Liberty
Parties for the disposition of all the Covered TW Securities if all TW
Securities of all Liberty Parties are disposed of within 12 months of such
notice. If TW Parent becomes obligated to compensate any Liberty Party
pursuant to this Section 4.3, then such Liberty Party, if it desires to
assert a claim for compensation hereunder, shall provide to TW Parent a
statement, certified by independent public accountants of national
standing, setting forth the estimated Blended Rate for the taxable year in
which the disposition occurred and the estimated Adjustment Amount owed to
such Liberty Party with respect to its TW Securities so disposed of. Within
30 days after delivery of such statement, TW Parent shall pay to such
Liberty Party the estimated Adjustment Amount by wire transfer of
immediately available funds to such account and in accordance with such
instructions as such Liberty Party shall have previously advised TW Parent
in writing. Within 30 days after the end of the taxable year in which the
disposition of TW Securities by such Liberty Party occurred, such Liberty
Party shall provide to TW Parent a statement, certified by independent
public accountants of national standing, setting forth the actual Blended
Rate for such taxable year and the actual Adjustment Amount owed to such
Liberty Party. Within five days after delivery of such statement, (i) TW
Parent shall pay to Liberty Party an amount equal to the amount by which
the Adjustment Amount exceeds the estimated Adjustment Amount, or (ii) such
Liberty Party shall pay to TW Parent an amount equal to the amount by which
the estimated Adjustment Amount exceeds the Adjustment Amount. Any such
payment shall be made by wire transfer of immediately available funds to
such account and in accordance with such instructions as such payee shall
have previously advised such payor in writing.
<PAGE>
(f) LMC Parent shall upon request from time to time advise TW
Parent of the identity of each Liberty Party.
(g) LMC Parent shall promptly notify TW Parent in writing of (i)
any acquisition of "Beneficial Ownership" of "Common Shares" by any of its
"Affiliates" or Associates", and (ii) any "Person" who has "Beneficial
Ownership" of any "Common Shares" becoming its "Affiliate" or "Associate",
in each case promptly following LMC Parent's obtaining actual knowledge of
such occurrence. Terms used in this Section 4.3(g) in quotation marks have
the meanings given such terms in the Rights Agreement, as amended by the
Rights Amendment and as the same may be further amended to the actual
knowledge of LMC Parent from time to time.
ARTICLE V
MISCELLANEOUS
SECTION 5.1 Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such
cost or expense.
SECTION 5.2 Specific Performance. Each of LMC Parent and the
Shareholders, on the one hand, and TW Parent, on the other hand, agrees
that the other parties would be irreparably damaged if for any reason such
party fails to perform any of such party's obligations under this
Agreement, and that the other parties would not have an adequate remedy at
law for money damages in such event. Accordingly, any of the other parties
shall be entitled to seek specific performance and injunctive and other
equitable relief to enforce the performance of this Agreement by such
party. This provision is without prejudice to any other rights the parties
may have against each other for any failure to perform their respective
obligations under this Agreement.
SECTION 5.3 Amendments; Termination. This Agreement may not be
modified, amended, altered or supplemented, except upon the execution and
delivery of a written agreement executed by the parties hereto. The
representations, warranties, covenants and agreements set forth herein
shall terminate, except with respect to liability for prior breaches
thereof, upon the first to occur of (x) December 31, 1996, if the Effective
Time of the Merger has not occurred on or prior to such date unless the
Elective Merger has theretofore been consummated, (y) the termination of
the Merger Agreement in accordance with its terms or the abandonment
thereof by TW Parent if required pursuant to Section 2.3 hereof unless the
Elective Merger has theretofore been consummated and (z) LMC Parent having
timely made the election not to consummate the Transactions pursuant to
Section 2.3 (the "Termination Date"). The representations, warranties,
covenants and agreements set
<PAGE>
forth herein (other than in Article II) shall survive the Effective Time of
the Merger (and, if applicable, the Elective Merger).
SECTION 5.4 Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns; provided,
however, that a party may not assign, delegate or otherwise transfer any of
such party's rights or obligations under this Agreement without the consent
of the other parties hereto and any purported assignment, delegation or
transfer without such consent shall be null and void.
SECTION 5.5 Entire Agreement. This Agreement (including Exhibits
and Schedules), the TW/LMC Letter Agreement and the Elective Merger
Agreement contemplated thereby, together with the Stock Agreements,
constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof.
SECTION 5.6 Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed
given (i) on the first business day following the date received, if
delivered personally or by telecopy (with telephonic confirmation of
receipt by the addressee), (ii) on the business day following timely
deposit with an overnight courier service, if sent by overnight courier
specifying next day delivery and (iii) on the first business day that is at
least five days following deposit in the mails, if sent by first class
mail, to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
If to TW Parent, to it at:
75 Rockefeller Plaza
New York, New York 10019
Facsimile: (212) 956-7281
Attention: General Counsel
with a copy (which shall not constitute notice) to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Facsimile: (212) 474-3700
<PAGE>
Attention: Peter S. Wilson, Esq.
If to LMC Parent or any Shareholder, to it at:
8101 East Prentice Avenue
Suite 500
Englewood, Colorado 80111
Facsimile: (303) 721-5415
Attention: President
with a copy (which shall not constitute notice) to each of:
Stephen M. Brett, Esq.
General Counsel
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Facsimile: (303) 488-3245
Baker & Botts, L.L.P.
885 Third Avenue
New York, New York 10022
Facsimile: (212) 705-5125
Attention: Elizabeth M. Markowski, Esq.
SECTION 5.7 Governing Law. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of
Delaware.
SECTION 5.8 Counterparts; Effectiveness. This Agreement may be
executed in two or more counterparts, all of which shall be considered one
and the same agreement, and shall become effective when two or more
counterparts have been signed by each of the parties and delivered to the
other parties.
SECTION 5.9 Descriptive Headings. The descriptive headings used
herein are inserted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of this Agreement.
<PAGE>
SECTION 5.10 Severability. Whenever possible, each provision or
portion of any provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law but if any
provision or portion of any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or portion of any
provision in such jurisdiction, and this Agreement will be reformed,
construed and enforced in such jurisdiction as if such invalid, illegal or
unenforceable provision or portion of any provision had never been
contained herein. The parties shall endeavor in good-faith negotiations to
replace any invalid, illegal or unenforceable provision with a valid
provision the effects of which come as close as possible to those of such
invalid, illegal or unenforceable provisions.
SECTION 5.11 Attorney's Fees. If any action at law or in equity
is necessary to enforce or interpret the terms of this Agreement, the
prevailing party shall be entitled to reasonable attorney's fees, costs and
necessary disbursements, in addition to any other relief to which such
party may be entitled.
<PAGE>
IN WITNESS WHEREOF, TW Parent, LMC Parent and the Shareholders
have caused this Agreement to be duly executed as of the day and year first
above written.
TIME WARNER INC.
By:/s/ Peter R. Haje
------------------------
Name:
Title:
With respect to LIBERTY MEDIA CORPORATION
Sections 2.1(c), 2.2, 3.1(c) and 4.1 only:
TELE-COMMUNICATIONS, INC. By: /s/ Stephen M. Brett
-----------------------
Name:
Title:
By: /s/ Stephen M. Brett
-----------------------
Name:
Title:
With respect to SUBSIDIARIES OF LMC PARENT:
Section 2.1(c) only:
TCI TURNER PREFERRED, INC.
TCI COMMUNICATIONS, INC.
By: /s/ Stephen M. Brett By: /s/ Stephen M. Brett
--------------------- -----------------------
Name: Name:
Title: Title:
TIME TBS HOLDINGS, INC. COMMUNICATIONS CAPITAL CORP.
By: /s/ Thomas W. McEnerney By: /s/ Stephen M. Brett
------------------------ -----------------------
Name: Name:
Title: Title:
<PAGE>
UNITED CABLE TURNER
INVESTMENT INC.
By:/s/ Stephen M. Brett
-----------------------
Name:
Title:
<PAGE>
EXHIBIT A TO
LMC AGREEMENT
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF SERIES K
VOTING PARTICIPATING CONVERTIBLE
PREFERRED STOCK
OF
TIME WARNER INC.
--------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
--------------------
TIME WARNER INC., a corporation organized and existing by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), does hereby certify that the following resolution was
duly adopted by action of the Board of Directors of the Corporation
(the "Board of Directors") at a meeting duly held on September 22,
1995.
RESOLVED that pursuant to the authority expressly granted to
and vested in the Board of Directors by the provisions of Section 2 of
Article IV of the Restated Certificate of Incorporation of the
Corporation, as amended from time to time (the "Certificate of
Incorporation"), and Section 151(g) of the General Corporation Law of
the State of Delaware (the "DGCL"), the Board of Directors hereby
creates, from the authorized shares of Preferred Stock, par value
$1.00 per share (the "Preferred Stock"), of the Corporation authorized
to be issued pursuant to the Certificate of Incorporation, a series of
Preferred Stock, and hereby fixes the voting powers, designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of
the shares of such series as follows:
The series of Preferred Stock hereby established shall
consist of [ ] shares designated as Series K Voting Participating
Convertible Preferred Stock. The number of shares constituting such
series may be increased or decreased from time to time by a resolution
or
<PAGE>
resolutions of the Board of Directors. The rights, preferences
and limitations of such series shall be as follows:
1. Definitions. As used herein, the following terms shall
have the indicated meanings:
1.1 "Board of Directors" shall mean the Board of
Directors of the Corporation or, with respect to any action to be
taken by the Board of Directors, any committee of the Board of
Directors duly authorized to take such action.
1.2 "Capital Stock" shall mean any and all shares of
corporate stock of a Person (however designated and whether
representing rights to vote, rights to participate in dividends or
distributions upon liquidation or otherwise with respect to such
Person, or any division or subsidiary thereof, or any joint venture,
partnership, corporation or other entity).
1.3 "Certificate" shall mean the Certificate of the
Voting Powers, Designations, Preferences and Relative, Participating,
Optional or Other Special Rights, and Qualifications, Limitations or
Restrictions Thereof, of Series K Voting Participating Convertible
Preferred Stock filed with respect to this resolution with the
Secretary of State of the State of Delaware pursuant to Section 151 of
the DGCL.
1.4 "Certificate of Incorporation" shall mean the
Restated Certificate of Incorporation of the Corporation, as amended
from time to time.
1.5 "Closing Price" of the Common Stock shall mean the
last reported sale price of the Common Stock (regular way) as shown on
the Composite Tape of the NYSE, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices on the
NYSE, or, if the Common Stock is not listed or admitted to trading on
the NYSE, on the principal national securities exchange on which such
stock is listed or admitted to trading, or, if it is not listed or
admitted to trading on any national securities exchange, the last
reported sale price of the Common Stock, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, in either case as reported by NASDAQ.
<PAGE>
1.6 "Common Stock" shall mean the class of Common
Stock, par value $1.00 per share, of the Corporation authorized
at the date of the Certificate, or any other class of stock
resulting from (x) successive changes or reclassifications of
such Common Stock consisting of changes in par value, or from par
value to no par value, (y) a subdivision or combination or
(z) any other changes for which an adjustment is made under
Section 2.4(a) hereof, and in any such case including any shares
thereof authorized after the date of the Certificate, together
with any associated rights to purchase other securities of the
Corporation which are at the time represented by the certificates
representing such shares of Common Stock.
1.7 "Communications Laws" shall mean the
Communications Act of 1934 (as amended and supplemented from time
to time and any successor statute or statutes regulating
telecommunications companies) and the rules and regulations (and
interpretations thereof and determinations with respect thereto)
promulgated, issued or adopted from time to time by the Federal
Communications Commission (the "FCC"). All references herein to
Communications Laws shall include as of any relevant date in
question the Communications Laws as then in effect (including any
Communications Law or part thereof the effectiveness of which is
then stayed) or promulgated with a delayed effective date.
1.8 "Conversion Date" shall have the meaning set
forth in Section 3.5 hereof.
1.9 "Corporation" shall mean Time Warner Inc., a
Delaware corporation, and any of its successors by operation of law,
including by merger or consolidation.
1.10 "DGCL" shall mean the General Corporation Law of
the State of Delaware.
1.11 "Dividend Payment Date" shall have the meaning set
forth in Section 2.1 hereof.
1.12 "Effective Time of the Merger" shall have the
meaning given to such term in the Merger Agreement.
1.13 "Formula Number" shall have the meaning set forth
in Section 2.1 hereof.
<PAGE>
1.14 "Junior Stock" shall mean the Common Stock, the
Series A Stock and the shares of any other class or series of Capital
Stock of the Corporation which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors,
acting pursuant to authority granted in the Certificate of
Incorporation, shall fix the relative rights, preferences and
limitations thereof, shall be junior to the shares of this Series in
respect of the right to receive dividends or to participate in any
distribution of assets other than by way of dividends.
1.15 "LMC Agreement" shall mean the Agreement dated as
of September 22, 1995, among the Corporation, Liberty Media
Corporation, a Delaware corporation ("LMC Parent"), and certain
subsidiaries of LMC Parent listed under "Subsidiaries of LMC Parent"
on the signature pages thereto, as the same may be amended from time
to time.
1.16 "Merger Agreement" shall mean the Agreement and
Plan of Merger dated as of September 22, 1995, among the Corporation,
Time Warner Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of the Corporation and Turner Broadcasting System,
Inc., a Georgia corporation, as the same may be amended from time to
time.
1.17 "NASDAQ" shall mean The Nasdaq Stock Market.
1.18 "NYSE" shall mean the New York Stock Exchange,
Inc.
1.19 "Parity Stock" shall mean the Series J Stock and
the shares of any other class or series of Capital Stock of the
Corporation which, by the terms of the Certificate of Incorporation
or of the instrument by which the Board of Directors, acting pursuant
to authority granted in the Certificate of Incorporation, shall fix
the relative rights, preferences and limitations thereof, shall, in
the event that the stated dividends thereon are not paid in full, be
entitled to share ratably with the shares of this Series in the
payment of dividends in accordance with the sums which would be
payable on such shares if all dividends were declared and paid in
full, or shall, in the event that the amounts payable thereon in
liquidation are not paid in full, be entitled to share ratably with
the shares of this Series in any distribution of assets other than by
way of
<PAGE>
dividends in accordance with the sums which would be payable in
such distribution if all sums payable were discharged in full;
provided, however, that the term "Parity Stock" shall be deemed to
refer in Section 5.4 hereof to any stock which is Parity Stock in
respect of the distribution of assets.
1.20 "Permitted Transferee" shall mean any Liberty
Party, as such term is defined in the LMC Agreement.
1.21 "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association,
trust, unincorporated organization or other entity.
1.22 "Preferred Stock" shall mean the class of
Preferred Stock, par value $1.00 per share, of the Corporation
authorized at the date of the Certificate, including any shares
thereof authorized after the date of the Certificate.
1.23 "Record Date" shall have the meaning set forth in
Section 2.1 hereof.
1.24 "Senior Stock" shall mean the Series B Stock, the
Series C Stock, the Series D Stock, the Series E Stock, the Series F
Stock, the Series G Stock, the Series H Stock and the shares of any
class or series of Capital Stock of the Corporation which, by the
terms of the Certificate of Incorporation or of the instrument by
which the Board of Directors, acting pursuant to authority granted in
the Certificate of Incorporation, shall fix the relative rights,
preferences and limitations thereof, shall be senior to the shares of
this Series in respect of the right to receive dividends or to
participate in any distribution of assets other than by way of
dividends.
1.25 "Series A Stock" shall mean the series of
Preferred Stock authorized and designated as Series A Participating
Cumulative Preferred Stock at the date of the Certificate, including
any shares thereof authorized and designated after the date of the
Certificate.
1.26 "Series B Stock" shall mean the series of
Preferred Stock authorized and designated as Series B 6.40% Preferred
Stock at the date of the Certificate, including any shares thereof
authorized and designated after the date of the Certificate.
<PAGE>
1.27 "Series C Stock" shall mean the series of
Preferred Stock authorized and designated as Series C Convertible
Preferred Stock at the date of the Certificate, including any shares
thereof authorized and designated after the date of the Certificate.
1.28 "Series D Stock" shall mean the series of
Preferred Stock authorized and designated as Series D Convertible
Preferred Stock at the date of the Certificate, including any shares
thereof authorized and designated after the date of the Certificate.
1.29 "Series E Stock" shall mean the series of
Preferred Stock authorized and designated as the Series E Convertible
Preferred Stock issued or issuable pursuant to the Agreement and Plan
of Merger dated as of February 6, 1995, among Cablevision Industries
Corporation, Alan Gerry, the Corporation and TW CVI Acquisition Sub
(the "Cablevision Merger Agreement"), including any shares thereof
authorized and designated after the date of the Certificate.
1.30 "Series F Stock" shall mean the series of
Preferred Stock authorized and designated as the Series F Convertible
Preferred Stock issued or issuable pursuant to the Cablevision Merger
Agreement, including any shares thereof authorized and designated
after the date of the Certificate.
1.31 "Series G Stock" shall mean the series of
Preferred Stock authorized and designated as the Series G Convertible
Preferred Stock issued or issuable pursuant to the Restructuring
Agreement, dated as of August 31, 1995, among the Corporation, ITOCHU
Corporation and ITOCHU Entertainment Inc. and the Restructuring
Agreement dated as of August 31, 1995, between the Corporation and
Toshiba Corporation (together, the "Restructuring Agreements"),
including any shares thereof authorized and designated after the date
of the Certificate.
1.32 "Series H Stock" shall mean the series of
Preferred Stock authorized and designated as the Series H Convertible
Preferred Stock issued or issuable pursuant to the Restructuring
Agreements, including any shares thereof authorized and designated
after the date of the Certificate.
1.33 "Series I Stock" shall mean the series of
Preferred Stock authorized and designated as the Series I Convertible
Preferred Stock issued or issuable pursuant to
<PAGE>
the Restructuring Agreements, including any shares thereof
authorized and designated after the date of the Certificate.
1.34 "Series J Stock" shall mean the series of
Preferred Stock authorized and designated as Series J Non-Voting
Participating Convertible Preferred Stock at the date of the
Certificate, including any shares thereof authorized and designated
after the date of the Certificate.
1.35 "Series K Stock" and "this Series" shall mean the
series of Preferred Stock authorized and designated as Series K Voting
Participating Convertible Preferred Stock at the date of the
Certificate, including any shares thereof authorized and designated
after the date of the Certificate.
1.36 "Trading Day" shall mean, so long as the Common
Stock is listed or admitted to trading on the NYSE, a day on which the
NYSE is open for the transaction of business, or, if the Common Stock
is not listed or admitted to trading on the NYSE, a day on which the
principal national securities exchange on which the Common Stock is
listed is open for the transaction of business, or, if the Common
Stock is not so listed or admitted for trading on any national
securities exchange, a day on which the National Market System of
NASDAQ is open for the transaction of business.
2. Dividends.
2.1 The holders of shares of this Series shall be
entitled to receive dividends, if, as and when declared by the Board
of Directors, out of funds legally available therefor, payable on such
dates as may be set by the Board of Directors for payment of cash
dividends on the Common Stock (each such date being referred to herein
as a "Dividend Payment Date"), in cash, in an amount per share equal
to the product of (i) the Formula Number in effect as of such Dividend
Payment Date multiplied by (ii) the amount of the regularly scheduled
cash dividend to be paid on one share of Common Stock on such Dividend
Payment Date; provided, however, dividends on the shares of this
Series shall be payable pursuant to this Section 2.1 only to the
extent that regularly scheduled cash dividends are declared and paid
on the Common Stock. As used herein, the "Formula Number" shall
initially be 1,000, which shall be adjusted
<PAGE>
from time to time pursuant to Section 2.4 hereof. The dividends
payable on any Dividend Payment Date shall be paid to the holders of
record of shares of this Series at the close of business on the record
date for the related regularly scheduled cash dividend on the Common
Stock (each such date being referred to herein as a "Record Date").
The amount of dividends that are paid to each holder of record on any
Dividend Payment Date shall be rounded to the nearest cent.
2.2 In case the Corporation shall at any time
distribute (other than a distribution in liquidation of the
Corporation) to the holders of its shares of Common Stock any assets
or property, including evidences of indebtedness or securities of the
Corporation (other than Common Stock subject to a distribution or
reclassification covered by Section 2.4 hereof) or of any other Person
(including common stock of such Person) or cash (but excluding
regularly scheduled cash dividends payable on shares of Common Stock)
or in case the Corporation shall at any time distribute (other than a
distribution in liquidation of the Corporation) to such holders
rights, options or warrants to subscribe for or purchase shares of
Common Stock (including shares held in the treasury of the
Corporation), or rights, options or warrants to subscribe for or
purchase any other security or rights, options or warrants to
subscribe for or purchase any assets or property (in each case,
whether of the Corporation or otherwise, but other than any
distribution of rights to purchase securities of the Corporation if
the holder of shares of this Series would otherwise be entitled to
receive such rights upon conversion of shares of this Series for
Common Stock pursuant to Section 3 hereof; provided, however, that if
such rights are subsequently redeemed by the Corporation, such
redemption shall be treated for purposes of this Section 2.2 as a cash
dividend (but not a regularly scheduled cash dividend) on the Common
Stock), the Corporation shall simultaneously distribute such assets,
property, securities, rights, options or warrants to the holders of
shares of this Series on the record date fixed for determining the
holders of Common Stock entitled to participate in such distribution
(or, if no such record date shall be established, the effective time
thereof) in an amount per share of this Series equal to the amount
that a holder of one share of this Series would have been entitled to
receive had such share of this Series been converted into Common Stock
immediately prior to such record date (or effective time). In the
event of a distribution to holders
<PAGE>
of shares of this Series pursuant to this Section 2.2, such
holders shall be entitled to receive fractional shares or interests
only to the extent that holders of Common Stock are entitled to
receive the same. The holders of shares of this Series on the
applicable record date (or effective time) shall be entitled to
receive in lieu of such fractional shares or interests the same
consideration as is payable to holders of Common Stock with respect
thereto. If there are no fractional shares or interests payable to
holders of Common Stock, the holders of shares of this Series on the
applicable record date (or effective time) shall receive in lieu of
such fractional shares or interests the fair value thereof as
determined by the Board of Directors.
2.3 In the event that the holders of Common Stock are
entitled to make any election with respect to the kind or amount of
securities or other property receivable by them in any distribution
that is subject to Section 2.2 hereof, the kind and amount of
securities or other property that shall be distributable to the
holders of shares of this Series shall be based on (i) the election,
if any, made by the holder of record (as of the date used for
determining the holders of Common Stock entitled to make such
election) of the largest number of shares of this Series in writing to
the Corporation on or prior to the last date on which a holder of
Common Stock may make such an election or (ii) if no such election is
timely made, an assumption that such holder failed to exercise any
such rights (provided that if the kind or amount of securities or
other property is not the same for each nonelecting holder, then the
kind and amount of securities or other property receivable by holders
of shares of this Series shall be based on the kind or amount of
securities or other property receivable by a plurality of the shares
held by the nonelecting holders of Common Stock). Concurrently with
the mailing to holders of Common Stock of any document pursuant to
which such holders may make an election of the type referred to in
this Section 2.3, the Corporation shall mail a copy thereof to the
holders of record of shares of this Series as of the date used for
determining the holders of record of Common Stock entitled to such
mailing, which document shall be used by the holders of record of
shares of this Series to make such an election.
2.4 The Formula Number shall be adjusted from time to
time as follows, whether or not any shares of
<PAGE>
this Series have been issued by the Corporation, for events
occurring on or after [ ]:<F1>
(a) In case the Corporation shall (i) pay a dividend in
shares of its Common Stock, (ii) combine its outstanding shares
of Common Stock into a smaller number of shares, (iii) subdivide
its outstanding shares of Common Stock or (iv) reclassify (other
than by way of a merger or consolidation that is subject to
Section 3.6 hereof) its shares of Common Stock, then the Formula
Number in effect immediately before such event shall be
appropriately adjusted so that immediately following such event
the holders of shares of this Series shall be entitled to receive
upon conversion thereof the kind and amount of shares of Capital
Stock of the Corporation which they would have owned or been
entitled to receive upon or by reason of such event if such
shares of this Series had been converted immediately before the
record date (or, if no record date, the effective date) for such
event (it being understood that any distribution of cash or
Capital Stock (other than Common Stock) that shall accompany a
reclassification of the Common Stock, shall be subject to Section
2.2 hereof rather than this Section 2.4(a)). An adjustment made
pursuant to this Section 2.4(a) shall become effective
retroactively immediately after the record date in the case of a
dividend or distribution and shall become effective retroactively
immediately after the effective date in the case of a
subdivision, combination or reclassification. For the purposes of
this Section 2.4(a), in the event that the holders of Common
Stock are entitled to make any election with respect to the kind
or amount of securities receivable by them in any transaction
that is subject to this Section 2.4(a) (including any election
that would result in all or a portion of the transaction becoming
subject to Section 2.2 hereof), the kind and amount of securities
that shall be distributable to the holders of shares of this
Series shall be based on (i) the election, if any, made by the
holder of record (as of the date used for determining the holders
of Common Stock entitled to make such election) of the largest
number of shares of this Series in writing to the Corporation on
or prior
<F1> Insert the date of filing of the Certificate or the relevant effective
time.
<PAGE>
to the last date on which a holder of Common Stock may
make such an election or (ii) if no such election is timely made,
an assumption that such holder failed to exercise any such rights
(provided that if the kind or amount of securities is not the
same for each nonelecting holder, then the kind and amount of
securities receivable shall be based on the kind or amount of
securities receivable by a plurality of nonelecting holders of
Common Stock). Concurrently with the mailing to holders of Common
Stock of any document pursuant to which such holders may make an
election of the type referred to in this Section 2.4(a), the
Corporation shall mail a copy thereof to the holders of record of
shares of this Series as of the date used for determining the
holders of record of Common Stock entitled to such mailing, which
document shall be used by the holders of record of shares of this
Series to make such an election.
(b) The Corporation shall be entitled to make such
additional adjustments in the Formula Number, in addition to
those required by Section 2.4(a) hereof as shall be necessary in
order that any dividend or distribution in Common Stock or any
subdivision, reclassification or combination of shares of Common
Stock referred to above, shall not be taxable to the holders of
Common Stock for United States Federal income tax purposes, so
long as such additional adjustments pursuant to this Section
2.4(b) do not decrease the Formula Number.
(c) All calculations under this Section 2 and Section 3
hereof shall be made to the nearest cent, one-hundredth of a
share or, in the case of the Formula Number, one
hundred-thousandth. Notwithstanding any other provision of this
Section 2.4, the Corporation shall not be required to make any
adjustment of the Formula Number unless such adjustment would
require an increase or decrease of at least one percent (1%) of
the Formula Number. Any lesser adjustment shall be carried
forward and shall be made at the time of and together with the
next subsequent adjustment that, together with any adjustment or
adjustments so carried forward, shall amount to an increase or
decrease of at least one percent (1%) of the Formula Number. Any
adjustments under this Section 2.4 shall be made successively
whenever an event requiring such an adjustment occurs.
<PAGE>
(d) Promptly after an adjustment in the Formula Number
is required, the Corporation shall provide written notice to each
of the holders of shares of this Series, which notice shall state
the adjusted Formula Number.
(e) If a distribution is made in accordance with the
provisions of Section 2.2 hereof, anything in this Section 2.4 to
the contrary notwithstanding, no adjustment pursuant to this
Section 2.4 shall be effected by reason of the distribution of
such assets, property, securities, rights, options or warrants or
the subsequent modification, exercise, expiration or termination
of such securities, rights, options or warrants.
3. Conversion at the Option of the Holder.
3.1 Each holder of a share of this Series shall have
the right at any time to convert such share of this Series into a
number of shares of Common Stock per share of this Series equal to the
Formula Number in effect on the Conversion Date; provided, however,
that such holder may convert shares of this Series only to the extent
that the ownership by such holder or its designee of the shares of
Common Stock issuable upon such conversion would not violate the
Communications Laws.
3.2 No adjustments in respect of payments of dividends
on shares of this Series surrendered for conversion or any dividend on
the Common Stock issued upon conversion shall be made upon the
conversion of any shares of this Series (it being understood that if
the Conversion Date for shares of this Series occurs after the Record
Date and prior to the Dividend Payment Date of any such dividend, the
holders of record on such Record Date shall be entitled to receive the
dividend payable with respect to such shares on the related Dividend
Payment Date pursuant to Section 2.1 hereof).
3.3 The Corporation may, but shall not be required to,
in connection with any conversion of shares of this Series, issue a
fraction of a share of Common Stock, and if the Corporation shall
determine not to issue any such fraction, the Corporation shall make a
cash payment (rounded to the nearest cent) equal to such fraction
multiplied by
<PAGE>
the Closing Price of the Common Stock on the last Trading Day prior to
the Conversion Date.
3.4 Any holder of shares of this Series electing to
convert such shares into Common Stock shall surrender the certificate
or certificates for such shares at the principal executive office of
the Corporation (or at such other place as the Corporation may
designate by notice to the holders of shares of this Series) during
regular business hours, duly endorsed to the Corporation or in blank,
or accompanied by instruments of transfer to the Corporation or in
blank, or in form satisfactory to the Corporation, and shall give
written notice to the Corporation at such office that such holder
elects to convert such shares of this Series. If any such certificate
or certificates shall have been lost, stolen or destroyed, the holder
shall, in lieu of delivering such certificate or certificates, deliver
to the Corporation (or such other place) an indemnification agreement
and bond satisfactory to the Corporation. The Corporation shall, as
soon as practicable (subject to Section 3.8 hereof) after such deposit
of certificates for shares of this Series or delivery of the
indemnification agreement and bond, accompanied by the written notice
above prescribed, issue and deliver at such office (or such other
place) to the holder for whose account such shares were surrendered,
or a designee of such holder, certificates representing the number of
shares of Common Stock and the cash, if any, to which such holder is
entitled upon such conversion. Each share of Common Stock delivered to
a holder or its designee as a result of conversion of shares of this
Series pursuant to this Section 3 shall be accompanied by any rights
associated generally with each other share of Common Stock outstanding
as of the Conversion Date.
3.5 Conversion shall be deemed to have been made as of
the date (the "Conversion Date") that the certificate or certificates
for the shares of this Series to be converted and the written notice
prescribed in Section 3.4 hereof are received by the Corporation; and
the Person entitled to receive the Common Stock issuable upon such
conversion shall be treated for all purposes as the holder of record
of such Common Stock on such date. The Corporation shall not be
required to deliver certificates for shares of Common Stock while the
stock transfer books for such stock or for this Series are duly closed
for any purpose, but certificates for shares of Common Stock shall
<PAGE>
be delivered as soon as practicable after the opening of such books.
3.6 In the event that on or after [ ]<F2>, whether or not
any shares of this Series have been issued by the Corporation, either
(a) any consolidation or merger to which the Corporation is a party,
other than a merger or consolidation in which the Corporation is the
surviving or continuing corporation and which does not result in any
reclassification of, or change (other than a change in par value or
from par value to no par value or from no par value to par value, or
as a result of a subdivision or combination) in, outstanding shares of
Common Stock or (b) any sale or conveyance of all or substantially all
of the property and assets of the Corporation, then lawful provision
shall be made as part of the terms of such transaction whereby the
holder of each share of this Series shall have the right thereafter,
during the period such share shall be convertible, to convert such
share into the kind and amount of shares of stock or other securities
and property receivable upon such consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock into
which such shares of this Series could have been converted immediately
prior to such consolidation, merger, sale or conveyance, subject to
adjustment which shall be as nearly equivalent as may be practicable
to the adjustments provided for in Section 2.4 hereof and this Section
3 (based on (i) the election, if any, made in writing to the
Corporation by the holder of record (as of the date used for
determining holders of Common Stock entitled to make such election) of
the largest number of shares of this Series on or prior to the last
date on which a holder of Common Stock may make an election regarding
the kind or amount of securities or other property receivable by such
holder in such transaction or (ii) if no such election is timely made,
an assumption that such holder failed to exercise any such rights
(provided that if the kind or amount of securities or other property
is not the same for each nonelecting holder, then the kind and amount
of securities or other property receivable shall be based upon the
kind and amount of securities or other property receivable by a
plurality of the nonelecting holders of Common Stock)). In the event
that any of the transactions referred to in clause (a) or (b) of the
first sentence of
<F2> Insert the date of filing of the Certificate or the relevant effective
time.
<PAGE>
this Section 3.6 involves the distribution of cash or property (other
than equity securities) to a holder of Common Stock, lawful provision
shall be made as part of the terms of the transaction whereby the
holder of each share of this Series on the record date fixed for
determining holders of Common Stock entitled to receive such cash or
property (or if no such record date is established, the effective date
of such transaction) shall be entitled to receive the amount of cash
or property that such holder would have been entitled to receive had
such holder converted his shares of this Series into Common Stock
immediately prior to such record date (or effective date) (based on
the election or nonelection made by the holder of record of the
largest number of shares of this Series, as provided above).
Concurrently with the mailing to holders of Common Stock of any
document pursuant to which such holders may make an election regarding
the kind or amount of securities or other property that will be
receivable by such holders in any transaction described in clause (a)
or (b) of the first sentence of this Section 3.6, the Corporation
shall mail a copy thereof to the holders of record of the shares of
this Series as of the date used for determining the holders of record
of Common Stock entitled to such mailing, which document shall be used
by the holders of shares of this Series to make such an election. The
Corporation shall not enter into any of the transactions referred to
in clauses (a) or (b) of the first sentence of this Section 3.6 unless
effective provision shall be made in the certificate or articles of
incorporation or other constituent documents of the Corporation or the
entity surviving the consolidation or merger, if other than the
Corporation, or the entity acquiring the Corporation's assets, as the
case may be, so as to give effect to the provisions set forth in this
Section 3.6. The provisions of this Section 3.6 shall apply similarly
to successive consolidations, mergers, sales or conveyances. For
purposes of this Section 3.6, the term "Corporation" shall refer to
the Corporation as constituted immediately prior to the merger,
consolidation or other transaction referred to in this Section 3.6.
3.7 The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but
unissued stock, for the purpose of effecting the conversion of the
shares of this Series, such number of its duly authorized shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of this Series into such Common
Stock at any time (assuming that, at the time of the
<PAGE>
computation of such number of shares, all such Common Stock would be
held by a single holder); provided, however, that nothing contained
herein shall preclude the Corporation from satisfying its obligations
in respect of the conversion of the shares by delivery of purchased
shares of Common Stock that are held in the treasury of the
Corporation. All shares of Common Stock that shall be deliverable upon
conversion of the shares of this Series shall be duly and validly
issued, fully paid and nonassessable. For purposes of this Section 3,
any shares of this Series at any time outstanding shall not include
shares held in the treasury of the Corporation.
3.8 In any case in which Section 2.4 hereof shall
require that any adjustment be made effective as of or retroactively
immediately following a record date, the Corporation may elect to
defer (but only for five (5) Trading Days following the occurrence of
the event which necessitates the notice referred to in Section 2.4(d)
hereof) issuing to the holder of any shares of this Series converted
after such record date (i) the shares of Common Stock issuable upon
such conversion over and above (ii) the shares of Common Stock
issuable upon such conversion on the basis of the Formula Number prior
to adjustment; provided, however, that the Corporation shall deliver
to such holder a due bill or other appropriate instrument evidencing
such holder's right to receive such additional shares upon the
occurrence of the event requiring such adjustment.
3.9 If any shares of Common Stock that would be
issuable upon conversion pursuant to this Section 3 require
registration with or approval of any governmental authority before
such shares may be issued upon conversion (other than any such
registration or approval required to avoid a violation of the
Communications Laws), the Corporation will in good faith and as
expeditiously as possible cause such shares to be duly registered or
approved, as the case may be. The Corporation will use commercially
reasonable efforts to list the shares of (or depositary shares
representing fractional interests in) Common Stock required to be
delivered upon conversion of shares of this Series prior to such
delivery upon the principal national securities exchange, if any, upon
which the outstanding Common Stock is listed at the time of such
delivery.
3.10 The Corporation shall pay any and all issue or
other taxes that may be payable in respect of any
<PAGE>
issue or delivery of shares of Common Stock on conversion of shares of
this Series pursuant hereto. The Corporation shall not, however, be
required to pay any tax which is payable in respect of any transfer
involved in the issue or delivery of Common Stock in a name other than
that in which the shares of this Series so converted were registered,
and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Corporation the amount of
such tax, or has established, to the satisfaction of the Corporation,
that such tax has been paid.
3.11 In case of (i) the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation or (ii) any
action triggering an adjustment to the Formula Number pursuant to
Section 2.4 hereof or Section 3.6 hereof, then, in each case, the
Corporation shall cause to be mailed, first-class postage prepaid, to
the holders of record of the outstanding shares of this Series, at
least fifteen (15) days prior to the applicable record date for any
such transaction (or if no record date will be established, the
effective date thereof), a notice stating (x) the date, if any, on
which a record is to be taken for the purpose of any such transaction
(or, if no record date will be established, the date as of which
holders or record of Common Stock entitled to participate in such
transaction are determined), and (y) the expected effective date
thereof. Failure to give such notice or any defect therein shall not
affect the legality or validity of the proceedings described in this
Section 3.11.
4. Voting.
4.1 The shares of this Series shall have no voting
rights except as expressly provided in this Section 4 or as required
by law.
4.2 Each share of this Series shall be entitled to vote
together with the holders of shares of Common Stock upon all matters
upon which the holders of shares of Common Stock are entitled to vote.
In any such vote, the holders of shares of this Series shall be
entitled to a number of votes per share of this Series equal to the
product of (i) the Formula Number then in effect multiplied by (ii)
the maximum number of votes per share of Common Stock that any holder
of shares of Common Stock generally then has with respect to such
matter.
<PAGE>
4.3 Except as otherwise provided herein or by
applicable law, the holders of shares of this Series and the holders
of shares of Common Stock shall vote together as one class for the
election of directors of the Corporation and on all other matters
submitted to a vote of stockholders of the Corporation.
4.4 So long as any shares of this Series remain
outstanding, unless a greater percentage shall then be required by
law, the Corporation shall not, without the affirmative vote at a
meeting or the written consent with or without a meeting of the
holders of shares of this Series representing at least 66-2/3% of the
aggregate voting power of shares of this Series then outstanding,
amend, alter or repeal any of the provisions of the Certificate, or
the Certificate of Incorporation, so as in any such case to adversely
affect the voting powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, of the shares of this Series.
4.5 So long as any shares of this Series remain
outstanding, the Corporation shall not, without the affirmative vote
at a meeting or the written consent with or without a meeting of the
holders of shares of this Series representing 100% of the aggregate
voting power of shares of this Series then outstanding, amend, alter
or repeal the provisions of Section 7.8 hereof.
4.6 No consent of holders of shares of this Series
shall be required for (i) the creation of any indebtedness of any kind
of the Corporation, (ii) the authorization or issuance of any class or
series of Junior Stock, Parity Stock or Senior Stock, (iii) the
authorization of any increase or decrease in the number of shares
constituting this Series or (iv) the approval of any amendment to the
Certificate of Incorporation that would increase or decrease the
aggregate number of authorized shares of Preferred Stock or Common
Stock, except to the extent expressly required by the DGCL.
5. Liquidation Rights.
5.1 Upon the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, no distribution
shall be made to the holders of shares of Junior Stock (either as to
dividends or upon
<PAGE>
liquidation, dissolution or winding up) unless, prior thereto, the
holders of shares of this Series shall have received an amount equal
to the greater of (i) $.01 per whole share of this Series or (ii) an
aggregate amount per share equal to the product of the Formula Number
then in effect multiplied by the aggregate amount to be distributed
per share to holders of Common Stock.
5.2 Neither the sale, exchange or other conveyance (for
cash, shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Corporation nor the
merger or consolidation of the Corporation into or with any other
corporation, or the merger or consolidation of any other corporation
into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes
of this Section 5.
5.3 After the payment to the holders of the shares of
this Series of full preferential amounts provided for in this Section
5, the holders of this Series as such shall have no right or claim to
any of the remaining assets of the Corporation.
5.4 In the event the assets of the Corporation
available for distribution to the holders of shares of this Series
upon any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full
all amounts to which such holders and the holders of all Parity Stock
are entitled, no such distribution shall be made on account of any
shares of any Parity Stock upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on
account of the shares of this Series, ratably, in proportion to the
full distributable amounts for which holders of all Parity Stock are
entitled upon such dissolution, liquidation or winding up.
6. Transfer Restrictions.
6.1 Without the prior written consent of the
Corporation, no holder of shares of this Series shall offer, sell,
transfer, pledge, encumber or otherwise dispose of, or agree to offer,
sell, transfer, pledge, encumber or otherwise dispose of, any shares
of this Series or interests in any shares of this Series except to a
Permitted
<PAGE>
Transferee that shall agree that, prior to such Permitted
Transferee ceasing to be a Permitted Transferee, such Permitted
Transferee must transfer ownership of any shares of this Series,
and all interests therein, held by such Permitted Transferee to
the initial holder who received such shares pursuant to the LMC
Agreement. For the avoidance of doubt, the preceding sentence is
not intended to prohibit a holder of shares of this Series from
entering into, or offering to enter into, any arrangement under
which such holder agrees to promptly convert shares of this
Series and sell, transfer or otherwise dispose of the Common
Stock issuable upon such the conversion.
6.2 Certificates for shares of this Series shall bear
such legends as the Corporation shall from time to time deem
appropriate.
7. Other Provisions.
7.1 All notices from the Corporation to the holders of
shares of this Series shall be given by one of the methods specified
in Section 7.2 hereof. With respect to any notice to a holder of
shares of this Series required to be provided hereunder, neither
failure to give such notice, nor any defect therein or in the
transmission thereof, to any particular holder shall affect the
sufficiency of the notice or the validity of the proceedings referred
to in such notice with respect to the other holders or affect the
legality or validity of any distribution, right, warrant,
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any such
action. Any notice which was mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not
the holder receives the notice.
7.2 All notices and other communications hereunder
shall be deemed given (i) on the first Trading Day following the date
received, if delivered personally, (ii) on the Trading Day following
timely deposit with an overnight courier service, if sent by overnight
courier specifying next day delivery and (iii) on the first Trading
Day that is at least five days following deposit in the mails, if sent
by first class mail to (x) a holder at its last address as it appears
on the transfer records or registry for the shares of this Series and
(y) the Corporation at the following address (or at such other address
as the Corporation shall specify in a notice
<PAGE>
pursuant to this Section 7.2): Time Warner Inc., 75 Rockefeller Plaza,
New York, New York 10019, Attention: General Counsel.
7.3 Any shares of this Series which have been converted
or otherwise acquired by the Corporation shall, after such conversion
or acquisition, as the case may be, be retired and promptly cancelled
and the Corporation shall take all appropriate action to cause such
shares to obtain the status of authorized but unissued shares of
Preferred Stock, without designation as to series, until such shares
are once more designated as part of a particular series by the Board
of Directors. The Corporation may cause a certificate setting forth a
resolution adopted by the Board of Directors that none of the
authorized shares of this Series are outstanding to be filed with the
Secretary of State of the State of Delaware. When such certificate
becomes effective, all references to this Series shall be eliminated
from the Certificate of Incorporation and the shares of Preferred
Stock designated hereby as Series K Voting Participating Convertible
Preferred Stock shall have the status of authorized and unissued
shares of Preferred Stock and may be reissued as part of any new
series of Preferred Stock to be created by resolution or resolutions
of the Board of Directors.
7.4 The shares of this Series shall be issuable in
whole shares, in such fraction of a whole share as may be required in
order to effect any exchange of shares of Common Stock for shares of
this Series required by the terms of the LMC Agreement or, if
authorized by the Board of Directors (or any authorized committee
thereof), in any other fraction of a whole share so authorized.
7.5 The Corporation shall be entitled to recognize the
exclusive right of a Person registered on its records as the holder of
shares of this Series, and such holder of record shall be deemed the
holder of such shares for all purposes.
7.6 All notice periods referred to in the Certificate
shall commence on the date of the mailing of the applicable notice.
7.7 Any registered holder of shares of this Series may
proceed to protect and enforce its rights by any available remedy by
proceeding at law or in equity to protect and enforce any such rights,
whether for the
<PAGE>
specific enforcement of any provision in the Certificate or in aid of
the exercise of any power granted herein, or to enforce any other
proper remedy.
7.8 The shares of this Series shall not be subject to
redemption at the option of the Corporation, including pursuant to
Section 5 of Article IV of the Certificate of Incorporation (or any
equivalent provision in any further amendment to or restatement of the
Certificate of Incorporation).
IN WITNESS WHEREOF, Time Warner Inc. has caused this
certificate to be signed and attested this [ ] day of [ ].
TIME WARNER INC.,
by
--------------------
Name:
Title:
Attest:
--------------------
Name:
Title:
<PAGE>
EXHIBIT B TO LMC AGREEMENT
[FIRST REFUSAL]
STOCKHOLDERS' AGREEMENT
Stockholders' Agreement, dated ___________, ____, by
and among TCI Turner Preferred, Inc., a Colorado corporation
("TCITP"), United Cable Turner Investment, Inc.
("UC-Turner") and Communications Capital Corp. ("CCC" and,
together with UC- Turner and TCITP, the "TCITP
Stockholders"), R.E. Turner, III ("Turner") and Turner
Outdoor, Inc. ("TOI" and, together with Turner, the "Turner
Stockholders"), and Time Warner Inc., a Delaware corporation
("TW").
Each of the TCITP Stockholders, Turner and the Turner
Stockholders is or may become a beneficial owner of shares of capital stock
of TW. Turner, the Turner Stockholders, TW, and the TCITP Stockholders
desire to enter into the arrangements set forth in this Agreement regarding
future dispositions of shares of TW capital stock which Turner, the Turner
Stockholders or the TCITP Stockholders now or may in the future
beneficially own.
Therefore, in consideration of the premises and the mutual
benefits to be derived hereunder and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties
hereby agree as follows:
1. Definitions: The following terms shall have the following
respective meanings:
Affiliate: With respect to any Person, any other Person which
directly or indirectly Controls, is under common Control with or is
Controlled by such first Person. The term "affiliated" (whether or not
capitalized) shall have a correlative meaning. For purposes of this
Agreement (i) the Turner Foundation, Inc. (the "Turner Foundation"), the
R.E. Turner Charitable Remainder Unitrust No. 2 (the "Turner Unitrust") and
any other Charitable Transferee or Qualified Trust shall be deemed not to
be Affiliates of any Turner Stockholder and (ii) (A) no TCITP Affiliate
shall be deemed to be an Affiliate of any Turner Affiliate, or vice versa,
and (B) no TCITP Affiliate or Turner Affiliate shall be deemed to be an
Affiliate of any TW Affiliate, or vice versa.
Affiliated Group: With respect to any Stockholder, the group
consisting of such Stockholder and all Controlled Affiliates of such
Stockholder.
<PAGE>
Agreement: This Agreement as the same may be amended from time to
time in accordance with its terms.
Appraised Value: As defined in Section 4.1 hereof.
The "beneficial owner" of any security means a direct or indirect
beneficial owner of such security within the meaning of Rule 13d-3 under
the Exchange Act, as in effect on and as interpreted by the Commission
through the date of this Agreement, and the terms (whether or not
capitalized) "beneficially own," "beneficially owned" and "owned
beneficially" shall have correlative meanings; provided, however, that any
Person who at any time beneficially owns any Option or Convertible Security
shall also be deemed to beneficially own the Underlying Securities, whether
or not such Option or Convertible Security then is or within 60 days will
be exercisable, exchangeable or convertible.
Board of Directors: The Board of Directors of TW.
Bona Fide Offer: As defined in Section 3.1 hereof.
Broker Transactions: "Broker's transactions" within the meaning
of paragraph (g) of Rule 144 of the General Rules and Regulations under the
Securities Act.
Charitable Transfer: Any Disposition of Covered Securities by a
Turner Stockholder to the Turner Foundation, any other Charitable
Transferee, the Turner Unitrust or any other Qualified Trust that is not an
Exempt Transfer pursuant to clause (viii) of the definition of Exempt
Transfer; provided, however, that any such transferee shall, by a written
instrument in form and substance reasonably satisfactory to TCITP, agree to
be bound by the provisions of this Agreement with respect to the Covered
Securities that are the subject of such Charitable Transfer to the same
extent as the Turner Stockholder making such Disposition.
Charitable Transferee: Any charitable organization described in
Section 501(c)(3) of the Code.
Code: The Internal Revenue Code of 1986, as amended.
<PAGE>
Commission: The Securities and Exchange Commission, or any other
Federal agency at the time administering the Securities Act or the Exchange
Act.
Common Stock: The common stock, par value $1.00 per share, of TW
or any other shares of capital stock of TW into which the Common Stock may
be reclassified or changed.
Contract: Any agreement, contract, commitment, indenture, lease,
license, instrument, note, bond or security.
Control: As 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 ownership of securities,
partnership interests or other ownership interests, by contract, or
otherwise). The terms "Controlled," "Controlling" and similar variations
shall have correlative meanings.
Controlled Affiliate: When used with respect to a specified
Person, means each Affiliate of such Person which is Controlled by such
Person and which is not Controlled by or under common Control with any
other Person (except one or more other Controlled Affiliates of such
specified Person); provided, however, that for purposes of any provision of
this Agreement which requires any Stockholder to cause one or more of its
Controlled Affiliates to take or refrain from taking any action (including
any action relating to the Disposition of any Covered Securities) or which
otherwise purports to be applicable to any Covered Securities owned or held
by one or more Controlled Affiliates of such Stockholder, no Affiliate of
such Stockholder which otherwise would be a Controlled Affiliate of such
Stockholder shall be deemed to be a Controlled Affiliate of such
Stockholder unless such Stockholder possesses, directly or indirectly, the
power to direct decisions regarding such action or the Disposition of such
Covered Securities.
Convertible Securities: Evidences of indebtedness, shares of
stock or other securities or obligations which are convertible into or
exchangeable, with or without payment of additional consideration in cash
or property, for any TW Shares, either immediately or upon the occurrence
of a specified date or a specified event, the satisfaction of or failure to
satisfy any condition or the happening or failure to happen of any other
contingency.
<PAGE>
Covered Securities: Any and all TW Shares, Convertible Securities
and Options.
Current Market Price: As to any share of Common Stock at any
date, the average of the daily closing prices for shares of the Common
Stock for the five consecutive trading days ending on the trading day
immediately before the day in question. The closing price for such shares
for each day shall be the last reported sale price or, in case no such
reported sale takes place on such day, the average of the reported closing
bid and asked prices, in either case on the principal United States
securities exchange on which such shares are listed or admitted to trading,
or if they are not listed or admitted to trading on any such exchange, the
last reported sale price (or the average of the quoted closing bid and
asked prices if no sale is reported) as reported on the Nasdaq Stock
Market, or any comparable system, or if such shares are not quoted on the
Nasdaq Stock Market, or any comparable system, the average of the closing
bid and asked prices as furnished by any member of the National Association
of Securities Dealers, Inc. selected by TW.
Defensive Provision: (i) any control share acquisition,
interested stockholder, business combination or other similar antitakeover
statute (including the Delaware Statute) applicable to TW, (ii) any
provision of the Restated Certificate of Incorporation or Bylaws of TW
(including Article V of such Restated Certificate of Incorporation), and
(iii) any plan or agreement to which TW is a party (including the Rights
Plan), whether now or hereafter existing, which would constitute a "poison
pill" or similar antitakeover device.
Delaware Statute: Section 203 of the Delaware General Corporation
Law or any successor statutory provision.
Disadvantageous Result: (i) The breach or violation of any
Restriction applicable to any member of the Group of such Stockholder or
its Affiliates, (ii) any member of the Group of such Stockholder or its
Affiliates becoming subject to any Restriction to which it was not
previously subject, or (iii) the occurrence of any Rights Plan Triggering
Event.
Disposition: When used with respect to any Covered Security, any
sale, assignment, alienation, gift, exchange, conveyance, transfer,
hypothecation or other
<PAGE>
disposition whatsoever, whether voluntary or involuntary and whether
direct or indirect, of such Covered Security or of dispositive control
over such Covered Security. "Disposition" shall not include (i) a
transfer of voting control of a Covered Security to the extent required to
avoid imposition of any prohibition, restriction, limitation or condition
on or requirement under any Requirement of Law or Defensive Provision
having any of the effects described in clauses (A) and (B) of the
definition of Restriction herein, or (ii) delivery of a revocable proxy in
the ordinary course of business. The term "dispose" (whether or not
capitalized) shall mean to make a Disposition. Without limiting the
generality of the foregoing:
(i) any redemption, purchase or other acquisition in any manner
(whether or not for any consideration) by TW of any Covered Securities
shall be deemed to be a Disposition of such Covered Securities; and
(ii) none of the conversion or exchange of a Convertible
Security, the exercise of any Option or the failure to convert or
exchange a Convertible Security or to exercise any Option prior to the
expiration of the right of conversion, exchange or exercise shall be
deemed to be a Disposition of such Convertible Security or such
Option.
For purposes of this Agreement any Disposition of any Option or
Convertible Security shall also constitute a Disposition of the Underlying
Securities.
Effective Time: "Effective Time of the Merger", as defined in the
Merger Agreement.
Encumbrance: As defined in Section 3.1(f) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, or
any successor Federal statute, and the rules and regulations of the
Commission promulgated thereunder, as from time to time in effect.
Exempt Transfer: Any Disposition that falls within any one of the
following clauses: (1) An exchange or conversion of Covered Securities
which occurs by operation of law in connection with a merger, consolidation
of TW with or into another corporation, or a recapitalization,
reclassification or similar event that has been duly authorized and
approved by the required vote of the Board of
<PAGE>
Directors and the stockholders of TW pursuant to the Restated Certificate
of Incorporation of TW and the law of the jurisdiction of incorporation
of TW; (2) any surrender by a Stockholder to TW of Covered Securities
upon redemption by TW of such Covered Securities pursuant to any right
or obligation under the express terms of such Covered Securities that
is made on a proportionate basis from all holders of such Covered
Securities and is not at the option of such Stockholder; (3) any
Permitted Pledge and any transfer of such pledged Covered Securities to the
Pledgee upon default of the obligations secured by such pledge; (4) any
transfer solely from one member of the Affiliated Group of a Stockholder to
another member of the Affiliated Group of a Stockholder; (5) any (A)
deposit of Covered Securities into a trust under the Voting Trust
Agreement, (B) transfer or other disposition of Covered Securities so
deposited from any trustee thereunder to a successor trustee pursuant to
Section 5(i) of the Voting Trust Agreement or (C) transfer or other
disposition of Covered Securities so deposited from the trustee to TCITP or
any Controlled Affiliate of TCITP pursuant to Section 4(e) of the Voting
Trust Agreement; (6) any transfer by a Stockholder who is an individual to
(A) a spouse, (B) any other member of his immediate family (i.e., parents,
children, including those adopted before the age of 18, grandchildren,
brothers, sisters, and the spouses or children of the foregoing), (C)
Qualified Trust or (D) a custodian under the Uniform Gifts to Minors Act or
similar fiduciary for the exclusive benefit of his children during their
lives; (7) subject to Section 4, any transfer to the legal representatives
of a Stockholder who is an individual upon his death or adjudication of
incompetency or by any such legal representatives to any Person to whom
such Stockholder could have transferred such Covered Securities
pursuant to any clause of this definition; (8) a transfer by the Turner
Stockholders of up to an aggregate of 12 million shares (less the
product of (A) the number of shares of Class A Common Stock and Class B
Common Stock of TBS that are the subject of a Disposition (as such term is
defined in the TBS Shareholders' Agreement) effected by Turner that is
contemplated by Section 3(a) of the TBS Shareholders' Agreement after
September 22, 1995 and (B) the Common Conversion Number (as defined in the
Merger Agreement)) of Common Stock (appropriately adjusted to take into
account any stock split, reverse stock split, reclassification,
recapitalization, conversion, reorganization, merger or other change in
such Common Stock) to any Charitable Transferee if, in the written opinion
of legal counsel reasonably acceptable to TCITP, requiring such Charitable
<PAGE>
Transferee to become a party to this Agreement would limit by a material
amount the amount of the deduction for federal income tax purposes that
would be available to the applicable Turner Stockholder in the absence
of such requirement, and any subsequent transfer by any such Charitable
Transferee of any such shares; (9) any exchange, conversion or transfer of
Covered Securities pursuant to Section 4.1 of the LMC Agreement; and (10)
any sale or transfer permitted by and made in accordance with Section 3 or
4 hereof; provided, however, that no Disposition pursuant to clause (iii),
(iv), (v)(C), (vi) or (vii) shall be an Exempt Transfer, unless each Person
to whom any such Disposition is made, unless already a party to this
Agreement and bound by such provisions or a Controlled Affiliate of a party
to this Agreement who is bound by such provisions, shall by a written
instrument become a party to this Agreement bound by all of the provisions
hereof applicable to the Stockholder making such Disposition.
Exercise Notice: Either an Other Stockholder Exercise Notice or a
TW Exercise Notice, as the context requires.
Fast-Track Offer Notice: As defined in Section 3.3(a) hereof.
Fast-Track Sale: Any sale of shares of Common Stock for the
account of any Stockholder which meets all of the following requirements as
of the date a Fast-Track Offer Notice is given with respect thereto
pursuant to Section 3.3:
(i) such Stockholder has a bona fide intention to sell such
shares of Common Stock within a period of 115 days after such date and
such sale is not being undertaken as a result of any offer to buy, bid
or request, invitation or solicitation to sell made by any Person
(other than any such offer, bid, request, invitation or solicitation
from a registered broker-dealer or investment banker not intended to
circumvent the provisions of Section 3.1);
(ii) the Common Stock is registered under Section 12(b) or 12(g)
of the Exchange Act and is listed for trading on a national securities
exchange registered under the Exchange Act or traded in the
over-the-counter market and quoted in an automated quotation
<PAGE>
system of the National Association of Securities Dealers, Inc.;
(iii) such sale is to be effected through Broker Transactions or
pursuant to a registration statement covering such shares in effect at
the date of the Fast-Track Offer Notice; and
(iv) the following sum does not exceed $100 million:
(A) the aggregate Current Market Price of the shares of
Common Stock to be sold (determined as of the date a
Fast-Track Offer Notice with respect thereto is given
pursuant to Section 3.3), plus
(B) the aggregate sale price of all shares of Common
Stock sold pursuant to Section 3.3 by any member or former
member of the same Group as such Stockholder during the 90
days immediately preceding the date of such Fast Track Offer
Notice, plus
(C) without duplication, the aggregate Current Market
Price, determined as of the date specified in subclause (A)
of this clause (iv), of all shares of Common Stock as to
which any Fast-Track Offer Notice is given by any other
Stockholder who is a member of the same Group as such
Stockholder within two business days before or two business
days after such date.
Fast-Track Shares: As defined in Section 3.3(a) hereof.
Free to Sell Date: As defined in Section 3.1(j) hereof.
Governmental Authority: Any nation or government, any state or
other political subdivision thereof and any court, commission, agency or
other body exercising executive, legislative, judicial or regulatory
functions.
<PAGE>
Group: Either the TCITP Stockholders considered collectively as a
group or the Turner Stockholders considered collectively as a group, as the
context requires.
Initial Trigger: As of a given time, for either Stockholder, with
respect to the Subject Shares covered by any Offer Notice or Tender Notice,
the greatest number of such Subject Shares as may then be acquired by such
Stockholder (or its Affiliates) without causing a Disadvantageous Result.
Involuntary Event: As defined in Section 4.1 hereof.
Judgment: Any order, judgment, writ, decree, award or other
determination, decision or ruling of any court, judge, justice or
magistrate, any other Governmental Authority or any arbitrator.
LMC Agreement: The LMC Agreement dated as of September 22, 1995,
among TW, Liberty Media Corporation and certain subsidiaries of Liberty
Media Corporation.
Merger Agreement: The Agreement and Plan of Merger dated as of
September 22, 1995, among Time Warner Inc., Time Warner Acquisition Corp.
and TBS.
Offer Notice: As defined in Section 3.1(a) hereof.
Options: Any options, warrants or other rights (except
Convertible Securities), however denominated, to subscribe for, purchase or
otherwise acquire any TW Shares or Convertible Securities, with or without
payment of additional consideration in cash or property, either immediately
or upon the occurrence of a specified date or a specified event or the
satisfaction or failure to satisfy any condition or the happening or
failure to happen of any other contingency.
Original Rights Plan: As defined in Section 5.2 hereof.
Other Stockholder: With respect to a Turner Stockholder, the
"Other Stockholder" shall be TCITP, and with respect to a TCITP
Stockholder, the "Other Stockholder" shall be Turner.
<PAGE>
Other Stockholder Elected Shares: As defined in Section 3.1(e)
hereof.
Other Stockholder Exercise Notice: As defined in Section 3.1(e)
hereof.
Other Stockholder Group: With respect to any Other Stockholder,
the Group of which such Other Stockholder is a member.
Permitted Pledge: A bona fide pledge of Covered Securities by a
Stockholder to a financial institution to secure borrowings permitted by
applicable law; provided that such financial institution agrees in writing
to be bound by the provisions of Sections 2, 3 and 4 of this Agreement to
the same extent and with the same effect as such Stockholder and the
borrowings so secured are with full recourse against other assets of such
Stockholder or other collateral.
Per-Share Offer Consideration: As defined in Section 3.1(a)
hereof.
Person: Any individual, corporation, limited liability company,
general or limited partnership, joint venture, association, joint stock
company, trust, unincorporated business or organization, governmental
authority or other legal entity or legal person, whether acting in an
individual, fiduciary or other capacity. The term "Person" also includes
any group of two or more Persons formed for any purpose.
Prospective Purchaser: As defined in Section 3.1 hereof.
Public Sale: Any sale to the public for the account of any
Stockholder, (i) in Broker Transactions, (ii) otherwise pursuant to Rule
144 or (iii) through a registered offering pursuant to an effective
registration statement under the Securities Act which in any case meets
both of the following requirements (to the extent applicable) as of the
date an Offer Notice is given:
(A) such Stockholder has a bona fide intention to sell such
shares of Common Stock as promptly as practicable after all applicable
requirements of the Securities Act are satisfied, and such sale is not
being undertaken as a result of any offer to buy, bid or request,
invitation or solicitation to sell made by
<PAGE>
any Person (other than any such offer, bid, request, invitation or
solicitation from a registered broker-dealer or investment banker
not intended to circumvent the provisions of Section 3.1); and
(B) in the case of a registered offering, such shares either have
been registered under the Securities Act or such Stockholder has the
immediate right to require TW to register such shares under the
Securities Act.
Purchase Price: As defined in Section 3.1(a) hereof.
Purchase Right: As defined in Section 3.1(c) hereof.
Purchased Shares: When used with reference to a Purchaser which
is the Other Stockholder, the Other Stockholder Elected Shares, and when
used with respect to a Purchaser which is a TW Affiliate, the TW Elected
Shares.
Purchaser: The term "Purchaser" means TCITP, in the case of any
purchase of TCITP Elected Shares pursuant to any Other Stockholder Exercise
Notice, Turner, in the case of any purchase of Turner Elected Shares
pursuant to any Other Stockholder Exercise Notice, and TW, in the case of
any purchase of TW Elected Shares pursuant to any TW Exercise Notice.
Qualified Trust: Any trust described in Section 664 of the Code
of which a Stockholder, members of his family or a Charitable Transferee
(and no other persons) are income beneficiaries.
Related Party: As to any Person, any Affiliate of such Person
and, if such Person is a natural person, such Person's parents, children,
siblings and spouse, the parents and siblings of such Person's spouse and
the spouses of such Person's children who become parties to this Agreement.
Requirement of Law: With respect to any Person, all federal,
state and local laws, rules, regulations, Judgments, injunctions and orders
of a court or other Governmental Authority or an arbitrator, applicable to
or binding upon such Person, any of its property or any business conducted
by it or to which such Person, any of its assets or any business conducted
by it is subject.
<PAGE>
Restriction: Any prohibition, restriction, limitation or
condition on or requirement under any Defensive Provision or Requirement of
Law (A) that (i) limits the ability of any Stockholder to acquire
additional TW Shares or hold or dispose of any TW Shares or to participate
in any material right or benefit otherwise available or to be distributed
to security holders of the same class as the TW Shares, generally, or
requires such Stockholder to Dispose of any TW Shares, (ii) reduces or
otherwise limits the ability to exercise the voting or other rights of all
or a portion of the TW Shares beneficially owned by such Stockholder below
that applicable to TW Shares generally, or (iii) limits the ability of any
Stockholder to consummate any merger, consolidation, business combination
or other transaction with, TW or any of its subsidiaries or other
Affiliates or substantially increases the cost of consummation or (B) under
which the acquisition or ownership of additional TW Shares (i) would result
in a material violation of applicable law, (ii) would require the
discontinuance of any material business or activity or the divestiture of
any material portion of any business or property, or (iii) would make the
continuation of any such business or activity or the ownership of such
property illegal or subject to material damages or penalties.
Rights: The rights issued to the holders of record of the Common
Stock outstanding on January 20, 1994, or issued thereafter, with each
right entitling the holder thereof to purchase, on the terms and subject to
the conditions contained in the Rights Plan, one one-thousandth of a share
of Series A Participating Cumulative Preferred Stock, par value $1.00 per
share, of TW, as the same may have been or may be amended or modified from
time to time, and any other security or right which may be issued or
granted in exchange or substitution therefor or in replacement or upon
exercise thereof.
Rights Plan: The Rights Agreement, dated as of January 20, 1994,
between TW and Chemical Bank, as Rights Agent, as the same may have been or
may be amended from time to time.
Rights Plan Trigger: As of a given time, for either Stockholder,
with respect to the Subject Shares covered by any Offer Notice or Tender
Notice, the greatest number of such Subject Shares as may then be acquired
by such Stockholder (or its Affiliates) without causing a Rights Plan
Triggering Event.
<PAGE>
Rights Plan Triggering Event: Any member of either Group becoming
an "Acquiring Person" within the meaning of the Rights Plan (as then in
effect) or the Rights becoming transferable separately from shares of the
Common Stock, as determined in accordance with Section 3.1(d) (or an
analogous event under any subsequent "poison pill" adopted by TW).
Sale Agreement: As defined in Section 3.1(f) hereof.
Securities Act: The Securities Act of 1933, as amended, and the
rules and regulations of the Commission promulgated thereunder, as from
time to time in effect.
Selling Stockholder: As defined in Section 3.1 hereof.
Stockholder: Any TCITP Stockholder or Turner Stockholder.
Subject Shares: As defined in Section 3.1 hereof.
TBS: Turner Broadcasting System, Inc.
TBS Shareholders' Agreement: The Shareholders' Agreement dated as
of June 3, 1987, among TBS, Turner and the Original Investors named
therein.
TCITP: As defined in the opening paragraphs of this Agreement.
TCITP Affiliates: TCITP and the Affiliates of TCITP.
TCITP Stockholders: TCITP and all Controlled Affiliates of TCITP,
in each case so long as such Person is or is required to be a party to this
Agreement or is the beneficial owner of any TCITP TW Shares.
TCITP TW Shares: Any and all Covered Securities of which any
TCITP Stockholder becomes the direct or indirect beneficial owner at the
Effective Time or thereafter.
Tendering Stockholder: As defined in Section 3.4(a) hereof.
<PAGE>
Tender Notice: As defined in Section 3.4(a) hereof.
Tender Shares: As defined in Section 3.4(a) hereof.
Turner: As defined in the opening paragraphs of this Agreement.
Turner Affiliates: The Turner Stockholders and the Affiliates of
the Turner Stockholders.
Turner Stockholders: Turner and all Affiliates of Turner, in each
case so long as such Person is the beneficial owner of any Covered
Securities, the Turner Foundation, the Turner Unitrust or any other
Charitable Transferee if such entity is required to become a party to this
Agreement as a result of a Charitable Transfer (provided, however, that any
such entity shall be deemed a Turner Stockholder only with respect to
Turner TW Shares acquired by such entity in a Charitable Transfer) and any
Turner Related Party who is required to become a party to this Agreement
pursuant to the terms hereof.
Turner TW Shares: Any and all Covered Securities of which any
Turner Stockholder becomes the direct or indirect beneficial owner at the
Effective Time or thereafter; provided, however, that Covered Securities
beneficially owned by the Turner Foundation or the Turner Unitrust
immediately after the Effective Time shall not be Turner TW Shares.
TW: As defined in the opening paragraphs of this Agreement.
TW Affiliate: TW and Affiliates of TW.
TW Elected Shares: In the case of any Offer Notice, any Subject
Shares covered thereby as to which TW exercises its right of purchase
pursuant to Section 3.1(e).
TW Exercise Notice: As defined in Section 3.1(e).
TW Shares: Any and all shares of capital stock of TW of any class
or series, whether now or hereafter authorized or existing.
<PAGE>
TW Stockholders Agreement: Any stockholders' agreement between TW
or any one or more Turner Stockholders in effect on the date hereof.
Underlying Securities: When used with reference to any Option or
Convertible Security as of any time, the Covered Securities issuable or
deliverable upon exercise, exchange or conversion of such Option or
Convertible Security (whether or not such Option or Convertible Security is
then exercisable, exchangeable or convertible). In the case of an Option to
acquire a Convertible Security, the Underlying Securities of such Option
shall include the Underlying Securities of such Convertible Security.
A. Restrictions on Dispositions of Covered Securities. No Turner
Stockholder shall Dispose of any Turner TW Shares, except in an Exempt
Transfer or a Charitable Transfer. No TCITP Stockholder shall Dispose of
any TCITP TW Shares, except in an Exempt Transfer. Any purported
Disposition of Covered Securities in violation of this Agreement shall be
null and void and of no force or effect, and, if TW has actual knowledge of
such violation, TW shall (and shall direct each registrar and transfer
agent, if any, for the Covered Securities to) refuse to register or record
any such purported Disposition on its transfer and registration books and
records or to otherwise recognize such purported Disposition. Subject to
Section 4, if any Involuntary Event affecting any Stockholder shall occur,
such Stockholder's legal representatives, heirs, successors or transferees,
as the case may be, and all Covered Securities beneficially owned by them
shall be bound by all the terms and provisions of this Agreement. The
Turner Stockholders shall, and shall cause each Related Party of Turner to,
comply with the provisions of this Agreement intended to be applicable to
the Turner Stockholders or any Turner TW Shares. The TCITP Stockholders
shall, and shall cause each Related Party of each TCITP Stockholder to,
comply with the provisions of this Agreement intended to be applicable to
the TCITP Stockholders or any TCITP TW Shares.
B. Right of First Refusal:
1. If any Stockholder (the "Selling Stockholder") desires to
accept an offer (other than with respect to a Public Sale or a Fast-Track
Sale, consistent with the definitions thereof, or a tender or exchange
offer to which Section 3.4 is applicable) (a "Bona Fide Offer")
<PAGE>
from a Person which is not a Related Party of such Selling Stockholder
(the "Prospective Purchaser") to purchase any or all of the Covered
Covered Securities beneficially owned by such Selling Stockholder (the
"Subject Shares"), such Selling Stockholder shall, in accordance with the
following procedures, terms and conditions, first offer to sell the Subject
Shares to the Other Stockholder for a consideration (subject to subsections
(g) and (h) of this Section 3.1) and on terms no more favorable to the
Selling Stockholder than those which would apply if the Selling Stockholder
accepted the Bona Fide Offer:
a. The Selling Stockholder shall deliver to the Other
Stockholder a written notice (the "Offer Notice", which term shall include
any Offer Notice delivered pursuant to Section 3.2(a)) which shall (i) state
the number of shares or other appropriate unit of Covered Securities of each
class, series or other type that comprise the Subject Shares; (ii) identify
the Prospective Purchaser; and (iii) state the aggregate purchase price to
be paid by the Prospective Purchaser for the Subject Shares (the "Purchase
Price") and the kind and amount of consideration proposed to be paid or
delivered by the Prospective Purchaser for the Subject Shares of each
class, series or other type and the amount thereof allocable to each share
or other appropriate unit of the Subject Shares of that class, series or
other type (the "Per-Share Offer Consideration" for the Covered Securities
of that class, series or other type), the timing and manner of the payment
or other delivery thereof and any other material terms of such Bona Fide
Offer. The Selling Stockholder shall deliver a copy of the Offer Notice to
TW at the same time it is delivered to the Other Stockholder.
b. The Offer Notice shall be accompanied by a true and
complete copy of the Bona Fide Offer.
c. If an Offer Notice is given by a Selling Stockholder, the
Other Stockholder shall have the right (the "Purchase Right"), exercisable
in the manner hereinafter provided, to require the Selling Stockholder to
sell to the Other Stockholder the number or other amount of the Subject
Shares determined in accordance with this Section 3.1(c). If there is no
Defensive Provision or Requirement of Law in effect at the time any Offer
Notice is given that imposes any Restriction on the Other Stockholder (or
that would impose a Restriction if the Other Stockholder were to exercise
the Purchase Right as to all the Subject Shares), the Other Stockholder may
exercise the Purchase Right only
<PAGE>
as to all, but not less than all of the Subject Shares. If there are one or
more Defensive Provisions or Requirements of Law in effect at the time such
Offer Notice is given that impose any Restriction on the Other Stockholder
(or that would impose such a Restriction if the Other Stockholder were to
exercise the Purchase Right as to all the Subject Shares), the Other
Stockholder may exercise the Purchase Right only as to a number of Subject
Shares that is greater than or equal to the Initial Trigger relating to the
Other Stockholder at such time and less than or equal to the Rights Plan
Trigger relating to the Other Stockholder at such time. For purposes of
this Section 3.1(c), the Initial Trigger and the Rights Plan Trigger will
be determined as provided in Section 3.1(d).
d. Commencing not later than the second business day after
an Offer Notice is given if there are one or more Defensive Provisions in
effect at such time, the Selling Stockholder and the Other Stockholder
shall consult with each other and TW in an effort to agree with respect to
the Initial Trigger and the Rights Plan Trigger, and upon request TW will
provide the Stockholders with information relating thereto pursuant to
Section 3.5. If agreement is not reached by the Selling Stockholder and the
Other Stockholder on or prior to the fifth business day after the Offer
Notice was given, then, within two business days after such fifth business
day, the Selling Stockholder and the Other Stockholder shall jointly
designate an independent law firm of recognized national standing, which
firm will be directed to submit a written report regarding its conclusions
as to the Initial Trigger and the Rights Plan Trigger within 5 business
days. The number of Subject Shares as to which the Other Stockholder may
exercise the Purchase Right shall be determined as follows:
(i) upon such law firm rendering a written report within
such 5 business day period as to the Initial Trigger and the
Rights Plan Trigger, if the Other Stockholder elects to exercise
its Purchase Right, the Other Stockholder may exercise such
Purchase Right only as to a number of Subject Shares equal to or
greater than the Initial Trigger and less than or equal to the
Rights Plan Trigger, as such amounts shall be specified in such
report; and
(ii) if such law firm does not render a written report as to
the Initial Trigger and the
<PAGE>
Rights Plan Trigger within such 5 business day period, if
the Other Stockholder elects to exercise its Purchase Right, the
Other Stockholder may exercise such Purchase Right only as to a
number of Subject Shares equal to or greater than the Initial
Trigger and less than or equal to the Rights Plan Trigger, as
determined by such Other Stockholder.
If any law firm is so retained, TW, the Other Stockholder and the
Selling Stockholder shall provide such law firm with such information as
may be reasonably requested in connection with the preparation of such
report and shall otherwise cooperate with each other and such law firm with
the goal of allowing such law firm to render such report as promptly as
reasonably practicable. Each of TW, the Other Stockholder and the Selling
Stockholder shall be responsible for the payment of one-third of the fees
and disbursements of such law firm, except that if, at the time such law
firm is retained, TW waives its right to purchase any Subject Shares
covered by the current Offer Notice, TW shall not be responsible for any
such fees and disbursements, which shall in such case be borne equally by
the Selling Stockholder and the Other Stockholder. If the Selling
Stockholder and the Other Stockholder are unable to agree upon the
selection of an independent law firm within the two business day period
provided for in this Section 3.1(d), either such Stockholder may apply to
the American Arbitration Association (or another nationally-recognized
organization that provides alternative dispute resolution services) to
appoint an independent law firm to prepare and submit the report provided
for in this Section 3.1(d), and any law firm so appointed shall constitute
the law firm contemplated by this Section 3.1(d). Anything contained herein
to the contrary notwithstanding, no determination relating to the Initial
Trigger or the Rights Plan Trigger pursuant to this Section 3.1(d) shall be
binding upon TW in the absence of a written instrument signed by TW
agreeing to such determination (it being understood that TW has no
obligation to provide the Stockholders with any such written instrument).
(e) If the Other Stockholder desires to exercise the Purchase
Right with respect to any Subject Shares covered by any Offer Notice, it
shall do so by a written notice (an "Other Stockholder Exercise Notice")
delivered to the Selling Stockholder by the Other Stockholder prior to 5:00
P.M., New York City time, on the eighth business day following the receipt
of an Offer Notice
<PAGE>
or, if there is any dispute as to the Initial Trigger or the Rights Plan
Trigger, within 3 business days after the resolution of such dispute.
The Other Stockholder Exercise Notice shall state the aggregate
number or other appropriate amount of each class, series or other type of
the Subject Shares to be purchased (the "Other Stockholder Elected
Shares"). A copy of the Other Stockholder Exercise Notice shall be sent to
TW at the same time it is given to the Selling Stockholder. If an Other
Stockholder Exercise Notice is given within such period but, in accordance
with Sections 3.1(c) and 3.1(d), such Other Stockholder Exercise Notice
specifies that only a portion of the Subject Shares are elected to be
purchased (a "Partial Exercise Notice), then the Selling Stockholder shall
have the right, exercisable by written notice to each of the Other
Stockholder and TW given within five business days after the Partial
Exercise Notice was given, to terminate the Offer Notice and abandon the
proposed sale pursuant to the Bona Fide Offer, in which case the provisions
of this Section 3.1 shall be reinstated with respect to any and all
proposed future Dispositions of the same or any Subject Shares pursuant to
any subsequent Bona Fide Offer by the same or any other Prospective
Purchaser. If no Other Stockholder Exercise Notice is delivered within the
applicable number of business days, or if an Other Stockholder Exercise
Notice is delivered but the number of Other Stockholder Elected Shares is
less than the number of Covered Securities that are the subject of such
Offer Notice and the Selling Stockholder does not exercise its right to
terminate the Offer Notice and abandon the proposed sale pursuant to the
preceding sentence, TW shall have the right, exercisable by a written
notice (a "TW Exercise Notice") given to the Selling Stockholder by TW
prior to 5:00 P.M., New York City time, on the second business day
following the expiration of such period of 8 or 3 business days, as the
case may be, to elect to purchase all, but not less than all of the Subject
Shares which are not Other Stockholder Elected Shares, in accordance with
the procedures, terms and conditions set forth below in this Section 3.1
and for a consideration (subject to subsections (g) and (h) of this Section
3.1) and on terms no more favorable to the Selling Stockholder than those
which would apply if the Selling Stockholder accepted the Bona Fide Offer
with respect to the TW Elected Shares. A copy of the TW Exercise Notice
shall be sent to the Other Stockholder at the same time it is given to the
Selling Stockholder. The Selling Stockholder shall have the right to
condition the closing of the sale of the Other Stockholder Elected Shares
to the Other Stockholder upon the
<PAGE>
closing of the sale of any TW Elected Shares and the closing of the sale
of any TW Elected Shares on the closing of the sale of the Other
Stockholder Elected Shares.
(f) If an Exercise Notice is given in accordance with Section
3.1(e), within 5 business days thereafter the Purchaser and the Selling
Stockholder shall enter into a binding agreement (the "Sale Agreement") for
the sale of the Purchased Shares to the Purchaser, which agreement shall
contain such representations, warranties, covenants and conditions no less
favorable to the Selling Stockholder than the terms contemplated by the
Bona Fide Offer, except with respect to the kind and number or other amount
of Subject Shares to be purchased and the aggregate purchase price payable
in the event that the Purchased Shares constitute fewer than all the
Subject Shares. The Sale Agreement shall provide for the closing of the
purchase and sale of the Purchased Shares to be held at the offices of the
Selling Stockholder at 11:00 a.m. local time on the 60th day after the
Offer Notice was given (subject to extension in accordance with Sections
3.1(i) and 5.1) or at such other place or on such earlier date as the
parties to the Sale Agreement may agree. At such closing, the Purchaser
shall (subject to subsections (e), (g) and (h) of this Section 3.1)
purchase the Purchased Shares for cash by wire transfer of immediately
available funds in an account at a bank designated by the Selling
Stockholder, such designation to be made no less than three days prior to
closing. At the closing, the Selling Stockholder shall deliver the
certificates and other evidences of the Purchased Shares to the Purchaser,
against payment in full for the Purchased Shares, free and clear of any
pledge, claim, lien, option, restriction, charge, shareholders' agreement,
voting trust or other encumbrance of any nature whatsoever to which the
Purchased Shares are subject in the hands of the Selling Stockholder other
than restrictions on transfer arising under federal and state securities
laws and claims, restrictions, options and encumbrances arising under this
Agreement (an "Encumbrance"). Without limiting the generality of the
immediately preceding sentence, if such Purchased Shares are Other
Stockholder Elected Shares and if the Other Stockholder is TCITP, such
Purchased Shares shall be free and clear of all Encumbrances existing or
arising under any TW Stockholders Agreement, and TW shall release all such
Encumbrances upon the closing of the purchase and sale of such Purchased
Shares pursuant hereto. The certificates evidencing the Purchased Shares
will be in proper form for transfer, with appropriate stock powers
<PAGE>
executed in blank attached and documentary or transfer tax stamps affixed.
The Selling Stockholder shall execute such other documents as shall be
necessary to effectuate the sale of the Purchased Shares and such
additional documents as may be contemplated by the Bona Fide Offer or as
may reasonably be requested by any purchaser. The Other Stockholder may
assign any or all of its rights, and delegate any or all of its
obligations, under any Sale Agreement to which it is a party with respect
to the purchase and sale of any or all of the Other Stockholder Elected
Shares to any Controlled Affiliate of the Other Stockholder, provided that
no such assignment or delegation shall release the Other Stockholder from
its obligations thereunder without the written consent of the Selling
Stockholder. TW may assign any or all of its rights, and delegate any or
all of its obligations, under any Sale Agreement to which it is a party or
otherwise with respect to the purchase and sale of any or all of the TW
Elected Shares to any Controlled Affiliate of TW, provided that no such
assignment or delegation shall release TW from its obligations thereunder
without the written consent of the Selling Stockholders.
(g) Subject to Section 3.1(h), if the Bona Fide Offer
contemplated that the Purchase Price for the Subject Shares proposed to be
Disposed of by the Selling Stockholder would be paid, in whole or in part,
other than in cash, then the Purchaser shall pay for its Purchased Shares
in cash in lieu of such other consideration in an amount equal to the fair
market value of such other consideration as agreed by the Selling
Stockholder and the Other Stockholder. In the event of any disagreement
between the Other Stockholder and the Selling Stockholder as to the fair
market value of any non-cash consideration payable to the Selling
Stockholder, then at the request of either such party given within 5
business days following the delivery of the Offer Notice such determination
shall be conclusively made by a panel of appraisers, one of whom shall be
selected by the Other Stockholder, the second of whom shall be selected by
the Selling Stockholder and the third of whom shall be selected by the
first two appraisers. The Other Stockholder and the Selling Stockholder
shall each designate their appraiser within 3 business days after receipt
of any request for appraisal, and such appraisers shall designate the third
appraiser within 3 business days thereafter. Each appraiser shall submit
its determination of the fair market value of such non-cash consideration
to the Other Stockholder, TW and the Selling Stockholder within five business
days after the panel is empaneled and such fair
<PAGE>
market value shall be the average of the two closest valuations (or the
middle valuation, if the highest and lowest valuation differ from
the middle valuation by an equal amount). Each appraiser appointed shall be
a nationally recognized investment banking, appraisal or accounting firm
which is not directly or indirectly a Related Party of any party to this
Agreement or any Prospective Purchaser and which has no interest (other
than the receipt of customary fees) in the event giving rise to the need
for the appraisal. Each of the Other Stockholder and the Selling
Stockholder shall be responsible for the payment of one-half of the costs
of such appraisal.
(h) If the Bona Fide Offer contemplated that any part of the
Purchase Price for any Subject Shares would be paid in debt securities,
each purchaser of any of such Subject Shares may, in its discretion, elect
to pay the equivalent portion of its allocable share of the Purchase Price
for the Purchased Shares through the issuance of debt securities with
substantially similar terms in an amount the fair market value of which is
equal to the fair market value of the equivalent portion of the debt
securities specified in the Bona Fide Offer, in each case as agreed by such
purchaser and the Selling Stockholder or, failing such agreement, as
determined in accordance with the appraisal procedures specified in Section
3.1(g), taking into consideration relevant credit factors relating to the
Prospective Purchaser and each such purchaser and the marketability and
liquidity of such debt securities.
(i) All time periods specified in subsection (e) or (f) of this
Section 3.1 shall be extended for a number of days equal to the number of
days in the period from the date the request for appraisal is made pursuant
to subsection (g) or (h) of this Section 3.1 or Section 4 (as the case may
be) through and including the date of submission of the last to be
submitted of the required appraisals. Each of the Other Stockholder, the
Selling Stockholder and TW shall be responsible for the payment of
one-third of the costs of each appraisal pursuant to subsection (h) of this
Section 3.1 (including the fees of all appraisers appointed in accordance
with subsection (h) of this Section 3.1), except that, if, at the time such
appraisal is requested, TW waives its right to purchase any Subject Shares
covered by the current Offer Notice, TW shall not be responsible for any
such fees and disbursements, which shall in such case be borne equally by
the Selling Stockholder and the Other Stockholder.
<PAGE>
(j) The Selling Stockholder shall have the right to sell
Subject Shares to the Prospective Purchaser only in the following
circumstances:
(i) If neither an Other Stockholder Exercise Notice nor a TW
Exercise Notice is given in accordance with Section 3.1(e) within the
applicable time period specified therein (as such period may extended
pursuant to subsection (i) of this Section 3.1), the Selling
Stockholder shall have the right (within the period specified below in
this subsection) to sell all but not less than all of the Subject
Shares to the Prospective Purchaser, and in such case the "Free to
Sell Date" shall be the business day following the expiration of the
last to expire of all time periods provided for in Section 3.1(e).
(ii) If an Other Stockholder Exercise Notice is given but the
number of Other Stockholder Elected Shares is less than the number of
Covered Securities that are subject to the relevant Offer Notice, and
if no TW Exercise Notice is given in accordance with Section 3.1(e)
within the applicable time period specified therein (as such period
may be extended pursuant to subsection (i) of this Section 3.1), then
the Selling Stockholder shall have the right (within the period
specified below in this subsection) to sell all, but not less than all
of the Subject Shares which are not Other Stockholder Elected Shares
to the Prospective Purchaser, and in such case the "Free to Sell Date"
shall be the earlier of the fifth business day following the date the
Other Stockholder Exercise Notice was given and the date that TW
notifies the Selling Stockholder that it has determined not to
purchase any such Subject Shares.
(iii) If an Other Stockholder Exercise Notice is given but a Sale
Agreement for the Other Stockholder Elected Shares is not executed by
the Purchaser and tendered to the Selling Stockholder for execution
within the 5 business day period specified in the first sentence of
Section 3.1(f) (as such period may be extended pursuant to subsection (i)
of this Section 3.1), then the Selling Stockholder shall have the
right (within the period specified below in this subsection) to sell
all, but not less than all of the Subject Shares to the Prospective
Purchaser, and in such case
<PAGE>
the "Free to Sell Date" shall be the business day after
expiration of such five business day period.
(iv) If a TW Exercise Notice is given but a Sale Agreement for
the TW Elected Shares is not executed by the Purchaser and tendered to
the Selling Stockholder for execution within the 5 business day period
specified in the first sentence of Section 3.1(f) (as such period may be
extended pursuant to subsection (i) of this Section 3.1), then the
Selling Stockholder shall have the right (within the period specified
below in this subsection) to sell all, but not less than all of the TW
Elected Shares to the Prospective Purchaser, and in such case the
"Free to Sell Date" shall be the business day after the expiration of
such 5 business day period.
(v) If a Sale Agreement for either Other Stockholder Elected
Shares or TW Elected Shares is executed by the Purchaser and the
Selling Stockholder, but the closing of the purchase and sale
thereunder shall not occur by the latest date for such closing
determined in accordance with Sections 3.1(f), 3.1(i) and 5.1 for any
reason other than a breach or violation by the Selling Stockholder of
any of such Selling Stockholder's representations, warranties,
covenants or agreements that are a condition to such closing, then the
Selling Stockholder shall have the right (within the period specified
below in this subsection) to sell all, but not less than all of such
Other Stockholder Elected Shares or the TW Elected Shares covered by
such Sale Agreement to the Prospective Purchaser, and in such case the
"Free to Sell Date" shall be the business day after such latest date
for such closing as so determined.
(vi) If between the date an Other Stockholder Election Notice is
given with respect to any Other Stockholder Elected Shares and the
closing of the purchase and sale of such Other Stockholder Elected
Shares, there shall be any amendment or modification adverse to the
Other Stockholder of any Defensive Provision in effect on the date the
Other Stockholder Election Notice was given, adoption of any other
Defensive Provision adverse to the Other Stockholder, waiver adverse
to the Other Stockholder of any term or provision of or exercise
adverse to the Other Stockholder of any other discretionary right or
power
<PAGE>
under any Defensive Provision (whether then or thereafter in
effect), any reorganization, transfer of assets, consolidation,
merger, share exchange, dissolution, issue or sale of securities or
any other action or event which in the opinion of the Other
Stockholder would, if such purchase and sale were consummated, have a
Disadvantageous Result, then notwithstanding any other provision of
this Agreement or any provision of any Sale Agreement to which any
member of the Other Stockholder Group may be a party and without any
liability or obligation to the Selling Stockholder, TW, any other
party to this Agreement or any Prospective Purchaser, the Other
Stockholder may, by written notice given to the Selling Stockholder
and TW within five business days after the Other Stockholder acquires
actual knowledge of such action or event, rescind the Other
Stockholder Election Notice and any Sale Agreement which any member of
the Other Stockholder Group may be a party and abandon the purchase
and sale of the Other Stockholder Elected Shares pursuant thereto. In
such event, the Selling Stockholder shall have the right to sell all
or any portion of the Subject Shares to the Prospective Purchaser and
the "Free to Sell Date" shall be the business day following receipt by
the Selling Stockholder of such written notice of abandonment.
Any sale of Subject Shares to the Prospective Purchaser permitted by
this Section shall be for the Purchase Price (or a greater price),
payable in the manner specified in the Bona Fide Offer, and otherwise on
terms and conditions no more favorable to the Prospective Purchaser than
those contained in the Bona Fide Offer; provided, however, that if such
Subject Shares constitute fewer than all the Subject Shares, the purchase
price therefor shall be equal to or greater than the portion of the
Purchase Price allocable to such Subject Shares (determined by multiplying
each share or other appropriate unit of such Subject Shares of each class,
series or other type by the Per-Share Offer Consideration for the Subject
Shares of that class, series or other type). In the event that (i) the
Prospective Purchaser has not entered into a binding agreement with the
Selling Stockholder for the purchase of such Subject Shares within the
30-day period following the Free to Sell Date or (ii) the Prospective
Purchaser has not purchased such Subject Shares within the time period
which would be applicable to a purchase thereof by a Purchaser under the
second sentence of Section 3.1(f) as if calculated from the Free to Sell
Date
<PAGE>
(except that the 60-day period referred to therein shall be construed
as a 120-day period for this purpose), then, in either such case, the
Selling Stockholder's right to sell Subject Shares to the Prospective
Purchaser pursuant to this Section 3.1(j) shall expire and the provisions
of this Section 3.1 shall be reinstated with respect to any and all
proposed future Dispositions of the same or any other Subject Shares
pursuant to any subsequent Bona Fide Offer by the same or any other
Prospective Purchaser.
2. Public Sales.
a. If any Stockholder at any time intends to effect a Public Sale
of Covered Securities (other than a Fast-Track Sale), such Stockholder may
deliver to the Other Stockholder an Offer Notice pursuant to Section 3.1
offering to sell such Covered Securities to the Other Stockholder at a
price equal to the aggregate Current Market Price thereof on the date on
which such Offer Notice is given. A copy of such Offer Notice shall be sent
to TW at the same time it is given to the Other Stockholder. If any such
Offer Notice with respect to any Covered Securities is given, the
Stockholder giving the Offer Notice shall have all rights and obligations
of a "Selling Stockholder" under Section 3.1 and each of the Other
Stockholder and TW shall have all of their respective rights and
obligations provided for in Section 3.1, in each case with the same effect
as if such Covered Securities were "Subject Shares" proposed to be sold by
the Selling Stockholder to a Prospective Purchaser for "Per-Share Offer
Consideration" consisting of cash in an amount equal to the Current Market
Price of the Covered Securities on the date such Offer Notice is given and
for a "Purchase Price" equal to the total Current Market Price on such date
of all such Subject Shares, and as if the other terms of the Public Sale
were the terms of the "Bona Fide Offer" made by such assumed Prospective
Purchaser, except that subsections (g), (h) and (i) of Section 3.1 shall
not apply and the provisions of subsection (j) of Section 3.1 shall apply
only as modified by subsection (b) of this Section 3.2.
b. Subject Shares covered by any Offer Notice given pursuant to
this Section 3.2 may be sold (after full compliance with this Section 3.2
and the applicable provisions of Section 3.1) by the Selling Stockholder at
any available price in a Public Sale of the type described in such Offer
Notice, provided that such sale or sales are completed within the period of
120 days after the applicable
<PAGE>
Free to Sell Date; provided, however, that if the issuer of any Covered
Securities exercises any right to delay the filing or effectiveness
of a registration statement relating to such Covered Securities or to
suspend sales under such registration statement, then the period shall be
extended by the number of days in any such delay or suspension period. If
any Subject Shares covered by such Offer Notice which such Selling
Stockholder becomes obligated under this Section 3.2 to sell to one or more
purchasers or their permitted assignees are not, for any reason, sold to
such Persons within any applicable period determined pursuant to Section
3.1, or if any such Subject Shares which such Selling Stockholder is
entitled, pursuant to the first sentence of this Section 3.2(c), to sell in
the Public Sale are not so sold within the period provided in such
sentence, then in each case the right of such Selling Stockholder to sell
such unsold Subject Shares shall terminate and such Subject Shares shall
thereafter continue to be subject to the restriction on Dispositions of
Covered Securities contained in Section 2.
3. Fast-Track Sales.
a. Any Stockholder who proposes to make a Fast-Track Sale may
deliver to each of the Other Stockholder and TW a written notice (the
"Fast-Track Offer Notice") to such effect which states the number of shares
of Common Stock proposed to be sold (the "Fast-Track Shares"). The delivery
of any such notice shall constitute the offer by such Stockholder to sell
to the Other Stockholder, TW or both all or such portion of the Fast-Track
Shares as it or they may have the right to purchase in accordance with this
Section 3.3 at a price payable in cash equal to the aggregate Current
Market Price thereof on the date on which such Fast-Track Offer Notice is
given.
b. The Other Stockholder shall have the right to elect to
purchase (or to designate any one or more of the members of the Other
Stockholder Group as purchasers of) all or any number of the Fast-Track
Shares. The Other Stockholder and TW shall consult with each other in an
effort to resolve any questions as to the Initial Trigger and the Rights
Plan Trigger; provided, that if the Other Stockholder and TW cannot resolve
such issue, then the Other Stockholder shall have the right to purchase
only the number of Fast-Track Shares that TW shall specify. Anything
contained herein to the contrary notwithstanding, no determination relating
to the Initial Trigger or the Rights
<PAGE>
Plan Trigger pursuant to this Section 3.3(b) shall be binding upon TW in
the absence of a written instrument signed by TW agreeing to such
determination (it being understood that TW has no obligation to
provide the Other Stockholder with any such written instrument). If the
Other Stockholder desires to exercise its purchase right under this Section
3.3, it shall do so by a written notice specifying the number of the
Fast-Track Shares to be purchased and identifying the purchasers thereof,
given to the Stockholder who gave the Fast-Track Offer Notice prior to 5:00
P.M., New York City time, on the third business day following the receipt
by the Other Stockholder of the Fast-Track Offer Notice (provided that any
Fast-Track Offer Notice received on a day that is not a business day or
after 12 noon, New York City time, on a business day, shall be deemed to
have been received on the next following business day). TW shall have the
right to elect to purchase any or all of the Fast-Track Shares that the
Other Stockholder does not elect to purchase or have one or more other
members of the Other Stockholder Group purchase in accordance with the
immediately preceding sentence, which right shall be exercisable by a
written notice specifying the number of such Fast-Track Shares to be
purchased, which notice shall be given by TW to the Stockholder proposing
to sell such Fast-Track Shares and the Other Stockholder prior to 5:00
P.M., New York City time, on the fifth business day following the receipt
by the Other Stockholder and TW of the Fast-Track Offer Notice. If any such
notice is given by either the Other Stockholder or TW, the closing of the
purchase and sale of the Fast-Track Shares covered thereby shall be held at
the offices in the continental United States of the Other Stockholder or TW
(as the case may be) specified in such notice, 11:00 A.M., New York City
time, on the fourth business day after such notice was given or at such
other place or date as the Stockholder selling the Fast-Track Shares and
the purchasers thereof may agree, and such closing date shall not be
subject to extension pursuant to Section 5.1 or otherwise unless such
Selling Stockholder and such purchasers agree to such extension. At such
closing, the purchasers shall purchase such Fast-Track Shares for cash by
wire transfer of immediately available funds in an account at a bank
designated by the Selling Stockholder, such designation to be made no less
than three business days prior to closing, against delivery at the closing
by the Selling Stockholder of the certificates evidencing the Fast-Track
Shares to be sold to such purchasers, in proper form for transfer, with
appropriate stock powers executed in blank attached and documentary or
<PAGE>
transfer tax stamps affixed. Such delivery of such certificates shall
constitute the representation and warranty of such selling Stockholder that
upon such delivery, such selling Stockholder duly transferred good and
marketable title to the shares evidenced thereby, clear of any Encumbrance.
Without limiting the generality of the immediately preceding sentence, if
the Other Stockholder is TCITP, such purchased Fast-Track Shares shall be
free and clear of all Encumbrances existing or arising under any TW
Stockholders Agreement, and TW shall release all such Encumbrances upon the
closing of the purchase and sale thereof. The purchase price payable for
each Fast-Track Share purchased pursuant to this Section 3.3 shall be the
Current Market Price determined as of the date the Fast-Track Offer Notice
was given.
c. Any Fast-Track Shares not purchased pursuant to Section 3.3(b)
may be sold by the selling Stockholder at any available price in one or
more Fast-Track Sales within the 90-day period following the twelfth
business day after the receipt by both TW and the Other Stockholder of the
Fast-Track Offer Notice, and all Fast-Track Shares which for any reason are
not sold within such period either pursuant to Section 3.3(b) or in one or
more Fast-Track Sales, then the right to sell such Fast-Track Shares shall
terminate and such Fast-Track Shares shall thereafter continue to be
subject to the restrictions on Dispositions of Covered Securities contained
in Section 2.
4. Tender or Exchange Offer Sales.
a. If any Person shall make a tender or exchange offer to acquire
any Covered Securities, and if any Stockholder (a "Tendering Stockholder")
intends to tender any Covered Securities, such Tendering Stockholder shall
give the Other Stockholder written notice (the "Tender Notice") of such
intention not later than ten calendar days prior to the latest time by
which securities must be tendered in order to be accepted pursuant to such
offer as such date may from time to time be extended (the "Tender Date"),
specifying the Covered Securities proposed to be tendered (the "Tender
Shares"), together with copies of all written materials by which such offer
is being made. A copy of such Tender Notice shall be sent to TW at the same
time it is given to the Other Stockholder.
b. Any Tender Notice given by any Tendering Stockholder shall
constitute an offer by such Tendering
<PAGE>
Stockholder to sell to the Other Stockholder the Tender Shares. The
Other Stockholder shall have the right to elect to purchase (or to
designate any one or more of the members of the Other Stockholder Group as
purchasers of) all or any number of the Tender Shares in accordance with
this Section 3.4. The Other Stockholder and TW shall consult with each
other in an effort to resolve any questions as to the Initial Trigger and
the Rights Plan Trigger, but the rights of the Other Stockholder under this
Section 3.4 shall not be affected by the failure of TW to concur in any
conclusion of the Other Stockholder with respect to any such matter.
Anything contained herein to the contrary notwithstanding, no determination
relating to the Initial Trigger or the Rights Plan Trigger pursuant to this
Section 3.4(b) shall be binding upon TW in the absence of a written
instrument signed by TW agreeing to such determination (it being understood
that TW has no obligation to provide the Other Stockholder with any such
written instrument). If the Other Stockholder desires to exercise its
purchase right under this Section 3.4, it shall do so by a written notice
specifying the number of the Tender Shares to be purchased and identifying
the purchasers thereof, given to the Tendering Stockholder at least three
business days prior to the Tender Date. If any such notice is given by the
Other Stockholder, the closing of the purchase and sale of the Tender
Shares covered thereby shall be held at the offices of the Other
Stockholder within the continental United States specified in such notice
at 11:00 A.M., New York City time, on a date specified in such notice that
is not later than two business days prior to the Tender Date, or at such
other place or date as the Tendering Stockholder and the Other Stockholder
may agree, and such closing date shall not be subject to extension pursuant
to Section 5.1 or otherwise unless the Tendering Stockholder and the Other
Stockholder agree to such extension. At such closing, the purchasers
identified by the Other Stockholder shall purchase such Tender Shares for
cash by wire transfer of immediately available funds to an account at a
bank designated by the Tendering Stockholder in the Tender Notice, against
delivery at the closing by the Tendering Stockholder of the certificates or
other instruments evidencing the Tender Shares to be sold to such
purchasers, in proper form for transfer, with appropriate stock powers
executed in blank attached and documentary or transfer tax stamps affixed.
Such delivery of such certificates shall constitute the representation and
warranty of such Tendering Stockholder that upon such delivery, such
Tendering Stockholder duly transferred good and marketable title to the
shares
<PAGE>
evidenced thereby, free and clear of any Encumbrance. Without
limiting the generality of the immediately preceding sentence, such
purchased Tender Shares shall be free and clear of all Encumbrances
existing or arising under any TW Stockholders Agreement, and TW shall
release all such Encumbrances upon the closing of the purchase and sale
thereof. The total purchase price to be paid by such purchasers for such
Tender Shares shall be (i) if such tender or exchange offer is consummated,
the purchase price that the Tendering Stockholder would have received if it
had tendered such Tender Shares and all such Tender Shares had been
purchased in such tender or exchange offer, including any increases in the
price paid by the offeror after exercise by the Other Stockholder of its
right of first refusal under this Section 3.4 or after the closing of the
purchase of Tender Shares pursuant to such exercise, (ii) if such tender or
exchange offer is not consummated, the highest price offered pursuant
thereto, or (iii) if any other tender or exchange offer is commenced prior
to the expiration or termination of such tender or exchange offer, the
highest price offered in either such tender or exchange offers in each case
with any offered securities or other property except cash to be valued as
provided in Section 3.4(c).
c. If the consideration offered in such tender or exchange offer
consists, in whole or in part, of securities or other property except cash,
then the purchasers identified by the Other Stockholder shall pay for the
Tender Shares cash in lieu of such other consideration in an amount equal
to the fair market value of such other consideration as agreed by the
Tendering Stockholder and the Other Stockholder. In the event the Tendering
Stockholder and the Other Stockholder do not agree as to the fair market
value of any such non-cash consideration by the beginning of the second
business day after the Offer Notice is given, then such determination shall
be conclusively made by a panel of appraisers, one of whom shall be
selected by the Other Stockholder, the second of whom shall be selected by
the Tendering Stockholder and the third of whom shall be selected by the
first two appraisers. The Other Stockholder and the Tendering Stockholder
shall each designate their appraiser within three business days after such
Offer Notice is given, and such appraisers shall designate the third
appraiser within three business days thereafter. Each appraiser shall
submit its determination of the fair market value of such non-cash
consideration within three business days after the panel is empaneled and
such fair market value
<PAGE>
shall be the average of the two closest valuations (or the middle
valuation, if the highest and lowest valuation differ from the middle
valuation by an equal amount). Each appraiser appointed shall be a
nationally recognized investment banking, appraisal or accounting firm
which is not directly or indirectly a Related Party of any party to this
Agreement or the Person making the tender or exchange offer and which has
no interest (other than the receipt of customary fees) in the event giving
rise to the need for the appraisal. Each of the Other Stockholder and the
Tendering Stockholder shall be responsible for the payment of one-half of
the costs of such appraisal.
d. If the Other Stockholder does not exercise its right of first
refusal under this Section 3.4 by giving a notice of exercise in accordance
with Section 3.4(b) or, having given such notice, fails to purchase and pay
for (or have one or more of its designees purchase and pay for) such Tender
Shares on or prior to the business day prior to the Tender Date, then the
Tendering Stockholder shall be free to accept the tender or exchange offer
with respect to which the Tender Notice was given or any other tender or
exchange offer commenced during the pendency of the tender or exchange
offer with respect to which the Tender Notice was given.
5. TW to Provide Certain Information. If requested at any time
or from time to time by any Stockholder, TW shall promptly provide to
such Stockholder in writing (i) all information which such Stockholder
reasonably may request for the purpose of determining whether, based on the
facts set forth by such Stockholder in such request, any acquisition of
beneficial ownership by such Stockholder or the Other Stockholder would
result in the occurrence of a Disadvantageous Result under or in respect of
any Defensive Provision and (ii) such other non-confidential information
known to TW as such Stockholder may reasonably request regarding (A) the
number of Covered Securities issued and outstanding at any time, (B) the
number of Covered Securities owned of record by any person at any time, or
(C) the terms and conditions of any Defensive Provision.
6. Certain Actions by TW. In the event that TW shall (i) amend or
modify any Defensive Provision in effect on the date hereof, or (ii) adopt
any Defensive Provision after the date hereof, or (iii) purchase, redeem or
otherwise acquire any outstanding Covered Securities,
<PAGE>
directly or indirectly through any Controlled Affiliate of TW, and the
result of any such action is to reduce the Initial Trigger or the
Rights Plan Trigger with respect to any Stockholder Group, then, in the
case of any Offer Notice or Tender Notice delivered after such action, if
such action shall have had the effect of reducing the number of Subject
Shares covered by such Offer Notice that may then be purchased by the Other
Stockholder pursuant to this Agreement, TW shall have no right under this
Agreement to purchase any Subject Shares covered by such Offer Notice.
C. Involuntary Event; Death or Incapacity.
1. In the event that (i) any Stockholder shall be adjudicated
bankrupt or insolvent or file a voluntary petition for bankruptcy (or an
involuntary petition for bankruptcy shall have been filed against any
Stockholder and the same shall not have been dismissed within 60 days after
the date of filing), or file a pleading in any court of record admitting
his inability to pay his debts as they become due, or make a general
assignment for the benefit of creditors, or (ii) a receiver, administrator,
guardian, legal committee or other legal custodian of any Stockholder's
property shall be appointed (other than in connection with his death or
incapacity) and not discharged within 60 days, or (iii) a writ of
attachment or levy or other similar court order shall prevent any
Stockholder from exercising his or its right to vote or Dispose of any of
his or its Covered Securities and such writ or levy is not dismissed (or
such court order is not reversed) within 60 days, then such Stockholder
shall promptly notify the Other Stockholder of the occurrence of any such
event (the "Involuntary Event"). Simultaneously with the delivery of any
such notice required by this Section 4.1, such Stockholder shall deliver an
Offer Notice to such Other Stockholder pursuant to Section 3.1, offering to
sell all Covered Securities beneficially owned by such Stockholder to such
Other Stockholder at the Appraised Value. Each Stockholder giving such an
Offer Notice shall have, in respect of such Offer Notice, all rights and
obligations under Section 3.1 of a Selling Stockholder, except that if such
Stockholder is a Turner Stockholder, for so long as such Turner Stockholder
is subject to the restrictions on transfer contained in the TW
Stockholders' Agreement, it shall not be entitled to sell any Covered
Securities to any Person other than the Purchasers, if any; each
Stockholder and TW shall have, in respect of such Offer Notice, all rights
and obligations under Section 3.1 which are provided
<PAGE>
for therein in the case of any Offer Notice given pursuant thereto.
For the purpose hereof, the term "Appraised Value" means the fair
market value of the Covered Securities to be sold as determined by
appraisal in the same manner as provided in Section 3.1(h) with respect to
appraisals of non-cash consideration. Each of such Stockholder, the Other
Stockholder and TW shall be responsible for the payment of one-third of the
costs of such appraisal, except that, if, at the time such appraisal is
requested, TW waives its right to purchase any Subject Shares covered by
the current Offer Notice, TW shall not be responsible for any such fees and
disbursements, which shall in such case be borne equally by such
Stockholder and the Other Stockholder. All time periods specified in
subsection (e) or (f) of Section 3.1 shall be extended for a number of days
equal to the number of days in the period from the delivery of the Offer
Notice pursuant to this Section 4.1 through and including the date of
submission of the last to be submitted of the required appraisals.
2. Any Sale Agreement entered into by any Stockholder and the
Purchaser pursuant to an Offer Notice required by Section 4.1 shall provide
that the closing of the sale of the Covered Securities to be sold and
purchased thereunder may be postponed for such period as may be necessary
to effect the purchase of such Covered Securities free from any claims of a
trustee in bankruptcy, any garnishee or any court order. In the event that
any Covered Securities subject to such Offer Notice are not purchased for
any reason, such Covered Securities shall continue to be subject to this
Agreement.
3. In the event of Turner's incapacity or death, his legal
representative or the executor or administrator of his estate, as the case
may be, shall be bound by all the terms and provisions of this Agreement as
fully as if such representative, executor or administrator were a party
hereto and his or its name were substituted for Turner's name herein and
shall be entitled to exercise Turner's rights and required to perform his
obligations hereunder.
D. Regulatory Approvals; Certain Representations, Warranties and
Covenants.
1. Regulatory Approvals. If any sale of Covered Securities to
any Stockholder, TW or any permitted assignee of any Stockholder or TW in
accordance with Section 3.1, 3.2 or 4 requires, as a condition to the legal
and valid
<PAGE>
transfer thereof to such Purchaser, any consent, approval, waiver, or
authorization of, notice to or filing with, any Governmental Authority
or the expiration of any waiting period imposed by applicable law
and if Section 3.1, 3.2 or 4 (as the case may be) provides for the closing
of such sale to be held before some fixed or ascertainable date, then such
date shall be extended for the period of time during which efforts to
obtain each such consent, approval, waiver, or authorization, to give such
notice or make such filing and to obtain the termination of each such
waiting period at the earliest reasonably practicable time are diligently
being made; provided, however, that in no event shall the extension of any
such closing date pursuant to this Section 5.1 exceed 90 days. Each party
shall (and shall cause such party's Controlled Affiliates to) reasonably
cooperate with the other parties in obtaining any such consent, approval,
waiver, or authorization, to give any such notice or make any such filing
and in obtaining the termination of any such waiting period at the earliest
practicable time.
2. Representation and Warranty of TW. TW represents and warrants
to each of TCITP and Turner that, other than the Rights Plan, the
provisions of TW's Restated Certificate of Incorporation and By-laws and
the Delaware Statute, there were no Defensive Provisions in effect on the
date of the Merger Agreement; provided, however, that no representation is
made as to the laws of any jurisdiction other than Delaware.
E. Legend on Stock Certificates; No Recordation of Transfer.
1. Each certificate or instrument representing Covered Securities
directly or indirectly beneficially owned by any Stockholder shall bear the
following legend until such time as the shares represented thereby are no
longer subject to this Agreement:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND
CONDITIONS OF A STOCKHOLDERS' AGREEMENT DATED AS OF SEPTEMBER
___, 1995, AMONG R.E. TURNER, III, TCI TURNER PREFERRED, INC.,
TIME WARNER INC. AND CERTAIN OTHER PERSONS. A COPY OF SUCH
AGREEMENT IS ON FILE AT THE OFFICES OF TIME WARNER INC.
<PAGE>
TW shall not be responsible for placing the above legend on any
certificate representing Covered Securities, except to the extent that it
has actual knowledge that such certificate has been issued in the name of
any Stockholder.
2. TW agrees not to knowingly effect a transfer of any Covered
Securities which to TW's actual knowledge are directly or indirectly
beneficially owned by any Stockholder on its books except as permitted by
the terms of this Agreement. A copy of this Agreement shall be filed with
the Secretary of TW.
F. Representations and Warranties; Certain Additional Covenants.
1. Certain Representations and Covenants of the TCITP
Stockholders. Each of the TCITP Stockholders represents and warrants to the
Turner Stockholders and TW as follows:
(a) Neither such TCITP Stockholder nor any of its
Controlled Affiliates that hold TW Shares is a party to or bound by,
any Contract, Requirement of Law or Judgment, other than Requirements
of Law referred to in Section 7.3(d), that does or may prevent,
impede or delay the due and punctual performance by any such
Person of its agreements, obligations and commitments contained
in this Agreement, and such TCITP Stockholder will not enter into
or permit any of its Controlled Affiliates to enter into any such
Contract or take any other voluntary action or voluntarily omit
to take any action that would have any such effect.
(b) Except for this Agreement, there is no option, warrant,
right, call, proxy, or Contract that directly or indirectly
provides for the sale, pledge or other Disposition of any of such
TCITP TW Shares or any interest therein or any rights with
respect thereto, relates to the voting, Disposition or control of
any thereof or obligates or may obligate such TCITP Stockholder
or any of its Controlled Affiliates to grant, offer or enter into
any of the foregoing.
No breach or violation of any of the foregoing representations,
warranties or covenants shall result or be deemed to result directly or
indirectly from or by reason of any Contract between TCITP and any of its
Affiliates and TW and any of its Affiliates, directors or officers, whether
<PAGE>
now existing or hereafter entered into, and including the Voting Trust (as
such term is defined in the LMC Agreement), as the same may be amended from
time to time, nor from or by reason of the execution, delivery or
performance of or action taken or omitted to be taken pursuant to the terms
of any such Contract or the consummation of any transaction contemplated
thereby, nor from or by reason of any option, warrant, right, call, proxy
or other right granted, covenant made or obligation incurred under any such
Contract that directly or indirectly provides for the sale, pledge or other
Disposition of any of the TCITP TW Shares or any interest therein or any
rights with respect thereto.
2. Certain Representations and Covenants of the Turner
Stockholders. Each of the Turner Stockholders represents and warrants to
the TCITP Stockholders and TW as follows:
(a) Neither such Turner Stockholder nor any of his or its
Controlled Affiliates that hold TW Shares is a party to or bound
by, any Contract, Requirement of Law or Judgment, other than any
Requirements of Law referred to in Section 7.3(d), that does or
may prevent, impede or delay the due and punctual performance by
any such Person of his or its agreements, obligations and
commitments contained in this Agreement, and such Turner
Stockholder will not enter into or permit any of his or its
Controlled Affiliates to enter into any such Contract or take any
other voluntary action or voluntarily omit to take any action
that would have any such effect.
(b) Except for this Agreement and any TW Stockholders
Agreement, there is no option, warrant, right, call, proxy, or
Contract that directly or indirectly provides for the sale,
pledge or other Disposition of any of such Turner TW Shares or
any interest therein or any rights with respect thereto, relates
to the voting, Disposition or control of any thereof or obligates
or may obligate such Turner Stockholder or any of his or its
Controlled Affiliates to grant, offer or enter into any of the
foregoing. Each of the Turner Stockholders has delivered to TCITP
a true and complete copy of each TW Stockholders Agreement to
which it is a party, if any, as amended through and in effect on
the date of this Agreement.
<PAGE>
No Turner Stockholder shall permit the amendment of any TW Stockholders
Agreement to which it is a party in any manner that would have
any effect referred to in Section 7.2(a).
3. Representations and Warranties of Each Party. Each party,
severally and not jointly, represents and warrants to each of the other
parties as follows:
(a) If such party is a corporation or partnership, such party has
all requisite corporate power and authority or partnership power and
authority (as the case may be) to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance by such party
of, and the consummation of the transactions contemplated by, this
Agreement have been duly and validly authorized by all necessary corporate
action or partnership action (as the case may be) on the part of such
party.
(b) If such party is a natural person (whether acting
individually or in a fiduciary capacity), such party has full legal
capacity, right, power and authority to execute, deliver and perform his or
her obligations under this Agreement and to consummate the transactions
contemplated hereby.
(c) This Agreement has been duly executed and delivered by such
party. This Agreement constitutes a legal, valid and binding obligation of
such party enforceable in accordance with its terms, except that (i) such
enforceability may be subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights and (ii) such
enforceability may be subject to general principles of equity (regardless
of whether enforcement is considered in a proceeding in equity or at law).
(d) The execution, delivery and performance of this Agreement by
such party do not, either with or without the giving of notice or the
passage of time or both, (i) assuming compliance with the requirements
referred to in clause (ii) of this sentence, violate or conflict with any
Requirement of Law or Judgment applicable to such party, (ii) except for
(A) requirements, if any, arising out of any required pre-merger
notification and related filings with the Federal Trade Commission and the
Antitrust Division of
<PAGE>
the Department of Justice pursuant to the Hart-Scott-Rodino Antritrust
Improvements Act of 1976, as amended, and (B) requirements, if any,
arising out of the rules and regulations adopted by the Federal
Communications Commission, require the consent or authorization of or
waiver by or filing with any Governmental Authority or (iii) conflict with,
result in the breach of any provision of, result in the modification or
termination of, require the consent or authorization of or waiver by or
filing with any other parties to, or result in the creation or imposition
of any Encumbrance pursuant to, or constitute a default under, any material
agreement, permit, indenture, note, lease, license or franchise or any
other material instrument to which such party is a party or by which such
party's properties or assets are bound or from which such party derives
benefit. For purposes of this Section 7.3(d), the word "party" includes (i)
in the case of TW, TW and its Affiliates and (ii) in the case of any Turner
Stockholder, such Turner Stockholder and his or its Related Parties.
G. No Assignment.
This Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and permitted assigns
and, in the event of the incapacity or death of any Turner Stockholder who
is a natural person, his legal representatives, the executor or
administrator of his estate, and his heirs and beneficiaries, as provided
in Section 4 hereof. Except as specifically provided herein, this Agreement
and the rights and obligations of the parties hereunder may not be assigned
or delegated, in whole or in part. Without prejudice to the rights of TW
under any other provision of this Agreement, none of the provisions of
Section 2 (other than the third sentence of Section 2) of this Agreement
are intended to be for the benefit of or enforceable by TW, and TW shall
not have any right, remedy or claim against any Stockholder by reason of
any breach or violation thereof.
H. Specific Performance. The parties hereto acknowledge that the
benefits to them under this Agreement are unique, that they are willing to
enter into this Agreement only upon performance by each other of all of
their obligations hereunder and that monetary damage would not afford
adequate remedy for failure to perform any such obligations hereunder.
<PAGE>
Accordingly, the parties hereby consent to specific performance of their
obligations hereunder and waive any requirement for securing or posting of
any bond in connection with the obtaining of any injunctive or other
equitable relief to enforce their rights hereunder.
I. Termination, Amendment and Waiver. This Agreement shall
terminate as to all parties on the first to occur of (i) the date on which
no TCITP Stockholder beneficially owns any Covered Securities (otherwise
than by reason of any Disposition made in violation of this Agreement),
(ii) the date on which no Turner Stockholder beneficially owns any Covered
Securities (otherwise than by reason of any Disposition made in violation
of this Agreement) and (iii) any date of termination agreed to by TCITP and
Turner. If, by reason of one or more Dispositions, the number of TW Shares
directly or indirectly beneficially owned by the TCITP Stockholders, as a
group, or the Turner Stockholders, as a group, is less than one-third of
the number of the shares beneficially owned by such Group immediately after
the Effective Time, then such group shall no longer have any right of first
refusal under Section 3 or Section 4, but shall continue to be subject to
all obligations and restrictions arising under this Agreement with respect
to all Covered Securities which the members of that group continue to
beneficially own. This Agreement may be amended by the parties hereto only
by an instrument in writing signed by each party; provided, however, that
execution of any such amendment by or on behalf of TW shall not be required
unless such amendment adversely affects the rights or obligations of TW
hereunder. Any term or provisions of this Agreement may be waived in
writing at any time by the party which is entitled to the benefits thereof.
J. General Provisions.
1. All periods of time referred to in this Agreement (other than
references to business days) shall include all Saturdays, Sundays or State
of New York holidays provided that if the date or last date to perform the
act or give any notice with respect to this Agreement shall fall on a
Saturday, Sunday or State of New York holiday, such act or notice may be
timely performed or given if performed or given on the next succeeding day
which is not a Saturday, Sunday or State of New York holiday.
2. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be deemed
effectively given or delivered upon confirmed facsimile transmission,
personal delivery or
<PAGE>
the day following delivery to a courier service which guarantees
overnight delivery of such notice or five (5) days after deposit with the
U.S. Post Office, by registered or certified mail, return receipt
requested, postage prepaid, and, in the case of courier or mail delivery,
addressed to the intended recipient at his or its address as shown on
Schedule I attached hereto or such other address as a party may specify in
writing.
3. This Agreement constitutes the entire agreement and
understanding of the parties relating to the subject matter hereof, and
supersedes all prior agreements, whether oral or written, relating to the
subject matter hereof (it being understood that this Section 11.3 is not
intended to obviate the respective rights and obligations of Turner, TW and
the other parties thereto under the Investors Agreement (No. 1) dated as of
the same date as this Agreement among TW, Turner and TOI).
4. Any provision hereof which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or thereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
5. The headings of the articles and sections contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not affect the meaning or interpretation
of this Agreement. The definitions in Section 1 and elsewhere in this
Agreement shall apply equally to both the singular and plural forms of the
terms defined. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The words
"include", "includes" and "including" shall be deemed to be followed by the
phrase "without limitation". The words "herein", "hereof" and "hereunder"
and words of similar import refer to this Agreement in its entirety and not
to any part hereof unless the context shall otherwise require. All
references herein to Sections, Exhibits and Schedules shall be deemed
references to and Sections of, and Exhibits and Schedules to, this
Agreement unless the context shall otherwise require. Unless otherwise
expressly provided herein or unless the context shall otherwise require,
any references as of any time to the "Certificate of Incorporation",
<PAGE>
"Articles of Incorporation", "charter", "organizational or governing
documents" or "By-laws" of any Entity, to any agreement (including this
Agreement) or other Contract, instrument or document or to any statute or
regulation or any specific section or other provision thereof are to it as
amended and supplemented through such time (and, in the case of a statute
or regulation or specific section or other provision thereof, to any
successor of such statute, regulation, section or other provision). Unless
otherwise expressly provided herein or unless the context shall otherwise
require, any provision of this Agreement using a defined term (by way of
example and without limitation, such as "Controlled Affiliate") which is
based on a specified characteristic, qualification, feature, relationship
or status shall, as of any time, refer only to such Persons who have the
specified characteristic, qualification, feature, relationship or status as
of that particular time.
6. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original but which together shall
constitute but one and the same instrument.
7. This Agreement and the validity, interpretation and
performance of the terms and provisions hereof shall be governed by, and
construed in accordance with, the laws of the State of New York, without
regard to the provisions thereof relating to choice or conflict of laws,
except to the extent that the laws of the jurisdiction of incorporation of
TW shall be mandatorily applicable.
8. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY
HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY (I) SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF ANY NEW YORK STATE OR
FEDERAL COURT SITTING IN NEW YORK CITY (AND OF ANY APPELLATE COURT TO WHICH
AN APPEAL OF ANY JUDGMENT, ORDER, DECREE OR DECISION OF ANY SUCH COURT MAY
BE TAKEN) IN ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT RENDERED
IN ANY SUCH SUIT, ACTION OR PROCEEDING, (II) WAIVES ANY OBJECTION WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH SUIT, ACTION
OR PROCEEDING IN ANY SUCH COURT, INCLUDING ANY CLAIM THAT ANY SUCH SUIT,
ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM AND (III)
WAIVES ALL RIGHTS TO A TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement in
two or more counterparts as of the day and year first above written.
TCI TURNER PREFERRED, INC.
By: --------------------------------
Name:
Title:
UNITED CABLE TURNER INVESTMENT, INC.
By: --------------------------------
Name:
Title:
COMMUNICATIONS CAPITAL CORP.
By: --------------------------------
Name:
Title:
------------------------------------
R. E. TURNER, III
TURNER OUTDOOR, INC.
By: --------------------------------
Name:
Title:
TIME WARNER INC.
By: --------------------------------
Name:
Title:
<PAGE>
EXHIBIT C TO
LMC AGREEMENT
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL AND OTHER SPECIAL
RIGHTS AND QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS THEREOF, OF SERIES J
NON-VOTING PARTICIPATING
CONVERTIBLE PREFERRED STOCK
OF
TIME WARNER INC.
--------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
--------------------
TIME WARNER INC., a corporation organized and existing
by virtue of the General Corporation Law of the State of Delaware
(the "Corporation"), does hereby certify that the following
resolution was duly adopted by action of the Board of Directors
of the Corporation (the "Board of Directors") at a meeting duly
held on September 22, 1995.
RESOLVED that pursuant to the authority expressly
granted to and vested in the Board of Directors by the provisions
of Section 2 of Article IV of the Restated Certificate of
Incorporation of the Corporation, as amended from time to time
(the "Certificate of Incorporation"), and Section 151(g) of the
General Corporation Law of the State of Delaware (the "DGCL"),
the Board of Directors hereby creates, from the authorized
shares of Preferred Stock, par value $1.00 per share (the
"Preferred Stock"), of the Corporation authorized to be issued
pursuant to the Certificate of Incorporation, a series of
Preferred Stock, and hereby fixes the voting powers,
designations, preferences and relative, participating, optional
or other special rights, and qualifications, limitations or
restrictions thereof, of the shares of such series as follows:
The series of Preferred Stock hereby established shall
consist of [ ] shares designated as Series J Non-Voting
Participating Convertible Preferred Stock. The number of shares
constituting such series may be increased or decreased from time
to time by a resolution or resolutions of the Board of Directors.
The rights, preferences and limitations of such series shall be
as follows:
<PAGE>
1. Definitions. As used herein, the following terms shall
have the indicated meanings:
1.1 "Board of Directors" shall mean the Board of
Directors of the Corporation or, with respect to any action to be
taken by the Board of Directors, any committee of the Board of
Directors duly authorized to take such action.
1.2 "Capital Stock" shall mean any and all shares of
corporate stock of a Person (however designated and whether
representing rights to vote, rights to participate in dividends or
distributions upon liquidation or otherwise with respect to such
Person, or any division or subsidiary thereof, or any joint venture,
partnership, corporation or other entity).
1.3 "Certificate" shall mean the Certificate of the
Voting Powers, Designations, Preferences and Relative, Participating,
Optional or Other Special Rights, and Qualifications, Limitations or
Restrictions Thereof, of Series J Non-Voting Participating Convertible
Preferred Stock filed with respect to this resolution with the
Secretary of State of the State of Delaware pursuant to Section 151 of
the DGCL.
1.4 "Certificate of Incorporation" shall mean the
Restated Certificate of Incorporation of the Corporation, as amended
from time to time.
1.5 "Closing Price" of the Common Stock shall mean the
last reported sale price of the Common Stock (regular way) as shown on
the Composite Tape of the NYSE, or, in case no such sale takes place
on such day, the average of the closing bid and asked prices on the
NYSE, or, if the Common Stock is not listed or admitted to trading on
the NYSE, on the principal national securities exchange on which such
stock is listed or admitted to trading, or, if it is not listed or
admitted to trading on any national securities exchange, the last
reported sale price of the Common Stock, or, in case no such sale
takes place on such day, the average of the closing bid and asked
prices, in either case as reported by NASDAQ.
1.6 "Common Stock" shall mean the class of Common
Stock, par value $1.00 per share, of the Corporation authorized at the
date of the Certificate, or any other class of stock resulting from
(x) successive changes or reclassifications of such Common Stock
consisting of changes in par value, or from par value to no par value,
(y) a subdivision or combination or (z) any other changes for which
an adjustment is made under Section 2.4(a) hereof, and in any such
case including any shares thereof authorized after the date of the
Certificate, together with any associated rights to purchase other
securities of the Corporation which
<PAGE>
are at the time represented by the certificates representing such
shares of Common Stock.
1.7 "Communications Laws" shall mean the Communications
Act of 1934 (as amended and supplemented from time to time and any
successor statute or statutes regulating telecommunications companies)
and the rules and regulations (and interpretations thereof and
determinations with respect thereto) promulgated, issued or adopted
from time to time by the Federal Communications Commission (the
"FCC"). All references herein to Communications Laws shall include as
of any relevant date in question the Communications Laws as then in
effect (including any Communications Law or part thereof the
effectiveness of which is then stayed) or promulgated with a delayed
effective date.
1.8 "Conversion Date" shall have the meaning set forth
in Section 3.5 hereof.
1.9 "Corporation" shall mean Time Warner Inc., a
Delaware corporation, and any of its successors by operation of law,
including by merger or consolidation.
1.10 "DGCL" shall mean the General Corporation Law of
the State of Delaware.
1.11 "Dividend Payment Date" shall have the meaning set
forth in Section 2.1 hereof.
1.12 "Effective Time of the Merger" shall have the
meaning given to such term in the Merger Agreement.
1.13 "Formula Number" shall have the meaning set forth
in Section 2.1 hereof.
1.14 "Junior Stock" shall mean the Common Stock, the
Series A Stock and the shares of any other class or series of Capital
Stock of the Corporation which, by the terms of the Certificate of
Incorporation or of the instrument by which the Board of Directors,
acting pursuant to authority granted in the Certificate of
Incorporation, shall fix the relative rights, preferences and
limitations thereof, shall be junior to the shares of this Series in
respect of the right to receive dividends or to participate in any
distribution of assets other than by way of dividends.
<PAGE>
1.15 "LMC Agreement" shall mean the Agreement dated as
of September 22, 1995, among the Corporation, Liberty Media
Corporation, a Delaware corporation ("LMC Parent"), and certain
subsidiaries of LMC Parent listed under "Subsidiaries of LMC Parent"
on the signature pages thereto, as the same may be amended from time
to time.
1.16 "Merger Agreement" shall mean the Agreement and
Plan of Merger dated as of September 22, 1995, among the Corporation,
Time Warner Acquisition Corp., a Delaware corporation and a wholly
owned subsidiary of the Corporation, and Turner Broadcasting System,
Inc., a Georgia corporation, as the same may be amended from time to
time.
1.17 "NASDAQ" shall mean The Nasdaq Stock Market.
1.18 "NYSE" shall mean the New York Stock Exchange,
Inc.
1.19 "Parity Stock" shall mean the Series K Stock and
the shares of any other class or series of Capital Stock of the
Corporation which, by the terms of the Certificate of Incorporation
or of the instrument by which the Board of Directors, acting pursuant
to authority granted in the Certificate of Incorporation, shall fix
the relative rights, preferences and limitations thereof, shall, in
the event that the stated dividends thereon are not paid in full, be
entitled to share ratably with the shares of this Series in the
payment of dividends in accordance with the sums which would be
payable on such shares if all dividends were declared and paid in
full, or shall, in the event that the amounts payable thereon in
liquidation are not paid in full, be entitled to share ratably with
the shares of this Series in any distribution of assets other than by
way of dividends in accordance with the sums which would be payable in
such distribution if all sums payable were discharged in full;
provided, however, that the term "Parity Stock" shall be deemed to
refer in Section 5.4 hereof to any stock which is Parity Stock in
respect of the distribution of assets.
1.20 "Permitted Transferee" shall mean any Liberty
Party, as such term is defined in the LMC Agreement.
1.21 "Person" shall mean an individual, corporation,
partnership, limited liability company, joint
<PAGE>
venture, association, trust, unincorporated organization or other
entity.
1.22 "Preferred Stock" shall mean the class of
Preferred Stock, par value $1.00 per share, of the Corporation
authorized at the date of the Certificate, including any shares
thereof authorized after the date of the Certificate.
1.23 "Record Date" shall have the meaning set forth in
Section 2.1 hereof.
1.24 "Senior Stock" shall mean the Series B Stock, the
Series C Stock, the Series D Stock, the Series E Stock, the Series F
Stock, the Series G Stock, the Series H Stock and the shares of any
class or series of Capital Stock of the Corporation which, by the
terms of the Certificate of Incorporation or of the instrument by
which the Board of Directors, acting pursuant to authority granted in
the Certificate of Incorporation, shall fix the relative rights,
preferences and limitations thereof, shall be senior to the shares of
this Series in respect of the right to receive dividends or to
participate in any distribution of assets other than by way of
dividends.
1.25 "Series A Stock" shall mean the series of
Preferred Stock authorized and designated as Series A Participating
Cumulative Preferred Stock at the date of the Certificate, including
any shares thereof authorized and designated after the date of the
Certificate.
1.26 "Series B Stock" shall mean the series of
Preferred Stock authorized and designated as Series B 6.40% Preferred
Stock at the date of the Certificate, including any shares thereof
authorized and designated after the date of the Certificate.
1.27 "Series C Stock" shall mean the series of
Preferred Stock authorized and designated as Series C Convertible
Preferred Stock at the date of the Certificate, including any shares
thereof authorized and designated after the date of the Certificate.
1.28 "Series D Stock" shall mean the series of
Preferred Stock authorized and designated as Series D Convertible
Preferred Stock at the date of the Certificate, including any shares
thereof authorized and designated after the date of the Certificate.
<PAGE>
1.29 "Series E Stock" shall mean the series of
Preferred Stock authorized and designated as the Series E Convertible
Preferred Stock issued or issuable pursuant to the Agreement and Plan
of Merger dated as of February 6, 1995, among Cablevision Industries
Corporation, Alan Gerry, the Corporation and TW CVI Acquisition Sub
(the "Cablevision Merger Agreement"), including any shares thereof
authorized and designated after the date of the Certificate.
1.30 "Series F Stock" shall mean the series of
Preferred Stock authorized and designated as the Series F Convertible
Preferred Stock issued or issuable pursuant to the Cablevision Merger
Agreement, including any shares thereof authorized and designated
after the date of the Certificate.
1.31 "Series G Stock" shall mean the series of
Preferred Stock authorized and designated as the Series G Convertible
Preferred Stock issued or issuable pursuant to the Restructuring
Agreement, dated as of August 31, 1995, among the Corporation, ITOCHU
Corporation and ITOCHU Entertainment Inc. and the Restructuring
Agreement dated as of August 31, 1995, between the Corporation and
Toshiba Corporation (together, the "Restructuring Agreements"),
including any shares thereof authorized and designated after the date
of the Certificate.
1.32 "Series H Stock" shall mean the series of
Preferred Stock authorized and designated as the Series H Convertible
Preferred Stock issued or issuable pursuant to the Restructuring
Agreements, including any shares thereof authorized and designated
after the date of the Certificate.
1.33 "Series I Stock" shall mean the series of
Preferred Stock authorized and designated as the Series I Convertible
Preferred Stock issued or issuable pursuant to the Restructuring
Agreements, including any shares thereof authorized and designated
after the date of the Certificate.
1.34 "Series J Stock" and "this Series" shall mean the
series of Preferred Stock authorized and designated as Series J
Non-Voting Participating Convertible Preferred Stock at the date of
the Certificate, including any shares thereof authorized and
designated after the date of the Certificate.
1.35 "Series K Stock" shall mean the series of
Preferred Stock authorized and designated as Series K
<PAGE>
Voting Participating Convertible Preferred Stock at the date of the
Certificate, including any shares thereof authorized and designated
after the date of the Certificate.
1.36 "Trading Day" shall mean, so long as the Common
Stock is listed or admitted to trading on the NYSE, a day on which the
NYSE is open for the transaction of business, or, if the Common Stock
is not listed or admitted to trading on the NYSE, a day on which the
principal national securities exchange on which the Common Stock is
listed is open for the transaction of business, or, if the Common
Stock is not so listed or admitted for trading on any national
securities exchange, a day on which the National Market System of
NASDAQ is open for the transaction of business.
2. Dividends.
2.1 The holders of shares of this Series shall be
entitled to receive dividends, if, as and when declared by the Board
of Directors, out of funds legally available therefor, payable on such
dates as may be set by the Board of Directors for payment of cash
dividends on the Common Stock (each such date being referred to herein
as a "Dividend Payment Date"), in cash, in an amount per share equal
to the product of (i) the Formula Number in effect as of such Dividend
Payment Date multiplied by (ii) the amount of the regularly scheduled
cash dividend to be paid on one share of Common Stock on such Dividend
Payment Date; provided, however, dividends on the shares of this
Series shall be payable pursuant to this Section 2.1 only to the
extent that regularly scheduled cash dividends are declared and paid
on the Common Stock. As used herein, the "Formula Number" shall
initially be 1,000, which shall be adjusted from time to time pursuant
to Section 2.4 hereof. The dividends payable on any Dividend Payment
Date shall be paid to the holders of record of shares of this Series
at the close of business on the record date for the related regularly
scheduled cash dividend on the Common Stock (each such date being
referred to herein as a "Record Date"). The amount of dividends that
are paid to each holder of record on any Dividend Payment Date shall
be rounded to the nearest cent.
2.2 In case the Corporation shall at any time
distribute (other than a distribution in liquidation of the
Corporation) to the holders of its shares of Common
<PAGE>
Stock any assets or property, including evidences of indebtedness or
securities of the Corporation (other than Common Stock subject to a
distribution or reclassification covered by Section 2.4 hereof) or of
any other Person (including common stock of such Person) or cash (but
excluding regularly scheduled cash dividends payable on shares of
Common Stock) or in case the Corporation shall at any time distribute
(other than a distribution in liquidation of the Corporation) to such
holders rights, options or warrants to subscribe for or purchase
shares of Common Stock (including shares held in the treasury of the
Corporation), or rights, options or warrants to subscribe for or
purchase any other security or rights, options or warrants to
subscribe for or purchase any assets or property (in each case,
whether of the Corporation or otherwise, but other than any
distribution of rights to purchase securities of the Corporation if
the holder of shares of this Series would otherwise be entitled to
receive such rights upon conversion of shares of this Series for
Common Stock pursuant to Section 3 hereof; provided, however, that if
such rights are subsequently redeemed by the Corporation, such
redemption shall be treated for purposes of this Section 2.2 as a cash
dividend (but not a regularly scheduled cash dividend) on the Common
Stock), the Corporation shall simultaneously distribute such assets,
property, securities, rights, options or warrants to the holders of
shares of this Series on the record date fixed for determining the
holders of Common Stock entitled to participate in such distribution
(or, if no such record date shall be established, the effective time
thereof) in an amount per share of this Series equal to the amount
that a holder of one share of this Series would have been entitled to
receive had such share of this Series been converted into Common Stock
immediately prior to such record date (or effective time). In the
event of a distribution to holders of shares of this Series pursuant
to this Section 2.2, such holders shall be entitled to receive
fractional shares or interests only to the extent that holders of
Common Stock are entitled to receive the same. The holders of shares
of this Series on the applicable record date (or effective time) shall
be entitled to receive in lieu of such fractional shares or interests
the same consideration as is payable to holders of Common Stock with
respect thereto. If there are no fractional shares or interests
payable to holders of Common Stock, the holders of shares of this
Series on the applicable record date (or effective time) shall receive
in lieu of such fractional shares or interests
<PAGE>
the fair value thereof as determined by the Board of Directors.
2.3 In the event that the holders of Common Stock are
entitled to make any election with respect to the kind or amount of
securities or other property receivable by them in any distribution
that is subject to Section 2.2 hereof, the kind and amount of
securities or other property that shall be distributable to the
holders of shares of this Series shall be based on (i) the election,
if any, made by the holder of record (as of the date used for
determining the holders of Common Stock entitled to make such
election) of the largest number of shares of this Series in writing to
the Corporation on or prior to the last date on which a holder of
Common Stock may make such an election or (ii) if no such election is
timely made, an assumption that such holder failed to exercise any
such rights (provided that if the kind or amount of securities or
other property is not the same for each nonelecting holder, then the
kind and amount of securities or other property receivable by holders
of shares of this Series shall be based on the kind or amount of
securities or other property receivable by a plurality of the shares
held by the nonelecting holders of Common Stock). Concurrently with
the mailing to holders of Common Stock of any document pursuant to
which such holders may make an election of the type referred to in
this Section 2.3, the Corporation shall mail a copy thereof to the
holders of record of shares of this Series as of the date used for
determining the holders of record of Common Stock entitled to such
mailing, which document shall be used by the holders of record of
shares of this Series to make such an election.
2.4 The Formula Number shall be adjusted from time to
time as follows, whether or not any shares of this Series have been
issued by the Corporation, for events occurring on or after [ ]:<F1>
(a) In case the Corporation shall (i) pay a dividend in
shares of its Common Stock, (ii) combine its outstanding shares
of Common Stock into a smaller number of shares, (iii) subdivide
its outstanding shares of Common Stock or (iv) reclassify (other
than by way of a merger or consolidation that is subject to
<F1> Insert the date of filing of the Certificate or the relevant
effective time.
<PAGE>
Section 3.6 hereof) its shares of Common Stock, then the Formula
Number in effect immediately before such event shall be
appropriately adjusted so that immediately following such event
the holders of shares of this Series shall be entitled to receive
upon conversion thereof the kind and amount of shares of Capital
Stock of the Corporation which they would have owned or been
entitled to receive upon or by reason of such event if such
shares of this Series had been con- verted immediately before the
record date (or, if no record date, the effective date) for such
event (it being understood that any distribution of cash or
Capital Stock (other than Common Stock) that shall accompany a
reclassification of the Common Stock, shall be subject to Section
2.2 hereof rather than this Section 2.4(a)). An adjustment made
pursuant to this Section 2.4(a) shall become effective
retroactively immediately after the record date in the case of a
dividend or distribution and shall become effective retroactively
immediately after the effective date in the case of a
subdivision, combination or reclassification. For the purposes of
this Section 2.4(a), in the event that the holders of Common
Stock are entitled to make any election with respect to the kind
or amount of securities receivable by them in any transaction
that is subject to this Section 2.4(a) (including any election
that would result in all or a portion of the transaction becoming
subject to Section 2.2 hereof), the kind and amount of securities
that shall be distributable to the holders of shares of this
Series shall be based on (i) the election, if any, made by the
holder of record (as of the date used for determining the holders
of Common Stock entitled to make such election) of the largest
number of shares of this Series in writing to the Corporation on
or prior to the last date on which a holder of Common Stock may
make such an election or (ii) if no such election is timely made,
an assumption that such holder failed to exercise any such rights
(provided that if the kind or amount of securities is not the
same for each nonelecting holder, then the kind and amount of
securities receivable shall be based on the kind or amount of
securities receivable by a plurality of nonelecting holders of
Common Stock). Concurrently with the mailing to holders of Common
Stock of any document pursuant to which such holders may make an
election of the type referred to in this Section 2.4(a), the
Corporation shall mail a copy thereof to
<PAGE>
the holders of record of shares of this Series as of the date
used for determining the holders of record of Common Stock
entitled to such mailing, which document shall be used by the
holders of record of shares of this Series to make such an
election.
(b) The Corporation shall be entitled to make such
additional adjustments in the Formula Number, in addition to
those required by Section 2.4(a) hereof as shall be necessary in
order that any dividend or distribution in Common Stock or any
subdivision, reclassification or combination of shares of Common
Stock referred to above, shall not be taxable to the holders of
Common Stock for United States Federal income tax purposes, so
long as such additional adjustments pursuant to this Section
2.4(b) do not decrease the Formula Number.
(c) All calculations under this Section 2 and Section 3
hereof shall be made to the nearest cent, one-hundredth of a
share or, in the case of the Formula Number, one
hundred-thousandth. Notwithstanding any other provision of this
Section 2.4, the Corporation shall not be required to make any
adjustment of the Formula Number unless such adjustment would
require an increase or decrease of at least one percent (1%) of
the Formula Number. Any lesser adjustment shall be carried
forward and shall be made at the time of and together with the
next subsequent adjustment that, together with any adjustment or
adjustments so carried forward, shall amount to an increase or
decrease of at least one percent (1%) of the Formula Number. Any
adjustments under this Section 2.4 shall be made successively
whenever an event requiring such an adjustment occurs.
(d) Promptly after an adjustment in the Formula Number
is required, the Corporation shall provide written notice to each
of the holders of shares of this Series, which notice shall state
the adjusted Formula Number.
(e) If a distribution is made in accordance with the
provisions of Section 2.2 hereof, anything in this Section 2.4 to
the contrary notwithstanding, no adjustment pursuant to this
Section 2.4 shall be effected by reason of the distribution of
such assets, property, securities, rights, options or warrants or
<PAGE>
the subsequent modification, exercise, expiration or termination
of such securities, rights, options or warrants.
3. Conversion at the Option of the Holder.
3.1 Each holder of a share of this Series shall have
the right at any time to convert such share of this Series into
either: (i) a number of shares of Common Stock per share of this
Series equal to the Formula Number in effect on the Conversion Date or
(ii) one share of Series K Stock per share of this Series; provided,
however, that such holder may convert shares of this Series only to
the extent that the ownership by such holder or its designee of the
shares of Common Stock or Series K Stock issuable upon such conversion
would not violate the Communications Laws.
3.2 No adjustments in respect of payments of dividends
on shares of this Series surrendered for conversion or any dividend on
the Common Stock or Series K Stock issued upon conversion shall be
made upon the conversion of any shares of this Series (it being
understood that if the Conversion Date for shares of this Series
occurs after the Record Date and prior to the Dividend Payment Date of
any such dividend, the holders of record on such Record Date shall be
entitled to receive the dividend payable with respect to such shares
on the related Dividend Payment Date pursuant to Section 2.1 hereof).
3.3 The Corporation may, but shall not be required to,
in connection with any conversion of shares of this Series into shares
of Common Stock, issue a fraction of a share of Common Stock, and if
the Corporation shall determine not to issue any such fraction, the
Corporation shall make a cash payment (rounded to the nearest cent)
equal to such fraction multiplied by the Closing Price of the Common
Stock on the last Trading Day prior to the Conversion Date. The
Corporation shall issue a fraction of a share of Series K Stock in
order to effect a conversion of a fraction of a share of this Series
into Series K Stock.
3.4 Any holder of shares of this Series electing to
convert such shares into Common Stock or Series K Stock shall
surrender the certificate or certificates for such shares at the
principal executive office of the Corporation (or at such other place
as the Corporation may designate by notice to the holders of shares of
this Series)
<PAGE>
during regular business hours, duly endorsed to the Corporation or in
blank, or accompanied by instruments of transfer to the Corporation or
in blank, or in form satisfactory to the Corporation, and shall give
written notice to the Corporation at such office that such holder
elects to convert such shares of this Series, which notice shall state
whether the shares of this Series delivered for conversion shall be
converted into shares of Common Stock or shares of Series K Stock. If
any such certificate or certificates shall have been lost, stolen or
destroyed, the holder shall, in lieu of delivering such certificate or
certificates, deliver to the Corporation (or such other place) an
indemnification agreement and bond satisfactory to the Corporation.
The Corporation shall, as soon as practicable (subject to Section 3.8
hereof) after such deposit of certificates for shares of this Series
or delivery of the indemnification agreement and bond, accompanied by
the written notice above prescribed, issue and deliver at such office
(or such other place) to the holder for whose account such shares were
surrendered, or a designee of such holder, certificates representing
either (i) the number of shares of Common Stock and the cash, if any,
or (ii) the number of shares of Series K Stock, as the case may be, to
which such holder is entitled upon such conversion. Each share of
Common Stock delivered to a holder or its designee as a result of
conversion of shares of this Series pursuant to this Section 3 shall
be accompanied by any rights associated generally with each other
share of Common Stock outstanding as of the Conversion Date.
3.5 Conversion shall be deemed to have been made as of
the date (the "Conversion Date") that the certificate or certificates
for the shares of this Series to be converted and the written notice
prescribed in Section 3.4 hereof are received by the Corporation; and
the Person entitled to receive the Common Stock or Series K Stock
issuable upon such conversion shall be treated for all purposes as the
holder of record of such Common Stock or Series K Stock, as the case
may be, on such date. The Corporation shall not be required to deliver
certificates for shares of Common Stock or Series K Stock while the
stock transfer books for such stock or for this Series are duly closed
for any purpose, but certificates for shares of Common Stock or Series
K Stock, as the case may be, shall be delivered as soon as practicable
after the opening of such books.
<PAGE>
3.6 In the event that on or after [ ]<F2> , whether or
not any shares of this Series have been issued by the Corporation,
either (a) any consolidation or merger to which the Corporation is a
party, other than a merger or consolidation in which the Corporation
is the surviving or continuing corporation and which does not result
in any reclassification of, or change (other than a change in par
value or from par value to no par value or from no par value to par
value, or as a result of a subdivision or combination) in, outstanding
shares of Common Stock or (b) any sale or conveyance of all or
substantially all of the property and assets of the Corporation, then
lawful provision shall be made as part of the terms of such
transaction whereby the holder of each share of this Series shall have
the right thereafter, during the period such share shall be
convertible, to convert such share into the kind and amount of shares
of stock or other securities and property receivable upon such
consolidation, merger, sale or conveyance by a holder of the number of
shares of Common Stock into which such shares of this Series could
have been converted immediately prior to such consolidation, merger,
sale or conveyance, subject to adjustment which shall be as nearly
equivalent as may be practicable to the adjustments provided for in
Section 2.4 hereof and this Section 3 (based on (i) the election, if
any, made in writing to the Corporation by the holder of record (as of
the date used for determining holders of Common Stock entitled to make
such election) of the largest number of shares of this Series on or
prior to the last date on which a holder of Common Stock may make an
election regarding the kind or amount of securities or other property
receivable by such holder in such transaction or (ii) if no such
election is timely made, an assumption that such holder failed to
exercise any such rights (provided that if the kind or amount of
securities or other property is not the same for each nonelecting
holder, then the kind and amount of securities or other property
receivable shall be based upon the kind and amount of securities or
other property receivable by a plurality of the nonelecting holders of
Common Stock)). In the event that any of the transactions referred to
in clause (a) or (b) of the first sentence of this Section 3.6
involves the distribution of cash or property (other than equity
securities) to a holder of Common Stock, lawful provision shall be
made as part of the
<F2> Insert the date of filing of the Certificate or the relevant
effective time.
<PAGE>
terms of the transaction whereby the holder of each share of this
Series on the record date fixed for determining holders of Common
Stock entitled to receive such cash or property (or if no such record
date is established, the effective date of such transaction) shall be
entitled to receive the amount of cash or property that such holder
would have been entitled to receive had such holder converted his
shares of this Series into Common Stock immediately prior to such
record date (or effective date) (based on the election or nonelection
made by the holder of record of the largest number of shares of this
Series, as provided above). Concurrently with the mailing to holders
of Common Stock of any document pursuant to which such holders may
make an election regarding the kind or amount of securities or other
property that will be receivable by such holders in any transaction
described in clause (a) or (b) of the first sentence of this Section
3.6, the Corporation shall mail a copy thereof to the holders of
record of the shares of this Series as of the date used for
determining the holders of record of Common Stock entitled to such
mailing, which document shall be used by the holders of shares of this
Series to make such an election. The Corporation shall not enter into
any of the transactions referred to in clauses (a) or (b) of the first
sentence of this Section 3.6 unless effective provision shall be made
in the certificate or articles of incorporation or other constituent
documents of the Corporation or the entity surviving the consolidation
or merger, if other than the Corporation, or the entity acquiring the
Corporation's assets, as the case may be, so as to give effect to the
provisions set forth in this Section 3.6. The provisions of this
Section 3.6 shall apply similarly to successive consolidations,
mergers, sales or conveyances. For purposes of this Section 3.6, the
term "Corporation" shall refer to the Corporation as constituted
immediately prior to the merger, consolidation or other transaction
referred to in this Section 3.6.
3.7 The Corporation shall at all times reserve and keep
available, free from preemptive rights, out of its authorized but
unissued stock, for the purpose of effecting the conversion of the
shares of this Series, such number of its duly authorized shares of
Common Stock and Series K Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of this
Series into shares of Common Stock or Series K Stock at any time
(assuming that, at the time of the computation of such number of
shares, all such Common Stock or Series K Stock would be held by a
single holder); provided, however, that
<PAGE>
nothing contained herein shall preclude the Corporation from
satisfying its obligations in respect of the conversion of the shares
by delivery of purchased shares of Common Stock or Series K Stock that
are held in the treasury of the Corporation. All shares of Common
Stock or Series K Stock that shall be deliverable upon conversion of
the shares of this Series shall be duly and validly issued, fully paid
and nonassessable. For purposes of this Section 3, any shares of this
Series at any time outstanding shall not include shares held in the
treasury of the Corporation.
3.8 In any case in which Section 2.4 hereof shall
require that any adjustment be made effective as of or retroactively
immediately following a record date, the Corporation may elect to
defer (but only for five (5) Trading Days following the occurrence
of the event which necessitates the notice referred to in Section
2.4(d) hereof) issuing to the holder of any shares of this Series
converted after such record date (i) the shares of Common Stock
issuable upon such conversion over and above (ii) the shares of Common
Stock issuable upon such conversion on the basis of the Formula Number
prior to adjustment; provided, however, that the Corporation shall
deliver to such holder a due bill or other appropriate instrument
evidencing such holder's right to receive such additional shares upon
the occurrence of the event requiring such adjustment.
3.9 If any shares of Common Stock or Series K Stock
that would be issuable upon conversion pursuant to this Section 3
require registration with or approval of any governmental authority
before such shares may be issued upon conversion (other than any such
registration or approval required to avoid a violation of the
Communications Laws), the Corporation will in good faith and as
expeditiously as possible cause such shares to be duly registered or
approved, as the case may be. The Corporation will use commercially
reasonable efforts to list the shares of (or depositary shares
representing fractional interests in) Common Stock required to be
delivered upon conversion of shares of this Series prior to such
delivery upon the principal national securities exchange, if any, upon
which the outstanding Common Stock is listed at the time of such
delivery. Nothing in the Certificate shall require the Corporation to
register under the Securities Act of 1933, as amended, or the
securities laws of any state or any other jurisdiction, any shares of
Series K Stock or, except as provided in the Registration Rights
Agreement (as defined in
<PAGE>
the LMC Agreement), any shares of Common Stock issued upon conversion
pursuant to this Section 3.
3.10 The Corporation shall pay any and all issue or
other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock or Series K Stock on conversion of shares of
this Series pursuant hereto. The Corporation shall not, however, be
required to pay any tax which is payable in respect of any transfer
involved in the issue or delivery of Common Stock or Series K Stock in
a name other than that in which the shares of this Series so converted
were registered, and no such issue or delivery shall be made unless
and until the Person requesting such issue has paid to the Corporation
the amount of such tax, or has established, to the satisfaction of the
Corporation, that such tax has been paid.
3.11 In case of (i) the voluntary or involuntary
dissolution, liquidation or winding up of the Corporation or (ii) any
action triggering an adjustment to the Formula Number pursuant to
Section 2.4 hereof or Section 3.6 hereof, then, in each case, the
Corporation shall cause to be mailed, first-class postage prepaid, to
the holders of record of the outstanding shares of this Series, at
least fifteen (15) days prior to the applicable record date for any
such transaction (or if no record date will be established, the
effective date thereof), a notice stating (x) the date, if any, on
which a record is to be taken for the purpose of any such transaction
(or, if no record date will be established, the date as of which
holders or record of Common Stock entitled to participate in such
transaction are determined), and (y) the expected effective date
thereof. Failure to give such notice or any defect therein shall not
affect the legality or validity of the proceedings described in this
Section 3.11.
4. Voting.
4.1 The shares of this Series shall have no rights to
vote in the election of directors or with respect to any other matter
except as expressly provided in this Section 4 or as required by law.
4.2 So long as any shares of this Series remain
outstanding, unless a greater percentage shall then be required by
law, the Corporation shall not, without the affirmative vote at a
meeting or the written consent with or
<PAGE>
without a meeting of the holders of shares of this Series representing
at least 66-2/3% of the aggregate voting power of shares of this
Series then outstanding, amend, alter or repeal any of the provisions
of the Certificate, or the Certificate of Incorporation, so as in any
such case to adversely affect the voting powers, designations,
preferences and relative, participating, optional or other special
rights, and qualifications, limitations or restrictions thereof, of
the shares of this Series.
4.3 So long as any shares of this Series remain
outstanding, the Corporation shall not, without the affirmative vote
at a meeting or the written consent with or without a meeting of the
holders of shares of this Series representing 100% of the aggregate
voting power of shares of this Series then outstanding, amend, alter
or repeal the provisions of Section 7.8 hereof.
4.4 No consent of holders of shares of this Series
shall be required for (i) the creation of any indebtedness of any
kind of the Corporation, (ii) the authorization or issuance of any
class or series of Junior Stock, Parity Stock or Senior Stock, (iii)
the authorization of any increase or decrease in the number of shares
constituting this Series or (iv) the approval of any amendment to the
Certificate of Incorporation that would increase or decrease the
aggregate number of authorized shares of Preferred Stock or Common
Stock, except to the extent expressly required by the DGCL.
5. Liquidation Rights.
5.1 Upon the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, no distribution
shall be made to the holders of shares of Junior Stock (either as to
dividends or upon liquidation, dissolution or winding up) unless,
prior thereto, the holders of shares of this Series shall have
received an amount equal to the greater of (i) $.01 per whole share of
this Series or (ii) an aggregate amount per share equal to the product
of the Formula Number then in effect multiplied by the aggregate
amount to be distributed per share to holders of Common Stock.
5.2 Neither the sale, exchange or other conveyance (for
cash, shares of stock, securities or other consideration) of all or
substantially all the property and
<PAGE>
assets of the Corporation nor the merger or consolidation of the
Corporation into or with any other corporation, or the merger or
consolidation of any other corporation into or with the Corporation,
shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Section 5.
5.3 After the payment to the holders of the shares of
this Series of full preferential amounts provided for in this Section
5, the holders of this Series as such shall have no right or claim to
any of the remaining assets of the Corporation.
5.4 In the event the assets of the Corporation
available for distribution to the holders of shares of this Series
upon any dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full
all amounts to which such holders and the holders of all Parity Stock
are entitled, no such distribution shall be made on account of any
shares of any Parity Stock upon such dissolution, liquidation or
winding up unless proportionate distributive amounts shall be paid on
account of the shares of this Series, ratably, in proportion to the
full distributable amounts for which holders of all Parity Stock are
entitled upon such dissolution, liquidation or winding up.
6. Transfer Restrictions.
6.1 Without the prior written consent of the
Corporation, no holder of shares of this Series shall offer,
sell, transfer, pledge, encumber or otherwise dispose of, or
agree to offer, sell, transfer, pledge, encumber or otherwise
dispose of, any shares of this Series or interests in any shares
of this Series except to a Permitted Transferee that shall agree
that, prior to such Permitted Transferee ceasing to be a
Permitted Transferee, such Permitted Transferee must transfer
ownership of any shares of this Series, and all interests
therein, held by such Permitted Transferee to the initial holder
who received such shares pursuant to the LMC Agreement. For the
avoidance of doubt, the preceding sentence is not intended to
prohibit a holder of shares of this Series from entering into, or
offering to enter into, any arrangement under which such holder
agrees to promptly convert shares of this Series and sell,
transfer or otherwise dispose of the Common Stock issuable upon
such the conversion.
<PAGE>
6.2 Certificates for shares of this Series shall bear
such legends as the Corporation shall from time to time deem
appropriate.
7. Other Provisions.
7.1 All notices from the Corporation to the holders of
shares of this Series shall be given by one of the methods specified
in Section 7.2 hereof. With respect to any notice to a holder of
shares of this Series required to be provided hereunder, neither
failure to give such notice, nor any defect therein or in the
transmission thereof, to any particular holder shall affect the
sufficiency of the notice or the validity of the proceedings referred
to in such notice with respect to the other holders or affect the
legality or validity of any distribution, right, warrant,
reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up, or the vote upon any such
action. Any notice which was mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not
the holder receives the notice.
7.2 All notices and other communications hereunder
shall be deemed given (i) on the first Trading Day following the date
received, if delivered personally, (ii) on the Trading Day following
timely deposit with an overnight courier service, if sent by overnight
courier specifying next day delivery and (iii) on the first Trading
Day that is at least five days following deposit in the mails, if sent
by first class mail to (x) a holder at its last address as it appears
on the transfer records or registry for the shares of this Series and
(y) the Corporation at the following address (or at such other address
as the Corporation shall specify in a notice pursuant to this Section
7.2): Time Warner Inc., 75 Rockefeller Plaza, New York, New York
10019, Attention: General Counsel.
7.3 Any shares of this Series which have been converted
or otherwise acquired by the Corporation shall, after such conversion
or acquisition, as the case may be, be retired and promptly cancelled
and the Corporation shall take all appropriate action to cause such
shares to obtain the status of authorized but unissued shares of Pre-
ferred Stock, without designation as to series, until such shares are
once more designated as part of a particular
<PAGE>
series by the Board of Directors. The Corporation may cause a
certificate setting forth a resolution adopted by the Board of
Directors that none of the authorized shares of this Series are
outstanding to be filed with the Secretary of State of the State of
Delaware. When such certificate becomes effective, all references to
this Series shall be eliminated from the Certificate of Incorporation
and the shares of Preferred Stock designated hereby as Series J Non-
Voting Participating Convertible Preferred Stock shall have the status
of authorized and unissued shares of Preferred Stock and may be
reissued as part of any new series of Preferred Stock to be created by
resolution or resolutions of the Board of Directors.
7.4 The shares of this Series shall be issuable in
whole shares, in such fraction of a whole share as may be required in
order to effect any exchange of shares of Common Stock for shares of
this Series required by the terms of the LMC Agreement or, if
authorized by the Board of Directors (or any authorized committee
thereof), in any other fraction of a whole share so authorized.
7.5 The Corporation shall be entitled to recognize the
exclusive right of a Person registered on its records as the holder of
shares of this Series, and such holder of record shall be deemed the
holder of such shares for all purposes.
7.6 All notice periods referred to in the Certificate
shall commence on the date of the mailing of the applicable notice.
7.7 Any registered holder of shares of this Series may
proceed to protect and enforce its rights by any available remedy by
proceeding at law or in equity to protect and enforce any such rights,
whether for the specific enforcement of any provision in the
Certificate or in aid of the exercise of any power granted herein, or
to enforce any other proper remedy.
7.8 The shares of this Series shall not be subject to
redemption at the option of the Corporation, including pursuant to
Section 5 of Article IV of the Certificate of Incorporation (or any
equivalent provision in any further amendment to or restatement of the
Certificate of Incorporation).
<PAGE>
IN WITNESS WHEREOF, Time Warner Inc. has caused this
certificate to be signed and attested this [ ] day of [ ].
TIME WARNER INC.,
by
_____________________________
Name:
Title:
Attest: ______________________
Name:
Title:
<PAGE>
EXHIBIT D TO THE
LMC AGREEMENT
OPTION AGREEMENT
This Option Agreement (the "Agreement") is dated as of
___________, 199__, and is entered into between Time Warner Inc., a
Delaware corporation ("Buyer"1), and Liberty Media Corporation, a
Delaware corporation ("Seller") and, with respect to Section 11(e),
Section 11(g) and Section 11(i) only, Satellite Services, Inc. a
Delaware corporation ("Satellite"), and, with respect to the last
sentence of Section 12(a)(i) only, Tele-Communications, Inc., a
Delaware corporation ("TCI"). Buyer and Seller are referred to
collectively as the "Parties" and each, individually, is referred to
as a "Party."
WHEREAS Buyer, Seller and certain subsidiaries of Seller
have entered into an Agreement dated as of September 22, 1995 (the
"LMC Agreement"), which contemplates Buyer and Seller entering into
this Agreement;
WHEREAS Seller directly owns all the outstanding common
stock, par value $1.00 per share (the "Shares"), of Southern Satellite
Systems, Inc., a Georgia corporation (the "Subsidiary"), which is
engaged primarily in the Business (as defined in Section 24); and
WHEREAS Buyer desires to acquire from Seller an option to
acquire the Subsidiary and Seller is willing to grant the same.
NOW, THEREFORE, it is agreed as follows:
1. Option. Subject to and on the terms and conditions set forth
in this Agreement, Seller hereby grants to Buyer the right and option
(the "Option"), which may be exercised at any time during the Exercise
Period (as defined in Section 2(c)), to acquire the Subsidiary
pursuant to a merger (the "SSSI Merger") of the Subsidiary with and
into a newly-formed direct, wholly-owned subsidiary of the Buyer (the
"New Sub"), as a result of which (a) the separate existence of the
Subsidiary shall terminate and the New Sub shall continue as the
surviving corporation and (b) the Shares will be converted into the
right to receive the Merger Consideration (as defined below). The SSSI
Merger shall be effected pursuant to a merger
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1 Which term shall mean, if applicable, the newly formed
corporation that will become the sole stockholder of Buyer and Turner
Broadcasting System, Inc., a Georgia corporation, in the event the
Merger Agreement (as defined below) is amended as contemplated by the
last sentence of Section 1.01 thereof.
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agreement (the "SSSI Merger Agreement") substantially in the form of
Exhibit 1 attached hereto. Each Party shall, upon the execution of
this Agreement, execute the SSSI Merger Agreement and deliver an
executed copy thereof to the other Party.
2. Exercise of and Payment for Option.
(a) Initial Payment. In consideration of Seller entering into
this Agreement, Buyer shall deliver to Seller (or its designee pursuant to
Section 15) upon the execution of this Agreement (the "Execution Date"):
(i) that number of fully paid and nonassessable shares of the
Series K Voting Participating Convertible Preferred Stock of Buyer,
having the terms set forth on Exhibit C to the LMC Agreement ("Buyer
Preferred Stock"), which, on the Execution Date, is convertible into
5,000,000 shares of the Common Stock, par value $1.00 per share
("Buyer Common Stock"), of Buyer (the "Initial Payment").2
(ii) an opinion of counsel to Buyer (which counsel may be an
employee of Buyer), reasonably acceptable to Seller, addressed to
Seller and dated the Execution Date, to the effect that:
(1) Buyer is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation. Buyer has all requisite corporate power and
authority to execute and deliver this Agreement, the SSSI Merger
Agreement and the Registration Rights Agreement (as defined in
Section 2(a)(iii)), to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby
and thereby.
(2) The execution and delivery by Buyer of this
Agreement, the SSSI Merger Agreement and the Registration
Rights Agreement, the performance by Buyer of its
obligations hereunder and thereunder and the consummation by
Buyer of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary
corporate action on the part of Buyer. Each of this
Agreement, the SSSI Merger Agreement and the Registration
Rights Agreement have been duly executed and delivered by a
duly authorized officer of Buyer and constitutes the legal,
valid and binding obligation of Buyer enforceable against
Buyer in accordance with its terms (subject to all
applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws affecting
creditors' rights generally and subject, as to
enforceability, to general principles of equity, and except
that the indemnification obligations set forth in
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2 To be appropriately adjusted in the event of any
reclassification, recapitalization, stock dividend, stock split or
reverse stock split or other change in the Buyer Common Stock between
September 22, 1995 and the Execution Date.
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Section 8 of the Registration Rights Agreement may be
subject to considerations of public policy).
(3) The execution, delivery and performance by Buyer of this
Agreement, the SSSI Merger Agreement and the Registration Rights
Agreement do not conflict with or result in a violation of the
General Corporation Law of the State of Delaware, or the
certificate of incorporation or by-laws of Buyer.
(4) The shares of Buyer Preferred Stock delivered by Buyer to
Seller in satisfaction of the Initial Payment have been duly
authorized and are validly issued, fully paid, nonassessable and
are not subject to any preemptive rights.
(iii) the duly executed LMC Registration Rights Agreement, dated
as of the Execution Date (as amended, the "Registration Rights
Agreement"), between Seller and Buyer, as contemplated by the LMC
Agreement, a copy of which is attached as Exhibit F thereto, and the
duly executed SSSI Merger Agreement.
(b) Notwithstanding any other provision of this Agreement, the
Initial Payment shall not be refunded or refundable, nor may any claim be
made for the return of the Initial Payment, in whole or in part unless the
Buyer proves in a court of law that the Seller and the Subsidiary did not
at the Execution Date have all requisite corporate power to execute,
deliver and perform its obligations under this Agreement and such lack of
power has not been cured.
(c) Exercise Period. Subject to Section 10(a), Buyer may exercise
the Option at any time during the period (the "Exercise Period") commencing
on the Execution Date and ending on the Termination Date (as defined in
Section 10(a)), by giving written notice of exercise (the "Exercise
Notice") to Seller pursuant to Section 16. By giving the Exercise Notice,
Buyer shall have consented to the filing on the Closing Date (as defined in
Section 3) of appropriate certificates of merger with the appropriate
governmental entities in order to effect the SSSI Merger (subject to
Sections 5, 6, 7, 8 and 9 of this Agreement). Buyer shall execute and
deliver to Seller any documents required to effect the SSSI Merger
simultaneously with such notice. Prior to the Closing (as defined in
Section 3), Seller shall retain all rights with respect to the Subsidiary
and the Shares, subject to Section 11.
(d) Merger Consideration. The "Merger Consideration" shall
consist of a number of fully paid and nonassessable shares of Buyer
Preferred Stock equal to the quotient of (i) the quotient obtained by
dividing $160,000,000 by the Current Market Price (as defined below)
of the Buyer Common Stock on the Closing Date, divided by (ii) the
number of shares of Buyer Common Stock into which one share of Buyer
Preferred Stock shall then be convertible. "Current Market Price", as
of any date, shall mean the average of the daily closing prices for
the shares of Buyer Common Stock for the 20 trading day period ending
on the full trading day immediately prior to the date in question,
appropriately adjusted to take into account any stock
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dividends, splits, reverse splits, combinations and the like, the
ex-dividend date or effective date for which occurs during (but after the
first day of) such 20 trading day period. The closing price for each
trading day shall be the last reported sale price on such day (or if no
such reported sale takes place on such day, the average of the reported
closing bid and asked prices) of the Buyer Common Stock (regular way) as
shown on the Composite Tape of the New York Stock Exchange ("NYSE"), or if
the Buyer Common Stock is not listed or admitted to trading on the NYSE, on
the principal United States national securities exchange on which the Buyer
Common Stock is listed or admitted to trading or, if the Buyer Common Stock
is not listed or admitted to trading on any such exchange, then the last
reported sale price (or the average of the quoted closing bid and asked
prices if no sale is reported) of the Buyer Common Stock as reported by the
Nasdaq Stock Market ("Nasdaq") or any other quotation system of the
National Association of Securities Dealers, Inc. ("NASD"), or if the Buyer
Common Stock is not quoted on Nasdaq, or any comparable system, the average
of the closing bid and asked prices as furnished by any member of the NASD
selected by Seller. In the event of any reclassification, recapitalization,
stock dividend, stock split or reverse stock split or other change in the
Buyer Common Stock, or any consolidation or merger of Buyer with or into
another entity affecting the Buyer Common Stock, the record date of which
(or, if no record date, the effective date of which) occurs on or after the
date Buyer exercises the Option and before the Closing Date, the Merger
Consideration shall also include such shares of stock or other
consideration to which Seller would have been entitled if Seller had been a
holder, on the record date (or effective date, as applicable) for such
occurrence, of the shares of Buyer Common Stock into which the shares of
Buyer Preferred Stock constituting the Merger Consideration as calculated
above, are convertible.
3. Closing. If the Option is exercised, the closing of the SSSI
Merger pursuant to this Agreement and the SSSI Merger Agreement (the
"Closing") shall occur as soon as practicable after the exercise of the
Option, but in no event more than 5 business days following the
satisfaction or waiver (to the extent waived by the Party entitled to do
so) of the conditions to the Closing described in Sections 5, 6, 7, 8 and 9
of this Agreement (such date for the Closing being referred to as the
"Closing Date").
4. Representations and Warranties of Seller and Buyer as of
Execution Date.
(a) Each of Seller and Buyer represents and warrants to the other
as of the Execution Date that:
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(i) Such Party has all requisite corporate power to execute,
deliver and perform its obligations under this Agreement, the SSSI
Merger Agreement and the Registration Rights Agreement, and such
execution, delivery and performance have been duly authorized by all
corporate action on its part required to be taken.
(ii) This Agreement, the SSSI Merger Agreement and the
Registration Rights Agreement are such Party's legal, valid and
binding obligations, enforceable in accordance with their respective
terms, except as may be affected by bankruptcy, insolvency or similar
laws affecting the rights of creditors generally and by equitable
principles of general applicability.
(iii) Neither the execution and delivery of this Agreement, the
SSSI Merger Agreement and the Registration Rights Agreement by such
Party nor, except as set forth below such Party's name on Schedule
4(a)(iii) hereto, the performance of its obligations under this
Agreement, the SSSI Merger Agreement and the Registration Rights
Agreement: (i) will violate or conflict with, or constitute a breach
or default under, (A) the certificate of incorporation or by-laws of
such Party, (B) any law, statute, regulation, rule, order or other
enactment of any Governmental Entity (as defined in Section 24(c))
applicable to such Party, or (C) any agreement or instrument to which
such Party is a party or by which it is bound or affected, except for
any violations, conflicts, breaches or defaults as would not,
individually or in the aggregate, have a material adverse effect on
the legality, validity, binding effect or enforceability of this
Agreement, the SSSI Merger Agreement or the Registration Rights
Agreement or on the material rights or ability of the other Party to
realize the material benefits intended to be created by this
Agreement, the SSSI Merger Agreement, and the Registration Rights
Agreement, and except for any violations, conflicts, breaches or
defaults as may be the result of actions taken by Buyer subsequent to
the SSSI Merger, or (ii) result in the creation or imposition of any
lien or other encumbrance on any of its assets, except for liens or
encumbrances as would not, individually or in the aggregate, have a
material adverse effect on the legality, validity, binding effect or
enforceability of this Agreement, the SSSI Merger Agreement and the
Registration Rights Agreement or on the material rights or ability of
the other Party to realize the material benefits intended to be
created hereby and thereby. No authorization, consent, approval or
other action by, and no notice to or filing with, any Governmental
Entity or other third party is required to be obtained or made in
connection with such Party's execution, delivery and, except as set
forth below such Party's name on Schedule 4(a)(iii) hereto,
performance of this Agreement, the SSSI Merger Agreement and the
Registration Rights Agreement, except any thereof the failure of which
to be obtained, given or made would not, individually or in the
aggregate, have a material adverse effect on the legality, validity,
binding effect or enforceability of this Agreement, the SSSI Merger
Agreement and the Registration Rights Agreement or on the material
rights or ability of the other Party to realize the material benefits
intended to be created hereby and thereby.
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(b) Seller represents and warrants to Buyer as of the Execution
Date that:
(i) Consolidated Return. As of the Execution Date, Seller (and,
if Seller shall have designated another person to receive the Initial
Payment pursuant to Section 15, such designated person) is a member of
the same group of corporations filing a consolidated return for
federal income tax purposes as the Liberty Subsidiaries, as defined in
the Voting Trust Agreement dated as of ________________, 199_ by and
among TCI Turner Preferred Inc., United Cable Turner Investment, Inc.,
Communications Capital Corp. and Gerald M. Levin.
(ii) No Encumbrances. Seller represents and warrants to Buyer that
Seller is the owner of all the legal and beneficial right, title and
interest in and to the Shares, free and clear of any lien, encumbrance
or other adverse claim of any nature (except as otherwise permitted by
Section 11(b)(i)); and there are no outstanding options, warrants,
rights or calls or any preemptive or other similar rights to acquire
any shares of capital stock of the Subsidiary.
(iii) Investment Intent. The shares of Buyer Preferred Stock
acquired by Seller as part of the Initial Payment are being acquired
by Seller and, if the Option is exercised the shares of Buyer
Preferred Stock constituting the Merger Consideration will be acquired
by Seller, for its own account, for investment and not with a view to
the distribution or resale thereof other than as contemplated by the
Registration Rights Agreement. Seller understands that such shares
have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or any state securities or blue sky laws, by
reason of their issuance in a transaction exempt from the registration
requirements thereunder and may not be resold unless the subsequent
disposition thereof is registered thereunder or is exempt from
registration thereunder.
(c) Buyer represents and warrants to Seller as of the Execution
Date that:
(i) The shares of Buyer Preferred Stock delivered to Seller in
satisfaction of the Initial Payment have been duly authorized and are
validly issued, fully paid, nonassessable and free of preemptive
rights.
(ii) Neither the execution and delivery by Buyer of this
Agreement, the SSSI Merger Agreement and the Registration Rights
Agreement nor the performance of its obligations hereunder and
thereunder will result in the creation or imposition of any lien or
other encumbrance on the shares of Buyer Preferred Stock to be
delivered by Buyer to Seller in satisfaction of the Initial Payment or
the Merger Consideration.
<PAGE>
(d) In addition to the representations and warranties of Buyer
set forth in Section 4(c), the following representations and warranties of
the Buyer are hereby incorporated by reference, with the same effect as if
made in this Agreement by Buyer to Seller on and as of the Execution Date:
(i) the representations and warranties of Buyer contained in
Section 3.02(a) of the Agreement and Plan of Merger, dated as of
September 22, 1995 (the "Merger Agreement"), among Buyer, Time Warner
Acquisition Corp. and Turner Broadcasting System, Inc., under the
heading entitled "Organization, Standing and Corporate Power";
(ii) the representations and warranties of Buyer contained in
Section 3.02(c) of the Merger Agreement under the heading entitled
"Capital Structure";
(iii) the representations and warranties of Buyer contained in
Section 3.02(e) of the Merger Agreement under the heading entitled
"SEC Documents; Undisclosed Liabilities";
(iv) the representations and warranties of Buyer contained in
Section 3.02(g) of the Merger Agreement under the heading entitled
"Absence of Certain Changes or Events";
(v) the representations and warranties of Buyer contained in
Section 3.02(h) of the Merger Agreement under the heading entitled
"Litigation";
(vi) the representations and warranties of Buyer contained in
Section 3.02(j) of the Merger Agreement under the heading entitled
"Brokers"; and
(vii) the representations and warranties of Buyer contained in
Section 3.02(k) of the Merger Agreement under the heading entitled
"Taxes".
5. Representations and Warranties of Seller and Buyer as of the
Closing Date. If the Option is exercised, it shall be a condition to the
obligations of Seller to be performed hereunder on the Closing Date that,
on and as of the Closing Date, each of the following representations and
warranties, if qualified by materiality, shall be true and complete, or, if
not so qualified, shall be true and complete in all material respects, with
respect to Buyer, and it shall be a condition to the obligations of Buyer
to be performed hereunder on the Closing Date that, on and as of the
Closing Date, each of the following representations and warranties, if
qualified by materiality, shall be true and complete, or, if not so
qualified, shall be true and complete in all material respects, with
respect to Seller:
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(a) Such Party has all requisite corporate power to execute,
deliver and perform its obligations under this Agreement, the SSSI Merger
Agreement and the Registration Rights Agreement, and such execution,
delivery and performance have been duly authorized by all corporate action
on its part required to be taken.
(b) This Agreement, the SSSI Merger Agreement and the
Registration Rights Agreement are such Party's legal, valid and binding
obligations, enforceable in accordance with their respective terms, except
as may be affected by bankruptcy, insolvency or similar laws affecting the
rights of creditors generally and by equitable principles of general
applicability.
(c) Neither the execution and delivery of this Agreement, the
SSSI Merger Agreement and the Registration Rights Agreement by such Party
nor, except as set forth below such Party's name on Schedule 5(c) hereto,
the performance of its obligations under this Agreement, the SSSI Merger
Agreement and the Registration Rights Agreement: (i) will violate or
conflict with, or constitute a breach or default under, (A) the certificate
of incorporation or by-laws of such Party, (B) any law, statute,
regulation, rule, order or other enactment of any Governmental Entity
applicable to such Party, or (C) any agreement or instrument to which such
Party is a party or by which it is bound or affected, except for any
violations, conflicts, breaches or defaults as would not, individually or
in the aggregate, have a material adverse effect on the legality, validity,
binding effect or enforceability of this Agreement, the SSSI Merger
Agreement or the Registration Rights Agreement or on the material rights or
ability of the other Party to realize the material benefits intended to be
created by this Agreement, the SSSI Merger Agreement and the Registration
Rights Agreement or (ii) result in the creation or imposition of any lien
or other encumbrance on any of its assets, except for liens or encumbrances
as would not, individually or in the aggregate, have a material adverse
effect on the legality, validity, binding effect or enforceability of this
Agreement, the SSSI Merger Agreement and the Registration Rights Agreement
or on the material rights or ability of the other Party to realize the
material benefits intended to be created hereby and thereby. No
authorization, consent, approval or other action by, and no notice to or
filing with, any Governmental Entity or other third party is required to be
obtained or made in connection with such Party's execution, delivery and,
except as set forth below such Party's name on Schedule 5(c) hereto,
performance of this Agreement, the SSSI Merger Agreement and the
Registration Rights Agreement, except any thereof the failure of which to
be obtained, given or made would not, individually or in the aggregate,
have a material adverse effect on the legality, validity, binding effect or
enforceability of this Agreement, the SSSI Merger Agreement and the
Registration Rights Agreement or on the material rights or ability of the
other Party to realize the material benefits intended to be created hereby
and thereby.
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Without limiting the rights or obligations of either Party under any
provision of this Agreement: (1) if the Option is exercised, each Party
shall promptly notify the other Party of any information that should be set
forth below such Party's name on Schedule 5(c); (2) upon receipt of any
such notice, Schedule 5(c) shall automatically be amended to incorporate
such information under the name of such Party; and (3) it shall be a
condition to the obligations of each Party to be performed hereunder on the
Closing Date that such Party shall be reasonably satisfied with the
contents of Schedule 5(c) (as so amended) set forth under the name of the
other Party, to the extent such matters are materially different from the
matters set forth under the name of such other Party on Schedule 4(a)(iii).
6. (a) Representations and Warranties of Seller as of the Closing
Date. If the Option is exercised, it shall be a condition to the
obligations of Buyer to be performed hereunder on the Closing Date
that, on and as of the Closing Date, each of the following
representations and warranties of Seller, if qualified by materiality,
shall be true and complete, or, if not so qualified, shall be true and
complete in all material respects, except in each case as shall be set
forth in a letter (the "Disclosure Letter") from Seller to Buyer dated
as of a date after the exercise of the Option and not later than the
date 10 days prior to the Closing Date:
(i) Corporate Power. Except as set forth in Schedule 6(a)(i) to the
Disclosure Letter:
(A) each of Seller and the Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws of its
state of incorporation; and
(B) the Subsidiary is duly qualified and in good standing to do
business as a foreign corporation in each jurisdiction in which the
conduct or nature of its business or the ownership, leasing or holding
of its properties makes such qualification necessary, except such
jurisdictions where the failure to be so qualified or in good
standing, individually or in the aggregate, would not have a Material
Adverse Effect (as defined in Section 24(e)).
(ii) No Encumbrances. Except as set forth in Schedule 6(a)(ii) to
the Disclosure Letter, Seller is the owner of all the legal and
beneficial right, title and interest in and to the Shares, free and
clear of any lien, encumbrance or other adverse claim of any nature;
there are no outstanding options, warrants, rights or calls or any
preemptive or other similar rights to acquire any shares of capital
stock of the Subsidiary.
(iii) Authorized Stock. Except as set forth in Schedule 6(a)(iii)
to the Disclosure Letter:
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(A) the authorized capital stock of the Subsidiary consists
of 10,000 shares of Common Stock, par value $1.00 per share of
which 1,000 shares, constituting the Shares, are duly authorized
and validly issued and outstanding, fully paid and nonassessable;
(B) Seller is the sole record and beneficial owner of the Shares;
(C) except for the Shares, there are no shares of capital stock
or other equity securities of the Subsidiary outstanding;
(D) none of the Shares have been issued in violation of, and none
of the Shares are subject to, any purchase option, call, right of
first refusal, preemptive, subscription or similar rights under any
provision of applicable law, the certificate of incorporation or
by-laws of the Subsidiary, or any contract, agreement or instrument to
which the Subsidiary is subject, bound or a party or otherwise;
(E) there are no outstanding warrants, options, rights, "phantom"
stock rights, agreements, convertible or exchangeable securities or
other commitments (other than this Agreement) (i) pursuant to which
Seller or the Subsidiary is or may become obligated to issue, sell,
purchase, return or redeem any shares of capital stock or other
securities of the Subsidiary or (ii) that give any person the right to
receive any benefits or rights similar to any rights enjoyed by or
accruing to the holders of shares of capital stock of the Subsidiary;
(F) there are no equity securities of the Subsidiary reserved for
issuance for any purpose; and
(G) there are no outstanding bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which
stockholders of the Subsidiary may vote.
(iv) No Conflicts With Respect to Subsidiary. Except as set forth
in Schedule 6(a)(iv) to the Disclosure Letter, the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby, (i) will not violate or conflict with, or
constitute a breach, default or right to terminate or materially
modify under, (A) the Subsidiary's certificate of incorporation or
by-laws, (B) any law, statute, regulation, rule, order or other
enactment of any Governmental Entity applicable to the Subsidiary, or
(C) any agreement or instrument to which Subsidiary is a party or by
which it is bound (including any termination or modification of an
affiliation agreement of the Subsidiary, provided that Seller will
make no representations or warranties to the effect that Buyer's
ownership of the Subsidiary will not impair the availability of the
compulsory license under 17 U.S.C. Section 111 to cable systems) except
for any violations,
<PAGE>
conflicts, breaches or defaults as would not, individually or in
the aggregate, have a Material Adverse Effect or (ii) result in the
creation or imposition of any lien or other encumbrance on any of the
Subsidiary's assets, except for liens or encumbrances as would not,
individually or in the aggregate, have a material adverse effect on
the legality, validity, binding effect or enforceability of this
Agreement.
(v) Consents. Except as set forth in Schedule 6(a)(v) to the
Disclosure Letter, no consent, approval, license, permit, order
or authorization of, or registration, declaration or filing with,
any governmental entity is required to be obtained or made by or
with respect to the Subsidiary in connection with (I) the
execution, delivery and performance of this Agreement by Seller
and the Subsidiary or the consummation of the transactions
contemplated hereby or (II) the conduct of the business of the
Subsidiary following the Closing hereof, other than (1)
compliance with and filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended ("HSR Act"), if
applicable, (2) those that may be required solely by reason of
Buyer's (as opposed to any other third party's) participation in
the transactions contemplated hereby, (3) those that will be
obtained by the Closing and (4) those the failure of which to be
obtained or made by Closing would not, individually or in the
aggregate, have a Material Adverse Effect.
(vi) Financial Statements.
(A) Attached to the Disclosure Letter as Schedule 6(a)(vi) are
(I) the unaudited consolidated balance sheet of the Subsidiary as of
the end of the most recent fiscal period or calendar month prior to
the date of the Disclosure Letter (the "Balance Sheet"), and (II) the
unaudited consolidated statement of operating results of the
Subsidiary for the period ended as of the end of the most recent
fiscal period or calendar month prior to the date of the Disclosure
Letter (the financial statements described above, the "Financial
Statements").
(B) The Financial Statements have been prepared in accordance
with generally accepted accounting principles consistently applied and
on that basis fairly present (subject to normal, recurring year-end
adjustments) the consolidated financial condition and results of
operations of the Subsidiary as of the date thereof and for the
periods indicated.
(C) To the knowledge of Seller, as of the Closing Date, the
Subsidiary does not have any material liabilities or obligations of
any nature (whether accrued, absolute, contingent, unasserted or
otherwise), that are required by generally accepted accounting
principles to be reflected on a consolidated balance sheet, except (I)
as disclosed, reflected or reserved against in the Balance Sheet, (II)
for liabilities and obligations incurred in the ordinary course of
business consistent with past practice since the date of the Balance
Sheet and not in violation of this Agreement and (III) for Taxes.
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(vii) Taxes. Except as set forth in Schedule 6(a)(vii) to the
Disclosure Letter:
(A) as of the Closing, the Subsidiary and each subsidiary of the
Subsidiary, and each affiliated, combined or unitary group of which
the Subsidiary or such subsidiary is or has ever been a member and
which also (at the relevant time) included either Seller or TCI (a
"Subsidiary Group") have timely filed (or have had timely filed on
their behalf) or will file or cause to be timely filed, all material
Tax Returns (as defined in the LMC Agreement) required by applicable
law to be filed by any of them prior to or as of the effective time
(the "Effective Time") of the SSSI Merger;
(B) all such Tax Returns are, or will be at the time of filing,
true, complete and correct in all material respects; and
(C) the Subsidiary and each subsidiary of the Subsidiary and each
Subsidiary Group has paid (or has had paid on their behalf), or where
payment is not due as of the Closing, has established (or has had
established on their behalf and for their sole benefit and recourse),
or will establish or cause to be established on or before the
Effective Time of the SSSI Merger, an adequate accrual for the payment
of all material Taxes due with respect to any period ending prior to
or as of the Closing of the SSSI Merger.
The preceding sentence shall apply only to periods during which
the Subsidiary and/or the relevant subsidiary of the Subsidiary
was a member of a Subsidiary Group. Except as set forth in
Schedule 6(a)(vii) to the Disclosure Letter, as of the Closing of
the SSSI Merger, neither the Subsidiary nor any subsidiary of the
Subsidiary has any continuing obligation to Seller (or to any
other person other than a taxing authority) with respect to
Taxes.
(viii) Assets. Except as set forth in Schedule 6(a)(viii) to the
Disclosure Letter, the Subsidiary has good title to all material
properties and assets (which, in the case of real property owned in
fee, is marketable title) reflected on the Balance Sheet or thereafter
acquired, except as sold or otherwise disposed of for fair value since
the date of the Balance Sheet in the ordinary course of business
consistent with past practice and not in violation of this Agreement
and except for obsolete property disposed of in the usual manner of
the Subsidiary, in each case free and clear of all mortgages, liens,
security interests, options, rights of first refusal, leases,
assignments, subleases, easements, covenants, rights-of-way or
encumbrances of any kind except (A) mechanics', carriers', workmen's,
repairmen's or other like liens arising or incurred in the ordinary
course of business, (B) liens arising under equipment lease
agreements, conditional sales contracts and other liens in favor of
third parties incurred in connection with financing the purchase or
other acquisition of personal property in the ordinary course of
business, provided that, at the time incurred, the fair market value
of the property so financed
<PAGE>
exceeds the principal amount of the indebtedness secured by such
liens, determined in accordance with generally accepted accounting
principles, consistently applied, (C) liens for Taxes which are not
due and payable or which may thereafter be paid without penalty, (D)
mortgages, liens, security interests and encumbrances which secure
debt that is reflected as a liability on the Balance Sheet, (E)
easements, covenants, rights-of-way and other similar restrictions of
record, (F) any conditions that may be shown by a current, accurate
survey or physical inspection of any property of the Subsidiary made
prior to Closing and (G) other imperfections of title or encumbrances
(including, without limitation, (I) zoning, building and other similar
restrictions, (II) mortgages, liens, security interests, encumbrances,
easements, covenants, rights-of-way and other similar restrictions
that have been placed by any developer, landlord or other third party
on property over which the Subsidiary has easement rights or on any
leased property and subordination or similar agreements relating
thereto, and (III) unrecorded easements, covenants, rights-of-way and
other similar restrictions) which do not, individually or in the
aggregate, materially impair the operation of the Business taken as a
whole. Except as set forth in Schedule 6(a)(viii) to the Disclosure
Letter, the Subsidiary owns or has sufficient rights to use under
existing leases and license agreements all material properties, rights
and assets reasonably necessary for the conduct of the Business as
then conducted.
(ix) Contracts. Except as set forth in Schedule 6(a)(ix) to the
Disclosure Letter: (A) all material agreements, contracts, leases,
licenses, commitments or instruments of the Subsidiary (collectively,
the "Contracts"), as of the Closing Date that are reasonably necessary
for the conduct of the Business as then conducted are valid, binding
and in full force and effect and, as of the Closing Date, are
enforceable by the Subsidiary in accordance with their terms; and (B)
the Subsidiary, as of the Closing Date, has performed in all material
respects all material obligations required to be performed by it under
the Contracts and, as of the Closing Date, is not (with or without the
lapse of time or the giving of notice, or both) in breach or default
in any material respect thereunder and no other party to any of the
Contracts is to the knowledge of Seller as of the Closing Date (with
or without the lapse of time or the giving of notice, or both) in
breach or default in any material respect thereunder.
(x) Litigation. Except as set forth in Schedule 6(a)(x) to the
Disclosure Letter: (A) there are not, as of the Closing Date, any
pending lawsuits or claims, with respect to which Seller or the
Subsidiary has been contacted in writing by counsel for the plaintiff
or claimant, against or affecting the Subsidiary or any of its
properties, assets, operations or businesses as to which there is at
least a reasonable possibility of adverse determination, that would
have, if so determined, individually or in the aggregate, a Material
Adverse Effect; (B) to the knowledge of Seller as of the Closing Date,
the Subsidiary is not a party or subject to or in default under any
material judgment, order, injunction or decree of any Governmental
Entity applicable to it or any of its respective
<PAGE>
properties, assets, operations or business; (C) there is not, as
of the Closing Date, any material lawsuit or claim by the Subsidiary
pending, against any other person; and (D) as of the Closing Date, to
the knowledge of Seller, there is not any pending investigation of or
proceeding affecting the Subsidiary by any Governmental Entity.
(xi) Insurance. Seller or the Subsidiary, through one or more
Affiliates, maintains or has the benefit of policies of fire and
casualty, liability and other forms of insurance (including self
insurance) in such amounts, with such deductibles and against such
risks and losses as are, in Seller's judgment, reasonable for the
business and assets of the Subsidiary. Except as set forth in Schedule
6(a)(xi) to the Disclosure Letter: (A) all such policies are in full
force and effect, all premiums due and payable thereon as of the
Closing Date, have been paid (other than retroactive or retrospective
premium adjustments that may be required to be paid with respect to
any period ending prior to the Closing Date under comprehensive
general liability and workmen's compensation insurance policies), and
no notice of cancellation or termination as of the Closing Date has
been received with respect to any such policy which has not been
replaced prior to the date of such cancellation; and (B) to the
knowledge of Seller, the activities and operations of the Subsidiary,
as of the Closing Date, have been conducted in a manner so as to
conform in all material respects to all applicable provisions of such
insurance policies.
(xii) Compliance with Applicable Laws. Except as set forth in
Schedule 6(a)(xii), neither Seller nor the Subsidiary as of the
Closing Date has received any written communication during the past
two years from a Governmental Entity that alleges that the Subsidiary
is not in compliance in any material respect with any applicable
statutes, laws, ordinances, rules, orders and regulations of any
Governmental Entity, other than any such communications alleging any
failures to be in compliance that, if true, would not, individually or
in the aggregate, have a Material Adverse Effect.
(xiii) Licenses; Permits. Except as set forth in Schedule
6(a)(xiii) to the Disclosure Letter, the Subsidiary has full corporate
power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it
to own, lease or otherwise hold its properties and assets and to carry
on its business as presently conducted, other than such franchises,
licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, would not have a Material Adverse
Effect.
(xiv) Absence of Changes or Events. Except as set forth in
Schedule 6(a)(xiv) to the Disclosure Letter: (A) since the date of the
Balance Sheet, there has not been any material adverse change in the
business, assets, condition (financial or otherwise) or results of
operations of the Subsidiary taken as a whole; and (B) since the date
of the Balance Sheet, Seller has caused the business of the Subsidiary
to be
<PAGE>
conducted in the ordinary course and in substantially the same
manner as previously conducted (except for such changes in the
day-to-day operations of the Business as the management of Seller and
the Subsidiary, in the good faith exercise of their business judgment,
shall from time to time determine to be in the best interests of the
Subsidiary) and has made all reasonable efforts consistent with past
practices to preserve the Subsidiary's relationships with customers,
suppliers and others with whom the Subsidiary deals.
(b) Certain Representations and Warranties of Buyer as of Closing
Date. If the Option is exercised, it shall be a condition to the
obligations of Seller to be performed hereunder on the Closing Date
that, on and as of the Closing Date, each of the following
representations and warranties of Buyer, if qualified by materiality,
shall be true and complete, or, if not so qualified, shall be true and
complete in all material respects:
(i) At the Closing Date, the shares of Buyer Preferred Stock
to be received by Seller (or its designee pursuant to Section 15)
in the SSSI Merger will be duly authorized, validly issued, fully
paid and nonassessable and free of preemptive rights.
(ii) Neither the execution and delivery by Buyer of this
Agreement, the SSSI Merger Agreement and the Registration Rights
Agreement nor the performance of its obligations hereunder and
thereunder will result in the creation or imposition of any lien
or other encumbrance on the shares of Buyer Preferred Stock to be
delivered by Buyer to Seller in satisfaction of the Initial
Payment or the Merger Consideration.
(iii) Buyer has filed all required reports, schedules,
forms, statements and other documents with the Securities and
Exchange Commission ("SEC") since December 31, 1992 (as such
documents have been amended prior to the Closing Date, the "Buyer
SEC Documents"). As of their respective dates, the Buyer SEC
Documents complied in all material respects with the requirements
of the Securities Act or the Securities Exchange Act of 1934, as
amended, as the case may be, and the rules and regulations of the
SEC promulgated thereunder applicable to such Buyer SEC
Documents, and none of the Buyer SEC Documents contained any
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent
such statements have been modified or superseded by a later Buyer
SEC Document. Except to the extent that information contained in
any Buyer SEC Document has been revised or superseded by a later
Buyer SEC Document, neither Buyer's Annual Report on
<PAGE>
Form 10-K for the year ended December 31, 1994, nor any
Buyer SEC Document filed after December 31, 1994, contains any
untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances
under which they were made, not misleading. The consolidated
financial statements of Buyer included in the Buyer SEC Documents
comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations
of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the
case of unaudited statements, as permitted by Form 10-Q of the
SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of Buyer and its
consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments). Except as set forth in the
Buyer SEC Documents, neither Buyer nor any subsidiary of Buyer
has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by generally
accepted accounting principles to be set forth on a consolidated
balance sheet of Buyer and its consolidated subsidiaries or in
the notes thereto and which, individually or in the aggregate,
could reasonably be expected to have a Parent Material Adverse
Effect (as defined in the Merger Agreement).
(iv) Except as disclosed in any Buyer SEC Document, since
the date of the most recent audited financial statements included
in the Buyer SEC Documents, Buyer has conducted its business only
in the ordinary course, and there has not been:
(A) any change or effect (or any development that, insofar
as can reasonably be foreseen, is likely to result in a change or
effect) which, individually or in the aggregate, has had or is
likely to have, a Parent Material Adverse Effect;
(B) except for regular quarterly dividends not in excess of
$0.09 per share of Buyer Common Stock and the stated or required
amount of dividends on any series of Parent Preferred Stock (as
defined in the Merger Agreement), in each case with customary
record and payment dates, any declaration, setting aside or
payment of any dividend or other distribution (whether in cash,
stock or property) with respect to the Buyer Common Stock or any
series of Parent Preferred Stock;
<PAGE>
(C) any split, combination or reclassification of the Buyer
Common Stock or any issuance or the authorization of any issuance
of any other securities in exchange or in substitution for shares
of the Buyer Common Stock;
(D) any damage, destruction or loss, whether or not covered
by insurance that has had or is likely to have a Parent Material
Adverse Effect; or
(E) any change in accounting methods, principles or
practices by Buyer or any Material Parent Subsidiary (as defined
in the Merger Agreement) materially affecting its assets,
liabilities or business, except insofar as may have been required
by a change in generally accepted accounting principles.
(c) Representations and Warranties of Buyer Incorporated by
Reference as of the Closing Date. In addition to the
representations and warranties of Buyer set forth in Section
6(b), the following representations and warranties of Buyer are
hereby incorporated by reference, with the same effect as if made
in this Agreement by Buyer to Seller on and as of the Closing
Date:
(i) the representations and warranties of Buyer contained in
Section 3.02(a) of the Merger Agreement under the heading
entitled "Organization, Standing and Corporate Power";
(ii) the representations and warranties of Buyer contained
in Section 3.02(j) of the Merger Agreement under the heading
entitled "Brokers"; and
(iii) the representations and warranties of Buyer contained
in Section 3.02(k) of the Merger Agreement under the heading
entitled "Taxes";
and it shall be a condition to the obligations of Seller to
be performed hereunder on the Closing Date that each of the
representations and warranties so incorporated by reference, if
qualified by materiality, shall be true and complete, or, if not
so qualified, shall be true and complete in all material
respects, on and as of the Closing Date.
7. Conditions to the Obligation of Each Party. The obligations of
Seller and Buyer to consummate the SSSI Merger (if the Option is exercised)
are conditioned upon the satisfaction, prior to or on the Closing Date, of
the following conditions:
(a) on the Closing Date, no action, proceeding or investigation
commenced or brought by any U.S. Federal Governmental Entity shall be
pending, the purpose of which is to set aside or modify in any
material respect the authorizations of
<PAGE>
any of the transactions provided for in this Agreement and the SSSI
Merger Agreement or to enjoin or prevent consummation of any of such
transactions, nor shall any restraining order or preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or any other legal restraint or prohibition preventing
the consummation of the transactions contemplated hereby be in effect;
(b) the receipt of all required regulatory approvals and
authorizations (including from the Federal Communications Commission)
and the making of all filings (other than filing of certificates of
merger pursuant to Section 2(c)) and the termination of all waiting
periods required in connection with the Closing, including all waiting
periods under the HSR Act, with the understanding that, if the Option
is exercised, Buyer and Seller will use their commercially reasonable
efforts to secure all such required regulatory approvals and
authorizations prior to the Closing; provided, however, that nothing
in this Agreement shall require Buyer or Seller (or any of their
respective Affiliates) (i) to agree to, approve or otherwise be bound
by or satisfy any condition of any kind referred to in the second or
third sentences of Section 2.1(d) of the LMC Agreement, (ii) to agree
to or enter into or be bound by any settlement or judgment, or (iii)
subject to Section 4.1 of the LMC Agreement, to agree to any change to
the terms of the Voting Trust (including the identity of the Trustee),
this Agreement or any of the other Additional Agreements (as defined
in the LMC Agreement).
8. Conditions to Obligation of Buyer. The obligation of Buyer to
consummate the SSSI Merger (if the Option is exercised) is also subject to
the satisfaction, prior to or on the Closing Date, of each of the following
additional conditions (unless waived by Buyer):
(a) Seller shall have performed in all material respects all its
obligations hereunder which are required to be performed prior to the
Closing Date.
(b) Buyer shall have received a certificate from an officer of
Seller (i) to the effect that Seller has complied, in all material
respects, with all its obligations under this Agreement and the SSSI
Merger Agreement, (ii) as to the incumbency of certain officers of
Seller, (iii) as to the satisfaction of the conditions to Closing set
forth in Section 5 (with respect to the representations and warranties
of Seller contained therein) and Section 6(a), (iv) attaching all
resolutions of Seller's board of directors authorizing the
transactions contemplated by this Agreement and the SSSI Merger
Agreement, and (v) any other customary matters as may be reasonably
requested by Buyer.
(c) The Carriage Agreement (as defined in Section 11(g)) shall be
in full force and effect, subject to satisfaction of the conditions
set forth therein.
<PAGE>
(d) The Program Services Agreement (as defined in Section 11(i))
shall be in full force and effect, assuming consummation of the
transactions contemplated by the Merger Agreement.
(e) The Subsidiary shall have received all material third party
consents, approvals and authorizations required for the consummation
of the SSSI Merger.
(f) Buyer shall have received an opinion of counsel to Seller
(which counsel may be an employee of Seller), reasonably acceptable to
Buyer, addressed to Buyer and dated the Closing Date, to the effect
that:
(i) Each of Seller and the Subsidiary is a corporation duly
organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation. Seller has all requisite
corporate power and authority to execute and deliver the
Agreement, to perform its obligations thereunder and to
consummate the transactions contemplated thereby.
(ii) The execution and delivery by Seller of the Agreement,
the performance by Seller of its obligations thereunder and the
consummation by Seller of the transactions contemplated thereby
have been duly and validly authorized by all necessary corporate
action on the part of Seller. The Agreement has been duly
executed and delivered by a duly authorized officer of Seller and
constitutes the legal, valid and binding obligation of Seller
enforceable against Seller in accordance with its terms (subject
to all applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium and similar laws affecting creditors'
rights generally and subject, as to enforceability, to general
principles of equity).
(iii) The Shares constitute all the issued and outstanding
shares of capital stock of the Subsidiary.
(iv) The execution, delivery and performance of the
Agreement by Seller and the consummation of the SSSI Merger in
accordance herewith and with the SSSI Merger Agreement does not
conflict with or result in a violation of the General Corporation
Law of the State of Delaware, or the Certificate of Incorporation
or By-laws of Seller or the Subsidiary.
(g) Buyer shall have received the Disclosure Letter from Seller
at least 10 days prior to the scheduled Closing Date and shall be
reasonably satisfied with the contents thereof and of all attachments
thereto.
<PAGE>
(h) Buyer shall be reasonably satisfied with the results of its
due diligence investigation of the Subsidiary provided for in Section
11(b)(ii).
9. Conditions to Obligation of Seller. The obligation of Seller
to consummate the SSSI Merger (if the Option is exercised) is also subject
to the satisfaction, prior to or on the Closing Date, of each of the
following conditions (unless waived by Seller):
(a) Buyer shall have performed in all material respects all its
obligations hereunder which are required to be performed prior to the
Closing Date.
(b) No petition or similar document shall have been filed by or
with respect to Buyer under any bankruptcy, insolvency or similar law.
(c) The shares of Buyer Common Stock underlying the shares of
Buyer Preferred Stock constituting the Merger Consideration delivered
by Buyer to Seller shall be subject to the Registration Rights
Agreement, until such shares of Buyer Common Stock are freely
transferable by Seller without registration or other restriction under
the Securities Act or other applicable law; the Registration Rights
Agreement shall be in full force and effect; and Buyer shall not be in
default of its obligations thereunder.
(d) Seller shall have received an opinion of counsel to Buyer
(which counsel may be an employee of Buyer), reasonably acceptable to
Seller, addressed to Seller and dated the Closing Date, to the effect
that:
(1) Buyer is a corporation duly organized, validly existing
and in good standing under the laws of its jurisdiction of
incorporation. Buyer has all requisite corporate power and
authority to perform its obligations under this Agreement, the
SSSI Merger Agreement and the Registration Rights Agreement and
to consummate the transactions contemplated hereby and thereby.
(2) The performance by Buyer of its obligations under this
Agreement, the SSSI Merger Agreement and the Registration Rights
Agreement, and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of
Buyer. Each of this Agreement, the SSSI Merger Agreement and the
Registration Rights Agreement constitutes the legal, valid and
binding obligation of Buyer enforceable against Buyer in
accordance with its terms (subject to all applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and
similar laws affecting creditors' rights generally and subject,
as to enforceability, to general principles of equity, and except
that the indemnification obligations set forth in Section 8 of
the Registration Rights Agreement may be subject to
considerations of public policy).
<PAGE>
(3) The performance by Buyer of this Agreement, the SSSI
Merger Agreement and the Registration Rights Agreement do not
conflict with or result in a violation of the General Corporation
Law of the State of Delaware, or the certificate of incorporation
or by-laws of Buyer.
(4) The shares of Buyer Preferred Stock constituting the
Merger Consideration have been duly authorized and are validly
issued, fully paid, nonassessable and are not subject to any
preemptive rights;
(e) Seller shall have received a certificate from an officer of
Buyer (i) to the effect that Buyer has complied, in all material
respects, with all its obligations under this Agreement, the SSSI
Merger Agreement and the Registration Rights Agreement, (ii) as to the
incumbency of certain officers of Buyer, (iii) as to the satisfaction
of the conditions to Closing set forth in Section 5 (with respect to
the representations and warranties of Buyer contained therein),
Section 6(b) and Section 6(c), (iv) attaching all resolutions of
Buyer's board of directors authorizing the transactions contemplated
by this Agreement, and (v) any other customary matters as may be
reasonably requested by Seller.
10. Termination.
(a) Subject to the last sentence of Section 14, Buyer's rights
and obligations and Seller's rights and obligations under this
Agreement and the SSSI Merger Agreement will terminate on the last to
occur of (i) the sixth anniversary of the date of this Agreement, (ii)
the first anniversary of the date of any Exercise Notice given by
Buyer prior to the sixth anniversary of the date of this Agreement and
(iii) if as a result of any action or failure to act by any unrelated
third party, including any Governmental Entity, the conditions to the
Closing have not been satisfied in full on or prior to the first
anniversary of the date of any Exercise Notice, the earlier of (x) 5
business days after the date as of which all such conditions have been
satisfied in full and (y) the second anniversary of the date of such
Exercise Notice (the last of such dates, the "Termination Date"),
provided that the Closing has not occurred on or prior to such last
date.
(b) The termination of this Agreement will in no way limit any
obligation or liability of any Party based on or arising from a breach
or default by such Party prior to such termination with respect to any
of its representations, warranties or agreements contained in this
Agreement, the SSSI Merger Agreement or the Registration Rights
Agreement.
<PAGE>
11. Covenants.
(a) Covenants of Each Party. If the Option is exercised, each of
Seller and Buyer agrees to use its commercially reasonable efforts to
cause the conditions to the Closing described in Sections 7, 8 and 9
of this Agreement to be satisfied as promptly as practicable following
the exercise of the Option.
(b) Covenants of Seller.
(i) Disposition of Shares. During the period from the
Execution Date through the earlier to occur of the Closing
Date or the Termination Date, Seller shall not transfer or
otherwise dispose of any of the Shares (other than a
transfer of all, but not less than all, the Shares to any
member of the affiliated group (within the meaning of
Section 1504(a) of the Code) of which Seller is (at the time
of such transfer or disposition) a member; provided, that
(A) such transferee is, at the time of such transfer or
disposition, a Liberty Party (as defined in the LMC
Agreement) and (B) the transferee agrees to be bound by this
Agreement to the same effect as Seller); provided, further,
that Seller shall be entitled to pledge or otherwise
hypothecate the Shares in connection with the incurrence of
bona fide indebtedness to the extent that the applicable
pledgee of the Shares agrees to be bound by the terms of
this Agreement.
(ii) Access. Upon Seller's receipt of the Exercise Notice,
Seller shall, and shall cause the Subsidiary to, give Buyer and
its representatives, employees, counsel and accountants
reasonable access, during normal business hours and upon
reasonable notice, and subject to the obligations of Seller and
the Subsidiary under any then existing confidentiality or
non-disclosure agreements, to the personnel, properties, books
and records of the Subsidiary, so that Buyer may confirm the
satisfaction of all conditions precedent to its obligations to be
performed hereunder and under the SSSI Merger Agreement on the
Closing Date; provided, however, that such access does not
unreasonably disrupt the normal operations of Seller or the
Subsidiary. Seller agrees to use commercially reasonable efforts
in good faith to obtain all waivers and consents necessary under
any existing confidentiality or non-disclosure agreement to
afford full access to Buyer; provided, however, that nothing in
this Agreement shall require Seller or the Subsidiary (or any of
their respective Affiliates) (i) to agree to any material
modification or amendment to any agreement between Seller, the
Subsidiary or any such Affiliate and any third party, or any
other onerous or burdensome condition or requirement or (ii) to
make any payment of money or deliver any other consideration to
any third party, as a condition to the receipt of any waiver or
consent hereunder. Upon Seller's receipt of the Exercise Notice,
Seller shall also give Buyer a list of the WTBS Distributors (as
defined in Section 24).
<PAGE>
During the period from the Execution Date through the earlier to
occur of the Closing Date or the Termination Date, if the
Subsidiary proposes to enter into any agreement with a WTBS
Distributor or other third party, which agreement will contain a
confidentiality or non-disclosure covenant relating to the
existence, terms and/or conditions of any material agreement to
which the Subsidiary is or will be a party, or any other material
matter relating to the Business or the Subsidiary, Seller shall,
and shall cause the Subsidiary to, use commercially reasonable
efforts in good faith to negotiate a provision in such agreement
or covenant to permit the Subsidiary to disclose the matters
subject to such confidentiality or non-disclosure agreement to
Buyer and its representatives, employees, counsel and accountant,
subject to Seller's prior receipt of the Exercise Notice;
provided, however, that nothing in this Agreement shall require
Seller or the Subsidiary (or any of their respective Affiliates)
(i) to agree to any material concession, condition or other
provision in any agreement that, in the good faith business
judgment of Seller, is in any respect materially less favorable
to Seller, the Subsidiary or the Business than the comparable
provision that could have been negotiated by Seller and the
Subsidiary if this sentence did not apply or (ii) to make any
payment of money or deliver any other consideration to any third
party, as a condition to receipt of any provision permitting any
disclosure to Buyer or any such other person.
(iii) Ordinary Conduct. During the period from the Execution
Date through the earlier to occur of the Closing Date or the
Termination Date, Seller shall cause the Subsidiary to operate
the Business in the ordinary course in substantially the same
manner as currently conducted (except for such changes in the
day-to-day operations of the Business as the management of Seller
and the Subsidiary, in the good faith exercise of their business
judgment, shall from time to time determine to be in the best
interests of the Subsidiary). In that connection, Seller shall
cause Subsidiary to use its reasonable efforts to preserve their
relationships with customers, suppliers and others with whom the
Subsidiary deals. In addition, Seller shall not permit the
Subsidiary to take any action that could reasonably be expected
to materially impair the business, assets and financial condition
of the Subsidiary at the time of the SSSI Merger (provided, that
Seller shall be permitted to discontinue the operations of the
Subsidiary if because of an act of God, significant change in law
or other occurrence, it would not be reasonable to continue such
operations). Anything contained herein to the contrary
notwithstanding, subject to approval of the Federal
Communications Commission, Seller and the Subsidiary may take
such action as is reasonably necessary to change the status of
the Subsidiary from a common carrier to a private carrier, if, in
the business judgment of Seller and the Subsidiary, such change
is in the best interests of the Business and the Subsidiary,
provided that such action does not impair the availability of the
exception under 17 U.S.C.
<PAGE>
Section 111(a)(3) and does not materially and adversely affect the
Subsidiary's existing agreements with WTBS Distributors.
(iv) Resignations. On the Closing Date, Seller shall cause to
be delivered to Buyer duly signed resignations, effective
immediately after the Closing, of all directors of the Subsidiary
and shall take such other action as is necessary to accomplish
the foregoing.
(v) Insurance. At all times during the period from the
Execution Date through the earlier of the Closing Date and the
Termination Date, Subsidiary shall maintain (and Seller shall
cause Subsidiary to maintain) in full force and effect, insurance
policies meeting the requirements of Section 6(a)(xi).
(vi) Other Transactions. Neither Seller nor the Subsidiary
shall, nor shall they permit any of their respective officers,
directors, stockholders or other representatives to, directly or
indirectly, encourage, solicit, initiate or participate in
discussions or negotiations with, or provide any information or
assistance to, any person or group (other than Buyer and its
representatives) concerning any merger, sale of securities, sale
of substantial assets or similar transaction involving the
Subsidiary, except for such a transaction involving Seller or
TCI, provided that any entity engaging in such a transaction with
Seller or TCI agrees to be bound by this Agreement. In the event
that Seller or the Subsidiary receives a proposal relating to any
such transaction specifically relating to the Subsidiary, Seller
shall promptly notify Buyer of such proposal.
(vii) Closing Schedules. Upon Buyer's exercise of the Option,
Seller shall as soon as practicable prepare and deliver to Buyer
the Disclosure Letter and all required schedules to this
Agreement that have not previously been delivered.
(viii) Supplemental Disclosure. Seller shall promptly notify
Buyer of, and furnish Buyer any information it may reasonably
request with respect to, the occurrence to Seller's knowledge of
any event or condition or the existence to Seller's knowledge of
any fact that causes any of the conditions to Buyer's obligation
to consummate the SSSI Merger not to be fulfilled, provided that
no such notification shall be required with respect to any
representation or warranty of Seller hereunder prior to delivery
of the Disclosure Letter.
(ix) Restricted Activities. Seller hereby covenants and
agrees that (A) during the period from the Execution Date through
the earlier of the Closing Date and the Termination Date, Seller
shall not (and shall cause its Affiliates not to) engage in the
Business, other than through the Subsidiary, and
<PAGE>
(B) during the period from the Closing Date to the seventh
anniversary of the Closing Date, Seller shall not (and shall
cause its Affiliates not to) engage in the Business.
(c) Covenants Regarding Certain Indebtedness. Each of Seller and
the Subsidiary hereby covenants with and for the benefit of Buyer and
New Sub as follows:
(i) In the event that the Subsidiary incurs any indebtedness
for borrowed money after the Execution Date, the Subsidiary shall
(and Seller shall cause the Subsidiary to) cause such
indebtedness to be satisfied and discharged on or before the
Closing Date, other than any equipment lease agreement,
conditional sales contract, purchase money indebtedness or other
indebtedness incurred to finance the purchase or acquisition of
personal property in the ordinary course of business, provided
that, at the time incurred, the fair market value of the property
so financed exceeds the principal amount of such indebtedness,
determined in accordance with generally accepted accounting
principles, consistently applied.
(ii) In the event that the Shares, or any of them, or any
other capital stock of the Subsidiary is at any time pledged to
secure any indebtedness of the Subsidiary or any other Affiliate
of Seller, Seller shall cause such indebtedness to be repaid when
due and otherwise to be satisfied and discharged in full on or
prior to the Closing Date. In that connection, Seller shall not
permit any pledgee of shares of capital stock of the Subsidiary
to sell such shares in foreclosure or otherwise. At the Closing,
Seller shall deliver the Shares (and any other outstanding
capital stock of the Company) to Buyer pursuant to the SSSI
Merger, the SSSI Merger Agreement and this Agreement, free and
clear of all liens and encumbrances whatsoever.
(d) Confidentiality. Until the Closing Date (or if the Closing
does not occur, until the second anniversary of the Termination Date)
Buyer agrees to use the same efforts that it uses with respect to its
own confidential and proprietary information to retain in strict
confidence all proprietary and confidential information concerning the
Subsidiary which is conveyed to it by Seller or any Affiliate of
Seller, or any representative of Seller or any such Affiliate
("Confidential Information"). Notwithstanding the foregoing, the term
"Confidential Information" does not include: (i) information which is,
at the time of its disclosure to Buyer or any Affiliate of Buyer or
their respective representatives, already in Buyer's, its Affiliates'
or their representatives' possession (without violation, to Buyer's
knowledge, of any legally enforceable confidentiality agreement with
Seller or any Affiliate of Seller relating to such information), (ii)
information which is or becomes generally available to the public
other than as a result of a disclosure by Buyer or any Affiliate of
Buyer or their
<PAGE>
respective representatives, (iii) information which was or becomes
available to Buyer or any Affiliate of Buyer or their respective
representatives on a non-confidential basis from a source other than
Seller, an Affiliate of Seller or their respective representatives,
provided that such source was not known by Buyer to be bound by the
terms of a legally enforceable confidentiality agreement with Seller
or any Affiliate of Seller relating to such information, (iv)
information which is information that is independently developed by
Buyer or its Affiliates or their respective representatives or (v) any
oral information, unless such information is stated to be proprietary
and confidential at the time of disclosure and such statement and
information is summarized in writing within 30 days after such
disclosure. In the event that Buyer, any of its Affiliates or any of
their respective representatives is requested or required (by oral
questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or other process) to disclose any
Confidential Information, it is agreed that Buyer will provide Seller
with prompt notice of any such request or requirement (written if
practical) so that Seller may seek at its own expense an appropriate
protective order or waive Buyer's compliance with the provisions of
this Agreement. If, failing the entry of a protective order or the
receipt of a waiver hereunder, Buyer, any of its Affiliates or any of
their respective representatives is, in the opinion of its counsel,
compelled to disclose any Confidential Information, Buyer or such
Affiliate or representative may disclose that portion of any
Confidential Information which its counsel advises that it is
compelled to disclose and will upon written request and at the expense
of Seller cooperate with Seller in Seller's efforts to obtain a
protective order or other reasonable assurance that confidential
treatment will be accorded to that portion of such Confidential
Information which is being disclosed. Buyer will use the Confidential
Information only in connection with its due diligence review of the
Subsidiary as contemplated by this Agreement and will not otherwise
use it in its business or disclose it to others, except to its
employees, representatives and Affiliates (and their employees and
representatives) who require such Confidential Information to perform
their duties in connection with, or exercise Buyer's rights under,
this Agreement and agree not to disclose or use such Confidential
Information except as provided herein. Buyer agrees that it shall be
responsible for any breach of this Section 11(d) by such persons. In
the event that the Closing does not occur under this Agreement, Buyer
shall, at its option, either (i) return all Confidential Information
provided or made available to it hereunder relating to the Subsidiary,
whether in written, computer-readable or other form, together with all
copies thereof in the possession of Buyer or (ii) destroy all such
Confidential Information and certify such destruction to Seller;
provided, however, that Buyer's sole obligation with respect to the
disposition of any internal notes, memoranda or other materials
prepared by it that incorporate any Confidential Information shall be
to redact or otherwise expunge all such Confidential Information from
such materials.
(e) Covenant by Satellite Relating to Carriage of WTBS. During
the period from the Execution Date through the earlier of the Closing
Date and the
<PAGE>
Termination Date, provided that Buyer or any Managed Subsidiary of
Buyer then owns the programming service currently known as "WTBS" (as
it may be renamed in the future) ("WTBS"), Satellite shall cause each
of its affiliates (as such term is defined in Section 1(a) of
Satellite's existing affiliation agreement, dated as of July 15, 1992,
with The Cartoon Network, Inc., a copy of the pertinent provisions of
which was attached to a letter dated as of October 2, 1995, from Baker
& Botts, L.L.P., counsel to Seller, to Peter R. Haje, the general
counsel of Buyer) (and each affiliate of any other intermediary (as
contemplated by the second sentence of the definition of "Business" in
Section 24(b))) that carries WTBS, and each other entity to which
Satellite (or such other intermediary) provides (or arranges for the
provision of) the WTBS signal, to carry the WTBS signal transmitted by
the Subsidiary (provided that the Subsidiary is able to transmit such
signal), on a non-exclusive basis, it being understood that nothing in
this Agreement shall prohibit any such affiliate or other person or
entity from deleting carriage of the WTBS signal transmitted by the
Subsidiary, provided that upon such deletion such affiliate or other
person or entity does not carry the WTBS signal from any other source
(it being understood that nothing in this Section 11(e) shall limit
the effects of the Carriage Agreement, or the rights and obligations
of the parties thereunder, when that agreement becomes effective in
accordance with its terms).
(f) Acknowledgement by Seller. Seller acknowledges and agrees for
itself and each of its Affiliates that, from and after the closing of
the Merger (as defined in the LMC Agreement), Buyer intends to (and
may) communicate directly with cable, MMDS, DBS or other multichannel
video or other distribution systems (including any of the foregoing
that are WTBS Distributors) regarding the transformation of WTBS into
a copyright paid, satellite delivered, twenty-four hour per day cable
television programming service, it being understood that, until
receipt of the Exercise Notice, nothing in this Agreement shall
constitute a waiver by Seller, the Subsidiary or any of their
respective Affiliates of, or an agreement by Seller, the Subsidiary or
any such Affiliate to waive any non-disclosure or confidentiality
agreement between Seller, the Subsidiary, or any such Affiliate and
any WTBS Distributor.
(g) Buyer's Right to Assign Carriage Agreement to Managed
Subsidiaries. Seller and Satellite hereby acknowledge and agree
that the rights of Buyer under the Carriage Agreement attached
hereto as Exhibit 2A (the "Carriage Agreement") may be assigned
by Buyer to any Managed Subsidiary of Buyer (including, after the
SSSI Merger and without limitation, the Subsidiary), provided
that any such assignment shall terminate if the assignee ceases
to be a Managed Subsidiary. This Section 11(g) amends and
modifies the Carriage Agreement, and Exhibit 2 and this Section
11(g) shall survive the exercise of the Option and any
termination of this Agreement. Exhibit 2 is not intended to amend
or modify the Carriage Agreement or the Program Services
Agreement, but is merely intended to clarify the
interrelationship between the Carriage Agreement and the Program
Services Agreement.
<PAGE>
(h) Effectiveness of the Carriage Agreement. The Parties hereby
acknowledge and agree that upon the satisfaction of the conditions set
forth in Exhibit 2, as described in the last sentence of Section
11(g), and in the Carriage Agreement, the Carriage Agreement and
Exhibit 2, as described in the last sentence of Section 11(g), shall
become effective.
(i) Non-Exclusive Right to Digitize, Compress and Reuplink.
Reference is made to Paragraph 7 of the Program Services
Agreement attached hereto as Exhibit 2B (the "Program Services
Agreement"). The Parties hereby consent to any action taken by
Satellite during the term of this Agreement that would be
permitted by Paragraph 7 of the Program Services Agreement, as if
the Program Services Agreement were then in effect with respect
to WTBS and (i) all references therein to "TBS" referred to the
Subsidiary, (ii) all references therein to "TBS services"
referred to WTBS, and (iii) the reference in the third line to
"licensed by TBS" meant "authorized by the Subsidiary pursuant to
contractual relationships." In that connection, and on the same
basis, Satellite shall comply with clause (iii) of such Paragraph
7.
12. Allocation of Tax Liability.
(a) Obligation to Indemnify. (i) Seller shall be liable for, and
shall indemnify and hold Buyer and each Affiliate of Buyer (including,
after the Closing, the Subsidiary and each subsidiary of the
Subsidiary) (collectively, the "Buyer Group") harmless from and
against (A) all liability for any federal, state or local income or
non-income tax liability (a "Tax") of the Subsidiary or any
subsidiary of the Subsidiary for taxable years or portions thereof
ending on or prior to the Effective Time (as defined in Section
6(a)(vii) hereof), (B) all liability (as a result of Treasury
Regulation Section 1.1502-6(a) or any comparable provision of state or
local tax law or otherwise) for Taxes of any person which is or has
ever been affiliated with the Subsidiary or any subsidiary of the
Subsidiary or with which the Subsidiary or any subsidiary of the
Subsidiary otherwise joins or has ever joined (or is or has ever been
required to join) in filing any consolidated, combined, unitary or
aggregate return, prior to the Effective Time and (C) all liability
for Taxes of Seller or Subsidiary or any subsidiary of the Subsidiary
arising as a result of the granting of the Option, the receipt of the
Initial Payment or the SSSI Merger, in each case on an after-Tax
basis. TCI shall be jointly and severally liable for all obligations
and liabilities assumed by Seller pursuant to this Section 12 to the
extent (and only to the extent) that such obligations and liabilities
are attributable to periods in which Seller is a member of the
affiliated group (within the meaning of Section 1504(a) of the
Internal Revenue Code of 1986, as amended (the "Code")) of which TCI
is the parent.
<PAGE>
(ii) All Taxes of any member of the Buyer Group for which Seller
is not required to indemnify the Buyer Group pursuant to Section
12(a)(i) shall be the obligation of Buyer, and Buyer shall be liable
for, and shall indemnify and hold the members of the Seller Group
harmless from and against, all such liabilities on an after-Tax
basis.
(iii) For purposes of this Agreement, each Tax liability for a
taxable year that includes, but does not end on, the date of the SSSI
Merger (a "Straddle Period") shall be allocated (on an interim
"closing of the books" basis) between the period ending on the date of
the SSSI Merger and the period beginning the day after the date of the
SSSI Merger by allocating Tax liability as if each such period were a
taxable year.
(b) Refunds. Any refunds of Taxes or any credit against Taxes
(when and to the extent applied by any member of the Buyer Group
against any Tax liability that Seller has not assumed pursuant to
Section 12(a)(i) resulting in a Tax benefit to any member of the Buyer
Group that it otherwise would not have realized in the absence of such
credit) (including any interest relating to such refunds or credits)
of the Subsidiary or any subsidiary of the Subsidiary with respect to
taxable years or portions thereof ending on or prior to the Effective
Time of the SSSI Merger shall be for the account of Seller (and in the
case of refunds or credits of the Subsidiary or any subsidiary of the
Subsidiary, have been or shall be assigned to Seller), and any other
refunds of Taxes or credits against Taxes of any member of the Buyer
Group shall be for the account of New Sub. Any refunds or credits with
respect to Straddle Periods shall be allocated under the principles
set forth in Section 12(a)(iii). Buyer shall promptly forward to, or
reimburse Seller for, any such refunds or credits and interest due
Seller after receipt thereof, and Seller shall promptly forward to, or
reimburse New Sub for, any such refunds or credits and interest due
New Sub after receipt thereof. In either case, the party entitled to
such refund or credit shall reimburse the other party to the extent of
any net Tax cost imposed on such other party in connection with the
receipt of such refund or credit. Each party hereto shall cooperate
with the other party as reasonably requested in making such filings as
may be necessary and appropriate to seek any such refunds or credits.
(c) Final Returns. Seller shall prepare or cause to be prepared
any Tax Returns to be filed that relate to any period ending on or
prior to the Effective Time. All such Tax Returns shall be prepared in
a manner consistent with prior years. Seller and Buyer shall jointly
prepare and control any Tax Return of the Subsidiary or any subsidiary
of the Subsidiary for Straddle Periods in a manner consistent with
prior years. Each party shall promptly respond to all reasonable
requests by the other party for information necessary to prepare and
file any such Tax Returns.
<PAGE>
(d) Conduct of Audits and Disputes. (i) Contest Rights. A Party
who has "contest rights" with respect to an asserted Tax liability or
a refund claim shall have the right (but not the obligation), at its
own expense, to negotiate, settle or contest such asserted Tax
liability or refund claim, in its own name or in the name of the other
party or its Affiliates, as appropriate, all in accordance with the
terms of this Section 12(d). Such contest rights shall include, but
not be limited to, the determination (x) whether any action shall
initially be by way of judicial or administrative proceedings, or
both, (y) whether any such asserted Tax liability shall be contested
by resisting payment thereof or by paying the same and seeking a
refund thereof and (z) if judicial action is undertaken, the court or
other judicial body before which such action shall be commenced.
(ii) Claims Controlled by Seller. Subject to paragraphs (iv), (v)
and (vi) hereof, Seller (and not Buyer) shall have the right to
control the contest with respect to any asserted Tax liability or
refund claim of any member of the Buyer Group to the extent that
Seller is required to indemnify against such asserted Tax liability
pursuant to Section 12(a)(i) or is entitled to such refund or credit
pursuant to Section 12(b). Buyer and its Affiliates have the right to
be consulted with respect to such contest but shall have no right to
participate in any such contest undertaken by Seller. Seller shall not
settle any Tax liability or refund claim without the written consent
of Buyer, which consent shall not be unreasonably withheld.
(iii) Claims Controlled by Buyer. Subject to paragraphs (iv), (v)
and (vi) hereof, Buyer (and not Seller) shall have the right to
control the contest with respect to any asserted Tax liability or
refund claim of any member of the Buyer Group to the extent that Buyer
is required to indemnify against such asserted Tax liability pursuant
to Section 12(a)(ii) or is entitled to such refund or credit pursuant
to Section 12(b). Seller and its Affiliates have the right to be
consulted with respect to such contest but shall have no right to
participate in any such contest undertaken by Buyer. Buyer shall not
settle any Tax liability or refund claim without the written consent
of Seller, which consent shall not be unreasonably withheld.
(iv) Contests Involving Multiple Issues. If any contest shall
involve issues with respect to which both Seller and Buyer have
contest rights hereunder, the Parties will cooperate in any such
contest, and will endeavor to permit each Party to control the contest
of issues for which it has such contest rights. In the event there is
a disagreement among the Parties over matters (such as choice of
forum) relating to issues the contest of which are controlled by more
than one Party, such disagreement shall be resolved in favor of the
Party who controls the contest of the issues therein which, in the
aggregate, would result in the largest Tax liability if resolved
unfavorably or the largest Tax refund if resolved favorably.
<PAGE>
(v) Notice; Cooperation. If any member of the Buyer Group or the
affiliated group of corporations which includes the Seller and its
Affiliates (but, after the Closing, not including the Subsidiary and
any subsidiaries of the Subsidiary) (collectively, the "Seller Group")
(in either case the "Tax Indemnified Party") receives any written
communication from a taxing authority regarding any actual or proposed
assessment, official inquiry or proceeding that could give rise to an
official determination with respect to any Tax liability or Tax refund
claim for any period for which Seller or Buyer, respectively (the "Tax
Indemnifying Party"), may be liable (in the case of a liability) or
for which Seller or New Sub, respectively, may be entitled (in the
case of a refund claim) pursuant to this Agreement, such Tax
Indemnified Party (i) shall within 30 days of receipt of such written
communication so notify such Tax Indemnifying Party in writing, (ii)
shall request in such notice that such Tax Indemnifying Party notify
it in writing if it intends to exercise its contest rights hereunder,
and (iii) shall, prior to and for at least 30 days after so notifying
such Tax Indemnifying Party (or, if less, within a period ending 5
days prior to the date on which the Tax Indemnified Party is required
to take action pursuant to such written communication), refrain from
making any payment of any Tax claimed and forbear from any settlement
negotiations or compromises with respect to such proposed adjustment.
The Tax Indemnifying Party agrees to notify the Tax Indemnified Party
in writing within such 30 day period if it intends to exercise its
contest rights hereunder with respect to the asserted Tax liabilities
or the Tax refund claim. The Parties hereto agree to cooperate with
each other in connection with any examination process with respect to
any asserted Tax liability or Tax refund claim and shall make
available on a reasonable basis to each other any personnel, books,
records or other documents necessary or appropriate for participation
in such process.
(vi) Payment. If a Tax Indemnified Party elects to contest an
asserted Tax by paying the deficiency asserted and then seeking a
refund thereof or is otherwise required to pay a Tax, the Tax
Indemnified Party shall give written notice to the Tax Indemnifying
Party and such Tax Indemnifying Party shall remit the amount of the
deficiency or Tax, as the case may be, to such Tax Indemnified Party
within 10 days of the date of such notice. Otherwise, such Tax
Indemnifying Party shall pay the amount of any indemnification
obligation to such Tax Indemnified Party within 10 days after any
Final Determination (as defined in Section 13(b)(vii) of this
Agreement) with respect to the Tax giving rise to such indemnity
obligation.
(vii) Failure to Comply. The failure of a Party to comply with any
of its obligations under this Section 12(d) shall not relieve the
other Party of its indemnity obligations hereunder, except to the
extent (and only to the extent) that the other Party is materially
prejudiced by such failure.
<PAGE>
13. Indemnification for SSSI Merger Tax Liability. (a) General.
It is the intention of the Parties that the SSSI Merger qualify as a
"reorganization" within the meaning of Section 368 of the Code.
Notwithstanding the provisions of Section 12, if solely as a result of any
action taken after the Effective Time by Buyer or any Affiliate of Buyer,
except for any actions or transactions expressly contemplated by this
Agreement, the SSSI Merger Agreement, the Registration Rights Agreement,
the LMC Agreement, or any other Additional Agreement (as such term is
defined in the LMC Agreement) (other than the formation of a new holding
company with respect to Buyer pursuant to Section 351 of the Code),
including without limitation any merger by Buyer or such affiliate with, or
acquisition by Buyer or such Affiliate of any other corporation, taking
place after or simultaneously with the SSSI Merger, the SSSI Merger fails
to so qualify as a "reorganization," then Buyer shall be liable for, and
shall indemnify and hold each member of the Seller Group harmless on an
after-Tax basis from and against, any Federal, state or local income or
franchise Tax liability arising as a result of the SSSI Merger (but only to
the extent such Tax liability exceeds the Tax liability that would have
been imposed on such member if the SSSI Merger had qualified as a
"reorganization" and only to the extent such Tax liability exceeds the Tax
liability that would have been imposed on such member if Buyer or such
Affiliate of Buyer had not taken such action after the Effective Time) and
any expenses incurred in good faith (including, without limitation, legal
fees) to the extent incurred in conducting any contest of such excess Tax
liability. As used in this Section 13(a), the term "SSSI Merger" means and
includes the SSSI Merger, the execution and delivery of this Agreement, the
SSSI Merger Agreement and the Registration Rights Agreement and the
consummation of the transactions contemplated by this Agreement and the
SSSI Merger Agreement, including the grant of the Option. Buyer shall have
no liability pursuant to this Section 13(a) solely because of its failure
to exercise the Option.
(b) Conduct of Audits and Disputes.
(i) Contest Provisions. If Seller receives written notice of
a position taken on audit or a claim by the Internal Revenue
Service or other relevant taxing authority which, if sustained,
would require the Buyer to indemnify the Seller Group pursuant to
Section 13(a), Seller will notify Buyer in writing of such
determination within 30 days after receipt of such written
notice, and Seller shall be required to take further action to
contest such position or claim only if requested in good faith by
Buyer in writing.
(ii) Control.
(A) As long as Buyer confirms to Seller in writing
Buyer's liability under this Agreement in the event that the
position or claim referred to in Section 13(b)(i) is
sustained, Buyer shall have sole control over any contest
undertaken pursuant to this Section 13(b); otherwise, Seller
shall have sole control of such contest, provided that
Seller shall not
<PAGE>
settle any such contest without Buyer's consent, which shall
not be unreasonably withheld.
(B) If Buyer has sole control over any contest pursuant
to Section 13(b)(ii)(A), Buyer shall have sole discretion to
determine (x) whether any such action shall initially be by
way of judicial or administrative proceedings, or both, (y)
whether any such position or claim shall be contested by
resisting payment thereof or by paying the same and seeking
a refund thereof and (z) if Buyer shall undertake judicial
action with respect to such asserted Tax liability, the
court or other judicial body before which such action shall
be commenced. Each Party shall keep the other fully advised
of the progress of the contest and shall confer with such
other Party and its independent tax counsel upon request.
Seller and Buyer shall provide to each other, upon request,
such reasonably obtainable information and such other
reasonable assistance as may be necessary or advisable for
the effective evaluation or conduct of any contest pursuant
to this Section 13(b).
(iii) Contest of Adverse Determinations. If Seller receives
notice of an adverse determination by any court with respect to a
contest undertaken pursuant to this Section 13(b), Seller will
notify Buyer in writing of such determination within 10 days
after receipt of such notice, and Seller shall be required to
take further action to contest such claim only if the following
conditions are satisfied within 30 days after Seller gives such
written notice to Buyer (or, if less, within a period ending 5
days prior to the date on which Seller is required to take
further action to contest such determination):
(A) Buyer shall have requested Seller in writing to
contest such determination; and
(B) If such further action requires posting any bond or
satisfying any other similar requirements, Buyer shall, at
its own expense, post such bond or satisfy such other
requirements.
(iv) Payment. If Seller elects to contest an asserted Tax
liability by paying the deficiency asserted and then seeking a
refund thereof, Seller shall give written notice to Buyer and
Buyer shall remit the amount of the deficiency to Seller within
10 days of the date of such notice and Seller shall timely pay
such Tax to the relevant taxing authority. Otherwise, Buyer shall
pay the amount of any indemnification obligation to Seller within
10 days after any Final Determination (as defined below) with
respect to the Tax giving rise to such
<PAGE>
indemnity obligation and Seller shall timely pay such Tax to the
relevant taxing authority.
(v) Refunds. If Seller or any of its Affiliates receives a
refund or credit of all or any part of the amount paid by Seller
as Tax pursuant to the first sentence of Section 13(b)(iv),
Seller will reimburse to Buyer, within 15 days after receipt by
Seller of any such refund or credit, any amounts paid by Buyer to
Seller pursuant to the first sentence of Section 13(b)(iv), up to
the amount of any such refund or credit (including interest
thereon) so received by Seller or any of its Affiliates.
(vi) Failure to Comply. The failure by Seller to comply with
any of its obligations under this Section 13(b) shall not relieve
Buyer of its indemnity obligations hereunder, except to the
extent (and only to the extent) that Buyer is materially
prejudiced by such failure.
(vii) "Final Determination" shall mean (1) a decision,
judgment, decree or other order by any court of competent
jurisdiction, which decision, judgment, decree or other order has
become final after all allowable appeals by either party to the
action have been exhausted (it being understood that for purposes
of this definition, the term "allowable appeals" means an appeal
taken or required to be taken under the provisions of the contest
provisions with respect to the indemnification obligation and
permitted by applicable law) or the time for filing such appeal
has expired, (2) a closing agreement entered into under Section
7121 of the Code (or comparable state or local law) or any other
binding settlement agreement entered into in connection with an
administrative or judicial proceeding (including, without
limitation, any settlement entered into in accordance with the
contest provisions with respect to the indemnification
obligation), or (3) the expiration of the time for instituting a
claim for refund, or if such a claim was filed, the expiration of
the time for instituting suit with respect thereto.
14. Survival. The representations, warranties and agreements of
the Parties in this Agreement and in the other documents and instruments to
be delivered by any Party pursuant to this Agreement will continue in full
force and effect from the time made or deemed to have been made until the
Closing, whereupon such representations, warranties and agreements shall
terminate. Notwithstanding any other provision of this Agreement, the
indemnification obligations provided for in Sections 12 and 13, and the
representations and warranties of Buyer contained in Sections 4(c)(i) and
(ii) and Sections 6(b)(i) and (ii) shall survive the Execution Date, the
Closing and the termination of this Agreement pursuant to Section 10 and
shall continue in full force and effect indefinitely.
<PAGE>
15. Parties Obligated and Benefited; Seller's Right to Designate
Recipient. Subject to the limitations set forth below, this Agreement will
be binding upon the Parties and their respective assigns and successors in
interest and will inure solely to the benefit of the Parties and their
respective assigns and successors in interest, and no other person will be
entitled to any of the benefits conferred by this Agreement. Without the
prior written consent of the other Party, no Party will assign any of its
rights or delegate any of its duties under this Agreement or the SSSI
Merger Agreement, except that Seller may assign (without the consent of
Buyer) any of its rights (including, without limitation, the right to
receive the Initial Payment and/or the Merger Consideration) under this
Agreement and/or the SSSI Merger Agreement to any person that, at the time
of such assignment (and, in the case of any such person designated to
receive the Initial Payment, at the Execution Date), is (i) a Liberty Party
(as defined in the LMC Agreement) and (ii) a member of the affiliated group
(within the meaning of Section 1504(a) of the Code) of which Seller is (at
such time) a member.
16. Notices. Any notice, request, demand, waiver or other
communication required or permitted to be given under this Agreement will
be in writing and will be deemed to have been duly given only if delivered
in person or by first class, postage prepaid, registered or certified mail,
or sent by courier or, if receipt is confirmed, by telecopier:
If to Buyer:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Attention: President
with a copy similarly addressed
to the attention of General Counsel
with a copy (which shall not constitute notice) to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Peter S. Wilson, Esq.
<PAGE>
If to Seller:
Liberty Media Corporation
8101 East Prentice Avenue
Suite 500
Englewood, Colorado 80111
Attention: President
with copies (which shall not constitute notice) to:
Stephen M. Brett, Esq.
General Counsel
Tele-Communications, Inc.
Terrace Towers II
5619 DTC Parkway
Englewood, Colorado 80111-3000
and
Baker & Botts, L.L.P.
885 Third Avenue
Suite 1900
New York, New York 10022
Attention: Elizabeth Markowski, Esq.
Any party may change the address to which notices are required to be sent
by giving notice of such change in the manner provided in this Section 16.
All notices will be deemed to have been received on the date of delivery or
on the fifth business day after mailing in accordance with this Section,
except that any notice of a change of address will be effective only upon
actual receipt.
17. Waiver. This Agreement or any of its provisions may not be
waived except in writing. The failure of any Party to enforce any right
arising under this Agreement on one or more occasions will not operate as a
waiver of that or any other right on that or any other occasion.
18. Interpretation. The section captions of this Agreement are
for convenience only and do not constitute a part of this Agreement. When a
reference is made in this Agreement to a Section or Exhibit such reference
shall be to a Section of, or an Exhibit to, this Agreement, unless
otherwise indicated. Whenever the words "include", "includes" or
<PAGE>
"including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation".
19. Choice of Law. This Agreement and the rights of the Parties
under it will be governed by and construed in all respects in accordance
with (a) the laws of the State of New York applicable to contracts made and
performed wholly therein and (b) as applicable, the Delaware General
Corporation Law and the corporate law of the State of Georgia.
20. Time. If the last day permitted for the giving of any notice
or the performance of any act required or permitted under this Agreement
falls on a day which is not a business day, the time for the giving of such
notice or the performance of such act will be extended to the next
succeeding business day.
21. Counterparts. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which
together shall constitute a single instrument.
22. Entire Agreement. This Agreement (including all Exhibits and
Schedules attached to this Agreement, the Registration Rights Agreement,
the LMC Agreement and the agreements referenced herein and therein, each of
which shall be deemed to constitute a part of this Agreement) contains the
entire agreement of the Parties, and supersedes all prior oral or written
agreements and understandings with respect to the subject matter hereof.
This Agreement may not be amended or modified except by a writing signed by
the Parties.
23. Severability. Any term or provision of this Agreement which
is held to be invalid or unenforceable in any jurisdiction, as to such
jurisdiction, will be ineffective only to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction, and in the event any provision of this Agreement is
held to be invalid or unenforceable in any jurisdiction, such provision
will be reformed with respect to, and enforced as fully as possible in,
such jurisdiction, consistent (to the extent possible) with the purposes
and intents of the parties expressed herein.
24. Certain Definitions.
As used in this Agreement, the following terms have the
corresponding meanings:
(a) An "Affiliate" of a person means another person that directly
or indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, such first person;
<PAGE>
(b) "Business" means the business of uplinking and distributing
the signal of WTBS to cable, MMDS, DBS and other multichannel video and
other distribution systems. Anything contained herein to the contrary
notwithstanding, neither (i) the existence of an agreement between the
Subsidiary or any unrelated third party and any intermediary (such as
Satellite) pursuant to which such intermediary arranges for the WTBS signal
transmitted by the Subsidiary or such unrelated third party to be received
by any "affiliate" of such intermediary as defined in Section 11(e) of this
Agreement (or an analogous definition, if the intermediary is not
Satellite), and any other person to whom such intermediary is authorized to
arrange for the transmission of such signal, as contemplated by Section
11(e), nor (ii) any activities by any intermediary of the type contemplated
by Section 11(i) hereof, shall in itself cause such an intermediary to be
construed as engaging in the "Business" as defined herein.
(c) "Governmental Entity" means a court, administrative agency or
commission or other governmental authority or instrumentality;
(d) "Managed Subsidiary" means, as to Buyer, an Affiliate of
Buyer (i) in which Buyer has, directly or indirectly, a majority ownership
interest and (ii) as to which Buyer has day-to-day management control,
specifically including, without limitation, as of the date hereof, Time
Warner Entertainment Company L.P. and Time Warner Entertainment/Advance
Newhouse Partnership.
(e) "Material Adverse Effect" means a material adverse effect on
the business, assets, financial condition or results of operations of the
Subsidiary or on the ability of Seller to consummate the transaction
contemplated herein or hereby; and
(f) "WTBS Distributors" means those persons and entities with
whom the Subsidiary has an affiliation agreement or other arrangement or
agreement for the distribution of WTBS.
25. Enforcement. The Parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the Parties shall be entitled to
seek an injunction or injunctions to prevent breaches of this Agreement,
and to enforce specifically the terms and provisions of this Agreement in
any court of the United States located in the States of Colorado, Delaware
or New York or in Delaware or Colorado state court (in addition to any
other remedy to which they are entitled at law or in equity). In addition,
each of the Parties hereto (a) hereby consents and submits itself to the
non-exclusive personal jurisdiction of any Federal court located in the
States of Colorado, Delaware and New York or any Delaware or Colorado state
court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, and (b) agrees that it will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court.
<PAGE>
IN WITNESS WHEREOF, the Parties have caused this Agreement
to be duly executed and delivered as of the date first written above.
TIME WARNER INC.
By:
----------------------------
Name:
Title:
LIBERTY MEDIA CORPORATION
By:
----------------------------
Name:
Title:
With respect to the last sentence
of Section 12(a)(i) only:
TELE-COMMUNICATIONS, INC.
By:
----------------------------
Name:
Title:
With respect to Section 11(e),
Section 11(g) and Section 11(i)
only:
SATELLITE SERVICES, INC.
By:
----------------------------
Name
Title:
<PAGE>
Schedule 4(a)(iii)
Exceptions to "No Conflicts" Representations and Warranties
(to be attached at time of execution)
Buyer
Seller
<PAGE>
Exhibit 1 to
the Option Agreement
AGREEMENT AND PLAN OF MERGER, dated as
of ____________________, among TIME
WARNER INC., a Delaware corporation
("TW"), [TIME WARNER SUB], a ___________
corporation ("Sub"), LIBERTY MEDIA
CORPORATION, a Delaware corporation
("LMC"), and SOUTHERN SATELLITE SYSTEMS,
INC., a Georgia corporation
("Southern"), (collectively, the
"Parties").
The respective boards of directors of the Parties have duly
adopted and approved this Agreement, whereby, among other things, the
issued and outstanding shares of common stock, par value $1.00 per
share ("Southern Common Stock"), of Southern, will be converted into
shares of Series K Voting Participating Convertible Preferred Stock,
par value $1.00 per share (the "Voting Exchange Preferred Stock"), of
TW in accordance with Article II of this Agreement.
NOW, THEREFORE, in consideration of the mutual benefits, the
Parties agree as follows:
ARTICLE I
1.1 The Merger. In accordance with and subject to the
provisions of this Agreement, Southern shall be merged with and into
Sub which, at and after the Effective Time, shall be and is herein
sometimes referred to as the "Surviving Corporation". Southern and Sub
are herein sometimes collectively referred to as the "Constituent
Corporations".
1.2 Effective Time of the Merger. The merger of Southern
with and into Sub as provided herein (the "Merger") shall become
effective upon the filing by the Constituent Corporations with the
appropriate governmental entity or entities a Certificate or
Certificates of Merger, which shall be executed and delivered in the
manner provided under the appropriate laws of the jurisdictions of
incorporation of Southern and Sub. The date and time when the Merger
shall become effective as aforesaid is herein called the "Effective
Time".
<PAGE>
1.3 Effect of Merger.
(a) At the Effective Time, the separate existence of
Southern shall cease and Southern shall be merged with and into the
Surviving Corporation, and the Surviving Corporation shall possess all
of the properties, rights, privileges, power and franchises, subject
to all the restrictions, disabilities and duties, of each of the
Constituent Corporations.
(b) The Merger shall have the effects specified under
applicable law of the jurisdictions of incorporation of Southern and
Sub. Without limiting the generality of the foregoing, and subject
thereto, at the Effective Time all the properties, rights, privileges,
powers and franchises of the Constituent Corporations shall vest in
the Surviving Corporation, and all debts, liabilities and duties of
the Constituent Corporations shall become the debts, liabilities and
duties of the Surviving Corporation. If, at any time after the
Effective Time, the Surviving Corporation considers or is advised that
any deeds, bills of sale, assignments, assurances or any other actions
or things are necessary or desirable to vest, perfect or confirm of
record or otherwise in the Surviving Corporation its right, title or
interest in, to or under any of the rights, properties or assets of
either Sub or Southern, or otherwise to carry out the intent and
purposes of this Agreement, the officers and directors of the
Surviving Corporation will be authorized to execute and deliver, in
the name and on behalf of each of Sub and Southern, all such other
instruments and do such other actions and things, as may be necessary
or desirable to vest, perfect or confirm any and all right, title and
interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out the intent and
purposes of this Agreement.
1.4 Certificate of Incorporation and By-Laws of Surviving
Corporation. At the Effective Time, (i) the certificate of
incorporation of Sub shall become the certificate of incorporation of
the Surviving Corporation until altered, amended or repealed as
provided by applicable law, (ii) the by-laws of Sub shall become the
by-laws of the Surviving Corporation until altered, amended or
repealed as provided by applicable law or in the certificate of
incorporation or by-laws of the Surviving Corporation, (iii) the
directors of Sub shall become the directors of the Surviving
Corporation and (iv) the officers of Sub shall become the officers of
the Surviving Corporation.
<PAGE>
1.5 Taking of Necessary Action. Prior to the Effective Time,
the Parties shall take, or cause to be taken (as the case may be), all
such reasonable actions as may be necessary or appropriate in order to
effectuate the Merger, as expeditiously as reasonably practicable.
1.6 Certain Definitions. As used herein, the following terms
have the corresponding meanings:
(a) "Current Market Price" means the average of the daily
closing prices of the TW Common Stock for the 20 trading day period
ending on the full trading day immediately prior to the Closing Date
(as defined in the Option Agreement) appropriately adjusted to take
into account any stock dividends, stock splits, reverse stock splits,
combinations and other changes in the TW Common Stock, including
without limitation any consolidation or merger affecting the TW Common
Stock, the ex-dividend date or effective date for which occurs during
(but after the first day of) such 20 trading day period. The closing
price for each trading day shall be the last reported sale price on
such day (or if no such reported sale takes place on such day, the
average of the reported closing bid and asked prices) of the TW Common
Stock (regular way) as shown on the Composite Tape of the New York
Stock Exchange ("NYSE"), or, if the TW Common Stock is not listed or
admitted to trading on the NYSE, on the principal United States
national securities exchange on which the TW Common Stock is listed or
admitted to trading or, if the TW Common Stock is not listed or
admitted to trading on any such exchange, then the last reported sale
price (or the average of the quoted closing bid and asked prices if no
sale is reported) of the TW Common Stock as reported by the Nasdaq
Stock Market ("Nasdaq") or any other quotation system of the National
Association of Securities Dealers, Inc. (the "NASD") or if the TW
Common Stock is not quoted on Nasdaq or any comparable system, the
average of the closing bid and asked prices as furnished by any member
of the NASD selected by LMC.
(b) "Merger Consideration" means that number of fully paid
and non-assessable shares of Voting Exchange Preferred Stock
(including any fraction of a share) equal to the number derived by
dividing (i) the quotient obtained by dividing $160,000,000 by the
Current Market Price, by (ii) the number of shares of TW Common Stock
into which one share of Voting Exchange Preferred Stock shall then be
convertible. Anything contained herein to the contrary
notwithstanding, in the event of any reclassification,
recapitalization, stock dividend, stock split, reverse stock split or
other change in the TW Common Stock, including without limitation any
consolidation or merger effecting
<PAGE>
the TW Common Stock, the record date of which (or, if no record date,
the effective date of which) occurs on or after the Option Exercise
Date and before the Effective Time, the Merger Consideration shall
also include such shares of stock or other consideration to which LMC
would have been entitled if LMC had been a holder, on the record date
(or effective date, as applicable) for such occurrence, of the shares
of Voting Exchange Preferred Stock constituting the Merger
Consideration, as calculated above.
(c) "Option" means the right and option of TW to acquire
Southern by merger pursuant to the Option Agreement and this
Agreement.
(d) "Option Agreement" means the Option Agreement among TW, LMC,
Satellite Services, Inc. and Tele-Communications, Inc.
(e) "Option Exercise Date" means the date on which TW shall have
given written notice to LMC exercising the option pursuant to Section 2(c)
of the Option Agreement.
(f) "TW Common Stock" means the common stock, par value $1.00 per
share, of TW.
1.7 Conditions to Merger. It shall be a condition to the
effectiveness of the Merger and to the obligations of the Parties hereunder
(a) that TW shall have exercised the Option and (b) that the conditions to
the obligations of TW and LMC, respectively, set forth in Sections 5, 6, 7,
8 and 9 of the Option Agreement be satisfied or, to the extent such
conditions may be waived, waived by the Party entitled to do so.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATION; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock. At the Effective Time, pursuant to
the terms and subject to the conditions of this Agreement, by virtue of the
Merger and without any action on the part of the Constituent Corporations
or the holders of the capital stock of the Constituent Corporations:
<PAGE>
(a) Capital Stock of Sub. The issued and outstanding shares
of the common stock, par value $1.00 per share, of Sub shall
continue to be outstanding and held of record by the record
holders thereof as of immediately prior to the Effective Time,
and as such shall constitute the issued and outstanding shares of
common stock, par value $1.00 per share, of the Surviving
Corporation.
(b) Southern Common Stock. Subject to Section 2.2, the
issued and outstanding shares of Southern Common Stock shall be
converted, in the aggregate, into the right to receive the Merger
Consideration.
2.2 Exchange of Certificates.
Promptly after the Effective Time, TW or its agent shall
deliver to LMC or, at the discretion of LMC, to a permitted designee
specified in Section 15 of the Option Agreement which has been
designated by LMC to receive the Merger Consideration (the "Designated
Holder") duly executed certificates, registered in the name of the
Designated Holder, representing in the aggregate that number of shares
of Voting Exchange Preferred Stock as shall constitute, in the
aggregate, the Merger Consideration, against receipt of a certificate
or certificates representing all the shares of Southern Common Stock
issued and outstanding at the Effective Time (together with duly
executed stock powers or other instruments of assignment reasonably
requested by TW).
2.3 [intentionally omitted]
2.4 Authorization of the Merger and this Agreement. By execution
and delivery of this Agreement, but subject to the exercise of the Option
by TW, TW, as the sole stockholder of Sub, and LMC, as the sole stockholder
of Southern, hereby authorize, approve and adopt this Agreement and the
Merger, and TW and LMC shall execute written consents to that effect
simultaneously with the execution and delivery of this Agreement.
ARTICLE III
TERMINATION
This Agreement shall be terminated, and the Merger abandoned,
notwithstanding the approval by the respective boards of directors and
stockholders of Southern and Sub of this
<PAGE>
Agreement and the Merger, in the event of and simultaneously with a
termination (at any time prior to the Effective Time) of the Option
Agreement in accordance with its terms.
ARTICLE IV
APPROVAL OF AGREEMENT; FILINGS
The respective boards of directors of the Constituent
Corporations have, by resolutions duly adopted, unanimously approved
and adopted this Agreement and the Merger, subject to the exercise of
the Option by TW. Upon satisfaction or waiver (by the Party so
entitled) of all conditions of the Merger contained in the Option
Agreement and herein, the Parties shall cause a certificate or
certificates of merger (and this Agreement, if required) to be
delivered to and filed with the appropriate governmental entity or
entities pursuant to applicable law and the Merger shall thereupon
become effective.
ARTICLE V
MISCELLANEOUS
5.1 Amendment. This Agreement may be amended by the Parties, by
action taken by the respective boards of directors of the Consistent
Corporations, at any time prior to the Effective Time. TW and LMC, as sole
stockholders of the Consistent Corporations, hereby consent to any such
amendment that by law requires the approval of the stockholders of either
or both of the Constituent Corporations. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the Parties.
5.2 Entire Agreement. This Agreement and the Option Agreement
(including the agreements referenced in the Option Agreement and all
schedules and exhibits hereto and thereto) contain the entire agreement
between the Parties with respect to the subject matter hereof and supersede
all prior arrangements and understandings, both written and oral, with
respect thereto.
5.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement,
and shall become
<PAGE>
effective when one or more counterparts have been signed by each of the
Parties and delivered to the other Parties, it being understood that both
Parties need not sign the same counterpart.
5.4 Benefits; Assignment. This Agreement is not intended to
confer upon any person other than the parties any rights or remedies
hereunder and shall not be assigned by operation of law or otherwise,
except to the extent otherwise provided in the Option Agreement.
5.5 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware and, to the
extent applicable, the corporate law of the State of Georgia.
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement
to be executed on its behalf as of the day and year first above written.
TIME WARNER INC.
By:
Name:
Title:
[TIME WARNER SUB]
By:
Name:
Title:
LIBERTY MEDIA CORPORATION
By:
Name:
Title:
SOUTHERN SATELLITE SYSTEMS,
INC.
By:
Name:
Title:
<PAGE>
TABLE OF CONTENTS
ARTICLE I
1.1 The Merger................................................ 1
1.2 Effective Time of the Merger.............................. 1
1.3 Effect of Merger.......................................... 2
1.4 Certificate of Incorporation and By-Laws of Surviving
Corporation............................................... 2
1.5 Taking of Necessary Action................................ 3
1.6 Certain Definitions....................................... 3
(a) "Current Market Price".............................. 3
(b) "Merger Consideration".............................. 3
(c) "Option"............................................ 4
(d) "Option Agreement".................................. 4
(e) "Option Exercise Date".............................. 4
(f) "TW Common Stock"................................... 4
1.7 Conditions to Merger...................................... 4
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATION; EXCHANGE OF CERTIFICATES
2.1 Effect on Capital Stock................................... 4
(a) Capital Stock of Sub................................. 5
(b) Southern Common Stock................................ 5
2.2 Exchange of Certificates.................................. 5
2.3 [intentionally omitted]................................... 5
<PAGE>
2.4 Authorization of the Merger and this Agreement........... 5
ARTICLE III
TERMINATION
ARTICLE IV
APPROVAL OF AGREEMENT; FILINGS
ARTICLE V
MISCELLANEOUS
5.1 Amendment................................................ 6
5.2 Entire Agreement......................................... 6
5.3 Counterparts............................................. 6
5.4 Benefits; Assignment..................................... 7
5.5 Governing Law............................................ 7
<PAGE>
EXHIBIT F TO
LMC AGREEMENT
LMC REGISTRATION RIGHTS AGREEMENT, dated
as of [ ], among TIME WARNER INC., a
Delaware corporation (the "Company"), and the
Holders (as defined below).
WHEREAS, in connection with the Agreement and Plan of
Merger, dated as of September [ ], 1995 (the "Merger Agreement"),
among the Company, Time Warner Acquisition Corp., a Delaware
corporation, and Turner Broadcasting System, Inc., a Georgia
corporation <F1>, each initial Holder will receive shares of Common
Stock (as defined below); and
WHEREAS, in connection with the Merger Agreement, the Company,
Liberty Media Corporation and the other initial Holders have entered into
the LMC Agreement (as hereinafter defined); and
WHEREAS this is the Registration Rights Agreement provided for by
the LMC Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the parties
hereto, intending to be legally bound hereby, agree as follows:
SECTION 1. Definitions. As used in this Agreement, the following
terms shall have the following meanings:
"Advice" shall have the meaning set forth in Section 5 hereof.
"Affiliate" means, with respect to any specified person, any
other person directly or indirectly controlling or controlled by or under
direct or indirect common control with such specified person. For the
purposes of this definition, "control" when used with respect to any
specified person means the power to direct the management and policies of
such person, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; and the terms "controlling"
and "controlled" have meanings correlative to the foregoing.
"Affiliated Holder" means any Holder that is an affiliate of the
Company within the meaning of Rule 144 under the Securities Act. For the
purposes of this definition, in determining whether or not any Holder is an
affiliate of the Company within the meaning of such Rule 144, any
limitation on the voting or other
<F1> If the transactions contemplated by the Elective Merger
Agreement are consummated, reference to the Elective Merger Agreement
will be substituted for this reference to the Merger Agreement.
<PAGE>
rights of such Holder with respect to Registrable Shares owned by such
Holder arising under the Voting Trust shall not be considered and
Registrable Shares issuable upon conversion of Exchange Preferred
Stock owned by such Holder shall be deemed to have been issued.
"Business Day" means any day that is not a Saturday, a Sunday or
a legal holiday on which banking institutions in the State of New York are
not required to be open.
"Capital Stock" means, with respect to any person, any and all
shares, interests, participations or other equivalents (however designated)
of corporate stock issued by such person, including each class of common
stock and preferred stock of such person.
"Common Stock" means the Common Stock, par value $1.00 per
share, of the Company (i) issued to any of the initial Holders
pursuant to the Merger Agreement, (ii) issuable upon conversion of any
Voting Exchange Preferred Stock referred to in clause (i) above may be
exchanged pursuant to the LMC Agreement, (iii) issuable upon
conversion of any Voting Exchange Preferred Stock issued pursuant to
the Option Agreement dated __________, 199 , between the Company and
Liberty Media Corporation, (iv) issued to any Turner Stockholder (as
such term is defined in the First Refusal Agreement) and acquired by
any Holder pursuant to the First Refusal Agreement, or (v) issuable
upon conversion of any Exchange Preferred Stock for which any Common
Stock, Voting Exchange Preferred Stock of Non-Voting Exchange
Preferred Stock referred in clauses (i) through (iv) above may be
exchanged from time to time, and any other shares of capital stock or
other securities of the Company into which such shares of Common Stock
shall be reclassified or changed, including by reason of a merger,
consolidation, reorganization or recapitalization; provided, however,
that in the case of any Demand Registration pursuant to Section
2(a)(ii) hereof, "Common Stock" shall include all Common Stock, par
value $1.00 per share, of the Company, and any other shares of capital
stock or other securities of the Company into which such shares of
Common Stock shall be reclassified or changed, including by reason of
a merger, consolidation, reorganization or recapitalization, held at
the time of such Demand Registration by any Holder that is a Liberty
Party or issuable upon conversion of any Exchange Preferred Stock held
at the time of such Demand Registration by any Holder that is a
Liberty Party. If the Common Stock has been reclassified or changed,
or if the Company pays a dividend or makes a distribution on the
Common Stock in shares of capital stock, or subdivides (or combines)
its outstanding shares of Common Stock into a greater (or smaller)
number of shares of Common Stock, a share of Common Stock shall be
deemed to be such number of shares of stock and amount of other
securities to which a holder of a share of Common Stock outstanding
immediately prior to such change, reclassification, exchange,
dividend, distribution, subdivision or combination would be entitled.
"Company" shall have the meaning set forth in the introductory
clauses hereof.
"Delay Period" shall have the meaning set forth in Section 2(d)
hereof.
<PAGE>
"Demand Notice" shall have the meaning set forth in Section 2(a)
hereof.
"Demand Registration" shall have the meaning set forth in Section
2(b) hereof.
"Effectiveness Period" shall have the meaning set forth in
Section 2(d) hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated thereunder.
"Exchange Preferred Stock" shall mean the Non-Voting
Exchange Preferred stock and the Voting Exchange Preferred Stock.
"First Refusal Agreement" has the meaning set forth in the LMC
Agreement.
"Hold Back Period" shall have the meaning set forth in Section 4
hereof.
"Holder" means a person who owns Registrable Shares or
Exchange Preferred Stock that is convertible into Registrable Shares
and is either (i) named on the signature pages hereof as a Holder, or
(ii) a person who has agreed to be bound by the terms of this
Agreement as if such person were a Holder and is (A) a person to whom
a Holder has transferred Registrable Shares pursuant to Rule
"4(1-1/2)" (or any similar private transfer exemption), (B) upon the
death of any Holder, the executor of the estate of such Holder or any
of such Holder's heirs, devisees, legatees or assigns, (C) upon the
disability of any Holder, any guardian or conservator of such Holder
or (D) an Affiliate of a Holder to which a Holder has transferred any
Common Stock or Exchange Preferred Stock.
"Interruption Period" shall have the meaning set forth in Section
5 hereof.
"Liberty Party" has the meaning set forth in the LMC Agreement.
"LMC Agreement" means the Agreement dated as of September
22, 1995, among the Company, Liberty Media Corporation and certain
subsidiaries of Liberty Media Corporation.
"Merger Agreement" shall have the meaning set forth in the
introductory clauses hereof.
<PAGE>
"Non-Voting Exchange Preferred Stock" shall mean the Series
J Non-Voting Participating Convertible Preferred Stock of the Company.
"person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Piggyback Registration" shall have the meaning set forth in
Section 3 hereof.
"Prospectus" means the prospectus included in any Registration
Statement (including a prospectus that discloses information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A), as amended or supplemented by any
prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Shares covered by such Registration Statement
and all other amendments and supplements to such prospectus, including
post-effective amendments, and all material incorporated by reference or
deemed to be incorporated by reference in such prospectus.
"Registrable Shares" means shares of Common Stock unless (i) they
have been effectively registered under Section 5 of the Securities Act and
disposed of pursuant to an effective Registration Statement, (ii) such
securities can be freely sold and transferred without restriction under
Rule 145 or any other restrictions under the Securities Act or (iii) such
securities have been transferred pursuant to Rule 144 under the Securities
Act or any successor rule such that, after any such transfer referred to in
this clause (iii), such securities may be freely transferred without
restriction under the Securities Act.
"Registration" means registration under the Securities Act of an
offering of Registrable Shares pursuant to a Demand Registration or a
Piggyback Registration.
"Registration Period" shall have the meaning set forth in Section
2(a) hereof.
"Registration Statement" means any registration statement under
the Securities Act of the Company that covers any of the Registrable Shares
pursuant to the provisions of this Agreement, including the related
Prospectus, all amendments and supplements to such registration statement,
including pre- and post-effective amendments, all exhibits thereto and all
material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
"SEC" means the Securities and Exchange Commission.
<PAGE>
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the SEC promulgated thereunder.
"Shelf Registration" shall have the meaning set forth in Section
2(b) hereof.
"underwritten registration or underwritten offering" means a
registration under the Securities Act in which securities of the Company
are sold to an underwriter for reoffering to the public.
"Voting Exchange Preferred Stock" shall mean the Series K
Voting Participating Convertible Preferred Stock of the Company.
SECTION 2. Demand Registration. (a) (i) The Holders of not
less than a majority of the Registrable Shares then held by all
Holders shall have the right, during the period (the "Registration
Period") commencing on the date of this Agreement and ending as to
each Holder on the later of (x) the third anniversary of the date of
this Agreement and (y) if such Holder is an Affiliated Holder, the
date such Holder shall cease to be an Affiliated Holder, by written
notice (the "Demand Notice") given to the Company, to request the
Company to register under and in accordance with the provisions of the
Securities Act all or any portion of the Registrable Shares designated
by such Holders; provided, however, that the aggregate number of
Registrable Shares requested to be registered pursuant to any Demand
Notice and pursuant to any related Demand Notices received pursuant to
the following sentence shall be at least 4,000,000 or the remaining
Registrable Shares, if less. For purposes of this Agreement, a Holder
shall be deemed to hold as of any relevant date all Registrable Shares
issuable upon conversion of any Exchange Preferred Stock then held by
such Holder. Upon receipt of any such Demand Notice, the Company shall
promptly notify all other Holders of the receipt of such Demand Notice
and allow them the opportunity to include Registrable Shares held by
them in the proposed registration by submitting their own Demand
Notice. In connection with any Demand Registration in which more than
one Holder participates, in the event that such Demand Registration
involves an underwritten offering and the managing underwriter or
underwriters participating in such offering advise in writing the
Holders of Registrable Shares to be included in such offering that the
total number of Registrable Shares to be included in such offering
exceeds the amount that can be sold in (or during the time of) such
offering without delaying or jeopardizing the success of such offering
(including the price per share of the Registrable Shares to be sold),
then the amount of Registrable Shares to be offered for the account of
such Holders shall be reduced pro rata on the basis of the number of
Registrable Shares to be registered by each such Holder or on such
other basis as the Holders may agree. The Holders as a group shall be
entitled to three Demand Registrations pursuant to this Section
2(a)(i). Any Demand Registration that does not become effective or is
not maintained for the period (whether or not continuous) specified in
Section 2(c) (or such shorter period as shall terminate when all the
Registrable Shares covered by such Demand Registration have
<PAGE>
been sold pursuant thereto) shall not reduce the number of Demand
Registrations available to the Holders hereunder.
(ii) If, at any time during the Registration Period or
thereafter, a Prohibited Effect (as defined in the LMC Agreement) shall
occur which would give rise to an obligation of the Company to compensate
the Liberty Parties (as defined in the LMC Agreement) pursuant to Section
4.3 of the LMC Agreement, any Holders that are Liberty Parties shall be
immediately entitled to a Demand Registration, exercisable at any time that
such Prohibited Effect shall have occurred and be continuing, whether or
not a Demand Registration would then be available pursuant to clause (i) of
this Section 2(a).
(b) The Company, within 45 days of the date on which the Company
receives a Demand Notice given by Holders in accordance with Section 2(a)
hereof, shall file with the SEC, and the Company shall thereafter use its
best efforts to cause to be declared effective, a Registration Statement on
the appropriate form for the registration and sale, in accordance with the
intended method or methods of distribution, of the total number of
Registrable Shares specified by the Holders in such Demand Notice, which
may include a "shelf" registration (a "Shelf Registration") pursuant to
Rule 415 under the Securities Act (a "Demand Registration").
(c) The Company shall use commercially reasonable efforts to keep
each Registration Statement filed pursuant to this Section 2 continuously
effective and usable for the resale of the Registrable Shares covered
thereby (i)(A) in the case of a Registration that is not a Shelf
Registration, for a period of 120 days from the date on which the SEC
declares such Registration Statement effective and (B) in the case of a
Shelf Registration, for a period of two years from the date on which the
SEC declares such Registration Statement effective (or such shorter period
of time as shall be applicable to such Shelf Registration pursuant to the
next two sentences) or (ii) until all the Registrable Shares covered by
such Registration Statement have been sold pursuant to such Registration
Statement, if earlier, in either case, as such period may be extended
pursuant to this Section 2. Notwithstanding clause (i)(B) of the preceding
sentence, if the Company in good faith determines that the number of
Registrable Shares to be included in any Shelf Registration would have a
material adverse effect on the public market price of the Company's Common
Stock, par value $1.00 per share, the Company may, within 5 days after
receipt of the Demand Notice relating thereto, notify the Holders of such
determination, stating the basis for such determination. Upon receipt of
any such notice, the Holders and the Company will discuss in good faith the
basis for a mutually acceptable compromise, which may include (1) a
reduction in the period provided for in clause (i)(B) of this Section 2(c),
<PAGE>
(2) a reduction in the number of Registrable Shares included in
such Shelf Registration, or (3) a combination of the foregoing, as the
Company and Holders of a majority of the Registrable Shares shall agree;
provided, however, that if the Company and such Holders are unable to agree
on such a mutually acceptable compromise within 10 days after the Company
delivers such notice, the period provided for in clause (i)(B) shall be
reduced to 180 days; and provided further that there shall be no reduction
in the number of Registrable Shares included in such Shelf Registration
without the consent of the Holders of a majority of the Registrable Shares.
(d) The Company shall be entitled to postpone the filing of any
Registration Statement otherwise required to be prepared and filed by the
Company pursuant to this Section 2, or suspend the use of any effective
Registration Statement under this Section 2, for a reasonable period of
time, but not in excess of 90 days (a "Delay Period"), if any executive
officer of the Company determines that in such executive officer's
reasonable judgment and good faith the registration and distribution of the
Registrable Shares covered or to be covered by such Registration Statement
would materially interfere with any pending financing, acquisition or
corporate reorganization or other corporate development involving the
Company or any of its subsidiaries or would require premature disclosure
thereof and promptly gives the Holders written notice of such
determination, containing a general statement of the reasons for such
postponement and an approximation of the anticipated delay; provided,
however, that (i) the aggregate number of days included in all Delay
Periods and Hold Back Periods during any consecutive 12 months shall not
exceed 180 days and (ii) a period of at least 60 days shall elapse between
the termination of any Delay Period or Hold Back Period and the
commencement of the immediately succeeding Delay Period or Hold Back
Period. The Company shall promptly notify the Holders of the expiration of
any Delay Period. If the Company shall so postpone the filing of a
Registration Statement, the Holders of Registrable Shares to be registered
shall have the right to withdraw the request for registration by giving
written notice from the Holders of a majority of the Registrable Shares
that were to be registered to the Company within 45 days after receipt of
the notice of postponement or, if earlier, the termination of such Delay
Period (and, in the event of such withdrawal, such request shall not be
counted for purposes of determining the number of requests for registration
to which the Holders of Registrable Shares are entitled pursuant to this
Section 2). The time period for which the Company is required to maintain
the effectiveness of any Registration Statement shall be extended by the
aggregate number of days of all Delay Periods, all Hold Back Periods and
all Interruption Periods occurring during such Registration and such period
and any extension thereof is hereinafter referred to as the "Effectiveness
Period".
<PAGE>
(e) In the case of a proposed firm commitment underwritten
offering pursuant to a Demand Registration, the Company may include other
Company securities in the related Registration Statement, if of the same
type as the Registrable Shares covered by such Registration Statement, for
the account of other security holders, if any, who have piggyback
registration rights with respect thereto, on the same terms and conditions
as the Registrable Shares. The Company shall give the managing underwriter
or underwriters participating in such offering written notice of its intent
to include any such Company securities in such Registration within 10 days
of receipt of the initial Demand Notice applicable to such Registration.
Notwithstanding the foregoing, if the managing underwriter or underwriters
participating in such offering conclude that the total amount of the
Company securities proposed to be included in such Demand Registration
exceeds the amount which can be sold in (or during the time of) such
offering without delaying or jeopardizing the success of such offering
(including the price per share of the Registrable Shares to be sold), then
the amount of securities to be offered for the account of all holders other
than the Holders shall be reduced (to zero if necessary) to an amount
recommended by such managing underwriter or underwriters before any
reduction in the number of Registrable Shares proposed to be offered by the
Holders.
(f) Holders of a majority in number of the Registrable Shares to
be included in a Registration Statement pursuant to this Section 2 may, at
any time prior to the effective date of the Registration Statement relating
to such Registration, revoke such request by providing a written notice to
the Company revoking such request. The Holders of Registrable Shares who
revoke such request shall reimburse the Company for all its out-of-pocket
expenses incurred in the preparation, filing and processing of the
Registration Statement; provided, however, that, if such revocation was
based on the Company's failure to comply in any material respect with its
obligations hereunder or if such revocation results from a material adverse
change in the operating results, financial condition or business of the
Company of which the Holders were not aware at the time of delivery of a
Demand Notice pursuant to Section 2(a), such reimbursement shall not be
required.
SECTION 3. Piggyback Registration. (a) Right to Piggyback. If at
any time during the Registration Period the Company proposes to file a
registration statement under the Securities Act with respect to a public
offering of securities of the same type as the Registrable Shares pursuant
to a firm commitment underwritten offering solely for cash for its own
account (other than a registration statement (i) on Form S-8 or any
successor forms thereto, or (ii) filed solely in connection with a dividend
reinvestment plan or employee benefit plan covering officers or directors
of the Company or its Affiliates), then the Company shall give written
notice of such proposed filing to the Holders at least 15 days before the
anticipated filing date. Such
<PAGE>
notice shall offer the Holders the opportunity to register such amount
of Registrable Shares as they may request (a "Piggyback Registration").
Subject to Section 3(b) hereof, the Company shall include in each such
Piggyback Registration all Registrable Shares with respect to which
the Company has received written requests for inclusion therein within
10 days after notice has been given to the Holders. Each Holder shall
be permitted to withdraw all or any portion of the Registrable Shares
of such Holder from a Piggyback Registration at any time prior to the
effective date of such Piggyback Registration; provided, however, that if
such withdrawal occurs after the filing of the Registration Statement with
respect to such Piggyback Registration and the Company does not exercise
its right to abandon the Registration Statement under Section 3(c), the
withdrawing Holders shall reimburse the Company for the portion of the SEC
registration fee payable with respect to the Registrable Shares so
withdrawn and all other registration expenses allocable to such Registrable
Shares of the types described in clauses (i), (ii) and (vii) of Section 6
hereof.
(b) Priority on Piggyback Registrations. The Company shall permit
the Holders to include all such Registrable Shares on the same terms and
conditions as any similar securities, if any, of the Company included
therein. Notwithstanding the foregoing, if the Company or the managing
underwriter or underwriters participating in such offering advise the
Holders in writing that the total amount of securities requested to be
included in such Piggyback Registration exceeds the amount which can be
sold in (or during the time of) such offering without delaying or
jeopardizing the success of the offering (including the price per share of
the securities to be sold), then the amount of securities to be offered for
the account of the Holders and other holders of securities who have
piggyback registration rights with respect thereto shall be reduced (to
zero if necessary) pro rata on the basis of the number of common stock
equivalents requested to be registered by each such Holder or holder
participating in such offering.
(c) Right To Abandon. Nothing in this Section 3 shall create any
liability on the part of the Company to the Holders if the Company in its
sole discretion should decide not to file a registration statement proposed
to be filed pursuant to Section 3(a) hereof or to withdraw such
registration statement subsequent to its filing, regardless of any action
whatsoever that a Holder may have taken, whether as a result of the
issuance by the Company of any notice hereunder or otherwise.
SECTION 4. Holdback Agreement. If (i) during the Effective
Period, the Company shall file a registration statement (other than in
connection with the registration of securities issuable pursuant to an
employee stock option, stock purchase or similar plan or pursuant to a
merger, exchange offer or a transaction of
<PAGE>
the type specified in Rule 145(a) under the Securities Act) with
respect to an issuance by the Company of Common Stock or similar
securities or securities convertible into, or exchangeable or exercisable
for, such securities and (ii) with reasonable prior notice, the Company (in
the case of a non-underwritten public offering by the Company pursuant to
such registration statement) advises the Holders in writing that a public
sale or distribution of such Registrable Shares would materially adversely
affect such offering or the managing underwriter or underwriters (in the
case of an underwritten public offering by the Company pursuant to such
registration statement) advises the Company in writing (in which case the
Company shall notify the Holders) that a public sale or distribution of
Registrable Shares would materially adversely impact such offering, then
each Holder shall, to the extent not inconsistent with applicable law,
refrain from effecting any public sale or distribution of Registrable
Shares pursuant to any then effective Shelf Registration during the ten
days prior to, and during the 90-day period beginning on, the effective
date of such registration statement or such shorter period as may be
requested by such underwriters (each such period, a "Hold Back Period"),
and any public sale by a Holder of Registrable Shares during such Hold Back
Period shall be made in accordance with the volume limitations set forth in
Rule 144(e) under the Securities Act (determined without regard for Rule
144(k)). Notwithstanding the foregoing, a Holder shall not be obligated to
refrain from effecting an underwritten public offering of Registrable
Shares during a Hold Back period if, at least five Business Days prior to
receiving the notice from the Company contemplated by clause (ii) above,
the Holder shall have notified the Company of its current intention to
effect an underwritten public offering of Registrable Shares (with a view
to consummating such an offering within 45 days after the date of such
notice) pursuant to a then effective Shelf Registration during such
Hold Back Period.
SECTION 5. Registration Procedures. In connection with the
registration obligations of the Company pursuant to and in accordance with
Sections 2 and 3 hereof (and subject to Sections 2 and 3 hereof), the
Company shall use commercially reasonable efforts to effect such
registration to permit the sale of such Registrable Shares in accordance
with the intended method or methods of disposition thereof, and pursuant
thereto the Company shall as expeditiously as possible (but subject to
Sections 2 and 3 hereof):
(a) prepare and file with the SEC a Registration Statement for
the sale of the Registrable Shares on any form for which the Company
then qualifies and which counsel for the Company shall deem
appropriate in accordance with the intended method or methods of
distribution specified by the Holders thereof, and, subject to the
Company's right to terminate or abandon a Piggyback Registration
pursuant to Section 3(c) hereof, use commercially
<PAGE>
reasonable efforts to cause such Registration Statement to become
effective and remain effective as provided herein;
(b) prepare and file with the SEC such amendments (including
post-effective amendments) to such Registration Statement, and such
supplements to the related Prospectus, as may be required by the
rules, regulations or instructions applicable to such Registration
Statement under the Securities Act during the applicable period in
accordance with the intended methods of disposition specified by the
Holders of the Registrable Shares covered by such Registration
Statement, make generally available earnings statements satisfying the
provisions of Section 11(a) of the Securities Act (provided that the
Company shall be deemed to have complied with this clause if it has
complied with Rule 158 under the Securities Act), and cause the
related Prospectus as so supplemented to be filed pursuant to Rule 424
under the Securities Act; provided, however, that before filing a
Registration Statement or Prospectus, or any amendments or supplements
thereto (other than reports required to be filed by it under the
Exchange Act), the Company shall furnish to the Holders of Registrable
Shares covered by such Registration Statement and their counsel for
review and comment, copies of all documents required to be filed;
(c) notify the Holders of any Registrable Shares covered by such
Registration Statement promptly and (if requested) confirm such notice
in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to such
Registration Statement or any post-effective amendment, when the same
has become effective, (ii) of any request by the SEC for amendments or
supplements to such Registration Statement or the related Prospectus
or for additional information regarding such Holders, (iii) of the
issuance by the SEC of any stop order suspending the effectiveness of
such Registration Statement or the initiation of any proceedings for
that purpose, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of any of the Registrable Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (v) of the happening of any event that requires the
making of any changes in such Registration Statement, Prospectus or
documents incorporated or deemed to be incorporated therein by
reference so that they will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading:
(d) use commercially reasonable efforts to obtain the withdrawal
of any order suspending the effectiveness of such Registration
Statement, or the lifting
<PAGE>
of any suspension of the qualification or exemption from
qualification of any Registrable Shares for sale in any jurisdiction
in the United States;
(e) furnish to the Holder of any Registrable Shares covered by
such Registration Statement, each counsel for such Holders and each
managing underwriter, if any, without charge, one conformed copy of
such Registration Statement, as declared effective by the SEC, and of
each post-effective amendment thereto, in each case including
financial statements and schedules and all exhibits and reports
incorporated or deemed to be incorporated therein by reference; and
deliver, without charge, such number of copies of the preliminary
prospectus, any amended preliminary prospectus, each final Prospectus
and any post-effective amendment or supplement thereto, as such Holder
may reasonably request in order to facilitate the disposition of the
Registrable Shares of such Holder covered by such Registration
Statement in conformity with the requirements of the Securities Act;
(f) prior to any public offering of Registrable Shares covered by
such Registration Statement, use commercially reasonable efforts to
register or qualify such Registrable Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as the Holders
of such Registrable Shares shall reasonably request in writing;
provided, however, that the Company shall in no event be required to
qualify generally to do business as a foreign corporation or as a
dealer in any jurisdiction where it is not at the time so qualified or
to execute or file a general consent to service of process in any such
jurisdiction where it has not theretofore done so or to take any
action that would subject it to general service of process or taxation
in any such jurisdiction where it is not then subject;
(g) upon the occurrence of any event contemplated by paragraph
5(c)(v) above, prepare a supplement or post-effective amendment to
such Registration Statement or the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference and
file any other required document so that, as thereafter delivered to
the purchasers of the Registrable Shares being sold thereunder
(including upon the termination of any Delay Period), such Prospectus
will not contain an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading;
(h) use commercially reasonable efforts to cause all Registrable
Shares covered by such Registration Statement to be listed on each
securities exchange
<PAGE>
or automated interdealer quotation system, if any, on which
similar securities issued by the Company are then listed or quoted;
(i) on or before the effective date of such Registration
Statement, provide the transfer agent of the Company for the
Registrable Shares with printed certificates for the Registrable
Shares covered by such Registration Statement, which are in a form
eligible for deposit with The Depository Trust Company;
(j) if such offering is an underwritten offering, make available
for inspection by any Holder of Registrable Shares included in such
Registration Statement, any underwriter participating in any offering
pursuant to such Registration Statement, and any attorney, accountant
or other agent retained by any such Holder or underwriter
(collectively, the "Inspectors"), all financial and other records and
other information, pertinent corporate documents and properties of any
of the Company and its subsidiaries and affiliates (collectively, the
"Records"), as shall be reasonably necessary to enable them to
exercise their due diligence responsibilities; provided, however, that
the Records that the Company determines, in good faith, to be
confidential and which it notifies the Inspectors in writing are
confidential shall not be disclosed to any Inspector unless such
Inspector signs a confidentiality agreement reasonably satisfactory to
the Company (which shall permit the disclosure of such Records in such
Registration Statement or the related Prospectus if necessary to avoid
or correct a material misstatement in or material omission from such
Registration Statement or Prospectus) or either (i) the disclosure of
such Records is necessary to avoid or correct a misstatement or
omission in such Registration Statement or (ii) the release of such
Records is ordered pursuant to a subpoena or other order from a court
of competent jurisdiction; provided further, however, that (A) any
decision regarding the disclosure of information pursuant to subclause
(i) shall be made only after consultation with counsel for the
applicable Inspectors and the Company and (B) with respect to any
release of Records pursuant to subclause (ii), each Holder of
Registrable Shares agrees that it shall, promptly after learning that
disclosure of such Records is sought in a court having jurisdiction,
give notice to the Company so that the Company, at the Company's
expense, may undertake appropriate action to prevent disclosure of
such Records; and
(k) if such offering is an underwritten offering, enter into such
agreements (including an underwriting agreement in form, scope and
substance as is customary in underwritten offerings) and take all such
other appropriate
<PAGE>
and reasonable actions requested by the Holders of a majority of
the Registrable Shares being sold in connection therewith (including
those reasonably requested by the managing underwriters) in order to
expedite or facilitate the disposition of such Registrable Shares, and
in such connection, (i) use commercially reasonable efforts to obtain
opinions of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters and counsel to the Holders
of the Registrable Shares being sold), addressed to each selling
Holder of Registrable Shares covered by such Registration Statement
and each of the underwriters as to the matters customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such counsel and underwriters, (ii) use
commercially reasonable efforts to obtain "cold comfort" letters and
updates thereof from the independent certified public accountants of
the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business
acquired by the Company for which financial statements and financial
data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder of Registrable Shares
covered by the Registration Statement (unless such accountants shall
be prohibited from so addressing such letters by applicable standards
of the accounting profession in which case such letters shall be
addressed to the extent permissible in a manner permitting such Holder
to rely thereon) and each of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in
"cold comfort" letters in connection with underwritten offerings,
(iii) if requested and if an underwriting agreement is entered into,
provide indemnification provisions and procedures substantially to the
effect set forth in Section 8 hereof with respect to all parties to be
indemnified pursuant to said Section. The above shall be done at each
closing under such underwriting or similar agreement, or as and to the
extent required thereunder.
The Company may request in writing each Holder of Registrable
Shares covered by a Registration Statement to furnish such information
regarding such Holder and such Holder's intended method of disposition of
such Registrable Shares as is required by the form of such Registration
Statement, applicable law or the SEC. If any such information is not
furnished within a reasonable period of time after receipt of such request,
the Company may exclude such Holder's Registrable Shares from such
Registration Statement.
Each Holder of Registrable Shares covered by a Registration
Statement agrees that, upon receipt of any notice from the Company of the
happening of any
<PAGE>
event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(iv) or
5(c)(v) hereof, that such Holder shall forthwith discontinue
disposition of any Registrable Shares covered by such Registration
Statement or the related Prospectus until receipt of the copies of the
supplemented or amended Prospectus contemplated by Section 5(g) hereof, or
until such Holder is advised in writing (the "Advice") by the Company that
the use of the applicable Prospectus may be resumed, and has received
copies of any amended or supplemented Prospectus or any additional or
supplemental filings which are incorporated, or deemed to be incorporated,
by reference in such Prospectus (such period during which disposition is
discontinued being an "Interruption Period") and, if requested by the
Company, the Holder shall deliver to the Company (at the expense of the
Company) all copies then in its possession, other than permanent file
copies then in such holder's possession, of the Prospectus covering such
Registrable Shares at the time of receipt of such request.
Each Holder of Registrable Shares covered by a Registration
Statement further agrees not to utilize any material other than the
applicable current preliminary prospectus or Prospectus in connection with
the offering of such Registrable Shares.
SECTION 6. Registration Expenses. Whether or not any Registration
Statement is filed or becomes effective, the Company shall pay all costs,
fees and expenses incident to the Company's performance of or compliance
with this Agreement, including (i) all registration and filing fees,
including NASD filing fees and any applicable stock exchange or interdealer
quotation system listing fees, (ii) all fees and expenses of compliance
with securities or Blue Sky laws, including reasonable fees and
disbursements of counsel in connection therewith, (iii) printing and
photocopying expenses (including expenses of printing certificates for
Registrable Shares and of printing prospectuses if the printing of
prospectuses is requested by the Holders or the managing underwriter, if
any), (iv) messenger, telephone and delivery expenses, (v) fees and
disbursements of counsel for the Company, (vi) fees and disbursements of
all independent certified public accountants of the Company (including
expenses of any "cold comfort" letters required in connection with this
Agreement) and all other persons retained by the Company in connection with
such Registration Statement, (vii) fees and disbursements of one counsel,
other than the Company's counsel, selected by Holders of a majority of the
Registrable Shares being registered, to represent all such Holders, (viii)
fees and disbursements of underwriters customarily paid by the issuers or
sellers of securities and (ix) all other costs, fees and expenses incident
to the Company's performance or compliance with this Agreement.
Notwithstanding the foregoing, the fees and expenses of any persons
retained by any Holder, other than one counsel for all such Holders, and
any discounts, commissions or brokers' fees or fees of similar securities
industry professionals and any transfer taxes relating to the disposition
of the Registrable
<PAGE>
Shares by a Holder, will be payable by such Holder and the Company will
have no obligation to pay any such amounts.
SECTION 7. Underwriting Requirements. (a) Subject to Section 7(b)
hereof, any Holder shall have the right, by written notice, to request that
any Demand Registration provide for an underwritten offering.
(b) In the case of any underwritten offering pursuant to a Demand
Registration, the Holders of a majority of the Registrable Shares to be
disposed of in connection therewith shall select the institution or
institutions that shall manage or lead such offering, which institution or
institutions shall be reasonably satisfactory to the Company. In the case
of any underwritten offering pursuant to a Piggyback Registration, the
Company shall select the institution or institutions that shall manage or
lead such offering. No Holder shall be entitled to participate in an
underwritten offering unless and until such Holder has entered into an
underwriting or other agreement with such institution or institutions for
such offering in such form as the Company, the Holders of a majority of the
Registrable Shares included in any Demand Registration and such institution
or institutions shall mutually determine.
SECTION 8. Indemnification. (a) Indemnification by the Company.
The Company shall, without limitation as to time, indemnify and hold
harmless, to the full extent permitted by law, each Holder of Registrable
Shares whose Registrable Shares are covered by a Registration Statement or
Prospectus, the officers, directors and agents and employees of each of
them, each Person who controls each such Holder (within the meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act) and the
officers, directors, agents and employees of each such controlling person,
to the fullest extent lawful, from and against any and all losses, claims,
damages, liabilities, judgment, costs (including, without limitation, costs
of preparation and reasonable attorneys' fees) and expenses (collectively,
"Losses"), as incurred, arising out of or based upon any untrue or alleged
untrue statement of a material fact contained in such Registration
Statement or Prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or based upon any omission or
alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as
the same are based upon information furnished in writing to the Company by
or on behalf of such Holder expressly for use therein; provided, however,
that the Company shall not be liable to any such Holder to the extent that
any such Losses arise out of or are based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
preliminary prospectus if (i) having previously been furnished by or on
behalf of the Company with copies of the Prospectus, such Holder failed to
send or deliver a copy of the Prospectus with or
<PAGE>
prior to the delivery of written confirmation of the sale of Registrable
Shares by such Holder to the person asserting the claim from which such
Losses arise and (ii) the Prospectus would have corrected in all material
respects such untrue statement or alleged untrue statement or such
omission or alleged omission; and provided further, however, that the
Company shall not be liable in any such case to the extent that any such
Losses arise out of or are based upon an untrue statement or alleged untrue
statement or omission or alleged omission in the Prospectus, if (x) such
untrue statement or alleged untrue statement, omission or alleged omission
is corrected in all material respects in an amendment or supplement to the
Prospectus and (y) having previously been furnished by or on behalf of the
Company with copies of the Prospectus as so amended or supplemented, such
Holder thereafter fails to deliver such Prospectus as so amended or
supplemented, prior to or concurrently with the sale of Registrable Shares.
(b) Indemnification by Holder of Registrable Shares. In
connection with any Registration Statement in which a Holder is
participating, such Holder shall furnish to the Company in writing such
information as the Company reasonably requests for use in connection with
such Registration Statement or the related Prospectus and agrees to
indemnify, to the full extent permitted by law, the Company, its directors,
officers, agents or employees, each Person who controls the Company (within
the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act) and the directors, officers, agents or employees of such
controlling Persons, from and against all Losses arising out of or based
upon any untrue or alleged untrue statement of a material fact contained in
such Registration Statement or the related Prospectus or any amendment or
supplement thereto, or any preliminary prospectus, or arising out of or
based upon any omission or alleged omission of a material fact required to
be stated therein or necessary to make the statements therein not
misleading, to the extent, but only to the extent, that such untrue or
alleged untrue statement or omission or alleged omission is based upon any
information so furnished in writing by or on behalf of such Holder to the
Company expressly for use in such Registration Statement or Prospectus;
provided, however, that such Holder shall not be liable in any such case
(i) to the extent that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Prospectus used by any person
(other than such Holder or an Affiliate of such Holder) after such time as
such Holder advised the Company of the need for a correction thereof or
(ii) in an amount that exceeds the net proceeds received by such Holder
from the sale of Registrable Shares pursuant to such Registration
Statement.
(c) Conduct of Indemnification Proceedings. If any Person shall
be entitled to indemnity hereunder (an "indemnified party"), such
indemnified party shall give prompt notice to the party from which such
indemnity is sought (the
<PAGE>
"indemnifying party") of any claim or of the commencement of any
proceeding with respect to which such indemnified party seeks
indemnification or contribution pursuant hereto; provided, however, that
the delay or failure to so notify the indemnifying party shall not relieve
the indemnifying party from any obligation or liability except to the
extent that the indemnifying party has been prejudiced by such delay or
failure. The indemnifying party shall have the right, exercisable by giving
written notice to an indemnified party promptly after the receipt of
written notice from such indemnified party of such claim or proceeding, to
assume, at the indemnifying party's expense, the defense of any such claim
or proceeding, with counsel reasonably satisfactory to such indemnified
party; provided, however, that (i) an indemnified party shall have the
right to employ separate counsel in any such claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless: (1) the
indemnifying party agrees to pay such fees and expenses; (2) the
indemnifying party fails promptly to assume the defense of such claim or
proceeding or fails to employ counsel reasonably satisfactory to such
indemnified party; or (3) the named parties to any proceeding (including
impleaded parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by counsel that
there may be one or more legal defenses available to it that are
inconsistent with those available to the indemnifying party or that a
conflict of interest is likely to exist among such indemnified party and
any other indemnified parties (in which case the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
indemnified party); and (ii) subject to clause (3) above, the indemnifying
party shall not, in connection with any one such claim or proceeding or
separate but substantially similar or related claims or proceedings in the
same jurisdiction, arising out of the same general allegations or
circumstances, be liable for the fees and expenses of more than one firm of
attorneys (together with appropriate local counsel) at any time for all of
the indemnified parties, or for fees and expenses that are not reasonable.
Whether or not such defense is assumed by the indemnifying party, such
indemnified party shall not be subject to any liability for any settlement
made without its consent. The indemnifying party shall not consent to entry
of any judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release, in form and substance reasonably
satisfactory to the indemnified party, from all liability in respect of
such claim or litigation for which such indemnified party would be entitled
to indemnification hereunder.
(d) Contribution. If the indemnification provided for in this
Section 8 is unavailable to an indemnified party in respect of any Losses
(other than in accordance with its terms), then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable
<PAGE>
by such indemnified party as a result of such Losses, in such proportion
as is appropriate to reflect the relative fault of the indemnifying
party, on the one hand, and such indemnified party, on the other hand,
in connection with the actions, statements or omissions that resulted
in such Losses as well as any other relevant equitable considerations.
The relative fault of such indemnifying party, on the one hand, and
indemnified party, on the other hand, shall be determined by reference
to, among other things, whether any action in question, including
any untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The amount paid
or payable by a party as a result of any Losses shall be deemed to include
any legal or other fees or expenses incurred by such party in connection
with any investigation or proceeding. The parties hereto agree that it
would not be just and equitable if contribution pursuant to this Section
8(d) were determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable considerations
referred to in this Section 8(d). Notwithstanding the provision of this
Section 8(d), an indemnifying party that is a Holder shall not be required
to contribute any amount which is in excess of the amount by which the
total proceeds received by such Holder from the sale of the Registrable
Shares sold by such Holder (net of all underwriting discounts and
commissions) exceeds the amount of any damages that such indemnifying party
has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
SECTION 9. Miscellaneous. (a) Termination. This Agreement and the
obligations of the Company and the Holders hereunder (other than Section 8
hereof) shall terminate on the first date on which no Registrable Shares
remain outstanding.
(b) Notices. All notices or communications hereunder shall be in
writing (including telecopy or similar writing), addressed as follows:
To the Company:
[ ]
<PAGE>
With a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Peter S. Wilson, Esq.
Telecopier no.: (212) 474-3700
To the Holder[s]:
[ ]
With a copy to:
Baker & Botts, L.L.P.
885 Third Avenue
19th Floor
New York, New York 10022
Attention: Elizabeth Markowski, Esq.
Telecopier no.: (212) 705-5032
Any such notice or communication shall be deemed given (i)
when made, if made by hand delivery, (ii) upon transmission, if sent
by confirmed telecopier, (iii) one business day after being deposited
with a next-day courier, postage prepaid, or (iv) three business days
after being sent certified or registered mail, return receipt
requested, postage prepaid, in each case addressed as above (or to
such other address or to such other telecopier number as such party
may designate in writing from time to time).
(c) Separability. If any provision of this Agreement shall
be declared to be invalid or unenforceable, in whole or in part,
such invalidity or unenforceability shall not affect the remaining
provisions hereof which shall remain in full force and effect.
(d) Assignment. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
devisees, legatees, legal representatives, successors and assigns.
<PAGE>
(e) Entire Agreement. This Agreement, the Merger Agreement,
the LMC Agreement and the agreements referred to herein and
therein together represent the entire agreement of the parties
with respect to the subject matter hereof and supersede any and
all prior contracts, arrangements or understandings between the
parties hereto with respect to such subject matter.
(f) Amendments and Waivers. Except as otherwise provided
herein, the provisions of this Agreement may not be amended, modified
or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained
the written consent of Holders of at least a majority in number of the
Registrable Shares then outstanding.
(g) Publicity. No public release or announcement concerning
the transactions contemplated hereby shall be issued by any party
without the prior consent of the other parties, except to the extent
that such party is advised by counsel that such release or announcement
is necessary or advisable under applicable law or the rules or
regulations of any securities exchange, in which case the party
required to make the release or announcement shall to the extent
practicable provide the other party with an opportunity to review and
comment on such release or announcement in advance of its issuance.
(h) Expenses. Whether or not the transactions contemplated
hereby are consummated, except as otherwise provided herein, all costs
and expenses incurred in connection with the execution of this Agreement
shall be paid by the party incurring such costs or expenses, except as
otherwise set forth herein.
(i) Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(j) Counterparts. This Agreement may be executed in two or
more counterparts, all of which shall be one and the same agreement,
and shall become effective when counterparts have been signed by
each of the parties and delivered to each other party.
(k) Governing Law. This Agreement shall be construed,
interpreted, and governed in accordance with the internal laws of New
York.
(l) Calculation of Time Periods. Except as otherwise indicated,
all periods of time referred to herein shall include all Saturdays,
Sundays and holidays; provided, however, that if the date to perform
the act or give any notice with respect
<PAGE>
to this Agreement shall fall on a day other than a Business Day,
such act or notice may be timely performed or given if performed or
given on the next succeeding Business Day.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
TIME WARNER INC.
By: ------------------------
Name:
Title:
LIBERTY MEDIA CORPORATION
By: ------------------------
Name:
Title:
<PAGE>
EXHIBIT G TO
LMC AGREEMENT
RIGHTS PLAN AMENDMENTS
"Acquiring Person" shall mean, as of any time, any
Person who or which, alone or together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of more
than 15% of the Common Shares outstanding as of such time, other
than (a) the Company, any Subsidiary of the Company, any employee
benefit plan of the Company or any of its Subsidiaries, or any
Person holding Common Shares for or pursuant to the terms of any
such employee benefit plan, or (b) any Person who or which, alone
or together with one or more of its Affiliates or Associates,
becomes or became the Beneficial Owner of more than 15% of the
Common Shares outstanding as of such time pursuant to a
Qualifying Offer. Notwithstanding the foregoing, the term
"Acquiring Person" shall not include any Person who or which as
of any time becomes the Beneficial Owner of more than 15% of the
Common Shares outstanding as of such time (i) solely as the
result of a change in the number of Common Shares outstanding
since the most recent preceding date on which such Person
acquired Beneficial Ownership of any Common Shares or (ii) solely
as the result of the acquisition by such Person or one or more of
its Affiliates or Associates of Beneficial Ownership of
additional Common Shares if such acquisition was made in the good
faith belief that such acquisition would not cause either the
number of Common Shares beneficially owned by such Person,
together with its Affiliates and Associates, to exceed 15% of the
Common Shares outstanding at the time of such acquisition or
otherwise cause a Distribution Date or the adjustment provided in
Section 11(a) to occur and such good faith belief was based on
the good faith reliance on information contained in publicly
filed reports or documents of the Company which were inaccurate
or out-of-date or (iii) solely as the result of the acquisition
of beneficial ownership of any Common Shares by any of such
Person's Affiliates or Associates who or which are not Controlled
Related Parties of such Person or (iv) solely as the result of
any transaction or event pursuant to which any Person who or
which beneficially owns any Common Shares and was not previously
an Affiliate or Associate of such Person becomes an Affiliate or
Associate of such Person or (v) solely as the result of the
acquisition by such Person or one or more of its Affiliates or
Associates of Beneficial Ownership of additional Common Shares if
such acquisition was made in the good faith belief that such
acquisition would not cause the number of Common Shares
beneficially owned by such Person, together with its Affiliates
and Associates, to exceed 15% of the Common Shares outstanding at
the time of such acquisition or otherwise cause a Distribution
Date or the adjustment provided in Section 11(a) to occur and
such good faith belief was based on the good faith reliance on
inaccurate or out-of-date information concerning the number of
Common Shares beneficially owned by any Affiliates or Associates
of such Person who or which are not Controlled Related Parties of
such Person; provided, however, that in the case of any of
clauses (i) through (v), the percentage of the Common Shares
outstanding represented by the number of Common Shares
beneficially owned by such Person is reduced to 15% or less
within the applicable cure period. For purposes of the
immediately preceding sentence, the "applicable cure period"
shall be the period commencing on (and including) the date that
such Person becomes aware that the number of Common Shares
beneficially owned by such Person exceeds 15% of the Common
Shares outstanding (except that if such Person has separately
agreed in writing with the Company to notify the Company once
such Person becomes aware of such fact,
<PAGE>
the cure period shall commence on (and include) the date of
receipt by such Person of written notice from the Company that
the number of Common Shares beneficially owned by such Person
exceeds, as of the date such notice is given, 15% of the Common
Shares outstanding as of such date) and ending upon the Close of
Business on (i) the fifth Business Day after such date in the
case of any Person described in clause (i) or (ii) of the
immediately preceding sentence or (ii) the tenth Business Day
after such date in the case of any Person described in clause
(iii), (iv) or (v) of the immediately preceding sentence;
provided, however, that if such reduction would require the
disposition by such Person or any of its Affiliates or Associates
of any Common Shares and such Person notifies the Company in
writing that, in such Person's good faith belief, such
disposition within such period could not reasonably be
accomplished without violation of applicable law or could
reasonably be accomplished only for consideration or on terms
materially disadvantageous as compared to the consideration or
terms on which such disposition could be accomplished during some
longer period of time, then such period shall be extended for
such time as the directors of the Company whose approval would be
required to redeem the Rights under Section 24 shall reasonably
deem to be required in order to prevent such violation of
applicable law or shall reasonably deem to be sufficient to
minimize such disadvantageous effect (as the case may be),
subject to the condition that such Person shall during the cure
period, as extended (or until such earlier time at which such
Person, together with its Affiliates and Associates, otherwise
ceases to beneficially own more than 15% of the outstanding
Common Shares), diligently and in good faith proceed to effect
the required disposition as expeditiously as reasonably
practicable and comply with any arrangements regarding the voting
of a number of Common Shares beneficially owned by such Person,
together with its Affiliates and Associates, equal to the number
so required to be disposed of pending completion of such
disposition as such directors of the Company shall request
(including arrangements not to vote such number of Common Shares
or only to vote such number of Common Shares in a manner approved
by such directors of the Company). For purposes of this
definition, the determination of whether any Person (other than a
director of the Company, in his or her capacity as a director of
the Company) acted in "good faith" shall be conclusively
determined in good faith by those directors of the Company whose
approval would be required to redeem the Rights under Section 24.
A Person shall be deemed the "Beneficial Owner" of, and
shall be deemed to "beneficially own", and shall be deemed to
have "Beneficial Ownership" of, any securities:
(i) which such Person or any of such Person's
Affiliates or Associates is deemed to 'beneficially own'
within the meaning of Rule 13d-3 of the General Rules and
Regulations under the Exchange Act, as in effect on the date
of this Rights Agreement;
(ii) which such Person or any of such Person's
Affiliates or Associates has: (A) the right to acquire
(whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement
or understanding (written or oral), or upon the exercise of
conversion rights, exchange rights, rights (other than the
Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed under this clause
(A) to be the Beneficial Owner of, or to beneficially own,
or to have Beneficial Ownership of, any securities tendered
pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates
<PAGE>
or Associates until such tendered securities are accepted
for purchase or exchange thereunder; or (B) the right to
vote pursuant to any agreement, arrangement or understanding
(written or oral); provided, however, that a Person shall
not be deemed under this clause (B) to be the Beneficial
Owner of, or to beneficially own, any security if (1) the
agreement, arrangement or understanding (written or oral) to
vote such security arises solely from a revocable proxy or
consent given to such Person in response to a public proxy
or consent solicitation made pursuant to, and in accordance
with, the applicable rules and regulations under the
Exchange Act and (2) the beneficial ownership of such
security is not also then reportable on Schedule 13D under
the Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or
any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (written or oral)
for the purpose of acquiring, holding, voting or disposing
of any Common Shares, any other securities of the Company
generally entitled to vote together with the Common Shares
or any rights, warrants, options or other securities
exercisable or exchangeable for, or convertible into, Common
Shares or other securities of the Company generally entitled
to vote together with the Common Shares.
A Person shall also be deemed to be the "Beneficial
Owner" of, and to "beneficially own", and to have "Beneficial
Ownership" of, Common Shares of the Company if such Person is the
Beneficial Owner of, or beneficially owns, or has Beneficial
Ownership of (as the case may be), any other securities of the
Company (whether or not convertible into or exchangeable for
Common Shares) generally entitled to vote together with the
Common Shares. If the preceding sentence is applicable in any
case, such Person shall be deemed by virtue of Beneficial
Ownership of such other securities to be the "Beneficial Owner"
of, and to "beneficially own", and to have "Beneficial Ownership"
of, that number of Common Shares of the Company equal to the
greater of (x) the number of votes entitled to be cast in respect
of such other securities upon any matter being voted upon by the
holders of Common Shares and the holders of such other
securities, voting together as a single class, and (y) if
applicable, the number of Common Shares of the Company issuable
upon conversion in full into, or exchange in full for, Common
Shares of the Company of such other securities.
In the event any Common Shares are subject to a voting
trust approved by the directors of the Company whose approval
would be required to redeem the Rights under Section 24, than (x)
the trustee or trustees under such voting trust shall be deemed
not to be the "Beneficial Owner" of any such Common Shares and
(y) each beneficiary of such voting trust shall be deemed to be
the "Beneficial Owner" of all such Common Shares.
<PAGE>
Notwithstanding the foregoing, (a) no Person ordinarily engaged
in business as an underwriter of securities shall be deemed to be
the "Beneficial Owner" of, to "beneficially own", or to have any
"Beneficial Ownership" of, any securities acquired in a bona fide
firm commitment underwriting pursuant to an underwriting
agreement with the Company; and (b) no Person shall be deemed to
be the "Beneficial Owner" of, to "beneficially own", or to have
any "Beneficial Ownership" of, any securities by reason of such
Person or any of such Person's Affiliates or Associates having
the right to acquire (whether such right is exercisable
immediately or only after the passage of time) such securities
pursuant to a right of first refusal, right of first offer or
similar agreement, arrangement or understanding (written or oral)
granted by another Person (the "subject Person") (I) that does
not provide any direct or indirect limitations or restrictions on
the ability of the subject Person to exercise (or refrain from
exercising) any voting rights associated with such securities or
contain any other agreement, arrangement or understanding with
respect to such voting rights, (II) that does not contain any
incentive for the subject Person to support or oppose any
particular Business Combination or otherwise to exercise (or
refrain from exercising) any voting rights associated with such
securities in a manner advantageous to such Person or any of such
Person's Affiliates or Associates and (III) prior written notice
of which shall have been given to the Company.
"Common Shares outstanding" or "outstanding Common
Shares" when used in this Section 1 in the definition of
"Acquiring Person" and when used in Section 3(b), with respect to
any Person who is, as of any time, the Beneficial Owner of,
beneficially owns, or has Beneficial Ownership of, any specified
percentage of "Common Shares outstanding" or "outstanding Common
Shares", shall mean the sum of (i) all Common Shares and any
other securities generally entitled to vote together with the
Common Shares (in the case of such other securities, counted as a
number of Common Shares equal to the greater of (x) the number of
votes entitled to be cast in respect of such other securities
upon any matter being voted upon by the holders of Common Shares
and the holders of such other voting securities, voting together
as a single class and (y), if applicable, the number of Common
Shares issuable upon conversion in full into, or exchangeable in
full for, Common Shares of such other securities) actually issued
as of such time, except Common Shares or such other securities,
if any, then owned by the Company or any Subsidiary of the
Company which, under the laws of the
<PAGE>
jurisdiction of incorporation of the Company, could not then be
voted at a meeting of the holders of Common Shares called for the
purpose of electing directors of the Company plus (ii) the
maximum aggregate number of Common Shares and such other
securities which would be issued upon the exercise in full of all
then outstanding options, warrants and rights, however
denominated (but in each case only if issued by the Company or
any of its Subsidiaries, and excluding the Rights and excluding
any securities included in clause (i) of this calculation), to
subscribe for, purchase or otherwise acquire any Common Shares or
such other securities, and the conversion into, or exchange for,
Common Shares or such other securities in full of all then
outstanding securities of the Company or any of its Subsidiaries
that are convertible into or exchangeable for Common Shares or
such other securities (excluding any securities included in
clause (i) of this calculation), in each case with or without
payment of additional consideration in cash or property, whether
or not such options, warrants, rights or securities are then
exercisable, convertible or exchangeable, as the case may be,
regardless of whether or not any of such Common Shares or such
other securities would be deemed to be outstanding under
generally accepted accounting principles for purposes of
determining book value or net income per share and regardless of
whether or not any of such Common Shares or such other securities
would be deemed to be outstanding under paragraph (d)(1)(i) of
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act (either as in effect on the date of this Rights
Agreement or as subsequently amended) or under any other rule,
regulation or statute for the purpose of computing the percentage
of Common Shares outstanding owned by any particular Person as of
any time or for any other purpose.
"Controlled Related Party" means, when used with
respect to any specified Person, each Affiliate or Associate of
such Person if such Person possesses, directly or indirectly, by
or through stock ownership, agency or otherwise, or pursuant to
or in connection with an agreement, arrangement or understanding
(written or oral) with one or more other persons, the power to
direct decisions regarding the acquisition, disposition or voting
by such Affiliate or Associate of Common Shares or rights to
acquire or vote Common Shares.
<PAGE>
Exhibit J to
LMC Agreement
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT (the "Trust Agreement") is entered
into as of _________________ by and among TCI Turner Preferred, Inc.
("TCITP"), United Cable Turner Investment, Inc. ("UCT"), Communication
Capital Corp. ("CCC", and together with TCITP and UCT; the "Liberty
Subsidiaries"), and Gerald M. Levin (the "Trustee").
WHEREAS, Time Warner Inc. ("Time Warner") has entered into
various agreements pursuant to which Time Warner will acquire Turner
Broadcasting System, Inc. (the "Acquisition"); and
WHEREAS, in connection with the Acquisition and various related
transactions the Liberty Subsidiaries will be entitled to receive shares of
the Series K Voting Participating Convertible Preferred Stock (the
"Preferred Stock") of Time Warner; and
WHEREAS, in connection with the Acquisition, Time Warner,
Liberty Media Corporation ("LMC") and certain subsidiaries of LMC have
executed the LMC Agreement (the "LMC Agreement") pursuant to which,
among other things, LMC and such subsidiaries have agreed that any
shares of Preferred Stock to which the Liberty Subsidiaries become
entitled in connection with the Acquisition or otherwise (the
"Preferred Shares") shall be transferred to the Trustee pursuant to
this Trust Agreement; and
WHEREAS, the LMC Agreement provides that all voting
securities of Time Warner from time to time held beneficially or of
record by LMC or any of its Controlled Affiliates
<PAGE>
(as defined in the LMC Agreement) shall be deposited in the trust
established hereby and, for so long as LMC is a Controlled Affiliate
of Tele-Communications, Inc. ("TCI"), all voting securities of Time
Warner held beneficially or of record by TCI or any of its Controlled
Affiliates (with certain exceptions set forth in the LMC Agreement)
shall be deposited in the trust established hereby, and pursuant
thereto it is intended that this Trust Agreement be amended to provide
for the deposits of such voting securities (all such voting
securities, together with the Preferred Shares, the "Shares") and to
add as a party hereto the record owner of the Shares so deposited (in
any such case, the record owners of the Shares so deposited, together
with the Liberty Subsidiaries, the "Liberty Entities"); and
WHEREAS, the Liberty Entities desire to enter into this Trust
Agreement to assure that under the rules, regulations and policies of the
Federal Communications Commission (the "FCC"), there will be no attribution
to the Liberty Entities of any interest in Time Warner;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
hereby agree as follows:
1. Creation and Purpose of Trust. Subject to the terms and
conditions hereof, a voting trust in respect of the Shares is hereby
created and established, and the Trustee hereby accepts the trust created
hereby and agrees to serve as trustee hereunder. The trust created hereby
shall be irrevocable, and shall not terminate except in accordance with the
terms set forth herein.
2. Deposit and Transfer of the Shares; Trust Certificates
(a) At the closing of the Acquisition and at any other time
that any Liberty Entity receives beneficial ownership of any Shares,
such Liberty Entity will cause certificates representing such Shares
to be delivered to the
<PAGE>
Trustee. Each certificate delivered to the Trustee pursuant to this
Section 2(a) shall be surrendered to Time Warner for cancellation and
new certificates evidencing the Shares represented thereby shall be
issued and registered in the name of the Trustee. All of the
certificates for the Shares issued in the name of the Trustee shall
bear a legend to the effect that such Shares are held subject to the
terms and conditions of this Trust Agreement in accordance with
Section 218 of the Delaware General Corporation Law (the "DGCL"). Upon
the issuance and registration of such certificates, the Trustee shall
deliver a voting trust certificate evidencing the underlying Shares
(the "Certificate") to the applicable Liberty Entity, substantially in
the form of Exhibit A attached hereto.
(b) The Trustee shall retain and hold the Shares only in
accordance with, and subject to the terms and conditions set forth in,
this Trust Agreement. Except as hereinafter provided, all the Shares
shall at all times be and remain in the possession of the Trustee.
3. Maintenance of Records; Replacement of Trust
Certificates.
In case any Certificate shall become mutilated, lost, stolen
or destroyed, the Trustee, under such conditions with respect to
indemnity and otherwise as the Trustee in the Trustee's sole
discretion may prescribe, may provide for the issuance of a new
Certificate in lieu of such lost, stolen or destroyed Certificate or
in exchange for such mutilated Certificate.
4. Voting, Management and Other Actions by Trustee.
(a) During the term of this Trust Agreement, all voting
rights with respect to the Shares shall be vested in the Trustee, who
shall vote the Shares with the objective to maximize the value of the
Shares consistent with his discretion pursuant to Section 5(e) and
subject to Section 4(c).
<PAGE>
(b) No person other than the Trustee shall have any voting
rights in respect of the Shares so long as this Trust Agreement is in
effect. The Trustee shall have no beneficial interest in the Shares.
(c) The Trustee shall not:
(i) sell or otherwise transfer or encumber any of the
Shares except as specifically provided for in this Trust Agreement; or
(ii) vote the Shares in favor of certain extraordinary
events, as follows: (A) any sale, lease transfer or other disposition
of all or substantially all of the assets or stock of Time Warner; (B)
any merger, consolidation, reorganization, dissolution, liquidation or
recapitalization of Time Warner; or (C) any amendment to the Restated
Certificate of Incorporation or Bylaws of Time Warner that would
materially adversely affect the rights, benefits, powers or privileges
of the holders of the Shares or of the Common Stock of Time Warner
generally. The limitations imposed by clauses (A) and (B) of this
Section 4(c)(ii) shall not apply to any transaction contemplated
thereunder that (x) would constitute a tax-free transaction under the
Internal Revenue Code of 1986 (as from time to time amended) for the
Liberty Entities or any other person or entity with which a Liberty
Entity would be consolidated for Federal income tax purposes and (y)
provides identical consideration (including, without limitation, for
any consideration consisting of securities, par value, principal or
face amount, interest or dividend rate and any preferences,
privileges, priorities or rights (including voting rights)) for each
security of Time Warner of the same class as the Shares.
<PAGE>
(d) If any Liberty Entity notifies the Trustee in writing
that it desires to sell Shares and the Trustee acting in his
reasonable discretion agrees that such sale is consistent with the
requirements of applicable law, then the Trustee, acting for the
benefit of such Liberty Entity, shall sell such Shares in a
commercially reasonable manner with the objective to maximize the
proceeds to such Liberty Entity to the extent reasonably practicable;
provided however, that any such sale shall be subject to and
consistent with the rights and obligations of the Liberty Subsidiaries
established under the Stockholders Agreement dated ____________, 199_
among TCITP, Time Warner, R.E. Turner III and the Related Turner
Stockholders named therein.
(e) The Trustee shall cause certificates representing all of
the Shares to be delivered to the Liberty Entities, properly endorsed
for transfer to the appropriate Liberty Entity or its designee, and
shall take all other actions appropriate to effectuate the transfer of
title to the Shares and all other property held by the Trustee
pursuant to this Trust Agreement, to the Liberty Entities or their
designees at such time as (i) legal counsel nationally recognized for
expertise in FCC matters has delivered its written opinion that such
delivery and transfer will not violate the Communications Act of 1934,
as amended, or the rules and regulations of the FCC, including any
provisions of the Communications Act, or FCC rule or regulation, the
effectiveness of which shall at that time have been stayed or which
shall have been promulgated with a delayed effective date, but which
shall in any such case be considered as if then in effect, and (ii)
the Trustee receives a written notice from the Liberty Entities
authorizing such transfer.
<PAGE>
(f) In the event the FCC holds, or legal counsel to the
Liberty Entities determines, that for any reason the Shares held in
trust under this Trust Agreement result in any Liberty Entity having
an attributable interest in Time Warner, the Trustee shall, in his
capacity as Trustee, at the direction of such Liberty Entity, take
appropriate action to eliminate such attributable interest with a view
to maximizing the value of the Shares to such Liberty Entity; provided
that if the exchange of the Shares for shares of Series J Non-Voting
Participating Convertible Preferred Stock of Time Warner ("Non-Voting
Preferred Stock") would eliminate such attributable interest, then at
the direction of such Liberty Entity such exchange shall be effected
and the shares of Non-Voting Preferred Stock distributed to the
applicable Liberty Entity or its designee.
(g) The Trustee shall, in his capacity as Trustee, have any
and all such further powers and shall take such further actions
(including, but not limited to, taking legal action) as may be
necessary to fulfill the Trustee's obligations under this Trust
Agreement.
5. Concerning the Trustee.
(a) Subject to the provisions of this Trust Agreement, the
trust created hereby shall be managed by the Trustee.
(b) The Trustee shall not receive compensation for his
services hereunder.
(c) The Trustee is expressly authorized to incur and pay all
reasonable charges and other expenses which the Trustee deems
necessary and proper in the performance of the Trustee's duties under
this Trust Agreement, including fees and charges for legal counsel of
his choosing and the cost of any necessary secretarial staff. The
Liberty Entities hereby agree to promptly reimburse the Trustee for
all costs, expenses and liabilities incurred
<PAGE>
by the Trustee in connection with the performance of the Trustee's
duties under this Trust Agreement.
(d) The Liberty Entities jointly and severally assume,
indemnify and agree to hold the Trustee harmless, from, against, and
in respect of, any and all losses, liabilities, claims, damages,
expenses (including costs of investigation and defense, costs incurred
in enforcing this indemnity, and reasonable legal fees and expenses),
assessments, fines, penalties, settlements or judgments, whether or
not involving a third party claim (collectively "Losses"), suffered or
incurred by the Trustee arising from, relating to or otherwise in
respect of, any provision of this Trust Agreement, any action or
omission by the Trustee in his capacity as such or any certificate,
document or instrument delivered by the Trustee pursuant thereto,
except that the Liberty Entities shall not be required to indemnify
the Trustee in respect of any Loss to the extent such Loss is
determined by a court of competent jurisdiction in a final
nonappealable order to be the direct result of the gross negligence,
intentional wrongful action or willful misconduct of the Trustee.
(e) For purposes of Sections 4(a) and 4(f) of this Trust
Agreement, the Trustee shall be deemed to have acted to maximize the
value of the Shares if, in the exercise of his business judgment, he
is acting in the best interests of the holders of Common Stock of Time
Warner generally and the Trustee shall have no liability hereunder to
the extent that he is exculpated from liability to holders of the
Common Stock of Time Warner pursuant to the provisions of its
Certificate of Incorporation which are consistent with Section
102(b)(7) of the DGCL. In any action against the Trustee in connection
with the performance of his duties hereunder, the Trustee shall be
entitled to the presumption that he acted in good
<PAGE>
faith in his reasonable business judgment, and he shall not be deemed
an "interested party" by reason of his being an officer and/or
director of Time Warner.
(f) The Trustee shall be free from liability in acting upon
any paper, document or signature believed by the Trustee to be genuine
and to have been signed by the proper party. The Trustee shall not be
liable for any error of judgment in any act done or omitted, nor for
any mistake of fact or law, nor for anything which the Trustee may do
or refrain from doing in good faith. The Trustee may consult with
legal counsel of his own choosing and any action under this Trust
Agreement taken or suffered in good faith by the Trustee and in
accordance with the opinion of the Trustee's counsel (if such opinion
shall have been obtained by Trustee) shall be conclusive on the
parties to this Trust Agreement and the Trustee shall be fully
protected and be subject to no liability in respect thereof. So long
as the Trustee is Gerald M. Levin, if the Trustee is required to take
any action hereunder which the Trustee believes raises substantial
issues as to whether such action would be inconsistent with the best
interests of the holders of the Common Stock of Time Warner generally
or Time Warner, the Trustee may, in lieu of taking such action,
deliver a notice of resignation as Trustee hereunder in accordance
with Section 5(h) and, upon delivery of such notice, the Trustee shall
not be obligated to take any further action hereunder and shall not
incur any liability to any Liberty Entity or any other person
(including any government agency) for failing to take such action.
(g) The rights and duties of the Trustee hereunder shall
terminate upon the Trustee's disqualification, which disqualification
shall occur upon any of the following: the Trustee's incapacity to
act, death, insolvency, or, so long as the Trustee is Gerald M. Levin,
if
<PAGE>
the Trustee for any other reason ceases to serve as the Chief
Executive Officer and Chairman of Time Warner. No interest in any of
the Shares directly or indirectly held by the Trustee nor any of the
rights and duties of a disqualified Trustee may be transferred by
will, devise, succession or in any manner except as provided in this
Trust Agreement. The heirs, administrators, executors or other
representatives of a disqualified Trustee shall, however, have the
right and duty to convey any Shares held by the Trustee to one or more
successor Trustees, as designated under Section 5(i) of this Trust
Agreement.
(h) The Trustee may resign by giving not less than 60 days'
advance written notice of resignation to the Liberty Entities,
provided that a successor Trustee has been appointed as provided for
in Section 5(i) of this Trust Agreement. The Liberty Entities shall
cooperate fully by prompt appointment of a successor Trustee pursuant
to Section 5(i) of this Trust Agreement and shall not unreasonably
interfere with or delay the effectiveness of such resignation.
(i) In the event of the resignation or disqualification of
the Trustee, he shall be succeeded by a successor Trustee chosen by
the Liberty Entities. Any successor Trustee shall succeed to all of
the rights and obligations of the Trustee replaced hereunder upon
execution by such successor Trustee of a counterpart of this Trust
Agreement. Notwithstanding the above, in the sole discretion of the
Liberty Entities, and consistent with FCC rules and regulations, the
resignation or disqualification of Gerald M. Levin as Trustee may
trigger the termination of this Trust Agreement and the underlying
trust. In that case, the Liberty Entities shall appoint a successor
trustee whose sole right, duty and obligation shall be
<PAGE>
to accomplish the termination of the trust in accordance with the
terms of this Trust Agreement.
(j) The Trustee and any successor Trustee designated
pursuant to Section 5(i) shall not be a partner, officer, employee,
director or 1% or greater shareholder of any Liberty Entity or of any
entity controlled by, controlling, or under common control with any
Liberty Entity, and may not have any business or familial relationship
with any Liberty Entity or any entity controlled by, controlling or
under common control with any Liberty Entity or with any officer,
employee, or director thereof. The Trustee or any successor Trustee
shall not serve as a partner, officer, employee, or director of any
Liberty Entity or of any entity controlled by, controlling, or under
common control with any Liberty Entity.
(k) Notwithstanding any other provision of this Trust
Agreement, the rights of the Trustee set forth in Sections 5(c), 5(d),
5(e) and 5(f) of this Trust Agreement shall survive any termination of
this Trust Agreement or the trust created hereby or the
disqualification, resignation or other removal of the Trustee.
6. Distribution of Proceeds of Sale of Shares.
In the event of (i) the sale of the Shares pursuant to
Section 4(d) of this Trust Agreement, or (ii) the sale of all or
substantially all of the stock of Time Warner or any merger,
consolidation, reorganization, dissolution, recapitalization or
liquidation of Time Warner and regardless of whether the Trustee has
voted the Shares in favor of such transaction, the Trustee shall sell,
transfer, surrender or otherwise dispose of the Shares in accordance
with the terms of the applicable transaction and receive the money,
securities, rights or property which are distributed or are
distributable in respect of the Shares, or which
<PAGE>
are received in exchange or in payment for the Shares and, after
paying (or reserving for payment thereof) any expenses incurred
pursuant to this Trust Agreement, shall distribute or cause the
distribution of such money, securities, rights or property to the
Liberty Entities or their designees in proportion to their respective
ownership interests.
7. Termination of Trust Agreement.
(a) This Trust Agreement and the trust created hereby shall
terminate upon the first to occur of the following: (i) the
distribution to Liberty Entities or their designees of the Shares as
contemplated by Section 4(e) of this Trust Agreement; (ii) the sale of
the Shares as contemplated under Section 4(d) or Section 6 of this
Trust Agreement; or (iii) upon exercise by the Liberty Entities of
their rights under Section 5(i) to terminate this Agreement in the
event of the disqualification or resignation of the Trustee.
(b) Upon the termination of this Trust Agreement pursuant to
Section 7(a) hereof and consistent with the requirements of the FCC,
the Trustee shall deliver to the Liberty Entities or their designees
the stock certificates representing the Shares which shall be duly
endorsed for transfer or with duly executed stock powers attached,
together with all other property held by the Trustee pursuant to this
Trust Agreement except that in the case of a distribution under
Section 6, all of the proceeds (net of expenses and necessary
reserves) therefrom will be delivered to the Liberty Entities or their
designees in accordance with the provisions of Section 6.
<PAGE>
8. Communications
(a) The Trustee may communicate with, and provide reports to
the Liberty Entities or their designees concerning the implementation
of the trust and the acquisition of the Shares.
(b) Neither the Liberty Entities, nor any of the officers,
directors, or employees thereof shall communicate with the Trustee
regarding the operation or management of Time Warner or with respect
to the Trustee's decisions as to how to vote the Shares on any matter.
The Liberty Entities may communicate with the Trustee concerning the
transfer of the Shares or other information on the mechanics of
implementing such transfer.
(c) Any communications permitted by Section 8(a) or 8(b)
shall be in writing.
(d) All notices and other communications given under this
Trust Agreement shall be deemed to have been duly given when delivered
in person or by overnight express or mailed by first-class, registered
or certified mail, postage prepaid, or transmitted by telefax and
addressed to the Parties as follows:
(i) If to any Liberty Entity:
In care of Liberty Media Corporation
8101 East Prentice Avenue
Suite 500
Englewood, Colorado 80111
Attention: President
with copies to:
Stephen M. Brett, Esq.
General Counsel
<PAGE>
Tele-Communications, Inc.
Terrace Towers II
5619 DTC Parkway
Englewood, Colorado 80111-3000
and
Baker & Botts, L.L.P.
885 Third Avenue
Suite 1900
New York, New York 10022
Attention: Elizabeth Markowski, Esq.
(ii) If to the Trustee:
Gerald M. Levin
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Fax: (212) 333-3987
with copies to:
General Counsel
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Fax: (212) 956-7281
and
William P. Rogers, Jr.
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax: (212) 765-0993
or to such other address as either of them by written notice to the other
may from time to time designate. Each notice or other communication which
shall be delivered, mailed or transmitted in the manner described above
shall be deemed sufficiently received for all
<PAGE>
purposes at such time as it is delivered to the addressee (with any
return receipt, delivery receipt or (with respect to a telefax) answer
back being deemed conclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.
9. Miscellaneous.
(a) This Trust Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof
and supersedes all prior oral or other written agreements, commitments
or understandings with respect to the matters provided for herein.
This Trust Agreement shall not be amended, altered or modified except
by an instrument in writing duly executed by each of the parties
hereto.
(b) This Trust Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective
permitted successors and permitted assigns. Subject to Section 5(i)
hereof, this Trust Agreement shall not be assignable by the Trustee.
(c) If any part of any provision of this Trust Agreement or
any other agreement, document or writing given pursuant to or in
connection with this Trust Agreement shall be invalid or unenforceable
under applicable law, said part shall be ineffective to the extent of
such invalidity only, without in any way affecting the remaining part
of said provision or the remaining provisions of this Trust Agreement.
(d) The headings of the sections of this Trust Agreement are
inserted for convenience of reference only and do not form a part or
affect the meaning hereof.
(e) This Trust Agreement, the rights and obligations of the
parties hereto, and any claims and disputes relating thereto, shall be
governed by and construed in
<PAGE>
accordance with the laws of the State of Delaware (not including the
choice of law rules thereof).
(f) This Trust Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, and all of
which together shall be deemed to be one and the same instrument.
(g) The Trustee shall comply with all rules, regulations and
policies of the FCC.
(h) A copy of this Trust Agreement shall be filed in the
registered office of Time Warner in the State of Delaware and shall be
available for inspection in accordance with the provisions of Section
218 of the DGCL.
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Trust
Agreement or caused this Trust Agreement to be duly executed on their
behalf as of the date and year first herein above set forth.
TCI TURNER PREFERRED, INC.
By:
-----------------------
Name:
Title
UNITED CABLE TURNER INVESTMENT, INC.
By:
-----------------------
Name:
Title
COMMUNICATION CAPITAL CORP.
By:
-----------------------
Name:
Title
-----------------------
Gerald M. Levin
<PAGE>
Exhibit A
No. Shares
TRUST CERTIFICATE
This certifies that the undersigned, Gerald M. Levin, as
Trustee (the "Trustee") has received certificates representing
____________ shares of Series K Voting Participating Convertible
Preferred Stock (the "Shares") of Time Warner Inc. a Delaware
corporation, which Shares are held for the benefit of [Liberty Entity]
("Liberty Entity"), a corporation, in accordance with Section 2 of the
Voting Trust Agreement, dated ____________, 1995, among the Trustee,
TCI Turner Preferred, Inc., United Cable Turner Investments, Inc., and
Communication Capital Corp. (the "Trust Agreement"). The Shares are
being held by the Trustee on the following terms and conditions:
Rights of Liberty Entity
Liberty Entity, by its acceptances hereof, agrees to,
accepts and ratifies all of the terms, conditions and covenants of the
Trust Agreement. Liberty Entity shall possess and be entitled to
rights of ownership in the Shares only to the limited extent provided
in the Trust Agreement.
<PAGE>
Voting Rights
The Trustee, during the term of the Trust Agreement, is the
owner of the Shares for all purposes provided for in the Trust
Agreement, and shall have all voting rights with respect to the
Shares, and the right to take part in or consent to any corporate or
Stockholder's actions of any kind, as provided in the Trust Agreement.
Restriction on Transfers
This Trust Certificate is not transferable. The Shares of
stock for which it was issued are not transferable during the term of
the Trust Agreement, except as provided in the Trust Agreement.
Trust Agreement
This Trust Certificate is governed in all respects by the
Trust Agreement. In the event of any inconsistency between the terms
and conditions of this Certificate and the Trust Agreement, the Trust
Agreement shall control.
TRUSTEE:
Dated: __________________ ____________________________________
Gerald M. Levin
EXHIBIT 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference of our
report dated February 15, 1995, which appears on page 53 of
Turner Broadcasting System, Inc.'s 1994 Annual Report to
Shareholders, which is incorporated by reference in Turner
Broadcasting System, Inc.'s Annual Report on Form 10-K for
the year ended December 31, 1994 and which report has been
incorporated by reference in the Current Report on Form 8-K
of Time Warner Inc. dated September 22, 1995, in each of the
following:
1. Post-Effective Amendment No. 2 to
Registration Statements No. 33-11031 and No.
2-76763 on Form S-8;
2. Post-Effective Amendment No. 4 on Form S-3 to
Registration Statement No. 2-75960 on Form
S-16 and Post-Effective Amendment No. 1 on
Form S-3 to Registration Statement No.
33-58262 on Form S-3;
3. Registration Statements No. 33-20883 and No.
33-35945 on Form S-8;
4. Post-Effective Amendment No. 8 to
Registration Statements No. 2-62477 and No.
2-67216 on Form S-8;
5. Registration Statements No. 33-37929 and No.
33-47152 on Form S-8;
6. Post-Effective Amendment No. 2 to
Registration Statement No. 33-16507 on Form
S-8 and Registration Statement No. 33-48381
on Form S-8;
7. Post-Effective Amendment No. 1 to
Registration Statement No. 33-29247 on Form
S-8;
8. Registration Statement No. 33-33076 (the
Prospectus constituting a part thereof also
applies to Registration Statements No.
33-29029 and No. 33-29030) on Form S-8;
9. Amendment No. 1 to Registration Statement No.
33-33043 on Form S-8 and Registration
Statement No. 33-51471 on Form S-8;
<PAGE>
10. Pre-Effective Amendment No. 1 to Registration
Statement No. 33-29031 on Form S-3;
11. Registration Statement No. 33-35317 on Form
S-8;
12. Registration Statements No. 33-40859 and No.
33-48382 on Form S-8;
13. Registration Statement No. 33-47151 on Form
S-8;
14. Post-Effective Amendment No. 1 on Form S-8 to
Registration Statement No. 33-47705 on Form
S-4;
15. Registration Statements No. 33-62774 and No.
33-51015 on Form S-8;
16. Registration Statement No. 33-57812 on Form
S-3;
17. Post-Effective Amendment No. 1 to
Registration Statement No. 33-50237 on Form
S-3;
18. Registration Statement No. 33-53213 on Form
S-8 and Post-Effective Amendment No. 1 to
Registration Statement No. 33-57667 on Form
S-8;
19. Registration Statement No. 33-61497 on Form
S-8.
PRICE WATERHOUSE LLP
Atlanta, Georgia
October 2, 1995
Exhibit 99(c)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
U S WEST, INC. AND U S WEST )
MULTIMEDIA COMMUNICATIONS, )
INC., individually and deriva- )
tively on behalf of Time )
Warner Entertainment Company, )
L.P., )
)
Plaintiffs, )
)
v. ) Civil Action No. 14555
)
TIME WARNER INC., AMERICAN )
TELEVISION AND COMMUNICATIONS )
CORPORATION, TIME WARNER OPER- )
ATIONS INC., WARNER CABLE COM- )
MUNICATIONS INC. and WARNER )
COMMUNICATIONS INC., )
)
Defendants, )
)
and )
)
TIME WARNER ENTERTAINMENT )
COMPANY, L.P., a Delaware )
limited partnership, )
)
Nominal Defendant. )
COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF
Plaintiffs U S WEST, Inc. ("USWI") and U S WEST Multi-
media Communications, Inc. ("USWMCI"), suing both
individually and derivatively on behalf of Time Warner
Entertainment Company, L.P. ("TWEC" or the "Partnership"),
by and through their attorneys, allege upon knowledge with
respect to themselves and their own actions and the written
<PAGE>
agreements set forth herein, and upon information and belief
with respect to all other allegations, as follows:
NATURE OF THE ACTION
1. This action is brought by plaintiffs, suing
both in their own right and derivatively on behalf of Time
Warner Entertainment Company, L.P., for equitable relief,
including injunctive and declaratory relief. This action
arises out of the wrongful actions being pursued and
threatened by defendants, Time Warner Inc. and certain of
its wholly-owned subsidiaries, American Television and
Communications Corporation, Time Warner Operations Inc.,
Warner Cable Communications Inc. and Warner Communications
Inc. This conduct is (i) in breach of fiduciary duties
owing by defendants to plaintiffs and TWEC pursuant to
written limited partnership agreements and the common law
and statutory law of the State of Delaware, and (ii) in
violation of written agreements that defendants have entered
into with plaintiffs. The conduct contemplated by
defendants threatens to severely, immediately and
irreparably injure the interests of plaintiffs and TWEC.
2. In particular, plaintiffs seek to enjoin a
proposed merger of defendant Time Warner Inc. ("TWI"),
directly or through any controlled entity, with Turner
<PAGE>
Broadcasting Systems, Inc. ("TBS"), in derogation of TWEC's
rights.
(a) TBS is one of the largest and most vigorous
competitors of TWEC. The conduct of defendants
simply in pursuing the merger with TBS constitutes a patent
breach of the fiduciary duties they owe to TWEC and
plaintiff USWMCI, the sole limited partner of TWEC. TWEC
was formed and exists for the purpose of operating and
expanding a host of lucrative entertainment businesses,
involving broadcasting, cable television movies, and related
operations. TBS is engaged in precisely those businesses.
Nevertheless, rather than offering TWEC the opportunity to
acquire TBS, defendants usurped this business opportunity
for themselves and have selfishly (and exclusively) pursued
it, without either offering this opportunity to TWEC or
permitted TWEC to pursue the opportunity on its own. To the
contrary, defendants appropriated the services of Joseph
J. Collins, the Chairman and Chief Executive of Time Warner
Cable, a division of TWE, for the purpose of having him
negotiate on behalf of TWI in TWI's effort to acquire TBS.
Mr. Collins is not even a TWI employee.
(b) Moreover, the proposed merger is not
permitted by the Partnership Agreement pursuant to which
TWEC was formed and related agreements among the parties;
<PAGE>
indeed, it is expressly prohibited by non-competition
covenants in those agreements. Hence, the merger would
violate plaintiffs' individual contractual rights; and if
TWI is permitted to proceed with the merger, plaintiffs will
suffer irreparable harm.
(c) Should TWI be successful in its
acquisition of TBS, the immediate and long-term interests of
TWEC plainly will be materially jeopardized: the entity,
TWI, that solely controls TWEC's general partners (and that
has an approximately 75% interest in TWEC) will be the 100%
owner of one of TWEC's largest competitors. TWI thus will
decide whether (and if so, on what terms) business
opportunities will be made available to TWEC, as opposed to
its wholly-owned but competing TBS subsidiary; the most
sensitive business and financial information of TWEC will be
in the possession of the very entity (TWI) that owns TBS,
TWEC's head-to-head competitor; and opportunities, in the
day-to-day operational sense (e.g., film and script
opportunities, business ventures, etc.) will be the subject
of TWI's divided loyalties -- in violation not only of TWI's
fiduciary duties to TWEC but the very business premises on
which TWEC was formed.
<PAGE>
THE PARTIES
3. Plaintiff USWI is a Colorado corporation with
its principal place of business in Denver, Colorado.
4. Plaintiff USWMCI is a Colorado corporation
with its principal place of business in Denver, Colorado.
USWMCI owns an approximately 25% limited partnership
interest in TWEC.
5. Defendant TWI is a Delaware corporation with
its principal place of business in New York, New York. TWI
is engaged in a broad range of media-related businesses,
including publishing, production of movies and television
programming, and cable television production and operations.
6. Defendant American Television and
Communications Corporation is a Delaware corporation.
7. Defendant Time Warner Operations Inc. is a
Delaware corporation.
8. Defendant Warner Cable Communications Inc. is
a Delaware corporation.
9. Defendant Warner Communications Inc. is a
Delaware corporation.
10. Nominal Defendant TWEC is a Delaware limited
partnership with its principal place of business in New York
and has a registered office in the State of Delaware.
<PAGE>
FACTUAL ALLEGATIONS
THE 1991 LIMITED PARTNERSHIP AGREEMENT
11. In or about 1991, TWI determined to form a
strategic global limited partnership, Time Warner
Entertainment Company, L.P., for the purpose of creating and
financing an international alliance that combined market
sophistication, industry leadership and technical innovation
to exploit film, television and other video entertainment
and related evolving businesses throughout the world. The
business and operations of the Partnership were to consist
of TWI's cable television operations; the film entertainment
division of TWI (including world-wide theatrical,
television, video, pay television network, features and
syndication operations of its Warner Brothers Inc.
subsidiary and Lorimar Telepictures Corporation); the
programming operations conducted by TWI's Home Box Office
subsidiary, including HBO, Cinemax and Time Warner Sports;
and certain other, related operations.
12. The initial partners of TWEC were certain
wholly-owned subsidiaries of two Japanese corporations,
Itochu Corporation and Toshiba Corporation, and TWI and
certain of its wholly-owned subsidiaries, including other
defendants herein.
<PAGE>
13. TWI and certain of its subsidiaries
contributed several billion dollars of assets to the
Partnership. Itochu and Toshiba contributed a total of
$1 billion in cash. Itochu and Toshiba recently converted
their interest in TWEC to TWI stock, and thus no longer are
partners in TWEC.
14. The Partnership was formed pursuant to an
Agreement Of Limited Partnership (the "Partnership
Agreement") dated as of October 29, 1991.
15. Pursuant to the Partnership Agreement,
certain wholly-owned subsidiaries of TWI -- Defendants
American Television and Communications Corporation, Time
Warner Operations Inc., Warner Cable Communications Inc. and
Warner Communications Inc. -- became the general partners of
the Partnership. Two of these wholly-owned subsidiaries,
American Television and Communications Corporation and
Warner Communications, were named the managing general
partners, and remain the managing general partners. TWI,
through these wholly-owned subsidiaries, has managed and
directed the business of the Partnership since that time.
16. As noted above, the fundamental premise and
raison d'etre of the Partnership was to operate and expand
the various entertainment businesses of TWI and its
subsidiaries. For that reason, and to protect the limited
<PAGE>
partners' economic stake in the Partnership, the Partnership
Agreement contained clear and express provisions limiting or
precluding the right of TWI -- directly or indirectly,
including through subsidiaries or affiliates -- to compete
with the Partnership or to invest material sums in competing
entities. In particular, Section 5.5 (specifically entitled
"Covenants Against Competition") provides, in relevant part,
that no party to the Agreement, or any controlled affiliate
thereof, shall "engage, directly or indirectly" (in defined
geographic areas) "in any business or businesses then being
conducted, directly or indirectly, by the Partnership"
(each, a "Competing Business"). Partnership Agreement
Section 5.5(a). Furthermore, Section 5.5 prohibits any of
the parties thereto, or their affiliates, from "becom[ing]
interested, directly or indirectly, in any Person engaged,
directly or indirectly, in a Competing Business" in
specified geographic areas (a "Competing Person"), whether
"as a partner, shareholder, principal or in any other
capacity of ownership or control." Partnership Agreement
Section 5.5(a) (emphasis added).
17. The Partnership Agreement did provide certain
limited exceptions to these broad non-competition
provisions. In particular, it permitted certain relatively
immaterial, non-controlling investment interests in
<PAGE>
securities of Competing Persons, and ownership of interests
in businesses generating de minimis revenues. Partnership
Agreement Section 5.5(b)(i), (iv).
18. The Partnership Agreement also excluded from
the non-competition provision TWI's ownership or conduct of
any Competing Business disclosed on Schedule 5.5 thereto, or
its ownership of "an interest in a Competing Person
disclosed on Schedule 5.5 or that owns or conducts any
Competing Business so disclosed." Partnership Agreement
Section 5.5(b)(ii).
19. Schedule 5.5 to the Agreement provided an
exception for "1. Any of the Assets, or Rights of TWI and
its Subsidiaries listed on Schedule 3.1-C and 3.1-D".
Schedule 3.1-C provides that the term "Rights" of TWI and
its subsidiaries shall be deemed to mean the assets of TWI
and its subsidiaries. The only Rights of TWI and its
subsidiaries in TBS at the time of this agreement consisted
of TWI's approximately 18% investment in TBS.
20. No provision in the Agreement permits TWI to
obtain 100% or any controlling interest in TBS or any other
Competing Business.
<PAGE>
THE MAY 1993 "ADMISSION AGREEMENT" AND "AMENDMENT AGREEMENT"
21. In or about the first half of 1993, USWI
expressed its willingness to become, through an affiliate, a
limited partner in TWEC. TWI and TWEC wanted USWI to become
involved as a limited partner so that TWI and TWEC could
take advantage of USWI's vast expertise and resources in the
areas of telecommunications, telephone and information
technology, as well as to benefit from a substantial
investment of funds by USWI into TWEC.
22. Accordingly, an Admission Agreement dated as
of May 16, 1993 between TWEC and USWI was negotiated and
executed; such Agreement was acknowledged and agreed to by,
inter alia, TWI, which executed it on behalf of itself and
its subsidiaries that were partners in TWEC. Pursuant to
the Admission Agreement, USWI caused a wholly-owned
subsidiary (plaintiff USWMCI) to make a $2.5 billion capital
contribution; and such subsidiary became a limited partner
in the Partnership. Pursuant to the Admission Agreement, as
well, TWI and the other general and limited partners in TWEC
(including the defendants herein) executed an Amendment
Agreement dated as of September 14, 1993, amending the
Partnership Agreement.
23. In connection with the negotiation and
execution of the Admission Agreement and the Amendment
<PAGE>
Agreement, the subject -- and requirement -- of non-
competition by TWI and its affiliates was raised, agreed to,
and reaffirmed in writing. Specifically, the Admission
Agreement included, as Annex 1, a document entitled
"COVENANTS AGAINST COMPETITION". Pursuant to Annex 1,
Section 5.5 of the Partnership Agreement was "amended and
restated in its entirety." As so amended, Section 5.5(a)
now provided, inter alia, that TWI and its controlled
affiliates "shall not (and such party shall cause its
Controlled Affiliates not to), . . . engage, directly or
indirectly (whether by operations, investment or otherwise)"
- -- anywhere in "the entire world" (Section 5.5(c)(viii)(B)) --
"in any Co-Managed Business or any Programming and Filmed
Entertainment Business (a 'Restricted Business')".
(Emphasis added.) The term "Co-Managed Business" was
defined in Section 5.5(c)(iii) as "the ownership and
operation of the physical plant, transport and switching
activities of cable television systems"; the term
"Programming and Filmed Entertainment Business" was defined
broadly to mean "any business of the type now conducted by
the Partnership's Filmed Entertainment and Programming
Divisions, as such businesses may evolve from time to time
and any logical extension of such business . . ."
Section 5.5(c)(vi) (emphasis added).
<PAGE>
24. The Admission Agreement, in Annex 1, like the
original Partnership Agreement, contained only limited
exceptions to this broad non-competition provision, such as
permitting investments in securities of companies involved
in Competing Businesses, so long as such interest was less
than 5% of any class of such securities and was not a
controlling interest, or where the sales of such companies
were de minimis. Section 5.5(b)(ii), (xii). Again, an
exception was made to the extent of TWI or its affiliates
"owning or conducting any Restricted Business or Businesses
Disclosed on Schedule 5.5 (or an interest therein) or owning
an interest in a Restricted Business disclosed on
Schedule 5.5 or an entity that owns or conducts any
Restricted Business so disclosed". Section 5.5(b)(iii).
25. Schedule 5.5 was not amended at that time.
TWI's (non-controlling) ownership interest in TBS at that
time remained at approximately 18%. The Agreement contained
no provision permitting TWI to acquire all of, or a
controlling interest in, the securities of TBS. To the
contrary, TWI represented to USWI and USWMCI that TWI
intended to sell its 18% interest in TBS or exchange such
interest for specific assets of TBS that then would be
contributed to TWEC upon terms to be agreed upon.
<PAGE>
26. Absent such explicit authorization in the
Agreements -- or waiver of the Covenants Against Competition
by USWI and USWMCI -- TWI may not acquire complete ownership
of or a controlling interest in TBS because TBS competes
directly and substantially with the Partnership in the
distribution and production of film and television
programming, cable television and related businesses,
including the Partnership's "Programming and Filmed
Entertainment Business."
THE CHALLENGED CONDUCT
27. Notwithstanding the fiduciary duties owed by
TWI and its subsidiaries to TWEC and TWEC's limited partner,
USWMCI, and the provisions of the Agreements and the
Covenants Against Competition, TWI has been actively and
aggressively pursuing a merger with TBS, pursuant to which
TWI would own 100% of TBS -- an entity directly competing
with TWEC and having billions of dollars of sales each year
in the Programming and Filmed Entertainment Business. These
businesses include Turner Broadcasting Stations, TNT, MGM's
film library, TBS Productions, Turner Pictures, Tuner Home
Entertainment, New Line Cinema and Castle Rock
Entertainment. The acquisition of these businesses does not
fall within any of the exceptions to the Covenants Against
Competition set forth in the agreements.
<PAGE>
28. USWI advised TWI that the proposed merger
with TBS would violate the terms of the Partnership
Agreement, as amended, and the Admission Agreement. Merger
talks between TBS and TWI nevertheless continued and a
merger agreement has been announced.
29. TWI has pursued the merger with TBS in its
own right and on its own behalf, despite the fact that TBS
is engaged in precisely the same kinds of businesses as TWEC
- -- and the acquisition by TWEC of TBS and its business would
provide obvious and significant benefits to TWEC. TWI has
not offered the Partnership the opportunity to acquire TBS,
and TWI has not directed, much less permitted, the general
partners of TWEC to pursue such opportunities on behalf of
the TWEC. In short, rather than giving TWEC the opportunity
to make a dramatic expansion of its business, operations and
revenues -- both at present and as springboard to the future
- -- TWI has usurped such opportunity for itself and has
assured that TWEC does not seek such opportunity. Indeed,
the Chairman and Chief Executive Officer of Time Warner
Cable, a division of TWE, Joseph J. Collins, at TWI's
direction, has been commandeered by TWI to conduct the
negotiations for the merger on behalf of TWI itself,
presumably with the benefit of TWEC assets such as TWEC's
<PAGE>
information and knowledge concerning the businesses in which
TWEC and TBS compete.
30. Notwithstanding that plaintiffs have advised
TWI that the merger would violate the Partnership and
Admission Agreements, TWI has said only that "we understand
your concern regarding the future operation of TBS business
that may compete with TWE operations or that do business
with TWE," but that TWI will do no more than "discuss such
matters . . . once an agreement regarding TBS is reached."
That point in time, of course, is too late. On
September 22, 1995, TWI and TBS announced their agreement to
merge. In such announcement, and highlighting the conflicts
presented by the merger, TWI and TBS stated that Ted Turner,
TBS' chairman and president, "will become vice chairman of
[TWI] and head of the Time Warner video division which will
consist of all the businesses of TBS plus have supervisory
responsibilities for the businesses of Home Box Office," a
major TWEC business segment.
IRREPARABLE INJURY
31. In light of the foregoing facts,
plaintiffs -- in their own right and in the right of TWEC --
face the immediate threat of extraordinary injury if the
TWI-TBS merger is not enjoined. The merger immediately
threatens the rights and protections to which plaintiffs are
<PAGE>
entitled, as limited partners, in light of the fiduciary
obligations that TWI and its affiliates, as general partners
(and controlling person of the general partners) voluntarily
undertook and assumed by entering into the Partnership
Agreement, as amended, and the Admission Agreement. The
merger also violates the express terms of the TWEC
Partnership and related Agreements to which plaintiffs are
parties or beneficiaries; and the provisions that thereby
would be violated go to the heart of the Agreements and
plaintiffs' multi-billion dollar investment in TWEC.
32. Indeed, the Partnership faces immediate and
irreparable injury, not only from the potential entry by TWI
into a merger agreement with TBS, but from the very fact
that TWI is pursuing such a merger at all; by usurping such
business opportunity for itself and not permitting the
general partners of the Partnership to pursue the merger on
behalf of TWEC, the Partnership is deprived of the
opportunity to obtain such a significant business interest.
Every day that TWI pursues TBS -- and every day that TWEC
does not -- injures TWEC and the rights and interests
thereof and of TWEC's limited partner, USWMCI. Every day
that goes past makes the potential for TWEC ever obtaining
such opportunity more remote.
<PAGE>
33. The proposed merger would create a situation
in which TWI would own 75% of TWEC and 100% of a major
competitor of TWEC. TWEC's filmed entertainment and
programming businesses, which account for nearly 75% of
TWEC's revenues, compete with a significant portion of TBS's
businesses. TWEC's filmed entertainment businesses, which
include Warner Bros. film production and distribution
divisions, compete directly with TBS's New Line Cinema and
Castle Rock Entertainment units and its MGM film library.
TWEC's programming businesses, HBO and Cinemax, compete with
TBS, CNN, TNT and WTBS cable channels. In managing TWEC and
TBS, TWI will face conflicts with respect to allocations of
resources and business opportunities between TWEC and TBS,
including opportunities relating to film and programming
production and distribution and other business
opportunities. For virtually any business opportunity that
may come along, TWI will choose whether TBS, its wholly-
owned subsidiary, or TWEC, its 75% owned affiliate, should
produce a film or pursue a specific business opportunity.
TWI also will choose whether to distribute films and other
programming of TBS and Warner Bros. on TWEC's or TBS's cable
channels.
<PAGE>
34. In short, TWI will have the constant ability
to benefit its wholly-owned TBS subsidiary at the expense of
TWEC and USWMCI, the limited partner of TWEC.
35. Indeed, TWE already has demonstrated its
willingness to misuse its control over TWEC for its own
corporate interests and without regard to the risks or harm
to TWEC: in connection with and to conduct TWI's intensive
negotiations with Tele-Communications, Inc. -- another large
shareholder of TBS, whose consent is a pre-condition to any
TBS merger with TWI -- TWI has called upon Joseph J.
Collins, the Chairman and Chief Executive Officer of Time
Warner Cable, a division of TWE. Mr. Collins is not a TWI
employee. Yet he has been pulled away from his work on
behalf of TWEC to work for TWI, and the inducements to be
offered by him (on behalf of TWI) to Tele-Communications,
Inc. pose substantial risks to TWEC and its business, and
jeopardize its confidential business information and
strategies. Mr. Collins conspicuously is not pursuing TBS
or Tele-Communications, Inc. on behalf of TWEC; rather, at
TWI's behest, he is letting that opportunity slip away from
the Partnership.
36. Paragraph 17.18 of the Partnership Agreement
specifically provides for specific performance:
17.18 Specific Performance. Each of the
parties recognizes that its rights and
<PAGE>
obligations hereunder are unique and that
damages at law will be an inadequate remedy
for breach or threatened breach of this
Agreement, and agrees that the parties'
respective rights and obligations hereunder
shall be enforceable by specific performance,
injunction or other equitable remedy.
37. In short, Defendants' conduct, and disregard
of their fiduciary duties and contractual obligations, is
jeopardizing the Partnership and plaintiffs' contractual
rights and partnership interest in TWEC.
COUNT I
(BREACH OF FIDUCIARY DUTY,
ASSERTED INDIVIDUALLY AND DERIVATIVELY
ON BEHALF OF TWEC)
38. Plaintiffs repeat and reallege the
allegations set forth in paragraphs 1 through 39 above, as
if fully set forth herein.
39. At all times relevant hereto, the defendants
other than TWI have been the general partners of TWEC; and
TWI has been the controlling person of both TWEC and the
general partners thereof.
40. In such roles and by their conduct,
Defendants stand in a fiduciary relationship with the
Partnership and the limited partners thereof. The limited
partners have reposed their trust and confidence in
Defendants, as the managing general partners and the
controlling shareholder thereof, for the proper management
<PAGE>
of Partnership affairs. Defendants therefore owe the
Partnership and the plaintiffs the highest degree of
loyalty, fidelity, care, candor and fair dealing in their
conduct with respect to or affecting the Partnership.
41. In willful disregard and violation of such
fiduciary obligations, and in furtherance of their own self-
interest, TWI and the other defendants are seeking to effect
the merger of TBS with TWI; and TWI has usurped (with the
acquiescence of the general partners) a material business
opportunity that TWI was obligated to provide to the
Partnership and not to usurp for itself. Moreover, the
merger with TBS would violate the Partnership Agreement, and
the rights and protections and benefits thereof to the
Partnership and its limited partners.
42. Plaintiffs have not made a demand upon the
general partners of TWEC to bring this action because such a
demand would be futile, and therefore is excused. The
general partners are wholly owned subsidiaries of and
controlled by defendant TWI, the entity that is actively
formulating, participating in and seeking to cause -- and
will be the sole beneficiary, to the detriment of TWEC, of
- -- the wrongful, self-interested and self-enriching course
of dealing challenged in this action. The general partners
are aware of the conduct here in issue and, at the direction
<PAGE>
of TWI have done nothing to prevent or address any of the
wrongful acts or to protect or advance TWEC's interests.
These general partners have participated and/or acquiesced
in the conduct challenged in this litigation. These general
partners each are named as defendants in this action, and
are personally liable for the wrongdoing alleged in this
action and cannot be relied upon to reach an independent
business judgment concerning whether to sue themselves and
their controlling shareholder, TWI, and whether such
litigation should be vigorously pursued. Under these
circumstances, demand upon the general partners to bring
this action would be futile and is excused as a matter of
law.
43. Plaintiffs will fairly and adequately
represent the interests of TWEC in enforcing and prosecuting
the rights of TWEC. Plaintiffs have retained competent
counsel, experienced and successful in corporate, securities
and derivative litigation, to prosecute this action.
44. Plaintiffs have no adequate remedy at law.
<PAGE>
COUNT II
(BREACH OF CONTRACT, ASSERTED
BY PLAINTIFFS INDIVIDUALLY)
45. Plaintiffs repeat and reallege the
allegations in paragraphs 1 through 39 as if fully set forth
herein.
46. TWI is threatening to breach its express
contractual obligations by acquiring 100% of the outstanding
stock of TBS.
47. Plaintiffs have complied with all of their
obligations under the relevant agreements.
48. Plaintiffs have no adequate remedy at law,
should the merger be affected and the contract be breached.
PRAYER FOR RELIEF
WHEREFORE, the plaintiffs demand judgment against
defendants as follows:
(a) Declaring that Defendants have breached their
fiduciary duties owing to plaintiffs and the Partnership,
including by usurping a Partnership business opportunity;
(b) Declaring that Defendant TWI, by entering
into the merger agreement with TBS, has violated the
Partnership Agreement, as amended, and the Admission
Agreement;
<PAGE>
(c) Preliminarily and permanently enjoining
defendants from consummating the announced merger of TWI
with TBS;
(d) Awarding plaintiffs their reasonable costs
and expenses of this action, including the fees of attorneys
and other professionals; and
(e) Granting such other and further relief as
this Court deems just and proper.
MORRIS, NICHOLS, ARSHT & TUNNELL
/s/ A. Gilchrist Sparks III
A. Gilchrist Sparks, III
Alan J. Stone
S. Mark Hurd
1201 North Market Street
P.O. Box 1347
Wilmington, Delaware 19899
Attorneys for Plaintiffs
September 22, 1995
