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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): FEBRUARY 1, 1995
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THE TIMES MIRROR COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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DELAWARE 1-4914 95-4481525
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
TIMES MIRROR SQUARE 90053
LOS ANGELES, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:(213) 237-3700
NEW TMC INC.
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
GENERAL
On February 1, 1995, the predecessor ("Old Times Mirror") to The Times
Mirror Company (the "Company" or "New Times Mirror") consummated a series of
transactions described below (collectively, the "Transactions") which resulted
in the acquisition of Old Times Mirror's cable television business by Cox
Communications, Inc. ("Cox"). All references herein to "Times Mirror" shall mean
Old Times Mirror and New Times Mirror, as the successor to Old Times Mirror,
collectively.
THE TIMES MIRROR COMPANY
The Company, as the successor to Old Times Mirror, is engaged principally
in the newspaper publishing, professional information and consumer media
businesses. The Company publishes the Los Angeles Times, Newsday and New York
Newsday, The Baltimore Sun newspapers, The Hartford Courant, The Morning Call,
The Advocate and the Greenwich Time. In addition, the Company publishes several
smaller newspapers.
Prior to the consummation of the Transactions, these businesses (the
"Publishing Business") were conducted by Old Times Mirror, which was also
engaged in the ownership and operation of cable television systems. Old Times
Mirror's cable television business consisted of Old Times Mirror's wholly owned
subsidiary, Times Mirror Cable Television, Inc. ("TMCT"), and the subsidiaries
of TMCT (collectively with TMCT, "Times Mirror Cable"). Times Mirror Cable owns
and operates approximately 60 cable systems in four geographic regions,
including Phoenix, Arizona, Southern California and Rhode Island. As of
September 30, 1994, these systems, which were operated under the name "Dimension
Cable Services," served approximately 1.2 million basic subscribers in 13 states
and passed approximately 2.1 million homes.
Old Times Mirror was incorporated in 1884 in the State of California and
was reincorporated in the State of Delaware in 1986. The Company was
incorporated in the State of Delaware in June 1994 for the purpose of owning and
operating the Publishing Business after the consummation of the Transactions.
The Company was originally incorporated under the name "New TMC Inc.," but
changed its name to "The Times Mirror Company" immediately after the
consummation of the Transactions.
COX COMMUNICATIONS, INC.
Cox, which was a wholly owned subsidiary of Cox Enterprises, Inc. ("Cox
Enterprises") prior to the consummation of the Transactions, is a
fully-integrated diversified media and broadband communications company with
operations and investments in four related areas: (i) U.S. cable television
systems; (ii) international cable television systems; (iii) programming; and
(iv) telecommunications and technology. Prior to the consummation of the
Transactions, Cox was the sixth largest cable television operator in the United
States, serving as of September 30, 1994 approximately 1.9 million basic
customers in 18 states. Internationally, Cox has invested significantly in cable
systems in the United Kingdom and in Denmark. Cox also holds substantial
investments in several cable television programming services, including The
Discovery Channel, The Learning Channel, E! Entertainment, UK Gold and Viewer's
Choice. Finally, Cox has numerous investments in the telecommunications and
technology industry, including businesses involved in competitive access
telephony, on-screen programming guides, communications, direct broadcast
satellite operations, computer software and interactive services. Cox was
incorporated in the State of Delaware in May 1994 under the name "Cox Cable
Communications, Inc.," and on November 21, 1994, Cox's name was changed to "Cox
Communications, Inc." Prior to Cox's incorporation, Cox's operations and
investments were a division of Cox Holdings, Inc., a subsidiary of Cox
Enterprises.
DISPOSITION OF TIMES MIRROR CABLE
Cox was selected as the buyer through an auction conducted by Old Times
Mirror in which a number of potential buyers were invited to submit bids. Old
Times Mirror received five bids and ultimately determined that Cox's bid was the
most favorable.
Old Times Mirror, the Company, Cox and Cox Enterprises then entered into
that certain Agreement and Plan of Merger dated as of June 5, 1994, as amended
(the "Merger Agreement"), pursuant to which Cox
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acquired Times Mirror Cable and the Company became the successor to Old Times
Mirror. This was accomplished through the Transactions, which consisted of,
among other things: (i) the contribution of the Publishing Business by Old Times
Mirror to the Company (the "Contribution"); (ii) the assumption by the Company
of all of the liabilities of Old Times Mirror other than those related to Times
Mirror Cable and certain other liabilities, including the indebtedness described
below under the caption "Consideration"; (iii) the exchange (the "Chandler
Exchange") by Old Times Mirror's controlling stockholders, Chandler Trust No. 1,
Chandler Trust No. 2 and Chandis Securities Company (collectively, the "Chandler
Trusts"), of all of their Old Times Mirror Series A Common Stock, par value
$1.00 per share ("Old Times Mirror Series A Common Stock"), and Old Times Mirror
Series C Common Stock, par value $1.00 per share ("Old Times Mirror Series C
Common Stock" and together with the Old Times Mirror Series A Common Stock, the
"Old Times Mirror Common Stock"), for the same number of shares of the Company's
Series A Common Stock, par value $1.00 per share (the "Series A Common Stock"),
and the Company's Series C Common Stock, par value $1.00 per share (the "Series
C Common Stock" and together with the Series A Common Stock, the "Common
Stock"), and the commitment by the Company to issue to the Chandler Trusts
shares of the Company's Cumulative Redeemable Preferred Stock, Series A, par
value $1.00 per share (the "Series A Preferred Stock"), and, under certain
circumstances, additional shares of Series A Common Stock (such shares of Series
A Preferred Stock and additional shares of Series A Common Stock, if any, are
hereinafter referred to as the "Additional Chandler Shares"); and (iv) the
merger of Old Times Mirror (then consisting only of Times Mirror Cable) with and
into Cox (the "Merger"). Upon the effectiveness of the Merger on February 1,
1995, each share of Old Times Mirror Series A Common Stock outstanding
immediately prior to the Merger was converted into one share of Series A Common
Stock and a portion of a share of Cox's Class A Common Stock, par value $1.00
per share ("Cox Class A Common Stock"), and each share of Old Times Mirror
Series C Common Stock outstanding immediately prior to the Merger was converted
into one share of Series C Common Stock and a portion of a share of Cox Class A
Common Stock. As a result of the Chandler Exchange, the Chandler Trusts were not
stockholders of Old Times Mirror at the time the Merger was consummated and
therefore did not receive any of the securities issued in the Merger. The
Additional Chandler Shares will be issued on an as yet undetermined date
sometime between March 20, 1995 and May 3, 1995.
CONSIDERATION
The consideration paid by Cox for the acquisition of Times Mirror Cable
consists of: (i) the issuance in the Merger of between 48,806,033 shares and
59,651,818 shares of Cox Class A Common Stock to stockholders of Old Times
Mirror other than the Chandler Trusts (the "Other Stockholders") and (ii) the
assumption by Cox of $1.364 billion of Old Times Mirror's debt and accrued
interest.
The indebtedness assumed by Cox consisted of: (i) approximately $57 million
of Old Times Mirror's publicly held notes not repurchased or exchanged in
certain tender and exchange offers prior to the effective date of the Merger and
(ii) approximately $1.306 billion of new indebtedness (the "New Indebtedness")
incurred by Old Times Mirror shortly before the Merger. As part of the
Contribution, Old Times Mirror transferred to the Company as a capital
contribution approximately $773 million in cash, which constituted all of the
proceeds from the incurrence of the New Indebtedness that remained after
repayment of indebtedness incurred to fund the tender offer referred to above
and certain other obligations of Old Times Mirror.
The value of the Cox Class A Common Stock issued to the Other Stockholders
(based on the average of the closing prices of a share of Cox Class A Common
Stock on the New York Stock Exchange for the five trading days ending on the
Valuation Date (as defined below) will be $932 million, or $10.45 per share of
Old Times Mirror Common Stock held by the Other Stockholders, provided that the
average closing price of the Cox Class A Common Stock during such five trading
day period (the "Trading Value") is not less than $15.624 or greater than
$19.096. Based on this valuation, the Additional Chandler Shares to be issued to
the Chandler Trusts will have a value of $412 million, or $10.45 per share of
Old Times Mirror Common Stock held by the Chandler Trusts. There can be no
assurance that prior to or after the Valuation Date the Cox Class A Common Stock
will have a Trading Value within the range from $15.624 to $19.096 per share. If
the Trading Value during the five trading day period is less than $15.624, the
value of the Cox Class A Common
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Stock received by the Other Stockholders would be less than $932 million, which
would mean that the Other Stockholders would receive Cox Class A Common Stock
with a value of less than $10.45 per share of Old Times Mirror Common Stock. If
the value of the Other Stockholders' Cox Class A Common Stock is less than $932
million, the number of Additional Chandler Shares to be issued would be reduced
so that the value of the Additional Chandler Shares to be issued with respect to
each share of Old Times Mirror Common Stock owned by the Chandler Trusts would
remain substantially equivalent to the value of the Cox Class A Common Stock to
be issued with respect to each share of Old Times Mirror Common Stock owned by
the Other Stockholders. The "Valuation Date" will be a date to be selected by
Cox that is no earlier than March 17, 1995 and no later than May 1, 1995.
JOINT VENTURE BETWEEN THE COMPANY AND COX
As part of the Merger Agreement, the Company and Cox have agreed to form a
joint venture for the purpose of purchasing investment interests in general
audience and theme-based cable or pay television programming operations in the
United States and throughout the world. The joint venture will be structured as
a limited partnership in which a corporation, owned two-thirds by the Company
and one-third by Cox, will be the general partner and the Company and Cox will
each be limited partners. The Company has agreed to contribute up to $200
million to the joint venture and Cox has agreed to contribute up to $100
million, and the Company and Cox will share in all profits, losses and
distributions of the joint venture in proportion to their capital commitments.
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ITEM 7. PRO FORMA FINANCIAL INFORMATION
INDEX TO UNAUDITED PRO FORMA FINANCIAL DATA
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Unaudited Pro Forma Condensed Consolidated Balance Sheet................................ 5
Unaudited Pro Forma Condensed Consolidated Statements of Income......................... 6
Notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet and Statements of
Income................................................................................ 7
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UNAUDITED PRO FORMA FINANCIAL DATA
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
The unaudited pro forma condensed consolidated balance sheet of Times
Mirror has been derived from the historical consolidated balance sheet of Times
Mirror adjusted for certain costs and expenses to be incurred as a result of the
consummation of the Transactions. The pro forma condensed consolidated balance
sheet has been prepared assuming the Transactions occurred on September 25,
1994.
The pro forma condensed consolidated balance sheet should be read in
conjunction with the historical consolidated financial statements and the notes
thereto for the year ended December 31, 1993 contained in Old Times Mirror's
report on Form 8-K dated November 10, 1994. The pro forma condensed consolidated
balance sheet is not necessarily indicative of the financial position of Times
Mirror that would have actually been obtained had the Transactions been
consummated on September 25, 1994.
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ASSETS
PRO FORMA ADJUSTMENTS
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HISTORICAL DEBIT CREDIT PRO FORMA
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(IN THOUSANDS OF DOLLARS)
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Current Assets
Cash and cash equivalents................... $ 92,242 $1,306,000(a) $ 52,000(b)
12,232(c)
548,574(a) $ 785,436
Accounts receivable, less allowance for
doubtful accounts of $77,305.............. 524,549 524,549
Inventories................................. 148,472 148,472
Net assets of discontinued Cable
operations................................ 626,091 626,091(d)
Prepaid and other........................... 148,926 148,926
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Total Current Assets................... 1,540,280 1,607,383
Property, plant and equipment, at cost less
accumulated depreciation of $813,857........ 1,294,005 1,294,005
Goodwill...................................... 711,947 711,947
Other intangibles............................. 122,652 122,652
Deferred charges and other assets............. 543,956 543,956
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$4,212,840 $4,279,943
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable............................ $ 359,680 $ $ 359,680
Accrued liabilities......................... 45,768 45,768
Short-term debt............................. 128,044 103,574(a) 24,470
Other current liabilities................... 357,134 1,000(d) 356,134
------------ ------------
Total Current Liabilities.............. 890,626 786,052
Long-term debt................................ 749,044 1,363,000(d) $1,306,000(a)
445,000(a) 247,044
Other liabilities and deferrals............... 654,177 654,177
------------ ------------
Total Liabilities...................... 2,293,847 1,687,273
Cox Class A common stock...................... 932,000(d) 932,000(e)
Shareholders' Equity
Series A common stock....................... 98,700 1,345(f)
16,563(g) 80,792
Series B common stock.......................
Series C common stock, convertible.......... 31,259 31,259
Series A preferred stock.................... 412,000(h) 412,000
Series B preferred stock.................... 350,000(g) 350,000
Additional paid-in capital.................. 167,331 167,331
Retained earnings........................... 1,707,446 52,000(b) 1,669,909(d)
12,232(c)
932,000(e)
60,198(f)
333,437(g)
412,000(h) 1,575,488
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2,004,736 2,616,870
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Less treasury stock, at cost................ 61,543 61,543(f) 0
Less guaranteed debt of ESOP................ 24,200 24,200
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Total Shareholders' Equity............. 1,918,993 2,592,670
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$4,212,840 $4,279,943
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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME
The unaudited pro forma condensed consolidated statements of income of
Times Mirror have been derived from the historical consolidated statements of
income of Times Mirror adjusted for interest expense expected to be reduced as a
result of the Transactions. The pro forma condensed consolidated statements of
income have been prepared assuming that the transaction occurred on January 1,
1993.
The pro forma condensed consolidated statements of income should be read in
conjunction with the historical consolidated financial statements and the notes
thereto for the year ended December 31, 1993 contained in Old Times Mirror's
report on Form 8-K dated November 10, 1994. The pro forma condensed consolidated
statements of income are not necessarily indicative of the financial results of
Times Mirror that would have actually been obtained had the Transactions been
consummated on January 1, 1993.
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YEAR ENDED DECEMBER 31, 1993
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PRO FORMA
ADJUSTMENTS
-----------------
HISTORICAL DEBIT CREDIT PRO FORMA
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(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE
AMOUNTS)
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Revenues........................................... $3,243,749 $3,243,749
Cost of sales...................................... 1,759,052 1,759,052
Selling, general and administrative................ 1,215,491 1,215,491
Restructuring charges.............................. 80,164 80,164
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Operating profit................................... 189,042 189,042
Interest expense................................... (84,054) 50,033(i) (34,021)
Other, net......................................... 4,797 4,797
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Income from continuing operations
before income taxes.............................. 109,785 159,818
Income taxes....................................... 58,116 20,514(i) 78,630
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Income from continuing operations.................. $ 51,669 $ 81,188
========= =========
Earnings per common share from continuing
operations....................................... $ .40 $ .19
</TABLE>
<TABLE>
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NINE MONTHS ENDED SEPTEMBER 25, 1994
---------------------------------------------
PRO FORMA
ADJUSTMENTS
-----------------
HISTORICAL DEBIT CREDIT PRO FORMA
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(IN THOUSANDS OF DOLLARS EXCEPT PER SHARE
AMOUNTS)
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Revenues........................................... $2,400,068 $2,400,068
Cost of sales...................................... 1,291,433 1,291,433
Selling, general and administrative................ 921,880 921,880
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Operating profit................................... 186,755 186,755
Interest expense................................... (51,757) 33,964(i) (17,793)
Nonrecurring gain.................................. 22,099 22,099
Other, net......................................... 2,062 2,062
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Income from continuing operations
before income taxes.............................. 159,159 193,123
Income taxes....................................... 79,774 13,925(i) 93,699
---------- ----------
Income from continuing operations.................. $ 79,385 $ 99,424
========= =========
Earnings per common share from continuing
operations....................................... $ .61 $ .49
</TABLE>
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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET AND STATEMENTS
OF INCOME
(a) To record $1.306 billion of new indebtedness incurred by Times Mirror
immediately prior to the Merger. Cash proceeds from this debt were or will
be used to purchase or redeem $100 million of fixed rate public notes, all
outstanding commercial paper and short-term borrowings related to the debt
tender offer. There was $103,574,000 of commercial paper outstanding at
September 25, 1994, however, additional short-term borrowings were incurred
in mid-December 1994 to fund the debt tender offer. The debt tender offer
ended on December 8, 1994 and resulted in the tender of approximately $345
million of debt. These interim borrowings were paid off at or prior to the
completion of the Transactions.
(b) Expenses incurred in connection with the Transactions are estimated at
approximately $52 million, consisting of legal, accounting, investment
banking fees, shareholder litigation costs and costs and expenses incurred
for the registration of the capital stock of New Times Mirror. These costs
have been reflected in the pro forma balance sheet as a reduction of
retained earnings, as these costs relate to the disposition of Times Mirror
Cable and the redemption of stockholder interests.
(c) Times Mirror paid a premium to retire the approximately $345 million of
fixed rate public notes, as described in note (a) above. The premium and
related costs of approximately $12.2 million were recorded as an
extraordinary loss in the fourth quarter of 1994, reducing net income. This
extraordinary loss is not reflected in the pro forma statements of income.
(d) To record the disposition of Times Mirror Cable. Proceeds of $2.296 billion
are comprised of approximately $932 million of Cox Class A Common Stock,
received by the Other Stockholders in the Merger, and the assumption of
$1.364 billion in debt and accrued interest by Cox. The gain is expected to
be approximately $1.6 billion. This gain is not reflected in the pro forma
statements of income.
(e) To reflect the deemed distribution of approximately $932 million of the
proceeds from the sale of Times Mirror Cable. These proceeds are in the
form of Cox Class A Common Stock distributed by Cox directly to the Other
Stockholders in the Merger.
(f) To retire treasury stock outstanding as of the Merger date.
(g) To record the issuance of $350 million, or 16,563,343 shares, of New Times
Mirror's Conversion Preferred Stock, Series B, par value $1.00 per share
(the "Series B Preferred Stock"), assumed to be exchanged for Series A
Common Stock. Stockholders electing to receive Series B Preferred Stock
will receive it in exchange for a like number of shares of Common Stock.
Each share of Series B Preferred Stock has a stated value of $21.131 per
share. The Series B Preferred Stock is stated at liquidation value.
(h) To record the issuance of $412 million of Series A Preferred Stock to the
Chandler Trusts. The Series A Preferred Stock is stated at liquidation
value.
(i) To reduce interest expense assuming all commercial paper and $500 million
of fixed rate public notes outstanding as of January 1, 1993 were retired
using cash proceeds from the new indebtedness or were assumed by Cox
pursuant to the Merger.
(j) The pro forma earnings per share calculation was determined on the
aggregate number of shares of Series A and Series C Common Stock assumed
outstanding at January 1, 1993, assuming that the issuance of the Series B
Preferred Stock reduces the number of Series A shares by 16,563,343. The
Series A and Series B Preferred Stock are not common stock equivalents for
earnings per share purposes. The estimated preferred stock dividends of
$59.8 million for 1993 and $44.9 million for the first three quarters of
1994 have been deducted from income from continuing operations for purposes
of determining earnings per common share from continuing operations. The
preferred stock dividends have been estimated using a 9% dividend rate for
the Series A Preferred Stock and a 6.5% dividend rate for the Series B
Preferred Stock. Subsequent to the Merger, dividends on Common Stock are
expected to be reduced. Beginning in June 1995 and continuing for a period
of three years, New Times Mirror has agreed to pay an annual dividend on
shares of Common Stock of no less than 24 cents per share, subject to the
fiduciary duties of New Times Mirror's Board of Directors. Thereafter, the
payment of dividends on Common Stock will depend on future earnings,
capital requirements, financial condition and other factors.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE TIMES MIRROR COMPANY
By /s/ O. JEAN WILLIAMS
--------------------------------
O. Jean Williams
Secretary and Associate
General Counsel
February 15, 1995
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EXHIBIT INDEX
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SEQUENTIALLY
EXHIBIT DESCRIPTION NUMBERED PAGE
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2.1 Agreement and Plan of Merger by and between The Times Mirror
Company, New TMC Inc., Cox Cable Communications, Inc. and Cox
Enterprises, Inc., dated as of June 5, 1994*......................
2.2 Amendment No. 1 to Agreement and Plan of Merger by and between The
Times Mirror Company, New TMC Inc., Cox Communications, Inc. and
Cox Enterprises, Inc. dated as of December 16, 1994*..............
2.3 Amendment No. 2 to Agreement and Plan of Merger by and between The
Times Mirror Company, New TMC Inc., Cox Communications, Inc. and
Cox Enterprises, Inc. dated as of January 30, 1995................
2.4 Amended and Restated Stock Exchange and Registration Rights
Agreement by and between the Times Mirror Company, New TMC Inc.
and certain stockholders of The Times Mirror Company dated as of
December 16, 1994*................................................
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* Filed as an exhibit to the Registration Statement on Form S-4 of the
Registrant (File No. 33-80154) and incorporated herein by reference.
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EXHIBIT 2.3
AMENDMENT NO. 2
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 2 to Agreement and Plan of Merger (this "Amendment"),
dated as of January 30, 1995, is made by and among The Times Mirror Company, a
Delaware corporation (the "Company"), New TMC Inc., a Delaware corporation and
wholly owned subsidiary of the Company ("New Times Mirror"), Cox Communications,
Inc., a Delaware corporation ("Acquiror"), and Cox Enterprises, Inc., a Delaware
corporation ("CEI").
RECITALS
WHEREAS, the parties hereto (including Acquiror under the name "Cox Cable
Communications, Inc.") have entered into that certain Agreement and Plan of
Merger dated as of June 5, 1994 as amended by Amendment No. 1 thereto dated as
of December 16, 1994 (the "Merger Agreement") pursuant to which and subject to
the terms and conditions thereof (i) the Company will contribute to New Times
Mirror all of the assets of the Company except the capital stock of Times Mirror
Cable Television, Inc., a Delaware corporation and wholly owned subsidiary of
the Company ("TMCT" and together with its subsidiaries (other than KDFW, KTBC
and WVTM (as defined in Section 6.10(a)(i)) "Cable"), and certain other assets,
(ii) subsequent to such contribution, the Chandler Trust No. 1, the Chandler
Trust No. 2 and Chandis Securities Company (collectively, the "Trusts"), which
are the controlling stockholders of the Company, will exchange all of their
shares of the capital stock of the Company for shares of the capital stock of
New Times Mirror, and (iii) the Company will merge with and into Acquiror, as a
result of which the stockholders of the Company immediately prior to such merger
will become stockholders of New Times Mirror and of Acquiror.
WHEREAS, for federal income tax purposes, it is intended that such
transactions will qualify as a tax-free reorganization within the meaning of
Sections 368(a)(1)(D), 355, and 368(a)(1)(A) of the Internal Revenue Code.
WHEREAS, the parties to the Merger Agreement now wish to make certain
amendments and modifications thereto.
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties and agreements set forth below, the parties hereto agree that the
Merger Agreement shall be amended as follows:
1. Section 2.02(a). Subsection (a) of Section 2.02 of the Merger
Agreement is hereby amended to read in its entirety as follows:
"(a) Immediately prior to the Closing and pursuant to the terms of
the Contribution and Assumption Agreement to be entered into by the
Company and New Times Mirror in the form attached hereto as Exhibit B
(the "Contribution Agreement"), the Company shall contribute and
transfer (the "Contribution") to New Times Mirror all the Company's
right, title and interests in any and all assets of the Company, whether
tangible or intangible and whether fixed, contingent or otherwise,
including the stock of all subsidiaries of the Company; provided,
however, that the Company shall not contribute to New Times Mirror (i)
the issued and outstanding capital stock of TMCT or any subsidiaries
thereof, (ii) the Company's rights created pursuant to the Contribution
Agreement, and (iii) cash sufficient to pay all expenditures incurred in
connection with the Exchange Offer (as defined in Section 2.03) and
other expenses relating to the transactions described in this Agreement
that are the responsibility of the Company hereunder, including, without
limitation, the Company's obligations under Section 6.26(e)."
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2. Section 6.03(c). Subsection (c) of Section 6.03 of the Merger
Agreement is hereby amended to read in its entirety as follows:
"(c) subject to Section 6.26(e), declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or
any combination thereof) in respect of its capital stock, or redeem or
otherwise acquire any of its securities; provided, however, that any
subsidiary of TMCT may declare and pay dividends that are payable to
TMCT or to any other subsidiary of TMCT, and TMCT may declare and pay
dividends to the Company in an aggregate amount not to exceed Cable's
consolidated adjusted net income for the period from January 1, 1994 to
the Closing Date before giving effect to the Closing Payment (as defined
in Section 6.26(e)) decreased for the amount by which the working
capital surplus of Cable as of the Closing Date before giving effect to
the Closing Payment is less than $37,667,000 minus the Designated
Expenditures (as defined below) and increased for the amount by which
the working capital surplus of Cable as of the Closing Date is greater
than $37,667,000 minus the Designated Expenditures; for purposes of this
paragraph, (i) Cable's working capital means (A) cash and accounts
receivable (net of allowance for doubtful accounts) less accounts
payable, unearned income and accrued liabilities, all determined as of
the Closing Date on a basis consistent with the amounts set forth on the
Cable Balance Sheet (as defined in Section 4.06), minus (B) cash flow
generated by the Laguna Village cable system between the date of its
acquisition by Cable and the Closing Date; (ii) Cable's consolidated
adjusted net income for such period means Cable's consolidated net
income, determined in accordance with GAAP, (A) increased by the sum of
(1) the amount of depreciation and amortization deductions taken during
such period, and (2) the amount of accrued but unpaid Company
Consolidated Income Taxes deducted in calculating Cable's consolidated
net income to the extent not otherwise paid pursuant to tax sharing
arrangements, and (B) decreased by the sum of (1) the greater of (a) the
amount of capital expenditures set forth on the capital expenditure
budget attached as Schedule 6.03(g) plus $6,300,000 or (b) the amount of
capital expenditures (other than Designated Expenditures) actually made
by Cable during such period, (2) any dividends paid by TMCT to the
Company from January 1, 1994 to June 5, 1994 with respect to 1994 net
income, (3) to the extent not deducted in calculating Cable's
consolidated net income, the amount of any payments made by Cable during
such period in connection with obtaining any authorization, consent,
order or approval of any governmental authority necessary for the
transfer of control of any Franchise (as defined in Section 7.05(g))
held by Cable as a result of the violation of the terms of such
Franchise by Cable, and (4) to the extent not deducted in calculating
Cable's consolidated net income or described in clause (3), one-half of
the amount of any payments made by Cable during such period in
connection with obtaining any authorization, consent, order or approval
of any governmental authority necessary for the transfer of control of
any Franchise; and (iii) "Designated Expenditures" means the lesser of
(A) the amount of capital expenditures and investments to be made prior
to the Closing Date by Cable in accordance with the budget attached as
Schedule 6.03(j) or (B) the amount of capital expenditures and
investments actually made prior to the Closing Date by Cable in
accordance with Section 6.03(j), whether paid or unpaid."
3. Section 6.03(g). Subsection (g) of Section 6.03 of the Merger
Agreement is hereby amended to read in its entirety as follows:
"(g) fail to make (i) capital expenditures substantially in
accordance with the capital expenditure budget attached as Schedule
6.03(g) hereto, except for changes in expenditures that are appropriate
in light of changed circumstances, and (ii) capital expenditures of
$6,300,000 for January 1995;"
4. Section 6.26(e). Subsection (e) of Section 6.26 of the Merger
Agreement is hereby amended to read in its entirety as follows:
"(e) Immediately prior to the Closing, the Company shall make a
cash payment to TMCT (the "Dividend Restoration Payment") in an amount
equal to the aggregate amount, if any, of dividends and other
distributions paid by TMCT to the Company after June 5, 1994 in excess
of the
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amount permitted by Section 6.03(c). Simultaneously therewith, the
Company shall make a cash payment to TMCT (the "Working Capital
Restoration Payment") in an amount equal to (i) $74,667,000 minus (ii)
the amount, if any, of dividends that would have been payable by TMCT to
the Company pursuant to Section 6.03(c) immediately prior to such
payment but after giving effect to (A) a cash payment of $74,667,000 by
the Company to TMCT and (B) the Dividend Restoration Payment plus (iii)
the Specified Amount (as defined below). Attached hereto as Schedule
6.26(e) is a schedule showing the Company's calculation of the amount of
the payments to be made pursuant to this Section 6.26(e) (collectively,
the "Closing Payment"). "Specified Amount" shall mean an amount equal to
the sum of all payments to be made to Cable Employees on or prior to the
Closing Date pursuant to the Company's Long-Term Incentive Plan, stay
bonus arrangements and stock option buy-outs. Upon receipt of the
Closing Payment, TMCT shall promptly forward the Specified Amount to the
Cable Employees entitled to receive payment thereof."
5. Article VI. Article VI of the Merger Agreement is hereby amended by
adding new Section 6.27, which reads as follows:
"6.27 Closing Payment Adjustment; Indemnification for Accruals.
(a) If at any time prior to June 1, 1995 either Acquiror or New
Times Mirror notifies the other that the amount of the Closing Payment
made by the Company was incorrect, New Times Mirror and Acquiror shall
cooperate with each other in conducting a review of Schedule 6.26(e) and
the detail and calculations underlying the schedule to determine the
correct amount of the Closing Payment. If it is ultimately determined
that the Closing Payment as actually paid was smaller than the amount
required by Section 6.26(e), New Times Mirror shall promptly pay to
Acquiror cash in an amount equal to the underpayment. If it is
ultimately determined that the Closing Payment as actually paid was
larger than required by Section 6.26(e), Acquiror shall promptly pay to
New Times Mirror cash in an amount equal to the overpayment.
(b) New Times Mirror shall indemnify Acquiror against all Losses
(as defined in Section 7.06) attributable to liability of Cable for (i)
refund obligations relating to additional outlets, (ii) property taxes
or (iii) general and automobile liability to the extent that such
liability of Cable exceeds the accrual therefor on the financial
statements of Cable as of the Closing Date; provided, however, that once
New Times Mirror has indemnified Acquiror under this Section 6.27(b) for
Losses equal to $12,500,000 in the aggregate, New Times Mirror shall
have no further liability under this Section unless and to the extent
that Losses subject to this Section exceed in the aggregate $12,500,000
plus the Acquiror Deductible (as defined in Section 6.27(d)). New Times
Mirror shall have no liability under this Section 6.27(b) with respect
to claims for Losses under clause (i) or (ii) where such claims are
submitted by Acquiror after January 31, 1996 and New Times Mirror shall
have no liability under this Section 6.27(b) with respect to claims for
Losses under clause (iii) where such claims are submitted by Acquiror
after January 31, 1997.
(c) New Times Mirror shall indemnify Acquiror against all Losses
attributable to liability of Cable for matters for which there was
recorded or should have been recorded an accrual or reserve on the
financial statements of Cable as of the Closing Date in order to have
caused such financial statements to conform to GAAP (without regard to
exceptions to the application thereof for immateriality), other than
those covered by Section 6.27(b), to the extent that such liability of
Cable exceeds the accrual therefor, if any, on the books of Cable as of
the Closing Date; provided, however, that New Times Mirror shall have no
liability under this Section unless and to the extent that Losses
subject to this Section exceed in the aggregate the Acquiror Deductible.
New Times Mirror shall have no liability under this Section 6.27(c) with
respect to claims submitted by Acquiror after January 31, 1996.
(d) "Acquiror Deductible" shall mean a deductible amount initially
equal to $10,000,000 that will be reduced to the extent that (i) Losses
in excess of $12,500,000 that are subject to Section 6.27(b) are
incurred and (ii) Losses that are subject to Section 6.27(c) are
incurred.
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(e) Any disputes between the parties regarding accounting
principles that the parties are unable to resolve shall be submitted to
and conclusively resolved by the accounting firm of Arthur Andersen &
Co. using such procedures as it may in its sole discretion elect after
being presented with the position of each party. Such disputes may be
submitted to any office of Arthur Andersen & Co. other than the New
York, Los Angeles and Atlanta offices. The fees and expenses of Arthur
Andersen & Co. shall be borne equally by New Times Mirror and Acquiror.
(f) Disputes as to any matters in connection with this Section 6.27
other than disputes subject to Section 6.27(e) shall be conclusively
resolved by arbitration conducted by a three-member panel in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association then in effect and judgment upon the award of the panel may
be entered in any state or federal court of competent jurisdiction.
Discovery shall be permitted in accordance with the rules of discovery
then in effect in the United States District Court for the District of
Columbia. The site of the arbitration shall be selected by Acquiror. The
fees and expenses of arbitration, including the legal fees and expenses
of the parties, shall be borne by one or both of the parties in the
manner determined by the arbitration panel.
(g) New Times Mirror shall have the right to participate reasonably
in, but not control, any appeal to any regulatory authority regarding
Cable's refund obligations relating to additional outlets. If Acquiror
settles any matter regarding such obligations without the prior written
consent of New Times Mirror, unless New Times Mirror shall have withheld
its consent to such settlement unreasonably, New Times Mirror shall be
released from its obligation to indemnify Acquiror against any losses
relating to the settled matter. Any release of New Times Mirror pursuant
to the preceding sentence shall not affect New Times Mirror's obligation
to indemnify Acquiror against losses unrelated to the settled matter.
(h) Whenever any claim shall arise for indemnification under this
Section 6.27, Acquiror shall promptly notify New Times Mirror in writing
of such claim and, when known, the facts constituting the basis for such
claim (in reasonable detail). Failure of Acquiror to so notify New Times
Mirror shall not relieve New Times Mirror of any liability hereunder
except to the extent that such failure prejudices New Times Mirror.
Subject to Section 6.27(g), after such notice if New Times Mirror
undertakes to defend any such claim, then New Times Mirror shall be
entitled, if it so elects, to take control of the defense and
investigation with respect to such claim and to employ and engage
attorneys of its own choice to handle and defend the same, at New Times
Mirror's cost, risk and expense, upon written notice to Acquiror of such
election, which notice acknowledges New Times Mirror's obligation to
provide indemnification hereunder. New Times Mirror shall not settle any
third-party claim that is the subject of indemnification without the
prior written consent of Acquiror, which consent may not be unreasonably
withheld; provided, however, that New Times Mirror may settle a claim
without Acquiror's consent if such settlement (i) makes no admission or
acknowledgment of liability or culpability with respect to Acquiror or
Cable, (ii) includes a complete release of Acquiror and Cable and (iii)
does not require Acquiror or Cable to make any payment or forego or take
any action. Acquiror shall cooperate in all reasonable respects with New
Times Mirror and its attorneys in the investigation, trial and defense
of any lawsuit or action with respect to such claim and any appeal
arising therefrom (including the filing in Acquiror's or Cable's name of
appropriate cross claims and counterclaims). Acquiror may, at its own
cost, participate in any investigation, trial and defense of such
lawsuit or action controlled by New Times Mirror and any appeal arising
therefrom. If, after receipt of a claim notice pursuant to this Section
6.27(h), New Times Mirror does not undertake to defend any such claim,
Acquiror may, but shall have no obligation to, contest any lawsuit or
action with respect to such claim and New Times Mirror shall be bound by
the result obtained with respect thereto by Acquiror (including, without
limitation, the settlement thereof without the consent of New Times
Mirror). If there are one or more legal defenses available to Acquiror
that conflict with those available to New Times Mirror, Acquiror shall
have the right, at the expense of New Times Mirror, to assume the
defense of the lawsuit or action; provided, however, that Acquiror may
not settle such lawsuit or action without the prior written consent of
New Times
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Mirror, which consent may not be unreasonably withheld. At any time
after the commencement of defense of any lawsuit or action, New Times
Mirror may request Acquiror to agree in writing to the abandonment of
such lawsuit or to the payment or compromise of such claim, whereupon
such action shall be taken unless Acquiror determines that the contest
should be continued and so notifies New Times Mirror in writing within
15 days of such request from New Times Mirror. If Acquiror determines
that the lawsuit should be continued or that the claim should not be
compromised, New Times Mirror shall be liable hereunder only to the
extent of the lesser of (i) the amount that the other party(ies) to the
lawsuit or claim had agreed to accept in payment or compromise as of the
time that New Times Mirror made its request therefor to Acquiror or (ii)
such amount for which New Times Mirror may be liable with respect to
such lawsuit or claim by reason of the provisions hereof.
(i) Nothing in this Section 6.27 shall affect the application of
Section 9.01 to any matter not expressly covered by this Section 6.27."
6. Section 7.06. Section 7.06 of the Merger Agreement is hereby
amended by adding the following to the end thereof:
"Any Loss subject to Section 6.27 shall not also be subject to this
Section 7.06."
7. Closing Date and Effective Time. Notwithstanding any provision of
the Merger Agreement to the contrary, the "Closing Date" for purposes of
the Merger Agreement shall be January 31, 1995 and the "Effective Time" for
purposes of the Merger Agreement shall be 12:01 a.m., Eastern time, on
February 1, 1995.
8. Verification of Designated Expenditures. For purposes of verifying
after the Closing Date the amount of Designated Expenditures actually made
by Cable prior thereto, Designated Expenditures shall be regarded as a
discrete body of work and projects added to the capital expenditures
contemplated by Section 6.03(g) (the "Budgeted Expenditures"). In the event
of a possible overlap in description between Budgeted Expenditures and
Designated Expenditures, reference shall first be made to the descriptions
of the specific work and projects underlying the Budgeted Expenditures as
described in Section 6.03(g) and the Designated Expenditures as described
in Section 6.03(j), respectively, in order to determine the work and
projects that were added as Designated Expenditures by Section 6.03(j) and
the amount of capital expenditures actually made with respect to such work
and projects.
9. Prior Consents Unimpaired. Nothing in this Amendment shall be
construed to impair the validity and continuing effect of that certain
Consent and Waiver, dated as of October 21, 1994, among the Company, New
Times Mirror, Acquiror, and CEI (the "Telephony Consent"), and that certain
Consent and Waiver, dated as of November 4, 1994, among the Company, New
Times Mirror, Acquiror, and CEI (the "Newport News Consent"). For all
purposes under the Merger Agreement, including determining whether either
of the conditions in Section 7.04(a) and Section 7.04(b) has been
satisfied, all representations, warranties, and covenants of Acquiror
contained in the Merger Agreement or in any other document delivered
pursuant to the Merger Agreement shall be deemed to include an exception
for those matters described in the materials listed on Exhibit A to the
Telephony Consent or on Exhibit A to the Newport News Consent. Exhibit A to
the Telephony Consent and Exhibit A to the Newport News Consent are each
hereby amended to add to the descriptions of the transactions described
therein the descriptions of those transactions in the Joint Proxy
Statement/Prospectus, as amended to date.
10. Miscellaneous.
(a) Except where inconsistent with the express terms of this
Amendment, all provisions of the Merger Agreement as originally entered
into and amended prior to the date hereof shall remain in full force and
effect.
(b) 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 principles of conflicts of laws applicable thereto.
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(c) The rules of construction set forth in the Merger Agreement shall
apply to this Amendment.
(d) The parties shall take any actions and execute any other documents
that may be reasonably necessary for the implementation and consummation of
this Amendment.
(e) This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed on its behalf by its officers thereunto duly authorized on the day and
year first above written.
THE TIMES MIRROR COMPANY
By: /s/ THOMAS UNTERMAN
----------------------------------
Name: Thomas Unterman
Title: Vice President
NEW TMC INC.
By: /s/ THOMAS UNTERMAN
----------------------------------
Name: Thomas Unterman
Title: Vice President
COX COMMUNICATIONS, INC.
By: /s/ JIMMY W. HAYES
----------------------------------
Name: Jimmy W. Hayes
Title: Senior Vice President,
Finance
COX ENTERPRISES, INC.
By: /s/ JOHN R. DILLON
----------------------------------
Name: John R. Dillon
Title: Senior Vice President and
Chief Financial Officer
6
