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 6, 1996
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.
Amendments to TBS Transaction.
As previously reported, Time Warner Inc. ("Time Warner"),
TW Inc., a Delaware corporation and currently a wholly owned
subsidiary of Time Warner ("New Time Warner"), Time Warner
Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of New Time Warner ("Delaware Sub"), TW Acquisition
Corp., a Georgia corporation and a wholly owned subsidiary of
New Time Warner ("Georgia Sub"), and Turner Broadcasting
System, Inc. ("TBS") have entered into an Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement") dated as
of September 22, 1995, pursuant to which (a) Delaware Sub will
be merged (the "Time Warner Merger") into Time Warner, (b)
each outstanding share of Common Stock, par value $1.00 per
share, of Time Warner, other than shares held directly or
indirectly by Time Warner, will be converted into one share of
Common Stock, par value $.01 per share, of New Time Warner
("New Time Warner Common Stock"), (c) each outstanding share
of each series of preferred stock of Time Warner, other than
shares held directly or indirectly by Time Warner and shares
with respect to which appraisal rights are properly exercised,
will be converted into one share of a substantially identical
series of preferred stock of New Time Warner, (d) Georgia Sub
will be merged (the "TBS Merger", and together with the Time
Warner Merger, the "Holding Company Transaction") into TBS,
(e) each outstanding share of Class A Common Stock, par value
$.0625 per share, of TBS ("TBS Class A Common Stock") and
Class B Common Stock, par value $.0625 per share, of TBS ("TBS
Class B Common Stock"), other than shares held directly or
indirectly by Time Warner or New Time Warner or in the
treasury of TBS and shares with respect to which dissenters'
rights are properly exercised, will be converted into 0.75 of
a share of New Time Warner Common Stock, (f) each outstanding
share of Class C Preferred Stock, par value $.125 per share,
of TBS ("TBS Class C Preferred Stock"), other than shares held
directly or indirectly by Time Warner or New Time Warner or in
the treasury of TBS and shares with respect to which
dissenters' rights are properly exercised, will be converted
into 4.80 shares of New Time Warner Common Stock, (g) each of
Time Warner and TBS will become a wholly owned subsidiary of
New Time Warner and (h) New Time Warner will be renamed "Time
Warner Inc." A copy of the Merger Agreement is attached as
Exhibit 2(a) to Time Warner's Current Report on Form 8-K dated
December 1, 1995, and incorporated herein by reference.
The Holding Company Transaction was subject to extensive
scrutiny by the staff of the Federal Trade Commission (the
"FTC") and, in order to eliminate concerns raised by the staff
of the FTC regarding possible competitive effects of the
Holding Company Transaction, Time Warner, TBS, Tele-
Communications, Inc. ("TCI"), and Liberty Media Corporation
("LMC"), a wholly owned subsidiary of TCI, have executed the
Agreement Containing Consent Order (together with the Interim
Agreement contemplated thereby, the "FTC Consent Decree")
dated August 14, 1996, and have submitted the FTC Consent
Decree to the commissioners of the FTC. The FTC commissioners
have not yet initially accepted the FTC Consent Decree, which
requires that certain changes be made to the terms of the
Holding Company Transaction and related transactions. The
obligations of Time Warner, TBS and TCI to consummate the
Holding Company Transaction are conditioned upon such initial
acceptance. In response to the FTC Consent Decree, Time
Warner, New Time Warner, Delaware Sub, Georgia Sub and TBS
have entered into Amendment No. 1, dated as of August 8, 1996,
to the Merger Agreement. A copy of such Amendment No. 1 is
attached as Exhibit 2(a) hereto and incorporated herein by
reference. The Merger Agreement, as amended by such Amendment
No. 1, is referred to herein as the "Amended Merger
Agreement". A copy of the FTC Consent Decree is attached as
Exhibit 2(b) hereto and incorporated herein by reference.
<PAGE>
Time Warner has entered into 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) to Time Warner's Current Report on Form 8-K dated
September 22, 1995, and incorporated herein by reference. In
August 1996, Time Warner and New Time Warner entered into a
Second Amended and Restated LMC Agreement dated as of
September 22, 1995, with LMC and certain direct and indirect
wholly owned subsidiaries of LMC (the "Second Amended and
Restated LMC Agreement"), a copy of which is attached as
Exhibit 10(a) hereto and incorporated herein by reference.
Pursuant to the Shareholders' Agreement, the Turner
Shareholders have agreed to vote all their TBS shares in favor
of the approval of the TBS Merger and each of the other
transactions contemplated by the Amended Merger Agreement and
in favor of the approval and adoption of the Amended Merger
Agreement. In addition, pursuant to the Amended Merger
Agreement and the Shareholders' Agreement, New Time Warner and
the Turner Shareholders have agreed that, upon consummation of
the Holding Company Transaction, New 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 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 New Time Warner, (b) certain of
the Turner Shareholders will be subject to certain
restrictions on transfer of New Time Warner Common Stock and
certain restrictions on other activities relating to New Time
Warner and (c) New Time Warner will grant to the Turner
Shareholders rights to require the registration of sales of
shares of New Time Warner Common Stock received in the TBS
Merger under the Securities Act of 1933, as amended (the
"Securities Act").
Pursuant to the Second Amended and Restated 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 TBS Merger and each of the other
transactions contemplated by the Amended Merger Agreement and
in favor of the approval and adoption of the Amended Merger
Agreement. Time Warner has agreed with LMC that Time Warner
will terminate the Amended Merger Agreement and abandon the
Holding Company Transaction under certain circumstances,
including (a) the imposition by any regulatory authority of
certain restrictions or burdens on LMC and its affiliates as a
condition to approval of the Holding Company Transaction and
related transactions (other than the FTC Consent Decree) and
(b) if New Time Warner adopts a stockholder rights agreement
and such agreement differs from the Time Warner stockholder
rights agreement in any material respect except as set forth
in Exhibit F to the Second Amended and Restated LMC Agreement,
which is incorporated herein by reference.
In addition, the Second Amended and Restated LMC
Agreement contemplates that substantially all the shares of
New Time Warner Common Stock issued in the TBS Merger to LMC
and its affiliates will be exchanged for shares of a series of
common stock of New Time Warner ("LMCN-V Common Stock")
economically equivalent to the New Time Warner Common Stock at
a ratio of one share of New Time Warner Common Stock for each
share of LMCN-V Common Stock. The terms of the LMCN-V Common
Stock are set forth in the form of certificate of designation
for such security, which is attached as Exhibit A to the
Second Amended and Restated LMC Agreement and incorporated
herein by reference. The LMCN-V Common Stock is the economic
equivalent of the New Time Warner Common Stock, with identical
rights, except it carries only 1/100th of a vote per share
with respect to the election of directors, is not entitled to
vote with respect to any other matter (with limited
exceptions) and may not be redeemed by New Time Warner
pursuant to Section 5 of Article IV of the proposed Restated
Certificate of Incorporation of New Time Warner (which will be
substantially identical to Section 5 of Article IV of the
<PAGE>
Restated Certificate of Incorporation of Time Warner, as
amended to date). Subject to the FTC Consent Decree, the
LMCN-V Common Stock is convertible at the option of the holder
thereof into New Time Warner Common Stock on a one-for-one
basis and is mandatorily convertible upon transfer.
Pursuant to the Second Amended and Restated LMC
Agreement, if the Holding Company Transaction is consummated,
New 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 New Time Warner,
the Turner Shareholders, LMC and certain subsidiaries of
LMC, pursuant to which Turner and the Turner-related
stockholders, on the one hand, and LMC and the
LMC-related stockholders, on the other hand, grant first
to the other group and then to New Time Warner a right of
first refusal with respect to dispositions of voting
securities of New Time Warner (the form of the
Stockholders' Agreement is attached as Exhibit B to the
Second Amended and Restated LMC Agreement and
incorporated herein by reference);
(b) an SSSI Agreement, pursuant to which (i) New
Time Warner will issue to Southern Satellite Systems,
Inc. ("SSSI"), a wholly owned subsidiary of LMC,
4,166,667 shares of LMCN- V Common Stock and SSSI will
grant to New Time Warner an option (the "SSSI Option") to
cause to become effective a distribution contract (the
"Distribution Contract") pursuant to which SSSI will
provide uplinking and distribution services for WTBS in
the event WTBS acquires national broadcast rights to all
of its programming and becomes a copyright-paid cable
television programming service, enabling WTBS to charge a
subscription fee to cable operators and to sell local
advertising time without any obligation on the part of
the cable operators to make cable compulsory license
payments under the Copyright Act (the "WTBS Conversion"),
and (ii) New Time Warner will issue to LMC 833,333 shares
of LMCN-V Common Stock and will pay to LMC an additional
approximately $67 million (payable, at New Time Warner's
option, in cash or additional shares of LMCN-V Common
Stock) and LMC will agree not to compete with the
business of SSSI (the form of the SSSI Agreement is
attached as Exhibit D to the Second Amended and Restated
LMC Agreement and incorporated herein by reference);
(c) a Program Agreement between TCI and TBS relating
to the mandatory carriage after the consummation of the
Mergers by TCI-affiliated cable systems of WTBS (after
the WTBS Conversion) and Headline News, rebates available
to TCI-affiliated cable systems for carriage of TBS
programming services (conditional upon TCI remaining one
of the two largest domestic distributors of TBS
programming services), incentive payments in 1999 and
2003 for TCI to remain one of the two largest domestic
distributors of TBS programming services, and other
related matters;
(d) an LMC Registration Rights Agreement, pursuant
to which New Time Warner will grant to LMC rights to
require the registration under the Securities Act of
sales of New Time Warner Common Stock received in the TBS
Merger or pursuant to the SSSI Agreement, or upon
conversion of LMCN-V Common Stock so received (the form
of the LMC Registration Rights Agreement is attached as
Exhibit E to the Second Amended and Restated LMC
Agreement and incorporated herein by reference);
<PAGE>
(e) a SportSouth Stock Purchase Agreement, pursuant
to which TBS has agreed to sell its interest in the
SportSouth Network, a regional sports cable network, to
LMC for an amount currently estimated at approximately
$65 million;
(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 of its affiliates in the Sunshine Network, a
Florida-based sports cable network, for $14 million; and
(g) Pay-Per-View Output Agreements between certain
TBS subsidiaries, on the one hand, and certain affiliates
of TCI, on the other hand, providing for the licensing of
all motion pictures theatrically released during the term
of the agreement by the TBS motion picture studios for
exhibition, on a non-exclusive basis, on pay-per-view
services owned by such TCI affiliates.
Pursuant to the Second Amended and Restated LMC
Agreement, New 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) and certain permitted
transferees of the LMCN-V Common Stock issued pursuant to the
Second Amended and Restated LMC Agreement is required as a
result of certain actions taken by New Time Warner (including
certain actions amending any New Time Warner Stockholder
Rights Agreement) to dispose of shares of New Time Warner or
suffer certain other adverse consequences by reason of
continued ownership of shares of New Time Warner, New Time
Warner will indemnify such person for certain income tax
liabilities incurred in the disposition of shares of New Time
Warner.
In connection with the execution of Amendment No. 1 to
the Merger Agreement and the Second Amended and Restated LMC
Agreement, Time Warner, TBS, TCI and LMC agreed to eliminate
the following agreements:
(a) the Voting Trust, under which New Time Warner
Common Stock held by LMC would have been placed in a
voting trust and would have been voted by Gerald M.
Levin, Chairman and Chief Executive Officer of Time
Warner;
(b) Time Warner's option to acquire the interest of
LMC in TBS prior to the consummation of the Holding
Company Transaction;
(c) the Option Agreement, pursuant to which New Time
Warner would have been granted an option to purchase
SSSI; and
(d) the Program Services Agreement and the Carriage
Agreement, relating to the mandatory carriage by
TCI-affiliated cable systems of TBS programming services.
The Holding Company Transaction remains subject to the
approval of the stockholders of Time Warner, the approval of
the shareholders of TBS, initial acceptance of the FTC Consent
Decree and all necessary approvals of the Federal
Communications Commission. Time Warner currently expects that
the Holding Company Transaction will be consummated early in
the fourth quarter of 1996.
<PAGE>
FTC Consent Decree.
The material provisions of the FTC Consent Decree are
described below. All these provisions will terminate on the
tenth anniversary of final acceptance thereof by the FTC and
apply only in the United States.
TCI/LMC Equity Interest in New Time Warner. TCI and its
affiliates will not be permitted to hold voting securities of New
Time Warner (other than securities, such as LMCN-V Common Stock,
that have limited voting rights). In addition, TCI and its
affiliates will not be permitted to hold more than the lesser of
(a) 9.2% of the outstanding New Time Warner Common Stock
(calculated on a fully diluted basis) and (b) 12.4% of the
outstanding common stock of New Time Warner (calculated on an
actual oustanding basis), without the prior approval of the FTC.
TCI will be required under the FTC Consent Decree to use its
best efforts to obtain a ruling (the "Letter Ruling") from the
Internal Revenue Service to the effect that a distribution by TCI
of all the stock of SSSI, which at the time of such distribution
will hold, directly and indirectly, substantially all of TCI's
interest in New Time Warner arising out of consummation of the
Mergers, to holders of the Liberty Media Group Common Stock
issued by TCI would be a non-taxable transaction under Section
355 of the Internal Revenue Code. If the Letter Ruling is
obtained, TCI will implement such distribution within 30 days
after making regulatory filings. If such distribution takes
place, Mr. Robert Magness, Dr. John C. Malone and Kearns-Tribune
Corporation (together, the "TCI Control Shareholders") will
exchange all of the shares of SSSI they receive in such
distribution for a convertible preferred security of SSSI that
will have limited voting rights in SSSI. TCI's officers,
directors and employees (including the TCI Control Shareholders)
will be prohibited from communicating with the management of
SSSI, except on those limited matters on which the TCI Control
Shareholders are entitled to vote. Following such distribution,
SSSI will be prohibited from holding more than 14.99% of the
outstanding New Time Warner Common Stock (calculated on a fully
diluted basis), and from holding New Time Warner securities with
voting rights (other than securities, such as LMCN-V Common
Stock, that have limited voting rights). The restrictions
described in the immediately preceding sentence will terminate if
the TCI Control Shareholders hold no more than 0.1% of the
ownership interest and the voting power of SSSI or if the TCI
Control Shareholders hold no more than 0.1% of the ownership
interest and the voting power of both of TCI and LMC. Following
such distribution, TCI will not be permitted to purchase more
than the lesser of (a) an additional 1% of the New Time Warner
Common Stock (calculated on a fully diluted basis) and (b) 1.35%
of the outstanding common stock of New Time Warner (calculated on
an actual outstanding basis), without the prior approval of the
FTC.
Program Carriage Agreements. Prior to six months after
the consummation of the Holding Company Transaction, New Time
Warner and TCI will not be permitted to enter into any new
agreement providing for the mandatory analog carriage by TCI
cable systems on their analog tiers of any video programming
service offered by TBS (other than WTBS (after the WTBS
Conversion) and Headline News), and any such mandatory
carriage agreement entered into thereafter will be limited in
effective duration to five years.
Anti-bundling Provision. New Time Warner will not be
permitted to condition the availability or terms of providing
its HBO video programming service to any multi-channel video
programming distributor ("MVPD") on whether that MVPD or any
other MVPD agrees to carry any national video programming
service offered by TBS. New Time Warner will not be permitted
to condition the availability or terms of providing CNN, TNT
or WTBS to any MVPD on whether that MVPD or any other MVPD
agrees to carry any national video programming service offered
by TWE.
<PAGE>
Price Discrimination Provision. New Time Warner will be
prohibited from discriminating, in certain respects, against
MVPDs having geographical overlap with New Time Warner's cable
systems in the terms upon which TBS programming services are
made available to such MVPDs in the relevant geographical
overlap area.
Programming Foreclosure Provision. New Time Warner will
be prohibited generally from requiring a financial interest in
any national video programming service as a condition for
carriage or otherwise improperly discriminating against
unaffiliated national video programming vendors in the
provision of access to New Time Warner's cable systems.
New Time Warner will be required to collect, on a
quarterly basis, certain information relating to the terms
under which New Time Warner cable systems carry national video
programming services, including information relating to
pricing, commitments, if any, to a roll-out schedule and
penetration rates. This information is to be provided to each
member of the Management Committee of TWE on a quarterly
basis.
By February 1, 1997, New Time Warner will be required to
enter into a programming service agreement with at least one
nationally significant advertising-supported news and
informational national video programming service not
affiliated with New Time Warner. Under the terms of the FTC
Consent Decree, New Time Warner will be required to carry such
national video programming service in accordance with a
roll-out schedule incorporated in the FTC Consent Decree.
To the extent applicable to New Time Warner, the
foregoing provisions are generally consistent with existing
legal requirements or Time Warner's existing business
practices and will not impose undue financial burdens on New
Time Warner and, accordingly, Time Warner does not believe
that these provisions will have an adverse effect on the
businesses of Time Warner and TBS following consummation of
the Holding Company Transaction.
If the FTC does not initially accept the FTC Consent
Decree, the FTC may seek to enjoin the consummation of the
Transaction. If the FTC does initially accept the FTC Consent
Decree, the FTC will publish the FTC Consent Decree for public
comment for a period of 60 days. If the FTC does not finally
accept the FTC Consent Decree after the period for public
comment, the FTC could take such action under the antitrust
laws as it deems necessary or desirable in the public
interest, including seeking the divestiture of substantial
assets of TBS or its subsidiaries or of Time Warner or its
subsidiaries. If the FTC does finally accept the FTC Consent
Decree, the FTC Consent Decree will terminate on the tenth
anniversary of such final acceptance.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
(i) Exhibit 2(a): Amendment No. 1 dated as of August 8,
1996, to the Amended and Restated Agreement and Plan of
Merger dated as of September 22, 1995, among Time Warner
Inc., TW Inc., Time Warner Acquisition Corp., TW
Acquisition Corp., and Turner Broadcasting System, Inc.
<PAGE>
(ii) Exhibit 2(b): Agreement Containing Consent Order
dated August 14, 1996, among Time Warner Inc., Turner
Broadcasting System, Inc., Tele-Communications, Inc.,
Liberty Media Corporation and the Federal Trade
Commission.
(iii) Exhibit 10(a): Second Amended and Restated LMC
Agreement dated as of September 22, 1995, among Time
Warner Inc., TW Inc., Liberty Media Corporation, TCI
Turner Preferred, Inc., Communication Capital Corp. and
United Cable Turner Investment, Inc.
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
September 6, 1996.
TIME WARNER INC.,
By:
------------------------
Name: Peter R. Haje
Title: Executive Vice President
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit No. Description of Exhibit Page Number
2(a) Amendment No. 1 dated as of
August 8, 1996, to the Amended
and Restated Agreement and
Plan of Merger dated as of
September 22, 1995, among Time
Warner Inc., TW Inc., Time
Warner Acquisition Corp., TW
Acquisition Corp. and Turner
Broadcasting System, Inc.
2(b) Agreement Containing Consent
Order dated August 14, 1996,
among Time Warner Inc., Turner
Broadcasting System, Inc.,
Tele-Communications, Inc.,
Liberty Media Corporation and
the Federal Trade Commission.
10(a) Second Amended and Restated
LMC Agreement dated as of
September 22, 1995, among Time
Warner Inc., TW Inc., Liberty
Media Corporation, TCI Turner
Preferred, Inc., Communication
Capital Corp. and United Cable
Turner Investment, Inc.
AMENDMENT No. 1 (this "Amendment")
dated as of August 8, 1996, to the AMENDED AND
RESTATED AGREEMENT AND PLAN OF MERGER (the
"Agreement") dated as of September 22, 1995,
among TIME WARNER INC., a Delaware corporation
("Parent"), TW INC., a Delaware corporation
("Holdco") and a direct wholly owned subsidiary
of Parent, TIME WARNER ACQUISITION CORP., a
Delaware corporation ("Delaware Sub") and a
direct wholly owned subsidiary of Holdco, TW
ACQUISITION CORP., a Georgia corporation
("Georgia Sub") and a direct wholly owned
subsidiary of Holdco, and TURNER BROADCASTING
SYSTEM, INC., a Georgia corporation (the
"Company").
WHEREAS Parent, Holdco, Delaware Sub, Georgia Sub and the
Company have agreed to amend the Agreement; and
WHEREAS the respective Boards of Directors of Parent, Holdco,
Delaware Sub, Georgia Sub and the Company have approved and adopted this
Amendment.
NOW, THEREFORE, the parties agree as follows:
SECTION 1. Amendment of Agreement. (a) Section 2.01 of the
Agreement is hereby amended and restated in its entirety to read as
follows:
"SECTION 2.01. Effect on Parent Capital Stock. As of the
Effective Time of the Mergers, by virtue of the TW Merger and without
any action on the part of the holder of any shares of Parent Capital
Stock (as defined in Section 2.01(a)) or any shares of capital stock of
Delaware Sub:
(a) Capital Stock of Delaware Sub. Each issued and outstanding
share of Common Stock, par value $1.00 per share, of Delaware Sub shall
be converted into (i) one one-millionth (1/1,000,000th) of a fully paid
and nonassessable share of Common Stock, par value $1.00 per share, of
the TW Surviving Corporation for each share of Common Stock, par value
$1.00 per share, of Parent ("Parent Common Stock") issued and
outstanding immediately prior to the Effective Time of the Mergers, (ii)
one one-millionth
<PAGE>
(1/1,000,000th) of a fully paid and nonassessable share of Series C
Convertible Preferred Stock, par value $1.00 per share, of the TW
Surviving Corporation for each share of Series C Convertible Preferred
Stock, par value $1.00 per share, of Parent ("Parent Series C Preferred
Stock"), if any, issued and outstanding immediately prior to the
Effective Time of the Mergers, (iii) one one-millionth (1/1,000,000th)
of a fully paid and nonassessable share of Series D Convertible
Preferred Stock, par value $1.00 per share, of the TW Surviving
Corporation for each share of Series D Convertible Preferred Stock, par
value $1.00 per share, of Parent ("Parent Series D Preferred Stock"), if
any, issued and outstanding immediately prior to the Effective Time of
the Mergers, (iv) one one-millionth (1/1,000,000th) of a fully paid and
nonassessable share of Series E Convertible Preferred Stock, par value
$1.00 per share, of the TW Surviving Corporation for each share of
Series E Convertible Preferred Stock, par value $1.00 per share, of
Parent ("Parent Series E Preferred Stock"), if any, issued and
outstanding immediately prior to the Effective Time of the Mergers, (v)
one one-millionth (1/1,000,000th) of a fully paid and nonassessable
share of Series F Convertible Preferred Stock, par value $1.00 per
share, of the TW Surviving Corporation for each share of Series F
Convertible Preferred Stock, par value $1.00 per share, of Parent
("Parent Series F Preferred Stock"), if any, issued and outstanding
immediately prior to the Effective Time of the Mergers, (vi) one
one-millionth (1/1,000,000th) of a fully paid and nonassessable share of
Series G Convertible Preferred Stock, par value $1.00 per share, of the
TW Surviving Corporation for each share of Series G Convertible
Preferred Stock, par value $1.00 per share, of Parent ("Parent Series G
Preferred Stock"), if any, issued and outstanding immediately prior to
the Effective Time of the Mergers, (vii) one one-millionth
(1/1,000,000th) of a fully paid and nonassessable share of Series H
Convertible Preferred Stock, par value $1.00 per share, of the TW
Surviving Corporation for each share of Series H Convertible Preferred
Stock, par value $1.00 per share, of Parent ("Parent Series H Preferred
Stock"), if any, issued and outstanding immediately prior to the
Effective Time of the Mergers, (viii) one one-millionth (1/1,000,000th)
of a fully paid and nonassessable share of Series I Convertible
Preferred Stock, par value $1.00 per share, of the TW Surviving
Corporation for each share of Series I Convertible Preferred Stock, par
value $1.00 per share, of Parent ("Parent Series I Preferred Stock"), if
any, issued and outstanding immediately prior to the
<PAGE>
Effective Time of the Mergers, (ix) one one-millionth (1/1,000,000th) of
a fully paid and nonassessable share of Series J Convertible Preferred
Stock, par value $1.00 per share, of the TW Surviving Corporation for
each share of Series J Convertible Preferred Stock, par value $1.00 per
share, of Parent ("Parent Series J Preferred Stock"), if any, issued and
outstanding immediately prior to the Effective Time of the Mergers, (x)
one one-millionth (1/1,000,000th) of a fully paid and nonassessable
share of 10 1/4% Series K Exchangeable Preferred Stock, par value $1.00
per share, of the TW Surviving Corporation for each share of 10 1/4%
Series K Exchangeable Preferred Stock, par value $1.00 per share, of
Parent ("Parent Series K Preferred Stock"), if any, issued and
outstanding immediately prior to the Effective Time of the Mergers, (xi)
one one-millionth (1/1,000,000th) of a fully paid and nonassessable
share of 10 1/4% Series L Exchangeable Preferred Stock, par value $1.00
per share, of the TW Surviving Corporation for each share of 10 1/4%
Series L Exchangeable Preferred Stock, par value $1.00 per share, of
Parent ("Parent Series L Preferred Stock"), if any, issued and
outstanding immediately prior to the Effective Time of the Mergers and
(xii) one one-millionth (1/1,000,000th) of a fully paid and
nonassessable share of 10 1/4% Series M Exchangeable Preferred Stock,
par value $1.00 per share, of the TW Surviving Corporation for each
share of 10 1/4% Series M Exchangeable Preferred Stock, par value $1.00
per share, of Parent ("Parent Series M Preferred Stock" and, together
with the Parent Common Stock, the Parent Series C Preferred Stock, the
Parent Series D Preferred Stock, the Parent Series E Preferred Stock,
the Parent Series F Preferred Stock, the Parent Series G Preferred
Stock, the Parent Series H Preferred Stock, the Parent Series I
Preferred Stock, the Parent Series J Preferred Stock, the Parent Series
K Preferred Stock and the Parent Series L Preferred Stock, the "Parent
Capital Stock"), if any, issued and outstanding immediately prior to the
Effective Time of the Mergers. For the purposes of this Section 2.01(a),
shares of Parent Capital Stock, other than Parent Series C Preferred
Stock, held by Parent Subsidiaries (as defined in Section 3.02(a)) shall
be deemed to be not outstanding.
(b) Cancellation of Treasury Stock. Each share of Parent
Capital Stock that is owned by Parent shall automatically be canceled
and retired and shall cease to exist, and no shares of Common Stock, par
value $.01 per share, of Holdco (the "Holdco Common Stock") or other
consideration shall be delivered in exchange therefor.
<PAGE>
(c) Conversion of Parent Capital Stock. Subject to Sections
2.01(d) and 2.03(e), each issued share of Parent Capital Stock (other
than shares to be canceled in accordance with Section 2.01(b) and other
than shares subject to Section 2.01(f)) shall be converted into fully
paid and nonassessable shares of the capital stock of Holdco ("Holdco
Capital Stock") in accordance with the following table (it being
acknowledged that as of August 8, 1996 (the date of the last amendment
of this Section 2.01), (x) no shares of Parent Series J Preferred Stock,
Parent Series L Preferred Stock and Parent Series M Preferred Stock are
outstanding and (y) it is anticipated that no shares of Parent Series C
Preferred Stock, Parent Series L Preferred Stock and either Parent
Series K Preferred Stock or Parent Series M Preferred Stock will be
outstanding immediately prior to the Effective Time of the Mergers):
Each Share of the Number and Class or Series
Specified Class or Series of Shares of Holdco Capital
of Parent Capital Stock Stock Into Which Converted
Parent Common Stock One Share of Holdco Common
Stock
Parent Series C Preferred 2.08264 shares of Holdco
Stock Common Stock
Parent Series D Preferred One share of Series D
Stock Convertible Preferred Stock,
par value $.10 per share, of
Holdco ("Holdco Series D
Preferred Stock")
Parent Series E Preferred One share of Series E
Stock Convertible Preferred Stock,
par value $.10 per share, of
Holdco ("Holdco Series E
Preferred Stock")
Parent Series F Preferred One share of Series F
Stock Convertible Preferred Stock,
par value $.10 per share, of
Holdco ("Holdco Series F
Preferred Stock")
Parent Series G Preferred One share of Series G
Stock Convertible Preferred Stock,
par value $.10 per share, of
Holdco ("Holdco Series G
Preferred Stock")
<PAGE>
Parent Series H Preferred One share of Series H
Stock Convertible Preferred Stock,
par value $.10 per share, of
Holdco ("Holdco Series H
Preferred Stock")
Parent Series I Preferred One share of Series I
Stock Convertible Preferred Stock,
par value $.10 per share, of
Holdco ("Holdco Series I
Preferred Stock")
Parent Series J Preferred One share of Series J
Stock Convertible Preferred Stock,
par value $.10 per share, of
Holdco ("Holdco Series J
Preferred Stock")
Parent Series K Preferred One share of 10 1/4% Series M
Stock Exchangeable Preferred Stock,
par value $.10 per share, of
Holdco ("Holdco Series M
Preferred Stock")
Parent Series L Preferred One share of 10 1/4% Series L
Stock Exchangeable Preferred Stock,
par value $.10 per share, of
Holdco ("Holdco Series L
Preferred Stock")
Parent Series M Preferred One share of Holdco Series M
Stock Preferred Stock
As of the Effective Time of the Mergers, all such shares of
Parent Capital Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist. Subject
to Sections 2.01(d) and 2.03(e), as of the Effective Time of the Mergers
(i) each certificate theretofore representing shares of Parent Capital
Stock (other than each certificate theretofore representing Parent
Series C Preferred Stock or Parent Series K Preferred Stock (the
"Changed Parent Stock")), without any action on the part of Holdco,
Parent or the holder thereof, shall be deemed to represent an equivalent
number of shares of the class or series of Holdco Capital Stock set
forth above next to the class or series of Parent Capital Stock formerly
represented by such certificate and shall cease to represent any rights
in any shares of Parent Capital Stock, and (ii) each holder of a
certificate representing any shares of Changed Parent Stock shall cease
<PAGE>
to have any rights with respect thereto, except the right to receive,
upon the surrender of any such certificates, certificates representing
the number of shares of the class or series of Holdco Capital Stock, and
any cash in lieu of fractional shares of such class or series of Holdco
Capital Stock, set forth above next to the series of Changed Parent
Stock formerly represented by such certificate to be issued or paid in
consideration therefor upon surrender of such certificate in accordance
with Section 2.03, without interest.
(d) Appraisal Rights. Notwithstanding anything in this
Agreement to the contrary, shares ("Appraisal Shares") of Parent Capital
Stock (other than Parent Common Stock) that are outstanding immediately
prior to the Effective Time of the Mergers and that are held by any
stockholder of Parent who is entitled to demand and properly demands
appraisal of such Appraisal Shares pursuant to, and who complies in all
respects with, the provisions of Section 262 of the DGCL ("Section 262")
shall not be converted into Holdco Capital Stock as provided in Section
2.01(c), but rather the holders of Appraisal Shares shall be entitled to
payment of the fair value of such Appraisal Shares in accordance with
the provisions of Section 262; provided, however, that if any such
holder shall fail to perfect or otherwise shall waive, withdraw or lose
the right to appraisal under Section 262 or a court of competent
jurisdiction shall determine that such holder is not entitled to the
relief provided by Section 262, then the right of such holder of
Appraisal Shares to be paid the fair value of such holder's Appraisal
Shares shall cease and such Appraisal Shares shall be treated as if they
had been converted as of the Effective Time of the Mergers into shares
of Holdco Capital Stock as provided in Section 2.01(c).
(e) Exchange Ratio for Parent Options and Parent Warrants. (i)
As of the Effective Time of the Mergers, each outstanding Parent Option
(as defined in Section 3.02(c)) and each outstanding warrant (a "Parent
Warrant") to purchase Parent Common Stock, originally issued in
connection with the first issuance of Parent Series B Preferred Stock,
shall be assumed by Holdco and converted into an option or warrant, as
the case may be, to purchase shares of Holdco Common Stock, as provided
below. Following the Effective Time of the Mergers, each Parent Option
shall continue to have, and shall be subject to, the same terms and
conditions set forth in the applicable Parent Stock Plan
<PAGE>
(as defined in Section 3.02(c)) pursuant to which such Parent Option was
granted, and each Parent Warrant shall continue to have, and shall be
subject to, the same terms and conditions, in each case as in effect
immediately prior to the Effective Time of the Mergers, except that each
such Parent Option or Parent Warrant shall be exercisable for the same
number of shares of Holdco Common Stock as the number of shares of
Parent Common Stock for which such Parent Option or Parent Warrant was
exercisable immediately prior to the Effective Time of the Mergers.
(ii) As of the Effective Time of the Mergers, Holdco shall
enter into an assumption agreement with respect to each Parent Option
and each Parent Warrant, which, in the case of any Parent Option, shall
provide for Holdco's assumption of the obligations of Parent under the
applicable Parent Stock Plan. Prior to the Effective Time of the
Mergers, Parent shall make such amendments, if any, to the Parent Stock
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 Parent Option constitutes an "incentive stock option" (within
the meaning of Section 422 of the Code) immediately prior to the
Effective Time of the Mergers, such Parent 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 Parent Option
provided by this Section 2.01(e) shall satisfy the conditions of Section
424(a) of the Code.
(f) Treatment of Parent Capital Stock Held by Parent
Subsidiaries. Notwithstanding anything in this Agreement to the
contrary, each share of Parent Capital Stock (other than any Parent
Series C Preferred Stock) held by any Parent Subsidiary shall be
converted into (i) in the case of each share of Parent Common Stock, one
one-thousandth (1/1,000th) of a fully paid and nonassessable share of
Common Stock of the TW Surviving Corporation, (ii) in the case of each
share of Parent Series D Preferred Stock, one one-thousandth (1/1,000th)
of a fully paid and nonassessable share of Series D Convertible
Preferred Stock of the TW Surviving Corporation, (iii) in the case of
each share of Parent Series E Preferred Stock, one one-thousandth
(1/1,000th) of a fully paid and nonassessable share of Series E
Convertible Preferred Stock of the TW Surviving Corporation, (iv) in the
case of each share of Parent Series F Preferred Stock, one
one-thousandth (1/1,000th) of
<PAGE>
a fully paid and nonassessable share of Series F Convertible Preferred
Stock of the TW Surviving Corporation, (v) in the case of each share of
Parent Series G Preferred Stock, one one-thousandth (1/1,000th) of a
fully paid and nonassessable share of Series G Convertible Preferred
Stock of the TW Surviving Corporation, (vi) in the case of each share of
Parent Series H Preferred Stock, one one-thousandth (1/1,000th) of a
fully paid and nonassessable share of Series H Convertible Preferred
Stock of the TW Surviving Corporation, (vii) in the case of each share
of Parent Series I Preferred Stock, one one-thousandth (1/1,000th) of a
fully paid and nonassessable share of Series I Convertible Preferred
Stock of the TW Surviving Corporation, (viii) in the case of each share
of Parent Series J Preferred Stock, one one-thousandth (1/1000th) of a
fully paid and nonassessable share of Series J Convertible Preferred
Stock of the TW Surviving Corporation, (ix) in the case of each share of
Parent Series K Preferred Stock, one one-thousandth (1/1,000th) of a
fully paid and nonassessable share of 10 1/4% Series K Exchangeable
Preferred Stock of the TW Surviving Corporation, (x) in the case of each
share of Parent Series L Preferred Stock, one one-thousandth (1/1,000th)
of a fully paid and nonassessable share of 10 1/4% Series L Exchangeable
Preferred Stock of the TW Surviving Corporation and (xi) in the case of
each share of Parent Series M Preferred Stock, one one-thousandth
(1/1,000th) of a fully paid and nonassessable share of 10 1/4% Series M
Exchangeable Preferred Stock of the TW Surviving Corporation."
(b) Section 2.03(e)(iv) of the Agreement is hereby deleted.
(c) The definition of "Material Transaction" in the fifth
sentence of Section 5.16 of the Agreement is hereby amended and restated
in its entirety as follows:
"For purposes of this Agreement, "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 (excluding any transaction
involving an exchange by Parent on a one-for-one basis of newly issued
shares of Parent Series J Preferred Stock for outstanding
<PAGE>
shares of Parent Series C Preferred Stock) 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."
(c) Section 6.01(c) of the Agreement is hereby amended and
restated in its entirety to read as follows:
"(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. The
Federal Trade Commission (the "FTC") shall have initially accepted the
FTC Agreement Containing Consent Order relating to the Mergers and
ancillary matters. Any consents, approvals and filings under any foreign
antitrust law the absence of which would prohibit the consummation of
the Mergers shall have been obtained or made."
(d) Section 6.01(h) of the Agreement is hereby deleted.
(e) Section 7.01(b)(iii) of the Agreement is hereby amended
and restated in its entirety, as follows:
"(iii) if the Mergers shall not have been consummated on
or before December 31, 1996, unless the failure to consummate
the Mergers is the result of a wilful and material breach of
this Agreement by the party seeking to terminate this
Agreement;".
SECTION 2. Miscellaneous. (a) Except as expressly set forth in
Section 1, all the provisions of the Agreement are hereby ratified and
confirmed by all the parties and shall remain in full force and effect.
All references in the Agreement to "this Agreement" shall be read as
references to the Agreement, as amended by this Amendment.
<PAGE>
(b) Each party consents to the execution and delivery by
Parent and the Company of the Agreement Containing Consent Order
referred to in Section 6.01(c) of the Agreement, as amended by this
Amendment.
(c) This Amendment 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.
(d) This Amendment 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.
IN WITNESS WHEREOF, Parent, Holdco, Delaware Sub, Georgia Sub
and the Company have caused this Amendment to be signed by their
respective officers thereunto duly authorized, all as of the date first
written above.
TIME WARNER INC.,
by /s/ Peter R. Haje
---------------------------
Name: Peter R. Haje
Title: Executive Vice President
TW INC.,
by /s/ Thomas W. McEnerney
----------------------------
Name: Thomas W. McEnerney
Title: Vice President
TIME WARNER ACQUISITION CORP.,
by /s/ Thomas W. McEnerney
---------------------------
Name: Thomas W. McEnerney
Title: Vice President
<PAGE>
TW ACQUISITION CORP.,
by /s/ Thomas W. McEnerney
---------------------------
Name: Thomas W. McEnerney
Title: Vice President
TURNER BROADCASTING SYSTEM,
INC.,
by /s/ Steven W. Korn
---------------------------
Name: Steven W. Korn
Title: General Counsel
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
- -----------------------------------
)
In the Matter of )
)
TIME WARNER INC., )
a corporation; )
)
TURNER BROADCASTING )
SYSTEM, INC., )
a corporation; )
) File No. 961-0004
TELE-COMMUNICATIONS, INC., )
a corporation; and )
)
LIBERTY MEDIA CORPORATION, )
a corporation. )
- ------------------------------------)
AGREEMENT CONTAINING CONSENT ORDER
The Federal Trade Commission ("Commission"), having
initiated an investigation of the proposed acquisition of Turner
Broadcasting System, Inc. ("Turner") by Time Warner Inc. ("Time
Warner"), and Tele-Communications, Inc.'s ("TCI") and Liberty Media
Corporation's ("LMC") proposed acquisitions of interests in Time
Warner, and it now appearing that Time Warner, Turner, TCI, and LMC,
hereinafter sometimes referred to as "proposed respondents," are
willing to enter into an agreement containing an order to divest
certain assets, and providing for other relief:
IT IS HEREBY AGREED by and between proposed respondents,
by their duly authorized officers and attorneys, and counsel for the
Commission that:
1. Proposed respondent Time Warner is a corporation organized,
existing and doing business under and by virtue of the laws of
the State of Delaware with its office and principal place of
business located at 75 Rockefeller Plaza, New York, New York
10019.
<PAGE>
2. Proposed respondent Turner is a corporation organized, existing
and doing business under and by virtue of the laws of the State
of Georgia, with its office and principal place of business
located at One CNN Center, Atlanta, Georgia 30303.
3. Proposed respondent TCI is a corporation organized, existing
and doing business under and by virtue of the law of the State
of Delaware, with its office and principal place of business
located at 5619 DTC Parkway, Englewood, Colorado 80111.
4. Proposed respondent LMC is a corporation organized, existing
and doing business under and by virtue of the law of the State
of Delaware, with its office and principal place of business
located at 8101 East Prentice Avenue, Englewood, Colorado
80111.
5. Proposed respondents admit all the jurisdictional facts set
forth in the draft of complaint here attached for purposes of
this agreement and order only.
6. Proposed respondents waive:
(1) any further procedural steps;
(2) the requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
(3) all rights to seek judicial review or otherwise to
challenge or contest the validity of the order entered pursuant
to this agreement; and
(4) any claim under the Equal Access to Justice Act.
7. Proposed respondents shall submit (either jointly or
individually), within sixty (60) days of the date this
agreement is signed by proposed respondents, an initial report
or reports, pursuant to Section 2.33 of the Commission's Rules,
signed by the proposed respondents and setting forth in detail
the manner in which the proposed respondents will comply with
Paragraphs VI, VII and VIII of the order, when and if entered.
Such report will not become part of the public record unless
and until this agreement and order are accepted by the
Commission for public comment.
8. This agreement shall not become part of the public record of
the proceeding unless and until it is accepted by the
Commission. If this agreement is accepted by the Commission it,
together with a draft of the complaint contemplated hereby,
will be placed on the public record for a period of sixty (60)
days and information in respect thereto publicly released. The
Commission thereafter may either withdraw its acceptance of
this agreement and so notify the proposed respondents, in which
event it will take such action as it may consider appropriate,
or issue and serve its complaint (in such form as the
circumstances may require) and decision, in disposition of the
<PAGE>
proceeding.
9. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondents that the law
has been violated as alleged in the draft of complaint here
attached, or that the facts as alleged in the draft complaint,
other than jurisdictional facts, are true.
10. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently
withdrawn by the Commission pursuant to the provisions of Section
2.34 of the Commission's Rules, the Commission may, without
further notice to the proposed respondents, (1) issue its
complaint corresponding in form and substance with the draft of
complaint here attached and its decision containing the
following order in disposition of the proceeding, and (2) make
information public with respect thereto. When so entered, the
order shall have the same force and effect and may be altered,
modified or set aside in the same manner and within the same
time provided by statute for other orders. The order shall
become final upon service. Delivery by the U.S. Postal Service
of the complaint and decision containing the agreed-to order to
proposed respondents' addresses as stated in this agreement
shall constitute service. Proposed respondents waive any right
they may have to any other manner of service. The complaint may
be used in construing the terms of the order, and no agreement,
understanding, representation, or interpretation not contained
in the order or the agreement may be used to vary or contradict
the terms of the order.
11. Proposed respondents have read the proposed complaint and order
contemplated hereby. Proposed respondents understand that once
the order has been issued, they will be required to file one or
more compliance reports showing that they have fully complied
with the order. Proposed respondents further understand that
they may be liable for civil penalties in the amount provided
by law for each violation of the order after it becomes final.
12. Proposed respondents agree to be bound by all of the terms of
the Interim Agreement attached to this agreement and made a
part hereof as Appendix I, upon acceptance by the Commission of
this agreement for public comment. Proposed respondents agree
to notify the Commission's Bureau of Competition in writing,
within 30 days of the date the Commission accepts this
agreement for public comment, of any and all actions taken by
the proposed respondents to comply with the Interim Agreement
and of any ruling or decision by the Internal Revenue Service
("IRS") concerning the Distribution of The Separate Company
stock to the holders of the Liberty Tracking Stock within two
(2) business days after service of the IRS Ruling.
13. The order's obligations upon proposed respondents are
contingent upon consummation of the Acquisition.
<PAGE>
ORDER
I.
As used in this Order, the following definitions shall apply:
A) "Acquisition" means Time Warner's acquisition of Turner and TCI's
and LMC's acquisition of interest in Time Warner.
B) "Affiliated" means having an Attributable Interest in a Person.
C) "Agent" or "Representative" means a Person that is acting in a
fiduciary capacity on behalf of a principal with respect to the
specific conduct or action under review or consideration.
D) "Attributable Interest" means an interest as defined in 47 C.F.R.
Section 76.501 (and accompanying notes), as that rule read on July 1,
1996.
E) "Basic Service Tier" means the Tier of video programming as
defined in 47 C.F.R. Section 76.901(a), as that rule read on July 1,
1996.
F) "Buying Group" or "Purchasing Agent" means any Person
representing the interests of more than one Person distributing
multichannel video programming that: (1) agrees to be financially
liable for any fees due pursuant to a Programming Service Agreement
which it signs as a contracting party as a representative of its
members, or each of whose members, as contracting parties, agrees to
be liable for its portion of the fees due pursuant to the
programming service agreement; (2) agrees to uniform billing and
standardized contract provisions for individual members; and (3)
agrees either collectively or individually on reasonable technical
quality standards for the individual members of the group.
G) "Carriage Terms" means all terms and conditions for sale,
licensing or delivery to an MVPD for a Video Programming Service and
includes, but is not limited to, all discounts (such as for volume,
channel position and Penetration Rate), local advertising
availabilities, marketing, and promotional support, and other terms
and conditions.
H) "CATV" means a cable system, or multiple cable systems Controlled
by the same Person, located in the United States.
I) "Closing Date" means the date of the closing of the Acquisition.
J) "CNN" means the Video Programming Service Cable News Network.
K) "Commission" means the Federal Trade Commission.
<PAGE>
L) "Competing MVPD" means an Unaffiliated MVPD whose proposed or
actual service area overlaps with the actual service area of an Time
Warner CATV.
M) "Control," "Controlled" or "Controlled by" has the meaning set
forth in 16 C.F.R. Section 801.1 as that regulation read on July 1, 1996,
except that Time Warner's 50% interest in Comedy Central (as of the
Closing Date) and TCI's 50% interests in Bresnan Communications,
Intermedia Partnerships and Lenfest Communications (all as of the
Closing Date) shall not be deemed sufficient standing alone to
confer Control over that Person.
N) "Converted WTBS" means WTBS once converted to a Video Programming
Service.
O) "Fully Diluted Equity of Time Warner" means all Time Warner
common stock actually issued and outstanding plus the aggregate
number of shares of Time Warner common stock that would be issued
and outstanding assuming the exercise of all outstanding options,
warrants and rights (excluding shares that would be issued in the
event a poison pill is triggered) and the conversion of all
outstanding securities that are convertible into Time Warner common
stock.
P) "HBO" means the Video Programming Service Home Box Office,
including multiplexed versions.
Q) "Independent Advertising-Supported News and Information Video
Programming Service" means a National Video Programming Service (1)
that is not owned, Controlled by, or Affiliated with Time Warner;
(2) that is a 24-hour per day service consisting of current
national, international, sports, financial and weather news and/or
information, and other similar programming; and (3) that has
national significance so that, as of February 1, 1997, it has
contractual commitments to supply its service to 10 million
subscribers on Unaffiliated MVPDs, or, together with the contractual
commitments it will obtain from Time Warner, it has total
contractual commitments to supply its service to 15 million
subscribers. If no such Service has such contractual commitments,
then Time Warner may choose from among the two Services with
contractual commitments with Unaffiliated MVPDs for the largest
number of subscribers.
R) "Independent Third Party" means (1) a Person that does not own,
Control, and is not Affiliated with or has a share of voting power,
or an Ownership Interest in, greater than 1% of any of the
following: TCI, LMC, or the Kearns-Tribune Corporation; or (2) a
Person which none of TCI, LMC, or the TCI Control Shareholders owns,
Controls, is Affiliated with, or in which any of them has a share of
voting power, or an Ownership Interest in, greater than 1%.
Provided, however, that an Independent Third Party shall not lose
such status if, as a result of a transaction between an Independent
Third Party and The Separate Company, such Independent Third Party
becomes a successor to The Separate Company and the TCI Control
Shareholders collectively hold an Ownership Interest of 5% or less
and collectively hold a share of voting power of 1% or less in that
successor company.
<PAGE>
S) "LMC" means Liberty Media Corporation, all of its directors,
officers, employees, Agents, and Representatives, and also includes
(1) all of its predecessors, successors, assigns, subsidiaries, and
divisions, all of their respective directors, officers, employees,
Agents, and Representatives, and the respective successors and
assigns of any of the foregoing; and (2) partnerships, joint
ventures, and affiliates that Liberty Media Corporation Controls,
directly or indirectly.
T) "The Liberty Tracking Stock" means Tele-Communications, Inc.
Series A Liberty Media Group Common Stock and Tele-Communications,
Inc. Series B Liberty Media Group Common Stock.
U) "Multichannel Video Programming Distributor" or "MVPD" means a
Person providing multiple channels of video programming to
subscribers in the United States for which a fee is charged, by any
of various methods including, but not limited to, cable, satellite
master antenna television, multichannel multipoint distribution,
direct-to-home satellite (C-band, Ku- band, direct broadcast
satellite), ultra high-frequency microwave systems (sometimes called
LMDS), open video systems, or the facilities of common carrier
telephone companies or their affiliates, as well as Buying Groups or
Purchasing Agents of all such Persons.
V) "National Video Programming Service" means a Video Programming
Service that is intended for distribution in all or substantially
all of the United States.
W) "Ownership Interest" means any right(s), present or contingent,
to hold voting or nonvoting interest(s), equity interest(s), and/or
beneficial ownership(s) in the capital stock of a Person.
X) "Penetration Rate" means the percentage of Total Subscribers on
an MVPD who receives a particular Video Programming Service.
Y) "Person" includes any natural person, corporate entity,
partnership, association, joint venture, government entity or trust.
Z) "Programming Service Agreement" means any agreement between a
Video Programming Vendor and an MVPD by which a Video Programming
Vendor agrees to permit carriage of a Video Programming Service on
that MVPD.
AA) "The Separate Company" means a separately incorporated Person,
either existing or to be created, to take the actions provided by
Paragraph II and includes without limitation all of The Separate
Company's subsidiaries, divisions, and affiliates Controlled,
directly or indirectly, all of their respective directors, officers,
employees, Agents, and Representatives, and the respective
successors and assigns of any of the foregoing, other than any
Independent Third Party.
<PAGE>
BB) "Service Area Overlap" means the geographic area in which a
Competing MVPD's proposed or actual service area overlaps with the
actual service area of a Time Warner CATV.
CC) "Similarly Situated MVPDs" means MVPDs with the same or similar
number of Total Subscribers as the Competing MVPD has nationally and
the same or similar Penetration Rate(s) as the Competing MVPD makes
available nationally.
DD) "TCI" means Tele-Communications, Inc., all of its directors,
officers, employees, Agents, and Representatives, and also includes
(1) all of its predecessors, successors, assigns, subsidiaries, and
divisions, all of their respective directors, officers, employees,
Agents, and Representatives, and the respective successors and
assigns of any of the foregoing; and (2) partnerships, joint
ventures, and affiliates that Tele-Communications, Inc. Controls,
directly or indirectly. TCI acknowledges that the obligations of
subparagraphs (C)(6), (8)-(9), (D)(1)-(2) of Paragraph II and of
Paragraph III of this order extend to actions by Bob Magness and
John C. Malone, taken in an individual capacity as well as in a
capacity as an officer or director, and agrees to be liable for such
actions.
EE) "TCI Control Shareholders" means the following Persons,
individually as well as collectively: Bob Magness, John C. Malone,
and the Kearns-Tribune Corporation, its Agents and Representatives,
and the respective successors and assigns of any of the foregoing.
FF) "TCI's and LMC's Interest in Time Warner" means all the
Ownership Interest in Time Warner to be acquired by TCI and LMC,
including the right of first refusal with respect to Time Warner
stock to be held by R. E. Turner, III, pursuant to the Shareholders
Agreement dated September 22, 1995 with LMC or any successor
agreement.
GG) "TCI's and LMC's Turner-Related Businesses" means the businesses
conducted by Southern Satellite Systems, Inc., a subsidiary of TCI
which is principally in the business of distributing WTBS to MVPDs.
HH) "Tier" means a grouping of Video Programming Services offered by
an MVPD to subscribers for one package price.
II) "Time Warner" means Time Warner Inc., all of its directors,
officers, employees, Agents, and Representatives, and also includes
(1) all of its predecessors, successors, assigns, subsidiaries, and
divisions, including, but not limited to, Turner after the Closing
Date, all of their respective directors, officers, employees,
Agents, and Representatives, and the respective successors and
assigns of any of the foregoing; and (2) partnerships, joint
ventures, and affiliates that Time Warner Inc. Controls, directly or
indirectly. Time Warner shall, except for the purposes of
definitions OO and PP, include Time Warner Entertainment Company,
L.P., so long as it falls within this definition.
JJ) "Time Warner CATV" means a CATV which is owned or Controlled by
Time Warner.
<PAGE>
"Non-Time Warner CATV" means a CATV which is not owned
or Controlled by Time Warner. Obligations in this order applicable
to Time Warner CATVs shall not survive the disposition of Time
Warner's Control over them.
KK) "Time Warner National Video Programming Vendor" means a Video
Programming Vendor providing a National Video Programming Service
which is owned or Controlled by Time Warner. Likewise, "Non-Time
Warner National Video Programming Vendor" means a Video Programming
Vendor providing a National Video Programming Service which is not
owned or Controlled by Time Warner.
LL) "TNT" means the Video Programming Service Turner Network
Television.
MM) "Total Subscribers" means the total number of subscribers to an
MVPD other than subscribers only to the Basic Service Tier.
NN) "Turner" means Turner Broadcasting System, Inc., all of its
directors, officers, employees, Agents, and Representatives, and
also includes (1) all of its predecessors, successors (except Time
Warner), assigns (except Time Warner), subsidiaries, and divisions;
and (2) partnerships, joint ventures, and affiliates that Turner
Broadcasting System, Inc., Controls, directly or indirectly.
OO) "Turner Video Programming Services" means each Video Programming
Service owned or Controlled by Turner on the Closing Date, and
includes (1) WTBS, (2) any such Video Programming Service and WTBS
that is transferred after the Closing Date to another part of Time
Warner (including TWE), and (3) any Video Programming Service
created after the Closing Date that Time Warner owns or Controls
that is not owned or Controlled by TWE, for so long as the Video
Programming Service remains owned or Controlled by Time Warner.
PP) "Turner-Affiliated Video Programming Services" means each Video
Programming Service, whether or not satellite-delivered, that is
owned, Controlled by, or Affiliated with Turner on the Closing Date,
and includes (1) WTBS, (2) any such Video Programming Service and
WTBS that is transferred after the Closing Date to another part of
Time Warner (including TWE), and (3) any Video Programming Service
created after the Closing Date that Time Warner owns, Controls or is
Affiliated with that is not owned, Controlled by, or Affiliated with
TWE, for so long as the Video Programming Service remains owned,
Controlled by, or affiliated with Time Warner.
QQ) "TWE" means Time Warner Entertainment Company, L.P., all of its
officers, employees, Agents, Representatives, and also includes (1)
all of its predecessors, successors, assigns, subsidiaries,
divisions, including, but not limited to, Time Warner Cable, and the
respective successors and assigns of any of the foregoing, but
excluding Turner; and (2) partnerships, joint ventures, and
affiliates that Time Warner Entertainment Company, L.P., Controls,
directly or indirectly.
<PAGE>
RR) "TWE's Management Committee" means the Management Committee
established in Section 8 of the Admission Agreement dated May 16,
1993, between TWE and U S West, Inc., and any successor thereof, and
includes any management committee in any successor agreement that
provides for membership on the management committee for non-Time
Warner individuals.
SS) "TWE Video Programming Services" means each Video Programming
Service owned or Controlled by TWE on the Closing Date, and includes
(1) any such Video Programming Service transferred after the Closing
Date to another part of Time Warner and (2) any Video Programming
Service created after the Closing Date that TWE owns or Controls,
for so long as the Video Programming Service remains owned or
Controlled by TWE.
TT) "TWE-Affiliated Video Programming Services" means each Video
Programming Service, whether or not satellite-delivered, that is
owned, Controlled by, or Affiliated with TWE, and includes (1) any
such Video Programming Service transferred after the Closing Date to
another part of Time Warner and (2) any Video Programming Service
created after the Closing Date that TWE owns or Controls, or is
Affiliated with, for so long as the Video Programming Service
remains owned, Controlled by, or Affiliated with TWE.
VV) "Unaffiliated MVPD" means an MVPD which is not owned, Controlled
by, or Affiliated with Time Warner.
WW) "United States" means the fifty states, the District of
Columbia, and all territories, dependencies, or possessions of the
United States of America.
XX) "Video Programming Service" means a satellite-delivered video
programming service that is offered, alone or with other services,
to MVPDs in the United States. It does not include pay-per-view
programming service(s), interactive programming service(s),
over-the-air television broadcasting, or satellite broadcast
programming as defined in 47 C.F.R. Section 76.1000(f) as that rule
read on July 1, 1996.
YY) "Video Programming Vendor" means a Person engaged in the
production, creation, or wholesale distribution to MVPDs of Video
Programming Services for sale in the United States.
ZZ) "WTBS" means the television broadcast station popularly known as
TBS Superstation, and includes any Video Programming Service that
may be a successor to WTBS, including Converted WTBS.
<PAGE>
II.
IT IS ORDERED that:
(A) TCI and LMC shall divest TCI's and LMC's Interest in Time Warner and
TCI's and LMC's Turner-Related Businesses to The Separate Company by:
(1) combining TCI's and LMC's Interest in Time Warner Inc. and
TCI's and LMC's Turner-Related Businesses in The Separate
Company;
(2) distributing The Separate Company stock to the holders of
Liberty Tracking Stock ("Distribution"); and
(3) using their best efforts to ensure that The Separate
Company's stock is registered or listed for trading on the
Nasdaq Stock Market or the New York Stock Exchange or the
American Stock Exchange.
(B) TCI and LMC shall make all regulatory filings, including, but
not limited to, filings with the Federal Communications Commission
and the Securities and Exchange Commission that are necessary to
accomplish the requirements of Paragraph II(A).
(C) TCI, LMC, and The Separate Company shall ensure that:
(1) The Separate Company's by-laws obligate The Separate
Company to be bound by this order and contain provisions
ensuring compliance with this order;
(2) The Separate Company's board of directors at the time of
the Distribution are subject to the prior approval of the
Commission;
(3) The Separate Company shall, within six (6) months of the
Distribution, call a shareholder's meeting for the purpose of
electing directors;
(4) No member of the board of directors of The Separate
Company, both at the time of the Distribution and pursuant to
any election now or at any time in the future, shall, at the
time of his or her election or while serving as a director of
The Separate Company, be an officer, director, or employee of
TCI or LMC or shall hold, or have under his or her direction or
Control, greater than one-tenth of one percent (0.1%) of the
voting power of TCI and one-tenth of one percent (0.1%) of the
Ownership Interest in TCI or greater than one-tenth of one
percent (0.1%) of the voting power of LMC and one-tenth of one
percent (0.1%) of the Ownership Interest in LMC;
(5) No officer, director or employee of TCI or LMC shall
concurrently serve as an officer or employee of The Separate
Company. Provided further, that TCI or LMC
<PAGE>
employees who are not TCI Control Shareholders or directors or
officers of either Tele-Communications, Inc. or Liberty Media
Corporation may provide to The Separate Company services
contemplated by the attached Transition Services Agreement;
(6) The TCI Control Shareholders shall promptly exchange the
shares of stock received by them in the Distribution for shares
of one or more classes or series of convertible preferred stock
of The Separate Company that shall be entitled to vote only on
the following issues on which a vote of the shareholders of The
Separate Company is required: a proposed merger; consolidation
or stock exchange involving The Separate Company; the sale,
lease, exchange or other disposition of all or substantially
all of The Separate Company's assets; the dissolution or
winding up of The Separate Company; proposed amendments to the
corporate charter or bylaws of The Separate Company; proposed
changes in the terms of such classes or series; or any other
matters on which their vote is required as a matter of law
(except that, for such other matters, The Separate Company and
the TCI Control Shareholders shall ensure that the TCI Control
Shareholders' votes are apportioned in the exact ratio as the
votes of the rest of the shareholders);
(7) No vote on any of the proposals listed in subparagraph (6)
shall be successful unless a majority of shareholders other
than the TCI Control Shareholders vote in favor of such
proposal;
(8) After the Distribution, the TCI Control Shareholders shall
not seek to influence, or attempt to control by proxy or
otherwise, any other Person's vote of The Separate Company
stock;
(9) After the Distribution, no officer, director or employee of
TCI or LMC, or any of the TCI Control Shareholders shall
communicate, directly or indirectly, with any officer,
director, or employee of The Separate Company. Provided,
however, that the TCI Control Shareholders may communicate with
an officer, director or employee of The Separate Company when
the subject is one of the issues listed in subparagraph 6 on
which TCI Control Shareholders are permitted to vote, except
that, when a TCI Control Shareholder seeks to initiate action
on a subject listed in subparagraph 6 on which the TCI Control
Shareholders are permitted to vote, the initial proposal for
such action shall be made in writing. Provided further, that
this provision does not apply to communications by TCI or LMC
employees who are not TCI Control Shareholders or directors or
officers of either Tele-Communications, Inc. or Liberty Media
Corporation in the context of providing to The Separate Company
services contemplated by the attached Transition Services
Agreement or to communications relating to the possible
purchase of services from TCI's and LMC's Turner-Related
Businesses;
(10) The Separate Company shall not acquire or hold greater
than 14.99% of the Fully Diluted Equity of Time Warner.
Provided, however, that, if the TCI Control
<PAGE>
Shareholders reduce their collective holdings in The Separate
Company to no more than one-tenth of one percent (0.1%) of the
voting power of The Separate Company and one-tenth of one
percent (0.1%) of the Ownership Interest in The Separate
Company or reduce their collective holdings in TCI and LMC to
no more than one-tenth of one percent (0.1%) of the voting
power of TCI and one-tenth of one percent (0.1%) of the
Ownership Interest in TCI and one-tenth of one percent (0.1%)
of the voting power of LMC and one-tenth of one percent (0.1%)
of the Ownership Interest in LMC, then The Separate Company
shall not be prohibited by this order from increasing its
holding of Time Warner stock beyond that figure; and
(11) The Separate Company shall not acquire or hold, directly
or indirectly, any Ownership Interest in Time Warner that is
entitled to exercise voting power except (a) a vote of one-one
hundredth (1/100) of a vote per share owned, voting with the
outstanding common stock, with respect to the election of
directors and (b) with respect to proposed changes in the
charter of Time Warner Inc. or of the instrument creating such
securities that would (i) adversely change any of the terms of
such securities or (ii) adversely affect the rights, power, or
preferences of such securities. Provided, however, that any
portion of The Separate Company's stock in Time Warner that is
sold to an Independent Third Party may be converted into voting
stock of Time Warner. Provided, further, that, if the TCI
Control Shareholders reduce their collective holdings in The
Separate Company to no more than one-tenth of one percent
(0.1%) of the voting power of The Separate Company and
one-tenth of one percent (0.1%) of the Ownership Interest in
The Separate Company or reduce their collective holdings in
both TCI and LMC to no more than one-tenth of one percent
(0.1%) of the voting power of TCI and one-tenth of one percent
(0.1%) of the Ownership Interest in TCI and one-tenth of one
percent (0.1%) of the voting power of LMC and one-tenth of one
percent (0.1%) of the Ownership Interest in LMC, The Separate
Company's Time Warner stock may be converted into voting stock
of Time Warner.
(D) TCI and LMC shall use their best efforts to obtain a private
letter ruling from the Internal Revenue Service to the effect that
the Distribution will be generally tax-free to both the Liberty
Tracking Stock holders and to TCI under Section 355 of the Internal
Revenue Code of 1986, as amended ("IRS Ruling"). Upon receipt of the
IRS Ruling, TCI and LMC shall have thirty (30) days (excluding time
needed to comply with the requirements of any federal securities and
communications laws and regulations, provided that TCI and LMC shall
use their best efforts to comply with all such laws and regulations)
to carry out the requirements of Paragraph II(A) and (B). Pending
the IRS Ruling, or in the event that TCI and LMC are unable to
obtain the IRS Ruling,
(1) TCI, LMC, Bob Magness and John C. Malone,
collectively or individually, shall not acquire or hold,
directly or indirectly, an Ownership Interest that is
more than the lesser of 9.2% of the Fully Diluted Equity
of Time Warner or 12.4% of the actual issued and
outstanding common stock of Time Warner, as determined by
generally accepted accounting principles. Provided,
however, that day-to-day market price changes that cause
any such holding to exceed the latter threshold shall not
be deemed to cause the parties to be in violation of this
subparagraph; and
<PAGE>
(2) TCI, LMC and the TCI Control Shareholders shall not acquire
or hold any Ownership Interest in Time Warner that is entitled
to exercise voting power except (a) a vote of one-one hundredth
(1/100) of a vote per share owned, voting with the outstanding
common stock, with respect to the election of directors and (b)
with respect to proposed changes in the charter of Time Warner
Inc. or of the instrument creating such securities that would
(i) adversely change any of the terms of such securities or
(ii) adversely affect the rights, power, or preferences of such
securities. Provided, however, that any portion of TCI's and
LMC's Interest in Time Warner that is sold to an Independent
Third Party may be converted into voting stock of Time Warner.
In the event that TCI and LMC are unable to obtain the IRS Ruling,
TCI and LMC shall be relieved of the obligations set forth in
subparagraphs (A), (B) and (C).
III.
IT IS FURTHER ORDERED that
After the Distribution, TCI, LMC, Bob Magness and John C.
Malone, collectively or individually, shall not acquire or
hold, directly or indirectly, any voting power of, or other
Ownership Interest in, Time Warner that is more than the less
of 1% of the Fully Diluted Equity of Time Warner or 1.35% of
actual issued and outstanding common stock of Time Warner, as
determined by generally accepted accounting principles
(provided, however, that such interest shall not vote except
as provided in Paragraph II(D)(2)), without the prior approval
of the Commission. Provided, further, that day-to-day market
price changes that cause any such holding to exceed the latter
threshold shall not be deemed to cause the parties to be in
violation of this Paragraph.
IV.
IT IS FURTHER ORDERED that
(A) For six months after the Closing Date, TCI and Time Warner shall
not enter into any new Programming Service Agreement that requires
carriage of any Turner Video Programming Service on any analog Tier
of TCI's CATVs.
(B) Any Programming Service Agreement entered into thereafter that
requires carriage of any Turner Video Programming Service on TCI's
CATVs on an analog Tier shall be limited in effective duration to
five (5) years, except that such agreements may give TCI the
unilateral right(s) to renew such agreements for one or more
five-year periods.
(C) Notwithstanding the foregoing, Time Warner, Turner and TCI may
enter into, prior to the Closing Date, agreements that require
carriage on an analog Tier by TCI for no more than five years for
each of WTBS (with the five year period to commence at the time of
WTBS' conversion to Converted WTBS) and Headline News, and such
agreements may give TCI the unilateral right(s) to renew such
agreements for one or more five-year periods.
<PAGE>
V.
IT IS FURTHER ORDERED that
Time Warner shall not, expressly or impliedly:
(A) refuse to make available or condition the availability of HBO to
any MVPD on whether that MVPD or any other MVPD agrees to carry any
Turner-Affiliated Video Programming Service;
(B) condition any Carriage Terms for HBO to any MVPD on whether that
MVPD or any other MVPD agrees to carry any Turner-Affiliated Video
Programming Service;
(C) refuse to make available or condition the availability of each
of CNN, WTBS, or TNT to any MVPD on whether that MVPD or any other
MVPD agrees to carry any TWE-Affiliated Video Programming Service;
or
(D) condition any Carriage Terms for each of CNN, WTBS, or TNT to
any MVPD on whether that MVPD or any other MVPD agrees to carry any
TWE-Affiliated Video Programming Service.
VI.
IT IS FURTHER ORDERED that
(A) For subscribers that a Competing MVPD services in the Service
Area Overlap, Time Warner shall provide, upon request, any Turner
Video Programming Service to that Competing MVPD at Carriage Terms
no less favorable, relative to the Carriage Terms then offered by
Time Warner for that Service to the three MVPDs with the greatest
number of subscribers, than the Carriage Terms offered by Turner to
Similarly Situated MVPDs relative to the Carriage Terms offered by
Turner to the three MVPDs with the greatest number of subscribers
for that Service on July 30, 1996. For Turner Video Programming
Services not in existence on July 30, 1996, the pre-Closing Date
comparison will be to relative Carriage Terms offered with respect
to any Turner Video Programming Service existing as of July 30,
1996.
(B) Time Warner shall be in violation of this Paragraph if the
Carriage Terms it offers to the Competing MVPD for those subscribers
outside the Service Area Overlap are set at a higher level compared
to Similarly Situated MVPDs so as to avoid the restrictions set
forth in subparagraph (A).
<PAGE>
VII.
IT IS FURTHER ORDERED that
(A) Time Warner shall not require a financial interest in any
National Video Programming Service as a condition for carriage on
one or more Time Warner CATVs.
(B) Time Warner shall not coerce any National Video Programming
Vendor to provide, or retaliate against such a Vendor for failing to
provide exclusive rights against any other MVPD as a condition for
carriage on one or more Time Warner CATVs.
(C) Time Warner shall not engage in conduct the effect of which is
to unreasonably restrain the ability of a Non-Time Warner National
Video Programming Vendor to compete fairly by discriminating in
video programming distribution on the basis of affiliation or
nonaffiliation of Vendors in the selection, terms, or conditions for
carriage of video programming provided by such Vendors.
VIII.
IT IS FURTHER ORDERED that
(A) Time Warner shall collect the following information, on a
quarterly basis:
(1) for any and all offers made to Time Warner's corporate
office by a Non-Time Warner National Video Programming Vendor
to enter into or to modify any Programming Service Agreement
for carriage on a Time Warner CATV, in that quarter:
a) the identity of the National Video Programming Vendor;
b) a description of the type of programming;
c) any and all Carriage Terms as finally agreed to or,
when there is no final agreement but the Vendor's initial
offer is more than three months old, the last offer of
each side;
d) any and all commitment(s) to a roll-out schedule, if
applicable, as finally agreed to or, when there is no
final agreement but the Vendor's initial offer is more
than three months old, the last offer of each side;
e) a copy of any and all Programming Service Agreement(s)
as finally agreed to or, when there is no final agreement
but the Vendor's initial offer is more than three months
old, the last offer of each side; and
<PAGE>
(2) on an annual basis for each National Video Programming
Service on Time Warner CATVs, the actual carriage rates on Time
Warner CATVs and
(a) the average carriage rates on all Non-Time Warner
CATVs for each National Video Programming Service that has
publicly-available information from which Penetration
Rates can be derived; and
(b) the carriage rates on each of the fifty (50) largest
(in total number of subscribers) Non-Time Warner CATVs for
each National Video Programming Service that has
publicly-available information from which Penetration
Rates can be derived.
(B) The information collected pursuant to subparagraph (A) shall be
provided to each member of TWE's Management Committee on the last
day of March, June, September and December of each year. Provided,
however, that, in the event TWE's Management Committee ceases to
exist, the disclosures required in this Paragraph shall be made to
any and all partners in TWE; or, if there are no partners in TWE,
then the disclosures required in this Paragraph shall be made to the
Audit Committee of Time Warner.
(C) The General Counsel within TWE who is responsible for CATV shall
annually certify to the Commission that it believes that Time Warner
is in compliance with Paragraph VII of this order.
(D) Time Warner shall retain all of the information collected as
required by subparagraph (A), including information on when and to
whom such information was communicated as required herein in
subparagraph (B), for a period of five (5) years.
IX.
IT IS FURTHER ORDERED that
(A) By February 1, 1997, Time Warner shall execute a Programming
Service Agreement with at least one Independent
Advertising-Supported News and Information National Video
Programming Service, unless the Commission determines, upon a
showing by Time Warner, that none of the offers of Carriage Terms
are commercially reasonable.
(B) If all the requirements of either subparagraph (A) or (C) are
met, Time Warner shall carry an Independent Advertising-Supported
News and Information Video Programming Service on Time Warner CATVs
at Penetration Rates no less than the following:
(1) If the Service is carried on Time Warner CATVs as of July
30, 1996, Time Warner must make the Service available:
<PAGE>
(a) By July 30, 1997, so that it is available to 30% of
the Total Subscribers of all Time Warner CATVs at that
time; and
(b) By July 30, 1999, so that it is available to 50% of
the Total Subscribers of all Time Warner CATVs at that
time.
(2) If the Service is not carried on Time Warner CATVs as of
July 30, 1996, Time Warner must make the Service available:
(a) By July 30, 1997, so that it is available to 10% of
the Total Subscribers of all Time Warner CATVs at that
time;
(b) By July 30, 1999, so that it is available to 30% of
the Total Subscribers of all Time Warner CATVs at that
time; and
(c) By July 30, 2001, so that it is available to 50% of
the Total Subscribers of all Time Warner CATVs at that
time.
(C) If, for any reason, the Independent Advertising-Supported News and
Information National Video Programming Service chosen by Time Warner
ceases operating or is in material breach of its Programming Service
Agreement with Time Warner at any time before July 30, 2001, Time Warner
shall, within six months of the date that such Service ceased operation
or the date of termination of the Agreement because of the material
breach, enter into a replacement Programming Service Agreement with a
replacement Independent Advertising-Supported News and Information
National Video Programming Service so that replacement Service is
available pursuant to subparagraph (B) within three months of the
execution of the replacement Programming Service Agreement, unless the
Commission determines, upon a showing by Time Warner, that none of the
Carriage Terms offered are commercially reasonable. Such replacement
Service shall have, six months after the date the first Service ceased
operation or the date of termination of the first Agreement because of
the material breach, contractual commitments to supply its Service to at
least 10 million subscribers on Unaffiliated MVPDs, or, together with
the contractual commitments it will obtain from Time Warner, total
contractual commitments to supply its Service to 15 million subscribers;
if no such Service has such contractual commitments, then Time Warner
may choose from among the two Services with contractual commitments with
Unaffiliated MVPDs for the largest number of subscribers.
X.
IT IS FURTHER ORDERED that:
(A) Within sixty (60) days after the date this order becomes final
and every sixty (60) days thereafter until respondents have fully
complied with the provisions of Paragraphs IV(A) and IX(A) of this
order and, with respect to Paragraph II, until the Distribution,
respondents shall
<PAGE>
submit jointly or individually to the Commission a verified written
report or reports setting forth in detail the manner and form in
which they intend to comply, are complying, and have complied with
Paragraphs II, IV(A) and IX(A) of this order.
(B) One year (1) from the date this order becomes final, annually
for the next nine (9) years on the anniversary of the date this
order becomes final, and at other times as the Commission may
require, respondents shall file jointly or individually a verified
written report or reports with the Commission setting forth in
detail the manner and form in which they have complied and are
complying with each Paragraph of this order.
XI.
IT IS FURTHER ORDERED that respondents shall notify the
Commission at least thirty (30) days prior to any proposed change in
respondents (other than this Acquisition) such as dissolution,
assignment, sale resulting in the emergence of a successor
corporation, or the creation or dissolution of subsidiaries or any
other change in the corporation that may affect compliance
obligations arising out of the order.
XII.
IT IS FURTHER ORDERED that, for the purpose of determining or
securing compliance with this order, and subject to any legally
recognized privilege, upon written request, respondents shall permit
any duly authorized representative of the Commission:
1. Access, during regular business hours upon reasonable notice and
in the presence of counsel for respondents, to inspect and copy all
books, ledgers, accounts, correspondence, memoranda and other
records and documents in the possession or under the control of
respondents relating to any matters contained in this order; and
2. Upon five days' notice to respondents and without restraint or
interference from it, to interview officers, directors, or employees
of respondents, who may have counsel present, regarding such
matters.
XIII.
IT IS FURTHER ORDERED THAT this order shall terminate ten (10)
years from the date this order becomes final.
<PAGE>
Signed this _____ day of _______________, 19____.
TIME WARNER INC., A CORPORATION
By: _________________________
Gerald M. Levin
_________________________
Counsel for Time Warner Inc.
TURNER BROADCASTING SYSTEM, INC., A CORPORATION
By: ________________________
General Counsel
________________________
Counsel for Turner Broadcasting System, Inc.
TELE-COMMUNICATIONS, INC., A CORPORATION
By: ________________________
John C. Malone
________________________
Counsel for Tele-Communications, Inc.
LIBERTY MEDIA CORPORATION, A CORPORATION
By: ________________________
Vice President
________________________
Counsel for Liberty Media Corporation
<PAGE>
FEDERAL TRADE COMMISSION
By:
________________________
James A. Fishkin
Attorney
Bureau of Competition
Approved:
________________________
Robert W. Doyle, Jr.
Deputy Assistant Director
Bureau of Competition
________________________
George S. Cary
Senior Deputy Director
Bureau of Competition
________________________
William J. Baer
Director
Bureau of Competition
<PAGE>
Appendix I
UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
- --------------------------------)
)
)
In the Matter of )
)
TIME WARNER INC., )
a corporation; )
)
TURNER BROADCASTING )
SYSTEM, INC., )
a corporation; )
) File No. 961-0004
TELE-COMMUNICATIONS, INC., )
a corporation; and )
)
LIBERTY MEDIA CORPORATION, )
a corporation. )
)
- --------------------------------)
INTERIM AGREEMENT
This Interim Agreement is by and between Time Warner Inc.
("Time Warner"), a corporation organized, existing, and doing
business under and by virtue of the law of the State of Delaware,
with its office and principal place of business at New York, New
York; Turner Broadcasting System, Inc. ("Turner"), a corporation
organized, existing, and doing business under and by virtue of the
law of the State of Georgia with its office and principal place of
business at Atlanta, Georgia; Tele-Communications, Inc. ("TCI"), a
corporation organized, existing, and doing business under and by
virtue of the law of the State of Delaware, with its office and
principal place of business located at Englewood, Colorado; Liberty
Media Corp. ("LMC"), a corporation organized, existing and doing
business under and by virtue of the law of the State of Delaware,
with its office and principal place of business located at
Englewood, Colorado; and the Federal Trade Commission
("Commission"), an independent agency of the United States
Government, established under the Federal Trade Commission Act of
1914, 15 U.S.C. ss. 41 et seq.
<PAGE>
Interim Agreement Page 2 of 5
WHEREAS Time Warner entered into an agreement with Turner for
Time Warner to acquire the outstanding voting securities of Turner,
and TCI and LMC proposed to acquire stock in Time Warner
(hereinafter "the Acquisition");
WHEREAS the Commission is investigating the Acquisition to
determine whether it would violate any statute enforced by the
Commission;
WHEREAS TCI and LMC are willing to enter into an Agreement
Containing Consent Order (hereafter "Consent Order") requiring them,
inter alia, to divest TCI's and LMC's Interest in Time Warner and
TCI's and LMC's Turner-Related Businesses," by contributing those
interests to a separate corporation, The Separate Company, the stock
of which will be distributed to the holders of Liberty Tracking
Stock ("the Distribution"), but, in order to fulfill paragraph II(D)
of that Consent Order, TCI and LMC must apply now to receive an
Internal Revenue Service ruling as to whether the Distribution will
be generally tax-free to both the Liberty Tracking Stock holders and
to TCI under Section 355 of the Internal Revenue Code of 1986, as
amended ("IRS Ruling");
WHEREAS "TCI's and LMC's Interest in Time Warner" means all of
the economic interest in Time Warner to be acquired by TCI and LMC,
including the right of first refusal with respect to Time Warner
stock to be held by R. E. Turner, III, pursuant to the Shareholders
Agreement dated September 22, 1995 with LMC or any successor
agreement;
WHEREAS "TCI's and LMC's Turner-Related Businesses" means the
businesses conducted by Southern Satellite Systems, Inc., a
subsidiary of TCI which is principally in the business of
distributing WTBS to MVPDs;
WHEREAS "Liberty Tracking Stock" means Tele-Communications,
Inc. Series A Liberty Media Group Common Stock and
Tele-Communications, Inc. Series B Liberty Media Group Common Stock;
WHEREAS Time Warner, Turner, TCI, and LMC are willing to enter
into a Consent Order requiring them, inter alia, to forego entering
into certain new programming service agreements for a period of six
months from the date that the parties close this Acquisition
("Closing Date"), but, in order to comply more fully with that
requirement, they must cancel now the two agreements that were
negotiated as part of this Acquisition: namely, (1) the September
15, 1995, program service agreement between TCI's subsidiary,
Satellite Services, Inc. ("SSI"), and Turner and (2) the September
14, 1995, cable carriage agreement between SSI and Time Warner for
WTBS (hereafter "Two Programming Service Agreements");
WHEREAS if the Commission accepts the attached Consent Order,
the Commission is required to place the Consent Order on the public
record for a period of at least sixty (60)
<PAGE>
Interim Agreement Page 3 of 5
days and may subsequently withdraw such acceptance pursuant to the
provisions of Rule 2.34 of the Commission's Rules of Practice and
Procedure, 16 C.F.R. ss. 2.34;
WHEREAS the Commission is concerned that if the parties do not,
before this order is made final, apply to the IRS for the IRS Ruling
and cancel the Two Programming Service Agreements, compliance with
the operative provisions of the Consent Order might not be possible
or might produce a less than effective remedy;
WHEREAS Time Warner, Turner, TCI, and LMC's entering into this
Agreement shall in no way be construed as an admission by them that
the Acquisition is illegal;
WHEREAS Time Warner, Turner, TCI, and LMC understand that no
act or transaction contemplated by this Agreement shall be deemed
immune or exempt from the provisions of the antitrust laws or the
Federal Trade Commission Act by reason of anything contained in this
Agreement;
NOW, THEREFORE, upon understanding that the Commission has not
yet determined whether the Acquisition will be challenged, and in
consideration of the Commission's agreement that, unless the
Commission determines to reject the Consent Order, it will not seek
further relief from Time Warner, Turner, TCI, and LMC with respect
to the Acquisition, except that the Commission may exercise any and
all rights to enforce this Agreement and the Consent Order to which
this Agreement is annexed and made a part thereof, the parties agree
as follows:
1. Within thirty (30) days of the date the Commission accepts
the attached Consent Order for public comment, TCI and LMC
shall apply to the IRS for the IRS Ruling.
2. On or before the Closing Date, Time Warner, Turner and TCI
shall cancel the Two Programming Service Agreements.
3. This Agreement shall be binding when approved by the
Commission.
Dated: _____________________
FOR THE FEDERAL TRADE COMMISSION
<PAGE>
Interim Agreement Page 4 of 5
- ----------------------
- ----------------------
Stephen Calkins
General Counsel
FOR TIME WARNER INC., A CORPORATION
By: ________________________
Gerald A. Levin
________________________
Counsel for Time Warner Inc.
FOR TURNER BROADCASTING SYSTEM, INC., A CORPORATION
By: ________________________
General Counsel
________________________
Counsel for Turner Broadcasting System, Inc.
FOR TELE-COMMUNICATIONS, INC., A CORPORATION
By: ________________________
John C. Malone
________________________
Counsel for Tele-Communications, Inc.
FOR LIBERTY MEDIA CORPORATION, A CORPORATION
By: ________________________
Vice President
________________________
Counsel for Liberty Media Corporation
SECOND AMENDED AND RESTATED LMC AGREEMENT,
dated as of September 22, 1995 (this
"Agreement"), among TIME WARNER INC., a
Delaware corporation, TW INC., a Delaware
corporation ("Holdco"), LIBERTY MEDIA
CORPORATION, a Delaware corporation ("LMC
Parent"), TCI TURNER PREFERRED, INC., a
Colorado corporation ("TCITP"), and
certain, other subsidiaries of LMC Parent
listed with TCITP under "Subsidiaries of
LMC Parent" on the signature pages hereto
(TCITP and such subsidiaries collectively,
the "Shareholders").
Recitals
A. This Agreement amends and restates in its entirety the
Amended and Restated LMC Agreement, dated as of September 22, 1995
(the "Amended LMC Agreement"), among the parties hereto, which in turn
amended and restated the LMC Agreement dated as of September 22, 1995
(the "Original LMC Agreement"), among Old TW, LMC Parent, LMC Sub and
the other Shareholders.
B. The Original LMC Agreement was entered into concurrently
with, and in contemplation of, the Agreement and Plan of Merger dated
as of September 22, 1995 (the "Original Merger Agreement"), among Old
TW, Time Warner Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of Old TW ("Delaware Sub"), and Turner Broadcasting
System, Inc., a Georgia corporation (the "Company"), providing for the
merger of the Company with and into Delaware Sub.
C. The Amended LMC Agreement was entered into concurrently
with, and in contemplation of, (1) the Original Merger Agreement being
amended and restated (as so amended and restated, and as amended by
Amendment No. 1 thereto dated as of August 8, 1996, the "Amended and
Restated Merger Agreement") to provide for, among other things, a
tax-free incorporation transaction under Section 351 of the Internal
Revenue Code of 1986, as amended, as contemplated by Section 1.01 of
the Original Merger Agreement, and (2) both Holdco and TW Acquisition
Corp., a Georgia corporation and direct wholly owned subsidiary of
Holdco ("Georgia Sub"), becoming parties to the Amended and Restated
Merger Agreement. Holdco is currently a direct wholly owned subsidiary
of Old TW, and Delaware Sub is a direct wholly owned subsidiary of
Holdco. The Amended and Restated Merger Agreement provides
<PAGE>
for the merger of Delaware Sub into Old TW (the "TW Merger") and the
simultaneous merger of Georgia Sub into the Company (the "TBS Merger"
and, collectively with the TW Merger, the "Mergers"), in a transaction
in which the outstanding capital stock of Old TW and the Company,
respectively, will be converted into capital stock of Holdco, and each
of Old TW and the Company will become a wholly owned subsidiary of
Holdco.
D. The TBS Merger is subject to certain conditions,
including the approval of the TBS Merger and the approval and adoption
of the Amended and Restated 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.
E. 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 September 22,
1995 and prior to the Effective Time of the Mergers, being
collectively referred to herein as the "Shareholder Shares").
F. The TBS Merger is also subject to the condition that the
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended (the "HSR Act") shall have expired. In connection
therewith, Old TW, Tele-Communications, Inc., a Delaware corporation
("TCI"), LMC Parent and the Company have entered into an Agreement
Containing Consent Order (the "ACCO") dated as of August , 1996, and
an Interim Agreement in the form attached as Appendix I to the ACCO,
with the Federal Trade Commission (the "FTC"), which contemplates the
issuance of an Order (the ACCO, together with such Order and the
Interim Agreement, in each case as the same may be amended or modified
from time to time hereafter, the "FTC Consent Decree").
G. Old TW, Holdco, LMC Parent and the Shareholders desire to
amend and restate in its entirety the Amended LMC Agreement and the
Original LMC Agreement as amended thereby, as provided herein.
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties do hereby agree as follows:
<PAGE>
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 Amended and Restated 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 Amended and Restated Merger
Agreement, (prior to the execution and delivery of the Amended and
Restated Merger Agreement) the Original Merger Agreement, any
Additional Agreement or any other agreement expressly contemplated by
this Agreement, the Amended and Restated Merger Agreement or any
Additional Agreement.
"Additional Agreements" shall mean the Registration Rights
Agreement, the First Refusal Agreement, the SSSI Agreement, the
Distribution Contract, the Rights Amendment (if entered into), the
SportSouth Agreement, the Sunshine Agreement, the Contribution and
Exchange Agreement and the Program and Digitization 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 or a SpinCo 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 correlative
meaning. For purposes of this Agreement: (i). no Liberty Party or
SpinCo Party shall be deemed to be an Affiliate of TW Parent or any of
its subsidiaries and neither TW Parent nor any of its
<PAGE>
Affiliates shall be deemed to be an Affiliate of any Liberty Party or
SpinCo Party; prior to the effective time of the TBS 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; and after the effective time of
the Distribution, in determining whether any person is an Affiliate of
SpinCo, the SpinCo Convertible Preferred Stock shall be assumed to
have been converted by the holders thereof into SpinCo Series A Common
Stock and SpinCo Series B Common Stock, as applicable.
"Blended Rate", as to any Liberty Party or SpinCo Party, as
applicable, 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 or SpinCo Party
during such taxable year as contemplated by Section 4.3 and Section
4.4(a), 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) or of the SpinCo Party (or of the
consolidated group of which such SpinCo 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) or such SpinCo Party (or such consolidated group),
as applicable, for such taxable year. Such tax rate shall be
determined taking into account such Liberty Party's (or its
consolidated group's) or such SpinCo 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 September 22, 1995, 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
September 22, 1995, 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 Original Merger Agreement, the Amended and
Restated 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, or (iii) prior to the
Closing, Holdco ceasing to be a wholly owned subsidiary of Old TW or
entering into any agreement (other than the
<PAGE>
Amended and Restated Merger Agreement or any amendment thereto)
that would result in Holdco ceasing to be a wholly owned
subsidiary of Old TW.
"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 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 those certain letters dated
September 22, 1995, December 1, 1995, and August 8, 1996, from the
Company to Old TW 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.
"Contribution and Exchange Agreement" shall mean the
Contribution and Exchange Agreement, dated as of September 22, 1995,
to be entered into by Holdco, Old TW, TCITP and LBI, concurrently with
the execution and delivery of this Agreement, and the Exhibit and
Schedules thereto, a copy of which is annexed hereto as Exhibit I.
"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.
<PAGE>
"Covered TW Securities" shall mean:
(i) (A) the shares of TW Parent Common Stock beneficially
owned by LMC Parent immediately following the
consummation of the TBS Merger as a result of the
conversion in the TBS Merger of the shares of Company
Capital Stock beneficially owned by LMC Parent on
September 22, 1995;
(B) the shares of TW Parent Common Stock received by
TCITP and LBI pursuant to the Contribution and Exchange
Agreement in connection with their contribution to
Holdco of the issued and outstanding shares of capital
stock of UCTI, assuming that the shares of Company
Capital Stock owned by UCTI did not include any shares
of Company Capital Stock not beneficially owned by LMC
Parent on September 22, 1995; and
(ii) all shares of Holdco LMC Common Stock issued pursuant
to the SSSI Agreement; and
(iii) all shares of Holdco LMC Common Stock for which the
shares of TW Parent Common Stock referred to in clause (i)
above 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.
"Distribution" means the proposed distribution by TCI to the
holders of shares of Tele-Communications, Inc. Series A Liberty Media
Group Common Stock, and to the holders of shares of
Tele-Communications, Inc. Series B Liberty Media Group Common Stock,
of all of the issued and outstanding shares of common stock of SpinCo.
"Distribution Contract" shall mean the Distribution
Contract, substantially in the form of Exhibit 1 to the SSSI
Agreement, to be entered into by Holdco, SpinCo and Satellite, at or
prior to the Closing (but will not become effective until the
"Closing" under the SSSI Agreement).
"Exchange Act" means the Securities Exchange Act of 1934,
and the rules and regulations thereunder.
"FCC" shall mean the Federal Communications Commission and
any successor agency or other agency charged with the administration
of any Communications Law.
<PAGE>
"First Refusal Agreement" shall mean the Stockholders
Agreement substantially in the form of Exhibit B, to be entered into
by Holdco, the Shareholders (other than UCTI), LBI and certain other
shareholders of the Company at or prior to the Closing.
"Holdco LMC Common Stock" shall mean the LMCN-V Common Stock
and the Voting Holdco LMC Common Stock, collectively.
"Holdco Rights Plan" shall have the meaning given to such
term in Section 2.3(c).
"Horizontal Rule" shall mean the rule promulgated by the FCC
that is set forth at 47 C.F.R. 76.503 on September 22, 1995.
"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.
"LBI" shall mean Liberty Broadcasting, Inc., an Oregon
corporation.
"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 Affiliate of TCI, shall also mean TCI and
each Affiliate of TCI that is controlled by TCI.
"Lien" shall mean any pledge, claim, lien, charge,
encumbrance or security interest of any kind or nature whatsoever.
"LMCN-V Common Stock" shall mean the Series LMCN-V Common
Stock of Holdco, having the terms set forth in Exhibit A.
"Old TW" shall mean the Delaware corporation known as "Time
Warner Inc." on September 22, 1995, and, in the event of any merger,
consolidation or binding share exchange after such date (other than
pursuant to the Amended and Restated Merger Agreement or any amendment
thereto), any successor corporation.
"Option Consideration" shall mean the shares of Holdco LMC
Common Stock to be issued and delivered, and, if so elected by Holdco
as provided in the SSSI Agreement, the cash to be paid by TW Parent
pursuant to the SSSI Agreement in respect of the non-competition
agreement and contract option contained therein (specifically
excluding any amounts to be paid under the Distribution Contract).
"person" shall have the meaning ascribed to such term in the
Amended and Restated Merger Agreement and shall include any
Governmental Entity.
<PAGE>
"Program and Digitization Agreement" shall mean the letter
agreement, dated August __, 1996, between Satellite and the Company
with respect to, among other things, the carriage by Satellite of
certain programming services of the Company and Satellite's non-
exclusive right to digitize, compress and reuplink certain programming
services of the Company.
"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)(i) 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 (ii) of making the
continued ownership by the SpinCo Parties or any of them of any TW
Securities then owned by the SpinCo 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 or the SpinCo Parties or any of them of damages or penalties by
reason of or as a result of the ownership by any of the Liberty
Parties or SpinCo Parties of TW Securities or (c) of requiring the
divestiture of, or resulting in the requirement to divest, any TW
Securities by any Liberty Party or SpinCo Party under any Specified
Law, or (d) of requiring, or resulting in the requirement, under any
Specified Law that any Liberty Party or SpinCo Party discontinue any
business or divest of any business or assets or that any license that
such Liberty Party or SpinCo 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.
"Registration Rights Agreement" shall mean the LMC
Registration Rights Agreement substantially in the form of Exhibit E,
to be entered into by Holdco, LMC Parent, the Shareholders (other than
UCTI), LBI and SpinCo at or prior to the Closing.
"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
(i) if the Distribution does not occur, continuing until the first
time that the ownership or deemed ownership by the Liberty Parties of
the TW Parent Common Stock, Voting Holdco LMC Common Stock and other
voting securities of TW Parent then owned by the Liberty Parties
(assuming conversion in full of all LMCN-V Common Stock and the
absence of any restriction on the exercise of the rights of a holder
of voting securities of TW Parent) would not either (x) 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)
or (y) violate the FTC Consent Decree; and (ii) if the Distribution
occurs, continuing until the first time that both the ownership
<PAGE>
by the SpinCo Parties of the TW Parent Common Stock, Voting Holdco LMC
Common Stock and other voting securities of TW Parent then owned by
the SpinCo Parties (assuming conversion in full of all LMCN-V Common
Stock and the absence of any restriction on the exercise of the rights
of a holder of voting securities of TW Parent), and any deemed
ownership of such TW Parent securities (assuming such conversion and
absence of restrictions) by the Liberty Parties pursuant to any
relevant attribution rules of the Communications Laws (assuming for
this purpose the conversion of the SpinCo Convertible Preferred Stock
into SpinCo Series A Common Stock and SpinCo Series B Common Stock, as
applicable, by the holders thereof), would not either (x) 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)
or (y) violate the FTC Consent Decree. Notwithstanding the foregoing,
if any LMCN-V Common Stock is converted into TW Parent Common
Stock or into Voting Holdco LMC Common Stock by any Liberty Party
(other than in connection with the transfer thereof, whether voluntary
or involuntary, to a person that is not a Liberty Party or SpinCo
Party), then the Restriction Period shall be deemed to terminate upon
such conversion with respect to the Liberty Parties and if any
LMCN-V Common Stock is converted into TW Parent Common Stock or into
Voting Holdco LMC Common Stock by any SpinCo Party (other than in
connection with the transfer thereof, whether voluntary or
involuntary, to a person that is not a Liberty Party or SpinCo Party),
then the Restriction Period shall be deemed to terminate upon such
conversion with respect to the SpinCo Parties.
"Rights Amendment" shall mean those amendments described on
Exhibit F to the terms of the Rights Agreement.
"Satellite" shall mean Satellite Services, Inc., a Delaware
corporation.
"Specified Law", when used with respect to the Liberty
Parties or SpinCo 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,
(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 SpinCo Party or to
which a Liberty Party or SpinCo Party, any of its assets or any
business conducted by it is subject and (iv) the FTC Consent Decree.
Following the Distribution, "Specified Law" shall specifically exclude
the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder. 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.
"SpinCo" shall mean Southern Satellite Systems, Inc., a
Georgia corporation, and any successor thereto by operation of law.
<PAGE>
"SpinCo Party" shall mean, after the effective time of the
Distribution, SpinCo and each Affiliate of SpinCo that is Controlled
by SpinCo from time to time and, for so long as SpinCo is an Affiliate
of TCI, shall also mean TCI and each Affiliate of TCI that is
Controlled by TCI.
"SpinCo Convertible Preferred Stock" shall mean the classes
or series of preferred stock of SpinCo to be issued immediately
following the Distribution to John C. Malone, Bob Magness and
Kearns-Tribune Corporation in exchange for their shares of SpinCo
Series A Common Stock and in exchange for their shares of SpinCo
Series B Common Stock, as contemplated by the FTC Consent Decree. One
class or series of the SpinCo Convertible Preferred Stock will be
convertible into SpinCo Series A Common Stock, and the other series
will be convertible into SpinCo Series B Common Stock, subject to the
restrictions of the FTC Consent Decree.
"SpinCo Series A Common Stock" shall mean that series of
SpinCo's common stock to be known as Series A Common Stock, $.01 par
value per share. The Series A Common Stock will have one vote per
share.
"SpinCo Series B Common Stock" shall mean that series of
SpinCo's common stock to be known as Series B Common Stock, $.01 par
value per share. The Series B Common Stock will have ten votes per
share.
"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 hereto as Exhibit G.
"SSSI Agreement" shall mean the SSSI Agreement substantially
in the form of Exhibit D, to be entered into by Holdco, LMC Parent,
SpinCo and Satellite at or prior to the Closing.
"Sunshine Agreement" shall mean an agreement substantially
in the form of Exhibit H 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.
<PAGE>
"Transactions" shall mean the Mergers, the other
transactions contemplated by the Amended and Restated Merger Agreement
and the transactions contemplated by this Agreement and the Additional
Agreements.
"Turner Letter" shall mean those certain letters dated
September 22, 1995, December 1, 1995, and August 8, 1996, from R.E.
Turner, III to Old TW and LMC Parent.
"TW Parent" shall mean (i) Old TW, with respect to all times
prior to the Closing, and (ii) Holdco, with respect to all times from
and after the Closing.
"TW Parent Common Stock" shall mean (i) prior to the
Closing, the common stock, par value $1.00 per share, of Old TW, as it
exists on September 22, 1995, and (ii) on and after the Closing, the
Common Stock, par value $.01 per share, of Holdco as it then exists,
and shall include, in all cases, 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
(other than the TW Merger), 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 Holdco LMC Common Stock and the
LMCN-V Common Stock.
"UCTI" shall mean United Cable Turner Investment, Inc., a
Colorado corporation.
"Voting Holdco LMC Common Stock" shall mean the Series LMC
Common Stock of Holdco, having the terms set forth in Exhibit C.
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.
<PAGE>
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 TBS Merger and each of the other
transactions contemplated by the Amended and Restated Merger Agreement
and in favor of the approval of the Amended and Restated 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 sought: (i) the Amended and Restated Merger
Agreement shall be in full force and effect in the form originally
executed, as amended through August 8, 1996, and shall not have been
thereafter amended in any respect, nor shall any right of the Company
or obligation of Old TW thereunder (including any condition to the
obligation of the Company to consummate the TBS Merger and the other
transactions contemplated by the Amended and Restated Merger
Agreement) have been waived, other than any amendments and waivers
that do not change the consideration to be received in exchange for
Company Capital Stock in the TBS 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 TBS
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 TBS 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.
<PAGE>
(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, Old TW, Time TBS Holdings, Inc. ("Time-TBS"), 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 Old TW, 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 Original Merger Agreement and the Amended and Restated
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 by reason of
such execution, delivery or performance. Each of Old TW, Time-TBS,
TCI, TCIC, LMC Parent and each Shareholder confirms and agrees that
the execution, delivery and performance of this Agreement, the
Original Merger Agreement, the Amended and Restated Merger Agreement,
the Additional Agreements 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. Each
Shareholder and LMC Parent consents to the execution and delivery
by Old TW, Holdco, Delaware Sub, Georgia Sub and the Company of
Amendment No. 1 to the Amended and Restated Merger Agreement and the
execution and delivery by Old TW and the Company of the FTC Consent
Decree. Old TW and Holdco each consent to the execution and delivery
by LMC Parent and TCI of the FTC Consent Decree.
(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
<PAGE>
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 Holdco LMC
Common Stock pursuant to the Amended and Restated Merger Agreement,
the SSSI Agreement, the First Refusal Agreement or otherwise), any
agreement to divest of any such shares, any requirement not to
receive, or to agree to divest, shares of Voting Holdco LMC Common
Stock or LMCN-V Common 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, as
provided in the FTC Consent Decree and other than the required
exchange of TW Parent Common Stock for Holdco LMC Common 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 or any of
LMC Parent's other Affiliates to terminate or modify the terms of any
pledge of any shares of capital stock of the Company held by LMC
Parent, such Shareholder or Affiliate existing as of the date of
execution hereof (including, without limitation, either of the Pledge
Agreements, as such term is defined in the letter dated June 28, 1996,
from LMC Parent to Old TW and Holdco).
SECTION 2.2 Reasonable Efforts. Prior to the Termination
Date, TCI and LMC Parent shall, and LMC Parent shall cause each
Shareholder to, and Old TW and Holdco 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 Amended and Restated 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
<PAGE>
in Section 2.1(d), (ii) to agree to enter into or be bound by any
settlement or judgment (other than the FTC Consent Decree), (iii) to
agree to any change to the terms of this Agreement or any of the
Additional Agreements or (iv) to seek or agree to any changes to the
terms of the FTC Consent Decree.
SECTION 2.3 Agreement to Abandon. Old TW and Holdco shall,
upon the written request of LMC Parent, terminate the Amended and
Restated Merger Agreement and abandon the TBS Merger if:
(a) on the date fixed for the Closing (i). this Agreement,
any Additional Agreement or the Amended and Restated Merger Agreement
or consummation of the Mergers or any other Transaction shall be
illegal, the consummation of the Mergers or any other Transaction
would result in the imposition on the Liberty Parties (or, after the
Distribution, the SpinCo Parties) of damages or penalties (other than
any such damages or penalties arising out of a breach of this
Agreement, any Additional Agreement or the FTC Consent Decree by LMC
Parent or any of its Affiliates or for which TW Parent and/or Holdco
has agreed to indemnify LMC Parent and its Affiliates), the FTC
has failed to accept or denied acceptance of the FTC Consent Decree
for public comment 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) (including any proceeding with respect to an alleged
violation of the FTC Consent Decree other than any proceeding by or
before the FTC as contemplated by the FTC Consent Decree); 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 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, Holdco shall have adopted
any shareholder rights plan or other form of poison pill (any such
plan (regardless of when adopted by Holdco), the "Holdco Rights
Plan"), other than a shareholder rights plan identical in all material
respects to the Rights Agreement, as amended in accordance with the
Rights Amendment (the "Amended TW Plan"); 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 Amended and Restated 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
<PAGE>
(f) any Action shall have been taken by Old TW or any of its
Controlled Affiliates after September 22, 1995 and prior to the
Closing which if taken after the Effective Time of the Mergers would
result in a Prohibited Effect; or
(g) as of the date fixed for the Closing, (i) the
representations and warranties of Old TW and Holdco made herein and to
be made in each Additional Agreement to which Old TW or Holdco 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 (other than the
Distribution Contract) 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 Company Letter or Turner
Letter shall not have been made; or
(h) as of the date fixed for the Closing, any required
approval by the stockholders of Old TW of the issuance and payment of
the Option Consideration or of this Agreement, any of the Additional
Agreements or the Transactions has not been obtained.
SECTION 2.4 Closing Deliveries. At the Closing, Old TW,
Holdco, 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 Contribution and Exchange 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. 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 Sections 3.2 and 3.3, respectively, are true in all material
respects on and as of the Closing Date with the same force and effect
as if then made and that such party is in compliance in all material
respects with the FTC Consent Decree.
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 TBS Merger is effectuated.
<PAGE>
SECTION 2.6 Abandoned and Terminated Agreements. The parties
hereto acknowledge that upon the initial acceptance by the FTC of the
FTC Consent Decree for public comment, the Voting Trust Agreement in
the form of Exhibit J to the Original LMC Agreement, as amended by the
Amended LMC Agreement, and the SSSI Agreement (including the related
Cable Carriage Agreement) in the form of Exhibit D to the Original LMC
Agreement, as amended by the Amended LMC Agreement, will not be
entered into and have been abandoned. The TW/LMC Letter Agreement (as
defined in the Amended LMC Agreement) is hereby terminated and the
"Elective Merger" contemplated thereby abandoned. Upon the initial
acceptance by the FTC Consent Decree for public comment, the Program
Service Agreement, dated September 15, 1995, a copy of which was
attached as Exhibit E to the Original LMC Agreement, will
automatically be terminated by the parties thereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of LMC Parent and
the Shareholders. Each Shareholder represents and warrants to Old TW,
as to itself, and LMC Parent represents and warrants to Old TW as to
itself and as to each Shareholder, that (assuming that the consents,
waivers and agreements given and made by Old TW 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 September 22, 1995 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 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 (i) the
Investors Agreement dated as of June 3, 1987, among the Company and
the original holders of the Class C Preferred Stock; (ii) 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;
(iii) the Voting Agreement dated as of June 3, 1987, among certain
holders of Class C Preferred Stock; and (iv) the Agreement dated as of
June 3, 1987 among Old TW, certain of the Shareholders and certain
other holders of Class C Preferred Stock affiliated with Old TW and/or
LMC Parent. To the knowledge of TCI and LMC Parent, none of TCI, LMC
Parent or any of
<PAGE>
their respective Affiliates are party to any agreement with the
Company, any of the Company's Affiliates, Old TW or any of Old TW's
Affiliates that would require the consent, waiver or approval of or by
TCI, LMC Parent or any of their respective Affiliates of the Mergers
or for the consummation of any of the Transactions, or the execution,
delivery or performance of the Amended and Restated 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, the FTC
Consent Decree 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, the FTC Consent Decree 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 and the FTC Consent Decree have been,
and when delivered at or prior to the Closing 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, the FTC Consent Decree 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, 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 Amended and Restated 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
<PAGE>
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 and the
initial acceptance of the FTC Consent Decree, (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 September 22,
1995, 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 Mergers or any of the other Transactions. As of
September 22, 1995, 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 Common Stock issuable to such
Shareholder in connection with the Mergers (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 Old TW. Old TW
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) Old TW 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 September 22, 1995. As of
September 22, 1995, no amendments to the Rights Agreement have been
authorized, approved or adopted and there is
<PAGE>
no commitment, arrangement or understanding by Old TW to effect any
amendment other than the Rights Amendment.
(b) Old TW has all requisite corporate power and authority
to enter into this Agreement, the FTC Consent Decree 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, the FTC Consent Decree and
each such Additional Agreement by Old TW 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 and
the FTC Consent Decree have been, and when delivered at or prior to
the Closing each of such Additional Agreements will have been, duly
executed and delivered by Old TW and the applicable Affiliates of Old
TW named as parties thereto (if any) (each, an "Applicable TW
Affiliate", which term shall also include Holdco, Delaware Sub and
Georgia Sub) 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 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). Except as otherwise
set forth in the Amended and Restated Merger Agreement or in the
Parent Disclosure Letter, the execution and delivery of this
Agreement, the FTC Consent Decree and each of the Additional
Agreements to which it is contemplated to be a party by Old TW 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 Old TW or any Parent Subsidiary under, (i) the
Restated Certificate of Incorporation or By-laws of Old TW or the
comparable organizational documents of any Parent Subsidiary, (ii) any
Contract to which Old TW or any Parent Subsidiary 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 Amended and
Restated Merger Agreement and in the following sentence, any
Requirement of Law applicable to Old TW 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 Old TW 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 Amended and Restated 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 Old TW or any Applicable TW Affiliate
in connection with the execution
<PAGE>
and delivery of this Agreement or any applicable Additional Agreement
by Old TW or any Applicable TW Affiliate or the consummation by Old TW
or any Applicable TW Affiliate, as the case may be, of any of the
Transactions, except for (i) filings under the HSR Act and the initial
acceptance of the FTC Consent Decree, (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 Old
TW 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 Old TW, none of Old TW 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 Old TW or any of its
Affiliates of the Mergers or for the consummation of any of the
Transactions, or the execution, delivery or performance of the Amended
and Restated Merger Agreement, this Agreement or the Additional
Agreements, other than the Stock Agreements.
(c) Except as disclosed in the Parent Disclosure Letter, as
of September 22, 1995, there is no suit, action or proceeding
(including any proceeding by or before the FCC) pending or, to the
knowledge of Old TW, threatened against or affecting Old TW or any of
its Affiliates (and Old TW 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 Old TW 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
Mergers or any of the other Transactions.
(d) As of September 22, 1995, and other than the Horizontal
Rule, Old TW 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 Mergers (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 and Bear,
Stearns & Co. Inc., the fees and expenses of which will be paid by Old
TW, 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 Old TW or Holdco.
SECTION 3.3 Representations and Warranties of Holdco. Holdco
represents and warrants to LMC Parent and each Shareholder that:
<PAGE>
(a) Holdco has delivered to LMC Parent complete and correct
copies of its Certificate of Incorporation and By-laws and the Holdco
Rights Plan, if any, in each case as amended to the date of execution
of this Agreement, including, without limitation, all certificates of
designation. As of the date of execution hereof, no amendments to any
of the foregoing have been authorized, approved or adopted and there
is no commitment, arrangement or understanding by Holdco (other than
pursuant to the Amended and Restated Merger Agreement and this
Agreement) to effect any such amendment. All shares of Holdco LMC
Common Stock which may be issued pursuant to Section 4.1 or 4.2 or
pursuant to the SSSI Agreement will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(b) Holdco 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
Holdco and the consummation by it 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 each of such Additional
Agreements will have been, duly executed and delivered by Holdco and
constitutes, or in the case of such Additional Agreements will as of
the Closing constitute, a valid and binding obligation of Holdco,
enforceable against Holdco in accordance with its terms (except 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). 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 by Holdco and the consummation by it 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 Holdco or any subsidiary of Holdco under, (i)
the Certificate of Incorporation or By-laws of Holdco or the
comparable organizational documents of any subsidiary of Holdco, (ii)
any Contract to which Holdco or any subsidiary of Holdco 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 Holdco or any subsidiary of Holdco 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 Holdco or any subsidiary
of Holdco 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
<PAGE>
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 Holdco or any
subsidiary of Holdco in connection with the execution and delivery of
this Agreement or any applicable Additional Agreement by Holdco or the
consummation by Holdco or any subsidiary of Holdco, as the case may
be, of any of the Transactions, except for (i) filings under the HSR
Act and the initial acceptance of the FTC Consent Decree, (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 Holdco or any subsidiary of
Holdco 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 Holdco, none of Holdco 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 Holdco or any of its Affiliates
of the Mergers 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.
(c) Except as disclosed in the Parent Disclosure Letter, as
of September 22, 1995, there is no suit, action or proceeding
(including any proceeding by or before the FCC) pending or, to the
knowledge of Holdco, threatened against or affecting Holdco or any its
Affiliates (and Holdco 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 Holdco 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 Mergers or any of the other
Transactions.
(d) As of September 22, 1995, and other than the Horizontal
Rule, Holdco 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 Mergers (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 and Bear,
Stearns & Co. Inc., the fees and expenses of which will be paid by Old
TW, 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 Old TW or Holdco.
<PAGE>
ARTICLE IV
CERTAIN POST-CLOSING COVENANTS
SECTION 4.1 Share Exchange. Immediately following the
Effective Time of the Mergers, 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 LMCN-V Common Stock. The rate of
exchange pursuant to the foregoing provisions of this Section 4.1
shall be one share of TW Parent Common Stock for each whole share of
LMCN-V Common Stock. An exchange for LMCN-V Common Stock shall be
effected through a direction from each Shareholder to the Exchange
Agent (or, in the case of an exchange in connection with the
Contribution and Exchange Agreement, such other agent of Holdco
exercising a similar function) to register all of the shares of TW
Parent Common Stock issuable to such Shareholder in the Mergers (or
the transactions relating to the Contribution and Exchange Agreement,
as applicable) 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 LMCN-V Common
Stock. All shares of Holdco LMC Common Stock delivered to the Liberty
Parties or the SpinCo Parties from time to time in accordance with
this Agreement shall be duly authorized, validly issued, fully paid
and nonassessable and free of preemptive rights. For so long as the
Liberty Parties or SpinCo Parties hold any LMCN-V Common Stock, all of
the TW Parent Common Stock and Voting Holdco LMC Common Stock from
time to time owned beneficially or of record (a) by LMC Parent or any
of its Controlled Affiliates, (b) by any SpinCo Party or (c) for so
long as TCI is a Liberty Party, by TCI or any of its Controlled
Affiliates (other than any of 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 Old TW dated September 22, 1995,
unless and until TCI acquires sole voting and dispositive control of
such shares) shall be delivered to TW Parent for exchange for LMCN-V
Common Stock; provided, however, that the obligations in this sentence
shall terminate with respect to (x) LMC Parent and its Controlled
Affiliates, and TCI and its Controlled Affiliates, upon the
termination of the Restriction Period with respect to the Liberty
Parties and (y) the SpinCo Parties, upon the termination of the
Restriction Period with respect to the SpinCo Parties. TW Parent shall
issue, in exchange for the TW Parent Common Stock delivered to it
pursuant to the immediately preceding sentence, a number of shares of
LMCN-V Common 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 LMCN-V Common Stock, and, in
exchange for each share of Voting Holdco LMC Common Stock delivered to
it at any time pursuant to the two immediately preceding sentences,
one share of LMCN-V Common Stock.
SECTION 4.2 No Redemption. The Voting Holdco LMC Common
Stock and the LMCN-V Common Stock shall not be redeemable at the
option of TW Parent, including pursuant to any provision equivalent to
Section 5 of Article IV of Old TW's Restated Certificate
<PAGE>
of Incorporation, as amended, as in effect on September 22, 1995
contained in Holdco's 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 or
SpinCo Party of any of its shares of TW Parent Common Stock unless it
has first given at least 10 business days' prior written notice of
such redemption to each Liberty Party or SpinCo Party, as applicable
(which notice shall state that TW Parent intends to effect the
redemption of shares of TW Parent Common Stock held by such Liberty
Party or SpinCo 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 or SpinCo Party,
as applicable, 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 Holdco LMC Common 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 Mergers,
(i) any Action shall be taken by TW Parent or any of
its Controlled Affiliates (including, after the effective
time of the TBS Merger, 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 or the FTC Consent Decree by LMC Parent or
any Applicable LMC Affiliate or by any SpinCo Party; and
(iii) if such Prohibited Effect relates to a Liberty
Party, such Action shall have been taken prior to the
termination of the Restriction Period with respect to the
Liberty Parties; and if such Prohibited Effect relates to a
SpinCo Party, such action shall have been taken prior to the
termination of Restriction Period with respect to the SpinCo
Parties;
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, if the
Prohibited Effect is with respect to a Liberty Party, or SpinCo, if
the Prohibited Effect is with respect to a SpinCo Party, shall notify
TW Parent thereof. If such notice is received by TW Parent prior to
<PAGE>
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 pay compensation 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, if the Prohibited Effect is
with respect to a Liberty Party, or SpinCo, if the Prohibited Effect
is with respect to a SpinCo Party (the applicable of the foregoing
being the "Notice Party"), shall notify TW Parent thereof. Following
the giving of such notice, the Notice Party 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 the Notice Party 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 (if prior to the
Distribution or the Distribution does not occur) or the SpinCo Parties
(if the Distribution occurs) (the Liberty Parties or the SpinCo
Parties, as applicable, being the "Affected Parties") pursuant to this
Section 4.3 if a Prohibited Effect described in Section 4.3(a) occurs;
provided, however, that if the Notice Party and TW Parent also agree
that certain actions could be taken by the Notice Party and its
Controlled Affiliates (or by the Affected Party, if different from the
Notice Party, and its Controlled Affiliates) to eliminate the
Prohibited Effect which would be substantially less burdensome to the
Notice Party and its Controlled Affiliates (and to the Affected Party,
if different from the Notice Party, 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
Affected Parties pursuant to this Section 4.3, then subject to the
following sentence, the Liberty Parties or SpinCo Parties, as the case
may be, shall, at TW Parent's expense, use reasonable efforts to take
such actions. Notwithstanding the foregoing, unless such Liberty Party
or SpinCo Party otherwise agrees, no Liberty Party or SpinCo Party
shall be required to dispose of any of its TW Securities, to dispose
of any assets or discontinue any business or investments that LMC
Parent or SpinCo, as applicable, determines in good faith are material
to the Liberty Parties or SpinCo Parties or their respective strategic
objectives, or to agree to any restrictions or limitations that LMC
Parent or SpinCo, as applicable, 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 or the applicable of the
Liberty Parties or SpinCo Parties, as agreed by TW Parent and LMC
Parent or SpinCo, as applicable, have commenced an agreed upon
<PAGE>
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 or SpinCo 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 Affected Parties pursuant to this
Section 4.3.
(e) If TW Parent becomes obligated to compensate the
Affected Parties pursuant to this Section 4.3, then TW Parent shall be
required to (i) compensate any Affected 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 Affected Parties
pursuant to clause (i) above equals or exceeds (on an as converted
basis, if applicable) 5% of the sum of the number of Covered TW
Securities of all Shareholders immediately after the Effective Time of
the Mergers, plus the number of Covered TW Securities included in the
Option Consideration (as such numbers 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 (if the Affected Party is a Liberty Party)
or SpinCo (if the Affected Party is a SpinCo Party) (exercised by
notice in writing to TW Parent within 60 days of the first disposition
pursuant to clause (i) above), compensate all Affected Parties for the
disposition of all the Covered TW Securities if all TW Securities of
all Affected Parties are disposed of within 12 months of such notice
(provided that claims for compensation may be made pursuant to the
following sentences as dispositions are made during such 12-month
period and payment of such claims shall not be delayed or deferred for
such 12 month period, but rather shall be paid as provided below, and
provided, further, that if all TW Securities of the Affected Parties
are not disposed of within such 12-month period, the Affected Parties
shall reimburse TW Parent for the amount of compensation paid pursuant
to this clause (ii) that is in excess of the amount that was required
to be paid pursuant to clause (i) of this sentence). If TW Parent
becomes obligated to compensate any Affected Party pursuant to this
Section 4.3, then such Affected 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 particular disposition occurred and the estimated Adjustment
Amount owed to such Affected Party with respect to those of its TW
Securities so disposed of. Within 30 days after delivery of such
statement, TW Parent shall pay to such Affected Party the estimated
Adjustment Amount by wire transfer of immediately available funds to
such account and in accordance with such instructions as such Affected
Party shall have previously advised TW Parent in writing. Within 30
days after the end of the taxable year in which the particular
disposition of TW Securities by such Affected Party occurred, such
Affected 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 Affected Party with respect to such disposition.
Within five days after delivery of such statement, (i) TW Parent
<PAGE>
shall pay to such Affected Party an amount equal to the amount by
which the Adjustment Amount exceeds the estimated Adjustment Amount,
or (ii) such Affected 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.
(f) LMC Parent shall upon request from time to time advise
TW Parent of the identity of each Liberty Party and, following the
Distribution, SpinCo shall upon request from time to time advise TW
Parent of the identity of each SpinCo Party.
SECTION 4.4 Certain Post-Closing Covenants.
(a) If a Holdco Rights Plan is in effect immediately
following the Effective Time of the Mergers or no Holdco Rights Plan
is then in effect, but a Holdco Rights Plan is thereafter adopted,
then, in either such case, such Holdco Rights Plan (the "Initial
Rights Plan") shall, in all material respects, be the same as the
Amended TW Plan. If Holdco amends the Initial Rights Plan or adopts a
new Holdco Rights Plan after adoption of the Initial Rights Plan (such
amended or new plan, the "Subsequent Rights Plan") and the "Beneficial
Ownership" by any Liberty Party or SpinCo Party, alone or together
with all of its "Affiliates" and "Associates", of TW Securities would,
by reason of and immediately upon such amendment or adoption, have
effects ("Rights Plan Effects") under such Subsequent Rights Plan
analogous to the effects under the Rights Agreement of a person
becoming an "Acquiring Person" (as defined therein) or of the rights
issued pursuant to the Rights Agreement becoming transferable
separately from the TW Parent Common Stock, but such "Beneficial
Ownership" would not have had such effects under the Amended TW Plan,
then Holdco shall be required to (i) compensate, as provided below,
any such Liberty Party or SpinCo Party, together with its "Affiliates"
and "Associates", that disposes of TW Securities (the "Selling
Parties") to the extent necessary to avoid the Rights Plan Effects and
(ii) if the aggregate number of TW Securities disposed of by the
Selling Parties pursuant to clause (i) above equals or exceeds (on an
as converted basis, if applicable) 5% of the sum of the number of
Covered TW Securities of all Shareholders immediately after the
Effective Time of the Mergers, plus the number of Covered TW
Securities included in the Option Consideration (as such numbers 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, on
behalf of the Liberty Parties, and at the option of SpinCo, on behalf
of the SpinCo Parties (exercised by notice in writing to Holdco within
60 days of the first disposition pursuant to clause (i) above),
compensate, as provided below (x) all Selling Parties that are Liberty
Parties for the disposition of all TW Securities owned by the Liberty
Parties of the type considered by the Subsequent Rights Plan in
determining the "Beneficial Ownership" that would trigger Rights Plan
Effects (the "Relevant TW Securities") and (y) all Selling Parties
that are SpinCo Parties for the disposition of all Relevant TW
Securities owned by the SpinCo Parties, as applicable, provided, in
each case, that all Relevant TW Securities of the Liberty
<PAGE>
Parties or the SpinCo Parties, as applicable, are disposed of within
12 months of such notice (provided that claims for compensation may be
made pursuant to the following sentences as dispositions are made
during such 12-month period and payment of such claims shall not be
delayed or deferred for such 12-month period, but rather shall be paid
as provided below, and provided, further, that if all Relevant TW
Securities of the Selling Parties are not disposed of within such
12-month period, the Selling Parties shall reimburse TW Parent for the
amount of compensation paid pursuant to this clause (ii) that is in
excess of the amount that was required to be paid pursuant to clause
(i) of this sentence). The obligation of Holdco to compensate any
Selling Party pursuant to this Section 4.4(a) shall be subject to the
condition that, as of the date of the adoption of the Subsequent
Rights Plan, (i) such Selling Party and its "Affiliates" and
"Associates" shall have made all filings on Schedule 13D with respect
to their beneficial ownership of Relevant TW Securities due on or
prior to such date in compliance with Regulation 13D-G under the
Exchange Act, and (ii) LMC Parent or Spinco, as applicable, shall be
in compliance with its obligations under Section 4.4(b), except to the
extent any failure to make any such filings, and/or any failure to be
in compliance with such obligations, shall not have prejudiced Holdco.
If TW Parent becomes obligated to compensate any Selling Party
pursuant to this Section 4.4(a), then such Selling 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 particular disposition occurred and the
estimated Adjustment Amount owed to such Selling Party with respect to
those of its Relevant TW Securities so disposed of. Within 30 days
after delivery of such statement, TW Parent shall pay to such Selling
Party the estimated Adjustment Amount by wire transfer of immediately
available funds to such account and in accordance with such
instructions as such Selling Party shall have previously advised TW
Parent in writing. Within 30 days after the end of the taxable year in
which the particular disposition of Relevant TW Securities by such
Selling Party occurred, such Selling 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 Selling Party with
respect to such disposition. Within five days after delivery of such
statement, (i) TW Parent shall pay to such Selling Party an amount
equal to the amount by which the Adjustment Amount exceeds the
estimated Adjustment Amount, or (ii) such Selling 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.
(b) Prior to the Closing, LMC Parent shall, and following
the Closing, if Holdco adopts a Holdco Rights Plan having the terms
contemplated by the first sentence of Section 4.4(a), LMC Parent and
SpinCo (following the Distribution) 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"
<PAGE>
becoming its "Affiliate" or "Associate", in each case promptly
following LMC Parent's or SpinCo's (as applicable) obtaining actual
knowledge of such occurrence.
(c) Except as otherwise expressly indicated, terms used in
Section 4.4(a) and Section 4.4(b) in quotation marks have the meanings
given such terms (i) prior to the Closing, in the Amended TW Plan, and
(ii) from and after the Closing, the Holdco Rights Plan, if any,
except that the Liberty Parties or, following the Distribution, the
SpinCo Parties shall be deemed to "Beneficially Own" any TW Securities
the subject of an "Offer Notice" (under Section 3 of the First Refusal
Agreement) from any Turner Stockholder (as defined in the First
Refusal Agreement), any "Fast-Track Offer Notice" (under Section 3.3
of the First Refusal Agreement) from any Turner Stockholder or any
"Tender Notice" (under Section 3.4 of the First Refusal Agreement)
from any Turner Stockholder, in each case until the earlier of the
purchase of such TW Securities pursuant to the First Refusal Agreement
and the first date upon which such Turner Stockholder is free to sell
such TW Securities.
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 Old TW and Holdco, 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 Mergers has not occurred on or
prior to such date and (y) the termination of the Amended and Restated
Merger Agreement in accordance with its terms or the abandonment
thereof by TW Parent if required pursuant to Section 2.3 (the
"Termination Date"). The representations, warranties,
<PAGE>
covenants and agreements set forth herein (other than in Article II)
shall survive the Effective Time of the Mergers.
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. Each Liberty Party and SpinCo Party from time
to time, provided that it is a Liberty Party or SpinCo Party as of the
relevant time, shall be an intended third party beneficiary of the
covenants of TW Parent contained in Article IV.
SECTION 5.5 Entire Agreement. This Agreement (including the
Exhibits and Schedules attached hereto), 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
<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: Richard Hall, 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.
599 Lexington 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.
<PAGE>
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.
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.
SECTION 5.12 Obligations of Old TW and Holdco Joint and
Several. Each of Old TW and Holdco (collectively, the "TW Parties")
covenants and agrees with LMC Parent and each Shareholder that such TW
Party is and shall be jointly and severally liable, as a primary
obligor and not merely a surety, for the full and timely payment and
performance of all obligations of each other TW Party to be paid
and/or performed under this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amended and Restated LMC Agreement to be duly executed and delivered
as of the day and year first above written.
TIME WARNER INC. LIBERTY MEDIA CORPORATION
By: By:
Name: Name:
Title: Title:
TW INC. SUBSIDIARIES OF LMC PARENT:
TCI TURNER PREFERRED, INC.
By:
Name:
Title: By:
Name:
Title:
COMMUNICATION CAPITAL CORP.
By:
Name:
Title:
UNITED CABLE TURNER INVESTMENT INC.
By:
Name:
Title:
<PAGE>
With respect to
Sections 2.1(c), 2.2, 3.1(c) and 4.1 only:
TELE-COMMUNICATIONS, INC.
By:
Name:
Title:
With respect to
Section 2.1(c) only:
TCI COMMUNICATIONS, INC.
By:
Name:
Title:
TIME TBS HOLDINGS, INC.
By:
Name:
Title:
EXHIBIT A TO
SECOND AMENDED AND RESTATED
LMC AGREEMENT
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS, AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS THEREOF, OF
SERIES LMCN-V COMMON STOCK
OF
TW INC.
--------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
--------------------
TW 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 [ ], 1996.
RESOLVED that pursuant to the authority expressly
granted to and vested in the Board of Directors by the
provisions of Section 3 of Article IV of the Restated
Certificate of Incorporation of the Corporation (the
"Certificate of Incorporation") and Section 151(g) of the
General Corporation Law of the State of Delaware (the "DGCL"),
the Board of Directors hereby creates, from the authorized
shares of Series Common Stock, par value $.01 per share (the
"Series Common Stock"), of the Corporation authorized to be
issued pursuant to the Certificate of Incorporation, a series
of Series Common 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 Series Common Stock hereby established
shall consist of [ ] shares designated as Series LMCN-V Common
Stock. The number of shares constituting such series may be
increased or decreased (but not below the number of shares then
outstanding) from time
<PAGE>
to time by a resolution or resolutions of the Board of
Directors. The terms 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
LMCN-V Common Stock filed with the Secretary of State of the
State of Delaware pursuant to Section 151 of the DGCL.
1.4 "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.
1.5 "Common Stock" shall mean the class of
Common Stock, par value $.01 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 sub-
<PAGE>
division or combination or (z) any other changes for which an
adjustment is made under Section 2.4(a), and in any such case
including any shares thereof authorized after the date of the
Certificate, together with any rights associated generally with
the shares of Common Stock.
1.6 "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).
1.7 "Conversion Date" shall have the meaning set
forth in Section 3.5.
1.8 "Corporation" shall mean TW Inc., a Delaware
corporation, and any of its successors by operation of law,
including by merger or consolidation.
1.9 "DGCL" shall mean the General Corporation
Law of the State of Delaware, as amended from time to time.
1.10 "Dividend Payment Date" shall have the
meaning set forth in Section 2.1.
1.11 "Formula Number" shall have the meaning set
forth in Section 2.1.
1.12 "LMC Agreement" shall mean the Second
Amended and Restated LMC Agreement dated as of September 22,
1995, among a Delaware corporation known on such date as "Time
Warner Inc.", 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 amended from time to time.
1.13 "NASDAQ" shall mean The Nasdaq Stock
Market.
<PAGE>
1.14 "NYSE" shall mean the New York Stock
Exchange, Inc.
1.15 "Parity Stock" shall mean shares of Common
Stock and shares of any other class or series of Capital Stock
of the Corporation that, 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 that 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 that
would be payable in such distribution if all sums payable were
discharged in full.
1.16 "Permitted Transferee" shall mean any
Liberty Party or any SpinCo Party, as such terms are defined in
the LMC Agreement.
1.17 "Person" shall mean an individual,
corporation, partnership, limited liability company, joint
venture, association, trust, unincorporated organization or
other entity.
1.18 "Preferred Stock" shall mean the class of
Preferred Stock, par value $.10 per share, of the Corporation
authorized at the date of the Certificate, including any shares
thereof authorized after the date of the Certificate.
1.19 "Record Date" shall have the meaning set
forth in Section 2.1.
1.20 "Senior Stock" shall mean shares of any
class or series of Capital Stock of the Corporation that, 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
<PAGE>
in any distribution of assets other than by way of dividends.
1.21 "Series Common Stock" shall mean the class
of Series Common Stock, par value $.01 per share, of the
Corporation authorized at the date of the Certificate,
including any shares thereof authorized after the date of the
Certificate.
1.22 "Series LMC Common Stock" shall mean the
series of Series Common Stock authorized and designated as
Series LMC Common Stock at the date of the Certificate,
including any shares thereof authorized and designated after
the date of the Certificate.
1.23 "Series LMCN-V Common Stock" and "this
Series" shall mean the series of Series Common Stock authorized
and designated as Series LMCN-V Common Stock at the date of the
Certificate, including any shares thereof authorized and
designated after the date of the Certificate.
1.24 "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, 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
<PAGE>
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 1.0000, which shall be adjusted
from time to time pursuant to Section 2.4. 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 and other than a distribution of Common Stock as a
result of which an adjustment to the Formula Number is made
pursuant to Section 2.4) to the holders of its shares of
Common Stock any assets or property, including evidences of
indebtedness or securities of the Corporation 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, 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
<PAGE>
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 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, 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.
<PAGE>
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 Section 3.6) 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 that 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 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), 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
- -----------
[FN]
<F1> Insert the earliest of (x) the date of filing of the
Certificate, (y) the date of filing of the certificate for the
Series LMC Common Stock or (z) the closing of the Mergers.
<PAGE>
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 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) 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 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
<PAGE>
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, 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 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 LMC Common
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 LMC 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 or Series LMC 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 of shares of this Series 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).
<PAGE>
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 LMC
Common Stock in order to effect a conversion of a fraction of
a share of this Series into Series LMC Common Stock.
3.4 Any holder of shares of this Series
electing to convert such shares into Common Stock or Series
LMC 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, 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 LMC Common 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) 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
LMC Common 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
<PAGE>
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
are received by the Corporation; and the Person entitled to
receive the Common Stock or Series LMC Common Stock issuable
upon such conversion shall be treated for all purposes as the
holder of record of such Common Stock or Series LMC Common
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 LMC 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 or
Series LMC Common Stock, as the case may be, shall 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 that 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 that shall
[FN]
<F2> Insert the earliest of (x) the date of filing of the
Certificate, (y) the date of filing of the certificate for the
Series LMC Common Stock or (z) the closing of the Mergers.
<PAGE>
be as nearly equivalent as may be practicable to the
adjustments provided for in Section 2.4 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 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 clause (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
<PAGE>
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 LMC
Common 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 LMC Common Stock at any
time (assuming that, at the time of the computation of such
number of shares, all such Common Stock or Series LMC 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
or Series LMC Common Stock that are held in the treasury of
the Corporation. All shares of Common Stock or Series LMC
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 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) Trad-
ing Days following the occurrence of the event that
necessitates the notice referred to in Section 2.4(d)) 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
<PAGE>
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 LMC
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
issue or delivery of shares of Common Stock or Series LMC
Common Stock on conversion of shares of this Series pursuant
hereto. The Corporation shall not, however, be required to pay
any tax that is payable in respect of any transfer involved in
the issue or delivery of Common Stock or Series LMC 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 or Section 3.6, 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 of record of Common Stock entitled to
participate in such transaction
<PAGE>
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 as one class with the holders of shares of
Common Stock upon the election of the directors of the
Corporation. 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 divided
by (iii) 100.
4.3 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 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, as applicable, to (i)
amend, alter or repeal any of the powers, preferences or
rights of the Series Common Stock or (ii) 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 or the Series LMC Common Stock;
provided, however, that no affirmative vote of any shares of
this Series shall be required to amend, alter or repeal any of
the powers, preferences or rights of any series of Series
Common Stock other than this Series and the Series LMC Common
Stock.
4.4 So long as any shares of this Series remain
outstanding, the Corporation shall not, without the
affirmative vote of the holders of shares of this Series
representing 100% of the aggregate voting power of shares of
<PAGE>
this Series then outstanding, amend, alter or repeal the
provisions of Section 7.7.
4.5 No consent of holders of shares of this
Series shall be required for (i) the creation of any indebt-
edness of any kind of the Corporation, (ii) the authorization
or issuance of any class or series of Parity Stock or Senior
Stock, (iii) the approval of any amendment to the Certificate
of Incorporation that would increase or decrease the aggregate
number of authorized shares of Series Common Stock or Common
Stock or (iv) the authorization of any increase or decrease in
the number of shares constituting this Series; provided,
however, that the number of shares constituting this Series
shall not be decreased below the number of such shares then
outstanding.
5. Liquidation Rights.
5.1 Upon the liquidation, dissolution or
winding up of the Corporation, whether voluntary or
involuntary, the holders of shares of this Series shall be
entitled to receive, contemporaneously with any distribution
to holders of shares of Common Stock upon such liquidation,
dissolution or winding up, 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.
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 any Permitted Transferee. 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, (a) 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 conversion or (b) any pledge or encumbrance
of shares of this Series; provided, however, that the terms of
any such pledge or encumbrance must require that, in the event
of any sale or foreclosure with respect to shares of this
Series, such shares must be delivered immediately to the
Corporation for conversion into Common Stock. The provisions
of this Section 6.1 shall continue to be in effect with
respect to any shares of this Series received by any holder by
virtue of merger, consolidation, operation of law or
otherwise.
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. 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, trans-
fer, dissolution, liquidation or winding up, or the vote upon
any such action. Any notice that 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,
<PAGE>
(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): TW
Inc., 75 Rockefeller Plaza, New York, New York 10019,
Attention: General Counsel.
7.3 Any shares of this Series that 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 shall become authorized but
unissued shares of this Series, unless the Board of Directors
determines otherwise.
7.4 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.
7.5 All notice periods referred to in the
Certificate shall commence on the date of the mailing of the
applicable notice.
7.6 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.
7.7 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, TW Inc. has caused this
certificate to be signed and attested this [ ] day of [ ],
1996.
TW INC.,
by
Name:
Title:
EXHIBIT B TO
SECOND AMENDED AND RESTATED
LMC AGREEMENT
STOCKHOLDERS' AGREEMENT
Stockholders' Agreement, dated ___________, 199_,
by and among TCI Turner Preferred, Inc., a Colorado corporation
("TCITP"), Liberty Broadcasting, Inc. ("LBI") and Communication
Capital Corp. ("CCC" and, together with LBI and TCITP, the "TCITP
Stockholders"), R.E. Turner, III ("Turner") and Turner Outdoor,
Inc. ("TOI" and, together with Turner, the "Turner
Stockholders"), and TW Inc., a Delaware corporation, which
promptly following the date hereof will change its name to Time
Warner Inc. ("Holdco").
Each of the TCITP Stockholders and the Turner
Stockholders is or may become a beneficial owner of shares of
capital stock of Holdco. The Turner Stockholders, Holdco and the
TCITP Stockholders desire to enter into the arrangements set
forth in this Agreement regarding future dispositions of shares
of Holdco capital stock which 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 in this
Agreement shall have the respective meanings listed below:
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 Holdco 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
Holdco.
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
(vii) 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.
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 $.01 per
share, of Holdco or any other shares of capital stock of Holdco
into which the Common Stock may be reclassified or changed.
<PAGE>
Contract: Any agreement, contract, commitment,
indenture, lease, license, instrument, note, bond or security.
Control: As to any Person, 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, 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 Holdco
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.
Covered Securities: Any and all Holdco 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 5 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
<PAGE>
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 Holdco.
Defensive Provision: (i) any control share
acquisition, interested stockholder, business combination or
other similar antitakeover statute (including the Delaware
Statute) applicable to Holdco, (ii) any provision of the Restated
Certificate of Incorporation or Bylaws of Holdco (including
Article V of such Restated Certificate of Incorporation), and
(iii) any plan or agreement to which Holdco is a party, whether
now or hereafter existing, which would constitute a "poison pill"
or similar antitakeover device (including any Rights Plan).
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 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
Holdco 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.
<PAGE>
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: (i) An exchange or conversion
of Covered Securities which occurs by operation of law in
connection with a merger, consolidation of Holdco 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 Directors and the stockholders of
Holdco pursuant to the Restated Certificate of Incorporation of
Holdco and the law of the jurisdiction of incorporation of
Holdco; (ii) any surrender by a Stockholder to Holdco of Covered
Securities upon redemption by Holdco 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; (iii) any Permitted Pledge and any
transfer of such pledged Covered Securities to the Pledgee upon
default of the obligations secured by such pledge; (iv) any
transfer solely from one member of the Affiliated Group of a
Stockholder to another member of the Affiliated Group of a
Stockholder; (v) 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; (vi) 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; (vii) 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
<PAGE>
opinion of legal counsel reasonably acceptable to TCITP,
requiring such Charitable 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; (viii) any exchange, conversion or
transfer of Covered Securities pursuant to Section 4.1 of the LMC
Agreement; and (ix) 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) or (vi) 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 Holdco 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 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:
<PAGE>
(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.
FTC: The Federal Trade Commission.
FTC Consent Decree: The Agreement Containing
Consent Order (the "ACCO") dated as of August __, 1996 among Old
TW, TCI, TBS, LMC and the FTC which contemplates the issuance of
an Order, together with such Order and the Interim Agreement
attached as Exhibit I to the ACCO, in each case as the same may
be amended from time to time hereafter.
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.
Group: Either the TCITP Stockholders considered
collectively as a group or the Turner Stockholders considered
collectively as a group, as the context requires.
Holdco: As defined in the opening paragraphs of
this Agreement.
Holdco Affiliates: Holdco and Affiliates of
Holdco.
Holdco Elected Shares: In the case of any Offer
Notice, any Subject Shares covered thereby as to which Holdco
exercises its right of purchase pursuant to Section 3.1(e).
<PAGE>
Holdco Exercise Notice: As defined in Section 3.1(e).
Holdco Shares: Any and all shares of capital stock
of Holdco of any class or series, whether now or hereafter
authorized or existing.
Holdco Stockholders Agreement: Any stockholders'
agreement between Holdco and any one or more of the Turner
Stockholders in effect on the date hereof.
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 Second Amended and Restated LMC
Agreement dated as of September 22, 1995, among Old TW, Holdco,
LMC Parent and certain subsidiaries of LMC Parent.
LMC Parent: Liberty Media Corporation, a Delaware
corporation.
Merger Agreement: The Amended and Restated
Agreement and Plan of Merger dated as of September 22, 1995,
among Old TW, Holdco, TW Acquisition Corp., a Georgia
corporation, Time Warner Acquisition Corp., a Delaware
corporation, and TBS, as amended by Amendment No. 1 thereto dated
as of August 8, 1996.
Offer Notice: As defined in Section 3.1(a) hereof.
Old TW: The Delaware corporation known on
September 22, 1995 as Time Warner Inc.
Old TW Rights Plan: The Rights Agreement dated as
of January 20, 1994, between Old TW and Chemical Bank, as Rights
Agent.
Options: Any options, warrants or other rights
(except Convertible Securities), however denominated, to
subscribe for, purchase or otherwise acquire any Holdco 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
<PAGE>
specified event or the satisfaction or failure to satisfy any
condition or the happening or failure to happen of any other
contingency.
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.
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 any Person (other than any such
<PAGE>
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
Holdco 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 Holdco Affiliate, the Holdco 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 Holdco, in the case of any
purchase of Holdco Elected Shares pursuant to any Holdco 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.
Restriction: Any prohibition, restriction,
limitation or condition on or requirement under any Defensive
Provision or Requirement of Law, including the FTC Consent
Decree, (A) that (i) limits the ability of any Stockholder to
acquire additional Holdco Shares or hold or dispose of any Holdco
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 Holdco Shares, generally, or requires such
Stockholder to Dispose of any Holdco Shares,
<PAGE>
(ii) reduces or otherwise limits the ability to exercise the
voting or other rights of all or a portion of the Holdco Shares
beneficially owned by such Stockholder below that applicable to
Holdco Shares generally, or (iii) limits the ability of any
Stockholder to consummate any merger, consolidation, business
combination or other transaction with, Holdco 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 Holdco 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 pursuant to any Rights Plan, having the
rights and privileges, and subject to the terms and conditions,
set forth in such Rights Plan, 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: Any stockholder rights plan or other
form of "poison pill" adopted by Holdco and in effect at any time
during the term of this Agreement, as amended or modified 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;
provided, however, that if at such time there shall be no Rights
Plan in effect, the Rights Plan Trigger shall be equal to the
total number of Subject Shares covered by such Offer Notice or
Tender Notice.
Rights Plan Triggering Event: Any event under any
Rights Plan analogous (in terms of its effects under such Rights
Plan) to one of the following events under the Old TW Rights
Plan:
(i) any member of either Group becoming an
"Acquiring Person" within the meaning of the Old
TW Rights Plan or
(ii) the Rights becoming transferable separately
from shares of the Common Stock;
in any such case, in the event of a dispute, as determined in
accordance with Section 3.1(d).
Sale Agreement: As defined in Section 3.1(f) hereof.
<PAGE>
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 Holdco Shares.
TCITP Holdco 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.
Tender Notice: As defined in Section 3.4(a) hereof.
Tender Shares: As defined in Section 3.4(a) hereof.
TOI: As defined in the opening paragraphs of this Agreement.
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
<PAGE>
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 Holdco 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 Holdco 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 Holdco Shares.
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.
2. Restrictions on Dispositions of Covered
Securities. No Turner Stockholder shall Dispose of any Turner
Holdco Shares, except in an Exempt Transfer or a Charitable
Transfer. No TCITP Stockholder shall Dispose of any TCITP Holdco
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 Holdco has
actual knowledge of such violation, Holdco 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 Holdco 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 Holdco Shares.
3. Right of First Refusal:
3.1 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") from a Person which is not a
Related Party of such Selling Stockholder (the
<PAGE>
"Prospective Purchaser") to purchase any or all of the 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
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 Holdco 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 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).
<PAGE>
(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 Holdco in an effort to agree with respect to the
Initial Trigger and the Rights Plan Trigger, and upon request
Holdco 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 (which report shall
include, if requested, such law firm's conclusion as to whether
any specified event under a Rights Plan constitutes a Rights Plan
Triggering Event). 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
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, Holdco, 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 Holdco, 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, Holdco waives its right to purchase any
Subject Shares covered by the current Offer Notice, Holdco 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
<PAGE>
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, the Rights Plan
Trigger or any Rights Plan Triggering Event pursuant to this
Section 3.1(d) shall be binding upon Holdco in the absence of a
written instrument signed by Holdco agreeing to such
determination (it being understood that Holdco 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 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 Holdco
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 Holdco 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, Holdco shall
have the right, exercisable by a written notice (a "Holdco
Exercise Notice") given to the Selling Stockholder by Holdco
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 Holdco Elected Shares. A
copy of the Holdco Exercise Notice shall be sent to the Other
Stockholder at the same
<PAGE>
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 closing of the sale of any Holdco Elected
Shares and the closing of the sale of any Holdco 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 Holdco Stockholders
Agreement, and Holdco 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 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
<PAGE>
obligations thereunder without the written consent of the Selling
Stockholder. Holdco 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 Holdco Elected Shares to any
Controlled Affiliate of Holdco, provided that no such assignment
or delegation shall release Holdco from its obligations
thereunder without the written consent of the Selling
Stockholder.
(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, Holdco and the
Selling Stockholder within 5 business days after the panel is
empaneled and such fair 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 such purchaser and the marketability and liquidity
of such debt securities.
<PAGE>
(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 Holdco 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, Holdco waives its right to purchase any Subject Shares
covered by the current Offer Notice, Holdco 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.
(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 Holdco 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), 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 Holdco 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 Holdco 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
<PAGE>
than all of the Subject Shares to the Prospective Purchaser,
and in such case the "Free to Sell Date" shall be the
business day after expiration of such 5 business day period.
(iv) If a Holdco Exercise Notice is given but a
Sale Agreement for the Holdco 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 Holdco 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 Holdco 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 Holdco 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 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, Holdco,
any other party to this Agreement or any Prospective
Purchaser, the Other Stockholder may, by written notice
given to the Selling Stockholder and Holdco within five
business days after the Other Stockholder acquires actual
knowledge of such action or event, rescind the Other
Stockholder
<PAGE>
Election Notice and any Sale Agreement to 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 (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.
3.2 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 Holdco 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 Holdco
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
<PAGE>
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 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(b), 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.
3.3 Fast-Track Sales.
(a) Any Stockholder who proposes to make a
Fast-Track Sale may deliver to each of the Other Stockholder and
Holdco 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, Holdco 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
Holdco 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 Holdco cannot resolve
such issue, then the Other Stockholder shall have the right to
purchase only the number of Fast-
<PAGE>
Track Shares that Holdco shall specify. Anything contained herein
to the contrary notwithstanding, no determination relating to the
Initial Trigger or the Rights Plan Trigger pursuant to this
Section 3.3(b) shall be binding upon Holdco in the absence of a
written instrument signed by Holdco agreeing to such
determination (it being understood that Holdco 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). Holdco 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
Holdco 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 Holdco of the Fast-Track Offer Notice. If
any such notice is given by either the Other Stockholder or
Holdco, 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 Holdco (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 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
Holdco Stockholders Agreement, and Holdco 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.
<PAGE>
(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 Holdco and the Other Stockholder of the
Fast-Track Offer Notice, and if all Fast-Track Shares 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.
3.4 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 Holdco 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
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 Holdco 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 Holdco 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 Holdco in the absence of a written instrument
signed by Holdco agreeing to such determination (it being
understood that Holdco 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
<PAGE>
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 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 Holdco Stockholders Agreement, and Holdco 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 shall be the average of
<PAGE>
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.
3.5 Holdco to Provide Certain Information. If
requested at any time or from time to time by any Stockholder,
Holdco 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 Holdco 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.
3.6 Certain Actions by Holdco. In the event that
Holdco 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, directly or
indirectly through any Controlled Affiliate of Holdco, 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, Holdco shall have no right under this Agreement to
purchase any Subject Shares covered by such Offer Notice.
4. Involuntary Event; Death or Incapacity.
<PAGE>
4.1 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 Holdco
Stockholders' Agreement, it shall not be entitled to sell any
Covered Securities to any Person other than the Purchasers, if
any; each Other Stockholder and Holdco shall have, in respect of
such Offer Notice, all rights and obligations under Section 3.1
which are provided 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 Holdco 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, Holdco waives its right to
purchase any Subject Shares covered by the current Offer Notice,
Holdco 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.
4.2 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.
<PAGE>
4.3 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.
5. Regulatory Approvals; Certain Representations,
Warranties and Covenants.
5.1 Regulatory Approvals. If any sale of Covered
Securities to any Stockholder, Holdco or any permitted assignee
of any Stockholder or Holdco in accordance with Section 3.1, 3.2
or 4 requires, as a condition to the legal and valid 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.
5.2 Representation and Warranty of Holdco. Holdco
represents and warrants to each of TCITP and Turner that, other
than the Old TW 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
September 22, 1995; provided, however, that no representation is
made as to the laws of any jurisdiction other than Delaware.
6. Legend on Stock Certificates; No Recordation of
Transfer.
6.1 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
<PAGE>
AS OF________ ___, 1996, 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.
Holdco 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.
6.2 Holdco agrees not to knowingly effect a
transfer of any Covered Securities which to Holdco'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 Holdco.
7. Representations and Warranties; Certain
Additional Covenants.
7.1 Certain Representations and Covenants of the
TCITP Stockholders. Each of the TCITP Stockholders represent and
warrant to the Turner Stockholders and Holdco as follows:
(a) Neither such TCITP Stockholder nor any of
its Controlled Affiliates that hold Holdco 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 and except for
any Permitted Pledge in effect as of the date hereof, 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 Holdco 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 Holdco and any of its
Affiliates, directors or officers, whether now existing or
hereafter entered into, nor from or by reason of the
<PAGE>
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 Holdco Shares or
any interest therein or any rights with respect thereto.
7.2 Certain Representations and Covenants of the
Turner Stockholders. Each of the Turner Stockholders represents
and warrants to the TCITP Stockholders and Holdco as follows:
(a) Neither such Turner Stockholder nor any
of his or its Controlled Affiliates that hold Holdco 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 Holdco
Stockholders Agreement and except for any Permitted Pledge
in effect as of the date hereof, 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 Holdco 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
Holdco Stockholders Agreement to which it is a party, if
any, as amended through and in effect on the date of this
Agreement.
No Turner Stockholder shall permit the amendment of any Holdco
Stockholders Agreement to which it is a party in any manner that
would have any effect referred to in Section 7.2(a).
7.3 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
<PAGE>
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 FTC and the Antitrust
Division of the Department of Justice pursuant to the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, (B)
requirements, if any, arising out of the rules and regulations
adopted by the Federal Communications Commission, and (C)
requirements, if any, arising out of the FTC Consent Decree,
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 Holdco, Holdco and its Affiliates, and (ii) in the
case of any Turner Stockholder, such Turner Stockholder and his
or its Related Parties.
8. 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
<PAGE>
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 Holdco 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 Holdco, and Holdco shall not
have any right, remedy or claim against any Stockholder by reason
of any breach or violation thereof.
9. 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.
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.
10. 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 Holdco 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 (which number, in the case of the TCITP
Stockholders, shall be calculated after giving effect to the
exchange required by Section 4.1 of the LMC Agreement and, as to
each Group, shall be appropriately adjusted to take into account
any stock split, reverse stock split, reclassification,
recapitalization, conversion, reorganization, merger or other
change in such Holdco Shares) 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 Holdco shall not be required unless such amendment
adversely affects the rights or obligations of Holdco 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.
11. General Provisions
<PAGE>
11.1 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.
11.2 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 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.
11.3 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, Holdco
and the other parties thereto under the Investors Agreement
(No. 1) dated as of the same date as this Agreement among Holdco,
Turner and TOI).
11.4 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.
11.5 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", "Restated
<PAGE>
Certification of Incorporation", "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.
11.6 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.
11.7 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
Holdco shall be mandatorily applicable.
11.8 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:
LIBERTY BROADCASTING, INC.
By: ----------------------------
Name:
Title:
COMMUNICATION CAPITAL CORP.
By: ----------------------------
Name:
Title:
---------------------------------
R. E. TURNER, III
TURNER OUTDOOR, INC.
By: ----------------------------
Name:
Title:
TW INC. (which promptly following the
date hereof is changing its name to
Time Warner Inc.)
By: ----------------------------
Name:
Title:
EXHIBIT C TO
SECOND AMENDED AND RESTATED
LMC AGREEMENT
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS, AND QUALIFICATIONS, LIMITATIONS
OR RESTRICTIONS THEREOF, OF
SERIES LMC COMMON STOCK
OF
TW INC.
--------------------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
--------------------
TW 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 [ ], 1996.
RESOLVED that pursuant to the authority expressly granted to
and vested in the Board of Directors by the provisions of Section 3 of
Article IV of the Restated Certificate of Incorporation of the
Corporation (the "Certificate of Incorporation") and Section 151(g) of
the General Corporation Law of the State of Delaware (the "DGCL"), the
Board of Directors hereby creates, from the authorized shares of Series
Common Stock, par value $.01 per share (the "Series Common Stock"), of
the Corporation authorized to be issued pursuant to the Certificate of
Incorporation, a series of Series Common 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 Series Common Stock hereby established shall
consist of [ ] shares designated as Series LMC Common Stock. The number
of shares constituting such series may be increased or decreased (but
not below the number of shares then outstanding) from time
<PAGE>
to time by a resolution or resolutions of the Board of Directors. The
terms 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 LMC Common Stock filed with the
Secretary of State of the State of Delaware pursuant to Section 151 of
the DGCL.
1.4 "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.
1.5 "Common Stock" shall mean the class of Common Stock,
par value $.01 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
<PAGE>
an adjustment is made under Section 2.4(a), and in any such case including
any shares thereof authorized after the date of the Certificate,
together with any rights associated generally with the shares of Common
Stock.
1.6 "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).
1.7 "Conversion Date" shall have the meaning set forth in
Section 3.5.
1.8 "Corporation" shall mean TW Inc., a Delaware
corporation, and any of its successors by operation of law, including by
merger or consolidation.
1.9 "DGCL" shall mean the General Corporation Law of the
State of Delaware, as amended from time to time.
1.10 "Dividend Payment Date" shall have the meaning set
forth in Section 2.1.
1.11 "Formula Number" shall have the meaning set forth in
Section 2.1.
1.12 "LMC Agreement" shall mean the Second Amended and
Restated LMC Agreement dated as of September 22, 1995, among a Delaware
corporation known on such date as "Time Warner Inc.", 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 amended from time to time.
1.13 "NASDAQ" shall mean The Nasdaq Stock Market.
<PAGE>
1.14 "NYSE" shall mean the New York Stock Exchange, Inc.
1.15 "Parity Stock" shall mean shares of Common Stock and
shares of any other class or series of Capital Stock of the Corporation
that, 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 that 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 that would be payable in such distribution if all sums payable
were discharged in full.
1.16 "Permitted Transferee" shall mean any Liberty Party
or any SpinCo Party, as such terms are defined in the LMC Agreement.
1.17 "Person" shall mean an individual, corporation,
partnership, limited liability company, joint venture, association,
trust, unincorporated organization or other entity.
1.18 "Preferred Stock" shall mean the class of Preferred
Stock, par value $.10 per share, of the Corporation authorized at the
date of the Certificate, including any shares thereof authorized after
the date of the Certificate.
1.19 "Record Date" shall have the meaning set forth in
Section 2.1.
1.20 "Senior Stock" shall mean shares of any class or
series of Capital Stock of the Corporation that, 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
<PAGE>
in any distribution of assets other than by way of dividends.
1.21 "Series Common Stock" shall mean the class of Series
Common Stock, par value $.01 per share, of the Corporation authorized at
the date of the Certificate, including any shares thereof authorized
after the date of the Certificate.
1.22 "Series LMC Common Stock" and "this Series" shall
mean the series of Series Common Stock authorized and designated as
Series LMC Common Stock at the date of the Certificate, including any
shares thereof authorized and designated after the date of the
Certificate.
1.23 "Series LMCN-V Common Stock" shall mean the series
of Series Common Stock authorized and designated as Series LMCN-V Common
Stock at the date of the Certificate, including any shares thereof
authorized and designated after the date of the Certificate.
1.24 "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, 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
<PAGE>
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 1.0000,
which shall be adjusted from time to time pursuant to Section 2.4. 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 and other
than a distribution of Common Stock as a result of which an adjustment
to the Formula Number is made pursuant to Section 2.4) to the holders of
its shares of Common Stock any assets or property, including evidences
of indebtedness or securities of the Corporation 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, 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
<PAGE>
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 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, 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.
<PAGE>
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 [ ]:1/
(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) 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 that
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 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), 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
- --------------
1/ Insert the earliest of (x) the date of filing of the Certificate,
(y) the date of filing of the certificate for the Series LMCN-V Common
Stock or (z) the closing of the Mergers.
<PAGE>
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
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) 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
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
<PAGE>
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, 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 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 LMCN-V Common 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 LMCN-V 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 or Series LMCN-V 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 of shares of this Series 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).
<PAGE>
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 LMCN-V Common
Stock in order to effect a conversion of a fraction of a share of this
Series into Series LMCN-V Common Stock.
3.4 Any holder of shares of this Series electing to
convert such shares into Common Stock or Series LMCN-V 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, 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 LMCN-V
Common 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) 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 LMCN-V Common
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
<PAGE>
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 are received by the Corporation; and the
Person entitled to receive the Common Stock or Series LMCN-V Common
Stock issuable upon such conversion shall be treated for all purposes as
the holder of record of such Common Stock or Series LMCN-V Common 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 LMCN-V
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 or Series LMCN-V Common Stock, as the case may be, shall be
delivered as soon as practicable after the opening of such books.
3.6 In the event that on or after [ ]2/, 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 that 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 that shall
- --------------
2/ Insert the earliest of (x) the date of filing of the Certificate, (y)
the date of filing of the certificate for the Series LMCN-V Common Stock
or (z) the closing of the Mergers.
<PAGE>
be as nearly equivalent as may be practicable to the adjustments
provided for in Section 2.4 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
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
clause (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
<PAGE>
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 LMCN-V Common 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 LMCN-V Common Stock at any
time (assuming that, at the time of the computation of such number of
shares, all such Common Stock or Series LMCN-V 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 or Series LMCN-V Common Stock that are held in the
treasury of the Corporation. All shares of Common Stock or Series LMCN-V
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 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 that
necessitates the notice referred to in Section 2.4(d)) 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
<PAGE>
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 LMCN-V 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 issue or delivery of shares
of Common Stock or Series LMCN-V Common Stock on conversion of shares of
this Series pursuant hereto. The Corporation shall not, however, be
required to pay any tax that is payable in respect of any transfer
involved in the issue or delivery of Common Stock or Series LMCN-V
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 or Section 3.6, 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 of record of Common Stock
entitled to participate in such transaction
<PAGE>
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 Except as otherwise required by law, each share of
this Series shall be entitled to vote together as one class 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.
4.3 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 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, as applicable, to (i) amend,
alter or repeal any of the powers, preferences or rights of the Series
Common Stock or (ii) 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 or the Series LMCN-V Common Stock; provided,
however, that no affirmative vote of any shares of this Series shall be
required to amend, alter or repeal any of the powers, preferences or
rights of any series of Series Common Stock other than this Series and
the Series LMCN-V Common Stock.
4.4 So long as any shares of this Series remain
outstanding, the Corporation shall not, without the affirmative vote of
the holders of shares of this Series representing 100% of the aggregate
voting power of shares of
<PAGE>
this Series then outstanding, amend, alter or repeal the provisions of
Section 7.7.
4.5 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 Parity Stock or Senior Stock, (iii) the approval of any amendment to
the Certificate of Incorporation that would increase or decrease the
aggregate number of authorized shares of Series Common Stock or Common
Stock or (iv) the authorization of any increase or decrease in the
number of shares constituting this Series; provided, however, that the
number of shares constituting this Series shall not be decreased below
the number of such shares then outstanding.
5. Liquidation Rights.
5.1 Upon the liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of shares
of this Series shall be entitled to receive, contemporaneously with any
distribution to holders of shares of Common Stock upon such liquidation,
dissolution or winding up, 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.
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 any Permitted Transferee.
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, (a) 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 conversion or
(b) any pledge or encumbrance of shares of this Series; provided,
however, that the terms of any such pledge or encumbrance must require
that, in the event of any sale or foreclosure with respect to shares of
this Series, such shares must be delivered immediately to the
Corporation for conversion into Common Stock. The provisions of this
Section 6.1 shall continue to be in effect with respect to any shares of
this Series received by any holder by virtue of merger, consolidation,
operation of law or otherwise.
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. 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 that 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,
<PAGE>
(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): TW Inc., 75
Rockefeller Plaza, New York, New York 10019, Attention: General Counsel.
7.3 Any shares of this Series that 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
shall become authorized but unissued shares of this Series, unless the
Board of Directors determines otherwise.
7.4 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.
7.5 All notice periods referred to in the Certificate
shall commence on the date of the mailing of the applicable notice.
7.6 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.
7.7 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, TW Inc. has caused this certificate
to be signed and attested this [ ] day of [ ], 1996.
TW INC.,
by
________________________
Name:
Title:
EXHIBIT D TO THE
SECOND AMENDED AND RESTATED
LMC AGREEMENT
SSSI Agreement
This SSSI Agreement (the "Agreement") is
dated as of _________, 1996, and is entered
into between TW Inc. (which will be renamed
Time Warner Inc.), a Delaware corporation
("Holdco"), Liberty Media Corporation, a
Delaware corporation ("LMC"), and Southern
Satellite Systems, Inc., a Georgia corporation
("SpinCo"), and, with respect to Section 11(d),
Section 11(f) and Section 11(g) only, Satellite
Services, Inc., a Delaware corporation
("Satellite"). For purposes of this Agreement,
LMC, SpinCo and, with respect to the above
referenced Sections, Satellite, on the one hand
are, collectively, a "Party" and Holdco on the
other hand, individually, is a "Party".
References to "Parties" is a collective
reference to LMC, SpinCo and with respect to
the above referenced Sections, Satellite, on
the one hand, and Holdco, on the other.
WHEREAS Holdco, LMC and certain subsidiaries of LMC
have entered into a Second Amended and Restated LMC Agreement
dated as of September 22, 1995 (the "LMC Agreement"), which
contemplates the Parties entering into this Agreement;
WHEREAS Holdco desires to acquire (a) from SpinCo
the Contract Option (as defined in Section 2) and (b) from LMC
and its Affiliates (as defined in Section 24) the
non-competition agreement contemplated in Section 11(b)(ix);
WHEREAS Tele-Communications, Inc., a Delaware
corporation ("TCI"), is required pursuant to the FTC Consent
Decree (including the FTC Agreement in Principle) (each, as
defined in Section 24) to seek from the Internal Revenue
Service the Letter Ruling (as defined in Section 24) with
respect to the Spin-off (as defined in Section 24) of 100% of
the shares of SpinCo;
WHEREAS as of the date hereof LMC directly owns all
the outstanding common stock, par value $1.00 per share (the
"Shares"), of SpinCo, which is engaged primarily in the
Business;
<PAGE>
WHEREAS, in connection with the Spin-off, LMC shall
contribute all the capital stock of TCI Turner Preferred,
Inc., a Colorado corporation ("TCITP"), to SpinCo, so that, as
of immediately prior to the effectiveness of the Spin-off,
TCITP will be a wholly owned subsidiary of SpinCo;
WHEREAS immediately prior to the Spin-off, TCITP
will own, directly or indirectly, all voting securities of
Holdco then owned beneficially or of record by LMC or any of
its Controlled Affiliates (as defined in the LMC Agreement)
and, if LMC is then a Controlled Affiliate of TCI, all voting
securities of Holdco then owned beneficially or of record by
TCI or any of its Controlled Affiliates, other than the
Excluded Shares (as defined in the LMC Agreement);
WHEREAS this Agreement is being executed on the date
of the closing of Holdco's acquisition of Turner Broadcasting
System, Inc., but the Contract Option provided for in Section
2 will not be granted until the Grant Date (as defined in
Section 2); and
WHEREAS capitalized terms used but not defined in
any of the other Sections of this Agreement are defined in
Section 24.
NOW, THEREFORE, it is agreed as follows:
1. Execution Date. (a) Holdco shall deliver to LMC
(or its designee pursuant to Section 15) and SpinCo upon the
execution of this Agreement (the "Execution Date"):
(i) An opinion of counsel to Holdco (which counsel
may be an employee of Holdco), reasonably acceptable to
LMC and SpinCo, addressed to LMC and SpinCo and dated the
Execution Date, to the effect that:
(A) Holdco is a corporation duly organized,
validly existing and in good standing under the
laws of its jurisdiction of incorporation 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
<PAGE>
aggregate, would not have a Material Adverse
Effect. Holdco has all requisite corporate power
and authority to execute and deliver this
Agreement, the Distribution Contract and the
Registration Rights Agreement (as defined in the
LMC Agreement) (collectively, the "Relevant
Agreements"), to perform its obligations thereunder
and to consummate the transactions contemplated
hereby and thereby.
(B) The execution and delivery by Holdco of the
Relevant Agreements, the performance by Holdco of
its obligations thereunder and the consummation by
Holdco of the transactions contemplated thereby
have been duly and validly authorized by all
necessary corporate action on the part of Holdco.
Each of the Relevant Agreements has been duly
executed and delivered by a duly authorized officer
of Holdco and constitutes the legal, valid and
binding obligation of Holdco enforceable against
Holdco 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).
(C) The execution, delivery and performance by
Holdco of the Relevant Agreements 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 Holdco.
(ii) The duly executed Registration Rights
Agreement.
(b) On the Execution Date, Holdco shall execute and
deliver to SpinCo, and SpinCo shall execute and deliver to
Holdco, the Distribution Contract (the "Distribution
Contract") in substantially the form of Exhibit 1 hereto. The
Distribution Contract shall not become effective until the
Contract Option provided for in Section 2 is exercised and
closed.
<PAGE>
2. Contract Option; Non-Competition Agreement. (a)
Subject to and on the terms and conditions set forth in this
Agreement (including Section 15(b)), SpinCo hereby agrees to
grant to Holdco on the Grant Date the right and option (the
"Contract Option"), which may be exercised at any time during
the Exercise Period (as defined in Section 2(d)), to cause the
effectiveness of the Distribution Contract. The "Grant Date"
shall be five business days after the earliest of (i) receipt
of the Letter Ruling, (ii) the date on which TCI shall have
been advised by the Internal Revenue Service, or TCI shall
have notified Holdco in writing that it has determined, that
it will not obtain the Letter Ruling and (iii) May 31, 1997,
subject however, in the case of clauses (ii) and (iii) to the
provisions of Section 15(b).
(b) On the Grant Date, Holdco shall deliver:
(i) to SpinCo, in respect of the Contract Option,
4,166,667 fully paid and nonassessable shares of Series
LMCN-V Common Stock of Holdco, having the terms set forth
on Exhibit A to the LMC Agreement ("LMCN-V Common
Stock");
(ii) to LMC (or its designee pursuant to Section
15), in respect of LMC's noncompetition agreement with
respect to itself and its Affiliates set forth in Section
11(b)(ix), (A) 833,333 fully paid and nonassessable
shares of the LMCN-V Common Stock, and (B) $66,666,700
payable, at Holdco's option, in cash or fully paid and
nonassessable shares of LMCN-V Common Stock (if the
$66,666,700 is paid in LMCN-V Common Stock, the number of
shares to be delivered in respect of such amount shall be
equal to the quotient obtained by dividing (x)
$66,666,700 by (y) the product of the Formula Number (as
defined in the terms of the LMCN-V Common Stock) and the
Current Market Price of the common stock, par value $0.01
per share, of Holdco (the "Holdco Common Stock") on the
Grant Date); and
(iii) to LMC and SpinCo an opinion of counsel to
Holdco (which counsel may be an employee of Holdco),
reasonably acceptable to LMC and SpinCo, addressed to LMC
and SpinCo to the effect that the shares of LMCN-V Common
Stock delivered by Holdco to LMC and SpinCo on such date
have been duly
<PAGE>
authorized and are validly issued, fully paid,
nonassessable and are not subject to any preemptive
rights.
(c) Notwithstanding any other provision of this
Agreement, the obligation of Holdco to deliver the
consideration provided for in this Section 2 on the Grant Date
is absolute, and not subject to any right of setoff or
counterclaim that Holdco may have or claim, and no
consideration paid or delivered in respect of the Contract
Option pursuant to this Section 2 shall be refunded or
refundable, nor may any claim be made for the return thereof,
in whole or in part, unless Holdco proves in a court of law
that LMC and SpinCo did not at the Execution Date have all
requisite corporate power to execute, deliver and perform its
obligations, as applicable, under this Agreement and the
Distribution Contract and such lack of power has not been
cured.
(d) Holdco may exercise the Contract Option at any
time during the period (the "Exercise Period") commencing on
and including the Grant Date and ending on and including the
Termination Date (as defined in Section 10(a)), by giving
written notice of exercise (the "Exercise Notice") to SpinCo
pursuant to Section 16.
(e) If the Contract Option is exercised, the
consideration therefor shall be the amounts payable pursuant
to Section 2 of the Distribution Contract.
(f) Each Party agrees to be bound by and act in
accordance with the payment allocation set forth in Section
2(b) in the preparation and filing of all tax returns and in
any proceeding before any tax authority. In the event that
such payment allocation is disputed by a taxing authority, the
Party receiving notice of the dispute shall promptly notify
the other Party hereto of such dispute and keep such other
Party informed with respect to all matters concerning such
dispute.
3. Closing. The closing (the "Closing") of the
exercise of the Contract Option shall occur as soon as
practicable after such exercise, but in no event more than
five 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 (such date for the Closing being referred to as the
<PAGE>
"Closing Date"). On the Closing Date, the Distribution
Contract shall become effective.
4. Representations and Warranties as of Execution
Date.
(a) Each of LMC and SpinCo represents and warrants
to Holdco, and Holdco represents to LMC and SpinCo, as of the
Execution Date that:
(i) Such party has all requisite corporate power to
execute, deliver and perform its obligations under each
of the Relevant Agreements to which it is a party and
such execution, delivery and performance have been duly
authorized by all corporate action on its part required
to be taken.
(ii) Each of the Relevant Agreements to which it is
a party is such party's legal, valid and binding
obligation, enforceable in accordance with its 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 by such
party of any of the Relevant Agreements to which it is a
party, nor the performance of its obligations thereunder:
(A) will violate or conflict with, or constitute a breach
or default under, (1) the certificate of incorporation or
by-laws of such Party, (2) any law, statute, regulation,
rule, order or other enactment of any Governmental Entity
(as defined in Section 24) applicable to such party, or
(3) 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 any of the Relevant Agreements or on
the material rights or ability of the other Party to
realize the material benefits intended to be created by
the Relevant Agreements, and except for any violations,
conflicts, breaches or defaults as may be the result of
actions taken by Holdco subsequent to effective date of
the Distribution Contract, or (B) result in the creation
or imposition of any lien or other encumbrance on any of
its assets, except for
<PAGE>
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
any of the Relevant Agreements 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, as applicable, such party's execution,
delivery and performance of the Relevant Agreements to
which it is a party, 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 any of the Relevant Agreements or on
the material rights or ability of the other Party to
realize the material benefits intended to be created
hereby and thereby.
(b) LMC and SpinCo represent and warrant to Holdco
as of the Execution Date that:
(i) Consolidated Return. As of the Execution Date,
(A) each of LMC and SpinCo (and, if LMC shall have
designated another person to receive the Section 2
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 (the "LMC affiliated group") and
(B) except in connection with the Spin-off, none of LMC,
TCITP, SpinCo or their respective affiliates (other than
the holders of the Excluded Shares, as such term is
defined in the LMC Agreement) has any current plan or
intention (1) to transfer any Holdco equity securities
held directly or indirectly by it immediately following
the Execution Date (or to be acquired by it pursuant to
this Agreement) (any such holder or acquirer, a "Holder")
to any person that is not a member of the LMC affiliated
group or (2) to cause any Holder to cease to be a member
of the LMC affiliated group.
(ii) Investment Intent. The shares of LMCN-V Common
Stock to be acquired by each of LMC and SpinCo pursuant
to Section 2 will be acquired for its own account, for
investment and not with a view to the distribution or
resale thereof other than as
<PAGE>
contemplated in connection with the Spin-off or as
contemplated by the Registration Rights Agreement (and
except that LMC currently intends to transfer the shares
of LMCN-V Common Stock that it so acquires to TCITP or a
wholly-owned subsidiary of TCITP). Each of LMC and SpinCo
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) Holdco represents and warrants to LMC and SpinCo
as of the Execution Date that:
(i) The shares of LMCN-V Common Stock to be
delivered as payment for the Contract Option and the
non-competition agreement in Section 11(b)(ix) will as of
their date of issuance be duly authorized and validly
issued, fully paid, nonassessable and free of preemptive
rights.
(ii) Neither the execution and delivery by Holdco of
this Agreement, the Distribution Contract 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 LMCN-V Common Stock to delivered as
payment for the Contract Option and the non-competition
agreement in Section 11(b)(ix).
(d) In addition to the representations and
warranties of Holdco set forth in Section 4(c), the following
representations and warranties of Time Warner Inc., a Delaware
corporation ("Old TW"), are hereby incorporated by reference,
with the same effect as if made in this Agreement by Holdco to
LMC and SpinCo on and as of the Execution Date:
(i) the representations and warranties of Old TW
contained in Section 3.02(a) of the Amended and Restated
Agreement and Plan of Merger, dated as of September 22,
1995, as amended as of August , 1996 (the "Merger
Agreement"), among Old TW, Holdco, Time Warner
Acquisition Corp., TW Acquisition Corp. and
<PAGE>
Turner Broadcasting System, Inc., under the heading
entitled "Organization, Standing and Corporate Power";
(ii) the representations and warranties of Old TW
contained in Section 3.02(c) of the Merger Agreement
under the heading entitled "Capital Structure";
(iii) the representations and warranties of Old TW
contained in Section 3.02(e) of the Merger Agreement
under the heading entitled "SEC Documents; Undisclosed
Liabilities";
(iv) the representations and warranties of Old TW
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 Old TW
contained in Section 3.02(h) of the Merger Agreement
under the heading entitled "Litigation";
(vi) the representations and warranties of Old TW
contained in Section 3.02(j) of the Merger Agreement
under the heading entitled "Brokers"; and
(vii) the representations and warranties of Old TW
contained in Section 3.02(k) of the Merger Agreement
under the heading entitled "Taxes".
5. Representations and Warranties of Both Parties as
of the Closing Date. If the Contract Option is exercised, it
shall be a condition to the Closing (for the benefit of
SpinCo) 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 Holdco, and it shall be a condition
to the Closing (for the benefit of Holdco) 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 LMC and SpinCo:
(a) Such party is a corporation duly organized,
validly existing and in good standing under the laws of its
state of incorporation and is duly qualified and in good
standing to do business as a foreign corporation in each
<PAGE>
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.
(b) Such party has all requisite corporate power to
execute, deliver and perform its obligations under each of the
Relevant Agreements to which it is a party, and such
execution, delivery and performance have been duly authorized
by all corporate action on its part required to be taken.
(c) Each of the Relevant Agreements to which it is a
party is such party's legal, valid and binding obligation,
enforceable in accordance with its 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.
(d) Neither the execution and delivery by such party
of each of the Relevant Agreements to which it is a party nor,
except as set forth below the applicable party's name on
Schedule 5(d) hereto, the performance of its obligations
thereunder: (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 any of the Relevant Agreements or
on the material rights or ability of the other Party to
realize the material benefits intended to be created by the
Relevant Agreements 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 the Relevant Agreements 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
<PAGE>
made in connection with, as applicable, such party's
execution, delivery and any of the Relevant Agreements to
which it is a party, except as set forth below the applicable
party's name on Schedule 5(d) hereto, performance of each of
the Relevant Agreements to which it is a party, or on the
material rights or ability of the other Party to realize the
material benefits intended to be created hereby and thereby.
Without limiting the rights or obligations of either
Party under any provision of this Agreement: (1) if the
Contract 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 SpinCo as
of the Closing Date. If the Contract Option is exercised, it
shall be a condition to Closing (for the benefit of Holdco)
that, on and as of the Closing Date, each of the following
representations and warranties of SpinCo, 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 SpinCo to Holdco dated
as of a date after the exercise of the Contract Option and not
later than the date 10 days prior to the Closing Date:
(i) Consents. Except as set forth in Schedule
6(a)(i) 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 SpinCo in connection with (A) the
execution, delivery and performance of this Agreement or
the Distribution Contract by SpinCo or performance by
SpinCo of its obligations hereunder or thereunder or (B)
the conduct of the business of SpinCo following the
<PAGE>
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 Holdco'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 the Closing would not, individually or in the
aggregate, have a Material Adverse Effect.
(ii) Financial Statements. (A) Attached to the
Disclosure Letter as Schedule 6(a)(ii) are (1) the
unaudited consolidated balance sheet of the Business (or,
if prior to the Spin-off, of SpinCo) 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
(2) the unaudited consolidated statements of operating
results and cash flows of the Business (or, if prior to
the Spin-off, of SpinCo) 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 Business
(or of SpinCo) as of the date thereof and for the periods
indicated.
(C) To the knowledge of SpinCo and, if prior to the
Spin-off, LMC, as of the Closing Date, the Business (or, if
prior to the Spin-off, SpinCo) 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 (1) as
disclosed, reflected or reserved against in the Balance Sheet,
(2) 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 (3) for Taxes.
<PAGE>
(iii) Assets. Except as set forth in Schedule
6(a)(iii) to the Disclosure Letter, SpinCo 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.
(iv) Contracts. Except as set forth in Schedule
6(a)(iv) to the Disclosure Letter:
(A) all material agreements, contracts, leases,
licenses, commitments or instruments of SpinCo, as
of the Closing Date that are reasonably necessary
for the conduct of the Business as then conducted
(collectively, the "Contracts"), are valid, binding
and in full force and effect and, as of the Closing
Date, are enforceable by SpinCo in accordance with
their 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; and
(B) SpinCo has, as of the Closing Date,
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 SpinCo,
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, except in either such case for any such
breach or default resulting from any action or
omission by Holdco, Turner Broadcasting System,
Inc. ("TBS") or any of their respective Affiliates,
including without limitation any change in the
programming service known as WTBS on the date of
execution of this Agreement.
(v) Litigation. Except as set forth in Schedule
6(a)(v) to the Disclosure Letter:
(A) there are not, as of the Closing Date, any
pending lawsuits or claims with respect to the
Business to which SpinCo or, if prior to the
Spin-off, LMC has been contacted in writing by
counsel
<PAGE>
for the plaintiff or claimant, against or affecting
SpinCo 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 SpinCo and, if prior to
the Spin-off, LMC, as of the Closing Date, SpinCo
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 material properties or assets, which relates
to the Business or could result in a Material
Adverse Effect;
(C) there is not pending against any other
person, as of the Closing Date, any material
lawsuit or claim by SpinCo, which relates to the
Business or which, if adversely determined, could
result in a Material Adverse Effect; and
(D) as of the Closing Date, to the knowledge of
SpinCo and, if prior to the Spin-off, LMC, there is
not any pending investigation of or proceeding by
any Governmental Entity which relates to the
Business and which if determined adversely could
result in a Material Adverse Effect with respect to
the Business or SpinCo.
(vi) Insurance. SpinCo, through one or more
Affiliates, maintains or has the benefit (through TCI,
LMC or otherwise) 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 its
judgment, reasonable for the Business under the
circumstances in which it is being conducted. Except as
set forth in Schedule 6(a)(vi) 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
<PAGE>
compensation insurance policies), and no notice of
cancelation 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 cancelation; and
(B) to the knowledge of SpinCo and, if prior to
the Spin-off, LMC, its activities and operations
with respect to the Business, 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, except for
any failures so to conform that could not,
individually or in the aggregate, have a Material
Adverse Effect.
(vii) Compliance with Applicable Laws. Except as set
forth in Schedule 6(a)(vii), as of the Closing Date,
SpinCo has not received any written communication during
the past two years from a Governmental Entity that
alleges that it or the Business is not in compliance in
any material respect with any applicable statutes, laws,
ordinances, rules, orders and regulations of any
Government 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.
(viii) Licenses; Permits. Except as set forth in
Schedule 6(a)(viii) to the Disclosure Letter, SpinCo
possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to
own, lease or otherwise hold its properties and assets
with respect to the Business and to carry on the 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.
(ix) Absence of Changes or Events. Except as set
forth in Schedule 6(a)(ix) 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 Business
(or, if prior to the Spin-off, SpinCo); and
<PAGE>
(B) since the date of the Balance Sheet, the
Business has been conducted in the ordinary course
(in accordance with the Ordinary Course Guidelines)
and in substantially the same manner as previously
conducted except for such changes (in accordance
with the Ordinary Course Guidelines) in the
day-to-day operations of the Business as the
management of SpinCo (or, if prior to the Spin-off,
LMC and SpinCo), in the good faith exercise of
their business judgment, shall from time to time
determine to be in the best interests of the
Business) and has made commercially reasonable
efforts consistent with past practices to preserve
the Business' relationships with customers,
suppliers and others with whom SpinCo deals in
connection with the Business.
(b) Certain Representations and Warranties of Holdco
as of Closing Date. If the Contract Option is exercised, it
shall be a condition to the Closing (for the benefit of
SpinCo) that, on and as of the Closing Date, each of the
following representations and warranties of Holdco, if
qualified by materiality, shall be true and complete, or, if
not so qualified, shall be true and complete in all material
respects:
(i) Neither the execution and delivery by Holdco of
this Agreement, the Distribution Contract and the
Registration Rights Agreement nor the performance of its
obligations hereunder and thereunder resulted in the
creation or imposition of any lien or other encumbrance
on the shares of LMCN-V Common Stock delivered by Holdco
pursuant to Section 2 as payment for the Contract Option
and the non-competition agreement in Section 11(b)(ix).
(ii) Old TW and Holdco have, collectively, filed all
required reports, schedules, forms, statements and other
documents with the Securities and Exchange Commission
("SEC") since December 31, 1993 (as such documents have
been amended prior to the Closing Date, the "TW SEC
Documents"). As of their respective dates, the TW 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 TW SEC
<PAGE>
Documents, and none of the TW 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 TW SEC Document. Except to the
extent that information contained in any TW SEC Document
has been revised or superseded by a later TW SEC
Document, neither Old TW's Annual Report on Form 10-K for
the year ended December 31, 1995, nor any TW SEC Document
filed after December 31, 1995, 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 Old TW and
Holdco included in TW 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 Old TW or Holdco,
as applicable, 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
TW SEC Documents, neither Holdco nor any subsidiary of
Holdco 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 Holdco
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).
(iii) Except as disclosed in any TW SEC Document,
since the date of the most recent audited financial
<PAGE>
statements included in TW SEC Documents, Holdco has (or,
if Holdco shall have not yet filed audited financial
statements as part of the TW SEC Documents, each of Old
TW and Holdco 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 Holdco 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 Holdco Common Stock or any series
of Parent Preferred Stock;
(C) any split, combination or reclassification
of Holdco Common Stock or any issuance or the
authorization of any issuance of any other
securities in exchange or in substitution for
shares of Holdco 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 Holdco 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 Holdco
Incorporated by Reference as of the Closing Date. In addition
to the representations and warranties of Holdco set forth in
Section 6(b), the following representations and warranties of
Old TW are hereby incorporated by reference,
<PAGE>
with the same effect as if made in this Agreement by Holdco to
SpinCo on and as of the Closing Date:
(i) the representations and warranties of Old TW
contained in Section 3.02(a) of the Merger Agreement
under the heading entitled "Organization, Standing and
Corporate Power"; and
(ii) the representations and warranties of Old TW
contained in Section 3.02(j) of the Merger Agreement
under the heading entitled "Brokers".
and it shall be a condition to the Closing (for the benefit of
SpinCo) 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 Obligations of Each Party. The
obligations of SpinCo and Holdco to consummate the Closing 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
Government Entity shall be pending, the purpose of which is to
set aside or modify in any material respect the authorizations
of any of the transactions provided for in this Agreement and
the Distribution Contract 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; and
(b) the receipt of any required regulatory approvals
and authorizations and the making of all filings and the
termination of all waiting periods required in connection with
the Closing, with the understanding that, if the Contract
Option is exercised, SpinCo will use its (or, if prior to the
Spin-off, LMC and SpinCo will use their) commercially
reasonable efforts to secure any required regulatory approvals
and authorizations prior to the Closing; provided, however,
that nothing in this Agreement shall require, Holdco or SpinCo
(or any of their respective Affiliates) (i) to agree to,
approve or otherwise be bound
<PAGE>
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 or (ii) to agree to or enter into or be bound by any
settlement or judgment.
8. Conditions to Obligation of Holdco. The
obligation of Holdco to consummate the Closing is also subject
to the satisfaction, prior to or on the Closing Date, of each
of the following additional conditions (unless waived by
Holdco):
(a) Each of the Parties (other than Holdco) shall
have performed in all material respects all its obligations
hereunder which are required to be performed prior to the
Closing Date.
(b) If prior to the Spin-off, Holdco shall have
received a certificate from an officer of LMC (i) to the
effect that LMC has complied, in all material respects, with
all its obligations under this Agreement to be performed on or
before the Closing Date, (ii) as to the incumbency of certain
officers of LMC, (iii) as to the satisfaction of the
conditions to Closing set forth in Section 5 (with respect to
the representations and warranties of LMC contained therein)
and Section 6(a) and (iv) attaching certified copies of
SpinCo's certificate of incorporation and by-laws, as amended
through and in effect on the Closing Date, together with all
resolutions of LMC's board authorizing the transactions
contemplated by this Agreement and the Distribution Contract.
(c) If prior to the Spin-off, Holdco shall have
received an opinion of counsel to LMC (which counsel may be an
employee of LMC and which counsel may be counsel to SpinCo),
reasonably acceptable to Holdco, addressed to Holdco and dated
the Closing Date, to the effect that:
(i) LMC is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation. LMC 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 LMC of the
Agreement, the performance by LMC of its obligations
thereunder and the consummation by LMC of the
<PAGE>
transactions contemplated thereby have been duly and
validly authorized by all necessary corporate action on
the part of LMC. The Agreement has been duly executed and
delivered by a duly authorized officer of LMC and
constitutes the legal, valid and binding obligation of
LMC enforceable against LMC 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 execution, delivery and performance of the
Agreement by LMC in accordance therewith does not
conflict with or result in a violation of the Delaware
Corporation Law or the Certificate of Incorporation or
By-laws of LMC.
(d) Holdco shall have received a certificate from an
officer of SpinCo (i) to the effect that SpinCo has complied,
in all material respects, with all its obligations under this
Agreement to be performed on or before the Closing Date, (ii)
as to the incumbency of certain officers of SpinCo, (iii) as
to the satisfaction of the conditions to Closing set forth in
Section 5 (with respect to the representations and warranties
of SpinCo contained therein) and Section 6(a), and (iv)
attaching certified copies of SpinCo's certificate of
incorporation and by-laws as amended through and in effect on
the Closing Date, together with all resolutions of SpinCo's
board of directors authorizing the transactions contemplated
by this Agreement and the Distribution Contract.
(e) Holdco shall have received an opinion of counsel
to SpinCo (which counsel may be an employee of SpinCo and may
also be counsel to LMC and/or an employee of LMC), reasonably
acceptable to Holdco, addressed to Holdco and dated the
Closing Date, to the effect that:
(i) SpinCo is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation. SpinCo has all requisite
corporate power and authority to execute and deliver this
Agreement and the Distribution Contract and to perform
its obligations hereunder and thereunder.
<PAGE>
(ii) The execution and delivery by SpinCo of this
Agreement and the Distribution Contract and the
performance by SpinCo of its obligations hereunder and
thereunder have been duly and validly authorized by all
necessary corporate action on the part of SpinCo. Each of
this Agreement and the Distribution Contract has been
duly executed and delivered by a duly authorized officer
of SpinCo and constitutes the legal, valid and binding
obligation of SpinCo enforceable against SpinCo 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 execution and delivery of this Agreement
and the Distribution Contract by SpinCo, and the
performance by SpinCo of its obligations hereunder and
thereunder, does not conflict with or result in a
violation of the corporate laws of the State of Georgia,
or the Certificate of Incorporation or by-laws of SpinCo.
(f) The Program and Digitization Agreement (as
defined in the LMC Agreement) shall be in full force and
effect, subject to satisfaction of the conditions set forth
therein.
(g) SpinCo shall have received any material third
party consents, approvals and authorizations necessary to
cause the effectiveness of the Distribution Contract.
(h) Subject to Section 15(b), if an Exercise Notice
shall have been delivered on or prior to June 1, 1997, Holdco
shall have received the Disclosure Letter from SpinCo at least
10 days prior to the scheduled Closing Date and shall be
reasonably satisfied with the contents thereof and of all
attachments thereto.
If an Exercise Notice shall have been delivered by
Holdco after June 1, 1997, (i) Holdco shall have received, as
contemplated by Section 11(b)(vii), the revised Disclosure
Letter from SpinCo at least 10 days prior to the scheduled
Closing Date and (ii) Holdco shall be reasonably satisfied
with the contents of the revised Disclosure Letter and of all
attachments thereto, to the extent (and only to the extent)
that such contents and attachments differ in any material
respect from the initial Disclosure Letter
<PAGE>
delivered to Holdco pursuant to Section 11(b)(vii), and
provided that the incurrence by SpinCo, TCITP and/or any of
their respective subsidiaries of indebtedness for borrowed
money, whether or not secured (unless secured in contravention
of Section 11(b)(vi)(C)), shall not be a reasonable basis for
Holdco's dissatisfaction under this Section 8(h).
(i) Subject to Section 15(b), if an Exercise Notice
shall have been delivered on or prior to June 1, 1997, Holdco
shall be reasonably satisfied with the results of its due
diligence investigation provided for in Section 11(b)(ii).
9. Conditions to Obligation of SpinCo. The
obligation of SpinCo to consummate the Closing is also subject
to the satisfaction, prior to or on the Closing Date, of each
of the following conditions (unless waived by SpinCo):
(a) Holdco 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 Holdco under any bankruptcy,
insolvency or similar law.
(c) SpinCo shall have received an opinion of counsel
to Holdco (which counsel may be an employee of Holdco),
reasonably acceptable to SpinCo, addressed to SpinCo and dated
the Closing Date, to the effect that:
(i) Holdco is a corporation duly organized, validly
existing and in good standing under the laws of its
jurisdiction of incorporation. Holdco has all requisite
corporate power and authority to perform its obligations
under this Agreement, the Distribution Contract and the
Registration Rights Agreement and to consummate the
transactions contemplated hereby and thereby.
(ii) The performance by Holdco of its obligations
under this Agreement, the Distribution Contract and the
Registration Rights Agreement, and the consummation by
Holdco of the transactions contemplated hereby and
thereby have been duly and validly authorized by all
necessary corporate action on the part of Holdco. Each
<PAGE>
of this Agreement, the Distribution Contract and the
Registration Rights Agreement constitutes the legal,
valid and binding obligation of Holdco enforceable
against Holdco 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).
(iii) The performance by Holdco of this Agreement,
the Distribution Contract and the Registration Rights
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 Holdco.
(d) SpinCo shall have received a certificate from an
officer of Holdco (i) to the effect that Holdco has complied,
in all material respects, with all its obligations under this
Agreement, the Distribution Contract and the Registration
Rights Agreement, (ii) as to the incumbency of certain
officers of Holdco, (iii) as to the satisfaction of the
conditions to Closing set forth in Section 5 (with respect to
the representations and warranties of Holdco contained
therein), Section 6(b) and Section 6(c), (iv) attaching all
resolutions of Holdco's board of directors authorizing the
transactions contemplated by this Agreement, and (v) any other
customary matters as may be reasonably requested by SpinCo.
10. Termination. (a) Subject to the last two
sentences of Section 14 with respect to the survival of
certain provisions, each of LMC's, SpinCo's and Holdco's
rights and obligations under this Agreement (including with
respect to the option granted hereunder, whether or not
exercised) will terminate on the earliest to occur of the
following:
(i) if Holdco shall deliver an Exercise Notice on or
before June 1, 1997 (subject to extension as provided in
Section 15(b)), the earlier of (A) the sixth anniversary
of the Execution Date and (B) the conversion of WTBS to a
copyright-paid programming service;
<PAGE>
(ii) if Holdco shall deliver an Exercise Notice
after June 1, 1997 (subject to extension as provided in
Section 15(b)), but before the sixth anniversary of the
Execution Date, 60 days after the date of such Exercise
Notice; and
(iii) if Holdco shall not theretofore have delivered
an Exercise Notice, the earlier of (A) the sixth
anniversary of the Execution Date and (B) the conversion
of WTBS to a copyright-paid programming service;
provided in each case that the Closing has not occurred on or
prior to such earliest date (the "Termination Date").
Notwithstanding the foregoing, if (following the delivery of a
timely Exercise Notice) 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 Termination Date,
the "Termination Date" shall be extended to the earlier of (i)
five business days after the date as of which all such
conditions have been satisfied in full and (y) the first
anniversary of the date of such Exercise Notice.
(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
Distribution Contract or the Registration Rights Agreement.
11. Covenants. (a) Covenants of Each Party. If the
Contract Option is exercised each of SpinCo (or, if prior to
the Spin-off, LMC and SpinCo) and Holdco agree to use its
commercially reasonable efforts to cause the conditions to the
Closing described in Sections 7, 8 and 9 to be satisfied as
promptly as practicable following such exercise.
(b) Covenants of LMC and SpinCo.
(i) Disposition of Shares. During the period from
the Execution Date through the earlier to occur of the
Grant Date or the Termination Date, LMC 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
<PAGE>
which LMC 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 and
the provisions of the Distribution Contract to the same
effect as LMC); provided further that LMC 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. Subject to Section 15(b), (A) during
the period from the Execution Date until and including
June 1, 1997, and (B) during the sixty-day period
following the delivery of any Exercise Notice (including
an Exercise Notice delivered on or prior to June 1,
1997), LMC and SpinCo shall give Holdco and its
representatives, employees, counsel and accountants
reasonable access, during normal business hours and upon
reasonable notice, and subject to, as applicable, LMC's
and SpinCo's obligations under any then existing
confidentiality or non-disclosure agreements, to the
personnel, properties, books and records of the Business
to the extent in their possession or control, so that
Holdco may confirm the satisfaction of all conditions
precedent to its obligations to be performed hereunder on
the Closing Date; provided, however, that such access
does not unreasonably disrupt the normal operations of
LMC or SpinCo. As against Holdco and its representatives,
employees, counsel and accountants, each of LMC and
SpinCo hereby waives any confidentiality or
non-disclosure covenants contained for its benefit in any
agreement concerning the Business (including any WTBS
service agreements or arrangements) and it agrees to
execute any acknowledgements with respect to such waiver
as Holdco may reasonably request. Each of LMC and SpinCo
agree 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 Holdco with respect to the
Business; provided, however, that nothing in this
Agreement shall require LMC or SpinCo (or any of their
respective Affiliates) (x) to agree to any material
modification or amendment to any agreement between any of
them or any such Affiliate and any third party, or
<PAGE>
any other onerous or burdensome condition or requirement
or (y) 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. On the
Execution Date and upon Holdco's delivery of the Exercise
Notice, SpinCo shall also give Holdco a list of the WTBS
Distributors (as defined in Section 24). During the
period from the Execution Date through the earlier to
occur of the Closing Date or the Termination Date, if
SpinCo 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 it is or will be a party, or
any other material matter relating to the Business,
SpinCo shall use commercially reasonable efforts in good
faith to negotiate a provision in such agreement or
covenant to permit it to disclose the matters subject to
such confidentiality or non-disclosure agreement to
Holdco and its representatives, employees, counsel and
accountants; provided, however, that nothing in this
Agreement shall require LMC or SpinCo (or any of their
respective Affiliates) (x) to agree to any material
concession, condition or other provision in any agreement
that, in their good faith business judgment, is in any
respect materially less favorable to it or the Business
than the comparable provision that could have been
negotiated by it if this sentence did not apply or (y) 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
Holdco 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, SpinCo shall
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 SpinCo (or, if prior to
the Spin-off, the management of LMC and SpinCo), in the
good faith exercise of their business judgment, shall
from time to time determine to be in the best interests
of the Business. In that connection, SpinCo shall use its
commercially reasonable efforts to preserve the Business'
relationships with customers, suppliers and others with
whom SpinCo deals with
<PAGE>
respect to the Business. In addition, SpinCo shall not
take any action that could reasonably be expected to
materially impair the business, assets and financial
condition of the Business at the time of the
effectiveness of the Distribution Contract (provided that
SpinCo shall be permitted to discontinue the operations
of the Business if because of an act of God, significant
change in law or other occurrence, it would not be
commercially reasonable to continue such operations). In
connection, with its obligation to operate in the
ordinary course, SpinCo shall not cease to be a private
carrier with respect to the Business, as conducted
domestically in the U.S., without the prior written
consent of Holdco, which shall not unreasonably be
withheld or delayed; provided, however, that such consent
may be withheld by Holdco in its sole discretion if it
determines that such action impairs the availability of
the exception under 17 U.S.C. ss.111(a)(3). Holdco agrees
that it and its Affiliates will not assist any third
party in competing against SpinCo in uplinking the WTBS
broadcast signal.
(iv) [Reserved.]
(v) Insurance. At all times during the period from
the Execution Date through the earlier of the Closing
Date and the Termination Date, SpinCo shall maintain in
full force and effect (through one or more Affiliates or
otherwise), insurance policies meeting the requirements
of Section 6(a)(vi).
(vi) Mergers; Business Transfer; Security
Arrangements. (A) SpinCo shall not merge with another
corporation or other entity unless SpinCo is the
surviving entity in such merger or the surviving entity
delivers to Holdco prior to such merger an agreement (in
form and substance reasonably satisfactory to Holdco and
its counsel) pursuant to which it agrees to be bound by
the terms of this Agreement and the Distribution
Contract.
(B) SpinCo shall not sell, transfer or
otherwise dispose of the Business (other than any
security interest granted in connection with a
SpinCo financing covered by clause (C) below)
unless (1) Spinco sells, transfers or otherwise
disposes of the Business in its entirety and (2)
the entity or person so acquiring the Business
<PAGE>
prior to such acquisition delivers to Holdco an
agreement (in form and substance reasonably
satisfactory to Holdco and its counsel) pursuant to
which it agrees to be bound by the terms of this
Agreement and the Distribution Contract.
(C) SpinCo shall not grant or permit to exist
any lien or other security interest on the assets
of the Business (including the Distribution
Contract and its WTBS service agreements) in
connection with any SpinCo financing unless the
secured party or parties prior to any such grant
agree in writing, for the benefit of Holdco, that
(1) any foreclosure or sale of the Business shall
involve the foreclosure or sale of the Business in
its entirety and (2) as a condition to such
foreclosure or sale, the entity or person so
acquiring the Business shall be required to deliver
to Holdco, prior to such acquisition, an agreement
(in form and substance reasonably satisfactory to
Holdco and its counsel) pursuant to which it agrees
to be bound by the terms of this Agreement and the
Distribution Contract.
(D) In the event that SpinCo or, prior to the
Spin-off, LMC receives any proposal with respect
to, or determines to enter into any transaction
involving, any of the events described in this
paragraph (vi), SpinCo and LMC shall promptly
notify Holdco thereof.
(vii) Disclosure Letter and Closing Schedules. If,
subject to Section 15(b), Holdco delivers an Exercise
Notice on or prior to June 1, 1997, SpinCo shall as soon
as practicable after such delivery (and in any event not
later than 10 days prior to the Closing Date) prepare and
deliver to Holdco the Disclosure Letter and all required
schedules to this Agreement that have not previously been
delivered. If Holdco shall have not delivered an Exercise
Notice on or prior to June 1, 1997, SpinCo shall as soon
as practicable after such date (but in any event not
later than June 16, 1997) deliver to Holdco the
Disclosure Letter and all required schedules to this
Agreement as of such date. If thereafter Holdco delivers
an Exercise Notice, Spinco shall as soon as practicable
after such delivery (and in any event not later than ten
days prior to the Closing Date) prepare and deliver to
Holdco a revised
<PAGE>
Disclosure Letter and all required schedules to this
Agreement that have not previously been delivered.
(viii) Supplemental Disclosure. SpinCo shall
promptly notify Holdco of, and furnish Holdco any
information it may reasonably request with respect to,
the occurrence to its knowledge of any event or condition
or the existence to its knowledge of any fact that causes
any of the conditions to Holdco's obligation to cause the
effectiveness of the Distribution Contract not to occur;
provided, however, that no such notification shall be
required with respect to any representation or warranty
of LMC or SpinCo hereunder prior to delivery of the
Disclosure Letter.
(ix) Restricted Activities; SpinCo Obligations. Each
of LMC and SpinCo covenants and agrees with Holdco as
follows:
(A) During the period from the Execution Date
through the earlier of the Closing Date and the
Termination Date, each of LMC and SpinCo shall not
(and each shall cause its Affiliates not to) engage
in the Business, other than through SpinCo.
(B) If the Closing Date occurs, during the
period from the Closing Date through the fifth
anniversary of the termination of the last service
agreement between SpinCo and any MVPD (as defined
in Section 24), LMC shall not, and shall cause its
Affiliates not to, engage in the Business (other
than through SpinCo). If the Closing Date occurs,
during the period from the Closing Date through the
Termination Date (as defined in the Distribution
Contract) LMC shall not, directly or indirectly
(including through any Affiliate), solicit any MVPD
to terminate carriage of the WTBS programming
service (including the programming of the broadcast
television SuperStation known on the Execution Date
as WTBS and any cable programming network
established as the successor thereto) or, except as
contemplated by the Distribution Contract, to
terminate any service agreement with SpinCo with
respect to such programming service; provided,
however, that the provisions of this sentence shall
not apply with respect to any MVPD that enters into
a WTBS programming agreement with Holdco. By way of
example, and without limiting the generality of the
foregoing,
<PAGE>
it is understood that the offering of WTBS as a
distant broadcast signal (other than through
SpinCo) violates the restrictions of this
subparagraph (B).
Anything contained herein to the contrary
notwithstanding, Holdco acknowledges (I) that LMC
and its Affiliates represent numerous programming
services that are marketed, distributed and sold to
MVPDs on a continuous basis, in competition with
WTBS and other programming services, (II) that due
to limited channel capacity, an MVPD must often
terminate an existing programming service carried
by such MVPD in order to carry a new programming
service, and (III) that activities conducted by LMC
and its Affiliates in connection with the marketing
of programming services that compete with WTBS
shall not be construed to violate LMC's covenant in
this Section, even if an MVPD terminates carriage
of WTBS to carry a programming service marketed by
LMC or any of its Affiliates, unless LMC or such
Affiliate shall have urged or induced such MVPD to
drop WTBS.
(C) If the Closing Date occurs prior to the
consummation of the Spin-off, then, so long as
SpinCo is LMC's Controlled Affiliate (as defined in
the LMC Agreement), LMC shall cause SpinCo to
comply with its obligations under this Agreement
and the Distribution Contract, including the
provisions of Section 3 thereof.
(D) If the Closing Date occurs, then prior to
and after consummation of the Spin-off, LMC shall
provide Holdco and its representatives reasonable
access, on a basis comparable to the access
provided by SpinCo pursuant to Section 2(d) of the
Distribution Contract, to any records of LMC
relating to the Business prior to the Spin-off to
confirm amounts payable to SpinCo after the Closing
Date pursuant to the Distribution Contract.
(c) Confidentiality. Until the Closing Date (or if
the Closing does not occur, until the second anniversary of
the Termination Date) Holdco 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
Business or SpinCo which is conveyed to it by LMC, SpinCo or
any of their Affiliates, or any representative of LMC, SpinCo
or any of their Affiliates ("Confidential
<PAGE>
Information"). Notwithstanding the foregoing, the term
"Confidential Information" does not include: (i) information
which is, at the time of its disclosure to Holdco or any
Affiliate of Holdco or their respective representatives,
already in Holdco's, its Affiliates' or their representatives'
possession (without violation, to Holdco's knowledge, of any
legally enforceable confidentiality agreement with LMC, SpinCo
or any of their Affiliates relating to such information), (ii)
information which is or becomes available to the public other
than as a result of a disclosure by Holdco or any Affiliate of
Holdco or their respective representatives, (iii) information
which was or becomes available to Holdco or any Affiliate of
Holdco or their respective representatives on a
non-confidential basis from a source other than LMC, SpinCo,
any of their Affiliates or their respective representatives
(provided that information contained in any agreement with
respect to the Business obtained solely as a result of the
confidentiality waiver in Section 11(b)(ii) shall not be
considered to be obtained on a non-confidential basis);
provided that such source was not known by Holdco to be bound
by the terms of a legally enforceable confidentiality
agreement with LMC, SpinCo or any of their Affiliates relating
to such information, (iv) information which is information
that is independently developed by Holdco 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 Holdco, 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 Holdco will provide SpinCo and, prior to the
Spin-off, LMC with prompt notice of any such request or
requirement (written if practical) so that LMC and/or SpinCo
may seek at its own expense an appropriate protective order or
waive Holdco's compliance with the provisions of this Section
11(c). If, failing the entry of a protective order or the
receipt of a waiver hereunder, Holdco, any of its Affiliates
or any of their respective representatives is, in the opinion
of its counsel, compelled to disclose any Confidential
Information, Holdco 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
<PAGE>
of LMC and/or SpinCo use reasonable efforts to cooperate in
LMC's and/or SpinCo'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. Holdco will use the Confidential
Information only in connection with its due diligence review
of the Business and SpinCo, 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 Holdco's rights under, this
Agreement and agree not to disclose or use such Confidential
Information except as provided herein. Holdco agrees that it
shall be responsible for any breach of this Section 11(c) by
such persons. In the event that the Closing does not occur
under this Agreement, Holdco shall, at its option, either (i)
return all Confidential Information provided or made available
to it hereunder relating to the Business and SpinCo, whether
in written, computer-readable or other form, together with all
copies thereof in the possession of Holdco or (ii) destroy all
such Confidential Information and certify such destruction to
LMC and SpinCo; provided, however, that Holdco'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.
(d) Covenant by Satellite Relating to Carriage of
WTBS. During the period from the Execution Date through the
earlier of the Closing Date and the Termination Date, provided
that Holdco or any Managed Subsidiary of Holdco 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
LMC, to Peter R. Haje, the general counsel of Holdco) (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
<PAGE>
SpinCo (provided that SpinCo is able to transmit such signal),
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 SpinCo,
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(d)
shall limit the effects of the "HITS" provisions of the
Program and Digitization Agreement with respect to the
carriage of the WTBS signal, or the rights and obligations of
the parties thereunder, when those provisions become effective
in accordance with their terms).
(e) Acknowledgement by SpinCo and LMC. Each of
SpinCo and LMC acknowledges and agrees for itself and each of
its Affiliates that, from and after the closing of the Mergers
(as defined in the LMC Agreement), (i) Holdco intends to (and
may) communicate directly with MVPDs (including MVPDs that are
WTBS Distributors) regarding the transformation of WTBS into a
copyright-paid, satellite delivered, twenty-four-hour-per-day
cable television programming service and (ii) Holdco intends
to (and may) communicate with WTBS Distributors about (x) the
terms of a new WTBS distribution contract or arrangement
directly with Holdco or any of its Managed Subsidiaries
(conditioned on transformation of WTBS to such a
copyright-paid service) and (y) the possible termination of
their existing contracts or arrangements with SpinCo (upon
transformation of WTBS to a copyright-paid service), and
Holdco intends to (and may) enter into agreements with WTBS
Distributors with respect to the foregoing (conditioned upon
the transformation of WTBS to a copyright-paid service), all
without creating any liability to SpinCo, LMC or any of their
respective Affiliates. Neither Spinco, LMC nor any of their
respective Affiliates will discourage any MVPD from engaging
in any such conversations or negotiations with Holdco or its
Affiliates with respect to the converted WTBS program service
or discourage any MVPD from entering into any such contracts
or arrangements with respect to the converted WTBS program
service.
(f) Holdco's Right to Assign Program and
Digitization Agreement to Managed Subsidiaries. LMC, SpinCo
and Satellite hereby acknowledge and agree that, from and
after the closing of the Mergers (as defined in the LMC
Agreement), the rights (but not the obligations) of TBS under
the Program and Digitization Agreement attached hereto as
Exhibit 2 (the "Program and Digitization Agreement"),
<PAGE>
between TBS and Satellite with respect to the carriage of the
copyright-paid WTBS service may be assigned to any Managed
Subsidiary, provided that any such assignment shall terminate
if the assignee ceases to be a Managed Subsidiary. This
Section 11(f) shall survive the exercise of the Contract
Option and any termination of this Agreement.
(g) Non-Exclusive Right to Digitize, Compress and
Reuplink. Reference is made to the "HITS" provisions of the
Program and Digitization Agreement. The Parties hereby consent
to any action taken by Satellite during the term of this
Agreement that would be permitted by such provisions of the
Program and Digitization Agreement, as if such agreement were
then in effect with respect to WTBS prior to its conversion to
a copyright-paid service and (i) all references therein to
"TBS" referred to SpinCo, (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 SpinCo
pursuant to contractual relationships". In that connection,
and on the same basis, Satellite shall comply with the
obligations required to be performed by Satellite in such
"HITS" provisions.
12. [Reserved.]
13. [Reserved.]
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 tax representations and
warranties in Section 4(b)(i), and the representations and
warranties of Holdco 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. In addition, the provisions of Section
2(f) and Section 11(b)(ix) shall survive the Execution Date,
the Closing and the termination of this Agreement pursuant to
Section 10 and shall survive in accordance with their terms.
15. Parties Obligated and Benefited; LMC's Right to
Designate Recipient; Other Transaction. (a) Subject to
<PAGE>
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 Distribution Contract, except: (i) LMC may
assign (without the consent of Holdco) any of its rights
(including, without limitation, the right to receive the
Section 2 payment for the non-competition agreement in Section
11(b)(ix) to any person that, at the time of such assignment
(and, in the case of any such person designated to receive
such payment, at the payment date), is (A) a Liberty Party (as
defined in the LMC Agreement) and (B) a member of the
affiliated group (within the meaning of Section 1504(a) of the
Code) of which LMC is (at such time) a member; (ii) by
operation of law; and (iii) with respect to any merger of
SpinCo or sale or disposition of the Business, in each case,
permitted under Section 11(b)(vi).
(b) If, as contemplated by Section 2, the Letter
Ruling shall have not been obtained by May 31, 1997 or TCI
shall have been advised or have determined that it will not
obtain the Letter Ruling (or, that it will not obtain the
Letter Ruling unless TCI and the other parties thereto agree
to changes in the transactions contemplated by the LMC
Agreement and the Additional Agreements (as defined in the LMC
Agreement) or any other conditions imposed as a prerequisite
by the Internal Revenue Service), the Parties agree that (i)
notwithstanding the provisions of Section 2, the Grant Date
shall be postponed for 30 days during which period the Parties
shall mutually endeavor in good faith to negotiate the
consummation of a transaction that is more tax efficient to
both Parties and (ii) the references to June 1, 1997, in this
Agreement (including as they relate to the definition of the
Termination Date, Holdco's delivery of an Exercise Notice,
Holdco's conditions to Closing, Holdco's access to the
Business and SpinCo's delivery of the Disclosure Letter and
related schedules) shall be automatically extended to the
date, if later than June 1, 1997, that is five days after the
termination of the discussions contemplated by this Section
15(b).
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
<PAGE>
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 Holdco:
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: William P. Rogers, Jr., Esq.
If to LMC:
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
<PAGE>
Baker & Botts, L.L.P.
599 Lexington Avenue
Suite 2800
New York, New York 10022
Attention: Elizabeth Markowski, Esq.
If to SpinCo:
Southern Satellite Systems, Inc.
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
(but only prior to the Spin-off)
and
Baker & Botts, L.L.P.
599 Lexington Avenue
Suite 2800
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
<PAGE>
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
"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 the laws of the State of New York
applicable to contracts made and performed wholly therein.
20. Time. If the last day permitted for the timing
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
Distribution Contract, 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
<PAGE>
affecting the validity or enforceability of any of the terms
or provisions of the 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;
(b) "Business" means the business of uplinking and
distributing to MVPDs the signal of the television station
broadcasting on the date hereof in Atlanta, Georgia under the
call letters WTBS, and any successor over-the-air television
station in Atlanta, Georgia that broadcasts substantially
similar programming as WTBS following its conversion to a
copyright-paid programming service (as such converted service
may be renamed); provided that the Business shall refer to the
business of uplinking and distributing only one such broadcast
television station at any one time. Anything contained herein
to the contrary notwithstanding, neither (i) the existence of
an agreement between SpinCo or any unrelated third party and
any intermediary (such as Satellite and/or Netlink USA)
pursuant to which such intermediary arranges for the WTBS
signal transmitted by SpinCo or such unrelated third party to
be received by an "affiliate" of such intermediary as defined
in Section 11(d) 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(d), nor (ii) any activities by any intermediary
of the type contemplated by Section 11(g) hereof, shall in
itself (A) cause such an intermediary to be construed as
engaging in the "Business" as defined herein or (B) cause such
an intermediary to be in violation of the restrictions of
Section 4 pursuant to the last sentence of the first paragraph
thereof;
<PAGE>
(c) "Current Market Price", as of any date, means
the average of the daily closing prices for the shares of the
Holdco 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 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 Holdco Common Stock
(regular way) as shown on the Composite Tape of the New York
Stock Exchange;
(d) "FTC Agreement in Principle" means the Agreement
in Principle with FTC Staff re: Consent Order dated July 16,
1996, entered into by the Federal Trade Commission, Holdco and
TCI;
(e) "FTC Consent Decree" means the Agreement
Containing Consent Order (including the FTC Agreement in
Principle, the "ACCO") dated as of August , 1996, with the
Federal Trade Commission, together with the Order issued in
connection with the ACCO;
(f) "Governmental Entity" means a court,
administrative agency or commission or other governmental
authority or instrumentality;
(g) "Holdco Common Stock" means the Common Stock,
$.01 par value, of Holdco;
(h) "Letter Ruling" means a letter ruling from the
Internal Revenue Service (i) to the effect that, at the time
thereof, the Spin-off shall constitute a tax free distribution
under Section 355 of the Internal Revenue Code of 1986, as
amended, and (ii) that is otherwise acceptable to Holdco and
TCI;
(i) "Liberty Subsidiaries" means TCI Turner
Preferred, Inc., Liberty Broadcasting, Inc., United Cable
Turner Investment, Inc. and Communication Capital Corp.;
(j) "Managed Subsidiary" means, as to Holdco, an
Affiliate of Holdco (i) in which Holdco has, directly or
indirectly, a majority ownership interest and (ii) as to which
Holdco has day-to-day management control, specifically
<PAGE>
including, without limitation, as of the date hereof, Time
Warner Entertainment Company L.P. and Time Warner
Entertainment Advance Newhouse Partnership;
(k) "Material Adverse Effect" means, as to any
person, a material adverse effect on the business, assets,
financial condition or results of operations of such person
and its consolidated subsidiaries, taken as a whole, or on the
ability of such person to perform its obligations under any of
the Relevant Agreements to which it is a party;
(l) "MVPDs" means all cable, MMDS, LMDS, TVRO, DBS,
video dial tone and/or other distributors of multichannel
video programming by any means;
(m) "Ordinary Course Guidelines" means the general
guidelines with respect to the operation of the Business of
SpinCo as set forth on Exhibit 3 hereto;
(n) "Spin-off" means the distribution by TCI of 100%
of the capital stock of SpinCo to holders of record of TCI's
Tele-Communications, Inc. Series A Liberty Media Group Common
Stock and Tele-Communications, Inc. Series B Liberty Media
Group Common Stock;
(o) "Taxing Authority" shall mean any Federal,
state, local or foreign court or governmental agency,
authority, instrumentality or regulatory body.
(p) "Tax" shall mean any Federal, state, local and
foreign taxes and assessments, including all interest
penalties and additions imposed with respect to such amounts;
and
(q) "WTBS Distributors" means those persons and
entities with whom SpinCo has an affiliate 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
<PAGE>
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.
26. No Unauthorized Transfer of Control. Nothing in
this Agreement or the Distribution Contract shall, nor shall
be construed to, constitute a transfer of control of the
licenses held by SpinCo and its subsidiaries without prior
approval by the Federal Communications Commission ("FCC") of
the transfer of all such licenses issued by the FCC to SpinCo
and its subsidiaries. SpinCo shall at all times retain full,
exclusive and absolute control of the licensed facilities as
well as ultimate responsibility for the operation of the FCC
licensed facilities pursuant to all applicable rules and
policies of the FCC and the Communications Act of 1934, as the
foregoing may be superseded or amended.
27. Continuation as Passive Carrier. SpinCo is and
will continue to be a passive carrier, and nothing in this
Agreement or the Distribution Contract shall, nor shall be
construed to, require SpinCo to operate with respect to
carriage of the WTBS signal other than as a passive carrier
pursuant to 17 U.S.C. ss. 111(a)(3) and as a satellite carrier
pursuant to 17 U.S.C. ss. 119(a), prior to the Converted WTBS,
as defined in Section 18 of the Distribution Contract.
IN WITNESS WHEREOF, the Parties have caused this
Agreement to be duly executed and delivered as of the date
first written above.
TW INC.,
By
--------------------------
Name:
Title:
<PAGE>
LIBERTY MEDIA CORPORATION,
By
--------------------------
Name:
Title:
SOUTHERN SATELLITE SYSTEMS,
INC.
By
--------------------------
Name:
Title:
With respect to Section 11(d),
Section 11(f) and
Section 11(g) only:
SATELLITE SERVICES, INC.,
By
--------------------------
Name:
Title:
[CS&M Draft--8/8/96]
EXHIBIT 1 TO
THE SSSI AGREEMENT
DISTRIBUTION CONTRACT
This Distribution Contract (the
"Agreement") is dated as of _________,
1996, and is entered into between TW Inc.
(which will be renamed Time Warner Inc.), a
Delaware corporation ("Holdco"), and
Southern Satellite Systems, Inc.
("SpinCo"). For purposes of this Agreement,
each of SpinCo, on the one hand, and
Holdco, on the other hand, is a "Party",
and SpinCo and Holdco are sometimes
referred to collectively herein as
"Parties".
WHEREAS Holdco, Liberty Media Corporation, a Delaware
corporation ("LMC"), and Satellite Services, Inc., a Delaware
corporation ("Satellite") (with respect to certain sections
thereof only), have entered into an SSSI Agreement dated as of
_________, 1996 (the "SSSI Agreement"), which contemplates the
execution of this Agreement;
WHEREAS pursuant to the SSSI Agreement, Holdco acquired
the right, upon the closing of the exercise of the option granted
to Holdco therein, to cause the Effective Date to occur under this
Agreement, whereupon the Parties will be bound to perform their
respective obligations provided for herein;
WHEREAS Tele-Communications, Inc., a Delaware
corporation ("TCI"), is required pursuant to the FTC Consent
Decree (including the FTC Agreement in Principle) to seek from the
Internal Revenue Service the Letter Ruling (as defined in Section
18) with respect to the Spin-off (as defined in Section 18) of
100% of the shares of SpinCo;
WHEREAS on the date hereof SpinCo is engaged primarily
in the Business and is a wholly owned subsidiary of LMC;
WHEREAS, in connection with the Spin-off, LMC shall
contribute all the capital stock of TCI Turner Preferred, Inc., a
Colorado corporation ("TCITP"), to SpinCo, so that, as of
immediately prior to the effectiveness of the Spin-off, TCITP will
be a wholly owned subsidiary of SpinCo; and
<PAGE>
WHEREAS in connection with this Agreement and the SSSI
Agreement, SpinCo and any transferee of the Business in accordance
with the terms of this Agreement has or will agree to the
non-competition provisions of Section 4 hereof.
NOW, THEREFORE, in consideration for good and valuable
consideration, which is hereby acknowledged by each Party, it is
agreed as follows:
1. Effective Date; Definitions. The Parties agree that
this Agreement shall automatically become effective on the Closing
Date (as defined in the SSSI Agreement) upon the closing of the
exercise of the Contract Option under the SSSI Agreement in
accordance with the provisions thereof (such date being the
"Effective Date"). Capitalized terms used, but not defined, in any
other Sections of this Agreement are defined in Section 18.
2. Contract Payments.
(a) Aggregate Payments. Subject to paragraphs (b) and
(c) below, Holdco shall make payments to SpinCo in an amount
sufficient to ensure that on or after the Effective Date, the sum
of (A) aggregate Net Cash Flow for the Business subsequent to the
Effective Date and (B) all payments received by SpinCo from Holdco
in respect of its obligations under this Agreement have a present
value as of the Effective Date of $213,333,333. Unless agreed
otherwise, all payments made under this Section 2 shall be made by
wire transfer to an account designated in writing by SpinCo on or
prior to the Effective Date and from time to time thereafter. The
calculation of the present value of all amounts paid or payable
under this Section 2 shall be determined in accordance with
paragraph (d) below. The obligation of Holdco to make the payments
provided for in this Section 2 shall not be subject to any right
of setoff or counterclaim that Holdco may have or claim not
arising under this Agreement.
(b) Minimum Quarterly Payments. Subject to paragraph (c),
until the aggregate amounts required pursuant to paragraph (a) above
have been received by SpinCo, Holdco agrees to make minimum
quarterly payments to SpinCo in an amount sufficient to ensure that,
with respect to each of SpinCo's fiscal quarters ending after the
Effective Date, the sum of (A) aggregate Net Cash Flow for the
Business in respect of such fiscal quarter and (B) Holdco's payments
<PAGE>
hereunder in respect of such fiscal quarter equals $7,681,000.
Notwithstanding the foregoing, (i) in respect of the first such
fiscal quarter, Holdco shall be obligated to make only a pro rata
minimum quarterly payment in respect thereof (determined based on
the number of days occurring after the Effective Date in a quarter
of 91 days); (ii) Holdco's obligation to make any such quarterly
minimum payment in respect of each such fiscal quarter shall be
reduced (but not below zero) if SpinCo shall have received (A)
aggregate payments from Holdco under this Agreement and (B)
aggregate Net Cash Flow for the Business in respect of all prior
fiscal quarters ending after the Effective Date (other than the most
recently completed fiscal quarter), which when added together (the
sum of clauses A and B being the "Received Amount") have a present
value as of the Effective Date greater than the aggregate present
value as of the Effective Date of a series of quarterly payments of
$7,681,000 (or, in respect of the initial partial fiscal quarter,
the required portion thereof), for each fiscal quarter ending after
the Effective Date (other than the most recently completed fiscal
quarter) (such aggregate amount being the "Required Amount"); and
(iii) Holdco shall in no event be obligated to make any payment
pursuant to the foregoing quarterly minimum payment requirement that
would result in the present value as of the Effective Date of the
sum of (A) the aggregate payments received by SpinCo from Holdco
under this Agreement (including any prepayments) and (B) the
aggregate Net Cash Flow for the Business in respect of all prior
fiscal years ending after the Effective Date, exceeding
$213,333,333. The amount of the reduction provided for in clause
(ii) of the preceding sentence shall equal the amount having a
present value as of the Effective Date equal to the excess of the
Required Amount over the Received Amount.
The minimum payment contemplated by this paragraph (b) for
any quarter shall be due and payable as follows:
(X) For each of the first three quarters in each fiscal
year (or, in respect of any partial fiscal year, each quarter
of such partial fiscal year other than the last full or
partial quarter thereof), such minimum quarterly payment
shall be paid by Holdco to SpinCo promptly (but in no event
later than 30 days) after SpinCo's delivery to Holdco of (A)
the unaudited consolidated financial statements for such
fiscal quarter (or partial fiscal quarter) (each of which
<PAGE>
shall include a consolidated income statement, balance sheet
and statement of cash flows) for SpinCo and the Business and
(b) an Officers' Certificate signed by the Chief Financial
Officer and President of SpinCo certifying as to the accuracy
of such financial statements (subject to normal, recurring
year-end adjustments) and the preparation thereof in accordance
with GAAP (except as permitted by Form 10-Q of the Securities
and Exchange Commission) consistent with prior years and
setting forth in reasonable detail the calculation of (1) the
minimum amount payable in respect of the immediately ended
prior fiscal quarter (or portion thereof) pursuant to this
paragraph (b), (2) Holdco's remaining payment obligations under
this Agreement after giving effect to such minimum quarterly
payment, assuming, in each case, SpinCo's receipt of such
minimum quarterly payment on the 30th day following the
delivery to Holdco of the items required by this sentence and
(3) SpinCo's and the Business' selling, general and
administrative ("SG&A") expenses for the immediately preceding
fiscal quarter (or partial fiscal quarter) as determined in
accordance with Section 19.
(Y) For the last quarter in each fiscal year (or partial
fiscal year), such minimum quarterly payment shall be paid by
Holdco to SpinCo promptly (but in no event later than 30 days)
after SpinCo's delivery to Holdco of (A) for the fiscal year
(or partial fiscal year) then ended, audited consolidated
financial statements for each of SpinCo and the Business (each
of which shall include a balance sheet as at the end of such
fiscal year and a consolidated income statement and statement
of cash flows for such period); (B) an Officers' Certificate
signed by the Chief Financial Officer and President of SpinCo
certifying as to the accuracy of such financial statements and
the preparation thereof in accordance with GAAP consistent with
prior years and setting forth in reasonable detail the
calculation of (1) the minimum amount payable in respect of the
immediately ended prior fiscal quarter (or partial fiscal
quarter) and each fiscal quarter (or, if applicable, partial
fiscal quarter) within the immediately preceding fiscal year
and the aggregate minimum amount payable in respect of such
fiscal year, (2) Holdco's remaining payment obligations (on a
present value basis) under this Agreement after giving effect
to such quarterly payments assuming, in each
<PAGE>
case, SpinCo's receipt of such quarterly minimum payment on the
30th day following the delivery to Holdco of the items required
by this sentence and (3) SpinCo's and the Business' SG&A
expenses for the immediately preceding fiscal quarter (or
partial fiscal quarter), for each fiscal quarter (or, if
applicable, partial fiscal quarter) within the immediately
preceding fiscal year and for such fiscal year; and (C) a
certificate of SpinCo's independent auditors as to the accuracy
of the calculations set forth in the foregoing Officers'
Certificate. It is understood that for purposes of satisfying
the obligations in clauses (B)(1) and (3) above with respect to
any quarter in any fiscal year (other than the last fiscal
quarter), SpinCo may, in good faith, attach the Officers'
Certificate, together with the related calculations of Net Cash
Flow and SG&A expenses, previously delivered by SpinCo pursuant
to subparagraph (X) above in satisfaction of its obligations
with respect to any such prior fiscal quarter under this
subparagraph (Y).
Notwithstanding the foregoing, if, for any fiscal year (or
partial fiscal year) ending after the Effective Date, Holdco
disagrees with SpinCo's calculation of any minimum payments in
respect of any quarter or the aggregate quarterly minimum payments
in respect of such fiscal year (or partial fiscal year), then,
within 30 days after the receipt of the documents provided for in
clause (Y) of the immediately preceding paragraph, Holdco shall
notify SpinCo of its disagreement and supply SpinCo its calculation
in reasonable detail of the amount of any such quarterly minimum
payment or such aggregate quarterly minimum payments. SpinCo and
Holdco will in good faith endeavor to determine the proper amount of
such payments during the five-day period following SpinCo's receipt
of such notice. If SpinCo and Holdco are unable to resolve such
dispute during such five-day period (i) Holdco shall promptly pay
that portion of the aggregate minimum quarterly payments (to the
extent not already paid) as to which there is no dispute and (ii)
SpinCo and Holdco shall promptly (but in any event within five days
after SpinCo's receipt of such notice) appoint an independent firm
of nationally recognized public accountants to determine the proper
amount of each quarterly minimum payment and the aggregate quarterly
minimum payments in respect of the immediately ended prior fiscal
year (or partial fiscal year) (it being understood that any such
determination shall not require the audit of any interim
<PAGE>
period in respect of such immediately ended prior fiscal year (or
partial fiscal year)). Such independent accounting firm shall be
mutually agreeable to Holdco and SpinCo and shall not be auditors to
either Holdco or SpinCo. If Holdco and SpinCo fail to agree on an
accounting firm, such firm shall be selected by Holdco's and
SpinCo's respective accounting firms. Following the determination by
the independent accounting firm so selected of each quarterly
minimum payment and the aggregate quarterly minimum payments for the
immediately preceding fiscal year, Holdco shall within five days pay
to SpinCo that portion, if any, of the aggregate quarterly minimum
payments in respect of the immediately ended prior fiscal year (or
partial fiscal year) required to be paid by Holdco. If the amount of
such aggregate payments as determined by the independent accounting
firm exceeds by 3% or more the aggregate payments as determined by
Holdco, Holdco shall pay interest on the amount required to be paid
by Holdco pursuant to the immediately preceding sentence at an
annual rate equal to the discount rate provided in paragraph (d)
below for the period from the date on which such payment was
otherwise required to be paid pursuant to this Section 2(b) through
the date of payment. The fees and expenses of any independent
accounting firm engaged pursuant to this paragraph shall be borne
equally by Holdco and SpinCo.
Nothing in this paragraph (b) shall preclude Holdco from
prepaying any amounts owed under this Section 2 (which prepayments
Holdco may make in whole at one time or in part from time to time).
(c) Effective Date Audit; Annual Audit.
(i) SpinCo shall close its books and records relating to
the Business as of the end of the Effective Date and LMC and SpinCo
shall cause there to be conducted an audit in accordance with
generally accepted auditing standards of the Business' consolidated
financial statements (which shall include a consolidated income
statement, balance sheet and statement of cash flows) for (A) the
period commencing on, but not including, the Effective Date to the
end of SpinCo's first fiscal year after the Effective Date and (B)
each fiscal year thereafter. Such audit shall be conducted by a firm
of nationally recognized public accountants selected by SpinCo and
reasonably acceptable to Holdco.
<PAGE>
(ii) Without affecting the applicability of Section 3(e)
and Section 8, if (A) SpinCo shall merge with another entity and it
shall not be the surviving entity or (B) SpinCo shall sell or
transfer the Business, the surviving entity or acquiror of the
Business shall be required to maintain separate accounts and audits
for the Business. In addition, on and after the effective date of
any such merger or acquisition, in lieu of the SpinCo financial
statements delivered pursuant to paragraph (b) above in connection
with any minimum payment, (x) the surviving entity or acquiror of
the Business shall deliver comparable audited financial statements
for itself, together with the required financial statements for the
Business, and (y) the accompanying Officers' Certificate shall be
signed by the Chief Financial Officer and President of the surviving
entity or the acquiror of the Business and shall make the required
certification with respect to the financial statements of the
surviving entity or the acquiror of the Business.
(d) Present Value Calculation. To the extent not otherwise
specified above, for purposes of calculating the present value of
all amounts paid or payable by Holdco under this Agreement, the
following shall apply:
(i) Net Cash Flow for the Business in respect of any
period (or portion thereof) shall be deemed to have been
received at the middle of such period;
(ii) payments by Holdco shall be credited on the date
Holdco delivers such payment to SpinCo; and
(iii) all actual payments by Holdco hereunder, and all
calculations of Net Cash Flow used to determine the required
amounts of such payments, will be discounted to the Effective
Date at a discount rate equal to 10% per annum assuming
quarterly interest periods.
(e) Fiscal Year; GAAP. SpinCo shall not change its fiscal
year or its accounting principles (unless required by GAAP) without
the prior written consent of Holdco, which consent will not be
unreasonably withheld or delayed. If Holdco shall agree to any such
change in SpinCo's fiscal year or accounting principles, the Parties
will enter into an appropriate amendment of this Agreement to
appropriately reflect such change.
<PAGE>
3. Agreements of SpinCo.
(a) WTBS Distribution Related Covenants.
(i) WTBS Distribution. SpinCo shall, to the extent
requested by Holdco, uplink the Converted WTBS programming service
(or, if requested by Holdco and to the extent allowable under the
Communications Act of 1934 (the "Communications Act") and the
Copyright Act of 1976 (the Copyright Act"), the WTBS programming
service prior to Conversion) to (A) all cable, MMDS, LMDS, TVRO,
DBS, video dial tone and/or other distributors of multichannel video
programming by any means (collectively, "MVPDs") with which it has
service agreements or arrangements and (B) any MVPDs that enter into
programming agreements or arrangements directly with Holdco or a
Managed Subsidiary. In addition, Holdco and SpinCo shall mutually
cooperate and each shall use its commercially reasonable best
efforts to ensure the uninterrupted delivery of, and quality of, the
Converted WTBS signal (or, if applicable, the non-Converted WTBS
signal) to be delivered to such MVPDs. In connection with SpinCo's
obligations under clause (B) above, if the Spin-off occurs on or
before the later of the Effective Date and the one-year anniversary
of the Execution Date (as defined in the SSSI Agreement), Holdco
agrees to use SpinCo as its principal means of uplinking the
Converted WTBS service through the fifth anniversary of the
Spin-off.
(ii) Holdco Negotiation of MVPD Agreements;
Modification of SpinCo MVPD Agreements. SpinCo understands and
acknowledges that Holdco intends to, and shall be permitted to,
negotiate with MVPDs in order to conclude programming agreements
or arrangements directly between Holdco and the MVPD covering
the Converted WTBS service; SpinCo will participate in any such
negotiations if, as and when reasonably requested by Holdco (and
not otherwise); and SpinCo will consent to the termination or
modification of any existing service agreement or arrangement
between SpinCo and any MVPD upon the joint request of Holdco and
the MVPD (including any such modification to add Holdco as a
party to any such MVPD agreement or arrangement) and it will
waive (to the extent it may lawfully do so) performance by an
MVPD of any provision of a service agreement upon the reasonable
request of Holdco. In no event will SpinCo solicit any MVPD (i)
to replace the Converted WTBS program service (or, if the
non-Converted WTBS signal may be distributed by SpinCo under the
Communications Act and Copyright Act, non-Converted WTBS) with
another program service or (ii) except
<PAGE>
as provided in this subparagraph (a)(ii), terminate its carriage of
Converted WTBS (or, if applicable, non-Converted WTBS).
(iii) SpinCo Enforcement of MVPD Agreements. SpinCo shall
advise Holdco of all matters pertaining to the compliance with its
WTBS service agreements or arrangements by the MVPDs with which it
has WTBS service agreements or arrangements, consistent with any
confidentiality agreement binding on SpinCo. If restricted by any
such confidentiality agreement, SpinCo shall seek a waiver or
consent as to such matters as contemplated by (d) below. Subject to
clause (ii) of this Section 3(a), SpinCo shall enforce all of its
rights under its service agreements with MVPDs, including any
provisions requiring the MVPD to take the WTBS service exclusively
from SpinCo and distribute it to specified tiers of service;
provided that SpinCo will provide Holdco written notice of any
material alleged breach by an MVPD of a service agreement known to
it and reasonable advance written notice of any proposed action by
SpinCo to enforce any such service agreement, and will delay any
such enforcement action for such period as may be reasonably
requested by Holdco.
(iv) Renewal. If requested by Holdco, SpinCo shall
actively seek to renew all MVPD service agreements on terms approved
by Holdco.
(v) Limitation on Certain Activities. Unless otherwise
requested by Holdco, SpinCo shall not (A) seek to enter into new
service agreements for the WTBS service or (B) except as provided in
(iv) above, seek to renew, amend or extend any existing service
agreement covering the WTBS service except at the request of Holdco;
provided that SpinCo may require that any agreement so renewed be
terminable by SpinCo following the termination of this Agreement.
(vi) Conduct of Business. Subject to the provisions of
subparagraphs (i) through (v) above in each of the following
instances, SpinCo shall conduct the Business in the ordinary course
with a view to maximizing its cash flow from operations and, in that
connection, (A) SpinCo shall use its commercially reasonable efforts
to maintain its relationships with customers, suppliers and others
with whom it deals in connection with the Business and (B) SpinCo
shall not take any action that could reasonably be expected to
materially impair the Business or SpinCo's business,
<PAGE>
assets and financial condition on a consolidated basis taken as a
whole. In connection with its obligation to maximize the cash flow
of the Business, without Holdco's prior consent, SpinCo shall not
change the conduct of its operations relating to the Business in a
manner that is inconsistent with the manner in which the Business
was conducted on the Effective Date.
(b) Assignment of Transponder Lease. SpinCo hereby assigns
to Holdco its existing transponder sublease on the Galaxy V
Satellite and any replacement transponder lease or sublease relating
to WTBS, such assignment to become effective upon the termination of
this Agreement, subject to (i) Holdco having satisfied and
discharged in full its obligations under Section 2(a), (ii) the
receipt of any required third party and/or governmental consents to
such assignment, (iii) the occurrence of the Termination Date, (iv)
the making of all governmental filings and the expiration of any
governmental waiting periods in connection with such assignment and
(v) Holdco assuming all obligations under such lease from and after
the effective date of such assignment. SpinCo in good faith shall
use commercially reasonable efforts to obtain any such required
consents and shall make all filings and execute such other documents
as may be reasonably necessary to effect the foregoing assignment.
In addition, if, at the time that such assignment becomes effective,
SpinCo is using the vertical blanking interval and/or side band of
the satellite feed on such transponder in connection with SpinCo's
uplinking business not relating to the Business, Holdco will
negotiate with SpinCo in good faith to agree on the terms on which
SpinCo could continue to use such portions of the transponder
frequency on a transitional basis following the effectiveness of
such assignment so long as any such agreement will not have a
material adverse effect on the Business' assets, financial condition
or results of operation.
(c) Access. SpinCo shall give Holdco and its
representatives, employees, counsel and accountants reasonable
access, during normal business hours and upon reasonable notice, and
subject to the obligations of SpinCo under any then existing
confidentiality or nondisclosure agreements, to the personnel,
properties, books and records of SpinCo, so that Holdco may confirm
the matters contemplated by Section 2 hereof, the satisfaction of
SpinCo's obligations to be performed hereunder and the satisfaction
by any MVPD of its obligations under any WTBS
<PAGE>
agreement or arrangement with SpinCo; provided, however, that
such access does not unreasonably disrupt the normal
operations of SpinCo. SpinCo agrees to use commercially
reasonable efforts in good faith to obtain all waivers and
consents necessary under any existing confidentiality or
nondisclosure agreement to afford full access to Holdco;
provided, however, that nothing in this Agreement shall
require SpinCo (or any of its Affiliates) to make any payment
of money or deliver any other consideration to any third
party, as a condition to the receipt of any waiver. As against
Holdco, its Affiliates and its representatives, employees,
counsel and accountants, SpinCo hereby waives any
confidentiality or nondisclosure covenants contained for its
benefit in any agreement concerning the Business (including
its WTBS service agreements or arrangements with MVPDs) and
SpinCo agrees to execute any acknowledgements with respect to
such waiver as Holdco may reasonably request. Except as
permitted under Section 3(a), SpinCo shall not enter into any
agreement with respect to the Business (including any
agreement with an MVPD) which contains a confidentiality or
non-disclosure covenant relating to the existence, terms
and/or conditions of any material agreement to which it is or
will be a party, or any other material matter, unless such
agreement or covenant permits it to disclose the matters
subject to such confidentiality or non-disclosure agreement to
Holdco and its representatives, employees, counsel and
accountants. Except to the extent that such books and records
reasonably relate to the Business or are reasonably required
to determine any amounts paid or payable under this Agreement,
Holdco shall not have access to the books and records of
SpinCo relating to any business other than the Business
acquired or entered into after the date of the Spin-off.
(d) Insurance. At all times during the period from
the Effective Date through the Termination Date, SpinCo shall
maintain in full force and effect with respect to the
Business, through one or more Affiliates or otherwise, 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 in
effect prior to the Effective Date, or as Holdco shall
otherwise reasonably request in writing.
(e) Mergers; Business Transfer; Security
Arrangements. (i) SpinCo shall not merge with another
corporation or other entity unless it is the surviving entity
in such merger or the surviving entity delivers to
<PAGE>
Holdco prior to such merger an agreement (in form and
substance reasonably satisfactory to Holdco and its counsel)
pursuant to which it agrees to be bound by the terms of this
Agreement (including the provisions of Section 4).
(ii) SpinCo shall not sell, transfer or otherwise
dispose of the Business (other than any security interest
granted in connection with a SpinCo financing covered by
paragraph (iii) below) unless (i) SpinCo sells, transfers or
otherwise disposes of the Business in its entirety and (ii)
the entity or person so acquiring the Business prior to such
acquisition delivers to Holdco an agreement (in form and
substance reasonably satisfactory to Holdco and its counsel)
pursuant to which it agrees to be bound by the terms of this
Agreement (including the provisions of Section 4).
(iii) SpinCo shall not grant or permit to exist any
lien or other security interest on the assets of the Business
(including the Distribution Contract and the MVPD agreements)
in connection with any SpinCo financing unless the secured
party or parties prior to any such grant agree in writing, for
the benefit of Holdco, that (A) any foreclosure or sale of the
Business shall involve the foreclosure or sale of the Business
in its entirety and (B) as a condition to such foreclosure or
sale, the entity or person so acquiring the Business shall be
required to deliver to Holdco, prior to such acquisition, an
agreement (in form and substance reasonably satisfactory to
Holdco and its counsel) pursuant to which it agrees to be
bound by the terms of this Agreement (including the provisions
of Section 4).
(iv) In the event that SpinCo receives any proposal
with respect to, or determines to enter into any transaction
involving, any of the events described in this paragraph (e),
SpinCo shall promptly notify Holdco thereof.
(f) No Unauthorized Transfer of Control. Nothing in
this Agreement or in the SSSI Agreement shall, nor shall be
construed to, constitute a transfer of control of the licenses
held by SpinCo and its subsidiaries without prior approval by
the Federal Communications Commission ("FCC") of the transfer
of all such licenses issued by the FCC to SpinCo and its
subsidiaries. SpinCo shall at all times, notwithstanding any
other provisions of this Agreement, retain full, exclusive and
absolute control of the licensed facilities as well as
ultimate responsibility for the
<PAGE>
operation of the FCC licensed facilities as required by all
applicable rules and policies of the FCC and the
Communications Act of 1934, as the foregoing may be superseded
or amended.
(g) Continuation as Passive Carrier. SpinCo is and
will continue to be a passive carrier, and nothing in this
Agreement or the SSSI Agreement shall be construed to, require
SpinCo to operate with respect to carriage of the WTBS signal
other than as a passive carrier pursuant to 17 U.S.C. Section
111(a)(3) and as a satellite carrier pursuant to 17 U.S.C.
Section 119(a), prior to the Conversion of WTBS.
4. Restricted Activities. SpinCo hereby covenants
and agrees that during the period from the Effective Date
through the fifth anniversary of the termination of the last
service agreement between SpinCo and any MVPD with respect to
the carriage of WTBS, it shall not (and shall cause its
Affiliates not to) (a) engage in the Business, other than as
expressly contemplated by this Agreement, or (b) solicit any
MVPD to terminate carriage of the WTBS programming service
(including the programming of the broadcast television
SuperStation known on the Effective Date as WTBS and any cable
programming network established as the successor thereto) or,
except as permitted by this Agreement, to terminate any
service agreement with SpinCo with respect to such programming
service. In addition, for purposes of the foregoing and
without limiting the generality thereof, it is understood that
the offering of WTBS as a distant broadcast signal (other than
through SpinCo) violates the restrictions of this Section 4.
Anything contained herein to the contrary
notwithstanding, Holdco acknowledges (I) that on the Execution Date
(as defined in the SSSI Agreement) LMC and its Affiliates represent
numerous programming services that are marketed, distributed and
sold to MVPDs on a continuous basis, in competition with WTBS and
other programming services, (II) that due to limited channel
capacity, an MVPD may terminate an existing programming service
carried by such MVPD in order to carry a new programming service,
and (III) that activities conducted by LMC and its Affiliates in
connection with the marketing of programming services that compete
with WTBS shall not be construed to violate SpinCo's covenant in
this Section as it relates to the conduct of SpinCo's Affiliates,
even if an MVPD terminates carriage of WTBS to carry a programming
service marketed by LMC or any
<PAGE>
of its Affiliates, unless LMC or any Affiliate shall have urged or
induced such MVPD to drop WTBS.
5. SpinCo Payment of Net Cash Flow; Holdco Payment of
Negative Net Cash Flow. (a) If Holdco shall have satisfied and
discharged in full its obligations under Section 2(a), then, with
respect to each fiscal quarter thereafter occurring during the term
of this Agreement, (i) SpinCo shall pay to Holdco, on the date on
which it delivers the financial statements referred to in paragraph
(b) below to Holdco, the Business' Net Cash Flow, if positive, for
such fiscal quarter and (ii) Holdco shall pay to SpinCo, within
five business days after the delivery of such financials, the
amount, if any, by which the Business' Net Cash Flow for such
fiscal quarter is negative. Unless agreed otherwise, all payments
made under this Section 5 shall be made by wire transfer to an
account designated in writing by Holdco or SpinCo, as applicable,
on or prior to the Effective Date and from time to time thereafter.
For purposes of calculating Net Cash Flow under this Section 5 for
any fiscal quarter, any amounts credited to SpinCo under Section
2(a) shall be excluded from such calculation. In addition, if
Holdco or SpinCo shall fail to pay any amounts due hereunder on the
date required for payment, interest shall be due on such amounts
from the required date of payment to the actual date of payment at
a per annum interest rate of 10%.
(b) (i) For each fiscal quarter (other than the last
fiscal quarter of any fiscal year) after Holdco shall have
satisfied and discharged in full its obligations under Section
2(a), SpinCo shall deliver promptly (but in no event later than 45
days after the end of such fiscal quarter) (A) the unaudited
consolidated financial statements for each of SpinCo and the
Business for such fiscal quarter (each of which shall include a
consolidated income statement, balance sheet and statement of cash
flows) and (B) an Officers' Certificate signed by the Chief
Financial Officer and President of SpinCo certifying as to the
accuracy of such financial statements (subject to normal, recurring
year-end adjustments) and the preparation thereof in accordance
with GAAP (except as permitted by Form 10-Q of the Securities and
Exchange Commission) consistent with prior years and setting forth
in reasonable detail the calculation of (1) the Business' Net Cash
Flow (positive or negative) for the prior fiscal quarter and (2)
SpinCo's and the Business' SG&A expenses for the immediately
preceding fiscal quarter as determined in accordance with Section
19.
<PAGE>
(ii) For the last quarter in each fiscal year after
Holdco shall have satisfied and discharged in full its obligations
under Section 2(a), SpinCo shall deliver promptly (but in no event
later than 90 days after the end of such fiscal year) (A) for the
fiscal year then ended, audited consolidated financial statements
for each of SpinCo and the Business (each of which shall include a
balance sheet as at the end of such fiscal year and a consolidated
income statement and statement of cash flows for such period); (B)
an Officers' Certificate signed by the Chief Financial Officer and
President of SpinCo certifying as to the accuracy of such financial
statements and the preparation thereof in accordance with GAAP
consistent with prior years and setting forth in reasonable detail
the calculation of the Business' Net Cash Flow (positive or
negative) in respect of (1) the immediately ended prior fiscal
quarter and each fiscal quarter within the immediately preceding
fiscal year and the aggregate Net Cash Flow in respect of such
fiscal year and (2) SpinCo's and the Business' SG&A expenses for
the immediately preceding fiscal quarter, for each fiscal quarter
within the immediately preceding fiscal year and for such fiscal
year; and (C) a certificate of SpinCo's independent auditors as to
the accuracy of the calculations set forth in the foregoing
Officers' Certificate. It is understood that for purposes of
satisfying the obligations in clauses (B)(1) and (2) above with
respect to any quarter in any fiscal year (other than the last
fiscal quarter), SpinCo may, in good faith, attach the Officers'
Certificate, together with the related calculations of Net Cash
Flow and SG&A expenses, previously delivered by SpinCo pursuant to
subparagraph (b)(i) above in satisfaction of its obligations with
respect to any such prior fiscal quarter. The amount of any payment
required to be made by SpinCo or Holdco in respect of such fiscal
quarter shall be adjusted to appropriately reflect the cumulative
Net Cash Flow (positive or negative) for the immediately preceding
fiscal year.
(c) Notwithstanding the foregoing, if, for any fiscal
year after Holdco shall have satisfied and discharged in full its
obligations under Section 2(a), Holdco disagrees with SpinCo's
calculation of the Net Cash Flow in respect of such fiscal year or
any fiscal quarter within such fiscal year, then, within 30 days
after the receipt of the documents provided for in paragraph
(b)(ii), Holdco shall notify SpinCo of its disagreement and supply
SpinCo its calculation in reasonable detail of the amount of any
such disputed Net Cash Flow. SpinCo and Holdco will in good
<PAGE>
faith endeavor to determine the proper amount of any such disputed
Net Cash Flow during the five-day period following SpinCo's receipt
of such notice. If SpinCo and Holdco are unable to resolve such
dispute during such five-day period they agree that (i) Holdco or
SpinCo, as applicable, shall promptly pay to the other that portion
of the Net Cash Flow required to be paid by them (to the extent not
already paid) as to which there is no dispute and (ii) SpinCo and
Holdco shall promptly (but in any event within five days after
SpinCo's receipt of such notice) appoint an independent firm of
nationally recognized public accountants to determine the proper
amount of the Net Cash Flow in respect of the immediately ended
prior fiscal year and for each quarter within such fiscal year (it
being understood that any such determination shall not require the
audit of any interim period in respect of such immediately ended
prior fiscal year (or partial fiscal year)). Such independent
accounting firm shall be mutually agreeable to Holdco and SpinCo
and shall not be auditors to either Holdco or SpinCo. If Holdco and
SpinCo fail to agree on an accounting firm, such firm shall be
selected by Holdco's and SpinCo's respective accounting firms.
Following the determination by the independent accounting firm so
selected of the Net Cash Flow in respect of the immediately
preceding fiscal year and for each quarter within such fiscal year,
SpinCo or Holdco, as applicable, shall within five days pay to the
other that portion, if any, of the aggregate Net Cash Flow, in
respect of the immediately ended prior fiscal year required to be
paid by it to the other Party. If the amount of such aggregate Net
Cash Flow as determined by the independent accounting firm exceeds
by 3% or more of the aggregate Net Cash Flow as determined by
Holdco, Holdco shall pay interest on the amount, if any, required
to be paid by it pursuant to the immediately preceding sentence at
an annual rate equal to the rate set forth in Section 2(d)(iii).
The fees and expenses of any independent accounting firm engaged
pursuant to this paragraph shall be borne equally by Holdco and
SpinCo.
(d) Other than in accordance with Section 2(e), SpinCo
shall not change its fiscal year or accounting principles.
6. Holdco's Right to Assign to Managed Subsidiaries.
SpinCo hereby acknowledges and agrees that the rights of Holdco
under this Agreement may be assigned to any Holdco Managed
Subsidiary, provided that any such assignment shall terminate if
the assignee ceases to be a
<PAGE>
Managed Subsidiary and provided further that no such assignment
shall relieve Holdco of its obligations hereunder.
7. Termination. (a) Subject to the last sentence of
Section 8 as to the survival of certain provisions, the rights and
obligations of Holdco and SpinCo under this Agreement will
terminate upon not less than 30 days' prior written notice by
Holdco to SpinCo, provided that at such time (i) Holdco shall have
satisfied and discharged in full its obligations under Section 2(a)
hereof and (ii) Holdco shall not have any continuing obligations
under Section 3(a)(i) (the date of such termination, or any
termination pursuant to paragraphs (b) or (c) below, being the
"Termination Date").
(b) Subject to the last sentence of Section 8 as to the
survival of certain provisions, the rights and obligations of
Holdco and SpinCo under this Agreement will terminate upon not less
than 30 days' prior written notice by SpinCo to Holdco, provided
that at such time SpinCo shall have satisfied and discharged its
obligations under this Agreement and the last WTBS programming
agreement between SpinCo and any MVPD shall have expired or
terminated without any breach by SpinCo of its obligations
hereunder, including Sections 3 and 4.
(c) Subject to the last sentence of Section 8 as to the
survival of certain provisions, the Distribution Contract will
terminate on the later of (i) the 12th anniversary of the Effective
Date and (ii) the expiration date of SpinCo's longest WTBS
distribution agreement in effect on the Effective Date (excluding
any distribution agreement with Holdco or its Affiliates or
Satellite or with any MVPD with fewer than 20,000 subscribers; and
without giving effect to any renewals or extensions to the duration
of any such distribution agreements that are exercisable solely at
the option of the relevant MVPD).
(d) 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 agreements contained in this Agreement.
8. Survival. The representations, warranties and
agreements of the Parties in this Agreement and in the other
<PAGE>
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 Termination Date,
whereupon such representations, warranties and agreements shall
terminate. Notwithstanding any other provision of this Agreement,
the obligations of SpinCo and its Affiliates under Section 4 shall
survive through the fifth anniversary of the termination of the
last service agreement between SpinCo and any MVPD.
9. Parties Obligated and Benefited. 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, except by operation of law and except with
respect to any merger of SpinCo or sale or disposition of the
Business, in each case, permitted under Section 4.
10. 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 Holdco:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Attention: President
with a copy similarly addressed to the attention
of General Counsel
<PAGE>
with a copy (which shall not constitute notice)
to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: William P. Rogers, Jr., Esq.
If to SpinCo:
Southern Satellite Systems, Inc.
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
(but only prior to the Spin-off)
and
Baker & Botts, L.L.P.
599 Lexington Avenue
Suite 2800
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 10. 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.
<PAGE>
11. 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.
12. 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 "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation".
13. 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 the laws of the State of New York applicable to
contracts made and performed wholly therein.
14. Time. If the last day permitted for the timing 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.
15. 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.
16. Entire Agreement. This Agreement (including all
Exhibits and Schedules attached to this Agreement, the Distribution
Contract 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.
17. 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
<PAGE>
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 the
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.
18. 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;
(b) "Business" means the business of uplinking and
distributing to MVPDs the signal of the television station
broadcasting on the date hereof in Atlanta, Georgia under the call
letters WTBS, and any successor over-the-air television station in
Atlanta, Georgia that broadcasts substantially similar programming
as WTBS following its conversion to a copyright-paid programming
service (as such converted service may be renamed); provided that
the Business shall refer to the business of uplinking and
distributing only one such broadcast television station at any one
time. Anything contained herein to the contrary notwithstanding,
neither (i) the existence of an agreement between SpinCo or any
unrelated third party and any intermediary (such as Satellite)
pursuant to which such intermediary arranges for the WTBS signal
transmitted by SpinCo or such unrelated third party to be received
by an "affiliate" of such intermediary as defined in Section 11(d)
of the SSSI 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(d) of the SSSI Agreement, nor
(ii) any digitization activities by any intermediary of the type
contemplated by the "HITS" provisions of the Program and
Digitization Agreement (as defined in the LMC Agreement), shall in
itself (A) cause such an intermediary to be
<PAGE>
construed as engaging in the "Business" as defined herein or (B)
cause such an intermediary to be in violation of the restrictions of
Section 4 pursuant to the last sentence of the first paragraph
thereof;
(c) "FTC Agreement in Principle" means the Agreement in
Principle with FTC Staff re: Consent Order dated July 16, 1996,
entered into by the Federal Trade Commission, Holdco and TCI;
(d) "FTC Consent Decree" means the Agreement Containing
Consent Order (including the related FTC Agreement in Principle, the
"ACCO") dated as of August , 1996, with the Federal Trade
Commission, together with the Order issued in connection with the
ACCO;
(e) "GAAP" means generally accepted accounting principles
in the United States as in effect from time to time;
(f) "Letter Ruling" means a private letter ruling from the
Internal Revenue Service (a) to the effect that, at the time
thereof, the Spin-off shall constitute a tax-free distribution under
Section 355 of the Internal Revenue Code of 1986, as amended, and
(b) that is otherwise acceptable to Holdco and TCI;
(g) "Managed Subsidiary" means, as to Holdco, an Affiliate
of Holdco (i) in which Holdco has, directly or indirectly, a
majority ownership interest and (ii) as to which Holdco 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;
(h) "Net Cash Flow" means, for any period, (i) net
earnings, (ii) plus depreciation and amortization, (iii) plus
non-cash charges reflecting increases in long- term liabilities and
decreases (or write downs) in long-term assets, (iv) minus non-cash
items of income reflecting decreases in long-term liabilities and
increases (or write ups) in long-term assets, (v) plus interest
expense, (vi) minus interest income, (vii) plus income tax expense,
(viii) minus income tax benefits, (ix) minus capital expended for
property and equipment (consistent with past practices and in
accordance with the provisions of this Agreement), (x) plus proceeds
from the sale of capital assets, (xi) minus cash payments under
capitalized leases
<PAGE>
(consistent with past practices and entered into in accordance with
the provisions of this Agreement), (xii) minus cash payments not
reflected in net income for which a reserve has been established
(exclusive of reserves for working capital items), determined in
each case for the Business and for the applicable period, without
duplication, in accordance with GAAP, consistently applied. For the
avoidance of doubt, it is understood that the net earnings of the
Business as used in the calculation of "Net Cash Flow", will
reflect, without duplication, direct selling, general and
administrative ("SG&A") expenses of the Business (however provided)
and the portion of SpinCo's aggregate SG&A expenses allocated to the
Business, in each case, in accordance with the provisions of Section
19;
(i) "Spin-off" means the distribution by TCI of 100% of
the capital stock of SpinCo to holders of record of TCI's
Tele-Communications, Inc. Series A Liberty Media Group Common Stock
and Tele-Communications, Inc. Series B Liberty Media Group Common
Stock;
(j) "Services Agreement" means, collectively all service
agreements entered into between SpinCo and TCI and/or LMC and/or one
or more affiliates of either in connection with the Spin-off or this
Agreement that provide for administrative and/or other services to
be provided to SpinCo by TCI and/or LMC and/or one or more of their
respective affiliates; and
(k) "WTBS" means the television station popularly known as
TBS SuperStation and includes any cable programming service which
may be a successor to WTBS. "Converted WTBS" means WTBS once
converted to a copyright-paid cable programming service. For
purposes of this Agreement, the terms "Conversion" and "Convert"
shall have the correlative meanings thereto.
19. Allocation of SG&A Expenses of SpinCo. (a) SG&A
expenses incurred by SpinCo for any period, including without
limitation under the Services Agreement, shall be allocated, in good
faith, to the Business for purposes of determining the Net Cash Flow
of the Business for such period as follows:
(i) SG&A expenses incurred by SpinCo for services
performed by any person (including, without limitation,
employees of SpinCo) that were performed in whole or in part
for the benefit of the Business shall be allocated
<PAGE>
to the Business based on the actual benefit to the Business
relative to the aggregate benefit to SpinCo, at the actual cost
of such services to SpinCo.
(ii) SG&A expenses incurred by SpinCo for services
performed by any person (including, without limitation,
employees of SpinCo) that were performed solely for the benefit
of any business other than the Business (including without
limitation the business of holding, acquiring and/or selling
Holdco stock or other investment securities, evaluating or
pursuing other business opportunities or any other activity
intended to produce revenue, income or gain) shall not be
allocated to the Business.
(iii) SG&A expenses (including amounts under any Services
Agreement) in any period that cannot be attributed directly to
any specific services shall be allocated to the Business in the
same proportion that the revenues of the Business bear to the
aggregate revenues of SpinCo and its consolidated subsidiaries,
determined in accordance with GAAP, for the relevant period;
provided, however, that (i) no portion of the expense of
managing SpinCo's investment in Holdco, or of evaluating,
negotiating, acquiring or disposing of any business or assets
(other than the Business and its assets) or of entering into
new businesses shall be allocated to the Business and (ii) the
amount of SG&A expenses allocated on the basis of SpinCo's
revenues in any fiscal year shall not exceed $800,000.
(b) For purposes of determining the Net Cash Flow of the
Business, the aggregate amount payable by SpinCo under any Services
Agreement for services rendered to SpinCo thereunder shall not
exceed the amount that SpinCo reasonably would pay for comparable
services under an arrangement entered into on an arms'-length basis
with an unrelated third party.
20. Capital Expenditures. (a) In connection with the
Business, SpinCo shall not, without the prior written consent of
Holdco, which consent will not unreasonably be withheld or delayed,
(i) incur any capital expenditures except in the ordinary course of
business, consistent with past practice or (ii) incur capital
expenditures (excluding capital expenditures funded with insurance
proceeds) in excess of $150,000 during any fiscal year. Attached
hereto as Exhibit 1 is a schedule of the
<PAGE>
amount and nature of historical capital expenditures related to the
Business for fiscal years 1994 and 1995. At the Effective Date,
SpinCo will update Exhibit 1 to include the amount and nature of
capital expenditures related to the Business for each full fiscal
year after fiscal year 1995 ended prior to the Effective Date.
(b) In connection with the Business, SpinCo shall not
without the prior written consent of Holdco, which will not
unreasonably be withheld or delayed, enter into any capitalized
lease, except in connection with the acquisition of capital property
or equipment that could be purchased by the Business pursuant to
paragraph (a) above.
21. Enforcement. (a) 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.
(b) Nothing in this Agreement shall be construed to
require either party to violate any law or regulation or to breach
any contractual obligation. SpinCo agrees that it will not enter
into any contract, the purpose or effect of which is to circumvent
the obligations of SpinCo contained in this Agreement (including,
without limitation, Section 3 hereof).
22. Copyright License; Indemnification. (a) To the extent
required by SpinCo to perform its obligations under this Agreement,
Holdco hereby grants to SpinCo a non-exclusive, non-transferable,
royalty-free license (or sublicense, as applicable), for the term of
this Agreement,
<PAGE>
to distribute the signal of WTBS and Converted WTBS pursuant to and
in accordance with the provisions of this Agreement (including
Section 3), in the United States (including the 50 states, District
of Columbia, and all territories and possessions thereof), to the
full extent that Holdco (or any Managed Subsidiary of Holdco) holds
the copyrights in the programming transmitted by such signal, or has
the right to grant to SpinCo such a license or sublicense pursuant
to any licenses or other agreements with the holders of any such
copyrights.
(b) Holdco hereby agrees to indemnify SpinCo and hold
SpinCo harmless from and against any and all losses, costs, damages
and expenses (including without limitation attorneys' fees and
settlement costs) relating to or resulting from any claim that the
distribution by SpinCo of the signal of WTBS and Converted WTBS as
contemplated hereby infringes the copyright of any person, if such
claim of copyright infringement is based in whole or in part on the
claim that this Agreement, or the actions of Holdco hereunder, cause
SpinCo to be ineligible for any passive carrier exemption under
United States copyright law.
IN WITNESS WHEREOF, the Parties have caused this Agreement
to be duly executed and delivered on the date first written above.
TW INC.
By:
Name:
Title:
SOUTHERN SATELLITE SYSTEMS,
INC.
By:
Name:
Title:
EXHIBIT E TO
SECOND AMENDED AND RESTATED
LMC AGREEMENT
LMC REGISTRATION RIGHTS AGREEMENT, dated as of [ ], among
TW INC., a Delaware corporation, which will be renamed "Time
Warner Inc." ("Holdco"), and the Holders (as defined below).
WHEREAS, in connection with the Amended and Restated Agreement
and Plan of Merger, dated as of September 22, 1995, as amended by
Amendment No. 1 thereto dated as of August ___, 1996 (the "Merger
Agreement"), among Holdco, Time Warner Inc., Time Warner Acquisition
Corp., TW Acquisition Corp., and Turner Broadcasting System, Inc., a
Georgia corporation, each initial Holder will receive shares of Common
Stock (as defined below); and
WHEREAS, in connection with the Merger Agreement, Holdco,
Liberty Media Corporation and certain of 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
Holdco 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 Holdco within the meaning of such Rule 144, any
limitation on the voting or other rights of such Holder with respect to
Registrable Shares owned by such Holder arising under the
<PAGE>
FTC Consent Decree shall not be considered and Registrable Shares
issuable upon conversion of Holdco LMC Common 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 $.01 per
share, of Holdco (i) issued to any of the initial Holders pursuant
to the Merger Agreement, (ii) issued to any of the initial Holders
pursuant to the Contribution and Exchange Agreement, (iii) issuable
upon conversion of any Holdco LMC Common Stock for which the shares
of Common Stock referred to in clause (i) and clause (ii) above may
be exchanged pursuant to the LMC Agreement, (iv) issuable upon
conversion of any Holdco LMC Common Stock issued pursuant to the
SSSI Agreement, (v) 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 (vi) issuable
upon conversion of any Holdco LMC Common Stock for which any Common
Stock, Voting Holdco LMC Common Stock or LMCN-V Common Stock
referred in clauses (i) through (v) above may be exchanged from time
to time, and any other shares of capital stock or other securities
of Holdco 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, and any other shares of capital stock or other securities of
Holdco 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 SpinCo Party
or issuable upon conversion of any Holdco LMC Common Stock held at
the time of such Demand Registration by any Holder that is a Liberty
Party or SpinCo Party. If the Common Stock has been reclassified or
changed, or if Holdco 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,
<PAGE>
reclassification, exchange, dividend, distribution, subdivision or
combination would be entitled.
"Contribution and Exchange Agreement" has the meaning set
forth in the LMC Agreement.
"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.
"First Refusal Agreement" has the meaning set forth in the LMC
Agreement.
"FTC Consent Decree" has the meaning set forth in the LMC
Agreement.
"Hold Back Period" shall have the meaning set forth in Section
4 hereof.
"Holdco" shall have the meaning set forth in the introductory
clauses hereof.
"Holdco LMC Common Stock" means the Voting Holdco LMC Common
Stock and the LMCN-V Common Stock.
"Holder" means a person who owns Registrable Shares or Holdco
LMC Common 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
<PAGE>
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 Holdco LMC Common 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 Second Amended and Restated LMC
Agreement dated as of September 22, 1995, among Holdco, Time Warner
Inc., Liberty Media Corporation and certain subsidiaries of Liberty
Media Corporation.
"LMCN-V Common Stock" shall mean the Series LMCN-V Common
Stock of Holdco.
"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
<PAGE>
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 of
Holdco under the Securities Act 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.
"SpinCo Party" has the meaning set forth in the LMC Agreement.
"SSSI Agreement" has the meaning set forth in the LMC
Agreement.
"underwritten registration or underwritten offering" means a
registration under the Securities Act pursuant to which securities of
Holdco are offered and sold by Holdco in a public offering through one
or more underwriters.
"Voting Holdco LMC Common Stock" shall mean the Series LMC
Common Stock of Holdco.
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
<PAGE>
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 Holdco, to request Holdco
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 Holdco LMC Common Stock then held by
such Holder. Upon receipt of any such Demand Notice, Holdco 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 requested 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 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 Holdco to compensate the
Liberty Parties or SpinCo Parties pursuant to Section 4.3 of the LMC
Agreement, any Holders that are Liberty Parties or SpinCo 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).
<PAGE>
(b) Holdco, within 45 days of the date on which Holdco
receives a Demand Notice given by Holders in accordance with Section
2(a) hereof, shall file with the SEC, and Holdco 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) Holdco 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 Holdco 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 Holdco's Common Stock, par value $.01 per share, Holdco 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 Holdco
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), (2) a reduction in the number of
Registrable Shares included in such Shelf Registration, or (3) a
combination of the foregoing, as Holdco and Holders of a majority of the
Registrable Shares shall agree; provided, however, that if Holdco and
such Holders are unable to agree on such a mutually acceptable
compromise within 10 days after Holdco 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) Holdco shall be entitled to postpone the filing of any
Registration Statement otherwise required to be prepared and filed by
Holdco 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
<PAGE>
Period"), if any executive officer of Holdco determines in good
faith that in such executive officer's reasonable judgment 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 Holdco 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. Holdco shall promptly notify the
Holders of the expiration of any Delay Period. If Holdco 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 Holdco 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 Holdco 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".
(e) In the case of a proposed firm commitment underwritten
offering pursuant to a Demand Registration, Holdco may include other
Holdco 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. Holdco shall give the managing
underwriter or underwriters participating in such offering written
notice of its intent to include any such Holdco 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 Holdco 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
<PAGE>
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 Holdco revoking such request. The Holders
of Registrable Shares who revoke such request shall reimburse Holdco 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 Holdco'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 Holdco 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 Holdco 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 Holdco or its Affiliates), then Holdco shall give written
notice of such proposed filing to 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,
Holdco shall include in each such Piggyback Registration all Registrable
Shares with respect to which Holdco 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 Holdco does not exercise its right to abandon the Registration
Statement under Section 3(c), the withdrawing Holders shall reimburse
Holdco for the portion of the SEC registration fee payable with respect
to the Registrable Shares so withdrawn and all other
<PAGE>
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. Holdco shall permit
the Holders to include all such Registrable Shares on the same terms and
conditions as any similar securities, if any, of Holdco included
therein. Notwithstanding the foregoing, if Holdco 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 Holdco to the Holders if Holdco 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 Holdco of any notice hereunder or otherwise.
SECTION 4. Holdback Agreement. If (i) during the Effectiveness
Period, Holdco 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 an issuance by Holdco
of Common Stock or similar securities or securities convertible into, or
exchangeable or exercisable for, such securities and (ii) with
reasonable prior notice, Holdco (in the case of a non-underwritten
public offering by Holdco 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 Holdco pursuant to such registration
statement) advises Holdco in writing (in which case Holdco 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,
<PAGE>
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 Holdco contemplated by clause (ii) above, the Holder shall have
notified Holdco 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 Holdco pursuant to and in accordance with
Sections 2 and 3 hereof (and subject to Sections 2 and 3 hereof), Holdco
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
Holdco 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 Holdco
then qualifies and which counsel for Holdco shall deem appropriate
in accordance with the intended method or methods of distribution
specified by the Holders thereof, and, subject to Holdco's right to
terminate or abandon a Piggyback 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 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 Holdco 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;
<PAGE>
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), Holdco
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 Holdco 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 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
<PAGE>
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
Holdco 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 or automated interdealer
quotation system, if any, on which similar securities issued by
Holdco are then listed or quoted;
(i) on or before the effective date of such Registration
Statement, provide the transfer agent of Holdco 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
<PAGE>
and other records and other information, pertinent corporate
documents and properties of any of Holdco 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 Holdco 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
Holdco (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 Holdco 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 Holdco so
that Holdco, at Holdco'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 Holdco and
updated thereof (which counsel and opinion (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 and 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 accounts of Holdco (and, if necessary, any
other independent certified public accountants of any subsidiary
of Holdco or
<PAGE>
of any business acquired by Holdco for which financial statements
and financial data are, or are required to be, included in the
Registration Statment), addressed to each selling Holder of
Registrable Shares covered by the Registration Statment (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 hereto 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 to
the extent required thereunder.
Holdco 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, Holdco 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 Holdco 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 Holdco 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 Holdco, the Holder shall deliver to Holdco (at the
expense of Holdco) 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.
<PAGE>
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, Holdco shall
pay all costs, fees and expenses incident to Holdco'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 Holdco, (vi) fees and disbursements of all independent
certified public accountants of Holdco (including expenses of any
"cold comfort" letters required in connection with this Agreement)
and all other persons retained by Holdco in connection with such
Registration Statement, (vii) fees and disbursements of one counsel,
other than Holdco'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 Holdco'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 Holder and Holdco 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
Holdco. In the case of any underwritten offering pursuant to a
Piggyback Registration, Holdco 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
<PAGE>
agreement with such institution or institutions for such offering in
such form as Holdco, 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 Holdco.
Holdco 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 Holdco by or on behalf of such
Holder expressly for use therein; provided, however, that Holdco
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 Holdco 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
Holdco 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 Holdco 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
<PAGE>
indemnify, to the full extent permitted by law, Holdco, its
directors, officers, agents or employees, each Person who controls
Holdco (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 furnished in writing by or on behalf of such Holder to
Holdco 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
Holdco 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 "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
<PAGE>
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 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 contributions 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
<PAGE>
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 Holdco and the Holders hereunder (other than Section
8 hereof) shall terminate on the first date on which no Registrable
Shares remain outstanding.
(a) Notices. All notices or communications hereunder shall be
in writing (including telecopy or similar writing), addressed as
follows:
<PAGE>
If to Holdco, to it at:
75 Rockefeller Plaza
New York, New York 10019
Telecopier no.: (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, New York 10019
Attention: Richard Hall, Esq.
Telecopier no.: (212) 474-3700
If to a Holder, to it at:
c/o Liberty Media Corporation
8101 East Prentice Avenue
Suite 500
Englewood, Colorado 80111
Telecopier No. (303) 721-5415
Attention: President
With a copy (which shall not constitute notice) to
each of:
Steve M. Brett, Esq.
General Counsel
Tele-Communications, Inc.
Terrace Tower II
5619 DTC Parkway
Englewood, CO 80111-3000
Telecopier No.: (303) 488-3245
Baker & Botts, L.L.P.
599 Lexington Avenue
New York, New York 10022-6030
Attention: Elizabeth Markowski, Esq.
Telecopier no.: (212) 705-5125
<PAGE>
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, 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 Holdco 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
<PAGE>
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 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 shall be deemed
references to Sections of 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 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
"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.
(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 to this Agreement
shall fall on a day other than a Business Day, such act or notice
<PAGE>
may be timely performed or given if performed or given on the next
succeeding Business Day.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first written above.
TW INC.
By:
Name:
Title:
LIBERTY MEDIA CORPORATION
By:
Name:
Title:
TCI TURNER PREFERRED, INC.
By:
Name:
Title:
LIBERTY BROADCASTING, INC.
By:
Name:
Title:
COMMUNICATION CAPITAL CORP.
By:
Name:
Title:
SOUTHERN SATELLITE SYSTEMS,
INC.
By:
Name:
Title:
EXHIBIT F TO
SECOND AMENDED AND RESTATED
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
<PAGE>
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, 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;
<PAGE>
(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 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.
<PAGE>
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, then (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.
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 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
<PAGE>
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.
EXHIBIT I TO
SECOND AMENDED AND RESTATED
LMC AGREEMENT
CONTRIBUTION AND EXCHANGE
AGREEMENT dated as of September 22,
1995, among TIME WARNER INC., a
Delaware corporation ("TW Parent"),
TW INC., a Delaware corporation and
direct wholly-owned subsidiary of TW
Parent ("Holdco"), LIBERTY MEDIA
CORPORATION, a Delaware corporation
("LMC Parent"), TCI TURNER PREFERRED,
INC., a Colorado corporation
("TCITP"), and LIBERTY BROADCASTING,
INC., an Oregon corporation and
direct wholly-owned subsidiary of
TCITP ("LBI").
Recitals
A. Reference is made to that certain Amended and
Restated Agreement and Plan of Merger dated as of September 22,
1995, and as amended by Amendment No. 1 thereto dated as of
August 8, 1996 (the "Merger Agreement"), among TW Parent,
Holdco, Time Warner Acquisition Corp., a Delaware corporation
and direct wholly-owned subsidiary of Holdco ("Delaware Sub"),
TW Acquisition Corp., a Georgia corporation and direct wholly-
owned subsidiary of Holdco ("Georgia Sub"), and Turner
Broadcasting System, Inc., a Georgia corporation ("TBS").
B. The Merger Agreement provides for the merger of
Delaware Sub into TW Parent (the "TW Merger") and the
simultaneous merger of Georgia Sub into TBS (the "TBS Merger"
and, collectively with the TW Merger, the "Mergers"), in a
transaction in which the outstanding capital stock of TW Parent
and TBS, respectively, will be converted into capital stock of
Holdco, and each of TW Parent and TBS will become a direct
wholly-owned subsidiary of Holdco. The Mergers are intended to
qualify as tax-free exchanges pursuant to Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code").
C. Reference is also made to that certain Second
Amended and Restated LMC Agreement dated as of September 22,
1995 (the "LMC Agreement"), among TW Parent, Holdco, LMC Parent,
TCITP and certain subsidiaries of TCITP named therein (TCITP and
such subsidiaries, collectively, the "Shareholders"). TCITP is a
direct wholly-owned subsidiary of LMC Parent. The LMC Agreement
provides for, among other things, the Shareholders to vote all
shares of TBS capital stock owned by the Shareholders in favor
of the TBS Merger.
D. In order to induce LMC Parent, TCITP and the other
Shareholders to enter into the LMC Agreement, TW Parent and
Holdco have agreed to enter into this Agreement,
<PAGE>
which provides for, among other things, the Contribution
Election and the Contribution described herein.
E. The TBS Merger is also subject to the condition
that the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), shall have
expired. In connection therewith, TW Parent, TBS,
Tele-Communications, Inc., a Delaware corporation ("TCI"), and
LMC Parent have entered into an Agreement Containing Consent
Order (the "ACCO") dated as of August , 1996, with the Federal
Trade Commission (the "FTC"), which contemplates the issuance of
an Order (the ACCO, together with such Order and the Interim
Agreement attached as Appendix I to the ACCO, in each case as
the same may be amended or modified from time to time hereafter,
the "FTC Consent Decree").
F. This Agreement is the Contribution and Exchange
Agreement contemplated by the LMC Agreement.
NOW, THEREFORE, in consideration of the premises and
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
DEFINITIONS AND CONSTRUCTION
1.1 Certain Definitions. As used in this Agreement,
the following terms have the corresponding meanings:
"Additional Agreements" means the LMC Agreement, the
Registration Rights Agreement, the First Refusal Agreement, the
Distribution Contract, the SSSI Agreement, the Rights Amendment
(if entered into), the SportSouth Agreement, the Sunshine
Agreement and the Program and Digitization Agreement.
"Affiliate", when used with respect to a specified
person, means any other person that directly or indirectly
Controls, is Controlled by or is under common Control with such
first person. The term "affiliated" (whether or not capitalized)
shall have a correlative meaning. Prior to the Effective Time,
no Liberty Party shall be deemed to be an Affiliate of TW
Parent, Holdco or any of their respective subsidiaries and
neither TW Parent, Holdco nor any of their respective Affiliates
shall be deemed to be an Affiliate of any Liberty Party. Prior
to the Effective Time, neither TW Parent nor any of its
Affiliates nor TCI, LMC Parent nor any of their respective
Affiliates shall be deemed to be an Affiliate of TBS or any of
its subsidiaries.
<PAGE>
"Agreement" means this Contribution and Exchange
Agreement, including all Schedules hereto.
"Change in Control Event" means any of the following
events: (i) any person becomes an Acquiring Person (as defined
in the Rights Agreement as in effect on September 22, 1995, 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 September 22, 1995, 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, (ii) TW Parent enters into any
agreement (other than the Elective Merger Agreement, the Merger
Agreement or any amendment thereto) providing for a 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
shares of the common stock, par value $1.00 per share, of TW
Parent, or (iii) prior to the closing of the Mergers, Holdco
ceases to be a wholly owned subsidiary of TW Parent or enters
into any agreement (other than the Merger Agreement or any
amendment thereto) that would result in Holdco ceasing to be a
wholly-owned subsidiary of TW Parent.
"Closing Date" means the date on which the Mergers are
consummated, pursuant to Section 1.02 of the Merger Agreement.
"Communications Laws" means 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 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.
"Consideration" means consideration that is identical
in form and value to the aggregate consideration that UCTI would
have been entitled to receive in the TBS Merger, pursuant to the
Merger Agreement, in respect of all shares of capital stock of
TBS held of record by UCTI at the Effective Time, if the
Contribution Election had not been made and UCTI had not
delivered timely notice of an intent to demand appraisal rights
pursuant to any applicable statute.
"Contract" means any agreement, contract, commitment,
indenture, lease, license, instrument, note, bond, security,
undertaking, promise, covenant or legally binding arrangement or
understanding.
<PAGE>
"Contributed Assets" means all the issued and
outstanding shares of capital stock of UCTI.
"Control", as to any person, means 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
(whether or not capitalized) have correlative meanings.
"Distribution Contract" means the Distribution
Contract, substantially in the form of Exhibit 1 to the SSSI
Agreement, to be entered into by Holdco, SpinCo and Satellite at
or prior to the Closing (but will not become effective until the
"Closing" under the SSSI Agreement).
"Effective Time" means the time at which the Mergers
become effective pursuant to the Merger Agreement and applicable
state law.
"FCC" means the Federal Communications Commission and
any successor agency or other agency charged with the
administration of any Communications Law.
"Final Determination" means (i) 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 contest provisions with
respect to the applicable indemnification obligation and
permitted by applicable law) or the time for filing such appeal
has expired, (ii) 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 any settlement
entered into in accordance with the contest provisions with
respect to the applicable indemnification obligation hereunder)
or (iii) 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.
"First Refusal Agreement" means the Stockholders'
Agreement substantially in the form of Exhibit B to the LMC
Agreement, to be entered into by Holdco, TCITP, LBI, SpinCo and
certain other shareholders of TBS at or prior to the Closing.
"Holdco Common Stock" means the common stock, par
value $.01 per share, of Holdco to be issued in the Mergers, and
in the event of any reclassification, recapitalization or other
change in the Holdco Common Stock, or in the event of any
consolidation or merger of Holdco with or into another person
affecting the Holdco Common Stock, such capital stock or
<PAGE>
other securities to which a holder of Holdco Common Stock would
be entitled upon the occurrence of such event.
"Horizontal Rule" means the rule promulgated by the
FCC that is set forth at 47 C.F.R. 76.503 on September 22, 1995.
"Judgment" means any order, judgment, writ, decree,
injunction, award or other determination, decision or ruling of
any court, any other Governmental Entity or any arbitrator.
"LBI Consideration" means that portion of the
Consideration that bears the same proportion to the entire
Consideration as the number of shares of UCTI Capital Stock
owned by LBI bears to the total number of shares of UCTI Capital
Stock outstanding, in each case as of the Effective Time,
determined, if the Consideration consists of consideration of
more than one form, on a pro rata basis for all forms of
consideration constituting the Consideration.
"Liberty Party" means 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 Affiliate of TCI that is
controlled by TCI, also means TCI and each Affiliate of TCI that
is controlled by TCI.
"Liberty Subsidiaries" means TCITP, UCTI, LBI and
Communication Capital Corp.
"LMC Group" means TCITP and all corporations that
would join with TCITP in the filing of a consolidated return for
federal income tax purposes, other than UCTI.
"LMCN-V Common Stock" means the Series LMCN-V Common
Stock of Holdco, having the terms set forth on Exhibit A to the
LMC Agreement.
"person" has the meaning ascribed to such term in the
Merger Agreement and includes any Governmental Entity.
"Program and Digitization Agreement" means the letter
agreement, dated as of ____________, 1996, between Satellite and
TBS with respect to, among other things, the carriage by
Satellite of certain programming services of TBS and Satellite's
non-exclusive right to digitize, compress and reuplink certain
programming services of TBS.
"Registration Rights Agreement" means the LMC
Registration Rights Agreement substantially in the form of
Exhibit E to the LMC Agreement to be entered into by Holdco, LMC
Parent, TCITP and certain subsidiaries of TCITP at or prior to
the Closing.
<PAGE>
"Requirement of Law", when used with respect to any
person, means 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.
"Rights Agreement" means the Rights Agreement dated as
of January 20, 1994, between TW Parent and Chemical Bank, as
Rights Agent.
"Rights Amendment" means those certain amendments to
the Rights Agreement described in Exhibit F to the Original LMC
Agreement.
"Satellite" means Satellite Services, Inc., a Delaware
corporation.
"SpinCo" means Southern Satellite Systems, Inc., a
Georgia corporation, and any successor thereto by operation of
law.
"Spin-off" means the distribution by TCI of 100% of
the capital stock of SpinCo to holders of record of TCI's
Tele-Communications, Inc. Series A Liberty Media Common Stock
and Tele-Communications, Inc. Series B Liberty Media Group
Common Stock.
"SportSouth Agreement" means that certain Stock
Purchase Agreement dated as of September 22, 1995, between TBS
and LMC Southeast Sports, Inc., and the Exhibits and Schedules
thereto, a copy of which is annexed as Exhibit G to the LMC
Agreement.
"SSSI Agreement" means the SSSI Agreement
substantially in the form of Exhibit D to the LMC Agreement to
be entered into by Holdco and LMC Parent, SpinCo and Satellite
(with respect to certain provisions thereof) at or prior to the
Closing.
A "subsidiary" of any person means another person, an
amount of the voting securities or other voting ownership or
voting partnership interests of which 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 and/or one or more subsidiaries of such
first person.
"Sunshine Agreement" means that certain agreement
substantially in the form of Exhibit H to the LMC Agreement, 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
<PAGE>
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.
"Tax Returns" 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.
"Taxes" 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.
"TBS Class C Preferred Stock" means the Class C
Preferred Stock, par value $.125 per share, of TBS.
"TBS Stock Agreements" means, individually and
collectively, (a) the Investors Agreement dated as of June 3,
1987, among TBS and the original holders of the TBS 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 TBS, R.E. Turner, III, and the original
holders of the TBS Class C Preferred Stock; (c) the Voting
Agreement dated as of June 3, 1987, among certain holders of TBS
Class C Preferred Stock and (d) the Agreement dated as of June
3, 1987, among TW Parent, TCITP and certain other holders of TBS
Class C Preferred Stock.
"TCI" means Tele-Communications, Inc., a Delaware
corporation.
"TCITP Consideration" means that portion of the
Consideration that bears the same proportion to the entire
Consideration as the number of shares of UCTI Capital Stock
owned by TCITP bears to the total number of shares of UCTI
Capital Stock outstanding, in each case as of the Effective
Time, determined, if the Consideration consists of consideration
of more than one form, on a pro rata basis for all forms of
consideration constituting the Consideration.
"TW Parent Common Stock" means the common stock, par
value $1.00 per share, of TW Parent on September 22, 1995, and
in the event of any reclassification, recapitalization or other
change in the TW Parent Common Stock, or in the event of any
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
would be entitled upon the occurrence of such event.
"UCTI" means United Cable Turner Investment Inc., a
Colorado corporation.
<PAGE>
"Voting Holdco LMC Common Stock" means the Series LMC
Common Stock of Holdco, having the terms set forth on Exhibit C
to the LMC Agreement.
1.2 Additional Definitions. The following additional
terms have the meaning ascribed thereto in the Section indicated
below next to such term:
Defined Term Section Defined In
Closing 2.2
Code Recital B
contest rights 3.4(a)
Contribution 2.1
Contribution Election 2.1
Delaware Sub Recital A
Georgia Sub Recital A
Governmental Entity 4.1(d)
Holdco Preamble
HSR Act 4.1(d)
Liens 4.1(b)
LBI Preamble
LMC Agreement Recital C
LMC Parent Recital C
Material TW Parent Subsidiary 4.2(a)
Merger Agreement Recital A
Mergers Recital B
Proprietary Information 5.3
Representatives 5.3
Scheduled Closing Date 2.5
SEC 4.2(a)
Shareholders Recital C
Straddle Period 3.1(c)
Tax Indemnified Party 3.4(e)
Tax Indemnifying Party 3.4(e)
TBS Recital A
TBS Merger Recital B
TBS Shares 4.1(b)
TCITP Preamble
TW Material Adverse Effect 4.2(a)
TW Merger Recital B
TW Parent Preamble
TW Parent Subsidiary 4.2(a)
<PAGE>
TWE 4.2(a)
UCTI Capital Stock 4.1(c)
UCTI Material Adverse Effect 4.1(a)
UCTI Stock Transfer 3.7
1.3 Terms Generally. The definitions in Sections 1.1
and 1.2 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
(including Schedules) in its entirety and not to any part hereof
unless the context shall otherwise require. All references
herein to Articles, Sections and Schedules shall be deemed
references to Articles and Sections of, and Schedules to, this
Agreement unless the context shall otherwise require. Unless the
context shall otherwise require, any references to any agreement
or other instrument or statute or regulation are to it as
amended and supplemented from time to time (and, in the case of
a statute or regulation, to any successor provisions). 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
THE CONTRIBUTION
2.1 Right to Make Contribution. LMC Parent shall have
the right and option, exercisable by notice given to TW Parent
and Holdco at least ten business days prior to the Scheduled
Closing Date (the "Contribution Election"), to cause TCITP and
LBI to contribute the Contributed Assets to Holdco in exchange
for the Consideration (the "Contribution"). The Contribution is
intended to qualify as a tax-free exchange pursuant to Section
351 of the Code, upon and subject to the terms and conditions of
this Agreement.
2.2 Closing. If LMC Parent makes the Contribution
Election, the closing of the Contribution (the "Closing") will
take place on the Closing Date, concurrently with the
consummation of the Mergers.
2.3 Exchange of Certificates. At the Closing, (a) LMC
Parent shall cause TCITP to deliver to Holdco one or more stock
certificates representing in the aggregate all the Contributed
Assets held of record by TCITP, and shall cause LBI to deliver
to Holdco one or
<PAGE>
more stock certificates representing in the aggregate all the
Contributed Assets held of record by LBI, in each case duly
endorsed for transfer or accompanied by stock powers duly
endorsed for transfer, and (b) Holdco shall deliver to TCITP and
LBI, respectively, (i) one or more stock certificates, duly
executed and registered in the name of TCITP, representing in
the aggregate the TCITP Consideration and (ii) one or more
certificates, duly executed and registered in the name of LBI,
representing in the aggregate the LBI Consideration. Until
surrendered as contemplated by this Article II, the Contributed
Assets shall be deemed from and after the Effective Time to
represent only the right to receive the Consideration. The
Consideration issued and paid in accordance with this Article II
shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to the Contributed Assets.
No interest will be paid or will accrue on any cash payable in
lieu of any fractional shares constituting part of the
Consideration.
2.4 Effectiveness of the Contribution. The
Contribution shall be effective, and all deliveries pursuant to
Section 2.3 shall be conclusively deemed to have occurred,
concurrently with the effectiveness of the Mergers at the
Effective Time.
2.5 Scheduled Closing Date; Changes in Election. TW
Parent shall give LMC Parent notice of the date on which the
closing of the Mergers is scheduled to occur (the "Scheduled
Closing Date"), at least 20 days prior thereto, and shall give
LMC Parent such prior notice of any changes in the Scheduled
Closing Date as shall be reasonable under the circumstances. LMC
Parent shall have the right to revoke its election pursuant to
Section 2.1 at any time prior to three business days prior to
the Effective Time.
2.6 Assignment and Delegation of this Agreement.
Concurrently with the effectiveness of the Spin-off, LMC Parent
shall assign and delegate to SpinCo, and SpinCo shall assume
from LMC Parent, all rights and obligations of LMC Parent under
this Agreement as of the date thereof, and SpinCo will from and
after such date be bound by, and entitled to the benefit of this
Agreement, with the same effect as if SpinCo had been an
original party and signatory to this Agreement, in lieu of LMC
Parent, and as if the representations and warranties of LMC
Parent made herein, and the obligations of LMC Parent contained
herein to be performed on and after the date of the Spin-off,
were in each case the representations, warranties and
obligations of SpinCo. In that connection, on the date of the
Spin-off, SpinCo shall execute and deliver to each of the other
parties hereto a counterpart of this Agreement, and SpinCo and
each of the other parties hereto shall execute and deliver to
LMC Parent an unconditional release of all obligations of LMC
Parent hereunder (whether or not known or suspected), in such
form as LMC Parent and its counsel shall reasonably request.
Without limiting the generality of any of the foregoing, on the
date of the Spin-off, upon delivery to the other parties hereto
of the counterpart to this Agreement referred to in the
immediately preceding sentence, SpinCo shall be deemed to make
the representation and warranty set forth in Section 4.1(d), for
the benefit
<PAGE>
of LMC Parent and each other party hereto, as of such date and
as if all references therein to LMC Parent, TCITP and LBI
referred instead to SpinCo.
ARTICLE III
CERTAIN POST-CLOSING COVENANTS
3.1 Obligation of TCITP to Indemnify; TCI Guarantee.
(a) TCITP hereby assumes and shall be liable for, and shall
indemnify and hold UCTI, Holdco and the Affiliates of Holdco
harmless from and against, (i) all liability for Taxes of UCTI
for taxable years or portions thereof ending on or prior to the
Closing Date (including any Straddle Period pursuant to Section
3.1(c)), (ii) all liability (as a result of Treasury Regulation
Section 1.1502-6(a) or otherwise) for Taxes of any person other
than UCTI with which prior to the Closing Date UCTI joins or has
ever joined (or is or ever has been required to join) in filing
any consolidated, combined, unitary or aggregate Tax Return, and
(iii) subject to the representations, warranties, covenants and
agreements of Holdco and TW Parent set forth in Section 3.7, all
liability for Taxes of UCTI arising as a result of the
Contribution, in each case on an after-Tax basis. TCI hereby
unconditionally and irrevocably guarantees all obligations and
liabilities assumed by TCITP pursuant to this Section 3.1(a)
(subject, in the case of the obligations and liabilities assumed
by TCITP for Taxes of UCTI arising as a result of the
Contribution, to the representations, warranties, covenants and
agreements of Holdco and TW Parent set forth in Section 3.7).
(b) All Taxes of UCTI for which TCITP is not required
to indemnify UCTI, Holdco and the Affiliates of Holdco pursuant
to Section 3.1(a) shall be the obligation of UCTI, and UCTI
shall be liable for, and shall indemnify and hold the members of
the LMC Group harmless from and against, all such liabilities,
on an after-Tax basis.
(c) For purposes of this Agreement, each Tax liability
for a taxable year that includes, but does not end on, the
Closing Date (a "Straddle Period") shall be allocated, based
upon a "closing of books," between the period ending on the
Closing Date and the period beginning the day after the Closing
Date, as if each such period were a taxable year.
3.2 Refunds. Any refunds of Taxes or any credit
against Taxes of UCTI, Holdco and the Affiliates of Holdco with
respect to taxable years or portions thereof ending on or prior
to the Closing Date (when and to the extent applied by UCTI
against any Tax liability that TCITP has not assumed pursuant to
Section 3.1(a), resulting in a tax benefit to UCTI that it
otherwise would not have realized in the absence of such credit)
(including any interest relating to any such refunds or credits)
shall be for the account of TCITP, and are hereby and shall be
assigned to TCITP, and any other refunds of Taxes or credits
against Taxes of UCTI shall be for the account of Holdco. Any
refunds or credits with respect to Straddle Periods shall
<PAGE>
be allocated under the principles set forth in Section 3.1(c).
Holdco shall forward to, or reimburse TCITP for, any such
refunds or credits and interest due TCITP, promptly after
receipt thereof, and TCITP shall forward to Holdco any such
refunds or credits and interest due Holdco, promptly 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.
3.3 Final Returns. TCITP shall prepare or cause to be
prepared any Tax Returns to be filed that relate to any period
ending on or prior to the Closing Date. All such Tax Returns
shall be prepared in a manner consistent with prior years. TCITP
and Holdco shall jointly prepare and control any Tax Return of
UCTI 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.
3.4 Conduct of Audits and Disputes.
(a) Contest Rights. A party who has "contest rights"
with respect to an asserted Tax liability, Tax refund claim or
Tax credit claim shall have the right (but not the obligation),
at its own expense, to negotiate, settle or contest such
asserted Tax liability, refund claim or credit 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
3.4. Such contest rights shall include, but not be limited to,
(i) the determinations (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 and (ii) the right to control any such proceedings or
actions.
(b) Claims Controlled by TCITP. Subject to paragraphs
(d), (e) and (f) of this Section 3.4, TCITP (and not UCTI) shall
have contest rights with respect to any asserted Tax liability,
refund claim or credit claim of UCTI to the extent that TCITP is
required to indemnify against such asserted Tax liability
pursuant to Section 3.1(a) or is entitled to such refund or
credit pursuant to Section 3.2. Holdco shall have the right to
participate in and be consulted with respect to any such contest
undertaken by TCITP. TCITP shall not settle any Tax liability,
refund claim or credit claim without the prior written consent
of Holdco, which consent shall not be unreasonably withheld.
(c) Claims Controlled by Holdco. Subject to paragraphs
(d), (e) and (f) of this Section 3.4, Holdco (and not TCITP)
shall have contest rights with respect to any asserted Tax
<PAGE>
liability, refund claim or credit claim of UCTI to the extent
that UCTI is required to indemnify against such asserted Tax
liability pursuant to Section 3.1(b) or is entitled to such
refund or credit pursuant to Section 3.2. TCITP and its
Affiliates shall have the right to participate in and be
consulted with respect to any such contest undertaken by Holdco.
Holdco shall not settle any Tax liability, refund claim or
credit claim without the written consent of TCITP, which consent
shall not be unreasonably withheld.
(d) Contests Involving Multiple Issues. If any contest
shall involve issues with respect to which both TCITP and Holdco
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 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.
(e) Notice; Cooperation. If UCTI, Holdco, any
Affiliate of Holdco or any member of the LMC 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
asserted Tax liability or refund claim for any period for which
TCITP or UCTI, respectively (the "Tax Indemnifying Party"), may
be liable (in the case of a liability) or 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,
including any extension, 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 forebear 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
liability, refund claim or credit claim. The parties hereto
agree to cooperate with each other in connection with any
examination process with respect to any asserted Tax liability,
refund claim or credit 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.
(f) Payment. If, with respect to any asserted Tax
liability that is the subject of an indemnification obligation
hereunder, the party with contest rights with respect to such
Tax liability elects not to contest such asserted Tax liability
or elects to contest such asserted Tax liability by causing the
Tax Indemnified Party to pay the deficiency asserted and then
seek a
<PAGE>
refund thereof, the Tax Indemnifying Party shall advance the
amount of the Tax liability so asserted to such Tax Indemnified
Party to the extent that the Indemnified Party is required to
pay such contested amount. Otherwise, such Tax Indemnifying
Party shall pay the amount of any indemnification obligation
(net of any payment made pursuant to the preceding sentence) to
such Tax Indemnified Party no later than 5 days after any Final
Determination with respect to the Tax giving rise to such
indemnity obligation.
(g) Obligations of Tax Indemnified Party. The failure
of a Tax Indemnified Party to comply with any of its obligations
under this Section 3.4 shall not relieve any Tax Indemnifying
Party or any other party of its indemnity obligations hereunder,
except to the extent (and only to the extent) that such Tax
Indemnifying Party or other party is actually prejudiced by such
failure.
3.5 Carrybacks. No losses or credits of UCTI arising
in taxable years beginning after the Closing Date may be carried
back to taxable years ending on or prior to the Closing Date,
except to the extent required by law.
3.6 LMC Agreement; Covered TW Securities. If the
Contribution Election is made, then upon the Closing, (a) LBI
shall automatically and without further action become a party to
the LMC Agreement, as a Shareholder (as such term is defined
therein), with the same effect as if LBI were an original party
thereto and were named as a Shareholder therein, and shall be
deemed to have made the appropriate representations, warranties,
covenants and agreements contained therein, and (b) all shares
of Holdco Common Stock or other securities of Holdco issued to
LBI and TCITP as Consideration hereunder (and all shares of
Voting Holdco LMC Common Stock and/or LMCN-V Common Stock for
which such shares may be exchanged pursuant to Section 4.1 of
the LMC Agreement (directly or indirectly and in one or more
exchanges)) shall constitute Covered TW Securities for all
purposes of the LMC Agreement (in addition to and not in lieu of
the Holdco Common Stock to be received in the TBS Merger and
Voting Holdco LMC Common Stock and/or LMCN-V Common Stock
exchanged therefor). If the Contribution Election is made, then
upon the Closing, the LMC Agreement shall be amended to the
effect of this Section 3.6 without further action by the parties
to the LMC Agreement.
3.7 No Liquidation. As of the Closing Date, TW Parent
and Holdco hereby represent, warrant, covenant and agree with
LMC Parent, TCITP and LBI, for the benefit of all members of any
LMC Group, that neither TW Parent nor Holdco has, as of the
Closing Date, any plan or intention to liquidate or dissolve
UCTI or to sell or otherwise transfer or dispose of (or agree to
sell or otherwise transfer or dispose of) any capital stock of
UCTI, or any securities exercisable or exchangeable for, or
convertible into, capital stock of UCTI, or any interest
therein, (a "UCTI Stock Transfer") and Holdco shall not, and TW
Parent shall not permit Holdco to, liquidate or dissolve UCTI
for at least two years following the Closing.
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of LMC Parent,
TCITP and LBI. Each of LMC Parent, TCITP and LBI represents and
warrants to TW Parent and Holdco as follows:
(a) Organization, Standing and Corporate Power. UCTI
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation
and has the requisite corporate power and authority to carry on
its business as now being conducted. UCTI 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 any property 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) has not had and is not reasonably likely to have a
material adverse effect on the business, properties, assets,
results of operations or financial condition of UCTI (a "UCTI
Material Adverse Effect"). UCTI has delivered to TW Parent
complete and correct copies of UCTI's Articles of Incorporation
and By-laws, in each case as amended to September 22, 1995. UCTI
is not in violation of any provision of its Articles of
Incorporation or By-laws, except to the extent that any such
violations would not, individually or in the aggregate, have a
UCTI Material Adverse Effect. UCTI does not have any
subsidiaries.
(b) Ownership of TBS Shares. UCTI owns 5,820,452
shares of TBS Class C Preferred Stock (the "TBS Shares"), free
and clear of all pledges, claims, liens, charges, encumbrances,
security interests, options and restrictions of any kind or
nature whatsoever (collectively, "Liens") and the TBS Shares are
not subject, other than pursuant to this Agreement and the TBS
Stock Agreements, to any Contract restricting or otherwise
relating to the disposition, transfer, voting rights or dividend
rights of the TBS Shares. Except for the TBS Shares, UCTI does
not own, directly or indirectly, any capital stock, general or
limited partnership interest or other ownership interest of any
kind in any corporation, partnership, limited liability company,
joint venture or other person.
(c) Capital Structure. The authorized capital stock of
UCTI consists of 30,000 shares of common stock, par value $.01
per share ("UCTI Capital Stock"), of which 20,119.4 shares are
outstanding. All the outstanding shares of UCTI Capital Stock
are validly issued, fully paid and nonassessable. TCITP is the
record owner of 10,000 shares of UCTI Capital Stock
(approximately 50.297% of the total number of such shares
outstanding) and LBI is the record owner of 10,119.4 shares of
UCTI Capital Stock (approximately 49.703% of the total number of
such shares outstanding), which shares are in each case owned
free and clear of any Liens. Except for the UCTI Capital Stock
owned of record by TCITP and LBI, there are no shares of capital
stock or other voting securities of UCTI issued, reserved for
issuance or
<PAGE>
outstanding. There are no options, warrants, calls, rights,
commitments, agreements, arrangements, undertakings or other
Contracts of any kind to which UCTI is a party or by which it is
bound relating to any issued or unissued capital stock of UCTI,
or obligating UCTI 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, UCTI or obligating UCTI to issue, grant,
extend or enter into any such option, warrant, call, right,
commitment, agreement, arrangement or undertaking. There are not
outstanding any contractual obligations of UCTI to repurchase,
redeem or otherwise acquire any shares of capital stock of UCTI,
or to make any investment (in the form of a loan, capital
contribution or otherwise) in any other person.
(d) Authority; Noncontravention. Each of LMC Parent,
TCITP and LBI has the requisite corporate power and authority to
enter into this Agreement and to consummate the transactions
provided for herein. The execution and delivery of this
Agreement by LMC Parent, TCITP and LBI and the consummation by
them of the transactions provided for herein have been duly
authorized by all necessary corporate action on the part of LMC
Parent, TCITP and LBI. This Agreement has been duly executed and
delivered by LMC Parent, TCITP and LBI and constitutes 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 by LMC Parent, TCITP and LBI do not, and the
performance by them of their respective obligations hereunder
and the consummation of the transactions provided for herein
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 LMC Parent, TCITP, LBI, UCTI or any
of their subsidiaries under, (i) the Articles of Incorporation
or By-laws of LMC Parent or TCITP or the comparable
organizational documents of LBI, UCTI or any other subsidiary of
LMC Parent or TCITP, (ii) any Contract to which LMC Parent,
TCITP, LBI, UCTI or any other subsidiary of LMC Parent or TCITP
is a party or by which any of them or their respective
properties or assets are bound, other than the TBS Stock
Agreements, as to which no representation is being made, or
(iii) subject to the governmental filings and other matters
referred to in the following sentence and in Sections 3.01(d)
and 3.02(d) of the Merger Agreement, any Requirement of Law
applicable to LMC Parent, TCITP, LBI, UCTI or any other
subsidiary of LMC Parent or TCITP 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 UCTI Material Adverse Effect, (y) prevent
LMC Parent, TCITP or LBI 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
<PAGE>
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 respect to LMC Parent, TCITP or
LBI in connection with the execution and delivery by them of
this Agreement or the consummation by them of the transactions
provided for herein, except for (i) the filing of notification
and report forms under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and
initial acceptance by the FTC of the FTC Consent Decree for
public comment, (ii) such filings with, and orders of, the FCC
as may be required under the Communications Laws in connection
with the transactions contemplated by this Agreement and the
Merger Agreement, (iii) the filing with the SEC of such reports
under Section 13 of the Exchange Act as may be required in
connection with this Agreement, the Merger Agreement and the
transactions contemplated hereby and thereby, (iv) such filings
with, and orders of, cable franchising authorities as may be
required in connection with this Agreement, the Merger Agreement
and the transactions contemplated hereby and thereby and (v)
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 contemplated by this
Agreement and the Merger Agreement or otherwise prevent LMC
Parent, TCITP or LBI from performing its obligations under this
Agreement in any material respect or have, individually or in
the aggregate, a UCTI Material Adverse Effect.
(e) Assets and Liabilities. Except for the TBS Shares,
UCTI does not have any assets or liabilities of any nature
(whether accrued, absolute, contingent or otherwise), other than
assets not required by generally accepted accounting principles
to be set forth on a balance sheet of UCTI or in the notes
thereto.
(f) Litigation. Except as disclosed on Schedule
4.1(f), there is no suit, action or proceeding (including any
proceeding by or before the FCC) pending or, to the knowledge of
LMC Parent, TCITP, threatened against or affecting LMC Parent,
TCITP or LBI (and LMC Parent is not aware of any basis for any
such suit, action or proceeding) that, individually or in the
aggregate, could reasonably be expected (i) to have a UCTI
Material Adverse Effect, (ii) to prevent LMC Parent, TCITP or
LBI from performing its obligations under this Agreement or
(iii) to prevent or delay the consummation of any of the
transactions contemplated by this Agreement, and there is no
Judgment outstanding against LMC Parent, TCITP or LBI having, or
which could reasonably be expected to have in the future, a UCTI
Material Adverse Effect. Except as disclosed on Schedule 4.1(f),
there is no suit, action or proceeding (including any proceeding
by or before the FCC) pending or, to the knowledge of LMC
Parent, threatened against or affecting UCTI (and LMC Parent is
not aware of any basis for any such suit, action or proceeding).
(g) Brokers. 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
<PAGE>
connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of LMC Parent, or
LBI or any Affiliate of LMC Parent, TCITP or LBI.
(h) Taxes.
(i) UCTI has timely filed (or has had timely
filed on its behalf) or will file or cause to be
timely filed, all material Tax Returns required
by applicable law to be filed by it prior to or
as of the Closing Date, including any Tax Return
of any affiliated or combined group that includes
or had included UCTI. All such Tax Returns are,
or will be at the time of filing, true, complete
and correct in all material respects.
(ii) UCTI and each affiliated or combined
group that includes or had included UCTI 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 Closing
Date, an adequate accrual for the payment of, all
material Taxes due with respect to any period
(including any Straddle Period pursuant to
Section 3.01(c)) ending prior to or as of the
Closing Date.
(iii) As of the Closing Date, UCTI will not
have any continuing obligation to LMC Parent,
TCITP or LBI (or to any other person) with
respect to any Taxes.
(i) Compliance with Laws. UCTI has not violated or
failed to comply with any Requirement of Law, except for
violations and failures to comply that could not, individually
or in the aggregate, reasonably be expected to result in a UCTI
Material Adverse Effect.
(j) Consolidated Return. As of the Effective Time, (A)
each of LMC Parent and SpinCo (and, if LMC Parent shall have
designated another person to receive LMCN-V Common Stock
pursuant to the SSSI Agreement, 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 (the "LMC Affiliated Group"), and (B) except in
connection with the Spin-off (as defined in the SSSI
Agreement), none of LMC Parent, TCITP, SpinCo or their
respective affiliates (other than the holders of the Excluded
Shares, as such term is defined in the LMC Agreement) has any
current plan or intention (i) to transfer any Holdco equity
securities held directly or indirectly by it immediately
following the Closing Date (or to be acquired by it pursuant to
the SSSI Agreement) (any such holder or acquirer, a "Holder") to
any person that is not a member of the LMC Affiliated Group or
(ii) to cause any Holder to cease to be a member of the LMC
Affiliated Group.
<PAGE>
(k) ERISA Compliance. Except as would not have a UCTI
Material Adverse Effect, (i) all employee benefit plans or
programs maintained for the benefit of the current or former
employees or directors of UCTI that are sponsored, maintained or
contributed to by UCTI or with respect to which UCTI may have
any liability, including any such plan that is an "employee
benefit plan" as defined in Section 3(3) or ERISA, are in
compliance with all applicable requirements of law, including
ERISA and the Code, and (ii) UCTI does not have 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 LMC Parent are any
such liabilities or obligations expected to be incurred.
4.2 Representations and Warranties of TW Parent and
Holdco. Each of TW Parent and Holdco represents and warrants to
LMC Parent, TCITP and LBI as follows:
(a) Organization, Standing and Corporate Power. Each
of TW Parent, Holdco and each of the Material TW 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 TW Parent and TW
Parent's subsidiaries (each, a "TW 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 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 TW Parent and
the TW Parent Subsidiaries, taken as a whole (a "TW Material
Adverse Effect"). TW Parent has delivered to LMC Parent 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 the Material TW Parent
Subsidiaries, in each case as amended to September 22, 1995.
Neither TW Parent nor Holdco is in violation of any provision of
its Restated Certificate of Incorporation or By-laws and no
Material TW Parent Subsidiary is in violation of any provision
of its certificate of incorporation, by-laws or comparable
organizational documents, except, in the case of the Material TW
Parent Subsidiaries, to the extent that such violations would
not, individually or in the aggregate, have a TW Material
Adverse Effect. Time Warner Entertainment Company, L.P. ("TWE"),
and each TW Parent Subsidiary that constitutes a significant
subsidiary of TW Parent within the meaning of Rule 1-02 of
Regulation S-X of the rules and regulations promulgated by the
Securities and Exchange Commission ("SEC") (determined without
regard to paragraph (3) of the definition thereof) is referred
to herein as a "Material TW Parent Subsidiary".
(b) Authority; Noncontravention. TW Parent and Holdco
have all requisite corporate power and authority to enter into
this Agreement and to consummate, subject to the stockholder
vote described in Section 4.2(d), the Mergers, the Contribution
and each of the other
<PAGE>
transactions provided for in this Agreement. The execution and
delivery of this Agreement by TW Parent and Holdco and the
consummation by them of the Mergers, the Contribution and each
of the other transactions provided for herein have been duly
authorized by all necessary corporate action on the part of TW
Parent and Holdco, subject to the stockholder vote described in
Section 4.2(d). This Agreement has been duly executed and
delivered by TW Parent and Holdco and constitutes a valid and
binding obligation of each TW Parent and Holdco, enforceable
against each such party in accordance with its terms (except 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). Except as set forth in
Schedule 4.2(b), the execution and delivery of this Agreement by
TW Parent and Holdco and the consummation by them of the
Mergers, the Contribution and each of the other transactions
provided for in this Agreement and compliance with the
provisions hereof 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 TW
Parent Subsidiary under, (i) the Restated Certificate of
Incorporation or By-laws of TW Parent or the comparable
organizational documents of any TW Parent Subsidiary, (ii) any
Contract to which TW Parent or any TW Parent Subsidiary is a
party or by which any of them or their respective properties or
assets are bound, other than the TBS Stock Agreements, as to
which no representation is being made, or (iii) subject to the
governmental filings and other matters referred to in the
following sentence, any Requirement of Law applicable to TW
Parent or any other TW 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 TW Material Adverse Effect, (y) prevent TW
Parent or Holdco from performing its respective obligations
under this Agreement in any material respect or (z) prevent or
delay in any material respect the consummation of the Mergers or
any of the transactions provided for in 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 TW Parent or Holdco in connection with the
execution and delivery of this Agreement by TW Parent and Holdco
or the consummation by them of the Mergers and each of the
transactions provided for in this Agreement, except for (i) the
filing of notification and report forms under the HSR Act and
initial acceptance by the FTC of the FTC Consent Decree for
public comment, (ii) such filings with, and orders of, the FCC
under the Communications Laws as may be required in connection
with the transactions contemplated by this Agreement and the
Merger Agreement, (iii) the filing with the SEC of such reports
under Sections 13 and 16(a) of the Exchange Act as may be
required in connection with this Agreement, the Merger Agreement
and the transactions contemplated hereby and thereby, (iv) such
filings with, and orders of, cable franchising authorities as
may be required in connection with this Agreement, the Merger
Agreement and the transactions contemplated hereby and thereby
and (v) such other consents, approvals, orders, authorizations,
registrations, declarations and filings which, if not obtained
or made, would not prevent or delay in any
<PAGE>
material respect the consummation of any of the transactions
contemplated by this Agreement and the Merger Agreement or
otherwise prevent TW Parent or Holdco from performing its
obligations under this Agreement or the Merger Agreement in any
material respect or have, individually or in the aggregate, a TW
Material Adverse Effect.
(c) Litigation. Except as disclosed in any required
report, schedule, form, statement or other document filed with
the SEC since December 31, 1992, or in Schedule 4.2(c), 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 of the TW
Parent Subsidiaries (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 prevent TW Parent
from performing its obligations under this Agreement in any
material respect. As of the date of this Agreement, except as
disclosed in any required report, schedule, form, statement or
other document filed with the SEC since December 31, 1992, or in
Schedule 4.2(c), there is no suit, action or proceeding pending,
or, to the knowledge of TW Parent, threatened, against TW Parent
or any of the TW Parent Subsidiaries (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 prevent or delay in any material respect the consummation of
any of the transactions contemplated by this Agreement or the
Merger Agreement.
(d) Voting Requirements. The adoption of the Merger
Agreement by the holders of a majority in voting power of the
outstanding TW Parent Common Stock and the outstanding voting
preferred stock, par value $1.00 per share, of TW Parent, voting
together as a single class, is the only vote of the holders of
any class or series of TW Parent's capital stock necessary to
approve this Agreement, the Merger Agreement, the Additional
Agreements and the transactions contemplated hereby and thereby.
(e) 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 TW
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 TW Parent or any Affiliate
of TW Parent.
(f) Holdco Charter. Holdco has delivered to LMC Parent
complete and correct copies of its Certificate of Incorporation
and By-laws and the Holdco Rights Plan, if any, in each case as
amended to September 22, 1995, including all certificates of
designation. No amendments to any of the foregoing have been
authorized, approved or adopted and there is no commitment,
arrangement or understanding by Holdco to effect any such
amendment, except as provided in the Merger Agreement. All
shares of capital stock of Holdco that 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.
<PAGE>
ARTICLE V
CERTAIN COVENANTS
5.1 Conduct of Business.
(a) Business of UCTI. On the Closing Date: (i) UCTI
will own the TBS Shares, free and clear of all Liens, other
adverse claims or voting or other rights of third parties other
than the TBS Stock Agreements and other than any claims or
rights of TW Parent, Holdco and their respective subsidiaries
under this Agreement, the Merger Agreement or any Additional
Agreement; (ii) UCTI will not have any liabilities or
obligations, other than any liabilities or obligations under
this Agreement, the Merger Agreement, any Additional Agreements
to which it is a party and the TBS Stock Agreements; (iii) UCTI
will not have any employees; and (iv) UCTI will not have any
material properties or assets, other than the TBS Shares, and
will not be engaged in the conduct of any business or other
activities, other than the ownership, directly or indirectly, of
TBS Shares.
(b) Assumption; Indemnification. Prior to or at the
Closing (i) LMC Parent, TCITP and/or LBI shall assume all
liabilities and obligations of UCTI, (ii) LMC Parent, TCITP and
LBI shall agree to indemnify TW Parent, Holdco and any
subsidiaries of TW Parent or Holdco and the respective officers,
employees, stockholders, agents, and representatives of each of
the foregoing against, and shall hold them harmless from, any
loss, liability, claim, damage or expense arising from any
liability or obligation of UCTI other than those relating to the
business of UCTI subsequent to the Closing or otherwise first
arising or accruing after the Closing, and (iii) UCTI shall
transfer to LMC Parent, TCITP and/or LBI all assets of UCTI
other than the TBS Shares, in each case pursuant to agreements
in form and substance satisfactory to TW Parent.
(c) Certain Actions by UCTI. During the period from
September 22, 1995, to the Closing, UCTI shall not (i) issue any
securities (or rights to acquire securities), (ii) incur any
obligation other than any obligation to be assumed by TCITP
and/or LBI on or prior to the Closing Date; (iii) make any Tax
election or settle or compromise any Tax liability or refund or
(iv) amend its certificate of incorporation or by-laws in any
respect, without in any such case the prior approval of TW
Parent, which will not be unreasonably withheld or delayed.
(d) Advice of Changes. TCITP and TW 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 UCTI Material Adverse Effect or a TW Material
Adverse Effect, as applicable.
<PAGE>
5.2 Access to Information. During the period from the
making of the Contribution Election through the Closing Date,
UCTI shall afford to TW Parent and its officers, employees,
accountants, counsel, financial advisors and other
representatives reasonable access during normal business hours
to all properties, books, contracts, commitments, personnel and
records of UCTI, and shall furnish promptly to TW Parent such
information concerning its business, properties and personnel as
TW Parent may reasonably request.
5.3 Confidentiality. TW Parent and Holdco shall, and
shall cause their affiliates, directors, officers, employees,
agents and controlling persons (collectively, "Representatives")
to, (i) keep confidential all Proprietary Information of UCTI
and its Affiliates disclosed pursuant to Section 5.2 and not
disclose or reveal any such Proprietary Information (as defined
below) to any person other than those Representatives of TW
Parent and Holdco who are participating in effecting the
transactions contemplated hereby or who otherwise need to know
such Proprietary Information, (ii) use such Proprietary
Information only in connection with consummating the
transactions contemplated hereby and enforcing TW Parent's and
Holdco's rights hereunder, and (iii) not use Proprietary
Information in any manner detrimental to LMC Parent, TCITP or
its Affiliates. In the event that TW Parent, Holdco or any
Representative is requested pursuant to, or required by,
applicable law or regulation or by legal process to disclose any
Proprietary Information, TW Parent shall provide LMC Parent or
TCITP with prompt notice of such request to enable LMC Parent or
TCITP to seek an appropriate protective order. TW Parent's and
Holdco's obligations hereunder with respect to Proprietary
Information that (i) is disclosed to a third party with LMC
Parent's written approval, (ii) is required to be produced under
order of a court of competent jurisdiction or other similar
requirements of a governmental agency, or (iii) is required to
be disclosed by applicable law or regulation, will, subject in
the case of clauses (ii) and (iii) to TW Parent's and Holdco's
compliance with the preceding sentence, cease to the extent of
the disclosure so consented to or required, except to the extent
otherwise provided by the terms of such consent or covered by a
protective order. If TW Parent and Holdco use a degree of care
to prevent disclosure of the Proprietary Information that is at
least as great as the care they normally take to preserve their
own information of a similar nature, then they shall not be
liable for any disclosure that occurs despite the exercise of
that degree of care, and in no event shall TW Parent or Holdco
be liable for any indirect, punitive, special or consequential
damages under this Section 5.3. In the event this Agreement is
terminated, TW Parent and Holdco shall, if so requested by LMC
Parent, promptly return or destroy all of the Proprietary
Information, including all copies, reproductions, summaries,
analyses or extracts thereof or based thereon in the possession
of TW Parent, Holdco or their Representatives; provided,
however, that TW Parent and Holdco shall not be required to
return or cause to be returned summaries, analyses or extracts
prepared by either of them or their Representatives, but shall
destroy (or cause to be destroyed) the same upon request of LMC
Parent.
<PAGE>
For purposes of this Section 5.3, "Proprietary
Information" means all proprietary or confidential information
that is furnished to TW Parent or its Representatives, pursuant
to Section 5.2, regardless of the manner in which it is
furnished. "Proprietary Information" does not include, however,
information which (a) has been or in the future is published or
now or in the future is otherwise in the public domain through
no fault of TW Parent, Holdco or any of their Representatives,
(b) was available to TW Parent or Holdco on a non-confidential
basis prior to its disclosure pursuant to Section 5.2, (c)
becomes available to TW Parent or Holdco on a non-confidential
basis from a person other than LMC Parent or its Representatives
who is not otherwise bound by a confidentiality agreement with
LMC Parent or its Representatives, and is not otherwise
prohibited from transmitting the information to TW Parent or
Holdco, or (d) is independently developed by TW Parent or Holdco
through persons who have not had, either directly or indirectly,
access to or knowledge of such information.
Notwithstanding any other terms of this Section 5.3,
after the Closing, the terms of this Section 5.3 shall not apply
to any Proprietary Information, to the extent such Proprietary
Information relates to the TBS Shares or to the business or
assets of TBS or UCTI.
5.4 Reasonable Efforts; Notification. (a) If LMC
Parent makes the Contribution Election, upon the terms and
subject to the conditions set forth in this Agreement, each of
the parties agrees to use reasonable efforts (i) 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
Contribution and the other transactions contemplated by this
Agreement or to avoid an action or proceeding by any
Governmental Entity, and (ii) to defend any lawsuits or other
legal proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the
transactions contemplated by this Agreement, 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 5.4 shall
require any such person (i) to agree to, approve, or otherwise
be bound by or satisfy any condition of the kind referred to in
Section 2.1(d) of the LMC Agreement, (ii) to agree to enter into
or be bound by any settlement or judgment (other than the FTC
Consent Decree) or (iii) subject to Section 4.1 of the LMC
Agreement, to agree to any change to the terms of this Agreement
or any of the other Additional Agreements.
(b) Between September 22, 1995 and the Closing, each
party will give prompt written notice to the other party of: (i)
any information that indicates that any of its representations
or warranties contained herein was not true and correct as of
September 22, 1995, or will not be true and correct at and as of
the Closing, with the same force and effect as if made at and as
of the Closing (except for changes permitted or contemplated by
this
<PAGE>
Agreement), (ii) the occurrence of any event that will result,
or has a reasonable prospect of resulting, in the failure of any
condition specified in Article VI hereof to be satisfied, (iii)
any notice or other communication from any third party alleging
that the consent of such third party is or may be required in
connection with the transactions contemplated by this Agreement
or that such transactions otherwise may violate the rights of or
confer remedies upon such third party and (iv) any notice of, or
other communication relating to, any litigation referred to in
Sections 6.2(c) or any order or judgment entered or rendered
therein.
5.5 Public Announcements. TW Parent and Holdco, on the
one hand, and LMC Parent, TCITP and LBI, 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, 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 or pursuant to applicable
requirements of any national securities association.
5.6 Fees and Expenses. All fees and expenses incurred
in connection with the Contribution, this Agreement and the
other transactions contemplated hereby shall be paid by the
party incurring such fees or expenses, whether or not the
Contribution is consummated.
5.7 Stock Exchange Listing. Holdco shall use
reasonable efforts to cause all shares of Holdco Common Stock to
be issued as Consideration hereunder (or issuable in exchange
for or upon conversion of any Voting Holdco LMC Common Stock or
LMCN-V Common Stock issued to any Liberty Party pursuant to this
Agreement or any Additional Agreement) to be approved for
listing on the New York Stock Exchange, subject to official
notice of issuance, prior to the Closing Date.
5.8 Tax Treatment. If the Contribution Election is
made, each of TW Parent, on the one hand, and LMC Parent, TCITP
and LBI, on the other hand, shall use commercially reasonable
efforts to cause the Contribution to qualify as a tax-free
exchange under Section 351 of the Code.
5.9 Transfer and Real Property Transfer Gains Taxes.
TW Parent (and not TBS or any Liberty Party) shall be
responsible for any liabilities, without deduction or
withholding from any amount payable to any Liberty Party
pursuant to this Agreement or to the TBS stockholders pursuant
to the Merger Agreement, 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 city or State of the United States
(and any penalties and interest with respect to such Taxes), to
the extent any such Taxes are attributable to the transfer
<PAGE>
of Contributed Assets and become payable in connection with the
transactions contemplated by this Agreement and the Merger
Agreement, on behalf of the Liberty Parties. Except as otherwise
required by law, the Liberty Parties shall not take a position
on any Tax Return that is inconsistent with the values and
allocations established by Holdco, UCTI or any Affiliates of
Holdco on any Tax Returns relating to such Taxes.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation To Effect
Contribution. The respective obligation of each party to
consummate the Contribution is subject to the satisfaction or
waiver on or prior to the Closing Date of the following
conditions:
(a) 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 and the FTC shall have initially accepted the FTC
Consent Decree for public comment.
(b) No Injunctions or Restraints. No temporary
restraining order, preliminary or permanent injunction or other
order issued by any court of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of
the Mergers, the Contribution or any other material transaction
contemplated by this Agreement or the Merger Agreement shall be
in effect; provided, however, that, subject to the proviso in
Section 5.4(a), each of the parties shall have used its
commercially reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible,
any such injunction or other order that may be entered.
(c) Consummation of the Mergers. The Mergers shall be
consummated and become effective concurrently with the
consummation and effectiveness of the Contribution.
6.2 Conditions to Obligations of Holdco. The
obligation of Holdco to consummate the Contribution is further
subject to the satisfaction or waiver by Holdco on or prior to
the Closing Date of the following conditions:
(a) Representations and Warranties. The
representations and warranties of LMC Parent, TCITP and LBI set
forth in this Agreement that are qualified as to materiality
shall be true and correct, and the representations and
warranties of LMC Parent, TCITP and LBI 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
<PAGE>
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 Holdco shall have received
a certificate to such effect signed on behalf of LMC Parent,
TCITP and LBI by the chief executive officer (or a senior vice
president) and the chief financial officer of LMC Parent.
(b) Performance of Obligations. LMC Parent, TCITP and
LBI 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 Holdco shall have
received a certificate to such effect signed on behalf of LMC
Parent, TCITP and LBI by the chief executive officer (or a
senior vice president) and the chief financial officer of LMC
Parent.
(c) No Litigation. There shall not be pending any
suit, action or proceeding by any Governmental Entity (i)
seeking to restrain or prohibit the consummation of the
Contribution or any other transaction contemplated by this
Agreement or seeking to obtain from Holdco, TW Parent or any of
their subsidiaries any damages that are material in relation to
UCTI, (ii) seeking to prohibit or limit the ownership by Holdco
or any of its subsidiaries (including UCTI) of the Contributed
Assets or the ownership by Holdco or any of its subsidiaries
(including UCTI) of the TBS Shares, or seeking to compel Holdco
or any of its subsidiaries (including UCTI) to dispose of or
hold separate any material portion of the Contributed Assets or
the TBS Shares, (iii) seeking to impose limitations on the
ability of Holdco or any of its subsidiaries (including UCTI) to
acquire or hold, or exercise full rights of ownership of the
Contributed Assets or any TBS Shares, including the right to
vote or cause the vote of such TBS Shares on all matters
properly presented to the stockholders of TBS, or (iv) which
otherwise is reasonably likely to have a UCTI Material Adverse
Effect or a TW Material Adverse Effect.
6.3 Right of LMC Parent to Withdraw Contribution
Election. The obligations of LMC Parent, TCITP and LBI to
consummate the Contribution are further subject to the right of
LMC Parent to withdraw the Contribution Election at any time
prior to three business days prior to the Effective Time.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual written consent of TW Parent and LMC
Parent;
<PAGE>
(b) by LMC Parent, at any time prior to three business
days prior to the Effective Time, by written notice to TW Parent
and Holdco; and
(c) by TW Parent:
(i) if the Merger Agreement has been terminated;
or
(ii) if the Mergers shall not have been
consummated on or before September 30, 1996, unless the
failure to consummate the Mergers is the result of a wilful
and material breach of this Agreement by TW Parent; or
(iii) if any condition set forth in Section 6.1
or Section 6.2, is not satisfied and not capable of being
satisfied prior to the end of the period referred to in
Section 7.1(c)(ii).
This Agreement will automatically terminate upon the
consummation of the TBS Merger, if no Contribution Election
shall theretofore have been timely made hereunder.
7.2 Effect of Termination. In the event of any
termination of this Agreement by either LMC Parent or TW Parent
as provided in Section 7.1, this Agreement shall forthwith
become void and have no effect, without any liability or
obligation on the part of TW Parent, LMC Parent, TCITP or LBI,
other than the provisions of Sections 4.1(g), 4.2(e), 5.3 and
5.6, this Section 7.2 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. The
Termination of this Agreement shall not affect the
enforceability of, the obligations under or the terms of any
other agreements relating to or entered into in connection with
the Mergers.
7.3 Amendment. This Agreement may be amended by the
parties at any time, but only by an instrument in writing signed
on behalf of each of the parties.
7.4 Extension; Waiver. At any time prior to the
Effective Time, 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) 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.
<PAGE>
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-survival of Representations and Warranties.
Subject to the next sentence, none of the representations and
warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the Effective Time.
Notwithstanding the previous sentence or any other provision of
this Agreement, the representation and warranty provided in
Section 4.1(j) shall survive the Effective Time and shall
continue in full force and effect indefinitely. This Section 8.1
shall not limit any covenant or agreement which by its terms
contemplates performance after the Effective Time (including
those set forth in Article III and Section 5.1(b)).
8.2 Notices. All notices, requests, claims, demands
and other communications under this Agreement shall be in
writing and shall be sufficient if delivered personally or sent
by overnight courier (providing 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 TW Parent or Holdco, to
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 to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Attention: Richard Hall, Esq.
<PAGE>
(b) to LMC Parent, TCITP or LBI, to
Liberty Media Corporation
Terrace Towers II
5619 DTC Parkway
Englewood, Colorado 80111-3000
Attention: President
with copies 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.
599 Lexington Avenue
New York, New York 10022
Attention: Elizabeth M. Markowski, Esq.
8.3 Descriptive Headings. 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.
8.4 Counterparts. This Agreement may be executed in
two or more counterparts and on separate counterparts, each of
which shall be an original instrument and all of which together
shall constitute one and the same agreement.
8.5 Entire Agreement; No Third-Party Beneficiaries.
This Agreement and the Additional Agreements (including the
documents referred to herein and therein) (a) constitute the
entire agreement, and supersede 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 III of this Agreement, are not
intended to confer upon any person other than the parties hereto
and thereto and, on and after the date of Spin-off, SpinCo, any
rights or remedies.
<PAGE>
8.6 Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of
Delaware applicable to contracts among Delaware corporations
made and to be performed wholly in the State of Delaware, except
to the extent the laws of the State of Colorado are mandatorily
applicable.
8.7 Assignment. Neither this Agreement nor any of the
rights, interests or obligations under this Agreement shall be
assigned, in whole or in part, by operation of law or otherwise
by any of the parties without the prior written consent of the
other parties, except as provided in Section 2.6.
8.8 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 State of
Delaware or in Delaware 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 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 bring 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.
8.9 Waivers. Except as provided in this Agreement or
any waiver pursuant to Section 7.4, 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.
<PAGE>
IN WITNESS WHEREOF, TW Parent, Holdco, TCITP and LBI
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
Name:
Title:
TW INC.
By
Name:
Title:
TCI TURNER PREFERRED, INC.
By
Name:
Title:
LIBERTY MEDIA CORPORATION
By
Name:
Title:
LIBERTY BROADCASTING, INC.
By
Name:
Title:
Acknowledged and agreed by
TELE-COMMUNICATIONS, INC.
(for purposes of Section 3.1(a) only)
By
Name:
Title:
<PAGE>
The undersigned hereby agree to the amendment of the
LMC Agreement as provided in Section 3.6, above.
TIME WARNER INC. TCI TURNER PREFERRED, INC.
By: By:
Name: Name:
Title: Title:
TW INC. COMMUNICATION CAPITAL CORP.
By: By:
Name: Name:
Title: Title:
LIBERTY MEDIA CORPORATION UNITED CABLE TURNER INVESTMENT INC.
By: By:
Name: Name:
Title: Title:
To the extent necessary to approve the amendment, only
TELE-COMMUNICATIONS, INC.
By:
Name:
Title:
<PAGE>
To be executed on and as of the date of the Spin-off, as
provided in Section 2.6:
SOUTHERN SATELLITE SYSTEMS, INC.
By:
Name:
Title:
